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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 2019 to Apr 2024
TIDMSYS
RNS Number : 4442U
SysGroup PLC
25 November 2019
25 November 2019
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Half yearly results for the six months ended 30 September 2019
SysGroup PLC (AIM:SYS), the multi award-winning Managed IT Services and Cloud Hosting provider, is pleased to announce its unaudited half year results for the six months ended 30 September 2019 (H1 2020).
Financial highlights
-- Revenue increased 60.0% to GBP9.3m (H1 2019: GBP5.8m) -- Recurring Managed IT Services represented 79.7% of total revenue (H1 2019: 77.8%) -- Adjusted EBITDA(1) increased 111.2% to GBP1.18m (H1 2019: GBP0.56m) -- Adjusted profit before tax(2) of GBP0.65m (H1 2019: GBP0.26m) -- Statutory loss before tax of GBP0.37m (H1 2019: loss of GBP0.35m) -- Adjusted basic EPS(3) of 1.1p (H1 2019: 1.1p) -- Basic loss per share of 0.9p (H1 2019: loss per share 1.4p) -- Adjusted cash generated from operations(4) increased 106% to GBP1.1m (H1 2019: GBP0.5m) -- Cash of GBP2.65m at 30 September 2019 (30 September 2018: GBP1.15m) -- Net (debt)(5) at 30 September 2019 of GBP(0.72)m (30 September 2018: GBP(0.84)m)
Operational highlights
Hot Features
Premium
-- Acquisition of Hub Network Services Limited ("HNS") for GBP1.45m
-- Integration of HNS completed in under three months
-- Introduction of Customer Engagement plan demonstrating >97% satisfaction
-- Planned closure of legacy Coventry office and datacentre complete
Post-period highlights
-- Martin Audcent awarded North West Finance Director of the year 2019
Adam Binks, Chief Executive Officer, commented:
"I am pleased to report that SysGroup continues to deliver strongly against its stated strategy, with recurring revenues now representing almost 80% of our total income compared to 68% when I stepped into the CEO role in April 2018. The acquisition of HNS has supplemented the acquisition of Certus which we completed in H2 2018 and was our largest acquisition to date. The successful execution of these transactions demonstrates our capability to identify and attract good businesses, together with the capability to successfully integrate them as we build out our operational infrastructure to scale up the business.
Supported by a team of more than 130 individuals, SysGroup is moving forward at pace and is taking its place in the market as a serious contender. I thank each and every one of the team that strive each day to help make SysGroup one of the leading MSPs in the UK and give me the confidence to report that the Company continues to trade in line with management's expectations."
Notes
1. Adjusted EBITDA is earnings before interest, taxation, depreciation, amortisation of intangible assets, exceptional items and share based payments.
2. Adjusted profit before tax is profit before tax after adding back amortisation of intangible assets, exceptional items and share based payments.
3. Adjusted basic EPS is profit after tax after adding back amortisation of intangible assets, exceptional items, share based payments and associated tax.
4. Adjusted cash generated from operations represents operational cashflows adjusted to exclude cashflows for exceptional items
5. Net (debt) represents cash balances less bank loans, lease liabilities and contingent consideration.
For further information please
contact:
Tel: 0151 559
SysGroup Plc 1777
Adam Binks, Chief Executive
Officer
Martin Audcent, Chief Financial
Officer
Shore Capital (Nomad and Broker) Tel: 020 7408
Corporate Finance: Edward Mansfield 4090
/ Daniel Bush
Corporate Broking: Heath Snyder
/ Fiona Conroy
Alma PR (Financial PR) Tel: 0203 405
Josh Royston / Helena Bogle 0208
About SysGroup
SysGroup is a leading provider of Managed IT Services, Cloud Hosting, and expert IT Consultancy. The Group delivers solutions that enable clients to understand and benefit from industry leading technologies and advanced hosting capabilities. SysGroup focuses on a customer's strategic and operational requirements - enabling clients to free up resources, grow their core business and avoid the distractions and complexity of delivering IT services.
The Group has offices in Liverpool, London, Newport, Bristol and Telford.
For more information, visit http://www.sysgroupplc.com
Introduction
The Company has continued to make significant progress during the first six months of the year in a difficult economic environment, reflecting the success of our focus on building strong levels of recurring revenue. Revenue grew by 60% over the first half of last year, to GBP9.3m, with recurring revenue of 79.7% compared to 77.8% for the first half of last year. The revenue reflects the first full six-month contribution of Certus IT Limited ("Certus") which we acquired in February 2019, and a part period contribution from Hub Network Services Limited ("HNS"), which we acquired in June 2019.
