TIDMSYS
RNS Number : 9815G
SysGroup PLC
21 November 2022
21 November 2022
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Half year results for the six months ended 30 September 2022
SysGroup plc (AIM:SYS), the multi award-winning managed IT
services, cyber security and cloud hosting provider , is pleased to
announce its unaudited half year results for the six months ended
30 September 2022 ("H1 FY23").
Financial highlights
-- Revenue increased by 49% to GBP11.32m (H1 FY22: GBP7.58m)
-- Recurring Managed IT Services revenue represented 75% of
total revenue (H1 FY22: 86%), in line with expectations as a result
of acquisitions
-- Adjusted EBITDA(1) increased by 25% to GBP1.68m (H1 FY22: GBP1.34m)
-- Adjusted profit before tax(2) of GBP1.10m (H1 FY22: GBP0.96m)
-- Statutory loss before tax of GBP0.19m (H1 FY22: profit before tax GBP0.25m)
-- Adjusted basic EPS(3) of 2.0p (H1 FY22: 1.5p)
-- Basic EPS of (0.2)p (H1 FY22: 0.3p)
-- Cashflow from operations of GBP1.67m (H1 FY22: GBP1.14m)
-- Net debt (4) on 30 September 2022 of GBP1.92m, excluding
GBP2.94m of contingent consideration relating to the acquisition of
Truststream (30 September 2021: net cash of GBP1.96m)
Operational highlights
-- First two acquisitions since 2019 as M&A difficulties caused by pandemic and lockdowns ease
o Truststream Security Solutions Limited ("Truststream")
acquired for up to GBP7.9m, enhancing cyber security offering and
adding Edinburgh location
o Orchard Computers Limited ("Orchard") acquired for GBP1m in
cash, strengthening south west operations
o Both acquisitions immediately earnings enhancing and
integration largely completed as a result of Project Fusion
-- Consistently high customer satisfaction levels maintained above 97%
-- Successful launch of multi-tenanted SysCloud 2.0 platform
-- Early benefits seen from sales and marketing initiatives from
Manchester hub with growing pipeline of opportunities
-- Workforce at optimal levels as recruitment market eases
Outlook
-- Further potential for cross selling and client growth
-- Continuing to monitor and assess acquisition opportunities
-- The Board remains confident that trading for the current
financial year will be in line with its expectations
Adam Binks, Chief Executive Officer, commented:
" I am pleased to deliver results in line with expectations as
the Group benefits from the operational investments and
improvements that have been made over prior periods. Technology can
help businesses improve efficiency and protect margins which is
increasingly relevant when set against the current economic
backdrop.
"The two acquisitions made in the period have strengthened our
offering even further and added more great team members to the
Group. Additionally, they have both brought a base of customers
which we can service better from our enhanced footprint which now
covers the whole of Great Britain. As well as being earnings
enhancing, they are further evidence of our ambition to continue to
be a consolidator in this highly fragmented market."
Notes
1. Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation of intangible assets, exceptional items
and share based payments.
2. Adjusted profit before tax is profit before tax after adding
back amortisation of intangible assets, exceptional items and share
based payments.
3. Adjusted basic EPS is profit after tax after adding back
amortisation of intangible assets, exceptional items, share based
payments and associated tax, divided by the number of shares in
issue.
4. Net debt represents cash balances less bank loans and lease liabilities.
For further information please
contact:
Tel: 0151 559
SysGroup Plc 1777
Adam Binks, Chief Executive
Officer
Martin Audcent, Chief Financial
Officer
Zeus Capital (Nominated Adviser Tel: 0161 831
and Broker) 1512
Dan Bate
James Edis
Alma PR (Financial PR) Tel: 07780
Josh Royston 901 979
Matthew Young
About SysGroup
SysGroup is a leading provider of managed IT services, cloud
hosting, cyber security and expert IT consultancy. The Group
delivers solutions that enable clients to benefit from industry
leading technologies and delivers managed solutions with security,
compliance and governance from the core. SysGroup focuses on a
customer's strategic and operational requirements - enabling
clients to free up resources, grow their core business and avoid
the distractions and complexity of managing IT services.
The Group has offices in Bristol, Edinburgh, Liverpool, London,
Manchester and Newport.
For more information, visit http://www.sysgroup.com
Overview
I am pleased to report on a strong first half for the Group,
particularly in light of the continuing difficult economic
backdrop. This performance highlights the strength of our strategy
as we remain integral to our customers, understanding their
individual corporate needs and providing the mission critical
services required to meet their business ambitions. The Company
completed two acquisitions during the first six months and both are
performing in line with management's expectations whilst beginning
to enable future cross-selling opportunities.
