Annual report
and accounts
2024
SysGroup specialises in the delivery
and management of cloud, data and cyber
security solutions to power Artificial
Intelligence (‘AI’) and Machine Learning
(‘ML’) transformation for its customers.
The Group offers an integrated set of
modern technologies that collectively
meet customers’ end-to-end data needs
including connectivity, cloud hosting,
delivery, analytics and governance of
customer data, as well as a security layer
for users and applications.
While many small and medium-sized
enterprises are eager to adopt AI/ML,
they often lack a clear strategy or
implementation path and are largely
underserved by the well-established
organisations who focus on serving
enterprise-size customers. There is
significant demand therefore for a partner
like SysGroup to support them in their
development of an AI/ML strategy
and enable its implementation.
As at 31 March 2024, the Group had
112 staff across offices in Manchester,
Edinburgh, London, Newport and Bristol.
We are a multi-award-winning technology solutions
provider and trusted partner for our customers
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SysGroup plc Annual report and accounts 2024
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SysGroup plc Annual report and accounts 2024
Contents
Strategic report
05 Executive Chairman’s statement
09 Chief Financial Officer’s report
14 Principal risks and uncertainties
17 s172 statement
20 Environmental, social and governance (ESG) report
Governance report
27 Board of Directors
28 Directors’ report
31 Directors’ remuneration report
35 Corporate governance report
41 Statement of Directors’ responsibilities
Financial statements
42 Independent auditor’s report to the members of SysGroup plc
50 Consolidated statement of comprehensive income
51 Consolidated statement of financial position
53 Company statement of financial position
55 Consolidated statement of changes in equity
57 Company statement of changes in equity
58 Consolidated statement of cashflows
59 Notes to the consolidated financial statements
04 Highlights
95 Company information
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SysGroup plc Annual report and accounts 2024
2024
2023
(Restated)*
Change %
Revenue
£22.71m
£21.65m
5%
Recurring revenue as a % of total revenue
76%
75%
1%
Gross margin %
46%
51%
(11)%
Adjusted EBITDA1
£2.01m
£3.13m
(36)%
Statutory loss before tax
£(6.57)m
£(0.30)m
854%
Basic EPS
(12.1)p
0.0p
–%
Adjusted Basic EPS2
2.1p
3.5p
(44)%
Cashflow from operations
£1.10m
£3.02m
(64)%
Net (debt)3
£(3.40)m
£(1.32)m
157%
Strategic and organisational
• Heejae Chae acquired 14% share interest
and was appointed Executive Chairman
• Repositioned as technology partner
for Small Medium Businesses (SMBs)
in their AI and digital transformation
• Replaced 11 senior leaders (including Chief
Executive Officer (CEO) and Chief Financial
Officer (CFO)) with six new talents
• Recruited an AI team of software engineers
with extensive experience in ML and data
architecture and a team of cloud experts
• Rebuilding of go-to-market organisation
• Refreshed the Board with seasoned
professionals with extensive and
relevant experience
• Achieved AWS Select Tier Service
Partner status (Level 2)
• Announced a strategic partnership
with Softcat to become their designated
outsource partner for AI/ML offerings
Post period-end developments
• Raised £11.2m in oversubscribed equity placing
to fund an internal transformation project,
strengthen the balance sheet to provide for
ongoing working capital requirements and
liquidity for acquisitions
• Closed the second largest contract in
SysGroup’s history totalling £2.2m over
three years
• Progressed to AWS Advanced Tier Service
Partners status (Level 3) qualifying for
fundings and joint sales and marketing
• Authorised as one of only two UK Zscaler
Managed Security Service Partners
Financial
1 Adjusted EBITDA is defined as profit before net finance costs, tax, depreciation, amortisation, impairments, shared based
payment charge and adjusting items.
2 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.
3 Net (debt) represents cash balances less bank loans and lease liabilities excluding contingent consideration.
* See accounting policies (note 1) for further details of the restatement.
Highlights
5
SysGroup plc Annual report and accounts 2024
Strategic report
Executive Chairman’s statement
Overview
Over the past year, the Group has
completely transformed its strategy,
execution and leadership.
Since acquiring a 14% share and becoming
the Executive Chairman 12 months ago,
we have repositioned the Company as the
preferred technology partner for SMBs in their
AI and digital transformation efforts. AI will
have a significant impact on businesses and
represents a key opportunity for transformation.
Our goal is to guide SMBs through the complex
AI value chain and support their transformation
journey from start to finish.
Trading for the year has been strong with Group
revenues increasing 5% to £22.7m driven by a
significant 14% increase in the second half of the
year compared to the same period in FY23. We
have continued to maintain the momentum into
the new financial year across all our technology
offerings and, as previously announced, at the
end of April, we closed the second largest
contract in SysGroup’s history, totalling £2.2m of
revenue over three years. Our AI/ML proposition
continues to gain traction amongst both new and
existing customers with a growing pipeline
of opportunities.
Our progress has also been recognised by
our partners, as evidenced by our achieving
of AWS Select Partner Level 3 Status, approval
for the Zscaler Global MSSP Programme and
our partnership with Softcat plc (one of the UK’s
largest Valued Added Resellers) to be their ML
partner of choice.
We have also received considerable support from
existing and new investors and in June 2024 we
closed an oversubscribed placing, subscription
and retail offer that raised just over £11.2m; clear
validation of our strategic direction and affirmation
that others share our vision for the business and
the next stage of its growth. The funds raised will
be used for a variety of purposes: (i) approximately
£2m of the proceeds will be used to fund our
internal transformation programme, referred
to in more detail below; (ii) a further £2m will be
used to meet the contingent earn-out payment
in relation to the acquisition of Truststream back
in 2022; and (iii) the remainder has left us with
a strong balance sheet and given us liquidity
for the M&A opportunities we are pursuing.
We have made substantial investment in
both our IT infrastructure and people during
the year and will continue to make these
investments. These include upgrading our
SysCloud infrastructure with the latest hardware
and enhancing our internal security architecture
with a leading cloud-based security platform.
Approximately £2m of the proceeds from the
recent fundraising are intended to be used to
fund an internal transformation project to
provide the Group with systems using AI-driven
technologies. This will enable the Company to be
a true AI adopter and innovator, acting as a live
case study of best practice to our customers.
We have completed the refurbishment of our
offices to provide a positive and productive
working environment whilst we continue to
operate flexible working practices. Finally, we
announced the closure of our Liverpool office
and relocation of the registered office to
Manchester with effect from 1 March 2024.
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SysGroup plc Annual report and accounts 2024
To support our end-to-end data platform strategy,
we have segmented our technology into five key
areas: (i) data analytics and ML (ii) data storage
and management (iii) data connectivity (iv) data
engineering and (v) cybersecurity. We will invest
to enhance the existing competencies organically
as well as through acquisitions to fill the gaps
in our technology offerings and have, for example,
recruited a team of AI/ML engineers from
industry leaders such as AWS, JP Morgan,
Validus and McLaren.
We have significantly strengthened the
senior management team, bringing together
the right skillsets and mindsets. Throughout
the organisation we are reinforcing a culture
of customer focus and outstanding service
underpinned by innovation, entrepreneurialism
and high performance.
Finally, the core business, which has circa 80%
recurring revenues, provides a very solid base
from which we can expand, giving us very good
revenue certainty and visibility whilst the
investment we are making in the company
will drive growth in future years.
Strategy
Our technology strategy is to build a modern,
unified data solution platform that is as simple
for SysGroup to sell and support as it is for our
customers to consume and benefit from. This
will comprise of an integrated set of technologies
that collectively meets our customers end-to-end
data needs. It will allow for connectivity, storage,
preparation, delivery, analytics and governance
of customer data, as well as a security layer for
users and applications.
Since my appointment I have engaged with
various stakeholders including customers,
employees, partners and competitors.
These interactions have provided valuable
insights into both industry trends and company-
specific challenges. SysGroup is well positioned
to participate in the burgeoning field of AI/
ML, a technology set to redefine our era. AI’s
prominence is undeniable, with daily media
coverage and increasing demand for AI
strategies at the board level of every company
and organisation. AI is here to stay and will
be a powerful tool for those that embrace it.
Factors driving the AI/ML adoption include:
• The growing availability of data, crucial for
training AI/ML algorithms; as the amount of
data that companies collect continues to grow,
so does the potential for AI/ML to deliver value
• The decreasing costs of computing power,
making AI/ML models more accessible across
varying company sizes and budgets
• The increasing sophistication and user-
friendliness of AI/ML tools and technologies
Our overall strategy is to position SysGroup as
the go-to, end-to-end data solution provider for
SMBs embarking on their AI/ML journey. It is clear
from our conversations with our customers that
there is a significant gap in the market: while many
SMBs are eager to adopt AI/ML, they often lack
a clear strategy or implementation path. There
is a great demand for a partner to support the
development of an AI/ML strategy and transition
from current platforms and solutions. According
to a recent IONOS/YouGov study of 4,807 SMB
owners across the UK, US, France, Germany
and Spain: (i) UK business leaders have the lowest
number of people already using AI frequently
for work (9% compared to 15% average) (ii) only 7%
of UK SMBs consider their level of AI knowledge
to be very good compared to 32% in the US
(iii) 48% of UK SMBs state their knowledge of
the technology to be fairly poor or very poor
and (iv) 56% of respondents have never used
AI tools before in work, the highest percentage
of the countries surveyed. This failure to adopt
is not due to a lack of desire to engage with
technology and we see this as a huge opportunity
for our business and its future growth.
Many providers claim to be AI/ML experts but lack
the capability to provide an end-to-end solution.
Traditionally, most IT providers specialise in
specific technology stacks: AI/ML strategy
requires a holistic approach where the outcome
is delivered from both software and hardware
solutions. We know that a significant proportion
of all AI projects fail because they have not taken
this holistic approach, for example, by not defining
the correct business case or not employing
appropriate data architecture framed by the
right technology infrastructure. Whilst gaps still
exist in our offerings, we believe that we have the
framework to deliver our strategy, underpinned
by the relationship with our customers.
Finally, in order to build the size and scale
of business we are looking to create, we will
continue to explore acquisitions with the
focus on (i) expanding capabilities in certain
areas of technology expertise as well as
(ii) acquiring companies or businesses that
have interesting and relevant customer bases.
Ideally opportunities will satisfy both criteria.
Board and management changes
During the financial year, we have refreshed the
Board with people with significant and relevant
industry experience to match the expectation
and ambition of the Group. Paul Edwards joined
as a Non-Executive Director in September 2023
and brings extensive plc experience as the CFO
of Tatton Asset Management plc, and previously
Scapa Group plc and NCC Group plc.
Mark Reilly joined as a Non-Executive Director
in December 2023 and is currently Managing
Partner, Technology at IP Group plc. Mark was
previously a Non-Executive Director at Actual
Experience plc and Mirriad Advertising plc.
Owen Phillips joined as CFO in March 2024 from
Matillion Limited, a leading provider of cloud data
integration tools. Owen held various financial
management positions in the data/tech sector
as well as working in professional practice at
Grant Thornton UK LLP.
Davin Cushman joined as Non-Executive Director
in June 2024 and has over 25 years of experience
within the technology industry. He served as CEO
at Ignite Technologies, an enterprise software
company and founded Brightrose Ventures to
advise, acquire and operate software companies.
Wendy Baker was also appointed as Company
Secretary and General Counsel, providing
oversight and guidance on governance. Wendy
was previously at Scapa Group plc, Promethean
World plc and Volex Group plc.
We have also enhanced the senior management
team with the appointments of people with
relevant experience from leading companies
in the sector.
Paul Sullivan was appointed as Chief Technology
Officer; Paul was the founder of Truststream which
SysGroup acquired in April 2022.
Heinrich Koorts joined as Chief Revenue Officer
from Softcat plc where he spent the past 10 years
in London and Bristol.
Ross Humphrey joined as the Chief AI Officer
to lead our AI/ML initiative; Ross has over a
decade of experience in ML as one of the UK’s
early adopters during his tenure at JP Morgan
and Validus.
Charles Vivian joined as Director of Business
Development to support our M&A strategy;
Charles was previously at MXC Capital, Marwyn
Capital and Freshfields Bruckhaus Deringer.
Rebecca Boyle joined as Chief People and
Culture Officer; Rebecca has over 20 years
HR experience gathered from large plc’s such
as Boots, Galliford Try and Punch Taverns and
more recently was at Cawood Limited, a private
equity backed buy-and-build.
All these individuals bring invaluable experience
and expertise, positioning SysGroup extremely
well for future success.
Finally, we have taken steps to ensure robust
corporate governance, reviewing the board and
committees’ Terms of Reference and establishing
a new Nomination Committee to ensure that
the composition and succession of the board
is reviewed and reflects a balance of skills,
knowledge and experience which is appropriate
for the company.
Left to Right:
Owen Phillips: Chief Financial Officer. Rebecca Boyle: Chief People and Culture Officer. Paul Sullivan: Chief Technology Officer.
Wendy Baker: Company Secretary & General Counsel. Ross Humphrey: Chief AI Officer. Heinrich Koorts: Chief Revenue Officer.
Sumayya Suleman: Head of Customer Experience. Charles Vivian: Head of Corporate Development.
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SysGroup plc Annual report and accounts 2024
Summary and outlook
I’m enormously excited about the Company’s
potential and future prospects. What gives
me the greatest sense of optimism is the people
within our organisation and I wish to extend my
thanks to each and every one for their effort and
commitment. Our greatest asset is those people
and we are building an extraordinary team. It is
my mission to ensure SysGroup becomes a place
where everyone feels excited and proud to work
and I am committed to creating an environment
that inspires people to give their best and strive
for excellence around our core values of Learning,
Integrity, Kindness and Entrepreneurship.
Over the next 12 months we will lead by example,
revolutionising our Company through data and
AI. We have already identified 31 transformative
use cases that will significantly enhance
our business operations. This is not just about
adopting new tools; it’s about reimagining
our entire way of doing business. We will
simultaneously be carrying this approach into
our customer engagements as we seek to take
them on the same journey to transform their own
organisations and ways of doing business.
We are on the brink of very exciting times for
both the market in which we operate and our
own organisation and I look forward to taking
all our stakeholders on this journey.
Heejae Chae
Executive Chairman
30 July 2024
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SysGroup plc Annual report and accounts 2024
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SysGroup plc Annual report and accounts 2024
Strategic report
Chief Financial Officer’s report
Group statement of comprehensive income
The Group delivered revenue of £22.71m (FY23: £21.65m), an increase of 5%
on the prior year, Adjusted EBITDA of £2.01m (FY23: £3.13m) and a statutory
loss before tax of £6.57m (FY23: loss before tax of £0.3m).
Organic growth drove an increase in revenue
of 5% year-on-year, driven by a 14% increase in
the second half of the year (compared to the
same period FY23), which offset a (3)% decline
in the first half.
Managed IT services revenue was £18.59m
(FY23: £17.44m), an increase of 7% on the prior
year, and VAR revenue was £4.12m (FY23: £4.21m),
a decrease of 2%. The overall revenue mix
stands at 82% managed IT services (including
professional services) and 18% VAR (FY23:
81%:19%).
Gross profit was £10.40m with a gross margin
of 46% (FY23: £10.9m and 50% respectively).
Gross margin has fallen in part due to certain
supplier price rises as well as a change in
product mix, driven in particular by an increase
in cyber security revenue following the continued
growth of our Truststream’s IT security services
business, acquired in 2022, which typically carries
a lower margin than the remaining core managed
services offerings.
Revenue by operating segment
2024
£’000
2023
£’000
%
Managed IT services
18,592
17,441
7%
Value-added resale
4,122
4,207
–2%
Total
22,714
21,648
5%
Gross profit by operating segment
2024
£’000
2023
(Restated)*
£’000
%
Managed IT services
9,733
10,155
–4%
Value-added resale
663
747
–11%
Total
10,396
10,902
–5%
* See accounting policies (note 1) for details.
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SysGroup plc Annual report and accounts 2024
Reconciliation of operating profit to adjusted EBITDA
2024
£’000
2023
(Restated)*
£’000
Operating (loss)/profit
(5,996)
184
Depreciation
570
625
Amortisation of intangible assets
1,696
1,739
Impairment of intangible assets
3,718
–
EBITDA
(12)
2,548
Exceptional items
1,826
408
Share based payments
194
178
Adjusted EBITDA
2,008
3,134
Gross profit % by operating segment
2024
£’000
2023
(Restated)*
£’000
%
Managed IT services
52%
58%
–6pp
Value-added resale
16%
18%
–2pp
Total
46%
50%
–4pp
* See accounting policies (note 1) for details.
* See accounting policies (note 1) for details.
Operating expenses (before depreciation,
amortisation, impairments, exceptional items
and share based payments) of £8.39m were
£0.62m higher than last year (FY23: £7.77m) as
the Group underwent substantial investment
in people and systems to support our growth
strategy. During the year we also closed our
office in Liverpool, moving the registered address
to our Manchester office.
Adjusted EBITDA was £2.01m for the 12 months
to 31 March 2024 (FY23: £3.13m) which is an
Adjusted EBITDA margin of 8.8% (FY23: 14.5%).
The lower margin percentage reflects the
reduced gross margin combined with the
additional operating expenses detailed above.
The consolidated income statement includes
£1.83m (FY23: £0.41m) of exceptional costs
which include £0.74m costs associated with
the CEO exit settlement, £0.57m relating to costs
associated with the restructuring of the Senior
Leadership Team (FY23: £0.19m) and £0.43m
relating to supplier payments in dispute.
Amortisation of intangible assets was £1.70m
(FY23: £1.74m) in the year, of which £1.47m
(FY23: £1.56m) relates to the amortisation
of acquired intangible assets from acquisitions
and £0.22m (FY23: £0.18m) relates to the
amortisation of software development and
licence costs.
Impairment of intangible assets was £3.72m
(FY23: £nil) in the year. The managed IT services
cash-generating unit (CGU) goodwill is comprised
of acquisitions dating from 2016 to 2022.
Based upon a prudent assessment of the future
performance of these acquisitions (being the
‘managed IT services CGU’), management’s view
is that the CGU is impaired by £3.72m.
Finance costs increased in the year to £0.57m
(FY23: £0.48m) relating to the loan balance at
31 March 2024 of £4.7m (31 March 2023: £4.7m),
mainly from the increase in bank base rates
during the period. Finance costs also include
£0.11m (FY23: £0.13m) 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 £0.19m for
the year (FY23: £0.18m) 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.
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SysGroup plc Annual report and accounts 2024
Taxation
The Group has a tax credit of £0.67m this year
(FY23: £0.10m) which principally arises from
the deferred tax credit movement in the period.
The corporation tax current credit of £0.08m
(FY23: £0.37m charge) is as a result of R&D
tax credits claimed this year in relation to
the prior year. The deferred tax movement
is a £0.59m credit (FY23: £0.47m credit) due
to the increase in amortisation of acquired
intangibles recognised in the Consolidated
Statement of Comprehensive Income.
