REG - SysGroup PLC - Half Year Results to 30 September 2024
03/12/2024 07:00
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RNS Number : 5133O SysGroup PLC 03 December 2024
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constitute inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014 as it forms part of the domestic law of the United Kingdom
by virtue of the European Union (Withdrawal) Act 2018 (as amended) ("UK MAR").
Upon the publication of this announcement via the Regulatory Information
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3 December 2024
SysGroup plc
("SysGroup" or the "Company" or the "Group")
Half year results for the six months ended 30 September 2024
SysGroup plc (AIM:SYS), the technology partner for delivery and management of
cloud, data, and security services to power Artificial Intelligence ("AI") and
Machine Learning ("ML") transformation, announces its unaudited half year
results for the six months ended 30 September 2024 ("H1 FY25" or the
"Period").
Operational highlights
· Successfully raised £11.2m by way of an oversubscribed equity
placing, providing a robust financial foundation to support the future
strategic plan
· Invested in technical capabilities to deliver end to end solution
across the entire data landscape including full cloud solution across AWS and
Azure
· Developed additional R&D resources, including offshore
capabilities in India and Eastern Europe
· Progressed to AWS Advanced Tier Service Partners status (Level 3) in 6
months following our registration as a partner
· Invited to present AI transformation project at AWS re:Invent in
Las Vegas - 50,000+ attendees
· Approved as one of only two UK Zscaler Managed Security Service
Partners
· Promoted to CyberArk's Advanced Partner, top tier partner status
· Won second largest contract in SysGroup's history, totalling £2.2m
over three years
· In November 2024, acquired the trade and assets Crossword Consulting
Limited (in administration) (a recognised leader in cybersecurity consulting)
Financial highlights
· Revenue £10.16m (H1 FY24: £10.96m), includes a strategic shift
towards growth-oriented accounts that align with our core service offerings
· Managed IT Services recurring revenue increased to 86% of total
revenue (H1 FY23: 84%)
· Gross margin 49.6% (H1 FY24: 49.9%)
· Rebalanced cost base with a net investment of £0.6m in additional
resources and capabilities to underpin our new growth strategy
· Adjusted EBITDA(1)( )of £0.44m (H1 FY24: £1.57m)
· Statutory loss before tax of £1.09m (H1 FY24: loss before tax of
£1.09m)
· Net cash(2)( )of £4.63m at 30 September 2024 (30 September 2023:
net debt(2) of £(3.43)m)
Outlook
Whilst the Group has made significant advances operationally and the high
recurring nature of our revenue provides good visibility into our existing
revenue base, the Group remains dependent on a few high-value projects that
meaningfully impact the overall results given the Group's current size. As a
result of the longer-than-expected sales cycles and the focus on core
competencies and account consolidation process, the Board anticipates revenue
and adjusted EBITDA for H2 FY25 will be in line with H1 FY25 and therefore
performance for the year ending 31 March 2025 will be below current market
expectations.
Post the internal transformation the Board believes the Group is strategically
well positioned to maximise the opportunities presented in the medium term.
Heejae Chae, Executive Chair, commented:
"The past six months have been the most transformative and pivotal period for
the Group. The equity raise in June provided us with a robust financial
foundation enabling strategic investments in the technology and capabilities
necessary to accelerate our mission of becoming the partner of choice for
small and medium sized businesses ("SMBs") on their data journey. We have
successfully developed five technology towers, including comprehensive cloud
solutions across AWS and Azure. Within just six months of joining AWS as a
registered partner, we achieved Advanced Tier Partner status. This milestone
not only enhances our credibility but also allows us to co-market with AWS and
access critical marketing funds essential for thriving in the hyper-cloud
ecosystem. Further validating our progress, we have been invited to present
our internal AI transformation solution at the global AWS re:Invent conference
in Las Vegas, an event with over 50,000 attendees.
We have made significant progress in our transformation journey, addressing
legacy challenges and establishing a strong foundation for sustainable growth.
By re-earning customer trust, we have secured major transformation projects,
with Managed IT Services now accounting for 86% of our revenues, up from 84%
last year, further strengthening our financial stability.
