TIDMSYS
RNS Number : 8091D
SysGroup PLC
26 June 2023
26 June 2023
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Final results for the year ended 31 March 2023
SysGroup plc (AIM:SYS), the multi award-winning technology
solutions provider, is pleased to announce its audited final
results for the period ended 31 March 2023.
HIGHLIGHTS
Financial
2023 2022 Change
%
Revenue GBP21.65m GBP14.75m 47%
Recurring revenue as a % of total
revenue 81% 87% -6%
Gross profit GBP11.10m GBP8.92m 24%
Adjusted EBITDA (1) GBP3.33m GBP2.82m 18%
Adjusted EBITDA (1) margin % 15% 19% -4%
Statutory (loss)/profit before GBP(0.10)m GBP0.60m -
tax
Adjusted PBT (2) GBP2.22m GBP2.04m 9%
Basic EPS 0.0p 0.9p -0.9p
Adjusted Basic EPS (3) 3.9p 3.6p 0.3p
Cashflow from operations GBP3.02m GBP2.47m 22%
Net (debt)/cash (4) GBP(1.32)m GBP2.99m -
Operational
-- Acquisitions of Truststream Security Solutions Limited
("Truststream") and Orchard Computers Limited ("Orchard")
o Truststream acquired for up to GBP7.9m, enhancing cyber
security offering and adding Edinburgh location
o Orchard acquired for GBP1m in cash, strengthening south west
operations
o Business operations and systems integration into SysGroup
completed
-- New GBP8.0m revolving credit facility secured with Santander
-- Consistently high customer satisfaction levels maintained
above our 97% target throughout the 12 month period
Post period-end developments
-- New go-to-market strategy launched simplifying our messaging to prospects and customers
-- Heejae Chae to join the Company as Executive Chairman with
Adam Binks stepping down after nine successful years
1. Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation of intangible assets, exceptional items,
and share based payments.
2. Adjusted profit before tax ("Adjusted PBT") is profit before
tax after adding back amortisation of intangible assets,
exceptional items, and share based payments.
3. Adjusted Basic EPS is profit after tax after adding back
amortisation of intangible assets, exceptional items, share based
payments and associated tax, divided by the weighted average number
of shares in issue.
4. Net (debt)/cash represents cash balances less bank loans and lease liabilities.
5. Adjusted operating expenses are administrative expenses
before depreciation, amortisation, exceptional items and share
based payments.
Adam Binks, Chief Executive Officer, commented:
"For the final time, I am delighted to report a positive set of
results to the market. I am grateful to the entire team for their
drive and commitment to helping SysGroup continue on its growth
journey. It's been yet another challenging period with many
external headwinds, however, we have pushed hard and continued to
flourish, demonstrated by the positive organic growth that has been
achieved.
Whilst I am sad to be leaving the Group, I am confident that now
is the right time for me to step aside as I leave a solid legacy
behind that allows the Group to continue to grow.
Finally, the Group has made a good start to the new financial
year with the first two months of the period both in line with the
Board's expectations which is testament to the hard work of the
brilliant team that we have built over the years. I wish the team
well for the future and look forward to continuing to watch
SysGroup go from strength to strength."
For further information please contact:
SysGroup plc Tel: 0151 559 1777
Adam Binks, Chief Executive Officer
Martin Audcent, Chief Financial Officer
Liberum (Nomad and Broker) Tel: 0203 100 2000
Edward Mansfield
Alma PR (Financial PR) Tel: 07780 901 979
Josh Royston
Matthew Young
About SysGroup
SysGroup is a multi-award-winning technology solutions provider
that creates value through technology transformation. Our mission
is to supercharge the UK mid-market and we have built our business
around our customers' challenges, enabling them to drive
productivity, increase their resilience, mitigate risk and become
more sustainable. Our bespoke solutions are at the forefront of
technology innovation, combining world-class, green technology
infrastructure with cutting-edge expertise and best-in-breed
partners.
The Group has offices in Bristol, Edinburgh, Liverpool, London,
Manchester and Newport.
For more information, visit http://www.sysgroup.com
Chairman's statement
In my final report as Chairman, I am pleased to report a year of
positive revenue growth for SysGroup as it successfully executed on
its growth strategy and navigated the challenging sector headwinds.
I am incredibly proud to have been Chairman of SysGroup for the
last fourteen years which has seen the Group achieve significant
change and growth both organically and through M&A.
Trading for the year has been strong with revenue and Adjusted
EBITDA both increasing in line with market expectations. It is
pleasing to see the strategic acquisitions of Truststream and
Orchard already contributing to total Group revenues. Both
businesses have proven to be valuable additions to our existing
operations, enhancing our service offering, expanding our
geographical presence, fostering new client relationships and cross
sell opportunities. The teams have been seamlessly integrated into
the Group placing us in a stronger position. Moreover, these
businesses have brought robust recurring revenue streams,
reinforcing our commitment to the Group's buy and build strategy
and solidifying our position as a consolidator within a highly
fragmented market.
Our people are at the centre of everything we do and I would
like to take this opportunity to sincerely thank all of them for
their continued diligence and dedication. We have worked hard to
create an environment which allows the diverse range of talent
within SysGroup to thrive and I believe that this will play a
significant part in our continued success. It is the commitment of
our people that has consistently propelled our customer
satisfaction levels beyond our set targets, and they continue to be
at the centre of our growth plans.
On behalf of the Board and the wider team, I would like to
extend our thanks to Adam Binks for his dedication and commitment
during his time as CEO of SysGroup. Adam has been central to the
growth of the Company over the last nine years and I know I speak
for all stakeholders by wishing him well for the future.
I would also like to take the opportunity to welcome Heejae Chae
to the Board, who will take over from me as Chair.
As the Group continues to invest in its services, execute on its
growth strategy and as companies begin to increase investment in
technology solutions, we have confidence in the midterm outlook for
SysGroup.
Michael Edelson
Chairman
23 June 2023
Chief Executive Officer's Report
Introduction
I am pleased to be able to report, for the final time as Chief
Executive, another year of progress for SysGroup, in spite of the
continued difficult economic backdrop. The Group met expectations
with revenue growth of 47% to GBP21.6m (FY22: GBP14.7m) and
Adjusted EBITDA(1) increased to GBP3.33m (FY22: GBP2.82m). The
growth in Group revenues was achieved through a combination of 6%
organic growth supplemented by the successful acquisitions of
Truststream and Orchard (the "Acquisitions"), both in April
2022.
Managed IT services revenues grew by GBP4.6m to GBP17.4m, but
reduced as a percentage of Group revenues to 80.6% (FY22: 87.1%)
with VAR sales more than doubling during the period to GBP4.2m
(FY22: GBP1.9m). Although the increased proportion of VAR impacts
the gross margin, it is a reassuring signal that companies are once
again committing to IT spend.
SysGroup's strong track record of cash generation continued,
with gross cash of GBP4.19m at the year-end (FY22: GBP4.13m),
achieved after payment of GBP5.39m (net of cash acquired) in
respect of the initial consideration payable for the Acquisitions.