Our financial performance was in line with expectations and
reflects the expected impact of the acquisitions. Revenue for the
first six months was GBP11.32m, an increase of 49% over the prior
year (H1 FY22: GBP7.58m). As expected, revenue mix changed back
towards our previously guided split as both acquired businesses
have a greater proportion of value added resale ("VAR"). Recurring
managed services accounted for 75% of total revenue compared to 86%
for the prior year, a blend that is expected to continue for the
full year.
Gross profit margin of 50% reflects the higher proportion of
lower margin VAR sales (H1 FY22: 60%) and the Group delivered a
strong increase of 25% in Adjusted EBITDA to GBP1.68m (H1 FY22:
GBP1.34m). Cash conversion was outstanding at 120% (H1 FY22: 85%)
and the Group ended the half with a healthy gross cash balance of
GBP4.22m (H1 FY22: GBP3.47m). The Group swung to a net debt
position of GBP1.92m (H1 FY22: net cash of GBP1.96m) excluding
contingent consideration of GBP2.94m relating to the acquisition of
Truststream. The shift to a net debt position is a result of the
financing of the acquisitions via the Group's committed debt
facilities.
At the end of the last financial year, the Board highlighted
that it was starting to see the early signs of a recovery towards
more normalised trading conditions and the performance detailed for
H1 FY23 demonstrates this. Difficult economic conditions drive
businesses to explore ways in which they can maintain their
competitive edge whilst also aiming to protect and improve margins.
Investing in technology delivers these outcomes and our sales and
marketing hub in Manchester has been working on a number of
initiatives over the course of the year which are beginning to
prosper and build a growing pipeline of future potential.
Operations
We are benefiting from the operational optimisation that became
such a strong focus through the pandemic, readying the business for
these opportunities. The investment in Project Fusion, which
provided the Group with a single unified platform, has been
pivotal, vastly improving visibility and inter-operability between
locations as well enabling us to add scale at pace. There is still
work to do relating to the integration of the acquisitions.
However, we have made excellent progress in a short space of
time.
The first half saw us launch SysCloud 2.0, the Group's
multi-tenanted cloud platform, which went fully live and
operational in May 2022 with all existing customers now migrated
over from the legacy version. The design of the platform allows us
to scale quickly as needed in order to fulfil customer demand. We
support the full cloud lifecycle from design to deployment to
management of the platform as well as providing monitoring and
maintenance of customers' applications and data to ongoing service
and change management. SysCloud 2.0 provides our clients with even
better performance and provides the Group with greater efficiency,
giving more capacity from less physical space.
Power consumption is obviously an essential part of our business
and as is widely known the energy market continues to be unstable,
often with increases in costs coming at short notice. The Group has
worked closely with both its datacentre partners and energy
brokers, where we are in control of our own energy supply, to
negotiate the best rates possible for both the Group and our
customers. In the majority of instances, we have been able to pass
the increases in costs we have seen through to customers.
The Company renewed its lease on our London offices, ensuring
that we have a necessary presence in the Capital. Following the
closure of the office and data centre in Telford, the Board is
confident that the right structure is in place to support further
growth. Alongside existing operations in Bristol, Liverpool,
London, Manchester and Newport, the addition of our Edinburgh
location gives us a strong presence from which to grow our client
base across the United Kingdom.
Our people remain all important to our success. The recruitment
market has been a challenge in the post-pandemic world, however,
this is beginning to ease and we have seen increased levels of
activity in our recent talent acquisition drive and we are now
seeing the benefits of maintaining our talent acquisition strategy.
For our existing team members, their commitment and output remain
outstanding and on behalf of the Board, I offer my sincere
thanks.
Strategy
The Group's strategy remains consistent: to expand its position
as a trusted provider of managed IT services to businesses in the
UK mid-market. The Board believes that a business focused on the
provision of managed IT services offers the highest growth
opportunity, with the potential for increased margins and
longer-term contracts, thereby providing greater revenue
visibility.
To deliver against this strategy, the Group has positioned
itself as an extension of a customer's existing IT department, with
an emphasis on consultative-led sales to guide customers through
the complexities and developments in the managed IT services, cyber
security and cloud hosting marketplace. Our primary purpose is to
remain abreast of developments in technology and advise our
customers accordingly. This leading role is supplemented by
exceptional customer service and support, resulting in strong
client engagement and embedding SysGroup into their organisations.
The Group continues to invest in R&D to ensure its clients are
making use of the latest and best solutions available to them
whilst maintaining its vendor agnostic approach.
Results and Trading
The Group delivered revenue of GBP11.32m (H1 FY22: GBP7.58m) and
Adjusted EBITDA of GBP1.68m (H1 FY22: GBP1.34m), increases of 49%
and 25% respectively on the comparative period last year.
