Annual report
and accounts
2023
SysGroup plc
Walker House,
Exchange Flags
Liverpool L2 3YL
Company number
06172239
www.sysgroup.com
We create value
We are a multi-award-winning technology
solutions provider that creates value
through technology transformation.
Our mission is to supercharge the UK mid-
market. By focusing on the innovative use
of technology and creating clever, bespoke
solutions we support our customers in
achieving their true potential.
We have made two significant strategic
acquisitions which have expanded
our presence across the UK, enhanced
our service offering and bolstered our
client portfolio.
Over the last year, we have refined our
offering to focus on helping our customers
address their biggest challenges, enabling
them to drive productivity, increase their
resilience, mitigate risk and become
more sustainable.
Alongside this evolution of the business,
our continued focus on driving organic
growth and further strengthening our
network of industry-leading partnerships
has created robust foundations for
future growth.
SysGroup plc Annual report and accounts 2023
2
Contents
04 Directors, secretary and advisers
05 Highlights
Strategic report
08 Chairman’s statement
09 Chief Executive Officer’s report
12 Chief Financial Officer’s report
17 Principal risks and uncertainties
20 s172 statement
23 Environmental, social
and governance report
Governance report
34 Board of Directors’ profile
35 Directors’ report
38 Directors’ remuneration report
41 Corporate governance report
47 Statement of Directors’ responsibilities
Financial statements
49 Independent Auditor’s report
to the members of SysGroup plc
56 Consolidated statement
of comprehensive income
57 Consolidated statement
of financial position
59 Company statement
of financial position
61 Consolidated statement
of changes in equity
62 Company statement
of changes in equity
63 Consolidated statement
of cashflows
64 Company statement
of cashflows
65 Notes to the consolidated
financial statements
SysGroup plc Annual report and accounts 2023
3
Directors, secretary and advisers
Board of Directors
Michael Edelson
Non-Executive Chairman
Adam Binks
Chief Executive Officer
Martin Audcent
Chief Financial Officer
Michael Fletcher
Non-Executive Director
Mark Quartermaine
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 and broker
Liberum Capital Ltd
25 Ropemaker Street, London EC2Y 9LY
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
4
SysGroup plc Annual report and accounts 2023 Highlights
Revenue
Gross profit
£21.65m
£11.10m
+47%
+24%
Adjusted EBITDA1
Adjusted PBT2
£3.33m
£2.22m
+18%
+9%
Cashflow from operations
Net debt
£3.02m
£1.32m
+22%
–
SysGroup plc Annual report and accounts 2023
5
5
SysGroup plc Annual report and accounts 2023 Highlights
Revenue
Recurring revenue as a % of total revenue
Gross profit
Adjusted EBITDA1
Adjusted EBITDA1 margin %
Statutory (loss)/profit before tax
Adjusted PBT2
Basic EPS
Adjusted Basic EPS3
Cashflow from operations
Net (debt)/cash4
2023
2022
Change %
£21.65m
81%
£11.10m
£3.33m
15%
£(0.10)m
£2.22m
0.0p
3.9p
£3.02m
£(1.32)m
£14.75m
87%
£8.92m
£2.82m
19%
£0.60m
£2.04m
0.9p
3.6p
£2.47m
£2.99m
47%
(6%)
24%
18%
(4%)
–
9%
(0.9p)
0.3p
22%
–
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 (debt)/cash represents cash balances less bank loans and lease liabilities.
5. Adjusted operating expenses are administrative expenses before depreciation, amortisation, exceptional items and share
based payments.
Operational
• Acquisitions of Truststream Security
Solutions Limited (“Truststream”) and
Orchard Computers Limited (“Orchard”)
• Truststream acquired for up to £7.9m,
enhancing cyber security offering
and adding Edinburgh location
• Orchard acquired for £1m in cash,
strengthening south west operations
Post period-end developments
• New go-to-market strategy launched simplifying
• Heejae Chae to join the Company as Executive
our messaging to prospects and customers
Chairman with Adam Binks stepping down after
nine successful years
integration into SysGroup completed
• Business operations and systems
• New £8.0m revolving credit facility
• Consistently high customer satisfaction
secured with Santander
levels maintained above our 97% target
throughout the 12 month period
6
SysGroup plc Annual report and accounts 2023 Strategic
report
SysGroup plc Annual report and accounts 2023
7
7
SysGroup plc Annual report and accounts 2023 Strategic report
Chairman’s statement
In my final report as Chairman, I am pleased to report a year of positive
revenue growth for SysGroup as it successfully executed on its growth strategy
and navigated challenging sector headwinds. I am incredibly proud to have
been Chairman of SysGroup for the last fourteen years, which has seen the
Group achieve significant change and growth both organically and through M&A.
On behalf of the Board and the wider team,
I would like to extend our thanks to Adam
Binks for his dedication and commitment during
his time as CEO of SysGroup. Adam has been
central to the growth of the Company over
the last nine years and I know I speak for all
stakeholders by wishing him well for the future.
I would also like to take the opportunity to
welcome Heejae Chae to the Board, who will
take over from me as Chair.
As the Group continues to invest in its services,
execute on its growth strategy and as companies
begin to increase investment in technology
solutions, we have confidence in the mid-term
outlook for SysGroup.
Michael Edelson
Chairman
23 June 2023
Trading for the year has been strong with revenue
and Adjusted EBITDA both increasing in line
with market expectations. It is pleasing to see
the strategic acquisitions of Truststream and
Orchard already contributing to total Group
revenues. Both businesses have proven to be
valuable additions to our existing operations,
enhancing our service offering, expanding our
geographical presence and fostering new client
relationships and cross-sell opportunities.
The teams have been seamlessly integrated
into the Group, placing us in a stronger position.
Moreover, these businesses have brought
robust recurring revenue streams, reinforcing
our commitment to the Group’s buy and build
strategy and solidifying our position as a
consolidator within a highly fragmented market.
Our people are at the centre of everything we
do and I would like to take this opportunity to
sincerely thank all of them for their continued
diligence and dedication. We have worked hard
to create an environment which allows the
diverse range of talent within SysGroup to thrive
and I believe that this will play a significant part
in our continued success. It is the commitment
of our people that has consistently propelled
our customer satisfaction levels beyond our set
targets, and they continue to be at the centre
of our growth plans.
8
SysGroup plc Annual report and accounts 2023 Strategic report
Chief Executive Officer’s report
Introduction
Acquisitions
I am pleased to be able to report, for
the final time as Chief Executive, another
year of progress for SysGroup, in spite
of the continued difficult economic
backdrop. The Group met expectations
with revenue growth of 47% to £21.65m
(FY22: £14.75m) and Adjusted EBITDA1
increased to £3.33m (FY22: £2.82m).
The growth in Group revenues was
achieved through a combination of 6%
organic growth supplemented by the
successful acquisitions of Truststream
and Orchard (the “Acquisitions”), both
in April 2022.
Managed IT services revenues grew by £4.6m
to £17.4m, but reduced as a percentage of Group
revenues to 80.6% (FY22: 87.1%) with value-added
resale (VAR) sales more than doubling during
the period to £4.2m (FY22: £1.9m). Although the
increased proportion of VAR impacts the gross
margin, it is a reassuring signal that companies
are once again committing to IT spend.
SysGroup’s strong track record of cash
generation continued, with gross cash of £4.19m
at the year-end (FY22: £4.13m), achieved after
payment of £5.39m (net of cash acquired) in
respect of the initial consideration payable
for the Acquisitions. As expected, following
the Acquisitions and successful refinancing,
the Group has a net debt position of £1.32m
excluding contingent consideration (FY22: net
cash £2.99m). The balance sheet therefore
remains very healthy with an Adjusted EBITDA1
to net debt ratio of 0.4x.
The Board was pleased to complete two
acquisitions early in the financial year, being the
first since 2019. Both were strategically important,
enhancing our geographical presence as well
as complementing our suite of services to meet
market needs.
We acquired Truststream for an initial cash
consideration of £4.8m on a cash free, debt free
basis, and a maximum earn out consideration of
up to £3.07m over a 24 month period. Truststream
is a leading provider of professional and managed
cyber security services, providing SysGroup with
greater expertise and an expanded portfolio to
target one of the fastest-growing segments of
the market. With a strong client base covering
both private and public sectors, it covers all
aspects of cyber security, from analysis and
threat detection, through protection architecture
and implementation, to incident response and
ongoing 24/7 support and training.
Subsequently, the Group acquired Independent
Network Solutions Limited, which trades as
Orchard Computers, a Bristol-based managed
IT service provider, for £1m in cash. Orchard
has been in operation for over 30 years and has
built a longstanding and diverse customer base
totalling over 120 active clients in 2021, largely
in the Southwest of England, complementing
the Group’s operations in South Wales. Orchard
represents customers across a broad range
of sectors, covering both the private and public
sectors. Its managed IT service offering mirrors
that of SysGroup, providing high quality consulting
services and building tailor-made, vendor-agnostic
solutions, designed specifically to meet individual
customer needs, followed by ongoing support.
9
SysGroup plc Annual report and accounts 2023 At the time of the Truststream acquisition, the
Company secured a new £8m revolving credit
facility with Santander to provide additional
financial flexibility for the Group. This facility
has a term of five years with covenants that will
be tested quarterly relating to total net debt to
Adjusted EBITDA1 leverage and minimum liquidity.
The Group has drawn down £4.5m against the
new facility towards the funding of the
Truststream Acquisition.
As a result of the Group’s prior year investments
in Project Fusion, which provided the Group with
a single operating platform, the integration of both
businesses has been both swift and seamless.
The integration of both finance operations,
customer relationship management and team
members were completed during the first half
of the year and we have since completed
integration of all technical operations. In line
with our strategic focus, both businesses are
now trading under the SysGroup brand.
Strategy
During the periods dominated by the COVID-19
pandemic, the Group focused on ensuring we
had the right structure and systems in place to
be able to scale our business, both organically
and through acquisitions, seamlessly and
without friction. The success of this has been
demonstrated through the integration of both
Truststream and Orchard. We now have a Group
with a presence throughout the United Kingdom
able to serve the mid-market and enterprise
customers, all supported by a centralised sales
and marketing team.
During the year under review we refined and
simplified our go-to-market strategy. We know
that we have the right solutions to meet the
demands that businesses currently face and to
help them build for the future, which is reflected
in our outstanding levels of client retention and
customer satisfaction.
The technology transformation journey is
more complex than ever before and businesses
need to rely on trusted advisors to help them
navigate these complexities. SysGroup now
operates under a single unified brand and all
marketing material and sales collateral centres
around how we can help C-Suite executives grow
their businesses and achieve their corporate
ambitions. This includes a revitalised website,
which is consistent with our values and sales
efforts. Rather than looking to engage with them
on technical detail, our approach centres around
the key issues that they encounter, such as:
drive productivity and deliver top-line growth
• How better technology can help them to
• How they can increase resilience through
combatting threats, withstanding change
and ensuring continuity of their most
important assets
financial, operational or reputational damage
• How they can mitigate risks to avoid any
• How the power of technology can help them
become more sustainable by future-proofing
operations and accelerating their journey to
net zero
This approach is not only applicable for gaining
new clients but also for growing within our existing
estate. As a result of our acquisitive nature,
there is still a significant proportion of our client
base that utilise no more than two of our core
competencies. As previously stated, we believe
there is an opportunity to expand within these
customers and while some progress has been
made to date, our simplified message will drive
this further.
People
I am pleased to report that the initial results
of this refined strategy have been encouraging.
Organic growth of 6% in a difficult market highlights
that we are making progress and the feedback
internally is very supportive. The stability and
continuity of management and senior leadership
teams has created a collaborative culture in which
participation and having a voice are encouraged
and evident.
Having been in this business for nine years
and worked with many of the team throughout
that tenure, I am continually impressed by the
collective desire to improve as an organisation,
to learn new ways to develop our offering and
the commitment to provide our customers with
the very best levels of service. This is once again
demonstrated by our customer satisfaction levels
remaining above our 97% target throughout the
12 month period, and is a trait that I am certain
will continue beyond my stewardship.
10
SysGroup plc Annual report and accounts 2023 Summary and outlook
The Group has delivered a robust performance
with revenue and Adjusted EBITDA increasing
despite the challenging macroeconomic
environment impacting all businesses. We are
pleased to report that trading for the first two
months of the new financial year are in line with
the Board’s expectations, and as I look to leave
the business, I have complete confidence that
SysGroup has the right platform to succeed
in today’s technological world as it continues
to support business of all sizes find the right
solutions to meet their needs.
The solid foundations created through
investment during my time as CEO has placed
SysGroup in a strong position to capitalise on
the market opportunity as it executes against
its growth strategy. The seamless integration
of Truststream and Orchard serves to evidence
the strength of this position and our ability to
bring in complementary businesses which will
expand our addressable market, generate new
client relationships and be immediately earnings
enhancing for the Group.
As we continue to invest in our expanded service
offering, while remaining committed to exploring
further appropriate M&A opportunities, we have
great confidence in the mid-term outlook for
the Group.
SysGroup has built a fantastic team and it is clear
that all of the right systems and processes are
in place to achieve sustainable growth over the
coming period and beyond. I would like to take
this opportunity to wish every success to the
team as they continue to take the Company
further on its growth journey.
Adam Binks
Chief Executive Officer
23 June 2023
SysGroup plc Annual report and accounts 2023
11
Strategic report
Chief Financial Officer’s report
Group statement of comprehensive income
The Group delivered revenue of £21.65m (FY22: £14.75m), an increase of 47%
on the prior year, Adjusted EBITDA of £3.33m (FY22: £2.82m), an increase of 18%
compared to FY22, and a statutory loss before tax of (£0.1m) (FY22: profit before
tax of £0.60m).
The revenue and Adjusted EBITDA growth
has principally come from the acquisitions of
Truststream and Orchard (the “Acquisitions”)
which were both acquired in April 2022 and
provided a full years’ contribution to the Group
results, and overall the Group achieved organic
revenue growth of 6%.
The two acquisitions have performed well
and in line with expectations. Truststream’s
IT security services have proved to be a
strong area of growth, with cyber security being
a key concern for our mid-market and enterprise
level customers. The Orchard business, which
provides customers with a broad set of managed
IT services, has been integrated into the
SysGroup operational structure and it has been
pleasing to see new business won during the
year whilst their customer churn has remained at
relatively low levels. Revenue in the core business
has remained broadly level, though we are seeing
a stronger pipeline of opportunities.
In common with all companies, we have seen
a rise in energy costs and other supplier charges
due to the high inflation economy and impact
from the geopolitical situation. Our contract terms
with customers have largely allowed us to pass
price increases onto customers although power
consumption across our office footprint has
been absorbed into the overhead base.
Managed IT services revenue was £17.44m
(FY22: £12.85m), an increase of 36% on the prior
year, and VAR revenue was £4.2m (FY22: £1.9m),
an increase of 121%. Organic growth was 4%
and 14% respectively for managed IT services
and VAR revenue. The higher VAR revenue
performance has shifted the revenue mix to
81% managed IT services and 19% VAR (FY22:
87%:13%) which is more in line with our target
revenue mix model. This shift back had been
anticipated following the Acquisitions and
we expect a similar revenue mix in the
forthcoming year.
Gross profit was £11.10m with a gross margin
of 51.3% (FY22: £8.92m and 60.5% respectively).
Whilst gross profit has increased with the larger
size of the business, the gross margin percentage
has reduced as anticipated as a consequence
of the Acquisitions. Truststream has a higher
revenue mix of VAR sales compared to the legacy
SysGroup business and both Truststream and
Orchard operate at lower gross margins. The
gross profit achieved in managed IT services
was £10.35m at 59.3% (FY22: £8.51m at 66.2%)
with the margin fall due to acquisition dilution
and the gross profit achieved in VAR sales was
£0.75m at 17.8% (FY22: £0.41m at 21.5%) with the
lower gross margin % due to the lower license
sale margins in the Truststream business.
12
SysGroup plc Annual report and accounts 2023 Revenue by operating segment
Managed IT services
Value-added resale
Total
2023
£’000
17,441
4,207
2023
%
81%
19%
2022
£’000
12,845
1,901
2022
%
87%
13%
21,648
100%
14,746
100%
Adjusted operating expenses5 of £7.77m were
£1.67m above last year (FY22: £6.10m) as the
overheads of the acquired businesses have
increased the cost base of the Group. The ratio
of overheads to revenue is 36% (FY22: 41%)
which demonstrates the economies of scale
of a larger sized business. Notwithstanding the
general incidence of supplier cost increases,
overhead costs were managed well throughout
the year and we continued to invest into strategic
areas of value such as employee training and
development as well as the ESG programme.
During the year we opened a new office in
Edinburgh to provide the Truststream team with
a contemporary designed SysGroup branded
office space with available room for expansion.
Adjusted EBITDA was £3.33m for the twelve
months to 31 March 2023 (FY22: £2.82m) which is
an Adjusted EBITDA margin of 15.4% (FY22: 19.1%).
The lower margin percentage reflects the change
in the revenue and gross margin mix following
the Acquisitions.
The consolidated income statement includes
£0.41m of exceptional costs which relate to
professional fees for the Acquisitions, and
costs associated with the post-acquisition
integration and restructuring activities.
No further exceptional costs are expected
in FY24 in relation to these acquisitions.
Amortisation of intangible assets was £1.74m
(FY22: £1.24m) in the year, of which £1.56m (FY22:
£1.10m) relates to the amortisation of acquired
intangible assets from acquisitions and £0.18m
(FY22: £0.14m) relates to the amortisation of
software development and licence costs.
Finance costs increased in the year to £0.48m
(FY22: £0.13m), mainly from the increase in bank
loan interest charges following the £4.5m loan
drawdown in April 2022 and the impact of rising
bank base rates. Finance costs also include £0.1m
of non-cash finance charges for the unwinding
of discount on contingent consideration and
the amortisation of the loan arrangement fee.
