annual report & accounts 2017
SysGroup Plc
Walker House
Exchange Flags
Liverpool L2 3YL
Company Number
06172239
www.sysgroup.com
2
contents
4
6
8
9
16
18
22
26
29
31
34
36
39
42
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47
50
52
81
directors, secretary & advisers
highlights
strategic report – chairman’s statement
strategic report – chief executive officer’s report
board of directors’ profile
directors’ report
directors’ remuneration report
corporate governance report
statement of directors’ responsibilities
independent auditor’s report to the members of sysgroup plc
consolidated statement of comprehensive income
consolidated statement of financial position
company statement of financial position
consolidated statement of changes in equity
company statement of changes in equity
consolidated statement of cash flows
company statement of cash flows
notes to the consolidated financial statements
notice of annual general meeting
SysGroup Plc Annual Report & Accounts 2017 3
directors, secretary
and advisers
SysGroup Plc Annual Report & Accounts 2017 4
directors, secretary & advisers
Registrar
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS13 8AE
Lawyers
Kuit Steinart Levy LLP
3 St Mary’s Parsonage
Manchester M3 2RD
Hill Dickinson LLP
No.1 St. Paul’s Square
Liverpool L3 9SJ
Accountants
Grant Thornton UK LLP
Royal Liver Building
Liverpool L3 1PS
Independent Auditor
BDO LLP
3 Hardman Street
Manchester M3 3AT
Bankers
Santander (UK) plc
298 Deansgate
Manchester M3 4HH
Financial PR Advisers
Alma PR
1 Fore Street
London EC2Y 9DT
Board of Directors
John Michael Edelson
Non-Executive Chairman
Christopher Neil Evans
Chief Executive Officer
Julian Llewellyn
Chief Financial Officer
Robert Khalastchy
Non-Executive Director
Amy Yateman-Smith
Non-Executive Director
Company Secretary
Julian Llewellyn
Registered Office
Walker House
Exchange Flags
Liverpool L2 3YL
Company Number
06172239
Legal Entity Identifier (LEI)
213800D18GPZZJR9SH55
Company Website
www.sysgroup.com
Nominated Adviser
Shore Capital and Corporate Ltd
Bond Street House
14 Clifford Street
London W1S 4JU
Broker
Shore Capital Stockbrokers Ltd
The Corn Exchange
Fenwick Street
Liverpool L2 7RB
SysGroup Plc Annual Report & Accounts 2017 5
highlights
SysGroup Plc Annual Report & Accounts 2017 highlights
Financial
Revenue
Gross margin
Gross margin %
Adjusted EBITDA 1 (continuing operations)
Adjusted EBITDA 1 (discontinued operations)
Adjusted PBT 2
Profit/(loss) before tax
Operating cash inflow
Net Cash 3
6
2017
2016
2017
% increase /
decrease
£7.87m
£4.82m
61.3%
£0.62m
£0.19m
£0.45m
£0.32m
£1.22m
£3.07m
£4.76m
£3.00m
63.2%
£0.54m
£0.12m
£0.31m
£0.25m
£0.65m
£0.21m
+65.3%
+60.7%
(3.0%)
+14.8%
+58.3%
+45.2%
+28.0%
+87.7%
-
1.
Adjusted EBITDA, is earnings before interest, taxation, depreciation, amortisation, acquisition and restructuring costs, fair value adjustments and
share based payments
2.
Adjusted PBT is profit before taxation after adding back share based payments, amortisation on acquired intangibles and costs relating to integration
and restructuring
3.
Net Cash represents cash balances less finance lease liabilities
Operational
Transformation to a Managed Services provider
• Acquisition of System Professional Ltd (“Sys-Pro”) for an initial consideration of £4.0m
• Placing to raise £5.0m gross in July 2016
• Disposal of non-core SME Mass Market division for £2.7m (4.9x EBITDA) in July 2016
•
• New banking facilities of £3.0m, incorporating a £2.5m acquisition facility agreed with Santander
• Continued investment in infrastructure and portfolio of services including use of ‘hyper-scale’ technologies
•
•
•
• Creation of an “integrations” team to enhance capabilities around acquisition integration and to ensure efficient
First VEEAM Accredited Service Partner (VASP) in the UK
Finance function successfully relocated and integrated across Group to a single location, closure of Nottingham office
Existing customers overall net spend increasing
execution
Post Period-End Developments
•
Variation to terms of the Sys-Pro acquisition with settlement of all future potential deferred consideration by payment
of £150,000 to the vendors of Sys-Pro
• Group no longer has any contingent amounts due in relation to acquisitions
•
Further acceleration of integration and realisation of synergies
SysGroup Plc Annual Report & Accounts 2017 7
strategic report
SysGroup Plc Annual Report & Accounts 2017 8
strategic report
chairman’s statement
The Board is pleased to report on a busy and successful year for the Group, which saw the business undergo a complete
transformation to a Managed Services provider, delivering against our stated strategic objectives for the 2017 financial year.
At the same time the Group achieved impressive growth in line with market expectations, delivering an increase in Group
revenue of 65.1%, including 19.8% organic growth.
The Group’s transformation consisted of the acquisition of Systems Professional Limited (“Sys-Pro”) in early July,
complementing the Group’s existing managed services business, and an associated re-branding of the business from
Daily Internet Plc to SysGroup Plc. This, combined with the subsequent disposal of the Company’s legacy, non-core
SME Mass Market hosting division, resulted in the formation of a business focused exclusively on servicing the high value
managed services market, with a strong focus on cloud.
To facilitate the funding of the Sys-Pro, the Group completed an oversubscribed placing in July raising £5.0m gross and
bringing a number of new institutional shareholders onto the Company’s register. In conjunction with the placing and
acquisition, the Company also undertook a 40 for 1 share consolidation and sought court approval for the cancellation of
its share premium account, leaving the parent company able to pay dividends in the future should it be appropriate to do
so (see note 22).
In order to support the new business composition and operational focus, a number of organisational changes were
implemented to restructure the Group, including the appointment of Julian Llewellyn as CFO and Amy Yateman-Smith as
Non-Executive Director. I would like to welcome both Julian and Amy to the Board and I look forward to working with them
as we continue to execute our growth strategy.
The Board believes the Group now has in place the right platform, expertise and focused service offering to capitalise on a
substantial market opportunity. The Managed Services market continues to evolve and remains highly fragmented, and the
Board believes that a strategy of organic growth and targeted acquisitions, supported by the Group’s strong gross cash
position of £3.5m and unutilised £2.5m acquisition facility, will deliver sustained, long-term value for shareholders.
I would like to take this opportunity to thank all of our employees for their commitment and dedication to the business. We
have started the new financial year with an improved operational structure and strong financial footing, which, combined
with increasing levels of recurring revenue, leaves me optimistic for the Group’s growth prospects ahead.
Michael Edelson
Chairman
06 June 2017
SysGroup Plc Annual Report & Accounts 2017 9
strategic report
chief executive officer’s report
Introduction
The year to 31 March 2017 has been a year of both significant progress and change for SysGroup plc.
The acquisition of System Professional Ltd (“Sys-Pro”) in July 2016 and subsequent disposal of the SME Mass Market
business unit in the same month marked the firm transition to a Cloud and Managed Services business.
These were large undertakings for our business as firstly we acquired a business which had higher revenue and staff
numbers than ourselves and then disposed of a business which represented almost half of the Group’s size, before the
acquisition of Sys-Pro.
Subsequent to the transactions, we reorganised the combined businesses and made several changes to the management
team. We have created internal teams for managing the integration and have created liaisons between teams to maximise
the cross-selling opportunity to customers to take advantage of the increased range of services from our growing product
portfolio.
Not only did this work to create a business that is now focused on Managed Services with a cloud bias but it allowed us to
put in place the foundations to better take advantage of the opportunities that present themselves in this growing market.
The above corporate activity was in line with the Board’s stated strategy to exit from a light-touch, low margin and high
volume mass hosting market, which was largely commoditised and subject to high customer churn, to a business focused
exclusively on providing higher value Managed Services.
Notwithstanding the management time that was involved in this, we maintained focus on the core business and delivered
results in line with market expectations for FY 2017.
Our revenues (from continuing and discontinued operations) in the year were £7.87m, an increase of 65.3% on the
previous year (2016: £4.76m). Our adjusted EBITDA (from continuing and discontinued operations) increased by 22.7% to
£0.81m (2016: £0.66m) and our adjusted profit before tax increased from £0.31m in 2016 to £0.45m representing a 45.2%
increase. At the year-end, we had a healthy net cash position of £3.07m.
We believe that the foundations are now firmly laid for us to capture growth in our chosen markets and complement these
with carefully considered acquisitions.
Market
The market for managed and cloud services is large and long term, driven by the structural move to cloud delivered
solutions and IT outsourcing in general. IT is no longer seen as a cost base but is something which can really help drive
profits and efficiencies in businesses, and corporations are embracing technologies that will put them at a commercial
advantage compared with a competitor.
This desire to embrace the best of breed technologies which can drive these efficiencies means that knowledge of
better, more cost effective, reliable and secure solutions in a changing environment drives customers to partner with us
as we help guide and advise them along their journey. We become part of our customers’ IT function and our close and
increasing engagement with them is demonstrated by an overall net increase in customer spend year on year for the past
three years.
SysGroup Plc Annual Report & Accounts 2017 10
Our Managed Service offerings include all forms of Cloud hosting (private, public and hybrid) but also outsourced service
desk and various IT consulting services including public cloud (Azure and AWS services). Our Managed Services revenue
is predominantly derived from Cloud and this element of our service is growing at the fastest rate, with organic growth of
19.8% in 2017.
Strategy
SysGroup’s clear focus is to expand its position as a trusted provider of managed services and expert IT consultancy
to clients in the UK and Ireland. We have positioned the Group as an extension to a customer’s existing IT department
guiding them through the complexities and developments in the market.
Our target market is servicing the UK corporate sector that has traditionally managed and housed their own IT
infrastructure on premise. We operate in a variety of vertical sectors but have weighting in not for profit, education, health
services, financial services, insurance, technology and merchant and distribution sectors with a variety of well-known
clients in these verticals.
Being a Visa Level 1 PCI-DSS service provider (highest level) and with our ISO9001 and ISO27001 credentials we are an
attractive partner to anyone who wishes to ensure platforms are built and maintained to the highest of security standards.
Our IT consulting services often result in customers taking Cloud services from us, and the legacy VAR (Value Added
Reseller) element of the Sys-Pro business provides a feeder of cloud and managed service opportunities as customers
favour OPEX over CAPEX models and the flexibilities that offers.
Along with seeking to engage with larger spending customers who have a specific need for a large custom built cloud
platform we also seek to engage with customers in our chosen markets who are at different stages of their IT journey. This
can initially be by partnering with us for functions like our monitoring services, remote service desk, backup and disaster
recovery services. As our customers develop, the opportunity grows and results in more of their services being outsourced
to us. The result is that these customers can be very sticky in nature as the increased level of services provided by the
Group creates a greater reliance on the Group and significant barrier to entry for competitors. Customers typically sign up
for a contract period of one to three years, with larger contracts tending to be three years.
We intend to supplement our organic growth with carefully considered acquisitions.
Acquisitions
In July 2016 the Group acquired Sys-Pro for an initial consideration of £4.0m, paid 85% cash and 15% in new ordinary
shares at 60 pence per share, funded by way of a placing raising £5.0m gross. There have been certain operational
challenges at Sys-Pro since its acquisition but overall integration of the business into the Group is continuing and was
accelerated just prior to the year end, with a number of important milestones already reached.
During the period the Group secured new banking facilities with Santander UK plc. The facilities comprise a £2.5m
Revolving Credit Term Loan Facility to finance acquisitions alongside a £0.5 million overdraft facility and a £0.5m finance
leasing facility.
In line with the Group’s stated growth strategy, the Board remains alert to strategic acquisition opportunities to supplement
organic growth. In a fragmented market, we believe we are well placed to make further astute acquisitions given our size
and funding availability.
SysGroup Plc Annual Report & Accounts 2017 11
Disposal
On 22 July 2016 the Group announced the disposal of its SME Mass Market business for a total consideration of £2.7m in
cash, less an amount of £0.5m in respect of advance receipts/payments.
As this business was based in the Group’s former head office in Nottingham a necessary reorganisation occurred and a
new finance function was established in the Liverpool office of the Group.
