Final Results

RNS Number : 6815S
SysGroup PLC
27 June 2018
 

27 June 2018

SysGroup plc

("SysGroup" or the "Company" or the "Group")

 

Final Results for the year ended 31 March 2018

 

SysGroup PLC (AIM:SYS), the managed IT services and cloud hosting provider is pleased to announce its final results for the year ended 31 March 2018.

 

HIGHLIGHTS

 

Financial

·    Record revenues delivered with revenue increasing by 45.7% to £10.45 million (2017: £7.17 million) benefiting from the contribution of Rockford IT Ltd ("Rockford IT") in H2 2018

£7.13m of revenue is recurring in nature (2017: £5.0m)

Organic revenue growth of 20.8% generating revenues of £8.65 million

·     Adjusted EBITDA* increased by 61.3% to £1.0 million (2017: £0.62 million)

£0.86 million EBITDA delivered in H2

·     Adjusted PBT** growth of 104.2% to £0.49 million (2017: £0.24 million)

·     Cash generated from operations of £0.79 million (£1.00 million)

·     Net (debt)/cash*** of £(0.92) million (2017: £3.07 million)

 

Operational

·     Integration of System Professional Ltd ("Sys-Pro") completed

·     Acquisition of Rockford IT in November 2017 for an aggregate consideration of £3.85 million and subsequent integration completed

·     Improved sales and marketing functions

Creation of a single team focused on managed IT services and cloud hosting

Appointment of a Group Marketing Director

Investment in a single CRM system, to unify the sales operations onto a single platform

·    Three year c£1.0 million contract win with T.J. Morris Limited demonstrating success of sales and marketing focus

 

Board transition

·     Mark Quartermaine appointed as an independent Non-Executive Director in November 2017

·     Mike Fletcher appointed as an independent Non-Executive Director in January 2018

·     New executive team with the appointment of Adam Binks as CEO, having joined the Board as COO in October 2017, and Martin Audcent appointed as CFO post period end

 

Post period-end developments

·     Transition to a single brand complete

·     Momentum generated in H2 FY2018 continuing into H1 FY2019 with trading in line with expectations

 

 

 

 

2018

2017

2018% increase/decrease

Revenue (continuing operations)

£10.45m

£7.17m

+45.7%

Gross Margin

£5.99m

£4.38m

+36.8%

Gross Margin %

57.4%

61.3%

(6.4)%

Adjusted EBITDA* (continuing operations)

£1.00m

£0.62m

+61.3%

Adjusted PBT**

£0.49m

£0.24m

+104.2%

(Loss) before tax (continuing operations)

£(0.007)m

£(1.35)m

-

Operating cash inflow

£0.79m

£1.0m

(21.0)%

Net (debt)/cash***

£(0.92)m

£3.07m

 -

 

(*) Adjusted EBITDA, is earnings before interest, taxation, depreciation, amortisation, acquisition and restructuring costs, fair value adjustments and share based payments

(**) Adjusted PBT is profit before taxation after adding back share-based payments, amortisation on acquired intangibles, fair value adjustments, share based payments and costs relating to acquisition and restructuring

(***) Net (debt)/cash represents cash balances less loans and finance lease liabilities

 

 

 

Adam Binks, Chief Executive Officer commented:

"I am delighted to report, for the first time as Chief Executive Officer, what has been a transformational year for SysGroup. The acquisition of Rockford IT has added further capabilities to the Group's offering as well as providing additional scale. We have completed the integration of the previously acquired businesses, significantly strengthened the Board and begun to see the initial success of our newly focused sales and marketing teams.

Group revenue grew by 45.7% largely driven by the Managed Services division and supplemented by value added resale. Our sales pipeline continues to grow and I am confident we are now well placed to take advantage of the strong market dynamics as the demand for managed IT services and cloud hosting continues to grow.

We remain committed to investment in order to accelerate our organic growth strategy whilst continuing to assess complementary strategic acquisition opportunities.

I am confident we can continue to build on the strong momentum we've developed in FY2018 into FY2019 and beyond."

 

 

For further information please contact:

 

SysGroup plc

Adam Binks, CEO

Julian Llewellyn, CFO

 

 

 

Tel: 0151 559 1777

 

Shore Capital (Nomad and Broker)

Edward Mansfield / Anita Ghanekar

 

Tel: 020 7408 4090

Alma PR (Financial PR)

Josh Royston / Helena Bogle

 

Tel: 020 8004 4218

 

About SysGroup

SysGroup is a leading provider of Managed IT Services, Cloud Hosting, and expert IT Consultancy. The Group delivers solutions that enable clients to understand and benefit from industry leading technologies and advanced hosting capabilities. SysGroup focuses on a customer's strategic and operational requirements - enabling clients to free up resources, grow their core business and avoid the distractions and complexity of delivering IT services.

The Group has offices in Liverpool, Coventry, London and Telford.

 

For more information, visit http://www.sysgroupplc.com
 

STRATEGIC REPORT

 

Chairman's statement

 

SysGroup made considerable progress during the financial year to 31 March 2018. Revenue increased by 45.7% (including organic growth of 20.8%) with Adjusted EBITDA improving by 61.3%. Recurring revenue for the year increased to £7.13m (2017: £5.0m), evidence that the transformation of the Group into a trusted provider of managed IT services and cloud hosting is now complete.

 

During the course of the year Chris Evans left the business to focus on his health following long-standing issues. The Board naturally considered his replacement extensively and ultimately were delighted that Adam Binks, previously Chief Operating Officer, agreed to step up to become Chief Executive Officer in April 2018.

 

Adam has been integral to the development of SysGroup and has an unrivalled knowledge of our business through his previous role as Chief Operating Officer. The Board has been impressed with his strategic vision for the Company.  As separately announced this morning, Martin Audcent will be joining the Company as Chief Financial Officer in July, following Julian Llewellyn's decision to pursue other opportunities. Julian will remain with the Group for a brief period to oversee an orderly handover and we thank him for his contribution to the Group and wish him success for the future. Martin's appointment completes an Executive team positioned to drive this business through its next phase of growth and which will be ably supported by a Board which was strengthened further during the year with the appointments of Mark Quartermaine and Mike Fletcher as Non-Executive Directors. Mark and Mike bring a significant blend of industry and listed company expertise. 

 

The market opportunity for SysGroup is both considerable and growing as the secular trend continues towards trusted, outsourced partners driven by increasingly complex regulatory requirements and security needs. The Board believes that it has the right strategy and the right team in place to execute. With further investment in the current year we are confident that we can take advantage of this opportunity and look forward to another busy year.

 

 

 

Michael Edelson

Chairman

27 June 2018

 

 

Chief Executive Officer's report

 

Introduction

During the financial year ended 31 March 2018 my role was that of Chief Operating Officer, joining the Board of Directors at the end of October 2017 before taking up the post of Chief Executive Officer at the outset of the current financial year. I believe that the operational insights that I gained as COO provide the right grounding for driving the strategic direction of the business. SysGroup is well placed for continued profitable organic and acquisitive growth. I'd also like to thank Michael Edelson for his contribution and support during his tenure as Interim Executive Chairman towards the end of the period.

 

In 2016 SysGroup commenced a transition of the business to become a trusted provider of managed IT services and cloud hosting. This has been executed through the acquisitions of Sys-Pro (2016) and Rockford IT (2017) and disposal of the Group's SME mass market business (2016). These corporate actions, coupled with structural change within the organisation, have transformed the Group. The Group now has a robust platform, underpinned by high levels of recurring income, to execute its growth strategy.

 

Following the integration of the Sys-Pro and Rockford IT businesses the Group now has the capability to offer fully managed end to end solutions for its prospects and customers. From managed end user support through to hosted infrastructure, we have an excellent platform from which to deliver further organic growth. Another beneficial aspect of the integration is that we have been able to establish and develop a highly capable senior leadership team across the Group and an engaged workforce who are committed to executing our strategic objectives.

 

Market

The overall market for our services continues to be buoyant. Companies are increasingly looking for trusted partners to manage their IT needs, driven by the growing focus on security and burdens of compliance and governance, rather than applying internal resource that could struggle with the changing regulatory dynamics. As well as ensuring the best solutions this frees up time and resources for management teams to focus on their business operations.

 

As with most evolving and growing markets, ours is highly fragmented with a vast array of providers on a national and regional basis varying from full service offerings such as SysGroup through to niche operators.