The share-based payments charge of £0.18m for
the year (FY22: £0.20m) relates to charges for the
share options under the Executive Director LTIP
and Employee Management Incentive schemes.
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.
The Group has an adjusted profit before tax
of £2.22m (FY22: £2.04m) and a statutory
loss before tax of £0.10m (FY22: profit before
tax £0.60m). The statutory loss before tax results
from having £0.41m of non-recurring exceptional
costs, a £0.46m increase in amortisation of
acquired intangible assets, and an increase
in finance costs. Adjusted basic earnings per
share was 3.9p (FY22: 3.6p) and basic earnings
per share was 0.0p (FY22: 0.9p).
Reconciliation of operating profit to adjusted EBITDA
Operating profit
Depreciation
Amortisation of intangible assets
EBITDA
Exceptional items
Share based payments
Adjusted EBITDA
2023
£’000
2022
£’000
378
625
1,739
2,742
408
178
725
654
1,243
2,622
–
195
3,328
2,817
13
SysGroup plc Annual report and accounts 2023 The table below shows the reconciliation of profit before taxation to adjusted profit before tax.
Adjusted profit before tax
(Loss)/profit before taxation
Amortisation of intangible assets
Exceptional items
Share based payments
Total
2023
£’000
2022
£’000
(105)
1,739
408
178
598
1,243
–
195
2,220
2,036
Taxation
Cashflow and net debt
The Group has a tax credit of £0.10m this year
(FY22: £0.15m charge) which principally arises
from the deferred tax credit movement in the
period. The corporation tax current charge
has increased to £0.37m (FY22: £0.03m) as
a result of the larger size of the group and
the lower value of R&D tax credits claimed
this year. The deferred tax movement is a
£0.47m credit (FY22: £0.12m charge) due
to the increase in amortisation of acquired
intangibles recognised in the Consolidated
Statement of Comprehensive Income.
The Group’s tax charge is expected to increase
in FY24 due to the increase in the rate of
corporation tax from 19% to 25% on 1 April 2023.
Net debt
Cash balances
Bank loans – current
Bank loans – non-current
Net (debt)/cash before lease liabilities
Lease liabilities – equipment
Lease liabilities – property
Net (debt)/cash
Contingent consideration
The Group’s financial position moved from a
net cash position of £2.99m at 31 March 2022
to a net debt position of £1.32m at 31 March
2023, excluding the £2.68m of contingent
consideration. The gross cash balance at 31
March 2023 was £4.19m (FY22: £4.13m) and cash
conversion remained strong at 103% (FY22: 88%).
We consider net (debt)/cash to be a KPI of the
business since the level of cash availability and
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.
The structural shift in the Group’s net (debt)/
cash position has arisen from the £1.0m
acquisition of Orchard, which was financed
entirely from the Group’s existing cash balances,
and the Truststream acquisition which was
funded by £0.85m of the Group’s existing cash
resources and £4.5m from funds drawn from the
new £8.0m revolving credit facility. The £2.68m
contingent consideration liability is payable in
two tranches based on the EBITDA performance
of Truststream in the first twelve months and
second twelve month period following acquisition.
2023
£’000
2022
£’000
4,186
–
(4,705)
4,133
(416)
(387)
(519)
3,330
–
(803)
(1,322)
(2,681)
(8)
(331)
2,991
–
Net (debt)/cash including contingent consideration
(4,003)
2,991
14
SysGroup plc Annual report and accounts 2023 Cashflow from operations was £3.02m (FY22:
£2.47m) and cash conversion was strong at 103%
(FY22: 88%) which compares to the target cash
conversion range of 80-90%. Working capital
continues to be managed well with debtor days
below the target level of 25 days at year end and
suppliers routinely paid in our monthly payment
runs to agreed terms. All exceptional costs were
paid in cash during the year.
The Consolidated Statement of Cashflows
reflects the Acquisitions, including the amounts
paid to acquire the companies and the bank loan
drawdown used to part fund them. The Company
made a repayment of £0.6m on loans during the
year. The cash outflow for property, plant and
equipment of £0.25m (FY22: £0.62m) includes
the expenditure on the Edinburgh office fit-
out and the payments to acquire intangible
assets includes the capitalisation of software
development costs for a new financial system
that was implemented in April this year.
Cash conversion
Cashflow from operations
Adjustments:
Acquisition, integration and restructuring cashflows
Cash generated from operations
Adjusted EBITDA
Cash conversion
2023
£’000
2022
£’000
3,020
2,468
408
–
3,428
2,468
3,328
103%
2,817
88%
New £8.0m revolving
credit facility
Consolidated statement
of financial position
In April 2022, the Company re-financed its
existing term loan facility of £1.75m and its
undrawn acquisition revolving credit facility
(“RCF”) of £3.25m and replaced both with a new
£8.0m RCF provided by Santander to provide
additional financial flexibility for acquisitions
and working capital requirements. The Group
drew down £4.5m of RCF funds to finance the
acquisition of Truststream.
The new banking facility has a five year term which
expires in April 2027 and carries an interest rate
of base rate +3.25% on drawn funds and 1.3% on
undrawn funds. The bank covenants in the RCF
are tested quarterly and calculated on total net
debt to Adjusted EBITDA leverage and minimum
liquidity. All bank covenants were met during the
year with a comfortable level of headroom.
The Group’s total net assets of £39.1m at
31 March 2023 represent an increase of £11.5m
compared to the prior year (FY22: £27.6m).
Non-current assets of £29.9m (FY22: £21.4m)
have increased by £8.5m principally as a result
of the additions to goodwill and acquired
intangible assets from the Truststream
and Orchard acquisitions. Property, Plant and
Equipment of £2.0m has increased by £0.5m
compared to the prior year which is mainly
from new and renewed property leases that
are recognised as “right of use” assets.
Working capital was managed well throughout
the year. The gross trade debtor balance of
£1.71m compares to £1.15m in the previous year
despite the increase in size of the Group. The
prepayment balance of £3.3m (FY22: £0.9m) and
the contract liabilities balance (aka. “deferred
income”) of £4.0m (FY22; £1.5m), have both
increased significantly. This is due to the working
capital model of the Truststream business where
customers are typically invoiced annually in
advance and costs from suppliers are typically
received annually in advance. Accordingly, the
respective income and costs are deferred on
the balance sheet and recognised over the period
of the contracts.
15
SysGroup plc Annual report and accounts 2023 Share option grants
KPIs
In June 2022, the Remuneration Committee
granted 284,010 performance shares to Adam
Binks, Chief Executive Officer, and 170,406
performance shares to Martin Audcent,
Chief Financial Officer, in relation the Group’s
performance in FY22 and under the terms of
the 2020 SysGroup Long Term Incentive Plan.
Following the year end date, the Remuneration
Committee granted 362,709 performance
shares to Adam Binks and 204,024 performance
shares to Martin Audcent, in relation the Group’s
performance in FY23 and under the terms of
the same Plan.
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.
Martin Audcent
Chief Financial Officer
23 June 2023
Revenue
Recurring revenue as a % of total revenue
Gross margin
Gross margin %
Adjusted EBITDA1
Adjusted PBT2
Statutory (loss)/profit before tax
Net (debt)/cash4
2023
2022
Change %
£21.65m
£14.75m
81%
87%
£11.10m
£8.92m
51%
60%
£3.33m
£2.82m
£2.22m
£2.04m
£(0.10)m
£0.60m
£(1.32)m
£2.99m
47%
(6%)
24%
(9%)
18%
9%
–
–
SysGroup plc Annual report and accounts 2023
16
16
SysGroup plc Annual report and accounts 2023 Strategic report
Principal risks and 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
and Compliance who operates as a member
of the Senior Leadership Team and reports
to the Executive Directors. The Head of Legal,
Risk and 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 pandemic has
on the business environment
and wider economy
Likelihood: medium
In 2020, the COVID-19 pandemic
created an unprecedented period
of social and political challenges that led
to serious disruption to all businesses
and the worldwide economy.
As we have progressed a further
period of twelve months beyond
the government lockdowns, we now
consider it appropriate to reduce
the risk likelihood from high to medium.
In the event of government
restrictions being imposed from a
pandemic, we are confident that the
Group has a successful plan to “work
from home” which has already been
proved during the COVID-19 lockdown
period when the Group continued
to operate with minimal impact on
operations and without the need to
furlough any employees or take any
government loan assistance.
However, it is likely that the Group
would experience a negative impact
from a wider economic slowdown
and from customers postponing
or cancelling orders, and from
downsizing renewals to structurally
reduce their costs.
The Group successfully invoked
its Business Continuity Plan during
the COVID-19 period 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 can 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.
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.
17
SysGroup plc Annual report and accounts 2023 Principal risk
Potential impact
How we mitigate the risk
Impact on the business from
a cyber-attack that prevents
business operations
Likelihood: medium
Political and economic developments
Likelihood: medium
Dependency on key suppliers
Likelihood: low
Over-reliance on high value
customer contracts or high
value industry sectors
Likelihood: medium
The instance of cyber attacks on
companies is becoming more prevalent
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 and 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 and password security.
This business risk and uncertainty
is included in the Group’s Business
Continuity Plan.
The high level of inflation and energy
prices in the UK economy has
continued throughout FY23 and
as we have entered FY24, and the
continuation of the Russian invasion
of Ukraine has had an impact on
some supply chain timelines.
The impact of high inflation and energy
prices is to increase supplier costs
to the Group and particularly from
datacentre suppliers.
We have increased the likelihood
of this risk from low to medium given
the prolonged period of price inflation
in the UK economy.
SysGroup has the ability through
its standard contract terms to pass
on datacentre energy price changes
to our customers which assists in
mitigating the higher costs.
SysGroup are not dependent on
single suppliers for IT equipment
orders and alternative suppliers
are used when required. In the event
of a sector wide supply shortage,
SysGroup communicate the lead
times to customers to enable them
to program them into their own
strategic plans and/or recommend
alternative IT solutions.
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.
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 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.
The Board monitors customer
concentration throughout the
year with a target of customer
concentration below 5%. This target
was exceeded this financial year
with the top customer comprising
6.5% of revenue.
The Group’s customer base is
diversified across multiple industry
sectors which mitigates the impact
of a sector specific industry downturn.
18
SysGroup plc Annual report and accounts 2023 Principal risk
Potential impact
How we mitigate the risk
Attracting and retaining
high quality employees
Likelihood: medium
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, or if we’re unable
to attract talent, 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 recruitment market was difficult
in FY23 as businesses had to contend
with a candidate led market and
inflationary wage pressures.
The Group rewards our employees
with annual pay reviews and pay
awards for development and
promotions. We invest 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. We have seen an
improvement in the recruitment
market in 2023.
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
overvalued 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.
During the year, SysGroup acquired
Truststream Security Solutions Limited
and Independent Network Service
Limited (owners of Orchard Computers
Limited) which were acquired at
valuations within the target range
of the Board.
19
SysGroup plc Annual report and accounts 2023 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 the Group’s main
stakeholders to be 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 decision-making.
Both the Board and Senior Leadership Team
have direct communication with stakeholders
and our internal reporting framework ensures
the Board are appraised of stakeholder interests.
The Directors make key business decisions as
part of the day-to-day leadership of the business
and strategic level decisions are discussed
and approved at Board level. Examples of key
decisions taken in FY23 are:
• The acquisitions of Truststream and Orchard IT
• New office premises in Edinburgh
• Investment in new financial system
• Project Simplify programme
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.
20
SysGroup plc Annual report and accounts 2023 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 on
pages 41 to 46.
Political donations
No donations were made for political purposes
(FY22: £nil).
Having regard to the
interests of the employees
The Group’s employees are key to 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 has a wide provision of
employee benefits that is regularly monitored
against the market and enhanced each year.
All employees are encouraged to speak openly
with line managers and colleagues, and Senior
Leadership Team meetings are held at least
once a week to ensure the teams are working
with co-ordination and focus in the right areas.
We undertake employee surveys to gauge
opinions on working for SysGroup and the results
from these surveys feed into the decision making
of the Directors and Senior Leadership team to
find new ways to improve working life.
Delight your customer
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.
Having regard to the
consequences of strategic
and long-term decisions
The Directors hold regular Board meetings which
are 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, ESG strategy, 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.
SysGroup plc Annual report and accounts 2023
21
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 pay suppliers on monthly
payment runs.
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 the 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. Our CEO, CFO,
Chief Sales Officer and Senior Leadership Team
regularly meet 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.
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
Governance 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
Santander, our bank operator and lender,
are a key partner to the continued success of
SysGroup. The Directors maintain regular contact
with our Relationship Directors at the bank by
having regular meetings where updates on the
business are provided and updates on financial
performance are provided. The Board keep
the capital and funding structure of the Group
under consideration as the Group continues its
scale up strategy. In April 2022, the strength
of this relationship was demonstrated when
we signed a new £8m Revolving Credit Facility
with Santander which was part utilised in the
acquisition of Truststream.
Having regard to the
business impact on the
community and environment
Last year we took the step to launch
an Environmental, Social and Governance
(“ESG”) project with objectives to embed
and enhance ESG in the business, to
improve our environmental impact and to
make disclosures on our carbon footprint.
A summary ESG report is provided in the
Corporate Governance section of the annual
report and the full ESG report for FY23 will soon
be available to view on our website. SysGroup
is generally a low waste business and our
offices recycle to the fullest extent they can.
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. 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 changes and latest prospects.
22
SysGroup plc Annual report and accounts 2023 Strategic report
Environmental, social
and governance report
SysGroup
SysGroup is not subject to the mandatory ESG regulatory reporting requirements
since we do not meet the size thresholds. However, as a Board we took the decision
last year to commit to reducing our environmental impact and contributing to local
communities where we can.
We launched an ESG Project, beginning to
understand the environmental and social
impact of our operations, disclosing our
carbon emissions and reporting on the social
and governance activities that we undertook
for the first time.
Operating as a good citizen is embedded
within the purpose, culture and core values of
SysGroup and we aim to always act responsibly,
with consideration for the environment and the
local communities where we operate.
We have worked alongside a specialist ESG
consultancy to assist with the development
of our ESG strategy and this relationship
continues as we enter our third year. To ensure
our strategy was developed with best practice
guidance, we have followed the ESG disclosures
and reporting frameworks outlined as follows:
• Streamlined Energy and Carbon Reporting
(SECR) to calculate and voluntarily report on
our energy usage, associated emissions and
energy performance. We will use this framework
to inform our decisions associated with energy
consumption and carbon emissions.
• Task Force on Climate-Related Financial
Disclosures (TCFD) to assess our risks and
opportunities associated with climate change.
Last year we published our first TCFD Report.
This helped us to monitor the risks to our
business and to prepare for emerging
regulation. This financial year, we will publish
our second annual TCFD report.
• Global Reporting Initiative (GRI) to prepare
our first ESG Report, which outlines the
development of the Group’s ESG Project
and the next steps to our stakeholders.
The GRI is an in-depth ESG reporting
framework that enables organisations
to report on their environmental, social,
economic and governance performance.
23
SysGroup plc Annual report and accounts 2023
ESG - Social
We at SysGroup are committed to acting responsibly and positively
impacting our employees and the communities in which we operate.
Employee engagement
We understand that a motivated and engaged
workforce is crucial to our success. To foster this,
we encourage our team leaders to hold regular
face-to-face meetings with their team members
to discuss any work or personal concerns raised
by employees.
Employee welfare
We take the wellbeing and health of our
employees very seriously. Our People and
Culture (P&C) team continue to keep in close
contact with our teams and our employees
are able to access wellbeing and occupational
health support service when required.
Annually we hold an employee survey to hear
the views of our team members and gather
feedback and suggestions to improve our
business. Following an 85% participation rate
in FY23, “You Said, We Did” sessions were held
to highlight improvements which have been made
across the business. As a result, we introduced
a newsletter and an improved intranet. We also
introduced focus groups across the business
to further identify and introduce improvements,
as well as improving team collaboration.
In January 2023, our Culture Advocates
conducted informal temperature checks, by
engaging with team members to understand
what our employees would like to see introduced.
Every Friday we issue a Companywide “shout-out”
that appreciates the hard work of employees
across our teams in the form of e-cards. These
employees are selected by their colleagues,
who are encouraged to submit their nominations
each week. Employees can access their social
wall to view their gift-card and send eCards to
other colleagues, such as thank you cards, as a
display of appreciation. We plan to launch a new
recognition intranet in FY24.
During the year, we successfully launched a new
Company Newsletter which is circulated Quarterly
and distributed electronically. The newsletter
is a fun and inclusive way to showcase monthly
events, provide business updates and highlight
employee recognition to all colleagues.
We believe it’s important that our people have
energising office spaces to work in which fits
with our overall culture value of love what you
do. As such, we are committed to creating
energising working environments with current
technology for all of our employees. During the
year we sourced new office premises for our
Edinburgh team and arranged a fit out to
provide a vibrant and collaborative workspace,
which encourage creativity, collaboration, and
social interaction. We are confident that our
offices are conducive to employee growth
and success within the Company.
The P&C Team work to encourage social
interaction across the business, hosting a range
of activities and events such as quizzes, photo
competitions, bake competitions, exercise clubs
and book clubs. Our P&C team remains committed
to promoting a healthy and enjoyable work
environment for our employees.
Employee benefits
We are pleased to offer a wide range of
benefits to our employees. We offer private
medical insurance cover for all employees,
bringing peace of mind to our people in the
unfortunate event of illness or accident. This
insurance policy also includes up to six sessions
of free mental health counselling, prioritising
both the mental and physical health of our
employees. Additionally, all employees receive
Medicash coverage, which reimburses smaller
medical and dental expenses.
Through our Company intranet platform, our
team members can access discounts of retail
and experience discounts for a variety of
establishments, including gym memberships.
