Sysgroup (LSE:SYS) — SysGroup FY21 Full Year Results Presentation

0:02 Good morning, ladies and gentlemen, and welcome to the SYSGROUP Full Year twenty twenty one Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Just please simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard, and we will notify you by e mail when they're ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. And if you'd be so kind to give that your attention, we would be most grateful. And I'd now like to hand over to Adam Binks, CEO from SYSGROUP. Good morning, Adam.

0:52 Good morning. Thanks, Mark. Good morning, everybody, and thanks for joining us for our full year f y twenty one results presentation via the investor meet company platform once again. My intention this morning is to take you through an introduction to the company for those of you that are are new to us. And my apologies for repeating myself to those of you who are here for for the second time. And then we'll take you through a a summary between Martin and I of our performance throughout the f y twenty one period, and more specifically, the period under the the pandemic.

1:36 So just a quick introduction. My name is Adam Banks. I'm the chief executive officer of SYSGROUP. I've been with the business since 2014. I originally joined as chief operating officer, and was promoted to chief executive back in April 2018. So just over three years, at the helm of this fantastic business now. I've got a twenty one year, career in the in the TMT sector, largely around telecoms and and hosting. And Martin joined us on the board as chief financial officer back in July 2018, again, also with the business for three years, where he joined us from NCC Group where he was associate finance director. And we brought Martin on board to complement, my and the rest of the board's m and a experience given that we are a a buy and build company.

2:32 So, look, an an introduction to, SYSGROUP. We are a aim listed managed IT services and cloud hosting provider. We've posted our results yesterday morning, as you will have seen. So we're we're we're run rate 18,000,000 plus at the moment with 2,900,000 of adjusted EBITDA, which I think you'll all agree is a pretty good performance, given the restrictions under which we've faced over the last twelve months. But, yeah, look, we're we're a business that that competes largely in the mid market space, looking after customers with deployment sizes of typically 250,300 to to a thousand users, and providing services, largely in the data center, which I'll talk more about the capabilities as we as we move through the slides.

3:28 So we've got a 110 team members based across five offices, around The UK, Liverpool being the headquarters. We've an office in Central London. We've opened a brand new office just recently in Manchester, which, again, I'll talk more about later in the rationale for why we've done that. And then we've got our offices in, in Newport, which we acquired with the SYSGROUP acquisition back in 2019, and also our office in Telford. So great coverage across The UK for us. We ease out of lockdown restrictions once again to be able to service our customer base. We're looking after about 700 plus customers, as I say, in that mid market to enterprise space within the market.

4:16 We operate on a twenty four seven, three sixty five basis with our UK based service desk team. And as I always say at the start of these presentations, one of our most important KPIs that we love to report to the city is our 97% plus customer satisfaction. So throughout the period of our of lockdown, we have managed to retain, our our plus 97% consistently, customer satisfaction. Now one of the most important things, for being a trusted managed IT service provider, the clients, prospects, and existing customers look for is our vendor partnerships and our accreditations, which I think this slide spells out quite nicely. You'll see some very big recognized brands there, that SYSGROUP is partnered with that we, we work with in order to deliver our solutions, by utilizing the technology platforms and software.

5:22 So for example, we are one of two platinum partners in The UK, for WatchGuard, which really strengthens our security capabilities and our security offering. And, again, you'll see Fortinet and SonicWall on there, again, underpinning our security, creds. And then coming into our accreditations, you know, really, really important that we can demonstrate to our customers how we secure their data, how we work with their data, and how we look after their data. So accreditations such as Cyber Essentials Plus, ISO 27,001. And as I always say, the one I'm most proud of is our PCI DSS, Visa merchant service provider level one status, which really demonstrates our capability to secure data, and house it in an efficient manner whereby our customers can trust us to look after that data and know it's safe.

6:21 So just to, give you a reminder on the strategy, Martin and I are here to bring to drive this business to become a £100,000,000 market cap company. That remains the strategy. It's unchanged, from when we set out on this journey a couple of years ago, despite the pandemic. Albeit, I do believe we've suffered probably a twelve month delay to being able to deliver on that strategy. COVID has slowed us down. We are a buy and build business, and, you know, you will note that we've not made an acquisition throughout the lockdown period. And there's many, many reasons for that, largely because we've not seen the quality of assets come through, as well as the good quality assets have not been coming to market so as to prevent any any real chips on valuation, shall we say, for their own business in in what may deem to be a fire sale when selling a business through a difficult time.

7:22 So, you know, it remains our vision to become the leading provider of managed IT services and cloud hosting to businesses in The UK. And we're we're on track to achieve that vision and that goal as part of our strategy. And we do that purely through our value proposition, which comes through in our people and our solutions and services that we deliver to the market. I think it's really important that I drive out, the core values, which you see on this slide that the business operates on. And we ask all of our people, to to kinda live and breathe the core values of the business. You know, we've got them decorated on all of the walls across the offices. It's people's desktop backgrounds. It's your mouse map. We've sent them all out throughout lockdown, so we've kinda got those into people's homes.

