TIDMSYS
RNS Number : 3488H
SysGroup PLC
07 June 2017
7 June 2017
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Final Results for the year ended 31 March 2017
SysGroup PLC (AIM: SYS), the managed services and cloud
integrator, announces its final results for the year ended 31 March
2017.
HIGHLIGHTS
Financial:
-- Total revenue (including discontinued operations) up 65.2% to GBP7.87m (FY16: GBP4.76m)
o Revenue from continuing operations up 186% to GBP7.18m (FY16:
GBP2.51m)
-- Organic growth from existing Managed Services business
excluding the acquisition of System Professional Ltd and divestment
of SME Mass Market is 19.8%
-- Gross profit margin of 61.3% (FY16: 63.2%)
-- Adjusted EBITDA (including discontinued operations) of GBP0.81m (FY16: GBP0.66m)
o Adjusted EBITDA (continuing operations) of GBP0.62m (FY16:
GBP0.54m)
-- Adjusted PBT* growth of 45.1% to GBP0.45m (FY16: GBP0.31m)
*after adding back share based payments, amortisation on
acquired intangibles and costs relating to acquisition and
restructuring
Operational
-- Acquisition of Systems Professional Ltd ("Sys-Pro") for an initial consideration of GBP4.0m
-- 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
-- New banking facilities of GBP3.0m, incorporating a GBP2.5m
acquisition facility agreed with Santander
-- Continued investment in infrastructure and portfolio of
services including use of 'hyper-scale' technologies
-- First VEEAM Accredited Service Partner (VASP) in the UK
-- Finance function successfully relocated and integrated across
Group to a single location, closure of Nottingham office
-- Existing customers overall net spend increasing
-- Creation of an "integrations" team to enhance capabilities
around acquisition integration and to ensure efficient
execution
Post period-end developments
-- Variation to terms of the Sys-Pro acquisition with settlement
of all future potential deferred consideration by payment of
GBP150,000 to the vendors of Sys-Pro
-- Group no longer has any contingent amounts due in relation to acquisitions
-- Further acceleration of integration and realisation of synergies
2017 2016 2017 % increase/decrease
-------------------------- --------- --------- -------------------------
Revenue GBP7.87m GBP4.76m +65.2%
-------------------------- --------- --------- -------------------------
Gross margin GBP4.82m GBP3.01m +60.7%
-------------------------- --------- --------- -------------------------
Gross margin % 61.3% 63.2% (3.0)%
-------------------------- --------- --------- -------------------------
Adjusted EBITDA(1)
(continuing operations) GBP0.62m GBP0.54m +14.8%
-------------------------- --------- --------- -------------------------
Adjusted EBITDA(1)
(discontinued
operations) GBP0.19m GBP0.12m +46.2%
-------------------------- --------- --------- -------------------------
Adjusted PBT(2) GBP0.45m GBP0.31m +45.1%
-------------------------- --------- --------- -------------------------
Profit/(loss)
before tax GBP0.32m GBP0.25m +28.0%
-------------------------- --------- --------- -------------------------
Operating cash
inflow GBP1.27m GBP0.65m +95.4%
-------------------------- --------- --------- -------------------------
Net Cash(3) GBP3.07m GBP0.21m
-------------------------- --------- --------- -------------------------
(1) Adjusted EBITDA, is earnings before interest, taxation,
depreciation, amortisation, acquisition and restructuring costs,
fair value adjustments and share based payments
(2) Adjusted PBT is profit before taxation after adding back
share based payments, amortisation on acquired intangibles and
costs relating to acquisition and restructuring
(3) Net Cash represents cash balances less finance lease
liabilities
Chris Evans, Chief Executive commented: "We are pleased with our
results, delivered in a year of both significant progress and
change for the Group. We have achieved our objectives of
fundamentally transforming the business to focus on high growth
managed services whilst delivering enhanced profitability and
results in line with market expectations, while at the same time
integrating a large acquisition. Our sales pipeline has grown by
28.8% from 30 September 2016 to GBP3.49m at 31 March 2017, showing
the tangible impact of our growth strategy.
"We have started the new financial year with the right business
platform to support further organic and acquisitive growth. Given
our healthy levels of recurring revenue and long term contracts
with key customers, coupled with our cash generation, we are well
placed to capture market opportunity and I remain confident in the
Group's future prospects."
For further information please Tel: 0151 559 1777
contact:
SysGroup plc
Chris Evans, CEO
Julian Llewellyn, CFO
Shore Capital (Nomad and Broker) Tel: 020 7408 4090
Bidhi Bhoma / Edward Mansfield
Alma PR (Financial PR) Tel: 020 8004 4218
Josh Royston / Hilary Buchanan
/ Helena Bogle
About SysGroup
SysGroup is a leading provider of Cloud Hosting, Managed
Services and expert IT Consultancy. The Group delivers solutions
that ensure clients understand and benefit from industry-leading
technologies and advanced hosting capabilities. The SysGroup team
focuses on a customer's strategic and operational requirements -
enabling them 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
STRATEGIC REPORT
Chairman's Statement
The Board is pleased to report on a busy and successful year for
the Group, which saw the business undergo a complete transformation
to a managed services provider, delivering against our stated
strategic objectives for the 2017 financial year. At the same time
the Group achieved impressive growth in line with market
expectations, delivering an increase in Group revenue of 65.1%,
including 19.8% organic growth.
The Group's transformation consisted of the acquisition of
Systems Professional Limited ("Sys-Pro") in early July,
complementing the Group's existing managed services business, and
an associated re-branding of the business from Daily Internet Plc
to SysGroup Plc. This, combined with the subsequent disposal of the
Company's legacy, non-core SME Mass Market hosting division,
resulted in the formation of a business focussed exclusively on
servicing the high value managed services market, with a strong
focus on cloud.
To facilitate the funding of the Sys-Pro, the Group completed an
oversubscribed placing in July raising GBP5.0m gross and bringing a
number of new institutional shareholders onto the Company's
register. In conjunction with the placing and acquisition, the
Company also undertook a 40 for 1 share consolidation and sought
court approval for the cancellation of its share premium account,
leaving the parent company able to pay dividends in the future
should it be appropriate to do so (see note 22).
In order to support the new business composition and operational
focus, a number of organisational changes were implemented to
restructure the Group, including the appointment of Julian
Llewellyn as CFO and Amy Yateman-Smith as Non-Executive Director. I
would like to welcome both Julian and Amy to the Board and I look
forward to working with them as we continue to execute our growth
strategy.
The Board believes the Group now has in place the right
platform, expertise and focused service offering to capitalise on a
substantial market opportunity. The managed services market
continues to evolve and remains highly fragmented, and the Board
believes that a strategy of organic growth and targeted
acquisitions, supported by the Group's strong gross cash position
of GBP3.5m and unutilised GBP2.5m acquisition facility, will
deliver sustained, long-term value for shareholders.
I would like to take this opportunity to thank all of our
employees for their commitment and dedication to the business. We
have started the new financial year with an improved operational
structure and strong financial footing, which, combined with
increasing levels of recurring revenue, leaves me optimistic for
the Group's growth prospects ahead.
Michael Edelson
Chairman
06 June 2017
STRATEGIC REPORT
Chief Executive Officer's Report
Introduction
The year to 31 March 2017 has been a year of both significant
progress and change for SysGroup plc.
The acquisition of System Professional Ltd ("Sys-Pro") in July
2016 and subsequent disposal of the SME Mass Market business unit
in the same month marked the firm transition to a Cloud and Managed
Services business.
These were large undertakings for our business as firstly we
acquired a business which had higher revenue and staff numbers than
ourselves and then disposed of a business which represented almost
half of the Group's size, before the acquisition of Sys-Pro.
Subsequent to the transactions, we reorganised the combined
businesses and made several changes to the management team. We have
created internal teams for managing the integration and have
created liaisons between teams to maximise the cross-selling
opportunity to customers to take advantage of the increased range
of services from our growing product portfolio.
Not only did this work to create a business that is now focused
on managed services with a cloud bias but it allowed us to put in
place the foundations to better take advantage of the opportunities
that present themselves in this growing market.
The above corporate activity was in line with the Board's stated
strategy to exit from a light-touch, low margin and high volume
mass hosting market, which was largely commoditised and subject to
high customer churn, to a business focused exclusively on providing
higher value managed services.
Notwithstanding the management time that was involved in this,
we maintained focus on the core business and delivered results in
line with market expectations for FY 2017.