Managed IT services revenue was GBP8.54m (H1 FY22: GBP6.50m), an
increase of 31%, and VAR revenue was GBP2.78m (H1 FY22: GBP1.08m),
an increase of 156%. The higher VAR revenue performance shifted the
revenue mix back to our target model of 75%:25% (H1 FY22: 86%:14%)
which had been anticipated on the acquisitions of Truststream and
Orchard. The Group's results reflect a full half year of trading
from the two acquisitions and we're pleased to have seen single
digit organic growth in revenue after the recent COVID impacted
periods.
Gross profit was GBP5.61m with a gross margin of 50% (H1 FY22:
GBP4.56m and 60% respectively). Whilst gross profit has increased,
the gross margin percentage has reduced which is in line with
current guidance and relates to the revenue mix of the two acquired
businesses. Both Truststream and Orchard have a higher number of
VAR sales compared to the legacy SysGroup business, which is also
transacted at slightly lower gross margin.
Adjusted operating expenses of GBP3.94m were GBP0.72m above the
same period last year (H1 FY22: GBP3.22m) as the overheads of the
acquired businesses have been absorbed into the Group. Costs
continue to be controlled well, though like many other businesses
we have seen a significant rise in energy costs. Our contract terms
with customers have largely allowed us to pass these increases on
although power consumption across our office footprint has been
absorbed into the overhead base.
The consolidated income statement includes GBP0.34m of
exceptional costs which are for the professional fees related to
the acquisition of Truststream and Orchard and costs associated
with the post-acquisition integration and restructuring.
Finance costs of GBP0.24m have increased compared to the same
period last year (H1 FY22: GBP0.05m). Finance costs include
GBP0.12m of bank loan interest and GBP0.10m of non-cash finance
charges relating to the unwinding of discount on contingent
consideration and amortisation of the loan arrangement fee. The
bank loan interest has increased following the GBP4.5m drawdown to
finance the acquisition of Truststream and also from the increase
in bank interest rates.
The Group has an Adjusted profit before tax of GBP1.10m (H1
FY22: GBP0.96m) and a statutory loss before tax of GBP0.19m (H1
FY22: profit before tax GBP0.25m). The statutory loss before tax
results from having GBP0.34m of non-recurring exceptional costs, a
GBP0.25m increase in amortisation of acquired intangible assets,
and the increase in finance costs.
The taxation credit of GBP0.08m includes no significant one-off
items. The tax charge will increase in FY24 due to the increase in
corporation tax rate from 19% to 25% which applies from 1 April
2023.
Adjusted basic earnings per share for H1 FY23 was 2.0 pence (H1
FY22: 1.5 pence) and basic loss per share for H1 FY23 was 0.2 pence
(H1 FY22: earnings per share 0.3 pence).
The consolidated statement of financial position includes the
impact of the Truststream and Orchard acquisitions with GBP6.3m of
goodwill and GBP3.6m of acquired intangible assets recognised on
acquisition. The increase in the Group's working capital balances
primarily relate to the addition of the two businesses and the full
GBP2.9m discounted fair value of the contingent consideration is
included in current and non-current liabilities.
There were no significant items of capital expenditure in H1
FY23 and the total tangible capex spend was GBP0.1m. In H1 FY22 the
higher expenditure was due to the refurbishments of our Newport
& Manchester offices and investing into our multi-tenanted
SysCloud 2.0 platform. As planned, we completed Project Fusion at
the end of FY22 and there have been no system or commercial
development projects in H1 FY23.
The Group's financial position structurally shifted following
the financing of the two acquisitions in April. The net cash
position of GBP1.96m at 31 March 2022 shifted to a net debt
position of GBP1.92m at 30 September 2022, excluding the GBP2.94m
of contingent consideration. The GBP1m acquisition of Orchard was
financed from the Group's existing cash balance, and Truststream
was acquired using GBP4.5m of funds drawn from the new GBP8.0m
revolving credit facility and GBP0.85m from the Group's existing
resources. The Group had a gross cash balance of GBP4.22m at 30
September 2022 (30 Sept 2021: GBP3.47m).
Cashflow from operations was GBP1.67m (H1 FY22: GBP1.14m) and
cash conversion was higher than expected at 120% (H1 FY22: 85%).
The target cash conversion range for the Group is 80-90% but was
higher than usual due to a small number of VAR deals where payments
had been received from customers in advance of the related supplier
payments falling due for payment. Working capital continues to be
managed well with debtor days below the target level of 25 days.
Corporation tax of GBP0.13m was paid in H1 FY23 (H1 FY22:
GBP0.19m).
Acquisitions
In April, SysGroup completed its first two acquisitions since
2019, both of which are strategically important for the Group. We
are delighted with both additions as they bring with them great
teams, complement our existing offering, provide opportunities for
future cross selling and strengthen the Group's geographical
footprint.