Operational Review
All of the Group’s activities relate to delivering IT Managed Services with a Cloud bias along with consulting. The Group
is segmented into Managed Services, VAR and SME Mass Market. The SME Mass Market division was discontinued
following completion of the disposal of this division on 18 July 2016, and is therefore shown as discontinued in the table
below. Managed Services segment consists of all the activities of Netplan Internet Solutions Ltd and that of Sys-Pro but
excluding its VAR business.
The SME Mass Market and System Professional Ltd businesses are included in the results to their respective date of
disposal or acquisition.
We have introduced a new operating segment of VAR. This is legacy activity from which Sys-Pro built its business.
Traditionally Sys-Pro was a provider of hardware and software but has followed the transformation to Cloud and IT
Managed Services and was at the beginning but established level of the curve in converting its traditional ‘on premise’
customers to Cloud delivered solutions. We continue our work educating our traditional customers of the benefits of Cloud
delivered services and the concept of moving from a CAPEX to an OPEX model. Market drivers and overall trend underline
the substantial opportunity to us in this base. We expect the VAR segment to decrease as customers continue to shift to
Managed Services.
The revenue split of the divisions is shown below:
Revenue by operating
segment
Managed Services
Value Added Reseller
SME Mass Market (discontinued)
Total
2017
£’000
5,400
1,765
700
7,865
2017
%
69%
22%
9%
100%
2016
£’000
2,515
-
2,249
4,764
2016
%
53%
-
47%
100%
Key Performance Indicator Review
Revenue Growth
Revenue (continuing)
Growth
2017
£7.165m
184.9%
2016
£2.515m
22.0%
Revenue from continuing operations grew by 184.9% driven by Managed Services and the acquisition of System
Professional Ltd.
SysGroup Plc Annual Report & Accounts 2017
12
Adjusted EBITDA (including discontinued activities) improved 22.7% to £0.81m (2016: £0.66m).
The growth in Adjusted EBITDA is a combination of improved performance from the Netplan business unit and from
contribution from Sys-Pro (acquired in the period)
Performance Review
Group revenue for the year grew by 65.3% to £7.865m for the year to 31 March 2017 (2016: £4.764m). Revenue growth
was driven by the Managed Services division, which consists of the Netplan brand (incorporating Q4Ex) and the System
Professional brand (acquired in the year), contributing revenues of £7.165m (2016: £2.52m). The SME Mass Market division
generated revenues of £0.7m (2016: £2.2m) before being divested.
We continue to have good visibility of future revenues as the vast majority of our customers have entered into multi-year
contracts. As at 31 March 2017 there is £0.47m of deferred revenue (2016: £0.71m) which will be released to profit in future
periods.
Gross profit for the year on continuing and discontinued operations was £4.82m (2016: £3.01m) representing a gross
margin of 61.3% (2016: 63.2%). The reduction in gross margin is attributable to the change of sales mix during the year and
the slower conversion of Sys-Pro VAR customers into Managed Services revenue.
Adjusted earnings before interest, taxation, depreciation and amortisation (“EBITDA”) for the year to 31 March 2017 is
£0.81m (2016: £0.67m). Adjusted EBITDA is calculated after excluding acquisition and restructuring costs, share based
payment costs and fair value adjustments. The Directors consider that an adjusted EBITDA figure is a more appropriate
measure of the underlying performance of the business.
Balance Sheet
Net cash inflow from operating activities during the year amounted to £1.22m (2016: £0.65m). Cash at bank at 31 March
2017 was £3.47m (2016: £0.51m).
Payables falling due within one year are reported at £2.36m (2016: £1.64m). This figure includes an amount of £0.47m
(2016: £0.71m) for deferred revenue which will be released to profit in future years.
Contingent consideration payable on the System Professional Ltd acquisition of £0.69m (2016: nil), which is the fair value of
the amounts payable in shares, is included within liabilities falling due after more than one year. Contingent consideration
on the acquisition of Q4Ex Ltd has now been fully settled given all performance criteria were satisfied.
Based on certain performance criteria, the vendors of Sys-Pro could be due further consideration of up to £1.865m. At
the year-end the fair value of the contingent consideration stood at £0.69m. Post period end however this has now been
settled by a one-off payment of £150,000. This is a post balance sheet event and has also removed some operational
challenges by removing certain approval processes required with the vendors allowing for integration to be accelerated
and is explained in more detail in note 24.
The Directors are confident there is sufficient working capital within the Group. The Group also has surplus cash, is
cash generative and has £3.0m of committed but undrawn banking facilities (which includes a £2.5m acquisition facility).
However, should accretive acquisitions become available to the Group that cannot be met from existing resources (or with
enough headroom comfort), the Group may seek to raise additional finance either through debt, equity or a mixture of the
two.
SysGroup Plc Annual Report & Accounts 2017
13
Our People
Our people are very highly valued and the Directors place considerable emphasis on employees sharing in the success of
the Group. This is achieved through the participation in share option schemes. Due to the nature and size of the business,
employees are constantly encouraged to communicate with the Group’s senior management to discuss business issues
and potential improvements.
It is the policy of the Group that there should be no unfair discrimination in recruiting and promoting staff, including
applicants who are disabled. The Directors are committed to maintaining and developing communication and consultation
processes with employees, who in turn are encouraged to develop an awareness of the issues affecting the Group.
Divisional split average as at 31 March
2017
2016
Board of Directors
SME Mass Market
Managed Services
Total
Gender diversity as at
31 March 2017
Board of Directors
Senior Managers
Employees
Total
5
-
59
64
Women
Number
1
1
5
7
4
12
14
30
%
20%
25%
9%
11%
Men
Number
4
3
50
57
%
80%
75%
91%
89%
Infrastructure and Technology
During the year, we invested in our capabilities and have begun deploying Cloud services from a newly fitted out location
on our network in a datacentre in Manchester. We are utilising ‘hyper-scale’ technologies that the likes of Facebook,
Microsoft and Amazon utilise, such as software defined networking and continuous integration. These technologies allow
us to automatically roll-out a whole network deployment and virtual machine build in minutes whilst continuous integration
means we can test changes in a virtual environment before pushing these to a live environment, minimising ‘change
control’ risks.
Our work and contribution to the CEPH OpenSource community gained us recognition for the development of an industry
leading low cost storage solution which lead us to become the first VEEAM accredited service partner in the UK. We will
continue our R&D efforts and bring new and interesting services to our customers.
Principal Risks and Uncertainties
In line with the nature, size and complexity of the business the senior management team work very closely to identify and
evaluate areas of risk whilst developing and monitoring action plans to deal with any potential threats.
SysGroup Plc Annual Report & Accounts 2017 14
All outcomes are reported to the Board and support is given as necessary to ensure actions are carried out.
Identifiable areas of risk include:
• Dependency on key suppliers – the Group is dependent on certain key suppliers for the continued operation of its
business, the most significant of which are the supply of third party software and datacentre services. If any of these
suppliers fail in the provision of their services it may have an adverse effect on the Group’s ability to provide services
to its customers. However, the Group continually assess suppliers for both price competitiveness and technical
innovation and are confident that alternative providers could be found.
• Customer retention – the Group provides an essential service to its customers. Any diminution in service levels could
impact customer retention levels. However, the Group constantly monitors service levels and the low level of customer
attrition is evidence of the Group’s ability to provide the level of service required.
• Network – the datacentres we utilise are linked by fibre that we lease. Should the network fail there would be an
•
adverse impact on the service provided to our customers. The Group has designed its network to have no single point
of failure, it connects with transit providers at different geographical locations.
Employees – the Group is a service organisation and as such, is dependent on the skills, knowledge and commitment
of its staff. The performance of the Group is dependent on retaining its staff. We mitigate this risk by offering
competitive reward packages.
• Search engine optimisation – a significant amount of the Group’s sales revenues are generated from customers using
internet search engines. Should the Group’s search engine optimisation performance deteriorate, this could have an
adverse impact on Group revenue. The Group continually monitors the position of its websites with respect to these
search engines. The Group has experienced staff that work with specialist agencies to maintain or enhance the
position of its websites for inclusion in search results.
• Acquisitions – the Group has stated that its strategy is to continue to make acquisitions to strengthen its growth.
The risk is that we may not be able to find suitable acquisition targets. We mitigate this risk by regularly conducting
searches for targets and also retain advisers who introduce targets.
Summary and Outlook
We are pleased with our results, delivered in a year of both significant progress and change for the Group. We have
achieved our objectives of fundamentally transforming the business to focus on high growth managed services whilst
delivering enhanced profitability and results in line with market expectations, while at the same time integrating a large
acquisition. Our sales pipeline has grown by 28.8% from 30 September 2016 to £3.49m at 31 March 2017, showing the
tangible impact of our growth strategy.
Due to operational challenges at Sys-Pro since its acquisition the Group expects growth to be slower than originally
expected for FY 2018. The Board have taken the necessary remedial steps and following entry into the deed of variation
with the vendors of Sys- Pro, the management team has the ability to accelerate the integration process.
Our new management structure and internal teams will support further organic and acquisitive growth and given our
healthy levels of recurring revenue and long term contracts with key customers, coupled with our cash generation, we are
well placed to capture market opportunity.
We look forward to the future with confidence.
This Strategic Report was approved and signed by order of the board.
Chris Evans
Chief Executive Officer
06 June 2017
SysGroup Plc Annual Report & Accounts 2017 15
board of directors’
profile
SysGroup Plc Annual Report & Accounts 2017 16
board of directors’ profile
John Michael Edelson
Non-Executive Chairman
Robert Khalastchy
Non-Executive Director
Mr Khalastchy is a graduate from the University of Sussex
where he received a Bachelor’s degree in Electronic
Engineering. For the past 20 years he has been involved in
commercial property management working with high net
worth overseas clients, assisting in the management of
their total UK portfolio and various planning applications,
as well as the day to day management of the portfolio. In
2001 he set up RK Management Limited, a commercial
property management company handling a portfolio in
excess of £35 million. In 2011 he set up Sterling Property
Management, a residential block property management
company which manages several prestigious blocks in
Central and West London.
Amy Yateman-Smith
Non-Executive Director
Amy is an Investment Director at private equity firm
Livingbridge Equity Partners LLP (“Livingbridge”), where
she has worked since 2011. In recent years, Amy managed
Livingbridge’s investment in Onyx, the IT infrastructure
services provider and was also a non-executive director
of Onyx up until its sale to Pulsant, one of the UK’s largest
datacentre providers. Prior to Livingbridge, Amy spent
six years at KPMG where she qualified as an accountant
before joining the TMT Transaction Services team helping
to advise private equity and corporate clients on due
diligence and strategic option development across a wide
variety of transactions. Amy is a graduate of Warwick
University.
Michael brings a wealth of experience as a Board Director
to SysGroup plc. He has been a Founding Director or
Chairman of a number of companies admitted to the AIM
market, including Prestbury Group plc, Knutsford Group
plc, Mercury Recycling Group plc (now Ironveld plc) and
ASOS PLC. He was a non-executive Chairman of Bramhall
plc, subsequently renamed Magic Moments Internet plc
and then Host Europe plc, which acquired Magic Moments
Design Limited in September 1999. He has also been on
the Board of Manchester United Football Club since 1982.
Christopher Evans
Chief Executive Officer
Chris studied Software Engineering at Liverpool John
Moores University before founding Switch Media Ltd,
a web hosting provider. Switch Media was listed in the
Deloitte Fast 50 for two years running in 2007 and 2008
before being acquired by iomart Group PLC in April 2011.
Following the acquisition by Iomart, he was a Director of
Iomart’s Easyspace division involved in integrating divisional
acquisitions and delivering the financial budget ahead of
plan. He was a founder of Q4Ex Ltd (a company acquired
by SysGroup).
Julian Llewellyn
Chief Financial Officer
Julian was appointed as Chief Financial Officer on 23rd
January, 2017 and formally joined the Board on 6th April,
2017. Julian has over 25 years’ senior finance experience.
Julian’s two previous roles were as Interim Chief Financial
Officer of Redcentric PLC and Business Improvement
Director at Exertis (part of DCC PLC). Prior to those two
roles, from 2010 to 2014, Julian was Group Financial
Controller of Greenergy International Ltd. Julian has also
held senior finance roles in the IT sector at SurfControl PLC
and IFS AB, and with BAE SYSTEMS PLC and Premier
Brands Ltd. Julian is a graduate of Lancaster University
and a fellow of The Institute of Chartered Accountants in
England and Wales.
