Sysgroup (LSE:SYS) — Final Results for the period ended 31 March 2025

0:00 Good morning, and welcome to the SYSGROUP PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today on published responses, which is appropriate to do so. Before we begin, I would like to submit the following poll. And I would now like to hand you over to the management team

0:32 of SYSGROUP PLC. Hejay, good morning. Good morning, Alex. Thank you very much for the introduction. Welcome, everybody. Thank you for joining us today for FY '25 results presentation. My name is TJ Jai. I'm the executive chairman of SYSGROUP, and with me, I have Owen Phillips, our CFO. Hello. A quick I assume most of you know SYSGROUP, but a quick snapshot of the

0:59 of the SYSGROUP. Can you go to next page?

1:05 We are a trusted partner for cloud cybersecurity AI enablement, delivering end to end solution at the intersection of cybersecurity and digital transformation, and we'll go later in the presentation to explain what that means. We have 95 employees across four offices. It used to be six. Actually, it's three and a half because we've downsized Newport office from two to one floor in Manchester, London, and Denver, as I said, Newport. Our revenue is 20,500,000, of which 79% is recurring, EBITDA of point nine, and net cash of 3,600,000. So when I joined and invested in SYSGROUP two years ago, we set out on a journey to transform SYSGROUP from a typical one of 11,000 MSP that exists in UK to a you know, that provides a very narrow product, and it's a more technical sale to a trusted technology partner for UK SMEs, which accounts for over 90% of the of the companies out there in the country, delivering end to end solution across the entire technology state.

2:20 So the strategy really rose from my experience of running UK PLC, Agolix and SYSGROUP over a decade. And, really, you know, recognizing the market need for a technical supplier, an adviser that can deliver a holistic and interoperable solution. I remember kinda, you know, every year, my CIO used to come and bring me a CapEx requirement, you know, six figures and seven figures that, you know, made me question is, like, how many suppliers are we dealing with? And how how come every solution seems to make the last one obsolete, and it seems to be redundant? And, really, there was really a myriad of advisers that was very difficult to navigate.

3:05 And I think today when technology is at the forefront of every board's mind, not only because of the high incidence of cybersecurity, which I think it's really provides a a a heightened awareness of the risk of technology, but really also the opportunity that AI represents in terms of the the ability to kinda transform and deliver value leveraging technology. So in the combination of that, I think, clearly, I think from a UK SME, there's a a need for someone they can, you know, consult and get advice in terms of what's the right way to engage with with an important aspect of a business. And I think the reality is that there's a really a dearth of choices out there whether on one extreme as the NSA is very fragmented MSP world, but the other end of the of the spectrum are big large consulting firms that are really out of reach both from the price as well as their scope that most people are are, have availability to.

4:07 So what we have set upon in the last two years and and particularly last year is really, I think, transform and transition us to from a strategic perspective as well as operationally and, you know, ultimately, a financial perspective. From a strategic transformation, as I mentioned before, we wanted to reposition a way from a structurally declining business that was very much focused on on a a private cloud, which and and become a solution provider at the intersection of the two growth markets, cybersecurity and digital transformation. To that, I mean, to that end, we build we defined and built five key technology pillars that form the foundation of our end to end solution, which for you know, enables to shift to consultative led approach that deliver holistic, interoperable, and future proof solutions.

5:05 You know, giving us the really, I think they've you know, give us the foundation of of to engage the the c suite on a consultative and advisory basis. And, really, I think the the the event that enables to accelerate that motion is really the acquisition of Crossword Consulting, which added the cybersecurity element, cybersecurity consulting, this virtual c suite, and pen testing, as well as the c suite access given their engagement with their existing customer and really a quite exciting, list of FTSE client base that they brought with them. And from our perspective, we wanted to leverage the provide the best world class technical solution.

5:51 To that end, we deepen our relationship with a a market leading technical solution providers to provide a kinda holistic and interoperable solution, which we'll come back to later in the presentation to demonstrate what that means. Whilst we made that strategic shift, we had to make sure that the the operational foundation was solid. And, you know, I gotta be honest. The the issues that we dealt with was bigger than we expected. Having said that, we have addressed them and resolved. We had to replace and invest to to upgrade the obsolete infrastructure, both hardware and software, to meet the compliance and security standard. We integrated the fragmented acquisitions.