Cashflow and net debt
The Group’s financial position is a net debt
position at 31 March 2024 of £3.40m (31 March
2023: £1.32m). This excludes contingent
consideration at 31 March 2024 of £1.75m
(31 March 2023: £2.68m). The gross cash
balance at 31 March 2024 was £1.94m (FY23:
£4.19m). Cash balances have been utilised in
satisfaction of: (i) £0.93m in the Truststream
Security Solutions Limited (‘Truststream’)
Year 1 earn-out (contingent consideration)
and (ii) £1.50m in settlement of the former
CEO’s contractual departure terms including
the Company’s purchase of 2,076,394 ordinary
SysGroup shares (now held in treasury) following
the exercise of share options and immediate
sale of those shares.
Adjusted cash generated from operations was
£2.22m (FY23: £3.43m) and cash conversion
was strong at 111% (FY23: 109%) which compares
favourably to the target cash conversion range
of 80-90%. 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.
Net debt
2024
£’000
2023
£’000
Cash balances
1,943
4,186
Bank loans – current
–
–
Bank loans – non-current
(4,738)
(4,705)
Net (debt) before lease liabilities
(2,795)
(519)
Lease liabilities – property
(604)
(803)
Net (debt)
(3,399)
(1,322)
Contingent consideration
(1,751)
(2,681)
Net (debt) including contingent consideration
(5,150)
(4,003)
12
SysGroup plc Annual report and accounts 2024
The Consolidated Statement of Cashflows
reflects a further £0.89m payment of contingent
consideration relating to the acquisition of
Truststream. The Company also made a further
purchase of £0.76m shares into treasury,
relating to the exit settlement terms of the
previous CEO. The cash outflow for property,
plant and equipment of £0.45m (FY23: £0.25m)
includes expenditure on various office fit-outs
and the payments to acquire intangible assets
of £0.11m (FY23: £0.16m) includes the capitalisation
of various software development costs.
£8.0m revolving credit facility
The Company continues to hold a £8.0m RCF
provided by Santander in April 2022, to provide
financial flexibility for acquisitions and working
capital requirements. The Group drew down
£4.5m of RCF funds to finance the acquisition
of Truststream in FY23. There have been no
further drawdowns other than interest charges.
The 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.
Consolidated statement
of financial position
At the year end, the Group’s total net
assets are £14.77m (FY23: £21.24m).
Non-current assets of £24.50m (FY23: £29.98m)
include Intangible Assets of £22.66m (FY23:
27.96m) and Property, Plant and Equipment
(‘PPE’) of £1.85m (FY23: £1.97m). There were
£0.45m of PPE additions relating to office
expenditure. As noted above, an impairment
of goodwill in the managed IT services CGU
of £3.72m has been recorded in the year.
The remaining movement year-on-year relates
to ordinary amortisation and depreciation.
Working capital was managed well throughout
the year with debtor days at the target level
of 25 days at year end and suppliers routinely
paid in our monthly payment runs to agreed
terms. The gross trade debtor balance of £1.58m
compares to £1.71m in the previous year despite
the increase in trading revenue. The prepayment
balance of £1.85m (FY23: £3.10m restated) and the
contract liabilities balance (i.e. ‘deferred income’)
of £2.78m (FY23: £4.02m) have both decreased.
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.
Cash conversion
2024
£’000
2023
(Restated)*
£’000
Cashflow from operations
1,104
3,020
Adjustments:
Acquisition, integration and restructuring cashflows
1,117
408
Cash generated from operations
2,221
3,428
Adjusted EBITDA1
2,008
3,134
Cash conversion
111%
109%
* See accounting policies (note 1) for further details of the restatement.
1 Adjusted EBITDA is defined as profit before net finance costs, tax, depreciation, amortisation, impairments, shared based
payment charge and adjusting items.
13
SysGroup plc Annual report and accounts 2024
2024
2023
(Restated)*
Change %
Revenue
£22.71m
£21.65m
5%
Recurring revenue as a % of total revenue
76%
75%
1%
Gross profit
£10.40m
£10.90m
(6)%
Gross margin %
46%
50%
(11)%
Adjusted EBITDA1
£2.01m
£3.13m
(36)%
Statutory (loss) before tax
£(6.57)m
£(0.30)m
854%
Net (debt)2
£(3.40)m
£(1.32)m
157%
Share option grants
During the year, the Remuneration Committee
granted 362,709 performance shares to
Adam Binks (former Chief Executive Officer)
and 204,024 performance shares to Martin
Audcent (former CFO), in relation to the Group’s
performance in FY23 under the terms of the
2020 SysGroup Long Term Incentive Plan.
During the year to 31 March 2023, the
Remuneration Committee granted 284,010
performance shares to Adam Binks and 170,406
performance shares to Martin Audcent in relation
to the Group’s performance in FY22 under the
terms of the same plan.
KPIs
The Board of Directors review the performance
of the Group using the financial measures
outlined below and an explanation of the financial
results is provided in the Financial Review above.
Owen Phillips
Chief Financial Officer
30 July 2024
*See accounting policies (note 1) for further details of the restatement.
1 Adjusted EBITDA is defined as profit before net finance costs, tax, depreciation, amortisation, impairments, shared based
payment charge and adjusting items.
2 Net (debt) represents cash balances less bank loans and lease liabilities.
14
SysGroup plc Annual report and accounts 2024
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 General Counsel who is a member
of the Senior Leadership Team is responsible
for reporting to the Board on the Group’s
Risk Management framework, General
Data Protection Regulation (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 the business from
a cyber-attack that prevents
business operations
Likelihood: medium
The instance of cyber-attacks on
companies is becoming more prevalent
across all businesses from SMBs
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 we have recently
enhanced our internal security
architecture with a leading cloud-
based security platform). In addition,
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.
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SysGroup plc Annual report and accounts 2024
Principal risk
Potential impact
How we mitigate the risk
Political and economic developments
Likelihood: medium
Whilst the high level of inflation
and energy prices in the UK economy
experienced throughout FY23 have
moderated in FY24, the Russian
invasion of Ukraine has continued
and we have also witnessed other
global conflicts. Again, whilst the
situation has improved, there
continues to be some impact on
certain supply chain timelines.
The impact of high inflation and energy
prices has been to increase supplier
costs to the Group and particularly
from datacentre suppliers.
We have maintained the likelihood
of this risk as medium and look to
review this as the broader situation
evolves over time.
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 is 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 would communicate the
lead times to customers to enable
them to programme them into
their own strategic plans and/or
recommend alternative IT solutions.
Over-reliance on high value
customer contracts or high
value industry sectors
Likelihood: medium
Business risk increases if the Group
is over-reliant on one or several high
value customer contracts, or over-
reliant on one or several industry
sectors. The loss of key contracts
or a downturn in a particular industry
sector may have a material impact on
the financial performance of the Group.
The Board monitors customer
concentration throughout the
year with a target of customer
concentration below 5%. This target
was exceeded this financial year
with the top customer comprising
7% of revenue.
The Group’s customer base is
diversified across multiple industry
sectors which mitigates the impact
of a sector specific industry downturn.
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 are unable
to attract talent, there is 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 technology recruitment market
in FY24 was highly competitive for
specialist skills. The business has
had to contend with this challenge,
alongside inflationary wage pressures.
The Group rewards employees with
annual pay reviews, and pay awards
for promotions or wider role
accountability. We invest in skill
development for employees through
internal and external training and
offer a wide range of benefits. At all
levels we encourage our people
to be bold and find opportunities
to innovate and improve. We have
seen an improvement in our ability to
recruit key skills required for growth.
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SysGroup plc Annual report and accounts 2024
Principal risk
Potential impact
How we mitigate the risk
Evolution of the
Company strategy
Likelihood: low-medium
The Group’s current strategy is
to become a technology partner
that specialises in the delivery and
management of cloud, data and cyber
security solutions to power AI and
ML transformation.
Whilst this represents an extension
of the historic offerings, it nonetheless
requires the Company to enhance
these as well as offering new
technologies, specifically AI and ML.
This strategy is also being implemented
in both a nascent as well as a fast-
moving market environment, where all
organisations are having to understand
then think about how they implement
these new technologies into their
businesses and operations.
The Company has recruited numerous
individuals across all functions within
the business in order to lead this
strategic initiative. Specifically, the
Company has recruited a team of AI/
ML engineers from industry leaders
such as AWS, JP Morgan, Validus
and McLaren.
The Company is trialling the
introduction of these technologies
within its own business and
operations, with the specific objective
of better understanding them and
their implementation within a customer
environment, in order to de-risk
this from an end-user perspective.
This represents an evolution of
the current business, which will
continue to evolve progressively
and in a managed way so as to
minimise disruption to existing
customer relationships and the
operations of the Group.
Dependency on key suppliers
Likelihood: low
The Group procures services from
key suppliers that are critical to the
continued operation of its business;
the most significant of these are
the suppliers of third-party software
and datacentre services. If any of
these suppliers fail in the provision
of their services, it may have an
adverse effect on the Group’s ability
to provide services to its customers.
The Group continually assesses
suppliers for price competitiveness,
quality of service, technical innovation
and good financial standing. We are
confident that alternative providers
are available in the market should
the need arise.
Failure in the Group’s network
infrastructure prevents SysGroup
and our customers from operating
key business systems.
Likelihood: low
The datacentres we utilise are
linked together by diverse fibre
cables. Should the whole network fail,
there would be an adverse impact on
SysGroup’s systems and the service
provided to our customers.
The Group has designed its network
to have no single point of failure;
it connects with transit providers
at different geographical locations
with failover resilience.
Company acquisitions are
over-valued or poorly integrated
leading to a diminution in
shareholder value.
Likelihood: low
The Group’s strategy is to continue
to make 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 technology services
providers has characteristics of
fragmentation which provides multiple
suitable acquisition opportunities.
The Board assesses and then
considers all acquisition opportunities
after a robust due diligence process
has been undertaken, including
detailed valuation work.
The Executive team plan the
integration of acquisitions during
the acquisition process and the final
approach taken 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.
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SysGroup plc Annual report and accounts 2024
Strategic report
s172 statement
The Directors and the Board as a whole consider that they have acted in a way
that would be most likely to promote the success of the Company for the benefit
of its members as a whole (having regard to the stakeholders and matters set out
in S172(1) (a) to (f) of the Companies Act 2006) in the decisions taken during the
year ended 31 March 2024.
The Directors recognise the Group’s primary
stakeholders as employees, customers,
suppliers, shareholders, the community
and regulators. The Board actively seeks to
understand the interests of these stakeholders
to ensure they are appropriately considered
in decision-making processes.
To fulfil their duties the Directors ensure that
robust governance structures and processes are
embedded throughout the Group’s operations.
The Group’s strategy is determined by the Board
after reviewing materials and presentations from
the Senior Leadership Team. This encompasses
the impact on each of our main stakeholders and
ensures alignment to the Group’s culture, the
cornerstones of which are Learning, Integrity,
Kindness, and Entrepreneurship.
The Group’s strategy and purpose is to be the
technology partner of choice specialising in
the delivery and management of cloud, data
and security services to power AI and ML
transformation. The Group offers an integrated
set of modern technologies that collectively
meets customers’ end-to-end data needs
including connectivity, cloud hosting, delivery,
analytics and governance of customer data, as
well as a security layer for users and applications.
The Directors hold Board meetings on a monthly
basis. Board papers provide a full review of
the Group’s financial performance, operational
issues, 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,
environmental, social and governance (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 Executive
Chairman, Heejae Chae. The composition of
the Board and the scope of skills and experience
that the individual Directors bring ensure that
the Board is well placed in determining the
strategy of the Group and in doing so all the key
stakeholder groups are considered in strategic
decisions made.
The Board receives updates on the markets in
which the business operates. The Board regularly
meets members of the Senior Leadership Team
to discuss progress on strategy and specific
projects. FY24 was a transitional year with
changes to both the Senior Leadership Team
and the Board. Examples of key decisions taken
in FY24 are:
• The consolidation of the Liverpool and
Manchester offices to one North West office
• Investing in the upgrade of SysCloud
infrastructure with the latest hardware
• Revision of the scope of services to include
AI and ML
Maintaining high standards of business conduct
Corporate governance
The Board recognises the importance of
operating a robust corporate governance
framework. Steps have been taken to further
enhance these standards and our compliance
with the Quoted Companies Alliance Corporate
Governance Code (‘the QCA Code’) is outlined
on pages 37 to 40.
Employees
The Group’s employees are key to the success
of the business. We look to recruit high calibre
individuals and invest in their ongoing learning
and 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 communicate
openly with their line managers and colleagues.
The Senior Leadership Team meets weekly
to ensure coordination and focus in the right
areas. To gauge employee opinions about
working for SysGroup, we conduct regular
surveys. The results of these surveys inform
the decision-making processes of both the
Directors and the Senior Leadership Team,
helping to identify new ways to enhance the
working environment. An example of this was
the implementation of hybrid working patterns
which improved the well-being of employees.
In FY25, the Group plans to evolve the Culture
Advocate Programme into ‘Engagement Cells’
which will further enhance engagement across
the organisation.
The Group has redefined its core values
as Learning, Integrity, Kindness and
Entrepreneurship. These cornerstones
drive the culture of our business and are
reflective in the execution of our strategy
and the relationship and engagement with
our key stakeholders.
Learning
We encourage learning, believing that developing
talent enhances our business by improving both
the quality of output and employee retention
through growth opportunities. We offer training
and development programmes to our employees
and will further enhance these initiatives
to assist employees in achieving accreditations
and professional qualifications in various
areas. Additionally, we strive to foster a culture
where asking questions is encouraged. Sharing
information with each other creates a vibrant
and exciting environment.
Integrity
Integrity is essential to any business, involving
adherence to moral and ethical principles,
honesty, and consistency in actions, values,
methods and outcomes. It means doing the
right thing, even when no one is watching. Our
governance standards provide the framework
for maintaining integrity, with the culture being
led from the Board throughout the organisation.
Kindness
Businesses thrive when they build and maintain
strong relationships. Appreciation and respect
for others foster a culture of inclusivity and
empathy, which in turn promotes positivity and
support. Professionalism and thoughtfulness are
central to how we conduct ourselves both within
the business and with our external stakeholders.
By valuing kindness, we create an environment
where everyone feels valued and supported.
Entrepreneurship
The importance of innovation, risk-taking,
and proactive thinking is crucial in driving
business growth and success. We encourage
all employees to explore and develop new
concepts, take the initiative, and approach
challenges with a solution-oriented mindset.
Embracing entrepreneurship within our
organisation helps us stay competitive and
responsive to changing market demands.
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SysGroup plc Annual report and accounts 2024
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SysGroup plc Annual report and accounts 2024
Customers and suppliers
The Board discusses strategic decisions
that may significantly impact our customers,
including the portfolio of services and
products we offer, the supplier partners we
engage with, and changes to our operational
structure. These discussions ensure that our
offerings remain aligned with customer needs
and market demands.
Customers
We aim to delight our customers, and this
sentiment is at the heart of everything we
do. Our Account Managers, Chief Revenue
Officer and Chief Technology Officer regularly
meet with customers to understand their
IT needs and ensure these are addressed
appropriately and cost-effectively. Our Head
of Customer Experience, a key member
of the Senior Leadership Team, is primarily
responsible for liaising with customers to
resolve their IT problems and improve our
services. We measure and track customer
feedback to ensure standards are maintained
and continuously improved.
In FY25, we will issue a customer survey
to gather honest feedback on our service
and performance, helping us identify areas
for further enhancement.
Suppliers
The Board is briefed on major contract
negotiations and strategies concerning
key suppliers, particularly those providing
datacentre services, software and connectivity.
The Board seeks to balance maintaining strong
partnerships with key suppliers with the need
to obtain value for our customers and ensure
continued high quality and service levels.
SysGroup pays suppliers through monthly
payment runs.
Our objective is to manage our supplier
relationships to ensure we maintain high-
quality, good-value goods and services for
our customers. Engagement with our suppliers
begins with the selection process, ensuring
the product and service specifications align
with our requirements, accompanied by
due diligence. This engagement continues
throughout the procurement journey with
regular monthly or quarterly meetings.
Regulators
As an AIM listed Company, 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 all
applicable regulations, including but not limited
to the AIM rules, the Companies Act, the Market
Abuse Regulation, Employment legislation, GDPR,
Health & Safety, and Anti-Bribery and Corruption.
Ensuring adherence to these regulations is
fundamental to our operations and reflects
our commitment to ethical business practices.
The community and environment
We aim to have a positive impact on the local
communities in which we operate. We encourage
and support our employees to participate in
charitable events. We partner with organisations
to donate unused or refurbished laptops to
underprivileged children in our local areas and
donate office furniture and equipment to not-for-
profit organisations.
Our ESG policy aims 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 FY24 will soon
be available on our website.
SysGroup is generally a low waste business
and our offices recycle to the fullest extent
possible. We are committed to continually
improving our practices to support sustainability
and community welfare.
Shareholders
The Directors recognise the importance of
engaging with the Company’s shareholders
to ensure that the strategy, business model
and financial performance are well understood.
Throughout the year, the Executive Chairman
and CFO meet with investors to discuss relevant
matters. Shareholders are invited to attend
the Annual General Meeting, where all Board
members are present to address questions
relevant to the business of the meeting.
Additionally, shareholders can contact the
Non-Executive Directors if they wish to raise
any concerns.
We consider the Annual Report and Interim
Announcement to be key communication
tools for our shareholders. These reports
provide a clear explanation of the business
performance, financial position, organisation
changes and strategy.
20
SysGroup plc Annual report and accounts 2024
Strategic report
Environmental, social and
governance (ESG) report
Governance
SysGroup delivers solutions that enable
clients to understand and benefit from
industry-leading technologies and
advanced hosting capabilities.
By focusing on our customer’s strategic and
operational requirements, we enable them
to free up resources, grow their core business
and avoid the distractions and complexity
of delivering IT services. Our business is
structured to operate in line with our core
values, to ensure we meet our strategic goals.
The SysGroup Board has overall responsibility
for the Group’s ESG strategy and ensures that
the Group builds a business strategy that is as
resilient as possible to climate change.
At SysGroup (‘the Group’) we aim to
continue to grow our business sustainably
benefitting both our stakeholders
and the environment.
Although we are not subject to mandatory ESG
regulatory reporting requirements due to our
size, in FY22, the Board decided to proactively
commit to reducing our environmental impact
and supporting local communities. Consequently
we launched an ESG project to understand
the environmental and social impacts of our
operations. The project includes disclosing our
Greenhouse Gas (GHG) emissions and reporting
on our social and governance activities.
Operating as a responsible business is
embedded within SysGroup’s purpose, culture,
and core values. We strive to act responsibly,
considering both the environment and the
local communities where we operate. We have
partnered with a specialist ESG consultancy,
to assist in developing our ESG strategy.
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SysGroup plc Annual report and accounts 2024
Social
At SysGroup, we are committed to acting responsibly and making a positive
impact on our employees and the communities in which we operate.
Employee engagement
We recognise that a motivated and engaged
workforce is essential to our success. To support
this, we encourage our team leaders (employees
in managerial roles) to regularly hold face-to-face
meetings with their team members, to address
any work or personal concerns. Additionally, we
conduct employee surveys, to capture the views
and feedback of our team, helping us to identify
opportunities to improve our business.
In FY24, we had a significant response rate
of 85%, with 80% stating they were extremely
satisfied working for us. We analysed the feedback
from our employees, with the main areas of
improvement being in relation to cultural working
patterns. As a result, we have implemented a
hybrid working pattern, which improved well-being
and engagement. We will continue to develop
employee engagement processes across the
Group, where possible.