As expected, following the Acquisitions and successful refinancing,
the Group has a net debt position of GBP1.32m excluding contingent
consideration (FY22: net cash GBP2.99m). The balance sheet
therefore remains very healthy with an Adjusted EBITDA(1) to net
debt ratio of 0.4x.
Acquisitions
The Board was pleased to complete two acquisitions early in the
financial year, being the first since 2019. Both were strategically
important, enhancing our geographical presence as well as
complementing our suite of services to meet the market needs.
We acquired Truststream for an initial cash consideration of
GBP4.8m on a cash free, debt free basis, and a maximum earn out
consideration of up to GBP3.075m over a 24 month period.
Truststream is a leading provider of professional and managed cyber
security services, providing SysGroup with greater expertise and an
expanded portfolio to target one of the fastest growing segments of
the market. With a strong client base covering both private and
public sectors, it covers all aspects of cyber security from
analysis and threat detection, through protection architecture and
implementation, to incident response and ongoing 24/7 support and
training.
Subsequently, the Group acquired Independent Network Solutions
Limited, which trades as Orchard Computers, a Bristol based managed
IT service provider, for GBP1.0m in cash. Orchard has been in
operation for over 30 years and has built a longstanding and
diverse customer base totalling over 120 active clients in 2021,
largely in the Southwest of England complementing the Group's
operations in South Wales. Orchard represents customers across a
broad range of sectors, covering both the private and public
sectors. It's managed IT service offering mirrors that of SysGroup,
providing high quality consulting services and building tailor
made, vendor agnostic solutions, designed specifically to meet
individual customer needs, followed by ongoing support.
At the time of the Truststream acquisition, the Company secured
a new GBP8.0m revolving credit facility with Santander to provide
additional financial flexibility for the Group. This facility has a
term of five years with covenants that will be tested quarterly
relating to total net debt to Adjusted EBITDA leverage and minimum
liquidity. The Group has drawn down GBP4.5m against the new
facility towards the funding of the Truststream Acquisition.
As a result of the Group's prior year investments in Project
Fusion, a project that provided the Group with a single operating
platform, the integration of both businesses has been both swift
and seamless. The integration of both finance operations, customer
relationship management and team members were completed during the
first half of the year and we have since completed integration of
all technical operations. In line with our strategic focus, both
businesses are now trading under the SysGroup brand.
Strategy
During the periods dominated by the COVID pandemic, the Group
focused on ensuring that we had the right structure and systems in
place to be able to scale our business, both organically and
through acquisitions, seamlessly and without friction. The success
of this has been demonstrated through the integration of both
Truststream and Orchard. We now have a group with a presence
throughout the United Kingdom able to serve the mid-market and
enterprise customers, all supported by a centralised sales and
marketing team.
During the year under review we refined and simplified our go to
market strategy. We know that we have the right solutions to meet
the demands that businesses currently face and to help them build
for the future, which is reflected in our outstanding levels of
client retention and customer satisfaction.
The technology transformation journey is more complex than ever
before and businesses need to rely on trusted advisors to help them
navigate the complexities. SysGroup now operates under a single
unified brand and all marketing material and sales collateral
centres around how we can help C-suite executives grow their
businesses and achieve their corporate ambitions. This includes a
revitalised website which is consistent with our values and sales
efforts. Rather than looking to engage with them on technical
detail, our approach centres around the key issues that they
encounter, such as: how better technology can help them to drive
productivity and deliver top line growth.; how they can increase
resilience through combatting threats, withstanding change and
ensuring continuity of their most important assets; how they can
mitigate risks to avoid any financial, operational or reputational
damage, and; how the power of technology can help them become more
sustainable by future proofing operations and accelerating their
journey to net zero.
This approach is not only applicable for gaining new clients but
also for growing within our existing estate. As a result of our
acquisitive nature there is still a significant proportion of our
client base that utilise no more than two of our core competencies.
As previously stated, we believe there is an opportunity to expand
within these customers and while some progress has been made to
date, our simplified message will drive this further.
People
I am pleased to report that the initial results of this refined
strategy have been encouraging. Organic growth of 6% in a difficult
market highlights that we are making progress and the feedback
internally is very supportive. The stability and continuity of
management and senior leadership teams has created a collaborative
culture in which participation and having a voice are encouraged
and evident.
Having been in this business for nine years and worked with many
of the team throughout that tenure, I am continually impressed by
the collective desire to improve as an organisation, to learn new
ways to develop our offering and the commitment to provide our
customers with the very best levels of service. This is once again
demonstrated by our customer satisfaction levels remaining above
our 97% target throughout the 12 month period and a trait that I am
certain will continue beyond my stewardship.
Summary and Outlook
The Group has delivered a robust performance with revenue and
Adjusted EBITDA increasing despite the challenging macroeconomic
environment impacting all businesses. We are pleased to report that
trading for the first two months of the new financial year are in
line with the Board's expectations, and as I look to leave the
business, I have confidence that SysGroup has the right platform to
succeed in today's technological world as it continues to support
business of all sizes find the right solutions to meet their
needs.
The foundations created through investment during my time as CEO
has placed SysGroup in a strong position to capitalise on the
market opportunity as it executes against its growth strategy. The
seamless integration of Truststream and Orchard serves to evidence
the strength of this position and our ability to bring in
complementary businesses which will expand our addressable market,
generate new client relationships and be immediately earnings
enhancing for the Group.
As we continue to invest in our expanded service offering, while
remaining committed to exploring further appropriate M&A
opportunities, we have great confidence in the mid-term outlook for
the Group.
SysGroup has built a fantastic team and it is clear that all of
the right systems and processes are in place to achieve sustainable
growth over the coming period and beyond. I would like to take this
opportunity to wish every success to the team as they continue to
take the Company further on its growth journey.
Adam Binks
Chief Executive Officer
23 June 2023
Chief Financial Officer's Report
Group Statement of Comprehensive Income
The Group delivered revenue of GBP21.65m (FY22: GBP14.75m), an
increase of 47% on the prior year, Adjusted EBITDA of GBP3.33m
(FY22: GBP2.82m), an increase of 18% compared to FY22, and a
statutory loss before tax of (GBP0.1m) (FY22: profit before tax of
GBP0.60m) The revenue and Adjusted EBITDA growth has principally
come from the acquisitions of Truststream and Orchard which were
both acquired in April 2022 and provided a full years' contribution
to the Group results, and overall the Group achieved organic
revenue growth of 6%.
The two acquisitions have performed well and in line with
expectations. Truststream's IT security services have proved to be
a strong area of growth with cyber security being a key concern for
our mid-market and enterprise level customers. The Orchard
business, which provides customers with a broad set of managed IT
services, has been integrated into the SysGroup operational
structure and it has been pleasing to see new business won during
the year whilst their customer churn has remained at relatively low
levels. Revenue in the core business has remained broadly level,
though we are seeing a stronger pipeline of opportunities.
