TIDMSYS
RNS Number : 7724R
SysGroup PLC
14 December 2016
14 December 2016
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Half yearly results for the six months ended 30 September
2016
SysGroup PLC (AIM: SYS), the managed services and cloud
integrator, is pleased to announce its unaudited half year results
for the six months ended 30 September 2016.
Financial Highlights
-- Total revenue (including discontinued operations) up 40% to GBP3.38m (H1 2016: GBP2.41m)
-- Revenue from continuing operations up 111% to GBP2.68m (H1 2016: GBP1.27m)
-- Organic growth from existing Managed Hosting business
excluding the acquisition of System Professional Ltd ("Sys-Pro") up
19% to GBP1.34m (H1 2016: GBP1.13m)
-- Adjusted EBITDA(1) (including discontinued operations) of GBP0.44m (H1 2016: GBP0.28m)
-- Adjusted EBITDA(2) (continuing operations) of GBP0.23m (H1 2016: GBP0.03m)
-- Reported loss from continuing operations of GBP0.55m (H1 2016: GBP(0.21)m)
-- Reported profit after tax (including the sale the SME Mass
Market division) of GBP1.05m (H1 2016: GBP(0.05)m)
-- Basic EPS 6.1 pence (H1 2016: (0.04) pence)
-- Net cash at 30 September 2016 of GBP3.66m(3) (30 September 2015: net debt of GBP0.004m)
(1) Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation, acquisition costs, restructuring costs,
fair value adjustments, share based payments and profit on sale of
discontinued operations
(2) excludes contribution from the SME Mass Market division sold
in July 2016
(3) Net cash/(debt) calculated cash less interest bearing debt
and obligations under financial leases
Operational Highlights
-- Successful acquisition of Sys-Pro for an initial consideration of GBP3.9m
-- Oversubscribed placing to raise GBP5.0m gross in July 2016
-- Disposal of non-core SME Mass Market division for GBP2.7m (4.9x EBITDA) in July 2016
-- Transformation to a Managed Services Provider
-- Expanded partnership with Epicor through its ERP (BisTrack) application software
-- New banking facilities of GBP3.0m, including a GBP2.5m
acquisition facility agreed with Santander post period end
Chris Evans, Chief Executive commented: "We are pleased with the
progress we have made during the period in transforming the focus
of the Company to that of a Managed Services provider while at the
same time delivering a solid set of results.
With our strong cash position and new banking facilities from
Santander we are ready to supplement our solid organic growth with
additional strategic acquisitions. With the expected benefits from
the integration of Sys-Pro into the Group and the increasing number
of opportunities we are seeing in the market, we believe the Group
is well-positioned to deliver on the objectives we have set
ourselves for the remainder of the year and beyond.
We therefore look forward to the year ahead with
confidence."
For further information
please contact:
Tel: 0151
SysGroup Plc 559 1777
Chris Evans, Chief Executive
Shore Capital (Nomad Tel: 020
and Broker) 7408 4090
Bidhi Bhoma / Edward
Mansfield
Newgate Communications Tel: 020
Bob Huxford / Adam Lloyd 7653 9848
/ Ed Treadwell
About SysGroup
SysGroup is a leading provider of Cloud Hosting, Managed
Services 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, Coventry, London and East
Sussex.
For more information, visit http://www.sysgroup.com
Chief Executive Officers Statement
I am pleased to present the interim results for SysGroup for the
six months ended 30 September 2016.
Introduction
This has been a very busy period for the Group during which we
completed the acquisition of System Professional Ltd ("Sys-Pro") in
early July, a Managed Service provider that complements the Group's
existing Managed Hosting business Netplan, and successfully
executed the disposal of our SME Mass Market division later in the
same month.
These two transactions marked a strategic change for the Group
transforming the business from being involved in servicing the low
value and high volume driven mass market, which had become largely
commoditised, and was facing pricing pressure from fierce
competition, to a business focused exclusively on the higher value
Managed Services market, with a strong focus on Cloud hosting. As a
result of this key strategic move, we have positioned SysGroup as a
virtually outsourced 'Chief Information Officer' that can provide
our customers with both managed systems and strategic advice.
