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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% | 30.50 | 30.00 | 31.00 | 30.50 | 30.50 | 30.50 | 20,780 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Computer Related Svcs, Nec | 21.65M | -7k | -0.0001 | -3,050.00 | 14.93M |
From Apr 2021 to Apr 2024
TIDMSYS
RNS Number : 4647C
SysGroup PLC
21 June 2021
21 June 2021
SysGroup plc
("SysGroup" or the "Group")
Final Results for the year ended 31 March 2021
SysGroup plc (AIM:SYS), the multi award-winning managed IT services and cloud hosting provider, is pleased to announce its audited final results for the year ended 31 March 2021.
HIGHLIGHTS
Financial
Hot Features
Premium
2021 2020 Change
%
-----------------------------------
Revenue GBP18.13m GBP19.49m -7%
---------- ----------- -------
Recurring revenue as a % of total
revenue 79% 77% +2%
---------- ----------- -------
Gross profit GBP10.50m GBP11.20m -6%
---------- ----------- -------
Adjusted EBITDA (1) GBP2.91m GBP2.81m +4%
---------- ----------- -------
Adjusted EBITDA (1) margin % 16% 14% +2%
---------- ----------- -------
Adjusted PBT (2) GBP2.09m GBP1.76m +18%
---------- ----------- -------
Adjusted Basic EPS (3) 3.5p 3.4p +3%
---------- ----------- -------
Profit/(loss) before tax GBP0.21m GBP(0.23)m -
---------- ----------- -------
Basic EPS 0.5p (0.2)p -
---------- ----------- -------
Operational cashflows GBP2.70m GBP1.93m +40%
---------- ----------- -------
Net cash/(debt) (4) GBP1.88m GBP(0.07)m -
---------- ----------- -------
Operational
-- Demonstrated resilience and relevance throughout the pandemic -- Renewed 36 month contract with the Group's largest managed hosting customer -- Acquired businesses fully integrated and operating on a single platform
-- Corporate structure simplified with Certus and HNS both hived up into a single trading entity
-- Customer satisfaction consistently remained above 97%, despite lockdown challenges
Post period-end developments
-- New Manchester office opened to expand sales & marketing presence and leverage northern tech hub
-- Complete refurbishment of the Newport office to bring in-line with SysGroup culture and values
-- EMI share options issued to all team members to align interests and to share future upside
1. Adjusted EBITDA is earnings before interest, taxation, depreciation, amortisation of intangible assets, exceptional items, and share based payments.
2. Adjusted profit before tax ("Adjusted PBT") is profit before tax after adding back amortisation of intangible assets, exceptional items, and share based payments.
3. Adjusted Basic EPS is profit after tax after adding back amortisation of intangible assets, exceptional items, share based payments and associated tax, divided by the weighted average number of shares in issue.
4. Net cash/(debt) represents cash balances less bank loans, lease liabilities and contingent consideration.
Adam Binks, Chief Executive Officer, commented:
"I am pleased to report that the business has performed well over the last year given the significant challenges posed by a full 12 month period of lockdown restrictions. Improved Adjusted EBITDA and increased net cash, despite ongoing investment for the future, reflect our high levels of recurring revenues, strong operational controls and cash flow generative model. Further I must once again pay testament to our fantastic team who have worked tirelessly throughout this exceptionally challenging time to ensure that SysGroup continues to thrive, and both the Board and I are extremely grateful for their efforts."
"As lockdown restrictions ease and greater economic certainty returns, I have no doubt that investment into IT will be a major priority for many business leaders, as the pandemic has made our industry more relevant than ever. With a clear market focus and with the operational developments made over the past year, SysGroup is well placed to take advantage of this anticipated growth. The strength of our balance sheet coupled with our supportive investor base will also enable us to continue to be a consolidator in a fragmented, growing market, and I look forward to the future with confidence."
For further information please
contact:
Tel: 0151 559
SysGroup plc 1777
Adam Binks, Chief Executive
Officer
Martin Audcent, Chief Financial
Officer
Shore Capital (Nomad and Broker) Tel: 020 7408
Corporate Finance: 4090
Edward Mansfield / Daniel
Bush
Corporate Broking:
Fiona Conroy
Alma PR (Financial PR) Tel: 07780 901979
Josh Royston / Helena Bogle
About SysGroup
SysGroup is a leading provider of managed IT services, cloud hosting and expert IT consultancy. The Group delivers solutions that enable clients to understand and benefit from industry leading technologies and advanced hosting capabilities. SysGroup focuses on a customer's strategic and operational requirements - enabling clients to free up resources, grow their core business and avoid the distractions and complexity of delivering IT services.
The Group has offices in Liverpool, London, Manchester, Newport and Telford.
For more information, visit http://www.sysgroup.com
STRATEGIC REPORT
Chairman's Statement
SysGroup delivered a highly commendable performance in FY21, delivering an improved Adjusted EBITDA, achieved in the face of the difficulties presented by the lockdown restrictions in place throughout the financial year. This performance was underpinned by our high levels of recurring revenues - a key focus over recent years - and, had this not been the case, the year would have been much harder for both the business and shareholders. SysGroup's performance this year is also testament to the Group's response to the operational challenges presented by the pandemic, swiftly moving employees to remote working whilst maintaining strong uninterrupted service levels for customers and keeping tight management control over costs.
I would like to place on record the Board's appreciation of the ongoing commitment and cooperation of our team in rising to the challenge. They have tackled all of the challenges presented by the pandemic with diligence, care and empathy. Not only have they applied themselves to helping our clients and ensuring that their business needs are met, but they have also been there to support each other and rallied together as all great teams do in times of adversity. The management team deserve credit for putting in place tiers of support mechanisms and accordingly we will emerge from the pandemic a stronger unit.
In order to retain our talented team and attract more quality individuals to support our ambitious growth aspirations, we have made additional grants, post the year end, under the Group's 2018 EMI share option scheme, as well as the implementation of a new executive LTIP scheme which was put in place in July 2020. The Board also took the decision, in December 2020, to buy back 560,000 Ordinary Shares and hold them in Treasury to satisfy the future exercise of options under the Group's incentive schemes.
It was very pleasing to note the recognition the Company has received during the year with SysGroup being included in the London Stock Exchange's Top 1000 most influential companies in Britain and our Chief Executive, Adam Binks, was listed in the North West Power 100 for the second time which reflects the continued efforts of the entire SysGroup team.