Our revenues (from continuing and discontinued operations) in
the year were GBP7.87m, an increase of 65.1% on the previous year
(2016: GBP4.76m). Our adjusted EBITDA (from continuing and
discontinued operations) increased by 22.7% to GBP0.81m (2016:
GBP0.66m) and our adjusted profit before tax increased from
GBP0.31m in 2016 to GBP0.45m representing a 45.1% increase. At the
year-end, we had a healthy net cash position of GBP3.07m.
We believe that the foundations are now firmly laid for us to
capture growth in our chosen markets and complement these with
carefully considered acquisitions.
Market
The market for managed and cloud services is large and long
term, driven by the structural move to cloud delivered solutions
and IT outsourcing in general. IT is no longer seen as a cost base
but is something which can really help drive profits and
efficiencies in businesses, and corporations are embracing
technologies that will put them at a commercial advantage compared
with a competitor.
This desire to embrace the best of breed technologies which can
drive these efficiencies mean that knowledge of better, more cost
effective, reliable and secure solutions in a changing environment
drives customers to partner with us as we help guide and advise
them along their journey. We become part of our customers' IT
function and our close and increasing engagement with them is
demonstrated by an overall net increase in customer spend year on
year for the past three years.
Our managed service offerings include all forms of Cloud hosting
(private, public and hybrid) but also outsourced service desk and
various IT consulting services including public cloud (Azure and
AWS services). Our managed services revenue is predominantly
derived from Cloud and this element of our service is growing at
the fastest rate, with organic growth of 19.8% in 2017.
Strategy
SysGroup's clear focus is to expand its position as a trusted
provider of managed services and expert IT consultancy to clients
in the UK and Ireland. We have positioned the Group as an extension
to a customer's existing IT department guiding them through the
complexities and developments in the market.
Our target market is servicing the UK corporate sector that has
traditionally managed and housed their own IT infrastructure on
premise. We operate in a variety of vertical sectors but have
weighting in not for profit, education, health services, financial
services, insurance, technology and merchant and distribution
sectors with a variety of well-known clients in these
verticals.
Being a Visa Level 1 PCI-DSS service provider (highest level)
and with our ISO9001 and ISO27001 credentials we are an attractive
partner to anyone who wishes to ensure platforms are built and
maintained to the highest of security standards.
Our IT consulting services often results in customers taking
Cloud services from us, and the legacy Value Added Reseller ("VAR")
element of the Sys-Pro business provides a feeder of cloud and
managed service opportunities as customers favour OPEX over CAPEX
models and the flexibilities that offers.
Along with seeking to engage with larger spending customers who
have a specific need for a large custom built cloud platform we
also seek to engage with customers in our chosen markets who are at
different stages of their IT journey. This can initially be by
partnering with us for functions like our monitoring services,
remote service desk, backup and disaster recovery services. As our
customers develop, the opportunity grows and results in more of
their services being outsourced to us. The result is that these
customers can be very sticky in nature as the increased level of
services provided by the Group creates a greater reliance on the
Group and significant barrier to entry for competitors. Customers
typically sign up for a contract period of one to three years, with
larger contracts tending to be three years.
We intend to supplement our organic growth with carefully
considered acquisitions.
Acquisitions
In July 2016 the Group acquired Sys-Pro for an initial
consideration of GBP4.0m, paid 85% cash and 15% in new ordinary
shares at 60 pence per share, funded by way of a placing raising
GBP5.0m gross. There have been certain operational challenges at
Sys-Pro since its acquisition but overall integration of the
business into the Group is continuing and was accelerated just
prior to the year end, with a number of important milestones
already reached.
During the period the Group secured new banking facilities with
Santander UK plc. The facilities comprise a GBP2.5m Revolving
Credit Term Loan Facility to finance acquisitions alongside a
GBP0.5 million overdraft facility and a GBP0.5m finance leasing
facility.
In line with the Group's stated growth strategy, the Board
remains alert to strategic acquisition opportunities to supplement
organic growth. In a fragmented market, we believe we are well
placed to make further astute acquisitions given our size and
funding availability.
Disposal
On 22 July 2016 the Group announced the disposal of its SME Mass
Market business for a total consideration of GBP2.7m in cash, less
an amount of GBP0.5m in respect of advance receipts/payments.
As this business was based in the Group's former head office in
Nottingham a necessary reorganisation occurred and a new finance
function was established in the Liverpool office of the Group.
Operational Review
All of the Group's activities relate to delivering IT managed
services with a Cloud bias along with consulting. The Group is
segmented into managed services, VAR and SME Mass Market. The SME
Mass Market division was discontinued following completion of the
disposal of this division on 18 July 2016, and is therefore shown
as discontinued in the table below. Managed services segment
consists of all the activities of Netplan Internet Solutions Ltd
and that of Sys-Pro but excluding its VAR business.
For both SME Mass Market and for Sys-Pro they are included in
results to their respective date of disposal or acquisition.
We have introduced a new operating segment of VAR. This is
legacy activity from which Sys-Pro built its business.
Traditionally Sys-Pro was a provider of hardware and software but
has followed the transformation to Cloud and IT Managed Services
and was at the beginning but established level of the curve in
converting its traditional 'on premise' customers to Cloud
delivered solutions. We continue our work educating our traditional
customers of the benefits of Cloud delivered services and the
concept of moving from a CAPEX to an OPEX model. Market drivers and
overall trend underline the substantial opportunity to us in this
base. We expect the VAR segment to decrease in value as customers
continue to shift to Managed Services.
The revenue split of the divisions is shown below:
2017 2017 2016 2016
Revenue by operating GBP'000 % GBP'000 %
segment
======================== ======== ===== ======== =====
Managed Services 5,400 69% 2,515 53%
Value Added Reseller 1,765 22% - -
SME Mass Market
(discontinued) 700 9% 2,249 47%
Total 7,865 100% 4,764 100%
======================== ======== ===== ======== =====
Key performance indicator review
Revenue Growth 2017 2016
---------------------- ---------- ----------
Revenue (continuing) GBP7.165m GBP2.515m
---------------------- ---------- ----------
Growth 184.9% 22.%
---------------------- ---------- ----------
Revenue from continuing operations grew by 184.9% driven by
Managed Services and the acquisition of Sys-Pro.
Adjusted EBITDA (including discontinued activities) improved
22.7% to GBP0.81m (2016: GBP0.66m).
The growth in Adjusted EBITDA is a combination of improved
performance from the Netplan business unit and from contribution
from Sys-Pro (acquired in the period)
Performance review
Group revenue for the year grew by 65.3% to GBP7.865m for the
year to 31 March 2017 (2016: GBP4.764m). Revenue growth was driven
by the Managed Services division, which consists of the Netplan
brand (incorporating Q4Ex) and the System Professional brand
(acquired in the year), contributing revenues of GBP7.165m (2016:
GBP2.52m). The SME Mass Market division generated revenues of
GBP0.7m (2016: GBP2.2m) before being divested.
We continue to have good visibility of future revenues as the
vast majority of our customers have entered into multi-year
contracts. As at 31 March 2017 there is GBP0.47m of deferred
revenue (2016: GBP0.71m) which will be released to profit in future
periods.
Gross profit for the year on continuing and discontinued
operations was GBP4.82m (2016: GBP3.01m) representing a gross
margin of 61.2% (2016: 63.2%). The reduction in gross margin is
attributable to the change of sales mix during the year and the
slower conversion of Sys-Pro VAR customers into managed services
revenue.
Adjusted earnings before interest, taxation, depreciation and
amortisation ("EBITDA") for the year to 31 March 2017 is GBP0.81m
(2016: GBP0.67m). Adjusted EBITDA is calculated after excluding
acquisition and restructuring costs, share based payment costs and
fair value adjustments. The Directors consider that an adjusted
EBITDA figure is a more appropriate measure of the underlying
performance of the business.
Balance sheet
Net cash inflow from operating activities during the year
amounted to GBP1.10m (2016: GBP0.67m). Cash at bank at 31 March
2017 was GBP3.47m (2016: GBP0.51m).
Payables falling due within one year are reported at GBP1.98m
(2016: GBP1.64m). This figure includes an amount of GBP0.47m (2016:
GBP0.71m) for deferred revenue which will be released to profit in
future years.
Contingent consideration payable on the Sys-Pro acquisition of
GBP0.69m (2016: nil), which is the fair value of the amounts
payable in shares, is included within liabilities falling due after
more than one year. Contingent consideration on the acquisition of
Q4Ex Ltd has now been fully settled given all performance criteria
were satisfied.
