TIDMSYS
RNS Number : 4442U
SysGroup PLC
25 November 2019
25 November 2019
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Half yearly results for the six months ended 30 September
2019
SysGroup PLC (AIM:SYS), the multi award-winning Managed IT
Services and Cloud Hosting provider, is pleased to announce its
unaudited half year results for the six months ended 30 September
2019 (H1 2020).
Financial highlights
-- Revenue increased 60.0% to GBP9.3m (H1 2019: GBP5.8m)
-- Recurring Managed IT Services represented 79.7% of total revenue (H1 2019: 77.8%)
-- Adjusted EBITDA(1) increased 111.2% to GBP1.18m (H1 2019: GBP0.56m)
-- Adjusted profit before tax(2) of GBP0.65m (H1 2019: GBP0.26m)
-- Statutory loss before tax of GBP0.37m (H1 2019: loss of GBP0.35m)
-- Adjusted basic EPS(3) of 1.1p (H1 2019: 1.1p)
-- Basic loss per share of 0.9p (H1 2019: loss per share 1.4p)
-- Adjusted cash generated from operations(4) increased 106% to GBP1.1m (H1 2019: GBP0.5m)
-- Cash of GBP2.65m at 30 September 2019 (30 September 2018: GBP1.15m)
-- Net (debt)(5) at 30 September 2019 of GBP(0.72)m (30 September 2018: GBP(0.84)m)
Operational highlights
-- Acquisition of Hub Network Services Limited ("HNS") for GBP1.45m
-- Integration of HNS completed in under three months
-- Introduction of Customer Engagement plan demonstrating >97% satisfaction
-- Planned closure of legacy Coventry office and datacentre complete
Post-period highlights
-- Martin Audcent awarded North West Finance Director of the year 2019
Adam Binks, Chief Executive Officer, commented:
"I am pleased to report that SysGroup continues to deliver
strongly against its stated strategy, with recurring revenues now
representing almost 80% of our total income compared to 68% when I
stepped into the CEO role in April 2018. The acquisition of HNS has
supplemented the acquisition of Certus which we completed in H2
2018 and was our largest acquisition to date. The successful
execution of these transactions demonstrates our capability to
identify and attract good businesses, together with the capability
to successfully integrate them as we build out our operational
infrastructure to scale up the business.
Supported by a team of more than 130 individuals, SysGroup is
moving forward at pace and is taking its place in the market as a
serious contender. I thank each and every one of the team that
strive each day to help make SysGroup one of the leading MSPs in
the UK and give me the confidence to report that the Company
continues to trade in line with management's expectations."
Notes
1. Adjusted EBITDA is earnings before interest, taxation,
depreciation, amortisation of intangible assets, exceptional items
and share based payments.
2. Adjusted profit before tax is profit before tax after adding
back amortisation of intangible assets, exceptional items and share
based payments.
3. Adjusted basic EPS is profit after tax after adding back
amortisation of intangible assets, exceptional items, share based
payments and associated tax.
4. Adjusted cash generated from operations represents
operational cashflows adjusted to exclude cashflows for exceptional
items
5. Net (debt) represents cash balances less bank loans, lease
liabilities and contingent consideration.
For further information please
contact:
Tel: 0151 559
SysGroup Plc 1777
Adam Binks, Chief Executive
Officer
Martin Audcent, Chief Financial
Officer
Shore Capital (Nomad and Broker) Tel: 020 7408
Corporate Finance: Edward Mansfield 4090
/ Daniel Bush
Corporate Broking: Heath Snyder
/ Fiona Conroy
Alma PR (Financial PR) Tel: 0203 405
Josh Royston / Helena Bogle 0208
About SysGroup
SysGroup is a leading provider of Managed IT Services, Cloud
Hosting, and expert IT Consultancy. The Group delivers solutions
that enable clients to understand and benefit from industry leading
technologies and advanced hosting capabilities. SysGroup focuses on
a customer's strategic and operational requirements - enabling
clients to free up resources, grow their core business and avoid
the distractions and complexity of delivering IT services.