No further acquisitions were made during the year but we remain very much committed to our stated strategy of being a consolidator in a hugely fragmented market. We are in a strong position to make accretive acquisitions with committed debt facilities, a strong cash position and a supportive institutional shareholder base. Whilst we have continued to seek out complementary acquisitions during lockdown, we have maintained our discipline and only focus on quality assets that meet our strict acquisition criteria. As we begin to come out of the pandemic and are once again able to meet with potential vendors face to face, we are confident that the pipeline of opportunity will pick up, with anticipated changes to Capital Gains Tax fuelling this further.
Michael Edelson
Chairman
18 June 2021
Chief Executive Officer's report
Introduction
I'm pleased to report on what has proved to be a very robust performance from the Group against a backdrop of lockdown restrictions for the full twelve months under review. This resilience highlights the importance of our continued focus over recent years on securing high levels of recurring revenues, long-term contracts and a balance sheet set up to support corporate activity.
I am extremely proud of how our entire team has adapted since the pandemic began and I would like to take the opportunity to extend my sincere gratitude to the entire SysGroup team for their outstanding efforts during what has been a significant period of disruption and uncertainty in general. SysGroup has played an integral role for many of our customers and helped them to adapt to the forever changing environment through the use of technology and again, I am delighted that we have been able to play a part and help during this time.
Adjusted EBITDA shows an improvement of 4% on last year's results, reflecting synergies through the integration of prior year acquisitions and an extremely well managed overhead base. This is particularly impressive in light of the ongoing investment into the business to ensure we are ideally placed to benefit from opportunities, as and when normal business practices resume. Total revenues decreased slightly year on year, by 7%, due to the impact of the pandemic as customers deferred spending decisions coupled with the fact that our sales teams have been unable to have in-person interactions with our customers and prospects, owing to the restrictions and impacting the sales pipeline. As noted in our half year results, we also took the strategic decision to exit some lower margin customer contracts that came with the acquisitions we made in 2019, which had a small impact on revenue but minimal impact on the Group's profitability. As a result, Adjusted EBITDA margin rose to 16% (FY20: 14%). The Group has generated a strong operating cashflow this year and the growth in our net cash to GBP1.88m has ensured an extremely robust financial position going into FY22.
Despite the impact that the pandemic has had on this year's top line, there is no doubt that it has also refocused the minds of business leaders on the efficacy, resilience and suitability of their existing IT systems and the associated support that is required to ensure their platforms remain current, compliant and secure. There is much debate as to whether organisations will return to full office working, remain entirely flexible or adopt a hybrid solution. What is clear though is that the technology they deploy to support them is more critical than ever and we believe that the trend of outsourcing to experts such as SysGroup will increase. Once we have greater economic certainty and confidence returns, we are likely to see an increase in spend and commitment to long term managed IT services contracts, which we are ideally placed to fulfil.
As well as supporting our existing client base and ensuring they receive the best levels of service, we have also focused heavily on operational improvements and making sure that SysGroup is positioned to capitalise when market conditions improve. The remote working model that we employed throughout the last twelve months was highly successful, with our teams able to support clients through the trickiest of conditions, reflected in customer satisfaction levels throughout the full year of over 97%. At the same time, I am delighted that we were able to welcome team members back to the office from 24 May, with appropriate Covid safety measures, albeit at a reduced capacity and in-line with government guidance. The cultural importance of having our teams working together, drawing energy and inspiration from each other and relishing a normalised working environment cannot be understated.
Integration
During the course of the year, and post completion of the earn-out period, we completed the full integration of the Certus business which we acquired in February 2019. There is now one senior leadership team in place responsible for delivering our strategy and teams at all levels have been amalgamated to create greater pockets of expertise. As stated in our half year results and in line with our single go-to-market offering, known as "one SysGroup," all of our business operations have also now been rebranded to SysGroup and all legacy brands have been discontinued. The integration exercise was completed with a tidy up of our corporate structure at the end of year with both the Certus and HNS businesses being hived up into our main trading entity.
We have made substantial progress on Project Fusion and during the second half of the year, we went live with a new business system that unified our CRM platform, marketing, service desk and billing operations. This improvement to our core platform gives us much greater oversight at a Group level on all sales and marketing activities, customer support requests and billing processes. The benefits of this are already being experienced, but more importantly it will enable us to scale over the coming years more quickly and efficiently and make integration of future acquisitions simpler.
Project Fusion, which is our internal programme for amalgamating and developing business systems and processes to support future growth, will continue in FY22 as our focus moves to the people management and financial accounting systems and we will also continue to build out the full benefits of the reporting functionality giving even greater access to business intelligence.
Offices
Back in April, we announced our "2021 return to the office" programme to our teams. Whilst our people have successfully worked from home since 13 March 2020, as a business we continue to recognise the importance of providing an environment where our teams can come together and collaborate.
Further changes have been made across our UK footprint with the closure of our office in Bristol, with local clients now being serviced from our Newport facility supported by our wider teams across the country. Following the year-end, we have opened a new office in Manchester which will become our main sales & marketing hub in the North. The opening of a new location in Manchester was a strategic decision supported by the fact that Manchester is known to be the second largest technology hub outside of London and will give the Group even greater access to world class talent whilst also providing an environment which is focused solely on delivering sales growth, supported by strategic marketing campaigns.
People
Our people remain our greatest asset and great attention has been paid to making sure that we can attract and retain best in class talent. A significant part of this has been relaunching our core values, namely: Be Bold, Delight your customer, Work Smart, Own it and Love what you do . They resonate with our market position and reflect the ambitions of our talented workforce. Our benefits scheme has been rolled out throughout the Group, ensuring that there is a commonality of reward for all SysGroup team members, no matter their route into the organisation. A number of new hires were also made during the year which will help us to support our growth ambitions and which also help to drive our culture by bringing in fresh impetus and demonstrating our commitment to investing in the future.
As a result of the operational improvements made during FY21, we have started the new financial year with a more simplified leadership & operational structure with clear lines of responsibility, a more interactive workforce working towards defined common goals, greater visibility and presence throughout the UK market and the capacity and desire to grow market share.
Summary and Outlook
Whilst we remain mindful of the fact the pandemic is by no means over and despite the extension to the easing of restrictions, it is pleasing to see the positive effects of the vaccination programme, which in turn will help us to conduct business on a face to face basis once again.
Despite the challenges, FY21 overall has been another successful year for the Group, demonstrated by the increase in Adjusted EBITDA and the strength of our year-end balance sheet. The GBP1.95m growth in Net Cash is also testament to the performance of the business throughout the course of the year.