The market environment for Value Added Reseller ("VAR") services has been impacted due to ongoing macroeconomic uncertainty, with many businesses choosing to delay major asset refreshes and purchasing decisions until the political backdrop is clearer. While this has impacted the rate of our revenue growth we remain confident in meeting our expectations. In the six months under review, the Company delivered adjusted EBITDA of GBP1.18m (H1 2019: GBP0.56m) with strong operating cash generation. This has been achieved through a clear focus on our cost base, synergies from prior acquisitions and prioritising investment into areas most suitable for the current environment, providing a platform for the continued sustainable growth of the Group for the future. The VAR business remains well placed to capitalise on this investment once conditions normalise.
Both Certus and HNS have integrated very well which is a result of the structures previously put in place to enable the Company to scale effectively and seamlessly as it continues to seek attractive acquisition opportunities. Further operational and structural improvements have been made during the course of the first six months in preparation for the full integration of Certus once the earn-out period is completed in February 2020. Certus and HNS both continue to perform well and in line with our expectations and the feedback from customers and staff alike has been very positive.
Strategy
The Group's strategy remains consistent: to expand its position as a trusted provider of Managed IT Services to clients in the UK. The Board believes that a business focused on the provision of Managed IT Services offers the highest growth opportunity and the potential for increased margins and longer-term contracts, thereby providing greater revenue visibility. In pursuit of this strategy, the Group has positioned itself as an extension of a customer's existing IT department, with an emphasis on consultative-led sales to guide customers through the complexities and developments in the forever changing world of IT. The process is supplemented by customer service and support. The Group invests in R&D to ensure its clients take advantage of the latest and best solutions available to them, with a vendor/cloud agnostic approach.
The Company's route to execute this strategy is through a combination of organic and acquisitive growth whilst ensuring we create cross-selling opportunities across our acquired customer bases.
Results and trading
During the period, the Group has delivered revenues of GBP9.3m (H1 2019: GBP5.8m) and Adjusted EBITDA of GBP1.18m (H1 2019: GBP0.56m). Gross profit increased in the period to GBP5.5m (H1 2019: GBP3.6m), representing a gross margin of 59% (H1 2019: 62%). As expected, gross margin has shifted slightly lower compared to H1 2019 following the acquisitions of Certus and HNS.
Adjusted operating expenses have increased to GBP4.3m (H1 2019: GBP3.0m) which reflects the increased size of the Group following the acquisitions. Management have maintained good control of the cost base with operating expenses as a percentage of revenue having reduced by 6% to 46% in H1 2020 (H1 2019: 52%). We expect this improvement in operating cost efficiency to be maintained throughout the course of H2 2020.
Exceptional items of GBP0.3m (H1 2019: GBP0.2m) relate to professional fees for the acquisition of HNS, property exit costs for the planned closure of the Coventry office, and integration and restructuring costs following the acquisitions. The increase in amortisation is due to the commencement of amortisation charges for the Certus and HNS acquired intangible assets.
Adjusted basic earnings per share for H1 2020 was 1.1 pence (H1 2019: 1.1 pence). Basic loss per share for H1 2020 was 0.9 pence (H1 2019: loss per share of 1.4 pence).
Gross cash at 30 September 2019 was GBP2.65m (30 September 2018: GBP1.15m). The Group continues to manage working capital effectively with a strong operating cash conversion of 96% in H1 2020 (H1 2019: 99%) which is at the high end of the Board's target range. During H1 2020 cash has been invested in capex of GBP0.2m, one-off acquisition and integration costs of GBP0.3m and consideration paid for acquisitions of GBP1.7m. Net debt at 30 September 2019 was GBP0.72m (H1 2019: GBP0.84m) which includes the full fair value of contingent consideration payable for the acquisition of Certus which will be due for payment in Q1 of the next financial year, subject to the financial performance of Certus. During H2 2020 we will be investing in the core operational business systems for the Group and expect to capitalise the development costs associated with the design, build and implementation. The benefits afforded to the Group by this project will allow for further seamless scalability and a single platform from which our teams can operate.