Large, medium and small companies are relying on SysGroup to
provide their managed service platforms.
As a consequence of our business transformation, we re-branded
from Daily Internet Plc to SysGroup Plc (Daily Internet was the
name of our former SME Mass Market brand). We also conducted a
capital re-organisation reducing the number of shares in issue and
obtained a court sanction for a capital reduction thereby creating
distributable reserves. This has placed the Group in a position to
pay a dividend should it be appropriate.
Trading and results
The Group traded strongly during the period, reflecting the
contribution from Sys-Pro and also solid organic growth. Total
revenue (including the discontinued operations i.e. the sale of our
SME Mass Market division for the period until the date of sale) was
GBP3.38m which is up 40.25% (H1 2016: GBP2.41m).
Revenue from the continuing business (excluding the contribution
of SME Mass Market division but including that from Sys-Pro) was
GBP2.68m (H1 2016: GBP1.27m), representing a 120% increase.
Most encouragingly, the Group's existing managed hosting
business (calculated by excluding the contributions of both the SME
Mass Market division and Sys-Pro) generated revenues of GBP1.34m
(H1 2016: GBP1.13m), representing an organic growth rate of
19%.
Gross Profit for the period was GBP1.68m on a continuing basis
up 105% (H1 2016: GBP0.82m). Gross profit margin has fallen
slightly from 64.6% in H1 2016 to 62.5%. This is due to Sys-Pro
having some legacy Value Added Reseller ("VAR") activity which is
lower margin. Excluding VAR activities, gross margin from continued
operations increased to 69.6%.
At the EBITDA level, total adjusted EBITDA (including
discontinued operations) was GBP0.44m (H1 2016: GBP0.28m) an
increase of 57%. On a continuing basis (so excluding the
contribution from the SME Mass Market division in the period before
its sale), the Group delivered adjusted EBITDA of GBP0.23m (H1
2016: GBP0.03m).
On a continuing basis (i.e. excluding the SME Mass Market
division from the start of the period) we have reported a loss from
operations of GBP(0.53)m (H1 2016: GBP0.2m). However then bringing
in the profit from the sale of the SME Mass Market division,
Retained Profit for the period is GBP1.05m (H1 2016: loss of
GBP0.05m). This includes all the non-recurring costs incurred
relating to the acquisition of Sys-Pro and disposal of the SME Mass
Market division.
Basic earnings per share ("EPS") is 6.1p vs a loss of 0.04p in
H1 2016. This is calculated at the values post the capital
reorganisation that took place in the period. Further detail can be
found in notes 4 and 9.
At period end we had cash and cash equivalents of GBP3.88m (H1
2016: GBP0.44m). The cash increase has resulted from the surplus
funds from the GBP5.0m placing carried out to fund the Sys-Pro
acquisition and the proceeds from the disposal of the SME Mass
Market division (further detail below). The business enjoys very
low levels of debt; in H1 2016 this was GBP0.48m of which GBP0.21m
is asset finance and also includes loan notes and invoice
discounting (which have since been repaid).
New Banking Facilities
The Group has just secured new banking facilities with Santander
UK plc ("Santander"). The facilities comprise a GBP2.5m Revolving
Credit Term Loan Facility to finance acquisitions alongside a
GBP0.5 million overdraft facility. We are pleased with the
confidence Santander have shown in our business and look forward to
their ongoing support of our growth plans. The facilities will
provide the Group with strategic flexibility when evaluating
acquisition opportunities.
M&A Activity and Placing
On 15 June 2016 we announced the proposed acquisition of Sys-Pro
alongside a placing to raise GBP5.0m gross. The placing was
oversubscribed and we welcomed new institutional investors to our
share register. The acquisition and placing were both completed on
6 July 2016.
Sys-Pro a Managed Services provider which the Group acquired for
an initial consideration of GBP3.9m, paid 85% cash and 15% in new
ordinary shares at 60 pence per share.