 

Strategy

SysGroup's clear focus is to expand its position as a trusted provider of managed IT services and cloud hosting to clients in the UK. The Board believes that a business focused on the provision of managed IT services offers the highest growth opportunity and the potential for increased margins and longer-term contracts, thereby providing greater revenue visibility for the future. In pursuit of this strategy, the Group has been positioned as an extension of a customer's existing IT department, with an emphasis on consultative-led sales to guide customers through the complexities and developments in the market.

 

Acquisitions

In November 2017 the Group acquired Rockford IT for an aggregate consideration of £3.85m in cash (on a cash-free/debt-free basis). Rockford enhanced the Group's offering in hosting and security services as well as complementing with connectivity capabilities which now completes the product offering for the provision of end to end managed solutions.

 

Acquisitions will continue to play a significant role in the Group's strategy to complement organic growth. As previously mentioned, the market in which we operate remains highly fragmented and we believe that we are well placed to be a consolidator. The Board remains alert to earnings enhancing opportunities which will enable us to expand our customer base and / or enhance our offering alongside our internal initiatives.

 

Sales and Marketing
As highlighted in the group's Half Year Report, a number of strategic changes to the Sales and Marketing functions were implemented in the first half of the year to better support the business. The sales function was restructured to create a single team focused fully on managed IT services and cloud hosting, now headed up by the post-period appointment of Colin Deamer to the role of Group Sales Director. Colin was previously Group Sales Director at IDE Group Holding plc. All supporting teams have likewise been integrated across the Group with single teams operating across the service desk, infrastructure support, cloud delivery and professional services teams. Investments have been made in a new CRM system which has enabled us to unify our sales operations onto a single platform across the group.

In Marketing, the Group initiated a complete overhaul of the marketing efforts to create a new strategic marketing function. This included the appointment of Emmy Lippold to the newly created role of Group Marketing Director. Emmy has previously held senior positions in technology companies with Data8 Limited and Upland Software Inc. based in the USA. This has led to a much more coherent message and strategy with a newly embraced digital marketing capability.

The results of the improved sales and marketing functions are already being seen in the business, as evidenced by the three year contract with T.J Morris Limited which was announced in March of this year. This contract win came as a direct result of our improved marketing initiatives and underpinned the Board's belief in this strategy. As a result, further investments in marketing will be made throughout the current financial year. Whilst this will have an impact on profitability in the current year, the Board firmly believes that it will accelerate our rate of growth and enable us to better take advantage of the current market opportunity.

Financial review
In the following review, the numbers provided for 2017 exclude operations which were discontinued during that year, in order to give a meaningful comparison for progress achieved in the year to 31 March 2018.

Group revenue for the year grew by 45.7% to £10.45m for the year to 31 March 2018 (2017: £7.17m). Revenue growth was predominately driven by the Managed Services division and complemented by the value added resale services that the Group offers. Organic revenue growth was 20.8% for the year to 31 March 2018.

We continue to have good visibility of future revenues as the vast majority of our customers have entered into multi-year contracts. As at 31 March 2018 there is £0.43m of deferred revenue (2017: £0.47m) which will be released to profit in future periods.

Gross profit for the year was £5.99m (2017: £4.38m) representing a gross margin of 57.4% (2017: 61.2%). The reduction in gross margin is attributable to the change of sales mix during the year including the introduction of connectivity products which contribute less at the gross margin level. The loss before tax for the year of £(0.007)m was a significant improvement on the previous period (2017: £(1.35)m).

Adjusted earnings before interest, taxation, depreciation and amortisation ("EBITDA") for the year to 31 March 2018 increased by 61.3% to £1.0m (2017: £0.62m). Adjusted EBITDA is calculated after excluding acquisition and restructuring costs, share based payment costs and fair value adjustments.  The Directors consider that an adjusted EBITDA figure is a more appropriate measure of the underlying performance of the business.

 

2018

2018

2017

2017

Revenue by operating segment

£'000

%

£'000

%

Hosting/Managed Services

7,130

68%

5,400

69%

Value Added Reseller

3,321

32%

1,765

22%

SME Mass Market (discontinued)

-

0%

700

9%

 

10,451

100%

7,865

100%

Balance sheet, cashflow and net (debt)/cash

Net cash inflow from operating activities during the year amounted to £0.79m (2017: £1.0m). Net debt (comprising cash balances less loans and finance lease liabilities) at 31 March 2018 was £(0.92)m (2017: net cash £3.07m). During the period the Group drew down £2.0m from an acquisition facility to part fund the acquisition of Rockford IT on 1 November 2017.

 

Summary and outlook
With the integration of acquired businesses and subsequent transformation of the Group now complete, I am confident that SysGroup is well placed to take advantage of strong market dynamics. The momentum within the business is demonstrated by the fact that £0.86 million of the Group's Adjusted EBITDA performance was delivered in the second half of the year.

We have a full end-to-end managed service offering which provides the solutions that our clients need in an increasingly complex regulatory environment and with the necessary levels of security to protect their businesses. We have a clear go-to-market strategy that has already started to deliver results, led by an impressive senior leadership team and supported by a highly engaged workforce and the appropriate levels of infrastructure.

Our successful track record of identifying and integrating acquisitions positions us well in a market ripe for further consolidation, which will complement and enhance our organic initiatives.

The current year has started well and trading in line with expectations supported by a growing pipeline of opportunities. The Board will continue to invest in this financial year as we look to accelerate our growth and target profitability improvements next year and beyond. 

 

 

Adam Binks

Chief Executive Officer

27 June 2018

 

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2018

 

 

2018

2017

 

 

 

  (Restated*)

 

 

Group

Group

 

Notes

£'000

£'000

Revenue

 

 

 

Total group revenue - continuing and discontinued operations

4

10,451

7,865

Revenue discontinued operations

 

-

700

Revenue - continuing operations

 

10,451

7,165

Cost of sales

 

(4,456)

(2,783)

Gross profit

 

5,995

4,382

Operating expenses before depreciation, amortisation, acquisition and restructuring costs, fair value adjustment and share based payments

 

(4,995)

(3,767)

 

 

1,000

618

Adjusted EBITDA - continuing

 

Depreciation

14

(372)

(324)

Amortisation of intangibles

13

(500)

(326)

Acquisition and restructuring costs

8

(581)

(791)

Fair value adjustments

3

540

(498)

Share based payments

9

(10)

-

 

 

 

 

Administrative expenses

 

(5,918)

(5,706)

Profit/(loss) from operations

 

77

(1,324)

Finance costs

6

(84)

(27)

 

 

 

 

Loss before taxation

 

(7)

(1,351)

 

 

 

 

Taxation

12

245

20

Profit/(loss) from continuing operations

 

238

(1,331)

Profit from discontinued operations - net of income tax

23

-

1,508

Total comprehensive profit attributable to the equity holders of the company

 

238

177

Basic earnings per share (EPS)

11

£0.0103

£0.0090

Diluted earnings per share (EPS)

11

£0.0102

£0.0088

*Restated - note 22

 

 

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2018

 

 

2018

2017

 

 

 

(Restated*)

 

 

Group

Group

 

Notes

£'000

£'000

Assets

 

 

 

Non-current assets

 

 

 

Goodwill

13

9,727

7,620

Intangible assets

13

3,094

1,617

Property, plant and equipment

14

809

666

 

 

13,630

9,903

Current assets

 

 

 

Trade and other receivables

16

1,624

1,311

Cash and cash equivalents

 

1,315

3,473

 

 

2,939

4,784

Total assets

 

16,569

14,687

Equity and liabilities

 

 

 

Equity attributable to the equity shareholders of the parent

 

 

 

Called up share capital

21

231

231

Share premium reserve

 

-

-

Other reserve

 

2,010

2,000

Translation reserve

 

4

4

Retained earnings

 

9,092

8,854

 

 

11,337

11,089

Non-current liabilities

 

 

 

Obligations under finance leases

19

128

184

Contingent consideration due on acquisitions

17

-

690

Bank loan

18

1,742

-

Deferred taxation

12

674

365

 

 

2,544

1,239

Current liabilities

 

 

 

Trade and other payables

17

1,900

1,671

Deferred income

17

425

465

Bank loan

18

216

-

Obligations under finance leases

 19

147

223

 

 

2,688

2,359

Total Equity and liabilities

 

16,569

14,687

*Restated - notes 21 and 22

 

 

 

 

 

 

COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2018

 

 

2018

2017

 

 

 

(Restated*)

 

 

Company

Company

 

Notes

£'000

£'000

Assets

 

 

 

Non-current assets

 

 

 

Investments

15

14,279

10,429

Intangible assets

13

25

-

Property, plant and equipment

14

54

56

 

 

14,358

10,485

Current assets

 

 

 

Trade and other receivables

16

135

100

Cash and cash equivalents

 

115

2,077

 

 

250

2,177

Total assets

 

14,608

12,662

Equity and liabilities

 

 

 

Equity attributable to the equity shareholders of the parent

 

 

 

Called up share capital

21

231

231

Share premium reserve

 

-

-

Other reserve

 

2,010

2,000

Retained earnings

 

7,533

8,059

 

 

9,774

10,290

Non-current liabilities

 

 

 

Contingent consideration due on acquisitions

17

-

690

Bank loan

18

1,742

-

 

 

1,742

690

Current liabilities

 

 

 

Bank loan

18

216

-

Amounts due to subsidiary undertakings

 

2,584

1,531

Trade and other payables

17

292

151

 

 

3,092

1,682

Total Equity and liabilities

 

14,608

12,662

Restated - notes 21 and 22

 

 

 

As permitted by section 408 of the Companies Act 2006, the holding company's profit and loss statement has not been included in the financial statements.