8:11 But it's really, really important that business operates to its core values in order to achieve its goals. And by setting out those key fundamentals and having people operate to them is what really helps us drive success. So, you know, I I've spoke about them before. I'm not gonna go over it. They're listed on the screen there. But we've got a great team of people that absolutely love to live by our core values and and work coherently together every day in order to drive SYSGROUP forward. So in terms of our capabilities, I mentioned last time, you know, we made a couple of acquisitions in 2019 to really expand the portfolio and the service offering. And our main focus when we take solutions into customers and and into prospects is all about what we can deliver to them in the data center.

9:05 So we occupy space at five major data centers around The UK, and the building that you see pictured on the right hand side of the screen there, is what is now known as Vantage's C W CWL 1 Data Center, which used to be next generation data. They were acquired by Vantage in in July last year. And that's one of our main points of presence there down in South Wales. As I say, we acquired it with the or we acquired the footprint, not the data center, with the SYSGROUP PLC acquisition. We occupy about a 100 racks of, of data space in that facility, and it really is a world class fantastic facility that when we show it to prospects and to customers, they can see the kind of facility that it is and really know that their data data is safe, and and housed in a in an environment that is absolutely ideal, for running technology in the cloud.

10:07 So our core service offering is our SYSGROUP platform, very similar to an Azure or an Amazon in terms of its scalability and its flexibility to host complex workloads, and make those available for our customers, and the teams of our customers to be able to access data remotely and in always on twenty four seven, three sixty five uptime basis. But one of the key benefits to us being located in the, in the CWL 1 facility is it's where Microsoft also houses The UK Azure presence. And, you know, sure many of you will have heard, one of the hot topics right now, and has been for some time and will continue to be, is hybrid cloud.

10:58 So SYSGROUP is a specialist in in providing solutions that operate in a hybrid fashion. So we can plug in on prem infrastructure, into the data center as well as being able to connect to the public cloud services such as Microsoft Azure and and Amazon's AWS service. But with the Azure capability, we can connect really, really easily through, an internal interconnect within the same building, which really reduces network latency and makes the the communication between hybrid platforms almost instantaneous, because there's no public networks to transverse in order for that data to be shared.

11:46 And then coming back to our SYSGROUP platform and the rest of the data centers, so that platform is built on a scalable architecture across three core locations, being in Manchester, London, and Newport in South Wales. And we can operate workloads for our customers, from any of those facilities, and they can build, what we call virtual data centers, and have services operated in each of the three locations should they wish to to bring it as close as possible to the end user connectivity, which I'll talk more about on the next slide. But we really have that great geographical coverage and a 10 gigabits per second, fiber network that connects it all up to make the access to data real time.

12:38 So if I come on to the the network capability that SYSGROUP has, we obviously acquired Hub Network Services, back in 2019, which again expanded our national footprint in terms of our physical connectivity reach. So again, it's concentrated on three core locations to give us that geographical diversity across Manchester, London, and, again, Newport in South Wales. And then in each of those locations,

13:09 you'll see from the right hand side the the nice colorful big long list of names there is all the different tier one and tier two carriers that we interconnect with. And the purpose of that is so that we can bring connectivity to our customers' sites, be it their head offices, satellite offices, or remote offices, and we can connect them in quite easily by using local points of presence, what we call local pops. And that's really bringing the data as close to the edge as possible to make that real time, interaction as fast as possible and give access to the data center, without too much of the public Internet becoming involved. So this really is, you know, it's a vast network.

13:58 It's really beneficial for our customers, for us to be able to connect their sites, pretty much anywhere in The UK with with relative ease.

14:11 And then just moving on to, cover once again our service portfolio. So we we break our service offering down into seven core areas. You know, forgive me. I know this is a a really, really busy slide, but the intention is to demonstrate the breadth and depth of services that SYSGROUP can offer. And this is what we've managed to build up along the way with the acquisitions and why we've made the strategic acquisitions that we've made in order to make us into that true end to end managed IT services provider. So, you know, typical customer engagement will start with a professional services piece of work. It's amazing how many companies don't actually understand the IT that they they've got already. They've built it up over a number of years.

15:03 They know it just kind of works, but they don't know how it hangs together. So we put our professional services team, into a customer or into a prospect to really help them understand what their IT looks like. And then from from the back of that kind of engagement, we produce a document, which we know as a tech workshop, which then evolves to to kinda give a digital transformation journey to our customers in a in a kinda traffic light fashion, which will give a number of recommendations of where customers can buy services from each of the other arms of the service portfolio that we offer, that takes them on that digital transformation journey and brings their IT into the twenty first century and moves the majority of the IT workloads either into the data center or into the public cloud where our teams will then look after that service for you.

16:03 And the the customer no no longer needs to worry about keeping the lights on. They then have the ability to use their IT skills in house to sell their own products and services better through the use of technology. So it really is a vast offering that we've got. There isn't much, that we can't do for our customers now, with the acquisitions that we've made along the way and and the breadth and depth of services that we've acquired. So, you know, SYSGROUP really is a true end to end managed IT service provider right from connectivity through to end user support and managing everything that sits in the middle along with data center services, security, Doctor, and backup.