We introduced a cycle to work scheme in
May which had been requested by a number
of our team members.
Other SysGroup employee benefits include life
assurance, financial advice, free quarterly prize
draws, annual events to support team health
and wellbeing and an additional half-day of annual
leave on their birthday.
To help our people spread the positivity that
we implement into our working environment,
we also have a Candidate Referral Bonus Policy.
The purpose of this scheme is to incentivise our
team members to refer people they know directly
to the Company as candidates for positions.
24
SysGroup plc Annual report and accounts 2023 Diversity, equality and inclusion
SysGroup believe that a diverse team is the
foundation of a successful business, a happy
and productive culture and empowered
employees. We are committed to building a more
diverse workforce and in order to do so, it is our
policy to hire based on merit and talent. We are
in the process of developing a Diversity Policy,
which will outline our commitment to increasing
our employee diversity including by gender, race,
ethnicity and ability.
Gender diversity
While we are committed to increasing our
diversity as a whole, we have initially focused
our efforts on addressing gender diversity.
The tech industry has a particularly low
representation of women, as it stands just
26% of the tech workforce are female.
We aim to take steps to improve this
representation and are currently exploring
how we can identify and encourage female
candidates throughout the recruitment
process moving forward.
We have previously advertised job
opportunities specifically on online female
careers communities to encourage more
women to join SysGroup and enter the
technology sector. We have recently engaged
with a number of external organisations
to support us in understanding potential
future opportunities.
We are proud advocates for an increase
in female representation in the industry
and have sponsored events which aim to
celebrate excellence in women, from personal
achievements to outstanding contribution
in business.
Equal opportunities
We are committed to promoting equality
of opportunity and fostering a safe working
environment for all employees. SysGroup
operate an Equal Opportunities Policy which
outlines our commitment to not unjustifiably
discriminate against our Staff or Applicants
based on their sex, marital or civil partner status,
gender reassignment, sexual orientation, race,
colour, nationality, ethnic or national origin,
religion or belief, pregnancy or maternity,
disability or age.
Learning and development
We are a strong believer that the business
provides the best customer service from a
team that is motivated, trained well and curious
to learn more. We encourage an environment
of constant improvement and upskilling by
providing our employees with a variety of
learning and development opportunities.
Our people receive a range of training, from
general onboarding to specific development
training. During onboarding, all employees are
trained on Health & Safety, information and
security, General Data Protection Regulation
(GDPR), and an assortment of online safety
modules (such as social media and phishing).
Role specific training such as Cisco Certified
Network Associate (“CCNA”) and Microsoft
training was held for employees where
appropriate. We also aim to hold customer
service training for our Service Desk members.
At SysGroup, we are committed to promoting
the professional development of our workforce
in their chosen careers within our Company.
We operate a Professional Qualification Study
Support Policy which sets out the support
that will be offered and the expectations of
the employee undertaking the qualification.
We financially support many professional
qualifications for our employees, for example,
the CIMA for our Finance team, CIPD for our
People team and continuous role specific
accreditations for our IT teams.
In FY23 we implemented a Learning
Management System using Skillsoft
(Percipeo), which provides appropriate
learning opportunities for all team members,
including technical and other business needs.
We are in the process of expanding our
leadership development programmes
by introducing apprentices and graduate
programmes. We aim to engage with mentors
from within the business to provide support
and guidance, where necessary.
To enhance our learning and development
programme we have continued our ‘lunch and
learn scheme’, where guest speakers provide
presentations on various topics to our teams,
bringing everyone together in an educational
space monthly. Topics covered include
compliance policies and technology as well as
informative sessions hosted by the charity Mind.
25
SysGroup plc Annual report and accounts 2023 Health & Safety (H&S)
We consider the health and safety of our
employees and visitors to be of paramount
importance. We use the services of a third-
party Company that provides H&S Advice.
To enhance our governance and oversight of
H&S in SysGroup, we have a Health and Safety
Committee which meets on a quarterly basis.
The chairperson is the Head of People and
Culture, and fellow members are the CFO, Head
of Legal, Risk and Compliance, Senior People
and Culture Advisor and Executive Assistant.
The remit of the Committee covers employee
H&S training, fire wardens and training, first aid
kits and training, electrical appliance testing,
evacuation procedures, working at height policy,
personal protective equipment, review and
actioning of H&S office visit reports, maintain
and promote the H&S Policy.
Due to the nature of our operations, very
few H&S incidents occur. These tend to be
associated with minor injuries. Any incident is
recorded in an accident log, and any necessary
health and safety changes are implemented.
Charitable and local communities
We aim to have a positive impact on the
local communities in which we operate.
SysGroup’s chosen charity to support is
Mind,a mental health charity which provides
advice and support to empower anyone
experiencing a mental health problem.
In FY23, SysGroup encouraged colleagues
to participate in fundraising events such as
Christmas jumper days and Company fancy
dress events, in return for making a donation
to charity. In October 2022 we raised over
£900 for Mind, by hosting a “Freaky Friday
Fundraising” event, where colleagues carved
pumpkins and wore fancy dresses.
An information session was held to inform
SysGroup colleagues of the work Mind does
and how they could support in this work.
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. We partner with organisations to
donate unused and refurbished laptops to
underprivileged children in our local areas.
Where possible, we try to “buy local” to ensure
we support the surrounding economies of our
office locations, partnering with local suppliers
where possible. We donate old furniture
and equipment to not-for-profit organisations,
providing them with good condition second hand
office equipment and saving them a significant
cost of purchase.
Our kitchens have been fitted with food bank
boxes that allow our staff to donate. Our team
have also made donations to refugee causes,
such as in the recent events in Ukraine.
SysGroup has also worked the Grace Eyre
Foundation (Grace Eyre), which supports people
with learning disabilities and mental health needs
in Brighton, Hove and across Sussex. Grace Eyre
helps people to develop their independence,
obtain housing, find employment and learn new
skills. SysGroup provides technical consultancy,
strategic advice and IT problem resolution to
support Grace Eyre with its lack of in-house IT
expertise. We further support local communities,
by sponsoring a local football team in Bristol.
SysGroup plc Annual report and accounts 2023
26
26
SysGroup plc Annual report and accounts 2023 ESG - Environmental
Operating responsibly is embedded throughout our culture and developing
ESG strategy. We are at the start of our journey, improving our understanding
of our carbon emissions and impact on the environment. We aim to improve
our data collection processes and introduce initiatives to support our efforts
of become a more sustainable business.
Reducing waste
Due to the nature of our operations, SysGroup
is a low waste business. Despite this we are
committed to minimising waste and reducing
our environmental impact. Our offices are
fitted with recycle bins and employees are
encouraged to recycle to the fullest extent
they can. Our products and services require
minimal packaging which lessens our impact.
We are committed to taking a sustainable
approach to disposal when required,
separating waste materials for recycling.
At SysGroup we recycle as much of our old
IT equipment as possible using CPR Computer
Equipment Recycling (CPR). This partnership
ensures that our equipment is wiped to comply
with GDPR, before being restored and recycled,
with profits from retail sales being donated to
UK charities.
When disposing of old office equipment, we
allow our employees to make small donations
in exchange for reusable items. We have also
partnered with Collecteco to donate old furniture,
equipment, and materials to local charities and
non-profit organisations, supporting a circular
economy. Through this initiative, and to date, we
have donated 342 items, diverting 11,622kg of
waste from landfill and avoiding 11,815kg CO2e
emissions. We will continue to consider the
environment when making business decisions
and operate more sustainably where we can
at SysGroup.
Water
We do not operate in a high-water intensive
sector. Therefore, our water consumption
across the Group is for employee use only and
kept to a minimum. Our environmental impact in
relation to water usage is therefore very small.
Materials
We aim to minimise our impact on the
environment. When sourcing materials and
equipment we aim to partner with companies
who are committed to operating responsibly.
We have used furniture sourced ethnically
from sustainable sources and manufactured
from recycled materials in office fit-outs.
Greenhouse gas emissions (‘GHG’)
Reducing our carbon emissions is important
to becoming a more sustainable business.
We improved our understanding and collection
of our greenhouse gas emissions, by developing
our carbon balance sheet (Scope 1, 2 and 3
emissions) for the second time this year.
• Scope 1 emissions are direct GHG emissions
that occur from sources that we control or own,
i.e., gas usage and transport fuel. SysGroup do
not produce any direct emissions from sources
that we own or control.
• Scope 2 emissions are indirect GHG emissions
associated with our purchase of electricity,
steam, heating or cooling. Our offices and
datacentre racks consume electricity, which
comprise 15% of our total Group emissions.
• Scope 3 emissions are the indirect GHG
emissions within our value chain, which
represents 84% of our total Group emissions.
In FY23 we enhanced our data collection
processes to improve the accuracy of our
Scope 3 data, including launching by engaging
with members of the business to gather more
detailed information on Category 7: Employee
Commuting. We have also utilised improved
internal systems to collect more granular data
surrounding Category 6: Business Travel.
During the year we also conducted an initial
assessment of our top 10 suppliers, to better
understand their ESG credentials and strategy.
Over time we aim to develop this process further
to understand how we can utilise the progress
of our suppliers to improve the accuracy of our
data collection and engage with suppliers on
our ambition to reduce our carbon emissions.
27
SysGroup plc Annual report and accounts 2023 Table 1: A table showing SysGroup’s total Scope 1, 2 and 3 carbon emissions.
Emissions scope
Scope 1
Scope 2
Scope 3
Total
FY23 gross
emissions
FY23 percentage
of total emissions
FY22 gross
emissions
FY22 percentage
of total emissions
29
277
1,545
1,851
1%
15%
84%
100%
–
356
1,486
1,842
–
19%
81%
100%
Datacentres
The electricity consumed at the data centres
that we use for cloud hosting is responsible
for a high proportion of our Scope 2 emissions,
accounting for 254 tCO2e, compared to 349
tCO2e in FY22. We recognise the high energy
nature of data centres. Although, we have a
limited ability to impact this, many of our data
centre suppliers have communicated their
own ambitions to be net zero, along with a
commitment to utilise renewable energy
where possible across their sites. We aim
to engage with our data centres over time
to further understand their energy usage
and efforts to operate sustainably.
SysGroup plc Annual report and accounts 2023
28
28
SysGroup plc Annual report and accounts 2023 Streamlined energy and carbon reporting (SECR)
To further enhance our reporting and understand our impact, we have
voluntarily reported on all measured emissions sources required under
the government policy SECR.
SECR requires companies to report on their
energy usage (kWh) and its associated emissions
(tCO2e). For SysGroup, this specifically includes
separating our energy usage into Scope 2
supplied electricity and Scope 3 transportation
emissions. This reporting helps us and our
stakeholders to understand the energy
performance of the Group. We have reported our
intensity metric of tCO2e per £m turnover to track
our progress over time as our business grows.
Table 2: Total consumption (kWh) figures for energy supplies reportable by the Group.
Utility and scope
FY23 consumption (kWh)
FY22 consumption (kWh)
Gaseous and other fuels (Scope 1)
Transportation (Scope 1)
Grid-supplied electricity (Scope 2)
Transportation (Scope 3)
Total energy use – all scopes
85,136
57,803
1,430,125
50,084
1,623,148
–
–
1,676,193
101,523
1,777,716
Table 3: Total consumption (tCO2e) reportable by the Group.
Utility and scope
FY23 consumption (tCO2e)
FY22 consumption (tCO2e)
Gaseous and other fuels (Scope 1)
Transportation (Scope 1)
Grid-supplied electricity (Scope 2)
Transportation (Scope 3)
Total emissions – all scopes
15.54
13.13
276.56
11.55
316.78
–
–
355.91
23.54
379.45
Table 4: An intensity metric of tCO2e per £m revenue has been applied for the annual total consumption.
Intensity metric
tCO2e / £m
FY23 UK intensity metric
FY22 UK intensity metric
14.63
25.73
Energy efficiency
Our primary objective has been to understand
and calculate our impact, by implementing a
thorough data collection process to report
against SECR and TCFD. Understanding our
energy usage and carbon footprint enables
us to identify areas of high impact throughout
our operations. Our new offices are fitted with
LED lighting, reducing our energy consumption.
Over time, we aim to investigate the feasibility of
introducing energy efficiency measures across
our business and report on our progress annually.
SECR methodology
Scope 1, 2 and 3 consumption and CO2e
emissions data has been calculated, in line
with the 2019 UK Government environmental
reporting guidance. The following Emission Factor
Databases [2022] version 1 has been used,
utilising the current published kWh gross calorific
value (CV) and kgCO2e emissions factors relevant
for reporting year 01/04/2022 – 31/03/2023:
Intensity metrics have been calculated
using total tCO2e figures and the selected
performance indicator agreed with SysGroup
Plc for the relevant report period total turnover
£21.65m, which was £14.75m in FY22.
29
SysGroup plc Annual report and accounts 2023 Taskforce on climate-related financial disclosures (TCFD) report
TCFD framework
SysGroup is an AIM listed Company with under
500 employees and £500m turnover and as
such we are not required to comply with UK TCFD
disclosure and regulation. However, we recognise
that understanding climate change and its impact
will support us on our wider ESG journey. We are
pleased to voluntarily report on our progress of
embedding the recommendations of the TCFD
into our existing processes.
Governance
The SysGroup Board has overall responsibility
for the Group’s climate-related risks and
opportunities and ensuring that SysGroup builds
a business strategy that is as resilient as possible
to climate change. In order to equip the Board
with the skills and knowledge required to embed
climate change into future business decisions
we held an ESG training session in FY23 covering
climate change, carbon emissions and net zero.
We have used the TCFD framework as a guide,
to help understand climate change and its
associated risks and opportunities. By following
each of the eleven TCFD recommendations,
we have integrated climate change into our
Corporate Risk Management framework, which
is reviewed by the Board annually. Whilst we
are still at the beginning of this process, we are
pleased with our progress and intend to enhance
our TCFD reporting process over time as we
expand and develop our climate strategy.
Overview
We understand that climate-related impacts
may affect the success of our business in
the future. This year, we have increased our
understanding of the climate-related risks and
opportunities associated with our business over
the short (up to 2025), medium (2025-2035)
and long-term (2035-2050) time periods.
We have concluded that due to the nature of
our business and the location of our sites across
the UK, climate change poses a low risk to our
operations and business strategy. Nonetheless,
we are committed to mitigating the risks of
climate change and reducing our impact on
the environment. This year we have prioritised
the following:
Sheet (Scope 1, 2 and 3 emissions)
• Calculating our FY23 Carbon Balance
• Widening climate scenario analysis
• Establishing an ambition to be net zero
to newly acquired sites
for Scope 1 & 2 by 2030 and for Scope 3
by 2040
The ESG Committee is responsible for
assessing the Group’s climate-related risks
and opportunities and implementing controls
to minimise their impact. The ESG Committee
meets on a quarterly basis and will provide
an update to the Board annually.
The Head of Legal, Risk and Compliance maintains
a climate risk register which forms part of our
overall Corporate Risk Register. This is maintained
throughout the year and is subject to a scheduled
update and review each year with a formal
report to the Board. The Chief Financial Officer
presented the outcomes of the Climate Risk
Management Workshop to members of the Board,
which signed off on the classification of each risk.
Strategy
The Group’s clear strategy and purpose is to
become the leading provider of managed IT
services to businesses in the UK. Using the TCFD
recommendations, we ensure that our long-term
business strategy remains robust and resilient
to future changes in the climate.
We have conducted a detailed climate scenario
analysis across all sites, expanding our climate
scenario analysis, to include newly acquired
sites in FY23.
Climate scenarios are referenced models of
the future climate, based on global emission levels,
and are used to identify potential climate-related
risks and opportunities. The scenario modelling
considered transition risks, those associated with
the transition to a decarbonised global economy,
at Group level, while each site was analysed
against specific climate-related indicators, to
reveal the inherent climate-related physical risks
for the Group.
SysGroup plc Annual report and accounts 2023
30
We used a combination of the Intergovernmental
Panel on Climate Change’s (IPCC) Representative
Concentration Pathway (RCPs), the International
Energy Agency’s World Energy Model and
other established models to develop our three
scenarios, which are outlined below.
Results
The results of the climate scenario analysis
were presented at our annual Climate Risk
Management workshop. This session was used
to inform the categorisation of impact of each
potential climate-related risk across the Group.
• Below 2°C: Governments and companies align
with the Paris Agreement target of pursuing
efforts to limit warming to 1.5°C by 2100 and
achieve the UK Government’s 2050 net-zero
target. It is anticipated that Governments
will introduce policies in a timely and
coordinated fashion to reduce carbon
emissions. This scenario is associated with
high transition risks in the short term but
minimal physical risks due to prompt action.
• Between 2-3°C: This pathway predicts a
staggered response to climate change
from governments, introducing policies in
an uncoordinated manner to reduce global
emissions. The business continues as usual
in the short term, but the delayed action
results in the highest levels of transitional risks
within the medium term. It is associated with
increased severity of physical risks in the long
term, compared to the Below 2°C scenario.
• Above 3°C: In this scenario, limited action
is taken in the short or medium term. Fossil
fuels remain the dominant global energy
source, leading to rising emissions until
2040. The inevitable rise in temperatures
and subsequent physical risks will eventually
pressure governments to act, leading to
policies being introduced in an uncoordinated
method in the long term. This scenario contains
the highest levels of physical risk, due to
several tipping points being surpassed.
The TCFD recommends using a range of
scenarios and timelines, to fully evaluate the
impact of climate change. The climate scenarios
were modelled across three-time horizons:
• Short-term (up to 2025)
• Medium-term (2025-2035)
• Long-term (2035-2050)
In FY23, we identified 12 climate-related risks and
one opportunity. We defined a risk to be significant
if it had the potential to cause at least a small
disruption to our operations. Out of the 12 risks
identified, three were deemed to be significant
to SysGroup.
