Annual
Report &
Accounts
2021
SysGroup plc
Walker House
Exchange Flags
Liverpool L2 3YL
Company Number
06172239
www.sysgroup.com
2
Contents
4
6
9
26
28
32
36
Directors, Secretary & Advisers
Highlights
Strategic Report – Chairman’s Statement
Board of Directors’ Profile
Director’s Report
Directors’ Remuneration Report
Corporate Governance Report
44
Statement of Directors’ Responsibilities
46
53
55
58
61
63
65
67
69
Independent Auditor’s Report to the Members of SysGroup plc
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Company Statement of of Financial Position
Consolidated Statement of Changes in Equity
Company Statement of Changes in Equity
Consolidated Statement of Cashflows
Company Statement of Cashflows
Notes to the Consolidated Financial Statements
96
Notice of Annual General Meeting
SysGroup plc Annual Report & Accounts 2021 3
Directors,
Secretary
& Advisers
SysGroup plc Annual Report & Accounts 2021 4
Directors,
Secretary &
Advisers
Board of Directors
Michael Edelson
Non-Executive Chairman
Adam Binks
Chief Executive Officer
Martin Audcent
Chief Financial Officer
Mark Quartermaine
Non-Executive Director
Michael Fletcher
Non-Executive Director
Company Secretary
Martin Audcent
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
57 St James’s Street
St James
London SW1A 1LD
Broker
Shore Capital Stockbrokers Ltd
The Corn Exchange
Fenwick Street
Liverpool L2 7RB
Registrar
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Lawyers
Hill Dickinson LLP
50 Fountain Street
Manchester M2 2AS
Independent Auditor
BDO LLP
3 Hardman Street
Manchester M3 3AT
Bankers
Santander (UK) plc
298 Deansgate
Manchester M3 4HH
Financial PR Advisers
Alma PR
71-73 Carter Lane
London EC4V 5EQ
SysGroup plc Annual Report & Accounts 2021 5
Highlights
SysGroup plc Annual Report & Accounts 2021 6
Highlights
Financial
Revenue
Gross profit
Adjusted EBITDA 1
£18.13m £10.50m £2.91m
2020
£19.49m
2020
£11.20m
2020
£2.81m
-7%
-6%
+4%
Adjusted PBT 2
Operational cashflows
Net cash4
£2.09m
2020
£1.76m
£2.70m
2020
£1.93m
£1.88m
2020
£(0.07)m
+18%
Highlight
Revenue
+40%
Recurring revenue as a % of total revenue
Gross profit
Adjusted EBITDA1
Adjusted EBITDA 1 Margin %
Adjusted PBT 2
Adjusted Basic EPS 3
Statutory profit/(loss) before tax
Basic EPS
Operational cashflows
Net cash/(debt) 4
2021
£18.13m
79%
£10.50m
£2.91m
16%
£2.09m
3.5p
£0.21m
0.5p
£2.70m
£1.88m
2020
£19.49m
77%
£11.20m
£2.81m
14%
£1.76m
3.4p
£(0.23)m
(0.2)p
£1.93m
£(0.07)m
Change %
-7%
+2%
-6%
+4%
+2%
+18%
+3%
-
-
+40%
-
1.
Adjusted EBITDA is earnings before interest, taxation, depreciation, amortisation of intangible assets, exceptional items,
and share based payments.
2.
Adjusted profit before tax (“Adjusted PBT”) is profit before tax after adding back amortisation of intangible assets,
exceptional items, and share based payments.
3.
Adjusted Basic EPS is profit after tax after adding back amortisation of intangible assets, exceptional items, share based
payments and associated tax, divided by the weighted average number of shares in issue.
4.
Net cash/(debt) represents cash balances less bank loans, lease liabilities and contingent consideration.
SysGroup plc Annual Report & Accounts 2021 7
Highlights Continued
Operational
• Demonstrated resilience and relevance throughout the pandemic
• Acquired businesses fully integrated and operating on a single platform
• Corporate structure simplified with Certus and HNS both hived up into main trading entity
• Negligible impact from completion of Brexit
• Customer satisfaction consistently remained above 97%, despite lockdown challenges
• Secured ISO27001 for the entire Group
Post Period-End Developments
• Opening of a new office in Manchester to build a northern sales & marketing hub
• Complete refurbishment of the Newport office to provide a better working environment
• EMI share options issued to all team members
SysGroup plc Annual Report & Accounts 2021 8
Strategic
Report
SysGroup plc Annual Report & Accounts 2021 9
Strategic Report
Chairman’s
Statement
SysGroup delivered a highly commendable performance in FY21, delivering an improved Adjusted EBITDA, achieved
in the face of the difficulties presented by the lockdown restrictions in place throughout the financial year. This
performance was underpinned by our high levels of recurring revenues - a key focus over recent years - and, had
this not been the case, the year would have been much harder for both the business and shareholders. SysGroup’s
performance this year is also testament to the Group’s response to the operational challenges presented by the
pandemic, swiftly moving employees to remote working whilst maintaining strong uninterrupted service levels for
customers and keeping tight management control over costs.
I would like to place on record the Board’s appreciation of the ongoing commitment and cooperation of our team
in rising to the challenge. They have tackled all of the challenges presented by the pandemic with diligence, care
and empathy. Not only have they applied themselves to helping our clients and ensuring that their business needs
are met, but they have also been there to support each other and rallied together as all great teams do in times of
adversity. The management team deserve credit for putting in place tiers of support mechanisms and accordingly
we will emerge from the pandemic a stronger unit.
In order to retain our talented team and attract more quality individuals to support our ambitious growth
aspirations, we have made additional grants, post the year end, under the Group’s 2018 EMI share option scheme, as
well as the implementation of a new executive LTIP scheme which was put in place in July 2020. The Board also took
the decision, in December 2020, to buy back 560,000 Ordinary Shares and hold them in Treasury to satisfy the future
exercise of options under the Group’s incentive schemes.
It was very pleasing to note the recognition the Company has received during the year with SysGroup being
included in the London Stock Exchange’s Top 1000 most influential companies in Britain and our Chief Executive,
Adam Binks, was listed in the Northwest Power 100 for the second time which reflects the continued efforts of the
entire SysGroup team.
No further acquisitions were made during the year, but we remain very much committed to our stated strategy of
being a consolidator in a hugely fragmented market. We are in a strong position to make accretive acquisitions with
committed debt facilities, a strong cash position and a supportive institutional shareholder base. Whilst we have
continued to seek out complementary acquisitions during lockdown, we have maintained our discipline and only
focus on quality assets that meet our strict acquisition criteria. As we begin to come out of the pandemic and are
once again able to meet with potential vendors face to face, we are confident that the pipeline of opportunity will
pick up, with anticipated changes to Capital Gains Tax fuelling this further.
Michael Edelson
Chairman
18 June 2021
SysGroup plc Annual Report & Accounts 2021 10
Strategic Report
Chief Executive
Officer’s Report
Introduction
I’m pleased to report on what has proved to be a very robust performance from the Group against a backdrop
of lockdown restrictions for the full twelve months under review. This resilience highlights the importance of our
continued focus over recent years on securing high levels of recurring revenues, long-term contracts and a balance
sheet set up to support corporate activity.
I am extremely proud of how our entire team has adapted since the pandemic began and I would like to take the
opportunity to extend my sincere gratitude to the entire SysGroup team for their outstanding efforts during what has
been a significant period of disruption and uncertainty in general. SysGroup has played an integral role for many of
our customers and helped them to adapt to the forever changing environment through the use of technology and
again, I am delighted that we have been able to play a part and help during this time.
Adjusted EBITDA shows an improvement of 4% on last year’s results, reflecting synergies through the integration of
prior year acquisitions and an extremely well managed overhead base. This is particularly impressive in light of
the ongoing investment into the business to ensure we are ideally placed to benefit from opportunities, as and
when normal business practices resume. Total revenues decreased slightly year on year, by 7%, due to the impact
of the pandemic as customers deferred spending decisions coupled with the fact that our sales teams have
been unable to have in-person interactions with our customers and prospects, owing to the restrictions impacting
the sales pipeline. As noted in our half year results, we also took the strategic decision to exit some lower margin
customer contracts that came with the acquisitions we made in 2019, which had a small impact on revenue but
minimal impact on the Group’s profitability. As a result, Adjusted EBITDA margin rose to 16.1% (FY20: 14%). The Group has
generated a strong operating cashflow this year and the growth in our net cash to £1.88m has ensured an extremely
robust financial position going into FY22.
Despite the impact that the pandemic has had on this year’s top line, there is no doubt that it has also refocused the
minds of business leaders on the efficacy, resilience and suitability of their existing IT systems and the associated
support that is required to ensure their platforms remain current, compliant and secure. There is much debate as
to whether organisations will return to full office working, remain entirely flexible or adopt a hybrid solution. What
is clear though is that the technology they deploy to support them is more critical than ever and we believe that
the trend of outsourcing to experts such as SysGroup will increase. Once we have greater economic certainty and
confidence returns, we are likely to see an increase in spend and commitment to long term managed IT services
contracts, which we are ideally placed to fulfil.
As well as supporting our existing client base and ensuring they receive the best levels of service, we have also
focused heavily on operational improvements and making sure that SysGroup is positioned to capitalise when
market conditions improve. The remote working model that we employed throughout the last twelve months was
highly successful, with our teams able to support clients through the trickiest of conditions, reflected in customer
satisfaction levels throughout the full year of over 97%. At the same time, I am delighted that we were able to
welcome team members back to the office from 24 May on an optional basis, with appropriate Covid safety
measures, albeit at a reduced capacity and in-line with government guidance. The cultural importance of having
our teams working together, drawing energy and inspiration from each other and relishing a normalised working
environment cannot be understated.
SysGroup plc Annual Report & Accounts 2021 11
Chief Executive Officer’s Report Continued
Integration
During the course of the year, and post completion of the earn-out period, we completed the full integration of the
Certus business which we acquired in February 2019. There is now one senior leadership team in place responsible
for delivering our strategy and teams at all levels have been amalgamated to create greater pockets of expertise.
As stated in our half year results and in line with our single go-to-market offering, known as “one SysGroup,” all of our
business operations have also now been rebranded to SysGroup and all legacy brands have been discontinued. The
integration exercise was completed with a corporate structure tidy up at the end of year with both the Certus and
HNS businesses being hived up into our main trading entity.
We have made substantial progress on Project Fusion and during the second half of the year, we went live with a new
business system that unified our CRM platform, marketing, service desk and billing operations. This improvement to
our core platform gives us much greater oversight at a Group level on all sales and marketing activities, customer
support requests and billing processes. The benefits of this are already being experienced, but more importantly it
will enable us to scale over the coming years more quickly and efficiently and make integration of future acquisitions
simpler.
Project Fusion, which is our internal programme for amalgamating and developing business systems and processes
to support future growth, will continue in FY22 as our focus moves to the people management and financial
accounting systems and we will also continue to build out the full benefits of the reporting functionality giving even
greater access to business intelligence.
Offices
Back in April, we announced our “2021 return to the office” programme to our teams. Whilst our people have
successfully worked from home since 13 March 2020, as a business we continue to recognise the importance of
providing an environment where our teams can come together and collaborate.
Further changes have been made across our UK footprint with the closure of our offices in Bristol and local clients
are now being serviced from Newport supported by our wider teams. Following the year-end, we have opened a
new office in Manchester which will become our main sales & marketing hub in the North. The opening of a new
location in Manchester will give the Group even greater access to world class talent and provide an environment
which is focused solely on delivering growth, supported by strategic marketing campaigns.
People
Our people remain our greatest asset and great attention has been paid to making sure that we can attract and
retain best in class talent. A significant part of this has been relaunching our core values, namely: Be Bold, Delight
your customer, Work Smart, Own it and Love what you do. They resonate with our market position and reflect the
ambitions of our talented workforce. Our benefits scheme has been rolled out throughout the Group, ensuring that
there is a commonality of reward for all SysGroup team members, no matter their route into the organisation. A
number of new hires were also made during the year which will help us to support our growth ambitions, and which
also help to drive our culture by bringing in fresh impetus and demonstrating our commitment to investing in the
future.
As a result of the operational improvements made during FY21, we have started the new financial year with a more
simplified leadership & operational structure with clear lines of responsibility, a more interactive workforce working
towards defined common goals, greater visibility and presence throughout the UK market and the capacity and
desire to grow market share.
SysGroup plc Annual Report & Accounts 2021 12
Chief Executive Officer’s Report Continued
Summary & Outlook
Whilst we remain mindful of the fact the pandemic is by no means over, it is pleasing to see the positive effects of
the vaccination programme which is enabling us to feel the benefit of restrictions easing, which in turn will help us to
conduct business on a face-to-face basis once again.
Despite the challenges, FY21 overall has been another successful year for the Group, demonstrated by the increase
in Adjusted EBITDA and the strength of our year-end balance sheet. The £1.95m growth in Net Cash is also testament
to the performance of the business throughout the course of the year.
I said this time last year that the world has gone through material change and that technology has been an enabler
for many to simply survive. Twelve months later and I now believe that almost all businesses will have no option other
than to embrace technology in order to thrive. SysGroup is well established and ready to take advantage of those
opportunities that will once again come to the fore when key decision makers have the confidence to once again
commit to termed contracts and enhanced spending.
Our business is highly cash generative, and we remain committed to our stated acquisition strategy and continuing
to be a consolidator in a highly fragmented market whose relevance over the last 15 months has really come to the
fore. As the year progresses and we move beyond the fears of further lockdowns, I am certain confidence will return
to pre-pandemic levels and the investments made by businesses into their technology platforms will exceed all
previous levels.
Adam Binks
Chief Executive Officer
18 June 2021
SysGroup plc Annual Report & Accounts 2021
13
Strategic Report
Chief Financial
Officer’s Report
Group Statement of Comprehensive Income
In a challenging year with government lockdown restrictions in operation across the entire period, the Group
successfully delivered revenue of £18.13m (FY20: £19.49m), a decrease of 7% on the prior period, and an improved
Adjusted EBITDA of £2.91m (FY20: £2.81m), an increase of 4% against the FY20 performance.
Managed IT services revenue reduced to £14.34m (FY20: £15.09m). This reflects the effect of the pandemic as
customers deferred new capital spend and the fact that our sales and technical consulting teams were unable to
attend customer sites due to the restrictions. The impact of the pandemic also led to a small number of customers
choosing to downsize their service requirements or cancel contracts to reduce costs. In keeping with our business
model of focussing on the UK mid-market, we also exited some lower margin customer contracts that were inherited
with the Certus and HNS acquisitions. Whilst this has had a small impact on revenue the impact to the Group’s
profitability is minimal. Similarly, value added resale (“VAR”) revenue in FY21 was £3.79m (FY20: £4.40m) as sales
were affected by customers exercising caution by withholding capex expenditure in response to the impact of
COVID-19 on their businesses and markets. As greater economic certainty returns, we believe that those deferred
commitments to both managed IT services and VAR will resume.
The revenue mix of 79% managed IT services and 21% VAR was slightly ahead of the Group’s target business model of
75% managed IT services and 25% VAR. The FY20 revenue mix was 77%:23%.
Revenue by
Operating Segment
Managed IT Services
Value Added Resale
Total
2021
£’000
14,344
3,787
18,131
2021
%
79%
21%
100%
2020
£’000
15,092
4,400
19,492
2020
%
77%
23%
100%
Gross profit for the year was £10.50m with a gross margin of 57.9% (FY20: £11.20m and 57.5%) respectively. The
gross margin percentage was similar to last year with net neutral impacts from the change in revenue mix, an
improvement in VAR sales margin and a small reduction in the managed IT Services sales margin.
Adjusted operating expenses of £7.59m were £0.80m below last year (FY20: £8.39m) with an overhead/revenue ratio
of 42% (FY20: 43%). The lower overhead costs reflect the benefit of £0.40m acquisition synergies, £0.26m of travel and
general overhead savings and an increase in Project Fusion R&D capitalisation of £0.14m relating to the investment
in a unified platform of systems across the Group. The acquisition synergies are permanent savings. As lockdown
restrictions begin to ease and our sales teams are able to mobilise and generate additional revenue, we can expect
travel costs and general overheads to increase, and our investment in the development of Project Fusion to drive
further growth will continue into FY22. The Group made no use of the government furlough scheme, so the income
statement does not include any one-off credits from government support.
Adjusted EBITDA was £2.91m for the twelve months to 31 March 2021, an increase of £0.10m (+4%) from £2.81m in FY20.
The Adjusted EBITDA margin was 16.1% in FY21 compared to 14.4% in FY20 which continues our progressive profit
improvement from the Group’s scale-up strategy and synergising activity.
The reconciliation of operating profit to Adjusted EBITDA is shown in the table below. The Directors consider that
Adjusted EBITDA is the most appropriate measure to assess the business performance since this reflects the
underlying trading performance of the Group. Adjusted EBITDA is not a statutory measure and is calculated
differently by each Company.