16:47 So just in terms of our, oh, sorry. We've killed the slides. Let's get that back. Thanks, Mark. Just in terms of our sales and marketing strategy, so we are, as I said earlier, focused on The UK mid market. That's where we see the largest opportunity for SYSGROUP, both currently and moving forward. And look, we're not a business that is vertical focused, although we do have quite a lot of demonstrated success and some great customer case studies, in the verticals that you see listed in in the top left hand corner there, being retail, financial services, insurance, legal, and manufacturing.

17:38 And when you've got demonstrated success with a customer in an existing vertical, it it makes it that little bit easier to prospect the next business, the next target in that sector when you can tell somebody that you're already doing it for one of their competitor competitors and that you're doing it well. It really helps the sales journey and the sales life cycle to get in and be able to talk to those people to help take their services on board as well. So, you know, I I mentioned earlier, we look for typical deployment sizes kind of from 300 users right up to a thousand users. That's our our real sweet spot. We can deploy infrastructure almost at the touch of a button very, very simplistically without much investment needed to spin up services for businesses of that size.

18:36 But we also love to play in the enterprise space as well because that's where bigger ticket contracts come from. Although, obviously, as you can see from the graph, the opportunity starts to decline as you move into enterprise because there's there's not as many of them as sits in the mid market. And we've stated previously in the past that and we'll continue on with this strategy. We don't really play in the SMB space Once it starts to get below a 100 users, contracts are a lot more difficult to deliver because those businesses are a lot needier. They tend not to have anyone that's IT literate within the business. And whilst you're charging the same kind of prices to deliver those services, they're not as profitable to our organization because they lean on us much, much more.

19:25 And businesses that sit below that SMB set space are better suited to sort of smaller local local companies. And in terms of our marketing strategy, you you know, I say it all the time, there's no there's no secret formula or magic wand that can be waived in order to drive demand into this business. We we invest significantly into our marketing strategy. Excuse me. And we need to have multiple touch points that are working together in a coherent fashion consistently in order to generate demand. So, you know, we employ a demand generation team. We invest heavily into digital marketing and SEO. We actively work on campaigns all of the time, and that's supported quite heavily by our vendor partners.

20:17 So we work a lot with the vendors such as Dell and WatchGuard and Mimecast. We'll we'll go out with with joint campaigns with both of our logos on there, which again is a really solid thing to do. It shows solidarity to the prospect. And we target customers or prospects to become customers by using all these different means in our in our marketing department. And those of you that will follow us on social media and LinkedIn and whatnot, you will see that we're very, very active, all of the time about posting white papers, current topics that, exist within the IT space, such as cyber threats, to get the engagement from people so our salespeople can be plugged in to then start warming those leads up through into contracted sales.

21:06 And the targets that we we we like to prospect are are the c suite within business. We like to get involved at the top so the c suite knows that we are a trusted managed IT service provider, and the information that we present to them can be used at board level to help them with their own digital transformation journeys. And as you can see, from the table in the bottom right hand corner, we tend to tailor, the information that we send to each of those roles for their roles and based on the the key areas, that their roles are responsible for within the business. So when we're talking to a CFO about IT, CFO typically owns risk within the business, and their job is to manage risk.

21:54 So by highlighting risks within the IT platforms that they operate, that usually gets the CFO tuned in and wanting to talk more. So, if I come on to the f y twenty one period, I'll just give a quick highlight reflection, on what we've managed to achieve in a full twelve months under government restrictions. Whilst we're seven percent down on revenue from the previous period, I think the team has done a fantastic job, to help us deliver 18,100,000 in revenue. I think it also is testament to the fact that we are a business that is largely underpinned by contracted recurring income.

22:42 And we've done a a great job keeping those customers on board and spending with us and continuing to support them throughout the pandemic, which in turn has helped us generate a higher adjusted EBITDA profit, which is 4% up on the prior period at 2,900,000.

23:00 So, you know, a fantastic job that the team has done, and we're really, really proud of them. We've managed to resign our largest customer, during the pandemic. That was back in in March this year. That contract accounts for 5.5 of our managed services recurring revenue. That's not revenue as a whole. That's just the managed services piece, but a pretty significant contract. And, we're drawing out the renewal because I think it really helps support the piece that our services are more relevant than ever before. People need IT in order to transact business, and I think the pandemic has really, really helped bring IT services to the fore, especially managed IT services.

23:49 Project fusion, I'll let Martin talk a little bit more about that later. He's been leading that project and done a fantastic job for us throughout the last twelve months. Phase one and phase two of that project is complete. And just as a quick reminder, project fusion is the amalgamation of all of our business systems onto a single pane of glass as a result of all of the different business systems that we've acquired along the way as we've made the acquisitions. But as I say, Martin will talk more

24:18 about that a bit later. And, actually, the twelve month period on the lockdown, we've used it really, really wisely to complete the integration of the acquired businesses, more lastly, the H and S and SYSGROUP business. So those businesses are now fully integrated into SYSGROUP in terms of rebranding, customer management, even as far as the offices that came with them, have been rebranded into SYSGROUP as well. And we've actually done the hive ups of those businesses as well. So from a corporate point of standpoint, we've tidied up our corporate structure. And at the end of the financial year, we hired up all of the trade and assets of both HNS and SYSGROUP technology group into our main SYSGROUP trading entity.