6:39 As you recall, SYSGROUP is a combination of six different acquisition over the span of seven, eight years. We we as I mentioned before, we reduced the offices and functions were consolidated. We had to overhaul the data architecture to make sure we are be able to kinda be data led and and enable the kinda AI functionality that we wanna drive our efficiency and productivity. And and that really has kind of paid dividend. We have seen a strong evidence of of kind of the the deliverables on that, particularly in the service desk, and we'll come back and explain that. And that has not only from an operational benefit, but equally commercial benefit as well. The board has been refreshed. We have a strong new culture, new talent coming into the organization, you know, as we expand capability and the need to upgrade our skill of our organization.

7:32 So 40% of the people have less than two years, ten years. So a significant upgrade and and change of not only capability, but also culture. From a financial perspective, you know, again, we wanted to make sure we had a strong balance sheet that we can invest for growth as well as acquisitions. We raised at the beginning of the year 10,600,000, which Owen will go a little in, you know, in the presentation in terms of how we have

8:03 leveraged that. I think the key point to highlight in terms of financial aspect is that we have significantly improved the quality of revenue. As you can see, our gross margin has improved by three basis point, which I think is a significant step forward as we shifted more towards cybersecurity and I think moved away from the decline in the low margin value add resales, which inflate the revenue at a low margin. Driving some of the improvement in the gross margin is that we arrested the decline of the managed services, which is as we talked about is about 80% of our revenue. If you recall, the biggest challenge we had historically is that the number of trends of customers that were moving away from us, not only from poor services, but equally at the lack of the the products and capability that we could that we could follow them as they as as they evolve their technology technology roadmap.

8:56 So, you know, last year, we suffer 1,700,000 of churn, which obviously has a significant impact. But, you know, what's really, I think, pleasing to say is that that number has been arrested and actually is trending upward in the last two quarters. So that's a significant achievement. And and as, you know, as we'll go further in the presentation, the commercial impact as we show that improvement on service, it leads to customer gaining confidence in our capability, renewing their contracts, but most importantly, expanding their engagement with us. And, you know, small point, last one, it's it's a small, but I think it's reflective of some of the things that we're doing. We push through price increases, you know, across the the customer base with a minimal pushback.

9:47 Again, we're reflecting the stronger customer relationship and improved service value. So let me turn it over to now to Owen so he can go through some of the financial figures. Sure. Yes. Hello, everyone. Revenue, 20,500,000, as he just said, reflects our strategic shift towards higher propensity customers via cybersecurity and consulting led sales and away from legacy hosting and very low margin resale business. Yes. There was some downsell, which Adrian just mentioned. It's about 1,700,000 in in churn in downselling churn in customers. And what gives me confidence is we have arrested this. We've got had two quarters growth now in managed services after something like previous eight quarters decline. So we really feel more confident and then we turn it we turn that area around.

10:40 Crucially to that, all of our major customers that have that have come up for renewal post the year end have all we need. So we're feeling really good about that. And where I'm particularly getting confidence is our gross margin, which I just mentioned. As I say, you know, we've got 400,000 worse gross margin. However, that's off 2.2 less revenue. So, clearly, we've we've got quality revenue in that, and that is what really gives me confidence in the strategy going forward is that that there's some quality customers that are paying that we're getting good decent terms and good margin on. So

11:20 sorry. Linking into the managed IT services, that's now 86% of our business, a much smaller amount than legacy value added resell, which has which has decreased. In terms of overheads, our overheads are 9.1. They've gone up this year as we continue to invest in our people and processes. However, that is not going to continue into FY '26. It's not going to increase further. We are now level set at the size we need to be to push onwards and grow. Adjusted EBITDA of point nine, which is the number we'd already given to you, reflects the shift in the strategy. That's the that's the income statement. As I said, we're feeling we're feeling really good about the way we've repositioned the company now. We're feeling really good about the way we're focused towards cybersecurity and consultant led sales, less of a focus on the legacy hosting, certainly a far less focus on low margin where where I wouldn't class this as a resale business in any way at all. So that is the income statement. I'll jump to the balance sheet. And really, the key takeaway on the balance sheet is that we have dramatically increased our net assets from 15,000,000 to 24,000,000, and that is absolutely the cash we've raised, which we still hold on the balance sheet.