Significant risks
(Short – Medium Term)
• Increased cost of energy and materials
• Increase in carbon pricing (Medium Term)
• Increased frequency and severity
of flooding (Long Term)
Opportunity
• Transitioning to lower emissions
technologies (Short – Medium Term)
Our most significant climate-related risk is
the increased cost of energy and materials.
We have already experienced an increase in
energy prices and costs associated with some
finished products. As a result of climate change
and the increasing legislation, it is likely that
energy prices will increase further in the short-
medium term, under the below 2°C scenario
and the 2-3°C scenarios. We will monitor this
risk closely and review the impact, as we explore
more energy efficiency technology, supply chain
management, and initiatives to reduce our energy
usage. To enhance this journey, we have engaged
with a third-party consultancy Company.
SysGroup is not currently impacted by carbon
pricing. However, we recognise that this may
change over time if the government increase
regulation in this area. The impact of this risk
would be highest for SysGroup within the
2-3°C scenario, particularly in the medium-term,
when carbon pricing is expected to peak.
SysGroup may experience physical risk, for
example, increased flooding, within the above
3°C scenario in the long-term. While these risks
do not impact the Company in the near term, we
will continue to monitor the physical risks at all
our offices and third-party datacentre locations.
Further information on our climate-related risks
is available on our website: sysgroup.com.
31
SysGroup plc Annual report and accounts 2023 Risk management
SysGroup aims to decisively evaluate and
manage climate-related risks and opportunities
to deliver on its business strategy and deliver
long-term sustainable success. We have
integrated the recommendations from the
TCFD into our existing risk management
processes to support the development of an
internal climate risk management framework.
As a first step of our climate risk management
framework, we use climate scenario analysis
to identify the potential climate-related risks
and opportunities impacting the Group. We hold
an annual Climate Risk Management Workshop
with members of the ESG Committee to assess
the potential impact of each climate-related risk
over the short, medium and long-term. Each risk
was classified using existing risk management
processes. The workshop was held to further
understand climate change and identify its
broader scope of associated risks. After the
workshop, a climate risk register was created
and certified to assess and accurately report
all climate-related risks.
Following this, mitigation processes were
evaluated based on their ability to reduce
the impacts of climate change. From this step,
controls were developed and agreed upon
based on the effectiveness in building climate
resilience into our existing strategy and planning.
These classifications were signed off by the
Chief Financial Officer, members of the Audit
Committee and members of the Board.
We aim to reduce our carbon emissions over
time and further develop our ESG programme,
contributing to the mitigation of the impacts of
climate-related risks on our business. We also
plan to introduce an action plan to assess the
impact and capitalise on the climate-related
opportunity, transitioning to lower emissions
technology. We will continue to conduct climate
scenario analysis annually, to broaden our
scope of risk classification.
Metrics and targets
In FY22 we launched a data collection process
to calculate our Scope 1, 2 and 3 emissions
and help us to understand our impact on the
environment for the first time. We have continued
this process during FY23 to enable year-on-year
monitoring of our carbon emission.
Due to the complexity of this task, our Company
size and nature, we enlisted the support of
specialists, to assist us with this process.
Calculating our carbon footprint enables us
to understand the material emissions sources
across our business and value chain, and identify
areas where we can make the most significant
impact on emission reductions.
We followed the Greenhouse Gas Protocol (GHG)
Corporate Value Chain (Scope 3) Accounting
and Reporting Standard to calculate our Scope
3 emissions. Under the GHG Protocol, Scope 3
reporting has 15 reporting categories, 8 of which
apply to SysGroup.
In FY23, our efforts have focused on data
collection improvements, widening the scope
to capture categories we were unable to
calculate last due to data availability. We aim to
continuously broaden and strengthen our data.
Now we have set our baseline, we aim to develop
a net-zero strategy and set targets to reduce our
emissions over time. As part of this process, we
will introduce initiatives throughout the Group
to help mitigate the impact of our climate-related
risks. We will report on our progress annually.
Having established our baseline our next step
is to develop a net zero strategy roadmap over
time and set targets aligning to our ambition to be
net zero by 2040. As part of this process, we will
introduce initiatives throughout the Group to help
mitigate the impact of our climate-related risks.
We will report on our progress annually.
Martin Audcent
Chief Financial Officer
23 June 2023
Strategic report
The Strategic Report, which includes all of
the contents of pages 7 to 32, was approved
by the Board signed on its behalf by:
Adam Binks
Chief Executive Officer
23 June 2023
32
SysGroup plc Annual report and accounts 2023
Governance
report
SysGroup plc Annual report and accounts 2023
33
Governance report
Board of directors’ profile
Michael Edelson
Non-Executive Chairman
Michael Fletcher
Non-Executive Director
Michael brings a wealth of experience as a Board
Director to SysGroup plc. He has been a Founding
Director or Chairman of several companies admitted
to the AIM market, including Prestbury Group plc,
Knutsford Group plc, Mercury Recycling Group plc
(now Ironveld plc) and ASOS PLC.
He was a non-executive Chairman of Bramhall plc,
subsequently renamed Magic Moments Internet
plc and then Host Europe plc, which acquired Magic
Moments Design Limited in September 1999. He has
also been on the Board of Manchester United Football
Club since 1982.
Mike has extensive public markets experience
and is the Managing Partner of Arete Capital LLP,
a specialist venture and advisory business and
sits on the Board of several privately owned growth
companies. Previously, Mike was a managing director
for European investment bank GCA Altium where
he gained 10 years’ experience in M&A and corporate
finance. He has advised a range of clients from public
companies, private equity houses and entrepreneurs.
Mike is a chartered accountant, qualifying with PwC
in 1999, and is both FCA and SRA approved.
Adam Binks
Chief Executive Officer
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.
Adam joined SysGroup as Chief Operating Officer in
August 2014 and was formally appointed to the Board
in October 2017. Leveraging Adam’s vast equity capital
markets and M&A experience, he was promoted to
Group CEO in April 2018. He is responsible for setting
and delivering the group’s overall strategy to become
the leading provider of managed IT services to the
UK mid-market.
He has extensive experience in the managed
IT, hosting and telecoms sectors across a 21-
year career. Adam has played a pivotal role in the
transformation of the group from a mass-market
web hosting Company to the award-winning managed
IT services and cloud hosting provider that it has
become. Adam has previously held a number of
Senior Management and 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 and compliance experience with
listed companies and also has extensive acquisitions
and operational experience. Martin is a Chartered
Accountant, having qualified with PwC in 2000, and
joined the Group from NCC Group plc, where for four
years he was Associate Director of Finance and Group
Financial Controller. Prior to this he worked at Baker
Tilly and MBL Group plc in senior finance positions.
34
SysGroup plc Annual report and accounts 2023 Governance report
Directors’ report
The Directors present their annual report and audited
financial statements for the year ended 31 March 2023.
Principal activities
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.
Foreign exchange risk
Following the acquisition of Truststream, the
Group has increased its exposure to foreign
exchange risk since a number of customers are
invoiced in USD and certain suppliers invoice
the Company in USD. The Group manages this
foreign exchange risk partially through the natural
hedging of using USD cash receipts to make USD
cash payments to suppliers, but also uses USD
forward exchange contracts to mitigate the risk. At
31 March 2023, there was $347k of undrawn USD
forex contract outstanding which it is anticipated
will be used before 31 March 2024.
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.
The principal activities of the business are
the provision of Managed IT Services and
Value-added Resale of products and licences.
Business review
and future developments
A review of the Group’s operations and
performance for the twelve months to 31 March
2023, 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.
Results and dividends
The Consolidated Statement of Comprehensive
Income for the year is set out on page 56.
The Directors do not propose the payment
of a dividend for the year ended 31 March 2023
(FY22: 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.
35
SysGroup plc Annual report and accounts 2023 Directors
The Directors of the Company who held office during the year are as follows:
Name
Michael Edelson
Adam Binks
Martin Audcent
Mike Fletcher
Mark Quartermaine
Position Held
Non-Executive Chairman
Chief Executive Officer
Chief Financial Officer
Non-Executive Director
Non-Executive Director
The interests of current Directors in shares and options are detailed in the Directors’ Remuneration
Report on pages 38 to 40.
Significant shareholdings
As of 16 June 2023, 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
Heejae Chae*
Darren Carter
Herald Investment Management Ltd
Praetura Group Limited*
12,999,563
8,093,302
6,800,000
3,552,632
3,444,581
1,710,256
26.61%
16.56%
13.92%
7.27%
7.05%
3.50%
*Heejae Chae will be appointed Executive Chairman of the Board of Directors on 26 June 2023.
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 they ought to have taken as a director
to make themselves aware of any relevant audit
information and to establish that the Company’s
auditors are aware of that information.
Acquisitions
In April 2023, SysGroup plc acquired 100%
of the issued share capital in Truststream
Security Solutions Limited (“Truststream”) and
Independent Network Solutions Limited (“INSL”,
holding Company of Orchard Computers Limited).
SysGroup acquired Truststream for £5.33m
cash consideration (inclusive of cash and debt
acquired) with an earn-out payable following the
first and second anniversaries of the transaction
of up to £3.075m. The earn-out is subject to the
achievement of certain maintainable EBITDA
performance targets in the first and second
12-month periods following the completion of
the acquisition.
36
SysGroup plc Annual report and accounts 2023 The Truststream acquisition was mainly funded
from a new £8.0m revolving credit facility (“RCF”)
which was signed with Santander in April 2023.
SysGroup utilised £4.5m of funds from the RCF
to finance the acquisition. Further information
on the new RCF facility can be found in note 19
to the consolidated financial statements.
At 31 March 2023, the Group had a gross cash
balance of £4.18m and a net debt position of
£1.3m, excluding contingent consideration of
£2.68m. The Group has a £0.5m unused overdraft
facility and £3.2m of undrawn headroom in its
RCF Loan facility which is available for working
capital and acquisitions.
The forecasts, the resultant cashflows,
together with the RCF loan facilities, taking
account of reasonably possible changes in
trading performance, show that the Group can
continue to operate within the current facilities
available to it.
The Directors therefore have a reasonable
expectation that the Group has adequate
resources to continue in operational existence
for the foreseeable future and thus 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
23 June 2023
SysGroup acquired INSL for £1.0m cash
consideration which was funded from the Group’s
existing cash balances. There is no contingent
or deferred consideration for this acquisition.
Further information on the two acquisitions
can be found in note 10 to the consolidated
financial statements.
Going concern
The Directors have prepared the financial
statements on a going concern basis which
assumes that the Group and the Company
will continue to meet liabilities as they fall due.
The Directors have reviewed the Base business
forecast and a Sensitised version for the period
to 30 June 2024 and taken into account the
forecasts that support the business viability
for the period to 31 March 2025.
In the Base forecast there is significant
headroom in the bank covenants as the
business continues to operate with a high
level of cash conversion and a reducing level
of net debt. In the Sensitised forecast, which
includes assumptions for a significant decline
in revenue and profits, the Group maintains
positive gross cash balances, reduce net debt
and stays within the bank covenants. The Group
has a business model with a high degree of
financial resilience since circa 80% of revenue
is derived from contracted managed IT services
which is a continuous and business critical
service supply to customers. This provides
a high level of operating cash generation.
37
SysGroup plc Annual report and accounts 2023 Governance report
Directors’ remuneration report
Remuneration committee
Directors’ LTIP scheme
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. The Company makes pension
contributions for Executive Directors at 5%
of salary.
The Executive Directors have a Long Term
Incentive Plan (“2020 LTIP”) which was
implemented in July 2020 following an
independent review by professional advisors
and after consultation with certain of its larger
institutional shareholders. Under the 2020 LTIP,
the Remuneration Committee sets a minimum
Adjusted EBITDA performance (“Threshold”)
each year. On conclusion of the financial year
the Executive Directors are paid a mixture of a
cash bonus and issued with nil cost performance
shares, which are granted subject to the Group’s
performance against the Threshold and these
vest two years after the date of grant.
The Group 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 vest on
the second anniversary of the initial grant and
are 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.
38
SysGroup plc Annual report and accounts 2023 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.
In June 2022, under the 2020 LTIP Scheme
and in respect of performance for the FY22
financial year, a grant of 179,675 performance
shares was made to Adam Binks, Chief Executive
Officer, and 107,805 performance shares to
Martin Audcent, Chief Financial Officer.
Subsequent to the year end, under the same
Scheme and in respect of performance for
the FY23 financial year, a grant of 362,709
performance shares was made to Adam Binks,
Chief Executive Officer, and 204,024 performance
shares to Martin Audcent, Chief Financial Officer.
Directors’ remuneration
(audited)
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. In FY23, the annual salary
of the Chief Executive Officer was £200,000
and the Chief Financial Officer £150,000.
In April 2023, the Remuneration Committee
reviewed the fees of the Non-Executive Directors
in view of the growth of the business and in their
consideration used available peer group pay
information. The Committee resolved an increase
in Non-Executive Director fees from £40,000
to £44,000 per annum from 1 June 2022.
Director
Salary/Fees
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
Salary/Fees
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
2023
2022
Michael Edelson
Mike Fletcher
Mark Quartermaine
Adam Binks
Martin Audcent
Total
43
43
43
215
160
504
–
–
–
102
56
158
–
–
–
10
8
18
–
–
–
3
2
5
43
43
43
330
226
685
40
40
40
165
130
415
–
–
–
74
44
118
–
–
–
8
6
14
–
–
–
2
1
3
40
40
40
249
181
550
The salaries of Adam Binks and Martin Audcent
include a car allowance of £15,000 and £10,000
respectively in both years. Adam Binks and
Martin Audcent have LTIP share options that
incurred share-based payment charges
of £83,000 (FY22: £83,000) and £49,000
(FY22: £50,000) respectively.
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:
Number of
ordinary shares
Percentage
interest
Director
Michael Edelson*
Adam Binks
Martin Audcent*
Mark Quartermaine
Mike Fletcher*
* The Directors’ interest in shares include directly held shares and interests held via related parties.
858,179
220,134
117,499
76,923
77,193
1.76%
0.45%
0.24%
0.16%
0.16%
39
SysGroup plc Annual report and accounts 2023 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
LTIP scheme
2018 LTIP
2018 LTIP
Vested
Vested
Vested
Options over
ordinary shares
Grant date
Expiry date
750,000
26/06/2018
25/06/2028
250,000
15/07/2019
14/07/2029
2020 LTIP
Unvested
250,000
08/07/2020
07/07/2030
2020 LTIP
Unvested
179,675
21/06/2022
20/06/2032
Martin Audcent
2018 LTIP
2018 LTIP
Vested
Vested
450,000
16/07/2018
15/07/2028
150,000
15/07/2019
14/07/2029
2020 LTIP
Unvested
150,000
08/07/2020
07/07/2030
2020 LTIP
Unvested
107,805
21/06/2022
20/06/2032
On 26 May, the Board also agreed that the
482,235 unvested options granted to Martin
Audcent, the Company’s Chief Financial Officer,
under the Company’s 2020 LTIP Scheme may
vest with immediate effect with restrictions
on his options waived.
Mark Quartermaine
Chairman
Remuneration Committee
23 June 2023
Post balance sheet date
On 26 May 2023, subsequent to the balance
sheet date, it was announced that Adam Binks
would be stepping down as Chief Executive
Officer and from the Board on 26 June 2023.
Mr Binks will no longer be an employee of the
Company from this date. The Company reached
a mutual agreement with Mr Binks to retain his
services as a consultant for a period of six months
to 27 December 2023, and additionally agreed
a Settlement Agreement to pay twelve months’
contractual notice period for salary, car allowance
and benefits, and 100% of the FY24 LTIP bonus,
amounting to a gross payment of £449,000 in total.
In respect of Mr Binks’ departure, the Board
agreed that the 826,394 unvested options
granted to Mr Binks under the Company’s 2020
LTIP Scheme would vest with immediate effect
with all restrictions on all his options waived. Mr
Binks agreed to immediately exercise all his options
granted under the 2018 and 2020 LTIP schemes,
totalling 2,076,394 ordinary shares of 1p each
(“Ordinary Shares”) and further agreed to sell,
and the Company agreed to buy, a total of
2,076,394 Ordinary Shares at a price of £0.375
per Ordinary Share. The Company will hold these
Ordinary Shares in treasury to satisfy the exercise
of future share options under SysGroup’s share
incentive schemes.
40
SysGroup plc Annual report and accounts 2023 Governance report
Corporate governance report
Introduction
Board of directors
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 must 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: theqca.com.
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:
structure changes
opportunities and key investment decisions
• Business strategy and performance review
• Corporate governance and risk management
• Identification and approval of acquisition
• Approval of financing and equity
• Consideration of senior employee appointments
• Approval of the annual operating plan
• Approval of the annual report and accounts
• ESG strategy
and financial forecasts
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 regular operational and
financial information 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:
PLC Board
Audit committee Remuneration committee
Meetings
Michael Edelson
Mike Fletcher
Mark Quartermaine
Adam Binks
Martin Audcent
10
9
10
10
10
10
3
3
3
3
3
3
2
2
2
2
1
–
41
SysGroup plc Annual report and accounts 2023 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 reporting 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 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 and 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 be contacted
by shareholders if they wish to raise any matters.
The annual report and interim announcement
are key communications to our shareholders.
In these reports we aim to provide a clear
explanation of the business performance,
financial position, operational structure
changes and future 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.
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
payments to suppliers on a regular and routine
payment process.
The Group’s employees are key stakeholders
in the success of the business. We aim to recruit
high calibre individuals and the Group invests
in their ongoing development needs through
42
SysGroup plc Annual report and accounts 2023 internal and external training. The Group offers
competitive remuneration and benefits packages
including the periodic offer of EMI share options.
All employees are encouraged to speak openly
with line managers and colleagues, and Senior
Leadership Team meetings are held weekly 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 and
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’s 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 receive an annual
report from the HLRC to show 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 to monitor performance
and progress any necessary actions.