25:08 So that's the highlights. I'm going to hand over to Martin now to take us through the numbers, and detail on the performance. Martin, over to you. So we've just got a few slides here, which I'll run through the FY 'twenty one results for you. So just in terms of highlights, as Adam has mentioned, we have gone down on revenue, as Adam has mentioned, we have 7% decline. And we'll talk about revenue in a little bit more detail on the next slide. I think the the key things to draw out here is

25:39 we're going to increase profitability, and we're very pleased to to be able to announce that in terms of that progression. So you can see from here, our increase in profitability is at adjusted EBITDA level. So against FY 2020, we've got up from 2.8 to 2.9. You can see from the graph that we've actually progressed EBITDA over the last four years consistently. And obviously, this is part of the SYSGROUP strategy. We want to grow. As you've seen on previous slide, we're looking to get up to $100,000,000 market cap. So that will both be acquisition clearly and organic. But in terms of profitability as well, it's not just adjusted EBITDA. We've got progressive growth on adjusted PBT, on statutory PBT, and we've got growth on profit after tax as well, which is very pleasing to see this year. And again, making obvious point, that's in a year where we've had twelve months fully of the pandemic challenge.

26:39 Just in terms of so just to mention back around. Just some of the byproducts of the profitability is you same thing. Question. So think that's because I think if there's a another element, which I think is quite key to draw out this year as well as the profitability is really quite strong net cash and balance sheet position we've got. So I'll talk about that in a little bit. So I'll just move you to the income statement. This again, for for people who need SYSGROUP, I would describe our income statement as as fairly straightforward to understand. There's there's not many strange or complex things going on in here.

27:28 Revenue constant revenue. If you if you look at our full announcement, you'll see that we have two times of revenue. We have managed services and we have value added resell. And managed services are typically services that we build to customers on a monthly basis ahead of the service delivery. And these are typically three year contracts, they have twelve month automated extensions at the end of them. So very sticky, and we have good long term customer relationships through through these lines. In the the value added resell is more for IT equipment. So what we found over over a number of years is that our customers as well as wanting us to provide, if you like, a con continual delivery of IT support, backup, hosting, etcetera. They also want us to procure their equipment and license sales.

28:21 So value added resell makes up the other element of revenue. Our target business model is 75% managed IT services and 25% value added resale. So in FY '21, we've achieved 7921%, which is therefore slightly ahead of what we wanted. And in terms of gross margin, managed services is typically a high gross margin of around 60% as opposed to value added resell, which typically comes in 20% to 25. But mostly a a good revenues to have. We want both of them, but we want it within that target model. I'll just mention a couple of things about the the revenue decline. I think it's it's important that you that you know that. So in terms of managed services, so what we found over the last year was that we did have some customers that clearly had some difficulties themselves where they took the opportunity to downsize some of their contracts with us.

29:20 And obviously, have their own pressures that they're having to deal with. And in terms of value added resale, particularly in q one and q two of FY 2021, so this is going back quite a long way in terms of when COVID was first breaking out and lockdown started. A lot of companies were clearly trying to preserve their cash position. Now H2 in value added resell did improve, which we're pleased to see, But we're still cautious on value added resell going forward. We still think we're under some lockdown conditions, and it's not entirely clear how much customers do want to unlock that spend at this time. In terms of overhead control, we've had a very strong year in this area. It's also been very important to control these costs.

30:12 One thing that's been really pleasing for us to see is we've the last acquisitions we made in 2019, we made the transformational acquisition of SYSGROUP and we also added a connectivity company called HNS. And we've seen those acquisition synergies come through in FY twenty twenty one. And how they've come through is in is in headcount. So we the headcount is lowered throughout the year, and that's been done in in a managed way. So I'd say we've we've got no head base now going into FY twenty two, which is is currently sized against the the revenue and the the size we are. We have had a little bit of travel benefit as as you'd imagine. We have been moving around lots in in the last twelve months. So we would we we actually want travel clearly to come back in. If if we've got travel costs going up, that actually means we've got salespeople on the road, meeting customers, which would be a good thing. So we're expecting that to come back in f y twenty two.

31:10 We have some capitalization of project team related time on project fusion. And I'll talk a little bit more about project fusion, I think, on the cash flow slide, and I'll explain that a little bit in more detail. We've now well, we've been very pleased to say we've been fully operational throughout FY '21, so we've not furloughed any employees. Everyone's been working from home as as many other companies have been, But we've not used any government assistance in any way, and there's no one off government assistance credits in in the single statement. In terms of exceptional items, you can see that that's come down quite significantly. In the prior year, have the acquisitions. So that's what the the larger exceptional costs were.

31:58 This year, we we closed the first Just bear with me. Yeah. A legacy HMS office. So we closed the office and vacates that early. And we've also had some early employee departures from the integration of senior leadership team. I will mention share based payments mainly because the cost of share based payments this year did include what what can be perceived as a one off cost linked to the vesting of some LTIP options in July. In terms of FY 'twenty two and going forward, we expect that to be lower by a couple of 100,000. Tax is very well managed. We do have an underlying current tax charge, so we will be paying tax terms of cash flow view. The reason why we have a credit is we have deferred tax movements that that are on the credit side for amortization, intangibles, and share based payments.

