31 July
2024
SysGroup
plc
("SysGroup" or the "Group"
or the "Company")
Final results for the year ended 31 March 2024
Well positioned for the
future with a strong balance sheet to accelerate growth and
innovation
SysGroup plc (AIM:SYS), the
technology partner for delivery and management of cloud, data and
security services to power Artificial Intelligence ("AI") and
Machine Learning ("ML") transformation, today announces its annual audited financial results for the
year ended 31 March 2024 ("FY24" or "Period").
Financial Highlights
· Revenue grew 5% to £22.7m (FY23: £21.6m) driven by growth in
H2 in cybersecurity
· Recurring revenue as a % of total
revenue increased to 76%
(FY23:
75%)
· Gross margin declined to 46% (FY23: 50%) due to unmitigated
supplier cost increases combined with a change in product
mix
· Adjusted EBITDA1
£2.0m
(FY23:
£3.1m2) driven
by substantial
investment in people and systems to support our new growth
strategy coupled with gross margin
decrease
· Statutory loss before tax of £(6.6)m (FY23: £(0.3)m
2) driven in
part by £1.8m exceptional costs (FY23: £0.4m) including upgrade of
the leadership team, and £3.7m impairment of historic acquisitions
(FY23: £nil), as part of the implementation of the new
strategy
· Net
debt3 of £3.4m (FY23: £1.3m); increase due to payment of Truststream
acquisition earn-out and settlement with former CEO
Strategic & Organisational Highlights
· Heejae Chae acquired 14% share interest and was appointed
Executive Chairman
· Repositioned as technology partner for Small Medium
Businesses ("SMBs") in their AI and digital
transformation
· Replaced 11 senior leaders (including CEO and CFO) with 6 new
talents
· Recruited an AI team of software engineers with extensive
experience in ML and data architecture and a team of cloud
experts
· Rebuilding of go-to-market organisation
· Refreshed the Board with seasoned professionals with
extensive and relevant experience
· Achieved AWS Select Tier Service Partner status (Level
2)
· Announced a strategic partnership with Softcat to become
their designated outsource partner for AI/ML offerings
Post Balance Sheet Highlights
· Raised £11.2m in oversubscribed equity placing to fund an
internal transformation project, strengthen the balance sheet to
provide for ongoing working capital requirements and liquidity for
acquisitions
· Closed the second largest contract in SysGroup's history
totalling £2.2m over three years
· Progressed to AWS Advanced Tier Service Partners stratus
(Level 3) qualifying for fundings and joint sales and
marketing
· Authorised as one of only two UK Zscaler Managed Security
Service Partners
1) Adjusted EBITDA is earnings
before interest, taxes, depreciation, impairments and amortization
of intangible assets, exceptional items, and share based
payments
2) Includes prior year adjustment.
See accounting policies note within financial
statements
3) Net debt represents cash
balances less bank loans and leases liabilities
Heejae Chae, Executive Chairman, SysGroup Group,
said:
"Over the past year, the Group has completely transformed its
strategy, execution and leadership. Since acquiring a 14% share and
becoming the Executive Chairman, we have repositioned the Company
as the preferred technology partner for Small Medium Businesses in
their AI and digital transformation efforts. AI will have a
significant impact on businesses and represents a key opportunity
for transformation. Our goal is to guide SMBs through the complex
AI value chain and support their transformation journey from start
to finish.
We
raised £11.2 million through an oversubscribed equity raise to
accelerate our growth and innovation. We have invested in
additional R&D resources, including offshore capabilities in
India and Eastern Europe. In order to showcase the impact of AI
transformation, we are implementing 31 use cases internally to
transform SysGroup to demonstrate the benefits of AI. This will
allow us to serve as a live case study of best practices for our
customers and achieve significant productivity gain. Additionally,
we are actively seeking complementary acquisitions to expand our
technical capabilities and customer base.
I
am very excited about the Company's potential and future prospects.
AI will be the transformational technology of our generation
and will continue to gather momentum as the technology improves and
benefits are crystallised. As with any innovation, its
adoption will not be a straight line and will follow a
J-curve. Our mission is to inform and support British SMBs
which accounts for 99.2% of total business population in this
journey.
For further information, please contact:
|
SysGroup plc
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www.sysgroup.com
|
|
Heejae Chae, Executive
Chairman
Owen Phillips, Chief Financial
Officer
|
+44 (0) 333 101 9000
|
|
|
|
|
Zeus (Nominated Adviser and
Broker)
|
+44 (0) 161 831 1512
|
|
Jordan Warburton
Nick Cowles
Alex Campbell-Harris
Nick Searle
|
|
About SysGroup
SysGroup plc is a managed service
provider of end-to-end data solutions enabling us to take our
customers on their AI data journey. The Group offers an integrated
set of modern technologies that collectively meets our customers
end-to-end data needs including connectivity, cloud hosting,
delivery, analytics and governance of customer data, as well as a
security layer for users and applications.
The Group has offices
in Bristol, Edinburgh, London, Manchester and Newport.
For more information,
visit http://www.sysgroup.com
Executive Chairman's statement
Overview
Over the past year, the Group has
completely transformed its strategy, execution and leadership.
Since acquiring a 14% share and becoming the Executive Chairman
twelve months ago, we have repositioned the Company as a preferred
technology partner for Small Medium Businesses (SMBs) in their AI
and digital transformation efforts. AI will have a significant
impact on businesses and represents a key opportunity for
transformation. Our goal is to guide SMBs through the complex AI
value chain and support their transformation journey from start to
finish.
Trading for the year has been
strong with Group revenues increasing 5% to £22.7m driven
by a significant 14% increase in the second half of the year
compared to the same period in FY23. We have continued to
maintain the momentum into the new financial year across all our
technology offerings and, as previously announced, at the end of
April, we closed the second largest contract in SysGroup's history,
totalling £2.2m of revenue over three years. Our
AI/ML proposition continues to gain traction amongst both new and
existing customers with a growing pipeline of
opportunities.
Our progress has also been
recognised by our partners, as evidenced by our achieving AWS
Select Partner Level 3 Status, approval for the Zscaler Global MSSP
Program and our partnership with Softcat plc (one of UK's largest
Valued Added Resellers) to be their ML partner of
choice.
We have also received considerable
support from existing and new investors and in June 2024 we closed
an oversubscribed placing, subscription and retail offer that
raised just over £11.2m; clear validation of our strategic
direction and affirmation that others share our vision for the
business and the next stage of its growth. The funds raised
will be used for a variety of purposes: (i) approximately £2m of
the proceeds will be used to fund our internal transformation
programme, referred to in more detail below; (ii) a further £2m
will be used to meet the contingent earn-out payment in relation to
the acquisition of Truststream back in 2022; and (iii) the
remainder has left us with a strong balance sheet and given us
liquidity for the M&A opportunities we are
pursuing.
We have made substantial
investment in both in our IT infrastructure and people during the
year and will continue to make these investments. These
include upgrading our SysCloud infrastructure with the latest
hardware and enhancing our internal security architecture with a
leading cloud-based security platform. Approximately £2m of
the proceeds from the recent fundraising are intended to be used to
fund an internal transformation project to provide the Group with
systems using AI driven technologies. This will enable the
company to be a true AI adopter and innovator, acting as a live
case study of best practice to our customers. We have
completed the refurbishment of our offices to provide a positive
and productive working environment whilst we continue to operate
flexible working practices. Finally, we announced the closure of
our Liverpool office and relocation of the registered office to
Manchester with effect from 1 March 2024.
To support our end-to-end data
platform strategy, we have segmented our technology into five key
areas: (i) data analytics and ML (ii) data storage and management
(iii) data connectivity (iv) data engineering and (v)
cybersecurity. We will invest to enhance the existing
competencies organically as well as through acquisitions to fill
the gaps in our technology offerings and have, for example,
recruited a team of AI/ML engineers from industry
leaders such as AWS, JP Morgan, Validus and McLaren.
We have significantly strengthened
the senior management team, bringing together the right skillsets
and mindsets. Throughout the organisation we are reinforcing a
culture of customer focus and outstanding service underpinned by
innovation, entrepreneurialism and high performance.
Finally, the core business, which
has more than 80% recurring revenues, provides a very solid base
from which we can expand, giving us very good revenue certainty and
visibility whilst the investment we are making in the company will
drive growth in future years.
Strategy
Our technology strategy is to
build a modern, unified data solution platform that is as simple
for SysGroup to sell and support as it is for our customers to
consume and benefit from. This will comprise of an integrated
set of technologies that collectively meets our customers
end-to-end data needs. It will allow for connectivity,
storage, preparation, delivery, analytics and governance of
customer data, as well as a security layer for users and
applications.
Since my appointment I have
engaged with various stakeholders including customers, employees,
partners and competitors. These interactions have provided
valuable insights into both industry trends and company-specific
challenges. SysGroup is well positioned to participate in the
burgeoning field of AI/ML, a technology set to redefine our
era. AI's prominence is undeniable, with daily media coverage
and increasing demand for AI strategies at the board level of every
company and organisation. AI is here to stay and will be a
powerful tool for those that embrace it.
Factors driving the AI/ML adoption
include:
• The
growing availability of data, crucial for training AI/ML
algorithms; as the amount of data that companies collect continues
to grow, so does the potential for AI/ML to deliver
value.
• The
decreasing costs of computing power, making AI/ML models more
accessible across varying company sizes and budgets.
• The
increasing sophistication and user-friendliness of AI/ML tools and
technologies.
Our overall strategy is to
position SysGroup as the go-to, end-to-end data solution provider
for SMBs embarking on their AI/ML journey. It is clear from
our conversations with our customers that there is a significant
gap in the market: while many SMBs are eager to adopt AI/ML, they
often lack a clear strategy or implementation path. There is
a great demand for a partner to support the development of an AI/ML
strategy and transition from current platforms and solutions.
According to a recent IONOS/YouGov study of 4,807 SMB owners across
the UK, US, France, Germany and Spain: (i) UK business leaders have
the lowest number of people already using AI frequently for work
(9% compared to 15% average) (ii) only 7% of UK SMBs consider their
level of AI knowledge to be very good compared to 32% in the US
(iii) 48% of UK SMBs state their knowledge of the technology to be
fairly poor or very poor and (iv) 56% of respondents have never
used AI tools before in work, the highest percentage of the
countries surveyed. This failure to adopt is not due to a
lack of desire to engage with technology and we see this as a huge
opportunity for our business and its future growth.
Many providers claim to be AI/ML
experts but lack the capability to provide an end-to-end
solution. Traditionally, most IT providers specialise in
specific technology stacks: AI/ML strategy requires a holistic
approach where the outcome is delivered from both software and
hardware solutions. We know that a significant proportion of
all AI projects fail because they have not taken this holistic
approach, for example, by not defining the correct business case or
not employing appropriate data architecture framed by the right
technology infrastructure. Whilst gaps still exist in our
offerings, we believe that we have the framework to deliver our
strategy, underpinned by the relationship with our
customers.
Finally, in order to build the
size and scale of business we are looking to create, we will
continue to explore acquisitions with the focus on (i) expanding
capabilities in certain areas of technology expertise as well as
(ii) acquiring companies or businesses that have interesting and
relevant customer bases. Ideally opportunities will satisfy
both criteria.
Board and Management Changes
During the financial year, we have
refreshed the Board with people with significant and relevant
industry experience to match the expectation and ambition of the
Group. Paul Edwards joined as a Non-Executive Director in September
2023 and brings extensive plc experience as the CFO of Tatton Asset
Management plc and previously Scapa Group plc and NCC Group
plc.
Mark Reilly joined as a
Non-Executive Director in December 2023 and is currently Managing
Partner, Technology at IP Group plc. Mark was previously a
Non-Executive Director at Actual Experience plc and Mirriad
Advertising plc.
Owen Phillips joined as Chief
Financial Officer in March 2024 from Matillion Limited, a leading
provider of cloud data integration tools. Owen held various
financial management positions in the data/tech sector as well as
working in professional practice at Grant Thornton UK
LLP.
Davin Cushman joined as
Non-Executive Director in June 2024 and has over 25 years of
experience within the technology industry. He served as CEO
at Ignite Technologies, an enterprise software company and founded
Brightrose Ventures to advise, acquire and operate software
companies.
Wendy Baker was also appointed as
Company Secretary and General Counsel, providing oversight and
guidance on governance. Wendy was previously at Scapa Group
plc, Promethean World plc and Volex Group plc.
We have also enhanced the senior
management team with the appointments of people with relevant
experience from leading companies in the sector:
Paul Sullivan was appointed as
Chief Technology Officer; Paul was the founder of Truststream which
SysGroup acquired in April 2022.
Heinrich Koorts joined as Chief
Revenue Officer from Softcat plc where he spent the past ten years
in London and Bristol.
Ross Humphrey joined as the Chief
AI Officer to lead our AI/ML initiative; Ross has over a decade of
experience in Machine Learning as one of the UK's early adopters
during his tenure at JP Morgan and Validus.