I said this time last year that the world has gone through material change and that technology has been an enabler for many to simply survive. Twelve months later and I now believe that almost all businesses will have no option other than to embrace technology in order to thrive. SysGroup is well established and ready to take advantage of those opportunities that will once again come to the fore when key decision makers have the confidence to once again commit to termed contracts and enhanced spending.
Our business is highly cash generative and we remain committed to our stated acquisition strategy and continuing to be a consolidator in a highly fragmented market whose relevance over the last 15 months has really come to the fore. As the year progresses and we move beyond the fears of further lockdowns, I am certain confidence will return to pre-pandemic levels and the investments made by businesses into their technology platforms will exceed all previous levels.
Adam Binks
Chief Executive Officer
18 June 2021
Chief Financial Officer's Report
Group Statement of Comprehensive Income
In a challenging year with government lockdown restrictions in operation across the entire period, the Group successfully delivered revenue of GBP18.13m (FY20: GBP19.49m), a decrease of 7% on the prior period, and an improved Adjusted EBITDA of GBP2.91m (FY20: GBP2.81m), an increase of 4% against the FY20 performance.
Managed IT services revenue reduced to GBP14.34m (FY20: GBP15.09m). This reflects the effect of the pandemic as customers deferred new capital spend and the fact that our sales and technical consulting teams were unable to attend customer sites due to the restrictions. The impact of the pandemic also led to a small number of customers choosing to downsize their service requirements or cancel contracts to reduce costs. In keeping with our business model of focussing on the UK mid-market, we also exited some lower margin customer contracts that were inherited with the Certus and HNS acquisitions. Whilst this has had a small impact on revenue the impact to the Group's profitability is minimal. Similarly, value added resale ("VAR") revenue in FY21 was GBP3.79m (FY20: GBP4.40m) as sales were affected by customers exercising caution by withholding capex expenditure in response to the impact of COVID-19 on their businesses and markets. As greater economic certainty returns, we believe that those deferred commitments to both managed IT services and VAR will resume.
The revenue mix of 79% managed IT services and 21% VAR was slightly ahead of the Group's target business model of 75% managed IT services and 25% VAR. The FY20 revenue mix was 77%:23%.
Revenue by Operating 2021 2021 2020 2020
Segment
----------------------
GBP'000 % GBP'000 %
---------------------- -------- ----- -------- -----
Managed IT Services 14,344 79% 15,092 77%
Value Added Resale 3,787 21% 4,400 23%
Total 18,131 100% 19,492 100%
---------------------- -------- ----- -------- -----
Gross profit for the year was GBP10.50m with a gross margin of 57.9% (FY20: GBP11.20m and 57.5%) respectively. The gross margin percentage was similar to last year with net neutral impacts from the change in revenue mix, an improvement in VAR sales margin and a small reduction in the managed IT Services sales margin.
Adjusted operating expenses of GBP7.59m were GBP0.80m below last year (FY20: GBP8.39m) with an overhead/revenue ratio of 42% (FY20: 43%). The lower overhead costs reflect the benefit of GBP0.40m acquisition synergies, GBP0.26m of travel and general overhead savings and an increase in Project Fusion R&D capitalisation of GBP0.14m relating to the investment in a unified platform of systems across the Group. The acquisition synergies are permanent savings. As lockdown restrictions begin to ease and our sales teams are able to mobilise and generate additional revenue we can expect travel costs and general overheads to increase, and our investment in the development of Project Fusion to drive further growth will continue into FY22. The Group made no use of the government furlough scheme so the income statement does not include any one-off credits from government support.
Adjusted EBITDA was GBP2.91m for the twelve months to 31 March 2021, an increase of GBP0.10m (+4%) from GBP2.81m in FY20. The Adjusted EBITDA margin was 16.1% in FY21 compared to 14.4% in FY20 which continues our progressive profit improvement from the Group's scale-up strategy and synergising activity.
The reconciliation of operating profit to Adjusted EBITDA is shown in the table below. The Directors consider that Adjusted EBITDA is the most appropriate measure to assess the business performance since this reflects the underlying trading performance of the Group. Adjusted EBITDA is not a statutory measure and is calculated differently by each Company.
2021 2020
------------------------------------------------
Reconciliation of operating profit to Adjusted
EBITDA GBP'000 GBP'000
------------------------------------------------ -------- --------
Operating profit/(loss) 313 (28)
Depreciation 722 847
Amortisation of intangible assets 1,294 1,321
EBITDA 2,329 2,140
------------------------------------------------ -------- --------
Exceptional items 82 475
Share based payments 504 199
Adjusted EBITDA 2,915 2,814
------------------------------------------------ -------- --------
The Group incurred exceptional costs during the year of GBP0.08m (FY20: GBP0.48m) comprising employee exit costs from integration activities and for the closure of the Bristol office. Amortisation of intangible assets was GBP1.29m (FY20: GBP1.32m), of which GBP1.22m (FY20: GBP1.27m) relates to the amortisation of acquired intangible assets from acquisitions. Project Fusion capitalised software development costs commenced amortisation in November 2020 when the first modules of the new system went live.
Finance costs of GBP0.11m are reduced from the FY20 charge of GBP0.21m as the term loan continues to amortise through quarterly loan repayments and as lease contracts reach their expiry. The share-based payments charge of GBP0.50m for the year (FY20: GBP0.20m) includes a GBP0.18m charge for the 2018 & 2019 Executive Director LTIPs which vested in July 2020.
The Adjusted profit before tax for the year was GBP2.09m (FY20: GBP1.76m) and statutory profit before tax for the year was GBP0.21m (FY20: loss before tax GBP(0.23)m). Adjusted basic earnings per share for FY21 was 3.5p (FY20: 3.4p) and basic earnings per share for FY21 was 0.5p (FY20: (0.2)p loss per share).
2021 2020
-------------------------------
Adjusted profit before tax GBP'000 GBP'000
------------------------------- -------- --------
Profit/(loss) before taxation 205 (234)
Amortisation of intangibles 1,294 1,321
Exceptional items 82 475
Share based payments 504 199
Total 2,085 1,761
------------------------------- -------- --------
Taxation
The Group reports a tax credit in the FY21 Consolidated Income Statement of GBP0.04m which compares to a GBP0.11m credit in FY20. The corporation tax charge has increased this year to GBP0.27m (FY20: GBP0.02m) as trading profits have risen but this is more than offset by deferred tax credit movements, notably on the amortisation of intangible assets and share based payments. The Group uses the HMRC Research & Development tax credit scheme when project expenditure fulfils the HMRC scheme criteria. The Group's tax in the Income Statement is expected to become a net charge in the future as the business continues to grow and the remaining tax losses are fully utilised.