The Non-Executive 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 financial 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.
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.
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.
SysGroup plc Annual report and accounts 2023
43
43
SysGroup plc Annual report and accounts 2023 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.
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.
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 and 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 site 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 organisation structure and each
employee knows his or her line of responsibility
and accountability.
44
SysGroup plc Annual report and accounts 2023 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 oversight and 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, ESG strategy, 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, BDO, attend the
Audit Committee Meetings.
During the year to 31 March 2023, there were
three Audit Committee meetings and the
principal items discussed were:
interim and full year audit reports
audit fee and engagement letters
• Review of the BDO planning,
• BDO auditor independence,
• Review of Going Concern
• Review of IFRS15 revenue recognition
• Review and approval of the interim
• Review and approval of the annual
• Review and approval of the management
results, preliminary announcement
for the new acquisitions
report and accounts
letters of representation
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.
There were two Remuneration Committee
meetings during the year and the principal items
were to approve the FY23 Executive Directors’
cash bonus and grant of performance share
options, and to review the salaries of the Non-
Executive Directors.
45
SysGroup plc Annual report and accounts 2023 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.
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 standard communications
to shareholders are:
• Preliminary announcement
• Annual report and accounts
• Interim announcement
• Annual General Meeting
• Shareholder meetings following
• Regulatory RNS announcements
results announcements
Shareholders can find information on the Board
of Directors, Shareholder Circulars, Articles
of Association, Admission Document, Financial
Reports and Regulatory Announcements on
our sysgroup.com website.
SysGroup plc Annual report and accounts 2023
46
46
SysGroup plc Annual report and accounts 2023 Governance report
Statement of Directors’
responsibilities
The Directors are responsible for preparing the annual report of the Director’s
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 UK adopted
international accounting standards. 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.
In preparing these financial statements,
the Directors are required to:
and then apply them consistently;
• Select suitable accounting policies
• Make judgements and accounting
• State whether they have been prepared in
estimates that are reasonable and prudent;
accordance with UK adopted international
accounting standards, 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
23 June 2023
47
SysGroup plc Annual report and accounts 2023 Financial
statements
SysGroup plc Annual report and accounts 2023
48
SysGroup plc Annual report and accounts 2023 Financial statements
Independent auditor’s report
to the members of SysGroup plc
Opinion on the
financial statements
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
2023 and of the Group’s loss for the year
then ended;
• The Group financial statements have been
properly prepared in accordance with UK
adopted international accounting standards;
• The Parent Company financial statements
have been properly prepared in accordance
with UK adopted international accounting
standards 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 2023 which comprise the consolidated
statement of comprehensive income, the
consolidated statement of financial position,
the Company statement of financial position,
the consolidated statement of changes in equity,
the Company statement of changes in equity,
the consolidated statement of cashflows, the
Company statement of cashflows 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 UK
adopted international accounting standards
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.
Independence
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
In 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 the Directors’ assessment that
supports the Board’s conclusions with respect
to going concerns and the related disclosures;
• We considered the appropriateness of the
Directors’ forecasts by testing their mechanical
accuracy, assessing historical forecasting
accuracy by comparing the Group’s results to
its previous forecasts and using our knowledge
of the group, industry and economy assessed
the feasibility of the downside sensitivity
analysis and reverse stress testing completed;
49
SysGroup plc Annual report and accounts 2023 • We challenged the rationale for the assumptions
including revenue growth and the level of
overheads utilised in the forecasts, using
our knowledge of the business and the sector
and wider commentary available from stock
market analysts;
• We obtained an understanding of the financing
facilities from the finance agreements, including
the nature of the facilities, covenants and
attached conditions and assessed the facility
and covenant headroom calculations, and
re-performed sensitivities on the Directors’
base case and stressed case scenarios; and
• We reviewed the wording of the going concern
disclosures, and assessed its consistency
with the Directors’ forecasts and assessment.
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 and the 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.
Overview
Coverage
Key audit matter
Materiality
100% (2022: 100%) of Group profit before tax
100% (2022: 100%) of Group revenue
99% (2022: 99%) of Group total assets
2023
2022
Revenue recognition
Business combinations
Group financial statements as a whole
Materiality has been based on 1.25% (2022: 1%)
of revenue, rounded to £270,000 (2022: £145,000)
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.
Our Group audit scope focused on the Group’s
main trading entity being SysGroup Trading
Limited, the Parent Company and Truststream
Security Solutions Limited which were considered
to be the significant components. Full scope
audits were performed on these components
by the Group engagement team. Independent
Network Solutions Limited and Orchard
Computers Limited were considered insignificant
components to the Group, however full scope
audits were performed on these components
also by the Group engagement team.
There are in addition a number of dormant entities
in the Group which are insignificant components.
Dormant entities have been subject to desktop
reviews only by the Group audit team.
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.
50
SysGroup plc Annual report and accounts 2023
Key audit matter
Revenue
recognition
Note 4
See accounting
policy in note 1
The Group has a number of different
revenue streams, each of which have
a different revenue recognition policy
dependent on the specific terms of the
transfer of goods or the service provided.
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.
We have assessed that the risk of
material misstatement could arise from:
manual journals in revenue;
• An inappropriate use of
• Improper unbundling of contracts
and allocation of transaction price
to performance obligations; and
Business
combinations
Note 2 and 10
See accounting
policy in note 1
• Improper revenue recognition
before completion of performance
obligations, with a focus around
year end cut-off.
We therefore consider revenue
recognition to be a key audit matter.
The Group has made two
acquisitions during the year
‘Orchard’ and ‘Truststream’.
Accounting for acquisitions can
be complex and requires significant
judgement. The recognition and
valuation of assets and liabilities
acquired, such as intangible assets,
is inherently complex and judgemental.
Management prepared detailed
calculations to determine the fair value
of the intangible assets acquired without
the use of third party specialists. As a
result of the judgements required to
be made by Management there is a
risk of material misstatement in the fair
value allocated to assets and liabilities
acquired including intangible assets
and the balance of goodwill recognised.
There is further judgement required by
Management in relation to the valuation
of contingent consideration related
to Truststream.
For these reasons, acquisition accounting
was determined to be a key audit matter.
How the scope of our audit
addressed the key audit matter
The audit procedures included the following:
• 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 by review of key
terms in revenue contracts;
• We agreed the revenue recognised in the year for a
sample of contracts checking evidence of completion
of work and that the revenue recognised was in
accordance with IFRS15. We also specifically checked
a sample of revenue recognised by performance
obligation either side of year end, to contracts with
customers and to confirmation of the delivery of the
obligations in the year. Where contracts related to more
than one revenue stream we checked that these had
been appropriately bundled or unbundled; and
• For a sample of manual journal entries recorded in
revenue throughout the year, we assessed the validity
of the transaction by testing it to source documentation.
Key observations:
Based on the procedures performed we consider
that revenue has been appropriately recognised
based on performance obligations and recorded
in the appropriate period.
We obtained and reviewed the sale and purchase agreements
(SPAs) to check that the appropriate accounting treatment
had been applied. Our work included:
• With the support of our internal valuations experts we
challenged the key inputs, assumptions and methodology
used by Management in determining the fair values of
intangible assets acquired based on our knowledge of
the industry;
• We reviewed Management reconciliations and
supporting documentation to corroborate the acquisition
net book values of assets and liabilities and resulting fair
value adjustments;
• We challenged the completeness of intangible assets
acquired through inspection of due diligence reports and
previous financial statements of the acquired entities;
• We agreed the fair value of the purchase consideration
to supporting evidence and recalculating the equivalent
goodwill arising on acquisition; and
• We challenged the valuation of accrued contingent
consideration with reference to Truststream forecast
performance in the earn-out period, including the
challenge of underlying assumptions utilised within
the forecasts such as earning and discount are
against historic data, corroboration of data inputs
and comparison of forecast performance to actual
results post acquisition.
• Reviewing the disclosures for the business combinations
in line with IFRS 3 – Business Combinations.
Key observations:
Based on the procedures we performed, we consider
the judgements and estimates made by Management
to be reasonable in respect of business combinations.
51
SysGroup plc Annual report and accounts 2023 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.
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
2023
£
2022
£
2023
£
2022
£
Materiality
270,000
145,000
176,000
74,000
Basis for
determining
materiality
Rationale
for the
benchmark
applied
Performance
materiality
Basis for
determining
performance
materiality
Based on 1.25%
of revenue,
then rounded
Based on 1%
of revenue,
then rounded
Based on 0.5%
of gross assets,
then rounded
51% of
Group
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 due to no
significant change in ownership in the
year and stable profitability performance.
The Parent Company does not recognise
any external revenue and so a revenue
basis was not considered appropriate
and materiality was calculated as a
percentage of Group materiality.
Parent Company materiality in the prior year
was set at a percentage of group materiality
to address the aggregation risk.
195,750
108,750
127,600
55,500
Performance
materiality was
set at 75% of
materiality. This
was considered
appropriate
based on:
• Cumulative
knowledge
of the group
• Degree of
estimation in
the financial
statements
Performance
materiality was
set at 72.5% of
materiality. This
was considered
appropriate
based on:
• Cumulative
knowledge
of the group
• Degree of
estimation in
the financial
statements
• Acquisitions
made of ‘Orchard’
and ‘Truststream’
in the year
Performance
materiality was
set at 75% of
materiality. This
was considered
appropriate
based on:
• Cumulative
knowledge
of the group
• Degree of
estimation in
the financial
statements
Performance
materiality was
set at 72.5% of
materiality. This
was considered
appropriate
based on:
• Cumulative
knowledge
of the group
• Degree of
estimation in
the financial
statements
• Acquisitions
made of ‘Orchard’
and ‘Truststream’
in the year
52
SysGroup plc Annual report and accounts 2023 Component materiality
For the purposes of our Group audit opinion,
we set materiality for each significant component
of the Group, apart from the Parent Company
whose materiality is set out above, based on a
percentage of between 27% and 83% (2022: 51%
and 99% ) of Group materiality dependent on the
size and our assessment of the risk of material
misstatement of that component. Component
materiality ranged from £73,000 to £223,000
(2022: £74,000 to £143,500). In the audit of each
component, we further applied performance
materiality levels of 72.5% (2022: 75%) of the
component materiality to our testing to ensure
that the risk of errors exceeding component
materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that
we would report to them all individual audit
differences in excess of £10,800 (2022: £5,800).
We also agreed to report differences below
this threshold that, in our view, warranted
reporting on qualitative grounds.
Strategic report and Directors’ report
Matters on which we are required
to report by exception
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.
Other Companies
Act 2006 reporting
Based on the responsibilities described below
and our work performed during the course of
the audit, we are required by the Companies Act
2006 and ISAs (UK) to report on certain opinions
and matters as described below.
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
agreement with the accounting records and returns; or
• The Parent Company financial statements are not in
• Certain disclosures of Directors’ remuneration specified
• We have not received all the information and explanations
by law are not made; or
we require for our audit.
53
SysGroup plc Annual report and accounts 2023 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.
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. The extent to
which our procedures are capable of detecting
irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
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, UK
adopted international accounting standards,
the UK Companies Act 2006, the AIM listing
rules, the QCA Corporate Governance Code
and industry related such as compliance with
health and safety legislation, employment law
and taxation legislation.
Our audit procedures included,
but were not limited to:
• Holding discussions with those charged with
governance, including consideration of known
or suspected instances of non-compliance
with laws and regulation and fraud;
• Reviewing minutes of Board meetings for
instances of non-compliance with laws
and regulation and fraud;
• Reviewing a sample of legal costs incurred
and any known legal correspondence
throughout the year for instances of non-
compliance with laws and regulation; and
• Obtaining an understanding of the control
environment in monitoring compliance with
laws and regulations.
Fraud
We evaluated management’s incentives
and opportunities for fraudulent manipulation
of the financial statements (including the risk
of override of controls), and determined that
the principal risks were related to posting
inappropriate journal entries and management
bias in accounting estimates as well as
inappropriate revenue recognition.
Our audit procedures included,
but were not limited to:
to underlying supporting documentation;
• Agreeing the financial statement disclosures
• Performing the procedures set out in the key
audit matters section above in response to
the risk of fraud in revenue recognition and in
response to estimates and judgements within
business combination accounting;
54
SysGroup plc Annual report and accounts 2023 • Challenging assumptions and judgements
made by Management in their significant
accounting estimates, in particular in relation
to the expected credit loss provision, the
valuation of goodwill and intangibles and
judgements employed within accounting
for leases under IFRS 16;
• Identifying and testing journal entries to
source documentation, in particular any
journal entries posted with unusual account
combinations or including specific keywords
to supporting documentation; and
• Incorporating an element of unpredictability
into the audit procedures, by testing a sample
of immaterial employee expenses incurred
in the year to supporting documentation to
assess the validity.
We also communicated relevant identified laws
and regulations and potential fraud risks to all
engagement team members and remained alert
to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
The engagement partner has assessed and
confirmed that the engagement team collectively
had the appropriate competence and capabilities
to identify or recognize non-compliance with
laws and regulations.
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: 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.
Graham Ellis (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Liverpool
23 June 2023
BDO LLP is a limited liability partnership registered
in England and Wales (with registered number OC305127)
SysGroup plc Annual report and accounts 2023
55
55
SysGroup plc Annual report and accounts 2023
Financial statements
Consolidated statement
of comprehensive income
For the year ended 31 March 2023
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
Finance costs
(Loss)/profit before taxation
Taxation
Total comprehensive (loss)/profit attributable
to the equity holders of the Company
Basic earnings per share (EPS)
Diluted earnings per share (EPS)
2023
Group
£’000
2022
Group
£’000
21,648
14,746
(10,552)
(5,826)
11,096
8,920
(7,768)
(6,103)
3,328
(625)
2,817
(654)
(1,739)
(1,243)
(408)
(178)
–
(195)
(10,718)
(8,195)
378
(483)
(105)
98
(7)
0.0p
0.0p
725
(127)
598
147
451
0.9p
0.9p
Notes
4
14
13
8
9
6
12
11
11
56
SysGroup plc Annual report and accounts 2023 Financial statements
Consolidated statement
of financial position
As at 31 March 2023
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
Contract liabilities
Contingent consideration
Provisions
Deferred taxation
Bank loan
Current liabilities
Trade and other payables
Lease liabilities
Contract liabilities
Contingent consideration
Bank loan
Total Equity and Liabilities
2023
Group
£’000
2022
Group
£’000
Notes
13
13
14
16
21
19
20
17
18
12
19
17
19
20
17
19
21,666
15,554
6,295
1,966
4,318
1,478
29,927
21,350
5,007
4,186
9,193
2,079
4,133
6,212
39,120
27,562
494
9,080
(201)
3,205
–
494
9,080
(201)
3,027
4
8,851
8,854
21,429
21,258
621
383
1,875
191
1,434
4,705
195
296
–
–
1,011
387
9,209
1,889
3,861
182
3,633
806
–
2,692
144
1,163
–
416
8,482
4,415
39,120
27,562
57
SysGroup plc Annual report and accounts 2023
Financial statements
The financial statements on pages 48 to 98 were approved
by the Board and authorised on 23 June 2023.
Martin Audcent
Director
Registered number 06172239
SysGroup plc Annual report and accounts 2023
58
58
SysGroup plc Annual report and accounts 2023
Financial statements
Company statement
of financial position
As at 31 March 2023
Assets
Non-current assets
Investments
Intangible assets
Property, plant and equipment
Deferred tax asset
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
Lease liabilities
Contingent consideration
Provisions
Bank loan
Current liabilities
Trade and other payables
Lease liabilities
Contingent consideration
Bank loan
Total Equity and liabilities
*See the basis of preparation note for details of the FY22 restatement.
2023
Company
£’000
2022
(Restated)*
Company
£’000
Notes
15
14
16
34,034
24,895
26
325
166
–
254
116
34,551
25,265
625
401
1,026
172
634
806
35,577
26,071
21
494
494
9,080
9,080
19
17
18
19
17
19
17
19
(201)
3,205
11,536
(201)
3,027
6,417
24,114
18,817
88
1,875
68
4,705
6,736
152
–
–
387
539
3,863
6,224
58
806
–
75
–
416
4,727
6,715
35,577
26,071
59
SysGroup plc Annual report and accounts 2023
As permitted by section 408 of the Companies Act 2006, the Company’s statement of
comprehensive income has not been included in the financial statements. For the year ended
31 March 2023, the Company made a profit of £5,119,000 (FY22: restated profit of £109,000).
Martin Audcent
Director
Registered number 06172239
SysGroup plc Annual report and accounts 2023
60
60
SysGroup plc Annual report and accounts 2023
Financial statements
Consolidated statement
of changes in equity
For the year ended 31 March 2023
Attributable to equity holders of the parent
Share
capital
£’000
Share
premium
account
£’000
Treasury
reserve
£’000
Other
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 April 2021
494
9,080
(201)
2,832
Comprehensive income
Profit for the period
Total comprehensive income
Distributions to owners
Share options charge
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195
195
At 31 March 2022
494
9,080
(201)
3,027
As at 1 April 2022
494
9,080
(201)
3,027
Comprehensive income
Loss for the period
Total comprehensive income
Distributions to owners
Share options charge
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178
178
At 31 March 2023
494
9,080
(201)
3,205
4
–
–
–
–
4
4
(4)
(4)
–
–
–
8,403
20,612
451
451
–
–
451
451
195
195
8,854
21,258
8,854
21,258
(3)
(3)
–
–
(7)
(7)
178
178
8,851
21,429
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 relations to the consolidation of subsidiary
companies accounting for currencies other than the Group’s functional
currency. The only overseas subsidiary Company, Netplan LLC, no longer trades
and no further foreign currency translation differences are anticipated. The
balance of the reserves has been transferred to Retained Earnings in FY23.