Charles Vivian joined as Director
of Business Development to support our M&A strategy; Charles
was previously at MXC Capital, Marwyn Capital and Freshfields
Bruckhaus Deringer.
Rebecca Boyle joined as Chief
People and Culture Officer; Rebecca has over 20 years HR experience
gathered from large plcs such as Boots, Galliford Try and Punch
Taverns and more recently was at Cawood Limited, a private equity
backed buy-and-build.
All these individuals bring
invaluable experience and expertise, positioning SysGroup extremely
well for future success.
Finally, we have taken steps to
ensure robust corporate governance, reviewing the board and
committees' Terms of Reference and establishing a new Nomination
Committee to ensure that the composition and succession of the
board is reviewed and reflects a balance of skills, knowledge and
experience which is appropriate for the company.
Summary and Outlook
I'm enormously excited about the
Company's potential and future prospects. What gives me the
greatest sense of optimism is the people within our organisation
and I wish to extend my thanks to each and every one for their
effort and commitment. Our greatest asset is those people and
we are building an extraordinary team. It is my mission to
ensure SysGroup becomes a place where everyone feels excited and
proud to work and I am committed to creating an environment that
inspires people to give their best and strive for excellence around
our core values of Learning, Integrity, Kindness and
Entrepreneurship.
Over the next twelve months we
will lead by example, revolutionising our Company through data and
AI. We have already identified 31 transformative use cases
that will significantly enhance our business operations. This is
not just about adopting new tools; it's about reimagining our
entire way of doing business. We will simultaneously be
carrying this approach into our customer engagements as we seek to
take them on the same journey to transform their own organisations
and ways of doing business.
We are on the brink of very
exciting times for both the market in which we operate and our
organisation and I look forward to taking all our stakeholders on
this journey.
Heejae Chae
Executive Chairman
30 July 2024
Chief Financial Officer's report
Group statement of comprehensive income
The Group delivered revenue of £22.71m (FY23: £21.65m), an
increase of 5% on the prior year, Adjusted EBITDA of £2.01m (FY23:
£3.13m) and a statutory loss before tax of £6.57m (FY23: loss
before tax of £0.3m)
Organic growth drove an increase
in revenue of 5% year on year, driven by a 14% increase in the
second half of the year (compared to the same period FY23), which
offset a (3)% decline in the first half.
Managed IT services revenue was
£18.59m (FY23: £17.44m), an increase of 7% on the prior year, and
VAR revenue was £4.12m (FY23: £4.21m), a decrease of 2%. The
overall revenue mix stands at 82% managed IT services (including
professional services) and 18% VAR (FY23: 81%:19%).
|
Revenue by operating
segment
|
|
2024
|
2023
|
|
|
|
£'000
|
£'000
|
%
|
|
Managed IT Services
|
|
18,592
|
17,441
|
7%
|
|
Value Added Resale
|
|
4,122
|
4,207
|
-2%
|
|
Total
|
|
22,714
|
21,648
|
5%
|
Gross profit was £10.40m with a
gross margin of 46% (FY23: £10.9m and 50% respectively). Gross
margin has fallen in part due to certain supplier price rises as
well as a change in product mix, driven in particular by an
increase in cyber security revenue following the continued growth
of our Truststream's IT security services business, acquired in
2022, which typically carries a lower margin than the remaining
core managed services offerings.
|
Gross profit by operating
segment
|
|
2024
|
2023*
restated
|
|
|
|
£'000
|
£'000
|
%
|
|
Managed IT Services
|
|
9,733
|
10,155
|
-4%
|
|
Value Added Resale
|
|
663
|
747
|
-11%
|
|
Total
|
|
10,396
|
10,902
|
-5%
|
|
Gross profit % by operating
segment
|
|
2024
|
2023*
restated
|
|
|
|
£'000
|
£'000
|
%
|
|
Managed IT Services
|
|
52%
|
58%
|
-6pp
|
|
Value Added Resale
|
|
16%
|
18%
|
-2pp
|
|
Total
|
|
46%
|
50%
|
-4pp
|
See accounting policies note 1 for
details.
Operating expenses (before
depreciation, amortisation, impairments, exceptional items and
share based payments) of £8.39m were £0.62m higher than last year
(FY23: £7.77m) as the Group underwent substantial investment in
people and systems to support our growth strategy. During the year
we also closed our office in Liverpool, moving the registered
address to our Manchester office.
Adjusted EBITDA was £2.01m for the
twelve months to 31 March 2024 (FY23: £3.13m) which is an Adjusted
EBITDA margin of 8.8% (FY23: 14.5%). The lower margin percentage
reflects the reduced gross margin combined with the additional
operating expenses detailed above.
The consolidated income statement
includes £1.83m (FY23: £0.41m) of exceptional costs which include
£0.74m costs associated with the CEO exit settlement, £0.57m
relating to costs associated with the restructuring of the Senior
Leadership Team (FY23: £0.19m) and £0.43m relating to supplier
payments in dispute.
Amortisation of intangible assets
was £1.70m (FY23: £1.74m) in the year, of which £1.47m (FY23:
£1.56m) relates to the amortisation of acquired intangible assets
from acquisitions and £0.22m (FY23: £0.18m) relates to the
amortisation of software development and licence costs.
Impairment of intangible assets
was £3.72m (FY23: £nil) in the year. The Managed IT Services CGU
goodwill is comprised of acquisitions dating from 2016 to 2022.
Based upon a prudent assessment of the future performance of these
acquisitions (being the 'Managed IT Services CGU'), management's
view is that the CGU is impaired by £3.72m.
Finance costs increased in the
year to £0.57m (FY23: £0.48m) relating to the loan balance at 31
March 2024 of £4.7m (31 March 2023: £4.7m), mainly from the
increase in bank base rates during the period. Finance costs also
include £0.11m (FY23: £0.13m) 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
£0.19m for the year (FY23: £0.18m) 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.
|
Reconciliation of operating profit
to adjusted EBITDA
|
2024
|
2023* restated
|
|
£'000
|
£'000
|
|
Operating (loss)/profit
|
(5,996)
|
184
|
|
Depreciation
|
570
|
625
|
|
Amortisation of intangible
assets
|
1,696
|
1,739
|
|
Impairment of intangible
assets
|
3,718
|
-
|
|
EBITDA
|
(13)
|
2,548
|
|
Exceptional items
|
1,826
|
408
|
|
Share based payments
|
194
|
178
|
|
Adjusted EBITDA
|
2,008
|
3,134
|
* See accounting policies
(note 1) for further details of the restatement
Taxation
The Group has a tax credit of
£0.67m this year (FY23: £0.10m) which principally arises from the
deferred tax credit movement in the period. The corporation tax
current credit of £0.08m (FY23: £(0.37)m charge) is as a result of
R&D tax credits claimed this year in relation to the prior
year. The deferred tax movement is a £0.59m credit (FY23: £0.47m
credit) due to the increase in amortisation of acquired intangibles
recognised in the Consolidated Statement of Comprehensive
Income.
Cashflow and net debt
The Group's financial position is
a net debt position at 31 March 2024 of £3.40m (31 March 2023:
£1.32m). This excludes contingent consideration at 31 March 2024 of
£1.75m (31 March 2023: £2.68m). The gross cash balance at 31 March
2024 was £1.94m (FY23: £4.19m). Cash balances have been utilised in
satisfaction of: (i) £0.93m in the Truststream Year 1 earn-out
(contingent consideration) and (ii) £1.50m in settlement of the
former CEO's contractual departure terms including the Company's
purchase of 2,076,394 ordinary SysGroup shares (now held in
treasury) following the exercise of share options and immediate
sale of those shares.
|
Net debt
|
2024
|
2023
|
|
£'000
|
£'000
|
|
Cash balances
|
1,943
|
4,186
|
|
Bank loans - current
|
-
|
-
|
|
Bank loans -
non-current
|
(4,738)
|
(4,705)
|
|
Net (debt) before lease liabilities
|
(2,795)
|
(519)
|
|
Lease liabilities -
property
|
(604)
|
(803)
|
|
Net (debt)
|
(3,399)
|
(1,322)
|
|
Contingent
consideration
|
(1,751)
|
(2,681)
|
|
Net (debt) including contingent
consideration
|
(5,150)
|
(4,003)
|
Adjusted cash generated from
operations was £2.22m (FY23: £3.43m) and cash conversion was strong
at 111% (FY23: 109%) which compares favourably to the target cash
conversion range of 80-90%. 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.
|
Cash conversion
|
2024
|
2023*
restated
|
|
£'000
|
£'000
|
|
Cashflow from
operations
|
1,104
|
3,020
|
|
Adjustments:
|
|
|
|
Acquisition, integration and
restructuring cashflows
|
1,117
|
408
|
|
Adjusted cash generated from operations
|
2,221
|
3,428
|
|
Adjusted
EBITDA1
|
2,008
|
3,134
|
|
Cash conversion
|
111%
|
109%
|
1
Adjusted EBITDA
is earnings before interest, taxation, depreciation, amortisation
of intangible assets, exceptional items, and share based
payments
*See accounting policies (note 1) for further details of the
restatement
The Consolidated Statement of
Cashflows reflects a further £0.89m payment of contingent
consideration relating to the acquisition of Truststream. The
Company also made a further purchase of £0.76m shares into
treasury, relating to the exit settlement terms of the previous
CEO. The cash outflow for property, plant and equipment of £0.45m
(FY23: £0.25m) includes expenditure on various office fit-outs and
the payments to acquire intangible assets of £0.11m (FY23: £0.16m)
includes the capitalisation of various software development
costs.
£8.0m revolving credit facility
The Company continues to hold a
£8.0m RCF provided by Santander in April 2022, to provide financial
flexibility for acquisitions and working capital requirements. The
Group drew down £4.5m of RCF funds to finance the acquisition of
Truststream in FY23. There have been no further drawdowns other
than interest charges.
The 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.
Consolidated statement of financial
position
At the year end, the Group's total
net assets are £14.78m (FY23: £21.24m).
Non-current assets of £24.50m
(FY23: £29.98m) include Intangible Assets of £22.66m (FY23: 27.96m)
and Property, Plant and Equipment ('PPE') of £1.85m (FY23: £1.97m).
There were £0.45m of PPE additions relating to office expenditure.
As noted above, an impairment of goodwill in the Managed IT
Services CGU of £3.72m has been recorded in the year. The remaining
movement year on year relates to ordinary amortisation and
depreciation.
Working capital was managed well
throughout the year with debtor days at the target level of 25 days
at year end and suppliers routinely paid in our monthly payment
runs to agreed terms. The gross trade debtor balance of £1.58m
compares to £1.71m in the previous year despite the increase in
trading revenue. The prepayment balance of £1.85m (FY23: £3.10m
restated) and the contract liabilities balance (i.e. 'deferred
income') of £2.78m (FY23: £4.02m) have both decreased. 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
During the year, the Remuneration
Committee granted 362,709 performance shares to Adam Binks (former
Chief Executive Officer) and 204,024 performance shares to Martin
Audcent (former Chief Financial Officer), in relation the Group's
performance in FY23 under the terms of the 2020 SysGroup Long Term
Incentive Plan. During the year to 31 March 2023, the Remuneration
Committee granted 284,010 performance shares to Adam Binks and
170,406 performance shares to Martin Audcent in relation the
Group's performance in FY22 under the terms of the same
plan.
KPIs
The Board of Directors review the
performance of the Group using the financial measures outlined
below and an explanation of the financial results is provided in
the Financial Review above.
|
|
2024
|
2023*
restated
|
Change %
|
|
Revenue
|
£22.71m
|
£21.65m
|
5%
|
|
Recurring revenue as a % of total
revenue
|
76%
|
75%
|
2%
|
|
Gross profit
|
£10.40m
|
£10.90m
|
(6)%
|
|
Gross margin %
|
46%
|
50%
|
(9)%
|
|
Adjusted
EBITDA1
|
£2.01m
|
£3.13m
|
(36)%
|
|
Statutory (loss) before
tax
|
£(6.57)m
|
£(0.30)m
|
854%
|
|
Net (debt)2
|
£(3.40)m
|
£(1.32)m
|
157%
|
* See accounting policies
(note 1) for further details of the restatement
1 Adjusted EBITDA is earnings
before interest, taxation, depreciation, amortisation of intangible
assets, impairment, exceptional items, and share based
payments
2 Net (debt) represents cash
balances less bank loans and lease liabilities
Owen Phillips
Chief Financial Officer
30 July 2024
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
FOR THE YEAR ENDED 31 MARCH 2024
|
|
|
2024
|
2023*
Restated
|
|
|
|
Group
|
Group
|
|
|
Notes
|
£'000
|
£'000
|
|
Revenue
|
4
|
22,714
|
21,648
|
|
Cost of sales
|
|
(12,318)
|
(10,746)
|
|
Gross profit
|
|
10,396
|
10,902
|
|
Operating expenses before
depreciation, amortisation, exceptional items and share based
payments
|
|
(8,388)
|
(7,768)
|
|
Adjusted EBITDA**
|
|
2,008
|
3,134
|
|
Depreciation
|
14
|
(570)
|
(625)
|
|
Amortisation of
intangibles
|
13
|
(1,696)
|
(1,739)
|
|
Impairment of
intangibles
|
13
|
(3,718)
|
-
|
|
Exceptional items
|
8
|
(1,826)
|
(408)
|
|
Share based payments
|
9
|
(194)
|
(178)
|
|
Administrative expenses
|
|
(16,392)
|
(10,718)
|
|
Operating (loss) / profit
|
|
(5,996)
|
184
|
|
Finance costs
|
6
|
(574)
|
(483)
|
|
(Loss) before taxation
|
|
(6,570)
|
(299)
|
|
Taxation
|
12
|
670
|
98
|
|
Total comprehensive (loss) attributable to the equity holders
of the company
|
|
(5,900)
|
(201)
|
|
Adjusted earnings per share
(EPS)***
|
11
|
2.1p
|
3.5p
|
|
Basic earnings per share
(EPS)
|
11
|
(12.1)p
|
0.0p
|
|
Diluted earnings per share
(EPS)
|
11
|
(12.1)p
|
0.0p
|
* See accounting policies (note 1)
for further details of the restatement
** Adjusted EBITDA, which is
defined as profit before net finance costs, tax, depreciation,
amortisation, impairments, shared based payment charge and
adjusting items is a non-GAAP metric used by management and is not
an IFRS disclosure
*** Adjusted Basic EPS is profit after tax after adding back
amortisation of intangible assets, impairments, exceptional items,
share based payments and associated tax, divided by the weighted
average number of shares in issue.