The Group has adopted IFRS 16 - Leases for the financial year ending 31 March 2020 and has chosen to use the modified retrospective approach to adoption which means there are no restatements to the prior year figures. Within the income statement, operating lease charges, which previously sat in administrative expenses, have been replaced by depreciation and interest expenses. The adoption of IFRS 16 resulted in a right to use asset of GBP0.51m, with a corresponding liability of GBP0.60m, being recognised as at 1 April 2019. Within the consolidated income statement, the operating lease charge has been replaced by depreciation and interest expenses. This has resulted in a decrease in operating expenses and increase in finance costs. Further information is disclosed in the notes to the half yearly report.
Market Opportunity
The opportunity for SysGroup is, we believe, both significant and growing driven by both commercial and regulatory forces, most notably since the implementation of GDPR in May 2018 which has led to increased levels of demand from both prospects and customers for secure solutions. Security, Governance and Compliance remain three of the key areas of focus for organisations looking to consume managed IT services. With increasing regulation and external threats, businesses want to minimise risk as they rely more and more on IT to deliver their own products and services. Further, they want to understand where liability and risk share lies in the case of breaches and, at the same time, make their chosen solution as cost effective as possible. The volume and breadth of solutions, particularly with migration to the cloud, means that IT departments are struggling to understand what best suits their needs, exacerbated by the fact that the pace of technological change continues to be so swift.
SysGroup is ideally placed to benefit from these dynamics through its consultative approach to fulfilling clients' needs. Our staff are continually focused on the latest product developments and are able to design and present technology agnostic solutions. IT is no longer viewed merely as a burden cost centre but as a business critical enabler and with the shortage of non-industry skilled, relevant staff, an outsourced, consultative approach such as ours is proving an increasingly attractive proposition.
Operations
In sales and marketing, integration of sales teams across the acquired businesses of Certus and HNS with existing sales teams has been effective. As a result, all sales capabilities are aligned around the Group's strategy, with development training to focus on new business generation and opportunity creation across the board. Rebranding of the acquired businesses will take place in the second half of the year to reflect our operating model of a single brand across the Group. We have also launched a customer engagement strategy to better identify customer motivations and preferences to ensure we maintain our excellent customer retention rates. It's particularly pleasing to note that customer satisfaction in the six months under review was in excess of 97%.
The Group's Coventry data centre was decommissioned towards the end of the period with customers migrated to other facilities within our existing footprint, which was enhanced following the acquisition of Certus, providing further cost synergies as we move forward into the second half of the financial year.
Following the acquisition of the HNS business, we have commenced a project to consolidate all of our legacy network assets onto a single platform that will interconnect at each of our key datacentre locations, providing further scalability and redundancy to our hyper-scale hosting platforms. The project is expected to last for a period of 12 months and will provide future cost synergies once completed.
Outlook
We are continuing to build a very robust and capable business as a result of a growing, talented and dedicated team, all focused on delivering outstanding customer outcomes. Our geographical reach has expanded, along with our suite of products and services and we are increasingly well placed to meet the complex needs of our customers.
The operational and structural improvements that we continue to make will further benefit the business as it continues to scale and we have a proven ability to identify, attract and integrate good businesses to add to our platform, alongside the appetite to do so. I am pleased to report that the Group continues to perform in line with our expectations as we continue to execute on our growth strategy.
Adam Binks
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
Notes GBP'000 GBP'000 GBP'000
============================================ ====== ============ ============ ==========
Revenue 2 9,260 5,786 12,773
============================================ ====== ============ ============ ==========
Cost of sales (3,788) (2,214) (4,994)
Gross profit 2 5,472 3,572 7,779
Operating expenses before depreciation,
amortisation, acquisition and integration
costs and share based payments (4,291) (3,013) (6,366)
====== ============ ============
Adjusted EBITDA 1,181 559 1,413
============================================ ====== ============ ============ ==========
Depreciation (427) (243) (494)
Amortisation of intangibles (636) (336) (723)
Exceptional items 4 (288) (236) (736)
Share based payments (95) (32) (119)
============================================ ====== ============ ============ ==========
Administrative expenses (5,737) (3,860) (8,438)
Operating loss (265) (288) (659)
============================================ ====== ============ ============ ==========
Finance costs (103) (60) (167)
Loss before taxation (368) (348) (826)
Taxation (59) 34 104
============================================ ====== ============ ============ ==========
Total comprehensive loss attributable
to the equity holders of the company (427) (314) (722)
============================================ ====== ============ ============ ==========
Basic earnings per share (pence) 3 (0.9p) (1.4p) (2.8p)
Fully diluted earnings per share (pence) 3 (0.9p) (1.4p) (2.8p)
============================================ ====== ============ ============ ==========
The accompanying notes form an integral part of this consolidated statement of comprehensive income.