SysGroup Plc Annual Report & Accounts 2017 17
directors’ report
SysGroup Plc Annual Report & Accounts 2017 18
directors’ report
The Directors present their Annual Report and Audited Financial Statements for the year ended 31 March 2017.
Principal Activities
The principal activities of the business are the provision of IT Managed Services and are explained in detail in the strategic
report.
Business Review and Future Developments
A review of the Group’s operations and performance during the financial year, setting out the position at the year-end,
significant changes in the year and providing an indication of the outlook for the future is contained in the Strategic report
on pages 8 to 14.
Results and Dividends
The Consolidated Statement of Comprehensive Income for the year is set out on page 34. The Directors do not propose
the payment of a Dividend for the year ended 31 March 2017.
Financial Instruments
The Group uses various financial instruments. These include revolving credit facilities, bank loans, finance leases, cash
and various items (such as trade receivables and trade payables) that arise directly from its operations. The main purpose
of these financial instruments is to raise finance for the Group’s operations. The existence of these financial instruments
exposes the Group to a number of financial risks, which are described in more detail below.
Liquidity Risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. Short-term flexibility is achieved through available cash balances and its revolving
credit facility.
Interest Rate Risk
The Group finances its operations through a mixture of revolving credit facilities, bank loans, finance leases and the placing
of new ordinary shares. The Group’s loan and revolving credit facilities were undrawn at the year end.
SysGroup Plc Annual Report & Accounts 2017 19
Credit Risk
The Group’s principal financial assets are cash, and trade and other receivables. These balances are actively monitored
to avoid significant concentrations of credit risk however the total of the cash balances and trade and other receivables
represents the maximum exposure to credit risk.
In order to manage credit risk, the agreement with the customer states preferred collection by direct debit and limits are
set for customers based on a combination of payment history and third party credit references. Credit limits are reviewed
by the credit control team on a regular basis in conjunction with debt ageing and collection history. For hosting services,
the Group predominantly invoices in advance and the agreement with the customer states preferred collection by direct
debit, therefore the financial risk in respect of these debtors is limited.
Directors
The Directors of the Company who held office during the year are as follows:
• Michael Edelson
• Christopher Evans
Julie Joyce
•
• Michael Hogan
•
Julian Llewellyn
• Robert Khalastchy
Amy Yateman-Smith
•
Non-Executive Chairman
Chief Executive
Finance Director (resigned 15 August 2016)
Chief Financial Officer (appointed 15 August 2016, resigned 01 December 2016)
Chief Financial Officer (appointed 06 April 2017)
Non-Executive Director
Non-Executive Director (appointed 21 September 2016)
The interests of current Directors in shares and options are detailed in the Directors’ Remuneration Report on page 22.
Significant Shareholdings
As of 05 June 2017 the Company has been notified of the following significant shareholdings:
Name
Livingbridge EP LLP
Hargreave Hale Limited (discretionary clients)
Downing LLP
Legal & General Investment Management Ltd
Herald Investment Management Limited
Chris Evans
Hawk Investment Holdings Limited
Paul Jones
Arthur Duffy
Number of
shares
Percentage
holding
4,603,700
3,124,695
1,906,517
1,889,355
1,048,966
1,040,611
837,120
794,291
717,927
19.93%
13.52%
8.25%
8.18%
4.54%
4.50%
3.62%
3.53%
3.19%
SysGroup Plc Annual Report & Accounts 2017
20
Disclosure of Information to Auditors
The Directors who held office at the date of approval of this Directors’ report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company’s auditors are unaware; and each Director has taken all the
steps that ought to have been taken as a Director to make themselves aware of any relevant audit information and to
establish that the Company’s auditors are aware of that information.
Going Concern
The Directors have reasonable expectation that the Group has adequate resources to continue to operate for the
foreseeable future. For this reason they adopt the going concern basis for preparing the financial statements.
Post Balance Sheet Event
On 06 June 2017 the company entered into a deed of variation with the vendors of Sys-Pro, the resulting impact is a cash
payment of £150k from the company to the vendors and a reduction of the contingent consideration (shown at fair value of
£690k) to nil (see note 24).
Auditors
A resolution to re-appoint BDO LLP as auditors of the company will be put to the Annual General Meeting.
By order of the Board
Julian Llewellyn
Company Secretary
06 June 2017
SysGroup Plc Annual Report & Accounts 2017 21
directors’ remuneration
report
SysGroup Plc Annual Report & Accounts 2017 22
directors’ remuneration report
Remuneration Policy
The Group has a policy to attract, motivate and reward individuals of the highest calibre who are committed to growing the
value of the business and to maximising returns to shareholders.
The policy is as relevant to Executive Directors as it is to employees, as we aim to reward Executive Directors and senior
employees aligned to the performance of the Group.
The remuneration structure for all employees considers remuneration rates of competitors to ensure continuity and
commitment.
Directors’ Service Contracts
Copies of Directors’ service contracts will be available for inspection at the Annual General Meeting.
The Group does not operate a final salary pension scheme. Executive Directors who are entitled to receive pension
contributions may nominate a defined contribution scheme into which the Company makes payments on their behalf.
Directors’ Remuneration
A summary of the total remuneration paid to current Directors is set out below:
Director
Michael Edelson
Christopher Evans
Michael Hogan
Julie Joyce
Robert Khalastchy
2017
Benefits
in kind
£’000
-
-
-
2
-
Salary
£’000
40
96
80
126
12
Total
£’000
Salary
£’000
40
96
80
128
12
40
96
-
86
12
2016
Benefits
in kind
£’000
-
-
-
2
-
Total
£’000
40
96
-
88
12
SysGroup Plc Annual Report & Accounts 2017
The following pension contributions were paid within the year:
Director
Michael Edelson
Christopher Evans
Michael Hogan
Robert Khalastchy
2017
Total
£’000
-
5
1
-
23
2016
Total
£’000
-
-
-
-
Directors’ Interests in Ordinary Shares of SysGroup plc
The Directors in office at the end of the year had interests in the ordinary share capital of the company as shown below:
Employee
Christopher Evans
Michael Edelson
Robert Khalastchy
Amy Yateman-Smith
Number of
Ordinary Shares
Percentage
Interest
1,040,611
689,600
6,346
-
4.50%
2.98%
0.03%
-
Directors’ Interests in Share Options
The Directors had interests in options over ordinary shares of the Company at the end of the year as shown below:
Director
Michael Edelson
Robert Khalastchy
Amy Yateman-Smith
Christopher Evans
Total Options Over
Ordinary Shares
-
7,500
-
-
Grant Date
Expiry Date
-
-
19/12/2012
18/12/2022
-
-
-
-
SysGroup Plc Annual Report & Accounts 2017
24
Directors’ Warrants
The Directors held the following warrants over the ordinary shares of the Company at the end of the year as follows:
Director
Michael Edelson
Exercise
Price
No. of
Warrants
Grant Date
Expiry Date
200p
2,500
09/01/2012
08/01/2022
Mr Edelson’s warrants are exercisable at any time before 8 January 2022, provided that the Company may require the
exercise of these warrants if its shares are traded at a price in excess of 320p per share for a period of 60 business days
and an aggregate value of bargains exceeding £60,000 occurs over that period.
SysGroup Plc Annual Report & Accounts 2017 25
corporate governance
report
SysGroup Plc Annual Report & Accounts 2017 26
corporate governance report
Introduction
The Directors recognise the importance of, and are committed to, high standards of corporate governance. Although
compliance with the UK Corporate Governance Code is not compulsory for AIM companies, and therefore the Directors
do not claim compliance with the code, the Directors intend to apply the principles as they consider appropriate to a public
company of the size of SysGroup plc quoted on AIM, taking into account the recommendations contained in the QCA
Guidelines.
Board of Directors
The Board comprises five Directors - two Executives and three Non-Executives - and reflects a blend of different
experience and backgrounds. The roles of Chairman (which is a Non-Executive position) and Chief Executive have been
split by the Board and there is a clear division of responsibility between the two. The Board considers Michael Edelson,
Robert Khalastchy and Amy Yateman-Smith to be independent in character and judgement notwithstanding their
shareholding and/or share options in the Group. The Board, through the Chairman and the Non-Executive Director as
well as the Executive Directors, maintains regular contact with its advisers and seeks to ensure that the Board develops
an understanding of the views of the major shareholders about the Company. The Board meets regularly throughout the
year and is responsible for formulating, reviewing and approving the Company’s strategy, financial activities and operating
performance. Day-to-day management is delegated to the Executive Directors who are charged with consulting the
Board on all significant matters. Consequently, decisions are made promptly following consultation amongst the Directors
concerned where necessary and appropriate. All necessary information is supplied to the Directors on a timely basis to
enable them to discharge their duties effectively and all Directors have access to independent professional advice at the
Company’s expense, as and when required. The Chairman is available to meet with institutional shareholders to discuss
any issues and concerns regarding the Group’s governance. The participation of the private and institutional investors at
the AGM is welcomed by the Board.
Internal Controls
The Directors acknowledge their responsibility for the Company’s and the Group’s systems of internal controls, which are
designed to safeguard the assets of the Group and ensure the reliability of financial information for both internal use and
external publication. Overall control is achieved by a regular detailed reporting system covering both technical progress of
a project and the state of the Group’s financial affairs. Any system of internal controls can provide only reasonable, and not
absolute, assurance that material financial irregularities will be detected or that risk of failure to achieve business objectives
is eliminated.
The Directors consider that the system of internal controls operated effectively throughout the financial year and up to the
date the financial statements were signed. Based on the size and complexity of the Group, the Board of Directors do not
consider that there is a need for any internal audit function.
SysGroup Plc Annual Report & Accounts 2017 27
Committees
Audit Committee
The Company has established an Audit Committee that comprises of Michael Edelson, Robert Khalastchy and Amy
Yateman-Smith. Michael Edelson is the Chairman of this Committee. The Audit Committee meets at least twice a year
and is responsible for reviewing the integrity of the financial statements of the Group, the Group’s compliance with legal
and regulatory requirements, and the adequacy and effectiveness of the Group’s internal financial controls and risk
management processes including the extent to which internal audit review is required. It reviews the external auditors’
performance and independence and makes recommendations to the Board on the appointment of the auditors.
Remuneration Committee
The Company has established a Remuneration Committee that comprises Michael Edelson, Robert Khalastchy and
Amy Yateman-Smith. Michael Edelson is the Chairman. The Committee meets at least twice a year and is responsible
for determining and reviewing with the Board the policy for the remuneration of the Executive Directors and such other
members of the executive management it is designated to consider. Within the terms of the agreed policy, it determines
the total individual remuneration of the Executive Directors. The Remuneration Committee also approves the design of, and
determines targets for, any performance related pay schemes, reviews the design of any share incentive plans, determines
the awards to the Executive Directors and determines the policy for, and scope, of pension arrangements for each
Executive Director.
Rule 21 of The AIM Rules for Companies and MAR (“Market Abuse Regulation”)
The Group will comply with Rule 21 of the AIM Rules (as amended to incorporate the provisions of MAR) relating to dealing
during close periods. The Group has a reasonable and effective dealing policy in place. All employees are notified when
the company enters and exits close periods but the dealing code in any event requires that an employee seek permission
from certain designated people before trading in the shares of the Group. The Market Abuse Regulation (MAR) came into
effect on 3 July 2016. It aims to increase market integrity and investor protection, enhancing the attractiveness of securities
markets for capital raising.
Human Resources
The Group endeavours to appoint employees with appropriate skills, knowledge and experience for the roles they
undertake. The Group has a range of polices which are aimed at retaining and providing incentives for key staff. Objectives
are set for departments and employees that are derived from the Group’s business objectives. The Group has a clear and
well-understood organisational structure and each employee knows his or her line of accountability.
SysGroup Plc Annual Report & Accounts 2017 28
statement of directors’
responsibilities
SysGroup Plc Annual Report & Accounts 2017 29
statement of directors’
responsibilities
The Directors are responsible for preparing the Annual Report of the Directors and the Financial Statements in accordance
with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year. Under that law the Directors
have elected to prepare the Group and Company financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. Under company law the Directors must not approve the Financial
Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company
and of the profit or loss of the Group for that period. The Directors are also required to prepare financial statements in
accordance with the rules of the London Stock Exchange for companies trading securities on Alternative Investment
Market.
In preparing these Financial Statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and accounting estimates that are reasonable and prudent;
•
state whether they have been prepared in accordance with IFRSs as adopted by the European Union, subject to any
material departures disclosed and explained in the financial statements;
prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company
will continue in business.