Based on certain performance criteria, the vendors of Sys-Pro
could be due further consideration of up to GBP1.865m. At the
year-end the fair value of the contingent consideration stood at
GBP0.69m. Post period end however this has now been settled by a
one-off payment of GBP150,000. This is a post balance sheet event
and has also removed some operational challenges by removing
certain approval processes required with the vendors allowing for
integration to be accelerated and is explained in more detail in
note 24.
The Directors are confident there is sufficient working capital
within the Group. The Group also has surplus cash, is cash
generative and has GBP3.0m of committed but undrawn banking
facilities (which includes a GBP2.5m acquisition facility).
However, should accretive acquisitions become available to the
Group that cannot be met from existing resources (or with enough
headroom comfort), the Group may seek to raise additional finance
either through debt, equity or a mixture of the two.
Our people
Our people are very highly valued and the Directors place
considerable emphasis on employees sharing in the success of the
Group. This is achieved through the participation in share option
schemes. Due to the nature and size of the business, employees are
constantly encouraged to communicate with the Group's senior
management to discuss business issues and potential
improvements.
It is the policy of the Group that there should be no unfair
discrimination in recruiting and promoting staff, including
applicants who are disabled. The Directors are committed to
maintaining and developing communication and consultation processes
with employees, who in turn are encouraged to develop an awareness
of the issues affecting the Group.
Divisional split as at 31 March 2017 2016
Board of Directors 5 4
SME Mass Market - 12
Managed Services 59 14
64 30
================================= ===== =====
Men Women
Gender diversity as at Number %age Number %age
31 March 2017
======================== ======= ===== ======= =====
Board of Directors 4 80% 1 20%
Senior Managers 3 75% 1 25%
Employees 50 91% 5 9%
57 89% 7 11%
======================== ======= ===== ======= =====
Infrastructure and technology
During the year, we invested in our capabilities and have begun
deploying Cloud services from a newly fitted out location on our
network in a datacentre in Manchester. We are utilising
'hyper-scale' technologies that the likes of Facebook, Microsoft
and Amazon utilise, such as software defined networking and
continuous integration. These technologies allow us to
automatically roll-out a whole network deployment and virtual
machine build in minutes whilst continuous integration means we can
test changes in a virtual environment before pushing these to a
live environment, minimising 'change control' risks.
Our work and contribution to the CEPH OpenSource community
gained us recognition for the development of an industry leading
low cost storage solution which lead us to become the first VEEAM
accredited service partner in the UK. We will continue our R&D
efforts and bring new and interesting services to our
customers.
Summary and Outlook
We are pleased with our results, delivered in a year of both
significant progress and change for the Group. We have achieved our
objectives of fundamentally transforming the business to focus on
high growth managed services whilst delivering enhanced
profitability and results in line with market expectations, while
at the same time integrating a large acquisition. Our sales
pipeline has grown by 28.8% from 30 September 2016 to GBP3.49m at
31 March 2017, showing the tangible impact of our growth
strategy.
Due to operational challenges at Sys-Pro since its acquisition
the Group expects growth to be slower than originally expected for
FY 2018. The Board have taken the necessary remedial steps and
following entry into the deed of variation with the vendors of Sys-
Pro, the management team has the ability to accelerate the
integration process.
Our new management structure and internal teams will support
further organic and acquisitive growth and given our healthy levels
of recurring revenue and long term contracts with key customers,
coupled with our cash generation, we are well placed to capture
market opportunity.
We look forward to the future with confidence.
This Strategic Report was approved and signed by order of the
board.
Chris Evans
Chief Executive Officer
6 June 2017
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2017
2017 2016
Group Group
Notes GBP'000 GBP'000
-------------------------------- ------ --------- ---------
Revenue
-------------------------------- ------ --------- ---------
Total group revenue
- continuing and discontinued
operations 4 7,865 4,764
Revenue - discontinued
operations 700 2,249
-------------------------------- ------ --------- ---------
Revenue - continuing
operations 7,165 2,515
Cost of sales (2,783) (829)
Gross profit 4,382 1,686
Operating expenses
before depreciation,
amortisation, acquisition
and integration costs,
fair value adjustment
and share based payments (3,764) (1,579)
================================ ====== ========= =========
Adjusted EBITDA -
continuing 618 107
================================ ====== ========= =========
Depreciation - continuing 14 (324) (241)
Amortisation of intangibles
- continuing 13 (326) (205)
Acquisition and restructuring
costs - continuing 8 (791) (11)
Fair value adjustment
- continuing (300) 270
Share based payments
- continuing - 10
================================ ====== ========= =========
Administrative expenses (5,505) (1,756)
Loss from operations (1,123) (70)
================================ ====== ========= =========
Finance costs 6 (27) (44)
Loss before taxation (1,150) (114)
Taxation 12 20 41
================================ ====== ========= =========
Loss from continuing
operations (1,130) (73)
================================ ====== ========= =========
Profit from discontinued
operations - net of
income tax 23 1,508 375
================================ ====== ========= =========
Total comprehensive
profit attributable
to the equity holders
of the company 378 302
================================ ====== ========= =========
Basic earnings per 11 GBP0.019 GBP0.021
share (EPS)
-------------------------------- ------ --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2017
2017 2016
Group Group
Notes GBP'000 GBP'000
========================== ====== ================================================= ========
Assets
Non-current assets
Goodwill 13 7,620 4,454
Intangible assets 13 1,617 1,329
Property, plant
and equipment 14 666 450
========================== ====== ================================================= ========
9,903 6,233
Current assets
Trade and other
receivables 16 1,311 598
Cash and cash
equivalents 3,473 513
========================== ====== ================================================= ========
4,784 1,111
========================== ====== ================================================= ========
Total Assets 14,687 7,344
========================== ====== ================================================= ========
Equity and Liabilities
Equity attributable
to the equity
shareholders of
the parent
Called up share
capital 22 4,620 2,552
Share premium
reserve - 6,493
Other reserve 1,622 1,008
Translation reserve 4 -
Retained earnings
/ (losses) 4,843 (5,118)
========================== ====== ================================================= ========
11,089 4,935
========================== ====== ================================================= ========
Non-current liabilities
Obligations under
finance leases 19 184 91
Contingent consideration
due on acquisitions 17 690 435
Deferred taxation 12 365 242
1,239 768
========================== ====== ================================================= ========
Current liabilities
Trade and other
payables 17 1,671 718
Deferred Income 17 465 707
Other loans 18 - 105
Obligations under
finance leases 19 223 111
========================== ====== ================================================= ========
2,359 1,641
========================== ====== ================================================= ========
Total Equity and
Liabilities 14,687 7,344
========================== ====== ================================================= ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2017
Attributable to equity holders of the parent
=========================== ============== ====================================================================
Share capital Share premium Other reserve Translation Accumulated Total
reserve
reserve losses
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=========================== ============== ============== ============== ============ ============ ========
At 1 April 2015 2,399 6,493 656 - (5,420) 4,128
=========================== ============== ============== ============== ============ ============ ========
Profit and comprehensive
profit - - - - 302 302
Issue of share
capital 153 - 367 - - 520
Expenses of
share issue - - (7) - - (7)
Movement in
share option
reserve - - (8) - - (8)
=========================== ============== ============== ============== ============ ============ ========
At 31 March
2016 2,552 6,493 1,008 - (5,118) 4,935
=========================== ============== ============== ============== ============ ============ ========
Profit and comprehensive
profit - - - - 378 378
Translation
of foreign subsidiaries - - - 4 - 4
Issue of share
capital - placing 1,686 3,367 - - - 5,053
Issue of share
capital - consideration 382 - 616 - 998
Expenses of
share issue - (277) - - - (277)
Capital re-organisation
(note 22) - (9,583) - - 9,583 -
Movement in
share option
reserve - - (2) - - (2)
=========================== ============== ============== ============== ============ ============ ========
At 31 March
2017 4,620 - 1,622 4 4,843 11,089
=========================== ============== ============== ============== ============ ============ ========
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
Reserve 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 on
acquisition of another company
Accumulated All other net gains and losses and transactions
losses with owners (e.g. dividends) not recognised elsewhere.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 MARCH 2017
Group Group
2017 2016
GBP,000 GBP,000
======================================== ======== ========
Cash flows used in operating
activities
Profit after tax 378 302
Profit net of tax - discontinued
operations (1,508) (375)
Adjustments for:
Depreciation and amortisation 650 446
Fair Value adjustment on contingent
consideration 300 (270)
Finance costs 27 44
Acquisition and integration costs 791 34
Share based payments - (10)
Taxation (20) (41)
========================================= ======== ========
Operating cash flows before movement
in working capital 618 130
========================================= ======== ========
(Increase)/Decrease in trade
and other receivables (163) 61
Increase/(Decrease) in trade
and other payables 544 (35)
Cash generated from operations 999 156
========================================= ======== ========
Cash flows from investing activities
Payments to acquire property,
plant & equipment (380) (111)
Acquisition and integration costs (742) (34)
Acquisition of subsidiary net (3,425) -
of cash acquired
======================================== ======== ========
Net cash used in investing activities (4,547) (145)
========================================= ======== ========
Cash flows from financing activities
Net proceeds from issue of ordinary
share capital 4,722 (7)
Drawdown of loan facility - 105
Repayment of loan facility (105) (175)
Repayment of loan notes - (105)
Loan note interest paid - (9)
Taxation paid (197) -
Interest element of finance lease
payments (27) (33)
Sale and leaseback of assets 189 -
Capital repayment of finance
leases (153) (110)
Net cash from financing activities 4,429 (334)
========================================= ======== ========
Net increase (decrease) in cash
and cash equivalents from continuing
operations 881 (323)
========================================= ======== ========
Cash flows from discontinued
operations
======================================== ======== ========
Net cash used for operating activities 99 518
Net cash provided for investing
activities 1,987 (39)
Net cash used for financing activities (7) (69)
========================================= ======== ========
Net increase in cash and cash
equivalents from discontinued
operations 2,079 410
========================================= ======== ========
Cash and cash equivalents at
the beginning of the year 513 426
========================================= ======== ========
Cash and cash equivalents at
the end of the year 3,473 513
========================================= ======== ========
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARED 31 MARCH 2017
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. These
consolidated financial statements comprise the Company and its
subsidiaries (together referred to as the 'Group').