Retained earnings
All other net gains and losses and transactions with owners
(e.g. dividends) not recognised elsewhere.
61
SysGroup plc Annual report and accounts 2023
Financial statements
Company statement
of changes in equity
For the year ended 31 March 2023
Share
capital
£’000
Share
premium
account
£’000
Treasury
reserve
£’000
Other
reserve
£’000
Retained
earnings
£’000
Total
£’000
As at 1 April 2021
494
9,080
(201)
2,832
6,308
18,513
Comprehensive income
Profit for the period (restated)*
Total comprehensive income
Distributions to owners
Share options charge
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
195
195
109
109
–
–
109
109
195
195
At 31 March 2022 (restated)*
494
9,080
(201)
3,027
6,417
18,817
As at 1 April 2022
494
9,080
(201)
3,027
6,417
18,817
Comprehensive income
Profit for the period
Total comprehensive income
Distributions to owners
Share options charge
Total distributions to owners
–
–
–
–
–
–
–
–
–
–
–
–
–
–
178
178
5,119
5,119
–
–
5,119
5,119
178
178
At 31 March 2023
494
9,080
(201)
3,205
11,536
24,114
*See the basis of preparation note for details of the FY22 restatement.
62
SysGroup plc Annual report and accounts 2023
Financial statements
Consolidated statement
of cashflows
For the year ended 31 March 2023
Cashflows used in operating activities
(Loss)/profit after tax
Adjustments for:
2023
Group
£’000
2022
Group
£’000
Notes
(7)
451
Depreciation and amortisation
13,14
2,364
1,897
Finance costs
Share based payments
Taxation (credit)/charge
Operating cashflows before movement in working capital
Increase in trade and other receivables
Increase in trade and other payables
Cashflow from operations
Taxation paid
Net cash from operating activities
Cashflows from investing activities
Payments to acquire property, plant and equipment
Payments to acquire intangible assets
Acquisition of subsidiary net of cash acquired
Net cash used in investing activities
Cashflows from financing activities
Bank loans drawdown
Payment of bank loan arrangement fee
Repayment of bank loans
Capital/principal paid on lease liabilities
Interest paid on loan facility
Interest paid on lease liabilities
Net cash from/(used in) financing activities
Net increase 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
6
12
14
13
10
483
178
(98)
2,920
(737)
837
3,020
(303)
2,717
(252)
(163)
(5,389)
127
195
147
2,817
(354)
5
2,468
(159)
2,309
(620)
(271)
–
(5,804)
(891)
4,500
(127)
(582)
(303)
(316)
(32)
–
–
(417)
(256)
(67)
(18)
3,140
(758)
53
4,133
4,186
660
3,473
4,133
63
SysGroup plc Annual report and accounts 2023
Financial statements
Company statement
of cashflows
For the year ended 31 March 2023
Cashflows used in operating activities
Profit after tax
Adjustments for:
Depreciation and amortisation
Finance costs
Share based payments
Taxation (credit)/charge
Operating cashflows before movement in working capital
Increase in trade and other receivables
(Decrease)/increase in trade and other payables
Cashflow from operations
Taxation paid
Net cash from operating activities
Cashflows from investing activities
Payments to acquire property, plant and equipment
Payments to acquire intangible assets
Acquisition of subsidiary
Net cash used in investing activities
Cashflows from financing activities
Bank loans drawdown
Payment of bank loan arrangement fee
Repayment of bank loans
Capital/principal paid on lease liabilities
Interest paid on loan facility
Interest paid on lease liabilities
Net cash from/(used in) financing activities
Net (decrease)/increase 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
*See the basis of preparation note for details of the FY22 restatement.
2023
Company
£’000
2022
(Restated)*
Company
£’000
Notes
5,119
109
16
17
14
13
10
127
454
178
(49)
5,829
(342)
(2,612)
2,875
(7)
2,868
(159)
(28)
(6,337)
(6,524)
4,500
(127)
(500)
(119)
(316)
(15)
3,423
(233)
634
401
119
118
194
14
554
(11)
104
647
–
647
(51)
–
–
(51)
–
–
(417)
(53)
(67)
(10)
(547)
49
585
634
64
SysGroup plc Annual report and accounts 2023
Financial statements
Notes to the consolidated
financial statements
For the year ended 31 March 2023
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 UK
adopted international accounting standards
(“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 and share based
payments which have been valued in accordance
with IFRS9 and IFRS2 respectively.
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.
SysGroup plc Company -
Restatement of management charge
The SysGroup plc Company financial statements
for 2022 have been restated to reflect a prior year
adjustment of £1,592k that relates to an increase
in the central costs recharge to subsidiary
companies within the Group. The central cost
recharge from SysGroup plc to SysGroup Trading
Limited was overstated by £1,592k due to the
use of budgeted recharges which hadn’t been
updated for actual costs. In the SysGroup plc
entity the effect of the adjustment is to increase
administrative expenses by £1,592k and increase
the interCompany creditor by £1,592k. The tax
impact of this is to decrease the corporation
tax charge and corporation tax creditor by £113k.
The profit impact of this restatement has been
to reduce the FY22 profit from £1,479k to £109k.
There is no impact on the cashflow statement
since this is a non-cash adjustment. The FY22
retained earnings have reduced from £7,896k
to £6,417k.
Since the recharge is a transaction
between SysGroup companies the effect
of the restatement has no impact on the
SysGroup plc consolidated position.
Going concern
The Directors have prepared the financial
statements on a going concern basis which
assumes that the Group and the Company
will continue to meet liabilities as they fall due.
The Directors have reviewed the base business
forecast and a sensitised version for the period
to 30 June 2024 and taken into account the
forecasts that support the business viability
for the period to 31 March 2025.
65
SysGroup plc Annual report and accounts 2023 In the base forecast there is significant
headroom in the bank covenants as the
business continues to operate with a high level
of cash conversion and a reducing level of net
debt. In the sensitised forecast, which includes
assumptions for a significant decline in revenue
and profits, the Group maintains positive gross
cash balances, reduce net debt and stays within
the bank covenants. The Group has a business
model with a high degree of financial resilience
since circa 80% of revenue is derived from
contracted managed IT services which is a
continuous and business critical service supply
to customers. This provides a high level of
operating cash generation.
At 31 March 2023, the Group had a gross cash
balance of £4.19m and a net debt position of
£1.3m, excluding contingent consideration of
£2.68m. The Group has a £0.5m unused overdraft
facility and £3.2m of undrawn headroom in its
RCF loan facility which is available for working
capital and acquisitions.
The forecasts, the resultant cashflows,
together with the RCF loan facilities, taking
account of reasonably possible changes in
trading performance, show that the Group
can continue to operate within the current
facilities available to it.
New standards and interpretations
A number of new standards and amendments
to standards and interpretations have been
issued during the year ended 31 March 2023.
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.
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.
IFRS16 - Leases
The group has no activities acting as a lessor.
The group recognises right of use assets in
relation to the lease of motor vehicles, office
space and equipment.
Lease liabilities
At 1 April 2022
Additions
Disposals
Interest expense
Lease payments
At 31 March 2023
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
331
806
(71)
32
(295)
803
8
–
–
–
(8)
–
Total
£’000
339
806
(71)
32
(303)
803
2023
£’000
182
621
–
66
SysGroup plc Annual report and accounts 2023 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. The interest rate used was
4%. Variable lease payments are only included
in the measurement of the lease liability if they
depend on an index or rate. In such cases, the
initial measurement of the lease liability assumes
the variable element will remain unchanged
throughout the lease term. Other variable lease
payments are expensed in the period to which
they relate.
Right of use assets
At 1 April 2022
Additions
Disposals
Depreciation
At 31 March 2023
Right of use assets are initially measured at
the amount of the lease liability, reduced for any
lease incentives received, and increased for:
the commencement of the lease;
• Lease payments made at or before
• Initial direct costs incurred; and
• The amount of any provision recognised
where the group is contractually required to
dismantle, remove or restore the leased asset
(typically leasehold dilapidations – see note 20).
The property lease rentals are fixed payments
over the rental terms.
Basis of consolidation
Where the Company has control over an investee,
it is classified as a subsidiary. The Company
controls an investee if all three of the following
elements are present: power over the investee;
exposure to variable returns from the investee;
and the ability of the investor to use its power
to affect those variable returns. Control is re-
assessed whenever facts and circumstances
indicate that there may be a change in any of
these elements of control.
The consolidated financial statements present
the results of the Company and its subsidiaries
(“the Group”) as if they formed a single entity.
InterCompany transactions and balances
between Group companies are therefore
eliminated in full.
Land &
buildings
£’000
Plant &
machinery
£’000
380
932
(71)
(245)
996
11
–
–
(11)
–
Total
£’000
391
932
(71)
(256)
996
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
67
SysGroup plc Annual report and accounts 2023 of completion, and the fair value of contingent
consideration is based on the expected future
cashflows based on whether the Directors believe
performance conditions will be met and thus the
extent to which the further consideration will
be payable. Where the fair value of identifiable
assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is
credited in full to the consolidated statement of
comprehensive income on the acquisition date.
Impairment of non-financial assets
Impairment tests on goodwill and other intangible
assets with indefinite useful economic lives
are undertaken annually at the financial year
end. Other non-financial assets are subject to
impairment tests whenever events or changes
in circumstances indicate that their carrying
amount may not be recoverable. Where the
carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and fair
value less costs to sell), the asset is written
down accordingly.
Where it is not possible to estimate the
recoverable amount of an individual asset, the
impairment test is carried out on the asset’s cash-
generating unit (i.e. the lowest Group of assets
in which the asset belongs for which there are
separable identifiable cash flows that are largely
independent of the cash flows from the other
assets or Groups of assets). Goodwill is allocated
on initial recognition to each of the Group’s cash-
generating units that are expected to benefit from
the synergies of the combination giving rise to
the goodwill.
The estimated future cash flows are discounted
to their present value using a pre-tax discount
rate that reflects current market assessments
of the time value of money and the risks specific
to the asset for which the estimates of future
cash flows have not been adjusted.
Foreign currencies
Transactions in foreign currencies are recorded
using the rate of exchange ruling at the date of
the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated
using the rate of exchange ruling at the balance
sheet date and the gains or losses on translation
are included in the consolidated statement of
comprehensive income. The results of foreign
subsidiaries that have a functional currency
different from the Group’s presentation currency
are translated at the average rates of exchange
for the year. Assets and liabilities of foreign
subsidiaries that have a functional currency
different from the Group’s presentation currency,
are translated at the exchange rates prevailing
at the balance sheet date. Exchange differences
arising from the translation of the results of
foreign subsidiaries and their opening net assets
are recognised as a separate component
of equity.
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 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.
SysGroup plc Annual report and accounts 2023
68
68
SysGroup plc Annual report and accounts 2023 The revenue recognition policies can be summarised as follows:
Revenue category
Performance delivery
Revenue recognition
Managed services
Professional services
Value-added resale
Contracted managed services are
delivered from an agreed commencement
date and for a contracted term of one to
three years. Managed services comprises
multiple streams of service including
cloud hosting and support and operating
licences. 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 annually, quarterly or monthly
in advance of the service delivery period.
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.
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 (“VAR”) comprises
sales of IT hardware and licences
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 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.
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.
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
total revenue, Adjusted EBITDA, Adjusted PBT,
Adjusted EPS and Net debt.
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
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
69
SysGroup plc Annual report and accounts 2023 consider, because of their size or nature and
expected non-recurrence, merit separate
presentation to facilitate financial comparison
with prior periods and to assess trends in financial
performance. Exceptional items are included
in Administration expenses in the Consolidated
Statement of Comprehensive Income but
excluded from Adjusted EBITDA as management
believe they should be considered separately
to gain an understanding of the underlying
profitability of the trading businesses on a
consistent basis from year to year.
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.
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
(c) Inputs from the asset or liability that are not
based on observable market data (Level 3).
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 which the options were granted.
The fair value of warrants is also reviewed to
the extent that exercise of the warrants is
considered likely.
70
SysGroup plc Annual report and accounts 2023 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% straight line
Motor vehicles - 25% straight line
Freehold property - 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:
Deferred taxation
Deferred tax assets and liabilities are recognised
where the carrying amount of an asset or liability
in the consolidated statement of financial position
differs from its tax base, except for differences
arising on:
• The initial recognition of goodwill;
• The initial recognition of an asset or liability
in a transaction which is not a business
combination and at the time of the transaction
affects neither accounting or taxable profit; and
• Investments in subsidiaries and jointly
controlled entities where the Group is able
to control the timing of the reversal of the
difference and it is probable that the difference
will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted
to those instances where it is highly probable
that relief against taxable profit will be available.
The amount of the asset or liability is determined
using tax rates that have been enacted or
substantively enacted by the reporting date
and are expected to apply when the deferred
tax liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when
the Group has a legally enforceable right to offset
current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by
the same tax authority on either the same taxable
Group Company; or different Group entities which
intend either to settle current tax assets and
liabilities on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each
future period in which significant amounts of
deferred tax assets or liabilities are expected
to be settled or recovered.
Deferred tax liabilities are recognised
on intangible assets and other
temporary differences recognised
in business combinations.
Intangible asset
Estimated UEL
Valuation method
Customer relationships
Software licenses
System development
5–10 years
3–5 years
5 years
Estimated discounted cashflow
Cost less amortisation
Cost less amortisation
71
SysGroup plc Annual report and accounts 2023 2. Significant accounting estimates and judgements
Significant accounting judgements
Going concern
The Board have approved an annual operating
plan for FY24 and a forecast to 31 March 2025,
and management have exercised judgement
in the preparation of the financial forecasts
particularly on the level of future sales, customer
contract uplifts and cancellations, and working
capital assumptions. The Board have reviewed
the Group’s financial forecasts and a Sensitised
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 included 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 their judgement to identify the CGUs of the
Group. When SysGroup acquire a Company, the
newly acquired business is usually allocated its
own CGU for the first year and until such time as
either the business and assets have been hived
up into the main SysGroup trading Company or
when the systems, finances and management of
the business have been successfully integrated,
whichever is earlier.
The Board have reviewed the Group’s CGU’s
following the acquisition of Truststream Security
Services Limited and Orchard Computers
Limited in April 2022 and have concluded that
Truststream is a separate CGU at 31 March 2023
and Orchard is part of the IT Managed Services
CGU. Further detail is provided in Note 13.
The preparation of this financial information
requires management to make estimates and
judgements that affect the amounts reported
for assets and liabilities at the period end date
and the amounts reported for revenues and
expenses during each period. The nature of
the estimation or judgement means that actual
outcomes could differ from the estimates
and judgements taken in the preparation
of the financial statements.
Significant accounting estimates
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment annually
and in line with the stated accounting policy.
This involves judgement regarding the future
development of the business and the estimation
of the level of future profitability and cash flows
to support the carrying value of goodwill.
An impairment review has been performed
at the reporting date taking into account
sensitivities around future business performance,
covering a range of outcomes and risks over
levels of revenue, cost and cash generation.
No impairment has been identified.
Valuation of intangible assets
acquired in business combinations
Determining the fair value of customer
relationships acquired in business combinations
requires estimation of the value of the cash
flows related to those relationships and a suitable
discount rate in order to calculate the present
value. In FY23, there was a requirement to assess
the valuation of intangible assets acquired for
the acquisitions of Truststream Security Services
Limited and Orchard Computers Limited.
Contingent consideration
The Group has a contingent consideration liability
which is based on the future performance of an
acquired Company. When valuing the contingent
consideration still payable on acquisitions,
the Group considers various factors including
the performance of the acquired entity since
acquisition together with an estimate of the
expected future trading performance for the
period to the expiry of the earn-out period.
Contingent consideration is recognised
at, and carried thereafter at, fair value.
All changes in fair value (other than
measurement period adjustments)
are reflected in the income statement.
72
SysGroup plc Annual report and accounts 2023 Useful economic lives of intangible assets
Intangible assets are amortised over their
useful economic lives. Useful lives are based
on management’s estimates of the period
over which the assets will generate revenue,
which are periodically reviewed for continued
appropriateness. Changes to estimates can
result in changes in the carrying values and
hence amounts charged to the income statement
in particular periods which could be significant.
The Group have capitalised system development
expenditure in the current year and the intangible
asset is being amortised over a five-year useful
life which the Directors consider appropriate.
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
• 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:
Financial assets
Assets held at amortised cost
Cash and cash equivalents
Amounts due from subsidiaries
Trade receivables
Total financial assets
Group
Company
2023
£’000
2022
£’000
2023
£’000
2022
£’000
4,186
–
1,706
4,133
–
1,154
5,892
5,287
401
323
–
724
634
–
–
634
73
SysGroup plc Annual report and accounts 2023
Group
Company
2023
£’000
2022
£’000
2023
£’000
Restated*
2022
£’000
2,801
2,005
632
–
–
3,099
5,508
8,309
1,142
4,851
3,147
8,582
603
5,476
1,030
7,109
2,681
–
2,681
–
10,990
3,147
11,263
7,109
£'000
–
2,681
2,681
• Inputs for the asset or liability that are
not based on observable market data
(unobservable inputs) (level 3)
The following table sets out the fair value
of all financial assets and liabilities that are
measured at fair value:
Financial liabilities
Amortised cost
Trade and other payables
Amounts due to subsidiaries
Loans and other borrowings
At fair value
Contingent consideration
Total financial liabilities
Contingent consideration
At 1 April 2022
Acquisition of Truststream
At 31 March 2023
*See the basis of preparation note for details of the FY22 restatement.