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the Financial Statements comply with the requirements of the Companies Act 2006. They are
also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
Website publication
The Directors are responsible for ensuring the annual report and the Financial Statements are made available on a website.
Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions.
The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility
also extends to the ongoing integrity of the financial statements contained therein.
By order of the Board
Julian Llewellyn
Company Secretary
06 June 2017
SysGroup Plc Annual Report & Accounts 2017 30
independent auditor’s
report to the members
of sysgroup plc
SysGroup Plc Annual Report & Accounts 2017 31
independent auditor’s report to the
members of sysgroup plc
We have audited the financial statements of SysGroup plc for the year ended 31 March 2017 which comprise the
Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Company
Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Company Statement of Changes
in Equity, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows and the related notes.
The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements,
as applied in accordance with the provisions of the Companies Act 2006.
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a
body for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express
an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for
Auditors.
Scope of the Audit of the Financial Statements
A description of the scope of an audit of financial statements is provided on the FRC’s website at
www.frc.org.uk/auditscopeukprivate
Opinion on Financial Statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the group’s and the parent company’s affairs as at 31
March 2017 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
the parent company’s financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
SysGroup Plc Annual Report & Accounts 2017 32
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the
course of the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you
if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
•
• we have not received all the information and explanations we require for our audit.
Gary Harding (Senior Statutory Auditor)
For and on behalf of BDO LLP
Statutory Auditor
Manchester
United Kingdom
06 June 2017
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)
SysGroup Plc Annual Report & Accounts 2017 33
consolidated statement
of comprehensive income
SysGroup Plc Annual Report & Accounts 2017 34
consolidated statement
of comprehensive income
for the year ended 31 march 2017
Revenue
Total group revenue – continuing and discontinued
operations
Revenue – discontinued operations
Revenue – continuing operations
Cost of sales
Gross profit
Operating expenses before depreciation, amortisation,
acquisition and integration costs, fair value adjustment and
share based payments
Adjusted EBITDA - continuing
Depreciation – continuing
Amortisation of intangibles – continuing
Acquisition and restructuring costs – continuing
Fair value adjustment – continuing
Share based payments – continuing
Administrative expenses
(Loss) from operations
Finance costs
Loss before taxation
Taxation
(Loss) from continuing operations
Profit from discontinued operations – net of income
tax
Total comprehensive profit attributable to the
equity holders of the company
Basic earnings per share (EPS)
Notes
4
14
13
8
6
12
23
11
2017
Group
£’000
2016
Group
£’000
7,865
700
7,165
(2,783)
4,382
(3,764)
618
(324)
(326)
(791)
(300)
-
(5,505)
(1,123)
(27)
(1,150)
20
(1,130)
1,508
378
£0.019
4,764
2,249
2,515
(829)
1,686
(1,579)
107
(241)
(205)
(11)
270
10
(1,756)
(70)
(44)
(114)
41
(73)
375
302
£0.021
SysGroup Plc Annual Report & Accounts 2017 35
consolidated statement
of financial position
SysGroup Plc Annual Report & Accounts 2017 36
consolidated statement
of financial position
as at 31 march 2017
Notes
2017
Group
£’000
2016
Group
£’000
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and Liabilities
Equity attributable to the equity
shareholders of the parent
Called up share capital
Share premium reserve
Other reserve
Translation reserve
Retained earnings / (losses)
Non-current liabilities
Obligations under finance leases
Contingent consideration due on
acquisitions
Deferred taxation
13
13
14
16
22
19
17
12
7,620
1,617
666
9,903
1,311
3,473
4,784
14,687
4,620
-
1,622
4
4,843
11,089
184
690
365
1,239
4,454
1,329
450
6,233
598
513
1,111
7,344
2,552
6,493
1,008
-
(5,118)
4,935
91
435
242
768
SysGroup Plc Annual Report & Accounts 2017 Notes
17
17
18
19
2017
Group
£’000
1,671
465
-
223
2,359
14,687
37
2016
Group
£’000
718
707
105
111
1,641
7,344
Current liabilities
Trade and other payables
Deferred Income
Other loans
Obligations under finance leases
Total Equity and Liabilities
The notes on pages 51 to 79 are an integral part of these financial statements. The consolidated financial statements on
pages 33 to 79 were approved by the Board on 06 June 2017.
Chris Evans
Director
Julian Llewellyn
Director
Registered number 06172239
SysGroup Plc Annual Report & Accounts 2017 38
company statement
of financial position
SysGroup Plc Annual Report & Accounts 2017 39
company statement
of financial position
as at 31 march 2017
Assets
Non-current assets
Investments
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Total Assets
Equity and Liabilities
Called up share capital
Share premium reserve
Other reserve
Retained earnings / (losses)
Non-current liabilities
Amounts due from subsidiary undertakings
Contingent consideration due on
acquisitions
Current liabilities
Trade and other payables
Notes
2017 Company
£’000
2016 Company
£’000
15
14
16
22
17
17
10,429
56
10,485
100
2,077
2,177
6,576
33
6,609
34
12
46
12,662
6,655
4,620
-
1,622
4,048
10,290
1,531
690
2,221
151
151
2,552
6,493
1,008
(5,447)
4,606
1,543
435
1,978
71
71
Total Equity and Liabilities
12,662
6,655
SysGroup Plc Annual Report & Accounts 2017 40
As permitted by section 408 of the Companies Act 2006, the holding company’s profit and loss statement has not been
included in the financial statements.
For the year ended 31 March 2017, the Company made a loss of £86,000 (2016: loss of £386,000)
The notes on pages 51 to 79 are an integral part of these financial statements. The consolidated financial statements on
pages 33 to 79 were approved by the Board on 06 June 2017.
Chris Evans
Director
Julian Llewellyn
Director
Registered number 06172239
SysGroup Plc Annual Report & Accounts 2017 41
consolidated statement
of changes in equity
SysGroup Plc Annual Report & Accounts 2017 42
Total
£’000
4,128
302
520
(7)
(8)
consolidated statement
of changes in equity
for the year ended 31 march 2017
Attributable to equity holders of the parent
Share
capital
£’000
Share
premium
account
£’000
Other
reserve
£’000
Translation
reserve
Accumulated
losses
£’000
At 1 April 2015
2,399
6,493
Profit and comprehensive
profit
Issue of share capital
Expenses of share issue
Movement in share option
reserve
-
153
-
-
-
-
-
-
656
-
367
(7)
(8)
At 31 March 2016
2,552
6,493
1,008
Profit and comprehensive
profit
Translation of foreign
subsidiaries
Issue of share capital -
placing
Issue of share capital -
consideration
Expenses of share issue
Capital re-organisation
(note 22)
Movement in share option
reserve
-
-
-
-
1,686
3,367
-
-
-
382
-
616
-
-
-
(277)
(9,583)
-
-
-
-
(2)
1,622
At 31 March 2017
4,620
-
-
-
-
-
-
-
4
-
-
-
-
-
4
(5,420)
302
-
-
-
(5,118)
4,935
378
378
-
-
-
-
9,583
-
4
5,053
998
(277)
-
(2)
4,843
11,089
SysGroup Plc Annual Report & Accounts 2017
43
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.
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 sub-
scribed for share capital in excess of nominal value on acquisition of another
company
Accumulated losses
All other net gains and losses and transactions with owners (e.g. dividends) not
recognised elsewhere.
SysGroup Plc Annual Report & Accounts 2017 44
company statement
of changes in equity
SysGroup Plc Annual Report & Accounts 2017 company statement
of changes in equity
for the year ended 31 march 2017
At 1 April 2015
Loss for the period
Issue of share capital
Movement in share option reserve
Expenses of share issue
At 31 March 2016
Loss for the period
Issue of share capital – share placing
Issue of share capital - consideration
Expenses of share issue
Capital re-organisation (note 22)
Movement in share option reserve
Attributable to equity holders of the Company
Share
capital
£’000
Share
premium
reserve
£’000
2,399
6,493
-
153
-
-
-
-
-
-
Other
reserve
£’000
Accumulated
losses
£’000
656
-
367
(8)
(7)
(5,061)
(386)
-
-
-
2,552
6,493
1,008
(5,447)
-
1,686
382
-
-
-
-
3,367
-
(277)
(9,583)
-
-
-
-
616
-
-
(2)
(86)
-
-
-
9,583
(2)
At 31 March 2017
4,620
1,622
4,048
10,290
45
Total
£’000
4,487
(386)
520
(8)
(7)
4,606
(86)
5,053
998
(277)
-
(4)
SysGroup Plc Annual Report & Accounts 2017 46
consolidated statement
of cash flows
SysGroup Plc Annual Report & Accounts 2017 consolidated statement
of cash flows
for the year ended 31 march 2017
Cash flows used in operating activities
Profit after tax
Profit net of tax - discontinued operations
Adjustments for:
Depreciation and other amortisation
Fair Value adjustment on contingent consideration
Finance costs
Acquisition and integration costs
Share based payments
Taxation
Operating cash flows before movement in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Cash flows from investing activities
Payments to acquire property, plant & equipment
Acquisition and integration costs
Acquisition of subsidiary net of cash acquired
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue of ordinary share capital
Drawdown of loan facility
Repayment of loan facility
Repayment of loan notes
Loan note interest paid
Taxation paid
47
Group
2016
£’000
302
(375)
446
(270)
44
34
(10)
(41)
130
61
(35)
156
(111)
(34)
-
(145)
(7)
105
(175)
(105)
(9)
-
Group
2017
£’000
378
(1,508)
650
300
27
791
-
(20)
618
(163)
544
999
(380)
(742)
(3,425)
(4,547)
4,722
-
(105)
-
-
(197)
SysGroup Plc Annual Report & Accounts 2017 Interest element of finance lease payments
Drawdown of finance lease facility
Capital repayment of finance leases
Net cash from financing activities
Net increase (decrease) in cash and cash equivalents from continuing opera-
tions
Cash flows from discontinued operations
Net cash used for operating activities
Net cash provided for investing activities
Net cash used for financing activities
Net increase in cash and cash equivalents from discontinued operations
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
48
Group
2016
£’000
(33)
-
(110)
(334)
(323)
518
(39)
(69)
410
426
513
Group
2017
£’000
(27)
189
(153)
4,429
881
99
1,987
(7)
2,079
513
3,473
SysGroup Plc Annual Report & Accounts 2017 49
company statement
of cash flows
SysGroup Plc Annual Report & Accounts 2017 company statement
of cash flows
for the year ended 31 march 2017
Cash flows used in operating activities
Loss after tax
Adjustments for:
Depreciation and other amortisation
Fair Value adjustment on contingent consideration
Impairment of investments following disposal
Finance costs
Acquisition costs
Share based payments
50
2017
Company
£’000
2016
Company
£’000
(86)
(386)
15
300
1,099
-
791
-
12
(270)
-
12
11
(12)
Operating cash flows before movement in working capital
2,119
(633)
Increase in trade and other receivables
Increase in trade and other payables
Cash generated from operations
Cash flows from investing activities
Payments to acquire property, plant and equipment
Acquisition and costs
Payment for shares in subsidiaries
Net cash used in investing activities
Cash flows from financing activities
Net proceeds from issue ordinary share capital
(Paid to)/Received from subsidiary company
Repayment of convertible loan
Loan note interest paid
Net cash from financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
(66)
86
(25)
26
2,139
(632)
(37)
(742)
(3,720)
(4,499)
4,722
(297)
-
-
4,425
2,065
12
2,077
(42)
(11)
-
(53)
(7)
817
(105)
(10)
695
10
2
12
SysGroup Plc Annual Report & Accounts 2017 51
notes to the consolidated
financial statements
SysGroup Plc Annual Report & Accounts 2017 52
notes to the consolidated
financial statements
for the year ended 31 march 2017
1. Accounting Policies
SysGroup Plc (the ‘Company’) is a company incorporated and domiciled in the United Kingdom. The company’s registered
office is at Walker House, Exchange Flags, Liverpool, L2 3YL. These consolidated financial statements comprise the
Company and its subsidiaries (together referred to as the ‘Group’).
Statement of Compliance
These Group and Company financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRSs and IFRIC interpretations) as endorsed by the European Union (“endorsed IFRS”) and with those parts of
the Companies Act 2006 applicable to companies preparing their accounts under endorsed IFRS.