Our pipeline remains strong and well-positioned for further growth as our
brand awareness continues to expand. Additionally, our strong balance sheet
has empowered us to execute our growth strategy, including the recent
acquisition of Crossword Consulting Limited (in administration), which has
expanded our cybersecurity capabilities into Compliance as a Service ("CaaS"),
offering solutions such as vCISO and pen-testing. I am excited about the
progress we have made to date. As we celebrate milestones we've achieved and
reflect on the challenges we've overcome, I take pride in how far we have come
and look forward with increasing optimism as the opportunities ahead of us
become evident."
Notes
1. Adjusted EBITDA is earnings before interest, taxation, depreciation,
amortisation of intangible assets, impairment of intangibles, exceptional
items and share based payments.
2. Net cash / (debt) represents cash balances less bank loans and lease
liabilities and excludes contingent consideration.
About us
SysGroup plc is a managed service provider of end-to-end data solutions
enabling us to take our customers on their AI data journey. The Group offers
an integrated set of modern technologies that collectively meets our customers
end-to-end data needs including connectivity, cloud hosting, delivery,
analytics and governance of customer data, as well as a security layer for
users and applications.
The Group has offices in Edinburgh, London, Manchester and Newport.
For more information, visit http://www.sysgroup.com
For further information please contact:
SysGroup Plc Tel: 0333 101 9000
Heejae Chae, Executive Chair
Owen Philips, Chief Financial Officer
Zeus Capital (Nominated Adviser and Broker) Tel: 0161 831 1512
Jordan Warburton
Nick Cowles
Alex Campbell-Harris
Nick Searle
Overview & Strategy
Our strategy is to position SysGroup as the partner of choice for SMBs in
their AI and digital transformation journey. A core part of this vision is
our Technology Services strategy which focuses on building a modern unified
data solution platform. Our integrated offering encompasses connectivity,
cloud hosting, delivery, analytics and governance and a robust security layer
for users and applications enabling us to meet the end-to end data needs of
our customers.
Revenue in the Period was £10.16m (H1 FY24: £10.96m). Managed IT services
now constitutes 86% of our revenues, up from 84% last year, further
strengthening our financial stability and visibility. During the Period, we
delivered Adjusted EBITDA of £0.44m, while continuing to invest in talent and
systems to support our new growth strategy.
The Group's cash balance has improved significantly from £1.94m in March 24
to £9.93m in September 2024, primarily driven by an equity raise of £10.59m
(net of transaction costs) in June 2024. This funding has transformed the
Group's financial standing, moving us from a net debt position of £(3.37)m in
March 24 to a net cash position of £4.63m. Part of the cash reserves
generated from the equity raise were used to settle the final Truststream
earn-out payment of £1.79m with the remainder retained for future
acquisitions and internal transformation.
Operations
During the period, we continued to make substantial investments in both our
internal technology infrastructure and our people. We successfully developed
five technology towers, focusing on, Hosting, Data Protection, Connectivity,
Cybersecurity and Analytics including ML and AI. These pillars are supported
by our Support and Monitoring teams, enabling a fully managed service
offering. We have hired the senior leaders who are now driving these
forward. We have also invested in additional R&D resources, including
offshore capabilities in India and Eastern Europe to support these teams.
Our expertise is reinforced by the technical accreditations achieved in the
period including:
· AWS Advanced Tier Service Partners status (Level 3) qualifying for
fundings and joint sales and marketing
· Authorisation as one of only two UK Zscaler Managed Security
Service Partners
· Promoted to CyberArk's Advanced Partner, top tier partner status
· Softcat Specialist Partner status - chosen partner for AI/ML,
CyberArk and Zscaler
· Watchguard Platinum Partner - one of only 2 in the UK
· AWS Public Sector accredited Partner
GeneSys
Our internal transformation project "GeneSys" is progressing rapidly as we
strive to embody our vision of being a first in class AI-led company.
Implementing the benefits of AI will enable us to serve as a live case study
of best practices for our customers as well as achieve significant
productivity gains. To date, we have developed and launched New GeneSys UI
and multi-tenant AWS infrastructure. We have also developed and provided
training on service desk AI tools, including an Information Finder, Log Triage
Tool and Customer Portal tool. Success with these tools has been quickly
evident and 1st response Service Level Agreement achievements increased from
75% to 94% on the first day of deployment. AWS have invited us to present
our work on this project at multiple events to date in Europe and at their
flagship re:Invent in Las Vegas in December which further validates our
progress.