Statement of compliance
These Group and Company financial statements have 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.
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 IAS 39.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the Financial Statements and their effect are disclosed in note 2.
The financial statements are presented in pounds' sterling, rounded
to the nearest thousand, unless otherwise stated.
Going concern
The Directors have prepared the Financial Statements on a going
concern basis which assumes that the Group and the company will
continue to meet liabilities as they fall due.
The directors have reviewed forecasts prepared for the period
ending 31 March 2019 and considered the projected trading forecasts
and resultant cash flows together with confirmed loan facilities
and other sources of finance.
The Group's forecasts and projections, 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 not yet adopted
At the date of authorisation of these financial statements, the
following standards and interpretations, issued by the
International Accounting Standards Board (IASB), have been adopted
for the first time by the Group with no significant impact on its
consolidated results or financial position:
- Annual Improvements to IFRSs (2012-2014 Cycle)
- Disclosure Initiative: Amendments to IAS 1
A number of new standards, amendments to standards and
interpretations have been issued during the year ended 31 March
2017 but are not yet effective, and therefore have not yet been
adopted by the Group:
- Amendments to IAS12 'Recognition of Deferred Tax Assets for
Unrealised Losses' have not yet been endorsed but the IASB
effective date will be 1 January 2017.
- IFRS 9 'Financial Instruments' is effective from 2018. This
standard will simplify the classification of financial assets for
measurement purposes, but is not anticipated to have a significant
impact on the financial statements.
- IFRS 15 Revenue from Contracts with Customers is effective
after 1 January 2018. This standard will change how revenue is
recognised based on a framework. The potential impact on the Group
has not yet been fully assessed by management.
- IFRS 16 Leases is expected to be applicable after 1 January
2019. If endorsed, this standard will affect the presentation of
the Group financial statements with all leases apart from short
term leases being recognised as on-balance sheet finance leases
with a corresponding liability being the present value of lease
payments. The potential impact on the Group has not yet been
assessed by management.
The Group continues to monitor the potential impact of other new
standards and interpretations which may be endorsed by the European
Union and require adoption by the Group in future reporting
periods.
The adoption of these standards in future periods may have an
impact on the results and net assets of the Group, however it is
too early to quantify this.
Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits associated with the transaction will flow into
the Group. Revenue represents the fair value of amounts received or
receivable for goods and services provided net of trade discounts
and VAT. Revenue from the sale of domain name registrations is
recognised when the domain name is registered or renewed. Revenue
from value added resale is recognised as these products or services
are delivered. Revenue from managed services is taken to deferred
income on the balance sheet and recognised over the life of each
contract.
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 acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Business combinations
All business combinations are accounted for by applying the
purchase method. On acquisition, all the subsidiaries' assets and
liabilities that exist at the date of acquisition are recorded at
their fair values reflecting the conditions at that date. The
results of subsidiaries acquired in the period are included in the
income statement from the date on which control is obtained.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the total acquisition date fair value of the
identifiable assets, liabilities and contingent liabilities
acquired. Goodwill is not amortised but is capitalised as an
intangible asset with any impairment in carrying value being
charged to the consolidated statement of comprehensive income. In
determining the fair value of consideration, the fair value of
equity issued is the market value of equity at the date of
completion, and the fair value of contingent consideration is based
on the expected future cashflows based on whether the directors
believe performance conditions will be met and thus the extent to
which the further consideration will be payable. Where the fair
value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess
is credited in full to the consolidated statement of comprehensive
income on the acquisition date.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
asset's cash-generating unit (i.e. the lowest Group of assets in
which the asset belongs for which there are separable identifiable
cash flows that are largely independent of the cash flows from the
other assets or Groups of assets). Goodwill is allocated on initial
recognition to each of the Group's cash-generating units that are
expected to benefit from the synergies of the combination giving
rise to the goodwill.
The estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset for which the estimates of future cash flows have not
been adjusted.
Foreign currencies
Transactions in foreign currencies are recorded using the rate
of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated
using the rate of exchange ruling at the balance sheet date and the
gains or losses on translation are included in the consolidated
statement of comprehensive income. The results of foreign
subsidiaries that have a functional currency different from the
group's presentation currency are translated at the average rates
of exchange for the year. Assets and liabilities of foreign
subsidiaries that have a functional currency different from the
group's presentation currency, are translated at the exchange rates
prevailing at the balance sheet date. Exchange differences arising
from the translation of the results of foreign subsidiaries and
their opening net assets are recognised as a separate component of
equity.
Segment 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.
Financial instruments
Financial instruments are classified and accounted for,
according to the substance of the contractual arrangement, as
either financial assets, financial liabilities or equity
instruments. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all
of its liabilities.
Financial assets
The Group's loans and receivables comprise trade and other
receivables and cash and cash equivalents in the consolidated
statement of financial position. Trade receivables are stated at
their nominal value and an impairment provision will be recognised
if there is evidence that the amount is irrecoverable and will be
shown in administrative expenses in the Consolidated Statement of
Comprehensive Income. Cash and cash equivalents includes cash in
hand, deposits held at call with banks.
Share capital
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset. The Group's ordinary shares
are classified as equity instruments and are recorded at the
proceeds received, net of direct issue costs.
Financial liabilities
The Group classifies its financial liabilities into one of two
categories, depending on the purpose for which it was acquired. The
Group's accounting policy for each category is as follows:
Fair value through profit or loss
This category comprises only contingent consideration. They are
carried in the statement of financial position at fair values with
changes in fair value recognised in the consolidated income
statement.
Other financial liabilities
Other financial liabilities include trade payables and other
short-term monetary liabilities, which are initially recognised at
fair value and subsequently carried at amortised cost using the
effective interest rate method.
Fair value measurement hierarchy
IFRS 7 requires certain disclosures which require the
classification of financial assets and financial liabilities
measured at fair value to reflect the significance of the inputs
used in making the fair value measurement. The fair value hierarchy
has the following levels:
(a) Quoted prices in active markets for identical assets or liabilities (Level 1)
(b) Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices) (Level 2); and
(c) Inputs from the asset or liability that are not based on observable market data (Level 3)
The level in the fair value hierarchy within which the financial
asset or financial liability is categorised is determined on the
basis of the lowest level input that is significant to the fair
value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the three levels.
Share based payments
The fair value of employee options granted is charged to the
consolidated statement of comprehensive income with a corresponding
increase in equity. The fair value is measured at grant date and
spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the
options granted is measured using the Black Scholes pricing model,
taking into account the terms and conditions upon which the options
were granted.
Leases
Assets obtained under hire purchase contracts and finance leases
are capitalised as tangible assets and depreciated over the shorter
of the lease term and their useful lives. Obligations under such
agreements are included in payables net of the finance charge
allocated to future periods. The finance element of the rental
payment is charged to the consolidated statement of comprehensive
income so as to produce a constant periodic rate of charge on the
net obligation outstanding in each period. Rentals payable under
operating leases are charged against income on a straight-line
basis over the lease term.