Basis of Preparation
The principal accounting policies adopted in the preparation of the Financial Statements are set out below. The policies
have been consistently applied to all the years presented, unless otherwise stated. The consolidated financial statements
have been prepared under the historical cost basis, except for the revaluation of certain financial liabilities which have been
valued in accordance with IAS 39.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement in applying the Group’s accounting policies. The
areas where significant judgements and estimates have been made in preparing the Financial Statements and their effect
are disclosed in note 2. The financial statements are presented in pounds’ sterling, rounded to the nearest thousand,
unless otherwise stated.
Going Concern
The Directors have prepared the Financial Statements on a going concern basis which assumes that the Group and the
company will continue to meet liabilities as they fall due.
The directors have reviewed forecasts prepared for the period ending 31 March 2018 and considered the projected trading
forecasts and resultant cash flows together with confirmed loan facilities and other sources of finance.
The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that
the Group can continue to operate within the current facilities available to it.
The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing
the financial statements.
SysGroup Plc Annual Report & Accounts 2017 53
New Standards and Interpretations Not yet Adopted
At the date of authorisation of these financial statements, the following standards and interpretations, issued by the
International Accounting Standards Board (IASB), have been adopted for the first time by the Group with no significant
impact on its consolidated results or financial position:
• Annual Improvements to IFRSs (2012–2014 Cycle)
• Disclosure Initiative: Amendments to IAS 1
A number of new standards, amendments to standards and interpretations have been issued during the year ended 31
March 2017 but are not yet effective, and therefore have not yet been adopted by the Group:
• Amendments to IAS12 ‘Recognition of Deferred Tax Assets for Unrealised Losses’ have not yet been endorsed but the
•
•
•
IASB effective date will be 1 January 2017.
IFRS 9 ‘Financial Instruments’ is effective from 2018. This standard will simplify the classification of financial assets for
measurement purposes, but is not anticipated to have a significant impact on the financial statements.
IFRS 15 Revenue from Contracts with Customers is effective after 1 January 2018. This standard will change how
revenue is recognised based on a framework. The potential impact on the Group has not yet been fully assessed by
management.
IFRS 16 Leases is expected to be applicable after 1 January 2019. If endorsed, this standard will affect the
presentation of the Group financial statements with all leases apart from short term leases being recognised as on-
balance sheet finance leases with a corresponding liability being the present value of lease payments. The potential
impact on the Group has not yet been assessed by management.
The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed
by the European Union and require adoption by the Group in future reporting periods.
The adoption of these standards in future periods may have an impact on the results and net assets of the Group, however
it is too early to quantify this.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow
into the Group. Revenue represents the fair value of amounts received or receivable for goods and services provided net
of trade discounts and VAT. Revenue from the sale of domain name registrations is recognised when the domain name
is registered or renewed. Revenue from value added resale is recognised as these products or services are delivered.
Revenue from managed services is taken to deferred income on the balance sheet and recognised over the life of each
contract.
Basis of Consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all
three of the following elements are present: power over the investee, exposure to variable returns from the investee; and
the ability of the investor to use its power to affect those variable returns. Control is re-assessed whenever facts and
circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they
formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method.
SysGroup Plc Annual Report & Accounts 2017 54
In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on
which control ceases.
Business Combinations
All business combinations are accounted for by applying the purchase method. On acquisition, all the subsidiaries’ assets
and liabilities that exist at the date of acquisition are recorded at their fair values reflecting the conditions at that date.
The results of subsidiaries acquired in the period are included in the income statement from the date on which control is
obtained.
Goodwill
Goodwill represents the excess of the cost of a business combination over the total acquisition date fair value of the
identifiable assets, liabilities and contingent liabilities acquired. Goodwill is not amortised but is capitalised as an intangible
asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income.
In determining the fair value of consideration, the fair value of equity issued is the market value of equity at the date of
completion, and the fair value of contingent consideration is based on the expected future cashflows based on whether the
directors believe performance conditions will be met and thus the extent to which the further consideration will be payable.
Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the
excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
Impairment of Non-Financial Assets
Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually
at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds
its recoverable amount (i.e. the higher of value in use and fair value less costs to sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on
the asset’s cash-generating unit (i.e. the lowest Group of assets in which the asset belongs for which there are separable
identifiable cash flows that are largely independent of the cash flows from the other assets or Groups of assets). Goodwill
is allocated on initial recognition to each of the Group’s cash-generating units that are expected to benefit from the
synergies of the combination giving rise to the goodwill.
The estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash
flows have not been adjusted.
Foreign Currencies
Transactions in foreign currencies are recorded using the rate of exchange ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance
sheet date and the gains or losses on translation are included in the consolidated statement of comprehensive income.
The results of foreign subsidiaries that have a functional currency different from the group’s presentation currency are
translated at the average rates of exchange for the year. Assets and liabilities of foreign subsidiaries that have a functional
currency different from the group’s presentation currency, are translated at the exchange rates prevailing at the balance
sheet date. Exchange differences arising from the translation of the results of foreign subsidiaries and their opening net
assets are recognised as a separate component of equity.
SysGroup Plc Annual Report & Accounts 2017 55
Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Board of Directors.
Financial Instruments
Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as
either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a
residual interest in the assets of the company after deducting all of its liabilities.
Financial Assets
The Group’s loans and receivables comprise trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Trade receivables are stated at their nominal value and an impairment
provision will be recognised if there is evidence that the amount is irrecoverable and will be shown in administrative
expenses in the Consolidated Statement of Comprehensive Income. Cash and cash equivalents includes cash in hand,
deposits held at call with banks.
Share Capital
Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of
a financial liability or financial asset. The Group’s ordinary shares are classified as equity instruments and are recorded at
the proceeds received, net of direct issue costs.
Financial Liabilities
The Group classifies its financial liabilities into one of two categories, depending on the purpose for which it was acquired.
The Group’s accounting policy for each category is as follows:
•
Fair Value Through Profit or Loss – This category comprises only contingent consideration. They are carried in
the statement of financial position at fair values with changes in fair value recognised in the consolidated income
statement.
• Other Financial Liabilities – Other financial liabilities include trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate
method.
Fair Value Measurement Hierarchy
IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at
fair value to reflect the significance of the inputs used in making the fair value measurement. The fair value hierarchy has
the following levels:
a. Quoted prices in active markets for identical assets or liabilities (Level 1)
b.
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices) (Level 2); and
Inputs from the asset or liability that are not based on observable market data (Level 3)
c.
The level in the fair value hierarchy within which the financial asset or financial liability is categorised is determined on the
basis of the lowest level input that is significant to the fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the three levels.
SysGroup Plc Annual Report & Accounts 2017 56
Share Based Payments
The fair value of employee options granted is charged to the consolidated statement of comprehensive income with a
corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the
employees become unconditionally entitled to the options. The fair value of the options granted is measured using the
Black Scholes pricing model, taking into account the terms and conditions upon which the options were granted.
Leases
Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over
the shorter of the lease term and their useful lives. Obligations under such agreements are included in payables net of
the finance charge allocated to future periods. The finance element of the rental payment is charged to the consolidated
statement of comprehensive income so as to produce a constant periodic rate of charge on the net obligation outstanding
in each period. Rentals payable under operating leases are charged against income on a straight-line basis over the lease
term.
Property Plant and Equipment
Items of property, plant and equipment are stated at cost less depreciation. Depreciation is provided at annual rates
calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:
IT hardware
20% - 33.3% both reducing balance and straight line
Furniture and fittings
20% – 33.3% reducing balance
Investment in Subsidiaries
Fixed asset investments in the Parent Company are shown at cost less any provision for impairment as necessary.
Research and Development
Research expenditure is written off to the consolidated statement of comprehensive income in the year in which the
expenditure occurs. Development expenditure is treated in the same way unless the directors are satisfied as to the
technical, commercial and financial viability of individual projects, there is an intention to complete and sell the product and
the costs can be easily measurable. In this situation, the expenditure is capitalised and amortised expense is included in
administrative expenses in the Consolidated Statement of Comprehensive Income over the years during which the Group
is to benefit.
Intangible Assets
Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to
other contractual / legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation
techniques (see section related to critical estimates and judgements below).
The significant intangibles recognised by the Group, their estimated useful economic lives and the methods used to
determine the cost of intangibles acquired in business combinations are as follows:
Intangible asset
Estimated UEL
Valuation method
Customer relationships
5-7 years
Estimated discounted cash flow
SysGroup Plc Annual Report & Accounts 2017 57
Deferred Taxation
Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except for differences arising on:
•
•
•
the initial recognition of goodwill;
the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the
transaction affects neither accounting or taxable profit; and
investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those instances where it is highly probable that relief against taxable
profit will be available.
The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:
•
•
the same taxable Group company; or
different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the
assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Deferred tax liabilities are recognised on intangible assets and other temporary differences recognised in business
combinations.
2. Significant Accounting Estimates and Judgements
The preparation of this financial information requires management to make judgements, estimates and assumptions that
affect the amounts reported for assets and liabilities at the period end date and the amounts reported for revenues and
expenses during each period. However, the nature of estimation means that actual outcomes could differ from those
estimates. The key sources of estimation that have a significant impact on the carrying value of assets and liabilities are
discussed below.
Impairment of Goodwill and Other Intangibles
The Group tests goodwill for impairment on an annual basis in line with the accounting policy noted above. This involves
judgement regarding the future development of the business and the estimation of the level of future profitability and cash
flows to support the carrying value of goodwill. An impairment review has been performed at the reporting date and no
impairment has been identified. More details including carrying values are included in note 13.
Impairment of Other Assets
The Group reviews the carrying value of all other assets for indications of impairment at each period end. If indicators
of impairment exist, the carrying value of the asset is subject to further testing to determine whether its carrying value
exceeds its recoverable amount.
SysGroup Plc Annual Report & Accounts 2017 58
Valuation of Intangibles Acquired in Business Combinations
Determining the fair value of customer relationships acquired in business combinations requires estimation of the value
of the cash flows related to those relationships and a suitable discount rate in order to calculate the present value. More
details including carrying values are included in note 13.
Valuation of Contingent Consideration
When valuing the contingent consideration still payable on acquisitions, the Group considers various factors including the
performance of the acquired entity since acquisition together with its expected performance to the end of the earn-out
period. Following the adoption of IFRS 3 (revised) – Business Combinations, contingent consideration is recognised at, and
carried thereafter at, fair value. All changes in fair value (other than measurement period adjustments) are reflected in the
income statement.
Useful Economic Lives of Intangible Assets
Intangible assets are amortised over their useful economic lives. Useful lives are based on management’s estimates of
the period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness.
Changes to estimates can result in changes in the carrying values and hence amounts charged to the income statement in
particular periods which could be significant.
3. Financial Instruments – Risk Management
The Group’s financial instruments comprise cash and liquid resources and various items such as trade receivables and
trade payables that arise directly from its operations. There have been no substantive changes in the Group’s objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods. The
Group’s objective is to ensure adequate funding for continued growth and expansion.
All the Group’s financial instruments are carried at amortised cost with the exception of contingent consideration. There is
no material difference between the carrying and fair value of its financial instruments, in the current or prior year, due to the
instruments bearing interest at fixed rates or being of short term nature.
A summary of financial instruments held by category is shown below:
Group
Company
Financial assets
Loans and receivables
Cash and cash equivalents
Trade receivables
2017
£’000
3,473
902
2016
£’000
513
306
Total financial assets
4,375
819
2017
£’000
2,077
-
2,077
2016
£’000
12
-
12
SysGroup Plc Annual Report & Accounts 2017 Financial liabilities
At amortised cost
Trade and other payables
Loans and other borrowings
At fair value
Contingent consideration
Group
2017
£’000
1,409
407
1,816
690
2016
£’000
563
105
668
435
Company
2017
£’000
134
-
134
690
Total financial liabilities
2,506
1,103
824
59
2016
£’000
71
-
71
435
506
Per the fair value hierarchy classifications under IFRS 7 Financial Instruments the contingent consideration due on
acquisitions shown above are considered to be level 3 financial liabilities as there are no observable inputs for valuation.
Contingent consideration
At 1 April 2015
Settled during the year
Notional interest charged
Fair value adjustment through Income Statement
At acquisition
At 31 March 2016
Settled during the year
Notional interest charged
Fair value adjustment through Income Statement
Fair value adjustment through Income Statement
At 31 March 2017
Group
£’000
1,225
(520)
132
(402)
435
435
(666)
116
184
621
690
Company
£’000
1,225
(520)
132
(402)
435
435
(666)
116
184
621
690
The fair value adjustment related to the change in fair value calculation of the contingent consideration payable on the
Q4Ex acquisition.
