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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sysgroup Plc | LSE:SYS | London | Ordinary Share | GB00BYT18182 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 24.00 | 23.00 | 25.00 | 24.00 | 24.00 | 24.00 | 2,932 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Related Svcs, Nec | 22.71M | -5.9M | -0.0709 | -3.39 | 19.98M |
From Feb 2020 to Feb 2025
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
Hot Features
Premium
-- 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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