Last financial year, we successfully launched
a company newsletter, which continues to
be circulated quarterly to all employees and
distributed electronically on our intranet. The
newsletter is a fun and inclusive way to showcase
monthly events, provide business updates and
highlight employee recognition for all colleagues.
Our quarterly newsletter has gained a positive
reception among employees, serving as a
reliable source of updates and insights. This is an
important platform for distributing key information
so that new employees can learn more about
the Group. In FY25, we will develop the existing
culture advocate programme into ‘Engagement
Cells’. This will consist of quarterly team meetings
at each site, where employees can provide
feedback, and action plans can be developed.
This initiative will highlight any issues and result
in increased engagement across the Group.
In addition to the newsletter, the Executive
Chairman distributes a ‘Chairman’s Message’
to all employees via email, typically on a quarterly
basis, with key business updates. This ensures
employees are up to date in terms of strategy
and progress made by the Group.
As part of our strategic plan, we are embarking
on a comprehensive review of our organisational
values. Led by our leadership, this initiative
focuses on improving Learning, Integrity,
Kindness, and Entrepreneurship. These values
are to be embedded in the daily operations,
empowering every team member to embody them
authentically. Concurrently, we are committed
to nurturing a robust ‘Learning Culture’ across
the organisation, fostering continuous growth
and development. This involves a focus on
project- based learning, where employees
will acquire new skills by learning in the role.
To support this, we are introducing a dedicated
space for collaboration and idea-sharing in FY25.
Additionally, in FY25, our People and Culture (P&C)
team will explore avenues to enhance feedback
mechanisms, ensuring that every voice is heard
and valued going forward, for example, through
the Engagement Cells.
In FY24, we improved our employee shoutout
system, which employees use to send messages
to each other, such as messages of thanks, by
creating summaries in our newsletter, allowing
for even greater impact and recognition. Small
monetary vouchers are provided to employees
who are performing well, as a form of recognition.
This enhancement streamlines the process
and elevates the value of recognition within
our workplace culture. Furthermore, to help our
people spread the positivity that we implement
into our working environment, we have continued
our Candidate Referral Bonus Policy. The purpose
of this scheme is to incentivise our team members
to refer people they know directly to the Group as
candidates for positions.
Throughout the previous financial year, the P&C
team focused on decentralising activities, aiming
to improve engagement at localised levels. During
the festive season in December, we opted to
host different events at areas local to SysGroup
sites rather than just one location. This change
resulted in increased attendance rates and the
ability to tailor each gathering to the individuals
attending. Events included Clay Pigeon Shooting,
F1 simulator driving and various meals. Members
of the leadership team attended multiple site
events, to ensure that the events remained
inclusive whilst separate. We aim to continue
to arrange similar events at various times
during the year, to encourage direct interaction
amongst colleagues.
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SysGroup plc Annual report and accounts 2024
Employee welfare
At SysGroup, we take the well-being and health
of our employees seriously. We ensure that
all meetings are well structured, to effectively
address both immediate needs and long-term
strategic goals. Our Leadership Team meets
weekly to tackle practical, day-to-day matters,
and convenes bi-monthly to discuss long-term
initiatives, strategic planning, and execution
and milestones for project work.
Employee benefits
At SysGroup, we aim to provide benefits to our
employees, wherever possible. All employees
are offered the opportunity to sign-up for a private
medical insurance scheme upon completing their
probation period. They can increase their level
of insurance coverage and add their families to
the Group scheme, at a reduced rate compared
to the external market rate.
In May 2023, we successfully launched our
employee cycle-to-work scheme. Other SysGroup
employee benefits include financial advice, free
quarterly prize draws of vouchers typically valued
at £50 or £100, annual events to support team
health and well-being, and an additional half-day
of annual leave on their birthday.
In August 2024, we will be launching a Save
As You Earn (SAYE) scheme, accessible to
all employees, offering them the option to buy
shares at a discounted price. This initiative aims
to provide a valuable benefit and to foster
an entrepreneurial spirit within our workforce.
We believe it is important that employees can
provide feedback on their roles and the working
environment. Employees are encouraged to
share feedback with the Leadership Team on
an ad hoc basis. Feedback from Leadership
indicates that most of our employees thrive when
challenged and given opportunities to learn and
grow. Additionally, we remain proactive in our aim
to implement innovative ideas to enhance our
flexible benefits package, ensuring it evolves in
alignment with the diverse needs and preferences
of our workforce.
Diversity, equality and inclusion
Acknowledging the widely recognised challenge
of female representation within the IT industry,
SysGroup is committed to addressing this issue
and encouraging women to enter the industry
and apply for roles at SysGroup. Notably, we have
made significant strides in increasing female
representation on our leadership team, with
the proportion rising to 37.5% in FY2023/2024
(FY2022/2023: 22%). Furthermore, we have
implemented an enhanced maternity policy,
to better support working mothers. Additionally,
our adoption of hybrid working models, aims to
provide greater flexibility, encouraging improved
work-life balance for all employees.
Learning and development
We remain committed to developing our
employees’ technical skills and have commenced
a programme of training colleagues in ML and AI
capability. Colleagues are granted permission
to complete relevant training courses, to develop
their knowledge and skills.
In FY24, we supported employees
through professional qualifications such as
Augmentative and Alternative Communication
(AAC), and technical certificates, such as
Cisco Certified Network Associate (CCNA)
or similar from Microsoft and CyberArk.
These efforts aim to provide tailored pathways
for career advancement.
The success of the Cyber Graduate Apprentice
Programme continues, which we offer every
three years in partnership with Edinburgh Napier
University. Apprentices are with SysGroup four
days a week and spend one day at university.
A new starter was onboarded in FY24, with
an additional two participants scheduled to
complete the course in FY25. This continued
success highlights the effectiveness of the
programme in nurturing ability and developing
future talent. Encouraged by these achievements,
we are exploring opportunities to replicate this
model within other areas of our business, as well
as hiring more apprentices in September 2025.
Mirroring our decentralised approach to
engagement events, we adopted a similar
strategy for ‘bitesize learning’, which proved
particularly successful within the sales
function. By focusing on these learning
opportunities, we could effectively engage
vendors and partners, to provide tailored
training and upskilling sessions relevant
to each team member’s role. This approach
facilitated targeted learning and promoted
closer collaboration with external stakeholders.
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SysGroup plc Annual report and accounts 2024
Charitable and local communities
At SysGroup, we aim to have a positive impact
on the local communities in which we operate.
We partner with organisations to donate unused
and refurbished laptops, to underprivileged
children in our local areas, including the Young
Men’s Christian Association (YMCA), typically
twice a year. We try to ‘buy local’ and partner with
local businesses, where possible, to support the
local economies. We are committed to promoting
the circular economy and therefore donate old
furniture to not-for-profit organisations, providing
them with good condition second-hand office
equipment, alleviating significant costs for the
organisations. During the refurbishment of our
Bristol office in the current financial year and the
closure of the Liverpool office, we collaborated
with Collecteco, an organisation dedicated to
redistributing unwanted furniture and office items
to UK not-for-profit organisations. This partnership
had multifaceted benefits, facilitating a smooth
transition between offices and providing a
valuable benefit by diverting usable items
from landfills to support charitable causes.
Through our continued support of our chosen
charity, Mind, elected by our team members,
we have opportunities to make a positive impact
on communities’ mental health and well-being.
SysGroup supports and works with 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 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 in operating
more efficiently.
Environment
Responsible environmental operation is a key value embedded within our
culture and our growing ESG Strategy. We are committed to developing and
improving our ESG Strategy, by growing our understanding of ESG processes
and our environmental impact.
To underpin our growth and development,
we are committed to continually improving
our data collection processes and introducing
new initiatives to support our efforts to become a
more sustainable business. We are committed to
understanding and minimising our environmental
impact across all our operations, including
greenhouse gas emissions.
At SysGroup, our waste is typically domestic
due to the nature of our business. We promote
recycling efforts through fitted recycling bins
accessible across our offices, and employees
are actively encouraged through posters and
signs to fully recycle where they can.
Our colleagues will participate in a Group-wide
sustainability drive from September 2024,
where they can share their thoughts and ideas
on how SysGroup can be more sustainable.
We will aim to demonstrate our commitment
to protecting the planet. We ensure that our
products and service delivery have minimal
packaging. We are committed to taking a
sustainable approach to disposal when required,
separating waste materials for recycling.
At SysGroup, we recycle old office equipment
through a scheme which allows employees
to offer a small donation to a charity of their
choice in exchange for the recycled equipment.
Where equipment is not taken by employees
or donated, we recycle the old IT equipment
through Computer Equipment Recycling (CPR).
This collaboration ensures our equipment follows
GDPR legislation as the data is removed, restored
and recycled. The profits from retail sales and
this partnership are donated to UK charities.
Additionally, our partnership with Collecteco
helps further reduce our waste generation and
foster a circular economy. SysGroup remains
committed to considering the environment in our
business decisions and striving for sustainability
wherever possible.
Water
Although we do not operate in a high water-
intensive sector, we try to ensure that water
consumption by employees, across the Group,
is kept to a minimum.
24
SysGroup plc Annual report and accounts 2024
Materials
We recognise that our operations have an impact
on the environment, and we aim to minimise the
negative effects as much as possible. To this end
we aim to partner with companies that share our
ethos or ESG values. When sourcing materials we
particularly engage with companies committed
to operating responsibly, both environmentally
and socially. For each office fit-out, we strive to
source ethical and sustainably made products,
including those incorporating recycled materials.
GHG emissions
Reducing our GHG emissions is at the forefront
of our sustainability journey. We have established
an ambition to be net zero (90% reduction in
emissions prior to any residual offsets, up to
10% of the baseline being offset using carbon
removal offsets) for Scope 1 and 2 by 2030 and for
Scope 3 by 2040, compared to an FY2021/2022
baseline. As we have more control over reducing
our Scope 1 and 2 emissions, our net zero target
year is earlier than our Scope 3 target year.
Our emissions are defined and classified
as follows:
• Scope 1 emissions are direct GHG emissions
that occur from sources that we control
or own, i.e., gas usage and transport fuels.
In FY2023/2024, our total Scope 1 emissions
were 29.46 tCO2e.
• Scope 2 emissions are indirect GHG emissions
associated with our purchase of electricity.
Our offices and datacentre racks consume
electricity, which comprises 88.04% of our total
Group emissions. In FY2023/2024, our total
Scope 2 emissions were 360.60 tCO2e.
• Scope 3 emissions are the indirect GHG
emissions associated with our value chain.
Our SECR Scope 3 (Transport) emissions
in FY2023/2024 were 19.53 tCO2e.
Emissions scope
FY2023/2024 SECR
Emissions (tCO2e)
Percentage of
Total SECR
Scope 1
29.46
7.19%
Scope 2
360.60
88.04%
Scope 3 (Transport)
19.53
4.77%
Total
409.58
100%
Table 1: Our Scope 1, 2 and 3 (transport) emissions for FY2023/2024.
Data centres
We have taken steps to manage our Scope 2
emissions at datacentres. At our datacentres,
the energy we use for cloud hosting is responsible
for a high proportion of our Scope 2 emissions,
equating to 339.76 tCO2e in FY2023/2024.
Despite our limited ability to influence energy
efficiency within our datacentres, we have taken
steps to consolidate our locations. We have
exited the Bristol datacentre and transferred
most of the usage to the Vantage datacentre
in Cardiff. Vantage has a public net zero
commitment for 2030, along with many of
our other datacentres with net zero ambitions.
We plan to further engage with our datacentres
in FY25, to further understand their energy
consumption and initiatives for sustainable
operation, energy conservation and
carbon reduction.
25
SysGroup plc Annual report and accounts 2024
Streamlined energy and carbon reporting (SECR)
To enhance our reporting and deepen our understanding of our environmental
impact, we have voluntarily disclosed all measured emissions sources as required
by the UK Government’s SECR policy.
SECR mandates that companies report their
energy usage (kWh) and the corresponding
emissions (tCO2e). For SysGroup, this involves
categorising our energy usage into Scope 1
Natural Gas and Transport, Scope 2 Grid-supplied
Electricity and Scope 3 Transport Emissions.
This comprehensive reporting enables us and
our stakeholders to understand the Group’s
energy performance accurately and create
initiatives to promote energy efficiency. We have
reported our intensity metric of tCO2e per £m
turnover, to track our progress at the unit level
as our business grows and allow meaningful
year-on-year comparisons to monitor energy
management initiatives.
FY2023/2024
Consumption kWh
FY2022/2023
Consumption kWh
FY2021/2022
Consumption kWh
(baseline)
Percentage
change from
FY2023/2024
against baseline
Utility and scope
Total
Scope 1 Total
137,762
142,939
0
N/A
Natural Gas (Scope 1)
35,175
85,136
0
N/A
Transportation (Scope 1)
102,587
57,803
0
N/A
Scope 2 Total
1,741,398
1,430,125
1,676,193
+3.89%
Grid-Supplied Electricity (Scope 2)
1,741,398
1,430,125
1,676,193
+3.89%
Scope 3 Total
86,821
50,084
101,523
-14.48%
Transportation (Scope 3)
86,821
50,084
101,523
-14.48%
Total
1,965,981
1,623,148
1,777,716
+10.59%
FY2023/2024
Consumption
tCO2e
FY2022/2023
Consumption
tCO2e
FY2021/2022
Consumption
tCO2e (baseline)
Percentage
Change from
FY2023/2024
against baseline
Utility and scope
Total
Scope 1 Total
29.46
28.67
0.00
N/A
Natural Gas (Scope 1)
6.43
15.54
0.00
N/A
Transportation (Scope 1)
23.02
13.13
0.00
N/A
Scope 2 Total
360.60
276.56
355.91
+1.32%
Grid-Supplied Electricity (Scope 2)
360.60
276.56
355.91
+1.32%
Scope 3 Total
19.53
11.55
23.54
-17.03%
Transportation (Scope 3)
19.53
11.55
23.54
-17.03%
Total
409.58
316.78
379.45
+7.94%
Table 2: SysGroup FY2023/2024 Total Energy Consumption (kWh) for Scope 1, Scope 2 and Scope 3 (transport only).
Table 3: SysGroup FY2023/2024 Total Location-based Emissions (tCO2e) Scope 1, Scope 2 and Scope 3 (transport only).
26
SysGroup plc Annual report and accounts 2024
Increased on-site activity has contributed to an increase in electricity consumption. Also, new
datacentres added to the Company portfolio during FY2023/2024 have increased electricity
demand. As a result, overall emissions increased by 7.94% compared to the baseline year.
Intensity Metric
FY2023/2024
intensity metric
FY2022/2023
intensity metric
FY2021/2022
intensity metric
Percentage
Change from
FY2023/2024
against baseline
tCO2e/£m turnover
18.04
14.63
25.73
-29.89%
Table 4: SysGroup plc Total Emissions Intensity Metric.
Energy efficiency
Our primary objective has been to thoroughly
understand and accurately calculate our
environmental impact. To achieve this, we have
implemented a comprehensive data collection
process, enabling us to report in alignment
with SECR. By growing our understanding
of our energy consumption and carbon footprint,
we can identify emissions hotspots and areas
of significant environmental impact across
our portfolio. This insight allows us to target
these areas for improvement, driving more
sustainable practices and reducing our overall
carbon footprint.
A register of energy efficiency measures has
been compiled, with a view to implementing
these measures in the next five years. In the last
year, we have been reviewing and consolidating
our suppliers, with ESG performance forming
a growing part of our decision-making process.
We have also continued our partnership with
a specialist ESG consultancy, to support us
in navigating the ESG reporting landscape.
Ongoing in-depth reviews of our current
processes and policies have also contributed
towards the development of our ESG Strategy,
to introduce social and environmental initiatives.
Our colleagues will also be participating in
a company-wide sustainability drive from
September FY24, where we aim to demonstrate
our commitment to protecting the planet.
Methodology
SECR Scope 1, 2 and 3 consumption and CO2e
emissions data has been calculated, in line
with the 2019 UK Government environmental
reporting guidance and the GHG protocol - a
Corporate Accounting and Reporting Standard.
Government Emissions Factor Database 2023
version 1.1 has been used, utilising the current
published gross calorific value (CV) and kgCO2e
emissions factors relevant for reporting year
01/04/2023 – 31/03/2024. An intensity metric has
been calculated using total tCO2e figures, and
the selected performance indicator agreed with
SysGroup plc for the relevant report period (total
turnover), which was £22.70m and £21.65m in
FY2023/2024 and FY2022/2023, respectively.
27
SysGroup plc Annual report and accounts 2024
Governance report
Board of Directors
Heejae Chae
Executive Chairman
N
N
N
R
R
A
N
R
A
A
Heejae was appointed Executive Chairman on
26 June 2023. Previously he was the Chief Executive
of AIM-listed Scapa Group plc, a globally recognised
supplier of healthcare and industrial products.
Prior to his role at Scapa, Heejae served as the Group
Chief Executive of Volex Group plc and was Group
General Manager, Radio Frequency Worldwide, at
Amphenol Corporation. He holds Bachelor of Arts in
Economics and Bachelor of Science in Engineering from
Columbia University and an MBA from Harvard University.
Furthermore, Heejae is a Non-Executive Director and
Chairman of the Remuneration Committee for IP Group
plc and a Non-Executive Director of Elementis plc.
Paul Edwards
Non-Executive Director
Paul was appointed as a Non-Executive Director
on 25 September 2023. Paul is currently CFO
of Tatton Asset Management plc and has previously
been Group Finance Director of a number of quoted
companies including Scapa Group plc and
NCC Group plc.
N
Nomination Committee
A
Audit Committee
Committee Chairman
R
Remuneration Committee
Mark Reilly
Non-Executive Director
Mark was appointed as a Non-Executive Director
on 12 December 2023. Mark is currently Managing
Partner, Technology, at IP Group plc. Mark was
previously a Non-Executive Director at Actual
Experience plc and Mirriad Advertising plc.
He has overseen more than 200 private and
public company venture transactions and has
over a decade of experience sitting on technology
company boards. Mark holds a PhD in Engineering
from Cambridge University.
Mike Fletcher
Non-Executive Director
Mike was appointed as a Non-Executive Director on
8 January 2018. 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. Mike is a chartered accountant, qualifying
with PwC in 1999, and is both FCA and SRA approved.
Davin Cushman
Non-Executive Director
Davin was appointed as a Non-Executive Director
on 10 June 2024 and has over 25 years of experience
within the technology industry, having started his
career in 1996 with enterprise application pioneer
Trilogy. He served as CEO at Ignite Technologies,
an enterprise software company and subsequently
founded Brightrose Ventures to advise, acquire and
operate software companies, with a later $100 million
commitment from Brentwood Associates for software
acquisitions. Davin has an undergraduate degree in
Politics from Princeton University and an MBA from
Kellogg at Northwestern University.
Owen Phillips
Chief Financial Officer
Owen Phillips was appointed CFO with effect from
11 March 2024. Owen is a Chartered Accountant
having qualified in 2007. Prior to this appointment
Owen was Director in the finance function at
Matillion Limited, a leading provider of cloud data
integration tools with a valuation of $1.5 billion
at the last funding round. Previously, Owen held
various financial management positions in the
data and technology sectors as well as working
in professional practice at Grant Thornton UK LLP.