The Group has offices in Liverpool, London, Newport, Bristol and
Telford.
For more information, visit http://www.sysgroupplc.com
Introduction
The Company has continued to make significant progress during
the first six months of the year in a difficult economic
environment, reflecting the success of our focus on building strong
levels of recurring revenue. Revenue grew by 60% over the first
half of last year, to GBP9.3m, with recurring revenue of 79.7%
compared to 77.8% for the first half of last year. The revenue
reflects the first full six-month contribution of Certus IT Limited
("Certus") which we acquired in February 2019, and a part period
contribution from Hub Network Services Limited ("HNS"), which we
acquired in June 2019.
The market environment for Value Added Reseller ("VAR") services
has been impacted due to ongoing macroeconomic uncertainty, with
many businesses choosing to delay major asset refreshes and
purchasing decisions until the political backdrop is clearer. While
this has impacted the rate of our revenue growth we remain
confident in meeting our expectations. In the six months under
review, the Company delivered adjusted EBITDA of GBP1.18m (H1 2019:
GBP0.56m) with strong operating cash generation. This has been
achieved through a clear focus on our cost base, synergies from
prior acquisitions and prioritising investment into areas most
suitable for the current environment, providing a platform for the
continued sustainable growth of the Group for the future. The VAR
business remains well placed to capitalise on this investment once
conditions normalise.
Both Certus and HNS have integrated very well which is a result
of the structures previously put in place to enable the Company to
scale effectively and seamlessly as it continues to seek attractive
acquisition opportunities. Further operational and structural
improvements have been made during the course of the first six
months in preparation for the full integration of Certus once the
earn-out period is completed in February 2020. Certus and HNS both
continue to perform well and in line with our expectations and the
feedback from customers and staff alike has been very positive.
Strategy
The Group's strategy remains consistent: to expand its position
as a trusted provider of Managed IT Services to clients in the UK.
The Board believes that a business focused on the provision of
Managed IT Services offers the highest growth opportunity and the
potential for increased margins and longer-term contracts, thereby
providing greater revenue visibility. In pursuit of this strategy,
the Group has positioned itself as an extension of a customer's
existing IT department, with an emphasis on consultative-led sales
to guide customers through the complexities and developments in the
forever changing world of IT. The process is supplemented by
customer service and support. The Group invests in R&D to
ensure its clients take advantage of the latest and best solutions
available to them, with a vendor/cloud agnostic approach.
The Company's route to execute this strategy is through a
combination of organic and acquisitive growth whilst ensuring we
create cross-selling opportunities across our acquired customer
bases.
Results and trading
During the period, the Group has delivered revenues of GBP9.3m
(H1 2019: GBP5.8m) and Adjusted EBITDA of GBP1.18m (H1 2019:
GBP0.56m). Gross profit increased in the period to GBP5.5m (H1
2019: GBP3.6m), representing a gross margin of 59% (H1 2019: 62%).
As expected, gross margin has shifted slightly lower compared to H1
2019 following the acquisitions of Certus and HNS.
Adjusted operating expenses have increased to GBP4.3m (H1 2019:
GBP3.0m) which reflects the increased size of the Group following
the acquisitions. Management have maintained good control of the
cost base with operating expenses as a percentage of revenue having
reduced by 6% to 46% in H1 2020 (H1 2019: 52%). We expect this
improvement in operating cost efficiency to be maintained
throughout the course of H2 2020.
Exceptional items of GBP0.3m (H1 2019: GBP0.2m) relate to
professional fees for the acquisition of HNS, property exit costs
for the planned closure of the Coventry office, and integration and
restructuring costs following the acquisitions. The increase in
amortisation is due to the commencement of amortisation charges for
the Certus and HNS acquired intangible assets.