Liquidity Risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on
its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group’s policy is to prepare periodic working capital forecasts, allowing an assessment of the cash requirements of
the Group and Company, to manage liquidity risk. Cash resources are managed in accordance with planned expenditure
forecasts and the Directors have regard to the maintenance of sufficient cash resources to fund the Group and Company’s
immediate operating requirements and capital expenditure.
SysGroup Plc Annual Report & Accounts 2017 The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial
liabilities:
60
Group
At 31st March 2016
Trade and other payables
Contingent consideration
Loans and borrowings
Total
Group
At 31st March 2017
Trade and other payables
Contingent consideration
Loans and borrowings
Total
Company
At 31st March 2016
Trade and other payables
Contingent consideration
Loans and borrowings
Total
Company
At 31st March 2017
Trade and other payables
Contingent consideration
Loans and borrowings
Total
Up to 3
months
£’000
Between
3 and 12
months
£’000
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Over
5 years
£’000
563
-
28
591
Up to 3
months
£’000
1,409
-
56
1,465
Up to 3
months
£’000
71
-
-
71
-
-
188
188
-
435
91
526
-
-
-
-
-
-
-
-
Between
3 and 12
months
£’000
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Over
5 years
£’000
-
-
167
167
-
690
136
826
-
-
48
48
-
-
-
-
Between
3 and 12
months
£’000
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Over
5 years
£’000
-
-
-
-
-
435
-
435
-
-
-
-
-
-
-
-
Up to 3
months
£’000
Between
3 and 12
months
£’000
Between
1 and 2
years
£’000
Between
2 and 5
years
£’000
Over
5 years
£’000
134
-
-
134
-
-
-
-
-
690
-
690
-
-
-
-
-
-
-
-
SysGroup Plc Annual Report & Accounts 2017 61
Interest Rate Risk
The Group seeks to minimise exposure to interest rate risk by borrowing at fixed interest rates.
Credit Risk
The Group generally gives 30 day credit terms on its continuing business and provides against doubtful debts only when
recoverability is considered to be at risk. For cash and cash equivalents, the Group only uses recognised banks with high
credit ratings.
Capital Disclosures
The Group monitors “adjusted capital” which comprises all components of equity (i.e. share capital, share premium and
retained earnings).
The Group’s objective when maintaining capital are:
•
•
to safeguard the entity’s ability to continue as a going concern, so that it can provide returns for shareholders in future
periods and benefits for other stakeholders, and
to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes
adjustments to it in the light of changes in economic conditions and the risk characteristics of the underlying assets.
4. Segmental Analysis
The chief operating decision maker for the Group is the Board of Directors. The Group reports in three segments:
• SME Mass Market – this segment provides a range of VPS, shared hosting, email and domain registration services to
individuals and SME’s. This business was divested during the year.
• Managed Services – this segment provides all forms of Managed Services to customers. This segment was created
on the acquisition of Netplan in November 2013 and has been further expanded with the acquisition of Q4Ex Ltd and
System Professional Ltd. This segment was previously referred to as Managed Hosting.
Value Added Resale (VAR) of products/services – this segment provides all forms of VAR sales where the business is
acting as a reseller. This segment was created following the acquisition of System Professional Ltd
•
Information regarding the operation of the reportable segments is included below. The performance of each operating
segment is based on revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) before any
allocation of Group overheads, share based payments, fair value adjustments or acquisition costs, as the Board believe
this is the best measure for performance. The Group’s Adjusted EBITDA has been calculated after deducting Group
overheads which include the cost of the Board, Group marketing, legal and professional fees, share based payments, fair
value adjustments and acquisition costs.
Assets and liabilities are not reviewed on a segmental basis. All segments are continuing operations. The accounting
policies of the operating segments are the same as those described in the summary of significant accounting policies.
Transactions between segments are accounted for using an arm’s length commercial basis.
SysGroup Plc Annual Report & Accounts 2017 62
2016
%
47%
53%
-
100%
2016
%
80%
20%
100%
2016
£’000
2,249
2,515
-
4,764
2016
£’000
3,792
972
4,764
2016
Revenue by operating
segment
SME Mass Market (discontinued)
Managed Services
Value Added Resale (VAR)
Total
2017
£’000
700
5,400
1,765
7,865
2017
%
9%
69%
22%
100%
No individual customer accounts for more than 10% of the Group’s revenue.
The Group operates out of the UK and sells services to the following geographical locations:
2017
£’000
7,267
598
7,865
2017
%
92%
8%
100%
UK
Rest of World
Total
SME Mass
Market
Managed Ser-
vices
Value Added
Resale (VAR)
Group
overheads
Acquisition costs
Share based
payments
Fair value
adjustment
Group interest
Profit on sale of
SME
EBITDA
before
acquisition
costs and
share based
payments
£’000
2017
Depreciation
and
amortisation
Profit (loss)
before tax
£’000
£’000
193
905
468
1,566
(737)
-
-
-
-
-
(45)
(635)
-
(680)
(15)
-
-
-
-
-
148
270
468
886
(771)
(804)
-
(300)
(27)
1,336
EBITDA
before
acquisition
costs and
share based
payments
£’000
Depreciation
and
amortisation
Profit (loss)
before tax
£’000
£’000
558
(164)
394
-
-
1,300
(634)
-
-
-
-
-
-
-
(599)
(12)
-
-
-
-
-
-
-
701
(646)
(34)
8
270
(51)
-
248
Total
829
(695)
320
666
(611)
SysGroup Plc Annual Report & Accounts 2017
5. Operating loss
Operating loss is after charging the following:
Auditor’s remuneration
Group
Audit
Taxation - compliance
Corporate finance
Other advisory
Company
Audit
Depreciation of tangible fixed assets
Owned
Held under finance leases
Amortisation of intangible assets
Share based payments
Rentals payable under operating leases
Acquisition and integration costs
6. Finance Expense
Interest payable on finance leases
Interest payable on loan notes
Total
63
2017
£’000
2016
£’000
36
4
75
1
4
189
135
326
-
89
791
2017
£’000
27
-
27
31
4
-
1
4
134
107
205
(8)
81
34
2016
£’000
32
12
44
SysGroup Plc Annual Report & Accounts 2017 64
7. Staff Numbers and Costs
The average number of full time persons employed by the Group, including executive Directors during the year was:
Research and Development
Technical Support
Sales and Marketing
Executive and Administration
Total
2017
2016
6
37
5
8
56
4
20
1
6
31
The aggregate payroll costs including executive Directors but excluding Non-Executive Director service fees were as
follows:
Wages and salaries
Social security costs
Benefits in kind
Pension benefits accrued
Share based payment expense
Total
2017
£’000
3,278
289
24
31
-
2016
£’000
1,387
156
6
23
(8)
3,622
1,564
Total staff costs for the company are £339,599 (2016: £328,376). Average staff numbers for the year for the company are 5.
Directors and Key Management Personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling
the activities of the Group, they are also the Directors of the Company listed on page 19.
Fees and salaries
Social security costs
Benefits in kind
Pension
Share based payment expense
Total
2017
£’000
395
27
3
12
-
437
2016
£’000
287
156
3
23
(8)
290
SysGroup Plc Annual Report & Accounts 2017 65
The emoluments of the highest paid director Julie Joyce were £126,000 (2016: Christopher Evans £96,000).
The Group does not operate a defined benefit pension scheme and executive Directors who are entitled to receive pension
contributions may nominate a defined contribution scheme into which the Company makes pension contributions.
The fees relating to Non-Executive Directors are in some cases payable to third parties in connection with the provision of
their services.
8. Acquisition and Restructuring Costs
Professional fees on acquisition of System Professional Ltd
Professional fees on aborted transaction
Integration and restructuring of continuing business*
Total
2017
£’000
414
38
339
791
2016
£’000
4
30
-
34
*Integration and restructuring costs relate to closing and relocating offices/teams, streamlining operations and establishing single front and back office IT
platforms/systems. This includes costs of £161k in relation to the use of internal management and technical staff resources to deliver the changes.
9. Share Based Payments and Warrants
The Company has granted a number of EMI options. The Directors have the discretion to grant options to subscribe for
ordinary shares up to a maximum of 10 per cent of the Company’s issued share capital. Options can be granted to any
employee of the Group. There are no performance criteria associated with the options. The weighted average exercise
price is 50.97p per share.
Rights to options over ordinary shares of the Company are summarised as follows:
Grant date
24/08/07
19/12/12
12/12/13
02/03/15
14/08/15
No. of Ordinary Shares
Exercise
period
Exercise
price
At
31 March
2016
Granted
Waived
31/07/07
to 30/07/17
19/12/12
to 18/12/22
12/12/13
to 11/12/23
02/03/15
to 01/03/25
14/08/15
to 13/08/25
28p
89,286
40p
2,175,000
60p
625,000
62.8p
100,000
68p
1,000,000
-
-
-
-
-
-
-
-
-
-
At
31 March
2017
89,286
2,175,000
625,000
100,000
1,000,000
SysGroup Plc Annual Report & Accounts 2017
66
Grant date
21/02/16
15/08/16
13/09/16
Total
No. of Ordinary Shares
Exercise
period
Exercise
price
At
31 March
2016
Granted
Waived
At
31 March
2017
21/02/16
to 20/02/26
15/08/16
to 14/08/26
13/09/16
to 12/09/26
55.2p
475,000
-
-
475,000
60.5p
60.5p
-
-
125,000
(125,000)
-
5,000
-
5,000
-
-
4,464,286
130,000
(125,000)
4,469,286
The options have been valued, using the Black Scholes method, using the following assumptions:
Number of instruments granted
89,286
2,175,000
625,000
100,000
Grant date
Expiry date
Contract term (years)
Exercise price
Share price at granting
Annual risk free rate (%)
Annual expected dividend yield (%)
Volatility (%)
Fair value per grant instrument
23/03/09
19/12/12
12/12/13
02/03/15
30/07/17
18/12/22
11/12/23
01/03/25
8.2
287p
200p
5%
0%
50%
18.4p
10
40p
100p
0.5%
0%
40%
10
60p
85p
0.5%
0%
90%
54.4p
74.46p
10
62.8p
62p
0.5%
0%
40%
32p
Number of instruments granted
1,000,000
475,000
5,000
Grant date
Expiry date
Contract term (years)
Exercise price
Share price at granting
Annual risk free rate (%)
Annual expected dividend yield (%)
Volatility (%)
Fair value per grant instrument
14/08/15
21/02/16
13/09/16
13/08/25
20/02/26
12/09/26
10
68p
68p
0.5%
0%
90%
57.6p
10
55.2p
70.8p
0.5%
0%
55%
47.6p
10
60.5p
60.5p
0.5%
0%
55%
52.17p
The inputs to the share valuation model utilised at the grant of option is shown in the tables above.
SysGroup Plc Annual Report & Accounts 2017 67
Management has determined volatility using their knowledge of the business.
At 31 March 2017 there were 140,000 outstanding warrants to subscribe for the ordinary share capital of the Company as
follows:
No. of Warrants and Exercise price
Grant date
09/01/2012
Exercise period
08/01/2022
200p
140,000
Total
140,000
The fair value of the convertible loan warrants has been calculated at 0.36p based on the following assumptions – share
price at granting 50p, annual risk free rate 0.5%, and volatility 20%. No provision has been made for the convertible loan
note warrants in shared based payments.
10. Acquisitions
There has been one acquisition during the period. The Board strategically expect acquisitions to be a common component
of growth in the future.
Acquisitions made during the year to 31 March 2017 were:
System Professional Ltd
The Group acquired 100% of the share capital of System Professional Ltd (Sys-Pro) on 4 July 2016. Sys-Pro provides
managed services, cloud hosting, value added resale services, and IT consultancy support.
During the year to 31 March 2017 the Group incurred £414,000 of costs in relation to this acquisition. These costs are
included in administrative expenses in the Group’s consolidated statement of comprehensive income for the year ended 31
March 2017.