Committee Membership
28
SysGroup plc Annual report and accounts 2024
Governance report
Directors’ report
The Directors present their Annual Report and Audited Financial Statements
for the year ended 31 March 2024.
Principal activities
The principal activities of the business are
the provision of managed IT services specialising
in the delivery of cloud, data and security services
to power AI and ML transformation.
Business review
and future developments
A review of the Group’s operations and
performance for the twelve months to 31 March
2024, 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 50.
The Directors do not propose the payment
of a dividend for the year ended 31 March 2024
(FY23: 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, 12-month and monthly forecasts.
Short-term flexibility is achieved through available
cash balances and an overdraft facility.
Interest rate risk
The Group finances its operations and capital
investments through operational cash generation.
The Group has commercial lease agreements
in place for office properties and occasionally
leases are used for equipment purchases.
The bank facility is on a variable interest rate
and the Directors consider this to be appropriate
in the current economic environment.
Foreign exchange risk
A small number of suppliers invoice in USD.
Foreign exchange exposure is closely managed,
including holding limited funds in USD. Alternate
suppliers invoicing in GBP are also sought
where suitable.
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. Dedicated resources, within
the Finance team, manage credit risk by utilising
credit agency rating services to assess new
customers for creditworthiness and monitor
and address credit risks of our customers on
a continuing basis.
29
SysGroup plc Annual report and accounts 2024
Directors
The Directors of the Company who held office during the year are as follows:
Davin Cushman was appointed a Non-Executive Director on 10 June 2024.
The interests of current Directors in shares and options are detailed in the Directors’ Remuneration
Report on pages 31 to 34.
Name
Position held
Heejae Chae (appointed 26 June 2023)
Executive Chairman
Owen Phillips (appointed 11 March 2024)
Chief Financial Officer
Paul Edwards (appointed 26 September 2023)
Non-Executive Director
Mark Reilly (appointed 12 December 2023)
Non-Executive Director
Mike Fletcher
Non-Executive Director
Michael Edelson (retired 22 September 2023)
Non-Executive Chairman
Adam Binks (resigned 26 June 2023)
Chief Executive Officer
Martin Audcent (resigned 11 March 2024)
Chief Financial Officer
Mark Quartermaine (resigned 12 December 2023)
Non-Executive Director
Name
Number of shares
Percentage holding
Gresham House Asset Management Limited*
21,815,963
26.30%
Canaccord Genuity Group Inc
9,453,302
11.40%
Heejae Chae
7,705,575
9.30%
Darren Carter
5,788,158
6.98%
Herald Investment Management Ltd
4,194,581
5.06%
NR Holdings Limited
3,000,000
3.62%
Significant shareholdings
As at 30 July 2024, the Company has been notified of the following significant shareholdings:
* Relationship Agreement Gresham House Asset Management Limited
30
SysGroup plc Annual report and accounts 2024
In June 2016, the Company and Gresham
House Asset Management Limited (formerly
Livingbridge VC LLP) (‘Gresham’) entered into
an agreement (the ‘Agreement’), which provides
that for so long as Gresham is the registered
holder of 10% or more of the issued share capital
in the Company it may appoint a Director to the
Board of Directors, subject to the diligence of the
Company’s Nomad. Remuneration and terms of
appointment of the director should be in line with
the other Non-Executive Directors. Any conflict
of interest that arises shall be authorised by
the Company to the fullest extent permitted by
law. Subject to applicable laws and regulations,
the Company shall authorise the Director to
disclose to Gresham any information obtained
by the duly appointed Director, including that
which is deemed to be sensitive and confidential,
provided the information is required for the
purpose of Gresham reviewing its investments.
In such circumstances Gresham shall treat
the information as confidential and will be
subject to and comply with legal and regulatory
requirements, which would include but is not
limited to dealing in the Company’s shares.
Gresham has not activated its rights under the
Agreement and the Company has not received
notice of intention to do so.
Disclosure of information
to auditors
The Directors who held office at the date
of approval of this Directors’ report confirm
that, so far as they are each aware, there
is no relevant audit information of which the
Company’s auditors are unaware; and each
Director has taken all the steps that he ought
to have taken as a Director to make himself
aware of any relevant audit information and
to establish that the Company’s auditors are
aware of that information.
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 31 July 2025 and taken into account the
forecasts that support the business viability
for the period to 31 March 2026.
The Group raised £10.6m net funds from
a placing in June 2024. In the Base forecast
there is considered ample headroom in the bank
covenants, due to both the proceeds of this
placing and 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, reduces 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 2024, the Group had a gross cash
balance of £1.9m and a net debt position of
£3.4m, excluding contingent consideration of
£1.8m. The Group has a £0.5m unused overdraft
facility and £3.3m 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.
Post balance sheet events
The Group raised £10.6m net funds from
a placing in June 2024. Gross proceeds were
£11.2m, including a £0.3m retail offering and
a £10.9m placing.
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
Wendy Baker
Company Secretary
30 July 2024
31
SysGroup plc Annual report and accounts 2024
Governance report
Directors’ remuneration report
Remuneration committee
Membership of the Remuneration Committee
comprises Paul Edwards (Chairman),
Mike Fletcher and Mark Reilly. 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 designated members of the Senior
Management Team.
The Remuneration Committee approves
the design and determines targets for any
performance related pay schemes; reviews
the design and determines the targets for
any share incentive plans including the awards
made under these plans; and establishes the
policy for, and scope of, pension arrangements
for each Executive Director.
Remuneration policy
The Group’s policy on remuneration aims
to reward sustained performance by attracting,
motivating and rewarding individuals of the
highest calibre who are committed to growing
the business and maximising shareholder return.
The policy applies to both Executive Directors
and senior employees, who are rewarded on
the basis of their performance and the value
created for shareholders. Fixed remuneration
comprises salary, defined contribution pension
and benefits. Variable pay includes annual
bonus and long-term incentives. Independent
professional advisers are consulted for
benchmarking advice when changes to
incentive schemes are being considered.
Directors’ service contracts
Heejae Chae and Owen Phillips each have
a service contract, with mutual termination
provisions of up to six months’ notice.
Adam Binks’ original service agreement dated
13 June 2018 was superseded by a new service
agreement on 25 May 2023 increasing the mutual
notice period from six months to 12 months.
Martin Audcent’s original service agreement dated
16 July 2018 was superseded by a new service
agreement on 13 June 2023 increasing the mutual
notice period from six months to 12 months.
Non-Executive Directors are appointed under a
letter of appointment which covers such matters
as time commitment, duties and involvement in
other business interests. The remuneration of
the Non-Executive Directors is determined by
the Board (Executive Directors only) based on
benchmarking, research and within the limits set
in the Company’s Articles of Association. The
Non-Executive Directors receive a basic fee for
membership of the Board and its Committees.
2024 Management
Incentive Plans
The Company’s approach to incentivisation
aims to reward key contributors to Company
performance with incentive structures that
are tied to the delivery of shareholder value
over a sustained period. These incentives
are funded through issuance of equity or
equity-linked instruments.
At the General Meeting held on 24 June 2024,
shareholders unanimously approved two new
incentive plans:
1. The SysGroup plc Value Creation Plan; and
2. The SysGroup plc Performance Share Plan
These plans are integral to the overall
remuneration structure for senior employees,
designed to incentivise the management team
to deliver substantial value and realise the
Group’s growth ambitions.
Key features of the Incentive Plans are:
• Long-term focus: The long-term incentive
arrangements are designed and intended to
form a significant majority of remuneration for
the senior team, if growth plans are realised.
• Alignment with shareholder value: The potential
remuneration under these plans will be earned
if the management team meets the stretching
targets, creating significant shareholder value
in return.
Awards are expected to be made shortly following
the release of the FY24 Annual Results.
Alongside the long-term incentives, the
remuneration package will also include fixed
pay and short-term bonus plans.
32
SysGroup plc Annual report and accounts 2024
SysGroup plc Value
Creation Plan (VCP)
The VCP is a one-off leveraged plan, designed
to incentivise the Executive Directors and senior
management to deliver significant returns for
shareholders over a five-year period. Under
the VCP, participants will receive (in the form
of Ordinary Shares) a proportion of the returns
delivered for shareholders if a threshold rate
is achieved. Subject to meeting the hurdle rates
(as described below), participants in the VCP
as a whole are eligible to receive between
15% and 25% share of the value created for
shareholders above the market capitalisation
at the placing depending on the Company’s
share price at the end of the performance
period. The minimum hurdle rate to be achieved
before there is any value sharing is 12.5%
compound annual growth and in order for
the sharing ratio to increase, share prices
of £2.25 (i.e. c.47% compound annual growth)
and £3.00 (i.e. c.55% compound annual growth)
must be reached. These targets have been
set at a significant premium to the Issue Price
to incentivise and drive substantial growth.
SysGroup plc Performance
Share Plan (PSP)
The PSP is a discretionary incentive plan
allowing for the grant of a variety of awards
over Ordinary Shares (‘Awards’) to be made
to eligible employees of the Group on an annual
basis, with targets set over rolling three-year
periods. Awards made under the PSP may
take the form of options to acquire Ordinary
Shares, conditional share awards or awards
of restricted shares. The vesting of Awards may
be subject to the achievement of a performance
target (which may comprise a combination of
separate targets) measured over a specified
three-year period. Awards may be satisfied
by the issue of new Ordinary Shares or by
the transfer of Ordinary Shares held in treasury
or by the trustee of an employee benefit trust.
An offset feature will be built into Awards
for employees who are participants in both
the VCP and PSP to reduce the number
of shares vesting under the PSP to reflect
shares realised under the VCP. This will
prevent participants being remunerated
twice for the same performance.
SysGroup plc 2020 Long-Term
Incentive Plan (LTIP)
The LTIP expired in July 2023. This was an annual
incentive plan under which the Remuneration
Committee set a minimum Adjusted EBITDA
performance (‘Threshold’) each year. On
conclusion of the financial year the Executive
Directors were paid a mixture of a cash bonus
and issued nil cost performance shares, which
were granted subject to the Group’s performance
against the Threshold. The performance shares
would vest two years after the date of grant.
The Group had to achieve a minimum of 90%
of the Threshold before any cash payment or grant
of performance shares was due to the Executive
Directors. The level of cash payment and grant
of performance shares increased up to 110%
of the Threshold with the maximum grant due
at the discretion of the Remuneration Committee.
The maximum grant for Adam Binks was 150%
of annual salary and for Martin Audcent 112.5%
of annual salary. The split between a cash payment
and performance shares was set at 50%:50%
unless a Threshold of 100% was exceeded at
which point the split between a cash payment and
performance shares was at the discretion of the
Remuneration Committee for the excess amount.
Performance shares granted would vest on
the second anniversary of grant and were subject
to an additional grant uplift dependent upon the
performance of the share price based on a 90-day
volume weighted average price immediately prior
to the vesting date.
Under the LTIP, Awards were only granted to
Adam Binks and Martin Audcent with all Awards
having now vested in full.
On 25 May 2023, the Board (at that time) agreed,
as part of Adam Binks’ termination terms, that
826,394 unvested options granted to him 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
acquired, 2,076,394 Ordinary Shares at a price
of £0.375 per Ordinary Share, which are now held
by the Company as Treasury shares. It is the
Company’s intention to use the Treasury shares
to satisfy share incentive plans in the future.
33
SysGroup plc Annual report and accounts 2024
Employee
LTIP scheme
Vested
Options over
ordinary shares
Grant date
Expiry date
Martin Audcent
2018 LTIP
Vested
450,000
16/07/2018
15/07/2028
2018 LTIP
Vested
150,000
15/07/2019
14/07/2029
2020 LTIP
Vested
150,000
08/07/2020
07/07/2030
2020 LTIP
Vested
107,805
21/06/2021
20/06/2031
2020 LTIP
Vested
170,406
21/06/2022
20/06/2032
2020 LTIP
Vested
204,024
17/04/2023
16/04/2033
On 26 May 2023, the Board (at that time) agreed
that the 482,235 unvested options granted to
Martin Audcent, under the Company’s 2020 LTIP
Scheme, would vest with immediate effect with
restrictions on these options being waived. Details
of Martin’s interest in share options are outlined
in the table below.
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 at the date of this report as shown below:
Interests in share options as at 31 March 2024 of those Directors who served during the year:
Director
Number of
ordinary shares
Percentage
interest
Heejae Chae
7,707,575
9.30%
Owen Phillips
60,606
0.10%
Mike Fletcher*
122,647
0.10%
Paul Edwards
151,515
0.20%
Mark Reilly
45,454
0.10%
* Shares are held in the name of Colston Trustees Limited.
34
SysGroup plc Annual report and accounts 2024
2024
2023
Director
Salary/Fees
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
Salary/Fees
£’000
Bonus
£’000
Pension
£’000
BIK
£’000
Total
£’000
Michael Edelson
22
–
–
–
22
43
–
–
–
43
Mike Fletcher
44
–
–
–
44
43
–
–
–
43
Mark Quartermaine
31
–
–
–
31
43
–
–
–
43
Adam Binks*
1,254
–
2
5
1,261
215
102
10
3
330
Martin Audcent
128
50
6
12
196
160
56
8
2
226
Heejae Chae
154
–
7
12
173
–
–
–
–
–
Owen Phillips
9
–
–
1
10
–
–
–
–
–
Paul Edwards
22
–
–
–
22
–
–
–
–
–
Mark Reilly
13
–
–
–
13
–
–
–
–
–
Total
1,677
50
15
30
1,772
504
158
18
5
685
Directors’ remuneration (audited)
The salaries of the Executive Directors
are reviewed annually.
The annual salary of Adam Binks (former CEO)
was £200,000. Adam served as CEO for the
period 1 April 2023 to 26 June 2023. Upon his
resignation Adam received 12 months’ salary
in lieu of notice together with benefits and
bonus amounting to £449,200. The total amount
received by Adam Binks is set out in the table
below. Adam then entered a consultancy
agreement with the Company for the period
27 June 2023 to 27 December 2023 for which
he received £100,000 plus VAT.
The annual salary of Martin Audcent was
£150,000. Martin served as CFO for the period
1 April 2023 until 11 March 2024. Martin remained
in employment with the Company until 18 June
2024 and continued to receive payment of his
salary and benefits during that time.
The annual salaries of the incumbent Executive
Chairman and the CFO are £200,000 and
£140,000 respectively.
A breakdown of salaries and benefits received
by each Director (current and former) together
with fees paid to the Non-Executive Directors
are set out below.
* Adam Binks’ salary includes £449,000 compensation for loss of office, £758,000 of gains on exercise of share options
and £100,000 consultancy fees.
BIK (Benefits in Kind) include car allowance, private medical insurance and life assurance.
The Remuneration Report was approved by the Board of Directors and signed on its behalf by:
Paul Edwards
Chairman
Remuneration Committee
30 July 2024
35
SysGroup plc Annual report and accounts 2024
Governance report
Corporate governance report
Introduction
The Board establishes the Group’s values and standards and ensures that
its obligations to shareholders and other stakeholders, including customers,
employees, communities and suppliers are understood and met.
To support the Company’s governance framework, the Board has adopted the principles
of the 2018 Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’).
Details of the Company’s compliance with the 10 principles of the QCA Code are outlined
below. The Board aims to achieve substantial compliance with the new QCA Corporate
Governance Code 2023 throughout FY2025 and will report on this in the next fiscal year.
Board of Directors
During the year, the composition of the Board
changed with the appointment of a new Executive
Chairman and three Non-Executive Directors.
As of 30 July 2024, the Board consists of
an Executive Chairman, an Executive Director
and four Non-Executive Directors. Details of
the Directors’ appointments, retirements,
and resignations can be found on page 29.
The Board considers all the Non-Executive
Directors to be independent in accordance
with the QCA Code, with supporting details
provided below. The Non-Executive Directors
possess a wide and varied skill set, experience,
and knowledge, which enables them to provide
constructive challenge and contribute the
necessary mix of capabilities to effectively
deliver the Group’s strategy.
The Board has a schedule of Matters Reserved
for it which include:
The principal areas of Board responsibility are:
• Approval (and ongoing review) of the
Group’s long-term objectives, strategy
and operating policies
• Approval of the Annual Operating Plan
• Changes to the Group’s capital
structure and its listing status
• Approval of acquisitions
• Financial reporting and controls, including
major capital projects and treasury policies
• Corporate Governance and risk management
• Regulatory compliance
• Appointment and re-appointment
or removal of external auditor
• Approval of material policies, including
Health & Safety and Whistleblowing
• Undertaking a formal and rigorous review
of its own performance and that of its
Committees and individual Directors
• Determining the remuneration
of the Executive Directors
• Appointment and removal of Company Secretary
36
The Board formally meets every other month with a Board update call in the intervening period.
Ad hoc meetings are arranged at short notice as and when required. During the year, the Board
met 17 times. Attendance at the Board and Committee meetings in the year were as follows:
Board
Audit
committee
Remuneration
committee
Nomination
committee
Meetings
Adam Binks (resigned 26 June 2023)
2
1
0
0
Michael Edelson (retired 22 September 2023)
3
0
1
0
Mark Quartermaine (resigned 12 December 2023)
11
2
1
0
Martin Audcent (resigned 11 March 2024)
15
3*
0
0
Heejae Chae (appointed 26 June 2023)
13
2*
1*
2
Owen Phillips (appointed 11 March 2024)
1
1*
0
0
Paul Edwards (appointed 26 September 2023)
11
2
1
2
Mike Fletcher
17
3
2
2
Mark Reilly (appointed 12 December 2023)
5
1
1
1
* Although not members of the Committees, the Executive Directors may be invited to attend meetings of the Audit Committee,
Remuneration Committee and Nomination Committee when considered appropriate, and such attendance is reflected above.
Those Directors that joined part way through the year attended all Board and Committee meetings held following their appointment.
Internal controls
The Group has an ongoing process for
identifying, evaluating, and managing significant
risks to achieving its business objectives.
The Group’s system of internal controls is
designed to manage, rather than eliminate,
the risk of failure to meet business objectives.
These systems can provide only reasonable
assurance against material misstatement or
loss. Additionally, the Group insures against
various risks, with reviews conducted annually.
The Directors believe that the system of internal
controls operated effectively throughout the
financial year and up to 30 July 2024. Given the
size of the Group, the Board does not consider
an internal audit function necessary at this time,
though this decision is kept under regular review.
SysGroup plc Annual report and accounts 2024
37
SysGroup plc Annual report and accounts 2024
QCA Code principles
1. Establish a strategy and business
model which promotes long-term value
for shareholders
SysGroup’s business strategy is to be the
technology partner of choice specialising
in the delivery and management of cloud,
data and security services to power AI and ML
transformation. The Group offers an integrated
set of modern technologies that collectively
meets customers’ end-to-end data needs
including connectivity, cloud hosting, delivery,
analytics and governance of customer data, as
well as a security layer for users and applications.
The business has a solid track record of
acquiring and integrating managed IT services
businesses, with its acquisitions supported by
a company-wide sales and marketing, customer
support and billing platform.
The acquisition strategy remains core to
the Company’s growth strategy, focusing on
(i) expanding capabilities in certain areas of
technology expertise and (ii) acquiring companies
or businesses that have interesting and relevant
customer bases. The acquisition strategy will
also continue to supplement the organic growth
of the business.