32:56 That said, we've got about the most efficient tax number we can have. And in terms of Project Fusion, we have used the R and D tax regime to make those claims as well. So I think tax is in a pretty good position.

33:10 In terms of the balance sheet in old language, we this is a strong balance sheet. You can see that cash has gone up from last year. We've been very strongly cash generative in FY 2021, which is good to see. Kind of contrary to what what you might think is the intuition of the pandemic where you might have thought that cash collections would prove more difficult, we've we've actually had probably the best cash collection year we've had. We haven't done anything differently. We've got a credit control team that do a very good job. We've not had bad debts. We've we've simply had good customers. We've actually got customer base is is very diverse. So in terms of industry sectors, we have 10% to 11% in financial services.

33:58 We have 10 to 11% in IT. Our exposure to the sectors that have been more affected, like travel, leisure, hospitality, we that's around 6%. But even so, those customers in those sectors have have been good payers throughout the year. So we're grateful for that. So in terms of supply side, payments, no no change at all in terms of how we pay pay suppliers. We pay everybody every month. We've not stretched anything. We we took the opportunity of deferring our q one VAT payment early on in the year when the when the government gave us the option to do that. But we actually paid that in full in December 2020, so that's fully fully paid back. We've not had any government support loans. We haven't need to take any.

34:47 Bank loans have been repaid throughout the year on on a quarterly basis, And we do have significant headroom on all our covenant ratios, which is good to see. Just in the I will mention one thing, which you may have seen anywhere on RNS is we had a share buyback transaction in December. We just took the opportunity to buy some shares back for company ownership as treasury shares, and they'll be used in the future to settle EMI share options, so a sensible use of money. And we're just moving to cash flow. So this is quite a strong position for the company. Our target cash conversion is 80 to 90%. You can see here that we achieved a 95% cash conversion in the year, so slightly ahead.

35:35 So this is this is a really good result for us. It's allowed us to achieve at the end of FY twenty twenty one net cash position, which you can see the bottom right corner is is 1,900,000. So that's moved up from the 69,000 net debt at the end of last year. So this this really is is a strong position for for the company. In terms of certain items within that cash flow, just to pick out, CapEx is which is the normal PPE. Quite naturally, that's lower than usual. We've said we've been working on post, so we don't really have much to invest in in terms of what we do. The the intangible assets cash flow, that is for project fusion. So that's a mix of third party implementation partner supply costs as well as some internal projects in costs.

36:27 Project fusion, I'll mention it here because Adam Adam highlighted it earlier, is it's been a very, very important project for us. This is so we've had legacy acquisitions. So we've had duplicate CRMs, duplicate marketing, duplicate service desk ticketing systems. What we've now got is is one single platform of CRM, billing, marketing, service desk, project management, people, all in one platform. When I say one platform, I don't mean different systems interconnected, but that is literally under one new system, cloud based system. So that's a huge efficiency for business.

37:12 It's an efficiency insofar as it allows our people to service customers better and more efficiently. There's also a financial efficiency in as far as we've been able to retire quite a lot of old legacy systems and combine it under one. The project fusion will continue into FY twenty two. And key things we're having in FY twenty two is reporting BI. We've got a a little bit more on the people side of the system, and also we can look at our financial account system just to get that on spec. Once all of that is done, that is really putting us on a platform for the the full growth and scale up that we we that we want to do. The acquisitions, we we've paid out the SYSGROUP earn outs in full early financial year. So that was after SYSGROUP we bought in February 19 fully achieved their earn out. So that's we're really pleased with that performance.

38:11 The earn out payment has been made, and we've got no contingent consideration left in our balance sheet. So overall, good good position. We're cash generative. Cash is going up. We'd expect net cash to go up throughout FY 'twenty two. We also have an undrawn bank facility for acquisitions of $3,250,000 So in terms of our ability at this stage into smaller level acquisitions, you've actually to do that as we stand here today. So I think going into FY 'twenty two as we are, we're in a good healthy financial position. And in terms of coming out of the pandemic world, and I think we're all trying to judge how we're coming out, we're in a good position to to take advantage of the market as as it recovers.

39:04 Thank you. Very good. Just one question that has come in that'd be appropriate to answer now. You might not have the answer available, but I'll ask you anyway because it makes sense to do it now. Can we guide, to what the capitalization will be on fusion in 2022 period? We got a forecast on it? Yeah. I'd I'd I'd expect around 200 k on fusion Okay. In f y twenty two. Yeah. Good. Hopefully, that answers the question. Thanks very much, Malcolm. Cheers. So, yeah, moving on beyond the pandemic, whenever that may be, hopefully sooner rather than later because I'm I'm sure, like me, many of you on this call are fed up with it now. One of the most important things that we, we did in in early this year was we announced our 2021 return to the office program.

40:01 So as I'm sure many of you will remember, we consistently kept our offices closed from the 03/13/2020, even when the government guided back in August last year, that it was safe to go back to the office and, buy a coffee from your local local coffee shop to to help restart the economy, we maintained a position of keeping everything closed in order to maintain stability for our teams. But following the successful, rollout of the vaccine in, The UK, certainly, we thought it was important for us as a business to make our office space available for people, our team members to utilize once again, because I don't think we should downplay the fact that it's really important for people to come together to innovate and and collaborate.