All the results arise from continuing operations.
CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2019
Unaudited Unaudited Audited
30-Sep-19 30-Sep-18 31-Mar-19
Notes GBP'000 GBP'000 GBP'000
============================================== ====== ========== ========== ==========
Assets
Non-current assets
Goodwill 15,578 9,727 15,508
Intangible assets 6,704 2,709 6,173
Plant, property and equipment 1,977 804 1,420
============================================== ====== ========== ========== ==========
24,259 13,240 23,101
============================================== ====== ========== ========== ==========
Current assets
Trade and other receivables 6 2,283 1,313 2,856
Cash and cash equivalents 2,647 1,154 3,376
============================================== ====== ========== ========== ==========
4,930 2,467 6,232
============================================== ====== ========== ========== ==========
Total Assets 29,189 15,707 29,333
============================================== ====== ========== ========== ==========
Equity and Liabilities
Equity attributable to the equity shareholders of the parent
============================================================================== ==========
Called up share capital 494 231 494
Share premium 9,080 - 9,080
Other reserve 2,226 2,042 2,129
Translation reserve 4 4 4
Retained earnings 7,856 8,778 8,370
============================================== ====== ========== ========== ==========
19,660 11,055 20,077
============================================== ====== ========== ========== ==========
Non-current liabilities
Lease liabilities 540 28 81
Contingent consideration due on acquisitions - - 1,000
Deferred taxation 1,288 594 1,120
Bank loan 1,284 1,607 1,397
============================================== ====== ========== ========== ==========
3,112 2,229 3,598
============================================== ====== ========== ========== ==========
Current liabilities
Trade and other payables 7 3,575 1,796 3,992
Deferred income 1,297 268 1,238
Contingent consideration due on acquisitions 1,000 - -
Bank loan 224 226 224
Lease liabilities 321 133 204
============================================== ====== ========== ========== ==========
6,417 2,423 5,658
============================================== ====== ========== ========== ==========
Total Equity and Liabilities 29,189 15,707 29,333
============================================== ====== ========== ========== ==========
CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY
SIX MONTHSED 30 SEPTEMBER 2019
Attributable to equity holders of the parent
Share Share Other Translation Retained Total
capital premium reserve reserve profit
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================================ ========= ========= ========= ============ ========= ========
At 1 April 2018 231 - 2,010 4 9,092 11,337
Profit and total comprehensive
income for the period - - - - (314) (314)
Movement in share option
reserve - - 32 - - 32
================================ ========= ========= ========= ============ ========= ========
At 30 September 2018 231 - 2,042 4 8,778 11,055
Profit and total comprehensive
income for the period - - - - (408) (408)
Share options granted - - 87 - - 87
Issue of share capital
- fees - (657) - - - (657)
Issue of share capital
- placing 263 9,737 - - - 10,000
At 31 March 2019 494 9,080 2,129 4 8,370 20,077
Adjustment on adoption
of IFRS16 - - - - (87) (87)
Profit and total comprehensive
income for the period - - - - (427) (427)
Movement in share option
reserve - - 97 - - 97
================================ ========= ========= ========= ============ ========= ========
At 30 September 2019 494 9,080 2,226 4 7,856 19,660
================================ ========= ========= ========= ============ ========= ========
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Other reserve Amount reserved for share-based payments
to be released over the life of the instruments
and the equity element of convertible loans
and the amount subscribed for share capital
in excess of nominal value of acquisition
of another company
Retained earnings All accumulated profits and losses arising
net of distributions to shareholders
Share premium Amounts subscribed for share capital in
excess of required values
================== =========================================================
CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS
SIX MONTHSED 30 SEPTEMBER 2019
Unaudited Unaudited Audited
six months six months year to
to to 31 Mar 19
30 Sept 30 Sep 18
19
GBP'000 GBP'000 GBP'000
======================================== ================ ============ ===========
Cash flows used in operating
activities
Net loss after taxation (427) (314) (722)
Adjustments for:
Depreciation and amortisation 1,063 579 1,226
Finance costs 103 60 167
Share based payments 95 32 119
Taxation 59 (34) (104)
========================================= ================ ============ ===========
Operating cash flows before movement
in working capital 893 323 686
========================================= ================ ============ ===========
Decrease/(Increase) in trade
and other receivables 942 299 (188)
(Decrease)/Increase in trade
and other payables (902) (307) 275
========================================= ================ ============ ===========
Operating cashflows before interest
and tax 933 315 773
========================================= ================ ============ ===========
Interest paid (103) (60) (123)
Taxation refunded/ (paid) 21 12 (49)
========================================= ================ ============ ===========