We acquired Truststream for an initial cash consideration of
GBP4.8m and a maximum earn out consideration of up to GBP3.075m
over a 24 month period. Established in 2011, Truststream is one of
the UK's fastest growing providers of professional and managed
cyber security services. The global managed security services
market is forecast to grow by a CAGR of 7.9% through to 2027*.
Truststream has a strong and growing client base across both the
private and public sectors and is one of the UK's leading providers
of security transformation services. Its offering 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. Truststream has
built long term sustainable relationships with key vendors and is
identified as a leading partner of choice for market leading
vendors by Gartner. Truststream has a number of relevant security
accreditations, including ISO 9001 and ISO 27001.
We subsequently acquired Independent Network Solutions Limited,
which trades as Orchard Computers, a Bristol based managed IT
service provider, for GBP1.0m in cash. Orchard has been in
operation for over 30 years and has built a loyal customer base
totalling over 120 active clients in 2021, largely in the Southwest
of England. The average length of relationship amongst their 20
largest clients is 12 years, with no single customer representing
more than 7% of total revenues. Orchard represents customers 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.
At the time of the Truststream acquisition, the Company secured
a new GBP8.0m revolving credit facility with Santander to provide
additional financial flexibility for the Group. The new banking
facility has a term of five years with covenants that will be
tested quarterly relating to total net debt to Adjusted EBITDA
leverage and minimum liquidity. The Group has drawn down GBP4.5m
against the new facility towards the funding of the Truststream
Acquisition.
As a result of Project Fusion, the integration of both
businesses has been both swift and seamless. The integration of
both finance operations, customer relationship management and team
members have already been completed. By the end of the current
financial year, we expect to have completed integration of all
technical operations as well as have both businesses trading under
the SysGroup brand.
The Board is continuing to monitor and assess further
acquisition opportunities. The pipeline is looking healthy
following the disruptions caused by the pandemic and, as a
well-capitalised and well-run business with an increasing presence
throughout the UK, we are well placed to add quality businesses and
further scale whilst continuing to maintain discipline in line with
our strict acquisition criteria.
Share Option Grants
In June 2022, the Remuneration Committee granted 284,010
performance shares to Adam Binks, Chief Executive Officer, and
170,406 performance shares to Martin Audcent, Chief Financial
Officer in relation to the Group's performance in FY22 and under
the terms of the 2020 SysGroup Long Term Incentive Plan.
Outlook
Trading for the second half has continued with positive momentum
and the Board is therefore confident in meeting its full year
expectations. Clearly, we are conscious of the ongoing economic
uncertainty but are continuing to work hard to build a pipeline of
opportunity. The business is continuing to benefit from the
operational investments and optimisation focus of previous periods
and is well placed to deliver further growth. Technology has the
ability to drive productivity and efficiency and with the landscape
becoming increasingly sophisticated and diverse, companies need
outsourced expertise to deliver the right outcomes for their
individual needs.
The need for managed IT services remains prevalent and as
businesses increasingly seek to invest in technology to increase
efficiencies and improve their margins, SysGroup is ideally placed
to capitalise on this market opportunity.
The acquisitions of Truststream and Orchard demonstrate our
desire and ability to add quality businesses and we have the right
infrastructure to integrate them seamlessly and at pace. The market
remains hugely fragmented and we will look to consolidate further
as opportunities arise.
*Source - "Managed Security Services Market Outlook to 2025:
Global Report" by Research and Markets
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2022
Unaudited Unaudited Audited
six months six months year
to to to
30-Sep-22 30-Sep-21 31-Mar-22
Notes GBP'000 GBP'000 GBP'000
Revenue 2 11,321 7,580 14,746
Cost of sales (5,708) (3,017) (5,826)
Gross profit 2 5,613 4,563 8,920
----------------------------------------- ------ ------------ ------------ ----------
Operating expenses before depreciation,
amortisation, exceptional items
and share based payments (3,935) (3,219) (6,103)
----------------------------------------- ------ ------------ ------------ ----------
Adjusted EBITDA 1,678 1,344 2,817
----------------------------------------- ------ ------------ ------------ ----------
Depreciation (330) (334) (654)
Amortisation of intangible assets (866) (615) (1,243)
Exceptional items 4 (337) - -
Share based payments (96) (93) (195)
Administrative expenses (5,564) (4,261) (8,195)
----------------------------------------- ------ ------------ ------------ ----------
Operating profit 49 302 725
Finance costs 5 (243) (52) (127)
----------------------------------------- ------ ------------ ------------ ----------
(Loss)/profit before taxation (194) 250 598
Taxation 77 (83) (147)
Total comprehensive (loss)/profit
attributable
to the equity holders of the
company (117) 167 451
----------------------------------------- ------ ------------ ------------ ----------
Basic earnings per share (pence) 3 (0.2)p 0.3p 0.9p
Diluted earnings per share (pence) 3 (0.2)p 0.3p 0.9p
----------------------------------------- ------ ------------ ------------ ----------
All the results arise from continuing operations.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
Notes GBP'000 GBP'000 GBP'000
Assets
Non-current assets
Goodwill 7 21,894 15,554 15,554
Intangible assets 7 7,005 4,822 4,318
Plant, property and equipment 2,139 1,614 1,478
------------------------------- ------ ---------- ---------- ----------