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
AS AT 31 MARCH 2024
|
|
|
2024
|
2023*
Restated
|
|
|
|
Group
|
Group
|
|
|
Notes
|
£'000
|
£'000
|
|
Assets
|
|
|
|
|
Non-current assets
|
|
|
|
|
Goodwill
|
13
|
17,948
|
21,666
|
|
Intangible assets
|
13
|
4,708
|
6,295
|
|
Property, plant and
equipment
|
14
|
1,846
|
1,966
|
|
|
|
24,502
|
29,927
|
|
Current assets
|
|
|
|
|
Trade and other
receivables
|
16
|
4,003
|
4,813
|
|
Cash and cash
equivalents
|
|
1,943
|
4,186
|
|
|
|
5,946
|
8,999
|
|
Total Assets
|
|
30,448
|
38,926
|
|
Equity and Liabilities
|
|
|
|
|
Equity attributable to the equity shareholders of the
parent
|
|
|
|
|
Called up share capital
|
21
|
515
|
494
|
|
Share premium reserve
|
|
9,080
|
9,080
|
|
Treasury reserve
|
|
(984)
|
(201)
|
|
Other reserve
|
|
3,300
|
3,205
|
|
Retained earnings
|
|
2,856
|
8,657
|
|
|
|
14,767
|
21,235
|
|
Non-current liabilities
|
|
|
|
|
Lease liabilities
|
19
|
400
|
621
|
|
Contract liabilities
|
20
|
143
|
383
|
|
Contingent
consideration
|
17
|
-
|
1,875
|
|
Provisions
|
18
|
148
|
191
|
|
Deferred taxation
|
12
|
849
|
1,434
|
|
Bank loan
|
19
|
4,738
|
4,705
|
|
|
|
6,278
|
9,209
|
|
Current liabilities
|
|
|
|
|
Trade and other
payables
|
17
|
4,813
|
3,861
|
|
Lease liabilities
|
19
|
204
|
182
|
|
Contract liabilities
|
20
|
2,635
|
3,633
|
|
Contingent
consideration
|
17
|
1,751
|
806
|
|
|
|
9,403
|
8,482
|
|
Total Equity and Liabilities
|
|
30,448
|
38,926
|
* See accounting policies (note 1)
for further details of the restatement
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
|
|
Attributable to equity holders of the
parent
|
|
|
|
|
Share capital
|
Share premium account
|
Treasury reserve
|
Other reserve
|
Translation reserve
|
Retained earnings*
Restated
|
Total*
Restated
|
|
|
|
|
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
As at 1 April 2022
|
494
|
9,080
|
(201)
|
3,027
|
4
|
8,854
|
21,258
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
-
|
-
|
-
|
-
|
(4)
|
(197)
|
(201)
|
|
|
|
Total Comprehensive income
|
-
|
-
|
-
|
-
|
(4)
|
(197)
|
(201)
|
|
|
|
Distributions to owners
|
|
|
|
|
|
|
|
|
|
|
Share options charge
|
-
|
-
|
-
|
178
|
-
|
-
|
178
|
|
|
|
Total Distributions to owners
|
-
|
-
|
-
|
178
|
-
|
-
|
178
|
|
|
|
At 31 March 2023
|
494
|
9,080
|
(201)
|
3,205
|
-
|
8,657
|
21,235
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at 1 April 2023
|
494
|
9,080
|
(201)
|
3,205
|
-
|
8,657
|
21,235
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
Loss for the period
|
-
|
-
|
-
|
-
|
-
|
(5,900)
|
(5,900)
|
|
|
|
Total Comprehensive income
|
-
|
-
|
-
|
-
|
-
|
(5,900)
|
(5,900)
|
|
|
|
Distributions to owners
|
|
|
|
|
|
|
|
|
|
|
Issue of share capital
|
21
|
-
|
-
|
-
|
-
|
-
|
21
|
|
|
|
Purchase of own shares into
Treasury
|
-
|
-
|
(783)
|
-
|
-
|
-
|
(783)
|
|
|
|
Share options charge
|
-
|
-
|
-
|
194
|
-
|
-
|
194
|
|
|
|
Reserves transfer on forfeiture of
share options
|
-
|
-
|
-
|
(99)
|
-
|
99
|
-
|
|
|
|
Total Distributions to owners
|
21
|
-
|
(783)
|
95
|
-
|
99
|
(568)
|
|
|
|
At 31 March 2024
|
515
|
9,080
|
(984)
|
3,300
|
-
|
2,856
|
14,767
|
|
|
* See accounting policies (note 1)
for further details of the restatement
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEAR ENDED 31 MARCH 2024
|
|
|
2024
|
2023*
Restated
|
|
|
|
Group
|
Group
|
|
|
Notes
|
£'000
|
£'000
|
|
Cashflows used in operating activities
|
|
|
|
|
(Loss) after tax
|
|
(5,900)
|
(201)
|
|
Adjustments for:
|
|
|
|
|
Depreciation and
amortisation
|
13,14
|
2,266
|
2,364
|
|
Impairment of
intangibles
|
13
|
3,718
|
-
|
|
Finance costs
|
6
|
574
|
483
|
|
Share based payments
|
|
194
|
178
|
|
Taxation
(credit)/charge
|
12
|
(670)
|
(98)
|
|
Operating cashflows before movement in working
capital
|
|
182
|
2,726
|
|
Increase/decrease in trade and
other receivables
|
|
819
|
(543)
|
|
Increase in trade and other
payables
|
|
103
|
837
|
|
Cashflow from operations
|
|
1,104
|
3,020
|
|
Taxation paid
|
|
(439)
|
(303)
|
|
Net cash from operating activities
|
|
665
|
2,717
|
|
Cashflows from investing activities
|
|
|
|
|
Payments to acquire property,
plant and equipment
|
14
|
(450)
|
(252)
|
|
Payments to acquire intangible
assets
|
13
|
(109)
|
(163)
|
|
Acquisition of subsidiary net of
cash acquired
|
10
|
-
|
(5,389)
|
|
Net cash used in investing activities
|
|
(559)
|
(5,804)
|
|
Cashflows from financing activities
|
|
|
|
|
Payment of contingent
consideration on acquisitions
|
|
(885)
|
-
|
|
Bank loans drawdown
|
|
-
|
4,500
|
|
Payment of bank loan arrangement
fee
|
|
-
|
(127)
|
|
Repayment of bank loans
|
|
-
|
(582)
|
|
Repurchase of shares into
treasury
|
|
(762)
|
-
|
|
Capital/principal paid on lease
liabilities
|
|
(199)
|
(303)
|
|
Interest paid on loan
facility
|
|
(475)
|
(316)
|
|
Interest paid on lease
liabilities
|
|
(28)
|
(32)
|
|
Net cash (used in) / from financing
activities
|
|
(2,349)
|
3,140
|
|
Net (decrease) / increase in cash and cash
equivalents
|
|
(2,243)
|
53
|
|
Cash and cash equivalents at the
beginning of the year
|
|
4,186
|
4,133
|
|
Cash and cash equivalents at the end of the
year
|
|
1,943
|
4,186
|
* See accounting policies (note 1)
for further details of the restatement
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2024
1. Accounting
policies
SysGroup Plc (the 'Company') is a
Company incorporated and domiciled in the United Kingdom. The
Company changed its registered office during the year to 55 Spring
Gardens, Manchester M2 2BY. These consolidated financial statements
comprise the Company and its subsidiaries (together referred to as
the 'Group').
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 2023 are an extract of the
Company's statutory accounts for the year ended 31 March 2023,
prepared in accordance with International Financial Reporting
Standards (IFRS), approved by the Board of Directors on 23 June
2023 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 2024 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.
These Group 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. The Company financial statements have been
prepared in accordance with Financial Reporting Standard 101 (FRS
101) 'Reduced Disclosure Framework' issued by the Financial
Reporting Council (FRC). 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 and FRS
101.
Basis of preparation - Group
The principal accounting policies
adopted in the preparation of the Financial Statements are set out
below. The 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 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.
Basis of preparation - Company
The Company financial statements
are prepared under the historical cost convention, except for
certain financial instruments that are measured at fair value. The
company's financial statements are presented in pounds sterling
(£), which is also the functional currency of the
company.
The preparation of financial
statements in conformity with FRS 101 requires the use of certain
critical accounting estimates and assumptions. It also requires
management to exercise its judgment in applying the company's
accounting policies. Significant judgments and estimates are
disclosed in the relevant notes to the financial
statements.
The company has elected to take
advantage of certain disclosure exemptions available under FRS 101,
including:
· A
cash flow statement and related notes under IAS 7 'Statement of
Cash Flows'
· Certain disclosures required by IFRS 7 'Financial
Instruments: Disclosures'
· Disclosures in respect of the fair value of financial
instruments under IFRS 13 'Fair Value Measurement'
Restatement of Cost of sales
We have identified an error
relating to Managed IT services direct expenses not being
recognised for the year ended 31 March 2023 within the subsidiary:
SysGroup Trading Limited. Expenses were recognised as prepayments
rather than in the statement of comprehensive income. The total
impact of this error is to increase cost of sales by £193,678 and
to decrease prepayments (shown within Trade and other receivables)
by the same amount. There is no impact on comparative earnings per
share as a result of this correction.
|
|
2023
|
Restatement
|
2023*
Restated
|
|
|
£'000
|
£'000
|
£'000
|
|
Consolidated Statement
of Comprehensive Income
|
|
|
|
|
Cost of Sales
|
(10,552)
|
(194)
|
(10,746)
|
|
Total comprehensive (loss)
attributable to the equity holders of the company
|
(7)
|
(194)
|
(201)
|
|
|
|
|
|
|
Consolidated Statement
of Financial Position and Statement of Changes in Equity
|
|
|
|
|
Trade and other
receivables
|
5,007
|
(194)
|
4,813
|
|
Retained earnings
|
8,851
|
(194)
|
8,657
|
|
Shareholder funds
|
21,429
|
(194)
|
21,235
|
|
|
|
|
|
|
Consolidated Statement
of Cashflows
|
|
|
|
|
(Loss) after tax
|
(7)
|
(194)
|
(201)
|
|
Increase in trade and other
receivables
|
(737)
|
(194)
|
(543)
|
|
|
|
|
|
|
|
|
|
| |
Going concern
The Directors have prepared the
financial statements for the Group and the Company 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
31 July 2025 .
The Group raised £10.6m net funds
from a placing in June 2024. In the Base forecast there is
considered ample headroom in the bank covenants, due to both the
proceeds of this placing and 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, reduces 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 2024, the Group had a
gross cash balance of £1.9m and a net debt position excluding
contingent consideration of £3.4m, excluding contingent
consideration of £1.8m. The Group has a £0.5m unused overdraft
facility and £3.3m of undrawn headroom in its RCF Loan facility (at
the year-end date and the date of issue of these financial
statements) 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.
New standards and interpretations
A number of new standards and
amendments to standards and interpretations have been issued during
the year ended 31 March 2024. The Group has adopted all of the new
and revised standards and interpretations issued that are relevant
to its operations. Other new amended standards and
interpretations issued that apply to the financial statements do
not impact the Group as they are either not relevant to the Group's
activities or require accounting which is consistent with the
Group's current accounting policies.
New standards not yet effective
There are a number of standards
and amendments to standards, and interpretations which have been
issued and in some cases not yet adopted by the UK Endorsement
Board that are effective in future accounting periods that the
Group has decided not to adopt early. SysGroup plc is currently
assessing the impact of these new standard and amendments. The
Group does not expect any other standards issued by the IASB, but
not yet effective, to have a material outcome on the
Group.