Acquisition
We recently announced the acquisition of the trade and assets of Crossword
Consulting Limited ("CCL") (in administration), the consulting arm of
Crossword Cybersecurity plc (in administration). Based in London, CCL is a
recognised leader in cybersecurity consulting, offering specialised services
such as virtual CISO ("vCISO") support and penetration testing to medium and
large enterprises. This acquisition strengthens our capabilities with the
addition of 12 seasoned cybersecurity consultants, who will expand SysGroup's
customer offerings in cybersecurity and compliance. For the 12 months ending
30 September 2024, CCL delivered unaudited revenues of circa £2.40 million,
with more than 75% of revenues recurring. Additionally, CCL brings a diverse
client base of customers, including FTSE 100, FTSE 250, and S&P-listed
companies, which presents new cross-sell opportunities across multiple
sectors.
Results and Trading
In H1 FY25 the Group delivered revenue of £10.16m (H1 FY24: £10.96m) and
Adjusted EBITDA of £0.44m (H1 FY24: £1.57m). Managed IT services revenue
decreased to £8.77m (H1 FY24: £9.22m), a decline of 5% on the comparative
period, reflecting a strategic decision to off-board certain accounts. Value
Added Resale ("VAR") revenue was £1.39m (H1 FY24: £1.74m), a decrease of 20%
on the comparative period, driven by customer procurement cycles. The
revenue mix in H1 FY25 is 86% Managed IT services and 14% VAR sales (H1 FY24:
84%:16%).
Gross profit was £5.04m (H1 FY24: £5.47m) with a gross margin of 49.6% (H1
FY24: 49.9%). The Managed IT services margin of 52.5% is consistent with the
FY24 margin of 52.4%. The VAR margin has improved versus the prior period (up
to 31.7% compared to 16.1% in FY24) as the prior year contained a number of
lower margin VAR sales.
Adjusted operating expenses of £4.60m were higher than the same period last
year (H1 FY24: £3.90m), as expected due to the investment in the Senior
Leadership Team and AI/Machine Learning team. Adjusted operating expenses in
H2 FY25 are expected to be lower as we achieve forecast efficiencies in the
cost base, excluding the impact of the CCL acquisition.
The consolidated income statement includes £0.40m of exceptional costs (H1
FY24: £1.05m) which relate to restructuring costs, M&A project costs and
fair value adjustments on contingent consideration payments. The share-based
payments charge has decreased to £nil, with no active share schemes in H1
FY25. New Group incentive plans have been introduced in H2 FY25, as approved
by shareholders at the General meeting on 24 June 2024.
Net finance costs of £0.03m have decreased compared to the same period last
year (H1 FY24: £0.29m) as in the current period the Group has benefitted from
interest income on cash deposits raised, following the £10.59m (net of
transaction costs) equity raise in June 24.
The Group delivered a statutory loss before tax of £1.09m (H1 FY24: loss
before tax £1.09m).
The taxation credit of £0.28m (H1 FY24: credit of £0.34m) represents the
movement on deferred tax in the Period with no corporation tax charge arising
on the Group's trading position in H1 FY24.
Adjusted basic earnings per share for H1 FY25 was 0.0p (H1 FY24: 1.7p) and
basic loss per share was (1.2)p (H1 FY24: loss per share (1.5)p).
Cashflow & Net Debt
The Group's cash balance has increased significantly from £1.94m at 31 March
2024 to £9.93m at 30 September 2024, driven by the equity raise of £10.59m
(net of transaction costs) in June 2024. As a result, the Group has moved to a
net cash position of £4.63m (31 March 2024: net debt of (£3.37)m). The cash
reserves generated from the equity raise were partially used to settle the
final Truststream earn-out payment of £1.79m in the period and will be used
to fund future acquisitions and internal transformation.
Cash outflow from operations was £(0.49)m (H1 FY24: inflow of £0.23m) before
exceptional cash costs of £(0.53)m (H1 FY24: costs of £(1.01)m) is impacted
heavily by working capital movements and is expected to recover in H2 FY25.
Net cash outflows from investing activities of £(0.06)m) are lower than H1
FY24 (outflow of £(0.32)m) due to the benefit of £0.23m of interest income
on cash deposits (following the equity raise). The £0.25m of payments to
acquire intangible assets relate to the capitalisation of staff costs incurred
on internal AI transformation projects.