31,038 21,990 21,350
Current assets
Trade and other receivables 8 4,090 1,926 2,079
Cash and cash equivalents 4,216 3,469 4,133
------------------------------- ------ ---------- ---------- ----------
8,306 5,395 6,212
Total Assets 39,344 27,385 27,562
------------------------------- ------ ---------- ---------- ----------
Equity and Liabilities
Equity attributable to the equity shareholders of the
parent
Called up share capital 494 494 494
Share premium 9,080 9,080 9,080
Treasury reserve (201) (201) (201)
Other reserve 3,123 2,925 3,027
Translation reserve - 4 4
Retained earnings 8,741 8,570 8,854
------------------------------- ------ ---------- ---------- ----------
21,237 20,872 21,258
Non-current liabilities
Lease liabilities 685 269 195
Contract liabilities 486 - 296
Contingent consideration 1,060 - -
Provisions 10 175 - -
Deferred taxation 1,642 948 1,011
Bank loan 11 5,187 595 387
9,235 1,812 1,889
------------------------------- ------ ---------- ---------- ----------
Current liabilities
Trade and other payables 9 3,844 2,766 2,692
Lease liabilities 268 255 144
Contract liabilities 2,885 1,291 1,163
Contingent consideration 1,875 - -
Bank loan 11 - 389 416
8,872 4,701 4,415
------------------------------- ------ ---------- ---------- ----------
Total Equity and Liabilities 39,344 27,385 27,562
------------------------------- ------ ---------- ---------- ----------
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2022
Attributable to equity holders of the parent
Share Share Treasury Other Translation Retained Total
capital premium reserve reserve reserve earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2021 494 9,080 (201) 2,832 4 8,403 20,612
Loss and total comprehensive
income for the period - - - - - 167 167
Share options charge - - - 93 - - 93
-------------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 30 September 2021
(unaudited) 494 9,080 (201) 2,925 4 8,570 20,872
Profit and total comprehensive
income for the period - - - - - 284 284
Share options charge - - - 102 - - 102
-------------------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 March 2022 494 9,080 (201) 3,027 4 8,854 21,258
Loss and total comprehensive
income for the period - - - - - (117) (117)
Reclass of translation
reserve - - - - (4) 4 -
Share options charge - - - 96 - - 96
--------------------------------
At 30 September 2022
(unaudited) 494 9,080 (201) 3,123 - 8,741 21,237
-------------------------------- --------- --------- --------- --------- ------------ ---------- --------
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
---------------------- --------------------------------------------------------
Share Premium Reserve Amount subscribed for share capital in excess
of nominal values.
Treasury reserve Company owned shares held for the purpose of settling
the exercise of employee share options.
Other Reserve Amount reserved for share-based payments to be
released over the life of the instruments and
the equity element of convertible loans
Translation Reserve Amount represents differences in relations to
the consolidation of subsidiary companies accounting
for currencies other than the Group's functional
currency. In H1 FY23 the balance of the reserve
was reclassified to Retained earnings and no further
translation differences are expected to occur.
Retained earnings All other net gains and losses and transactions
with owners (e.g. dividends) not recognised elsewhere.
---------------------- --------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENT OF CASHFLOWS
SIX MONTHSED 30 SEPTEMBER 2022
Unaudited Unaudited Audited
six months six months year
to to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Cashflows used in operating
activities
(Loss)/profit after tax (117) 167 451
Adjustments for:
Depreciation and amortisation 1,196 949 1,897
Finance costs 243 52 127
Share based payments 96 93 195
Taxation (credit)/charge (77) 83 147
---------------------------------------------- ------------ ------------ -----------
Operating cashflows before movement
in working capital 1,341 1,344 2,817
---------------------------------------------- ------------ ------------ -----------
Decrease/(increase) in trade
and other receivables 68 (198) (354)
Increase/(decrease) in trade
and other payables 260 (5) 5
Cashflow from operations 1,669 1,141 2,468
---------------------------------------------- ------------ ------------ -----------
Taxation paid (128) (192) (159)
Net cash from operating activities 1,541 949 2,309
---------------------------------------------- ------------ ------------ -----------
Cashflows from investing activities
Payments to acquire property, plant
& equipment (105) (476) (620)
Payments to acquire intangible
assets - (147) (271)
Acquisition of subsidiary companies (5,390) - -
net of cash acquired
Net cash used in investing activities (5,495) (623) (891)
---------------------------------------------- ------------ ------------ -----------
Cashflows from financing activities
RCF drawdown net of arrangement fees 4,373 - -
Repayment of bank loan (82) (189) (417)
Capital/principal paid on lease liabilities (102) (88) (256)
Interest paid on loan facility (138) (45) (67)
Interest paid on lease liabilities (14) (8) (18)
Net cash used in financing activities 4,037 (330) (758)
---------------------------------------------- ------------ ------------ -----------
Net increase/(decrease) in cash and
cash equivalents 83 (4) 660
---------------------------------------------- ------------ ------------ -----------
Cash and cash equivalents at the beginning
of the period /year 4,133 3,473 3,473
Cash and cash equivalents at the
end of the period/year 4,216 3,469 4,133
---------------------------------------------- ------------ ------------ -----------
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2022
1. ACCOUNTING POLICIES
The accounting policies used in the preparation of the unaudited
consolidated condensed financial information for the six months
ended 30 September 2022 are prepared in accordance with UK adopted
International Financial Reporting Standards ("IFRS") and are
consistent with those that will be adopted in the annual statutory
financial statements for the year ended 31 March 2023.