On 18 July 2016 we announced the disposal of our SME Mass Market
division and this was completed on 22 July 2016. The SME Mass
Market division, which had become non-core, was sold for GBP2.7m
less an adjustment for advance payment and receipts of GBP0.47m and
achieved a valuation of 4.9x EBITDA.
The Group continues to progress its integration plan in relation
to Sys-Pro with a number of key milestones achieved.
Outlook
I am delighted we have achieved our primary strategic objective
of transitioning to a Managed Services provider. Sys-Pro and
Netplan complement each other with additional services that the
respective businesses did not offer on a standalone basis as well
as providing immediate critical mass and entry into new sector
verticals alongside expanding the Group's geographic reach. This
has added a significant piece to the jigsaw and has greatly
increased the range of the services we can now offer our customers.
We will be able to leverage our trusted adviser relationships with
our customers to capitalise on the additional opportunities now
available. On 26 August 2015, we announced a partnership with
Epicor as their preferred Cloud partner in the UK and Ireland for
Epicor BisTrack application software (an ERP application). This
partnership has since expanded to Netplan providing an end-to-end
solution to an increasing amount of Epicor customers. This
end-to-end solution includes deploying of their ERP application,
optimising it and providing support services for the actual
application. We expect the expanded partnership with Epicor should
also enhance and accelerate these opportunities.
I believe this has been a period of solid progress for the
Group, and the board would like to thank all of the staff and
management for their hard work and congratulate them on their
achievements in the first half of the year. I would also like to
thank our investors for their continued support in the company.
Chris Evans
Chief Executive Officer
13 December 2016
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2016
Unaudited Unaudited Audited
six six year
months months
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
Notes GBP'000 GBP'000 GBP'000
-------------------------------------------- ------- ---------- ----------- -----------
Revenue
-------------------------------------------- ------- ---------- ----------- -----------
Total group revenue - continuing
and discontinued operations 3,379 2,414 4,764
Revenue discontinued operations 700 1,143 2,249
----------------------------------------------------- ---------- ----------- -----------
Revenue - continuing operations 2,679 1,271 2,515
Cost of sales (1,002) (451) (829)
Gross profit 1,677 820 1,686
Operating expenses before depreciation,
amortisation, acquisition and integration
costs, fair value adjustment and
share based payments (1,444) (793) (1,579)
===================================================== ========== =========== ===========
Adjusted EBITDA - continuing 233 27 107
===================================================== ========== =========== ===========
Depreciation (132) (120) (241)
Amortisation of intangibles (143) (102) (205)
Acquisition and restructuring costs (415) (7) (11)
Fair value adjustment (77) (11) 270
Share based payments - 4 10
===================================================== ========== =========== ===========
Administrative expenses (2,211) (1,029) (1,756)
(Loss) from operations (534) (209) (70)
===================================================== ========== =========== ===========
Finance costs (17) (19) (44)
(Loss) before taxation (551) (228) (115)
Taxation 5 20 41
===================================================== ========== =========== ===========
(Loss) from continuing operations (546) (208) (73)
===================================================== ========== =========== ===========
Profit from discontinued operations
- net of income tax 1,598 162 375
===================================================== ========== =========== ===========
Total comprehensive profit (loss)
attributable to the equity holders
of the company 1,052 (46) 302
===================================================== ========== =========== ===========
4 GBP0.061 GBP(0.004) GBP(0.025)