For the year ended 31 March 2018, the Company made a loss of £526,783 (2017: loss of £85,672)

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2018

 

 

Attributable to equity holders of the parent

 

 

Share capital

Share premium account

Other reserve

Translation reserve

Retained profit

Total

 
 

 

£'000

£'000

£'000

£'000

£'000

£'000

 

At 1 April 2016

2,552

6,493

1,008

-

(5,118)

4,935

 

Profit for the period

-

-

-

-

378

378

 

Translation of foreign subsidiaries

-

-

-

4

-

4

 

Issue of share capital - placing

1,686

3,367

-

-

-

5,053

 

Issue of share capital - consideration

382

-

616

-

-

998

 

Expenses of share issue

-

(277)

-

-

-

(277)

 

Capital reorganisation

-

(9,583)

-

-

9,583

-

 

Movement in share option reserve

-

-

(2)

-

-

(2)

 

At 31 March 2017 (as previously reported)

4,620

-

1,622

4

4,843

11,089

 

Treatment of the premium on placing shares (note 22)

(180)

-

180

-

-

-

 

Capital reorganisation (note 22)

(4,209)

-

-

-

4,209

-

 

Q4Ex - contingent consideration (note 22)

-

-

198

-

(198)

-

 

At 31 March 2017 (as restated)

231

-

2,000

4

8,854

11,089

 

Profit for the period

-

-

-

-

238

238

 

Share based payments

-

-

10

-

-

10

 

At 31 March 2018

231

-

2,010

4

9,092

11,337

 

 

 

 

 

 

 

 

 

 

 

The following describes the nature and purpose of each reserve within equity:

 

Reserve

 Description and purpose

 

Share premium account

Amount subscribed for share capital in excess of nominal values.

 

Other reserve

Amount reserved for share based payments to be released over the life of the instruments and the equity element of convertible loans and amounts in excess of nominal value for shares issued as consideration.

 

Retained profit

All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMPANY STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2018

 

 

 

Attributable to equity holders of the Company

 

 

 

Share capital

Share premium account

Other reserve

Retained profits

Total

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000

 

 

At 1 April 2016

2,552

6,493

1,008

(5,447)

4,606

 

 

Loss for the period

-

-

-

(86)

(86)

 

 

Issue of share capital - share placing

1,686

3,367

-

-

5,053

 

 

Issue of share capital - consideration shares

382

-

616

-

998

 

 

Expenses of share issue

-

(277)

-

-

(277)

 

 

Capital reorganisation

-

(9,583)

-

9,583

-

 

 

Movement in share option reserve

-

-

(2)

(2)

(4)

 

 

At 31 March 2017 (as previously reported)

4,620

-

1,622

4,048

10,290

 

 

Treatment of the premium on placing shares (note 22)

(180)

-

180

-

-

 

 

Capital reorganisation (note 22)

(4,209)

-

-

4,209

-

 

 

Q4Ex - contingent consideration (note 22)

-

-

198

(198)

-

 

 

At 31 March 2017 (as restated)

231

-

2,000

8,059

10,290

 

 

Loss for the period

-

-

-

(526)

(526)

 

 

Share based payments

-

-

10

-

10

 

 

At 31 March 2018

231

-

2,010

7,533

9,774

 

 

 

 

 

 

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2018

 

 

2018

2017

 

 

(Restated)

 

Group

Group

 

£'000

£'000

Cash flows used in operating activities

 

 

Profit after tax

238

177

Profit net of tax - discontinued operations

-

(1,508)

Adjustments for:

 

 

Depreciation and other amortisation

872

650

Fair value adjustment on contingent consideration

(540)

501

Finance costs

84

27

Acquisition costs

581

791

Share based payments

10

-

Taxation

(245)

(20)

Operating cash flows before movement in working capital

1,000

618

Decrease / (increase) in trade and other receivables

190

(163)

(Decrease) / increase in trade and other payables

(405)

544

Taxation refunded/ (paid)

80

(197)

Cash generated from operations

865

802

Cash flows from investing activities

 

 

Payments to acquire property, plant & equipment

(212)

(380)

Acquisition and integration costs

(592)

(742)

Deferred consideration

(150)

-

Payments to acquire intangible assets

(3,523)

(3,425)

Net cash used in investing activities

(4,477)

(4,547)

Cash flows from financing activities

 

 

Net proceeds from issue of ordinary share capital

-

4,722

Repayment of loan facility

-

(105)

Interest element on acquisition loan

(49)

-

Interest element of finance lease payments

(17)

(27)

Drawdown of acquisition facility (net of fees)

1,940

-

Drawdown of finance lease facility

-

189

Capital repayment of finance leases

(228)

(153)

Net cash from financing activities

1,646

4,626

Net (decrease)/ increase in cash and cash equivalents from continuing operations

(1,966)

881

Cash flows from discontinued operations

 

 

Net cash used for operating activities

(192)

99

Net cash provided for investing activities

-

1,987

Net cash used for financing activities

-

(7)

Net (decrease)/ increase in cash and cash equivalents from discontinued operations

(192)

2,079

Cash and cash equivalents at the beginning of the year

3,473

513

Cash and cash equivalents at the end of the year

1,315

3,473

 

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2018

 

 

2018

2017

 

 

(Restated)

 

Company

Company

 

£'000

£'000

Cash flows used in operating activities

 

 

Loss after tax

(526)

(86)

Adjustments for:

 

 

Depreciation and other amortisation

26

15

Fair value adjustment on contingent consideration

(540)

300

Impairment of investments

 

1,099

Finance costs

67

-

Acquisition and restructuring costs

316

791

Share based payments

10

-

Taxation

(3)

-

Operating cash flows before movement in working capital

(650)

2,119

 

 

 

(Increase) in trade and other receivables

(19)

(66)

Increase in trade and other payables

1,188

86

Taxation refund received

3

-

Cash generated from operations

522

2,139

 

 

 

Cash flows from investing activities

 

 

Payments to acquire property, plant & equipment

(24)

(37)

Payments to acquire intangible fixed assets

(25)

-

Acquisition and restructuring costs

(476)

(742)

Payments for acquisitions

(3,850)

(3,720)

Net cash used in investing activities

(4,375)

(4,499)

 

 

 

Cash flows from financing activities

 

 

Net proceeds from issue of ordinary share capital

-

4,722

Received from subsidiary company

-

(297)

Drawdown of acquisition facility (net of fees)

1,940

-

Interest element on acquisition loan

(49)

-

Net cash from financing activities

1,891

4,425

 

 

 

Net (decrease)/ increase in cash and cash equivalents from continuing operations

(1,962)

2,065

 

 

 

Cash and cash equivalents at the beginning of the year

2,077

12

 

 

 

Cash and cash equivalents at the end of the year

115

2,077

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2018

 

1.     Accounting policies

SysGroup Plc (the 'Company') is a company incorporated and domiciled in the United Kingdom. The company's registered office is at Walker House, Exchange Flags, Liverpool, L2 3YL. These consolidated financial statements comprise the Company and its subsidiaries (together referred to as the 'Group').