IFRS16 - Leases
The group has no activities acting
as a lessor. The group recognises right of use assets in relation
to the lease of office space and equipment.
|
Lease liabilities
|
Land & Buildings
|
Plant & Machinery
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
|
At 1 April 2023
|
803
|
-
|
803
|
|
Additions
|
-
|
-
|
-
|
|
Disposal
|
-
|
-
|
-
|
|
Interest expense
|
28
|
-
|
28
|
|
Lease payments
|
(227)
|
-
|
(227)
|
|
At 31 March 2024
|
604
|
-
|
604
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of lease liabilities are
analysed as follows:
|
|
|
2024
|
|
|
|
|
£'000
|
|
Due within 1 year
|
|
|
204
|
|
Instalments due after 1 year but
no more than 5 years
|
|
|
400
|
|
Instalments due after 5
years
|
|
|
-
|
Lease liabilities are measured at
the present value of the contractual payments due to the lessor
over the lease term, with the discount rate determined by reference
to the rate inherent in the lease unless (as is typically the case)
this is not readily determinable, in which case the group's
incremental borrowing rate on commencement of the lease is used.
The interest rate used was 4%. Variable lease payments are only
included in the measurement of the lease liability if they depend
on an index or rate. In such cases, the initial measurement of the
lease liability assumes the variable element will remain unchanged
throughout the lease term. Other variable lease payments are
expensed in the period to which they relate.
|
Right of use assets
|
Land & Buildings
|
Plant & Machinery
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
|
At 1 April 2023
|
996
|
-
|
996
|
|
Additions
|
-
|
-
|
-
|
|
Disposals
|
-
|
-
|
-
|
|
Depreciation
|
(245)
|
-
|
(245)
|
|
At 31 March 2024
|
751
|
-
|
751
|
Right of use assets are initially
measured at the amount of the lease liability, reduced for any
lease incentives received, and increased for:
· lease payments made at or before the commencement of the
lease;
· initial direct costs incurred; and
· the
amount of any provision recognized where the group is contractually
required to dismantle, remove or restore the leased asset
(typically leasehold dilapidations - see note 18 to the Financial
Statements).
The property lease rentals are
fixed payments over the rental terms.
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.
Business combinations
All business combinations are
accounted for by applying the purchase method. On acquisition, all
the subsidiaries' assets and liabilities that exist at the date of
acquisition are recorded at their fair values reflecting the
conditions at that date. The results of subsidiaries acquired in
the period are included in the income statement from the date on
which control is obtained.
Goodwill
Goodwill represents the excess of
the cost of a business combination over the total acquisition date
fair value of the identifiable assets, liabilities and contingent
liabilities acquired. Goodwill is not amortised but is capitalised
as an intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income. In
determining the fair value of consideration, the fair value of
equity issued is the market value of equity at the date of
completion, and the fair value of contingent consideration is based
on the expected future cashflows based on whether the Directors
believe performance conditions will be met and thus the extent to
which the further consideration will be payable. Where the fair
value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess
is credited in full to the consolidated statement of comprehensive
income on the acquisition date.
Impairment of non-financial assets
Impairment tests on goodwill and
other intangible assets with indefinite useful economic lives are
undertaken annually at the financial year end. Other non-financial
assets are subject to impairment tests whenever events or changes
in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down
accordingly.
Where it is not possible to
estimate the recoverable amount of an individual asset, the
impairment test is carried out on the asset's cash-generating unit
(i.e. the lowest Group of assets in which the asset belongs for
which there are separable identifiable cash flows that are largely
independent of the cash flows from the other assets or Groups of
assets). Goodwill is allocated on initial recognition to each of
the Group's cash-generating units that are expected to benefit from
the synergies of the combination giving rise to the
goodwill.
The estimated future cash flows
are discounted to their present value using a post-tax discount
rate that reflects current market assessments of the time value of
money and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
Foreign currencies
Transactions in foreign currencies
are recorded using the rate of exchange ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies are translated using the rate of exchange ruling at the
balance sheet date and the gains or losses on translation are
included in the consolidated statement of comprehensive income. The
results of foreign subsidiaries that have a functional currency
different from the Group's presentation currency are translated at
the average rates of exchange for the year. Assets and liabilities
of foreign subsidiaries that have a functional currency different
from the Group's presentation currency, are translated at the
exchange rates prevailing at the balance sheet date. Exchange
differences arising from the translation of the results of foreign
subsidiaries and their opening net assets are recognised as a
separate component of equity.
Revenue
Revenue is recognised to the
extent that it is probable that the economic benefits associated
with the transaction will flow into the Group and revenue
represents the fair value of amounts received or receivable for
goods and services provided net of trade discounts and
VAT.
The Group has three principal
categories of performance obligation: managed services,
professional services and value-added resale. All customer sales
are signed as contracts or orders which separately specify the
services and products to be delivered and these are mapped to one
of the three revenue recognition categories. The contracts or
orders specify, by service and product, the sales price and the
contracted term of the services. As such, the separate performance
obligations and allocation of transaction price can be identified
clearly from the customer sales contracts.
The revenue recognition policies
can be summarised as follows:
|
Revenue category
|
Performance delivery
|
Revenue recognition
|
|
Managed services
|
Contracted managed services are
delivered from an agreed commencement date and for a contracted
term of one to three years. Managed services comprises
multiple streams of service including cloud hosting and support and
operating licences. Due to the nature of this revenue the streams
are considered inter-dependant. The services are delivered
uniformly over the duration of the contract and invoiced annually,
quarterly or monthly in advance of the service delivery
period.
|
Revenue is recognised evenly over
the duration of the contract period based on the sales price as
specified in the customer sales contract. This is on the basis that
the customer receives and consumes the services evenly over the
term of the contract. Amounts invoiced in advance of service
delivery periods are accounted for as contract liabilities and
recognised as revenue in the Consolidated Statement of
Comprehensive Income to match the period in which the services are
delivered.
|
|
Professional services
|
Professional services are
delivered by a team of technical consultants based on a scope of
work agreed and signed with a customer. The scope of work includes
a specification of the work to be delivered, an estimation of the
number of consultancy days required, and a sales value based on a
day rate. Professional services are invoiced either in advance of
work performed, in arrears after the service is delivered or as
part of a larger project contract milestone.
|
Revenue is recognised based on
chargeable days delivered using the sales day rate specified in the
customer contract. Revenue recognition is therefore matched to the
timing of when the customer receives the benefit of the consultancy
services which is in line with the day the work is performed.
Professional services are either invoiced in arrears for the actual
days delivered or invoiced in advance. When invoiced in advance,
the sales value is treated as contract liabilities and recognised
as revenue in the Consolidated Statement of Comprehensive Income in
the period in which the consultancy days are delivered.
|
|
Value added resale
|
Value added resale ('VAR')
comprises sales of IT hardware and licences where the Group
satisfies its performance obligation by procuring the products from
suppliers for delivery to the customer. There are no further or
ongoing obligations to the Group after delivery. The sales price
for each product is separately specified in the customer sales
contract. VAR sales are either invoiced in full in advance of
delivery or invoiced according to an agreed contract milestone if
part of a larger contract.
|
Revenue is recognised on delivery
of the products from the supplier. Invoices are typically raised in
advance of delivery and treated as contract liabilities until
delivery has been fulfilled. At this point the revenue and
associated purchase cost is recognised in the Consolidated
Statement of Comprehensive Income.
|
|
|
|
|
|
|
|
|
| |
For managed services and
professional services revenue, these are recognised over time as
the entity's performance does not create an asset with an
alternative use to the entity and the entity has an enforceable
right to payment for performance completed to date.
Note that some contracts with
customers combine a mix of managed services, professional services
and value-added resale. When this is the case, performance
obligations are identified and recognised in line with the policies
described above.
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 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.
Financial instruments
Financial instruments are
classified and accounted for, according to the substance of the
contractual arrangement, as either financial assets, financial
liabilities or equity instruments. An equity instrument is any
contract that evidences a residual interest in the assets of the
Company after deducting all of its liabilities.
Financial assets
The Group's financial assets
comprise trade and other receivables and cash and cash equivalents
in the consolidated statement of financial position. Trade
receivables are stated at their nominal value and an expected
lifetime credit loss will be recognised using the simplified
approach and shown in administrative expenses in the Consolidated
Statement of Comprehensive Income. Impairment reviews for other
receivables, including those due from related parties, use the
general approach whereby twelve month expected credit losses are
provided for and lifetime credit losses are only recognised where
there has been a significant increase in credit risk, by monitoring
the credit worthiness of the other party. Cash and cash equivalents
include cash in hand.
Contract assets
Costs incurred to fulfil a
contract are recognised as an asset if and only if all of the
following criteria are met:
· the costs relate
directly to a contract (or a specific anticipated
contract);
· the costs generate or
enhance resources of the entity that will be used in satisfying
performance obligations in the future; and
· the costs are expected
to be recovered.
These include costs such as direct
labour, direct materials, and the allocation of overheads that
relate directly to the contract.
The asset recognised in respect of
the costs to obtain or fulfil a contract is amortised on a
systematic basis that is consistent with the pattern of transfer of
the goods or services to which the asset relates.
Share capital
Financial instruments issued by
the Group are classified as equity only to the extent that they do
not meet the definition of a financial liability or financial
asset. The Group's ordinary shares are classified as equity
instruments and are recorded at the proceeds received, net of
direct issue costs. Proceeds of any share issue in excess of the
nominal value of the share capital is recognised within the share
premium account.
Financial liabilities
The Group classifies its financial
liabilities into one of two categories, depending on the purpose
for which it was acquired. The Group's accounting policy for each
category is as follows:
Fair value through profit or loss
This category comprises only
contingent consideration. They are carried in the statement of
financial position at fair values with changes in fair value
recognised in the consolidated income statement.
Other financial liabilities
Other financial liabilities
include trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest rate
method.
Fair value measurement hierarchy
IFRS 9 requires certain
disclosures which require the classification of financial assets
and financial liabilities measured at fair value to reflect the
significance of the inputs used in making the fair value
measurement. The fair value hierarchy has the following
levels:
(a) Quoted prices in
active markets for identical assets or liabilities (Level
1);
(b) Inputs other than
quoted prices included within Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices) (Level 2); and
(c) Inputs from the
asset or liability that are not based on observable market data
(Level 3).
The level in the fair value
hierarchy within which the financial asset or financial liability
is categorised is determined on the basis of the lowest level input
that is significant to the fair value measurement. Financial assets
and financial liabilities are classified in their entirety into
only one of the three levels.
Share based payments
The fair value of employee
options, along with any share warrants granted, is charged to the
consolidated statement of comprehensive income with a corresponding
increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes pricing model,
considering the terms and conditions upon which the options were
granted. The fair value of warrants is also reviewed to the extent
that exercise of the warrants is considered likely.
Property plant and equipment
Items of property, plant and
equipment are stated at cost less depreciation. Depreciation is
provided at annual rates calculated to write off the cost less
estimated residual value of each asset over its expected useful
life, as follows:
Office equipment - 20% - 33%
straight line
Motor vehicles - 25% straight
line
Freehold property - 2% straight
line
Right of use assets - over the
period of the lease
Investment in subsidiaries
Fixed asset investments in the
parent company are shown at cost less any provision for impairment
as necessary.
Research and development
Research expenditure is written
off to the consolidated statement of comprehensive income in the
year in which the expenditure occurs. Development expenditure is
treated in the same way unless the Directors are satisfied as to
the technical, commercial and financial viability of individual
projects, there is an intention to complete and sell the product
and the costs can be easily measurable. In this situation, the
expenditure is capitalised, and the amortised expense is included
in administrative expenses in the Consolidated Statement of
Comprehensive Income over the years during which the Group is to
benefit.
Intangible assets
Intangible assets are recognised
on business combinations if they are separable from the acquired
entity or give rise to other contractual/legal rights. The amounts
ascribed to such intangibles are arrived at by using appropriate
valuation techniques (see section related to critical estimates and
judgements below).
The significant intangibles
recognised by the Group, their estimated useful economic lives and
the methods used to determine the cost of intangibles acquired in
business combinations are as follows:
|
Intangible asset
|
Estimated UEL
|
|
Customer relationships
|
5-10 years
|
|
Software licenses
|
3-5 years
|
|
System development
|
5 years
|
|
|
|
Deferred taxation
Deferred tax assets and
liabilities are recognised where the carrying amount of an asset or
liability in the consolidated statement of financial position
differs from its tax base, except for differences arising
on:
· the
initial recognition of goodwill;
· the
initial recognition of an asset or liability in a transaction which
is not a business combination and at the time of the transaction
affects neither accounting or taxable profit; and
· investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets
is restricted to those instances where it is highly probable that
relief against taxable profit will be available.
The amount of the asset or
liability is determined using tax rates that have been enacted or
substantively enacted by the reporting date and are expected to
apply when the deferred tax liabilities/(assets) are
settled/(recovered).