In common with all companies, we have seen a rise in energy
costs and other supplier charges due to the high inflation economy
and impact from the geopolitical situation. Our contract terms with
customers have largely allowed us to pass price increases onto
customers although power consumption across our office footprint
has been absorbed into the overhead base.
Managed IT services revenue was GBP17.44m (FY22: GBP12.85m), an
increase of 36% on the prior year, and VAR revenue was GBP4.2m
(FY22: GBP1.9m), an increase of 121%. Organic growth was 4% and 14%
respectively for managed IT services and VAR revenue. The higher
VAR revenue performance has shifted the revenue mix to 81% managed
IT services and 19% VAR (FY22: 87%:13%) which is more in line with
our target revenue mix model. This shift back had been anticipated
following the acquisitions of Truststream and Orchard and we expect
a similar revenue mix in the forthcoming year.
Gross profit was GBP11.10m with a gross margin of 51.3% (FY22:
GBP8.92m and 60.5% respectively). Whilst gross profit has increased
with the larger size of the business, the gross margin percentage
has reduced as anticipated as a consequence of the acquisitions.
Truststream has a higher revenue mix of VAR sales compared to the
legacy SysGroup business and both Truststream and Orchard operate
at lower gross margins. The gross profit achieved in managed IT
services was GBP10.35m at 59.3% (FY22: GBP8.51m at 66.2%) with the
margin fall due to acquisition dilution and the gross profit
achieved in VAR sales was GBP0.75m at 17.8% (FY22: GBP0.41m at
21.5%) with the lower gross margin % due to the lower license sale
margins in the Truststream business.
Revenue by Operating
Segment 2023 2023 2022 2022
----------------------
GBP'000 % GBP'000 %
---------------------- -------- ----- -------- -----
Managed IT Services 17,441 81% 12,845 87%
Value Added Resale 4,206 19% 1,901 13%
Total 21,648 100% 14,746 100%
---------------------- -------- ----- -------- -----
Adjusted operating expenses (5) of GBP7.77m were GBP1.67m above
last year (FY22: GBP6.10m) as the overheads of the acquired
businesses have increased the cost base of the Group. The ratio of
overheads to revenue is 36% (FY22: 41%) which demonstrates the
economies of scale of a larger sized business. Notwithstanding the
general incidence of supplier cost increases, overhead costs were
managed well throughout the year and we continued to invest into
strategic areas of value such as employee training and development
as well as the ESG programme. During the year we opened a new
office in Edinburgh to provide the Truststream team with a
contemporary designed SysGroup branded office space with available
room for expansion.
Adjusted EBITDA was GBP3.33m for the twelve months to 31 March
2023 (FY22: GBP2.82m) which is an Adjusted EBITDA margin of 15.4%
(FY22: 19.1%). The lower margin percentage reflects the change in
the revenue and gross margin mix following the acquisitions of
Truststream and Orchard.
The consolidated income statement includes GBP0.41m of
exceptional costs which relate to professional fees for the
acquisitions of Truststream and Orchard, and costs associated with
the post-acquisition integration and restructuring activities. No
further exceptional costs are expected in FY24 in relation to these
acquisitions.
Amortisation of intangible assets was GBP1.74m (FY22: GBP1.24m)
in the year, of which GBP1.56m (FY22: GBP1.10m) relates to the
amortisation of acquired intangible assets from acquisitions and
GBP0.18m (FY22: GBP0.14m) relates to the amortisation of software
development and licence costs.
Finance costs increased in the year to GBP0.48m (FY22:
GBP0.13m), mainly from the increase in bank loan interest charges
following the GBP4.5m loan drawdown in April 2022 and the impact of
rising bank base rates. Finance costs also include GBP0.1m of
non-cash finance charges for the unwinding of discount on
contingent consideration and the amortisation of the loan
arrangement fee.
The share-based payments charge of GBP0.18m for the year (FY22:
GBP0.20m) relates to charges for the share options under the
Executive Director LTIP and Employee Management Incentive
schemes.
The reconciliation of operating profit to Adjusted EBITDA is
shown in the table below. The Directors consider that Adjusted
EBITDA is the most appropriate measure to assess the business
performance since this reflects the underlying trading performance
of the Group. Adjusted EBITDA is not a statutory measure and is
calculated differently by each company.
2023 2022
------------------------------------------------
Reconciliation of Operating profit to Adjusted
EBITDA GBP'000 GBP'000
------------------------------------------------ -------- --------
Operating profit 377 725
Depreciation 625 654
Amortisation of intangible assets 1,739 1,243
EBITDA 2,741 2,622
------------------------------------------------ -------- --------
Exceptional items 408 -
Share based payments 178 195
Adjusted EBITDA 3,328 2,817
------------------------------------------------ -------- --------
The Group has an adjusted profit before tax of GBP2.22m (FY22:
GBP2.04m) and a statutory loss before tax of GBP0.10m (FY22: profit
before tax GBP0.60m). The statutory loss before tax results from
having GBP0.41m of non-recurring exceptional costs, a GBP0.46m
increase in amortisation of acquired intangible assets, and an
increase in finance costs. Adjusted basic earnings per share was
3.9p (FY22: 3.6p) and basic earnings per share was 0.0p (FY22:
0.9p).
The table below shows the reconciliation of profit before
taxation to Adjusted profit before tax.
2023 2022
-----------------------------------
Adjusted Profit before tax GBP'000 GBP'000
----------------------------------- -------- --------
(Loss)/profit before taxation (105) 598
Amortisation of intangible assets 1,739 1,243
Exceptional items 408 -
Share based payments 178 195
Total 2,220 2,036
----------------------------------- -------- --------
Taxation
The Group has a tax credit of GBP0.10m this year (FY22: GBP0.15m
charge) which principally arises from the deferred tax credit
movement in the period. The corporation tax current charge has
increased to GBP0.37m (FY22: GBP0.03m) as a result of the larger
size of the group and the lower value of R&D tax credits
claimed this year. The deferred tax movement is a GBP0.47m credit
(FY22: GBP0.12m charge) due to the increase in amortisation of
acquired intangibles recognised in the Consolidated Statement of
Comprehensive Income.
The Group's tax charge is expected to increase in FY24 due to
the increase in the rate of corporation tax from 19% to 25% on 1
April 2023.
Cashflow & Net Debt
The Group's financial position moved from a net cash position of
GBP2.99m at 31 March 2022 to a net debt position of GBP1.32m at 31
March 2023, excluding the GBP2.68m of contingent consideration. The
gross cash balance at 31 March 2023 was GBP4.19m (FY22: GBP4.13m)
and cash conversion remained strong at 103% (FY22: 88%). We
consider net (debt)/cash to be a KPI of the business since the
level of cash availability and financial indebtedness of the Group
is relevant for Board strategic decisions and a key financial
measure for the Group's shareholder base and potential
investors.