Basic earnings per share (EPS)
-------------------------------------------- ------- ---------- ----------- -----------
The accompanying notes form an integral part of this
consolidated statement of comprehensive income
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2016
Unaudited Unaudited Audited
30 Sep 30 Sep 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
============================== ========== ========== ========
Assets
Non-current assets
Goodwill 7,283 4,454 4,454
Intangible assets 1,982 1,450 1,329
Plant, property and
equipment 424 575 450
=============================== ========== ========== ========
9,689 6,479 6,233
============================== ========== ========== ========
Current assets
Stock and WIP 64 - -
Trade and other receivables 1,313 494 598
Cash and cash equivalents 3,877 441 513
=============================== ========== ========== ========
5,254 935 1,111
============================== ========== ========== ========
Total Assets 14,943 7,414 7,344
=============================== ========== ========== ========
Equity and Liabilities
Equity attributable to the equity shareholders
of the parent
======================================================= ========
Called up share capital 4,430 2,399 2,552
Share premium reserve - 6,493 6,493
Share based payment
reserve 1,396 642 1,008
Retained profits (losses) 5,517 (5,466) (5,118)
=============================== ========== ========== ========
11,343 4,068 4,935
============================== ========== ========== ========
Non-current liabilities
Obligations under finance
leases 87 113 91
Deferred taxation 401 297 242
Contingent consideration
due on acquisitions - 618 435
=============================== ========== ========== ========
488 1,028 768
============================== ========== ========== ========
Current liabilities
Trade and other payables 1,365 640 718
Deferred income 339 692 707
Contingent consideration
due on acquisitions 1,281 618 -
Other loans - 150 105
Convertible loan notes - 103 -
Obligations under finance
leases 127 115 111
=============================== ========== ========== ========
3,112 2,318 1,641
============================== ========== ========== ========
Total Equity and Liabilities 14,943 7,414 7,344
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2016
Attributable to equity holders
of the parent
Share Share Other Accumulated Total
capital premium reserve profit
account (losses)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
========================== ========= ========= ========= ============ ========
At 1 April 2015 2,399 6,493 656 (5,420) 4,128
Loss and total
comprehensive
income for the
period - - - (46) (46)
Movement in share
option reserve - - (14) - (14)
========================== ========= ========= ========= ============ ========
At 30 September
2015 2,399 6,493 642 (5,466) 4,068
Profit and total
comprehensive
income for the
period - - - 348 348
Issue of share
capital - consideration
shares 153 - 367 - 520
Expenses of share
issue - - (7) - (7)
Movement in share
option reserve - - 6 - 6
========================== ========= ========= ========= ============ ========
At 31 March 2016 2,552 6,493 1,008 (5,118) 4,935
Profit and total
comprehensive
income for the
period - - - 1,052 1,052
Issue of share
capital - share
placing 1,683 3,367 - - 5,050
Issue of share
capital - consideration
shares 195 - 390 - 585
Expenses of share
issue - (277) - - (277)
Capital reorganisation - (9,583) - 9,583 -
Movement in share
option reserve - - (2) - (2)
========================== ========= ========= ========= ============ ========
At 30 September
2016 4,430 - 1,396 5,517 11,343
========================== ========= ========= ========= ============ ========
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and
purpose
Share Premium Amount subscribed for share capital
in excess of nominal values.
Other Reserve Amount reserved for share based
payments to be released over
the life of the instruments and
the equity element of convertible
loans and the amount subscribed
for share capital in excess of
nominal value of acquisition
of another company
Accumulated All other net gains and losses
profit (losses) and transactions with owners
(e.g. dividends) not recognised
elsewhere.