Net cash inflows from financing activities of £8.50m are driven mainly by the
£10.59m equity raise net of the Truststream earn-out payment of £1.79m and
RCF interest of £0.23m.
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
SIX MONTHS ENDED 30 SEPTEMBER 2024
Unaudited Unaudited Audited
year ended
six months to six months to
30-Sep-24 30-Sep-23 31-Mar-24
Notes £'000s £'000 £'000
Revenue 2 10,155 10,963 22,714
Cost of sales (5,114) (5,497) (12,318)
Gross profit 2 5,041 5,466 10,396
Operating expenses before depreciation, amortisation, exceptional items and (4,601) (3,897) (8,388)
share based payments
Adjusted EBITDA 440 1,569 2,008
Depreciation (277) (297) (570)
Amortisation of intangible assets (829) (866) (1,696)
Impairment of intangibles - - (3,718)
Exceptional items 4 (397) (1,052) (1,826)
Share based payments - (156) (194)
Administrative expenses (6,104) (6,268) (16,392)
Operating (loss)/profit (1,063) (802) (5,996)
Finance costs 5 (31) (287) (574)
Loss before taxation (1,094) (1,089) (6,570)
Taxation 276 343 670
Total comprehensive loss attributable (818) (746) (5,900)
to the equity holders of the company
Adjusted (loss) / earnings per share (pence) 3 0.0p 1.7p 2.1p
Basic loss per share (pence) 3 (1.2)p (1.5)p (12.1)p
Diluted loss per share (pence) 3 (1.2)p (1.5)p (12.1p)
All the results arise from continuing operations.
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2024
Unaudited Unaudited Audited
30-Sep-24 30-Sep-23 31-Mar-24
Notes £'000 £'000 £'000
Assets
Non-current assets
Goodwill 7 17,948 21,666 17,948
Intangible assets 7 4,133 5,536 4,708
Plant, property and equipment 1,605 2,013 1,846
23,686 29,215 24,502
Current assets
Trade and other receivables 8 4,967 5,609 4,003
Cash and cash equivalents 9,930 1,986 1,943
14,897 7,595 5,946
Total Assets 38,583 36,810 30,448
Equity and Liabilities
Equity attributable to the equity shareholders of the parent
Called up share capital 12 855 515 515
Share premium 19,329 9,080 9,080
Treasury reserve (984) (984) (984)
Other reserve 3,300 3,293 3,300
Retained earnings 2,038 8,173 2,856
24,538 20,077 14,767
Non-current liabilities
Lease liabilities 340 520 400
Contract liabilities 257 174 143
Provisions 148 148 148
Deferred taxation 574 1,106 849
Bank loan 10 4,752 4,720 4,738
6,071 6,668 6,278
Current liabilities
Trade and other payables 9 4,271 4,576 4,813
Lease liabilities 207 176 204
Contract liabilities 3,496 3,475 2,635
Contingent consideration 11 - 1,838 1,751
7,974 10,065 9,403
Total Equity and Liabilities 38,583 36,810 30,448
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
SIX MONTHS ENDED 30 SEPTEMBER 2024
Share capital Share premium Treasury reserve Other reserve Retained earnings Total
reserve
£'000 £'000 £'000 £'000 £'000 £'000
At 1 April 2023 494 9,080 (201) 3,205 8,851 21,429
Loss and total comprehensive expense for the period - - - - (552) (552)
Impact of prior year restatement - - - - (194) (194)
Purchase of own shares into Treasury - - (783) - - (783)
Issue of share capital 21 - - - - 21
Share options charge - - - 156 - 156
Reserves transfer on forfeiture of share options - - - (68) 68 -
At 30 September 2023 (unaudited) 515 9,080 (984) 3,293 8,173 20,077
Loss and total comprehensive expense for the period - - - - (5,348) (5,348)
Share options charge - - - 38 - 38
Reserves transfer on forfeiture of share options - - - (31) 31 -
At 31 March 2024 515 9,080 (984) 3,300 2,856 14,767
Loss and total comprehensive expense for the period - - - - (818) (818)
Issue of share capital net of transaction costs 340 10,249 - - - 10,589
At 30 September 2024 (unaudited) 855 19,329 (984) 3,300 2,038 24,538
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share Premium Reserve Amount subscribed for share capital in excess of nominal values.