12:37 We have spent some of that cash making tactical investments, and I'll take you through that in a moment. But the key is we're still holding 8,700,000 of cash. And on the next slide, I'll I'll talk to you particularly about how this compares with our debt. But as you can see, we've got circa 4,800,000 of a bank loan, so the net 3.6. The bank loan is a facility of 8,000,000. We've drawn down on 4.8. We haven't drawn down any more in this year. This is all this is all the legacy. You can see it there last year. And we still got 3,300,000 available should we need it at some point. In terms of other movements in the balance sheet, very, very straightforward. And, really, I I would say the cash is the point to bring out. In terms of trading other receivables, yes, they've gone up circa 5,000,000 versus 4,000,000, but that's just timing on some large contracts, all of which has since paid us.

13:27 Otherwise, current liabilities have gone down. You can see there was a continuing consideration last year. That has been paid 1,800,000, and the movement in share capital and share premium reflects the fundraising. So that's the balance sheet. I I think you wanna hear about the cash situation, which is really, you know, you know, just really gives us gives us that confidence and gives us that that strength on our balance sheet. In terms of, as I say, healthy cash reserves, we've got gross cash balances of 8,700,000 at the end of the year following the successful 10,600,000 fund raise. In terms of what we spent, we spent some of it, as I say, on tactical acquisitions, which which will make clear when we raise the money. 1,800,000 has met the final earn out payment from the trust stream cybersecurity business. So this was the business we bought a couple of years ago. This is now fully paid off and a fantastic investment and continues to grow.

14:20 We put 700,000 of capital investment into our own bespoke AI service desk platform. PJ's gonna tell you all about that in a moment, so I won't steal his thunder, but but that's the investment we've meant that made there. And we paid $300,000 on the acquisition of the trading assets of Crossword Consulting Limited. And in a second, I'll you a whole lot of detail on that. But that, as I said, is an acquisition we're super excited about. I think the key takeaway is net cash of £3,600,000 from a net debt position of £3,400,000 previously. So we have this strong base. You can see I've outlined our net debt on the right there. We've got a strong base in which we move forward.

15:05 So I'll just tell you a little bit about our crossword consulting acquisition, which we're super excited about. This was made in November last year. We were we were it was a very quick kind of acquisition. We went and looked at the companies in financial difficulties and ultimately went into administration. We went and looked at the business and and really liked the look of the consulting arm of their business. It was a fantastic business, and it it the group as a whole had come to stress because of because of difficulties in other parts of the business. So we acquired the consulting division at what we thought was a very reasonable price comprising 10 staff and various open recurring contracts. I think, you know, you're always nervous when you buy a consulting business, and that's why I'm super pleased because all the key staff have been retained. They're all effectively they are well, they are part of our senior leadership today.

16:01 We've retained all the large customers. And in fact, the largest customer recently renewed with an upsell with us. That's 1,300,000 contract over seventeen months. FTSE two fifty, brilliant logo. Really pleased that they see that they have the faith in SYSGROUP and that they can see that we're going to be a solid partner for them.

16:23 In terms of financials, as I said, prior to our acquisition for twelve months, it turned over 2,400,000 of revenue. More than 75 percent of that is recurring, and I'll explain what the recurring revenue is next. So, you know, there's great potential there already, but we see significant opportunities for further growth. And we're already seeing the fruits of this by, you know, introduce cross selling across the wider group, introducing them to our customers as well as well as introducing our wireless our original wireless services into their customers. In terms of services, what they do, they are leader in cybersecurity services. They are they are premium consultants with with with great backgrounds. And what they offer most of what they offer is is consulting services, in particular, what we call virtual SYSGROUP, which is retained consulting services to large enterprise contracts where we support their SYSGROUP, support their IT functions.

17:19 They also so this is about 75% of their business. They also offer pen testing, which is brilliant. You know, we used to buy that externally. Now we can offer that internally. And in fact, that's something that sits perfectly with a number of our customers. It's a substantial broad enhancement in what we can offer in our security capabilities. It really does take us to the next level. It lifts us above simple support into, you know, conversations at the board level and really help them set their security road map and strategy. And the customers, really impressive enterprise client because you're going to be a decent sized enterprise to to to acquire these sorts of services. Blue chip customer base customer base adds credibility. It's got, you know, you know, huge white space in those companies for us to to us to look at other things. I mean, recently, Logo was a very well known airline.