================= ============================================
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
SIX MONTHSED 30 SEPTEMBER 2016
Unaudited Unaudited Audited
six six year
months months
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
===================================== ========== ========== ========
Cash flows used in operating
activities
Net income (loss) 1,052 (46) 302
Profit net of tax - discontinued
operations (1,598) (162) (375)
Adjustments for:
Depreciation and other
amortisation 275 222 446
Fair value adjustment on
contingent consideration 77 11 (270)
Finance costs 17 19 44
Acquisition costs 50 - -
Share based payments - (4) (10)
Taxation (5) (20) (41)
====================================== ========== ========== ========
Operating cash flows before
movement in working capital (132) 20 96
Increase (decrease) in
trade and other receivables (39) 92 61
(Decrease) in trade and
other payables (107) (135) (35)
Net cash (outflow) inflow
from continuing operating
activities (278) (23) 122
====================================== ========== ========== ========
Cash flows from investing
activities
===================================== ========== ========== ========
Payments to acquire property,
plant & equipment (58) (50) (111)
Payment for acquisitions (3,026) - -
net of cash received
Net cash used in investing
activities (3,084) (50) (111)
====================================== ========== ========== ========
Cash flows from financing
activities
===================================== ========== ========== ========
Issue of ordinary share
capital 4,723 - (7)
Drawdown of loan facility - 150 105
Repayment of loan facility (105) (175) (175)
Repayment of loan notes - - (105)
Loan note interest paid - (4) (9)
Interest element of finance
lease payments (17) (15) (33)
Capital repayment of finance
leases (55) (57) (110)
-------------------------------------- ---------- ---------- --------
Net cash from financing
activities 4,546 (101) (334)
====================================== ========== ========== ========
Net increase (decrease)
in cash and cash equivalents
from continuing operations 1,184 (174) (323)
====================================== ========== ========== ========
Cash flows from discontinued
operations
===================================== ========== ========== ========
Net cash used for operating
activities 143 234 518
Net cash provided for investing
activities 2,044 (1) (39)
Net cash used for financing
activities (7) (44) (69)
====================================== ========== ========== ========
Net increase in cash and
cash equivalents from discontinued
operations 2,180 189 410
====================================== ========== ========== ========
Cash and cash equivalents
at the beginning of the
period/year 513 426 426
====================================== ========== ========== ========
Cash and cash equivalents
at the end of the period/year 3,877 441 513
====================================== ========== ========== ========
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2016
1. ACCOUNTING POLICIES
The financial information for the year ended 31 March 2016 set
out in this half-yearly report does not constitute statutory
financial statements as defined in section 434 of the Companies Act
2006. The figures for the year ended 31 March 2016 have been
extracted from the Group financial statements for that year. Those
financial statements have been delivered to the Registrar of
Companies and included an independent auditor's report, which was
unqualified and did not contain a statement under section 493 of
the Companies Act 2006.
The half yearly financial information has been prepared using
the same accounting policies and estimation techniques as will be
adopted in the Group financial statements for the year ending 31
March 2017. The Group financial statements for the year ended 31
March 2016 were prepared under International Financial Reporting
Standards as adopted by the European Union. These half yearly
financial statements have been prepared on a consistent basis and
format with the Group financial statements for the year ended 31
March 2016. The provisions of IAS 34 'Interim Financial Reporting'
have not been applied in full.
The Group currently applies IAS 18. Its application of IAS 18 is
as follows:
-- Revenue for hosting services is recognised over the period of the contract
-- Revenue for professional and VAR (Value Added Reseller)
services is recognised when the customer has the economic benefit
of the goods or service
The Group notes that IFRS 15 will become effective for financial
periods beginning on or after January 2018. The Group will
therefore adopt IFRS 15 for the year ended March 2019 or
before.
EXEPTIONAL ITEMS
Items which are material because of their size or nature and
which are non-recurring are highlighted separately on the face of
the income statement. The separate reporting of exceptional items
helps provide a better picture of the Company's underlying
performance. Items which may be included within the exceptional
category include:
-- spend on the integration of significant acquisitions and the
other major restructuring programmes;
-- significant goodwill or other asset impairments; and
-- other particularly significant or unusual items.
Spend on integration is incurred by the Group when integrating
one trading business into another. The types of costs include
employment related costs of staff being made redundant as a
consequence of integration, due diligence costs, property costs
such as lease termination penalties and vacant property provisions
and third party advisor fees.
Exceptional items are excluded from EBITDA as an adjustment as
management believe that they need to be considered separately to
gain an understanding of the underlying profitability of the
trading businesses.
Further information is provided in note 5.
GOING CONCERN
The condensed consolidated interim financial information has
been prepared on a going concern basis.
The Directors have prepared cash flow forecasts for the Group
following its acquisition of System Professional Ltd ("Sys-Pro")
and its disposal of its SME Mass Market division, including
sensitivity analysis on key assumptions. These forecasts show that
the Group expects to meet its liabilities from cash resources,
taking into account all risks and uncertainties. At the period end
the Group had cash and cash equivalents of GBP3.88m.
On 13 December 2016, the Group secured new banking facilities
with Santander UK plc. The facilities comprise GBP2.5m Revolving
Credit Term Loan Facility and a GBP0.5 million overdraft
facility.