Property plant and equipment
Items of property, plant and equipment are stated at cost less
depreciation. Depreciation is provided at annual rates calculated
to write off the cost less estimated residual value of each asset
over its expected useful life, as follows:
IT hardware 20% - 33.3% both reducing balance and straight
line
Furniture and fittings 20% - 33.3% reducing balance
Investment in subsidiaries
Fixed asset investments in the Parent Company are shown at cost
less any provision for impairment as necessary.
Research and Development
Research expenditure is written off to the consolidated
statement of comprehensive income in the year in which the
expenditure occurs. Development expenditure is treated in the same
way unless the directors are satisfied as to the technical,
commercial and financial viability of individual projects, there is
an intention to complete and sell the product and the costs can be
easily measurable. In this situation, the expenditure is
capitalised and amortised expense is included in administrative
expenses in the Consolidated Statement of Comprehensive Income over
the years during which the Group is to benefit.
Intangible assets
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual / legal rights. The amounts ascribed to such
intangibles are arrived at by using appropriate valuation
techniques (see section related to critical estimates and
judgements below).
The significant intangibles recognised by the Group, their
estimated useful economic lives and the methods used to determine
the cost of intangibles acquired in business combinations are as
follows:
Intangible asset Estimated UEL Valuation method
Customer relationships 5-7 years Estimated discounted cash
flow
Deferred Taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is highly probable that relief against taxable
profit will be available.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable Group company; or
-- different Group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Deferred tax liabilities are recognised on intangible assets and
other temporary differences recognised in business
combinations.
2 Significant accounting estimates and judgements
The preparation of this financial information requires
management to make judgements, estimates and assumptions 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. However, the nature of estimation means that
actual outcomes could differ from those estimates. The key sources
of estimation that have a significant impact on the carrying value
of assets and liabilities are discussed below.
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment on an annual basis in
line with the accounting policy noted above. 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 and no impairment has been
identified. More details including carrying values are included in
note 13.
Impairment of other assets
The Group reviews the carrying value of all other assets for
indications of impairment at each period end. If indicators of
impairment exist, the carrying value of the asset is subject to
further testing to determine whether its carrying value exceeds its
recoverable amount.
Valuation of intangibles 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. More details including
carrying values are included in note 13.
Valuation of contingent consideration
When valuing the contingent consideration still payable on
acquisitions, the Group considers various factors including the
performance of the acquired entity since acquisition together with
its expected performance to the end of the earn-out period.
Following the adoption of IFRS 3 (revised) - Business Combinations,
contingent consideration is recognised at, and carried thereafter
at, fair value. All changes in fair value (other than measurement
period adjustments) are reflected in the income statement.
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.
3 Financial instruments - risk management
The Group's financial instruments comprise cash and liquid
resources and various items such as trade receivables and trade
payables that arise directly from its operations. There have been
no substantive changes in the Group's objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods. The Group's objective is to ensure
adequate funding for continued growth and expansion.
All the Group's financial instruments are carried at amortised
cost with the exception of contingent consideration. There is no
material difference between the carrying and fair value of its
financial instruments, in the current or prior year, due to the
instruments bearing interest at fixed rates or being of short term
nature.
A summary of financial instruments held by category is shown
below:
Group Company
Financial assets 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
============================= =========== =========== ============ ============
Loans and receivables
Cash and cash equivalents 3,473 513 2,077 11
Trade receivables 902 306 - -
============================= =========== =========== ============ ============
Total financial assets 4,375 819 2,077 11
============================= =========== =========== ============ ============
Group Company
Financial liabilities 2017 2016 2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
============================= =========== =========== ============ ============
At amortised cost
Trade and other payables 1,409 563 134 71
Loans and other borrowings 407 105 - -
============================= =========== =========== ============ ============
At fair value 1,816 668 134 71
Contingent consideration 690 435 690 435
============================= =========== =========== ============ ============
Total financial liabilities 2,506 1,103 824 506
============================= =========== =========== ============ ============
Per the fair value hierarchy classifications under IFRS 7
Financial Instruments the contingent consideration due on
acquisitions shown above are considered to be level 3 financial
liabilities as there are no observable inputs for valuation.
Group Company
GBP'000 GBP'000
================================================ ======== ========
Contingent consideration
At 1 April 2015 1,225 1,225
Settled during the year (520) (520)
Notional interest
charged 132 132
Fair value adjustment through Income Statement (402) (402)
At acquisition 435 435
At 31 March 2016 435 435
Settled during the year (666) (666)
Notional interest charged 116 116
Fair value adjustment through Income Statement 184 184
At Acquisition 621 621
At 31 March 2017 690 690
================================================= ======== ========
The fair value adjustment related to the change in fair value
calculation of the contingent consideration payable on the Q4Ex
acquisition.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's policy is to prepare periodic working capital
forecasts, allowing an assessment of the cash requirements of the
Group and Company, to manage liquidity risk. Cash resources are
managed in accordance with planned expenditure forecasts and the
directors have regard to the maintenance of sufficient cash
resources to fund the Group and Company's immediate operating
requirements and capital expenditure.
The following table sets out the contractual maturities
(representing undiscounted contractual cash-flows) of financial
liabilities:
Group Between Between Between
3 and 1 and 2 and
Up to 12 2 5 Over
3 months months years years 5 years
At 31st March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
========================== ========== ======== ======== ======== =========
Trade and other 563 - - - -
payables
Contingent consideration - - 435 - -
Loans and borrowings 28 188 91 - -
========================== ========== ======== ======== ======== =========
591 188 526 - -
========================== ========== ======== ======== ======== =========
Group Between Between Between
3 and 1 and 2 and
Up to 12 2 5 Over
3 months months years years 5 years
At 31st March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2017
========================== ========== ======== ======== ======== =========
Trade and other 1,409 - - - -
payables
Contingent consideration - - 690 - -
Loans and borrowings 56 167 136 48 -
========================== ========== ======== ======== ======== =========
1,465 167 826 48 -
========================== ========== ======== ======== ======== =========
Company Between Between Between
3 and 1 and 2 and
Up to 12 2 5 Over
3 months months years years 5 years
At 31st March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2016
========================== ========== ======== ======== ======== =========
Trade and other 71 - - - -
payables
Contingent consideration - - 435 - -
Loans and borrowings - - - - -
========================== ========== ======== ======== ======== =========
71 - 435 - -
========================== ========== ======== ======== ======== =========
Company Between Between Between
3 and 1 and 2 and
Up to 12 2 5 Over
3 months months years years 5 years
At 31st March GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2017
========================== ========== ======== ======== ======== =========
Trade and other 134 - - - -
payables
Contingent consideration - - 690 - -
Loans and borrowings - - - - -
========================== ========== ======== ======== ======== =========
134 - 690 - -
========================== ========== ======== ======== ======== =========
Interest rate risk
The Group seeks to minimise exposure to interest rate risk by
borrowing at fixed interest rates.
Credit risk
The Group generally gives 30 day credit terms on its continuing
business and provides against doubtful debts only when
recoverability is considered to be at risk. For cash and cash
equivalents, the Group only uses recognised banks with high credit
ratings.
Capital Disclosures
The Group monitors "adjusted capital" which comprises all
components of equity (i.e. share capital, share premium and
retained earnings).
The Group's objective when maintaining capital are:
-- to safeguard the entity's ability to continue as a going
concern, so that it can provide returns for shareholders in future
periods and benefits for other stakeholders, and
-- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The Group sets the amount of capital it requires in proportion
to risk. The Group manages its capital structure and makes
adjustments to it in the light of changes in economic conditions
and the risk characteristics of the underlying assets.
4 Segmental analysis
The chief operating decision maker for the Group is the Board of
Directors. The Group reports in three segments:
-- SME Mass Market - this segment provides a range of VPS,
shared hosting, email and domain registration services to
individuals and SME's. This business was divested during the
year.
-- Managed Services - this segment provides all forms of managed
services to customers. This segment was created on the acquisition
of Netplan in November 2013 and has been further expanded with the
acquisition of Q4Ex Ltd and System Professional Ltd. This segment
was previously referred to as Managed Hosting..
-- Value Added Resale (VAR) of products/services - this segment
provides all forms of VAR sales where the business is acting as a
reseller. This segment was created following the acquisition of
System Professional Ltd
Information regarding the operation of the reportable segments
is included below. The performance of each operating segment is
based on revenue and earnings before interest, tax, depreciation
and amortisation (EBITDA) before any allocation of Group overheads,
share based payments, fair value adjustments or acquisition costs,
as the Board believe this is the best measure for performance. The
Groups Adjusted EBITDA has been calculated after deducting Group
overheads which include the cost of the Board, Group marketing,
legal and professional fees, share based payments, fair value
adjustments and acquisition costs.