18:11 You know? Largest in UK. Absolutely brilliant. You know, it's a really great group of customers and really great bunch of people. As I say, they were, you know, we acquired them a couple of weeks later. They were in our offices, weren't they? So it was, you know, super thrilled to have them on board. And we really think this this drives the cybersecurity consulting strategy. It gives us another it gives us another leg. It lifts us above simple support. It really gets us in the conversation at a boardroom level, and and it it gets us in the door. I mean I mean, you know, you will know about the cybersecurity, you know, public, you know, events that are in the public. It's not a difficult conversation asking to come in and and put our blue chip guys in front of you to talk to you about cybersecurity and talk to you about your strategy, talk to you about your roadmap. So we're super thrilled with this acquisition. Really think this is gonna drive growth. It's gonna it's already supercharged our consulting arm. It's supercharged our our wider consultancy business, and and we really think it's it's gonna take us forward. Yeah. No. Look.

19:12 I wanna do a little bit further on this the acquisition because, to some extent first of all, I wanna thank one of our shareholders who to, you know, provided the introduction, and and we're very fortunate to be able to move very quickly and close the transaction, you know, and and being able to acquire that really, I think, very attractive valuation for for the assets. But I was talking to my old colleague, a board member, Paul Edwards, who used to be by FDA at SCAPA, and we kinda were reminiscing that, you know, crossword consulting is kinda keen to the one of the key acquisition that we did at SYSGROUP that kinda turned and pivoted us away from kind of the boring industrial business to kinda why it end up being, ultimately, where we'll be able to sell 17 x of the investment.

19:58 And and, you know, again, I feel the same thing about the crossword consulting, and and particularly because it really, I think, fits the final piece of the of the strategy we're trying to to execute. And as we talked about, we wanna be more consultative and advisory engagement and partner with all the SMEs, particularly the c suite. And I think, you know, the transition from just a a transactional delivery company to that would have been difficult to do it organically and to be able to bring a suite of consultant who speaks the the language and engagement already. I think it's a huge leap forward. So, you know, if you flip to the next page in terms of our our strategy, as I mentioned before and, again, coming rising from my experience, and I think having speaking speaking to other colleagues of mine who are running businesses, both private and public, is that, you know, in in their mind now, technology is a very important thing, not only from a cybersecurity perspective because of the risk mitigation, as we all know and heard the horror stories, But equally at the same time, like, the opportunity that digital transformation and AI reflect represents, and they're all curious and and keen to get on that journey and wanna have someone who can have a conversation.

21:17 And and, really, I think if you reach back to the existing kind of marketplace of the technical adviser, it's pretty fragmented. You know, everybody is a specialist in a singular discipline. And and if you look at the supply chain of a lot of the SMEs out there, is that really, I think, it'd be difficult to find a kinda finding a singular person that a c suite can lean on to get the best advice, and that's holistic. You know, every every SME out there probably I reckon to say, probably have five to 10 suppliers when it comes to the IT support. So, you know, being able to beat that single throat to choke, say, particularly with emphasis on two areas that is very relevant to the conversation. The c suite is critical, the cybersecurity and AI, and I think that's where we kinda positioned ourself.

22:16 And and, you know, to that end, I think we needed to make sure that we had the capability internally, and that was kind of the the really, I think, heavy lifting that we have done in the last year is really defining the five pillars of technology. And we talked about it in the past, you know, starting with cybersecurity AI, hosting both private and cloud, public cloud. As you know, we never had really had an explosion in public cloud. Protection and and and connectivity and protection, again, being able to bring a company called Rubrik, which is a market leader and the backup solution and, you know, joining them as an advanced partner is a huge leap forward. What that enables to do is really, I think, put together what we call a digital house as you see in that presentation on the right side. Really, you know, we kinda act with the acquisition of cyber with of Crossword Consulting that really kinda brings that general contractor, the architecture motion that you need to be able to kinda talk to the different aspect of that house, whether that's, you know, the the the identity management, which is like the cyberwalks of the world, Zscaler, which is the kind of overall coverage zero trust, whether we talk about Rubrik, which is the the data backup and and disaster recovery in case you need to kinda address the cybersecurity incident, which is some most of the time, it's not a question of if, it's a question of when. And then, obviously, putting

23:47 the foundations in terms of what the what we call the piping, you know, in terms of the hosting and the connectivity and such. And so to be able to kinda talk holistically and really, I think, lead with the partners that are upper right quadrant of of of Gartner, really, I think, you know, puts us in a good position to have that consultative conversation. And I think that's really, I think, integral, and and there's a clear market need for that. In terms of AI strategy, which we, you know, which underpins everything that we do, because I do believe it's a transformational technology, and I think every conversation with with our customer in the in context of anything we do should be, know, with that with that with the view of how does it impact from an AI perspective.