Operational cashflows 851 267 601
========================================= ================ ============ ===========
Cash flows from investing activities
Payments to acquire property, plant
& equipment (180) (193) (296)
Acquisition of subsidiary companies (1,659) - (7,956)
Cash acquired with acquisitions 609 - 949
========================================= ================ ============ ===========
Net cash used in investing activities (1,230) (193) (7,303)
========================================= ================ ============ ===========
Cash flows from investing activities
======================================== ================ ============ ===========
Net proceeds from issue of ordinary
share capital - - 9,343
Repayment of loan facility including
fees (113) (125) (383)
Capital repayment of lease liabilities (237) (110) (197)
========================================= ================ ============ ===========
Net cash from financing activities (350) (235) 8,763
========================================= ================ ============ ===========
Cash flows from financing activities
======================================== ================ ============ ===========
Net (decrease)/increase in cash
and cash equivalents (729) (161) 2,061
========================================= ================ ============ ===========
Cash and cash equivalents at the
beginning of the period 3,376 1,315 1,315
========================================= ================ ============ ===========
Cash and cash equivalents at the
end of the period 2,647 1,154 3,376
========================================= ================ ============ ===========
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
SIX MONTHSED 30 SEPTEMBER 2019
1. ACCOUNTING POLICIES
The accounting policies used in the preparation of the consolidated interim financial information for the six months ended 30 September 2019 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union and are consistent with those that will be adopted in the annual statutory financial statements for the year ended 31 March 2020.
While the financial information included has been prepared in accordance with the recognition and measurement criteria of IFRS, as adopted by the European Union, these financial statements do not contain sufficient information to comply with IFRSs. The accounting policies applied by the Group in this financial information reflect the adoption of IFRS 16 Leases which is effective as of 1 January 2019. The adoption of this standard has not resulted in a restatement of the prior year figures.
Other than the adoption of IFRS 16 - Leases, the accounting policies adopted in the interim financial statements are consistent with those adopted in the financial statements for the year ended 31 March 2019.
IFRS 16 - Leases
IFRS16 has replaced IAS17 Leases and is effective on 1 January 2019. The Group has adopted IFRS 16 using the modified retrospective basis with recognition of a transitional adjustment on the date of initial application being 1 April 2019. IFRS 16 introduces a single lessee accounting model, where the Group now recognises a lease liability and a right of use asset for all leases. The group has no significant leasing activities acting as a lessor. On adoption of IFRS16 the group recognised a right of use asset in relation to the lease of office space.
IFRS16 provided for certain optional practical expedients, including those in relation to the initial adoption of the standard. The group applied the following practical expedients:
-- The group did not reassess any contracts not previously identified as a lease under IAS17 or IFRIC4 prior to the transition date of 1 April 2019.
-- A single discount rate was applied to a portfolio of leases with reasonably similar characteristics
-- Applied the exemption not to recognise a right-of-use asset and liability for leases with less than 12 months of lease term remaining as at the date of initial application
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the group's incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
Right of use assets have been calculated as if the standard had been applied from the lease commencement date and initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
-- lease payments made at or before commencement of the lease; -- initial direct costs incurred; and
-- the amount of any provision recognised where the group is contractually required to dismantle, remove or restore the leased asset.
Within the income statement, operating lease charges, which previously sat in administrative expenses, have been replaced by depreciation and interest expenses. The adoption of IFRS 16 resulted in a right of use asset of GBP0.51m, with a corresponding liability of GBP0.60m, being recognised as at 1 April 2019. Within the consolidated income statement, the operating lease charge has been replaced by depreciation and interest expense. This has resulted in a GBP0.1m decrease in operating expenses and Adjusted EBITDA, and a GBP0.1m increase in finance costs.
Exceptional items
The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which the Directors consider, because of their size or nature and expected non-recurrence, merit separate presentation to facilitate financial comparison with prior periods and to assess trends in financial performance. Exceptional items are included in Administration expenses in the Consolidated Statement of Comprehensive Income but excluded from Adjusted EBITDA as management believe they should be considered separately to gain an understanding of the underlying profitability of the trading businesses.
