TIDMSYS
RNS Number : 4647C
SysGroup PLC
21 June 2021
21 June 2021
SysGroup plc
("SysGroup" or the "Group")
Final Results for the year ended 31 March 2021
SysGroup plc (AIM:SYS), the multi award-winning managed IT
services and cloud hosting provider, is pleased to announce its
audited final results for the year ended 31 March 2021.
HIGHLIGHTS
Financial
2021 2020 Change
%
-----------------------------------
Revenue GBP18.13m GBP19.49m -7%
---------- ----------- -------
Recurring revenue as a % of total
revenue 79% 77% +2%
---------- ----------- -------
Gross profit GBP10.50m GBP11.20m -6%
---------- ----------- -------
Adjusted EBITDA (1) GBP2.91m GBP2.81m +4%
---------- ----------- -------
Adjusted EBITDA (1) margin % 16% 14% +2%
---------- ----------- -------
Adjusted PBT (2) GBP2.09m GBP1.76m +18%
---------- ----------- -------
Adjusted Basic EPS (3) 3.5p 3.4p +3%
---------- ----------- -------
Profit/(loss) before tax GBP0.21m GBP(0.23)m -
---------- ----------- -------
Basic EPS 0.5p (0.2)p -
---------- ----------- -------
Operational cashflows GBP2.70m GBP1.93m +40%
---------- ----------- -------
Net cash/(debt) (4) GBP1.88m GBP(0.07)m -
---------- ----------- -------
Operational
-- Demonstrated resilience and relevance throughout the pandemic
-- Renewed 36 month contract with the Group's largest managed hosting customer
-- Acquired businesses fully integrated and operating on a single platform
-- Corporate structure simplified with Certus and HNS both hived
up into a single trading entity
-- Customer satisfaction consistently remained above 97%, despite lockdown challenges
Post period-end developments
-- New Manchester office opened to expand sales & marketing
presence and leverage northern tech hub
-- Complete refurbishment of the Newport office to bring in-line
with SysGroup culture and values
-- EMI share options issued to all team members to align interests and to share future upside
1. Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation of intangible assets, exceptional items,
and share based payments.
2. Adjusted profit before tax ("Adjusted PBT") is profit before
tax after adding back amortisation of intangible assets,
exceptional items, and share based payments.
3. Adjusted Basic EPS is profit after tax after adding back
amortisation of intangible assets, exceptional items, share based
payments and associated tax, divided by the weighted average number
of shares in issue.
4. Net cash/(debt) represents cash balances less bank loans,
lease liabilities and contingent consideration.
Adam Binks, Chief Executive Officer, commented:
"I am pleased to report that the business has performed well
over the last year given the significant challenges posed by a full
12 month period of lockdown restrictions. Improved Adjusted EBITDA
and increased net cash, despite ongoing investment for the future,
reflect our high levels of recurring revenues, strong operational
controls and cash flow generative model. Further I must once again
pay testament to our fantastic team who have worked tirelessly
throughout this exceptionally challenging time to ensure that
SysGroup continues to thrive, and both the Board and I are
extremely grateful for their efforts."
"As lockdown restrictions ease and greater economic certainty
returns, I have no doubt that investment into IT will be a major
priority for many business leaders, as the pandemic has made our
industry more relevant than ever. With a clear market focus and
with the operational developments made over the past year, SysGroup
is well placed to take advantage of this anticipated growth. The
strength of our balance sheet coupled with our supportive investor
base will also enable us to continue to be a consolidator in a
fragmented, growing market, and I look forward to the future with
confidence."
For further information please
contact:
Tel: 0151 559
SysGroup plc 1777
Adam Binks, Chief Executive
Officer
Martin Audcent, Chief Financial
Officer
Shore Capital (Nomad and Broker) Tel: 020 7408
Corporate Finance: 4090
Edward Mansfield / Daniel
Bush
Corporate Broking:
Fiona Conroy
Alma PR (Financial PR) Tel: 07780 901979
Josh Royston / Helena Bogle
About SysGroup
SysGroup is a leading provider of managed IT services, cloud
hosting and expert IT consultancy. The Group delivers solutions
that enable clients to understand and benefit from industry leading
technologies and advanced hosting capabilities. 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 delivering IT services.
The Group has offices in Liverpool, London, Manchester, Newport
and Telford.
For more information, visit http://www.sysgroup.com
STRATEGIC REPORT
Chairman's Statement
SysGroup delivered a highly commendable performance in FY21,
delivering an improved Adjusted EBITDA, achieved in the face of the
difficulties presented by the lockdown restrictions in place
throughout the financial year. This performance was underpinned by
our high levels of recurring revenues - a key focus over recent
years - and, had this not been the case, the year would have been
much harder for both the business and shareholders. SysGroup's
performance this year is also testament to the Group's response to
the operational challenges presented by the pandemic, swiftly
moving employees to remote working whilst maintaining strong
uninterrupted service levels for customers and keeping tight
management control over costs.
I would like to place on record the Board's appreciation of the
ongoing commitment and cooperation of our team in rising to the
challenge. They have tackled all of the challenges presented by the
pandemic with diligence, care and empathy. Not only have they
applied themselves to helping our clients and ensuring that their
business needs are met, but they have also been there to support
each other and rallied together as all great teams do in times of
adversity. The management team deserve credit for putting in place
tiers of support mechanisms and accordingly we will emerge from the
pandemic a stronger unit.
In order to retain our talented team and attract more quality
individuals to support our ambitious growth aspirations, we have
made additional grants, post the year end, under the Group's 2018
EMI share option scheme, as well as the implementation of a new
executive LTIP scheme which was put in place in July 2020. The
Board also took the decision, in December 2020, to buy back 560,000
Ordinary Shares and hold them in Treasury to satisfy the future
exercise of options under the Group's incentive schemes.
It was very pleasing to note the recognition the Company has
received during the year with SysGroup being included in the London
Stock Exchange's Top 1000 most influential companies in Britain and
our Chief Executive, Adam Binks, was listed in the North West Power
100 for the second time which reflects the continued efforts of the
entire SysGroup team.
No further acquisitions were made during the year but we remain
very much committed to our stated strategy of being a consolidator
in a hugely fragmented market. We are in a strong position to make
accretive acquisitions with committed debt facilities, a strong
cash position and a supportive institutional shareholder base.