24:37 And and I think I think it's it's it's an understatement to say that AI is a a extremely

24:46 dynamic and fast changing technology. I mean, I think it it what it has what AI has defined to be twelve months ago is significantly different than what it is today. What the capability can do and and what's the use case has been has been really head spinning. And as a result, you know, our strategy has evolved with that as well. And I think if you recall from our perspective is, you know, when we started the journey is that we're gonna be a a use case model where we're gonna come in and and discuss and solve a a use case by developing a a software solution for our customer. What we realize is that the investment that's going in that space and the evolution of technology is so quick that it's difficult to kinda keep up with all the market leaders, you know, the unicorns that are there. And, equally, a lot of the platforms are integrating AI solutions already into the existing software that made it, you know, that those discussion really difficult

25:49 to keep up. But more importantly, I think important aspect that we learned not only in our conversation with our customer, but, you know, in our own implementation of AI internally is that, you know, there's really, I think, a a lack of understanding what AI is and what the AI ready is and really, I think, to to crystallize and define what the use cases are. And and what that means and and, again, this is married to our experience of engaging with

26:20 our customer, you know, through crossword consulting in terms of their sales motion and their engagement motion vis a vis the customer, because a lot of the these decisions will come from the c suite and a decision maker, not at the technical deployment or IT managers that traditional MSP will be engaged with. And, really, it's, you know, consultative approach where we sit down understanding the business requirements, really, you know, driving the the outcome more than kind of the use case specific. Then being able to really, I think, hold the customer's hands in terms of making sure their infrastructure and the data is ready to be to ready for the deployment, some of the tools that's coming that that coming coming down the pipe. And and, you know, we wanna make sure that the solutions are integrated across the entire system that is compatible with cybersecurity framework because, obviously, security is important, and it's not a piecemeal solution.

27:22 And into that end, we're gonna look we looked at both off the shelf tools, embedded features of of the tools that we talked about, such as Copilot of the world and bespoke development, which I think is a full spectrum of of capability. Again, I think there are very few people out there that can, you know, help a customer journey from beginning to an end. There'll be a lot of consultants who will come in and kinda, you know,

27:48 spend twenty hours with you and tell you, you know, how to get on a journey, but really never take you to the conclusion in terms of how to use the tool. But more importantly, making sure that the organizational engagement, more organizational awareness is up to speed to be able to make sure those tools get adapted. And again, that, you know, the internal transformation, as we say, walking the talk was really a critical element that we learned that we thought, you know, hey. As long as we put the tools out there, people will use it, and we recognize very quickly

28:24 that was not the case. And and, really, I think, you know, if I reflect on kinda what we've been able to achieve internally is that, you know, it took a lot of trial and error, I gotta admit. And I think it's a lot of learning experience in terms of how to properly transform your business. And and I think we are we are seeing really amazing results as a you know, from what we've been

28:51 able to achieve in the last twelve months. And and, really, I think it it's been a journey. I think, you know, we initially had to make the investment in the infrastructure and the system to get the data first initiative, we call it. And I and in cleaning up the data, I mean, particularly, was difficult because we and we were a collection of five different acquisition with all different dataset. So being able to kind of the the the data cleanup and to make it accessible if anything else has been really the challenge. And, you know, we use the tools that we

29:22 design ourselves. We call it Genesis, and, you know, we we spent a lot of money on that as well as kinda off the shelf AI tools as they were coming, you know, to market very quickly. And and, you know, I think what we also recognize a lot, you know, is that it's it's not just the hardware and the software we need to change. It's the structure of how the organization is laid out to create the visibility, create accountability, and really, I think, get people's what we call AIQ. You know, we had a series of webinars, series of of chat, trying to make sure we dispel the fear and kinda get people excited about what the tool is, and and it's not about displacing their job. So, you know, we've seen a significant improvement.

30:07 I mean, as you can imagine, 50%, now a lot less than that, 50% of our headcounts back then was related to service desk, which is answering customer inquiry tickets and and monitoring their their activity. And and in the over force of in the right side, you'll see the statistics of the span of twelve year twelve months, our productivity of of tickets resolved by an engineer went up by 30%, which is amazing. You know, in the context of our SA, service lead What's that? SYSGROUP. Thank you. Service level agreement, which is what we commit to to our customer, how quickly we'll resolve a ticket, improved to 96% from 91%.