The structural shift in the Group's net (debt)/cash position has
arisen from the GBP1.0m acquisition of Orchard, which was financed
entirely from the Group's existing cash balances, and the
Truststream acquisition which was funded by GBP0.85m of the Group's
existing cash resources and GBP4.5m from funds drawn from the new
GBP8.0m revolving credit facility. The GBP2.68m contingent
consideration liability is payable in two tranches based on the
EBITDA performance of Truststream in the first twelve months and
second twelve month period following acquisition.
2023 2022
--------------------------------------
Net debt GBP'000 GBP'000
-------------------------------------- -------- --------
Cash balances 4,186 4,133
Bank loans - current - (416)
Bank loans - non-current (4,705) (387)
Net (debt)/cash before lease
liabilities (519) 3,330
Lease liabilities - equipment - (8)
Lease liabilities - property (803) (331)
Net (debt)/cash (1,322) 2,991
-------------------------------------- -------- --------
Contingent consideration (2,681) -
Net (debt)/cash including contingent
consideration (4,003) 2,991
-------------------------------------- -------- --------
Cashflow from operations was GBP3.02m (FY22: GBP2.47m) and cash
conversion was strong at 103% (FY22: 88%) which compares to the
target cash conversion range of 80-90%. Working capital continues
to be managed well with debtor days below the target level of 25
days at year end and suppliers routinely paid in our monthly
payment runs to agreed terms. All exceptional costs were paid in
cash during the year.
2023 2022
--------------------------------------------
Cash conversion GBP'000 GBP'000
-------------------------------------------- -------- --------
Cashflow from operations 3,034 2,468
Adjustments:
Acquisition, integration and restructuring 408 -
cashflows
Cash generated from operations 3,442 2,468
-------------------------------------------- -------- --------
Adjusted EBITDA 3,328 2,817
-------------------------------------------- -------- --------
Cash conversion 103% 88%
-------------------------------------------- -------- --------
The Consolidated Statement of Cashflows reflects the
acquisitions of Truststream and Orchard including the amounts paid
to acquire the companies and the bank loan drawdown used to part
fund them. The company made a repayment of GBP0.6m on loans during
the year. The cash outflow for property, plant and equipment of
GBP0.25m (FY22: GBP0.62m) includes the expenditure on the Edinburgh
office fit-out and the payments to acquire intangible assets
includes the capitalisation of software development costs for a new
financial system that was implemented in April this year.
New GBP8.0m Revolving Credit Facility
In April 2022, the Company re-financed its existing term loan
facility of GBP1.75m and its undrawn acquisition revolving credit
facility ("RCF") of GBP3.25m and replaced both with a new GBP8.0m
RCF provided by Santander to provide additional financial
flexibility for acquisitions and working capital requirements. The
Group drew down GBP4.5m of RCF funds to finance the acquisition of
Truststream.
The new banking facility has a five year term which expires in
April 2027 and carries an interest rate of base rate +3.25% on
drawn funds and 1.3% on undrawn funds. The bank covenants in the
RCF are tested quarterly and calculated on total net debt to
Adjusted EBITDA leverage and minimum liquidity. All bank covenants
were met during the year with a comfortable level of headroom.
Consolidated Statement of Financial Position
The Group's total net assets of GBP39.1m at 31 March 2023
represent an increase of GBP11.5m compared to the prior year (FY22:
GBP27.6m).
Non-current assets of GBP29.9m (FY22: GBP21.4m) have increased
by GBP8.5m principally as a result of the additions to goodwill and
acquired intangible assets from the Truststream and Orchard
acquisitions. Property, Plant & Equipment of GBP2.0m has
increased by GBP0.5m compared to the prior year which is mainly
from new and renewed property leases that are recognised as "right
of use" assets.
Working capital was managed well throughout the year. The gross
trade debtor balance of GBP1.71m compares to GBP1.15m in the
previous year despite the increase in size of the Group. The
prepayment balance of GBP3.3m (FY22: GBP0.9m) and the contract
liabilities balance (aka. "deferred income") of GBP4.0m (FY22;
GBP1.5m), have both increased significantly. This is due to the
working capital model of the Truststream business where customers
are typically invoiced annually in advance and costs from suppliers
are typically received annually in advance. Accordingly, the
respective income and costs are deferred on the balance sheet and
recognised over the period of the contracts.
Share Option Grants
In June 2022, the Remuneration Committee granted 284,010
performance shares to Adam Binks, Chief Executive Officer, and
170,406 performance shares to Martin Audcent, Chief Financial
Officer, in relation the Group's performance in FY22 and under the
terms of the 2020 SysGroup Long Term Incentive Plan. Following the
year end date, the Remuneration Committee granted 362,709
performance shares to Adam Binks and 204,024 performance shares to
Martin Audcent, in relation the Group's performance in FY23 and
under the terms of the same plan.
Martin Audcent
Chief Financial Officer
23 June 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2023
2023 2022
Group Group
Notes GBP'000 GBP'000
Revenue 3 21,648 14,746
Cost of sales (10,552) (5,826)
Gross profit 11,096 8,920
----------------------------------------- ------ --------- --------
Operating expenses before depreciation,
amortisation, exceptional items and
share based payments (7,768) (6,103)
Adjusted EBITDA 3,328 2,817
----------------------------------------- ------ --------- --------
Depreciation (625) (654)
Amortisation of intangibles 9 (1,739) (1,243)
Exceptional items 5 (408) -
Share based payments (178) (195)
Administrative expenses (10,718) (8,195)
Operating profit 378 725
----------------------------------------- ------ --------- --------
Finance costs 4 (483) (127)
----------------------------------------- ------ --------- --------
(Loss)/profit before taxation (105) 598
Taxation 8 98 (147)
----------------------------------------- ------ --------- --------
Total comprehensive (loss)/profit
attributable to the equity holders
of the company (7) 451
----------------------------------------- ------ --------- --------
Basic earnings per share (EPS) 7 0.0p 0.9p
Diluted earnings per share (EPS) 7 0.0p 0.9p
----------------------------------------- ------ --------- --------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2023
2023 2022
Group Group
Notes GBP'000 GBP'000
Assets
------------------------------------------------ ------ -------- --------
Non-current assets
Goodwill 9 21,666 15,554
Intangible assets 9 6,295 4,318
Property, plant and equipment 1,966 1,478
29,927 21,350
------------------------------------------------ ------ -------- --------
Current assets
Trade and other receivables 10 5,007 2,079
Cash and cash equivalents 4,186 4,133
9,193 6,212
------------------------------------------------ ------ -------- --------
Total Assets 39,120 27,562
------------------------------------------------ ------ -------- --------
Equity and Liabilities
Equity attributable to the equity shareholders
of the parent
Called up share capital 494 494
Share premium reserve 9,080 9,080
Treasury reserve (201) (201)
Other reserve 3,205 3,027
Translation reserve - 4
Retained earnings 8,851 8,854
================================================ ====== ======== ========
21,429 21,258
------------------------------------------------ ------ -------- --------
Non-current liabilities
Lease liabilities 13 621 195
Contract liabilities 383 296
Contingent consideration 11 1,875 -
Provisions 12 191 -
Deferred taxation 8 1,434 1,011
Bank loan 13 4,705 387
9,209 1,889
------------------------------------------------ ------ -------- --------
Current liabilities
Trade and other payables 11 3,861 2,692
Lease liabilities 13 182 144
Contract liabilities 3,633 1,163
Contingent consideration 11 806 -
Bank loan 13 - 416
8,482 4,415
------------------------------------------------ ------ -------- --------
Total Equity and Liabilities 39,120 27,562