Treasury reserve Company owned shares held for the purpose of settling the exercise of employee
share options.
Other Reserve Amount reserved for share-based payments to be released over the life of the
instruments and the equity element of convertible loans
Translation Reserve Amount represents differences in relations to the consolidation of subsidiary
companies accounting for currencies other than the Group's functional
currency.
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends)
not recognised elsewhere.
CONSOLIDATED CONDENSED STATEMENT OF CASHFLOWS
SIX MONTHS ENDED 30 SEPTEMBER 2024
Unaudited Unaudited Audited
six months to
year to
six months to
31-Mar-24
30-Sep-23
30-Sep-24
£'000s £'000 £'000
Cashflows used in operating activities
Loss after tax (818) (746) (5,900)
Adjustments for:
Depreciation and amortisation 1,106 1,163 2,266
Impairment of intangibles - - 3,718
Finance costs 31 287 574
Movement in contingent consideration 43 - -
Share based payments - 156 194
Taxation credit (276) (343) (670)
Operating cashflows before movement in working capital 86 517 182
(Increase)/decrease in trade and other receivables (980) (713) 819
Increase in trade and other payables 403 430 103
Cashflow from operations (491) 234 1,104
Taxation paid 40 (64) (439)
Net cash from operating activities (451) 170 665
Cashflows from investing activities
Payments to acquire property, plant & equipment (36) (180) (450)
Payments to acquire intangible assets (254) (139) (109)
Interest received on cash deposits 229 - -
Net cash used in investing activities (61) (319) (559)
Payment of contingent consideration on acquisitions (1,794) (886) (885)
Repurchase of shares into treasury - (783) (762)
Proceeds from issue of share capital 10,589 21 -
Capital / principal paid on lease liabilities (57) (171) (199)
Interest paid on loan facility (228) (217) (475)
Interest paid on lease liabilities (11) (15) (28)
Net cash used in financing activities 8,499 (2,051) (2,349)
Net (decrease)/increase in cash and cash equivalents 7,987 (2,200) (2,243)
Cash and cash equivalents at the beginning of the period /year 1,943 4,186 4,186
Cash and cash equivalents at the end of the period/year 9,930 1,986 1,943
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED 30 SEPTEMBER 2023
1. ACCOUNTING POLICIES
The accounting policies used in the preparation of the unaudited consolidated
condensed financial information for the six months ended 30 September 2024 are
prepared in accordance with UK adopted International Financial Reporting
Standards ("IFRS") and are consistent with those that will be adopted in the
annual statutory financial statements for the year ended 31 March 2025.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria, in accordance with UK adopted
International Financial Reporting Standards, these consolidated condensed
financial statements do not contain sufficient information to comply with
IFRSs.
The financial information for the six-month period ended 30 September 2024 and
30 September 2023 does not constitute statutory accounts within the meaning of
Section 434(3) of the Companies Act 2006 and is unaudited. The comparative
financial information for the year ended 31 March 2024 included within this
report does not constitute the full statutory accounts for that period. The
statutory Annual Report and Financial Statements for 2024 have been filed with
the Registrar of Companies. The Independent Auditor's Report on that Annual
Report and Financial Statements for 2023 was unqualified, did not draw
attention to any matters by way of emphasis, and did not contain a statement
under 498(2) or 498(3) of the Companies Act 2006.
This Interim Report has been prepared solely to provide additional information
to shareholders to assess the Group's strategies and the potential for those
strategies to succeed. The Interim Report should not be relied on by any other
party or for any other purpose.
This unaudited interim financial information has been prepared in accordance
with the requirement of the AIM Rules for Companies and in accordance with
this basis of preparation.
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 (Note 4) as management
believe they should be considered separately to gain an understanding of the
underlying profitability of the trading businesses.
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 Group has an operating model with a high level of resilience with 86% of
revenue deriving from contracted managed IT services which are business
critical supplies to customers. The Group has a gross cash balance of £9.93m
and a net cash position of £4.64m at 30 September 2024. The Group has undrawn
RCF facilities available of £3.2m which can be used for working capital and
acquisitions, and an unutilised overdraft facility of £0.5m. The Group is
forecasting to generate healthy operational cashflows and achieve the bank
loan covenants for the full period of the forecast to March 2026.