30:53 NPS net promoter score went from dismal 8%

30:57 to acceptable, I said, 15% over twelve months. I think that's a massive improvement. And this is whilst our headcount reduced 33%. So, I mean, I think that really shows the power and the ability, you know, the capability and the opportunity of the digital transformation. I don't wanna call it AI transformation because AI is just one of the many tools that we apply to create this type of dividend. And and I think, you know, the commercially, the value of this is that, you know, happier customer will engage you with further, will buy more from you, and I think that's kinda, you know, the green shoot we're seeing. I mean, first instance, forget buying more. They're not leaving us. And I think as Owen said, our managed services figure, which has been, you know, precipitous falling. I mean, 1,700,000 on a 20,000,000 turnover $2,222,000,000 turnover.

31:55 You know, you could argue that bulk of our decline has been, you know, through the churn of the customers. We have managed to arrest that. I mean, I think the last two quarters that we've seen sequential growth. And, you know, I think that's a combination of really keeping the customer what we got as well as bringing new customers that are, you know, cybersecurity driven. So I think both combination, I think, speaks to our, you know, I think, you know, as we get look forward, you know, that we are going heading in the right direction. So look. I mean, in in conclusion, we have really strengthened our foundation. You know, I think strategically, we're in the right place, in the right market. I mean, I think if you look at kind of where having having worked the last twenty years in an industrial market was GDP plus, being in a sector where it's growing astronomically, you know, and being placed right in the middle of it, I think it's, you know, it's an amazing place, and then we see the the excitement and the activity that comes with it. And I think we do we are feeling a need that that exists out there. I think what we're trying to do is unique. I don't think there's anyone else who's doing what we're doing at our our level. I mean, they're obviously the McKinsey's and the Deloitte's of the world who are doing it, but I think it's a different space.

33:20 In in in you know, for and then the fact that, you know, we have a solid financial base and we can be opportunistic as we've done in the crossword consulting to move quickly, invest in the right places, puts us in a in a very good position. Look. You know, I'd be I'd be very frank in saying, look. The the the legacy issues, the operational fix that we had to do to to arrest some of the declines and the and the shifting landscape, the it has been tough, and it's been longer than I expected. I think that's behind us now. You know, that puts us in a position to, I think, go out and and leverage the work that we have done. So, you know, we are feeling very good about the outlook and and the opportunity. Having said that, you know, the market is tough right now, particularly in The UK. The uncertainty that exists out there, really, I think, is the visibility that we got toward the toward the opportunities.

34:18 A lot of the, you know, a lot of the pipelines and and projects that we were very excited about has been pushed back and some scaled down. So really, I think, you know, it puts a lot of, you know, challenges in the short term in terms of getting a good visibility. So, you know, I think from my perspective, it's really frustrating because, you know, we're dealing with a company of a small scale. So one or two project does move the needle significantly. Having said that, it goes both direction. And the lack of visibility, really, I think, it it it frustrates me to be able to say with confidence, you know, that that we can deliver some of the numbers that we have said in terms of that that aligns with my expectation.

35:04 So, you know, we have brought down our forecast down outlook, but I don't think that's to say we don't feel confident about the opportunity nor our pipeline. It's just the lack of visibility, and and we wanna make sure we are prudent in terms of how we position ourselves and how we communicate to the city. So with that, let me turn over for q and a. That's great, EJ Owen. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to view those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. I'm here, Jay Owen.

35:51 As you can see, we have received a number of questions throughout today's presentation. If I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Thank you. Okay. So let me there's You wanna read them, Josh? Yeah. No. No. Go through them. So we have many questions. So let me just kinda curate them through. When will revenue be back to growth? Will it be organic or nonorganic? I mean, I think that's a really good question. Hopefully, I mean, I think one of the things we really didn't touch on too much on the presentation is, look, m and a is a really a a a integral part of our acquisition. I mean, that's my history. I grew Scapa and Volex through acquisitions. So, you know and particularly in this environment, in this market where it's extremely fragmented, 11,000 MSP out there, it, you know, gives a a an ample opportunity, and and I would argue that, you know, most of those guys are sellers, not a buyer. So, you know, in terms of our ability to go find an acquisition, it's it's it's it's it's there.