Whilst we have continued to seek out complementary acquisitions
during lockdown, we have maintained our discipline and only focus
on quality assets that meet our strict acquisition criteria. As we
begin to come out of the pandemic and are once again able to meet
with potential vendors face to face, we are confident that the
pipeline of opportunity will pick up, with anticipated changes to
Capital Gains Tax fuelling this further.
Michael Edelson
Chairman
18 June 2021
Chief Executive Officer's report
Introduction
I'm pleased to report on what has proved to be a very robust
performance from the Group against a backdrop of lockdown
restrictions for the full twelve months under review. This
resilience highlights the importance of our continued focus over
recent years on securing high levels of recurring revenues,
long-term contracts and a balance sheet set up to support corporate
activity.
I am extremely proud of how our entire team has adapted since
the pandemic began and I would like to take the opportunity to
extend my sincere gratitude to the entire SysGroup team for their
outstanding efforts during what has been a significant period of
disruption and uncertainty in general. SysGroup has played an
integral role for many of our customers and helped them to adapt to
the forever changing environment through the use of technology and
again, I am delighted that we have been able to play a part and
help during this time.
Adjusted EBITDA shows an improvement of 4% on last year's
results, reflecting synergies through the integration of prior year
acquisitions and an extremely well managed overhead base. This is
particularly impressive in light of the ongoing investment into the
business to ensure we are ideally placed to benefit from
opportunities, as and when normal business practices resume. Total
revenues decreased slightly year on year, by 7%, due to the impact
of the pandemic as customers deferred spending decisions coupled
with the fact that our sales teams have been unable to have
in-person interactions with our customers and prospects, owing to
the restrictions and impacting the sales pipeline. As noted in our
half year results, we also took the strategic decision to exit some
lower margin customer contracts that came with the acquisitions we
made in 2019, which had a small impact on revenue but minimal
impact on the Group's profitability. As a result, Adjusted EBITDA
margin rose to 16% (FY20: 14%). The Group has generated a strong
operating cashflow this year and the growth in our net cash to
GBP1.88m has ensured an extremely robust financial position going
into FY22.
Despite the impact that the pandemic has had on this year's top
line, there is no doubt that it has also refocused the minds of
business leaders on the efficacy, resilience and suitability of
their existing IT systems and the associated support that is
required to ensure their platforms remain current, compliant and
secure. There is much debate as to whether organisations will
return to full office working, remain entirely flexible or adopt a
hybrid solution. What is clear though is that the technology they
deploy to support them is more critical than ever and we believe
that the trend of outsourcing to experts such as SysGroup will
increase. Once we have greater economic certainty and confidence
returns, we are likely to see an increase in spend and commitment
to long term managed IT services contracts, which we are ideally
placed to fulfil.
As well as supporting our existing client base and ensuring they
receive the best levels of service, we have also focused heavily on
operational improvements and making sure that SysGroup is
positioned to capitalise when market conditions improve. The remote
working model that we employed throughout the last twelve months
was highly successful, with our teams able to support clients
through the trickiest of conditions, reflected in customer
satisfaction levels throughout the full year of over 97%. At the
same time, I am delighted that we were able to welcome team members
back to the office from 24 May, with appropriate Covid safety
measures, albeit at a reduced capacity and in-line with government
guidance. The cultural importance of having our teams working
together, drawing energy and inspiration from each other and
relishing a normalised working environment cannot be
understated.
Integration
During the course of the year, and post completion of the
earn-out period, we completed the full integration of the Certus
business which we acquired in February 2019. There is now one
senior leadership team in place responsible for delivering our
strategy and teams at all levels have been amalgamated to create
greater pockets of expertise. As stated in our half year results
and in line with our single go-to-market offering, known as "one
SysGroup," all of our business operations have also now been
rebranded to SysGroup and all legacy brands have been discontinued.
The integration exercise was completed with a tidy up of our
corporate structure at the end of year with both the Certus and HNS
businesses being hived up into our main trading entity.
We have made substantial progress on Project Fusion and during
the second half of the year, we went live with a new business
system that unified our CRM platform, marketing, service desk and
billing operations. This improvement to our core platform gives us
much greater oversight at a Group level on all sales and marketing
activities, customer support requests and billing processes. The
benefits of this are already being experienced, but more
importantly it will enable us to scale over the coming years more
quickly and efficiently and make integration of future acquisitions
simpler.
Project Fusion, which is our internal programme for amalgamating
and developing business systems and processes to support future
growth, will continue in FY22 as our focus moves to the people
management and financial accounting systems and we will also
continue to build out the full benefits of the reporting
functionality giving even greater access to business
intelligence.
Offices
Back in April, we announced our "2021 return to the office"
programme to our teams. Whilst our people have successfully worked
from home since 13 March 2020, as a business we continue to
recognise the importance of providing an environment where our
teams can come together and collaborate.
Further changes have been made across our UK footprint with the
closure of our office in Bristol, with local clients now being
serviced from our Newport facility supported by our wider teams
across the country. Following the year-end, we have opened a new
office in Manchester which will become our main sales &
marketing hub in the North. The opening of a new location in
Manchester was a strategic decision supported by the fact that
Manchester is known to be the second largest technology hub outside
of London and will give the Group even greater access to world
class talent whilst also providing an environment which is focused
solely on delivering sales growth, supported by strategic marketing
campaigns.
People
Our people remain our greatest asset and great attention has
been paid to making sure that we can attract and retain best in
class talent. A significant part of this has been relaunching our
core values, namely: Be Bold, Delight your customer, Work Smart,
Own it and Love what you do . They resonate with our market
position and reflect the ambitions of our talented workforce. Our
benefits scheme has been rolled out throughout the Group, ensuring
that there is a commonality of reward for all SysGroup team
members, no matter their route into the organisation. A number of
new hires were also made during the year which will help us to
support our growth ambitions and which also help to drive our
culture by bringing in fresh impetus and demonstrating our
commitment to investing in the future.
As a result of the operational improvements made during FY21, we
have started the new financial year with a more simplified
leadership & operational structure with clear lines of
responsibility, a more interactive workforce working towards
defined common goals, greater visibility and presence throughout
the UK market and the capacity and desire to grow market share.