As a result, the Directors have a reasonable expectation that
the Group has adequate resources to continue in operational
existence for the foreseeable future. For this reason, the
Directors consider that the adoption of the going concern basis is
appropriate.
2. SEGMENTAL REPORTING
The Group has two operating segments SME Mass Market and Managed
Hosting. The SME Mass Market segment was discontinued during the
period.
The SME Mass Market division sold services to the mass-market
and included the brands Daily, Evohosting and NameHOG. This
division was sold on 22 July 2016 and is classified as
discontinued. The Managed Hosting segment is enterprise hosting,
private and public cloud and consultancy. Managed Hosting consists
of the Netplan brand (and includes the former Q4Ex business now
integrated into and trading as Netplan) and Sys-Pro, which was
acquired on 6 July 2016. Each reportable segment has a segment
manager or managers who are directly accountable to and maintain
regular contact with the CEO. Each of the segments and operational
units within the segments hold monthly executive meetings of which
the CEO attends.
No customer represents more than ten per cent of the Group's
revenue.
The following tables represent the revenue and profit
information for the Group's business segments:
6 months 6 months
to to Year ended
30 September 30 September 31 March
2016 2015 2016
GBP'000 GBP'000 GBP'000
----------------------- ------------- ------------- -----------
Revenue
SME Mass Market -
discontinued 700 1,143 2,249
Managed Hosting -
continuing 2,679 1,271 2,515
3,379 2,414 4,764
------------- ------------- -----------
Gross Profit
SME Mass Market -
discontinued 436 674 1,323
Managed Hosting -
continuing 1,677 820 1,686
2,113 1,494 3,009
------------- ------------- -----------
Adjusted EBITDA
SME Mass Market -
discontinued 207 250 558
Managed Hosting -
continuing 562 376 742
Group - continuing (330) (350) (634)
------------- ------------- -----------
439 276 666
------------- ------------- -----------
Profit (loss) before
tax
SME Mass Market -
discontinued 1,560 153 362
Managed Hosting -
continuing 277 148 272
Group - continuing (828) (377) (386)
------------- ------------- -----------
1,009 (76) 248
------------- ------------- -----------
Profit (loss) attributable to
the equity holders of the company
SME Mass Market -
discontinued 1,598 162 375
Managed Hosting -
continuing 282 168 313
Group - continuing (828) (376) (386)
------------- ------------- -----------
1,052 (46) 302
----------------------- ------------- ------------- -----------
3. DISCONTINUED OPERATIONS
Discontinued operations include the SME Mass Market business
unit comprising the Daily, EVO Hosting and NameHog brands. 100% of
the trade and assets of these brands were disposed of on 22nd July
2016 in a trade/asset deal for a total cash consideration of
GBP2,735,727 (less an initial amount of GBP465,519 in respect of
advance receipts/payments). The sale will enable SysGroup to focus
its strategy on creating longer term Managed Services relationships
with larger customers who in the most part contract for a
three-year period.
The following table summarises the results of the SME Mass
Market segment included in discontinued operations in the
Consolidated statement of income:-
Unaudited Unaudited Audited
six months six months year
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
====================== ============ ============ ========
Sales 700 1,143 2,249
Costs and expenses (539) (991) (1,887)
Profit on sale 1,399 - -
Profit before tax 1,560 152 362
Taxation 38 10 13
Profit attributable
to the shareholders
of the company 1,598 162 375
4. PROFIT (LOSS) PER SHARE
Unaudited Unaudited Audited
six months six months year
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
============================== ============= ============ ===========
Profit (loss) for the GBP1,052,000 (GBP46,000) GBP302,000
financial year attributable
to shareholders
Weighted number of equity
shares in issue 17,275,694 11,994,778 12,076,486
Basic profit (loss) GBP0.061 (GBP0.004) GBP0.025
per share
Diluted profit (loss) GBP0.060 (GBP0.004) GBP0.024
per share
============================== ============= ============ ===========
On 6 July 2016 the Company consolidated its GBP0.005 (half a
penny) shares in 1 share for 40, the nominal value therefore
becoming GBP0.20 (20 pence). Subsequently on 4 August 2016 the
Court approved a capital reduction which reduced the nominal value
of shares to GBP0.01 (one penny). See note 9 for further
information.