To support this strategy, during the year
the Company made significant investments
in both technology and people. SysGroup
has transformed its senior management team
reducing it from thirteen to eight members,
with six external appointments. The new
management team has a strong track record
in managing rapid growth, executing acquisitions
and building sales teams and, based on this
and the breadth of the skills within the business,
the Board believes that the strategy will deliver
shareholder value in the medium to long term.
Further detail on the Group’s strategy can be
found in the Strategic Report on pages 5 to 26.
2. Seek to understand and meet
shareholder needs and expectations
Throughout the year the Executive Directors
meet with investors to discuss matters relevant
to the Company. The Directors recognise the
importance of engaging with shareholders to
ensure that shareholder needs and expectations
are considered and addressed appropriately.
The AGM is a forum which the Board welcomes
shareholders to attend, providing an opportunity
for them to address the Chairmen of the Board
Sub-Committees as well as other Board members.
The Company’s website contains key information
for shareholders and other stakeholders including
the Annual Report and Interim Announcement
and other key communications. Additionally, the
Group uses social media to provide key updates
on the business, its strategy and progress.
3. Take into account wider stakeholder
and social responsibilities and their
implications for long-term success
Our stakeholders help to shape our strategy
and are critical to our success. Understanding
our stakeholders assists the Board in performing
its duty under s172 of the Companies Act
2006, which requires considering the interests,
concerns, and potential impact on each
stakeholder group. This understanding is
achieved through executive board papers,
customer feedback, and surveys.
Throughout the organisation, there is a culture
of customer focus and outstanding service
underpinned by innovation, entrepreneurialism
and high performance.
The Group selects suppliers on their service
offering, the quality of their products or services
and competitive pricing. Long-term relationships
are especially valuable as they enable us to
collaborate with suppliers to identify value-
creating opportunities. New suppliers undergo
thorough on-boarding diligence, and the Group
ensures timely monthly payments, through a
regular monthly payments process, to suppliers.
The Group’s employees are key stakeholders
in the success of the business. We aim
to recruit high-calibre individuals and invest
in their ongoing development through internal
and external training. The Group offers
competitive remuneration and benefits packages.
We believe that having a contemporary workplace
environment is crucial for attracting, retaining
and motivating our employees. Over the past
12 months we have invested in expanding
and enhancing our Manchester and London
offices to ensure our workplaces are vibrant
and energising places to work.
38
SysGroup plc Annual report and accounts 2024
4. Embed effective risk management,
considering both opportunities and
threats, throughout the organisation
The principal risks and uncertainties of the
Group are described on pages 14 to 16 of this
Annual Report. At the Board meetings the Board
are updated on any significant issues that have
arisen and the actions that management have
taken to address them.
The Directors acknowledge their responsibility
for the Company’s and Group’s systems of internal
controls, which are designed to safeguard the
Group’s assets and ensure the reliability
of financial information for both internal use
and external publication. Overall control is
achieved through 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.
The Senior Leadership Team is responsible for
monitoring and addressing the key risks of the
business. Any significant issues are escalated
as high priority to the Executive Directors.
As the Group continues to grow, the risks of
the business and risk management framework
will remain subject to regular review.
5. Maintain the Board as a well-functioning,
balanced team led by the Chair
The Board comprises six Directors; two Executive
Directors (including the Executive Chairman)
and four Non-Executives. The Board’s mix of
experience and skillsets supports the Company in
achieving its strategic goals. Heejae Chae serves
as the Executive Chairman, a role the Board
considers appropriate for the foreseeable future
whilst Heejae develops and drives the strategy of
the Group and enhances governance standards.
The Board of Directors meet regularly, usually
monthly, and at least six times a year. Additional
Board meetings are held outside the regular
calendar, and these may be attended by
telephone conference/video communication.
The Board maintains regular contact with its
advisers and seeks to ensure that it develops
an understanding of the views of the Company’s
major shareholders.
The Board has delegated authority to its
sub-committees; the Audit Committee, the
Remuneration Committee, and the Nomination
Committee. Membership of these Committees
comprises Independent Non-Executive Directors,
except for the Nomination Committee which is
chaired by Heejae Chae. Each Committee has
a set of Terms of Reference which outlines the
Committees’ scope of responsibilities.
The Board is satisfied that it has a suitable
balance between Executive and Non-
Executive Directors and is sufficiently
resourced to discharge its duties and
responsibilities effectively.
The Company has effective procedures in place
to monitor Directors’ conflicts of interest, which
are reported to and dealt with by the Board.
6. Ensure that between them the
Directors have the necessary up-to-date
experience, skills and capabilities
The composition of the Board brings a diverse
balance of skills, experience and knowledge
required for the business to achieve its strategic
goals. Appointments are carefully considered and
skillsets and experience are profiled against the
specific requirements of the Group. Biographical
details of each of the Directors can be found
on page 27 in this 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. Zeus Capital LLP, the
Company’s Nomad, provided training on the
AIM rules and the Market Abuse Regulation
when it assumed the role as Nomad and it
continues to provide training as part of the
on-boarding for newly appointed directors.
Additionally, all members of the Board have
access to the Company Secretary and are
able to receive additional training if required.
At the forthcoming Annual General Meeting,
all Directors will seek election/re-election
and it is proposed that this approach will be
adopted at future annual general meetings.
7. Evaluate Board performance based
on clear and relevant objectives,
seeking continuous improvement
The Executive Chairman is responsible for
assessing the individual contributions of
the Directors on an ongoing basis. Following
the appointments to the Board during the year,
the Executive Chairman is satisfied that all
the Directors are making valued contributions,
and the Board is working effectively together.
Whilst the Company does not currently have
a formal appraisal process for Directors,
we intend to review our processes for Board
performance evaluation over the next twelve
months and to establish a more formalised
framework for assessment and review.
39
SysGroup plc Annual report and accounts 2024
8. Promote a corporate culture that
is based on ethical values and behaviours
The Directors recognise the importance
of, and are committed to, high standards
of corporate governance, aligned with the
needs of the Company and the interests
of all stakeholders. The Board believes it upholds
its responsibility for maintaining high standards
of corporate governance which necessitates
managing the business in a transparent and
accountable way. This ethical leadership is
cascaded throughout the business creating
a culture of learning, integrity, kindness
and entrepreneurship, the cornerstones
of our culture.
We have recently recruited a Chief People and
Culture Officer who will be reviewing the Group’s
approach to employee communication and
engagement and ensuring that corporate culture
is embedded throughout the business. We have
also launched ‘SysHub’, an online platform for our
employees that provides access to our employee
benefits offering and the latest Company news
and serves as a ‘go-to’ source for all the Group’s
internal policies including the Health & Safety
Policy, Anti-Corruption and Bribery Policy,
Whistleblowing Policy, and Data Protection Policy.
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 a robust system of governance to ensure
appropriate levels of internal control, financial
reporting, risk management, compliance and
corporate responsibility.
Board meetings
Six Board meetings per year are scheduled
with Board update calls in the intervening periods.
Attendance is usually in person but may be by
video conference facilities. Board papers are
circulated in advance of the meeting to allow the
Directors sufficient time to review. The Executive
Chairman will ordinarily chair the meetings and
all Directors are given the opportunity to ask
questions, deliberate on issues and challenge
the Executives.
Matters Reserved for the Board is a schedule
of key issues that must be considered and
addressed by the Board. This is reviewed
annually. An outline of the contents of the
current schedule are referred to under
Principle 1 above.
Audit Committee
The Company has established an Audit
Committee that comprises Mike Fletcher
(Chairman), Paul Edwards and Mark Reilly.
The Audit Committee meets at least twice a year
and is responsible for reviewing the integrity of
the Group’s financial statements, compliance
with legal and regulatory requirements, and
the adequacy and effectiveness of the Group’s
internal financial controls and risk management
processes including the need for an internal
audit review. It also reviews the external
auditors’ performance and independence
and makes recommendations to the Board
on their appointment.
The Group’s auditors, BDO, attend the Audit
Committee Meetings.
During the year to 31 March 2024, there
were three Audit Committee meetings
and the principal items discussed were:
• Review of the BDO Planning,
Interim and Full Year Audit Reports
• BDO auditor independence,
audit fee and engagement letters
• Review of Going Concern
• Review of IFRS15 Revenue Recognition
for the new acquisitions
• Review and approval of the Interim
Results, Preliminary Announcement
• Review and approval of the
Annual Report and Accounts
• Review and approval of the Management
Letters of Representation
• Reviewed its Terms of Reference
which were then adopted by the Board
The Group has not included a separate Audit
Committee report in its financial statements.
The contents of such a report including the
principal risks 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.
40
SysGroup plc Annual report and accounts 2024
Remuneration Committee
The Company has established a Remuneration
Committee that comprises Paul Edwards
(Chairman), Mike Fletcher and Mark Reilly.
The Committee meets at least twice a year
and is responsible for determining the
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, and determines the awards to the
Executive Directors and other senior members
of management.
There were two Remuneration Committee
meetings during the year. On 13 April 2023,
the Committee approved the FY24 Executive
Directors’ cash bonus and the early vesting
of the share options. In addition the Committee
approved to extend the notice period of both
Adam Binks and Martin Audcent from 6 months
to 12 months. In January 2024, the Committee
met and recommended to the Board, for their
approval, the terms and conditions for the
new CFO.
Nomination Committee
The Company has established a Nomination
Committee that comprises Heejae Chae
(Chairman), Mike Fletcher, Paul Edwards
and Mark Reilly. The Nomination Committee
meets at least twice a year and is responsible
for reviewing the structure, size and composition
of the Board, leading the process for
appointments, ensuring plans are in place
for orderly succession to both the Board
and senior management positions, and
overseeing the development of a diverse
pipeline for succession.
There were two Nomination Committee
meetings during the year and the principal
items were to review the Board composition
and discuss and approve appointments to
the Board. The Committee also reviewed its
Terms of Reference which were then adopted
by the Board.
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.
Regular meetings are held with our principal
shareholders and the Executive Directors
maintain that dialogue. The Company
communicates with institutional investors
through briefings with management and analyst
notes are reviewed to understand the external
view of the Company.
Regular communications to
shareholders comprise:
• Full Year Announcement
• Annual Report and Accounts
• Interim Announcement
• Annual General Meeting
• Institutional shareholder meetings
following Results Announcements
• Regulatory News Service announcements
and other press releases
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.
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 an 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.
41
SysGroup plc Annual report and accounts 2024
Governance report
Statement of Directors’
responsibilities
The Directors are responsible for preparing the annual report of the Directors
and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors have elected
to prepare the Group and Company financial
statements in accordance with 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:
• Select suitable accounting policies
and then apply them consistently
• Make judgements and accounting
estimates that are reasonable and prudent
• State whether they have been prepared
in accordance with UK adopted international
accounting standards, subject to any material
departures disclosed and explained in the
financial statements
• Prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the Company will continue
in business
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s transactions
and disclose with reasonable accuracy at
any time the financial position of the Company
and enable them to ensure that the financial
statements comply with the requirements
of the Companies Act 2006. They are also
responsible for safeguarding the assets of
the Company and hence for taking reasonable
steps for the prevention and detection of fraud
and other irregularities.
Website publication
The Directors are responsible for ensuring the
annual report and the financial statements are
made available on a website. Financial statements
are published on the Company’s website in
accordance with legislation in the United Kingdom
governing the preparation and dissemination
of financial statements, which may vary from
legislation in other jurisdictions. The maintenance
and integrity of the Company’s website is the
responsibility of the Directors. The Directors’
responsibility also extends to the ongoing integrity
of the financial statements contained therein.
By order of the Board
Wendy Baker
Company Secretary
30 July 2024
42
SysGroup plc Annual report and accounts 2024
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 2024
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 United Kingdom Generally Accepted
Accounting Practice.
• 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 2024 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 and
notes to the financial statements, including
material accounting policy information.
The financial reporting framework that has
been applied in the preparation of the Group
financial statements is applicable law and UK
adopted international accounting standards.
The financial reporting framework that has been
applied in the preparation of the Parent Company
financial statements is applicable law and
United Kingdom Accounting Standards, including
Financial Reporting Standard 101 Reduced
Disclosure Framework (United Kingdom Generally
Accepted Accounting Practice).
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 assessed the consistency of the Directors’
cash flow forecasts with other areas of the
audit, such as the impairment model.
• We considered the starting point of the cash
flow forecast, including the impact of the
proceeds raised from the equity placing that
occurred post year end.
• We challenged the rationale for the assumptions
utilised in the cash flow forecasts, using our
knowledge of the business and the sector.
43
SysGroup plc Annual report and accounts 2024
• We considered the appropriateness of the cash
flow forecasts by testing their mathematical
accuracy, assessing the accuracy of their
historical forecasting, and understanding the
Directors’ application and consideration of
reverse stress testing.
• We obtained an understanding of financing
facilities available to the Group, including
the nature of the facilities, repayment
terms, covenants and attached conditions.
We assessed whether the terms and conditions
therein were consistent with those applied by
the Directors in their base case and downside
scenario forecasts.
• We reviewed the facility and covenant headroom
calculations, and reperformed sensitivities
on the Directors’ base case and reverse stress
test scenarios.
• We assessed the going concern disclosures
against the requirements of the accounting
standards, and assessed the consistency of the
disclosures made with the cash flow forecasts.
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.
Business combinations is no longer considered to be a key audit matter because no acquisitions
have taken place in the current year. Impairment of goodwill and intangible assets has been included
as a key audit matter in the current year as there is a high degree of management judgement involved
in assessing the value in use of the CGU to which the Goodwill and Intangible Assets are allocated.
In addition, the classification of items as exceptional has also been included as a key audit matter
due to the magnitude of the balance in the current year.
Overview
Coverage
100% (2023: 100%) of Group loss before tax
100% (2023: 100%) of Group revenue
100% (2023: 99%) of Group total assets
Key audit matter
Revenue recognition
Business combinations
Impairment of goodwill
and intangible assets
Classification of items
as exceptional items
2024
2023
Materiality
Group financial statements as a whole
Materiality has been based on 1.25% (2023: 1.25%)
of revenue, rounded to £280,000 (2023: £270,000)
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
of the financial statements. We also consider the
risk of management override of internal controls,
including assessing whether there was evidence
of bias by the Directors that may have resulted
in 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.
There are in addition a number of dormant entities
in the Group which are insignificant components.
Dormant entities have been subject to desktop
reviews 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.
44
SysGroup plc Annual report and accounts 2024
Key audit matter
How the scope of our audit
addressed the 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 IFRS 15, the
revenue recognition accounting standard,
including in relation to 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. As a result of this
we determined revenue recognition to be
a key audit matter.
We assessed that risks of material
misstatement could arise from:
• Inappropriate use of journals
to recognise revenue
• Improper recognition of contracts
and allocation of transaction price
to performance obligations
• Improper revenue recognition
before completion of performance
obligations, with a heightened focus
around year end cut-off for certain
revenue streams
We therefore considered revenue
recognition to be a key audit matter.
Our audit procedures included the following:
• We reviewed the Group’s revenue recognition policies
for all revenue streams to consider whether they
properly applied the provisions of the relevant
accounting standards.
• We evaluated Management’s assessment of the
performance obligations within a sample of revenue
contracts in relation to the IFRS 15 criteria and whether
revenue should be recognised at a point in time or over
time by review of key terms in revenue contracts.
• We tested the revenue recognised in the year for
a sample of contracts, obtaining evidence of completion
of work and that the revenue recognised was in
accordance with IFRS 15. We also specifically checked
a sample of revenue entries with 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 whether these had been
appropriately bundled or unbundled.
• For a sample of journal entries recorded in revenue
throughout the year which fell outside of expectations,
we assessed the validity of the transaction and its
accounting by testing it to source documentation.
Key observations:
No issues were noted from the work performed.
45
SysGroup plc Annual report and accounts 2024
Key audit matter
How the scope of our audit
addressed the key audit matter
Impairment
of goodwill and
intangible assets
Note 2 and 13
See accounting
policy in note 1
There is a high degree of management
judgement involved in assessing the
value in use of the CGU to which the
Goodwill and Intangible Assets are
allocated. This involved determining
whether any impairment exists in relation
to these assets. There is therefore
a risk that any impairment of these
assets is not appropriately recognised
in accordance with applicable financial
reporting standards.
For these reasons, impairment of goodwill
and intangible assets was considered
to be a key audit matter.
Our audit procedures include;
• An assessment of whether the Goodwill and other
intangible assets were correctly allocated to CGU’s
for monitoring purposes and in line with the requirements
of the applicable financial reporting standards.
• Challenging future trading projections by reference
to the current performance of the individual CGU’s
and the accuracy of prior year forecasting.
• Determining whether the forecasts adopted in
the impairment review were approved by the Board
and were consistent with those used in the going
concern assessment.
• We assessed the appropriateness of the discount
rate applied and challenged the assumptions using
a range of sensitivities, with reference to market data
and comparable entities.
• Checking the impairment analysis for logical and
arithmetic accuracy, and assessing whether it had
been undertaken in accordance with the requirements
of the applicable financial reporting standards.
• Performing sensitivity analysis on key inputs,
including growth projections, to understand the
relative impact of changes in the key assumptions
within the impairment model.
Key observations:
Based on our procedures we found management’s
assessment of the value in use for each CGU to be reasonable.
Classification
of items as
exceptional items
Notes 2 and 8
See accounting
policy in note 1
In reporting its results, the Group
has presented various alternative
profit measures (APMs) of its financial
performance, position or cashflows,
which are not defined or specified under
the requirements of the accounting
standards. In doing so, the Group makes
certain adjustments to the Group result
in order to derive many of these APMs,
including the use of exceptional items.
The Group presents exceptional items on
the face of the Consolidated Statement
of Comprehensive Income and includes
material items of income and expenditure,
which the Directors consider, due to
their size, nature and expected non-
occurrence, merit separate presentation
in the financial statements to facilitate
financial comparison with prior periods
and to assess trends in the financial
performance of the Group.
In the current year the Group has
identified £1,826 of items that should
be classified as exceptional items.
There are a number of judgements
involved in making this assessment.
We have assessed that the risk of
material misstatement could arise from:
• Items being classified as exceptional
that do not meet the definition within
the Group’s accounting policy; and
• Consistency in the identification
and presentation of these items.
We therefore considered the
classification of exceptional items
to be a key audit matter.
The audit procedures included the following:
• We challenged the rationale for the designation of
certain items as exceptional items, and assessed such
items against the Group’s accounting policy, including
the nature and magnitude of the amounts incurred, and
consideration of whether they were one off in nature.
• We assessed whether the accounting policy had been
applied consistently in identifying exceptional items.
• We reviewed the Group’s narrative disclosure
of exceptional items and challenged whether
the disclosure was sufficient.
Key observations:
Based on the procedures performed we did not identify
any indicators that the classification of exceptional items,
together with the related disclosures, were not appropriate.
46
SysGroup plc Annual report and accounts 2024
Group financial statements
Parent Company financial statements
2024
£
2023
£
2024
£
2023
£
Materiality
280,000
270,000
205,000
176,000
Basis for
determining
materiality
Based on 1.25%
of revenue,
then rounded
Based on 1.25%
of revenue,
then rounded
Based on 0.75%
of gross assets,
then rounded
Based on 0.5%
of gross assets,
then rounded
Rationale
for the
benchmark
applied
Revenue was considered the most stable
measure and to be of most relevance to
the users of the financial statements.