Adjusted basic earnings per share for H1 2020 was 1.1 pence (H1
2019: 1.1 pence). Basic loss per share for H1 2020 was 0.9 pence
(H1 2019: loss per share of 1.4 pence).
Gross cash at 30 September 2019 was GBP2.65m (30 September 2018:
GBP1.15m). The Group continues to manage working capital
effectively with a strong operating cash conversion of 96% in H1
2020 (H1 2019: 99%) which is at the high end of the Board's target
range. During H1 2020 cash has been invested in capex of GBP0.2m,
one-off acquisition and integration costs of GBP0.3m and
consideration paid for acquisitions of GBP1.7m. Net debt at 30
September 2019 was GBP0.72m (H1 2019: GBP0.84m) which includes the
full fair value of contingent consideration payable for the
acquisition of Certus which will be due for payment in Q1 of the
next financial year, subject to the financial performance of
Certus. During H2 2020 we will be investing in the core operational
business systems for the Group and expect to capitalise the
development costs associated with the design, build and
implementation. The benefits afforded to the Group by this project
will allow for further seamless scalability and a single platform
from which our teams can operate.
The Group has adopted IFRS 16 - Leases for the financial year
ending 31 March 2020 and has chosen to use the modified
retrospective approach to adoption which means there are no
restatements to the prior year figures. Within the income
statement, operating lease charges, which previously sat in
administrative expenses, have been replaced by depreciation and
interest expenses. The adoption of IFRS 16 resulted in a right to
use asset of GBP0.51m, with a corresponding liability of GBP0.60m,
being recognised as at 1 April 2019. Within the consolidated income
statement, the operating lease charge has been replaced by
depreciation and interest expenses. This has resulted in a decrease
in operating expenses and increase in finance costs. Further
information is disclosed in the notes to the half yearly
report.
Market Opportunity
The opportunity for SysGroup is, we believe, both significant
and growing driven by both commercial and regulatory forces, most
notably since the implementation of GDPR in May 2018 which has led
to increased levels of demand from both prospects and customers for
secure solutions. Security, Governance and Compliance remain three
of the key areas of focus for organisations looking to consume
managed IT services. With increasing regulation and external
threats, businesses want to minimise risk as they rely more and
more on IT to deliver their own products and services. Further,
they want to understand where liability and risk share lies in the
case of breaches and, at the same time, make their chosen solution
as cost effective as possible. The volume and breadth of solutions,
particularly with migration to the cloud, means that IT departments
are struggling to understand what best suits their needs,
exacerbated by the fact that the pace of technological change
continues to be so swift.
SysGroup is ideally placed to benefit from these dynamics
through its consultative approach to fulfilling clients' needs. Our
staff are continually focused on the latest product developments
and are able to design and present technology agnostic solutions.
IT is no longer viewed merely as a burden cost centre but as a
business critical enabler and with the shortage of non-industry
skilled, relevant staff, an outsourced, consultative approach such
as ours is proving an increasingly attractive proposition.
Operations
In sales and marketing, integration of sales teams across the
acquired businesses of Certus and HNS with existing sales teams has
been effective. As a result, all sales capabilities are aligned
around the Group's strategy, with development training to focus on
new business generation and opportunity creation across the board.
Rebranding of the acquired businesses will take place in the second
half of the year to reflect our operating model of a single brand
across the Group. We have also launched a customer engagement
strategy to better identify customer motivations and preferences to
ensure we maintain our excellent customer retention rates. It's
particularly pleasing to note that customer satisfaction in the six
months under review was in excess of 97%.
The Group's Coventry data centre was decommissioned towards the
end of the period with customers migrated to other facilities
within our existing footprint, which was enhanced following the
acquisition of Certus, providing further cost synergies as we move
forward into the second half of the financial year.
Following the acquisition of the HNS business, we have commenced
a project to consolidate all of our legacy network assets onto a
single platform that will interconnect at each of our key
datacentre locations, providing further scalability and redundancy
to our hyper-scale hosting platforms. The project is expected to
last for a period of 12 months and will provide future cost
synergies once completed.