Summary and Outlook
Whilst we remain mindful of the fact the pandemic is by no means
over and despite the extension to the easing of restrictions, it is
pleasing to see the positive effects of the vaccination programme,
which in turn will help us to conduct business on a face to face
basis once again.
Despite the challenges, FY21 overall has been another successful
year for the Group, demonstrated by the increase in Adjusted EBITDA
and the strength of our year-end balance sheet. The GBP1.95m growth
in Net Cash is also testament to the performance of the business
throughout the course of the year.
I said this time last year that the world has gone through
material change and that technology has been an enabler for many to
simply survive. Twelve months later and I now believe that almost
all businesses will have no option other than to embrace technology
in order to thrive. SysGroup is well established and ready to take
advantage of those opportunities that will once again come to the
fore when key decision makers have the confidence to once again
commit to termed contracts and enhanced spending.
Our business is highly cash generative and we remain committed
to our stated acquisition strategy and continuing to be a
consolidator in a highly fragmented market whose relevance over the
last 15 months has really come to the fore. As the year progresses
and we move beyond the fears of further lockdowns, I am certain
confidence will return to pre-pandemic levels and the investments
made by businesses into their technology platforms will exceed all
previous levels.
Adam Binks
Chief Executive Officer
18 June 2021
Chief Financial Officer's Report
Group Statement of Comprehensive Income
In a challenging year with government lockdown restrictions in
operation across the entire period, the Group successfully
delivered revenue of GBP18.13m (FY20: GBP19.49m), a decrease of 7%
on the prior period, and an improved Adjusted EBITDA of GBP2.91m
(FY20: GBP2.81m), an increase of 4% against the FY20
performance.
Managed IT services revenue reduced to GBP14.34m (FY20:
GBP15.09m). This reflects the effect of the pandemic as customers
deferred new capital spend and the fact that our sales and
technical consulting teams were unable to attend customer sites due
to the restrictions. The impact of the pandemic also led to a small
number of customers choosing to downsize their service requirements
or cancel contracts to reduce costs. In keeping with our business
model of focussing on the UK mid-market, we also exited some lower
margin customer contracts that were inherited with the Certus and
HNS acquisitions. Whilst this has had a small impact on revenue the
impact to the Group's profitability is minimal. Similarly, value
added resale ("VAR") revenue in FY21 was GBP3.79m (FY20: GBP4.40m)
as sales were affected by customers exercising caution by
withholding capex expenditure in response to the impact of COVID-19
on their businesses and markets. As greater economic certainty
returns, we believe that those deferred commitments to both managed
IT services and VAR will resume.
The revenue mix of 79% managed IT services and 21% VAR was
slightly ahead of the Group's target business model of 75% managed
IT services and 25% VAR. The FY20 revenue mix was 77%:23%.
Revenue by Operating 2021 2021 2020 2020
Segment
----------------------
GBP'000 % GBP'000 %
---------------------- -------- ----- -------- -----
Managed IT Services 14,344 79% 15,092 77%
Value Added Resale 3,787 21% 4,400 23%
Total 18,131 100% 19,492 100%
---------------------- -------- ----- -------- -----
Gross profit for the year was GBP10.50m with a gross margin of
57.9% (FY20: GBP11.20m and 57.5%) respectively. The gross margin
percentage was similar to last year with net neutral impacts from
the change in revenue mix, an improvement in VAR sales margin and a
small reduction in the managed IT Services sales margin.
Adjusted operating expenses of GBP7.59m were GBP0.80m below last
year (FY20: GBP8.39m) with an overhead/revenue ratio of 42% (FY20:
43%). The lower overhead costs reflect the benefit of GBP0.40m
acquisition synergies, GBP0.26m of travel and general overhead
savings and an increase in Project Fusion R&D capitalisation of
GBP0.14m relating to the investment in a unified platform of
systems across the Group. The acquisition synergies are permanent
savings. As lockdown restrictions begin to ease and our sales teams
are able to mobilise and generate additional revenue we can expect
travel costs and general overheads to increase, and our investment
in the development of Project Fusion to drive further growth will
continue into FY22. The Group made no use of the government
furlough scheme so the income statement does not include any
one-off credits from government support.
Adjusted EBITDA was GBP2.91m for the twelve months to 31 March
2021, an increase of GBP0.10m (+4%) from GBP2.81m in FY20. The
Adjusted EBITDA margin was 16.1% in FY21 compared to 14.4% in FY20
which continues our progressive profit improvement from the Group's
scale-up strategy and synergising activity.
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.
2021 2020
------------------------------------------------
Reconciliation of operating profit to Adjusted
EBITDA GBP'000 GBP'000
------------------------------------------------ -------- --------
Operating profit/(loss) 313 (28)
Depreciation 722 847
Amortisation of intangible assets 1,294 1,321
EBITDA 2,329 2,140
------------------------------------------------ -------- --------
Exceptional items 82 475
Share based payments 504 199
Adjusted EBITDA 2,915 2,814
------------------------------------------------ -------- --------
The Group incurred exceptional costs during the year of GBP0.08m
(FY20: GBP0.48m) comprising employee exit costs from integration
activities and for the closure of the Bristol office. Amortisation
of intangible assets was GBP1.29m (FY20: GBP1.32m), of which
GBP1.22m (FY20: GBP1.27m) relates to the amortisation of acquired
intangible assets from acquisitions. Project Fusion capitalised
software development costs commenced amortisation in November 2020
when the first modules of the new system went live.
Finance costs of GBP0.11m are reduced from the FY20 charge of
GBP0.21m as the term loan continues to amortise through quarterly
loan repayments and as lease contracts reach their expiry. The
share-based payments charge of GBP0.50m for the year (FY20:
GBP0.20m) includes a GBP0.18m charge for the 2018 & 2019
Executive Director LTIPs which vested in July 2020.
The Adjusted profit before tax for the year was GBP2.09m (FY20:
GBP1.76m) and statutory profit before tax for the year was GBP0.21m
(FY20: loss before tax GBP(0.23)m). Adjusted basic earnings per
share for FY21 was 3.5p (FY20: 3.4p) and basic earnings per share
for FY21 was 0.5p (FY20: (0.2)p loss per share).