SysGroup plc Annual Report & Accounts 2021 Chief Financial Officer’s Report Continued
Reconciliation of operating loss to Adjusted EBITDA
Operating loss
Depreciation
Amortisation of intangible assets
EBITDA
Exceptional items
Share based payments
Adjusted EBITDA
14
2020
£’000
(28)
847
1,321
2,140
475
199
2,814
2021
£’000
313
722
1,294
2,329
82
504
2,915
The Group incurred exceptional costs during the year of £0.08m (FY20: £0.48m) comprising employee exit costs
from integration activities and for the closure of the Bristol office. Amortisation of intangible assets was £1.29m (FY20:
£1.32m), of which £1.22m (FY20: £1.27m) relates to the amortisation of acquired intangible assets from acquisitions.
Project Fusion capitalised software development costs commenced amortisation in November 2020 when the first
modules of the new system went live.
Finance costs of £0.11m are reduced from the FY20 charge of £0.21m as the term loan continues to amortise through
quarterly loan repayments and as lease contracts reach their expiry. The share-based payments charge of £0.50m for
the year (FY20: £0.20m) includes a £0.18m charge for the 2018 & 2019 Executive Director LTIPs which vested in July 2020.
The Adjusted profit before tax for the year was £2.09m (FY20: £1.76m) and statutory profit before tax for the year was
£0.21m (FY20: loss before tax £(0.23)m). Adjusted basic earnings per share for FY21 was 3.5p (FY20: 3.4p) and basic
earnings per share for FY21 was 0.5p (FY20: (0.2)p loss per share).
Adjusted profit before tax
Profit/(loss) before taxation
Amortisation of intangibles
Exceptional items
Share based payments
Total
Taxation
2021
£’000
205
1,294
82
504
2,085
2020
£’000
(234)
1,321
475
199
1,761
The Group reports a tax credit in the FY21 Consolidated Income Statement of £0.04m which compares to a £0.11m
credit in FY20. The corporation tax charge has increased this year to £0.27m (FY20: £0.02m) as trading profits have
risen but this is more than offset by deferred tax credit movements, notably on the amortisation of intangible assets
and share based payments. The Group uses the HMRC Research & Development tax credit scheme when project
expenditure fulfils the HMRC scheme criteria. The Group’s tax in the Income Statement is expected to become a net
charge in the future as the business continues to grow and the remaining tax losses are fully utilised.
Cashflow & Net Cash
The Group had a strong net cash position of £1.88m as at 31 March 2021 (FY20: net debt £0.07m) which includes IFRS16
property lease liabilities. Cash conversion was 95% (FY20: 86%) and the Group’s gross cash balance as at 31 March
2021 was £3.47m (FY20: £3.03m). The Directors were pleased with this cash and debt management performance
given the challenges that COVID-19 presented to the business community at the commencement of, and
throughout, the Group’s financial year.
SysGroup plc Annual Report & Accounts 2021 15
Chief Financial Officer’s Report Continued
As reported in last year’s Annual Report, we entered Q1 with requests from a number of customers for financial
support which we were able to provide with extended settlement terms and in some cases a deferral of fees into
future periods. These arrangements were adhered to with full co-operation from the customers involved and all
have since come to an end with reversion to standard payment terms. Since SysGroup’s customer base has a
wide diversification of industry sectors there was only a low level of exposure to the sectors most exposed to the
pandemic restrictions imposed by the Government in hospitality, leisure, travel and tourism. Cash collection has
remained strong throughout the period which is a credit to our customers in a difficult period, and a reflection of the
business criticality of the IT services we provide. No changes were made to our supplier payment processes during
the year and suppliers were paid as normal in accordance with our usual monthly payment runs.
Operational cashflows were £2.70m (FY20: £1.93m) which reflected strong cash conversion at 95% (FY20: 86%), good
trade debtor control and lower interest and tax payments. The Group has made no use of the government furlough
scheme or any of the government backed COVID-19 assistance schemes and the deferral of the £0.28m Q1 VAT
payment reported in our Interim Results was repaid in full in December 2020.
Cash conversion
Operational cashflows
Adjustments:
Acquisition, integration and restructuring cashflows
Cash generated from operations
Adjusted EBITDA
Cash conversion
2021
£’000
2,700
82
2,782
2,915
95%
2020
£’000
1,930
492
2,422
2,814
86%
The Group’s investing activities included the payment of the final earn-out consideration relating to the acquisition
of Certus. The full earn-out profit target was achieved and £0.975m cash consideration was paid to the vendors of
Certus. In Financing activities, in addition to the quarterly bank loan and lease payments, the Company repurchased
560,000 ordinary shares of £0.01 each in the capital of the Company (“Ordinary Shares”) for consideration of £0.20m.
The Group’s net cash position of £1.88m is shown below and this includes IFRS16 Lease liabilities. Net cash/(debt) is
considered to be a KPI of the business since the level of financial indebtedness of the Group is relevant for Board
strategic decisions and a key financial measure for the Group’s shareholder base and potential investors.
Net cash
Cash balances
Bank loans – current
Bank loans - non-current
Lease liabilities - equipment
Lease liabilities – property
Contingent consideration
Net cash/(debt)
2021
£’000
3,473
(416)
(757)
(86)
(334)
-
1,880
2020
£’000
3,036
(251)
(1,146)
(186)
(522)
(1,000)
(69)
SysGroup plc Annual Report & Accounts 2021
16
Chief Financial Officer’s Report Continued
Consolidated Statement of Financial Position
The Group’s net assets of £20.6m at 31 March 2021 represented an increase of £0.5m to the prior year (FY20: £20.0m).
Non-current assets have reduced by £1.44m which mainly arises from the £1.22m amortisation of acquired intangible
assets. During the year, the Group invested £0.18m (FY20: £0.35m) in property, plant and equipment and £0.39m (FY20:
£0.18m) in Project Fusion software development costs. Working capital was managed well throughout the year with
the gross trade debtor balance of £1.18m comparing to £1.64m in the previous year and trade payables of £0.81m
comparing to £1.85m in the prior year.
The contingent consideration liability of £1.0m which was held at the prior year end for the Certus acquisition earn-
out was paid in H1 FY21 following the successful achievement of the earn-out. SysGroup paid £0.975m contingent
consideration to the vendors of Certus in full settlement.
The bank loan at 31 March 2021 was £1.17m (FY20: £1.40m); there have been no further drawdowns of the facilities
during the year and the bank loan covenants have been met throughout the year.
A new Treasury reserve has been established within equity. This is to recognise the Company purchase of 560,000
ordinary shares of £0.01 each on 1 December 2020 at a price of 35.745 pence per ordinary share. The shares will be
held in treasury to fulfil the future anticipated exercise of options under the Employee Share Option plans.
Project Fusion
Project Fusion was launched in FY20 as a project to deliver a unified platform of systems across the Group to enable
more efficient working practices and higher quality operating and reporting information. The project has multiple
workstreams for systems covering Customer Relationship Management (“CRM”), Service Desk, Financial Accounts,
Marketing and Risk Management.
During FY21, substantial progress has been made as our internal project teams and implementation partners have
worked well together to design and implement the core system. The new system which brings together CRM, Billing,
Service Desk & Marketing onto a single platform, went live in H2 FY21. Project Fusion will continue in FY22 as focus
moves to the People Management and Financial Accounts systems, in addition to building out the full benefits of the
reporting functionality which will provide far greater visibility of business intelligence and enable us to scale more
effectively and efficiently. During the year, £0.39m (FY20: £0.18m) of software development costs were capitalised as
an intangible asset comprising employee and third-party supplier costs
Share Option Grants
In July 2020 we announced the implementation of the new 2020 SysGroup Long Term Incentive Plan (“2020 LTIP”),
together with an initial grant of 400,000 performance shares (the “Award”) under the 2020 LTIP. The Remuneration
Committee granted 250,000 performance shares to Adam Binks, Chief Executive Officer, and 150,000 performance
shares to Martin Audcent, Chief Financial Officer (together the “Executive Directors”). The 2020 LTIP replaced in its
entirety the incentive plan set up in June 2018 (“2018 LTIP”) and the 1.6 million performance shares granted to the
Executive Directors under the 2018 LTIP vested with immediate effect.
In addition to the grant of the 400,000 performance shares to the Executive Directors, 450,000 share options were
granted in April 2020 to senior management under the existing 2018 SysGroup EMI Scheme.
On 8 April 2021, following the 31 March 2021 year end, the Company granted 306,000 share options to employees
under the SysGroup 2018 EMI Scheme.
SysGroup plc Annual Report & Accounts 2021 SysGroup plc Annual Report & Accounts 2021
17
Chief Financial Officer’s Report Continued
KPIs
The Board of Directors review the performance of the Group using the financial measures outlined below and an
explanation of the financial results is provided in the Financial Review above.
Revenue growth
Recurring revenue as a % of total revenue
Gross Profit
Gross Profit %
Adjusted EBITDA
Adjusted PBT
Profit/(loss) before tax
Net cash/(debt)
2021
£18.13m
79%
£10.50m
58%
£2.91m
£2.09m
£0.21m
£1.88m
2020
£19.49m
77%
£11.20m
57%
£2.81m
£1.76m
£(0.23)m
£(0.07)m
Change %
-7%
+2%
-6%
+1%
+4%
+18%
+191%
SysGroup plc Annual Report & Accounts 2021
18
Chief Financial Officer’s Report Continued
Principal Risks & Uncertainties
The Board is responsible for monitoring the Group’s principal risks and uncertainties which are considered in the
context of the nature, size and complexity of the business. The Group employs a Head of Legal, Risk & Compliance
who operates as a member of the Senior Leadership Team and reports to the Executive Directors. The Head of Legal,
Risk & Compliance has the responsibility for managing the Group’s Risk Management framework, GDPR policy, Data
Protection and other regulatory and compliance processes.
A detailed description of the principal risks and uncertainties faced by the Group, their potential impact, mitigating
processes and controls are set out below.
Principal risk
Potential impact
How we mitigate the risk
Impact on trading from the effect a
global pandemic has on the business
environment and wider economy
Likelihood: High
Impact on the business from a
cyber-attack that prevents business
operations
Likelihood: Medium
The COVID-19 pandemic has created
an unprecedented period of social
& political challenges that has led to
serious disruption to all businesses and
the worldwide economy. Whilst the
current outlook is for general economic
growth as the vaccination scheme
progresses, the business environment
will remain uncertain during FY22 and
there remains the risk of a roll-back
of government plans if further COVID
variants are found. This business risk
and uncertainty recognises that COVID
is likely to remain an issue worldwide
for the foreseeable future but also
recognises the risk that a new pandemic
could arise in the future that has an
impact on the Group.
In the event of a pandemic, whilst
the Group has successfully proved
its capability to “work from home”
with minimal impact to operating
requirements and without the need
to furlough employees, the Group is
likely to experience delays in customer
buying decisions. The Directors are also
aware that a downturn in the UK and
global economy will have an impact
on our customers’ businesses which
increases the risk of customer contract
cancellations and corporate defaults.
The Group successfully invoked its
Business Continuity Plan in March 2020
and adopted an operational “home
working” model for all team members
with minimal disruption. All services
were maintained to customers.
All employees have laptops rather than
desktop PCs so they are able to work
flexibly from home. Microsoft Teams is
the preferred communication tool for
remote collaboration between work
teams, and with our customers and
suppliers.
We monitor the business continuity
plans of our key suppliers to ensure the
Group has resilient sources of supply
and our customer base comes from a
diverse range of industry sectors.
The Group did not take advantage of
any government backed loans or the
furlough schemes during the period.
If there was a new catastrophic
pandemic, then the Board would
keep government loan support under
consideration and make a judgement
based on the specific circumstances.
The instance of cyber-attacks on
companies is becoming more common
across all businesses from SME’s to blue-
chip multinational enterprises. These
attacks, typically for the purpose of a
ransom, can be to access confidential
consumer & business information,
penetrate with viruses or to instigate
DDOS attacks on the IT infrastructure or
website.
The impact on a company can be
to prevent access to the business
operating systems, to prevent online
trading or to threaten disclosure of
confidential information.
SysGroup has an IT security framework
in place to mitigate the risk of cyber-
attacks. The IT infrastructure includes
multiple firewalls with enhanced
security features and the use of multiple
datacentres allows for suitable failover
resilience. All employees have regular IT
Security refresh training to remind them
of the risks, how to recognise social
engineered attacks and best practice
for physical IT & password security.
This business risk and uncertainty
is included in the Group’s Business
Continuity Plan.
Chief Financial Officer’s Report Continued
Principal risk
Potential impact
How we mitigate the risk
19
Economic uncertainty caused by
the UK Government exiting the EU
(“Brexit”).
Likelihood: Low
The Directors will continue to monitor
our level of cross-border trading to
assess the level of business risk but are
satisfied that the rating is judged low at
present.
The UK formally left the EU on 31
December 2020 and signed a new Free
Trade Agreement (“FTA”) with the EU
countries.
The impact of Brexit has been masked
by the wider economic impact from
the COVID-19 pandemic but there is an
increase in cross-border administration
and a longer-term risk of customers and
suppliers changing their buying and
selling behaviours following Brexit.
The extent of this is uncertain.
SysGroup continues to have little trade,
either buying or selling, into Europe and
vice versa and we do not expect this
position to change. It is possible that
Brexit may affect the businesses of our
customers and suppliers in the long
term and as part of the settling down of
the wider UK economy.
Dependency on key suppliers
Likelihood: Low
The Group procures services from
key suppliers that are critical to the
continued operation of its business,
the most significant of these are the
suppliers 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.
The Group continually assesses
suppliers for price competitiveness,
quality of service, technical innovation
and good financial standing. We are
confident that alternative providers are
available in the market should the need
arise.
Over-reliance on high value customer
contracts or high value industry
sectors
Likelihood: Low
Business risk increases if the Group is
over-reliant on one or several high value
customer contracts, or over-reliant on
one or several industry sectors. The
loss of key contracts or a downturn in
a particular industry sector may have
a material impact on the financial
performance of the Group.
The Board monitors customer
concentration throughout the year with
a target of customer concentration
below 5%. This target was exceeded in
FY21 with the top customer comprising
6% of revenue due to a one-off tech
refresh project but is expected to be
below 5% again in the forthcoming year.
The Group’s customer base is diversified
across multiple industry sectors which
mitigates the impact of a sector specific
industry downturn.
SysGroup plc Annual Report & Accounts 2021
20
Chief Financial Officer’s Report Continued
Principal risk
Potential impact
How we mitigate the risk
Attracting and retaining high quality
employees
Likelihood: Low
The Group’s business depends on
providing high quality service to
customers from having a motivated
and skilled workforce. If the employee
turnover is too high there’s a risk that the
Group has insufficient skills and quality
in the employee base.
The Group’s employees are key to the
success of the business. We seek to
recruit high calibre individuals who
have an appropriate level of skills,
knowledge and experience for the role
and have personal attributes that fit
with our corporate values. The Group
invests in training and development for
our employees through internal and
external training and offers competitive
remuneration and benefits packages.
At all levels we encourage our people
to be bold and find opportunities to
innovate and improve.
.
Failure in the Group’s network
infrastructure prevents SysGroup and
our customers from operating key
business systems.
Likelihood: Low
The datacentres we utilise are linked
together by diverse fibre cables. Should
the whole network fail, there would
be an adverse impact on SysGroup’s
systems, and 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 with
failover resilience.
Company acquisitions are over-
valued or poorly integrated leading to
a diminution in shareholder value.
Likelihood: Low
The Group’s strategy is to continue to
make earnings enhancing acquisitions
to strengthen its growth. We are
reliant on suitable acquisition targets
becoming available in the market
at appropriate valuations and the
Executive and Senior Leadership Team
has the responsibility to successfully
integrate acquisitions into the Group to
maximise operational opportunities and
financial benefits.
We mitigate this risk by regularly
conducting searches for targets and
developing adviser relationships who
introduce targets. We believe the
UK market for managed IT services
and cloud hosting companies has
characteristics of fragmentation which
provides opportunities for consolidation.
The Board considers all acquisition
valuations after a robust due diligence
process has been undertaken.
The Executive team plan the integration
of acquisitions during the acquisition
process and the approach typically
depends on the size of the business and
systems complexity in each case. Where
possible, smaller bolt-on acquisitions
are expected to be integrated within six
months.
.
SysGroup plc Annual Report & Accounts 2021
21
Chief Financial Officer’s Report Continued
Strategic Report
s172 Statement
This section describes how the Directors have had regard to the matters set out in section 172(1)(a) to (f) of the
Companies Act 2006 in exercising their duty to promote the success of the Group for the benefit of its members as a
whole.
The Directors consider that the following are the Group’s key stakeholders: employees, customers, suppliers,
shareholders, the community and regulators, and the Board seeks to understand the respective interests of the
stakeholders, so they are properly considered in the Board’s decisions. We do this by members of the Board having
direct engagement with the stakeholder groups and by receiving reports and updates from the Senior Leadership
Team who have certain delegated responsibility for stakeholder engagement
SysGroup purpose, culture and values
The Group’s clear strategy and purpose is to become the leading provider of managed IT services to businesses
in the UK. The Group delivers solutions that enable clients to understand and benefit from industry leading
technologies and advanced hosting capabilities. SysGroup focuses on a customer’s strategic and operational
requirements which enables clients to free up resources, grow their core business and avoid the distractions and
complexity of delivering IT services. To ensure we meet our strategic goals it’s vital that our organisation is structured,
managed and operates in accordance with our core values.