Assets and liabilities are not reviewed on a segmental basis.
All segments are continuing operations. The accounting policies of
the operating segments are the same as those described in the
summary of significant accounting policies. Transactions between
segments are accounted for using an arm's length commercial
basis.
2017 2017 2016 2016
Revenue by operating GBP'000 % GBP'000 %
segment
====================== ======== ====== ================== ======
SME Mass Market
(discontinued) 700 9% 2,249 47%
Managed Services 5,400 69% 2,515 53%
Value added resale
(VAR) 1,765 22% - -
7,865 100% 4,764 100%
====================== ======== ====== ================== ======
No individual customer accounts for more than
10% of the Group's revenue.
The Group operates out of the UK and sells services
to the following geographical locations.
2017 2017 2016 2016
GBP'000 % GBP'000 %
====================== ======== ====== ================== ======
UK 7,267 92% 3,792 80%
Rest of World 598 8% 972 20%
7,865 100% 4,764 100%
====================== ======== ====== ================== ======
2017 2016
EBITDA EBITDA
before before
acquisition acquisition
costs Profit costs Profit
and share (loss) and share (loss)
based Depreciation before based Depreciation before
payments and amortisation tax payments and amortisation tax)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= ============= ================== ======== ============= ================== ========
SME Mass
Market
- discontinued 193 (45) 148 558 (164) 394
Managed
Services
Value
Added 905 (635) 270
Resale
(VAR) 468 - 468 - - -
================= ============= ================== ======== ============= ================== ========
1,566 (680) 886 1,300 (599) 701
Group
overheads (737) (15) (771) (635) (12) (646)
----------------- ------------- ------------------ -------- ------------- ------------------ --------
Acquisition
costs - - (804) - - (34)
----------------- ------------- ------------------ -------- ------------- ------------------ --------
Share
based
payments - - - - - 8
----------------- ------------- ------------------ -------- ------------- ------------------ --------
Fair value
adjustment - - (300) - - 270
----------------- ------------- ------------------ -------- ------------- ------------------ --------
Group
interest - - (27) - - (51)
Profit
on sale
of SME - - 1,336
================= ============= ================== ======== ============= ================== ========
829 (695) 320 666 (611) 248
================= ============= ================== ======== ============= ================== ========
5 Operating loss
2017 2016
GBP'000 GBP'000
=========== ========================= ======== ========
Operating loss is after charging
the following:
Auditor's remuneration:
Group: Audit 36 31
Taxation - compliance 4 4
Corporate finance 75 -
Other advisory 1 1
Company: Audit 4 4
Depreciation of tangible fixed
assets:
Owned 189 134
Held under finance leases 135 107
Amortisation of Intangible assets 326 205
Share based payments - (8)
Rentals payable under operating
leases 89 81
Acquisition and integration costs 791 34
======================================= ======== ========
6 Finance expense
2017 2016
GBP'000 GBP'000
==================================== =============== ========
Interest payable on finance leases 27 32
Interest payable on loan notes - 12
27 44
==================================== =============== ========
7 Staff numbers and costs
The average number of full time persons employed by the Group, including executive Directors
during the year was:
==================================================================================================
2017 2016
======================================================================= ============ ===========
Research and Development 6 4
Technical Support 37 20
Sales and Marketing 5 1
Executive and Administration 8 6
======================================================================= ============ ===========
56 31
======================================================================= ============ ===========
The aggregate payroll costs including executive Directors but excluding Non-Executive Director
service fees were as follows:
====================================================================================================
2017 2016
GBP'000 GBP'000
============================================================= ================== =================
Wages and salaries 3,278 1,387
Social security costs 289 156
Benefits in kind 24 6
Pension benefits accrued 31 23
Share based payment credit - (8)
============================================================= ================== =================
3,622 1,564
============================================================= ================== =================
Total staff costs for the company are GBP339,599 (2016:
GBP328,376). Average staff numbers for the year for the company are
5.
Directors and Key Management Personnel
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group, they are also the Directors of the Company
listed on page13.
2017 2016
GBP'000 GBP'000
============================= ======== ========
Fees and salaries 395 287
Social security costs 27 156
Benefits in kind 3 3
Pension 12 23
Share based payment expense - 8
============================= ======== ========
437 290
============================= ======== ========
The emoluments of the highest paid director Julie Joyce were
GBP126,000 (2016: Christopher Evans GBP96,000).
The Group does not operate a defined benefits pension scheme and
executive Directors who are entitled to receive pension
contributions may nominate a defined contribution scheme into which
the Company makes pension contributions.
The fees relating to Non-Executive Directors are in some cases
payable to third parties in connection with the provision of their
services.
8 Acquisition and restructuring costs
2017 2016
GBP'000 GBP'000
================================== ============= =============
Professional fees on acquisition
of System Professional Ltd 414 4
Professional fees on aborted
transaction 38 30
Integration and restructuring 339 -
of continuing business*
791 34
================================== ============= =============
*Integration and restructuring costs relate to closing and
relocating offices/teams, streamlining operations and establishing
single front and back office IT platforms/systems. This includes
costs of GBP161k in relation to the use of internal management and
technical staff resources to deliver the changes.
9 Share based payments and warrants
The Company has granted a number of EMI options. The Directors
have the discretion to grant options to subscribe for ordinary
shares up to a maximum of 10 per cent of the Company's issued share
capital. Options can be granted to any employee of the Group. There
are no performance criteria associated with the options. The
weighted average exercise price is 50.97p per share.
Rights to options over ordinary shares of the Company are
summarised as follows:
No. of Ordinary Shares
Grant Exercise Exercise At 31 Granted Lapsed At 31
date period price March March
2016 2017
============ ========== ========= ========== ========== ============================ ==========
31 July
2007 to
30 July
24-Aug-07 2017 28p 89,286 - - 89,286
19 Dec
2012 to
18 Dec
19-Dec-12 2022 40p 2,175,000 - - 2,175,000
12 Dec
2013 to
11 Dec
12-Dec-13 2023 60p 625,000 - - 625,000
02 Mar
2015 to
01 Mar
02-Mar-15 2025 62.8p 100,000 - - 100,000
14 Aug
2015 to
13 Aug
14-Aug-15 2025 68p 1,000,000 - - 1,000,000
21 Feb
2016 to
20 Feb
2026
15 Aug
2018 to
21-Feb-16 14 Aug 55.2p 475,000 - - 475,000
2026
15-Aug-16 13 Sep 60.5p - 125,000 (125,000) -
2018 to
12 Sep
13-Sep-16 2026 60.5p - 5,000 - 5,000
============ ========== ========= ========== ========== ============================ ==========
4,464,286 130,000 (125,000) 4,469,286
======================= ========= ========== ========== ============================ ==========
The options have been valued, using
the Black Scholes method, using the
following assumptions:
Number of instruments
granted 89,286 4,025,000 1,900,000 300,000
Grant date 23-Mar-09 19-Dec-12 12-Dec-13 12-Feb-15
Expiry date 30-Jul-17 18-Dec-22 11-Dec-23 11-Feb-25
Contract term (years) 8.2 10 10 10
Exercise price 287p 40p 60p 62.8p
Share price at granting 200p 100p 85p 62p
Annual risk free
rate (%) 5% 0.5% 0.5% 0.5%
Annual expected dividend
yield (%) 0% 0% 0% 0%
Volatility (%) 50% 40% 90% 40%
Fair value per grant
instrument 18.4p 54.4p 74.46p 32p
================================ ========== ========== ==========
Number of instruments
granted 1,000,000 475,000 5,000
Grant date 14-Aug-15 21-Feb-16 13-Sep-16
Expiry date 13-Aug-25 20-Feb-26 12-Sep-26
Contract term (years) 10 10 10
Exercise price 68pp 55.2p 60.5p
Share price at granting 68p 70.8p 60.5p
Annual risk free
rate (%) 0.5% 0.5% 0.5%
Annual expected dividend
yield (%) 0% 0% 0%
Volatility (%) 90% 55% 55%
Fair value per grant
instrument 57.6p 47.6p 52.17p
The inputs to the share valuation model utilised
at the grant of option is shown in the tables
above. Management has determined volatility using
their knowledge of the business.
At 31 March 2017 there were 140,000 outstanding warrants to
subscribe for the ordinary share capital of the Company as
follows:
No. of Warrants and Exercise
price
===============================
Grant date Expiry Date 200p Total
============ ============= =============== ==============
09.01.12 08.01.22 140,000 140,000
============ ============= =============== ==============
The fair value of the convertible loan warrants has been
calculated at 0.36p based on the following assumptions - share
price at granting 50p, annual risk free rate 0.5%, and volatility
20%. No provision has been made for the convertible loan note
warrants in shared based payments.