Cashflow & net cash
The Group had a strong net cash position of GBP1.88m as at 31 March 2021 (FY20: net debt GBP0.07m) which includes IFRS16 property lease liabilities. Cash conversion was 95% (FY20: 86%) and the Group's gross cash balance as at 31 March 2021 was GBP3.47m (FY20: GBP3.03m). The Directors were pleased with this cash and debt management performance given the challenges that COVID-19 presented to the business community at the commencement of, and throughout, the Group's financial year.
As reported in last year's Annual Report, we entered Q1 with requests from a number of customers for financial support which we were able to provide with extended settlement terms and in some cases a deferral of fees into future periods. These arrangements were adhered to with full co-operation from the customers involved and all have since come to an end with reversion to standard payment terms. Since SysGroup's customer base has a wide diversification of industry sectors there was only a low level of exposure to the sectors most exposed to the pandemic restrictions imposed by the Government in hospitality, leisure, travel and tourism. Cash collection has remained strong throughout the period which is a credit to our customers in a difficult period, and a reflection of the business criticality of the IT services we provide. No changes were made to our supplier payment processes during the year and suppliers were paid as normal in accordance with our usual monthly payment runs.
Operational cashflows were GBP2.70m (FY20: GBP1.93m) which reflected strong cash conversion at 95% (FY20: 86%), good trade debtor control and lower interest and tax payments. The Group has made no use of the government furlough scheme or any of the government backed COVID-19 assistance schemes and the deferral of the GBP0.28m Q1 VAT payment reported in our Interim Results was repaid in full in December 2020.
2021 2020
--------------------------------------------
Cash conversion GBP'000 GBP'000
-------------------------------------------- -------- --------
Operational cashflows 2,700 1,930
Acquisition, integration and restructuring
cashflows 82 492
Cash generated from operations 2,782 2,422
-------------------------------------------- -------- --------
Adjusted EBITDA 2,915 2,814
-------------------------------------------- -------- --------
Cash conversion 95% 86%
-------------------------------------------- -------- --------
The Group's investing activities included the payment of the final earn-out consideration relating to the acquisition of Certus. The full earn-out profit target was achieved and GBP0.975m cash consideration was paid to the vendors of Certus. In Financing activities, in addition to the quarterly bank loan and lease payments, the Company repurchased 560,000 ordinary shares of GBP0.01 each in the capital of the Company ("Ordinary Shares") for consideration of GBP0.20m.
The Group's net cash position of GBP1.88m is shown below and this includes IFRS16 Lease liabilities. Net cash/(debt) is considered to be a KPI of the business since the level of financial indebtedness of the Group is relevant for Board strategic decisions and a key financial measure for the Group's shareholder base and potential investors.
2021 2020
-------------------------------
Net cash GBP'000 GBP'000
------------------------------- -------- --------
Cash balances 3,473 3,036
Bank loans - current (416) (251)
Bank loans - non-current (757) (1,146)
Lease liabilities - equipment (86) (186)
Lease liabilities - property (334) (522)
Contingent consideration - (1,000)
Net cash/(debt) 1,880 (69)
------------------------------- -------- --------
Consolidated Statement of Financial Position
The Group's net assets of GBP20.6m at 31 March 2021 represented an increase of GBP0.5m to the prior year (FY20: GBP20.1m).
Non-current assets have reduced by GBP1.44m which mainly arises from the GBP1.22m amortisation of acquired intangible assets. During the year, the Group invested GBP0.18m (FY20: GBP0.35m) in property, plant and equipment and GBP0.39m (FY20: GBP0.18m) in Project Fusion software development costs. Working capital was managed well throughout the year with the gross trade debtor balance of GBP1.18m comparing to GBP1.64m in the previous year and trade payables of GBP0.81m comparing to GBP1.85m in the prior year.
The contingent consideration liability of GBP1.0m which was held at the prior year end for the Certus acquisition earn-out was paid in H1 FY21 following the successful achievement of the earn-out. SysGroup paid GBP0.975m contingent consideration to the vendors of Certus in full settlement.
The bank loan at 31 March 2021 was GBP1.17m (FY20: GBP1.40m); there have been no further drawdowns of the facilities during the year and the bank loan covenants have been met throughout the year.
A new Treasury reserve has been established within equity. This is to recognise the company purchase of 560,000 ordinary shares of GBP0.01 each on 1 December 2020 at a price of 35.745 pence per ordinary share. The shares will be held in treasury to fulfil the future anticipated exercise of options under the Employee Share Option plans.
Project Fusion
Project Fusion was launched in FY20 as a project to deliver a unified platform of systems across the Group to enable more efficient working practices and higher quality operating and reporting information. The project has multiple workstreams for systems covering Customer Relationship Management ("CRM"), Service Desk, Financial Accounts, Marketing and Risk Management.
During FY21, substantial progress has been made as our internal project teams and implementation partners have worked well together to design and implement the core system. The new system which brings together CRM, Billing, Service Desk & Marketing onto a single platform, went live in H2 FY21. Project Fusion will continue in FY22 as focus moves to the People Management and Financial Accounts systems, in addition to building out the full benefits of the reporting functionality which will provide far greater visibility of business intelligence and enable us to scale more effectively and efficiently. During the year, GBP0.39m (FY20: GBP0.18m) of software development costs were capitalised as an intangible asset comprising employee and third-party supplier costs.
Share Option Grants
In July 2020 we announced the implementation of the new 2020 SysGroup Long Term Incentive Plan ("2020 LTIP"), together with an initial grant of 400,000 performance shares (the "Award") under the 2020 LTIP. The Remuneration Committee granted 250,000 performance shares to Adam Binks, Chief Executive Officer, and 150,000 performance shares to Martin Audcent, Chief Financial Officer (together the "Executive Directors"). The 2020 LTIP replaced in its entirety the incentive plan set up in June 2018 ("2018 LTIP") and the 1.6 million performance shares granted to the Executive Directors under the 2018 LTIP vested with immediate effect.
In addition to the grant of the 400,000 performance shares to the Executive Directors, 450,000 share options were granted in April 2020 to senior management under the existing 2018 SysGroup EMI Scheme.