Outlook
We are continuing to build a very robust and capable business as
a result of a growing, talented and dedicated team, all focused on
delivering outstanding customer outcomes. Our geographical reach
has expanded, along with our suite of products and services and we
are increasingly well placed to meet the complex needs of our
customers.
The operational and structural improvements that we continue to
make will further benefit the business as it continues to scale and
we have a proven ability to identify, attract and integrate good
businesses to add to our platform, alongside the appetite to do so.
I am pleased to report that the Group continues to perform in line
with our expectations as we continue to execute on our growth
strategy.
Adam Binks
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
Notes GBP'000 GBP'000 GBP'000
============================================ ====== ============ ============ ==========
Revenue 2 9,260 5,786 12,773
============================================ ====== ============ ============ ==========
Cost of sales (3,788) (2,214) (4,994)
Gross profit 2 5,472 3,572 7,779
Operating expenses before depreciation,
amortisation, acquisition and integration
costs and share based payments (4,291) (3,013) (6,366)
====== ============ ============
Adjusted EBITDA 1,181 559 1,413
============================================ ====== ============ ============ ==========
Depreciation (427) (243) (494)
Amortisation of intangibles (636) (336) (723)
Exceptional items 4 (288) (236) (736)
Share based payments (95) (32) (119)
============================================ ====== ============ ============ ==========
Administrative expenses (5,737) (3,860) (8,438)
Operating loss (265) (288) (659)
============================================ ====== ============ ============ ==========
Finance costs (103) (60) (167)
Loss before taxation (368) (348) (826)
Taxation (59) 34 104
============================================ ====== ============ ============ ==========
Total comprehensive loss attributable
to the equity holders of the company (427) (314) (722)
============================================ ====== ============ ============ ==========
Basic earnings per share (pence) 3 (0.9p) (1.4p) (2.8p)
Fully diluted earnings per share (pence) 3 (0.9p) (1.4p) (2.8p)
============================================ ====== ============ ============ ==========
The accompanying notes form an integral part of this
consolidated statement of comprehensive income.
All the results arise from continuing operations.
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2019
Unaudited Unaudited Audited
30-Sep-19 30-Sep-18 31-Mar-19
Notes GBP'000 GBP'000 GBP'000
============================================== ====== ========== ========== ==========
Assets
Non-current assets
Goodwill 15,578 9,727 15,508
Intangible assets 6,704 2,709 6,173
Plant, property and equipment 1,977 804 1,420
============================================== ====== ========== ========== ==========
24,259 13,240 23,101
============================================== ====== ========== ========== ==========
Current assets
Trade and other receivables 6 2,283 1,313 2,856
Cash and cash equivalents 2,647 1,154 3,376
============================================== ====== ========== ========== ==========
4,930 2,467 6,232
============================================== ====== ========== ========== ==========
Total Assets 29,189 15,707 29,333
============================================== ====== ========== ========== ==========
Equity and Liabilities
Equity attributable to the equity shareholders of the parent
============================================================================== ==========
Called up share capital 494 231 494
Share premium 9,080 - 9,080
Other reserve 2,226 2,042 2,129
Translation reserve 4 4 4
Retained earnings 7,856 8,778 8,370
============================================== ====== ========== ========== ==========
19,660 11,055 20,077
============================================== ====== ========== ========== ==========
Non-current liabilities
Lease liabilities 540 28 81
Contingent consideration due on acquisitions - - 1,000
Deferred taxation 1,288 594 1,120
Bank loan 1,284 1,607 1,397
============================================== ====== ========== ========== ==========
3,112 2,229 3,598
============================================== ====== ========== ========== ==========
Current liabilities
Trade and other payables 7 3,575 1,796 3,992
Deferred income 1,297 268 1,238
Contingent consideration due on acquisitions 1,000 - -
Bank loan 224 226 224
Lease liabilities 321 133 204
============================================== ====== ========== ========== ==========
6,417 2,423 5,658
============================================== ====== ========== ========== ==========
Total Equity and Liabilities 29,189 15,707 29,333
============================================== ====== ========== ========== ==========
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2019
Attributable to equity holders of the parent