 

 

Basis of preparation

 

The preliminary financial information does not constitute statutory accounts for the financial years ended 31 March 2018 and 31 March 2017, but has been derived from those accounts. The accounting policies used in preparation of this preliminary announcement have remained unchanged from those set out in the 2017 annual report. Statutory accounts for 2017 have been delivered to the Registrar of Companies and those for the financial year ended 31 March 2018 will be delivered following the Company's Annual General Meeting. The auditors have reported on those accounts and their reports were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

 

Going concern

The Directors have prepared the financial statements on a going concern basis which assumes that the Group and the company will continue to meet liabilities as they fall due. The Directors have reviewed forecasts prepared for the period ending 31 March 2020 and considered the projected trading forecasts and resultant cash flows together with confirmed loan facilities and other sources of finance. The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group can continue to operate within the current facilities available to it.

 

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

 

New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations have been issued during the year ended 31 March 2018 but are not yet effective, and therefore have not yet been adopted by the Group:

 

-     IFRS 15 Revenue from Contracts with Customers is effective after 1 January 2018. This standard will change how revenue is recognised based on a framework. The interim accounts to 30 September 2018 will be prepared in accordance with IFRS15. IFRS15 seeks to identify linked revenue transactions and to recognise that revenue over the period in which benefits accrue to the customers. The potential impact on the Group has been assessed by management and there is not currently expected to be a significant impact.

-     Amendments to IAS12 'Recognition of Deferred Tax Assets for Unrealised Losses' have not yet been endorsed but the IASB effective date will be 1 January 2018.

-     IFRS 9 'Financial Instruments' is effective from 2018. This standard will simplify the classification of financial assets for measurement purposes but is not anticipated to have a significant impact on the financial statements.

-     IFRS 16 Leases is expected to be applicable after 1 January 2019. If endorsed, this standard will affect the presentation of the Group financial statements with all leases apart from short term leases being recognised as on-balance sheet finance leases with a corresponding liability being the present value of lease payments. The potential impact on the Group has not yet been assessed by management.

The Group continues to monitor the potential impact of other new standards and interpretations which may be endorsed by the European Union and require adoption by the Group in future reporting periods.

 

The adoption of these standards does not have an impact on the results and net assets of the Group.

 

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits associated with the transaction will flow into the Group. Revenue represents the fair value of amounts received or receivable for goods and services provided net of trade discounts and VAT. Revenue from the sale of managed IT services and cloud hosting is recognised evenly over the life of the contract as benefits accrue to the customer. Revenue from value added resale is recognised as these products or services are delivered. This revenue policy also applies to Rockford IT Ltd, acquired during the year.

 

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee; exposure to variable returns from the investee; and the ability of the investor to use its power to affect those variable returns. Control is re-assessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the acquisition method. 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.

 

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the Board of Directors.

 

Financial instruments

Financial instruments are classified and accounted for, according to the substance of the contractual arrangement, as either financial assets, financial liabilities or equity instruments. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.

 

Financial assets

The Group's 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 impairment provision will be recognised if there is evidence that the amount is irrecoverable and will be shown in administrative expenses in the Consolidated Statement of Comprehensive Income. Cash and cash equivalents includes cash in hand and deposits held at call with banks.

 

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Group's ordinary shares are classified as equity instruments and are recorded at the proceeds received, net of direct issue costs. Proceeds of any share issue in excess of the nominal value of the share capital is recognised within the share premium account.

 

Financial liabilities

The Group classifies its financial liabilities into one of two categories, depending on the purpose for which it was acquired. The Group's accounting policy for each category is as follows:

 

Fair value through profit or loss

This category comprises only contingent consideration. They are carried in the statement of financial position at fair values with changes in fair value recognised in the consolidated income statement.

 

Other financial liabilities

Other financial liabilities include trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.

 

Fair value measurement hierarchy

IFRS 7 requires certain disclosures which require the classification of financial assets and financial liabilities measured at fair value to reflect the significance of the inputs used in making the fair value measurement. The fair value hierarchy has the following levels:

(a)   Quoted prices in active markets for identical assets or liabilities (Level 1)

(b)   Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) (Level 2); and

(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.

 

Leases

Assets obtained under hire purchase contracts and finance leases are capitalised as tangible assets and depreciated over the shorter of the lease term and their useful lives. Obligations under such agreements are included in payables net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the consolidated statement of comprehensive income so as to produce a constant periodic rate of charge on the net obligation outstanding in each period. Rentals payable under operating leases are charged against income on a straight-line basis over the lease term.

 

Property plant and equipment

Items of property, plant and equipment are stated at cost less depreciation. Depreciation is provided at annual rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

 

IT hardware                                                                 20% - 33.3% straight line

Furniture and fittings                                                 20% - 33.3% straight line

Motor vehicles                                                             25% straight line

 

Investment in subsidiaries

Fixed asset investments in the Parent Company are shown at cost less any provision for impairment as necessary.

 

Research and development

Research expenditure is written off to the consolidated statement of comprehensive income in the year in which the expenditure occurs. Development expenditure is treated in the same way unless the Directors are satisfied as to the technical, commercial and financial viability of individual projects, there is an intention to complete and sell the product and the costs can be easily measurable. In this situation, the expenditure is capitalised and the amortised expense is included in administrative expenses in the Consolidated Statement of Comprehensive Income over the years during which the Group is to benefit.

 

Intangible assets

Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques (see section related to critical estimates and judgements below).

 

The significant intangibles recognised by the Group, their estimated useful economic lives and the methods used to determine the cost of intangibles acquired in business combinations are as follows:

 

 

 

Intangible asset                                            Estimated UEL                      Valuation method

Customer relationships                                5-7 years                                Estimated discounted cash flow

Software and web design costs                  3-5 years                                Cost less amortisation

 

Deferred taxation

Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on:

·     the initial recognition of goodwill;

·     the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit; and

·     investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future.

 

Recognition of deferred tax assets is restricted to those instances where it is highly probable that relief against taxable profit will be available.

 

The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered).

 

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either:

·     the same taxable Group company; or

·     different Group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

 

Deferred tax liabilities are recognised on intangible assets and other temporary differences recognised in business combinations.

 

 

2   Significant accounting estimates and judgements

The preparation of this financial information requires management to make estimates and assumptions that affect the amounts reported for assets and liabilities at the period end date and the amounts reported for revenues and expenses during each period. However, the nature of estimation means that actual outcomes could differ from those estimates. The key sources of estimation that have a significant impact on the carrying value of assets and liabilities are discussed below.

 

Revenue

Management make judgements in determining the appropriate timing of revenue recognition and in unbundling contracts that relate to the provision of more than one service and/or product.

 

Impairment of goodwill and other intangibles

The Group tests goodwill for impairment on an annual basis in line with the accounting policy noted above. This involves judgement regarding the future development of the business and the estimation of the level of future profitability and cash flows to support the carrying value of goodwill. An impairment review has been performed at the reporting date, taking into account sensitivities around future business performance, covering a range of outcomes and risks over levels of revenue, cost and cash generation.  No impairment has been identified. More details including carrying values are included in note 13. 

Impairment of other assets

The Group reviews the carrying value of all other assets for indications of impairment at each period end. If indicators of impairment exist, the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount.  

Valuation of intangibles acquired in business combinations

Determining the fair value of customer relationships acquired in business combinations requires estimation of the value of the cash flows related to those relationships and a suitable discount rate in order to calculate the present value. More details including carrying values are included in note 13.

Valuation of contingent consideration

When valuing the contingent consideration still payable on acquisitions, the Group considers various factors including the performance of the acquired entity since acquisition together with its expected performance to the end of the earn-out period. Following the adoption of IFRS 3 (revised) - Business Combinations, contingent consideration is recognised at, and carried thereafter at, fair value. All changes in fair value (other than measurement period adjustments) are reflected in the income statement.  

Useful economic lives of intangible assets

Intangible assets are amortised over their useful economic lives. Useful lives are based on management's estimates of the period over which the assets will generate revenue, which are periodically reviewed for continued appropriateness. Changes to estimates can result in changes in the carrying values and hence amounts charged to the income statement in particular periods which could be significant.

 

3      Financial instruments - risk management

 

The Group's financial instruments comprise cash and liquid resources and various items such as trade receivables and trade payables that arise directly from its operations. There have been no substantive changes in the Group's objectives, policies and processes for managing those risks or the methods used to measure them from previous periods. The Group's objective is to ensure adequate funding for continued growth and expansion.

 

All the Group's financial instruments are carried at amortised cost with the exception of contingent consideration.  There is no material difference between the carrying and fair value of its financial instruments, in the current or prior year, due to the instruments bearing interest at fixed rates or being of short term nature.