Love what you do
Our people are passionate about what they do, committed to their team, their colleagues, and the success of
our business. Loving your job is a part of everybody’s role at SysGroup and we aim to inspire our colleagues and
customers by our energy, tenacity and adaptability.
Work smart
Being part of a fast-paced, dynamic and growing organisation means it is critical that our people work hard to
help us achieve our goals and vision. We encourage people to be innovative, contribute ideas and to work in a way
that is efficient and helps them to get the job done. Our people get a real buzz from the pace at which our business
operates and work with a strong sense of urgency and purpose which places them outside of their comfort zone.
Own it
Our people stand up and take ownership of tasks and take accountability for their actions. They volunteer to step up
when help is needed from their colleagues. Our people are expected to use their own judgement and consistently
challenge their own assumptions.
Delight your customers
At SysGroup, we don’t want happy, we want delighted! At the heart of everything we do is the desire to set ourselves
apart from our competitors by delighting our customers. We want to build our business through our excellent
reputation. We take the same approach with our internal customers, taking the time and making the effort to delight
our colleagues and stakeholders to promote a positive working environment.
Be bold and deliver
Our people are sharp, agile and insightful. We actively promote an environment where suggestions and ideas
are welcome, where people can speak up about an idea, discuss it, then formulate a way to deliver it.
SysGroup plc Annual Report & Accounts 2021 22
Chief Financial Officer’s Report Continued
Having regard to the consequences of strategic and long-term decisions
The Directors hold regular Board meetings which are usually held each month on scheduled calendar dates. The
Executive Directors prepare Board papers that cover a full review of the Group’s financial performance, operational
issues and plans, and opportunities and threats in the external market. In addition, the Board considers the
following matters of strategic importance: delegation of authority, annual operating plan and forecast approval,
acquisitions, senior management recruitment, capital structure and financing decisions, corporate governance,
and the approval of the interim and annual report and accounts. The Board is also responsible for reviewing the
effectiveness of the internal controls and risk management framework.
Board meetings are chaired by the Chairperson, Michael Edelson, and all matters on the agenda are covered with
the opportunity for additional matters to be raised. The complementary skills and experience of the Directors ensure
that strategic decisions are made with consideration to all the key stakeholder groups.
Having regard to maintaining high standards of business conduct
Corporate governance
The Board recognises the importance of operating a robust corporate governance framework, and you can read
about how we comply with the Quoted Companies Alliance Corporate Governance Code (“the QCA Code”) and
our approach to governance in our Corporate Governance Report.
Political donations
No donations were made for political purposes (FY20: £nil)
Having regard to the interests of the employees
The Group’s employees are key stakeholders in the success of the business. We look to recruit high calibre individuals
and the Group invests in their ongoing development needs through internal and external training. All employees are
encouraged to speak openly with line managers and colleagues, and Senior Leadership Team meetings are held
once a week to ensure the teams are working with co-ordination and focus in the right areas. We have undertaken
employee engagement surveys during the year to gauge how our people are coping with both working from home
and the pandemic in general. The results from these surveys have led to the Senior Leadership team finding new
ways to engage with their teams and support their well-being at a time where households are under considerable
strain.
Throughout the year, the most significant matter on which the Board have considered our employees is in dealing
with the COVID-19 situation. The health and safety of our employees was our prime concern from the outset, and
we took an early decision to move all of our employees to work from home ahead of the government guidance.
This was accomplished speedily and with minimal disruption and our offices were placed on lockdown. The
business continued to operate fully thoughout the lockdown period though it was necessary to change the way we
communicated both internally and externally which was mainly through online calls. Our People & Culture Team
were tasked with supporting our teams as they worked from home and this took the form of promoting more online
“socialising”, creating online activities & competitions and providing access to independent advice and support for
health & well-being. Many of our team are parents with children of school age and we ensured there was flexibility
for them to provide school time assistance during normal working hours. The employee survey results spoke
positively about the people engagement and how we communicated during the lockdown period.
Having regard to the fostering of relationships with customers and suppliers
Suppliers
The Board is briefed on major contract negotiations and strategy with regards to key suppliers, notably with the
Group’s providers of datacentre services, software and connectivity. The Board seeks to balance the benefits of
maintaining strong partnering relationships with key suppliers alongside the need to obtain value for money for our
shareholders and ensuring continued high quality and service levels for our customers.
SysGroup plc Annual Report & Accounts 2021 23
Chief Financial Officer’s Report Continued
Customers
We aim to delight our customers and this sentiment is at the heart of everything we do. Our Head of Customer
Experience is a key member of the Senior Leadership Team and her primary responsibility is to liaise with our
customers to understand how we can help them solve their IT problems and how we can improve our services.
We measure our customer feedback by asking clients to provide us with an automated response for their level
of satisfaction for every service ticket we complete and our level of satisfied or very satisfied is consistently higher
than 95% which is industry benchmark.
The Board Meetings include reviews of Sales, Marketing, Technical Operations and Customer Experience, all of
which highlight areas which directly affect our customers. Adam Binks, Chief Executive Officer, regularly meets with our
larger customers which strengthens relationships and allows opportunities and issues to be discussed and followed up.
Strategic decisions that the Board discuss that may particularly affect our customers are on the portfolio of
services and products we offer, the supplier partners we engage with and changes to our operational structure.
For both our suppliers and customers the Board recently had to consider our relationships in response to the
COVID-19 situation. The steps we took to address the COVID risk and our decision to transition all of our employees
to home working was communicated clearly and early to all of our customers and suppliers with a commitment
that our services would continue to run seamlessly. For our customers, we have provided financial support to a
small number of customers and in some cases the deferral of fees into future periods. For our suppliers we have
maintained our operational relationships as “business as usual” and continued to make payments according
to our usual payment calendar. We believe we’ve taken the right approach on corporate responsibility in this
unprecedented situation by not taking advantage of the UK Government’s financial assistance or seeking cost
reductions from our suppliers when other industry sectors have suffered significantly more.
Regulators
As an AIM listed Group, we recognise the importance of maintaining high quality regulatory compliance and internal
governance which is described in further detail in the Corporate Government Report. We comply with regulations for AIM,
the Companies Act, Employment, GDPR, Health & Safety, Anti-Bribery and Corruption, and all other relevant regulations.
Bank provider
We see Santander, our bank operator and lender, as a key partner to the continued success of SysGroup. We have
a Term Loan and an undrawn Revolving Credit Facility with Santander which provides funding for the future growth
of the organisation. The Directors maintain regular contact with our Relationship contacts at the bank by arranging
meetings where updates on the business are provided and by supplying monthly reports on financial performance.
The Board keep the capital and funding structure of the Group under consideration as the Group continues its scale
up strategy.
Having regard to the business impact on the community & environment
SysGroup endeavours to operate as a “good citizen” to its local communities and environment. We encourage and
support our employees to participate in charitable events and members of our teams have voluntarily contributed
their own time to support local educational groups with careers advice and developments in information
technology. SysGroup is a low waste business, and all our offices recycle to the fullest extent they can. Where
possible, we also try to “buy local” to ensure we support the surrounding economies of our office locations. During
this financial year, as the UK have been operating under lockdown restrictions we have not been involved in as many
charitable events as usual, but we expect the activities to pick up as we return to the office in FY22.
SysGroup plc Annual Report & Accounts 2021 24
Chief Financial Officer’s Report Continued
Having regard to the need to act fairly between members
The Directors recognise the importance of listening to and communicating openly with the Company’s shareholders
to ensure that the strategy, business model and financial performance are understood. We recognise that
understanding what analysts and investors think about the Company helps the Board to formulate future strategy.
The Executive Directors meet our major shareholders individually following the release of the full year and interim
results and are available for meetings at other times if requested. All shareholders are invited to attend the AGM
(subject to local lockdown restrictions). The Non-Executive Directors can also be contacted by shareholders if they
wish to raise any matters. We see the Annual Report and Interim Announcement as key communications to our
shareholders. In these Reports we provide a clear explanation of the business performance, financial position,
organisation structure changes and prospects.
Martin Audcent
Chief Financial Officer
18 June 2021
SysGroup plc Annual Report & Accounts 2021 25
Board of
Directors’
Profile
SysGroup plc Annual Report & Accounts 2021 26
Board of Directors’ Profile
Michael Edelson
Non-Executive Chairman
Adam Binks
Chief Executive Officer
Michael brings a wealth of experience as a Board Director to
Adam joined SysGroup as Chief Operating Officer in August
SysGroup plc. He has been a Founding Director or Chairman
2014 and was formally appointed to the Board in October
of several companies admitted to the AIM market, including
2017. Leveraging Adam’s vast equity capital markets
Prestbury Group plc, Knutsford Group plc, Mercury Recycling
and M&A experience, he was promoted to Group CEO in
Group plc (now Ironveld plc) and ASOS PLC.
April 2018. He is responsible for setting and delivering the
group’s overall strategy to become the leading provider of
He was a non-executive Chairman of Bramhall plc,
managed IT services to the UK mid-market. He has extensive
subsequently renamed Magic Moments Internet plc and
experience in the managed IT, hosting & telecoms sectors
then Host Europe plc, which acquired Magic Moments Design
across a 21-year career. Adam has played a pivotal role
Limited in September 1999. He has also been on the Board of
in the transformation of the group from a mass-market
Manchester United Football Club since 1982.
web hosting company to the award-winning managed IT
services & cloud hosting provider that it has become. Adam
has previously held a number of senior management &
Board level positions within the sector.
Martin Audcent
Chief Financial Officer
Martin was appointed as Chief Financial Officer in 2018 as
part of a newly established board to deliver on the next
stage of growth. Martin has considerable finance, regulatory
Michael Fletcher
Non-Executive Director
and compliance experience with listed companies and
Mike is a successful investor, business leader and
also has extensive acquisitions and operational experience.
entrepreneur with more than 20 years’ experience in the
Martin is a Chartered Accountant, having qualified with PwC
financial sector. He was the co-founder and former CEO of
in 2000, and joined the Group from NCC Group plc, where for
Praetura Group, which launched in 2011. His early career was
four years he was Associate Director of Finance and Group
spent with PwC as a chartered accountant before joining
Financial Controller. Prior to this he worked at Baker Tilly and
GCA Altium, where he was a managing director for 10 years.
MBL Group plc in senior finance positions.
Mike is a founding Partner at Arete Capital partners LLP and
is also a trusted advisor and non-executive chairman to
several other businesses, including Inspired Energy plc, and
a board member at several others, including Peak AI and
Sorted Group.
Mark Quartermaine
Non-Executive Director
Mark has over 30 years’ experience in the ICT industry in a
variety of executive, sales and marketing roles. He started
his career at IBM in 1984 where he held different executive
positions both in the UK and abroad culminating in running
the point-of-sale business in the US, as the Worldwide
Marketing Director for the Retail Division. In January 2013 Mark
joined the board of Alternative Networks as a Non-Executive
Director, he subsequently moved to become COO in January
2014 and was then appointed CEO in September 2015.
Alternative Networks was subsequently sold to Daisy Group
for £165 million in December 2016.
SysGroup plc Annual Report & Accounts 2021 27
Directors’
Report
SysGroup plc Annual Report & Accounts 2021 28
Directors’ Report
The Directors present their Annual Report and Audited Financial Statements for the year ended 31 March 2021.
Principal Activities
The principal activities of the business are the provision of Managed IT Services and Value Added Resale of products
and licences.
Business Review & Future Developments
A review of the Group’s operations and performance for the twelve months to 31 March 2021, a summary of the
financial position at the year-end and an indication of the outlook for the future is contained in the Strategic Report
on pages 8 to 24.
Results & Dividends
The Consolidated Statement of Comprehensive Income for the year is set out on page 53. The Directors do not
propose the payment of a dividend for the year ended 31 March 2021 (2020: nil).
Financial Instruments
The Group uses various financial instruments. These include bank loans, lease contracts, 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 strategic growth and to manage finance for the day-to-day
operations of the business. The existence of these financial instruments exposes the Group to a number of financial
risks, which are described in more detail in note 3 to the Accounts.
Liquidity Risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs
and to manage cash assets safely and profitably. Cashflow forecasts are maintained and monitored as part of the
Group’s three-year, twelve-month and monthly forecasts. Short-term flexibility is achieved through available cash
balances and an overdraft facility.
Interest Rate Risk
The Group finances its operations and capital investments through operational cash generation. The Group has
commercial lease agreements in place for office properties and occasionally leases are used for equipment
purchases. The bank facility is on a variable interest rate and the Directors consider this to be appropriate in the
current economic environment.
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 Group employs
a dedicated credit control team who have access to credit agency rating services. This allows the team to assess
new customers for creditworthiness and continually monitor and address credit risks in our customer base.
SysGroup plc Annual Report & Accounts 2021 29
Directors’ Report Continued
Directors
The Directors of the Company who held office during the year are as follows:
Name
Michael Edelson
Adam Binks
Martin Audcent
Mark Quartermaine
Mike Fletcher
Position Held
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
The interests of the current Directors in shares and options are detailed in the Directors’ Remuneration Report
on pages 31 to 34.
Significant Shareholdings
As of 16 June 2021, the Company has been notified of the following significant shareholdings:
Name
Number of Shares
Percentage Holding
Gresham House Asset Management Limited
Canaccord Genuity Group Inc
Darren Carter
Herald Investment Management Ltd
Downing LLP
Helium Rising Stars Fund
Praetura Group Limited*
13,999,563
8,998,803
3,552,632
3,444,581
3,412,560
2,300,000
1,710,256
28.33%
18.42%
7.19%
6.97%
6.91%
4.65%
3.46%
*Mike Fletcher (Non-Executive Director) is a Director and shareholder of Praetura Group Limited.
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 he ought to have taken as a director to make himself aware of any relevant audit information
and to establish that the Company’s auditors are aware of that information.
SysGroup plc Annual Report & Accounts 2021 30
Directors’ Report Continued
Going Concern
The Directors have prepared the financial statements on a going concern basis which assumes that the Group and
the Company will continue to meet liabilities as they fall due.
The Board recognises that the COVID-19 pandemic has had an unprecedented effect on the UK economy and
despite the recent upturn in growth from the gradual lifting of lockdown restrictions there remains considerable
uncertainty in economic outlook.
Over the past twelve months the Group has demonstrated that its operating model is broadly resilient to the
economic impacts of the pandemic. The Group’s products and services are typically considered to be critical IT
infrastructure supplies to customers with circa 75% of revenue deriving from contracted managed IT services which
is a continuous service supply and subject to twelve months to three-year contracts. The Group has a cash balance
of £3.47m and a net cash position of £1.88m on 31 March 2021. The gross cash has increased by £0.4m since 1 April
2020 and the net cash has increased by £1.95m in the same period. All the bank covenants were met in the financial
year and are forecast to be achieved in the foreseeable future.
The Directors have reviewed financial forecasts including a downside scenario and the resultant cashflows, together
with the confirmed loan facilities and other sources of finance, show that the Group can continue to operate within
the current facilities available to it. The Directors therefore have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable future and they continue to adopt the
going concern basis of accounting in preparing the financial statements.
Auditors
Pursuant to s487 of the Companies Act 2006, the auditor will be deemed to be reappointed and BDO LLP will therefore
continue in office.
By order of the Board
Martin Audcent
Company Secretary
18 June 2021
SysGroup plc Annual Report & Accounts 2021 31
Directors’
Remuneration
Report
SysGroup plc Annual Report & Accounts 2021 32
Directors’ Remuneration Report
Remuneration Committee
Membership of the Remuneration Committee comprises Mark Quartermaine (Chairman), Michael Edelson and Mike
Fletcher. The Committee meets at least twice a year and is responsible for determining and reviewing the policy
for the remuneration of the Executive Directors and such other members of the Senior Management Team as it is
designated to consider. 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.
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. Independent professional advisors are used when benchmarking advice is required or
changes to incentive schemes are being considered.
Directors’ Service Contracts
Each Executive Director has a service contract which is 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’ LTIP Scheme
The Remuneration Committee introduced a new Executive Director LTIP scheme in July 2020, the SysGroup Long Term
Incentive Plan (“2020 LTIP”), following an independent review by professional advisors and after consultation with
certain of its larger institutional shareholders. The Committee members consider the new scheme will incentivise
management to deliver long-term value creation for shareholders and ensure alignment with shareholder interests.
The 2020 LTIP replaces in its entirety the incentive plan set up in June 2018 (“2018 LTIP”).
Under the 2020 LTIP, the Remuneration Committee will, each financial year, set a minimum Adjusted EBITDA
performance (“Threshold”), by reference to prevailing market consensus. On conclusion of the financial year the
Executive Directors will be paid a mixture of a cash bonus and issued with nil cost performance shares, which will be
granted subject to the Group’s performance against the Threshold and will vest two years after the date of grant.