The amount of identifiable net assets assumed at the acquisition date is shown below:
Recognised amounts of net assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Stock and work in progress
Intangible assets
Trade and other payables
Current income tax liability
Deferred tax liability
Identifiable net assets
Goodwill
Fair Values
£’000
289
589
96
69
948
(579)
(383)
(203)
826
3,844
SysGroup Plc Annual Report & Accounts 2017 Recognised amounts of net assets acquired and liabilities assumed
Total consideration
Satisfied by:
Cash consideration - paid on acquisition
Consideration - new ordinary shares issued at 60p per share
Contingent consideration
Total consideration
68
Fair Values
£’000
4,670
3,464
585
621
4,670
The fair value of acquired customer relationships intangible asset has been estimated using a discounted cashflow
method, based on the estimated level of profit to be generated from them. A post tax discount rate of 19% was used in
the valuation. Customer relationships are being amortised over an estimated useful life of 5 years. The acquisition of Sys-
Pro included a contingent consideration which is payable 85% in cash and 15% in shares at 60p (resulting in the issue of
975,000 consideration shares in respect of the 15%). The contingent consideration payable is based on delivering certain
performance criteria and is capped at £1.865m. The earn out period is to 31 March 2018 (unless achieved in 31 March
2017). If EBIT (earnings before interest and tax) of less than £714k in the year ended 31 March 2018 then no consideration
is payable, there is a ratchet mechanism and a set of ranges. Achieving the maximum potential consideration would require
Sys-Pro to deliver £1.3m or more of EBIT for the respective full financial year.
Since the acquisition date to 31 March 2017, System Professional Limited has contributed £4,058,034 to Group revenue
and £331,472 to Group EBITDA. Had the acquisition taken place on 1 April 2016, the contribution to Group revenue would
have been £5,208,639 and £911,283 to Group EBITDA.
11. Earnings Per Share
Profit for the financial year attributable to shareholders
£378,000
£248,000
Weighted number of equity shares used in basic EPS
19,805,397
12,076,486
Weighted number of equity shares used in diluted EPS
20,164,861
12,076,486
Basic earnings per share
Diluted earnings per share
£0.0190
£0.0187
£0.0205
£0.0205
2017
2016
Basic earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average
number of ordinary shares in issue during the year, excluding treasury shares which are treated as cancelled.
For diluted earnings per share, the weighted average number of ordinary shares in issue during the year is adjusted to
include the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential
ordinary shares into ordinary shares.
SysGroup Plc Annual Report & Accounts 2017
12. Taxation
Current tax charge
Deferred tax
Timing differences
Total tax charge
Factors affecting the tax charge for the year
Profit (loss) on ordinary activities before taxation
Profit (loss) on ordinary activities before taxation multiplied by the Standard
rate of UK corporation tax of 20% (2016:20%)
Effects of:
Tax losses
Deferred tax movements
Total tax charge
The Group recognised deferred tax assets and liabilities as follows:
Deferred tax on customer relationships
Capital allowances timing differences
Deferred tax (liability)
2017
£’000
65
(123)
(58)
320
65
-
(123)
(58)
2017
£’000
(242)
(123)
(365)
69
2016
£’000
31
(85)
(54)
248
34
(3)
(85)
(54)
2016
£’000
(267)
25
(242)
Recognition of deferred tax assets is restricted to those instances where it is highly probable that relief against taxable
profit will be available.
The movement in the deferred tax account during the year was:
Balance at 1 April 2016
Credited to statement of comprehensive income
Balance at 31 March 2017
Capital
allowances
timing
differences
£’000
25
(25)
-
Customer
relationships
£’000
(267)
(98)
(365)
Total
£’000
(242)
(123)
(365)
SysGroup Plc Annual Report & Accounts 2017 Website
Cost
£’000
Development
Cost
£’000
Software
Cost
£’000
Customer
Relationships
£’000
Positive
Goodwill
£’000
197
232
13. Intangible Assets
Group
At 1 April 2015
Additions
Acquired from
acquisition
Disposals
At 31 March 2016
At 1 April 2016
Acquired from
acquisitions
Additions
Disposals
At 31 March 2017
-
-
-
197
197
-
-
197
Accumulated amortisation and impairment
At 1 April 2015
On disposals
Charge for the year
At 31 March 2016
At 1 April 2016
On disposals
Charge for the year
At 31 March 2017
Net book value
At 31 March 2016
At 31 March 2017
169
-
11
180
180
-
11
191
17
6
-
-
-
232
232
-
(232)
-
232
-
-
232
232
(232)
-
-
-
-
7
54
-
-
61
61
-
11
-
72
1
-
7
8
8
-
22
30
53
42
70
Total
£’000
6,804
54
-
-
1,914
4,454
-
-
-
-
-
-
1,914
4,454
6,858
1,914
4,454
948
3,844
-
(479)
-
(678)
6,858
4,792
11
(1,389)
2,383
7,620
10,272
354
-
301
655
655
(479)
638
814
-
-
-
-
-
-
-
-
756
-
319
1,075
1,075
(711)
671
1,035
1,259
1,569
4,454
7,620
5,783
9,237
SysGroup Plc Annual Report & Accounts 2017 71
The Company held no intangible assets at 31 March 2017 or 31 March 2016.
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial
assets classification, which is disclosed as administrative expenses in the statement of comprehensive income.
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment
charges arose as a result of this review.
The recoverable amount is determined based on a discounted cash flow basis and is allocated to individual cash
generating units. The calculation uses pre-tax cash flow projections based on financial budgets approved by the Board
covering a two year period. Cash flows beyond the two year period are extrapolated using the estimated growth rates
stated below. The growth rates and margins used to estimate future performance are based on past performance and the
experience of growth rates.
The carrying value of each CGU is as follows:
SME Mass Market (divested in year)
Netplan
System Professional
Total
The assumptions used for the impairment reviews are as follows:
Discount rate
Growth rate year 2 to year 5
Terminal growth rate
2017
£’000
-
5,348
4,585
9,932
System
Professional
19%
10%
5%
2016
£’000
620
4,977
-
5,597
Netplan
19%
10%
5%
Forecast period for which cashflows are estimated
2 years
2 years
The Group had no contractual liability for development costs at 31st March 2017. As a result of the impairment testing
carried out on the basis of these estimates and assumptions, no impairment provisions are required.
The recoverable amount for the Netplan and System Professional businesses exceeds the carrying value of the total net
assets by £2.8m. A 1% increase in the discount rate would reduce the recoverable amount by approximately £0.5m. A 4%
reduction in the growth rate would reduce the recoverable amount by approximately £0.27m.
SysGroup Plc Annual Report & Accounts 2017 14. Property Plant and Equipment
Group
At 1 April 2015
Additions
Acquisition of subsidiary
Disposals
At 31 March 2016
At 1 April 2016
Additions
Acquisition of subsidiary
Disposals
At 31 March 2017
Accumulated depreciation
At 1 April 2015
Charge for the year
On disposal
At 31 March 2016
At 1 April 2016
Charge for the year
On disposal
At 31 March 2017
Net book value
At 31 March 2015
At 31 March 2016
At 31 March 2017
72
Total
£’000
1,341
161
-
(11)
1,491
1,491
571
96
(737)
1,421
749
294
(2)
1,041
1,041
337
(624)
754
592
450
666
Furniture
and
equipment
£’000
1,341
161
-
(11)
1,491
1,491
571
96
(737)
1,421
749
294
(2)
1,041
1,041
337
(624)
754
592
450
666
Included in the net book value of £666,000 (2016: £450,000) are assets held under finance leases with a NBV of £340,291
(2016: £151,000).
The depreciation for the year on these assets was £135,000 (2016 £77,000).
SysGroup Plc Annual Report & Accounts 2017 73
Total
£’000
3
42
-
45
45
36
-
81
-
-
12
12
12
-
13
25
3
33
56
Furniture
and
equipment
£’000
3
42
-
45
45
36
-
81
-
-
12
12
12
-
13
25
3
33
56
Company
At 1 April 2015
Additions
Disposals
At 31 March 2016
At 1 April 2016
Additions
Disposals
At 31 March 2017
Accumulated depreciation
At 1 April 2015
On disposal
Charge for the year
At 31 March 2016
At 1 April 2016
On disposal
Charge for the year
At 31 March 2017
Net book value
At 31 March 2015
At 31 March 2016
At 31 March 2017
The Company held no finance leases at 31 March 2017 or 31 March 2016.
SysGroup Plc Annual Report & Accounts 2017 15. Investments
Company
Investment in Subsidiaries
At 1 April 2016
Additions
Impairment following disposals
Cost 31 March 2017
74
2016
£’000
6,576
-
-
6,576
2017
£’000
6,576
4,952
(1,099)
10,429
The Company’s subsidiary undertakings all of which are wholly owned (unless otherwise stated) and included in the
consolidated accounts are:
Undertaking
System Professional Ltd
Netplan Internet Solutions Limited
Netplan LLC*
SysGroup (DIS) Ltd
SysGroup (NH) Ltd
Project Clover Ltd
SysGroup (EH) Ltd
Registration
Principal activity
England
England
USA
England
England
England
England
Managed Services
Managed Services
Managed Services
Managed Services
Managed Services
Managed Services
Managed Services
*Netplan LLC is a wholly owned subsidiary of Netplan Internet Solutions Ltd
The recoverable amounts have been determined from discounted cash flow calculations based on cash flow projections
from approved budgets covering a one-year period to 31 March 2018. The major assumptions can be found in note 13.
The impairment charge above relates to the disposal of the SME segment during the period.
SysGroup (NH) Limited (Company Number 03963376), SysGroup (EH) Limited (Company Number 05814619), SysGroup
(DIS) Ltd (Company number 05743110), Project Clover Ltd (Company number 08995906) are taking advantage of the
exemption from audit under section 479a of the Companies Act 2006 following the guarantee provided by SysGroup plc
under section 479C of the companies Act 2006.
The registered office of all subsidiaries is the same as the registered office of the parent company.
SysGroup Plc Annual Report & Accounts 2017
16. Trade and Other Receivables
Amounts due within one year
Trade debtors
Other debtors
Amounts owed by subsidiary
undertakings
Prepayments and accrued
income
Total Debtors
Group
2017
£’000
902
-
-
409
1,311
Company
2017
£’000
-
-
-
100
100
Group
2016
£’000
306
-
-
292
598
The Group is not exposed to any significant credit risk from trade receivables.
17. Trade and Other Payables
75
Company
2016
£’000
-
-
-
34
34
Amounts falling due within
one year
Group
2017
£’000
Company
2017
£’000
Group
2016
£’000
Company
2016
£’000
Trade payables
Corporation tax
Other payables
Accruals
Total financial liabilities, excluding
loans and borrowings measured
at amortised cost
Other taxes and social security
costs
Deferred Income
Total
Contingent consideration
due on acquisitions
Q4Ex Ltd
System Professional
590
106
-
653
1,349
322
465
36
-
-
98
134
17
-
367
62
-
134
563
155
707
2,136
151
1,425
35
-
-
36
71
-
-
71
Group
2017
£’000
-
690
Company
2017
£’000
-
690
Group
2016
£’000
435
-
Company
2016
£’000
435
-
The fair value of contingent consideration was based on the present value of cash flows and the market value of the shares
to be issued.
SysGroup Plc Annual Report & Accounts 2017 76
To the extent trade payables and other payables are not carried at fair value in the consolidated balance sheet, book value
approximates to fair value at 31 March 2017 and 31 March 2016.
Maturity of the financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised
cost is shown in note 3.
18. Loans and Borrowings
The book value and fair value of loans and borrowings are as follows:
Group
2017
£’000
184
184
Group
2017
£’000
-
-
223
223
Company
2017
£’000
-
-
Company
2017
£’000
-
-
-
-
Group
2016
£’000
91
91
Group
2016
£’000
-
105
111
216
Company
2016
£’000
-
-
Company
2016
£’000
-
-
-
-
Non-Current
Finance lease creditor
Total
Current
Convertible loan
Other loan
Finance lease creditor
Total
19. Leases
Group Finance Leases
Future lease payments are due as follows:
Not later than one year
Later than one year and not later than 5 years
Later than 5 years
Total
Minimum Lease
Payments 2016
£’000
Interest
2016
£’000
Present
Value 2016
£’000
126
97
-
223
15
6
-
21
111
91
-
202
SysGroup Plc Annual Report & Accounts 2017 77
Minimum Lease
Payments 2017
£’000
Interest
2017
£’000
Present
Value 2017
£’000
Not later than one year
Later than one year and not later than 5 years
Later than 5 years
Total
The Company has no finance leases.