The percentage threshold was unchanged
from the previous year due to no significant
change in ownership or business model in
the year.
The Parent Company does not recognise
any external revenue and so a revenue
basis was not considered appropriate
and materiality was calculated based
on gross assets.
The same rationale was applied
for the prior period.
Performance
materiality
182,000
195,750
133,250
127,600
Basis for
determining
performance
materiality
65% of materiality
based on cumulative
knowledge of the
group and degree
of estimation in the
financial statements.
72.5% of materiality
based on cumulative
knowledge of the
group and degree
of estimation in the
financial statements.
65% of materiality
based on cumulative
knowledge of the
group and degree
of estimation in the
financial statements.
72.5% of materiality
based on cumulative
knowledge of the
group and degree
of estimation in the
financial statements.
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:
47
SysGroup plc Annual report and accounts 2024
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 34% and 88% (2023:
27% and 83% ) of Group materiality dependent
on the size and our assessment of the risk
of material misstatement of that component.
Component materiality ranged from £95,000
to £245,000 (2023: £73,000 to £223,00).
In the audit of each component, we further
applied performance materiality levels of 65%
(2023: 72.5%) 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 £11,200 (2023: £10,800).
We also agreed to report differences below
this threshold that, in our view, warranted
reporting on qualitative grounds.
Other information
The directors are responsible for the other
information. The other information comprises
the information included in the Annual Report
and Accounts other than the financial statements
and our auditor’s report thereon. Our opinion on
the financial statements does not cover the other
information and, except to the extent otherwise
explicitly stated in our report, we do not express
any form of assurance conclusion thereon.
Our responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with the
financial statements or our knowledge obtained
in the course of the audit, or otherwise appears
to be materially misstated. If we identify such
material inconsistencies or apparent material
misstatements, we are required to determine
whether this gives rise to a material misstatement
in the financial statements themselves. If, based
on the work we have performed, we conclude
that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
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.
Strategic report and Directors’ report
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.
• 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.
Matters on which we are required
to report by exception
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.
• The Parent Company financial statements are not in
agreement with the accounting records and returns.
• Certain disclosures of Directors’ remuneration
specified by law are not made.
• We have not received all the information
and explanations we require for our audit.
48
SysGroup plc Annual report and accounts 2024
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 of the Group and the
industry in which it operates
• Discussion with management, those charged
with governance and the Audit Committee
• Obtaining and understanding of the Group’s
policies and procedures regarding compliance
with laws and regulations
We considered the significant laws and
regulations to be the applicable accounting
framework, the Companies Act 2006, UK tax
legislation and the AIM Listing Rules.
The Group is also subject to laws and regulations
where the consequence of non-compliance
could have a material effect on the amounts
or disclosures in the financial statements, for
example through the imposition of fines or
litigation. We identified such laws and regulations
to be Health and Safety, Data Protection Act
and the Bribery Act 2010.
Our procedures in respect of the above included:
• Review of minutes of meetings of those
charged with governance for any instances
of non-compliance with laws and regulations
• Review of financial statement disclosures
and agreeing to supporting documentation
• Involvement of tax experts in the audit
• Made inquiries directly with external
lawyers and legal counsel
• Review of legal expenditure accounts to
understand the nature of expenditure incurred
Fraud
We assessed the susceptibility of the financial
statements to material misstatement, including
fraud. Our risk assessment procedures included:
• Enquiry with management, those charged with
governance and the Audit Committee regarding
any known or suspected instances of fraud
• Obtaining an understanding of the Group’s
policies and procedures relating to:
— Detecting and responding to the risks
of fraud
— Internal controls established to mitigate
risks related to fraud
• Review of minutes of meetings of those charged
with governance for any known or suspected
instances of fraud
• Discussion amongst the engagement team
as to how and where fraud might occur in
the financial statements
49
SysGroup plc Annual report and accounts 2024
• Performing analytical procedures to identify
any unusual or unexpected relationships that
may indicate risks of material misstatement
due to fraud
• Considering remuneration incentive schemes
and performance targets and the related
financial statement areas impacted by these
Based on our risk assessment, we considered
the areas most susceptible to fraud to be posting
inappropriate journal entries, management bias
in accounting estimates and revenue cut-off for
certain revenue streams.
Our procedures in respect of the above included:
• Identifying and testing journal entries to source
documentation, in particular any journal entries
posted with unusual account combinations
• Assessing revenue recognised on certain
revenue streams for a defined period around
the year end, selecting a sample of revenue
items within this defined period and identifying
whether the transactions have been reflected
in the correct period in line with when the
performance obligation was met
• Challenging assumptions and judgements
made by management in their significant
accounting estimates
• 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
throughout the year for instances of non-
compliance with laws and regulation or fraud
• Agreement of the financial
statement disclosures to underlying
supporting documentation
We also communicated relevant identified laws
and regulations and potential fraud risks to all
engagement team members who were all deemed
to have appropriate competence and capabilities
and remained alert to any indications of fraud
or non-compliance with laws and regulations
throughout the audit.
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.
Daniel Wilbourn (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Manchester, UK
30 July 2024
BDO LLP is a limited liability partnership registered
in England and Wales (with registered number OC305127).
50
SysGroup plc Annual report and accounts 2024
Financial statements
Consolidated statement
of comprehensive income
For the year ended 31 March 2024
Notes
2024
Group
£’000
2023
(Restated)*
Group
£’000
Revenue
4
22,714
21,648
Cost of sales
(12,318)
(10,746)
Gross profit
10,396
10,902
Operating expenses before depreciation, amortisation,
exceptional items and share based payments
(8,388)
(7,768)
Adjusted EBITDA**
2,008
3,134
Depreciation
14
(570)
(625)
Amortisation of intangibles
13
(1,696)
(1,739)
Impairment of intangibles
13
(3,718)
–
Exceptional items
8
(1,826)
(408)
Share based payments
9
(194)
(178)
Administrative expenses
(16,392)
(10,718)
Operating (loss)/profit
(5,996)
184
Finance costs
6
(574)
(483)
(Loss) before taxation
(6,570)
(299)
Taxation
12
670
98
Total comprehensive (loss) attributable
to the equity holders of the Company
(5,900)
(201)
Adjusted earnings per share (EPS)***
11
2.1p
3.5p
Basic earnings per share (EPS)
11
(12.1)p
0.0p
Diluted earnings per share (EPS)
11
(12.1)p
0.0p
* See accounting policies (note 1) for further details of the restatement.
*** Adjusted EPS is profit after tax after adding back amortisation of intangible assets, impairments, exceptional items,
share based payments and associated tax, divided by the weighted average number of shares in issue.
** Adjusted EBITDA, which is defined as profit before net finance costs, tax, depreciation, amortisation, impairments, shared based
payment charge and adjusting items, is a non-GAAP metric used by management and is not an IFRS disclosure.
51
SysGroup plc Annual report and accounts 2024
Financial statements
Consolidated statement
of financial position
As at 31 March 2024
Assets
Notes
2024
Group
£’000
2023
(Restated)*
Group
£’000
Non-current assets
Goodwill
13
17,948
21,666
Intangible assets
13
4,708
6,295
Property, plant and equipment
14
1,846
1,966
24,502
29,927
Current assets
Trade and other receivables
16
4,003
4,813
Cash and cash equivalents
1,943
4,186
5,946
8,999
Total assets
30,448
38,926
Equity and liabilities
Equity attributable to the equity shareholders of the parent
Called up share capital
21
515
494
Share premium reserve
9,080
9,080
Treasury reserve
(984)
(201)
Other reserve
3,300
3,205
Retained earnings
2,856
8,657
14,767
21,235
Non-current liabilities
Lease liabilities
19
400
621
Contract liabilities
20
143
383
Contingent consideration
17
–
1,875
Provisions
18
148
191
Deferred taxation
12
849
1,434
Bank loan
19
4,738
4,705
6,278
9,209
Current liabilities
Trade and other payables
17
4,813
3,861
Lease liabilities
19
204
182
Contract liabilities
20
2,635
3,633
Contingent consideration
17
1,751
806
9,403
8,482
Total equity and liabilities
30,448
38,926
* See accounting policies (note 1) for further details of the restatement.
52
SysGroup plc Annual report and accounts 2024
Financial statements
The financial statements on pages 42 to 94 were approved
by the Board and authorised on 30 July 2024.
Owen Phillips
Director
30 July 2024
Registered number 06172239
Financial statements
Consolidated statement
of financial position (contd.)
As at 31 March 2024
53
SysGroup plc Annual report and accounts 2024
Financial statements
Company statement
of financial position
As at 31 March 2024
Assets
Notes
2024
Company
£’000
2023
Company
£’000
Non-current assets
Investments
15
26,399
34,034
Intangible assets
13
47
26
Property, plant and equipment
14
331
325
Deferred tax asset
364
166
27,141
34,551
Current assets
Trade and other receivables
16
105
625
Cash and cash equivalents
118
401
223
1,026
Total assets
27,364
35,577
Equity and liabilities
Equity attributable to the equity shareholders of the parent
Called up share capital
21
515
494
Share premium reserve
9,080
9,080
Treasury reserve
(984)
(201)
Other reserve
3,300
3,205
Retained earnings
2,087
11,536
13,998
24,114
Non-current liabilities
Lease liabilities
19
49
88
Contingent consideration
17
–
1,875
Provisions
18
68
68
Bank loan
19
4,738
4,705
4,855
6,736
Current liabilities
Trade and other payables
17
6,717
3,863
Lease liabilities
19
43
58
Contingent consideration
17
1,751
806
Bank loan
19
–
–
8,511
4,727
Total equity and liabilities
27,364
35,577
54
SysGroup plc Annual report and accounts 2024
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 2024,
the Company made a loss of £9,548,000 (FY23: profit of £5,119,000) after an investment impairment
of £7,635,000 (see note 15).
Owen Phillips
Director
30 July 2024
Registered number 06172239
Financial statements
Company statement
of financial position (contd.)
As at 31 March 2024
55
SysGroup plc Annual report and accounts 2024
Financial statements
Consolidated statement
of changes in equity
For the year ended 31 March 2024
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
(Restated)*
£’000
As at 1 April 2022
494
9,080
(201)
3,027
4
8,854
21,258
Comprehensive income
Profit for the period
–
–
–
–
(4)
(197)
(201)
Total comprehensive income
–
–
–
–
(4)
(197)
(201)
Distributions to owners
Share options charge
–
–
–
178
–
–
178
Total distributions to owners
–
–
–
178
–
–
178
At 31 March 2023
494
9,080
(201)
3,205
–
8,657
21,235
As at 1 April 2023
494
9,080
(201)
3,205
–
8,657
21,235
Comprehensive income
Loss for the period
–
–
–
–
–
(5,900)
(5,900)
Total comprehensive income
–
–
–
–
–
(5,900)
(5,900)
Distributions to owners
Issue of share capital
21
–
–
–
–
–
21
Purchase of own
shares into Treasury
–
–
(783)
–
–
–
(783)
Share options charge
–
–
–
194
–
–
194
Reserves transfer on
forfeiture of share options
–
–
–
(99)
–
99
–
Total distributions to owners
21
–
(783)
95
–
99
(568)
At 31 March 2024
515
9,080
(984)
3,300
–
2,856
14,767
Reserve
Description and purpose
Share premium reserve
Amount subscribed for share capital in excess of nominal values.
Other reserve
Amount reserved for share based payments to be released over the life
of the instruments and the equity element of convertible loans.
Treasury reserve
Company owned shares held for the purpose of settling the exercise
of employee share options.
Translation reserve
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.
Retained earnings
All other net gains and losses and transactions with owners
(e.g. dividends) not recognised elsewhere.
The following describes the nature and purpose of each reserve within equity:
56
SysGroup plc Annual report and accounts 2024
57
SysGroup plc Annual report and accounts 2024
Financial statements
Company statement
of changes in equity
For the year ended 31 March 2024
Share
capital
£’000
Share
premium
account
£’000
Treasury
reserve
£’000
Other
reserve
£’000
Retained
earnings*
£’000
Total*
£’000
As at 1 April 2022
494
9,080
(201)
3,027
6,417
18,817
Comprehensive income
Profit for the period
–
–
–
–
5,119
5,119
Total comprehensive income
–
–
–
–
5,119
5,119
Distributions to owners
Share options charge
–
–
–
178
–
178
Total distributions to owners
–
–
–
178
–
178
At 31 March 2023 (restated)
494
9,080
(201)
3,205
11,536
24,114
As at 1 April 2023
494
9,080
(201)
3,205
11,536
24,114
Comprehensive income
Loss for the period
–
–
–
–
(9,548)
(9,548)
Total comprehensive income
–
–
–
–
(9,548)
(9,548)
Distributions to owners
Issue of share capital
21
–
–
–
–
21
Purchase of own
shares into Treasury
–
–
(783)
–
–
(783)
Share options charge
–
–
–
194
–
194
Reserves transfer on
forfeiture of share options
–
–
–
(99)
99
–
Total distributions to owners
21
–
(783)
95
99
(568)
At 31 March 2024
515
9,080
(984)
3,300
2,087
13,998
58
SysGroup plc Annual report and accounts 2024
Financial statements
Consolidated statement
of cashflows
For the year ended 31 March 2024
Notes
2024
Group
£’000
2023
(Restated)*
Group
£’000
Cashflows used in operating activities
(Loss) after tax
(5,900)
(201)
Adjustments for:
Depreciation and amortisation
13,14
2,266
2,364
Impairment of intangibles
13
3,718
–
Finance costs
6
574
483
Share based payments
194
178
Taxation (credit)/charge
12
(670)
(98)
Operating cashflows before movement in working capital
182
2,726
Increase/decrease in trade and other receivables
819
(543)
Increase in trade and other payables
103
837
Cashflow from operations
1,104
3,020
Taxation paid
(439)
(303)
Net cash from operating activities
665
2,717
Cashflows from investing activities
Payments to acquire property, plant and equipment
14
(450)
(252)
Payments to acquire intangible assets
13
(109)
(163)
Acquisition of subsidiary net of cash acquired
10
–
(5,389)
Net cash used in investing activities
(559)
(5,804)
Cashflows from financing activities
Payment of contingent consideration on acquisitions
(885)
–
Bank loans drawdown
–
4,500
Payment of bank loan arrangement fee
–
(127)
Repayment of bank loans
–
(582)
Repurchase of shares into treasury
(762)
–
Capital/principal paid on lease liabilities
(199)
(303)
Interest paid on loan facility
(475)
(316)
Interest paid on lease liabilities
(28)
(32)
Net cash from/(used in) financing activities
(2,349)
3,140
Net decrease in cash and cash equivalents
(2,243)
53
Cash and cash equivalents at the beginning of the year
4,186
4,133
Cash and cash equivalents at the end of the year
1,943
4,186
* See accounting policies (note 1) for further details of the restatement.
59
SysGroup plc Annual report and accounts 2024
Financial statements
Notes to the consolidated
financial statements
For the year ended 31 March 2024
1. Accounting policies
SysGroup plc (the ‘Company’) is a company
incorporated and domiciled in the United
Kingdom. The Company changed its registered
office during the year to 55 Spring Gardens,
Manchester M2 2BY. These consolidated
financial statements comprise the Company
and its subsidiaries (together referred to
as the ‘Group’).
Statement of compliance
These Group 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. The Company
financial statements have been prepared in
accordance with Financial Reporting Standard 101
(FRS 101) ‘Reduced Disclosure Framework’ issued
by the Financial Reporting Council (FRC).
Basis of preparation – Group
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 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.
Basis of preparation – Company
The Company financial statements are prepared
under the historical cost convention, except for
certain financial instruments that are measured
at fair value. The Company’s financial statements
are presented in pounds sterling (£), which is also
the functional currency of the Company.
The preparation of financial statements
in conformity with FRS 101 requires the use
of certain critical accounting estimates and
assumptions. It also requires management to
exercise its judgement in applying the Company’s
accounting policies. Significant judgements and
estimates are disclosed in the relevant notes
to the financial statements.
The Company has elected to take advantage of
certain disclosure exemptions available under
FRS 101, including:
• A cash flow statement and related notes
under IAS 7 ‘Statement of Cash Flows’
• Certain disclosures required by IFRS 7
‘Financial Instruments: Disclosures’
• Disclosures in respect of the fair value
of financial instruments under IFRS 13
‘Fair Value Measurement’
Restatement of cost of sales
We have identified an error relating to managed
IT services direct expenses not being recognised
for the year ended 31 March 2023 within the
subsidiary: SysGroup Trading Limited. Expenses
were recognised as prepayments rather than
in the statement of comprehensive income.
The total impact of this error is to increase
cost of sales by £193,678 and to decrease
prepayments (shown within Trade and other
receivables) by the same amount. There is no
impact on comparative earnings per share as
a result of this correction.
60
SysGroup plc Annual report and accounts 2024
2023
£’000
Restatement
£’000
2023
£’000
Consolidated statement of comprehensive income
Cost of sales
(10,552)
(194)
(10,746)
Total comprehensive (loss) attributable to the equity holders of the Company
(7)
(194)
(201)
Consolidated statement of financial position and statement of changes in equity
Trade and other receivables
5,007
(194)
4,813
Retained earnings
8,851
(194)
8,657
Shareholder funds
21,429
(194)
21,235
Consolidated statement of cashflows
(Loss) after tax
(7)
(194)
(201)
Increase in trade and other receivables
(737)
(194)
(543)
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 31 July 2025.
The Group raised £10.6m net funds from
a placing in June 2024. In the Base forecast
there is considered ample headroom in the
bank covenants, due to both the proceeds
of this placing and 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, reduces 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 2024, the Group had a gross
cash balance of £1.9m and a net debt
position excluding contingent consideration
of £3.4m, excluding contingent consideration
of £1.8m. The Group has a £0.5m unused overdraft
facility and £3.3m of undrawn headroom in its
RCF Loan facility which is available for working
capital and acquisitions.
The forecasts, the resultant cashflows,
together with the Revolving Credit Facility (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.
New standards and interpretations
A number of new standards and amendments
to standards and interpretations have been
issued during the year ended 31 March 2024.
The Group has adopted all of the new and revised
standards and interpretations issued by the
International Accounting Standards Board
(IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) of the IASB
that are relevant to its operations. Other new
amended standards and interpretations issued
by the IASB that apply to the financial statements
do not impact the Group as they are either
not relevant to the Group’s activities or require
accounting which is consistent with the Group’s
current accounting policies.
New standards not yet effective
There are a number of standards and
amendments to standards, and interpretations
which have been issued by the IASB and in some
cases not yet adopted by the UK Endorsement
Board that are effective in future accounting
periods that the Group has decided not to adopt
early. SysGroup plc is currently assessing the
impact of these new standard and amendments.
The Group does not expect any other standards
issued by the IASB, but not yet effective, to have
a material outcome on the Group.
IFRS16 - Leases
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.