40:59 You know, I'm sure many of us and many tech leaders came out, early on in the pandemic to say, we'll never go to offices again, and everybody will home work. And I I think that was the novelty factor. I too was was guilty of that and wondering whether we would need offices moving forward. But, actually, as you move throughout the course of the pandemic and and you start to understand the impacts of it, it's absolutely essential for businesses to continue to have hopes for people to come, and get together, and as I say, innovate and collaborate. So May 24, this year, we we made the offices available, albeit on a downsized footprint.

41:46 People can book desks. They need to fill in, health declarations and take COVID tests so that we can limit the spread and the potential risk as much as possible to our business. But it is great to see that we've got people coming back into the office and once again interacting and collaborating all to help towards the future success of our business. One of other things, we took the opportunity to refurb the Newport office. So we we we spent some money doing that place up. So that was the the building that we acquired with the SYSGROUP PLC acquisition. The place had been very heavily underinvested, and it was only when Martin and I visited, earlier this year, and the place was completely empty that you could really see that it was it was dated and it was tired.

42:40 So we spent some cash. We've ripped the place out. We we've we've made it a SYSGROUP home. We've got the SYSGROUP values everywhere, the SYSGROUP branding, and we've made it the SYSGROUP way. Actually, when we do get that full return to the office, whenever that may be, it will be a fantastic place for our our team members to come back and work. And, you know, again, it's something else that's not to be underestimated. If you provide a fantastic working environment for your team to come and work in, they tend to want to spend longer there. They want to be there. They don't wanna be they're not in a rush to get home at 05:00. It's just really important that we keep the offices up to date and modern and a really great place to work.

43:30 Now I mentioned very early on to start this presentation that we've made a bit of a bold move, and we've opened a new office, during lockdown. So we decided that we were going to open an office in Central Manchester. And the reasons for doing so, is one of the things that we've never had as a northern presence, in this business is a real sales and marketing hub where we can drive the energy that sales and marketing teams are used to, kind of that high pressure sales environment, with the the targets on wall boards and whatnot and the real collaboration between sales and marketing on campaign driven We've never really had that, so we we decided to do it in Manchester.

44:20 And you may ask, well, you know, why would you spend more money on another office when you've got one thirty miles down the road in Liverpool? But the answer to that is four of our largest competitors are based up here in Manchester, and we wanna be able to attract some of their world class talent from them, and bring those guys on board into SYSGROUP. So we we've built this brilliant office here. It's got real flexible ways of working. You know, it's not just an office with desks. We expect when people come here, they will see the place, and they really will want want to work here. You know, we've got a lounge area with with big screens that you can share your screen too so people can collaborate and innovate together.

45:09 So, you know, it's not gonna happen overnight. We only got the keys three or four weeks ago, I would say, Martin. We're recruiting people to come into this office at the moment. Some of the key hires have been made already, and we'll take up office in in July this year. And then we'll start to re recruit the workforce that's gonna come in here. But I think over the next twelve months, we'll put about eight to eight to 10 heads in this office, purely sales and marketing focused, and that will really start to help in future periods was drive that top line organic growth as we concentrate on campaign driven sales activity. So it's a really good move for us. You know, it's not a huge gamble. It's not cost us a great deal of money to do it. I'm sure you can imagine taking a lease on a building during a pandemic when everybody's moving out of office space is actually a lot cheaper than what you think it would be, on the normal market conditions.

46:09 So we've kinda seized the opportunity. And I think in twelve months' time, people that wait till it's safer to do so will be behind the curve. And I'm expecting with the move that we've made here at SYSGROUP, we should be ahead of the curve and and ready to prosecute that market opportunity as and when confidence is restored in the in the wider market space and people are ready to spend on IT again. So, you know, that plays on into the point that I'm talking about on focusing on hiring world class talent. We're all about employing the best here. This is why we build these fantastic offices, and we make them great places where where people want to come to work. As I say, you know, office working has been off the cards for the last twelve, thirteen months.

47:02 But as I say, we're slowly reintroducing that into our workforce, and people are taking us up on the ability to be able to come back to the office and have that social life that people have at work once again. And as more and more companies start to do that, I think we'll start to see more and more activity drive forward in the market. So look, in summary, f y twenty one, whilst it's been a tough year for everybody, not just SYSGROUP, I think our team has done a fantastic job, and demonstrated our resilience, certainly to the pandemic with a turnout of 18,100,000. I mean, I'm more than delighted with it. I've spoke to a number of the institutions over the last twenty four hours who are really, really pleased with the performance of the business. And, again, the increased adjusted EBITDA of 2,910,000 really demonstrating, the synergies that can come through from acquisitions once we've made them and fully integrated them.

48:05 And, you know, as I always say, the proof is in the pudding with 95% operational cash conversion. You know, plenty of people can deliver a big EBITDA adjusted EBITDA number, but whether that turns into cash or not is a different matter. But we're really demonstrating that with the huge increase in our cash balance and actually moving from a net debt position to a significant net cash position. I think the business is really demonstrating its resilience throughout COVID and what it's capable of delivering in the future as market conditions return. So, you know, that lead leads into we've got a robust business model. I think our products and services are really, really relevant. And as we move out of the pandemic, an IT spend becomes a huge agenda item on on the agendas of most board meetings for most businesses, Managed IT services will will really, come to fruition and should start to accelerate as that confidence returns.