10 Acquisitions
There has been one acquisition during the period. The Board
strategically expect acquisitions to be a common component of
growth in the future.
Acquisitions made during the year to 31 March 2017 were:
System Professional Ltd
The Group acquired 100% of the share capital of System
Professional Ltd (Sys-Pro) on 4 July 2016. Sys-Pro provides managed
services, cloud hosting, value added resale services, and IT
consultancy support.
During the year to 31 March 2017 the Group incurred GBP414,000
of costs in relation to this acquisition. These costs are included
in administrative expenses in the Group's consolidated statement of
comprehensive income for the year ended 31 March 2017.
The amount of identifiable net assets assumed at the acquisition
date is shown below:
Fair Values
Recognised amounts of net assets GBP'000
acquired and liabilities assumed
=================================== =========================
Cash and cash equivalents 289
Trade and other receivables 589
Property, plant and equipment 96
Stock and work in progress 69
Intangible assets 948
Trade and other payables (579)
Current income tax liability (383)
Deferred tax liability (203)
=================================== =========================
Identifiable net assets 826
Goodwill 3,844
=================================== =========================
Total consideration 4,670
=================================== =========================
Satisfied by:
Cash consideration - paid on
acquisition 3,464
Consideration - new ordinary
shares issued at 60p per share 585
Contingent consideration 621
=================================== =========================
Total consideration 4,670
=================================== =========================
The fair value of acquired customer relationships intangible
asset has been estimated using a discounted cashflow method, based
on the estimated level of profit to be generated from them. A post
tax discount rate of 19% was used in the valuation. Customer
relationships are being amortised over an estimated useful life of
5 years. 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.
Since the acquisition date to 31 March 2017, System Professional
Limited has contributed GBP4,058,000 to Group revenue and
GBP159,000 to Group EBITDA. Had the acquisition taken place on 1
April 2016, the contribution to Group revenue would have been
GBP5,208,639 and GBP911,283 to Group EBITDA.
11 Earnings per share
2017 2016
Profit for the financial GBP378,000 GBP248,000
year attributable to shareholders
Weighted number of equity
shares used in basic EPS 19,805,397 12,076,486
Weighted number of equity
shares used in diluted EPS 20,164,861 12,076,486
Basic earnings (loss) per GBP0.0190 GBP0.0205
share
Diluted loss per share GBP0.0187 GBP0.0205
==================================== =========== ===========
Basic earnings per share is calculated by dividing the earnings
attributable to equity shareholders by the weighted average number
of ordinary shares in issue during the year, excluding treasury
shares which are treated as cancelled.
For diluted earnings per share, the weighted average number of
ordinary shares in issue during the year is adjusted to include the
weighted average number of ordinary shares that would be issued on
the conversion of all the dilutive potential ordinary shares (from
share options) into ordinary shares.
12 Taxation
2017 2016
GBP'000 GBP'000
====================================== ======== ========
Current tax charge 65 31
====================================== ======== ========
Deferred tax
Temporary differences (123) (85)
====================================== ======== ========
Total tax credit (58) (54)
====================================== ======== ========
Factors affecting the tax charge
for the year
Profit (loss) on ordinary activities
before taxation 319 248
====================================== ======== ========
Profit (loss) on ordinary activities
before taxation multiplied by the
Standard rate of UK corporation tax
of 20% (2016:20%) 65 34
Effects of:
Tax losses - (3)
Deferred tax movements (123) (85)
Total tax credit (58) (54)
====================================== ======== ========
The Group recognised deferred tax assets and liabilities as
follows:
2017 2016
GBP'000 GBP'000
======================================== ======== ========
Deferred tax on customer relationships (242) (267)
Capital allowances timing differences (123) 25
Deferred tax (liability) (365) (242)
======================================== ======== ========
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 2016 25 (267) (242)
Credited to statement of
comprehensive income (25) (98) (123)
--------------------------- ------------- --------------- --------
Balance at 31 March 2017 - (365) (365)
=========================== ============= =============== ========
13 Intangible assets
Development Software Customer Positive
Website
cost
Group Cost licences relationships goodwill Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ========= =================== =================== ================ ================ ================
Cost
At 1 April
2015 197 232 7 1,914 4,454 6,810
Additions - 54 - - 54
Acquired from - - - - -
acquisition
Disposals - - - - -
=============== ========= =================== =================== ================ ================ ================
At 31 March
2016 197 232 61 1,914 4,454 6,858
At 1 April
2016 197 232 61 1,914 4,454 6,661
Acquired from
acquisitions - - 948 3,844 4,792
Additions 11 11
Disposals (232) - (479) (678) (1,389)
=============== ========= =================== =================== ================ ================ ================
At 31 March
2017 197 - 72 2,383 7,620 10,075
Accumulated amortisation
and impairment
At 1 April
2015 169 232 1 354 - 587
On disposals - - - - -
Charge for the
year 11 - 7 301 - 308
=============== ========= =================== =================== ================ ================ ================
At 31 March
2016 180 232 8 655 - 895
At 1 April
2016 180 232 8 655 - 895
On disposals (232) - (479) - (711)
Charge for the
year 11 - 22 638 - 660
=============== ========= =================== =================== ================ ================ ================
At 31 March
2017 191 - 30 814 - 844
Net book value
At 31 March
2016 17 - 53 1,259 4,454 5,963
=============== ========= =================== =================== ================ ================ ================
At 31 March
2017 6 - 42 1,569 7,440 9,428
=============== ========= =================== =================== ================ ================ ================
The Company held no Intangible assets at 31 March 2017 or 31
March 2016.
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.
During the year, goodwill was reviewed for impairment in
accordance with IAS 36 "Impairment of Assets". No impairment
charges arose as a result of this review.
The recoverable amount is determined based on a discounted cash
flow basis and is allocated to individual cash generating units.
The calculation uses pre-tax cash flow projections based on
financial budgets approved by the Board covering a two year period.
Cash flows beyond the two year period are extrapolated using the
estimated growth rates stated below. The growth rates and margins
used to estimate future performance are based on past performance
and the experience of growth rates.
The carrying value of each CGU is as follows:
2017 2016
GBP'000 GBP'000
============================== ======== ========
SME Mass Market (divested in
year) - 620
Netplan 5,348 4,977
============================== ======== ========
System Professional 4,585 -
============================== ======== ========
9,932 5,597
============================== ======== ========
The assumptions used for the impairment reviews are as
follows
System Netplan
Professional
Discount rate 19% 19%
Growth rate year 2 to year 5 10% 10%
Terminal growth rate 5% 5%
Forecast period for which cashflows 2 years 2 years
are estimated
===================================== ============== ========
The Group had no contractual liability for development costs at
31(st) March 2017. As a result of the impairment testing carried
out on the basis of these estimates and assumptions, no impairment
provisions are required.
The recoverable amount for the Netplan and System Professional
businesses exceeds the carrying value of the total net assets by
GBP2.8m. A 1% increase in the discount rate would reduce the
recoverable amount by approximately GBP0.5m. A 4% reduction in the
growth rate would reduce the recoverable amount by approximately
GBP0.27m."
14 Property Plant and Equipment
Furniture
and
Group equipment Total
GBP,000 GBP,000
========================== ========== ========
Cost
At 1 April 2015 1,341 1,341
Additions 161 161
Acquisition of - -
subsidiary
Disposals (11) (11)
========================== ========== ========
At 31 March 2016 1,491 1,491
At 1 April 2016 1,491 1,491
Additions 571 571
Acquisition of
subsidiary 96 96
Disposals (737) (737)
========================== ========== ========
At 31 March 2017 1,421 1,421
Accumulated depreciation
At 1 April 2015 749 749
Charge for the
year 294 294
On disposal (2) (2)
========================== ========== ========
At 31 March 2016 1,041 1,041
========== ========
At 1 April 2016 1,041 1,041
Charge for the
year 337 337
On disposal (624) (624)
========================== ========== ========
At 31 March 2017 754 754
Net book value
At 31 March 2015 592 592
========================== ========== ========
At 31 March 2016 450 450
========================== ========== ========
At 31 March 2017 666 666
========================== ========== ========
Included in the net book value of GBP666,000 (2016: GBP450,000)
are assets held under finance leases with a NBV of GBP340,291
(2016: GBP151,000).
The depreciation for the year on these assets was GBP135,000
(2016 GBP77,000).