 

A summary of financial instruments held by category is shown below:

 

Group

Company

 

2018

2017

2018

2017

Financial assets

£'000

£'000

£'000

£'000

Loans and receivables

 

 

 

 

Cash and cash equivalents

1,315

3,473

115

2,077

Trade receivables

1,101

902

-

-

Total financial assets

2,416

4,375

115

2,077

 

 

 

 

 

 

Group

Company

 

2018

2017

2018

2017

Financial liabilities

£'000

£'000

£'000

£'000

At amortised cost

 

 

 

 

Trade and other payables

1,377

1,349

262

134

Amounts due to subsidiaries

-

-

2,584

1,531

Loans and other borrowings

2,233

407

1,958

-

At fair value

3,610

1,756

4,804

1,665

Contingent consideration

-

690

-

690

Total financial liabilities

3,610

2,446

4,804

2,355

 

Per the fair value hierarchy classifications under IFRS 7 Financial Instruments the contingent consideration due on acquisitions shown above are considered to be level 3 financial liabilities as there are no observable inputs for valuation.

 

 

 

Group

Company

 

 

 

(Restated)

(Restated)

 

 

 

£'000

£'000

Contingent consideration at 1 April 2016

 

 

435

435

Settled during the year

 

 

(243)

(243)

Notional interest charged

 

 

116

116

Fair value adjustment through income statement

 

 

382

382

At 31 March 2017

 

 

690

690

Settled during the year

 

 

(150)

(150)

Notional interest charged

 

 

16

16

Fair value adjustment through income statement

 

 

(556)

(556)

At 31 March 2018

 

 

-

-

 

The fair value adjustment related to the change in fair value calculation of the contingent consideration payable on the System Professional acquisition.

 

Liquidity risk

Liquidity risk arises from the Group's management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

 

The Group's policy is to prepare periodic working capital forecasts, allowing an assessment of the cash requirements of the Group and Company, to manage liquidity risk. Cash resources are managed in accordance with planned expenditure forecasts and the Directors have regard to the maintenance of sufficient cash resources to fund the Group and Company's immediate operating requirements and capital expenditure.

 

The following table sets out the contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities:

Group

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

At 31st March 2018

£'000

£'000

£'000

£'000

£'000

Trade and other payables

1,377

-

-

-

-

Contingent consideration

-

-

-

-

-

Loans and borrowings

91

272

1,826

44

-

Total

1,468

272

1,826

44

-

 

 

 

 

 

 

Group

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

At 31st March 2017

£'000

£'000

£'000

£'000

£'000

Trade and other payables

1,349

-

-

-

-

Contingent consideration

-

-

690

-

-

Loans and borrowings

56

167

136

48

-

Total

1,405

167

826

48

-

 

 

 

 

 

 

 

 

 

 

 

 

Company

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

At 31st March 2018

£'000

£'000

£'000

£'000

£'000

Trade and other payables

262

-

-

-

-

Amounts due to subsidiaries

2,584

-

-

-

-

Contingent consideration

-

-

-

-

-

Loans and borrowings

52

164

1,742

-

-

Total

2,898

164

1,742

-

-

 

 

 

 

 

 

 

 

 

 

 

 

Company

Up to 3 months

Between 3 and 12 months

Between 1 and 2 years

Between 2 and 5 years

Over 5 years

At 31st March 2017

£'000

£'000

£'000

£'000

£'000

Trade and other payables

134

-

-

-

-

Amounts due to subsidiaries

1,531

-

-

-

-

Contingent consideration

-

-

690

-

-

Total

1,665

-

690

-

-

 

Interest rate risk

The Group seeks to minimise exposure to interest rate risk by borrowing at a mix of fixed and floating interest rates appropriate to the nature and term length of borrowings. During the period the Group drew down on a £2m acquisition facility with an interest rate set at LIBOR + 5%. 

Credit risk

The Group generally gives 30-day credit terms on its continuing business and provides against doubtful debts only when recoverability is considered to be at risk. For cash and cash equivalents, the Group only uses recognised banks with high credit ratings.

 

Capital disclosures

The Group monitors "adjusted capital" which comprises all components of equity (i.e. share capital, share premium and retained earnings).

 

The Group's objective when maintaining capital are:

·      to safeguard the entity's ability to continue as a going concern, so that it can provide returns for shareholders in future periods and benefits for other stakeholders, and

·      to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk.

The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and adjusts it in the light of changes in economic conditions and the risk characteristics of the underlying assets.

 

4      Segmental analysis

The chief operating decision maker for the Group is the Board of Directors. The Group reports in two segments:

 

·     Managed Services - this segment provides all forms of managed services to customers. This segment was created on the acquisition of Netplan in November 2013 and has been further expanded with the acquisition of Q4Ex Limited, System Professional Ltd and Rockford IT Limited.

·     Value Added Resale (VAR) of products/services - this segment provides all forms of VAR sales where the business is acting as a reseller. This segment was created following the acquisition of System Professional Limited and has been further expanded by the acquisition of Rockford IT Limited.

 

Information regarding the operation of the reportable segments is included below. The performance of each operating segment is based on revenue and gross profit as the Board believe this is the best measure for segmental performance.

 

Assets and liabilities are not reviewed on a segmental basis. All non-current assets are within the UK. All segments are continuing operations. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies. Transactions between segments are accounted for using an arm's length commercial basis.

 

 

2018

2018

2017

2017

Revenue by operating segment

£'000

%

£'000

%

Managed Services

7,130

68%

5,400

69%

Value Added Reseller

3,321

32%

1,765

22%

SME Mass Market (discontinued)

-

-

700

9%

 

10,451

 100%

7,865

 100%

 

 

 

 

 

No individual customer accounts for more than 10% of the Group's revenue.

 

 

 

 

 

 

The Group operates out of the UK and sells services to the following geographical locations.

 

 

 

 

 

 

2018

2018

2017

2017

 

£'000

%

£'000

%

UK

9,437

90%

7,267

92%

Rest of World*

           1,014

 

10%

598

8%

 

10,451

 100%

7,865

 100%

*The largest components are: France £0.5m; and USA £0.2m

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2018

2017

 

 

 

£'000

£'000

Revenue

 

 

 

 

SME Mass market - discontinued

 

 

-

700

Managed IT Services - continuing

 

 

7,130

5,400

Value Added Resale (VAR) - continuing

 

 

3,321

1,765

 

 

 

10,451

7,865

Gross profit

 

 

 

 

SME Mass market - discontinued

 

 

-

436

Managed IT Services - continuing

 

 

5,224

3,932

Value Added Resale (VAR) - continuing

 

 

771

450

 

 

 

5,995

4,818

 

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.

 

 

 

5      Operating profit/(loss)

 

 

 

2018

2017

 

 

 

£'000

£'000

Operating profit/(loss) is after charging the following:

 

 

Auditor's remuneration:

 

 

 

Group:

Audit

49

36

 

 

Corporate finance

-

75

 

 

Other advisory

5

1

 

Company:

Audit

4

4

Depreciation of tangible fixed assets:

 

 

 

Owned

 

201

189

 

Held under finance leases

171

135

Amortisation of intangible assets

500

326

Staff costs (note 7)

3,972

3,622

Share based payments (note 9)

10

-

Rentals payable under operating leases

156

89

Acquisition and restructuring costs

581

791

 

 

6      Finance expense

 

 

2018

2017

 

£'000

£'000

Interest payable on finance leases

17

27

Interest payable on bank loan

49

-

Arrangement fee amortisation on bank loan

18

-

 

84

27

 

 

7      Staff numbers and costs

The average monthly number of full time persons employed by the Group, including executive Directors during the year was:

 

2018

2017

Research and Development

4

6

Technical Support

48

37

Sales and Marketing

11

5

Executive and Administration

11

8

 

74

56

The aggregate monthly payroll costs including Executive Directors and excluding Non-Executive Directors were as follows:

 

2018

2017

 

£'000

£'000

Wages and salaries

3,548

3,278

Social security costs

365

289

Benefits in kind

22

24

Pension benefits

37

31

Share based payment expense

10

-

 

3,982

3,622

 

Total staff costs for the Company are £836,188 (2017: £580,907). Average staff numbers for the Company are 14 (2017: 11).

 

Directors and key management personnel

 

2017

 

£'000

£'000

Fees and salaries

369

375

Social security costs

35

27

Benefits in kind

2

2

Pension benefits contributions

14

6

Share based payment expense

9

-

 

429

410

 

Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, they are also the Directors of the Company listed on page 14.