Fair value of financial instruments
The Group has adopted the following fair value
hierarchy in relation to its financial instruments
that are carried in the balance sheet at the fair
values at the year end:
for identical assets or liabilities (level 1)
• Quoted prices (unadjusted) in active markets
• Inputs other than quoted prices included
within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2)
Group & Company
Liabilities measured at fair value
Contingent consideration
Total
2023
2022
Level 1
£’000
Level 2
£’000
Level 3
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
–
–
–
–
2,681
2,681
–
–
–
–
–
–
74
SysGroup plc Annual report and accounts 2023
Contingent consideration is included in Level
3 of the fair value hierarchy. The provision for
contingent consideration is in respect of the
Truststream acquisition in April 2022, further
details of which can be found in Note 10. The fair
value is determined considering the expected
payments, discounted to present value using
a risk adjusted discount rate.
The significant unobservable inputs are the
financial performance forecasts for the Year 1
and Year 2 twelve month periods post-acquisition
and the risk adjusted discount rate of 4.0%.
The estimated fair value would increase or
decrease if the EBITDA was higher or lower
or the risk adjusted discount rate was higher
or lower. A reasonably possible change to
one of these significant unobservable inputs,
holding the other inputs constant, would have
the following effects:
Group & Company
Effect of change in assumption on income statement
EBITDA movement by £100,000
Risk-adjusted discount rate change by 1.0%
Increase
£’000
Decrease
£’000
–
43
300
42
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 prepare cashflow forecasts during
the month and working capital forecasts on
a monthly basis. These allow the Directors to
make an assessment of the cash position and
the future requirements of the Group 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’s
operating requirements and capital expenditure.
The following table sets out the contractual
maturities (representing undiscounted
contractual cashflows) of financial liabilities:
Group
At 31 March 2023
Trade and other payables
Loans and borrowings
Contingent consideration
Total
At 31 March 2022
Trade and other payables
Loans and borrowings
Total
Up to
3 months
£’000
Between
3 & 12 mths
£’000
Between
1&2 years
£’000
Between
2&5 years
£’000
Over
5 years
£’000
2,801
46
806
3,653
2,005
133
2,138
–
137
–
137
–
402
402
–
621
1,875
–
4,705
–
2,496
4,705
–
537
537
–
51
51
–
–
–
–
–
–
–
75
SysGroup plc Annual report and accounts 2023 Company
At 31 March 2023
Trade and other payables
Amounts due to subsidiaries
Loans and borrowings
Contingent consideration
Total
At 31 March 2022 (restated)*
Trade and other payables
Amounts due to subsidiaries
Loans and borrowings
Total
Up to
3 months
£’000
Between
3 & 12 mths
£’000
Between
1&2 years
£’000
Between
2&5 years
£’000
Over
5 years
£’000
632
3,099
15
806
4,552
603
5,476
116
6,195
–
–
43
–
43
–
–
350
350
–
–
88
1,875
–
–
4,705
–
1,963
4,705
–
–
495
495
–
–
51
51
–
–
–
–
–
–
–
–
–
*See the basis of preparation note for details of the FY22 restatement.
The amounts due to subsidiaries shown in “up to 3 months” category in the table above are payable
on demand (Note 17).
Interest rate risk
The Group and Company finance their operations
through a combination of retained profits and
bank borrowings. The Group’s RCF Bank loan
with Santander has an interest charge of 3.25%
above bank base rate and accordingly the interest
charge the Group incurs fluctuates according
to the movement in the bank base rates. During
FY23 bank base rates were increased by the
Bank of England and the Group’s interest charge
has therefore increased as explained in the
Chief Financial Officer’s Report.
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 paying on
direct debit or 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 & Poor’s rating system.
Foreign exchange risk
Following the acquisition of Truststream, the
Group has some exposure to foreign exchange
risk since a number of customers are invoiced in
USD and certain suppliers of Truststream invoice
the Company in USD. The Group manages this
foreign exchange risk partially through the natural
hedging of using USD cash receipts to make USD
cash payments to suppliers, but also uses USD
forward exchange contracts to mitigate the risk. At
31 March 2023, there was $347k of undrawn USD
forex contract outstanding which it is anticipated
will be used before 31 March 2024. The fair value
of these USD forex contracts are not material to
the financial statements at year end date.
Capital disclosures
The Group monitors capital which comprises all
components of equity (i.e. share capital, share
premium and retained earnings).
The Group’s objective when maintaining capital
are to safeguard the entity’s ability to continue as
a going concern, so that it can provide returns for
shareholders in future periods and benefits for
other stakeholders, and to provide an adequate
return to shareholders by pricing products and
services commensurately with the level of risk.
The Group sets the amount of capital it requires
in proportion to risk. The Group manages its
capital structure and adjusts it in the light of
changes in economic conditions and the risk
characteristics of the underlying assets.
76
SysGroup plc Annual report and accounts 2023 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 (VAR) – this segment
provides all forms of VAR sales where the
business sells products and licences from
supplier partners.
Revenue by operating segment
Managed IT services
Value-added resale
Total
The monthly management accounts reported
to the Board of Directors are reviewed at a
consolidated level with the operating segments
representative of the business model for growth
of recurring contract income in Managed IT
Services and VAR sales as a complementary
business activity. The Board review the results
of the operating segments at a revenue and gross
profit level since the Group’s management and
operational structure supports both operational
segments as Group functions. In this respect,
assets and liabilities are also not reviewed on a
segmental basis. All assets are located in the UK.
All segments are continuing operations and there
are no transactions between segments.
2023
£’000
17,441
4,207
2023
%
81%
19%
2022
£’000
12,845
1,901
2022
%
87%
13%
21,648
100%
14,746
100%
No individual customer accounts for more than 7% 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
2023
£’000
2023
%
2022
£’000
2022
%
21,608
100%
14,706
100%
40
–
40
–
21,648
100%
14,746
100%
2023
£’000
2022
£’000
17,441
12,845
4,207
1,901
21,648
14,746
10,349
747
8,511
409
11,096
8,920
77
SysGroup plc Annual report and accounts 2023
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers:
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
2023
£’000
2022
£’000
4,016
1,459
1,163
1,549
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. The Group’s
assets are also managed centrally by the Board
and consequently there is no reconciliation
between the Group’s assets per the Statement
of Financial Position and the segment assets.
5. Operating profit
Operating profit is after charging the following:
Audit - Group
Audit - Company
Other advisory
Auditor’s remuneration:
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 bank loan
Unwind of discounting on contingent consideration
Interest payable on lease liabilities
Arrangement fee amortisation on bank loan
Other interest
Total
2023
£’000
2022
£’000
94
4
12
110
625
1,739
5,566
178
40
408
60
4
14
78
654
1,243
4,628
195
46
–
2023
£’000
2022
£’000
307
105
32
29
10
483
80
–
20
27
–
127
78
SysGroup plc Annual report and accounts 2023 7. Staff numbers and 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
2023
2022
70
18
20
108
60
13
15
88
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
2023
£’000
2022
£’000
4,793
4,026
547
55
171
178
444
35
123
195
5,744
4,823
Total staff costs for the Company are £5,744,000 (FY22: £4,823,000) and average staff numbers
for the Company are 108 (FY22: 88).
Directors
Fees and salaries
Social security costs
Benefits in kind
Pension benefits contributions
Share based payment expense
Total
2023
£’000
2022
£’000
662
533
69
3
18
132
884
57
3
14
133
740
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 £329,000 (FY22: £249,000).
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 2023 was nil (FY22: £Nil).
79
SysGroup plc Annual report and accounts 2023 8. Exceptional items
Integration and restructuring costs
Acquisition costs
Total
2023
£’000
2022
£’000
189
219
408
–
–
–
The acquisitions cost of £219,000 relates
to professional fees and other costs incurred
in the acquisitions of Truststream and
Independent Network Solutions Limited
(trading as Orchard IT). Integration and
restructuring costs of £189,000 in relation
to employee exit costs and professional fees.
9. Share based payments
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% 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
Exercise price
17/03/2014
17/03/17 to 16/03/24
21/02/2016
21/02/19 to 20/02/26
02/03/2018
02/03/21 to 01/03/28
26/11/2018
26/11/21 to 25/11/28
16/04/2020
16/04/23 to 15/04/30
06/04/2021
06/04/24 to 05/04/31
01/07/2021
01/07/24 to 30/06/31
14/02/2022
14/02/25 to 13/04/32
Total
60.0p
55.2p
35.5p
42.5p
27.0p
41.0p
1.0p
26.0p
Number of ordinary shares
At 31 March
2022
Granted
Waived
At 31 March
2023
3,750
11,875
30,000
231,000
150,000
255,000
250,000
30,000
961,625
–
–
–
–
–
–
–
–
–
(3,750)
–
–
–
11,875
30,000
(16,000)
215,000
–
150,000
(49,000)
206,000
(150,000)
100,000
–
30,000
(218,750)
742,875
80
SysGroup plc Annual report and accounts 2023
The inputs to the share valuation model
utilised at the grant of the option is shown
in the table below. Management has determined
volatility using their knowledge of the business.
The options have been valued using the
Black Scholes method and using the
following assumptions:
Number of
instruments granted
Grant date
Expiry date
11,875
30,000
215,000
150,000
206,000
100,000
30,000
21-Feb16
02-Mar18
26-Nov18
16-Apr20
06-Apr21
01-Jul21
14-Feb22
20-Feb26
01-Mar28
25-Nov28
15-Apr30
05-Apr31
30-Jun31
13-Feb32
Contract term (years)
10
10
10
Exercise price
55.2p
35.5p
42.5p
Share price at granting
70.8p
35.5p
42.5p
Annual risk free rate (%)
0.5%
0.5%
0.5%
Annual expected
dividend yield (%)
Volatility (%)
Fair value per
grant instrument
0%
27%
0%
27%
30.2p
41.5p
0%
27%
17.9p
10
27.0p
27.0p
0.5%
0%
27%
10
41.0p
41.0p
0.5%
0%
27%
10
10
1.0p
26.0p
42.0p
26.0p
0.5%
4.0%
0%
27%
0%
41%
14.8p
26.0p
14.3p
15.0p
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.
Grant date
Exercise period
Exercise price
Number of ordinary shares
At 31 March
2022
Granted
Waived
At 31 March
2023
28/06/2018
28/06/21 to 27/06/28
16/07/2018
16/07/21 to 15/07/28
15/07/2019
15/07/22 to 14/07/29
08/07/2020
08/07/22 to 07/07/30
21/06/2021
21/06/23 to 20/06/31
21/06/2022
21/06/24 to 20/06/32
Total
1.0p
1.0p
1.0p
1.0p
1.0p
1.0p
750,000
450,000
400,000
400,000
287,480
–
–
–
–
–
–
454,416
2,287,480
454,416
–
–
–
–
–
–
–
750,000
450,000
400,000
400,000
287,480
454,416
2,741,896
81
SysGroup plc Annual report and accounts 2023
The inputs to the share valuation model
utilised at the grant of the option is shown
in the table below. Management has determined
volatility using their knowledge of the business.
The options have been valued using the
Black Scholes method and using the
following assumptions:
Number of
instruments granted
Grant date
Expiry date
Contract term (years)
Exercise price
Share price at granting
Annual risk free rate (%)
Annual expected
dividend yield (%)
Volatility (%)
Fair value per
grant instrument
750,000
450,000
400,000
400,000
287,480
454,416
28-Jun-18
16-Jul-18
15-Jul-19
08-Jul-20
21-Jun-21
21-Jun-22
27-Jun-28
15-Jul-28
14-Jul-29
07-Jul-30
20-Jun-31
20-Jun-32
10
1.0p
41.5p
0.5%
0%
27%
10
1.0p
10
1.0p
10
1.0p
10
1.0p
10
1.0p
46.5p
42.0p
33.0p
42.0p
27.0p
0.5%
0.5%
0.5%
0.5%
4.0%
0%
27%
0%
27%
0%
27%
0%
27%
0%
41%
40.9p
43.7p
41.4p
32.0p
41.0p
26.0p
On 26 May 2023, subsequent to the balance
sheet date, it was announced that Adam Binks
would be stepping down as Chief Executive
Officer and the Board on 26 June 2023.
The Board agreed that the 826,394 unvested
options granted to Adam Binks under the
Company’s 2020 LTIP Scheme would vest
with immediate effect with all restrictions on
all his options waived. Adam Binks agreed to
immediately exercise all his options granted
under the 2018 and 2020 LTIP schemes,
totalling 2,076,394 ordinary shares of 1p each
(“Ordinary Shares”) and further agreed to sell,
and the Company agreed to buy, a total of
2,076,394 Ordinary Shares at a price of £0.375
per Ordinary Share. The Company will hold
these Ordinary Shares in treasury to satisfy
the exercise of future share options under
SysGroup’s share incentive schemes.
SysGroup plc Annual report and accounts 2023
82
82
SysGroup plc Annual report and accounts 2023 10. Acquisitions
In April 2022, SysGroup plc acquired 100%
of the issued share capital in Truststream
Security Solutions Limited (“Truststream”)
and Independent Network Solutions Limited
(“INSL”, holding Company of Orchard
Computers Limited).
Truststream Security Solutions Limited
Established in 2011 and based in Edinburgh,
Truststream is one of the UK’s fastest growing
providers of professional and managed cyber
security services. Truststream covers all
aspects of cyber security from analysis
and threat detection, through protection
architecture and implementation, to incident
response and ongoing 24/7 support and training.
The Acquisition further enhances SysGroup’s
service offering and is complementary to the
Group’s core expertise and key areas of focus.
In addition, the acquisition enables the Group
to further strengthen its UK presence by opening
up Scotland as an attractive hub for the Group.
SysGroup acquired Truststream on 4 April 2023
for £4.8m initial cash consideration on a cash-
free debt-free basis with an earn-out payable
following the first and second anniversaries of
the transaction of up to £3.075m. A payment
of £0.53m was paid in respect of the cash and
debt balances. The earn-out is subject to the
achievement of certain maintainable EBITDA
performance targets in the first and second
12 month periods following the completion of
the acquisition.
The Truststream acquisition was mainly funded
by a new £8.0m revolving credit facility (“RCF”)
which was signed with Santander on 4 April 2023.
SysGroup utilised £4.5m of funds from the RCF
to finance the acquisition. Further information
on the new RCF facility can be found in note 19
to the consolidated financial statements.
Recognised amounts of net assets acquired and liabilities assumed
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets
Trade and other payables
Corporation tax
Deferred tax
Identifiable net assets
Goodwill
Total net assets
Satisfied by:
Cash consideration - paid on acquisition
Contingent consideration
Discounting of contingent consideration
Total consideration
Book value
£’000
Fair value
adj. £’000
Fair value
£’000
550
1,783
1
–
–
–
–
550
1,783
1
2,525
2,525
(1,776)
(24)
(1,800)
(117)
–
–
(631)
(117)
(631)
2,311
5,602
7,913
5,337
2,754
(178)
7,913
83
SysGroup plc Annual report and accounts 2023
Independent Network Solutions Limited
INSL is the holding Company of Orchard
Computers Limited (“Orchard”), which is a
business based in Bristol. Orchard has been
in operation for over 30 years and has built a
loyal customer base largely in the South West of
England and across a broad range of private and
public sectors. Its managed IT service offering
mirrors that of SysGroup, providing high quality
consulting services and building tailor made,
vendor agnostic solutions, designed specifically
to meet individual customer needs, followed by
ongoing support.
SysGroup acquired INSL on 26 April 2023 for
£1.0m cash consideration on a cash-free debt-
free basis. There is no contingent or deferred
consideration for this acquisition. The cash
consideration was funded from the Group’s
existing cash balances.
Recognised amounts of net assets acquired and liabilities assumed
Book value
£’000
Fair value
adj. £’000
Fair value
£’000
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets
Trade and other payables
Bank loan
Corporation tax
Deferred tax
Identifiable net assets
Goodwill
Total net assets
Satisfied by:
Cash consideration - paid on acquisition
Total consideration
398
311
32
–
(383)
(82)
(63)
(7)
–
(15)
(32)
1,028
(435)
–
(5)
398
296
–
1,028
(818)
(82)
(68)
(257)
(264)
490
510
1,000
1,000
1,000
The Directors have considered the intangible
assets acquired with the two acquisitions and
have recognized intangible assets for customer
relationships which have been calculated using
a discounted cashflow method, based on the
estimated level of profit to be generated from
the customer bases acquired. A post tax discount
rate of 9.40% was used in the valuations and the
customer relationships are being amortised over
an estimated useful life of 7 years for Truststream
and 10 years for Orchard. The goodwill arising
on both acquisitions are attributable to the
technical skills of the workforce and cross-selling
opportunities achievable from combining the
acquired customer bases and trade with the
existing Group.
The goodwill and intangible assets of
Truststream have been allocated to a new
CGU named “Truststream” and the goodwill
and intangible assets of Orchard have been
allocated to the CGU “IT Managed Services”.
See Note 13 for further details. The Company
incurred £218,000 of professional fees and
other acquisition costs in relation to the two
acquisitions. These costs are included as
Exceptional costs in the Group’s consolidated
statement of comprehensive income.
Truststream contributed £4.9m to Group revenue
and £0.3m profit before tax for the twelve month
period to 31 March 2023. Orchard was acquired
on 26 April 2022 under a lock box mechanism
which fixed the financial returns to the Group
from 1 April 2022. Orchard contributed £1.8m
to Group revenue and £0.1m profit before tax
for the twelve month period to 31 March 2023 .