61
SysGroup plc Annual report and accounts 2024
Right of use assets
Land &
buildings
£’000
Plant &
machinery
£’000
Total
£’000
At 1 April 2023
996
–
996
Additions
–
–
–
Disposals
–
–
–
Depreciation
(245)
–
(245)
At 31 March 2024
751
–
751
Repayment of lease liabilities are analysed as follows:
2024
£’000
Due within 1 year
204
Instalments due after 1 year but no more than 5 years
400
Instalments due after 5 years
–
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 are initially measured at
the amount of the lease liability, reduced for any
lease incentives received, and increased for:
• Lease payments made at or before
the commencement of the lease
• Initial direct costs incurred
• 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 18)
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.
Lease liabilities
Land &
buildings
£’000
Plant &
machinery
£’000
Total
£’000
At 1 April 2023
803
–
803
Additions
–
–
–
Disposals
–
–
–
Interest expense
28
–
28
Lease payments
(227)
–
(227)
At 31 March 2024
604
–
604
62
SysGroup plc Annual report and accounts 2024
The consolidated financial statements present
the results of the Company and its subsidiaries
(‘the Group’) as if they formed a single entity.
Intercompany transactions and balances
between Group companies are therefore
eliminated in full.
The consolidated financial statements
incorporate the results of business combinations
using the acquisition method. In the statement
of financial position, the acquirer’s identifiable
assets, liabilities and contingent liabilities
are initially recognised at their fair values at
the acquisition date. The results of acquired
operations are included in the consolidated
statement of comprehensive income from
the date on which control is obtained. They
are deconsolidated from the date on which
control ceases.
Business combinations
All business combinations are accounted for
by applying the purchase method. On acquisition,
all the subsidiaries’ assets and liabilities that exist
at the date of acquisition are recorded at their
fair values reflecting the conditions at that date.
The results of subsidiaries acquired in the period
are included in the income statement from the
date on which control is obtained.
Goodwill
Goodwill represents the excess of the cost of
a business combination over the total acquisition
date fair value of the identifiable assets, liabilities
and contingent liabilities acquired. Goodwill
is not amortised but is capitalised as an intangible
asset with any impairment in carrying value
being charged to the consolidated statement
of comprehensive income. In determining the
fair value of consideration, the fair value of equity
issued is the market value of equity at the date
of completion, and the fair value of contingent
consideration is based on the expected future
cashflows based on whether the Directors believe
performance conditions will be met and thus
the extent to which the further consideration
will be payable. Where the fair value of identifiable
assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is
credited in full to the consolidated statement of
comprehensive income on the acquisition date.
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.
63
SysGroup plc Annual report and accounts 2024
Revenue category
Performance delivery
Revenue recognition
Managed services
Contracted managed services are
delivered from an agreed commencement
date and for a contracted term of one to
three years. Managed services comprise
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
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.
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.
Value-added resale
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 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.
Note that some contracts with customers combine a mix of managed services, professional
services and value-added resale. When this is the case, performance obligations are identified
and recognised in line with the policies described above.
The revenue recognition policies can be summarised as follows:
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.
64
SysGroup plc Annual report and accounts 2024
Segmental reporting
Operating segments are reported in a manner
consistent with the internal reporting provided
to the chief operating decision maker. The chief
operating decision maker has been identified
as the Board of Directors.
Alternative profit measures
In reporting its results, the Directors have
presented various alternative profit measures
(APMs) of financial performance, position or
cashflows, which are not defined or specified
under the requirements of IFRS. On the basis
that these measures are not defined by IFRS,
they may not be directly comparable with other
companies. The key APMs that the group uses
include recurring revenue as a percentage of
revenue, Adjusted EBITDA, Adjusted EPS and
Net cash.
The Group makes certain adjustments to the
statutory profit in order to derive many of these
APMs. These include exceptional items and
share based payments. The Group presents as
exceptional items on the face of the Statement
of Comprehensive Income those material items
of income and expense which the Directors
consider, because of their size or nature and
expected non-recurrence, merit separate
presentation to facilitate financial 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.
Contract assets
Costs incurred to fulfil a contract are recognised
as an asset if and only if all of the following criteria
are met:
• The costs relate directly to a contract
(or a specific anticipated contract)
• The costs generate or enhance resources
of the entity that will be used in satisfying
performance obligations in the future
• The costs are expected to be recovered
These include costs such as direct labour,
direct materials, and the allocation of overheads
that relate directly to the contract.
The asset recognised in respect of the costs
to obtain or fulfil a contract is amortised on
a systematic basis that is consistent with the
pattern of transfer of the goods or services
to which the asset relates.
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.
65
SysGroup plc Annual report and accounts 2024
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)
(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.
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.
66
SysGroup plc Annual report and accounts 2024
Intangible asset
Estimated UEL
Valuation method
Customer relationships
5–10 years
Estimated discounted cashflow
Software licenses
3–5 years
Cost less amortisation
System development
5 years
Cost less amortisation
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
• 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.
67
SysGroup plc Annual report and accounts 2024
2. Significant accounting estimates and judgements
The preparation of this financial information
requires management to make estimates and
judgements that affect the amounts reported
for assets and liabilities at the period end
date and the amounts reported for revenues
and expenses during each period. The nature
of the estimation or judgement means that
actual outcomes could differ from the estimates
and judgements taken in the preparation
of the financial statements.
Significant accounting estimates
Impairment of goodwill and other intangibles
The Group tests goodwill for impairment 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. Following
this review an impairment of the IT Managed
Services CGU of £3.7m has been recorded
(see note 13 for details).
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.
Impairment of investments (Company)
The Company holds investments in subsidiaries.
In line with the Company accounting policies
investments are assessed for impairment when
there is an impairment trigger.
An impairment review has been performed
at the reporting date considering sensitivities
around future business performance, covering
a range of outcomes and risks over levels of
revenue, cost and cash generation. Following
this review an impairment of the investment in
SysGroup Trading Limited of £7.6m has been
recorded (see note 15 for details).
Significant accounting judgements
Revenue
Management makes 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 Cash Generating Unit (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 CGU’s 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. For the current year, there are
two CGU’s, being the legacy SysGroup managed
services acquisitions which operate as one CGU,
and then Truststream.
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.
68
SysGroup plc Annual report and accounts 2024
Group
Company
Financial assets
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Assets held at amortised cost
Cash and cash equivalents
1,943
4,186
119
401
Amounts due from subsidiaries
–
–
–
323
Trade receivables
1,577
1,706
–
–
Total financial assets
3,520
5,892
119
724
IFRS16 – Leases
Management makes 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
Exceptional costs
The classification of costs as being exceptional
and their quantum is viewed as a key management
judgement. For details of exceptional costs in the
year see note 8.
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:
69
SysGroup plc Annual report and accounts 2024
Group
Company
Financial liabilities
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Amortised cost
Trade and other payables
4,472
2,801
805
632
Amounts due to subsidiaries
–
–
5,830
3,099
Loans and other borrowings
5,341
5,508
4,830
4,851
9,813
8,309
11,465
8,582
At fair value
Contingent consideration
1,751
2,681
1,751
2,681
Total financial liabilities
11,564
10,990
13,216
11,263
Contingent consideration
£'000
At 1 April 2023
2,681
Payment of Year 1 earn-out consideration
(885)
Fair value adjustment of liability
(117)
Unwinding of discount
72
At 31 March 2024
1,751
2024
2023
Group & Company
Level 1
£’000
Level 2
£’000
Level 3
£’000
Level 1
£’000
Level 2
£’000
Level 3
£’000
Liabilities measured at fair value
Contingent consideration
–
–
1,751
–
–
2,681
Total
–
–
1,751
–
–
2,681
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:
• Quoted prices (unadjusted) in active markets
for identical assets or liabilities (Level 1)
• 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)
• 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:
70
SysGroup plc Annual report and accounts 2024
Group
At 31 March 2024
Up to
3 months
£’000
Between
3 & 12 mths
£’000
Between
1&2 years
£’000
Between
2&5 years
£’000
Over
5 years
£’000
Trade and other payables
4,472
–
–
–
–
Loans and borrowings
51
153
400
4,783
–
Contingent consideration
–
1,751
–
–
–
Total
4,523
1,904
400
4,738
–
At 31 March 2023
Trade and other payables
2,801
–
–
–
–
Loans and borrowings
46
137
621
4,705
–
Contingent consideration
806
–
1,875
–
–
Total
3,653
137
2,496
4,705
–
Contingent consideration is included in Level
3 of the fair value hierarchy. The provision for
contingent consideration is in respect of the
Truststream acquisition, 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.
Note that as the Truststream Year 2 financial
position is final, there is now no judgement
in the estimated payment.
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:
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 & Company
Effect of change in assumption on income statement
Increase
£’000
Decrease
£’000
EBITDA movement by £100,000
66
300
Risk-adjusted discount rate change by 1.0%
–
–
71
SysGroup plc Annual report and accounts 2024
The Amounts due to subsidiaries shown in ‘up to 3 months’ category in the table above are payable
on demand (note 17).
Company
At 31 March 2024
Up to
3 months
£’000
Between
3 & 12 mths
£’000
Between
1&2 years
£’000
Between
2&5 years
£’000
Over
5 years
£’000
Trade and other payables
805
–
–
–
–
Amounts due to subsidiaries
5,830
–
–
–
–
Loans and borrowings
11
31
50
4,738
–
Contingent consideration
–
1,751
–
–
–
Total
6,646
1,782
50
4,738
–
At 31 March 2023
Trade and other payables
632
–
–
–
–
Amounts due to subsidiaries
3,099
–
–
–
–
Loans and borrowings
15
43
88
4,705
–
Contingent consideration
806
–
1,875
–
–
Total
4,552
43
1,963
4,705
–
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 any movement in the bank base rates.
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
A small number of suppliers invoice in USD.
Foreign exchange exposure is closely managed,
including holding limited funds in USD. Alternate
suppliers invoicing in GBP are also sought
where suitable.
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.
72
SysGroup plc Annual report and accounts 2024
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
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.
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.
Revenue by operating segment
2024
£’000
2024
%
2023
£’000
2023
%
Managed IT services
18,592
82%
17,441
81%
Value-added resale
4,122
18%
4,207
19%
Total
22,714
100%
21,648
100%
2024
£’000
2023
(Restated)*
£’000
Revenue
Managed IT services
18,592
17,441
Value-added resale
4,122
4,207
Total
22,714
21,648
Gross Profit
Managed IT services
9,733
10,155
Value-added resale
663
747
Total
10,396
10,902
2024
£’000
2024
%
2023
£’000
2023
%
UK
22,573
99%
21,608
100%
Rest of world
141
1%
40
–
Total
22,714
100%
21,648
100%
* See accounting policies (note 1) for further details of the restatement.
73
SysGroup plc Annual report and accounts 2024
2024
£’000
2023
£’000
Operating profit is after charging the following:
Audit - Group
116
94
Audit - Company
5
4
Assurance related – interim review
12
12
Auditor’s remuneration:
133
110
Depreciation of tangible fixed assets
570
625
Amortisation of intangible assets
1,696
1,739
Impairment of intangible assets
3,718
_
Staff costs (note 7)
5,763
5,566
Share based payments (note 7, 9)
194
178
Short term lease costs
20
40
Exceptional items (note 8)
1,826
408
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.
Assets and liabilities related to contracts with customers
The Group has recognised the following assets and liabilities related to contracts with customers:
2024
£’000
2023
£’000
Contract liabilities relating to deposits from customers
2,778
4,016
Release of contract liability recognised in revenue which was included
in the contract liability balance at the beginning of the year
1,509
1,163
2024
£’000
2023
£’000
Interest payable on bank loan
440
307
Unwind of discounting on contingent consideration
72
105
Interest payable on lease liabilities
28
32
Arrangement fee amortisation on bank loan
34
29
Other interest
–
10
Total
574
483
5. Operating profit
6. Finance expense
74
SysGroup plc Annual report and accounts 2024
2024
2023
Technical support
70
70
Sales and marketing
23
18
Administration
18
20
Total
111
108
7. Staff numbers and costs
The average monthly number of full-time persons employed by the Group, including Executive Directors
during the year was:
2024
£’000
2023
£’000
Wages and salaries
5,034
4,793
Social security costs
520
547
Benefits in kind
41
55
Pension benefits
168
171
Share based payment expense
194
178
Total
5,957
5,744
Directors
2024
£’000
2023
£’000
Fees and salaries
970
662
Social security costs
101
69
Benefits in kind
29
3
Pension benefits contributions
17
18
Share based payment expense
162
132
Total
1,279
884
The aggregate payroll costs including Executive Directors and excluding Non-Executive Directors
were as follows:
Total staff costs for the Company are £5,957,000 (FY23: £5,744,000) and average staff numbers
for the Company are 111 (FY23: 108).
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, including any contractual
settlement fees, of the highest paid Director
are £504,038 (FY23: £329,000). Total payments
for loss of office amounted to £449,200
(FY23: £nil).
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 2024 was nil (FY23: £nil).
75
SysGroup plc Annual report and accounts 2024
8. Exceptional items
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 must be employed
by the Group at the vesting date. The weighted
average exercise price of options in issue is 42.0p
per share.
2024
£’000
2023
£’000
CEO exit and settlement
744
–
Integration and restructuring costs
571
189
Supplier charges in dispute
434
–
M&A projects
194
–
Acquisition costs
–
219
Fair value adjustment of contingent consideration liability
(117)
–
Total
1,826
408
CEO exit and settlement relates to the
settlement of the former CEO’s contractual
terms. This is considered material and non-
recurring and has therefore been classified
as exceptional.
The integration and restructuring costs relate
to costs associated with the restructuring
of the Senior Leadership Team. This includes
exit and hiring expenses related to senior
team members as well as wider restructuring
expenses within supporting teams. This is
considered non-recurring and has therefore
been classified as exceptional.
The supplier charges in dispute are subject
to ongoing action for which the Company is
pursuing recovery. This is considered non-
recurring and has therefore been classified
as exceptional.
The M&A projects expenditure relate to
costs associated with the evaluation of
potential acquisition targets. This is considered
material and has therefore been classified
as exceptional.
The adjustment to the contingent consideration
liability relates to the purchase of Truststream in
the prior year. This is considered non-recurring and
has therefore been classified as exceptional.
In 2023, the acquisition and integration costs
relate to the two acquisitions in April 2022,
Truststream and Independent Network
Services Limited (trading as ‘Orchard IT’).
This is considered material and has therefore
been classified as exceptional.
All of the items above, based upon the judgement
of the management team, meet the definition
of an exceptional item as defined within the
Group’s accounting policies (note 2 – Alternative
Performance Measures).
76
SysGroup plc Annual report and accounts 2024
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
11,875
30,000
215,000
150,000
206,000
100,000
30,000
30,000
Grant date
21-Feb16
02-Mar18
26-Nov18
16-Apr20
06-Apr21
01-Jul21
14-Feb22
19-Apr23
Expiry date
20-Feb26
01-Mar28
25-Nov28
15-Apr30
05-Apr31
30-Jun31
13-Feb32
18-Apr33
Contract term (years)
10
10
10
10
10
10
10
10
Exercise price
55.2p
35.5p
42.5p
27.0p
41.0p
1.0p
26.0p
28.5p
Share price at granting
70.8p
35.5p
42.5p
27.0p
41.0p
42.0p
26.0p
31.0p
Annual risk-free rate (%)
0.5%
0.5%
0.5%
0.5%
0.5%
0.5%
4.0%
4.0%
Annual expected
dividend yield (%)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0%
Volatility (%)
27%
27%
27%
27%
27%
27%
41%
41%
Fair value per
grant instrument
30.2p
41.5p
17.9p
14.8p
26.0p
14.3p
15.0p
17.0p
Number of ordinary shares
Grant date
Exercise period
Exercise price
At 31 March
2023
Granted
Waived
At 31 March
2024
17/03/2014
17/03/17 to 16/03/24
60.0p
–
–
–
–
21/02/2016
21/02/19 to 20/02/26
55.2p
11,875
–
(6,875)
5,000
02/03/2018
02/03/21 to 01/03/28
35.5p
30,000
–
(30,000)
–
26/11/2018
26/11/21 to 25/11/28
42.5p
215,000
–
(65,000)
150,000
16/04/2020
16/04/23 to 15/04/30
27.0p
150,000
–
(150,000)
–
06/04/2021
06/04/24 to 05/04/31
41.0p
206,000
–
(75,000)
131,000
01/07/2021
01/07/24 to 30/06/31
1.0p
100,000
–
(100,000)
–
14/02/2022
14/02/25 to 13/04/32
26.0p
30,000
–
(30,000)
–
19.04/2023
19/04/26 to 18/04/36
28.5p
–
30,000
(30,000)
–
Total
742,875
30,000
(486,875)
286,000
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.
77
SysGroup plc Annual report and accounts 2024
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:
On 26 May 2023, it was announced that Adam
Binks would be stepping down as CEO 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.
The share based payment charge in the
statement of comprehensive income in
the year was £194,000 (2023:£178,000).
Number of
instruments granted
750,000
450,000
400,000
400,000
287,480
454,416
566,733
Grant date
28-Jun-18
16-Jul-18
15-Jul-19
08-Jul-20
21-Jun-21
21-Jun-22
17-Apr-23
Expiry date
27-Jun-28
15-Jul-28
14-Jul-29
07-Jul-30
20-Jun-31
20-Jun-32
16-Apr-33
Contract term (years)
10
10
10
10
10
10
10
Exercise price
1.0p
1.0p
1.0p
1.0p
1.0p
1.0p
1.0p
Share price at granting
41.5p
46.5p
42.0p
33.0p
42.0p
27.0p
27.5p
Annual risk-free rate (%)
0.5%
0.5%
0.5%
0.5%
0.5%
4.0%
4.0%
Annual expected
dividend yield (%)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Volatility (%)
27%
27%
27%
27%
27%
41%
41%
Fair value per
grant instrument
40.9p
43.7p
41.4p
32.0p
41.0p
26.0p
26.0p
Number of ordinary shares
Grant date
Exercise period
Exercise price
At 31 March
2023
Granted
Waived
At 31 March
2024
28/06/2018
28/06/21 to 27/06/28
1.0p
750,000
–
(750,000)
–
16/07/2018
16/07/21 to 15/07/28
1.0p
450,000
–
–
450,000
15/07/2019
15/07/22 to 14/07/29
1.0p
400,000
–
(250,000)
150,000
08/07/2020
08/07/22 to 07/07/30
1.0p
400,000
–
(250,000)
150,000
21/06/2021
21/06/23 to 20/06/31
1.0p
287,480
–
(179,675)
107,805
21/06/2022
21/06/24 to 20/06/32
1.0p
454,416
–
(284,010)
170,406
17/04/2023
17/04/25 to 16/04/33
1.0p
–
566,733
(362,709)
204,024
Total
2,741,896
566,733
(2,076,394)
1,232,235
78
SysGroup plc Annual report and accounts 2024
10. Acquisitions
The Group has not made any acquisitions
in the year to 31 March 2024. In April 2022
of the prior year, SysGroup plc acquired 100%
of the issued share capital in 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
2022 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
£3.1m. A payment of £0.5m 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. £0.9m has
been paid to date in relation to the first earn-out
period and a further £1.8m is held as Contingent
consideration at 31 March 2024. Final earn-out
is expected to be settled and paid within
12 months of the balance sheet date.
The Truststream acquisition was mainly
funded from a new £8.0m revolving credit
facility (‘RCF’) which was signed with
Santander on 4 April 2022. SysGroup utilised
£4.5m of funds from the RCF to finance
the acquisition. Further information on
the RCF facility can be found in note 19
to the consolidated financial statements.