Martin Audcent
Chief Financial Officer
18 June 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
Revenue 3 18,131 19,492
Cost of sales (7,630) (8,291)
Gross profit 10,501 11,201
------------------------------------------------ ------ --------- ---------
Operating expenses before depreciation,
amortisation, exceptional items and
share based payments (7,586) (8,387)
------------------------------------------------ ------ --------- ---------
Adjusted EBITDA 2,915 2,814
------------------------------------------------ ------ --------- ---------
Depreciation (722) (847)
Amortisation of intangibles 8 (1,294) (1,321)
Exceptional items 4 (82) (475)
Share based payments (504) (199)
Administrative expenses (10,188) (11,229)
Operating profit/(loss) 313 (28)
------------------------------------------------ ------ --------- ---------
Finance costs (108) (206)
------------------------------------------------ ------ --------- ---------
Profit/(loss) before taxation 205 (234)
Taxation 7 35 112
------------------------------------------------ ------ --------- ---------
Total comprehensive profit/(loss) attributable
to the equity holders of the company 240 (122)
------------------------------------------------ ------ --------- ---------
Basic earnings per share (EPS) 6 0.5p (0.2p)
Diluted earnings per share (EPS) 6 0.5p (0.2p)
------------------------------------------------ ------ --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
Assets
------------------------------------------------ ------ -------- --------
Non-current assets
Goodwill 8 15,554 15,554
Intangible assets 8 5,290 6,188
Property, plant and equipment 1,281 1,824
22,125 23,566
------------------------------------------------ ------ -------- --------
Current assets
Trade and other receivables 9 1,728 2,726
Cash and cash equivalents 3,473 3,036
5,201 5,762
------------------------------------------------ ------ -------- --------
Total Assets 27,326 29,328
------------------------------------------------ ------ -------- --------
Equity and Liabilities
Equity attributable to the equity shareholders
of the parent
Called up share capital 12 494 494
Share premium reserve 9,080 9,080
Treasury reserve (201) -
Other reserve 2,832 2,328
Translation reserve 4 4
Retained earnings 8,403 8,163
================================================ ====== ======== ========
20,612 20,069
------------------------------------------------ ------ -------- --------
Non-current liabilities
Lease liabilities 11 190 441
Bank loan 11 757 1,146
Deferred taxation 7 889 1,200
1,836 2,787
------------------------------------------------ ------ -------- --------
Current liabilities
Trade and other payables 10 2,683 3,488
Contract liabilities 1,549 1,465
Lease liabilities 11 230 268
Contingent consideration 10 - 1,000
Bank loan 11 416 251
4,878 6,472
------------------------------------------------ ------ -------- --------
Total Equity and Liabilities 27,326 29,328
------------------------------------------------ ------ -------- --------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 MARCH 2021
Attributable to equity holders of the parent
Share Share Treasury Other Translation Retained Total
capital premium reserve reserve reserve earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- --------- --------- --------- ------------ ---------- --------
As at 1 April 2019 494 9,080 - 2,129 4 8,285 19,992
---------------------- --------- --------- --------- --------- ------------ ---------- --------
Comprehensive income
Loss for the period - - - - - (122) (122)
Total Comprehensive
income - - - - - (122) (122) ---------------------- --------- --------- --------- --------- ------------ ---------- -------- Distributions to owners Share options charge - - - 199 - - 199 Total Distributions to owners - - - 199 - - 199 ---------------------- --------- --------- --------- --------- ------------ ---------- -------- At 31 March 2020 494 9,080 - 2,328 4 8,163 20,069 ---------------------- --------- --------- --------- --------- ------------ ---------- -------- As at 1 April 2020 494 9,080 - 2,328 4 8,163 20,069 ---------------------- --------- --------- --------- --------- ------------ ---------- -------- Comprehensive income Profit for the period - - - - - 240 240 Total Comprehensive income - - - - - 240 240 ---------------------- --------- --------- --------- --------- ------------ ---------- -------- Distributions to owners Share buy back - - (201) - - - (201) Share options charge - - - 504 - - 504 Total Distributions to owners - - (201) 504 - - 303 ---------------------- --------- --------- --------- --------- ------------ ---------- -------- At 31 March 2021 494 9,080 (201) 2,832 4 8,403 20,612 ---------------------- --------- --------- --------- --------- ------------ ---------- --------
CONSOLIDATED STATEMENT OF CASHFLOWS
FOR THE YEARED 31 MARCH 2021
2021 2020
Group Group
Notes GBP'000 GBP'000
------------------------------------------------- ------ -------- --------
Cashflows used in operating activities
Profit/(loss) after tax 240 (122)
Adjustments for:
Depreciation and amortisation 2,016 2,168
Finance costs 108 206
Share based payments 504 199
Taxation credit 7 (35) (112)
Operating cashflows before movement in working
capital 2,833 2,339
------------------------------------------------- ------ -------- --------
Decrease in trade and other receivables 987 501
Decrease in trade and other payables (889) (533)
Operating cashflows before interest and
tax 2,931 2,307
------------------------------------------------- ------ -------- --------
Interest paid and amortisation of arrangement
fee on loan facility (105) (161)
Interest paid on lease liabilities (28) (44)
Taxation paid (98) (172)
Operational cashflows 2,700 1,930
------------------------------------------------- ------ -------- --------
Cashflows from investing activities
Payments to acquire property, plant & equipment (179) (353)
Payments to acquire intangible assets 8 (396) (190)
Acquisition of subsidiary companies 5 (975) (1,911)
Amounts received in respect of previous
acquisitions - 252
Cash acquired with acquisitions - 609
================================================= ====== ======== ========
Net cash used in investing activities (1,550) (1,593)
------------------------------------------------- ------ -------- --------
Cashflows from financing activities
Payments for share buy-back 12 (201) -
Repayment of loan facility including fees (224) (224)
Capital/principal paid on lease liabilities (288) (453)
================================================= ====== ======== ========
Net cash from financing activities (713) (677)
------------------------------------------------- ------ -------- --------
Net increase / (decrease) in cash and cash
equivalents 437 (340)
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the beginning
of the year 3,036 3,376
------------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end of
the year 3,473 3,036
------------------------------------------------- ------ -------- --------
NOTES TO THE CONSOLIDATED FINANCIAL INFORMATION
FOR THE YEARED 31 MARCH 2021
1. Accounting policies
SysGroup plc (the 'Company') is a Company incorporated and domiciled in the United Kingdom. The Company's registered office is at Walker House, Exchange Flags, Liverpool, L2 3YL. This consolidated financial information comprise the Company and its subsidiaries (together referred to as the 'Group').