Furniture
and
Company equipment Total
GBP'000 GBP'000
========================== ========== ========
Cost
At 1 April 2015 3 3
Additions 42 42
Disposals - -
At 31 March 2016 45 45
At 1 April 2016 45 45
Additions 36 36
Disposals - -
At 31 March 2017 81 81
Accumulated depreciation
At 1 April 2015
On disposal - -
Charge for the year 12 12
========================== ========== ========
At 31 March 2016 12 12
At 1 April 2016 12 12
On disposal - -
Charge for the year 13 13
========================== ========== ========
At 31 March 2017 25 25
Net book value
At 31 March 2015 3 3
========================== ========== ========
At 31 March 2016 33 33
========================== ========== ========
At 31 March 2017 56 56
========================== ========== ========
The Company held no finance leases at 31 March 2017 or 31 March
2016.
15 Investments
Company Company
2017 2016
GBP'000 GBP'000
====================================== ========== =========
Investment in Subsidiaries
At 1 April 2016 6,576 6,576
Additions 4,952 -
Impairment following disposals (1,099) -
====================================== ========== =========
Cost 31 March 2017 10,429 6,576
====================================== ========== =========
The Company's subsidiary undertakings all of
which are wholly owned (unless otherwise stated)
and included in the consolidated accounts are:
Undertaking Registration Principal activity
====================== ============== =====================
System Professional England Managed Services
Ltd
Netplan Internet England Managed Services
Solutions Limited
Netplan LLC* USA Managed Services
SysGroup (DIS) Ltd England Managed Services
SysGroup (NH) Ltd England Managed Services
Project Clover Ltd England Managed Services
SysGroup (EH) Ltd England Managed Services
====================== ============== =====================
*Netplan LLC is a wholly owned subsidiary of Netplan Internet
Solutions Ltd
The recoverable amounts have been determined from discounted
cash flow calculations based on cash flow projections from approved
budgets covering a one-year period to 31 March 2018. The major
assumptions can be found in note 13. The impairment charge above
relates to the disposal of the SME segment during the period.
SysGroup (NH) Limited (Company Number 03963376), SysGroup (EH)
Limited (Company Number 05814619), SysGroup (DIS) Ltd (Company
number 05743110), Project Clover Ltd (Company number 08995906) are
taking advantage of the exemption from audit under section 479a of
the Companies Act 2006 following the guarantee provided by SysGroup
plc under section 479C of the companies Act 2006.
The registered office of all subsidiaries is the same as the
registered office of the parent company..
16 Trade and other receivables
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
============================ ======== ======== ======== ========
Amounts due within
one year:
Trade debtors 902 - 306 -
Other debtors - - - -
Amounts owed by subsidiary - - - -
undertakings
Prepayments and accrued
income 409 100 292 34
============================ ======== ======== ======== ========
Total Debtors 1,311 100 598 34
============================ ======== ======== ======== ========
The Group is not exposed to any significant credit risk from
trade receivables. There are no unimpaired trade receivables which
are past due at 31 March 2017
17 Trade and other payables
Group Company Group Company
2017 2017 2016 2016
Amounts falling due GBP'000 GBP'000 GBP'000 GBP'000
within one year
================================= ============== ======== ============== ========
Trade payables 590 36 367 35
Corporation tax 106 - 62 -
Other payables - - - -
Accruals 653 98 134 36
================================= ============== ======== ============== ========
Total financial liabilities,
excluding loans and borrowings
measured at amortised
cost 1,349 134 563 71
Other taxes and social
security costs 322 17 155 -
Deferred Income 465 - 707 -
================================= ============== ======== ============== ========
2,136 151 1,425 71
================================= ============== ======== ============== ========
Group Company Group Company
2017 2017 2016 2016
Contingent consideration GBP'000 GBP'000 GBP'000 GBP'000
due on acquisitions
========================== ======== ======== ======== ========
Q4Ex Ltd - - 435 435
System Professional 690 690 - -
========================== ======== ======== ======== ========
The fair value of contingent consideration was based on the
present value of cash flows and the market value of the shares to
be issued.
To the extent trade payables and other payables are not carried
at fair value in the consolidated balance sheet, book value
approximates to fair value at 31 March 2017 and 31 March 2016.
Maturity of the financial liabilities, excluding loans and
borrowings, classified as financial liabilities measured at
amortised cost is shown in note 3.
18 Loans and borrowings
The book value and fair value of loans and borrowings are as
follows:
Group Company Group Company
2017 2017 2016 2016
Non-Current GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== ======== ======== ========
Finance lease creditor 184 - 91 -
======================== ======== ======== ======== ========
184 - 91 -
======================== ======== ======== ======== ========
2017 2017 2016 2016
Current GBP'000 GBP'000 GBP'000 GBP'000
======================== ======== ======== ======== ========
Convertible loan - - - -
Other loan - - 105 -
Finance lease creditor 223 - 111 -
======================== ======== ======== ======== ========
223 - 216 -
======================== ======== ======== ======== ========
19 Leases
Group finance leases
Future lease payments Minimum Present
are due as follows: lease payments Interest value
2016 2016 2016
GBP'000 GBP'000 GBP'000
========================= ====================== ========= =============
Not later than one year 126 15 111
Later than one year and
not later than 5 years 97 6 91
Later than 5 years - - -
223 21 202
Minimum lease payments Interest Present value
2017 2017 2017
GBP'000 GBP'000 GBP'000
========================= ====================== ========= =============
Not later than one year 223 12 211
Later than one year and
not later than 5 years 184 5 179
Later than 5 years - - -
407 17 390
The Company has no finance leases.
Group operating leases
The total future value of minimum lease payments is due as follows:
Leasehold Property Other Leasehold Property Other
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Within one year 109 - 60 -
Within two to five years 364 - 131 -
After five years 13 - 35 -
486 - 226 -
Company operating leases
Leasehold Property Other Leasehold Property Other
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Within one year 13 - 13 -
Within two to five years 52 - 65 -
After five years - - - -
65 - 78 -
20 Contingent liabilities
There are no contingent liabilities at the year-end for either
the group or company.
21 Related party transactions
Details of Directors' remuneration are given in the Directors' Remuneration Report. Other
related party transactions are as follows:
Transaction value Balance due to Related Party
2017 2016 2017 2016
Related party relationship Type of Transaction GBP'000 GBP'000 GBP'000 GBP'000
Use of personal credit cards to
Directors pay online suppliers and - 450 - 0
Companies in which directors
or their immediate family
have a significant / Provision of management
controlling interest services and website design 13 58 - 1
22 SHARE CAPITAL AND CAPITAL RESTRUCTURING
Group Company Group Company
2017 2017 2016 2016
GBP'000 GBP'000 GBP'000 GBP'000
Allotted, called up and fully paid
At start of year 510,379,335 Ordinary shares of 0.5p each,
consolidated to 12,759,484 shares
of 20pence and later reduced by capital reduction to 1p (1) 2,552 2,552 2,399 2,399
Issued during the year 10,344,414 Ordinary shares of 20p 2,068 2,068 153 153
At end of year 23,103,898 Ordinary shares of 1p 4,620 4,620 2,552 2,552
(1) Following a 1 for 40 share consolidation each block of 40
shares with a nominal value of 0.5p share became one single share
of 20 pence, then following a capital reduction became 1p (one
pence), this is further set-out in the note below.
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 GBP9,583k 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.
When appropriate a progressive dividend policy will be
adopted.
23. DISCONTINUED OPERATIONS
Discontinued operations relate to the SME Mass Market business.
The trade and assets of this business were disposed of on 22 July
2016 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:
Year Year
to to
31 Mar 2017 31 Mar 2016
Sales 700 2,249
Costs and expenses (566) (1,887)
Profit on sale 1,336 -
Profit before tax 1,470 362
Taxation 38 13
Profit attributable to the shareholders of the company 1,508 375
Profit on disposal is calculated as the fair value of
consideration received less the fair value of assets and
liabilities disposed of.
Earnings per share for discontinued activities is GBP0.076
24. Post Balance Sheet Event
On 06 June 2017, the Group entered into a Deed of Variation with
the Vendors of System Professional Ltd. In consideration of payment
by SysGroup plc of GBP150,000 and various legal waivers to the
Vendors of System Professional Ltd the earn-out was considered
satisfied and the Group released from various "Sellers Protections"
allowing for the business to be integrated at a faster rate and
allowed for the exit of certain of the vendor management team and
for other changes to be made within the business.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BQLLBDQFZBBQ
(END) Dow Jones Newswires
June 07, 2017 02:00 ET (06:00 GMT)
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