Recognised amounts of net assets acquired and liabilities assumed
Book value
£’000
Fair value
adj. £’000
Fair value
£’000
Cash and cash equivalents
550
–
550
Trade and other receivables
1,783
–
1,783
Property, plant and equipment
1
–
1
Intangible assets
–
2,525
2,525
Trade and other payables
(1,776)
(24)
(1,800)
Corporation tax
(117)
–
(117)
Deferred tax
–
(631)
(631)
Identifiable net assets
2,311
Goodwill
5,602
Total net assets
7,913
Satisfied by:
Cash consideration - paid on acquisition
5,337
Contingent consideration
3,075
Discounting of contingent consideration
(499)
Total consideration
7,913
79
SysGroup plc Annual report and accounts 2024
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 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.
SysGroup acquired INSL on 26 April 2022
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.
The Directors have considered the intangible
assets acquired with the two acquisitions and
have recognised 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 seven 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 in the year
to 31 March 2023. These costs are included as
exceptional costs in the Group’s consolidated
statement of comprehensive income.
Truststream contributed to Group revenue
£6.3m (2023: £4.9m) and £0.4m (2023: £0.3m)
profit before tax for the year to 31 March 2024.
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
trading was fully hived into SysGroup Trading
Limited for the year to 31 March 2024. Orchard
contributed £1.8m to Group revenue and £0.1m
profit before tax for the year to 31 March 2023.
Recognised amounts of net assets acquired and liabilities assumed
Book value
£’000
Fair value
adj. £’000
Fair value
£’000
Cash and cash equivalents
398
–
398
Trade and other receivables
311
(15)
296
Property, plant and equipment
32
(32)
–
Intangible assets
–
1,028
1,028
Trade and other payables
(385)
(435)
(820)
Bank loan
(82)
–
(82)
Corporation tax
(63)
(5)
(68)
Deferred tax
(5)
(257)
(264)
Identifiable net assets
490
Goodwill
510
Total net assets
1,000
Satisfied by:
Cash consideration - paid on acquisition
1,000
Total consideration
1,000
80
SysGroup plc Annual report and accounts 2024
11. Earnings per share
2024
2023
(Restated)*
(Loss) for the financial year attributable to shareholders
(£5,900,000)
(£201,000)
Adjusted profit for the financial year
£1,010,000
£1,723,000
Weighted number of issued equity shares
48,923,389 48,859,690
Weighted number of equity shares for diluted EPS calculation
50,710,251
52,274,633
Adjusted basic earnings per share (pence)
2.1p
3.5p
Basic earnings per share (pence)
(12.1)p
0.0p
Diluted earnings per share (pence)
(12.1)p
0.0p
2024
£’000
2023
(Restated)*
(Loss) after tax used for basic earnings per share
(5,900)
(201)
Amortisation of intangible assets
1,696
1,739
Impairment of intangible assets
3,718
–
Exceptional items
1,826
408
Share based payments
194
178
Tax adjustments
(524)
(401)
Adjusted profit used for adjusted earnings per share
1,010
1,723
Current tax
2024
£’000
2023
£’000
Current tax - current year
–
374
Adjustments in respect of prior years
(84)
–
Total current tax charge
(84)
374
Deferred tax
Deferred tax - timing differences
(609)
(472)
Adjustments in respect of prior years
23
–
Total deferred tax
(586)
(472)
Total tax (credit)
(670)
(98)
12. Taxation
* See accounting policies (note 1) for further details of the restatement.
81
SysGroup plc Annual report and accounts 2024
The effective tax rate for the year to 31 March 2024 is lower (2023: lower) than
the standard rate of corporation tax in the UK. The differences are explained below:
Recognition of deferred tax assets is restricted to those instances where it is highly probable
that relief against taxable profit will be available. There are no unrecognised deferred tax assets.
The Group recognised deferred tax assets and liabilities as follows:
2024
£’000
2023
(Restated)*
£’000
(Loss) on ordinary activities before tax
(6,570)
(299)
(Loss) on ordinary activities before taxation multiplied by
the standard rate of UK corporation tax of 25% (2023: 19%)
(1,642)
(57)
Effects of:
Expenses not deductible
274
92
Income not taxable
899
–
Short term timing differences
374
136
R&D tax credits
–
(29)
Re-measurement of deferred tax due to changes in UK rate
–
(66)
Deferred tax on share based
31
32
Deferred tax on acquired intangibles
(368)
(206)
Adjustments in respect of prior years
(61)
–
Other permanent differences
(177)
–
Total tax (credit)
(670)
(98)
2024
£’000
2023
£’000
Deferred tax on customer relationships
(1,042)
(1,421)
Deferred tax asset on share-based payments
100
166
Fixed asset timing differences
(196)
(225)
Short term timing differences
21
–
Losses
268
(46)
Deferred tax liability
(849)
(1,434)
* See accounting policies (note 1) for further details of the restatement.
82
SysGroup plc Annual report and accounts 2024
Deferred tax balances are recognised at 25% (2023: 25%):
Losses
£’000
Fixed asset
timing
differences
£’000
Short term
timing
differences
Share based
payments
Customer
relationships
£’000
Total
£’000
Balance at 1 April 2023
46
(225)
–
166
(1,421)
(1,434)
Movement in deferred tax
on share based payments
–
–
–
(31)
–
(31)
Movement in deferred tax on
amortisation of intangible assets
–
35
–
–
368
403
Fixed asset and other timing
differences
222
(7)
22
(35)
11
213
Balance at 31 March 2024
268
(197)
22
100
(1,042)
(849)
82
SysGroup plc Annual report and accounts 2024
83
SysGroup plc Annual report and accounts 2024
Group cost
Systems
development
£’000
Software
licences
£’000
Customer
relationships
£’000
Positive
goodwill
£’000
Total
£’000
At 1 April 2022
1,073
205
9,156
15,554
25,988
Additions
163
–
3,553
6,112
9,828
Disposals
(225)
(205)
–
–
(430)
At 31 March 2023
1,011
–
12,709
21,666
35,386
At 1 April 2023
1,011
–
12,709
21,666
35,386
Additions
109
–
–
–
109
Disposals
–
–
–
–
–
Impairment
–
–
–
(3,718)
(3,718)
At 31 March 2024
1,120
–
12,709
17,948
31,777
Accumulated amortisation
At 1 April 2022
404
205
5,507
–
6,116
Charge for the year
177
–
1,562
–
1,739
Disposals
(225)
(205)
–
–
(430)
At 31 March 2023
356
–
7,069
–
7,425
At 1 April 2023
356
–
7,069
–
7,425
Charge for the year
224
–
1,472
–
1,696
Disposals
–
–
–
–
–
At 31 March 2024
580
–
8,541
–
9,121
Net book value
At 31 March 2023
655
–
5,640
21,666
27,961
At 31 March 2024
540
–
4,168
17,948
22,656
Company cost
Systems
development
£’000
Total
£’000
At 1 April 2022
–
–
Additions
28
28
At 31 March 2023
28
28
Additions
37
37
At 31 March 2024
65
65
Accumulated amortisation
At 1 April 2022
–
–
Charge for the year
2
2
At 31 March 2023
2
2
Charge for the year
16
16
At 31 March 2023
18
18
Net book value
At 31 March 2023
26
26
At 31 March 2024
47
47
13. Intangible assets
84
SysGroup plc Annual report and accounts 2024
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 two and
five years.
Cash-generating units (CGU’s)
Goodwill and intangible assets are allocated
to CGU’s 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. Whilst the
Truststream business has been 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
CGU 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:
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 CGU. 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 2.0% (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 weighted
average cost of capital 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 an impairment of
the managed IT services CGU of £3.7m has been
recorded. No impairment of the Truststream CGU
arose because of this review.
Allocation of goodwill
Carrying value of assets
2024
£’000
2023
£’000
2024
£’000
2023
£’000
Managed IT services
16,064
16,064
17,213
19,366
Truststream Security Solutions Limited
5,602
5,602
6,583
6,698
Total
21,666
21,666
23,796
26,064
85
SysGroup plc Annual report and accounts 2024
2024
Legacy
Managed
IT services
Truststream
Discount rate post-tax
10.3%
10.3%
Revenue growth rate Year 2 to Year 5
3.5%
6.0%
Terminal growth rate
2.0%
2.0%
2023
Discount rate post-tax
10.7%
10.7%
Revenue growth rate Year 2
2.5%
10.0%
Revenue growth rate Year 3 to Year 5
2.5%
2.5%
Terminal growth rate
2.0%
2.5%
Legacy managed IT services CGU
The managed IT services CGU goodwill
is comprised of acquisitions dating from 2016
to 2022, as listed below:
• System Professional – 2016
• Rockford IT – 2017
• Certus IT – 2019
• Hub Network – 2020
• Orchard IT — 2022
Based upon a prudent assessment of the future
performance of these acquisitions (being the
‘managed IT services CGU’), management’s view
is that the CGU is impaired by £3.7m. The VIU
model is sensitive to changes in key assumptions,
including revenue growth. If Year 1 revenue growth
were to reduce to 0%, then the impairment would
increase by a further £4.9m, assuming no changes
in other assumptions. Management is comfortable
with the revenue growth rate used
in the VIU model.
Truststream CGU
The Truststream CGU has over 18% headroom
of VIU compared to the carrying value of assets.
For the headroom to reduce to nil, the post-tax
discount rate would have to increase to over 11.8%
on Truststream or future CGU profits would have
to be significantly below current forecast levels.
The VIU model for the Truststream CGU is
particularly sensitive to changes in two key
assumptions, being Year 1 revenue and gross
margin percentage. Year 1 revenue growth would
have to drop by 4.7% from the base for there
to be an impairment of goodwill. As an example,
if the revenue growth rate were to drop by 10%
then there would be an impairment of £2.7m
(assuming all other assumptions remain in
line). Further, gross margin percentage would
have to drop 1.0% from the base for there to
be an impairment of goodwill. Management is
comfortable with the revenue growth rate and
gross margin percentage used in the VIU model.
The assumptions used for the impairment
review are detailed below:
86
SysGroup plc Annual report and accounts 2024
Group cost
Office
equipment
£’000
Right of
use lease
£’000
Freehold
property
£’000
Total
£’000
At 1 April 2022
2,744
2,181
382
5,307
Additions
249
935
–
1,184
Disposals
(1,793)
(1,851)
–
(3,644)
At 31 March 2023
1,200
1,265
382
2,847
At 1 April 2023
1,200
1,265
382
2,847
Additions
450
–
–
450
Disposals
–
–
–
–
At 31 March 2024
1,650
1,265
382
3,297
Accumulated depreciation
At 1 April 2022
2,014
1,790
25
3,829
Charge for the year
358
259
8
625
Disposals
(1,793)
(1,780)
–
(3,573)
At 31 March 2023
579
269
33
881
At 1 April 2023
579
269
33
881
Charge for the year
317
245
8
570
Disposals
–
–
–
–
At 31 March 2024
896
514
41
1,451
Net book value
At 31 March 2023
621
996
349
1,966
At 31 March 2024
754
751
341
1,846
14. Property, plant and equipment
87
SysGroup plc Annual report and accounts 2024
Company cost
Office
equipment
£’000
Right of
use Lease
£’000
Total
£’000
At 1 April 2022
320
346
666
Additions
150
47
197
Disposals
(298)
–
(298)
At 31 March 2023
172
393
565
At 1 April 2023
172
393
565
Additions
163
–
163
Disposals
–
–
–
At 31 March 2024
335
393
728
Accumulated depreciation
At 1 April 2022
278
134
412
Charge for the year
56
70
126
Disposals
(298)
–
(298)
At 31 March 2023
36
204
240
At 1 April 2023
36
204
240
Charge for the year
82
76
158
Disposals
–
–
–
At 31 March 2024
118
280
398
Net book value
At 31 March 2023
136
189
325
At 31 March 2024
217
113
331
14. Property, plant and equipment (contd.)
88
SysGroup plc Annual report and accounts 2024
15. Investments
Company
2024
£’000
2023
£’000
At start of year
34,034
24,895
Acquisitions
–
8,913
Investment in subsidiaries
–
226
Impairment
(7,635)
–
At 31 March
26,399
34,034
Undertakings
Registration
Principal activity
SysGroup Trading Limited
England & Wales
Managed IT services
Truststream Security Solutions Limited
Scotland
Managed IT services
Certus IT Limited
England & Wales
Non-trading
Hub Network Services Limited
England & Wales
Non-trading
Netplan LLC*
USA
Non-trading
Orchard Computers Limited
England & Wales
Dormant
Independent Network Solutions Limited
England & Wales
Non-trading
Netplan Internet Solutions Limited
England & Wales
Dormant
Rockford IT Limited
England & Wales
Dormant
System Professional Limited
England & Wales
Dormant
SysGroup (DIS) Limited
England & Wales
Dormant
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 2026. The principal
assumptions can be found in note 13.
In line with the rationale and conclusions drawn
in note 13 regarding the Legacy managed IT
services CGU, an impairment of the SysGroup
Trading Limited investment of £7.6m is required
and has been recorded in the period. Following
this impairment, the investment balance in
SysGroup Trading Limited is £18.5m. The remaining
balance of £7.9m relates to Truststream Security
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.
*Netplan LLC is a wholly owned subsidiary of Netplan Internet Solutions Limited.
The Company’s subsidiary undertakings all of which are wholly owned and included
in the consolidated accounts are:
89
SysGroup plc Annual report and accounts 2024
Amounts due within one year
Group
2024
£’000
Company
2024
£’000
Group
2023
(Restated)*
£’000
Company
2023
£’000
Trade debtors
1,577
–
1,706
–
Amounts due from subsidiaries
–
–
–
323
Other debtors
26
–
–
81
Corporation tax asset
84
–
–
–
Prepayments and accrued income
2,316
105
3,107
221
Total
4,003
105
4,813
625
Group
Company
Current
£’000
Over
1 month
past due
£’000
Total
£’000
Current
£’000
Over
1 month
past due
£’000
Total
£’000
Trade debtors
610
1,082
1,692
–
–
–
Expected credit loss
–
(115)
(115)
–
–
–
Net carrying amount
610
967
1,577
–
–
–
Debtor impairment
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Trade debtors
1,692
–
1,979
–
Impairment provision
(115)
–
(273)
–
Total
1,577
–
1,706
–
16. Trade and other receivables
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.
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.
* See accounting policies (note 1) for further details of the restatement.
90
SysGroup plc Annual report and accounts 2024
Amounts due within one year
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Trade payables
3,132
293
1,813
110
Amounts due to subsidiaries
–
5,830
–
3,099
Accruals
1,340
512
988
522
Total financial liabilities, excluding loans
and borrowings measured at amortised cost
4,472
6,635
2,801
3,731
Corporation tax
–
–
438
–
Other taxes and social security costs
341
82
622
132
Total
4,813
6,717
3,861
3,863
Contingent consideration
Amounts due within one year
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Contingent consideration
1,751
1,751
806
806
Amounts due after one year
Contingent consideration
–
–
1,949
1,949
Discounted value
–
–
(74)
(74)
Discounted contingent consideration
–
–
1,875
1,875
17. Trade and other payables
Amounts due to subsidiaries are due on demand and incur no interest charge.
The contingent consideration is stated at
its discounted fair value and is expected to
be paid in H1 FY25, following the completion
of the Year 2 earn-out period.
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 2024
and 31 March 2023. The maturity of the
financial liabilities, excluding loans and
borrowings, classified as financial liabilities
and measured at amortised cost is shown
in note 3.
91
SysGroup plc Annual report and accounts 2024
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Dilapidations provision
148
68
191
68
Total
148
68
191
68
Non-current
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Lease liabilities
400
49
621
88
Bank loan
4,738
4,738
4,705
4,705
Total
5,138
4,787
5,326
4,793
Current
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Lease liabilities
204
43
182
58
Bank loan
–
–
–
–
Total
204
43
182
58
18. Provisions
19. Loans and borrowings
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
2026 and 2028.
The Company has an RCF banking facility with
a term of five years to April 2027, 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.
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SysGroup plc Annual report and accounts 2024
Contract liabilities
Group
2024
£’000
Company
2024
£’000
Group
2023
£’000
Company
2023
£’000
Current - contract liabilities
2,635
–
3,633
–
Non-current - contract liabilities
143
–
383
–
Total
2,778
–
4,016
–
Group and Company
Number
£’000
Allotted, called up and fully paid ordinary shares of £0.01 each
At 1 April 2022
49,419,690
494
At 31 March 2023
49,419,690
494
Issue of share capital
2,076,394
21
At 31 March 2024
51,496,084
515
20. Contract liabilities
21. Share capital
93
SysGroup plc Annual report and accounts 2024
22. Reconciliation of net cashflow movements in net debt
1 April
2023
£’000
Non cashflow
movements
£’000
Cashflow
£’000
Right of use
movement
£’000
Maturity
reclass
£’000
31 March
2024
£’000
Cash and cash equivalents
4,186
–
(2,243)
–
–
1,943
Debt due in less than one year:
Bank loans
–
–
–
–
–
–
Contingent consideration
(806)
(79)
885
–
(1,751)
(1,751)
Lease liabilities
(182)
–
199
–
(221)
(204)
Debt due in more than one year:
Bank loans
(4,705)
(33)
–
–
–
(4,738)
Contingent consideration
(1,875)
124
–
–
1,751
–
Lease liabilities
(621)
–
–
–
221
(400)
Net cash/(debt)
(4,003)
(65)
(1,082)
–
–
(5,150)
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.
94
SysGroup plc Annual report and accounts 2024
23. Related party transactions
Transactions between the Company and its
subsidiaries, which are related parties of the
Company, have been eliminated on consolidation
and are not disclosed in this note. Details of
the transactions between the Group and
other related parties are disclosed below:
Arete Capital Partners, a Company of which
Mike Fletcher (Non-Executive Director) is
a partner, invoiced SysGroup plc £420 (2023:
£26,479) for a shared cost of corporate
services received by SysGroup plc and Arete
Capital Partners. At 31 March 2024, the balance
outstanding was £nil (31 March 2023: £nil).
24. Ultimate controlling party
The Directors consider the Group and Company
have no controlling shareholder and no ultimate
controlling party.
25. Contingent asset
As disclosed in note 8 the Group has incurred
£0.43m in relation to charges in dispute with
a third party supplier, which the Group is actively
seeking recovery of. The Group considers the
probability of recovery of the charges as possible.
As the recovery is not virtually certain, an asset
has not been recorded on the balance sheet.
26. Post balance sheet events
The Group raised £10.6m net funds from
a placing in June 2024. Gross proceeds
were £11.2m, including a £0.3m retail offering
and a £10.9m placing.
95
SysGroup plc Annual report and accounts 2024
Company information
Registrar
Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol BS99 6ZZ
Legal advisers
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
Legal entity identifier (LEI)
213800D18GPZZJR9SH55
Company number
06172239
Registered office
55 Spring Gardens, Manchester M2 2BY
Nominated adviser & broker
Zeus Capital Ltd
82 King Street, Manchester M2 4WQ
Company website
www.sysgroup.com
SysGroup plc
55 Spring Gardens
Manchester M2 2BY
Company number
06172239