Deferred tax assets and
liabilities are offset when the Group has a legally enforceable
right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax
authority on either the same taxable Group Company; or different
Group entities which intend either to settle current tax assets and
liabilities on a net basis, or to realise the assets and settle the
liabilities simultaneously, in each future period in which
significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
Deferred tax liabilities are
recognised on intangible assets and other temporary differences
recognised in business combinations.
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.
Following this review an impairment of the IT Managed Services CGU
of £3.7m has been recorded (see note 13 for details).
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.
Impairment of investments (Company)
The Company holds investments in
subsidiaries. In line with the Company accounting policies
investments are assessed for impairment when there is an impairment
trigger.
An impairment review has been
performed at the reporting date considering sensitivities around
future business performance, covering a range of outcomes and risks
over levels of revenue, cost and cash generation. Following
this review an impairment of the investment in SysGroup Trading
Limited of £7.6m has been recorded (see note 15 for
details).
Significant accounting judgements
Revenue
Management makes judgements in
determining the appropriate application of revenue recognition
policies to the sale of services and products. An explanation of
the Group's revenue recognition policy is included in note
1.
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 and management of the business have been
successfully integrated, whichever is earlier. For the current
year, there are two CGUs, being the legacy SysGroup managed
services acquisitions which operate as one CGU, and then
Truststream.
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.
IFRS16 - Leases
Management makes 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.
Exceptional costs
The classification of costs as
being exceptional, and their quantum is viewed as a key management
judgement. For details of exceptional costs in the year see note
8.
3 Financial instruments - risk
management
The Group's financial instruments
comprise cash and liquid resources and various items such as trade
receivables and trade payables that arise directly from its
operations. There have been no substantive changes in the Group's
objectives, policies and processes for managing those risks or the
methods used to measure them from previous periods. The Group's
objective is to ensure adequate funding for continued growth and
expansion.
All the Group's financial
instruments are carried at amortised cost with the exception of
contingent consideration. There is no material difference
between the carrying and fair value of its financial instruments,
in the current or prior year, due to the instruments bearing
interest at fixed rates or being of short-term nature.
The Group faces a financial risk
that such financial assets are not recovered but a provision is
made where recoverability is in doubt.
A summary of financial instruments
held by category is shown below:
|
|
Group
|
Company
|
|
|
2024
|
2023
|
2024
|
2023
|
|
Financial Assets
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Assets held at amortised cost
|
|
|
|
|
|
Cash and cash
equivalents
|
1,943
|
4,186
|
119
|
401
|
|
Amounts due from
subsidiaries
|
-
|
-
|
-
|
323
|
|
Trade receivables
|
1,577
|
1,706
|
-
|
-
|
|
Total financial assets
|
3,520
|
5,892
|
119
|
724
|
|
|
|
|
|
|
Group
|
Company
|
|
|
2024
|
2023
|
2024
|
2023
|
|
Financial Liabilities
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Amortised cost
|
|
|
|
|
|
Trade and other
payables
|
4,472
|
2,801
|
805
|
632
|
|
Amounts due to
subsidiaries
|
-
|
-
|
5,830
|
3,099
|
|
Loans and other
borrowings
|
5,341
|
5,508
|
4,830
|
4,851
|
|
|
9,813
|
8,309
|
11,465
|
8,582
|
|
At fair value
|
|
|
|
|
|
Contingent
consideration
|
1,751
|
2,681
|
1,751
|
2,681
|
|
Total financial liabilities
|
11,564
|
10,990
|
13,216
|
11,263
|
|
|
|
|
|
|
|
Contingent
consideration
|
|
|
|
£'000
|
|
At 1 April 2023
|
|
|
|
2,681
|
|
Payment of year 1 earn-out
consideration
|
|
(885)
|
|
Fair value adjustment of
liability
|
|
(117)
|
|
Unwinding of discount
|
|
72
|
|
At 31 March 2024
|
|
|
|
1,751
|
Fair value of financial instruments
The Group has adopted the
following fair value hierarchy in relation to its financial
instruments that are carried in the balance sheet at the fair
values at the year-end:
· Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1)
·
Inputs other than quoted prices included within
level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived
from prices) (level 2)
·
Inputs for the asset or liability that are not
based on observable market data (unobservable inputs) (level
3)
The following table sets out the
fair value of all financial assets and liabilities that are
measured at fair value:
|
|
2024
|
2023
|
|
Group and Company
|
Level 1
|
Level 2
|
Level 3
|
Level 1
|
Level 2
|
Level 3
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Liabilities measured at fair value
|
|
|
|
|
|
|
|
Contingent
consideration
|
-
|
-
|
1,751
|
-
|
-
|
2,681
|
|
Total
|
-
|
-
|
1,751
|
-
|
-
|
2,681
|
Contingent consideration is
included in Level 3 of the fair value hierarchy. The provision for
contingent consideration is in respect of the Truststream
acquisition, further details of which can be found in Note 10. The
fair value is determined considering the expected payments,
discounted to present value using a risk adjusted discount
rate.
The significant unobservable
inputs were the financial performance forecasts for the Year 1 and
Year 2 twelve-month periods post-acquisition and the risk adjusted
discount rate of 4.0%.
The estimated fair value would
increase or decrease if the EBITDA was higher or lower or the risk
adjusted discount rate was higher or lower. A reasonably possible
change to one of these significant unobservable inputs, holding the
other inputs constant, would have the following effects:
|
Group and Company
|
|
|
|
|
Increase
|
Decrease
|
|
Effect of change in assumption on
income statement
|
|
|
|
£'000
|
£'000
|
|
EBITDA movement by
£100,000
|
|
|
|
|
66
|
300
|
|
Risk-adjusted discount rate change
by 1.0%
|
|
|
|
-
|
-
|
Note that as the Truststream year
2 financial position is final, there is now no judgement in the
estimated payment.
Liquidity risk
Liquidity risk arises from the
Group's management of working capital and the finance charges and
principal repayments on its debt instruments. It is the risk that
the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group prepare cashflow
forecasts during the month and working capital forecasts on a
monthly basis. These allow the Directors to make an assessment of
the cash position and the future requirements of the Group to
manage liquidity risk. Cash resources are managed in accordance
with planned expenditure forecasts and the Directors have regard to
the maintenance of sufficient cash resources to fund the Group's
operating requirements and capital expenditure.
The following table sets out the
contractual maturities (representing undiscounted contractual
cashflows) of financial liabilities:
|
Group
|
Up to 3 months
|
Between 3 & 12
months
|
Between
1&2 years
|
Between 2&5 years
|
Over 5 years
|
|
At 31 March 2024
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade and other
payables
|
4,472
|
-
|
-
|
-
|
-
|
|
Loans and borrowings
|
51
|
153
|
400
|
4,783
|
-
|
|
Contingent
consideration
|
|
1,751
|
-
|
-
|
-
|
|
Total
|
4,523
|
1,904
|
400
|
4,738
|
-
|
|
|
|
|
|
|
|
|
At 31 March 2023
|
|
|
|
|
|
|
Trade and other
payables
|
2,801
|
-
|
-
|
-
|
-
|
|
Loans and borrowings
|
46
|
137
|
621
|
4,705
|
-
|
|
Contingent
consideration
|
806
|
-
|
1,875
|
-
|
-
|
|
Total
|
3,653
|
137
|
2,496
|
4,705
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
Up to 3 months
|
Between 3 & 12
months
|
Between
1&2 years
|
Between 2&5 years
|
Over 5 years
|
|
At 31 March 2024
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade and other
payables
|
805
|
-
|
-
|
-
|
-
|
|
Amounts due to
subsidiaries
|
5,830
|
-
|
-
|
-
|
-
|
|
Loans and borrowings
|
11
|
31
|
50
|
4,738
|
-
|
|
Contingent
consideration
|
-
|
1,751
|
-
|
-
|
-
|
|
Total
|
6,646
|
1,782
|
50
|
4,738
|
-
|
|
|
|
|
|
|
|
|
At 31 March 2023
|
|
|
|
|
|
|
Trade and other
payables
|
632
|
-
|
-
|
-
|
-
|
|
Amounts due to
subsidiaries
|
3,099
|
-
|
-
|
-
|
-
|
|
Loans and borrowings
|
15
|
43
|
88
|
4,705
|
-
|
|
Contingent
consideration
|
806
|
-
|
1,875
|
-
|
-
|
|
Total
|
4,552
|
43
|
1,963
|
4,705
|
-
|
|
|
|
|
|
|
|
| |
The Amounts due to subsidiaries
shown in 'up to 3 months' category in the table above are payable
on demand (Note 17 to the Financial Statements).
Interest rate risk
The Group and Company finance
their operations through a combination of retained profits and bank
borrowings. The Group's RCF Bank loan with Santander has an
interest charge of 3.25% above bank base rate and accordingly the
interest charge the Group incurs fluctuates according to any
movement in the bank base rates.
Credit risk
Credit risk is the risk of
financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations and
arises principally from the Group's receivables from customers. The
Group's exposure to credit risk is influenced mainly by the
individual characteristics of each customer. The Group receives
payments either from automated banking receipts or from customers
paying on direct debit or 30-day credit terms. The Group has a
dedicated credit control function to manage customer payments and
uses an external credit rating agency to assess customers and
prospects for creditworthiness. Doubtful debts are provided for in
accordance with IFRS9. For cash and cash equivalents, the Group
only uses recognised banks with high credit ratings of a negative
or above on the Standard & Poor's rating system.
Foreign exchange risk
A small number of suppliers
invoice in USD. Foreign exchange exposure is closely managed,
including holding limited funds in USD. Alternate suppliers
invoicing in GBP are also sought where suitable.
Capital disclosures
The Group monitors capital which
comprises all components of equity (i.e. share capital, share
premium and retained earnings).
The Group's objective when
maintaining capital are to safeguard the entity's ability to
continue as a going concern, so that it can provide returns for
shareholders in future periods and benefits for other stakeholders,
and to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk. The
Group sets the amount of capital it requires in proportion to risk.
The Group manages its capital structure and adjusts it in the light
of changes in economic conditions and the risk characteristics of
the underlying assets.
4 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.
|
|
2024
|
2024
|
2023
|
2023
|
|
Revenue by operating
segment
|
£'000
|
%
|
£'000
|
%
|
|
Managed IT Services
|
18,592
|
82%
|
17,441
|
81%
|
|
Value Added Resale
|
4,122
|
18%
|
4,207
|
19%
|
|
Total
|
22,714
|
100%
|
21,648
|
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.
|
|
|
|
|
2024
|
2024
|
2023
|
2023
|
|
|
£'000
|
%
|
£'000
|
%
|
|
UK
|
22,573
|
99%
|
21,608
|
100%
|
|
Rest of World
|
141
|
1%
|
40
|
-
|
|
|
22,714
|
100%
|
21,648
|
100%
|
|
|
|
|
|
|
|
|
|
|
2024
|
2023*
Restated
|
|
|
|
|
£'000
|
£'000
|
|
Revenue
|
|
|
|
|
|
Managed IT Services
|
|
|
18,592
|
17,441
|
|
Value Added Resale
|
|
|
4,122
|
4,207
|
|
Total
|
|
|
22,714
|
21,648
|
|
Gross Profit
|
|
|
|
|
|
Managed IT Services
|
|
|
9,733
|
10,155
|
|
Value Added Resale
|
|
|
663
|
747
|
|
Total
|
|
|
10,396
|
10,902
|
* See accounting policies (note
1.) for further details of the restatement
Assets and liabilities related to contracts with
customers
The Group has recognised the
following assets and liabilities related to contracts with
customers:
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Contract liabilities relating to
deposits from customers
|
2,778
|
4,016
|
|
Release of contract liability
recognised in revenue which was included in the contract liability
balance at the beginning of the year
|
1,509
|
1,163
|
There were no sales between the
two business segments, and all revenue is earned from external
customers. The business segments' gross profit is reconciled to
profit before taxation as per the consolidated income statement.
The Group's overheads are managed centrally by the Board and
consequently there is no reconciliation to profit before tax at a
segmental level . The Group's assets are also managed centrally by
the Board and consequently there is no reconciliation between the
Group's assets per the Statement of Financial Position and the
segment assets.