Statement of compliance
The Group financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as endorsed by the European Union ("endorsed IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under endorsed IFRS.
This consolidated financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The comparative figures for the financial year ended 31 March 2020 are an extract of the Company's statutory accounts for the year ended 31 March 2020, prepared in accordance with International Financial Reporting Standards (IFRS), approved by the Board of Directors on 30 June 2020 and delivered to the Registrar of Companies. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2021 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The Auditors have reported on those accounts; their report was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006.
Basis of preparation
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial statements have been prepared under the historical cost basis, except for the revaluation of certain financial liabilities which have been valued in accordance with IFRS9.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in note 2. The financial statements are presented in pounds sterling, rounded to the nearest thousand, unless otherwise stated.
Going concern
The Directors have prepared the financial statements on a going concern basis which assumes that the Group and the Company will continue to meet liabilities as they fall due.
The Board recognises that the COVID-19 pandemic has had an unprecedented affect on the UK economy and despite the recent upturn in growth from the gradual lifting of lockdown restrictions there remains considerable uncertainty in economic outlook.
Over the past twelve months the Group has demonstrated that its operating model is broadly resilient to the economic impacts of the pandemic. The Group's products and services are typically considered to be critical IT infrastructure supplies to customers with circa 75% of revenue deriving from contracted managed IT services which is a continuous service supply and subject to twelve month to three year contracts. The Group has a cash balance of GBP3.47m and a net cash position of GBP1.88m at 31 March 2021. The gross cash has increased by GBP0.4m since 1 April 2020 and the net cash has increased by GBP1.95m in the same period. Net cash includes a GBP1.2m Senior Term loan with Santander which is subject to quarterly loan covenant tests and calculated on a 12-month rolling basis for interest cover, net debt to Adjusted EBITDA leverage and debt service cover. All the bank covenants were met in the financial year and are forecast to be achieved in the foreseeable future.
The Directors have reviewed the financial forecasts and a Reverse Stress Test model. The Reverse Stress Test model has allowed the Board to assess a significant downside scenario set to the point where the bank loan covenants would breach. The projected trading forecasts and resultant cashflows, together with the confirmed loan facilities and other sources of finance, taking account of reasonably possible changes in trading performance, show that the Group can continue to operate within the current facilities available to it.
The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing the financial statements.
New standards and interpretations
A number of new standards and amendments to standards and interpretations have been issued during the year ended 31 March 2021. The Group has adopted all of the new and revised standards and interpretations issued by the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant to its operations. Other new amended standards and interpretations issued by the IASB that apply to the financial statements do not impact the Group as they are either not relevant to the Group's activities or require accounting which is consistent with the Group's current accounting policies.
New standards not yet effective
There are a number of standards and amendments to standards, and interpretations which have been issued by the IASB and in some cases not yet adopted by the UK Endorsement Board that are effective in future accounting periods that the Group has decided not to adopt early. SysGroup plc is currently assessing the impact of these new standard and amendments. The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material outcome on the Group.
Basis of consolidation
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee; exposure to variable returns from the investee; and the ability of the investor to use its power to affect those variable returns. Control is re-assessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquirer's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.
Alternative profit measures
In reporting its results, the Directors have presented various alternative profit measures (APMs) of financial performance, position or cashflows, which are not defined or specified under the requirements of IFRS. On the basis that these measures are not defined by IFRS, they may not be directly comparable with other companies. The key APMs that the group uses include recurring revenue as a percentage of revenue, Adjusted EBITDA, Adjusted PBT, Adjusted EPS and Net cash.
The Group makes certain adjustments to the statutory profit in order to derive many of these APMs. These include exceptional items and share based payments. The group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which the Directors consider, because of their size or nature and expected non-recurrence, merit separate presentation to facilitate financial comparison with prior periods and to assess trends in financial performance. Exceptional items are included in Administration expenses in the Consolidated Statement of Comprehensive Income but excluded from Adjusted EBITDA as management believe they should be considered separately to gain an understanding of the underlying profitability of the trading businesses on a consistent basis from year to year.
2. Significant accounting estimates and judgements
The preparation of this financial information requires management to make estimates and judgements that affect the amounts reported for assets and liabilities at the period end date and the amounts reported for revenues and expenses during each period. The nature of the estimation or judgement means that actual outcomes could differ from the estimates and judgements taken in the preparation of the financial statements.
Significant accounting estimates
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment annually and in line with the stated accounting policy. This involves judgement regarding the future development of the business and the estimation of the level of future profitability and cash flows to support the carrying value of goodwill. An impairment review has been performed at the reporting date taking into account sensitivities around future business performance, covering a range of outcomes and risks over levels of revenue, cost and cash generation. No impairment has been identified. Further details are included in note 8.
Valuation of intangible assets acquired in business combinations
Determining the fair value of customer relationships acquired in business combinations requires estimation of the value of the cash flows related to those relationships and a suitable discount rate in order to calculate the present value.
Significant accounting judgements
Going concern
The Board recognises that the Group is trading in an uncertain economy following the onset of the COVID-19 pandemic and there's considerable uncertainty in the timing and rate of economic recovery. Management have to exercise judgement in the preparation of financial forecasts particularly on the level of future sales, customer contract uplifts and cancellations, and working capital assumptions. The Directors have reviewed the Group's financial forecasts and a Reverse Stress Test model in order to assess the Group's business viability and to form a judgement on going concern. Having reviewed the forecasts the Board were satisfied that the Group remains a going concern.
Revenue
Management make judgements in determining the appropriate application of revenue recognition policies to the sale of services and products.
Assessment of CGU's and carrying value of intangible assets
A CGU is the smallest identifiable Group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or Groups of assets and the Board of Directors use judgement to identify the CGUs of the Group. The Board have reviewed the Group's CGU's this year and exercised their judgement to amend the CGUs following the integration of previously acquired businesses and changes to the Group's management and reporting structure in the current financial year. The Board have concluded that the Group has a single CGU of "Managed IT Services".
Useful economic lives of intangible assets
Intangible assets are amortised over their useful economic lives. Useful lives are based on management's estimates of the period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in changes in the carrying values and hence amounts charged to the income statement in particular periods which could be significant. The Group have capitalised system development expenditure in the current and previous financial year in relation to Project Fusion, a project to integrate all of the legacy business systems into one new CRM, Marketing, Projects, Billing & Service Desk system. Phase I of Project Fusion went live during the current period and the System Development intangible asset is being amortised over a five year useful life which the Directors consider appropriate for the Group's core business system.