The Company must achieve a minimum of 90% of the Threshold before any cash payment or grant of performance
shares is due to the Executive Directors. The level of cash payment and grant of performance shares increases up to
110% of the Threshold with the maximum grant due at the discretion of the Remuneration Committee. The maximum
grant for the Chief Executive Officer is 150% of annual salary and for the Chief Financial Officer 112.5% of annual salary.
The split between a cash payment and performance shares is set at 50%:50% unless a Threshold of 100% is exceeded
at which point the split between a cash payment and performance shares is at the discretion of the Remuneration
Committee for the excess amount.
Performance shares that are granted will vest on the second anniversary of the initial grant and will be subject to
an additional grant dependent upon the performance of the share price based on the 90-day volume weighted
average price immediately prior to the vesting date. The sale of shares received under the 2020 LTIP will be restricted
such that a maximum of one third of the shares received will be able to be sold from the vesting date, two thirds
from the first anniversary of the vesting date and all performance shares exercised will be able to be sold from the
second anniversary of the vesting date.
The award of performance shares is subject to continued employment, malus and clawback provisions and will vest
in full on a takeover of the Company.
SysGroup plc Annual Report & Accounts 2021 33
Directors’ Remuneration Report Continued
In July 2020, under the new 2020 LTIP Scheme, an initial grant of 250,000 performance shares was made to Adam
Binks, Chief Executive Officer, and 150,000 performance shares to Martin Audcent, Chief Financial Officer. On the
same date, since the 2020 LTIP replaced the 2018 LTIP, the 1.6 million performance shares that had previously been
granted to the Executive Directors under the 2018 LTIP vested with immediate effect and all future grants under the
2018 LTIP were cancelled.
Directors’ remuneration
The salaries of the Executive Directors are reviewed annually and are considered in relation to the growth of the
Group, the contributions made by the Directors and the need to retain and motivate individuals. The annual salary
of the Chief Executive Officer is £150,000 and the Chief Financial Officer is £120,000 and no pay review increases have
been awarded in the current or previous two years. The salary costs shown below includes car allowances.
2021
2020
Director
Michael Edelson
Mike Fletcher
Mark Quartermaine
Adam Binks
Martin Audcent
Total Remuneration
Salary
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
Salary
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
40
40
40
165
130
415
-
-
-
86
51
137
-
-
-
8
6
14
-
-
-
2
1
3
40
40
40
261
188
569
40
40
40
165
130
415
-
-
-
75
30
105
-
-
-
8
6
14
-
-
-
2
1
3
40
40
40
250
167
537
Adam Binks and Martin Audcent have LTIP share options that incurred share-based payment charges of £287,000 and £177,000 respectively in FY21.
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:
Directors’ interests in ordinary shares
Director
Michael Edelson*
Adam Binks*
Martin Audcent*
Mike Fletcher
Mark Quartermaine
Number of
Ordinary Shares
Percentage
Interest
858,179
220,134
117,499
77,193
76,923
1.76%
0.45%
0.24%
0.16%
0.16%
* The Directors’ interest in shares include directly held shares and interests held via related parties.
SysGroup plc Annual Report & Accounts 2021
34
Directors’ Remuneration Report Continued
Directors’ Options
The Directors had interests in options over ordinary shares of the Company at the end of the year as shown below:
Employee
Adam Binks
Martin Audcent
LTIP Scheme Vested
2018 LTIP
2018 LTIP
Vested
Vested
2020 LTIP
Unvested
2018 LTIP
2018 LTIP
Vested
Vested
2020 LTIP
Unvested
Directors’ Warrants
Options over
ordinary shares
750,000
250,000
250,000
450,000
150,000
150,000
Grant Date
Expiry Date
26/06/2018
25/06/2028
15/07/2019
14/07/2029
08/07/2020
07/07/2030
16/07/2018
15/07/2028
15/07/2019
14/07/2029
08/07/2020
07/07/2030
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
Michael Edelson’s warrants are exercisable at any time before 8 January 2022, 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 2021 35
Corporate
Governance
Report
SysGroup plc Annual Report & Accounts 2021 36
Corporate Governance Report
Introduction
The SysGroup Board seeks to follow the best practice in corporate governance as appropriate for a Company of our
size, nature and stage of development. As a public company listed on AIM we recognise the trust placed in the Board
by shareholders, employees and other stakeholders, and the importance of a corporate governance framework that
is robust and effective.
All AIM companies have to operate a corporate governance code in compliance with AIM Rule 26 and the SysGroup
Board have adopted the principles of the 2019 Quoted Companies Alliance Corporate Governance Code (“the QCA
Code”) to support the Company’s governance framework. We set out below the appropriate disclosures of how the
Company complies with the ten principles set out in the QCA Code, and where necessary we detail any areas of
non-compliance. A full copy of the QCA Code is available from the QCA’s website: www.theqca.com.
Board of Directors
The Board comprises five Directors, two Executive Directors and three Non-Executive Directors, and reflects
a complementary blend of different experience and backgrounds.
The principal areas of Board responsibility are:
Identification and approval of acquisition opportunities and key investment decisions
• Business strategy and performance review
• Corporate governance and risk management
•
• Approval of financing and equity structure changes
• Consideration of Senior employee appointments
• Approval of the Annual Operating Plan, financial forecasts and Annual Report & Accounts
Day-to-day management is delegated to the Executive Directors who are charged with consulting the Board on all
significant matters. Decisions are made promptly following full Board consultation when necessary and appropriate.
The Executive Directors provide the Non-Executive Directors with full operational and financial information regularly
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 attendance at Board and Committee Meetings in the year was as follows:
Meetings held
Michael Edelson
Mike Fletcher
Mark Quartermaine
Adam Binks
Martin Audcent
Plc Board
Audit Committee
Remuneration
Committee
11
10
11
11
11
11
3
3
3
3
3
3
2
2
2
2
-
-
SysGroup plc Annual Report & Accounts 2021 37
Corporate Governance Report Continued
Internal Controls
The Group has a system 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. As with all such systems, the goal
is to manage risk within acceptable parameters rather than to eliminate risk entirely. 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 Group insures against various risks and regularly
reviews both the type and amount of external insurance that it buys.
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 an internal audit function.
QCA Code Principles
1.
Establish a strategy and business model which promote long-term value for shareholders
SysGroup’s business strategy is to expand its position as a trusted provider of Managed IT Services & Cloud
Hosting to clients predominantly in the UK. The Board believes that a business focused on the provision of
Managed IT Services offers the highest growth opportunity, the potential for increased margins, longer-term
contracts, and greater forward revenue visibility. The Group provides managed IT solutions to customers
either as a fully outsourced service or as an extension to their existing IT department. We intend to continue to
supplement organic growth with carefully considered acquisitions that add critical mass and provide benefits
from economies of scale. Further detail on the Group’s strategy can be found in the Strategic Report.
2. Seek to understand and meet shareholder needs and expectations
The Directors recognise the importance of listening to and communicating openly with the Company’s
shareholders to ensure that the strategy, business model and financial performance are understood.
We recognise that understanding what analysts and investors think about the Company helps the Board to
formulate future strategy. The Directors actively seek to build relationships with our major institutional investors
and shareholders. The Executive Directors meet our major shareholders individually following the release of
the full year and interim accounts and are available for meetings at other times if requested. All shareholders
are invited to attend the AGM. The Non-Executive Directors can also be contacted by shareholders if they
wish to raise any matters.
We see the Annual Report and Interim Announcement as key communications to our shareholders. In these
Reports we provide a clear explanation of the business performance, financial position, organisation structure
changes and prospects.
All private and institutional investors are invited to attend the AGM where the Company Directors are present
to answer any questions. Additionally, shareholders can contact the Company with any questions by using
the investor enquiry email address on the website.
SysGroup plc Annual Report & Accounts 2021 38
Corporate Governance Report Continued
3. Take into account wider stakeholder and social responsibilities and their implications
for long-term success
In addition to our shareholders, we have a wider group of stakeholders who assist in creating value in the Group.
We have strong relationships with customers and suppliers, and the service and delivery capability of our
employees is of central importance. It is our teams that provide the high quality service to customers and we
ensure that we continue to invest in them through appropriate training and development.
A high proportion of the Group’s managed services are provided under contracts ranging from twelve months to
three years. We develop close working relationships with our customers through their use of our support services
and by assisting them with suggested solutions to improve their IT infrastructure and processes. We request
feedback from customers on a regular basis to assess how we are performing.
The Group selects suppliers on the quality of their products or services and on competitive pricing. Long term
relationships are particularly helpful in situations where we can work with the supplier to identify value creation
opportunities. New suppliers are subject to due diligence take-on procedures and the Group makes regular
monthly payments to suppliers.
The Group’s employees are key stakeholders in the success of the business. We look to recruit high calibre
individuals and the Group invests in their ongoing development needs through internal and external training.
The Group offers competitive remuneration and benefits packages. All employees are encouraged to speak
openly with line managers and colleagues, and Senior Leadership Team meetings are held once a week to
ensure the team are working with co-ordination and focus on the right priorities. We believe that having
a contemporary workplace environment is a key element to attract, retain and motivate our employees
and we ensure our workplaces are vibrant and energising places to work.
As an AIM listed Group, we recognise the importance of maintaining high quality regulatory compliance and
internal governance. We comply with AIM, the Companies Act, Employment, GDPR, Health & Safety, Anti-Bribery
and Corruption, and other relevant regulations.
4. Embed effective risk management, considering both opportunities and threats, throughout
the organisation
The Group employs a Head of Legal, Risk & Compliance (“HLRC”), a Senior Leadership Team position, whose
responsibility includes the identification of risks and the ownership and maintenance of the Corporate Risk Register.
The HLRC reports to the Chief Financial Officer in the organisation structure. The concept of risk and mitigation is
embedded in our Senior Leadership Team and the risks that have been recorded in our Risk Register have Senior
Leader business owners who are responsible and accountable for the risks and controls that are in place.
The Board of Directors receives periodic reports from the HLRC to convey the risk profile of the Group and how this
has changed from previous periods. As an IT Managed Services company, we also place the utmost importance
to IT security risks and we are accredited under ISO27001 for our internal policies and processes in this area. An
Information Security Management Systems Meeting is held on a quarterly basis which is attended by the HLRC,
CTO, CFO and Head of People & Culture, to monitor performance and progress any necessary actions.
In March 2020, the risk of the COVID-19 pandemic and the impact this would have on our business operations
was a trigger for us to implement our Business Continuity Plan (“BCP”) which is there to address events that carry
the highest level of risk to SysGroup. The BCP was effectively in operation throughout the financial year as the
business successfully continued to carry out its operations under lockdown restrictions.
The Board of Directors are updated by the Executive Directors on all significant risk matters or events, either at the
monthly Board meetings or at the time the issues arise depending on the considered level of urgency and importance.
The Directors acknowledge their responsibility for financial risk, and in particular for the Company’s and Group’s
internal system of 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 having
reporting processes and systems that are appropriate to the size and complexity of the Group’s operations and
by ensuring the workforce is sufficiently trained.
As the Group continues to grow the risks of the business and risk management framework will remain subject to regular
review. Further information on the principal risks and uncertainties of the Group can be found in the CFO Report.
SysGroup plc Annual Report & Accounts 2021 39
Corporate Governance Report Continued
5. Maintain the board as a well-functioning, balanced team led by the chair
The Board comprises five Directors, two Executives and three Non-Executives, and reflects a blend of different
experience and backgrounds. There is a clear division of responsibility between the Chairman of the Board
(a Non-Executive role) and the Chief Executive Officer. The Board considers the Non-Executive Directors to be
independent in character and judgement notwithstanding their shareholdings in the Group.
The Board of Directors usually meet in person on a monthly basis and at least ten times a year. Additional
Board meetings are sometimes held outside the regular calendar of dates and these may be attended by
teleconference calls. For the FY21 financial year and due to the government’s lockdown restrictions the Board,
Audit Committee & Remuneration Committee Meetings have been held by MS Teams calls.
The Board, through the Chairman and the Non-Executive Directors, 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 of the Company.
The Company has effective procedures in place to monitor Directors’ conflicts of interests which are reported to
and dealt with by the Board.
The Chairman is satisfied that there is a suitable balance between Executive and Non-Executive Directors in the
Board composition and is sufficiently resourced to discharge its duties and responsibilities effectively.
Ensure that between them the directors have the necessary up-to-date experience,
skills and capabilities
6. Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
The Chairman is satisfied that the Directors have an appropriate level of experience, skills and capabilities to
effectively discharge their duties and responsibilities. The recruitment of Executive and Non-Executive Directors
is carefully considered and profiled to match against the specific requirements of the Group. Details of the skills
and experience of each of the Directors can be found in the Annual Report as well as on the Company’s website.
All members of the Board receive training as required and can take independent professional advice if
necessary, in the furtherance of their duties.
At each Annual General Meeting of the Company, one-third of the Directors retire from office by rotation and a
Director retiring by rotation is eligible for re-election. Subject to the provisions of the Act and of the Articles, the
Directors to retire in every year shall include (so far as necessary to obtain the number required) any Director
who wishes to retire and not to offer himself for re-election. Any further Directors so to retire are those who have
been longest in office since their last appointment or reappointment.
Unless recommended by the Directors for appointment, no person other than a Director retiring at the meeting
shall be eligible for appointment to the office of Director at any General Meeting unless the Company receives
notice in writing by a member duly qualified to attend and vote at the meeting with the necessary particulars
and authorities. The notice must be received not less than seven nor more than 28 days before the day
appointed for the meeting.
7.
Evaluate board performance based on clear and relevant objectives, seeking continuous improvement
The Chairman is responsible for assessing the individual contributions of the Directors and this is monitored and
reviewed on an ongoing basis. The Chairman is satisfied that all the Directors are making valued contributions
and the Board is working effectively together. The Company does not currently have a formal appraisal process
for Directors, but this shall be kept under review.
SysGroup plc Annual Report & Accounts 2021 40
Corporate Governance Report Continued
8. Promote a corporate culture that is based on ethical values and behaviours.
The Directors both individually and together as a Board are committed to promoting ethical values and
behaviours throughout the organisation. SysGroup has a well-established set of corporate values that
are communicated and understood throughout the organisation, these are:
Love what you do
•
• Work smart
• Own it
• Delight your customers
Be bold and deliver
•
The corporate values are actively promoted by the Executive Directors, People & Culture Team and the Senior
Leadership Team and the ethical values of transparency, honesty, and doing the right thing underpins how we
work. New employees receive inductions on joining the organisation which includes an explanation of all the
key internal policies including the IT Security Policy, Health & Safety Policy, Anti-Corruption and Bribery Policy,
Whistleblowing Policy, and GDPR. These policies are also available to view on the Group’s intranet “SysHub” which
also offers employee benefits and Company latest news.
SysGroup uses personality insight tools in our recruitment processes and seeks to recruit candidates who fit well
with our corporate values in addition to having the appropriate skills, knowledge and experience for the roles. The
Group has a range of policies 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 overall plan. The Group has a clear and well-
understood organisational structure and each employee knows his or her line of responsibility and accountability.
9. Maintain governance structures and processes that are fit for purpose and support good
decision-making by the board
The Directors recognise the importance of having a robust system of governance to ensure there are appropriate
levels of internal control for financial reporting, risk management, compliance and corporate responsibility.
Board Meetings
Board meetings are attended by the Directors in person and are held on scheduled calendar dates, usually
every month and at least ten times a year. If a Director is unable to attend in person, they may attend instead by
telephone conference. An agenda and relevant Board papers are circulated in advance of the meeting to allow
the Directors sufficient time to review. The Board meeting is chaired by the Chairman, Michael Edelson, and all
matters on the agenda are covered with the opportunity for questions and discussion. Additional matters can
be raised under AOB. Minutes are recorded for each meeting which are reviewed and signed by the Chairperson.
Matters reserved for the Board include business strategy, acquisitions and disposals, bank facilities, equity and
capital structure, corporate governance, delegation of authority, annual operating plan, and the approval of
the interim and Annual Report and Accounts. The Board is also responsible for reviewing the effectiveness of the
internal controls and risk management framework.
Audit Committee
The membership of the Company’s Audit Committee comprises Michael Edelson, Mark Quartermaine and Mike
Fletcher. Mike Fletcher, a chartered accountant, is the Chairman of this Committee. The Audit Committee meets
at least three times 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. The Group’s auditors attend the Audit Committee Meetings.
SysGroup plc Annual Report & Accounts 2021 41
Corporate Governance Report Continued
During the year to 31 March 2021, there were four Audit Committee meetings and the principal items are detailed
below.
•
•
•
•
•
•
•
Review of the BDO Planning, Interim and Full Year Audit Reports
BDO auditor independence, audit fee and engagement letters
Review of the Group’s classification of Cash Generating Units
Review of Going Concern & Viability
Review and approval of the Interim Results, Preliminary Announcement and Annual Report & Accounts
Review and approval of the Management Letters of Representation
Audit Partner rotation
The Group have not included a separate Audit Committee report in its financial statements, the contents of such
a report including the principal risk and uncertainties, the role and structure of the Audit Committee and the
corporate governance disclosure are separately included throughout the report and have been reviewed by the
Audit Committee.