 

The emoluments of the highest paid Director, Julian Llewellyn, were £136,609 (2017: Julie Joyce £128,000).

 

The Group does not operate a defined benefits pension scheme and Executive Directors who are entitled to receive pension contributions may nominate a defined contribution scheme into which the Company makes pension contributions. 

 

The fees relating to Non-Executive Directors are in some cases payable to third parties in connection with the provision of their services. The balance outstanding at 31 March 2018 was £4,331 (2017: nil).

 

8      Acquisition and restructuring costs

 

2018

2017

 

£'000

£'000

Professional fees on acquisition of System Professional Limited

-

414

Professional fees on aborted transaction

-

38

Professional fees on acquisition of Rockford IT Limited

186

-

Integration and restructuring of continuing business*

395

339

Total

581

791

*Integration and restructuring costs relate to closing and relocating offices/teams, streamlining operations and establishing single front and back office IT platform/systems. This includes costs of £94k (2017: £161k) in relation to the use of internal technical staff and management resources to deliver the changes.

 

9      Share based payments and warrants

The Company has granted a number of EMI options. The Directors have the discretion to grant options to subscribe for ordinary shares up to a maximum of 10 per cent of the Company's issued share capital. Options can be granted to any employee of the Group. For options to vest the employee has to be employed by the Group at the vesting date. There are no other performance criteria attached to the options. The weighted average exercise price of options in issue is 48.4p per share.  

 

 

Rights to options over ordinary shares of the Company are summarised as follows:

 

 

 

No. of Ordinary Shares

Grant date

Exercise period

Exercise price

At 31 March 2017

Granted

Waived/lapsed

At 31 March 2018

27/09/2012

27/09/12

to 26/09/15

80p

10,000

-

-

10,000

19/12/2012

19/12/12       to 18/12/22

40p

54,375

-

(54,375)

-

12/12/2013

12/12/13     

to 11/12/23

60p

15,625

-

(10,000)

5,625

02/03/2015

02/03/15       to 01/03/25

62.8p

2,500

-

(2,500)

-

14/08/2015

14/08/15       to 13/08/25

68p

25,000

-

(25,000)

-

21/02/2016

21/02/16        to 20/02/26

55.2p

11,875

-

-

11,875

15/08/2016

15/08/16        to 14/08/26

60.5p

3,125

-

(3,125)

-

13/09/2016

13/09/16        to 12/09/26

60.5p

5,000

-

-

5,000

24/08/2017

31/07/07        to 30/07/17

28p

2,232

-

(2,232)

-

06/04/2017

06/04/17        to 05/04/27

47.5p

-

125,000

-

125,000

30/08/2017

30/08/17        to 29/08/27

43p

-

5,000

-

5,000

30/08/2017

30/08/17        to 29/08/27

43p

-

15,000

(15,000)

-

02/03/2018

02/03/18        to 01/03/28

35.5p

-

30,000

-

30,000

 

 

 

129,732

175,000

(112,232)

192,500

 

The options have been valued, using the Black Scholes method, using the following assumptions:

Number of instruments granted

10,000

5,625

11,875

5,000

 

Grant date

27-Sep-12

12-Dec-13

21-Feb-16

13-Sep-16

 

Expiry date

26-Sep-22

11-Dec-23

20-Feb-26

12-Sep-26

 

Contract term (years)

10

10

10

10

 

Exercise price

80p

60p

55.2p

60.5p

 

Share price at granting

2p

85p

70.8p

60.5p

 

Annual risk-free rate (%)

5%

0.5%

0.5%

0.5%

 

Annual expected dividend yield (%)

0%

0%

0%

0%

 

Volatility (%)

50%

90%

55%

55%

 

Fair value per grant instrument

18.4p

74.46p

47.6p

52.17p

 

 

 

 

 

 

 

 

Number of instruments granted

125,000

5,000

30,000

 

 

Grant date

06-Apr-17

30-Aug-17

02-Mar-18

 

 

Expiry date

05-Apr-27

29-Aug-27

01-Mar-28

 

 

Contract term (years)

10

10

10

 

 

Exercise price

47.5p

43p

35.5p

 

 

Share price at granting

48p

43p

35.5p

 

 

Annual risk-free rate (%)

1.4%

1.4%

1.4%

 

 

Annual expected dividend yield (%)

0%

0%

0%

 

 

Volatility (%)

36%

36%

36%

 

 

Fair value per grant instrument

22.77p

20.39p

16.84p

 

 

 

 

 

 

 

 

The inputs to the share valuation model utilised at the grant of the option is shown in the tables above. Management has determined volatility using their knowledge of the business.

 

At 31 March 2018 there were 2,500 outstanding warrants to subscribe for the ordinary share capital of the Company as follows:

 

 

 

No. of Warrants and Exercise price

Grant date

Expiry Date

200p

Total

09.01.12

08.01.22

2,500

2,500

 

 

The fair value of the warrants has been calculated at 0.36p based on the following assumptions - share price at granting 50p, annual risk-free rate 0.5%, and volatility 20%. No provision has been made for the warrants in shared based payments.

 

10   Acquisitions

There has been one acquisition during the period.  The Board strategically expect acquisitions to be a common component of growth in the future.

 

Acquisitions made during the year to 31 March 2018 were:

 

Rockford IT Limited

The Group acquired 100% of the share capital of Rockford IT Limited on 1 November 2017. Rockford provides managed services, cloud hosting, value added resale services, and IT consultancy support.

 

During the year to 31 March 2018 the Group incurred £186,458 of costs in relation to this acquisition. These costs are included in administrative expenses in the Group's consolidated statement of comprehensive income for the year ended 31 March 2018.

 

The fair value of acquired customer relationships intangible asset has been estimated using a discounted cashflow method, based on the estimated level of profit to be generated from them. A post tax discount rate of 10.3% was used in the valuation. Customer relationships are being amortised over an estimated useful life of 7 years.

                                              

Since the acquisition date to 31 March 2018, Rockford IT Limited has contributed £1,796,400 to Group revenue and £278,656 to Group EBITDA. Had the acquisition taken place on 1 April 2017, the contribution to Group revenue would have been £4,250,080 and £701,800 to Group EBITDA.

 

 

Recognised amounts of net assets acquired, and liabilities assumed

Book value   £'000

Fair value adj   £'000

Fair value   £'000

Cash and cash equivalents

327

-

327

Trade and other receivables

446

34

480

Property, plant and equipment

421

(87)

334

Stock and work in progress

21

-

21

Intangible assets

95

1,850

1,945

Trade and other payables

(791)

(111)

(902)

Current income tax liability

(81)

-

(81)

Deferred tax liability

(66)

(315)

(381)

Identifiable net assets

372

1,371

1,743

Goodwill

 

 

2,107

Total consideration

 

 

3,850

 

 

 

 

Satisfied by:

 

 

 

Cash consideration

 

 

3,850

Total consideration

 

 

3,850

 

 

11   Earnings per share

 

 

 

 

 

 

Continuing Operations

Discontinued Operations

Total

 

2018

2018

2018

Profit for the financial year attributable to shareholders

£237,923

-

£237,923

Weighted number of equity shares used in basic EPS

    23,103,898

 -

    23,103,898

Weighted number of equity shares used in diluted EPS

    23,298,898

 -

    23,298,898

Basic earnings per share

£0.0103

-

£0.0103

Diluted earnings per share

£0.0102

-

£0.0102

 

 

 

 

 

(Restated)

(Restated)

(Restated)

 

Continuing Operations

Discontinued Operations

Total

 

2017

2017

2017

(Loss)/profit for the financial year attributable to shareholders

(£1,331,054)

£1,508,499

£177,445

Weighted number of equity shares used in basic EPS

    19,805,397

    19,805,397

    19,805,397

Weighted number of equity shares used in diluted EPS

    20,164,861

    20,164,861

    20,164,861

Basic (Loss)/earnings per share

(£0.0672)

£0.0762

£0.0090

Diluted (Loss)/earnings per share

(£0.0672)

£0.0748

£0.0088

Basic (loss)/earnings per share is calculated by dividing the earnings attributable to equity shareholders by the weighted average of ordinary shares in issue during the year.

 

 

 

 

For diluted earnings per share, the weighted number of ordinary shares in issue during the year is adjusted to include the weighted average number of ordinary shares that would be issued on the conversion on all the dilutive potential shares into ordinary shares.