While the financial information included has been prepared in
accordance with the recognition and measurement criteria, in
accordance with UK adopted International Financial Reporting
Standards, these consolidated condensed financial statements do not
contain sufficient information to comply with IFRSs.
The financial information for the six-month period ended 30
September 2022 and 30 September 2021 does not constitute statutory
accounts within the meaning of Section 434(3) of the Companies Act
2006 and is unaudited but has been reviewed by our auditors in
accordance with the International Standard on Review Engagement
2410 issued by the Auditing Practices Board. The comparative
financial information for the year ended 31 March 2022 included
within this report does not constitute the full statutory accounts
for that period. The statutory Annual Report and Financial
Statements for 2022 have been filed with the Registrar of
Companies. The Independent Auditor's Report on that Annual Report
and Financial Statements for 2022 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a
statement under 498(2) or 498(3) of the Companies Act 2006.
This Interim Report has been prepared solely to provide
additional information to shareholders to assess the Group's
strategies and the potential for those strategies to succeed. The
Interim Report should not be relied on by any other party or for
any other purpose.
Exceptional items
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 (Note 6) as
management believe they should be considered separately to gain an
understanding of the underlying profitability of the trading
businesses.
Going concern
The Directors have prepared the financial statements on a going
concern basis which assumes that the Group and the Company will
continue to meet liabilities as they fall due.
The Group has an operating model with a high level of resilience
to economic downturn with circa 75% of revenue deriving from
contracted managed IT services which are business critical supplies
to customers. This resilience was demonstrated during the recent
economic downturn when the Group continued to operate at full
capacity throughout the period with no use of the government's
furlough or loan assistance schemes. The Group has a gross cash
balance of GBP4.2m and a net debt position of GBP1.92m (excluding
contingent consideration of GBP2.94m) which is forecast to steadily
reduce as the Group continues to generate strong levels of
operating cash inflow.
The Directors have reviewed the Group's financial forecasts and
taken into account the current UK economic outlook. The projected
trading forecasts and resultant cashflows, together with the
confirmed loan facilities and other sources of finance, 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 they continue to adopt the going
concern basis of accounting in preparing the financial
statements.
2. SEGMENTAL REPORTING
The chief operating decision maker for the Group is the Board of
Directors and 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
product and licence sales procured from supplier partners.
The monthly management accounts reported to the Board of
Directors are reviewed at a consolidated level and the Board review
the results of the operating segments at a revenue and gross profit
level since the Group's management and operational structure
operate as unified 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, 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.
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
--------------------- ------------ ------------ ----------
Revenue
Managed IT Services 8,543 6,496 12,845
Value Added Resale 2,778 1,084 1,901
11,321 7,580 14,746
--------------------- ------------ ------------ ----------
Gross Profit
Managed IT Services 5,157 4,329 8,511
Value Added Resale 456 234 409
5,613 4,563 8,920
--------------------- ------------ ------------ ----------
3. EARNINGS PER SHARE
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-22 30-Sep-21 31-Mar-22
(Loss)/profit for the financial period
attributable to shareholders (117) 167 451
Adjusted profit for the financial
period 974 741 1,748
Weighted number of equity shares in
issue 48,859,690 48,859,690 48,859,690
Weighted number of equity shares for
diluted calculation 52,189,652 51,786,614 51,983,666
Adjusted basic earnings per share
(pence) 2.0p 1.5p 3.6p
Basic (loss)/earnings per share (pence) (0.2p) 0.3p 0.9p
Diluted (loss)/earnings per share
(pence) (0.2p) 0.3p 0.9p
----------------------------------------- ------------ -------------- ------------------
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
(Loss)/profit after tax (117) 167 451
Amortisation of intangible assets 866 615 1,243
Exceptional items 337 - -
Share based payments 96 93 195
Tax adjustments (208) (134) (141)
----------------------------------------- ------------ -------------- ------------------
Adjusted profit used for Adjusted
earnings per share 974 741 1,748
----------------------------------------- ------------ -------------- ------------------
The tax adjustments relate to current and deferred tax on the
amortisation of intangible assets, exceptional items and share
based payments.
4. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
six months six months year
to to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
------------------------------ ------------ ------------ ----------
Integration and restructuring 113 - -
costs
Acquisition costs 224 - -
337 - -
------------------------------ ------------ ------------ ----------
5. FINANCE COSTS
Unaudited Unaudited Audited
six months six months year
to to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------ ------------ ----------
Interest payable on lease liabilities 26 2 20
Interest payable on bank loan 120 36 80
Arrangement fee amortisation
on bank loan 18 14 27
Unwinding of discount on contingent 79 - -
consideration
243 52 127
--------------------------------------- ------------ ------------ ----------
6. ALTERNATIVE PERFORMANCE MEASURES
Unaudited Unaudited Audited
Reconciliation of Operating six months six months year to
profit to Adjusted EBITDA to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Operating profit 49 302 725
Depreciation 330 334 654
Amortisation of intangible assets 866 615 1,243
EBITDA 1,245 1,251 2,622
----------------------------------- ------------ ------------ ----------------
Exceptional items 337 - -
Share based payments 96 93 195
Adjusted EBITDA 1,678 1,344 2,817
----------------------------------- ------------ ------------ ----------------
Reconciliation of loss before Unaudited Unaudited Audited
tax to Adjusted profit before six months six months year to
tax to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
(Loss)/profit before tax (194) 250 598
Amortisation of intangible assets 866 615 1,243
Exceptional items 337 - -
Share based payments 96 93 195
----------------------------------- ------------ ------------ ----------------
Adjusted profit before tax 1,105 958 2,036
----------------------------------- ------------ ------------ ----------------
Cash conversion Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Cashflow from operations 1,669 1,141 2,468
Adjustments:
Acquisitions, integration and 337 - -
restructuring cashflows
Adjusted cashflow from operations 2,006 1,141 2,468
----------------------------------- ------------ ------------ -------------
Adjusted EBITDA 1,678 1,344 2,817
----------------------------------- ------------ ------------ -------------
Cash conversion 120% 85% 88%
----------------------------------- ------------ ------------ -------------
Net debt Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Cash balances 4,216 3,469 4,133
Bank loans - current - (389) (416)
Bank loans - non-current (5,187) (595) (387)
Net (debt)/cash before lease
liabilities (971) 2,485 3,330
Lease liabilities - equipment - - (8)
Lease liabilities - property (953) (524) (331)
Net (debt)/cash (1,924) 1,961 2,991
Contingent consideration (2,935) - -
Net (debt)/cash including contingent
consideration (4,859) 1,961 2,991
-------------------------------------- ---------- ---------- ---------------
7. INTANGIBLE ASSETS
Software Customer
Systems development licences relationships Goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- -------------------- ---------- --------------- --------- --------
Cost
At 1 April 2021 802 205 9,156 15,554 25,717
Additions 271 - - - 271
At 31 March 2022 1,073 205 9,156 15,554 25,988
---------------------- -------------------- ---------- --------------- --------- --------
At 1 April 2022 1,073 205 9,156 15,554 25,988
Additions - - 3,555 6,340 9,895
---------------------- -------------------- ---------- --------------- --------- --------
At 30 September 2022 1,073 205 12,711 21,894 35,883
---------------------- -------------------- ---------- --------------- --------- --------
Accumulated amortisation
At 1 April 2021 264 201 4,408 - 4,873
Charge for the year 140 4 1,099 - 1,243
At 31 March 2022 404 205 5,507 - 6,116
---------------------- -------------------- ---------- --------------- --------- --------
At 1 April 2022 404 205 5,507 - 6,116
Charge for the year 86 - 782 - 868
---------------------- -------------------- ---------- --------------- --------- --------
At 30 September 2022 490 205 6,289 - 6,984
---------------------- -------------------- ---------- --------------- --------- --------
Net book value
At 31 March 2022 669 - 3,649 15,554 19,872
At 30 September 2022 583 - 6,422 21,894 28,899
---------------------- -------------------- ---------- --------------- --------- --------
8. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Trade receivables 1,723 991 1,154
Other receivables 2,367 935 925
-------------------- ---------- ---------- ----------------
4,090 1,926 2,079
------------------- ---------- ---------- ----------------
9. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Trade payables 1,399 1,344 1,116
Corporation tax 427 153 188
Other taxes and social
security 836 468 499
Accruals 1,182 801 889
------------------------- ---------- ---------- ----------------
3,844 2,766 2,692
------------------------ ---------- ---------- ----------------
10. PROVISIONS
Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Dilapidations provision 175 - -
------------------------ ---------- ---------- ----------------
This 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.