Share Share Other Translation Retained Total
capital premium reserve reserve profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================ ========= ========= ========= ============ ========= ========
At 1 April 2018 231 - 2,010 4 9,092 11,337
Profit and total comprehensive
income for the period - - - - (314) (314)
Movement in share option
reserve - - 32 - - 32
================================ ========= ========= ========= ============ ========= ========
At 30 September 2018 231 - 2,042 4 8,778 11,055
Profit and total comprehensive
income for the period - - - - (408) (408)
Share options granted - - 87 - - 87
Issue of share capital
- fees - (657) - - - (657)
Issue of share capital
- placing 263 9,737 - - - 10,000
At 31 March 2019 494 9,080 2,129 4 8,370 20,077
Adjustment on adoption
of IFRS16 - - - - (87) (87)
Profit and total comprehensive
income for the period - - - - (427) (427)
Movement in share option
reserve - - 97 - - 97
================================ ========= ========= ========= ============ ========= ========
At 30 September 2019 494 9,080 2,226 4 7,856 19,660
================================ ========= ========= ========= ============ ========= ========
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Other reserve Amount reserved for share-based payments
to be released over the life of the instruments
and the equity element of convertible loans
and the amount subscribed for share capital
in excess of nominal value of acquisition
of another company
Retained earnings All accumulated profits and losses arising
net of distributions to shareholders
Share premium Amounts subscribed for share capital in
excess of required values
================== =========================================================
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited Audited
six months six months year to
to to 31 Mar 19
30 Sept 30 Sep 18
19
GBP'000 GBP'000 GBP'000
======================================== ================ ============ ===========
Cash flows used in operating
activities
Net loss after taxation (427) (314) (722)
Adjustments for:
Depreciation and amortisation 1,063 579 1,226
Finance costs 103 60 167
Share based payments 95 32 119
Taxation 59 (34) (104)
========================================= ================ ============ ===========
Operating cash flows before movement
in working capital 893 323 686
========================================= ================ ============ ===========
Decrease/(Increase) in trade
and other receivables 942 299 (188)
(Decrease)/Increase in trade
and other payables (902) (307) 275
========================================= ================ ============ ===========
Operating cashflows before interest
and tax 933 315 773
========================================= ================ ============ ===========
Interest paid (103) (60) (123)
Taxation refunded/ (paid) 21 12 (49)
========================================= ================ ============ ===========
Operational cashflows 851 267 601
========================================= ================ ============ ===========
Cash flows from investing activities
Payments to acquire property, plant
& equipment (180) (193) (296)
Acquisition of subsidiary companies (1,659) - (7,956)
Cash acquired with acquisitions 609 - 949
========================================= ================ ============ ===========
Net cash used in investing activities (1,230) (193) (7,303)
========================================= ================ ============ ===========
Cash flows from investing activities
======================================== ================ ============ ===========
Net proceeds from issue of ordinary
share capital - - 9,343
Repayment of loan facility including
fees (113) (125) (383)
Capital repayment of lease liabilities (237) (110) (197)
========================================= ================ ============ ===========
Net cash from financing activities (350) (235) 8,763
========================================= ================ ============ ===========
Cash flows from financing activities
======================================== ================ ============ ===========
Net (decrease)/increase in cash
and cash equivalents (729) (161) 2,061
========================================= ================ ============ ===========
Cash and cash equivalents at the
beginning of the period 3,376 1,315 1,315
========================================= ================ ============ ===========
Cash and cash equivalents at the
end of the period 2,647 1,154 3,376
========================================= ================ ============ ===========
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2019
1. ACCOUNTING POLICIES
The accounting policies used in the preparation of the
consolidated interim financial information for the six months ended
30 September 2019 are in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
("IFRS") as adopted by the European Union and are consistent with
those that will be adopted in the annual statutory financial
statements for the year ended 31 March 2020.