2021 2020
-------------------------------
Adjusted profit before tax GBP'000 GBP'000
------------------------------- -------- --------
Profit/(loss) before taxation 205 (234)
Amortisation of intangibles 1,294 1,321
Exceptional items 82 475
Share based payments 504 199
Total 2,085 1,761
------------------------------- -------- --------
Taxation
The Group reports a tax credit in the FY21 Consolidated Income
Statement of GBP0.04m which compares to a GBP0.11m credit in FY20.
The corporation tax charge has increased this year to GBP0.27m
(FY20: GBP0.02m) as trading profits have risen but this is more
than offset by deferred tax credit movements, notably on the
amortisation of intangible assets and share based payments. The
Group uses the HMRC Research & Development tax credit scheme
when project expenditure fulfils the HMRC scheme criteria. The
Group's tax in the Income Statement is expected to become a net
charge in the future as the business continues to grow and the
remaining tax losses are fully utilised.
Cashflow & net cash
The Group had a strong net cash position of GBP1.88m as at 31
March 2021 (FY20: net debt GBP0.07m) which includes IFRS16 property
lease liabilities. Cash conversion was 95% (FY20: 86%) and the
Group's gross cash balance as at 31 March 2021 was GBP3.47m (FY20:
GBP3.03m). The Directors were pleased with this cash and debt
management performance given the challenges that COVID-19 presented
to the business community at the commencement of, and throughout,
the Group's financial year.
As reported in last year's Annual Report, we entered Q1 with
requests from a number of customers for financial support which we
were able to provide with extended settlement terms and in some
cases a deferral of fees into future periods. These arrangements
were adhered to with full co-operation from the customers involved
and all have since come to an end with reversion to standard
payment terms. Since SysGroup's customer base has a wide
diversification of industry sectors there was only a low level of
exposure to the sectors most exposed to the pandemic restrictions
imposed by the Government in hospitality, leisure, travel and
tourism. Cash collection has remained strong throughout the period
which is a credit to our customers in a difficult period, and a
reflection of the business criticality of the IT services we
provide. No changes were made to our supplier payment processes
during the year and suppliers were paid as normal in accordance
with our usual monthly payment runs.
Operational cashflows were GBP2.70m (FY20: GBP1.93m) which
reflected strong cash conversion at 95% (FY20: 86%), good trade
debtor control and lower interest and tax payments. The Group has
made no use of the government furlough scheme or any of the
government backed COVID-19 assistance schemes and the deferral of
the GBP0.28m Q1 VAT payment reported in our Interim Results was
repaid in full in December 2020.
2021 2020
--------------------------------------------
Cash conversion GBP'000 GBP'000
-------------------------------------------- -------- --------
Operational cashflows 2,700 1,930
Acquisition, integration and restructuring
cashflows 82 492
Cash generated from operations 2,782 2,422
-------------------------------------------- -------- --------
Adjusted EBITDA 2,915 2,814
-------------------------------------------- -------- --------
Cash conversion 95% 86%
-------------------------------------------- -------- --------
The Group's investing activities included the payment of the
final earn-out consideration relating to the acquisition of Certus.
The full earn-out profit target was achieved and GBP0.975m cash
consideration was paid to the vendors of Certus. In Financing
activities, in addition to the quarterly bank loan and lease
payments, the Company repurchased 560,000 ordinary shares of
GBP0.01 each in the capital of the Company ("Ordinary Shares") for
consideration of GBP0.20m.
The Group's net cash position of GBP1.88m is shown below and
this includes IFRS16 Lease liabilities. Net cash/(debt) is
considered to be a KPI of the business since the level of 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.
2021 2020
-------------------------------
Net cash GBP'000 GBP'000
------------------------------- -------- --------
Cash balances 3,473 3,036
Bank loans - current (416) (251)
Bank loans - non-current (757) (1,146)
Lease liabilities - equipment (86) (186)
Lease liabilities - property (334) (522)
Contingent consideration - (1,000)
Net cash/(debt) 1,880 (69)
------------------------------- -------- --------
Consolidated Statement of Financial Position
The Group's net assets of GBP20.6m at 31 March 2021 represented
an increase of GBP0.5m to the prior year (FY20: GBP20.1m).
Non-current assets have reduced by GBP1.44m which mainly arises
from the GBP1.22m amortisation of acquired intangible assets.
During the year, the Group invested GBP0.18m (FY20: GBP0.35m) in
property, plant and equipment and GBP0.39m (FY20: GBP0.18m) in
Project Fusion software development costs. Working capital was
managed well throughout the year with the gross trade debtor
balance of GBP1.18m comparing to GBP1.64m in the previous year and
trade payables of GBP0.81m comparing to GBP1.85m in the prior
year.
The contingent consideration liability of GBP1.0m which was held
at the prior year end for the Certus acquisition earn-out was paid
in H1 FY21 following the successful achievement of the earn-out.
SysGroup paid GBP0.975m contingent consideration to the vendors of
Certus in full settlement.
The bank loan at 31 March 2021 was GBP1.17m (FY20: GBP1.40m);
there have been no further drawdowns of the facilities during the
year and the bank loan covenants have been met throughout the
year.
A new Treasury reserve has been established within equity. This
is to recognise the company purchase of 560,000 ordinary shares of
GBP0.01 each on 1 December 2020 at a price of 35.745 pence per
ordinary share. The shares will be held in treasury to fulfil the
future anticipated exercise of options under the Employee Share
Option plans.
Project Fusion
Project Fusion was launched in FY20 as a project to deliver a
unified platform of systems across the Group to enable more
efficient working practices and higher quality operating and
reporting information. The project has multiple workstreams for
systems covering Customer Relationship Management ("CRM"), Service
Desk, Financial Accounts, Marketing and Risk Management.
During FY21, substantial progress has been made as our internal
project teams and implementation partners have worked well together
to design and implement the core system. The new system which
brings together CRM, Billing, Service Desk & Marketing onto a
single platform, went live in H2 FY21. Project Fusion will continue
in FY22 as focus moves to the People Management and Financial
Accounts systems, in addition to building out the full benefits of
the reporting functionality which will provide far greater
visibility of business intelligence and enable us to scale more
effectively and efficiently. During the year, GBP0.39m (FY20:
GBP0.18m) of software development costs were capitalised as an
intangible asset comprising employee and third-party supplier
costs.