The Directors have reviewed the Group's financial forecasts and taken into
account the current UK economic outlook. The projected trading forecasts and
resultant cashflows, together with the confirmed loan and overdraft
facilities, 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 they continue to adopt the going concern basis of accounting in
preparing the financial statements.
2. SEGMENTAL REPORTING
The chief operating decision maker for the Group is the Board of Directors and
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 is for sales of IT hardware
and licences procured from supplier partners.
The monthly management accounts reported to the Board of Directors are
reviewed at a consolidated level and the Board review the results of the
operating segments at a revenue and gross profit level since the Group's
management and operational structure operate as unified 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, 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.
Unaudited Unaudited Audited
six months to six months to year to
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Revenue
Managed IT Services 8,766 9,223 18,592
Value Added Resale 1,389 1,740 4,122
10,155 10,963 22,714
Gross Profit
Managed IT Services 4,601 5,167 9,733
Value Added Resale 440 299 663
5,041 5,466 10,396
3. EARNINGS PER SHARE
Unaudited Unaudited Audited year ended
six months to six months to
30-Sep-24 30-Sep-23 31-Mar-24
Loss for the financial period attributable to shareholders (£818,061) (£746,336) (£5,900,000)
Adjusted profit for the financial period £111,942 £809,553 £1,010,000
Weighted number of equity shares in issue* 66,966,623 48,912,025 48,923,389
Weighted number of equity shares for diluted calculation* 68,886,531 50,935,963 50,710,251
Adjusted basic earnings per share (pence) 0.0p 1.7p 2.1p
Basic loss per share (pence) (1.2p) (1.5p) (12.1p)
Diluted loss per share (pence) (1.2p) (1.5p) (12.1p)
*The weighted number of equity shares in issue and for diluted calculation
excludes the Treasury shares held by the Company.
3. EARNINGS PER SHARE (continued)
Unaudited Unaudited Audited year to
six months to six months to
30-Sep-24 30-Sep-23 31-Mar-24
£'000 £'000 £'000
Loss after tax used for basic earnings per share (818) (746) (5,900)
Amortisation of intangible assets 829 866 1,696
Impairments of intangible assets - - 3,718
Exceptional items 397 1,052 1,826
Share based payments - 156 194
Tax adjustments (296) (519) (524)
Adjusted profit used for Adjusted earnings per share 112 809 1,010
The tax adjustments relate to current and deferred tax on the amortisation of
intangible assets, exceptional items and share based payments.
4. EXCEPTIONAL ITEMS
Unaudited Unaudited Audited
six months to six months to year ended
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Integration and restructuring costs 238 832 571
CEO exit and settlement - - 744
Supplier charges in dispute - 220 434
M&A Projects 116 - 194
Fair value adjustment of contingent consideration liability 43 - (117)
397 1,052 1,826
The integration and restructuring costs in the period relate to employee exit
costs and professional service fees incurred when restructuring the Group's
workforce. In the prior year, the integration and restructuring costs relate
to the settlement of the former CEO's contractual terms and costs associated
with the restructuring of the Senior Leadership Team. These costs are
considered material and non-recurring and have therefore been classified as
exceptional.
The M&A projects expenditure relate to costs associated with the
evaluation of potential acquisition targets. This is considered material and
has therefore been classified as exceptional.
The supplier charges in dispute are subject to ongoing action for which the
company is pursuing recovery. These costs are considered non-recurring and
exceptional and are therefore classified as exceptional.
All of the items above, based upon the judgment of the management team, meet
the definition of an exceptional item as defined within the Group's accounting
policies.