IFR16 - Leases
Management make judgements in their assessment of lease contract agreements to ensure the appropriate lease accounting recognition under IFRS16 - Leases. The main elements of judgement are:
-- Determining the inherent rate of interest which applies to each lease or family of leases with similar characteristics;
-- Establishing whether or not it is reasonably certain that an extension option will be exercised; and
-- Considering whether or not it is reasonably certain that a termination option will not be exercised.
3. Segmental analysis
The chief operating decision maker for the Group is the Board of Directors . The Group reports in two segments:
-- Managed IT Services - this segment provides all forms of managed services to customers and includes professional services.
-- Value Added Resale (VAR) - this segment provides all forms of VAR sales where the business sells products and licences from supplier partners.
The monthly management accounts reported to the Board of Directors are reviewed at a consolidated level with the operating segments representative of the business model for growth of recurring contract income in Managed IT Services and VAR sales as a complementary business activity. The Board review the results of the operating segments at a revenue and gross profit level since the Group's management and operational structure supports both operational segments as Group functions. In this respect, assets and liabilities are also not reviewed on a segmental basis. All assets are located in the UK.
All segments are continuing operations and there are no transactions between segments.
2021 2021 2020 2020
Revenue by operating segment GBP'000 % GBP'000 %
--------------------------------- --------------- ------ -------- --------
Managed IT Services 14,344 79% 15,092 77%
Value Added Resale 3,787 21% 4,400 23%
Total 18,131 100% 19,492 100%
--------------------------------- --------------- ------ -------- --------
No individual customer account for more than 6% of the
Group's revenue.
The revenue by geographic location for where services are delivered
to customers is shown below.
2021 2021 2020 2020
GBP'000 % GBP'000 %
--------------------------------- --------------- ------ -------- --------
UK 18,091 100% 19,310 99%
Rest of World 40 0% 182 1%
================================= =============== ====== ======== ========
18,131 100% 19,492 100%
--------------------------------- --------------- ------ -------- --------
2021 2020
GBP'000 GBP'000
--------------------------------- --------------- ------ -------- --------
Revenue
Managed IT Services 14,344 15,092
Value Added Resale 3,787 4,400
Total 18,131 19,492
--------------------------------- --------------- ------ -------- --------
Gross profit
Managed IT Services 9,594 10,281
Value Added Resale 907 920
======== ========
Total 10,501 11,201
--------------------------------- --------------- ------ -------- --------
There were no sales between the two business segments, and all
revenue is earned from external customers. The business segments'
gross profit is reconciled to profit before taxation as per the
consolidated income statement. The Group's overheads are managed
centrally by the Board and consequently there is no reconciliation
to profit before tax at a segmental level.
4. Exceptional items
2021 2020
GBP'000 GBP'000
------------------------------- -------- --------
Acquisitions - 85
Integration and restructuring 82 390
Total 82 475
------------------------------- -------- --------
The Group has incurred exceptional costs during the year of GBP82,000 (FY20: GBP475,000) which are in relation to the exit of the Bristol office and employee costs incurred from the integration of the senior management team.
5. Acquisitions
In February 2019, the Company acquired 100% of the share capital of Certus IT Limited ("Certus"), and the parties agreed an earn-out mechanism for a period of twelve months post-acquisition based on profit performance targets. In February 2020 the earn-out period was completed and Certus successfully achieved the maximum EBITDA target. The Company paid GBP975,000 to the Sellers in full settlement of the contingent consideration during H1 FY21.
6. Earnings per share
2021 2020
--------------------------------------------------- ----------------------- ----------------------
Profit/(loss) for the financial year attributable GBP240,000 (GBP122,050)
to shareholders
Weighted number of issued equity shares 49,234,036 49,419,690
Weighted number of equity shares for diluted
EPS calculation 51,811,233 51,734,950
Adjusted basic earnings per share (pence) 3.5p 3.4p
Basic earnings per share (pence) 0.5p (0.2p)
Diluted earnings per share (pence) 0.5p (0.2p)
--------------------------------------------------- ----------------------- ----------------------
The weighted number of issued equity shares and the weighted
number of shares for the diluted calculation both exclude the
Treasury shares held by the Company in accordance with accounting
standards.
2021 2020
GBP'000 GBP'000
----------------------- ----------------------
Profit/(loss) after tax used for basic earnings
per share 240 (122)
Amortisation of intangible assets 1,294 1,321
Exceptional items 82 475
Share based payments 504 199
Tax adjustments (376) (216)
--------------------------------------------------- ----------------------- ----------------------
Adjusted profit used for Adjusted Earnings
per Share 1,744 1,657
--------------------------------------------------- ----------------------- ----------------------
7. Taxation
2021 2020
Current tax GBP'000 GBP'000
-------------------------------------------------- ----------------------- -----------------------
Current tax - current year 260 128
Adjustments in respect of prior years 16 (107)
Total current tax charge 276 21
-------------------------------------------------- ----------------------- -----------------------
Deferred tax
Deferred tax - timing differences (311) (133)
Total deferred tax (311) (133)
-------------------------------------------------- ----------------------- -----------------------
Total tax credit (35) (112)
-------------------------------------------------- ----------------------- -----------------------
The effective tax rate for the year to 31 March 2021 is
lower (2020: lower) than the standard rate of corporation
tax in the UK. The differences are explained below:
2021 2020
GBP'000 GBP'000
Profit/(loss) on ordinary activities
before tax 205 (234)
-------------------------------------------------- ----------------------- -----------------------
Profit/(loss) on ordinary activities
before taxation multiplied by the standard
rate of UK corporation tax of 19% (2020:19%) 39 (44)
Effects of:
Expenses not deductible 53 25
Prior year adjustment 17 (107)
Re-measurement of deferred tax due to
changes in UK rate 51 85
Deferred tax asset on share-based payments (122) -
Use of brought forward losses (73) (71)
Total tax credit (35) (112)
-------------------------------------------------- ----------------------- -----------------------
The Group recognised deferred tax assets
and liabilities as follows:
2021 2020
GBP'000 GBP'000
-------------------------------------------------- ----------------------- -----------------------
Deferred tax liability on customer relationships (927) (1,149)
Deferred tax asset on share-based payments 122 -
Capital allowances timing differences (84) (51)
Deferred tax liability (889) (1,200)
-------------------------------------------------- ----------------------- -----------------------
Recognition of deferred tax assets is restricted to those
instances where it is highly probable that relief against
taxable profit will be available.