 

 

12   Taxation

 

 

2018

2017

 

Current tax

£'000

£'000

 

Current tax - current year

32

65

 

Adjustments in respect of prior years

(126)

-

 

Tax refund

(80)

-

 

Total current tax credit

(174)

65

 

 

 

 

 

Deferred tax

 

 

 

Deferred tax - timing differences

(71)

(123)

 

Total deferred tax

(71)

(123)

 

Total tax credit

(245)

(58)

 

 

 

 

 

The effective tax rate for the year to 31 March 2018 is higher (2017: higher) than the standard rate of corporation tax in the UK. The differences are explained below:

 

 

 

2018

2018

 

 

£'000

£'000

 

(Loss)/ profit on ordinary activities before tax

                  (7)

                 320

 

 

 

 

 

(Loss)/ profit on ordinary activities before taxation multiplied by the standard rate of UK corporation tax of 19% (2017:20%)

(1)

65

 

 

 

 

 

Effects of:

 

 

 

Expenses not deductible

33

-

 

Income not taxable

(106)

-

 

Prior year adjustment

(126)

-

 

Deferred tax - timing differences

-

(123)

 

Re-measurement of deferred tax due to changes in UK rate

5

-

 

Deferred tax not recognised

(130)

-

 

Tax refund

80

-

 

Total tax credit

             (245)

                  (58)

 

 

 

 

 

 

 

 

 

The Group recognised deferred tax assets and liabilities as follows:

 

 

 

 

2018

2017

 

 

£'000

£'000

 

Deferred tax on customer relationships

(588)

(242)

 

Capital allowances timing differences

(86)

(123)

 

Deferred tax liability

(674)

(365)

 

Recognition of deferred tax assets is restricted to those instances where it is highly probable that relief against taxable profit will be available.

 

 

 

 

 

The movement in the deferred tax account during the year was:

 

 

 

 

Capital allowances timing
differences

Customer relationships

Total

 

£,000

£,000

£,000

Balance at 1 April 2017

-

(365)

(365)

Accelerated capital allowances

(20)

-

(20)

Accelerated capital allowances acquired on acquisition of Rockford IT

(66)

-

(66)

Deferred tax recognised on customer lists acquired on acquisition of Rockford IT

-

(315)

(315)

Credited to statement of comprehensive income

-

92

92

Balance at 31 March 2018

(86)

(588)

(674)

 

 

 

 

Factors affecting future tax charges:

 

 

 

The UK corporation tax rate will change from 19% to 17% on 1 April 2020.

 

 

 

 

 

 

13   Intangible assets

 

Website

Development

Software

Customer

Positive

 

Group

cost

cost

licences

relationships

goodwill

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

Cost

 

 

 

 

 

 

At 1 April 2016

197

232

61

1,914

4,454

6,858

Additions

-

-

11

-

-

11

Acquired from acquisition

-

-

-

948

3,844

4,792

Disposals

-

(232)

-

(479)

(678)

(1,389)

At 31 March 2017

197

-

72

2,383

7,620

10,272

 

 

 

 

 

 

 

At 1 April 2017

197

-

72

2,383

7,620

10,272

Additions

26

-

6

-

-

32

Acquired from acquisition (note 10)

-

-

95

1,850

2,107

4,052

Disposals

-

-

-

-

-

-

At 31 March 2018

223

-

173

4,233

9,727

14,356

Accumulated amortisation and impairment

 

 

 

 

 

At 1 April 2016

180

232

8

655

-

1,075

On disposals

-

(232)

-

(479)

-

(711)

Charge for the year

11

-

22

638

-

671

At 31 March 2017

191

-

30

814

-

1,035

 

 

 

 

 

 

 

At 1 April 2017

191

-

30

814

-

1,035

On disposals

-

-

-

-

-

-

Charge for the year

7

-

47

446

-

500

At 31 March 2018

198

-

77

1,260

-

1,535

 

 

 

 

 

 

 

Net book value

 

 

 

 

 

 

 

 

 

 

 

 

 

At 31 March 2017

6

-

42

1,569

7,620

9,237

At 31 March 2018

25

-

96

2,973

9,727

12,821

 

The Company had intangible assets of £25,083, comprising website development costs, at 31 March 2018 (2017: Nil)

 

All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive income.

 

During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of Assets". No impairment charges arose as a result of this review.

 

The recoverable amount is determined based on a discounted cash flow basis and is allocated to individual cash generating units. The calculation uses pre-tax cash flow projections based on financial budgets approved by the Board covering a two-year period. Cash flows beyond the two-year period are extrapolated using the estimated growth rates stated below. The growth rates and margins used to estimate future performance are based on past performance and the experience of growth rates.

 

The carrying value of each CGU is as follows:

 

 

 

2018

2017

 

 

 

£'000

£'000

Netplan

 

 

4,564

5,348

System Professional

 

 

4,710

4,585

Rockford IT

 

 

3,892

-

 

 

 

13,166

9,933

 

 

The assumptions used for the impairment reviews are as follows:

 

 

System Professional

Netplan

Rockford IT

 

 

Discount rate

 

10.13%

10.13%

10.13%

Growth rate year 2 to year 5

 

2.9%

2.9%

2.9%

Terminal growth rate

 

 

2.9%

2.9%

2.9%

Forecast period for which cashflows are estimated

2

2

2

           

 

The Group had no contractual liability for development costs at 31 March 2018. As a result of the impairment testing carried out on the basis of these estimates and assumptions, no impairment provisions are required.

 

14   Property, plant and equipment

 

Furniture

 

 

and

 

Group

equipment

Total

 

£'000

£'000

Cost

 

 

At 1 April 2016

1,491

1,491

Additions

571

571

Acquisition of subsidiary

96

96

Disposals

(737)

(737)

At 31 March 2017

1,421

1,421

 

 

 

At 1 April 2017

1,421

1,421

Additions

181

181

Acquisition of subsidiary

334

334

Disposals

-

-

At 31 March 2018

1,936

1,936

 

 

 

Accumulated depreciation

 

 

 

 

 

At 1 April 2016

1,041

1,041

Charge for the year

337

337

On disposal

(623)

(623)

At 31 March 2017

755

755

 

 

 

At 1 April 2017

755

755

Charge for the year

372

372

On disposal

-

-

At 31 March 2018

1,127

1,127

 

 

 

Net book value

 

 

At 31 March 2016

449

449

 

 

 

At 31 March 2017

666

666

 

 

 

At 31 March 2018

809

809

 

Included in the net book value of £809,000 (2017: £666,000) are assets held under finance leases with a NBV of £322,823 (2017: £340,291).

 

The depreciation for the year on these assets was £170,143 (2017: £135,000).

 

 

 

Furniture

 

 

and

 

Company

equipment

Total

 

£'000

£'000

Cost

 

 

At 1 April 2016

45

45

Additions

36

36

Acquisition of subsidiary

-

-

Disposals

-

-

At 31 March 2017

81

81

 

 

 

At 1 April 2017

81

81

Additions

24

24

Acquisition of subsidiary

0

0

Disposals

0

0

At 31 March 2018

105

105

 

 

 

Accumulated depreciation

 

 

 

 

 

At 1 April 2016

12

12

Charge for the year

13

13

On disposal

-

-

At 31 March 2017

25

25

 

 

 

At 1 April 2017

25

25

Charge for the year

26

26

On disposal

-

-

At 31 March 2018

51

51

 

 

 

Net book value

 

 

At 31 March 2016

33

33

 

 

 

At 31 March 2017

56

56

 

 

 

At 31 March 2018

54

54

 

The Company held no finance leases at 31 March 2018 or at 31 March 2017.

 

 

 

 

15   Investments

                                                                

 

2018

2017

£'000

£'000

Investment in Subsidiaries

 

 

At 1 April 2017

10,429

6,576

Acquisitions (note 10)

3,850

4,952

Impairment following disposals

-

(1,099)

Cost 31 March 2018

14,279

10,429

 

 

 

 

 

 

The Company's subsidiary undertakings all of which are wholly owned and included in the consolidated accounts are:

Undertakings

Registration

Principal activity

System Professional Limited

England

Managed Services

 

 

 

Netplan Internet Solutions Limited

England

Managed Services

 

 

 

Netplan LLC*

USA

Managed Services

 

 

 

SysGroup (DIS) Limited

England

Managed Services

 

 

 

 

SysGroup (NH) Limited

England

Managed Services

 

 

 

 

Project Clover Limited

England

Managed Services

 

 

 

 

SysGroup (EH) Limited

England

Managed Services

 

 

 

 

Rockford IT Limited

England

Managed Services

 

*Netplan LLC is a wholly owned subsidiary of Netplan Internet Solutions Limited

 

The recoverable amounts have been determined from discounted cash flow calculations based on cash flow projections from approved budgets covering a one-year period to 31 March 2019. The major assumptions can be found in note 13. The impairment charge above relates to the disposal of the SME segment during the prior year.