Share Option Grants
In July 2020 we announced the implementation of the new 2020
SysGroup Long Term Incentive Plan ("2020 LTIP"), together with an
initial grant of 400,000 performance shares (the "Award") under the
2020 LTIP. The Remuneration Committee granted 250,000 performance
shares to Adam Binks, Chief Executive Officer, and 150,000
performance shares to Martin Audcent, Chief Financial Officer
(together the "Executive Directors"). The 2020 LTIP replaced in its
entirety the incentive plan set up in June 2018 ("2018 LTIP") and
the 1.6 million performance shares granted to the Executive
Directors under the 2018 LTIP vested with immediate effect.
In addition to the grant of the 400,000 performance shares to
the Executive Directors, 450,000 share options were granted in
April 2020 to senior management under the existing 2018 SysGroup
EMI Scheme.
Martin Audcent
Chief Financial Officer
18 June 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
Revenue 3 18,131 19,492
Cost of sales (7,630) (8,291)
Gross profit 10,501 11,201
------------------------------------------------ ------ --------- ---------
Operating expenses before depreciation,
amortisation, exceptional items and
share based payments (7,586) (8,387)
------------------------------------------------ ------ --------- ---------
Adjusted EBITDA 2,915 2,814
------------------------------------------------ ------ --------- ---------
Depreciation (722) (847)
Amortisation of intangibles 8 (1,294) (1,321)
Exceptional items 4 (82) (475)
Share based payments (504) (199)
Administrative expenses (10,188) (11,229)
Operating profit/(loss) 313 (28)
------------------------------------------------ ------ --------- ---------
Finance costs (108) (206)
------------------------------------------------ ------ --------- ---------
Profit/(loss) before taxation 205 (234)
Taxation 7 35 112
------------------------------------------------ ------ --------- ---------
Total comprehensive profit/(loss) attributable
to the equity holders of the company 240 (122)
------------------------------------------------ ------ --------- ---------
Basic earnings per share (EPS) 6 0.5p (0.2p)
Diluted earnings per share (EPS) 6 0.5p (0.2p)
------------------------------------------------ ------ --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
Assets
------------------------------------------------ ------ -------- --------
Non-current assets
Goodwill 8 15,554 15,554
Intangible assets 8 5,290 6,188
Property, plant and equipment 1,281 1,824
22,125 23,566
------------------------------------------------ ------ -------- --------
Current assets
Trade and other receivables 9 1,728 2,726
Cash and cash equivalents 3,473 3,036
5,201 5,762
------------------------------------------------ ------ -------- --------
Total Assets 27,326 29,328
------------------------------------------------ ------ -------- --------
Equity and Liabilities
Equity attributable to the equity shareholders
of the parent
Called up share capital 12 494 494
Share premium reserve 9,080 9,080
Treasury reserve (201) -
Other reserve 2,832 2,328
Translation reserve 4 4
Retained earnings 8,403 8,163
================================================ ====== ======== ========
20,612 20,069
------------------------------------------------ ------ -------- --------
Non-current liabilities
Lease liabilities 11 190 441
Bank loan 11 757 1,146
Deferred taxation 7 889 1,200
1,836 2,787
------------------------------------------------ ------ -------- --------
Current liabilities
Trade and other payables 10 2,683 3,488
Contract liabilities 1,549 1,465
Lease liabilities 11 230 268
Contingent consideration 10 - 1,000
Bank loan 11 416 251
4,878 6,472
------------------------------------------------ ------ -------- --------
Total Equity and Liabilities 27,326 29,328
------------------------------------------------ ------ -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2021
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
---------------------- --------- --------- --------- --------- ------------ ---------- --------
As at 1 April 2019 494 9,080 - 2,129 4 8,285 19,992
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Comprehensive income
Loss for the period - - - - - (122) (122)
Total Comprehensive
income - - - - - (122) (122)
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Distributions to
owners
Share options charge - - - 199 - - 199
Total Distributions
to owners - - - 199 - - 199
---------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 March 2020 494 9,080 - 2,328 4 8,163 20,069
---------------------- --------- --------- --------- --------- ------------ ---------- --------
As at 1 April 2020 494 9,080 - 2,328 4 8,163 20,069
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Comprehensive income
Profit for the
period - - - - - 240 240
Total Comprehensive
income - - - - - 240 240
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Distributions to
owners
Share buy back - - (201) - - - (201)
Share options charge - - - 504 - - 504
Total Distributions
to owners - - (201) 504 - - 303
---------------------- --------- --------- --------- --------- ------------ ---------- --------
At 31 March 2021 494 9,080 (201) 2,832 4 8,403 20,612
---------------------- --------- --------- --------- --------- ------------ ---------- --------
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
------------------------------------------------- ------ -------- --------
Cashflows used in operating activities
Profit/(loss) after tax 240 (122)
Adjustments for:
Depreciation and amortisation 2,016 2,168
Finance costs 108 206
Share based payments 504 199
Taxation credit 7 (35) (112)
Operating cashflows before movement in working
capital 2,833 2,339
------------------------------------------------- ------ -------- --------
Decrease in trade and other receivables 987 501
Decrease in trade and other payables (889) (533)
Operating cashflows before interest and
tax 2,931 2,307
------------------------------------------------- ------ -------- --------
Interest paid and amortisation of arrangement
fee on loan facility (105) (161)
Interest paid on lease liabilities (28) (44)
Taxation paid (98) (172)
Operational cashflows 2,700 1,930
------------------------------------------------- ------ -------- --------
Cashflows from investing activities
Payments to acquire property, plant & equipment (179) (353)
Payments to acquire intangible assets 8 (396) (190)
Acquisition of subsidiary companies 5 (975) (1,911)
Amounts received in respect of previous
acquisitions - 252
Cash acquired with acquisitions - 609
================================================= ====== ======== ========
Net cash used in investing activities (1,550) (1,593)
------------------------------------------------- ------ -------- --------
Cashflows from financing activities
Payments for share buy-back 12 (201) -
Repayment of loan facility including fees (224) (224)
Capital/principal paid on lease liabilities (288) (453)
================================================= ====== ======== ========
Net cash from financing activities (713) (677)
------------------------------------------------- ------ -------- --------
Net increase / (decrease) in cash and cash
equivalents 437 (340)
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the beginning
of the year 3,036 3,376
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end of
the year 3,473 3,036
------------------------------------------------- ------ -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEARED 31 MARCH 2021
1. Accounting policies
SysGroup plc (the 'Company') is a Company incorporated and
domiciled in the United Kingdom. The Company's registered office is
at Walker House, Exchange Flags, Liverpool, L2 3YL. This
consolidated financial information comprise the Company and its
subsidiaries (together referred to as the 'Group').