------------------------------------------------ ------ -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2023
Attributable to equity holders of the parent
Share
Share premium Treasury Other Translation Retained
capital account reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- --------- --------- --------- ------------ ---------- --------
As at 1 April 2021 494 9,080 (201) 2,832 4 8,403 20,612
----------------------- --------- --------- --------- --------- ------------ ---------- --------
Comprehensive income
Profit for the period - - - - - 451 451
Total Comprehensive
income - - - - - 451 451
----------------------- --------- --------- --------- --------- ------------ ---------- --------
Distributions to
owners
Share options charge - - - 195 - - 195
Total Distributions
to owners - - - 195 - - 195
----------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 March 2022 494 9,080 (201) 3,027 4 8,854 21,258
----------------------- --------- --------- --------- --------- ------------ ---------- --------
As at 1 April 2022 494 9,080 (201) 3,027 4 8,854 21,258
----------------------- --------- --------- --------- --------- ------------ ---------- --------
Comprehensive income
Loss for the period - - - - (4) (3) (7)
Total Comprehensive
income - - - - (4) (3) (7)
----------------------- --------- --------- --------- --------- ------------ ---------- --------
Distributions to
owners
Share options charge - - - 178 - - 178
Total Distributions
to owners - - - 178 - - 178
----------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 March 2023 494 9,080 (201) 3,205 - 8,851 21,429
----------------------- --------- --------- --------- --------- ------------ ---------- --------
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 31 MARCH 2023
2023 2022
Group Group
Notes GBP'000 GBP'000
------------------------------------------------- ------ -------- --------
Cashflows used in operating activities
(Loss)/profit after tax (7) 451
Adjustments for:
Depreciation and amortisation 2,364 1,897
Finance costs 483 127
Share based payments 178 195
Taxation (credit)/charge (98) 147
Operating cashflows before movement in
working capital 2,920 2,817
------------------------------------------------- ------ -------- --------
Increase in trade and other receivables (737) (354)
Increase in trade and other payables 837 5
Cashflow from operations 3,020 2,468
------------------------------------------------- ------ -------- --------
Taxation paid (303) (159)
Net cash from operating activities 2,717 2,309
------------------------------------------------- ------ -------- --------
Cashflows from investing activities
Payments to acquire property, plant & equipment (252) (620)
Payments to acquire intangible assets 9 (163) (271)
Acquisition of subsidiary net of cash acquired 6 (5,389) -
Net cash used in investing activities (5,804) (891)
------------------------------------------------- ------ -------- --------
Cashflows from financing activities
Bank loans drawdown 4,500 -
Payment of bank loan arrangement fee (127) -
Repayment of bank loans (582) (417)
Capital/principal paid on lease liabilities (303) (256)
Interest paid on loan facility (316) (67)
Interest paid on lease liabilities (32) (18)
Net cash from/(used in) financing activities 3,140 (758)
------------------------------------------------- ------ -------- --------
Net increase in cash and cash equivalents 53 660
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the beginning
of the year 4,133 3,473
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end of
the year 4,186 4,133
------------------------------------------------- ------ -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2023
1. Accounting policies
SysGroup Plc (the 'Company') is a Company incorporated and
domiciled in the United Kingdom. The Company's registered office is
at Walker House, Exchange Flags, Liverpool, L2 3YL.
Statement of compliance
This consolidated financial information does not comprise
statutory accounts within the meaning of section 434 of the
Companies Act 2006. The comparative figures for the financial year
ended 31 March 2022 are an extract of the Company's statutory
accounts for the year ended 31 March 2022, prepared in accordance
with International Financial Reporting Standards (IFRS), approved
by the Board of Directors on 17 June 2022 and delivered to the
Registrar of Companies. The report of the auditor on those accounts
was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 (2) or (3) of
the Companies Act 2006.
The statutory accounts for the year ended 31 March 2023 will be
delivered to the Registrar of Companies following the Company's
Annual General Meeting. The Auditors have reported on those
accounts; their report was unqualified, did not contain an emphasis
of matter paragraph and did not contain any statement under section
498 (2) or (3) of the Companies Act 2006.
The Group and Company financial statements have been prepared in
accordance with UK adopted international accounting standards
("endorsed IFRS") and with those parts of the Companies Act 2006
applicable to companies preparing their accounts under endorsed
IFRS. While the financial information included in this annual
financial results announcement has been prepared in accordance with
the recognition and measurement principles of international
accounting standards in conformity with the requirements of
Companies Act 2006, this announcement does not contain sufficient
information to comply with IFRS.
Basis of preparation
The principal accounting policies have been consistently applied
to all the years presented, unless otherwise stated. The
consolidated financial statements have been prepared under the
historical cost basis, except for the revaluation of certain
financial liabilities and share based payments which have been
valued in accordance with IFRS9 and IFRS2 respectively.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note 2.
The financial statements are presented in pounds sterling, rounded
to the nearest thousand, unless otherwise stated.
Going concern
The Directors have prepared the financial statements on a going
concern basis which assumes that the Group and the Company will
continue to meet liabilities as they fall due.
The Directors have reviewed the Base business forecast and a
Sensitised version for the period to 30 June 2024 and taken into
account the forecasts that support the business viability for the
period to 31 March 2025.
In the Base forecast there is significant headroom in the bank
covenants as the business continues to operate with a high level of
cash conversion and a reducing level of net debt. In the Sensitised
forecast, which includes assumptions for a significant decline in
revenue and profits, the Group maintains positive gross cash
balances, reduce net debt and stays within the bank covenants. The
Group has a business model with a high degree of financial
resilience since circa 80% of revenue is derived from contracted
managed IT services which is a continuous and business critical
service supply to customers. This provides a high level of
operating cash generation.
At 31 March 2023, the Group had a gross cash balance of GBP4.19m
and a net debt position of GBP1.3m, excluding contingent
consideration of GBP2.68m. The Group has a GBP0.5m unused overdraft
facility and GBP3.2m of undrawn headroom in its RCF Loan facility
which is available for working capital and acquisitions.
The forecasts, the resultant cashflows, together with the RCF
loan facilities, taking account of reasonably possible changes in
trading performance, show that the Group can continue to operate
within the current facilities available to it.
The Directors therefore have a reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future and thus they continue to adopt the
going concern basis of accounting in preparing the financial
statements.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee;
exposure to variable returns from the investee; and the ability of
the investor to use its power to affect those variable returns.
Control is re-assessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between Group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquirer's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Board
of Directors.
