Shares in Redstone are up 8% (to 0.865p!) this morning following confirmation of a flat performance in FY12. In the year to March, the managed infrastructure provider and reseller saw revenue rise by just 0.2% to £67.2m, but it did managed to trim costs and thus boost EBITDA.
So the results are in line with the trading update released back in April (see Redstone: profits OK, growth a challenge). Growth certainly was a challenge. If we factor in the acquisition of Fujin Systems in November 2010, Redstone’s revenue in FY12 must have declined in low single digits on an organic basis.
Despite facing substantial headwinds in its core public and finance verticals, Redstone managed to grow project revenue by 9% in the year, thanks in part to early commencement of a contract with a major bank. However, the company's strategy of building a strong managed services base took a hit, with a 7% decrease in annuity revenue.
A couple of things suggest better prospects for Redstone in FY13. There’s little data to go on, but contact wins and renewals, including managed services, do appear to have picked up over the past year or so. Meanwhile, Redstone has taken some difficult action around cost cutting and reorganisation. This included reducing the size of the workforce from 446 to 409 in the course of FY12 and putting together a more unified sales force. Indeed the cost cutting helped profitability during the year, with adjusted EBITDA rising from £1.1m to £5.2m. That said, the company still delivered an EBIT loss (of £219k) and a loss before tax. But at current course and speed, you’d surely expect it to get into the black in FY13.