Statement of compliance
The Group financial information has been prepared in accordance
with International Financial Reporting Standards (IFRSs and IFRIC
interpretations) as endorsed by the European Union ("endorsed
IFRS") and with those parts of the Companies Act 2006 applicable to
companies preparing their accounts under endorsed IFRS.
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 2020 are an extract of the Company's statutory
accounts for the year ended 31 March 2020, prepared in accordance
with International Financial Reporting Standards (IFRS), approved
by the Board of Directors on 30 June 2020 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 2021 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.
Basis of preparation
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 which have been valued in accordance
with IFRS9.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note 2.
The financial statements are presented in pounds sterling, rounded
to the nearest thousand, unless otherwise stated.
Going concern
The Directors have prepared the financial statements on a going
concern basis which assumes that the Group and the Company will
continue to meet liabilities as they fall due.
The Board recognises that the COVID-19 pandemic has had an
unprecedented affect on the UK economy and despite the recent
upturn in growth from the gradual lifting of lockdown restrictions
there remains considerable uncertainty in economic outlook.
Over the past twelve months the Group has demonstrated that its
operating model is broadly resilient to the economic impacts of the
pandemic. The Group's products and services are typically
considered to be critical IT infrastructure supplies to customers
with circa 75% of revenue deriving from contracted managed IT
services which is a continuous service supply and subject to twelve
month to three year contracts. The Group has a cash balance of
GBP3.47m and a net cash position of GBP1.88m at 31 March 2021. The
gross cash has increased by GBP0.4m since 1 April 2020 and the net
cash has increased by GBP1.95m in the same period. Net cash
includes a GBP1.2m Senior Term loan with Santander which is subject
to quarterly loan covenant tests and calculated on a 12-month
rolling basis for interest cover, net debt to Adjusted EBITDA
leverage and debt service cover. All the bank covenants were met in
the financial year and are forecast to be achieved in the
foreseeable future.
The Directors have reviewed the financial forecasts and a
Reverse Stress Test model. The Reverse Stress Test model has
allowed the Board to assess a significant downside scenario set to
the point where the bank loan covenants would breach. 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 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
2021. The Group has adopted all of the new and revised standards
and interpretations issued by the IASB and the International
Financial Reporting Interpretations Committee (IFRIC) of the IASB
that are relevant to its operations. Other new amended standards
and interpretations issued by the IASB 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 by the IASB 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.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee;
exposure to variable returns from the investee; and the ability of
the investor to use its power to affect those variable returns.
Control is re-assessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between Group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquirer's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker has been identified as the Board
of Directors.
Alternative profit measures
In reporting its results, the Directors have presented various
alternative profit measures (APMs) of financial performance,
position or cashflows, which are not defined or specified under the
requirements of IFRS. On the basis that these measures are not
defined by IFRS, they may not be directly comparable with other
companies. The key APMs that the group uses include recurring
revenue as a percentage of revenue, Adjusted EBITDA, Adjusted PBT,
Adjusted EPS and Net cash.
The Group makes certain adjustments to the statutory profit in
order to derive many of these APMs. These include exceptional items
and share based payments. The group presents as exceptional items
on the face of the Statement of Comprehensive Income those material
items of income and expense which the Directors consider, because
of their size or nature and expected non-recurrence, merit separate
presentation to facilitate financial comparison with prior periods
and to assess trends in financial performance. Exceptional items
are included in Administration expenses in the Consolidated
Statement of Comprehensive Income but excluded from Adjusted EBITDA
as management believe they should be considered separately to gain
an understanding of the underlying profitability of the trading
businesses on a consistent basis from year to year.
2. Significant accounting estimates and judgements
The preparation of this financial information requires
management to make estimates and judgements that affect the amounts
reported for assets and liabilities at the period end date and the
amounts reported for revenues and expenses during each period. The
nature of the estimation or judgement means that actual outcomes
could differ from the estimates and judgements taken in the
preparation of the financial statements.
Significant accounting estimates
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment annually and in line
with the stated accounting policy. This involves judgement
regarding the future development of the business and the estimation
of the level of future profitability and cash flows to support the
carrying value of goodwill. An impairment review has been performed
at the reporting date taking into account sensitivities around
future business performance, covering a range of outcomes and risks
over levels of revenue, cost and cash generation. No impairment has
been identified. Further details are included in note 8.
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.
Significant accounting judgements
Going concern
The Board recognises that the Group is trading in an uncertain
economy following the onset of the COVID-19 pandemic and there's
considerable uncertainty in the timing and rate of economic
recovery. Management have to exercise judgement in the preparation
of financial forecasts particularly on the level of future sales,
customer contract uplifts and cancellations, and working capital
assumptions. The Directors have reviewed the Group's financial
forecasts and a Reverse Stress Test model in order to assess the
Group's business viability and to form a judgement on going
concern. Having reviewed the forecasts the Board were satisfied
that the Group remains a going concern.
Revenue
Management make judgements in determining the appropriate
application of revenue recognition policies to the sale of services
and products.
Assessment of CGU's and carrying value of intangible assets
A CGU is the smallest identifiable Group of assets that generate
cash inflows that are largely independent of the cash inflows from
other assets or Groups of assets and the Board of Directors use
judgement to identify the CGUs of the Group. The Board have
reviewed the Group's CGU's this year and exercised their judgement
to amend the CGUs following the integration of previously acquired
businesses and changes to the Group's management and reporting
structure in the current financial year. The Board have concluded
that the Group has a single CGU of "Managed IT Services".
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 and previous financial year in relation
to Project Fusion, a project to integrate all of the legacy
business systems into one new CRM, Marketing, Projects, Billing
& Service Desk system. Phase I of Project Fusion went live
during the current period and the System Development intangible
asset is being amortised over a five year useful life which the
Directors consider appropriate for the Group's core business
system.