5 Operating
profit
|
|
|
|
2024
|
2023
|
|
|
|
|
£'000
|
£'000
|
|
Operating profit is after charging
the following:
|
|
|
|
Audit - Group
|
|
116
|
94
|
|
Audit - Company
|
|
5
|
4
|
|
Assurance related - interim
review
|
|
12
|
12
|
|
Auditor's remuneration
|
133
|
110
|
|
|
|
|
|
Depreciation of tangible fixed
assets
|
570
|
625
|
|
Amortisation of intangible
assets
|
1,696
|
1,739
|
|
Impairment of intangible
assets
|
3,718
|
-
|
|
Staff costs (note 7)
|
5,763
|
5,566
|
|
Share based payments (note 7,
9)
|
194
|
178
|
|
Short term lease costs
|
20
|
40
|
|
Exceptional items (note
8)
|
1,826
|
408
|
6 Finance
expense
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Interest payable on bank
loan
|
440
|
307
|
|
Unwind of discounting on
contingent consideration
|
72
|
105
|
|
Interest payable on lease
liabilities
|
28
|
32
|
|
Arrangement fee amortisation on
bank loan
|
34
|
29
|
|
Other interest
|
-
|
10
|
|
|
574
|
483
|
7 Staff numbers and
costs
|
The average monthly number of
full-time persons employed by the Group, including Executive
Directors during the year was:
|
|
|
2024
|
2023
|
|
Technical Support
|
70
|
70
|
|
Sales and Marketing
|
23
|
18
|
|
Administration
|
18
|
20
|
|
Total
|
111
|
108
|
|
|
|
|
|
The aggregate payroll costs
including Executive Directors and excluding Non-Executive Directors
were as follows:
|
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
Wages and salaries
|
5,034
|
4,793
|
|
Social security costs
|
520
|
547
|
|
Benefits in kind
|
41
|
55
|
|
Pension benefits
|
168
|
171
|
|
Share based payment
expense
|
194
|
178
|
|
Total
|
5,957
|
5,744
|
Total staff costs for the Company
are £5,957,000 (FY23: £5,744,000) and average staff numbers for the
Company are 111 (FY23: 108).
|
|
2024
|
2023
|
|
Directors
|
£'000
|
£'000
|
|
Fees and salaries
|
970
|
662
|
|
Social security costs
|
101
|
69
|
|
Benefits in kind
|
29
|
3
|
|
Pension benefits
contributions
|
17
|
18
|
|
Share based payment
expense
|
162
|
132
|
|
Total
|
1,279
|
884
|
Key management personnel are those
persons having authority and responsibility for planning, directing
and controlling the activities of the Group, they are the Directors
of the Company. The emoluments, including any contractual
settlement fees, of the highest paid Director are £504,038 (FY23:
£329,000). Total payments for loss of office amounted to £449,200
(FY23: £nil).
The Group does not operate a
defined benefits pension scheme and Executive Directors who are
entitled to receive pension contributions may nominate a defined
contribution scheme into which the Company makes pension
contributions. The fees relating to Non-Executive Directors
are in some cases payable to third parties in connection with the
provision of their services. The balance outstanding at 31 March
2024 was nil (FY23: £Nil).
8 Exceptional
items
|
|
2024
|
2023
|
|
|
£'000
|
£'000
|
|
CEO exit and settlement
|
744
|
-
|
|
Integration and restructuring
costs
|
571
|
189
|
|
Supplier charges in
dispute
|
434
|
-
|
|
M&A projects
|
194
|
-
|
|
Acquisition costs
|
-
|
219
|
|
Fair value adjustment of
contingent consideration liability
|
(117)
|
|
|
Total
|
1,826
|
408
|
CEO exit and settlement
relates to the settlement of the former CEO's contractual
terms. This is considered material and non-recurring and has
therefore been classified as exceptional.
The integration and restructuring
costs relate to costs associated with the restructuring of the
Senior Leadership Team. This includes exit and hiring
expenses related to senior team members as well as wider
restructuring expenses within supporting teams. This is considered
non-recurring and has therefore been classified as
exceptional.
The supplier charges in dispute
are subject to ongoing action for which the company is pursuing
recovery. This is considered non-recurring and has
therefore been classified as exceptional.
The M&A projects expenditure
relate to costs associated with the evaluation of potential
acquisition targets. This is considered material and has
therefore been classified as exceptional.
The adjustment to the contingent
consideration liability relates to the purchase of Truststream
Security Solutions Limited in the prior year. This is
considered non-recurring and has therefore been classified as
exceptional.
In 2023, the acquisition and
integration costs relate to the two acquisitions in April 2022,
Truststream Security Solutions Limited and Independent Network
Services Limited (trading as 'Orchard IT'). This is considered
material and has therefore been classified as
exceptional.
All of the items above, based upon
the judgement of the management team, meet the definition of an
exceptional item as defined within the Group's accounting policies
(note 2 - Alternative Performance Measures).
9 Share based
payments
The Company has granted share
options to the Executive Directors under LTIP Schemes and Group
employees under an EMI Scheme. The Directors have the discretion to
grant options to subscribe for ordinary shares up to a maximum of
10 per cent of the Company's issued share capital. For new share
options issued in the year, the volatility was estimated using the
previous twelve months of the Group's share price.
EMI Scheme
Share options can be granted to
employees of the Group at the discretion of and with approval from
the Remuneration Committee. For EMI share options to vest the
employee must be employed by the Group at the vesting date. The
weighted average exercise price of options in issue is 42.0p per
share.
|
|
|
|
No. of Ordinary Shares
|
|
Grant date
|
Exercise period
|
Exercise price
|
At 31 March 2023
|
Granted
|
Waived
|
At 31 March 2024
|
|
17/03/2014
|
17/03/17 to 16/03/24
|
60.0p
|
-
|
-
|
-
|
-
|
|
21/02/2016
|
21/02/19 to 20/02/26
|
55.2p
|
11,875
|
-
|
(6,875)
|
5,000
|
|
02/03/2018
|
02/03/21 to 01/03/28
|
35.5p
|
30,000
|
-
|
(30,000)
|
-
|
|
26/11/2018
|
26/11/21 to 25/11/28
|
42.5p
|
215,000
|
-
|
(65,000)
|
150,000
|
|
16/04/2020
|
16/04/23 to 15/04/30
|
27.0p
|
150,000
|
-
|
(150,000)
|
-
|
|
06/04/2021
|
06/04/24 to 05/04/31
|
41.0p
|
206,000
|
-
|
(75,000)
|
131,000
|
|
01/07/2021
|
01/07/24 to 30/06/31
|
1.0p
|
100,000
|
-
|
(100,000)
|
-
|
|
14/02/2022
|
14/02/25 to 13/04/32
|
26.0p
|
30,000
|
-
|
(30,000)
|
-
|
|
19/04/2023
|
19/04/26 to 18/04/36
|
28.5p
|
-
|
30,000
|
(30,000)
|
-
|
|
Total
|
|
|
742,875
|
30,000
|
(486,875)
|
286,000
|
The inputs to the share valuation
model utilised at the grant of the option is shown in the table
below. Management has determined volatility using their knowledge
of the business. The options have been valued using the Black
Scholes method and using the following
assumptions:
|
Number of instruments
granted
|
11,875
|
30,000
|
215,000
|
150,000
|
206,000
|
100,000
|
30,000
|
30,000
|
|
Grant date
|
21-Feb16
|
02-Mar18
|
26-Nov18
|
16-Apr20
|
06-Apr21
|
01-Jul21
|
14-Feb22
|
19-Apr23
|
|
Expiry date
|
20-Feb26
|
01-Mar28
|
25-Nov28
|
15-Apr30
|
05-Apr31
|
30-Jun31
|
13-Feb32
|
18-Apr33
|
|
Contract term (years)
|
10
|
10
|
10
|
10
|
10
|
10
|
10
|
10
|
|
Exercise price
|
55.2p
|
35.5p
|
42.5p
|
27.0p
|
41.0p
|
1.0p
|
26.0p
|
28.5p
|
|
Share price at granting
|
70.8p
|
35.5p
|
42.5p
|
27.0p
|
41.0p
|
42.0p
|
26.0p
|
31.0p
|
|
Annual risk-free rate
(%)
|
0.5%
|
0.5%
|
0.5%
|
0.5%
|
0.5%
|
0.5%
|
4.0%
|
4.0%
|
|
Annual expected dividend yield
(%)
|
0%
|
0%
|
0%
|
0%
|
0%
|
0%
|
0%
|
0%
|
|
Volatility (%)
|
27%
|
27%
|
27%
|
27%
|
27%
|
27%
|
41%
|
41%
|
|
Fair value per grant
instrument
|
30.2p
|
41.5p
|
17.9p
|
14.8p
|
26.0p
|
14.3p
|
15.0p
|
17.0p
|
Executive LTIP options
The Remuneration Committee is
responsible for establishing the Executive LTIP Schemes and also
sets the targets by which the performance of the Executive
Directors is measured. The award of share options to the Executive
Directors is governed by the LTIP Scheme Rules. Further information
on the Schemes is presented in the Directors' Remuneration report.
The weighted average exercise price of options in issue is 1.0p per
share.
|
|
|
|
No. of Ordinary Shares
|
|
Grant date
|
Exercise period
|
Exercise price
|
At 31 March 2023
|
Granted
|
Exercised
|
At 31 March 2024
|
|
28/06/2018
|
28/06/21 to 27/06/28
|
1.0p
|
750,000
|
-
|
(750,000)
|
-
|
|
16/07/2018
|
16/07/21 to 15/07/28
|
1.0p
|
450,000
|
-
|
-
|
450,000
|
|
15/07/2019
|
15/07/22 to 14/07/29
|
1.0p
|
400,000
|
-
|
(250,000)
|
150,000
|
|
08/07/2020
|
08/07/22 to 07/07/30
|
1.0p
|
400,000
|
-
|
(250,000)
|
150,000
|
|
21/06/2021
|
21/06/23 to 20/06/31
|
1.0p
|
287,480
|
-
|
(179,675)
|
107,805
|
|
21/06/2022
|
21/06/24 to 20/06/32
|
1.0p
|
454,416
|
-
|
(284,010)
|
170,406
|
|
17/04/2023
|
17/04/25 to 16/04/33
|
1.0p
|
-
|
566,733
|
(362,709)
|
204,024
|
|
Total
|
|
|
2,741,896
|
566,733
|
(2,076,394)
|
1,232,235
|
The inputs to the share valuation
model utilised at the grant of the option is shown in the table
below. Management has determined volatility using their knowledge
of the business. The options have been valued using the Black
Scholes method and using the following assumptions:
|
Number of instruments
granted
|
750,000
|
450,000
|
400,000
|
400,000
|
287,480
|
454,416
|
566,733
|
|
Grant date
|
28-Jun-18
|
16-Jul-18
|
15-Jul-19
|
08-Jul-20
|
21-Jun-21
|
21-Jun-22
|
17-Apr-23
|
|
Expiry date
|
27-Jun-28
|
15-Jul-28
|
14-Jul-29
|
07-Jul-30
|
20-Jun-31
|
20-Jun-32
|
16-Apr-33
|
|
Contract term (years)
|
10
|
10
|
10
|
10
|
10
|
10
|
10
|
|
Exercise price
|
1.0p
|
1.0p
|
1.0p
|
1.0p
|
1.0p
|
1.0p
|
1.0p
|
|
Share price at granting
|
41.5p
|
46.5p
|
42.0p
|
33.0p
|
42.0p
|
27.0p
|
27.5p
|
|
Annual risk-free rate
(%)
|
0.5%
|
0.5%
|
0.5%
|
0.5%
|
0.5%
|
4.0%
|
4.0%
|
|
Annual expected dividend yield
(%)
|
0%
|
0%
|
0%
|
0%
|
0.0%
|
0.0%
|
0.0%
|
|
Volatility (%)
|
27%
|
27%
|
27%
|
27%
|
27%
|
41%
|
41%
|
|
Fair value per grant
instrument
|
40.9p
|
43.7p
|
41.4p
|
32.0p
|
41.0p
|
26.0p
|
26.0p
|
On 26 May 2023, it was announced
that Adam Binks would be stepping down as Chief Executive Officer
and the Board on 26 June 2023.The Board agreed that the 826,394
unvested options granted to Adam Binks under the Company's 2020
LTIP Scheme would vest with immediate effect with all restrictions
on all his options waived. Adam Binks agreed to immediately
exercise all his options granted under the 2018 and 2020 LTIP
schemes, totalling 2,076,394 ordinary shares of 1p each ('Ordinary
Shares') and further agreed to sell, and the Company agreed to buy,
a total of 2,076,394 Ordinary Shares at a price of £0.375 per
Ordinary Share. The Company will hold these Ordinary Shares in
treasury to satisfy the exercise of future share options under
SysGroup's share incentive schemes.
The share-based payment charge in
the statement of comprehensive income in the year was £194,000
(2023: £178,000).
10 Acquisitions
The Group has not made any
acquisitions in the year to 31 March 2024. In April 2022 of
the prior year, 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 2022 for £4.8m 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 £3.1m. A payment
of £0.5m 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. £0.9m has been paid to
date in relation to the first earn out period and a further £1.8m
is held as Contingent consideration at 31 March 2024. Final
earn
out is
expected to be settled and paid within 12 months of the balance
sheet date.