Alternative profit measures
In reporting its results, the Directors have presented various
alternative profit measures (APMs) of financial performance,
position or cashflows, which are not defined or specified under the
requirements of IFRS. On the basis that these measures are not
defined by IFRS, they may not be directly comparable with other
companies. The key APMs that the group uses include recurring
revenue as a percentage of revenue, Adjusted EBITDA, Adjusted PBT,
Adjusted EPS and Net cash.
The Group makes certain adjustments to the statutory profit in
order to derive many of these APMs. These include exceptional items
and share based payments. The group presents as exceptional items
on the face of the Statement of Comprehensive Income those material
items of income and expense which the Directors consider, because
of their size or nature and expected non-recurrence, merit separate
presentation to facilitate financial comparison with prior periods
and to assess trends in financial performance. Exceptional items
are included in Administration expenses in the Consolidated
Statement of Comprehensive Income but excluded from Adjusted EBITDA
as management believe they should be considered separately to gain
an understanding of the underlying profitability of the trading
businesses on a consistent basis from year to year.
2. Significant accounting estimates and judgements
The preparation of this financial information requires
management to make estimates and judgements that affect the amounts
reported for assets and liabilities at the period end date and the
amounts reported for revenues and expenses during each period. The
nature of the estimation or judgement means that actual outcomes
could differ from the estimates and judgements taken in the
preparation of the financial statements.
Significant accounting estimates
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment annually and in line
with the stated accounting policy. This involves judgement
regarding the future development of the business and the estimation
of the level of future profitability and cash flows to support the
carrying value of goodwill.
An impairment review has been performed at the reporting date
taking into account sensitivities around future business
performance, covering a range of outcomes and risks over levels of
revenue, cost and cash generation. No impairment has been
identified.
Valuation of intangible assets acquired in business
combinations
Determining the fair value of customer relationships acquired in
business combinations requires estimation of the value of the cash
flows related to those relationships and a suitable discount rate
in order to calculate the present value. In FY23, there was a
requirement to assess the valuation of intangible assets acquired
for the acquisitions of Truststream Security Services Limited and
Orchard Computers Limited.
Contingent consideration
The Group has a contingent consideration liability which is
based on the future performance of an acquired company. When
valuing the contingent consideration still payable on acquisitions,
the Group considers various factors including the performance of
the acquired entity since acquisition together with an estimate of
the expected future trading performance for the period to the
expiry of the earn-out period. Contingent consideration is
recognised at, and carried thereafter at, fair value. All changes
in fair value (other than measurement period adjustments) are
reflected in the income statement.
Significant accounting judgements
Going concern
The Board have approved an Annual Operating Plan for FY24 and a
forecast to 31 March 2025, and management have exercised judgement
in the preparation of the financial forecasts particularly on the
level of future sales, customer contract uplifts and cancellations,
and working capital assumptions. The Board have reviewed the
Group's financial forecasts and a Sensitised model in order to
assess the Group's business viability and to form a judgement on
going concern. Having reviewed the forecasts the Board were
satisfied that the Group remains a going concern.
Revenue
Management make judgements in determining the appropriate
application of revenue recognition policies to the sale of services
and products.
Assessment of CGU's and carrying value of intangible assets
A CGU is the smallest identifiable group of assets that generate
cash inflows that are largely independent of the cash inflows from
other assets or groups of assets and the Board of Directors use
their judgement to identify the CGUs of the Group. When SysGroup
acquire a company, the newly acquired business is usually allocated
its own CGU for the first year and until such time as either the
business and assets have been hived up into the main SysGroup
trading company or when the systems, finances & management of
the business have been successfully integrated, whichever is
earlier
The Board have reviewed the Group's CGU's following the
acquisition of Truststream Security Services Limited and Orchard
Computers Limited in April 2022 and have concluded that Truststream
is a separate CGU at 31 March 2023 and Orchard is part of the IT
Managed Services CGU.
Useful economic lives of intangible assets
Intangible assets are amortised over their useful economic
lives. Useful lives are based on management's estimates of the
period over which the assets will generate revenue, which are
periodically reviewed for continued appropriateness. Changes to
estimates can result in changes in the carrying values and hence
amounts charged to the income statement in particular periods which
could be significant. The Group have capitalised system development
expenditure in the current year and the intangible asset is being
amortised over a five-year useful life which the Directors consider
appropriate.
IFR16 - Leases
Management make judgements in their assessment of lease contract
agreements to ensure the appropriate lease accounting recognition
under IFRS16 - Leases. The main elements of judgement are:
-- Determining the inherent rate of interest which applies to
each lease or family of leases with similar characteristics;
-- Establishing whether or not it is reasonably certain that an
extension option will be exercised; and
-- Considering whether or not it is reasonably certain that a
termination option will not be exercised.
3 Segmental analysis
The chief operating decision maker for the Group is the Board of
Directors . The Group reports in two segments:
-- Managed IT Services - this segment provides all forms of
managed services to customers and includes professional
services.
-- Value Added Resale (VAR) - this segment provides all forms of
VAR sales where the business sells products and licences from
supplier partners.
The monthly management accounts reported to the Board of
Directors are reviewed at a consolidated level with the operating
segments representative of the business model for growth of
recurring contract income in Managed IT Services and VAR sales as a
complementary business activity. The Board review the results of
the operating segments at a revenue and gross profit level since
the Group's management and operational structure supports both
operational segments as Group functions. In this respect, assets
and liabilities are also not reviewed on a segmental basis. All
assets are located in the UK. All segments are continuing
operations and there are no transactions between segments.
2023 2023 2022 2022
Revenue by operating segment GBP'000 % GBP'000 %
------------------------------ ------------------ ------ -------- --------
Managed IT Services 17,441 81% 12,845 87%
Value Added Resale 4,207 19% 1,901 13%
Total 21,648 100% 14,746 100%
------------------------------ ------------------ ------ -------- --------
No individual customer accounts for more than 7% of
the Group's revenue.
The revenue by geographic location for where services are
delivered to customers is shown below.
2023 2023 2022 2022
GBP'000 % GBP'000 %
------------------------------ ------------------ ------ -------- --------
UK 21,608 100% 14,706 100%
Rest of World 40 - 40 -
============================== ================== ====== ======== ========
21,648 100% 14,746 100%
------------------------------ ------------------ ------ -------- --------
2023 2022
GBP'000 GBP'000
------------------------------ ------------------ ------ -------- --------
Revenue
Managed IT Services 17,441 12,845
Value Added Resale 4,207 1,901
Total 21,648 14,746
------------------------------ ------------------ ------ -------- --------
Gross Profit
Managed IT Services 10,349 8,511
Value Added Resale 747 409
======== ========
Total 11,096 8,920
------------------------------ ------------------ ------ -------- --------
4 Finance expense
2023 2022
GBP'000 GBP'000
--------------------------------------- -------- --------
Interest payable on bank loan 307 80
Unwind of discounting on contingent 105 -
consideration
Interest payable on lease liabilities 32 20
Arrangement fee amortisation on bank
loan 29 27
Other interest 10 -
483 127
--------------------------------------- -------- --------
5 Exceptional items
2023 2022
GBP'000 GBP'000
------------------------------------- -------- --------
Integration and restructuring costs 189 -
Acquisition costs 219 -
Total 408 -
------------------------------------- -------- --------
The acquisitions cost of GBP219,000 relates to professional fees
and other costs incurred in the acquisitions of Truststream and
Independent Network Solutions Limited (trading as Orchard IT).