Going concern
The consolidated interim financial information has been prepared on a going concern basis. The Directors have reviewed cash flow forecasts for the Group, including sensitivity analysis on key assumptions and the forecasts show that the Group expects to meet its liabilities taking into account all risks and uncertainties. As a result, the Directors formed a judgement that there is reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors consider that the adoption of the going concern basis is appropriate.
2. SEGMENTAL REPORTING
The Chief Operating Decision Maker for the Group is the Board of Directors. The Group reports in two segments: Managed IT Services - this segment provides all forms of managed services to customers and includes professional services; and Value Added Resale (VAR) - this segment provides all forms of VAR sales where the business sells products and licences from supplier partners.
The monthly management accounts reported to the Board of Directors is reviewed at a consolidated level with the operating segments representative of the business model for growth of recurring contract income in Managed IT Services and VAR sales as a complementary business activity. The Group's trading business is not subject to seasonal fluctuations, but the timing of VAR sales is subject to when customers elect to make asset refresh investment decisions. The Board review the results of the operating segments at the levels of revenue and gross profit since the Group's management and operational structure operate as centralised Group functions. Assets and liabilities are also not reviewed on a segmental basis. All assets are within the UK other than a low value of property, plant & equipment in the USA. All segments are continuing operations and there are no transactions between segments.
Unaudited Unaudited Audited
Six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================== ============ ============ ==========
Revenue
Managed IT Services 7,382 4,501 9,448
Value Added Resale (VAR) 1,878 1,285 3,325
=========================== ============ ============ ==========
9,260 5,786 12,773
========================== ============ ============ ==========
Gross Profit
Managed IT Services 5,073 3,285 6,959
Value Added Resale (VAR) 399 287 820
=========================== ============ ============ ==========
5,472 3,572 7,779
========================== ============ ============ ==========
There were no sales between the two business segments, and all revenue is earned from external customers. The business segments' gross profit is reconciled to profit before taxation as per the consolidated income statement. The Group's overheads are managed centrally by the Board and consequently there is no reconciliation to profit before tax at a segmental level.
3. EARNINGS PER SHARE
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
======================================== ============ ============ =================
Loss for the financial period
attributable to shareholders (427) (314) (722)
Adjusted profit for the financial
period 562 251 809
Weighted number of equity shares
in issue 49,419,690 23,103,898 25,843,624
Adjusted basic earnings per share
(pence) 1.1p 1.1p 3.1p
Basic loss per share (pence) (0.9p) (1.4p) (2.8p)
Diluted loss per share (pence) (0.9p) (1.4p) (2.8p)
======================================== ============ ============ =================
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
======================================== ============ ============ =================
Loss after tax used for basic earnings
per share (427) (314) (722)
Amortisation of intangible assets 636 336 723
Exceptional items 288 236 736
Share based payments 95 32 119
Tax adjustments (30) (39) (47)
======================================== ============ ============ =================
Adjusted profit used for adjusted
earnings per share 562 251 809
======================================== ============ ============ =================
4. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
Six months Six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
=============================== ============ ============ ==========
Integration and restructuring 204 170 182
Acquisition costs 84 66 554
=============================== ============ ============ ==========
288 236 736
=============================== ============ ============ ==========
The acquisition costs of GBP84,000 in H1 FY20 relate to professional fees incurred for the acquisition of Hub Network Services Limited in June 2019. Integration and restructuring costs represent the costs incurred for integrating newly acquired companies and for restructuring the internal business to manage the requirements of a larger group.