49:10 As I say, Martin and his team have done a fantastic job with getting phases one and two of project fusion delivered. Again, that's really enhanced our capabilities to make future acquisitions and integrate them with relative ease. We've got that platform now that is ready to be built upon, and we can migrate customer bases and the ancillary services that go along with them into our own single pane of glass system, which gives us great visibility of the business and and really helps us identify sales opportunity moving forward. You know, it's really important that we state whilst we've not made an acquisition for two years now, strategic acquisitions are still 100% part of our stated strategy, and we will continue to make acquisitions.

50:00 But the key to note there is we will continue to make the right acquisitions. I think I said earlier on in the presentation, there is a a number of businesses that we looked at throughout the the period of lockdown, but they just weren't the right deals for us to do. And shareholders certainly wouldn't affect us for doing them. So we've remained well disciplined on our acquisition strategy. We've not done a deal for doing a deal's sake, and we won't do. But we will continue to work hard in order to find quality assets and bring them into, the SYSGROUP family. So that concludes the presentation, and I think we can move on to q and a. That's brilliant. Adam, Martin, thank you once again for updating investors. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. I just want the company to take a few moments to review investor questions submitted already. I'd like to remind you that we're recording this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected for the opportunity to provide your feedback.

51:09 Adam, Martin, obviously, investors had the ability to pre submit question. We received three, so perhaps we could start off the Q and A with those. The first one reads as follows: Can you describe the sales process from a client being interested to a client being onboarded and invoiced and the typical time frames involved? Yeah. Sure. Thanks, Mark. So, I'll take that one. Could be quite a wide answer. All depends on on the size of the engagement, and what we'll be delivering for the customer. So typical sales life cycle used to be three to six months. It's more like six to nine now. On what would be a true managed services deal, we're we're we're gonna be providing the connectivity.

51:57 We're gonna be doing a migration to the data center. We're gonna be taking over the Office three six five platform. We're gonna be looking after the security. There is an a number of stages to go through there, in order to gain commitment. But if you go for something maybe a bit smaller where people are just looking for, let's say, some managed hosting in the data center, typical sales life cycle from introduction, through to invoice would typically be about three months. That's great. Thank you very much indeed. The next question we received reads as follows. The customer engagement survey, which was detailed in the 2020 annual report, suggested that you were going to dig deeper to determine levels of customer satisfaction.

52:44 What areas of improvement did you find, and has this now been implemented? Yeah. Okay. So it's a it's a good question, and it was all about building on our our customer satisfaction. So as I said back at the start of the presentation, you know, our our KPI is a minimum of 97% customer satisfaction, which we consistently, have beaten, in the last twelve months, which is great for us. But we did start to talk to the customers in in more detail, about what we can do better and what we can do more of. However, we've actually not got the results back from it that we would like. And what I mean by that, I don't mean that we got a lot of bad results. I mean, we've not got the engagement that we wanted.

53:31 People have been so focused on running their own businesses in the pandemic. They've not really had time to give survey feedback and really interact with us. But one of the things that we did get pretty early on is around account management and how different levels of account management would work better for our customers. And people wanted more of a single point of contact within the business, which doesn't always work in managed services, because there's lots of different, touch points within a customer. And we need lots of different skill sets within our own business to manage our customers. But one of the things that we have ramped up as a result of the early very early findings, and it's gonna take some time, and it's a continuing process that we're running through, is we've ramped up more strategic account management into the into the customer base.

54:27 That's great. Thank you, Adam. I think you've touched on this in the presentation. So if there is anything to add, please feel free. The question reads as follows: Can you provide an update on the project to consolidate the legacy network assets and the expected operational cost synergies? Perhaps if there's anything you can add to that. A follow on some from something that we I think we said back at the full year last year, we were we were looking to embark upon a project of integrating the physical network assets within our data centers for largely what consisted around the whole network services and network footprint. That project has been delayed in its entirety, purely because we can't get into data centers.

55:12 We can only send people into data centers still to this day, for what we call priority one service issues. So it's it's technically impossible to embark upon that project. And until we come out of, lockdown and the data center providers are prepared to let us in on a more ad hoc basis, we can't even start on that project. Thanks ever so much, Adam. Well, look, that takes care of those questions that pre submitted. If I could ask you just to open up the Q and A tab on the right hand corner of your screen, you'll see that there's a number of questions that are in there from investors. If I could ask you, please, if you wouldn't mind reading out the questions and, where appropriate, giving a response, and I'll pick up from you at the end. Yes. Sure. Thanks, Mark. So the first one we've got in here, have there been any changes in key people during the year? Yeah. We have. We've made a couple of changes to the senior leadership team as part of the, integration of, the businesses.

56:08 So, obviously, every time you buy a business, you get a a a new senior leadership team with it, and you you can't always accommodate everybody. Probably one of the the biggest changes we've made is around the the marketing strategy of the business. We've put a new head of marketing in place. We've amalgamated two roles certainly into one around presales and consultancy. That's come into one one role on the senior leadership team, and we also brought in a new CTO in January of this year, I think. That's probably about it in terms of key changes. Yeah. So the next one, as we come out of COVID, what is the plan with regards to m and a?