The Truststream acquisition was
mainly funded from a new £8.0m revolving credit facility ('RCF')
which was signed with Santander on 4 April 2022. SysGroup utilised
£4.5m of funds from the RCF to finance the acquisition. Further
information on the RCF facility can be found in note 19 to the
Consolidated Financial Statements.
|
|
|
|
Recognised amounts of net assets
acquired, and liabilities assumed
|
Book Value
|
FV Adj
|
Fair Value
|
|
|
£'000
|
£'000
|
£'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
|
|
|
3,075
|
|
|
Discounting of contingent
consideration
|
|
|
(499)
|
|
|
Total consideration
|
|
|
7,913
|
|
|
|
|
|
|
| |
Independent Network Solutions Limited
('INSL')
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
2022 for £1.0m 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 and liabilities assumed
|
Book Value
|
FV Adj
|
Fair Value
|
|
|
£'000
|
£'000
|
£'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)
|
(264)
|
|
|
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'. See Note 13 for further
details. The Company incurred £218,000 of professional fees and
other acquisition costs in relation to the two acquisitions in the
year to 31 March 2023. These costs are included as Exceptional
costs in the Group's consolidated statement of comprehensive
income.
Truststream contributed to Group
revenue £6.3m (2023: £4.9m) and £0.4m (2023: £0.3m) profit before
tax for the year to 31 March 2024. 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 trading was fully hived
into SysGroup Trading Limited for the year to 31 March 2024.
Orchard contributed £1.8m to Group revenue and £0.1m profit before
tax for the year to 31 March 2023.
11 Earnings per
share
|
|
2024
|
2023*
Restated
|
|
(Loss) for the financial year
attributable to shareholders
|
(£5,900,000)
|
(£201,000)
|
|
Adjusted profit for the financial
year
|
£1,010,000
|
£1,723,000
|
|
Weighted number of issued equity
shares
|
48,923,389
|
48,859,690
|
|
Weighted number of equity shares
for diluted EPS calculation
|
50,710,251
|
52,274,633
|
|
Adjusted basic earnings per share
(pence)
|
2.1p
|
3.5p
|
|
Basic earnings per share
(pence)
|
(12.1)p
|
0.0p
|
|
Diluted earnings per share
(pence)
|
(12.1)p
|
0.0p
|
|
|
2024
|
2023*
Restated
|
|
|
£'000
|
£'000
|
|
(Loss) after tax used for basic
earnings per share
|
(5,900)
|
(201)
|
|
Amortisation of intangible
assets
|
1,696
|
1,739
|
|
Impairment of intangible
assets
|
3,718
|
-
|
|
Exceptional items
|
1,826
|
408
|
|
Share based payments
|
194
|
178
|
|
Tax adjustments
|
(524)
|
(401)
|
|
Adjusted profit used for Adjusted Earnings per
Share
|
1,010
|
1,723
|
*See accounting policies (note 1)
for further details of the restatement
12 Taxation
|
|
2024
|
2023
|
|
Current tax
|
£'000
|
£'000
|
|
Current tax - current
year
|
-
|
374
|
|
Adjustments in respect of prior
years
|
(84)
|
-
|
|
Total current tax charge
|
(84)
|
374
|
|
Deferred tax
|
|
|
|
Deferred tax - timing
differences
|
(609)
|
(472)
|
|
Adjustments in respect of prior
years
|
23
|
-
|
|
Total deferred tax
|
(586)
|
(472)
|
|
Total tax (credit)
|
(670)
|
(98)
|
|
The effective tax rate for the
year to 31 March 2024 is higher (2023: higher) than the standard
rate of corporation tax in the UK. The differences are explained
below:
|
|
|
|
2024
|
2023*
Restated
|
|
|
|
£'000
|
£'000
|
|
|
(Loss) on ordinary activities before tax
|
(6,570)
|
(299)
|
|
|
(Loss)/profit on ordinary
activities before taxation multiplied by the standard rate of UK
corporation tax of 25% (2023:19%)
|
(1,642)
|
(57)
|
|
|
Effects of:
|
|
|
|
|
Expenses not deductible
|
274
|
92
|
|
|
Income not taxable
|
899
|
-
|
|
|
Short term timing
differences
|
374
|
136
|
|
|
R&D tax credits
|
-
|
(29)
|
|
|
Re-measurement of deferred tax due
to changes in UK rate
|
-
|
(66)
|
|
|
Deferred tax on share
based
|
31
|
32
|
|
|
Deferred tax on acquired
intangibles
|
(368)
|
(206)
|
|
|
Adjustments in respect of prior
years
|
(61)
|
-
|
|
|
Other permanent
differences
|
(177)
|
-
|
|
|
Total tax credit
|
(670)
|
(98)
|
|
|
*
See accounting policies (note 1) for further details of the
restatement
|
|
The Group recognised deferred tax
assets and liabilities as follows:
|
|
|
2024
|
2023
|
|
|
|
£'000
|
£'000
|
|
|
Deferred tax on customer
relationships
|
(1,042)
|
(1,421)
|
|
|
Deferred tax asset on share-based
payments
|
100
|
166
|
|
|
Fixed asset timing
differences
|
(196)
|
(225)
|
|
|
Short term timing
differences
|
21
|
-
|
|
|
Losses
|
268
|
(46)
|
|
|
Deferred tax liability
|
(849)
|
(1,434)
|
|
|
|
|
|
|
|
Recognition of deferred tax assets
is restricted to those instances where it is highly probable that
relief against taxable profit will be available. There are no
unrecognised deferred tax assets.
|
|
|
Deferred tax balances are
recognised at 25% (2023: 25%):
|
|
|
|
|
|
|
|
| |
|
|
Losses
|
Fixed asset timing
differences
|
Short term timing
differences
|
Share based
payments
|
Customer
relationships
|
Total
|
|
|
£'000
|
£'000
|
|
|
£'000
|
£'000
|
|
Balance at 1 April 2023
|
46
|
(225)
|
-
|
166
|
(1,421)
|
(1,434)
|
|
DT on share-based
payments
|
|
|
|
(31)
|
|
(31)
|
|
DT on amortisation of
intangibles
|
|
35
|
|
|
368
|
403
|
|
Fixed asset and other timing
differences
|
222
|
(7)
|
22
|
(35)
|
11
|
213
|
|
Balance at 31 March 2024
|
268
|
(197)
|
22
|
100
|
(1,042)
|
(849)
|
13 Intangible
assets
|
|
Systems
Development
|
Software
licences
|
Customer
relationships
|
Positive
goodwill
|
Total
|
|
Group cost
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
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
|
|
At 1 April 2023
|
1,011
|
-
|
12,709
|
21,666
|
35,386
|
|
Additions
|
109
|
-
|
-
|
-
|
109
|
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
|
Impairment
|
-
|
-
|
-
|
(3,718)
|
(3,718)
|
|
At 31 March 2024
|
1,120
|
-
|
12,709
|
17,948
|
31,777
|
|
Accumulated
amortisation
|
|
|
|
|
|
|
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
|
|
At 1 April 2023
|
356
|
-
|
7,069
|
-
|
7,425
|
|
Charge for the year
|
224
|
-
|
1,472
|
-
|
1,696
|
|
Disposals
|
-
|
-
|
-
|
-
|
-
|
|
At 31 March 2024
|
580
|
-
|
8,541
|
-
|
9,121
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
At 31 March 2023
|
655
|
-
|
5,640
|
21,666
|
27,961
|
|
At 31 March 2024
|
540
|
-
|
4,168
|
17,948
|
22,656
|
|
|
|
|
|
Systems
Development
|
Total
|
|
Company cost
|
|
|
|
£'000
|
£'000
|
|
At 1 April 2022
|
|
|
|
-
|
-
|
|
Additions
|
|
|
|
28
|
28
|
|
At 31 March 2023
|
|
|
|
28
|
28
|
|
Additions
|
|
|
|
37
|
37
|
|
At 31 March 2024
|
|
|
|
65
|
65
|
|
|
|
|
|
|
|
|
Accumulated
amortisation
|
|
|
|
|
|
At 1 April 2022
|
|
|
|
-
|
-
|
|
Charge for the year
|
|
|
|
2
|
2
|
|
At 31 March 2023
|
|
|
|
2
|
2
|
|
Charge for the year
|
|
|
|
16
|
16
|
|
At 31 March 2023
|
|
|
|
18
|
18
|
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
At 31 March 2023
|
|
|
|
26
|
26
|
|
At 31 March 2024
|
|
|
|
47
|
47
|
|
|
|
|
|
|
| |
All amortisation and impairment
charges are included in the depreciation, amortisation and
impairment of non-financial assets classification, which is
disclosed as administrative expenses in the statement of
comprehensive income. Customer relationships have a remaining
amortisation period of between 2 and 5 years.
Cash-generating units ('CGUs')
Goodwill and intangible assets are
allocated to CGUs in order to be assessed for potential impairment.
The Group has a core CGU of 'Managed IT Services' and as the Group
acquires new businesses they form their own CGU until they have
been integrated into the Group's core operational
structure.
The Group has a Senior Leadership
Team that manages the SysGroup business within a single operational
and delivery structure. Whilst the Truststream business has been
integrated within the SysGroup leadership structure and onto the
Group system platforms, the business continues to operate its own
cash transactions and balances and therefore remains a distinct
cash generating unit of the Group. As such, the Directors consider
Truststream to be a separate CGU.
The allocation of goodwill and
carrying amounts of assets for each CGU is as follows:
|
|
Allocation of
goodwill
|
Carrying value of
assets
|
|
|
2024
|
2023
|
2024
|
2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Managed IT Services
|
16,064
|
16,064
|
17,213
|
19,366
|
|
Truststream Security
Solutions
|
5,602
|
5,602
|
6,583
|
6,698
|
|
Total
|
21,666
|
21,666
|
23,796
|
26,064
|
Impairment review
When assessing impairment, the
recoverable amount of each CGU is based on value-in-use
calculations (VIU). VIU calculations are an area of material
management estimate as set out in note 2. These calculations
require the use of estimates, specifically: post-tax cash flow
projections; long-term growth rates; and a post-tax discount rate.
Cash flow projections are based on the Group's detailed annual
operating plan for the forthcoming financial year which has been
approved by the Board.
The VIU calculation is determined
based on a discounted cash flow basis prepared for each individual
cash generating unit. Cash flows beyond the forthcoming financial
year use estimated growth rates which are stated below. The
assumptions for growth rates and margins are based on management's
experience of growth and knowledge of the industry sector, markets
and our own internal opportunities for growth. The projections
beyond five years use an estimated long-term growth rate of 2.0%
(FY22: 2.5%) for net post tax cash flows. This represents
management's best estimate of a long-term annual growth rate
aligned to an assessment of long-term GDP growth rates. A higher
sector-specific growth rate would be a valid alternative estimate.
A different set of assumptions may be more appropriate in future
years dependent on changes in the macroeconomic
environment.
The discount rates used are based
on management's calculation of the WACC using the capital asset
pricing model to calculate the cost of equity. The same rate is
used for each CGU in the VIU calculation, and the rates reflect
management's assessment on the level of relative risk in each
respective CGU. Discount rates can change relatively quickly for
reasons both inside and outside management control. Those outside
management direct control or influence include changes in the
Group's Beta, changes in risk free rates of return and changes in
Equity Risk Premia. Matters inside management control are the
delivery of performance in line with plans or budgets and the
production of high or low risk plans.
At the year-end reporting date,
goodwill was reviewed for impairment in accordance with IAS 36
'Impairment of Assets' and an impairment of the Managed IT Services
CGU of £3.7m has been recorded. No impairment of the Truststream
CGU arose because of this review.
Legacy Managed IT Services
CGU
The Managed IT Services CGU
goodwill is comprised of acquisitions dating from 2016 to 2022, as
listed below:
System Professional - 2016
Rockford IT - 2017
Certus IT - 2019
Hub Network - 2020
Orchard IT - 2022
Based upon a prudent assessment of
the future performance of these acquisitions (being the "Managed IT
Services CGU"), management's view is that the CGU is impaired by
£3.7m. The VIU model is sensitive to changes in key assumptions,
including revenue growth. If year 1 revenue growth were to reduce
to 0%, then the impairment would increase by a further £4.9m,
assuming no changes in other assumptions. Management is comfortable
with the revenue growth rate used in the VIU model.
Truststream CGU
The Truststream CGU has over 18%
headroom of VIU compared to the carrying value of assets. For the
headroom to reduce to nil, the post-tax discount rate would have to
increase to over 11.8% on Truststream or future CGU profits would
have to be significantly below current forecast levels.
The VIU model for the Truststream
GGU is particularly sensitive to changes in two key assumptions,
being year 1 revenue and gross margin %. Year 1 revenue growth
would have to drop by 4.7% from the base for there to be an
impairment of goodwill. As an example, If the revenue growth rate
were to drop by 10% then there would be an impairment of £2.7m
(assuming all other assumptions remain in line). Further, gross
margin % would have to drop 1.0% from the base for there to be an
impairment of goodwill. Management is comfortable with the revenue
growth rate and gross margin % used in the VIU model.