Remuneration Committee
The membership of the Company’s Remuneration Committee comprises Michael Edelson, Mike Fletcher and
Mark Quartermaine. Mark Quartermaine 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.
During the year, the Remuneration Committee engaged professional advisors to recommend a new
Executive LTIP Scheme (the “2020 LTIP”) to better align Executive reward to the interests of the Group and for the
maximisation of shareholder value. Further details on this can be found in the Directors’ Remuneration Report.
There were two Remuneration Committee meetings during the year and the principal items were to approve the
new 2020 LTIP Scheme and the grant of performance share options to the Executive Directors, and to approve a
grant of EMI share options to SysGroup employees at the end of the financial year.
SysGroup plc Annual Report & Accounts 2021
42
Corporate Governance Report Continued
10. Communicate how the Company is governed and is performing by maintaining a dialogue
with shareholders and other relevant stakeholders
The Annual Report is a key deliverable to our shareholders to explain how our business is performing and our
approach to governance and risk management. In the Annual Report we aim to provide all relevant information
that allows shareholders to gain a clear understanding of how we manage the business and we shall continue
to identify areas of disclosure that can be enhanced.
We arrange regular meetings for our principal shareholders to meet with the Executive Directors so they can
receive an update on the business and have the opportunity to ask questions. Broker research notes on the
Group are also available for investors to review. Across the financial year, the regular communications to
shareholders are:
•
•
•
•
•
•
Preliminary Announcement
Annual Report & Accounts
Interim Announcement
Annual General Meeting
Institutional shareholder meetings following Results Announcements and on request
Regulatory RNS Announcements
Shareholders can find information on the Board of Directors, Shareholder Circulars, Articles of Association,
Admission Document, Financial Reports and Regulatory Announcements on our sysgroupplc.com website.
Rule 21 of The AIM Rules for Companies and MAR (“Market Abuse Regulation”)
The Group complies with Rule 21 of the AIM Rules 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 seeks permission from
certain designated people before trading in the shares of the Group.
SysGroup plc Annual Report & Accounts 2021 43
Statement
of Directors’
Responsibilities
SysGroup plc Annual Report & Accounts 2021 44
Statement of Directors’
Responsibilities
The Directors are responsible for preparing the Annual Report 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; and
• 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
Martin Audcent
Company Secretary
18 June 2021
SysGroup plc Annual Report & Accounts 2021 45
Independent
Auditor’s Report
to the Members
of SysGroup plc
SysGroup plc Annual Report & Accounts 2021 46
Independent Auditor’s Report
to the Members of SysGroup plc
Opinion
In our opinion:
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s
affairs as at 31 March 2021 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with international accounting
standards in conformity with the requirements of the Companies Act 2006;
the Parent Company financial statements have been properly prepared in accordance with international
accounting standards in conformity with the requirements of the Companies Act 2006 and as applied in
accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
•
•
•
We have audited the financial statements of Sysgroup plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 March 2021 which comprise the consolidated statement of comprehensive income, the
consolidated and Company statement of financial position, the consolidated and Company statement of changes
in equity, the consolidated and Company statement of cash flows and notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in their preparation is applicable law and international
accounting standards in conformity with the requirements of the Companies Act 2006 and, as regards the Parent
Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Rationale for the benchmark applied:
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that
are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions Relating to Going Concern
WIn auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment
of the Group and the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
• We obtained management’s assessment that supports the Board’s conclusions with respect to the disclosures
provided around going concern;
• We considered the appropriateness of management’s forecasts by testing their mechanical accuracy, assessing
historical forecasting accuracy and understanding management’s consideration of downside sensitivity analysis;
• We obtained an understanding of the financing facilities from the finance agreements, including the nature of the
facilities, covenants and attached conditions;
• We assessed the facility and covenant headroom calculations, and re-performed sensitivities on management’s
base case and stressed case scenarios; and
• We reviewed the wording of the going concern disclosures, and assessed its consistency with management’s
forecasts.
SysGroup plc Annual Report & Accounts 2021 47
Independent Auditor’s Report to the Members of SysGroup plc Continued
Based on the work we have performed, we have not identified any material uncertainties relating to events or
conditions that, individually or collectively, may cast significant doubt on the Group’s or Parent Company’s ability
to continue as a going concern for a period of at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the
relevant sections of this report.
Coverage
Key audit matters
Materiality
100% (2020: 100%) of Group profit before tax
100% (2020: 100%) of Group revenue
99% (2020:99%) of Group total assets
There is one Key audit matter in both 2021 and 2020
which is the judgements involved in the Group’s
revenue recognition policy.
Group financial statements as a whole
£150,000 (2020:£120,000) based on 0.85% (2020: 0.65%)
of revenue.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements.
We also addressed the risk of management override of internal controls, including assessing whether there was
evidence of bias by the Directors that may have represented a risk of material misstatement due to fraud.
The Group operates through a number of legal entities, which form reporting components. The Group audit team
have completed a full scope audit on all non-dormant components of the Group. As a consequence of the audit
scope determined, we achieved coverage of 100% (2020: 100%) of revenue, 100% (2020: 100%) of profit before tax and
99% (2020: 99%) of net assets.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
SysGroup plc Annual Report & Accounts 2021 Independent Auditor’s Report to the Members of SysGroup plc Continued
48
Key audit matter
Revenue recognition
Note 4
See accounting policy on
page 72
How the scope of our audit addressed the key audit matter
We reviewed the Group’s revenue recognition policies for all
revenue streams to check that these were in accordance with
accounting standards.
We evaluated Management’s assessment of the performance
obligations in relation to the IFRS 15 criteria and whether
revenue should be recognised at a point in time or over time
and challenged the key judgements made by Management.
We agreed the revenue recognised in the year for a sample
of new contracts to the underlying contact and evidence of
completion of work and checked that the revenue recognised
was in accordance with the underlying contracts and IFRS15.
Key observation: We are satisfied that the Group’s revenue
recognition is materially correct.
TThe Group has a number of
different revenue streams,
each of which has a different
revenue recognition policy
dependent on the specific
terms of the transfer of goods
or the service provided. Full
details of these policies can
be found in note 1 to the
financial statements.
There are a number of
judgements involved in
the application of IFRS15,
the revenue recognition
standard, including
determining the
appropriate timing of
revenue recognition and in
the unbundling of contracts
that relate to the provision
of more than one service
and/or product. Because of
this we determined revenue
recognition to be a key audit
matter.
Our Application of Materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we
use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly,
misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the
nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their
effect on the financial statements as a whole.
SysGroup plc Annual Report & Accounts 2021
49
Independent Auditor’s Report to the Members of SysGroup plc Continued
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Group financial statements
Parent Company financial statements
2021
£
2020
£
2021
£
2020
£
Materiality
150,000
120,000
100,000
60,000
Basis for determining
materiality
0.85% of Revenue
0.65% of Revenue
Capped at 67% of
Group materiality
Capped at 50% of
Group materiality
Rationale for the
benchmark applied
Performance
materiality
Revenue was considered the most stable
measure and to be of most relevance to
the users of the financial statements. The
percentage threshold was increased this year
given the increased stability of the Group this
year.
The Parent Company does not recognise any
external revenue and so a revenue basis was
not considered appropriate and materiality was
capped at a percentage of Group materiality.
112,500
90,000
75,000
45,000
Basis for determining
performance
materiality
Performance materiality was set at 75% of materiality. The performance materiality threshold
was selected based on the expected low level of misstatements and the relatively low number of
accounts that are subject to management estimation.
Component materiality was set at levels between £24,000 and £109,000 (2020: £30,000 to £100,000) based on
the revenue recognised in each component and our assessment of the risk of material misstatement of that
component. In the audit of each component, we further applied performance materiality levels of 75% of the
component materiality to our testing to ensure that the risk of errors exceeding component materiality was
appropriately mitigated.
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £6,000
(2020: £5,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other Information
The directors are responsible for the other information. The other information comprises the information included in
the Annual Report and Accounts, other than the financial statements and our auditor’s report thereon. Our opinion
on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated
in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
.
SysGroup plc Annual Report & Accounts 2021 Independent Auditor’s Report to the Members of SysGroup plc Continued
50
Strategic report and Directors’ report
Matters on which we are required to report by exception
In our opinion, based on the work undertaken in the course of
the audit:
•
•
the information given in the Strategic report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with
the financial statements; and
the Strategic report and the Directors’ report have
been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the
Group and 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
in relation to which 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.
Responsibilities of Directors
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, and for such
internal control as the Directors determine is necessary to enable the preparation of financial statements that are
free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
SysGroup plc Annual Report & Accounts 2021 51
Independent Auditor’s Report to the Members of SysGroup plc Continued
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities,
including fraud.
Based on our understanding and accumulated knowledge of the Group and the sector in which it operates we
considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud
and whether such actions or non-compliance might have a material effect on the financial statements. These
included but were not limited to those that relate to the form and content of the financial statements, such as the
Group accounting policies, International accounting standards, and the UK Companies Act; those that relate to the
payment of employees; and industry related such as GDPR compliance. All team members were briefed to ensure
they were aware of any relevant regulations in relation to their work.
•
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Agreement of the financial statement disclosures to underlying supporting documentation;
•
Challenging assumptions and judgements made by management in their significant accounting estimates,
•
in particular in relation to the expected credit loss provision, the depreciation of tangible assets and the
amortisation of intangible assets;
Identifying and testing journal entries, in particular any journal entries posted with unusual account
combinations or including specific keywords;
Testing a sample of revenue transactions within a specified cut off window pre and post year end to
determine if they have been recorded in the correct period;
Tested a sample of credit notes issued post year end to determine if the associated revenue had been
recorded in the correct period;
Discussions with management, including consideration of known or suspected instances of non-
compliance with laws and regulation and fraud;
Review of minutes of Board meetings throughout the period to identify any issues which were pertinent to
the audit; and
•
•
•
•
Our audit procedures were designed to respond to risks of material misstatement in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations is from the events and transactions reflected in the
financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
• This report is made solely to the Parent 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 Parent 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 Parent
Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Gary Harding
Senior Statutory Auditor
18 June 2021
For and on behalf
of BDO LLP Statutory
Auditor Manchester
United Kingdom
BDO LLP is a limited liability
partnership registered in England
and Wales (with registered
number OC305127)
SysGroup plc Annual Report & Accounts 2021 52
Consolidated
Statement of
Comprehensive
Income
SysGroup plc Annual Report & Accounts 2021 Consolidated Statement
of Comprehensive Income
For the year ended 31 March 2021
Revenue
Cost of sales
Gross profit
Operating expenses before depreciation, amortisation,
exceptional items and share based payments
Adjusted EBITDA
Depreciation
Amortisation of intangibles
Exceptional items
Share based payments
Administrative expenses
Operating profit/(loss)
Finance costs
Profit/(loss) before taxation
Taxation
Total comprehensive profit/(loss) attributable to the
equity holders of the company
Basic earnings per share (EPS)
Diluted earnings per share (EPS)
Notes
4
14
13
8
9
6
12
11
11
2021
Group
£’000
18,131
(7,630)
10,501
(7,586)
2,915
(722)
(1,294)
(82)
(504)
(10,188)
313
(108)
205
35
240
0.5p
0.5p
53
2020
Group
£’000
19,492
(8,291)
11,201
(8,387)
2,814
(847)
(1,321)
(475)
(199)
(11,229)
(28)
(206)
(234)
112
(122)
(0.2p)
(0.2p)
SysGroup plc Annual Report & Accounts 2021
54
Consolidated
Statement
of Financial
Position
SysGroup plc Annual Report & Accounts 2021 Consolidated Statement
of Financial Position
As at 31 March 2021
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
Treasury reserve
Other reserve
Translation reserve
Retained earnings
Non-current liabilities
Lease liabilities
Bank loan
Deferred taxation
Current liabilities
Trade and other payables
Contract liabilities
Lease liabilities
Contingent consideration
Bank loan
Total Equity and Liabilities
Notes
13
13
14
16
20
18
18
12
17
18
17
18
2021
Group
£’000
15,554
5,290
1,281
22,125
1,728
3,473
5,201
27,326
494
9,080
(201)
2,832
4
8,403
20,612
190
757
889
1,836
2,683
1,549
230
-
416
4,878
27,326
55
2020
Group
£’000
15,554
6,188
1,824
23,566
2,726
3,036
5,762
29,328
494
9,080
-
2,328
4
8,163
20,069
441
1,146
1,200
2,787
3,488
1,465
268
1,000
251
6,472
29,328
SysGroup plc Annual Report & Accounts 2021
Consolidated Statement of Financial Position Continued
The financial statements on pages 53 to 94 were approved by the Board and authorised on 18 June 2021.
56
Martin Audcent
Director
Registered number 06172239
SysGroup plc Annual Report & Accounts 2021 57
Company
Statement
of Financial
Position
SysGroup plc Annual Report & Accounts 2021 58
Company Statement
of Financial Position
As at 31 March 2021
Notes
2021
Company
£’000
2020
Company
£’000
Assets
Non-current assets
Investments
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
Treasury reserve
Other reserve
Retained earnings
Non-current liabilities
Bank loan
Lease liabilities
Current liabilities
Amounts due to subsidiary undertakings
Trade and other payables
Lease liabilities
Contingent consideration
Bank loan
Total Equity and Liabilities
15
14
16
20
18
18
17
17
18
17
18
24,895
-
133
25,028
285
585
870
24,895
8
194
25,097
314
217
531
25,898
25,628
494
9,080
(201)
2,832
6,308
18,513
757
64
821
5,456
652
40
-
416
6,564
25,898
494
9,080
-
2,328
6,421
18,323
1,146
104
1,250
4,110
655
39
1,000
251
6,055
25,628
SysGroup plc Annual Report & Accounts 2021
Company Statement of Financial Position Continued
As permitted by section 408 of the Companies Act 2006, the holding Company’s statement of comprehensive
income has not been included in the financial statements. For the year ended 31 March 2021, the Company made
a loss of £113,000 (FY20: loss of £159,000).
59
Martin Audcent
Director
Registered number 06172239
SysGroup plc Annual Report & Accounts 2021 60
Consolidated
Statement of
Changes in Equity
SysGroup plc Annual Report & Accounts 2021 61
Consolidated Statement
of Changes in Equity
For the year ended 31 March 2021
Attributable to equity holders of the parent
Share
capital
£’000
Share
premium
reserve
£’000
Treasury
reserve
£’000
As at 1 April 2019
494
9,080
Comprehensive income
Loss for the period
Total Comprehensive income
Distributions to owners
Share options charge
Total Distributions to owners
-
-
-
-
-
-
-
-
At 31 March 2020
494
9,080
As at 1 April 2020
494
9,080
Comprehensive income
Profit for the period
Total Comprehensive income
Distributions to owners
Share buy back
Share options charge
Total Distributions to owners
-
-
-
-
-
-
-
-
-
-
At 31 March 2021
494
9,080
-
-
-
-
-
-
-
-
-
(201)
-
(201)
(201)
Other
reserve
£’000
2,129
-
-
199
199
2,328
2,328
-
-
-
504
504
2,832
Translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
4
-
-
-
-
4
4
-
-
-
-
-
4
8,285
19,992
(122)
(122)
-
-
(122)
(122)
199
199
8,163
20,069
8,163
20,069
240
240
-
-
-
240
240
(201)
504
303
8,403
20,612
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
Treasury reserve
Translation Reserve
Amount reserved for share based payments to be released over the life of the
instruments and the equity element of convertible loans.
Company owned shares held for the purpose of settling the exercise of employee
share options.
Amount represents differences in relation to the consolidation of subsidiary
companies which are accounted for in currencies other than the Group’s functional
currency.
Retained Earnings
All other net gains and losses and transactions with owners not recognised elsewhere.