The comparative periods six months to 31 September 2015 and year
to 31 March 2016 have been restated as if the capital
reorganisation and capital reduction had taken place. Had this not
taken place then the figures would be as follows:
Unaudited Unaudited Audited
six months six months year
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
=========================== ============ ============ ============
Weighted number of equity
shares in issue 691,027,788 479,791,101 483,059,433
Basic/diluted profit GBP0.0015 (GBP0.0001) GBP0.0006
(loss) per share
=========================== ============ ============ ============
5. ACQUISTION AND RESTRUCTURING COSTS
In accordance with the Group's policy in respect
of acquisition and restructuring costs, the
following charges were incurred:
Unaudited Unaudited Audited
six six months year
months
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
---------------------------------- --- ---------- ------------ --------
Restructuring and reorganisation
costs 16 7 11
Acquisition costs - 361 - -
Sys-Pro
Acquisition costs - 38
aborted transaction
---------------------------------- --- ---------- ------------ --------
415 7 11
-------------------------------------- ---------- ------------ --------
Continuing operations 415 7 11
Discontinued operations - - -
---------------------------------- --- ---------- ------------ --------
415 7 11
-------------------------------------- ---------- ------------ --------
6. ACQUISITIONS
The Group acquired 100% of the share capital of Sys-Pro on 6
July 2016. Sys-Pro provides managed services, cloud hosting, and IT
consultancy services and is reported in the Managed Hosting
segment.
During the current period the Group incurred GBP361,000 of costs
in relation to this acquisition. These costs are included in
administrative expenses in the Groups consolidated statement of
comprehensive income for the period ended 30 Sept 2016.
The amount of identifiable net assets assumed at the acquisition
date is shown below:
Provisional
Fair Values
Recognised amounts of net assets GBP'000
acquired and liabilities assumed
=========================================== ============
Cash and cash equivalents 289
Trade and other receivables 878
Property, plant and equipment 96
Stock and work in progress 185
Intangible assets 1,128
Trade and other payables (523)
Current income tax liability (383)
Deferred tax liability (226)
=========================================== ============
Identifiable net assets 1,444
Goodwill 3,508
=========================================== ============
Total consideration 4,952
=========================================== ============
Satisfied by:
Cash consideration - paid on acquisition* 3,746
Consideration - new ordinary shares
issued at 60p per share 585
Contingent consideration 621
=========================================== ============
Total consideration 4,952
=========================================== ============
* The cash paid on acquisition includes a property valued at
GBP282k which was transferred to the vendors and a cash amount of
GBP149k relating to settlement of the debt-free, cash free with
normalised working capital calculation. Net of these amounts and
net of cash acquired this amounted to GBP3,026k.
Since the date of acquisition, Sys-Pro has contributed
GBP1,341,000 to Group revenues and GBP167,000 to Group EBITDA.
The acquisition of Sys-Pro included a contingent consideration
which is payable 85% in cash and 15% in shares at 60p (resulting in
the issue of 975,000 consideration shares in respect of the 15%).
The contingent consideration payable is based on delivering certain
performance criteria and is capped at GBP1.865m. The earn out
period is to 31 March 2018 (unless achieved in 31 March 2017). If
EBIT (earnings before interest and tax) of less than GBP714k in the
year ended 31 March 2018 then no consideration is payable, there is
a ratchet mechanism and a set of ranges. Achieving the maximum
potential consideration would require Sys-Pro to deliver GBP1.3m or
more of EBIT for the respective full financial year.
The fair value of deferred consideration has been estimated
using the discounted cashflow method based on the timing of the
payment of the consideration. A post tax discount rate of 19% was
used.
7. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
six six year
months months
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
------------------------- ---------- ---------- --------
Trade debtors 891 274 306
Prepayments and accrued
income 422 220 292
1,313 494 598
------------------------- ---------- ---------- --------
The Group's debtor days has increased as shown
below. This is In line with the Groups change
in focus from mass market hosting, where customers
paid cash in advance, to managed hosting, were
terms of between 30-60 days are offered to
customers.
Unaudited Unaudited Audited
six six year
months months
To to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
Trade debtor days 43 24 17
-------------------------- ---------- ---------- --------
8. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
six six year
months months
to to to
30 Sep 30 Sep 31 Mar
2016 2015 2016
GBP'000 GBP'000 GBP'000
------------------------ ---------- ---------- --------
Trade payables 408 321 367
Corporation tax 281 32 62
Other taxes and social
security 274 138 155
Other creditors 182 45 -
Accruals 220 104 134
1,365 640 718
------------------------ ---------- ---------- --------
9. CAPITAL RESTRUCTURING
On 15 June 2016 the Group announced the proposed acquisition of
Sys-Pro and a placing of 8,333,334 New Ordinary Shares at 60 pence
per share to raise GBP5.0 million gross. The Group also announced a
share consolidation and a capital reduction.
As at the date of that announcement, the Company had 510,379,335
existing Ordinary Shares in issue and the mid-market price of each
existing Ordinary Share as at the close of business on 14 June 2016
was GBP0.0165 (1.65 pence). The Directors considered that the share
consolidation was necessary in order to increase the marketability
of the Company's shares through the creation of a higher price per
share.
Shareholder approval was granted at the General Meeting ("GM")
held on 5 July 2016 with 40 existing ordinary shares becoming one
new ordinary share
The Share Consolidation reduced the number of existing ordinary
shares in issue from 510,379,360 (after the issue to the company
secretary of an additional 25 existing ordinary shares for the
purpose of effecting the share consolidation, given that the number
of existing ordinary shares in issue is not divisible by 40) to new
ordinary shares 12,759,484 and increased the nominal value of the
Company's shares from GBP0.005 (0.5 pence) to GBP0.20 (20
pence).
The nominal share capital of each new ordinary share was then
reduced to GBP0.01 (1 penny), following a court sanctioned capital
reduction. This capital reduction was approved at the same GM and
became effective following the registration of the court order with
Companies House on 4 August 2016.
The Capital Reduction, as approved by the Court, created
realised profits of GBP10,250,042.65 which was applied in
eliminating the accumulated deficit on the Company's profit and
loss account.
The Group now has distributable reserves and so is in a position
to pay a dividend in the future if appropriate.
10. SUBSEQUENT EVENTS
There have been no events subsequent to the period end.
11. AVAILABILITY OF INTERIM REPORT
Copies of this report are available on the Company's website at
http://www.sysgroup.com
INDEPENT REVIEW REPORT TO SYSGROUP PLC
Introduction
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2016 which comprises the Consolidated
Interim Statement of Comprehensive Income, the Consolidated Interim
Statement of Financial Position, the Consolidated Interim Statement
of Changes in Equity, the Consolidated Interim Statement of Cash
Flows and the related notes.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed set of financial statements.
Directors' responsibilities
The interim report, including the financial information
contained therein, is the responsibility of and has been approved
by the directors. The directors are responsible for preparing the
interim report in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the company in meeting the requirements of the
rules of the London Stock Exchange for companies trading securities
on AIM and for no other purpose. No person is entitled to rely on
this report unless such a person is a person entitled to rely upon
this report by virtue of and for the purpose of our terms of
engagement or has been expressly authorised to do so by our prior
written consent. Save as above, we do not accept responsibility for
this report to any other person or for any other purpose and we
hereby expressly disclaim any and all such liability.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity", issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2016 is not prepared, in all material respects, in
accordance with the rules of the London Stock Exchange for
companies trading securities on AIM.
BDO LLP
Chartered Accountants and Registered Auditors
Manchester, United Kingdom
13 December 2016
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR UOORRNNAUAUA
(END) Dow Jones Newswires
December 14, 2016 02:00 ET (07:00 GMT)
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