5. ALTERNATIVE PERFORMANCE MEASURES
Reconciliation of Operating loss Unaudited Unaudited Audited
to Six months Six months year to
Adjusted EBITDA to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
================================== ============ ============ ===========
Operating loss (265) (288) (659)
Depreciation 427 243 494
Amortisation of intangibles 636 336 723
================================== ============ ============ ===========
EBITDA 798 291 558
================================== ============ ============ ===========
Exceptional items 288 236 736
Share based payments 95 32 119
================================== ============ ============ ===========
Adjusted EBITDA 1,181 559 1,413
================================== ============ ============ ===========
Reconciliation of Loss before Tax Unaudited Unaudited Audited
to Six months Six months year to
Adjusted Profit before Tax to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
=================================== ============ ============ ===========
Loss before tax (368) (348) (826)
Amortisation of intangibles 636 336 723
Exceptional items 288 236 736
Share based payments 95 32 119
=================================== ============ ============ ===========
Adjusted Profit before Tax 651 256 752
=================================== ============ ============ ===========
Cash conversion Unaudited Unaudited Audited
Six months Six months year to
to to 31-Mar-19
30-Sep-19 30-Sep-18 GBP'000
GBP'000 GBP'000
============================================ ============ ============ ===========
Operational cashflows 851 267 601
Adjustments:
Acquisition, integration and restructuring
cashflows 288 286 611
Cash generated from operations 1,139 553 1,212
============================================ ============ ============ ===========
Adjusted EBITDA 1,181 559 1,413
============================================ ============ ============ ===========
Cash conversion 96% 99% 86%
============================================ ============ ============ ===========
Unaudited Unaudited Audited
six months to six months year to
to
Net (debt)/cash 30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================== ==================== ============ =================
Cash balances 2,647 1,154 3,376
Bank loans - current (224) (226) (224)
Bank loans - non-current (1,284) (1,607) (1,397)
Lease liabilities (861) (161) (285)
Contingent consideration (1,000) - (1,000)
================================ =============== ============ =================
Net (debt)/cash (722) (840) 470
================================ =============== ============ =================
6. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
Six months Six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
========================= ============ ============ =================
Trade debtors 1,166 906 1,744
Prepayments and accrued
income 1,117 407 1,112
========================== ============ ============ =================
2,283 1,313 2,856
========================= ============ ============ =================
7. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
six months six months year to
to to
30-Sep-19 30-Sep-18 31-Mar-19
GBP'000 GBP'000 GBP'000
================================= ============ ============ =================
Trade payables 1,622 783 1,885
Corporation tax 451 122 311
Other taxes and social security 626 444 817
Accruals 876 447 979
================================== ============ ============ =================
3,575 1,796 3,992
================================= ============ ============ =================
8. ACQUISITIONS
In June 2019, the Company acquired 100% of the share capital of Hub Network Services Limited ("HNS"), a Managed IT Services Company registered in England & Wales with a head office in Bristol, England. HNS provides high quality internet connections, co-location and hosting solutions.
HNS was acquired for GBP1.46m cash paid on completion, cash free debt free, with a further GBP0.45m cash payment following the agreement of the completion accounts for the cash balance acquired, debt items and working capital adjustment. The company incurred GBP84,000 of professional fees and other acquisition costs in relation to this acquisition. These costs are included as Exceptional items in the consolidated statement of comprehensive income.
The Directors have considered the intangible assets acquired with HNS and have recognized an intangible asset in respect of customer relationships. The asset value has been calculated using a discounted cashflow method, based on the estimated level of profit to be generated from the customers acquired. A post tax discount rate of 9.80% was used in the valuation and the customer relationships are amortised over an estimated useful life of seven years. The goodwill arising on this acquisition is attributable to the technical skills of the workforce and cross-selling opportunities achievable from combining the acquired customer bases and trade with the existing Group.
The goodwill and intangible asset has been allocated to a new CGU, HNS, given the Company has its own operational structure, cash generation and financial reporting processes. The Directors consider that HNS does not form a separate operating segment and instead the revenue and gross profit is included in the managed IT services and VAR segments.
Recognised value of net assets acquired Book value Fair value Fair value
and liabilities assumed GBP'000 adj GBP'000
GBP'000
========================================= =========== =========== ===========
Cash and cash equivalents 609 - 609
Trade and other receivables 341 2 343
Property, plant and equipment 111 (8) 103
Intangible assets - 1,146 1,146
Trade and other payables (338) (53) (391)
Current income tax liability (8) - (8)
Deferred tax liability (19) (195) (214)
========================================= =========== =========== ===========
Identifiable net assets 1,588
Goodwill 323
========================================= =========== =========== ===========
Total net assets 1,911
========================================= =========== =========== ===========
Satisfied by:
Cash paid - on acquisition 1,457
Cash paid - consideration adjustment 454
========================================= =========== =========== ===========
Total consideration 1,911
========================================= =========== =========== ===========
9. AVAILABILITY OF INTERIM REPORT
Copies of this report are available on the Company's website at http://www.sysgroupplc.com
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR PGGUGGUPBGAC
(END) Dow Jones Newswires
November 25, 2019 02:00 ET (07:00 GMT)
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