SysGroup plc Annual Report & Accounts 2021
62
Company
Statement
of Changes
in Equity
SysGroup plc Annual Report & Accounts 2021 63
Total
£’000
18,283
(159)
(159)
199
199
Company Statement
of Changes in Equity
For the year ended 31 March 2021
Attributable to equity holders of the parent
Share
capital
£’000
Share
premium
reserve
£’000
Treasury
reserve
£’000
Other
reserve
£’000
Retained
earnings
£’000
As at 1 April 2019
494
9,080
Comprehensive income
Loss for the period
Total Comprehensive income
Distributions to owners
Share options charge
Total Distributions to owners
-
-
-
-
-
-
-
-
At 31 March 2020
494
9,080
As at 1 April 2020
494
9,080
Comprehensive income
Loss for the period
Total Comprehensive income
Distributions to owners
Share buy back
Share options charge
Total Distributions to owners
-
-
-
-
-
-
-
-
-
-
At 31 March 2021
494
9,080
-
-
-
-
-
-
-
-
-
(201)
-
(201)
(201)
2,129
6,580
-
-
199
199
(159)
(159)
-
-
2,328
6,421
18,323
2,328
6,421
18,323
-
-
-
504
504
(113)
(113)
-
-
-
(113)
(113)
(201)
504
303
2,832
6,308
18,513
SysGroup plc Annual Report & Accounts 2021
64
Consolidated
Statement
of Cashflows
SysGroup plc Annual Report & Accounts 2021 65
Consolidated Statement
of Cashflows
For the year ended 31 March 2021
Notes
13,14
6
12
14
13
10
20
Cashflows used in operating activities
Profit/(loss) after tax
Adjustments for:
Depreciation and amortisation
Finance costs
Share based payments
Taxation credit
Operating cashflows before movement
in working capital
Decrease in trade and other receivables
Decrease in trade and other payables
Operating cashflows before interest and tax
Interest paid and amortisation of arrangement fee on loan
facility
Interest paid on lease liabilities
Taxation paid
Operational cashflows
Cashflows from investing activities
Payments to acquire property, plant & equipment
Payments to acquire intangible assets
Acquisition of subsidiary companies
Amounts received in respect of previous acquisitions
Cash acquired with acquisitions
Net cash used in investing activities
Cashflows from financing activities
Payments for share buy-back
Repayment of loan facility including fees
Capital/principal paid on lease liabilities
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
2021
Group
£’000
2020
Group
£’000
240
2,016
108
504
(35)
2,833
987
(889)
2,931
(105)
(28)
(98)
2,700
(179)
(396)
(975)
-
-
(122)
2,168
206
199
(112)
2,339
501
(533)
2,307
(161)
(44)
(172)
1,930
(353)
(190)
(1,911)
252
609
(1,550)
(1,593)
(201)
(224)
(288)
(713)
437
3,036
3,473
-
(224)
(453)
(677)
(340)
3,376
3,036
SysGroup plc Annual Report & Accounts 2021
66
Company
Statement
of Cashflows
SysGroup plc Annual Report & Accounts 2021 67
Company Statement
of Cashflows
For the year ended 31 March 2021
Notes
2021
Company
£’000
2020
Company
£’000
Cashflows used in operating activities
Loss after tax
Adjustments for:
Depreciation and amortisation
Finance costs
Share based payments
Taxation credit
Operating cashflows before movement
in working capital
Decrease in trade and other receivables
Increase in trade and other payables
Operating cashflows before interest and tax
Interest paid and amortisation of arrangement fee on loan
facility
Interest paid on lease liabilities
Operational cashflows
Cashflows from investing activities
Payments to acquire property, plant & equipment
Acquisition of subsidiary companies
Amounts received in respect of previous acquisitions
Net cash used in investing activities
Cashflows from financing activities
Payments for share buy-back
Repayment of loan facility
Capital/principal paid on lease liabilities
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
16
17
14
10
20
(113)
101
87
504
(122)
457
151
1,340
1,948
(105)
(6)
1,837
(32)
(975)
-
(1,007)
(201)
(224)
(37)
(463)
368
217
585
(159)
100
169
199
-
309
148
1,244
1,701
(161)
(8)
1,532
(33)
(1,911)
252
(1,692)
-
(224)
(27)
(251)
(411)
628
217
SysGroup plc Annual Report & Accounts 2021
68
Notes to the
Consolidated
Financial
Statements
SysGroup plc Annual Report & Accounts 2021 69
Notes to the Consolidated
Financial Statements
For the year ended 31 March 2021
1. Accounting Policies
SysGroup Plc (the ‘Company’) is a Company incorporated and domiciled in the United Kingdom. The Company’s
registered office is at Walker House, Exchange Flags, Liverpool, L2 3YL. 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 IFRS9.
The preparation of financial statements in compliance with adopted IFRS requires the use of certain critical
accounting estimates. It also requires Group management to exercise judgement in applying the Group’s
accounting policies. The areas where significant judgements and estimates have been made in preparing the
financial statements and their effect are disclosed in note 2. The financial statements are presented in pounds
sterling, rounded to the nearest thousand, unless otherwise stated.
Going Concern
The Directors have prepared the financial statements on a going concern basis which assumes that the Group and
the Company will continue to meet liabilities as they fall due.
The Board recognises that the COVID-19 pandemic has had an unprecedented effect on the UK economy and
despite the recent upturn in growth from the gradual lifting of lockdown restrictions there remains considerable
uncertainty in economic outlook.
Over the past twelve months the Group has demonstrated that its operating model is broadly resilient to the
economic impacts of the pandemic. The Group’s products and services are typically considered to be critical IT
infrastructure supplies to customers with circa 75% of revenue deriving from contracted managed IT services which
is a continuous service supply and subject to twelve months to three-year contracts. The Group has a cash balance
of £3.47m and a net cash position of £1.88m at 31 March 2021. The gross cash has increased by £0.4m since 1 April
2020 and the net cash has increased by £1.95m in the same period. Net cash includes a £1.2m Senior Term loan with
Santander which is subject to quarterly loan covenant tests and calculated on a 12-month rolling basis for interest
cover, net debt to Adjusted EBITDA leverage and debt service cover. All the bank covenants were met in the financial
year and are forecast to be achieved in the foreseeable future.
The Directors have reviewed the financial forecasts and a Reverse Stress Test model. The Reverse Stress Test model
has allowed the Board to assess a significant downside scenario set to the point where the bank loan covenants
would breach. The projected trading forecasts and resultant cashflows, together with the confirmed loan facilities
and other sources of finance, taking account of reasonably possible changes in trading performance, show that the
Group can continue to operate within the current facilities available to it.
SysGroup plc Annual Report & Accounts 2021 70
Notes to the Consolidated Financial Statements Continued
The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and thus they continue to adopt the going concern basis of
accounting in preparing the financial statements.
New standards and interpretations
A number of new standards and amendments to standards and interpretations have been issued during the year
ended 31 March 2021. The Group has adopted all of the new and revised standards and interpretations issued by
the IASB and the International Financial Reporting Interpretations Committee (IFRIC) of the IASB that are relevant
to its operations. Other new amended standards and interpretations issued by the IASB that apply to the financial
statements do not impact the Group as they are either not relevant to the Group’s activities or require accounting
which is consistent with the Group’s current accounting policies.
New standards not yet effective
There are a number of standards and amendments to standards, and interpretations which have been issued by
the IASB and in some cases not yet adopted by the UK Endorsement Board that are effective in future accounting
periods that the Group has decided not to adopt early. SysGroup plc is currently assessing the impact of these new
standard and amendments. The Group does not expect any other standards issued by the IASB, but not yet effective,
to have a material outcome on the Group.
IFRS16 - Leases
IFRS 16 introduces a single lessee accounting model, where the Group recognises a lease liability and a right of use
asset for all leases. The group has no significant leasing activities acting as a lessor. The group recognised a right of
use asset in relation to the lease of motor vehicles, office space and equipment.
At 1 April 2020
Additions
Disposals
Interest expense
Lease payments
At 31 March 2021
Repayment of lease liabilities are analysed as follows:
Due within 1 year
Instalments due after 1 year but no more than 5 years
Instalments due after 5 years
Land &
Buildings
£’000
Plant &
Machinery
£’000
Motor
Vehicles
£’000
523
-
-
19
(182)
360
159
-
(1)
8
(106)
60
27
-
(27)
-
-
-
Total
£’000
709
-
(28)
27
(288)
420
2021
£’000
230
190
-
The weighted average incremental borrowing rate applied to lease liabilities on 1 April 2020 was 4%.
Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily
determinable, in which case the group’s incremental borrowing rate on commencement of the lease is used. Variable lease
payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial
measurement of the lease liability assumes the variable element will remain unchanged throughout the lease term. Other
variable lease payments are expensed in the period to which they relate.
SysGroup plc Annual Report & Accounts 2021
Notes to the Consolidated Financial Statements Continued
Right of use assets
At 1 April 2020
Additions
Disposals
Depreciation
At 31 March 2021
Basis of consolidation
Land &
Buildings
£’000
Plant &
Machinery
£’000
Motor
Vehicles
£’000
494
-
-
(162)
332
328
-
-
(243)
85
18
-
-
(16)
2
71
Total
£’000
840
-
-
(421)
419
Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee
if all three of the following elements are present: power over the investee; exposure to variable returns from the
investee; and the ability of the investor to use its power to affect those variable returns. Control is re-assessed
whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if
they formed a single entity. Intercompany transactions and balances between Group companies are therefore
eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition
method. In the statement of financial position, the acquirer’s identifiable assets, liabilities and contingent liabilities
are initially recognised at their fair values at the acquisition date. The results of acquired operations are included
in the consolidated statement of comprehensive income from the date on which control is obtained. They are
deconsolidated from the date on which control ceases.
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.
SysGroup plc Annual Report & Accounts 2021 72
Notes to the Consolidated Financial Statements Continued
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.
Revenue
Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction
will flow into the Group and revenue represents the fair value of amounts received or receivable for goods and
services provided net of trade discounts and VAT.
The Group has three principal categories of performance obligation: managed IT services, professional services
and value-added resale. All customer sales are signed as contracts or orders which separately specify the
services and products to be delivered and these are mapped to one of the three revenue recognition categories.
The contracts or orders specify, by service and product, the sales price and the contracted term of the services.
As such, the separate performance obligations and allocation of transaction price can be identified clearly from
the customer sales contracts.
The revenue recognition policies can be summarised as follows:
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
73
Performance delivery
Revenue recognition
Revenue
category
Managed
services
Professional
services
Contracted managed IT services are delivered
from an agreed commencement date and for a
contracted time period, typically three years with
a twelve-month automatic extension. Managed
services is comprised of different streams including
hosting and support but due to the nature of
this revenue the streams are considered inter-
dependant. The services are delivered uniformly
over the duration of the contract and invoiced
either quarterly or monthly in advance of the
service delivery period.
Professional services are delivered by a team of
technical consultants based on a scope of work
agreed and signed with a customer. The scope
of work includes a specification of the work to
be delivered, an estimation of the number of
consultancy days required, and a sales value based
on a day rate. Professional services are invoiced
either in advance of work performed, in arrears
after the service is delivered or as part of a larger
project contract milestone.
Value added
resale
Value added resale (“VAR”) comprises sales of IT
hardware, licences and warranties (“products”)
where the Group satisfies its performance
obligation by procuring the products from suppliers
for delivery to the customer. There are no further or
ongoing obligations to the Group after delivery. The
sales price for each product is separately specified
in the customer sales contract. VAR sales are either
invoiced in full in advance of delivery or invoiced
according to an agreed contract milestone if part
of a larger contract.
Revenue is recognised evenly over the duration of
the contract period based on the sales price as
specified in the customer sales contract. This is on
the basis that the customer receives and consumes
the services evenly over the term of the contract.
Amounts invoiced in advance of service delivery
periods are accounted for as contract liabilities
and recognised as revenue in the Consolidated
Statement of Comprehensive Income to match the
period in which the services are delivered.
Revenue is recognised based on chargeable days
delivered using the sales day rate specified in the
customer contract. Revenue recognition is therefore
matched to the timing of when the customer
receives the benefit of the consultancy services
which is in line with the day the work is performed.
The relevant details of customer engagements
and the time delivered by consultants is recorded
on the Group’s financial systems. Professional
services are either invoiced in arrears for the actual
days delivered or invoiced in advance. When
invoiced in advance, the sales value is treated as
contract liabilities and recognised as revenue in the
Consolidated Statement of Comprehensive Income
in the period in which the consultancy days are
delivered.
Revenue is recognised on delivery of the products
from the supplier. Invoices are typically raised
in advance of delivery and treated as contract
liabilities until delivery has been fulfilled. At this
point the revenue and associated purchase cost
is recognised in the Consolidated Statement of
Comprehensive Income.
For managed services and professional services revenue, these are recognised over time as the entity’s
performance does not create an asset with an alternative use to the entity and the entity has an enforceable
right to payment for performance completed to date.
Segmental Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision maker. The chief operating decision maker has been identified as the Board of Directors.
Alternative profit measures
In reporting its results, the Directors have presented various alternative profit measures (APMs) of financial
performance, position or cashflows, which are not defined or specified under the requirements of IFRS. On the basis
that these measures are not defined by IFRS, they may not be directly comparable with other companies. The key
APMs that the group uses include recurring revenue as a percentage of revenue, Adjusted EBITDA, Adjusted PBT,
Adjusted EPS and Net cash.
The Group makes certain adjustments to the statutory profit in order to derive many of these APMs. These include
exceptional items and share based payments. The group presents as exceptional items on the face of the
Statement of Comprehensive Income those material items of income and expense which the Directors consider,
because of their size or nature and expected non-recurrence, merit separate presentation to facilitate financial
SysGroup plc Annual Report & Accounts 2021 74
Notes to the Consolidated Financial Statements Continued
comparison with prior periods and to assess trends in financial performance. Exceptional items are included in
Administration expenses in the Consolidated Statement of Comprehensive Income but excluded from Adjusted
EBITDA as management believe they should be considered separately to gain an understanding of the underlying
profitability of the trading businesses on a consistent basis from year to year.
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 financial assets 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 expected
lifetime credit loss will be recognised using the simplified approach and shown in administrative expenses in the
Consolidated Statement of Comprehensive Income. Impairment reviews for other receivables, including those due
from related parties, use the general approach whereby twelve month expected credit losses are provided for and
lifetime credit losses are only recognised where there has been a significant increase in credit risk, by monitoring
the credit worthiness of the other party. Cash and cash equivalents include cash in hand and 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. Proceeds of any share issue in excess of the
nominal value of the share capital is recognised within the share premium account.
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 9 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.
Share Based Payments
The fair value of employee options, along with any share warrants 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, considering the terms and conditions upon
SysGroup plc Annual Report & Accounts 2021 75
Notes to the Consolidated Financial Statements Continued
which the options were granted. The fair value of warrants is also reviewed to the extent that exercise of the warrants
is considered likely.
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:
Office equipment
20% – 33.3% straight line
Motor vehicles
Freehold property
25% straight line
2% straight line
Right of use assets
over the period of the lease
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 the 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
Software
System development
5-7 years
3-5 years
5 years
Estimated discounted cash flow
Cost less amortisation
Cost less amortisation
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
SysGroup plc Annual Report & Accounts 2021 76
Notes to the Consolidated Financial Statements Continued
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 & Judgements
The preparation of this financial information requires management to make estimates and judgements that affect
the amounts reported for assets and liabilities at the period end date and the amounts reported for revenues and
expenses during each period. The nature of the estimation or judgement means that actual outcomes could differ
from the estimates and judgements taken in the preparation of the financial statements.
Significant Accounting Estimates
•
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment 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 taking into account sensitivities around future business performance, covering a range of
outcomes and risks over levels of revenue, cost and cash generation. No impairment has been identified. More
details including carrying values are included in note 13.
• Valuation of intangible assets acquired in business combinations
Determining the fair value of customer relationships acquired in business combinations requires estimation
of the value of the cash flows related to those relationships and a suitable discount rate in order to calculate
Significant Accounting Judgements
• Going concern
The Board recognises that the Group is trading in an economy that has suffered a significant downturn following
the onset of the COVID-19 pandemic and there’s considerable uncertainty in the timing and rate of economic
recovery. Management have to exercise judgement in the preparation of financial forecasts particularly on the
level of future sales, customer contract uplifts and cancellations, and working capital assumptions. The Directors
have reviewed the Group’s financial forecasts and a Reverse Stress Test model in order to assess the Group’s
business viability and to form a judgement on going concern. Having reviewed the forecasts the Board were
satisfied that the Group remains a going concern.
• Revenue
Management make judgements in determining the appropriate application of revenue recognition policies
to the sale of services and products. An explanation of the Group’s revenue recognition policy is shown in note 1.
• Assessment of CGU’s and carrying value of intangible assets
A CGU is the smallest identifiable Group of assets that generate cash inflows that are largely independent of the
cash inflows from other assets or Groups of assets and the Board of Directors use judgement to identify the CGUs
of the Group. The Board have reviewed the Group’s CGU’s this year and exercised their judgement to amend the
CGUs following the integration of previously acquired businesses and changes to the Group’s management and
reporting structure in the current financial year. The Board have concluded that the Group has a single CGU of
“Managed IT Services”.
• Useful economic lives of intangible assets
Intangible assets are amortised over their useful economic lives. Useful lives are based on management’s
estimates of the period over which the assets will generate revenue, which are periodically reviewed for continued
appropriateness. Changes to estimates can result in changes in the carrying values and hence amounts charged
SysGroup plc Annual Report & Accounts 2021 77
Notes to the Consolidated Financial Statements Continued
to the income statement in particular periods which could be significant. The Group have capitalised system
development expenditure in the current and previous financial year in relation to Project Fusion, a project to
integrate all of the legacy business systems into one new CRM, Marketing, Projects, Billing & Service Desk system.
Phase I of Project Fusion went live during the current period and the System Development intangible asset is being
amortised over a five-year useful life which the Directors consider appropriate for the Group’s core business
system..