While the financial information included has been prepared in
accordance with the recognition and measurement criteria of IFRS,
as adopted by the European Union, these financial statements do not
contain sufficient information to comply with IFRSs. The accounting
policies applied by the Group in this financial information reflect
the adoption of IFRS 16 Leases which is effective as of 1 January
2019. The adoption of this standard has not resulted in a
restatement of the prior year figures.
Other than the adoption of IFRS 16 - Leases, the accounting
policies adopted in the interim financial statements are consistent
with those adopted in the financial statements for the year ended
31 March 2019.
IFRS 16 - Leases
IFRS16 has replaced IAS17 Leases and is effective on 1 January
2019. The Group has adopted IFRS 16 using the modified
retrospective basis with recognition of a transitional adjustment
on the date of initial application being 1 April 2019. IFRS 16
introduces a single lessee accounting model, where the Group now
recognises a lease liability and a right of use asset for all
leases. The group has no significant leasing activities acting as a
lessor. On adoption of IFRS16 the group recognised a right of use
asset in relation to the lease of office space.
IFRS16 provided for certain optional practical expedients,
including those in relation to the initial adoption of the
standard. The group applied the following practical expedients:
-- The group did not reassess any contracts not previously
identified as a lease under IAS17 or IFRIC4 prior to the transition
date of 1 April 2019.
-- A single discount rate was applied to a portfolio of leases
with reasonably similar characteristics
-- Applied the exemption not to recognise a right-of-use asset
and liability for leases with less than 12 months of lease term
remaining as at the date of initial application
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
Right of use assets have been calculated as if the standard had
been applied from the lease commencement date and initially
measured at the amount of the lease liability, reduced for any
lease incentives received, and increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the group is
contractually required to dismantle, remove or restore the leased
asset.
Within the income statement, operating lease charges, which
previously sat in administrative expenses, have been replaced by
depreciation and interest expenses. The adoption of IFRS 16
resulted in a right of use asset of GBP0.51m, with a corresponding
liability of GBP0.60m, being recognised as at 1 April 2019. Within
the consolidated income statement, the operating lease charge has
been replaced by depreciation and interest expense. This has
resulted in a GBP0.1m decrease in operating expenses and Adjusted
EBITDA, and a GBP0.1m increase in finance costs.
Exceptional items
The Group presents as exceptional items on the face of the
Statement of Comprehensive Income those material items of income
and expense which the Directors consider, because of their size or
nature and expected non-recurrence, merit separate presentation to
facilitate financial comparison with prior periods and to assess
trends in financial performance. Exceptional items are included in
Administration expenses in the Consolidated Statement of
Comprehensive Income but excluded from Adjusted EBITDA as
management believe they should be considered separately to gain an
understanding of the underlying profitability of the trading
businesses.
Going concern
The consolidated interim financial information has been prepared
on a going concern basis. The Directors have reviewed cash flow
forecasts for the Group, including sensitivity analysis on key
assumptions and the forecasts show that the Group expects to meet
its liabilities taking into account all risks and uncertainties. As
a result, the Directors formed a judgement that there is reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. For this reason,
the Directors consider that the adoption of the going concern basis
is appropriate.
2. SEGMENTAL REPORTING
The Chief Operating Decision Maker for the Group is the Board of
Directors. The Group reports in two segments: Managed IT Services -
this segment provides all forms of managed services to customers
and includes professional services; and Value Added Resale (VAR) -
this segment provides all forms of VAR sales where the business
sells products and licences from supplier partners.