Integration and restructuring costs of GBP189,000 in relation to
employee exit costs and professional fees.
6 Acquisitions
In April 2022, SysGroup plc acquired 100% of the issued share
capital in Truststream Security Solutions Limited ("Truststream")
and Independent Network Solutions Limited ("INSL", holding company
of Orchard Computers Limited).
Truststream Security Solutions Limited
Established in 2011 and based in Edinburgh, Truststream is one
of the UK's fastest growing providers of professional and managed
cyber security services. Truststream covers all aspects of cyber
security from analysis and threat detection, through protection
architecture and implementation, to incident response and ongoing
24/7 support and training. The Acquisition further enhances
SysGroup's service offering and is complementary to the Group's
core expertise and key areas of focus. In addition, the Acquisition
enables the Group to further strengthen its UK presence by opening
up Scotland as an attractive hub for the Group.
SysGroup acquired Truststream on 4 April 2023 for GBP4.8m
initial cash consideration on a cash-free debt-free basis with an
earn-out payable following the first and second anniversaries of
the transaction of up to GBP3.075m. A payment of GBP0.53m was paid
in respect of the cash and debt balances. The earn-out is subject
to the achievement of certain maintainable EBITDA performance
targets in the first and second 12 month periods following the
completion of the acquisition.
The Truststream acquisition was mainly funded from a new GBP8.0m
revolving credit facility ("RCF") which was signed with Santander
on 4 April 2023. SysGroup utilised GBP4.5m of funds from the RCF to
finance the acquisition.
Recognised amounts of net assets acquired Book Fair
and liabilities assumed Value FV Adj Value
----------------------------------------------
GBP'000 GBP'000 GBP'000
------------------------------------ -------- -------- -------- --------
Cash and cash equivalents 550 - 550
Trade and other receivables 1,783 - 1,783
Property, plant and equipment 1 - 1
Intangible assets - 2,525 2,525
Trade and other payables (1,776) (24) (1,800)
Corporation tax (117) - (117)
Deferred tax - (631) (631)
---------------------------------------------- -------- -------- --------
Identifiable net assets 2,311
Goodwill 5,602
Total net assets 7,913
---------------------------------------------- -------- -------- --------
Satisfied by:
Cash consideration - paid on acquisition 5,337
Contingent consideration 2,754
Discounting of contingent consideration (178)
Total consideration 7,913
---------------------------------------------- -------- -------- --------
Independent Network Solutions Limited
INSL is the holding company of Orchard Computers Limited
("Orchard") which is a business based in Bristol. Orchard has been
in operation for over 30 years and has built a loyal customer base
largely in the South West of England and across a broad range of
sectors, covering both the private and public sectors. Its managed
IT service offering mirrors that of SysGroup, providing high
quality consulting services and building tailor made, vendor
agnostic solutions, designed specifically to meet individual
customer needs, followed by ongoing support.
SysGroup acquired INSL on 26 April 2023 for GBP1.0m cash
consideration on a cash-free debt-free basis. There is no
contingent or deferred consideration for this acquisition. The cash
consideration was funded from the Group's existing cash
balances.
Recognised amounts of net assets acquired Book Fair
and liabilities assumed Value FV Adj Value
--------------------------------------------
GBP'000 GBP'000 GBP'000
-------------------------------------------- ---------- -------- ----------
Cash and cash equivalents 398 - 398
Trade and other receivables 311 (15) 296
Property, plant and equipment 32 (32) -
Intangible assets - 1,028 1,028
Trade and other payables (385) (435) (820)
Bank loan (82) - (82)
Corporation tax (63) (5) (68)
Deferred tax (5) (257) (262)
-------------------------------------------- ---------- -------- ----------
Identifiable net assets 490
Goodwill 510
Total net assets 1,000
-------------------------------------------- ---------- -------- ----------
Satisfied by:
Cash consideration - paid on acquisition 1,000
Total consideration 1,000
-------------------------------------------------- ---- ------------ ------
The Directors have considered the intangible assets acquired
with the two acquisitions and have recognized intangible assets for
customer relationships which have been calculated using a
discounted cashflow method, based on the estimated level of profit
to be generated from the customer bases acquired. A post tax
discount rate of 9.40% was used in the valuations and the customer
relationships are being amortised over an estimated useful life of
7 years for Truststream and 10 years for Orchard. The goodwill
arising on both acquisitions are attributable to the technical
skills of the workforce and cross-selling opportunities achievable
from combining the acquired customer bases and trade with the
existing Group.
The goodwill and intangible assets of Truststream have been
allocated to a new CGU named "Truststream" and the goodwill and
intangible assets of Orchard have been allocated to the CGU "IT
Managed Services." The Company incurred GBP218,000 of professional
fees and other acquisition costs in relation to the two
acquisitions. These costs are included as Exceptional costs in the
Group's consolidated statement of comprehensive income.
Truststream contributed GBP4.9m to Group revenue and GBP0.3m
profit before tax for the twelve month period to 31 March 2023.
Orchard was acquired on 26 April 2022 under a lock box mechanism
which fixed the financial returns to the Group from 1 April 2022.
Orchard contributed GBP1.8m to Group revenue and GBP0.1m profit
before tax for the twelve month period to 31 March 2023 .
7 Earnings per share
2023 2022
------------------------------------------- -------------- --------------
(Loss)/profit for the financial year (GBP7,000) GBP451,000
attributable to shareholders
Adjusted profit for the financial year GBP1,917,000 GBP1,748,000
Weighted number of issued equity shares 48,859,690 48,859,690
Weighted number of equity shares for
diluted EPS calculation 52,274,633 51,983,666
Adjusted basic earnings per share (pence) 3.9p 3.6p
Basic earnings per share (pence) 0.0p 0.9p
Diluted earnings per share (pence) 0.0p 0.9p
------------------------------------------- -------------- --------------
2023 2022
GBP'000 GBP'000
---------------------- ----------------------
(Loss)/profit after tax used for basic
earnings per share (7) 451
Amortisation of intangible assets 1,739 1,243
Exceptional items 408 -
Share based payments 178 195
Tax adjustments (401) (141)
---------------------------------------- ---------------------- ----------------------
Adjusted profit used for Adjusted
Earnings per Share 1,917 1,748
---------------------------------------- ---------------------- ----------------------
8 Taxation
2023 2022
Current tax GBP'000 GBP'000
--------------------------------------- -------- --------
Current tax - current year 374 120
Adjustments in respect of prior years - (94)
Total current tax charge 374 26
--------------------------------------- -------- --------
Deferred tax
Deferred tax - timing differences (472) 121
Total deferred tax (472) 121
--------------------------------------- -------- --------
Total tax (credit)/charge (98) 147
--------------------------------------- -------- --------
The effective tax rate for the year to 31 March 2023
is higher (2022:higher) than the standard rate of corporation
tax in the UK. The differences are explained below:
2023 2022
GBP'000 GBP'000
(Loss)/profit on ordinary activities
before tax (105) 598
------------------------------------------------ ---------------------- ---------------------
(Loss)/profit on ordinary activities
before taxation multiplied by the standard
rate of UK corporation tax of 19% (2022:19%) (19) 114
Effects of:
Expenses not deductible 92 34
Prior year adjustment - (94)
Short term timing differences 98 -
R&D tax credits (29) -
Re-measurement of deferred tax due to
changes in UK rate (66) 142
Deferred tax on share based payments 32 6
Deferred tax on acquired intangibles (206) -
Use of brought forward losses - (55)
Total tax credit/(charge) (98) 147
------------------------------------------------ ---------------------- ---------------------
Factors affecting future tax charges:
Deferred tax balances are recognised at 25% (2022: 19%) following
UK government legislation to increase the rate of corporation
tax from 19% to 25% on 1 April 2023.