•
IFR16 - Leases
Management make judgements in their assessment of lease contract agreements to ensure the appropriate
lease accounting recognition under IFRS16 – Leases. The main elements of judgement are:
• Determining the inherent rate of interest which applies to each lease or family of leases with similar
characteristics;
• Establishing whether or not it is reasonably certain that an extension option will be exercised; and
• Considering whether or not it is reasonably certain that a termination option will not be exercised.
3. 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.
The Group faces a financial risk that such financial assets are not recovered but a provision is made where
recoverability is in doubt.
A summary of financial instruments held by category is shown below:
Group
Financial assets
Assets held at amortised cost
Cash and cash equivalents
Amounts due from subsidiaries
Trade receivables
Total financial assets
Financial liabilities
Amortised cost
Trade and other payables
Amounts due to subsidiaries
Loans and other borrowings
At fair value
Contingent consideration
Total financial liabilities
2021
£’000
3,473
-
916
4,389
1,801
-
1,593
3,394
-
3,394
2020
£’000
3,036
-
1,427
4,463
2,778
-
2,106
4,885
1,000
5,885
Company
2021
£’000
585
-
-
585
546
5,456
1,278
7,280
-
7,280
2020
£’000
217
176
-
393
569
4,110
1,540
6,219
1,000
7,219
SysGroup plc Annual Report & Accounts 2021
Notes to the Consolidated Financial Statements Continued
Contingent consideration
At 1 April
Credited to the income statement
Certus IT acquisition
At 31 March
78
2020
£’000
1,000
-
-
1,000
2021
£’000
1,000
(25)
(975)
-
Liquidity Risk
• Liquidity risk arises from the Group’s management of working capital and the finance charges and principal
repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
The Group’s policy is to prepare periodic working capital forecasts, allowing an assessment of the cash requirements
of the Group and Company, to manage liquidity risk. Cash resources are managed in accordance with planned
expenditure forecasts and the Directors have regard to the maintenance of sufficient cash resources to fund the
Group and Company’s immediate operating requirements and capital expenditure.
The following table sets out the contractual maturities (representing undiscounted contractual cashflows)
of financial liabilities:
Group
At 31 March 2021
Trade and other payables
Loans and borrowings
Total
At 31 March 2020
Trade and other payables
Contingent consideration
Loans and borrowings
Total
Company
At 31 March 2021
Trade and other payables
Amounts due to subsidiaries
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
1,801
155
1,956
2,778
1,000
123
3,901
Up to
3 months
£’000
546
5,456
108
6,110
-
464
464
-
-
396
396
-
580
580
-
-
830
830
-
394
394
-
-
757
757
Between
3 and
12 months
£’000
Between
1 and
2 years
£’000
Between
2 and
5 years
£’000
-
-
323
323
-
-
432
432
-
-
415
415
-
-
-
-
-
-
-
Over
5 years
£’000
-
-
-
-
SysGroup plc Annual Report & Accounts 2021 79
Notes to the Consolidated Financial Statements Continued
Company
Company
At 31 March 2021
At 31 March 2020
Trade and other payables
Trade and other payables
Amounts due to subsidiaries
Amounts due to subsidiaries
Contingent consideration
Contingent consideration
Loans and borrowings
Loans and borrowings
Total
Total
Up to
Up to
3 months
3 months
£’000
£’000
Between
Between
3 and
3 and
12 months
12 months
£’000
£’000
Between
Between
1 and
1 and
2 years
2 years
£’000
£’000
Between
Between
2 and
2 and
5 years
5 years
£’000
£’000
Over
Over
5 years
5 years
£’000
£’000
569
569
4,110
4,110
1,000
1,000
96
96
5,735
5,735
-
-
-
-
-
-
299
299
299
299
-
-
-
-
-
-
389
389
389
389
-
-
-
-
-
-
756
756
756
756
-
-
-
-
-
-
-
-
-
-
Interest Rate Risk
The Group seeks to minimise exposure to interest rate risk by borrowing at a mix of fixed and floating interest rates
appropriate to the nature and term length of borrowings. The Group has not completed a sensitivity analysis on its
interest rate risk, as any sensitivity would be immaterial to the user of the financial statements.
Credit Risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group’s receivables from customers. The Group’s exposure
to credit risk is influenced mainly by the individual characteristics of each customer. The Group receives payments
either from automated banking receipts or from customers generally paying on 30-day credit terms. The Group
has a dedicated credit control function to manage customer payments and uses an external credit rating agency
to assess customers and prospects for creditworthiness. Doubtful debts are provided for in accordance with IFRS9.
For cash and cash equivalents, the Group only uses recognised banks with high credit ratings of a negative or above
on the standard and poor’s rating system.
Capital Disclosures
The Group monitors capital which comprises all components of equity (i.e. share capital, share premium and
retained earnings).
The Group’s objectives 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
adjusts 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 two segments:
• Managed IT Services
This segment provides all forms of managed services to customers and includes professional services.
• Value Added Resale
This segment provides all forms of sales where the business sells products and licences from supplier partners.
The monthly management accounts reported to the Board of Directors are reviewed at a consolidated level with
the operating segments representative of the business model for growth of recurring contract income in Managed
IT Services and VAR sales as a complementary business activity. The Board review the results of the operating
segments at a revenue and gross profit level since the Group’s management and operational structure supports
both operational segments as Group functions. In this respect, assets and liabilities are also not reviewed on a
segmental basis. All assets are located in the UK.
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
All segments are continuing operations and there are no transactions between segments.
Revenue by operating segment
Managed IT Services
Value Added Resale
Total
2021
£’000
14,344
3,787
18,131
2021
%
79%
21%
100%
2020
£’000
15,092
4,400
19,492
No individual customer accounts for more than 6% of the Group’s revenue.
The revenue by geographic location for where services are delivered to customers is shown below.
UK
Rest of World
Total
Revenue
Managed IT Services
Value Added Resale
Total
Gross profit
Managed IT Services
Value Added Resale
Total
2021
£’000
18,091
40
18,131
2021
%
100%
0%
100%
2020
£’000
19,310
182
19,492
2021
£’000
14,344
3,787
18,131
9,593
907
10,501
80
2020
%
77%
23%
100%
2020
%
99%
1%
100%
2020
£’000
15,092
4,400
19,492
10,281
920
11,201
There were no sales between the two business segments, and all revenue is earned from external customers. The
business segments’ gross profit is reconciled to profit before taxation as per the consolidated income statement. The
Group’s overheads are managed centrally by the Board and consequently there is no reconciliation to profit before
tax at a segmental level.
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers
Current contract liabilities relating to deposits from customers
Release of contract liability recognised in revenue which was included in the contract
liability balance at the beginning of the year
2021
£’000
1,549
1,465
2020
£’000
1,465
1,238
The Group expect to recognise all such revenue within twelve months of the balance sheet date.
SysGroup plc Annual Report & Accounts 2021
Notes to the Consolidated Financial Statements Continued
5. Operating Profit
Operating profit is after charging the following:
Auditor’s remuneration:
Group:
Audit
Other advisory
Company:
Audit
Depreciation of tangible fixed assets
Amortisation of Intangible assets
Staff costs (note 7)
Share based payments (note 9)
Short term lease costs
Exceptional items (note 8)
6. Finance Expense
Interest payable on lease liabilities
Interest payable on bank loan
Arrangement fee amortisation on bank loan
Total
81
2021
£’000
2020
£’000
64
12
4
722
1,294
5,315
504
38
82
2021
£’000
27
53
28
108
68
16
4
847
1,321
6,544
199
55
475
2020
£’000
45
134
27
206
SysGroup plc Annual Report & Accounts 2021
82
Notes to the Consolidated Financial Statements Continued
7. Staff Numbers & Costs
The average monthly number of full-time persons employed by the Group, including Executive Directors during
the year was:
Technical Support
Sales and Marketing
Administration
Total
2021
2020
81
20
15
116
84
22
14
120
The aggregate payroll costs including Executive Directors and excluding Non-Executive Directors were as follows:
Wages and salaries
Social security costs
Benefits in kind
Pension benefits
Share based payment expense
Total
2021
£’000
4,631
508
50
126
504
2020
£’000
5,757
627
59
101
199
5,819
6,743
Total staff costs for the Company are £3,497,000 (FY20: £2,781,000) and average staff numbers for the Company are
73 (FY20: 60).
Directors
Fees and salaries
Social security costs
Benefits in kind
Pension benefits contributions
Share based payment expense
Total
2021
£’000
552
53
3
14
464
1,086
2020
£’000
520
48
3
14
186
771
Key management personnel are those persons having authority and responsibility for planning, directing and
controlling the activities of the Group, they are the Directors of the Company.
The emoluments of the highest paid Director are £261,000 (FY20: £250,000).
The Group does not operate a defined benefits pension scheme and Executive Directors who are entitled to receive
pension contributions may nominate a defined contribution scheme into which the Company makes pension
contributions.
The fees relating to Non-Executive Directors are in some cases payable to third parties in connection with the
provision of their services. The balance outstanding at 31 March 2021 was £10,000 (FY20: £10,000).
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
8. Exceptional Items
Acquisitions
Integration and restructuring
Total
83
2020
£’000
85
390
475
2021
£’000
-
82
82
The Group has incurred exceptional costs during the year of £82,000 (FY20: £475,000) which are in relation to the exit
of the Bristol office and employee costs incurred from the integration of the senior management team.
9. Share Based Payments & Warrants
The Company has granted share options to the Executive Directors under LTIP Schemes and Group employees under
an EMI Scheme. 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. For new share options issued in the year, the volatility was
estimated using the previous twelve months of the Group’s share price.
EMI Scheme
Share options can be granted to employees of the Group at the discretion of and with approval from the
Remuneration Committee. For EMI share options to vest the employee has to be employed by the Group at the
vesting date. The weighted average exercise price of options in issue is 28.2p per share.
Grant date
Exercise period
17/03/2014
21/02/2016
02/03/2018
26/11/2018
16/04/2020
Total
17/03/17 to 11/12/24
21/02/16 to 20/02/26
02/03/21 to 01/03/28
26/11/21 to 25/11/28
16/04/23 to 15/04/30
Exercise
price
60.0p
55.2p
35.5p
42.5p
1.0p
At
31 March
2020
3,750
11,875
30,000
311,000
No. of Ordinary Shares
Granted
Waived
At
31 March
2021
3,750
11,875
30,000
-
-
-
(71,000)
240,000
-
-
-
-
-
450,000
(300,000)
150,000
356,625
450,000
(371,000)
435,625
The options have been valued, using the Black Scholes method, using the following assumptions:
Number of instruments granted
3,750
11,875
30,000
240,000
150,000
Grant date
Expiry date
Contract term (years)
Exercise price
Share price at granting
Annual risk-free rate (%)
Annual expected dividend yield (%)
Volatility (%)
17-Mar-14
21-Feb-16
02-Mar-18
26-Nov-18
16-Apr-20
17-Mar-17
20-Feb-19
01-Mar-21
26-Nov-21
16-Apr-23
10
60p
85p
5.0%
0%
24%
10
55.2p
70.8p
5.0%
0%
24%
10
35.5p
35.5p
5.0%
0%
24%
17.2p
10
42.5p
42.5p
5.0%
0%
24%
10
1.0p
27.0p
5.0%
0%
24%
20.5p
26.4p
Fair value per grant instrument
29.0p
40.4p
SysGroup plc Annual Report & Accounts 2021
84
Notes to the Consolidated Financial Statements Continued
Executive LTIP Options
The Remuneration Committee is responsible for establishing the Executive LTIP Schemes and also sets the targets
by which the performance of the Executive Directors is measured. The award of share options to the Executive
Directors is governed by the LTIP Scheme Rules. Further information on the Schemes is presented in the Directors’
Remuneration report. The weighted average exercise price of options in issue is 1.0p per share.
Executive LTIP Options
No. of Ordinary Shares
Grant date
28/06/2018
16/07/2018
15/07/2019
08/07/2020
Total
Exercise period
08/07/20 to 28/06/28
08/07/20 to 16/07/28
08/07/20 to 14/07/29
08/07/22 to 07/07/30
Exercise
price
1.0p
1.0p
1.0p
1.0p
At
31 March
2020
750,000
450,000
400,000
-
-
-
-
400,000
1,600,000
400,000
Granted
Waived
At
31 March
2021
750,000
450,000
400,000
400,000
2,000,000
-
-
-
-
-
Number of instruments granted
750,000
450,000
400,000
400,000
Grant date
Exercise date
Contract term (years)
Share price at granting
Annual risk-free rate (%)
Annual expected dividend yield (%)
Volatility (%)
Fair value per grant instrument
28-Jun-18
16-Jul-18
15-Jul-19
08-Jul-20
08-Jul-20
08-Jul-20
08-Jul-20
08-Jul-22
10
1.0p
41.5p
5.0%
24%
40.9p
10
1.0p
46.5p
5.0%
24%
43.7p
10
1.0p
42.0p
5.0%
24%
41.4p
10
1.0p
33.0p
5.0%
24%
32.4p
Share warrants
At 31 March 2021 there were 140,000 outstanding warrants to subscribe for the ordinary share capital of the Company,
of which 2,500 were held by Michael Edelson, Non-Executive Director.
Grant date
09/01/2012
No. of Warrants and Exercise price
Exercise period
08/01/2022
200p
140,000
The fair value of the warrants has been calculated at 0.36p based on the following assumptions – share price at
granting 50p, annual risk-free rate 1.5%, and volatility 20%. No provision has been made for the warrants in shared
based payments.
SysGroup plc Annual Report & Accounts 2021
85
Notes to the Consolidated Financial Statements Continued
10. Acquisitions
In February 2019, the Company acquired 100% of the share capital of Certus IT Limited (“Certus”), and the parties
agreed an earn-out mechanism for a period of twelve months post-acquisition based on profit performance
targets. In February 2020 the earn-out period was completed and Certus successfully achieved the maximum
EBITDA target. The company paid £975,000 to the Sellers in full settlement of the contingent consideration during H1
FY21.
11. Earnings Per Share
Profit/(loss) for the financial year attributable to shareholders
Weighted number of issued equity shares
2021
2020
£240,000
(£122,050)
49,234,036
49,419,690
Weighted number of equity shares for diluted EPS calculation
51,811,233
51,734,950
Adjusted basic earnings per share (pence)
Basic earnings per share (pence)
Diluted earnings per share (pence)
3.5p
0.5p
0.5p
3.4p
(0.2p)
(0.2p)
The weighted number of issued equity shares and the weighted number of shares for the diluted calculation both
exclude the Treasury shares held by the Company in accordance with accounting standards.
Profit/(loss) after tax used for basic earnings per share
Amortisation of intangible assets
Exceptional items
Share based payments
Tax adjustments
2021
£’000
2020
£’000
240
(122)
1,294
1,321
82
475
504
199
(376)
(216)
Adjusted profit used for Adjusted Earnings per Share
1,744
1,657
12. Taxation
Current tax
Current tax - current year
Adjustments in respect of prior years
Total current tax charge
Deferred tax
Deferred tax - temporary differences
Deferred tax credit
Total tax credit
2021
£’000
2020
£’000
260
16
276
(311)
(311)
(35)
128
(107)
21
(133)
(133)
(112)
SysGroup plc Annual Report & Accounts 2021
86
Notes to the Consolidated Financial Statements Continued
The effective tax rate for the year to 31 March 2021 is lower (2020: lower) than the standard rate of corporation tax in
the UK. The differences are explained below:
Profit/(loss) on ordinary activities before tax
Loss on ordinary activities before taxation multiplied by the standard rate of UK corporation
tax of 19% (2019:19%)
Effects of:
Expenses not deductible
Prior year adjustment
Re-measurement of deferred tax due to changes in UK rate
Deferred tax asset on share-based payments
Use of brought forward losses
Total tax credit
The Group recognised deferred tax assets and liabilities as follows:
Deferred tax liability on customer relationships
Deferred tax asset on share-based payments
Capital allowances timing differences
Deferred tax liability
2021
£’000
2020
£’000
205
(234)
39
53
17
51
(122)
(73)
(44)
25
(107)
85
-
(71)
(35)
(112)
2021
£’000
(927)
122
(84)
(889)
2020
£’000
(1,149)
-
(51)
(1,200)
Recognition of deferred tax assets is restricted to those instances where it is highly probable that relief against
taxable profit will be available. The movement in the deferred tax account during the year was:
The movement in the deferred tax account during the year was:
Capital
allowances timing
differences
£’000
Customer
relationships
£’000
Balance at 1 April 2020
Credited to statement of comprehensive income
Deferred tax recognised on acquired intangible assets
Balance at 31 March 2021
(51)
(33)
122
38
(1,149)
222
-
(927)
Total
£’000
(1,200)
189
122
(889)
Factors affecting future tax charges:
Deferred tax balances are recognised at 19% (2020: 17%) due to the cancellation of the planned reduction in tax rate
to 17%. The government further announced in the Spring Budget 2021 that from 1 April 2023, the corporation tax rate
would increase to 25% from 2023.