The monthly management accounts reported to the Board of
Directors is reviewed at a consolidated level with the operating
segments representative of the business model for growth of
recurring contract income in Managed IT Services and VAR sales as a
complementary business activity. The Group's trading business is
not subject to seasonal fluctuations, but the timing of VAR sales
is subject to when customers elect to make asset refresh investment
decisions. The Board review the results of the operating segments
at the levels of revenue and gross profit since the Group's
management and operational structure operate as centralised Group
functions. Assets and liabilities are also not reviewed on a
segmental basis. All assets are within the UK other than a low
value of property, plant & equipment in the USA. All segments
are continuing operations and there are no transactions between
segments.
Unaudited Unaudited Audited
Six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================== ============ ============ ==========
Revenue
Managed IT Services 7,382 4,501 9,448
Value Added Resale (VAR) 1,878 1,285 3,325
=========================== ============ ============ ==========
9,260 5,786 12,773
========================== ============ ============ ==========
Gross Profit
Managed IT Services 5,073 3,285 6,959
Value Added Resale (VAR) 399 287 820
=========================== ============ ============ ==========
5,472 3,572 7,779
========================== ============ ============ ==========
There were no sales between the two business segments, and all
revenue is earned from external customers. The business segments'
gross profit is reconciled to profit before taxation as per the
consolidated income statement. The Group's overheads are managed
centrally by the Board and consequently there is no reconciliation
to profit before tax at a segmental level.
3. EARNINGS PER SHARE
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
======================================== ============ ============ =================
Loss for the financial period
attributable to shareholders (427) (314) (722)
Adjusted profit for the financial
period 562 251 809
Weighted number of equity shares
in issue 49,419,690 23,103,898 25,843,624
Adjusted basic earnings per share
(pence) 1.1p 1.1p 3.1p
Basic loss per share (pence) (0.9p) (1.4p) (2.8p)
Diluted loss per share (pence) (0.9p) (1.4p) (2.8p)
======================================== ============ ============ =================
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
======================================== ============ ============ =================
Loss after tax used for basic earnings
per share (427) (314) (722)
Amortisation of intangible assets 636 336 723
Exceptional items 288 236 736
Share based payments 95 32 119
Tax adjustments (30) (39) (47)
======================================== ============ ============ =================
Adjusted profit used for adjusted
earnings per share 562 251 809
======================================== ============ ============ =================
4. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Six months Six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
=============================== ============ ============ ==========
Integration and restructuring 204 170 182
Acquisition costs 84 66 554
=============================== ============ ============ ==========
288 236 736
=============================== ============ ============ ==========
The acquisition costs of GBP84,000 in H1 FY20 relate to
professional fees incurred for the acquisition of Hub Network
Services Limited in June 2019. Integration and restructuring costs
represent the costs incurred for integrating newly acquired
companies and for restructuring the internal business to manage the
requirements of a larger group.