84
SysGroup plc Annual report and accounts 2023 11. Earnings per share
(Loss)/profit for the financial year attributable to shareholders
Adjusted profit for the financial year
Weighted number of issued equity shares
Weighted number of equity shares for diluted EPS calculation
Adjusted basic earnings per share (pence)
Basic earnings per share (pence)
Diluted earnings per share (pence)
(Loss)/profit after tax used for basic earnings per share
Amortisation of intangible assets
Exceptional items
Share based payments
Tax adjustments
Adjusted profit used for adjusted earnings per share
12. Taxation
Current tax
Current tax - current year
Adjustments in respect of prior years
Total current tax charge
Deferred tax
Deferred tax - timing differences
Total deferred tax
Total tax (credit)/charge
2023
2022
(£7,000)
£451,000
£1,917,000
£1,748,000
48,859,690 48,859,690
52,274,633
51,983,666
3.9p
0.0p
0.0p
3.6p
0.9p
0.9p
2023
£’000
2022
£’000
(7)
451
1,739
1,243
408
–
178
195
(401)
(141)
1,917
1,748
2023
£’000
2022
£’000
374
–
374
(472)
(472)
(98)
120
(94)
26
121
121
147
85
SysGroup plc Annual report and accounts 2023
The effective tax rate for the year to 31 March 2023 is higher (2022:higher) than the standard
rate of corporation tax in the UK. The differences are explained below:
(Loss)/profit on ordinary activities before tax
(105)
598
(Loss)/profit on ordinary activities before taxation multiplied
by the standard rate of UK corporation tax of 19% (2022:19%)
(19)
114
2023
£’000
2022
£’000
Effects of:
Expenses not deductible
Prior year adjustment
Short term timing differences
R&D tax credits
Re-measurement of deferred tax due to changes in UK rate
Deferred tax on share based payments
Deferred tax on acquired intangible assets
Use of brought forward losses
Total tax (credit)/charge
The Group recognised deferred tax assets and liabilities as follows:
Deferred tax on customer relationships
Deferred tax asset on share-based payments
Capital allowances timing differences
Deferred tax liability
92
–
98
(29)
(66)
32
(206)
–
34
(94)
–
–
142
6
–
(55)
(98)
147
2023
£’000
(1,421)
166
(179)
2022
£’000
(846)
116
(281)
(1,434)
(1,011)
Recognition of deferred tax assets is restricted to those instances where it is highly probable
that relief against taxable profit will be available.
86
SysGroup plc Annual report and accounts 2023
The movement in the deferred tax (“DT”) account during the year was:
Balance at 1 April 2022
Acquired intangible assets
DT acquired on acquisitions
DT on share based payments
DT on amortisation of intangible assets
Effect of changes in deferred tax rate
Fixed asset and other timing differences
Balance at 31 March 2023
Capital
allowances
& timing
differences
£’000
Customer
relationships
£’000
Total
£’000
(165)
(846)
(1,011)
–
(7)
15
–
–
144
(13)
(888)
(888)
–
–
379
(66)
–
(7)
15
379
(66)
144
(1,421)
(1,434)
Factors affecting future tax charges:
Deferred tax balances are recognised at 25% (2022: 19%) following UK government
legislation to increase the rate of corporation tax from 19% to 25% on 1 April 2023.
SysGroup plc Annual report and accounts 2023
87
87
SysGroup plc Annual report and accounts 2023 13. Intangible assets
Group cost
At 1 April 2021
Additions
At 31 March 2022
At 1 April 2022
Additions
Disposals
At 31 March 2023
Accumulated amortisation
At 1 April 2021
Charge for the year
At 31 March 2022
At 1 April 2022
Charge for the year
Disposals
At 31 March 2023
Net book value
At 31 March 2022
At 31 March 2023
Company cost
At 1 April 2021 & 31 March 2022
Additions
At 31 March 2023
Accumulated amortisation
At 1 April 2021 & 31 March 2022
Charge for the year
At 31 March 2023
Net book value
At 31 March 2022
At 31 March 2023
Systems
development
£’000
Software
licences
£’000
Customer
relationships
£’000
Positive
goodwill
£’000
Total
£’000
802
271
1,073
1,073
163
(225)
1,011
264
140
404
404
177
(225)
356
669
655
205
–
205
205
–
9,156
15,554
25,717
–
9,156
9,156
3,553
–
271
15,554
25,988
15,554
25,988
6,112
–
9,828
(430)
(205)
–
–
12,709
21,666
35,386
201
4
205
205
–
(205)
–
–
–
4,408
1,099
5,507
5,507
1,562
–
7,069
–
–
–
–
–
–
–
4,873
1,243
6,116
6,116
1,739
(430)
7,425
3,649
5,640
15,554
21,666
19,872
27,961
Systems
development
£’000
Total
£’000
–
28
28
–
2
2
–
26
–
28
28
–
2
2
–
26
88
SysGroup plc Annual report and accounts 2023
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 5 years
Cash-generating units (“CGUs”)
Goodwill and intangible assets are allocated
to CGUs in order to be assessed for potential
impairment. The Group has a core CGU of
“Managed IT Services” and as the Group
acquires new businesses they form their own
CGU until they have been integrated into the
Group’s core operational structure.
The Group has a Senior Leadership Team that
manages the SysGroup business within a single
operational and delivery structure and during
the year the Orchard business was fully integrated
within the core operational structure. On 31 March
2023, the trade, assets and liabilities of Orchard
Computers Limited were hived up to SysGroup
Trading Limited. In view of this integration and
hive up of the business, the Directors concluded
that the Orchard business formed part of the
IT Managed Services CGU at 31 March 2023.
Whilst the Truststream business was integrated
within the SysGroup leadership structure and
onto the Group system platforms, the business
continues to operate its own cash transactions
and balances and therefore remains a distinct
cash generating unit of the Group. As such,
the Directors consider Truststream to be a
separate CGU.
The allocation of goodwill and carrying amounts
of assets for each CGU is as follows:
Allocation of goodwill
Carrying value of assets
2023
£’000
2022
£’000
2023
£’000
2022
£’000
Managed IT services
16,064
15,554
19,366
21,280
Truststream Security Solutions
5,602
–
6,698
–
Total
21,666
15,554
26,064
21,280
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: post-tax cash flow
projections; long-term growth rates; and a post-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 prepared for
each individual cash generating unit. 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% (FY22:
2.5%) for net post-tax cash flows. 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 year end 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.
89
SysGroup plc Annual report and accounts 2023 The IT Managed Services CGU has over 40%
headroom of VIU compared to the carrying value
of assets, and the Truststream CGU has over 30%
headroom. For the headrooms to reduce to nil, the
post-tax discount rate would have to increase to
over 14.3% on IT Managed Services and 13.7%
on Truststream or future CGU profits would have
to be significantly below current forecast levels.
The assumptions used for the impairment review
are detailed below:
2023
Discount rate post-tax
Revenue growth rate year 2
Revenue growth rate year 3 to year 5
Terminal growth rate
2022
Discount rate post-tax
Revenue growth rate year 2
Revenue growth rate year 3 to year 5
Terminal growth rate
Managed
IT services
Truststream
10.7%
2.5%
2.5%
2.5%
9.4%
2.5%
2.5%
2.5%
10.7%
10.0%
2.5%
2.5%
–
–
–
–
SysGroup plc Annual report and accounts 2023
90
90
SysGroup plc Annual report and accounts 2023 14. Property, plant and equipment
Group cost
At 1 April 2021
Additions
Disposals
At 31 March 2022
At 1 April 2022
Additions
Disposals
At 31 March 2023
Accumulated depreciation
At 1 April 2021
Charge for the year
Disposals
At 31 March 2022
At 1 April 2022
Charge for the year
Disposals
At 31 March 2023
Net book value
At 31 March 2021
At 31 March 2022
At 31 March 2023
Office
equipment
£’000
Right of
use lease
£’000
Freehold
property
£’000
Total
£’000
2,138
620
(14)
2,744
2,744
249
(1,793)
1,200
1,641
379
(6)
2,014
2,014
358
1,942
239
–
2,181
2,181
935
(1,851)
1,265
1,523
267
–
1,790
1,790
259
(1,793)
(1,780)
579
269
382
4,462
–
–
382
382
–
–
859
(14)
5,307
5,307
1,184
(3,644)
382
2,847
17
8
–
25
25
8
–
33
3,181
654
(6)
3,829
3,829
625
(3,573)
881
497
730
621
419
391
996
365
357
349
1,281
1,478
1,966
During the year, the Group conducted a review of its fixed asset register and disposed of £3.6m
of fully written down value assets in office equipment and right of use assets. There was no net
gain or loss on disposal.
91
SysGroup plc Annual report and accounts 2023
14. Property, plant and equipment (contd.)
Company cost
At 1 April 2021
Additions
At 31 March 2022
At 1 April 2022
Additions
Disposals
At 31 March 2023
Accumulated depreciation
At 1 April 2021
Charge for the year
At 31 March 2022
At 1 April 2022
Charge for the year
Disposals
At 31 March 2023
Net book value
At 31 March 2021
At 31 March 2022
At 31 March 2023
Office
equipment
£’000
Right of
use Lease
£’000
269
51
320
320
150
(298)
172
223
55
278
278
56
(298)
36
46
42
136
157
189
346
346
47
–
393
70
64
134
134
70
–
204
87
212
189
Total
£’000
426
240
666
666
197
(298)
565
293
119
412
412
126
(298)
240
133
254
325
92
SysGroup plc Annual report and accounts 2023
15. Investments
Company
At start of year
Acquisitions
Investment in subsidiaries
At 31 March
2023
£’000
2022
£’000
24,895
24,895
8,913
226
–
–
34,034
24,895
The investment in subsidiaries of £226,000
relates to an investment cost in Orchard
Computers Limited arising from a loan waived
by SysGroup plc in favour of Orchard Computers
Limited, a 100% subsidiary group Company.
The recoverable amounts have been determined
from discounted cash flow calculations based
on cash flow projections from the forecasts
covering the period to 31 March 2024. The
principal assumptions can be found in note 13.
The Company’s subsidiary undertakings all of which are wholly owned and included in the consolidated
accounts are:
Undertakings
Registration
Principal activity
SysGroup Trading Limited
Truststream Security Solutions Limited
Certus IT Ltd
Hub Network Services Limited
Netplan LLC*
Orchard Computers Limited**
Independent Network Solutions Limited
Netplan Internet Solutions Limited
Rockford IT Limited
System Professional Limited
SysGroup (DIS) Ltd
England & Wales
England & Wales
England & Wales
England & Wales
USA
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Managed IT services
Managed IT services
Non-trading
Non-trading
Non-trading
Non-trading
Non-trading
Dormant
Dormant
Dormant
Dormant
*Netplan LLC is a wholly owned subsidiary of Netplan Internet Solutions Limited
** At 31 March 2023 Orchard Computers Limited became non-trading due to the hive up of its trade, assets and liabilities into SysGroup
Trading Limited. Orchard is owned 100% by Independent Network Solutions Limited.
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
Truststream Security Solutions Limited
whose registered office is:
8th Floor, Sugar Bond House,
Anderson Place, Leith, Edinburgh,
Scotland, EH6 5NP.
93
SysGroup plc Annual report and accounts 2023 16. Trade and other receivables
Amounts due within one year
Trade debtors
Amounts due from subsidiaries
Other debtors
Prepayments
Total
Group
2023
£’000
1,706
–
–
3,301
5,007
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
–
323
81
221
625
1,154
–
–
925
2,079
–
–
54
118
172
Amounts due from subsidiaries are due on demand and incur no interest.
The carrying value of trade and other receivables approximates to their fair value.
Debtor impairment
Trade debtors
Impairment provision
Total
Group
2023
£’000
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
1,979
(273)
1,706
–
–
–
1,360
(206)
1,154
–
–
–
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
585
(1)
584
Group
Over
1 month
past due
£’000
1,394
(272)
1,122
Total
£’000
1,979
(273)
1,706
Company
Up to
1 month
past due
£’000
Over
1 month
past due
£’000
–
–
–
–
–
–
Trade debtors
Expected credit loss
Net carrying amount
Total
£’000
–
–
–
94
SysGroup plc Annual report and accounts 2023 17. Trade and 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
Group
2023
£’000
Company
2023
£’000
1,813
–
988
110
3,099
522
Group
2022
£’000
1,116
–
889
Company
(restated)*
2022
£’000
115
5,476
488
2,801
3,731
2,005
6,079
438
622
–
132
188
499
7
138
Total
3,861
3,863
2,692
6,224
Amounts due to subsidiaries are due on demand and incur no interest charge.
Contingent consideration
Amounts due within one year
Contingent consideration
Amounts due after one year
Contingent consideration
Discounted value
Discounted contingent consideration
Group
2023
£’000
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
806
806
1,949
(74)
1,875
1,949
(74)
1,875
–
–
–
–
–
–
–
–
The contingent consideration is stated at its
discounted fair value. The consideration is
expected to be paid in two tranches in H1 FY24
and H1 FY25, following the completion of the
Year 1 and Year 2 earn-out periods and subject
to the terms of the earn-out mechanism.
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 2023 and 31 March 2022.
The maturity of the financial liabilities, excluding
loans and borrowings, classified as financial
liabilities and measured at amortised cost is
shown in note 3.
95
SysGroup plc Annual report and accounts 2023
18. Provisions
Dilapidations provision
Total
Group
2023
£’000
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
191
191
68
68
–
–
–
–
The provision is for the estimated aggregate cost of returning the Group’s offices to their original
condition on the expiry and exit of the property leases. Currently the leases extend to between
2023 and 2028.
19. Loans and borrowings
Non-current
Lease liabilities
Bank loan
Total
Current
Lease liabilities
Bank loan
Total
Group
2023
£’000
621
4,705
5,326
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
88
4,705
4,793
195
387
582
152
387
539
Group
2023
£’000
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
182
–
182
58
–
58
144
416
560
75
416
491
In April 2022, SysGroup plc re-financed its
existing term loan facility of £1.75m and its
undrawn acquisition revolving credit facility
of £3.25m and replaced both with a new £8.0m
revolving credit facility with Santander to provide
additional financial flexibility for the Group.
The new banking facility has a term of five years,
an interest rate of Base Rate +3.25% margin
on drawn funds and covenants that will be
tested quarterly relating to total net debt to
Adjusted EBITDA leverage and minimum liquidity.
The Group drew down £4.5m of RCF funds
for the Truststream acquisition in April 2022.
96
SysGroup plc Annual report and accounts 2023 20. Contract liabilities
Contract liabilities
Current - contract liabilities
Non-current - contract liabilities
Total
21. Share capital
Group
2023
£’000
Company
2023
£’000
Group
2022
£’000
Company
2022
£’000
3,633
383
4,016
–
–
–
1,163
296
1,459
–
–
–
Group and company
Number
£’000
Allotted, called up and fully paid ordinary shares of £0.01 each
At 1 April 2021
At 31 March 2022
At 31 March 2023
49,419,690
49,419,690
49,419,690
494
494
494
22. Reconciliation of net cashflow movements in net debt
1 April
2022
£’000
Non cashflow
movements
£’000
Cashflow
£’000
Right of use
movement
£’000
Maturity
reclass
£’000
31 March
2023
£’000
Cash and cash equivalents
4,133
–
53
Debt due in less than one year:
Bank loans
(436)
29
(3,901)
Contingent consideration
–
(2,681)
Lease liabilities
(144)
(32)
Debt due in more than one year:
Bank loans
(368)
(29)
Contingent consideration
Lease liabilities
–
(195)
–
–
–
303
–
–
–
–
–
–
(735)
–
4,186
4,308
1,875
426
–
(806)
(182)
–
–
–
(4,308)
(4,705)
(1,875)
(1,875)
(426)
(621)
Net cash/(debt)
2,990
(2,713)
(3,545)
(735)
–
(4,003)
The maturity reclass movements show the change in classification of the debt item
maturity periods due to contractual changes or new contracts incepted in the year.
97
SysGroup plc Annual report and accounts 2023
23. Related party transactions
24. Ultimate controlling party
The Directors consider the Group and Company
have no controlling shareholder and no ultimate
controlling party.
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:
Arete Capital Partners, a Company of which
Mike Fletcher (Non-Executive Director) is
a partner, invoiced SysGroup plc £26,479
(2022: £26,479) for a shared cost of corporate
services received by SysGroup plc and Arete
Capital Partners. At 31 March 2023, the balance
outstanding was £nil (31 March 2022: £nil).
98
SysGroup plc Annual report and accounts 2023 Notice of Annual General Meeting
SysGroup plc (Company)
Notice is hereby given that the Annual General Meeting of the Company will
be held on 22 September 2023 at 10am 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 2023 together
with the Directors’ and Auditors’ Reports
contained therein.
2. TO reappoint Michael James Fletcher
as a Director of the Company who retires
by rotation.
3. TO reappoint Martin Audcent as a Director
of the Company who retires by rotation.
4. TO appoint Heejae Chae as a Director
of the Company.
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 £343,307 (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. to holders of ordinary shares in proportion
(as nearly as may be practicable) to their
respective holdings; and
ii. 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 £171,653 (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 £171,653),
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.
99
SysGroup plc Annual report and accounts 2023 Special business
As special business, to consider and,
if thought fit, pass the following resolutions:
7. THAT, subject to the passing of resolution 6,
the Directors be given the general power to
allot equity securities (as defined by section
560 of the Companies Act 2006) for cash,
either pursuant to the authority conferred
by resolution 6 or by way of a sale of treasury
shares, as if section 561(1) of the 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.
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,
ii.
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 £25,748.
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 5,149,608;
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
17 August 2023
Registered Office:
Walker House, Exchange Flags, Liverpool, L2 3YL
100
SysGroup plc Annual report and accounts 2023 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.
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: sysgroup.com/
about-us/investor-relations/.
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 20
September 2023. Changes to entries on the
relevant register of securities after 10.00 am
20 September 2023 shall be disregarded in
determining the rights of any person to attend
and vote at the meeting.
4. As at 5pm on 16 August 2023, which is the
latest practicable date before publication
of this notice, the Company’s issued share
capital comprised 51,496,084 ordinary shares
of £0.01 each, of which 2,636,394 are treasury
shares in respect of which the Company is
not permitted to exercise voting rights (such
treasury shares equate to approximately
5.11 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 5pm on 16 August 2023
is 51,496,084. The Company’s website will
include information on the number of shares
and voting rights.
101
SysGroup plc Annual report and accounts 2023