The movement in the deferred tax account
during the year was:
Capital Customer Total
allowances relationships
timing
differences
GBP'000 GBP'000 GBP'000
-------------------------------------------------- ------------- -------------------------- ----------
Balance at 1 April 2020 (51) (1,149) (1,200)
Credited to statement of comprehensive
income (33) 222 189
Deferred tax asset on share-based payments 122 - 122
-------------------------------------------------- ------------- -------------------------- ----------
Balance at 31 March 2021 38 (927) (889)
-------------------------------------------------- ------------- -------------------------- ----------
Factors affecting future tax charges:
Deferred tax balances are recognised at 19% (2020: 17%) due
to the cancellation of the planned reduction in tax rate to
17%. The government further announced in the Spring Budget 2021
that from 1 April 2023, the corporation tax rate would increase
to 25% from 2023.
8. Intangible assets
Group Systems Software Customer Positive Total
Development licences relationships goodwill
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2019 223 198 8,010 15,508 23,939
Additions 184 6 - (277) (87)
Acquisitions - - 1,146 323 1,469
At 31 March 2020 407 204 9,156 15,554 25,321
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2020 407 204 9,156 15,554 25,321
Additions 395 1 - - 396
At 31 March 2021 802 205 9,156 15,554 25,717
-------------------------- ------------- ---------- --------------- ---------- --------
Accumulated amortisation
At 1 April 2019 206 136 1,916 - 2,258
Charge for the year 9 45 1,267 - 1,321
========================== ============= ========== =============== ========== ========
At 31 March 2020 215 181 3,183 - 3,579
-------------------------- ------------- ---------- --------------- ---------- --------
At 1 April 2020 215 181 3,183 - 3,579
Charge for the year 49 20 1,225 - 1,294
========================== ============= ========== =============== ========== ========
At 31 March 2021 264 201 4,408 - 4,873
-------------------------- ------------- ---------- --------------- ---------- --------
Net book value
At 31 March 2020 192 23 5,973 15,554 21,742
-------------------------- ------------- ---------- --------------- ---------- --------
At 31 March 2021 538 4 4,748 15,554 20,844
-------------------------- ------------- ---------- --------------- ---------- --------
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive income. Customer relationships have a remaining amortisation period of between 2 and 7 years.
Cash-generating units
Goodwill and intangible assets are allocated to CGUs in order to be assessed for potential impairment. During the year the Directors reconsidered the CGUs within the Group following the unification of all Group management, systems, reporting and operations. The Group has a Senior Leadership Team that manages the SysGroup business within a single operational and delivery structure having fully integrated the previously acquired Certus IT and Hub Network Services ("HNS") businesses. The Board of Directors review the financial and operating performance of the Group as a single performing unit which reflects how the business is managed and controlled. On 31 March 2021, the businesses, assets and liabilities of Certus IT and HNS were hived up to SysGroup Trading Limited.
In view of these developments, the Directors concluded that the CGUs which represented these businesses at the "statutory entity" level were no longer appropriate and that the Group has a single CGU of "Managed IT Services". As the Group acquires new businesses, they will form their own CGU until they have been integrated into the Group's core operational structure.
The allocation of goodwill and carrying amounts of assets for each CGU is as follows:
Carrying value of
Allocation of goodwill assets
2021 2020 2021 2020
GBP'000 GBP'000 GBP'000 GBP'000
----------------------- ----------- --------- ---------- --------
Managed Services 15,554 9,727 19,331 10,892
Certus IT - 5,504 - 8,341
HNS - 323 - 1,378
Total 15,554 15,554 19,331 20,611
----------------------- ----------- --------- ---------- --------
Impairment review
When assessing impairment, the recoverable amount of each CGU is based on value-in-use calculations (VIU). VIU calculations are an area of material management estimate as set out in note 2. These calculations require the use of estimates, specifically: pre-tax cash flow projections; long-term growth rates; and a pre-tax discount rate. Cash flow projections are based on the Group's detailed annual operating plan for the forthcoming financial year which has been approved by the Board.
2021 Managed Certus IT HNS
IT Services
------------------------------------- ------------- ---------- -------
Discount rate 9.50% - -
Revenue growth rate year 2 to year 5.00% - -
5
Terminal growth rate 2.50% - -
------------------------------------ ------------- ---------- -------
2020
------------------------------------- ------------- ---------- -------
Discount rate 11.00% 11.00% 11.00%
Revenue growth rate year 2 to year
5 5.00% 5.00% 5.00%
Terminal growth rate 2.50% 2.50% 2.50%
------------------------------------- ------------- ---------- -------
9. Trade and other receivables
Group Group
2021 2020
Amounts due within one year GBP'000 GBP'000
----------------------------- -------- --------
Trade debtors 916 1,427
Prepayments 812 1,299
Total 1,728 2,726
----------------------------- -------- --------
10. Trade and other payables
Group Group
2021 2020
Amounts due within one year GBP'000 GBP'000
----------------------------------------------- -------- --------
Trade payables 811 1,847
Accruals 990 931
----------------------------------------------- -------- --------
Total financial liabilities, excluding loans
and borrowings measured at amortised cost 1,801 2,778
Corporation tax 254 158
Other taxes and social security costs 628 552
Total creditors 2,683 3,488
----------------------------------------------- -------- --------
Group Group
2021 2020
Contingent consideration GBP'000 GBP'000
----------------------------------------------- -------- --------
Certus IT Limited - 1,000
----------------------------------------------- -------- --------
11. Loans and borrowings
Group Group
2021 2020
Non-current GBP'000 GBP'000
----------------------------------------------- --------- -----------
Lease liabilities 190 441
Bank loan 757 1,146
Total 947 1,587
----------------------------------------------- --------- -----------
Group Group
2021 2020
Current GBP'000 GBP'000
---------------------------------- ---------------------- -----------
Lease liabilities 230 268
Bank loan 416 251
Total 646 519
---------------------------------- ---------------------- -----------
12. Share Capital
Group Group
2021 2021
Number GBP'000
--------------------------------------------- ----------- --------
Allotted, called up and fully paid ordinary
shares of GBP0.01 each
At 1 April 2019 49,419,690 494
At 31 March 2020 49,419,690 494
--------------------------------------------- ----------- --------
At 31 March 2021 49,419,690 494
--------------------------------------------- ----------- --------
In December 2020, the Company purchased 560,000 of its own ordinary shares of GBP0.01 each for consideration of GBP201,000. These shares are being held as Treasury shares and will be used to settle future issues of share options to employees as they vest and become exercised.
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