The assumptions used for the impairment review are detailed
below:
|
|
|
Legacy
Managed IT Services
|
Truststream
|
|
2024
|
|
Discount rate post-tax
|
|
10.3%
|
10.3%
|
|
Revenue growth rate year 2 to year
5
|
|
3.5%
|
6.0%
|
|
Terminal growth rate
|
|
|
2.0%
|
2.0%
|
|
2023
|
|
|
|
|
Discount rate post-tax
|
|
10.7%
|
10.7%
|
|
Revenue growth rate year
2
|
|
2.5%
|
10.0%
|
|
Revenue growth rate year 3 to year
5
|
|
2.5%
|
2.5%
|
|
Terminal growth rate
|
|
|
2.0%
|
2.5%
|
14 Property, plant and
equipment
|
|
Office
Equipment
|
Right of
Use Lease
|
Freehold
Property
|
Total
|
|
Cost
|
£'000
|
£'000
|
£'000
|
£'000
|
|
At 1 April 2022
|
2,744
|
2,181
|
382
|
5,307
|
|
Additions
|
249
|
935
|
-
|
1,184
|
|
Disposals
|
(1,793)
|
(1,851)
|
-
|
(3,644)
|
|
At 31 March 2023
|
1,200
|
1,265
|
382
|
2,847
|
|
At 1 April 2023
|
1,200
|
1,265
|
382
|
2,847
|
|
Additions
|
450
|
-
|
-
|
450
|
|
Disposals
|
-
|
-
|
-
|
-
|
|
At 31 March 2024
|
1,650
|
1,265
|
382
|
3,297
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
At 1 April 2022
|
2,014
|
1,790
|
25
|
3,829
|
|
Charge for the year
|
358
|
259
|
8
|
625
|
|
Disposals
|
(1,793)
|
(1,780)
|
-
|
(3,573)
|
|
At 31 March 2023
|
579
|
269
|
33
|
881
|
|
At 1 April 2023
|
579
|
269
|
33
|
881
|
|
Charge for the year
|
317
|
245
|
8
|
570
|
|
Disposals
|
-
|
-
|
-
|
-
|
|
At 31 March 2024
|
896
|
514
|
41
|
1,451
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
At 31 March 2023
|
621
|
996
|
349
|
1,966
|
|
At 31 March 2024
|
754
|
751
|
341
|
1,846
|
|
|
Office
Equipment
|
Right of
Use Lease
|
|
|
|
Total
|
|
|
Company cost
|
£'000
|
£'000
|
£'000
|
|
|
At 1 April 2022
|
320
|
346
|
666
|
|
|
Additions
|
150
|
47
|
197
|
|
|
Disposals
|
(298)
|
-
|
(298)
|
|
|
At 31 March 2023
|
172
|
393
|
565
|
|
|
At 1 April 2023
|
172
|
393
|
565
|
|
|
Additions
|
163
|
-
|
163
|
|
|
Disposals
|
-
|
-
|
-
|
|
|
At 31 March 2024
|
335
|
393
|
728
|
|
|
|
|
|
|
|
|
Accumulated
depreciation
|
|
|
|
|
|
At 1 April 2022
|
278
|
134
|
412
|
|
|
Charge for the year
|
56
|
70
|
126
|
|
|
Disposals
|
(298)
|
-
|
(298)
|
|
|
At 31 March 2023
|
36
|
204
|
240
|
|
|
At 1 April 2023
|
36
|
204
|
240
|
|
|
Charge for the year
|
82
|
76
|
158
|
|
|
Disposals
|
-
|
-
|
-
|
|
|
At 31 March 2024
|
118
|
280
|
398
|
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
At 31 March 2023
|
136
|
189
|
325
|
|
|
At 31 March 2024
|
217
|
113
|
331
|
|
|
|
|
|
|
|
| |
15 Investments
|
|
2024
|
2023
|
|
Company
|
£'000
|
£'000
|
|
At start of year
|
34,034
|
24,895
|
|
Acquisitions
|
-
|
8,913
|
|
Investment in
subsidiaries
|
-
|
226
|
|
Impairment
|
(7,635)
|
-
|
|
At 31 March
|
26,399
|
34,034
|
The recoverable amounts have been
determined from discounted cash flow calculations based on cash
flow projections from the forecasts covering the period to 31 March
2026. The principal assumptions can be found in note 13.
In line with the rationale and
conclusions drawn in note 13 regarding the Legacy Managed IT
Services CGU, an impairment of the SysGroup Trading Limited
investment of £7.6m is required and has been recorded in the
period. Following this impairment, the investment balance in
SysGroup Trading Limited is £18.5m. The remaining balance of £7.9m
relates to Truststream Security Solutions Limited.
The Company's subsidiary
undertakings all of which are wholly owned and included in the
consolidated accounts are:
|
|
|
|
|
|
Undertakings
|
Registration
|
Principal activity
|
|
SysGroup Trading
Limited
|
England
& Wales
|
Managed
IT Services
|
|
Truststream Security Solutions
Limited
|
Scotland
|
Managed
IT Services
|
|
Certus IT Limited
|
England
& Wales
|
Non-trading
|
|
Hub Network Services
Limited
|
England
& Wales
|
Non-trading
|
|
Netplan LLC*
|
USA
|
Non-trading
|
|
Orchard Computers
Limited
|
England
& Wales
|
Dormant
|
|
Independent Network Solutions
Limited
|
England
& Wales
|
Non-trading
|
|
Netplan Internet Solutions
Limited
|
England
& Wales
|
Dormant
|
|
Rockford IT Limited
|
England
& Wales
|
Dormant
|
|
System Professional
Limited
|
England
& Wales
|
Dormant
|
|
SysGroup (DIS) Limited
|
England
& Wales
|
Dormant
|
* Netplan LLC is a wholly owned
subsidiary of Netplan Internet Solutions Limited
The registered office of all
subsidiaries is the same as the registered office of the parent
Company with the exception of:
Netplan LLC
Truststream Security Solutions Limited
whose registered office
is:
whose registered office is:
c/o USA Corporate Services
Inc
8th Floor, Sugar Bond House
19 West 34th Street, Suite 1018,
Anderson Place, Leith, Edinburgh
New York,
10001
Scotland EH6 5NP
16 Trade and other
receivables
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023*
Restated
|
2023
|
|
Amounts due within one
year
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade debtors
|
1,577
|
-
|
1,706
|
-
|
|
Amounts due from
subsidiaries
|
-
|
-
|
-
|
323
|
|
Other debtors
|
26
|
-
|
-
|
81
|
|
Corporation tax asset
|
84
|
-
|
-
|
-
|
|
Prepayments and accrued
income
|
2,316
|
105
|
3,107
|
221
|
|
Total
|
4,003
|
105
|
4,813
|
625
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts due from subsidiaries are
due on demand and incur no interest.
The carrying value of trade and
other receivables approximates to their fair value.
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Debtor impairment
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade debtors
|
1,692
|
-
|
1,979
|
-
|
|
Impairment provision
|
(115)
|
-
|
(273)
|
-
|
|
Total
|
1,577
|
-
|
1,706
|
-
|
The Group have applied the
simplified approach to calculate its impairment of trade
receivables. In completing this review, the Group have segregated
its receivables into categories based on the number of days past
due for each invoice and used this to estimate the expected
lifetime credit loss, with the historic credit losses being
adjusted for expected forward cashflows given the current economic
environment.
|
|
Group
|
Company
|
|
|
Current
|
Over 1
month past due
|
Total
|
Current
|
Over 1
month past due
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
|
|
Trade debtors
|
610
|
1,082
|
1,692
|
-
|
-
|
-
|
|
Expected credit loss
|
-
|
(115)
|
(115)
|
-
|
-
|
-
|
|
Net carrying amount
|
610
|
967
|
1,577
|
-
|
-
|
-
|
* See accounting policies (note 1)
for further details of the restatement
17 Trade and other
payables
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Amounts due within one
year
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Trade payables
|
3,132
|
293
|
1,813
|
110
|
|
Amounts due to
subsidiaries
|
-
|
5,830
|
-
|
3,099
|
|
Accruals
|
1,340
|
512
|
988
|
522
|
|
Total financial liabilities, excluding loans and borrowings
measured at amortised cost
|
4,472
|
6,635
|
2,801
|
3,731
|
|
Corporation tax
|
-
|
-
|
438
|
-
|
|
Other taxes and social security
costs
|
341
|
82
|
622
|
132
|
|
Total
|
4,813
|
6,717
|
3,861
|
3,863
|
|
Amounts due to subsidiaries are
due on demand and incur no interest charge.
|
|
Contingent consideration
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Amounts due within one year
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Contingent
consideration
|
1,751
|
1,751
|
806
|
806
|
|
Amounts due after one year
|
|
|
|
|
|
Contingent
consideration
|
-
|
-
|
1,949
|
1,949
|
|
Discounted value
|
-
|
-
|
(74)
|
(74)
|
|
Discounted contingent consideration
|
-
|
-
|
1,875
|
1,875
|
|
|
|
|
|
| |
The contingent consideration is
stated at its discounted fair value and is expected to be paid
following the completion of the Year 2 earn-out period.
To the extent trade payables and
other payables are not carried at fair value in the consolidated
balance sheet, book value approximates to fair value at 31 March
2024 and 31 March 2023. The maturity of the financial liabilities,
excluding loans and borrowings, classified as financial liabilities
and measured at amortised cost is shown in note 3.
18 Provisions
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Dilapidations provision
|
148
|
68
|
191
|
68
|
|
Total
|
148
|
68
|
191
|
68
|
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.
19 Loans and
borrowings
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Non- current
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Lease liabilities
|
400
|
49
|
621
|
88
|
|
Bank loan
|
4,738
|
4,738
|
4,705
|
4,705
|
|
Total
|
5,138
|
4,787
|
5,326
|
4,793
|
|
|
|
|
|
|
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Current
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Lease liabilities
|
204
|
43
|
182
|
58
|
|
Bank loan
|
-
|
-
|
-
|
-
|
|
Total
|
204
|
43
|
182
|
58
|
The company has an RCF banking
facility with a term of five years to April 2027, 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 £4.5m of RCF
funds for the Truststream acquisition in April 2022.
20 Contract
liabilities
|
|
Group
|
Company
|
Group
|
Company
|
|
|
2024
|
2024
|
2023
|
2023
|
|
Contract liabilities
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Current - contract
liabilities
|
2,635
|
-
|
3,633
|
-
|
|
Non-current - contract
liabilities
|
143
|
-
|
383
|
-
|
|
Total
|
2,778
|
-
|
4,016
|
-
|
21 Share
capital
|
|
|
|
|
Group and
Company
|
Number
|
£'000
|
|
Allotted, called up and fully paid
ordinary shares of £0.01 each
|
|
|
|
At 1 April 2022
|
49,419,690
|
494
|
|
At 31 March 2023
|
49,419,690
|
494
|
|
Issue of share capital
|
2,076,394
|
21
|
|
At 31 March 2024
|
51,496,084
|
515
|
22 Reconciliation of net
cashflow movements in net debt
|
|
1 April
2023
|
Non
cashflow movements
|
Cashflow
|
Right of
use Movement
|
Maturity
reclass
|
31 March
2024
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
Cash and cash equivalents
|
4,186
|
-
|
(2,243)
|
-
|
-
|
1,943
|
|
Debt due in less than one year:
|
|
|
|
|
|
|
|
Bank loans
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Contingent
consideration
|
(806)
|
(79)
|
885
|
-
|
(1,751)
|
(1,751)
|
|
Lease liabilities
|
(182)
|
-
|
199
|
-
|
(221)
|
(204)
|
|
Debt due in more than one year
|
|
|
|
|
|
|
|
Bank loans
|
(4,705)
|
(33)
|
-
|
-
|
-
|
(4,738)
|
|
Contingent
consideration
|
(1,875)
|
124
|
-
|
-
|
1,751
|
-
|
|
Lease liabilities
|
(621)
|
-
|
-
|
-
|
221
|
(400)
|
|
Net cash/(debt)
|
(4,003)
|
(65)
|
(1,082)
|
-
|
-
|
(5,150)
|
The maturity reclass movements
show the change in classification of the debt item maturity periods
due to contractual changes or new contracts incepted in the
year.
23 Related party
transactions
Transactions between the Company
and its subsidiaries, which are related parties of the Company,
have been eliminated on consolidation and are not disclosed in this
note. Details of the transactions between the Group and other
related parties are disclosed below:
Arete Capital Partners, a Company
of which Mike Fletcher (Non-Executive Director) is a partner,
invoiced SysGroup plc £420 (2023: £26,479) for a shared cost of
corporate services received by SysGroup plc and Arete Capital
Partners. At 31 March 2024, the balance outstanding was £nil (31
March 2023: £nil).
24 Ultimate controlling
party
The Directors consider the Group
and Company have no controlling shareholder and no ultimate
controlling party.
25 Contingent asset
As disclosed in Note 8 the group
has incurred £0.43m in relation to charges in dispute with a third
party supplier, which the group is actively seeking recovery of.
The group consider the probability of recovery of the charges as
possible. As the recovery is not virtually certain, an asset has
not been recorded on the balance sheet.
26 Post balance sheet
events
The Group raised £10.6m net funds
from a placing in June 2024. Gross proceeds were £11.2m, including
a £0.3m retail offering and a £10.9m placing.
|