5. FINANCE COSTS
Unaudited Unaudited Audited
six months to six months to year to
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Interest payable on lease liabilities 11 15 28
Interest payable on bank loan 228 212 440
Arrangement fee amortisation on bank loan 14 17 34
Unwinding of discount on contingent consideration - 43 72
Other interest 6 - -
Interest received on cash deposits (228) - -
31 287 574
6. ALTERNATIVE PERFORMANCE MEASURES
Unaudited Unaudited Audited year to
Reconciliation of operating profit to adjusted EBITDA six months to six months to
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Operating (loss)/profit (1,063) (802) (5,996)
Depreciation 277 297 570
Amortisation of intangible assets 829 866 866
EBITDA 43 361 (3,730)
Exceptional items 397 1,052 1,826
Impairment of Intangibles - - 3,718
Share based payments - 156 194
Adjusted EBITDA 440 1,569 2,008
6. ALTERNATIVE PERFORMANCE MEASURES (continued)
Net debt Unaudited Unaudited Audited
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Cash balances 9,930 1,986 1,943
Bank loans - non-current (4,752) (4,720) (4,705)
Net cash /(debt) before lease liabilities 5,178 (2,734) (2,762)
Lease liabilities - property (547) (696) (604)
Net cash / (debt) 4,631 (3,430) (3,366)
Contingent consideration - (1,838) (1,751)
Net cash / (debt) including contingent consideration 4,631 (5,268) (5,117)
7. INTANGIBLE ASSETS
Systems development Software licences Customer relationships Goodwill Total
£'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2023 1,011 - 12,709 21,666 35,386
Additions 109 - - - 109
Disposals - - - (3,718) (3,718)
At 31 March 2023 (audited) 1,120 - 12,709 17,948 31,777
Additions 254 - - - 254
At 30 September 2024 (unaudited) 1,374 - 12,709 17,948 32,031
Accumulated amortisation
At 1 April 2023 356 - 7,069 - 7,425
Charge for the year 224 - 1,472 - 1,696
Disposals - - - - -
At 31 March 2024 (audited) 580 - 8,541 - 9,121
Charge for the year 114 - 715 - 829
At 30 September 2024 (unaudited) 694 - 9,256 - 9,950
Net book value
At 31 March 2024 (audited) 540 - 4,168 17,948 22,656
At 30 September 2024 (unaudited) 680 - 3,453 17,948 22,081
8. TRADE AND OTHER RECEIVABLES
Unaudited Unaudited Audited
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Trade receivables 1,981 2,067 1,577
Other receivables 2,986 3,542 2,426
4,967 5,609 4,003
9. TRADE AND OTHER PAYABLES
Unaudited Unaudited Audited
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Trade payables 2,070 2,304 3,132
Corporation tax - 360 -
Other taxes and social security 660 615 341
Accruals 1,541 1,297 1,340
4,271 4,576 4,813
10. BANK LOAN
Unaudited Unaudited Audited
30-Sep-24 30-Sep-23 31-Mar-24
£'000s £'000 £'000
Bank loan net of arrangement fee 4,752 4,720 4,738
The Group has an £8.0m revolving credit facility with Santander of which
£4.75m is drawn down at 30 September 2024. The banking facility has a term of
five years to April 2027, an interest rate of Base Rate +3.25% margin on drawn
funds and covenants that are tested quarterly relating to total net debt to
adjusted EBITDA leverage and minimum liquidity.
11. CONTINGENT CONSIDERATION
The Group acquired Truststream Security Solutions Limited in April 2022 and
the agreement included a two year earn-out mechanism with contingent
consideration payable up to £3.08m following the first and second
anniversaries of the transaction. The earn-out was subject to the achievement
of certain maintainable EBITDA performance targets in the first and second
12-month periods following the completion of the acquisition. The final
earn-out payment of £1,794k was made in H1 FY25. The excess above the
£1,751k recorded on 31 March 24 is shown within exceptional costs (note 4).
Unaudited Unaudited Audited
Contingent consideration 30-Sep-24 30-Sep-23 31-Mar-24
Amounts due within one year £'000s £'000 £'000
Contingent consideration - 1,869 1,751
Discounted value - (31) -
- 1,838 1,751
Amounts due after one year
Contingent consideration - - -
Discounted value - - -
- - -
Discounted contingent consideration - 1,838 1,751
12. SHARE CAPITAL
Equity share capital Number £'000
At 30 September and 31 March 2024 51,496,084 515
Issue of share capital 34,019,007 340
At 30 September 2023 85,515,091 855
On 26 June 2024 34,019,007 shares were allotted with a nominal value of £0.01
following an equity raise with a subscription price of £0.33 per share. The
total cash raised was £11,226,272. Transaction costs of £637,052 were
incurred, leaving net proceeds of £10,589,220.
13. AVAILABILITY OF INTERIM REPORT
Copies of this report are available on the Company's website at
http://www.sysgroup.com.
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