IFR16 - Leases
Management make judgements in their assessment of lease contract
agreements to ensure the appropriate lease accounting recognition
under IFRS16 - Leases. The main elements of judgement are:
-- Determining the inherent rate of interest which applies to
each lease or family of leases with similar characteristics;
-- Establishing whether or not it is reasonably certain that an
extension option will be exercised; and
-- Considering whether or not it is reasonably certain that a
termination option will not be exercised.
3. Segmental analysis
The chief operating decision maker for the Group is the Board of
Directors . The Group reports in two segments:
-- Managed IT Services - this segment provides all forms of
managed services to customers and includes professional
services.
-- Value Added Resale (VAR) - this segment provides all forms of
VAR sales where the business sells products and licences from
supplier partners.
The monthly management accounts reported to the Board of
Directors are reviewed at a consolidated level with the operating
segments representative of the business model for growth of
recurring contract income in Managed IT Services and VAR sales as a
complementary business activity. The Board review the results of
the operating segments at a revenue and gross profit level since
the Group's management and operational structure supports both
operational segments as Group functions. In this respect, assets
and liabilities are also not reviewed on a segmental basis. All
assets are located in the UK.
All segments are continuing operations and there are no
transactions between segments.
2021 2021 2020 2020
Revenue by operating segment GBP'000 % GBP'000 %
--------------------------------- --------------- ------ -------- --------
Managed IT Services 14,344 79% 15,092 77%
Value Added Resale 3,787 21% 4,400 23%
Total 18,131 100% 19,492 100%
--------------------------------- --------------- ------ -------- --------
No individual customer account for more than 6% of the
Group's revenue.
The revenue by geographic location for where services are delivered
to customers is shown below.
2021 2021 2020 2020
GBP'000 % GBP'000 %
--------------------------------- --------------- ------ -------- --------
UK 18,091 100% 19,310 99%
Rest of World 40 0% 182 1%
================================= =============== ====== ======== ========
18,131 100% 19,492 100%
--------------------------------- --------------- ------ -------- --------
2021 2020
GBP'000 GBP'000
--------------------------------- --------------- ------ -------- --------
Revenue
Managed IT Services 14,344 15,092
Value Added Resale 3,787 4,400
Total 18,131 19,492
--------------------------------- --------------- ------ -------- --------
Gross profit
Managed IT Services 9,594 10,281
Value Added Resale 907 920
======== ========
Total 10,501 11,201
--------------------------------- --------------- ------ -------- --------
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.
4. Exceptional items
2021 2020
GBP'000 GBP'000
------------------------------- -------- --------
Acquisitions - 85
Integration and restructuring 82 390
Total 82 475
------------------------------- -------- --------
The Group has incurred exceptional costs during the year of
GBP82,000 (FY20: GBP475,000) which are in relation to the exit of
the Bristol office and employee costs incurred from the integration
of the senior management team.
5. Acquisitions
In February 2019, the Company acquired 100% of the share capital
of Certus IT Limited ("Certus"), and the parties agreed an earn-out
mechanism for a period of twelve months post-acquisition based on
profit performance targets. In February 2020 the earn-out period
was completed and Certus successfully achieved the maximum EBITDA
target. The Company paid GBP975,000 to the Sellers in full
settlement of the contingent consideration during H1 FY21.
6. Earnings per share
2021 2020
--------------------------------------------------- ----------------------- ----------------------
Profit/(loss) for the financial year attributable GBP240,000 (GBP122,050)
to shareholders
Weighted number of issued equity shares 49,234,036 49,419,690
Weighted number of equity shares for diluted
EPS calculation 51,811,233 51,734,950
Adjusted basic earnings per share (pence) 3.5p 3.4p
Basic earnings per share (pence) 0.5p (0.2p)
Diluted earnings per share (pence) 0.5p (0.2p)
--------------------------------------------------- ----------------------- ----------------------
The weighted number of issued equity shares and the weighted
number of shares for the diluted calculation both exclude the
Treasury shares held by the Company in accordance with accounting
standards.
2021 2020
GBP'000 GBP'000
----------------------- ----------------------
Profit/(loss) after tax used for basic earnings
per share 240 (122)
Amortisation of intangible assets 1,294 1,321
Exceptional items 82 475
Share based payments 504 199
Tax adjustments (376) (216)
--------------------------------------------------- ----------------------- ----------------------
Adjusted profit used for Adjusted Earnings
per Share 1,744 1,657
--------------------------------------------------- ----------------------- ----------------------
7. Taxation
2021 2020
Current tax GBP'000 GBP'000
-------------------------------------------------- ----------------------- -----------------------
Current tax - current year 260 128
Adjustments in respect of prior years 16 (107)
Total current tax charge 276 21
-------------------------------------------------- ----------------------- -----------------------
Deferred tax
Deferred tax - timing differences (311) (133)
Total deferred tax (311) (133)
-------------------------------------------------- ----------------------- -----------------------
Total tax credit (35) (112)
-------------------------------------------------- ----------------------- -----------------------
The effective tax rate for the year to 31 March 2021 is
lower (2020: lower) than the standard rate of corporation
tax in the UK. The differences are explained below:
2021 2020
GBP'000 GBP'000
Profit/(loss) on ordinary activities
before tax 205 (234)
-------------------------------------------------- ----------------------- -----------------------
Profit/(loss) on ordinary activities
before taxation multiplied by the standard
rate of UK corporation tax of 19% (2020:19%) 39 (44)
Effects of:
Expenses not deductible 53 25
Prior year adjustment 17 (107)
Re-measurement of deferred tax due to
changes in UK rate 51 85
Deferred tax asset on share-based payments (122) -
Use of brought forward losses (73) (71)
Total tax credit (35) (112)
-------------------------------------------------- ----------------------- -----------------------
The Group recognised deferred tax assets
and liabilities as follows:
2021 2020
GBP'000 GBP'000
-------------------------------------------------- ----------------------- -----------------------
Deferred tax liability on customer relationships (927) (1,149)
Deferred tax asset on share-based payments 122 -
Capital allowances timing differences (84) (51)
Deferred tax liability (889) (1,200)
-------------------------------------------------- ----------------------- -----------------------
Recognition of deferred tax assets is restricted to those
instances where it is highly probable that relief against
taxable profit will be available.