36:58 I think from an organic growth, look, we are already seeing the growth, the pipeline, you know, building. You know, the key was making sure that we don't, you know, they don't score goal on us, I guess, and and to use the football analogy and and not, you know, losing customer was that kinda the first step forward. And, you know, as the I think we have the pipeline to deliver growth. There are some big projects out there. The challenge is, again, as I said, is lack of visibility as customers are just delaying. And and having been in their shoes, I totally agree. I mean, I know I understand where they're coming from. UK is a scary place right now in terms of from a you know, what the outlook looks like, so people are very prudent about their capital allocation and their cash flow. So but I do expect that, you know you know, we will do better than well, you know, we have been prudent in terms of outlooks, but we expect that this year will be a growth in the year.

37:52 I'd be disappointed otherwise, but we're being prudent with our numbers. This is probably for you, Owen. Do you think the gross margin of thank you for saying good gross margin. Of 48% can be maintained? Why is it much higher than the gross margin of other I IT service provider, Accenture, Capgemini, etcetera. I mean, I guess Accenture is Capgemini. It's really not our comp. So that's a different It it's very difficult to compare the the two that those specific, you know, very large enterprise led customers. But to your point, 48%, I we believe, and we're very pleased that it's gone up, and we absolutely think it's sustainable. It's diff it's difficult to compare necessarily to to those big companies, but certainly, that's a very good margin for MSP.

38:42 I would say a lot of MSPs kind of do brilliant companies, but but but they are fighting each other, and therefore, they are frequently squeezed on margins. What we think we bring is different. We've got a consultative approach. We've got deep embedded expert expertise across a broad range of the data estate, and therefore, we think our process support that. So we are very confident to maintain our margin certainly going forwards. Okay. Can you give can you please give the main reasons why churn was so high last year? The churn was very high just because I think the service level was really poor. I mean, I think, you know, when you are not addressing the customer's needs and not engaging with them and not really providing the best service, really, I think, you know, it's difficult to hold on to customer. I mean, end of the day, our business is a service business.

39:39 As much as we like to say it's a technology business, it really is a service business. And I think, you know, our customer journey was not as what I would expect, and I think that's what we addressed leveraging, you know, not only the culture, but also leveraging the technology AI. And that's really, I think, you know, as you saw in the presentation, has really the the you know, I think dramatically shifted our performance and our customer perception, and that really, I think, you know, kinda and I still remember one of our I think it's our third largest customer, you know, telling me they're gonna leave when the contract is over. It goes our service, our tickets don't get returned reply. And we said, look, we made a commitment, and and we got a a nice testimonial email recently. It's on their website in case you wanna know who it was.

40:30 You know, that's saying that how how how they were amazed how our service improved, and and our engagement across the business is so dramatically different than what it was before. So, you know, I think, you know, from our perspective, I think that was a a main priority for us to solve last four months. And I think based on the results on the last two quarters, we are confident that that we have we've been arrested and now it's up into growing that business and growing our revenue. Sales and marketing staff have been reduced from 23 to 11 during the year, which looks very worrying for our business growing in the future. What are your plans for the sales and marketing function? So can take that. No.

41:22 It's okay. I can do it. So, I mean, look, I think the reality is that it's been difficult for salespeople to navigate in in in a organization with it. The service has been challenging, and and I think that, you know, salespeople are very kind of what is it? What kind of creature we say? It's a, you know, a financially driven creature that I've that I've paid in commission. So it's been challenging to retain some of the salespeople, and I think that's been impacting us. And we've been able to you know, once we have kinda gone through the challenging period, I think we've been we are rebuilding our sales organization. I think we are now back up to I don't know. What's the figure?

42:07 It's a thing that's Oh, no. It's 12 or 13. Yeah. I was I was gonna say our sales and marketing function has not reduced. Oh, is that a wrong figure? Okay. Sorry. So we were not not as high as as 23. We're we're investing in our sales and marketing function. We've got a partner manager joining next week. Got very close links with with Zscaler and various others. We've got an in house marketing manager. Previously, it was an area we'd we'd outsourced sort of on an ad hoc basis. We've marketing manager starting next week. We've got hired various roles. And in fact, if you see on LinkedIn, we're hiring even more. So I I absolutely I I would say that statement is actually incorrect. We're actually growing our sales and marketing function. Okay. I should have let you answer that. I shouldn't have. Next question. Zoos has reduced revenue forecast in the current year from 25 to 20 no. It's from no. Actually, I reduced their revenue for okay.