SysGroup plc Annual Report & Accounts 2021
Notes to the Consolidated Financial Statements Continued
87
Total
£’000
23,939
(87)
1,469
25,321
25,321
396
25,717
2,258
1,321
3,579
3,579
1,294
4,873
Systems
Development
£’000
Software
Licences
£’000
Customer
Relationships
£’000
Positive
Goodwill
£’000
223
184
-
407
407
395
802
206
9
215
215
49
264
192
538
198
6
-
204
204
1
205
136
45
181
181
20
201
23
4
8,010
-
1,146
9,156
9,156
-
9,156
1,916
1,267
3,183
3,183
1,225
4,408
5,973
4,748
15,508
(277)
323
15,554
15,554
-
15,554
-
-
-
-
-
-
15,554
15,554
21,742
20,844
13. Intangible Assets
Cost
At 1 April 2019
Additions
Acquisitions
At 31 March 2020
At 1 April 2020
Additions
At 31 March 2021
Accumulated amortisation
At 1 April 2019
Charge for the year
At 31 March 2020
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value
At 31 March 2020
At 31 March 2021
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-
financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive
income. Customer relationships have a remaining amortisation period of between 2 and 7 years.
Cash-Generating Units
Goodwill and intangible assets are allocated to CGUs in order to be assessed for potential impairment. During the
year the Directors reconsidered the CGUs within the Group following the unification of all Group management,
systems, reporting and operations. The Group has a Senior Leadership Team that manages the SysGroup business
within a single operational and delivery structure having fully integrated the previously acquired Certus IT and Hub
Network Services (“HNS”) businesses. The Board of Directors review the financial and operating performance of the
Group as a single performing unit which reflects how the business is managed and controlled. On 31 March 2021, the
businesses, assets and liabilities of Certus IT and HNS were hived up to SysGroup Trading Limited.
In view of these developments, the Directors concluded that the CGUs which represented these businesses at the
“statutory entity” level were no longer appropriate and that the Group has a single CGU of “Managed IT Services”. As
the Group acquires new businesses, they will form their own CGU until they have been integrated into the Group’s
core operational structure.
SysGroup plc Annual Report & Accounts 2021
Notes to the Consolidated Financial Statements Continued
The allocation of goodwill and carrying amounts of assets for each CGU is as follows:
Managed IT Services
Certus IT
HNS
Total
Allocation of goodwill
Carrying value of assets
2021
£’000
15,554
-
-
15,554
2020
£’000
9,727
5,504
323
15,554
2021
£’000
19,331
-
-
19,331
88
2020
£’000
10,892
8,341
1,378
20,611
Impairment Review
When assessing impairment, the recoverable amount of each CGU is based on value-in-use calculations (VIU). VIU
calculations are an area of material management estimate as set out in note 2. These calculations require the use
of estimates, specifically: pre-tax cash flow projections; long-term growth rates; and a pre-tax discount rate. Cash
flow projections are based on the Group’s detailed annual operating plan for the forthcoming financial year which
has been approved by the Board.
The VIU calculation is determined based on a discounted cash flow basis and is allocated to individual cash
generating units. Cash flows beyond the forthcoming financial year use estimated growth rates which are stated
below. The assumptions for growth rates and margins are based on management’s experience of growth and
knowledge of the industry sector, markets and our own internal opportunities for growth. The projections beyond
five years use an estimated long-term growth rate of 2.5% (FY20: 2.5%) for revenue. This represents management’s
best estimate of a long-term annual growth rate aligned to an assessment of long-term GDP growth rates. A higher
sector-specific growth rate would be a valid alternative estimate. A different set of assumptions may be more
appropriate in future years dependent on changes in the macroeconomic environment.
The discount rates used are based on management’s calculation of the WACC using the capital asset pricing
model to calculate the cost of equity. The same rate is used for each CGU in the VIU calculation and the rates reflect
management’s assessment on the level of relative risk in each respective CGU. Discount rates can change relatively
quickly for reasons both inside and outside management control. Those outside management direct control
or influence include changes in the Group’s Beta, changes in risk free rates of return and changes in Equity Risk
Premia. Matters inside management control are the delivery of performance in line with plans or budgets and the
production of high or low risk plans.
At the yearend reporting date, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of
Assets” and no impairment charges arose as a result of this review.
The assumptions used for the impairment review are detailed below. The CGU has over 70% headroom of VIU
compared to the carrying value of assets. For this headroom to reduce to nil, the discount rate would have to
increase to 14.9% for Managed IT Services, or future CGU profits would have to be significantly below current forecast
levels. The CGU has been tested for profit sensitivity and would remain with VIU headroom in the event of zero
revenue growth being achieved in years 2-5.
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
89
2021
Discount rate
Revenue growth rate year 2 to year 5
Terminal growth rate
2020
Discount rate
Revenue growth rate year 2 to year 5
Terminal growth rate
14. Property Plant & Equipment
Cost
At 1 April 2019
IFRS16 adoption
Additions
Acquisition of subsidiary
Disposals
At 31 March 2020
At 1 April 2020
Additions
At 31 March 2021
Accumulated depreciation
At 1 April 2019
IFRS16 adoption
Charge for the year
Disposals
At 31 March 2020
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value
At 31 March 2019
At 31 March 2020
At 31 March 2021
Managed IT
Services
Certus IT
HNS
9.50%
5.00%
2.50%
11.00%
5.00%
2.50%
Freehold
Property
£’000
382
-
-
-
-
382
382
-
382
1
-
8
-
9
9
8
17
381
373
365
-
-
-
11.00%
5.00%
2.50%
Motor
Vehicles
£’000
73
(73)
-
-
-
-
-
-
-
40
(40)
-
-
-
-
-
-
33
-
-
-
-
-
11.00%
5.00%
2.50%
Total
£’000
3,041
512
687
103
(60)
4,283
4,283
179
4,462
1,621
-
847
(9)
2,459
2,459
722
3,181
1,420
1,824
1,281
Office
Equipment
£’000
Right of
Use Lease
£’000
2,586
(1,083)
353
103
-
1,959
1,959
179
2,138
1,580
(679)
447
-
1,348
1,348
293
1,641
1,006
611
497
-
1,668
334
-
(60)
1,942
1,942
-
1,942
-
719
392
(9)
1,102
1,102
421
1,523
-
840
419
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
90
Company
Cost
At 1 April 2019
Additions
Adoption of IFRS16
At 31 March 2020
At 1 April 2020
Additions
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for the year
At 31 March 2020
At 1 April 2020
Charge for the year
At 31 March 2021
Net book value
At 31 March 2019
At 31 March 2020
At 31 March 2021
15. Investments
Company
Investment in subsidiaries
At start of year
Certus consideration adjustment
Additions
At 31 March
Office
Equipment
£’000
Right of
Use Lease
£’000
Total
£’000
204
33
-
237
237
32
269
109
56
165
165
58
223
95
72
46
-
-
157
157
-
-
157
-
35
35
35
35
70
-
122
87
204
33
157
394
394
32
426
109
91
200
200
93
293
95
194
133
2021
£’000
2020
£’000
24,895
23,235
-
-
(251)
1,911
24,895
24,895
The recoverable amounts have been determined from discounted cash flow calculations based on cash
flow projections from the approved annual operating plan covering the period to 31 March 2022. The principal
assumptions can be found in note 13.
SysGroup plc Annual Report & Accounts 2021
91
Notes to the Consolidated Financial Statements Continued
The Company’s subsidiary undertakings all of which are wholly owned and included in the consolidated accounts are:
Undertakings
SysGroup Trading Limited
Certus IT Limited
Hub Network Services Limited
Netplan LLC*
Netplan Internet Solutions Limited
Rockford IT Limited
System Professional Limited
SysGroup (DIS) Limited
Node Group Limited
Registration
Principal activity
England & Wales
Managed Services
England & Wales
England & Wales
USA
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Non-trading
Non-trading
Non-trading
Dormant
Dormant
Dormant
Dormant
Dormant
*Netplan LLC is a wholly owned subsidiary of Netplan Internet Solutions Limited
TNetplan Group Limited, SysGroup (EH) Limited and SysGroup (NH) Limited, all dormant companies in the prior year, were
dissolved during the year. SysGroup (DIS) Limited (Company number 05743110) and System Professional Limited (Company
number 08995906) have taken 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 with the
exception of Netplan LLC whose registered office is c/o USA Corporate Services Inc, 19 West 34th Street, Suite 1018, New
York, 10001.
16. Trade & Other Receivables
Amounts due within one year
Trade debtors
Other debtors
Amounts due from subsidiaries
Prepayments
Deferred tax asset
Total
Group
2021
£’000
916
-
-
812
-
1,728
Company
2021
£’000
-
54
-
109
122
285
The carrying value of trade and other receivables approximates to their fair value.
Debtor impairment disclosure
Trade debtors
Impairment provision
Total
Group
2021
£’000
1,183
(267)
916
Company
2021
£’000
-
-
-
Group
2020
£’000
1,427
-
-
1,299
-
2,726
Group
2020
£’000
1,640
(213)
1,427
Company
2020
£’000
-
46
176
92
-
314
Company
2020
£’000
-
-
-
SysGroup plc Annual Report & Accounts 2021 92
Notes to the Consolidated Financial Statements Continued
The Group have applied the simplified approach to calculate its impairment of trade receivables. In completing this
review, the Group have segregated its receivables into categories based on the number of days past due for each
invoice and used this to estimate the expected lifetime credit loss, with the historic credit losses being adjusted for
expected forward cashflows given the current economic environment.
Up to
1 month
past due
£’000
281
(1)
280
Group
Over
1 month
past due
£’000
902
(266)
636
Up to
1 month
past due
£’000
Company
Over
1 month
past due
£’000
-
-
-
-
-
-
Total
£’000
1,183
(267)
916
Trade debtors
Expected credit loss
Net carrying amount
17. Trade & Other Payables
Amounts due within one year
Trade payables
Amounts due to subsidiaries
Accruals
Total financial liabilities, excluding loans and
borrowings measured at amortised cost
Corporation tax
Other taxes and social security costs
Total
Contingent consideration
Certus IT Ltd
Group
2021
£’000
Company
2021
£’000
811
-
990
1,801
254
628
2,683
Group
2021
£’000
-
50
5,456
496
6,002
-
106
6,108
Company
2021
£’000
-
Group
2020
£’000
1,847
-
931
2,778
158
552
3,488
Group
2020
£’000
1,000
Total
£’000
-
-
-
Company
2020
£’000
147
4,110
422
4,679
-
86
4,765
Company
2020
£’000
1,000
The fair value of contingent consideration in the prior year relates to the acquisition of Certus IT Limited and was
recognised at the full value of the consideration. In February 2020 the earn-out period was completed and Certus
successfully achieved the EBITDA maximum target. Following the 31 March 2020 year end, the company paid
£975,000 to the Sellers in full settlement of the contingent consideration.
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 2021 and 31 March 2020.
The maturity of the financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at
amortised cost is shown in note 3.
SysGroup plc Annual Report & Accounts 2021 Notes to the Consolidated Financial Statements Continued
18. Loans and Borrowings
Non-current
Lease liabilities
Bank loan
Total
Current
Lease liabilities
Bank loan
Total
Group
2021
£’000
190
757
947
Group
2021
£’000
230
416
646
Company
2021
£’000
64
757
821
Company
2021
£’000
40
416
456
Group
2020
£’000
441
1,146
1,587
Group
2020
£’000
268
251
519
93
Company
2020
£’000
104
1,146
1,250
Company
2020
£’000
39
251
290
19. Related Party Transactions
Transactions between the Company and its subsidiaries, which are related parties of the Company, have been
eliminated on consolidation and are not disclosed in this note. Details of the transactions between the Group and
other related parties are disclosed below:
Praetura Capital LLP, a Company of which Mike Fletcher (Non-Executive Director) is a partner, invoiced SysGroup plc
£26,479 (2020: £26,000) for a shared cost of corporate services received by SysGroup plc and Praetura Capital LLP. At
31 March 2021, the balance outstanding was £nil (31 March 2020: £nil).
20. Share Capital
Equity share capital
Allotted, called up and fully paid ordinary shares of £0.01 each
At 1 April 2019
At 31 March 2020
At 31 March 2021
Group
2021
Number
49,419,690
49,419,690
49,419,690
Group
2021
£’000
494
494
494
In December 2020, the Company purchased 560,000 of its own ordinary shares of £0.01 each for consideration of
£201,000. These shares are being held as Treasury shares and will be used to settle future issues of share options to
employees as they vest and become exercised.
SysGroup plc Annual Report & Accounts 2021 94
Notes to the Consolidated Financial Statements Continued
21. Reconciliation of Net Cashflow Movement in Net Cash/(debt)
Cash and cash
equivalents
Debt due in less
than one year:
Bank loans
Lease liabilities
Contingent
consideration
Debt due in
more than one
year:
Bank loans
Lease liabilities
Total
1 April
2020
£’000
3,036
(251)
(268)
(1,000)
(1,146)
(440)
(69)
Non cashflow
movements
£’000
Cashflow
£’000
Reclass
£’000
31 March
2021
£’000
-
27
-
25
(27)-
-
25
437
224
288
975
-
250
1,924
-
3,473
(416)
(250)
-
416
250
-
(416)
(230)
-
(757)
(190)
1,880
22. Ultimate Controlling Party
The Directors consider the company and Group have no controlling shareholder and there’s no ultimate
controlling party.
SysGroup plc Annual Report & Accounts 2021 SysGroup plc Annual Report & Accounts 2021
95
Notice of Annual
General Meeting
96
Notice of Annual
General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held on 16 September 2021 at 10.00
am at Hill Dickinson LLP, 50 Fountain Street, Manchester M2 2AS 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 2021
together with the Directors’ and Auditors’ Reports contained therein.
2. TO reappoint Adam Binks as a director who retires by rotation.
3. TO reappoint Martin Audcent as a director who retires by rotation.
4. TO reappoint Mark Quartermaine as a director who retires by rotation.
5. TO reappoint BDO LLP as auditors of the Company and authorise the Directors to fix their remuneration.
6. THAT, in accordance with section 551 of the Companies Act 2006, the Directors be generally and unconditionally
authorised to allot Relevant Securities (as defined below):
a. comprising equity securities (as defined by section 560 of the Companies Act 2006) up to an aggregate
nominal amount of £325,730 (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 £162,865 (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 £162,865),
SysGroup plc Annual Report & Accounts 2021
97
Notice of Annual General Meeting Continued
provided that this authority shall, unless renewed, varied or revoked by the Company, expire 15 months from
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.
shares in the Company other than shares allotted pursuant to: (i) an employee share scheme (as defined
by section 1166 of the Companies Act 2006); (ii) a right to subscribe for shares in the Company where the grant
of the right itself constituted a Relevant Security; or (iii) a right to convert securities into shares in the Company
where the grant of the right itself constituted a Relevant Security; and
ii. 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 Companies Act 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 5, the Directors be given the general power to allot equity securities
(as defined by section 560 of the Companies Act 2006) for cash, either pursuant to the authority conferred by
resolution 5 or by way of a sale of treasury shares, as if section 561(1) of the Companies Act 2006 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 of equity securities or sale of treasury shares (otherwise than pursuant to resolutions 7.a above)
to any person up to an aggregate nominal amount of £24,429.
SysGroup plc Annual Report & Accounts 2021
98
Notice of Annual General Meeting Continued
The power granted by this resolution will expire 15 months from the date this resolution is passed or, if earlier, the
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 (or treasury shares to be sold) after such expiry and
the Directors may allot equity securities (or sell treasury shares) 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 Companies Act 2006 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 4,885,969;
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
Martin Audcent
Company Secretary
23 August 2021
Registered Office:
Walker House
Exchange Flags
Liverpool L2 3YL
SysGroup plc Annual Report & Accounts 2021
99
Notice of Annual General Meeting Continued
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 6ZZ, 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 14 September 2021. Changes to entries on the relevant register of securities after
10.00 am 14 September 2021 shall be disregarded in determining the rights of any person to attend and vote
at the meeting.
4. As at 5.00pm on 20 August 2021, which is the latest practicable date before publication of this notice, the
Company’s issued share capital comprised 49,419,690 ordinary shares of £0.01 each, of which 560,000 are
treasury shares in respect of which the Company is not permitted to exercise voting rights (such treasury shares
equate to approximately 1.15 per cent of the Company’s issued share capital (excluding treasury shares)). Each
ordinary share carries the right to one vote at a general meeting of the Company and, therefore, the total
number of voting rights in the Company as at 5.00pm on 20 August 2021 is 49,419,690. The Company’s website will
include information on the number of shares and voting rights.
5.
In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy,
shall be accepted to the exclusion of the votes of the other joint holders. For this purpose, seniority shall be
determined by the order in which the names stand in the register of members of the Company in respect
of the relevant joint holding (the first named being most senior).
6. 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.
7.
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.
8. The Annual Report and Financial statements can be downloaded from the investor section of the Company’s
website at the following location https://www.sysgroup.com/about-us/investors
SysGroup plc Annual Report & Accounts 2021