The movement in the deferred tax account
during the year was:
Capital Customer Total
allowances relationships
timing
differences
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- -------------------------- ----------
Balance at 1 April 2020 (51) (1,149) (1,200)
Credited to statement of comprehensive
income (33) 222 189
Deferred tax asset on share-based payments 122 - 122
-------------------------------------------------- ------------- -------------------------- ----------
Balance at 31 March 2021 38 (927) (889)
-------------------------------------------------- ------------- -------------------------- ----------
Factors affecting future tax charges:
Deferred tax balances are recognised at 19% (2020: 17%) due
to the cancellation of the planned reduction in tax rate to
17%. The government further announced in the Spring Budget 2021
that from 1 April 2023, the corporation tax rate would increase
to 25% from 2023.
8. Intangible assets
Group Systems Software Customer Positive Total
Development licences relationships goodwill
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2019 223 198 8,010 15,508 23,939
Additions 184 6 - (277) (87)
Acquisitions - - 1,146 323 1,469
At 31 March 2020 407 204 9,156 15,554 25,321
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2020 407 204 9,156 15,554 25,321
Additions 395 1 - - 396
At 31 March 2021 802 205 9,156 15,554 25,717
-------------------------- ------------- ---------- --------------- ---------- --------
Accumulated amortisation
At 1 April 2019 206 136 1,916 - 2,258
Charge for the year 9 45 1,267 - 1,321
========================== ============= ========== =============== ========== ========
At 31 March 2020 215 181 3,183 - 3,579
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2020 215 181 3,183 - 3,579
Charge for the year 49 20 1,225 - 1,294
========================== ============= ========== =============== ========== ========
At 31 March 2021 264 201 4,408 - 4,873
-------------------------- ------------- ---------- --------------- ---------- --------
Net book value
At 31 March 2020 192 23 5,973 15,554 21,742
-------------------------- ------------- ---------- --------------- ---------- --------
At 31 March 2021 538 4 4,748 15,554 20,844
-------------------------- ------------- ---------- --------------- ---------- --------
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 7 years.
Cash-generating units
Goodwill and intangible assets are allocated to CGUs in order to
be assessed for potential impairment. During the year the Directors
reconsidered the CGUs within the Group following the unification of
all Group management, systems, reporting and operations. The Group
has a Senior Leadership Team that manages the SysGroup business
within a single operational and delivery structure having fully
integrated the previously acquired Certus IT and Hub Network
Services ("HNS") businesses. The Board of Directors review the
financial and operating performance of the Group as a single
performing unit which reflects how the business is managed and
controlled. On 31 March 2021, the businesses, assets and
liabilities of Certus IT and HNS were hived up to SysGroup Trading
Limited.
In view of these developments, the Directors concluded that the
CGUs which represented these businesses at the "statutory entity"
level were no longer appropriate and that the Group has a single
CGU of "Managed IT Services". As the Group acquires new businesses,
they will form their own CGU until they have been integrated into
the Group's core operational structure.
The allocation of goodwill and carrying amounts of assets for
each CGU is as follows:
Carrying value of
Allocation of goodwill assets
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- --------- ---------- --------
Managed Services 15,554 9,727 19,331 10,892
Certus IT - 5,504 - 8,341
HNS - 323 - 1,378
Total 15,554 15,554 19,331 20,611
----------------------- ----------- --------- ---------- --------
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: pre-tax
cash flow projections; long-term growth rates; and a pre-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.
2021 Managed Certus IT HNS
IT Services
------------------------------------- ------------- ---------- -------
Discount rate 9.50% - -
Revenue growth rate year 2 to year 5.00% - -
5
Terminal growth rate 2.50% - -
------------------------------------ ------------- ---------- -------
2020
------------------------------------- ------------- ---------- -------
Discount rate 11.00% 11.00% 11.00%
Revenue growth rate year 2 to year
5 5.00% 5.00% 5.00%
Terminal growth rate 2.50% 2.50% 2.50%
------------------------------------- ------------- ---------- -------
9. Trade and other receivables
Group Group
2021 2020
Amounts due within one year GBP'000 GBP'000
----------------------------- -------- --------
Trade debtors 916 1,427
Prepayments 812 1,299
Total 1,728 2,726
----------------------------- -------- --------
10. Trade and other payables
Group Group
2021 2020
Amounts due within one year GBP'000 GBP'000
----------------------------------------------- -------- --------
Trade payables 811 1,847
Accruals 990 931
----------------------------------------------- -------- --------
Total financial liabilities, excluding loans
and borrowings measured at amortised cost 1,801 2,778
Corporation tax 254 158
Other taxes and social security costs 628 552
Total creditors 2,683 3,488
----------------------------------------------- -------- --------
Group Group
2021 2020
Contingent consideration GBP'000 GBP'000
----------------------------------------------- -------- --------
Certus IT Limited - 1,000
----------------------------------------------- -------- --------
11. Loans and borrowings
Group Group
2021 2020
Non-current GBP'000 GBP'000
----------------------------------------------- --------- -----------
Lease liabilities 190 441
Bank loan 757 1,146
Total 947 1,587
----------------------------------------------- --------- -----------
Group Group
2021 2020
Current GBP'000 GBP'000
---------------------------------- ---------------------- -----------
Lease liabilities 230 268
Bank loan 416 251
Total 646 519
---------------------------------- ---------------------- -----------
12. Share Capital
Group Group
2021 2021
Number GBP'000
--------------------------------------------- ----------- --------
Allotted, called up and fully paid ordinary
shares of GBP0.01 each
At 1 April 2019 49,419,690 494
At 31 March 2020 49,419,690 494
--------------------------------------------- ----------- --------
At 31 March 2021 49,419,690 494
--------------------------------------------- ----------- --------
In December 2020, the Company purchased 560,000 of its own
ordinary shares of GBP0.01 each for consideration of GBP201,000.
These shares are being held as Treasury shares and will be used to
settle future issues of share options to employees as they vest and
become exercised.
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(END) Dow Jones Newswires
June 21, 2021 02:00 ET (06:00 GMT)
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