 

SysGroup (NH) Limited (Company Number 03963376), SysGroup (EH) Limited (Company Number 05814619), SysGroup (DIS) Limited (Company number 05743110), Project Clover Ltd (Company number 08995906) are taking advantage of the exemption from audit under section 479a of the Companies Act 2006 following the guarantee provided by SysGroup plc under section 479C of the Companies Act 2006.

 

The registered office of all subsidiaries is the same as the registered office of the parent company with the exception of Netplan LLC whose registered office is c/o USA Corporate Services Inc, 19 West 34Th Street, Suite 1018, New York, 10001.

 

 

16   Trade and other receivables

 

Group

Company

Group

Company

 

2018

2018

2017

2017

Amounts due within one year

£'000

£'000

£'000

£'000

Trade debtors

1,101

-

902

-

Other debtors

-

35

-

-

Prepayments and accrued income

523

100

409

100

 

1,624

135

1,311

100

 

The Group is not exposed to any significant credit risk from trade receivables. There are no impaired trade receivables which are past due at 31 March 2018 or at 31 March 2017.

 

 

17   Trade and other payables

 

Group

Company

Group

Company

 

2018

2018

2017

2017

Amounts due within one year

£'000

£'000

£'000

£'000

Trade payables

893

102

590

36

Amounts due to subsidiaries

-

2,584

-

1,531

Accruals

484

160

653

98

Total financial liabilities, excluding loans and borrowings measured at amortised cost

1,377

2,846

1,243

1,665

Corporation tax

85

-

106

-

Other taxes and social security costs

439

30

322

17

Deferred income

425

-

465

-

 Total creditors

2,326

2,876

2,136

1,682

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Group

Company

Group

Company

 

2018

2018

2017

2017

Contingent consideration due on acquisitions

£'000

£'000

£'000

£'000

System Professional Limited

-

-

690

690

 

The fair value of contingent consideration was based on the present value of cash flows and the market value of the shares to be issued.

 

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 2018 and 31 March 2017.

 

Maturity of the financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost is shown in note 3.

 

 

18    Loans and borrowings

 

Group

Company

Group

Company

 

2018

2018

2017

2017

Non- Current

£'000

£'000

£'000

£'000

Obligations under finance leases

128

-

184

91

Bank loan*

1,742

1,742

-

-

 Total

1,870

1,742

184

91

 

 

 

 

 

 

Group

Company

Group

Company

 

2018

2018

2017

2017

Current

£'000

£'000

£'000

£'000

Obligations under finance leases

147

-

223

111

Bank loan*

216

216

-

-

Other loan

-

-

-

105

Total

363

216

223

216

*The bank loan is fully secured by a debenture over SysGroup PLC and its subsidiaries and interest charged at LIBOR + 5% per annum.

 

 

19   Leases

Group obligations under finances leases

 

Minimum lease payments

Interest

Present value

Future lease payments are due as follows:

2018

2018

2018

 

£'000

£'000

£'000

Not later than one year

158

11

147

Later than one year and not later than 5 years

134

6

128

Later than 5 years

-

-

-

 Total

292

17

275

 

 

 

 

 

 

 

 

 

Minimum lease payments

Interest

Present value

Future lease payments are due as follows:

2017

2017

2017

 

£'000

£'000

£'000

Not later than one year

235

12

223

Later than one year and not later than 5 years

189

5

184

Later than 5 years

-

-

-

 Total

424

17

407

 

 

 

 

 

 

 

Group operating leases

 

 

 

 

The total future value of minimum lease payments is due as follows:

 

 

Leasehold property

Other

Leasehold property

Other

 

2018

2018

2017

2017

 

£'000

£'000

£'000

£'000

Within one year

193

-

109

-

Within two to five years

268

-

364

-

After five years

-

-

13

-

 Total

461

-

486

-

 

 

 

 

 

Company operating leases

 

 

 

 

 

 

 

 

 

 

Leasehold property

Other

Leasehold property

Other

 

2018

2018

2017

2017

 

£'000

£'000

£'000

£'000

Within one year

23

-

13

-

Within two to five years

23

-

52

-

After five years

-

-

-

-

 Total

46

-

65

-

 

 

20   Related party transactions

Details of Directors' remuneration are given in the Directors' Remuneration Report. Other related party transactions are as follows:

 

 

Transaction value

Balance due to related party

 

 

2018

2017

2018

2017

Related party relationship

Type of transaction

£'000

£'000

£'000

£'000

 

 

 

 

 

 

Companies in which Directors or their immediate family have a significant / controlling interest

Provision of website design services

Training services

5

           

4

13

 

-

-

 

-

-

 

-

 

 

21   Share capital and capital restructuring

 

Number

£'000

At 1 April 2016

510,379,336

2,552

Consolidation of 0.5p shares to 20p shares

(497,619,852)

-

Issue of share capital - placing

9,391,667

1,686

Issue of share capital - consideration

952,747

382

At 31 March 2017 (as previously stated)

23,103,898

4,620

Restatement of Court capital reduction 4 August 2016

 

Restatement of the excess over nominal value on deferred consideration shares on the acquisition of Q4Ex Ltd

 

-

 

-

 

 

(4,209)

 

(180)

 

 

At 31 March 2017 (as restated)

23,103,898

231

At 1 April 2017

23,103,898

231

At end of year 23,103,898 Ordinary shares of 1p

23,103,898

231

 

The Group now has distributable reserves and so is in a position to pay a dividend in the future if appropriate. When appropriate a progressive dividend policy will be adopted.

 

 

22   Prior year accounting restatement - share capital and reserves

 

The Group has identified an error in the way it accounted for the court sanctioned capital reduction in its interim results to 30 September 2016, and this error has been replicated in subsequent reporting, being corrected in the year ended 31 March 2018. The Group has aIso identified an unrelated error in the accounting for the deferred consideration on the acquisition of Q4Ex Ltd in the year ended 31 March 2017. The errors have been corrected by restating each of the affected financial statement line items for prior periods. The following tables summarise the impacts on the Group's consolidated financial statements.

 

Consolidated statement of financial position 

Group

 

 

As previously reported

Adjustments

As restated

31 March 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Share capital

 

 

4,620

(4,389)

231

Share premium account                                                                

Other reserves

Translation reserve

Retained profit

 

 

-

1,622

4

4,843

-

378

-

4,011

-

2,000

4

8,854

Total equity

 

 

11,089

-

11,089

 

 

 

 

 

 

 

Group

 

 

 

Consolidated statement of comprehensive income

 

 

As previously reported

Adjustments

As restated

31 March 2017

 

 

£'000

£'000

£'000

 

 

 

 

 

 

Fair value adjustment

 

 

(300)

(198)

(498)

Others

 

 

(830)

(3)

(833)

Loss from continuing operations

 

 

(1,130)

(201)

(1,331)

Total comprehensive income

 

 

378

(201)

177

Basic earnings/ (loss) per share

 

 

£0.0190

£(0.0100)

£0.0090

Diluted earnings/ (loss) per share

 

 

£0.0187

£(0.0098)

£0.0088

                       

 

There is no impact on the total operating, investing or financing cash flows for the year ended 31 March 2017 and 31 March 2018.

 

 

23   Discontinued operations

Discontinued operations relate to the SME Mass Market business. The trade and assets of this business were disposed of on 22 July 2016 for a total cash consideration of £2,735,727 (less an initial amount of £465,519 in respect of advance receipts/payments).

 

 

 

The following table summarises the results of the SME Mass Market segment included in discontinued operations in the consolidated statement of income:

 

Year to              31 March 2018

Year to              31 March 2017

 

£'000

£'000

Sales

-

700

Costs and expenses

-

(566)

Profit on sale

-

1,336

Profit before tax

-

1,470

Taxation

-

38

Profit attributable to the shareholders of the Company

-

1,508

 

 

 

Profit on disposal is calculated as the fair value of consideration received less the fair value of assets and liabilities disposed.

 


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