Group Operating Leases
The total future value of minimum lease payments is due as follows:
235
189
-
424
12
5
-
17
Within one year
Within two to five years
After five years
Total
Company Operating Leases
Within one year
Within two to five years
After five years
Total
Leasehold
Property 2017
£’000
Other
2017
£’000
Leasehold
Property 2016
£’000
109
364
13
486
-
-
-
-
60
131
35
226
Leasehold
Property 2017
£’000
Other
2017
£’000
Leasehold
Property 2016
£’000
13
52
-
65
-
-
-
-
13
65
-
78
20. Contingent Liabilities
There are no contingent liabilities at the year-end for either the Group or Company.
223
184
-
407
Other
2016
£’000
-
-
-
-
Other
2016
£’000
-
-
-
-
SysGroup Plc Annual Report & Accounts 2017 78
21. Related Party Transactions
Details of Directors’ remuneration are given in the Directors’ Remuneration Report. Other related party transactions are as
follows:
Related party relationship
Type of Transaction
Directors
Use of personal credit cards to
pay online suppliers
Companies in which directors
or their immediate family have a
significant / controlling interest
Provision of management
services and website design
22. Share Capital and Capital Restructuring
Transaction
value
Balance Due to
Related Party
2017
£’000
-
13
2016
£’000
450
58
2017
£’000
2016
£’000
-
-
-
1
Allotted, called up and fully paid
At start of year 510,379,335 Ordinary shares
of 0.5p each, consolidated to 12,759,484
shares of 20 pence and later reduced by
capital reduction to 1p 1
Issued during the year 10,344,414 Ordinary
shares of 20p
At end of year 23,103,898 Ordinary
shares of 1p
Group
2017
£’000
Company
2017
£’000
Group
2016
£’000
Company
2016
£’000
2,552
2,552
2,399
2,399
2,068
2,068
153
153
4,620
4,620
2,552
2,552
1.
Following a 1 for 40 share consolidation each block of 40 shares with a nominal value of 0.5p share became one single share of 20 pence, then
following a capital reduction became 1p (one pence), this is further set-out in the note below.
On 15 June 2016 the Group announced the proposed acquisition of Sys-Pro and a placing of 8,333,334 new ordinary
shares at 60 pence per share to raise £5.0 million gross. The Group also announced a share consolidation and a capital
reduction.
As at the date of that announcement, the Company had 510,379,335 existing Ordinary Shares in issue and the mid-market
price of each existing ordinary share as at the close of business on 14 June 2016 was £0.0165 (1.65 pence). The Directors
considered that the share consolidation was necessary in order to increase the marketability of the Company’s shares
through the creation of a higher price per share.
Shareholder approval was granted at the General Meeting (“GM”) held on 5 July 2016 with 40 existing ordinary shares
becoming one new ordinary share.
The Share Consolidation reduced the number of existing ordinary shares in issue from 510,379,360 (after the issue to the
Company Secretary of an additional 25 existing ordinary shares for the purpose of effecting the share consolidation, given
that the number of existing ordinary shares in issue is not divisible by 40) to new ordinary shares 12,759,484 and increased
the nominal value of the Company’s shares from £0.005 (0.5 pence) to £0.20 (20 pence).
SysGroup Plc Annual Report & Accounts 2017
79
The nominal share capital of each new ordinary share was then reduced to £0.01 (1 pence), following a Court sanctioned
capital reduction. This capital reduction was approved at the same GM and became effective following the registration of
the Court Order with Companies House on 4 August 2016.
The Capital Reduction, as approved by the Court, created realised profits of £10,250,042 which was applied in eliminating
the accumulated deficit on the Company’s profit and loss account.
The Group now has distributable reserves and so is in a position to pay a dividend in the future if appropriate. When
appropriate a progressive dividend policy will be adopted.
23. Discontinued Operations
Discontinued operations relate to the SME Mass Market business. The trade and assets of this business were disposed
of on 22 July 2016 for a total cash consideration of £2,735,727 (less an initial amount of £465,519 in respect of advance
receipts/payments).
The following table summarises the results of the SME Mass Market segment included in discontinued operations in the
Consolidated statement of income:
Sales
Costs and expenses
Profit on sale
Profit before tax
Taxation
Profit attributable to the shareholders of the company
Year to
31 March 2017
Year to
31 March 2016
700
(566)
1,336
1,470
38
1,508
2,249
(1,887)
-
362
13
375
Profit on disposal is calculated as the fair value of consideration received less the fair value of assets and liabilities
disposed. Earnings per share for discontinued activities is £0.076
24. Post Balance Sheet Event
On 06 June 2017, the Group entered into a Deed of Variation with the Vendors of System Professional Ltd. In consideration
of payment by SysGroup plc of £150,000 and various legal waivers to the Vendors of System Professional Ltd the earn-
out was considered satisfied and the Group released from various “Sellers Protections” allowing for the business to be
integrated at a faster rate and allowed for the exit of certain of the vendor management team and for other changes to be
made within the business.
SysGroup Plc Annual Report & Accounts 2017 80
notice of annual
general meeting
SysGroup Plc Annual Report & Accounts 2017 81
notice of annual general meeting
Notice is hereby given that the Annual General Meeting of SysGroup plc (Company) will be held on Friday 25 August 2017
at 10.00 am at SysGroup Plc, Walker House, Exchange Flags, Liverpool L2 3YL for the purpose of considering and, if
thought fit, passing the resolutions set out below, of which Resolutions 1 to 6 will be proposed as ordinary resolutions and
Resolutions 7 and 8 will be proposed as special resolutions.
Ordinary Business
To consider and, if thought fit, pass the following resolutions:
1. TO receive, consider and adopt the Annual Report and Financial Statements for the year ended 31 March 2017,
together with the Directors’ and Auditors’ Reports contained therein.
2. TO reappoint John Michael Edelson as a director who retires by rotation.
3. TO reappoint Amy Louise Yateman-Smith as a director in accordance with the Company’s articles of association.
4. TO reappoint Julian David Llewellyn as a director in accordance with the Company’s articles of association.
5. TO reappoint BDO LLP Chartered Accountants as auditors of the Company and authorise the Directors to fix their
remuneration.
6. THAT, in accordance with section 551 of the CA 2006, the Directors be generally and unconditionally authorised to
allot Relevant Securities (as defined in the notes to this resolution):
a. comprising equity securities (as defined by section 560 of the CA 2006) up to an aggregate nominal amount of
£153,000 (such amount to be reduced by the nominal amount of any Relevant Securities allotted pursuant the
authority in resolution 6.b. below) in connection with an offer by way of a rights issue:
i.
ii.
to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings;
and
to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in
relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of
any territory or the requirements of any regulatory body or stock exchange; and
b.
in any other case, up to an aggregate nominal amount of £23,103 (such amount to be reduced by the nominal
amount of any equity securities allotted pursuant to the authority in resolution 6.a. above in excess of £23,103),
provided that this authority shall, unless renewed, varied or revoked by the Company, expire 15 months from
SysGroup Plc Annual Report & Accounts 2017 82
the date of this resolution or, if earlier, the date of the next annual general meeting of the Company save that
the Company may, before such expiry, make offers or agreements which would or might require Relevant
Securities to be allotted and the Directors may allot Relevant Securities in pursuance of such offer or agreement
notwithstanding that the authority conferred by this resolution has expired.
This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot
Relevant Securities but without prejudice to any allotment of shares or grant of rights already made, offered or
agreed to be made pursuant to such authorities.
For the purposes of the resolution: ‘Relevant Securities’ means:
i.
ii.
shares in the Company other than shares allotted pursuant to: an employee share scheme (as defined
by section 1166 of the CA 2006); a right to subscribe for shares in the Company where the grant of the
right itself constituted a Relevant Security; or a right to convert securities into shares in the Company
where the grant of the right itself constituted a Relevant Security; and
any right to subscribe for or to convert any security into shares in the Company other than rights to
subscribe for or convert any security into shares allotted pursuant to an employee share scheme (as
defined by section 1166 of the CA 2006). References to the allotment of Relevant Securities in the
resolution include the grant of such rights.
Special Business
As special business, to consider and, if thought fit, pass the following resolutions:
7. THAT, subject to the passing of resolution 6, the Directors be given the general power to allot equity securities (as
defined by section 560 of the Act) for cash, either pursuant to the authority conferred by resolution 6 or by way of a
sale of treasury shares, as if section 561(1) of the Act did not apply to any such allotment, provided that this power
shall be limited to:
a.
the allotment of equity securities in connection with an offer by way of a rights issue:
i.
ii.
to the holders of ordinary shares in proportion (as nearly as may be practicable) to their respective
holdings; and
to holders of other equity securities as required by the rights of those securities or as the Directors
otherwise consider necessary,
but subject to such exclusions or other arrangements as the Directors may deem necessary or expedient in relation to
treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory
or the requirements of any regulatory body or stock exchange; and
b.
the allotment (otherwise than pursuant to resolutions 7(a) above) of equity securities up to an aggregate nominal
amount of £23,103.
The power granted by this resolution will expire 15 months from the date this resolution is passed or, if earlier, the
SysGroup Plc Annual Report & Accounts 2017
83
conclusion of the Company’s next annual general meeting (unless renewed, varied or revoked by the Company prior
to or on such date) save that the Company may, before such expiry make offers or agreements which would or might
require equity securities to be allotted after such expiry and the Directors may allot equity securities in pursuance of
any such offer or agreement notwithstanding that the power conferred by this resolution has expired.
This resolution revokes and replaces all unexercised powers previously granted to the Directors to allot equity
securities as if section 561(1) of the 2006 Act did not apply but without prejudice to any allotment of equity securities
already made or agreed to be made pursuant to such authorities.
8. TO authorise the Company generally and unconditionally to make market purchases (within the meaning of section
693(4) of the Companies Act 2006) of ordinary shares of £0.01 each (Ordinary Shares) provided that:
a.
the maximum aggregate number of Ordinary Shares that may be purchased is 3,465,584;
b.
the minimum price (excluding expenses) which may be paid for each Ordinary Share is £0.01;
c.
the maximum price (excluding expenses) which may be paid for each Ordinary Share is the higher of:
i.
105 per cent of the average market value of an Ordinary Share in the Company for the five business
days prior to the day the purchase is made; and
ii.
the value of an Ordinary Share calculated on the basis of the higher of the price quoted for:
a) the last independent trade of; and
b) the highest current independent bid for,
any number of the Company’s Ordinary Shares on the trading venue where the purchase is carried out;
d.
the authority conferred by this resolution shall expire 15 months from the date this resolution is passed or, if
earlier, at the conclusion of the Company’s next annual general meeting save that the Company may, before the
expiry of the authority granted by this resolution, enter into a contract to purchase ordinary shares which will or
may be executed wholly or partly after the expiry of such authority.
By order of the board
Julian Llewellyn
Company Secretary
11 July 2017
Registered Office
Walker House
Exchange Flags
Liverpool L2 3YL
SysGroup Plc Annual Report & Accounts 2017
84
Notes
1. Any member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or more proxies
who need not be a member of the Company to attend and to vote instead of the member. Completion and return of a
form of proxy will not preclude a member from attending and voting at the meeting in person, should he subsequently
decide to do so.
2.
In order to be valid, any form of proxy and power of attorney or other authority under which it is signed, or a notarially
certified or office copy of such power of attorney, must reach the Company’s registrars, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99 6ZY, not less than 48 hours (excluding weekends and
bank holidays) before the time of the meeting or of any adjournment of the meeting.
3. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 the Company specifies that to be entitled
to attend and vote at the meeting (and for the purposes of the determination by the Company of the number of votes
they may cast), holders of Ordinary Shares must be entered on the relevant register of securities by 10.00 am on
23 August 2017. Changes to entries on the relevant register of securities after 10.00am on 23 August 2017 shall be
disregarded in determining the rights of any person to attend and vote at the meeting.
4. Copies of the service contracts and letters of appointment of each of the Directors of the Company together with the
Register of Directors’ Interests will be available for inspection at the registered office of the company during usual
business hours on any weekday (Saturday and public holidays excluded) and at the place of the Annual General
Meeting from at least 15 minutes prior to and until the conclusion of the Annual General Meeting.
5. The Directors have no present intention of exercising either the allotment authority under resolution 6 or the
disapplication of pre-emption rights authority under resolution 7.
6. The Annual Report and Financial statements can be downloaded from the investor section of our website at the
following location https://sysgroup.com/financial-reports/
SysGroup Plc Annual Report & Accounts 2017 SysGroup Plc
Walker House
Exchange Flags
Liverpool L2 3YL
Company Number
06172239
www.sysgroup.com