9 Intangible assets
Systems Software Customer Positive
Group Development licences relationships goodwill Total
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2021 802 205 9,156 15,554 25,717
Additions 271 - - - 271
At 31 March 2022 1,073 205 9,156 15,554 25,988
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2022 1,073 205 9,156 15,554 25,988
Additions 163 - 3,553 6,112 9,828
Disposals (225) (205) - - (430)
At 31 March 2023 1,011 - 12,709 21,666 35,386
-------------------------- ------------- ---------- --------------- ---------- --------
Accumulated amortisation
At 1 April 2021 264 201 4,408 - 4,873
Charge for the
year 140 4 1,099 - 1,243
========================== ============= ========== =============== ========== ========
At 31 March 2022 404 205 5,507 - 6,116
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2022 404 205 5,507 - 6,116
Charge for the
year 177 - 1,562 - 1,739
Disposals (225) (205) - - (430)
========
At 31 March 2023 356 - 7,069 - 7,425
-------------------------- ------------- ---------- --------------- ---------- --------
Net book value
At 31 March 2022 669 - 3,649 15,554 19,872
-------------------------- ------------- ---------- --------------- ---------- --------
At 31 March 2023 655 - 5,640 21,666 27,961
-------------------------- ------------- ---------- --------------- ---------- --------
10 Trade and other receivables
Group Group
2023 2022
Amounts due within one year GBP'000 GBP'000
------------------------------ ------------------- ----------
Trade debtors 1,706 1,154
Prepayments 3,301 925
Total 5,007 2,079
------------------------------ ------------------- ----------
11 Trade and other payables
Group Group
2023 2022
Amounts due within one year GBP'000 GBP'000
---------------------------------------- --------- --------
Trade payables 1,813 1,116
Amounts due to subsidiaries - -
Accruals 988 889
---------------------------------------- --------- --------
Total financial liabilities,
excluding loans and borrowings
measured at amortised cost 2,801 2,005
Corporation tax 438 188
Other taxes and social security
costs 622 499
Total 3,861 2,692
---------------------------------------- --------- --------
Amounts due to subsidiaries are due on demand and incur
no interest charge.
Group Group
Contingent consideration 2023 2022
Amounts due within one year GBP'000 GBP'000
---------------------------------------- --------- --------
Contingent consideration 806 -
---------------------------------------- --------- --------
Amounts due after one year
---------------------------------------- --------- --------
Contingent consideration 1,949 -
Discounted value (74) -
======================================== ========= ========
Discounted contingent consideration 1,875 -
---------------------------------------- --------- --------
The contingent consideration is stated at its discounted fair
value. The consideration is expected to be paid in two tranches in
H1 FY24 and H1 FY25, following the completion of the Year 1 and
Year 2 earn-out periods and subject to the terms of the earn-out
mechanism.
12 Provisions
Group Group
2023 2022
GBP'000 GBP'000
------------------------- -------- --------
Dilapidations provision 191 -
Total 191 -
------------------------- -------- --------
The provision is for the estimated aggregate cost of returning
the Group's offices to their original condition on
the expiry and exit of the property leases. Currently the leases
extend to between 2026 and 2028.
13 Loans and borrowings
Group Group
2023 2022
Non- current GBP'000 GBP'000
------------------- -------- --------
Lease liabilities 621 195
Bank loan 4,705 387
Total 5,326 582
------------------- -------- --------
Group Group
2023 2022
Current GBP'000 GBP'000
------------------- -------- --------
Lease liabilities 182 144
Bank loan - 416
Total 182 560
------------------- -------- --------
In April 2022, SysGroup plc re-financed its existing term loan
facility of GBP1.75m and its undrawn acquisition revolving credit
facility of GBP3.25m and replaced both with a new GBP8.0m revolving
credit facility with Santander to provide additional financial
flexibility for the Group. The new banking facility has a term of
five years, an interest rate of Base Rate +3.25% margin on drawn
funds and covenants that will be tested quarterly relating to total
net debt to Adjusted EBITDA leverage and minimum liquidity. The
Group drew down GBP4.5m of RCF funds for the Truststream
acquisition in April 2022.
Certain statements included or incorporated by reference within
this announcement may constitute "forward-looking statements" in
respect of the Group's operations, performance, prospects and/or
financial condition. Forward-looking statements are sometimes, but
not always, identified by their use of a date in the future or such
words and words of similar meaning as "anticipates", "aims", "due",
"could", "may", "will", "should", "expects", "believes", "intends",
"plans", "potential", "targets", "goal" or "estimates". By their
nature, forward looking statements involve a number of risks,
uncertainties and assumptions and actual results or events may
differ materially from those expressed or implied by those
statements. Accordingly, no assurance can be given that any
particular expectation will be met and reliance should not be
placed on any forward-looking statement. Additionally,
forward-looking statements regarding past trends or activities
should not be taken as a representation that such trends or
activities will continue in the future. No responsibility or
obligation is accepted to update or revise any forward-looking
statement resulting from new information, future events or
otherwise. Nothing in this announcement should be construed as a
profit forecast. This announcement does not constitute or form part
of any offer or invitation to sell, or any solicitation of any
offer to purchase any shares or other securities in the Company,
nor shall it or any part of it or the fact of its distribution form
the basis of, or be relied on in connection with, any contract or
commitment or investment decisions relating thereto, nor does it
constitute a recommendation regarding the shares or other
securities of the Company. Past performance cannot be relied upon
as a guide to future performance and persons needing advice should
consult an independent financial adviser. Statements in this
announcement reflect the knowledge and information available at the
time of its preparation. Liability arising from anything in this
announcement shall be governed by English law. Nothing in this
announcement shall exclude any liability under applicable laws that
cannot be excluded in accordance with such laws.
This information is provided by RNS, the news service of the
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END
FR EAEKSAASDEEA
(END) Dow Jones Newswires
June 26, 2023 02:00 ET (06:00 GMT)
SysGroup (AQSE:SYS.GB)
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