11. BANK LOAN
Unaudited Unaudited Audited
30-Sep-22 30-Sep-21 31-Mar-22
GBP'000 GBP'000 GBP'000
Bank loans - current - 389 416
Bank loans - non-current 5,187 595 387
5,187 984 803
-------------------------- ---------- ---------- ----------------
In April 2022, SysGroup plc re-financed its existing term loan
facility of GBP1.75m and its undrawn acquisition revolving credit
facility of GBP3.25m and replaced both with a new GBP8.0m revolving
credit facility with Santander to provide additional financial
flexibility for the Group. The new banking facility has a term of
five years, an interest rate of Base Rate +3.25% margin on drawn
funds and covenants that will be tested quarterly relating to total
net debt to Adjusted EBITDA leverage and minimum liquidity.
12. ACQUISITIONS
In April 2022 SysGroup acquired 100% of the issued share capital
in Truststream and Independent Network Solutions Limited ("INSL")
which is the holding company of Orchard.
Truststream
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.
Truststream was acquired for GBP4.8m initial cash consideration
on a cash-free debt-free basis with an additional GBP0.5m paid for
the net cash position following the conclusion of the completion
accounts exercise. The acquisition agreement includes a two year
earn-out mechanism with contingent consideration payable up to
GBP3.08m following the first and second anniversaries of the
transaction. The earn-out is subject to the achievement of certain
maintainable EBITDA performance targets in the first and second
12-month periods following the completion of the acquisition.
The Truststream acquisition was funded from a new GBP8.0m
revolving credit facility ("RCF") which was signed with Santander
in April 2022. SysGroup utilised GBP4.5m of funds from the RCF and
GBP0.8m from existing Group cash balances to finance the
acquisition.
Orchard
SysGroup acquired INSL in April 2022 for GBP1.0m cash
consideration with no contingent or deferred consideration. The
cash consideration was funded from the Group's existing cash
balances.
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. The
acquisition of Orchard furthers strengthen SysGroup's presence in
the south west of England.
Fair value of acquired net assets
The Directors have reviewed the intangible assets of both
companies and have recognized an intangible asset in respect of
customer relationships for both acquisitions. The asset values have
been calculated using a discounted cashflow method based on the
estimated level of profit to be generated from the customers
acquired. A post tax discount rate of 9.40% was used in the
valuation and the customer relationships are amortised over an
estimated useful life of seven years for Truststream and ten years
for Orchard. The goodwill arising on the acquisitions is
attributable to the technical skills of the workforce and
cross-selling opportunities achievable from combining the acquired
customer bases and trades with the existing Group.
The goodwill and intangible assets have been allocated to new
CGUs, Truststream & Orchard since the companies have their own
distinct cash operations and financial reporting processes.
The Directors consider it appropriate for both businesses to be
reported within the existing Group's operating segments, managed IT
services and VAR, since they are both managed within the Group's
management and operating structure and have revenues that align
with the segments.
Orchard Truststream
Recognised amounts of Fair Fair
net assets acquired and Book value Fair Book value Fair
liabilities assumed value Adj. value value Adj. value
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ---------- -------- -------- -------- -------- --------
Cash and cash equivalents 398 - 398 550 - 550
Trade and other receivables 311 (15) 296 1,783 - 1,783
Property, plant and equipment 32 (32) - - - -
Intangible assets - 1,028 1,028 - 2,526 2,526
Trade and other payables (385) (410) (795) (1,776) - (1,776)
Bank loan (82) - (82) - - -
Corporation tax (63) - (63) (119) - (119)
Deferred tax (5) (257) (262) - (632) (632)
---------------------------------- ---------- -------- -------- -------- -------- --------
Identifiable net assets 520 2,332
Goodwill 485 5,860
Total net assets 1,005 8,192
---------------------------------- ---------- -------- -------- -------- -------- --------
Satisfied by:
Cash consideration - paid
on acquisition 1,005 5,337
Contingent consideration - 3,075
Discounting of contingent consideration - (220)
Total consideration 1,005 8,192
---------------------------------- ---------- -------- -------- -------- -------- --------
13. AVAILABILITY OF INTERIM REPORT
Copies of this report are available on the Company's website at
http://www.sysgroup.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR PPGMPGUPPGPU
(END) Dow Jones Newswires
November 21, 2022 02:00 ET (07:00 GMT)
SysGroup (AQSE:SYS.GB)
Gráfica de Acción Histórica
De Dic 2024 a Ene 2025
SysGroup (AQSE:SYS.GB)
Gráfica de Acción Histórica
De Ene 2024 a Ene 2025