43:00 Got you. To what extent is the downgrade to the customer curtailing spend or losing market share to competitor? I mean, I think it really kinda it's it's too specific area. Well, too specific area. Is not losing market share as we talked about. Really, I think our managed services, which is the the kind of recurring revenue element of the business is growing. Where we are, you know, where we expected and and we are not seeing, and I think it really attributable to some of the projects getting delayed is that, you know, it's a value added resale, you know, and the correlating professional services work that will come with it. So if someone wants to refresh of their digital estate, you know, replace a server or move to cloud, they would have to buy kits, which relates or licenses, which is a value added resale number that will hit the year. It's not an advertised number.

43:50 Plus, to deploy it, they will be hiring a professional services work from us. And that's so that goes goes in hand in hand. So, you know, there are projects couple projects that are of seven figures that that got pushed out or shelved. And if those had fallen in the year and or we have a visibility of them, you know, coming online in this year for certainty, you know, we'll be talking about different things right now. So it really I think from our perspective, it's really the challenge of our customer spending less given the uncertainty in the macro today. Yeah. I I would say, you know, when we go into tender, we're very confident because of the broad range. We, you know, we don't we don't lose to to market as competitors in that respect. You know, if we where we might lose something out would be more on the value added resells side where where at times, we, you know, we're not able to compete with very large resellers without kind of going very rock bottom prices. And as we've said, we're not in that type of business anymore. We're not seeking to to kind of take a sliver of profit on on chunky infrastructure stuff. We're about consultative led value add sales, you know, managed recurring revenue.

45:03 So absolutely. You want to answer this one? Sorry, I'm reading this one. You mentioned that you've now seen two sequential increase in managed services revenue in the last two quarters. However, you've also included cross sell as in December. What's the mention what's the what's the mention to sequential revenue increase driven by cross acquisition? No. So that is the legacy managed services business. It's cross sell is in our is in our in our recurring revenue number. And when I say cross I mean the the virtual CCI retained contracts parts in our recurring revenue number. But, no, when we're referring to that, we're referring to the managed services business, the the legacy business, if you if you like. But absolutely, Crossword is we, you know, we view it as managed services, certainly for the virtual CSO part there. There's other ad hoc assignments on top. No, legacy business. Okay.

46:02 The last question would be, doesn't the near halving the share prices in the last year make m and a activity more difficult? That's that's painful to read it. That's true. Look. I mean, I think yes and no. I mean, I think the reality is that it you know, in terms of we were to use our share our share to do the deal, I think that would be a little difficult in terms of the scale. You know, having said that, we we've been able you know, we do have a cash position, and I think we have a a a you know, the targets that we're looking for are not, you know, transformative deals of of you know, that that is bigger than our market cap and such. So at this point, at least, we have not, you know, kinda run into that issue where, oh, we can't afford it because our share price is is lower.

46:52 So the simple answer is not at this point. Having said that, it's not a good thing. Obviously, if we had a higher prices, you know, we could use our shares to to finance the deal. But, you know, I think in this environment, it's difficult to raise financing of any significance, I think, you know, anyway. So I think that's all the question and answers. That's great. Let's see. Yeah. Perfect. Thank you very much indeed for addressing those questions for investors today. And, of course, the company can review your questions submitted today. We will publish those responses on the investment company platform. But, Heejie, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please just ask you for a few closing comments? Yeah. Look. I mean, I think we've done a lot of work. I mean, as we're putting together the presentation and and kinda outlined all the things that we have done as you saw in the kind of the first part of the presentation, there were a lot. You know? And I think that runs across the strategic operation and financial.

47:52 And having said that, I think as we sit today, we're feeling really good about what we'll be able to accomplish. I think we're in a significantly I don't wanna say even better. I would say it's different place than what legacy SYSGROUP was, and I think the direction we headed is significantly different than what a normal MSP would be. So I'm very optimistic of the outlook. I think, you know, we are well positioned. The conversation we're having with our customer is very engaging. I think it's a different level. So really optimistic about the growth. I mean, they're really need the challenge per se is the top market, you know, in terms of a lot of the SMEs that customers we're dealing with are cautious in their spending. And I think kinda IT in in kinda certain circumstances are are, you know, the simple question, hey. Can we get away with spending another year, you know, with the same thing another year is kinda get refraint, you know, the decision maker room. So having said that, the conversation is is continuing.

48:49 The opportunity is there, so we're excited about the future. Thank you. That's great. EJ Owen, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SYSGROUP PLC, we would like to thank you for attending today's presentation, and good morning to you all.