5. ALTERNATIVE PERFORMANCE MEASURES
Reconciliation of Operating loss Unaudited Unaudited Audited
to Six months Six months year to
Adjusted EBITDA to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
================================== ============ ============ ===========
Operating loss (265) (288) (659)
Depreciation 427 243 494
Amortisation of intangibles 636 336 723
================================== ============ ============ ===========
EBITDA 798 291 558
================================== ============ ============ ===========
Exceptional items 288 236 736
Share based payments 95 32 119
================================== ============ ============ ===========
Adjusted EBITDA 1,181 559 1,413
================================== ============ ============ ===========
Reconciliation of Loss before Tax Unaudited Unaudited Audited
to Six months Six months year to
Adjusted Profit before Tax to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
=================================== ============ ============ ===========
Loss before tax (368) (348) (826)
Amortisation of intangibles 636 336 723
Exceptional items 288 236 736
Share based payments 95 32 119
=================================== ============ ============ ===========
Adjusted Profit before Tax 651 256 752
=================================== ============ ============ ===========
Cash conversion Unaudited Unaudited Audited
Six months Six months year to
to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
============================================ ============ ============ ===========
Operational cashflows 851 267 601
Adjustments:
Acquisition, integration and restructuring
cashflows 288 286 611
Cash generated from operations 1,139 553 1,212
============================================ ============ ============ ===========
Adjusted EBITDA 1,181 559 1,413
============================================ ============ ============ ===========
Cash conversion 96% 99% 86%
============================================ ============ ============ ===========
Unaudited Unaudited Audited
six months to six months year to
to
Net (debt)/cash 30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================== ==================== ============ =================
Cash balances 2,647 1,154 3,376
Bank loans - current (224) (226) (224)
Bank loans - non-current (1,284) (1,607) (1,397)
Lease liabilities (861) (161) (285)
Contingent consideration (1,000) - (1,000)
================================ =============== ============ =================
Net (debt)/cash (722) (840) 470
================================ =============== ============ =================
6. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
Six months Six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================= ============ ============ =================
Trade debtors 1,166 906 1,744
Prepayments and accrued
income 1,117 407 1,112
========================== ============ ============ =================
2,283 1,313 2,856
========================= ============ ============ =================
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
================================= ============ ============ =================
Trade payables 1,622 783 1,885
Corporation tax 451 122 311
Other taxes and social security 626 444 817
Accruals 876 447 979
================================== ============ ============ =================
3,575 1,796 3,992
================================= ============ ============ =================
8. ACQUISITIONS
In June 2019, the Company acquired 100% of the share capital of
Hub Network Services Limited ("HNS"), a Managed IT Services Company
registered in England & Wales with a head office in Bristol,
England. HNS provides high quality internet connections,
co-location and hosting solutions.
HNS was acquired for GBP1.46m cash paid on completion, cash free
debt free, with a further GBP0.45m cash payment following the
agreement of the completion accounts for the cash balance acquired,
debt items and working capital adjustment. The company incurred
GBP84,000 of professional fees and other acquisition costs in
relation to this acquisition. These costs are included as
Exceptional items in the consolidated statement of comprehensive
income.
The Directors have considered the intangible assets acquired
with HNS and have recognized an intangible asset in respect of
customer relationships. The asset value has been calculated using a
discounted cashflow method, based on the estimated level of profit
to be generated from the customers acquired. A post tax discount
rate of 9.80% was used in the valuation and the customer
relationships are amortised over an estimated useful life of seven
years. The goodwill arising on this acquisition is attributable to
the technical skills of the workforce and cross-selling
opportunities achievable from combining the acquired customer bases
and trade with the existing Group.
The goodwill and intangible asset has been allocated to a new
CGU, HNS, given the Company has its own operational structure, cash
generation and financial reporting processes. The Directors
consider that HNS does not form a separate operating segment and
instead the revenue and gross profit is included in the managed IT
services and VAR segments.
Recognised value of net assets acquired Book value Fair value Fair value
and liabilities assumed GBP'000 adj GBP'000
GBP'000
========================================= =========== =========== ===========
Cash and cash equivalents 609 - 609
Trade and other receivables 341 2 343
Property, plant and equipment 111 (8) 103
Intangible assets - 1,146 1,146
Trade and other payables (338) (53) (391)
Current income tax liability (8) - (8)
Deferred tax liability (19) (195) (214)
========================================= =========== =========== ===========
Identifiable net assets 1,588
Goodwill 323
========================================= =========== =========== ===========
Total net assets 1,911
========================================= =========== =========== ===========
Satisfied by:
Cash paid - on acquisition 1,457
Cash paid - consideration adjustment 454
========================================= =========== =========== ===========
Total consideration 1,911
========================================= =========== =========== ===========
9. AVAILABILITY OF INTERIM REPORT
Copies of this report are available on the Company's website at
http://www.sysgroupplc.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR PGGUGGUPBGAC
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November 25, 2019 02:00 ET (07:00 GMT)
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