56:57 I guess this will be a key driver to your strategy of getting to a 100,000,000 market cap. What areas are are key? What size of transaction, and are are there any new territories you would like to be in? There's definitely five or six questions in one, so I'll I'll do my best. Look. M and a, as I said earlier, is still very much part of the, stated strategy. Absolutely, is a key part of getting us to the £100,000,000 market cap. In terms of size of deal, it's difficult for me to say. You know, it depends what's out there. We're not frightened to make big transformational deals. We've done it in the past. We did it with SYSGROUP. We doubled the size of the business overnight.

57:43 But we're also very much up for doing strategic bolt on acquisitions that we can very easily finance finance with the existing firepower that we've got. In terms of territories, you could almost argue territories don't really matter anymore. You can support anybody from anywhere. We've demonstrated that over the last twelve months. But I suppose it's obvious we don't have a presence in in the Northeast or or in Scotland. You know, whether there's any targets available for us to acquire in those regions, we'll have to wait and see as as time goes on. So, hopefully, that, that covers that question. I think I think it's might as well link it to, Bob Elle's question as well, just a bit further down. So I think Bob Elle is asking about, can you please give us details of your acquisition strategy? Does it require a strong share price? To what extent are you considering debt to finance acquisitions?

58:38 How do you funding options impact the size of acquisitions that you are targeting? So one one simple answer to that is we we will consider debt in terms of funding for acquisitions. This is obviously linked to what size of acquisition we're looking at. So you've probably seen from the slides already that for for bolt on acquisition, we've got an undrawn debt facility available and we've got existing cash. So to some extent, we've got the ability to do small a small acquisition. But if there was something larger, would we consider that funding? Yeah. Absolutely. But our Martin Adams attitude to to that is we don't wanna go racy and and go into thing on headroom on on leverage. We'll we'll keep it sensible within within the leverage to what we think we can manage. Yeah. The max source of leverage that in in a capital markets business of this size is one and a half times, EBITDA.

59:34 You you wouldn't wanna start to leverage more than that, if you still wanna be able to put your head on the pillow at night. But, yeah, debt is we we've easily got the capability to to service some debt. You know, as you can see, we're in a a net cash position. So, yeah, we we can finance deals through debt and and through equity if needs be. Interesting question from from Neil. I don't think at the h one figures, there was an expectation of an 11% decline in managed IT services for the second half of the year. What sectors of yours have been affected most? Have you experienced any increase in competition?

1:00:20 Or have companies been taking functions in house? Has the Salesforce now been able to get out on the road? So, you know, I'm not sure about the 11% figure. I'm not sure how you've calculated that, but I think one of the things that wasn't expected at the second half or certainly when we announced the second half results was another full blown lockdown. We back at that point in November, I think if you remember, we were in a tier system, and the government was tackling the COVID pandemic by means of, more localized lockdowns, which were more a lockdown was the closing of bars and restaurants as opposed to let's close everything and stay indoors.

1:01:05 So, you know, moving into January, mobilizing our sales team was was impossible. People meeting was impossible. You're back to the the the Microsoft Teams and and Zoom methods of meeting people, that everybody is now extremely fatigued with. And, again, to, you know, come on to the point about all the sale is the Salesforce now out on the road? No. It's not. The Salesforce is far from out on the road, purely because we've got a primary responsibility to keep our people safe, and protected from COVID, and we as a business have got to do our bit, to ensure, you know, number cases arising again, that that we don't become part of the problem, until the vaccination program is fully fully in in effect.

1:01:57 And the government guidance is to, get people out and and and to meet again in a business setting, which currently it isn't. We're actually a little bit ahead of the government guidance with making our own offices available, but we've done that in such a fashion whereby we're using a bubble, and we're testing everybody, and we're using health declarations to keep people safe. As much as we'd love to mobilize the Salesforce and as much as the Salesforce would like to be mobilized, it's just not possible to do it at the moment, and people don't want you turning up at their offices. You know, the odd one to one meeting between senior people might be happening. But I think in terms of general workforce, if we were a business that was seen to, be promoting such activity right now, I don't think that'd go down too well for us at all.

1:02:48 In terms of the sectors that have been most affected, I don't think we we've seen it in in anything specific. There's no specific sector. Yeah. I mean, we can talk about customers that have been affected themselves, but that's within that 6% of of the travel hospitality and leisure. So we've got some smaller hotels and and a couple of gyms, but they're coming out now, and they've paid throughout with a little bit of financial support along the way, but they've come out the other side of that and paid their way. So no no no particular sector or no particular pain. Yeah. Okay. So, look, I'm conscious of time. I'm gonna take one more, from David. Can you guide more specifically on the overhead increase attached to the sales and marketing push, e g lease, and new bodies, etcetera.

1:03:39 I mean, look, I I alluded to it earlier on. It's not costing a huge amount of money. As I said, leased space is, leased office space is is cheap at the moment. I'm I'm not gonna go into the details of of what that's costing at this stage. But in terms of introducing, new people into into the Salesforce, The twelve month cost, full fully fully complement complemented, will be around about 220,225,000 a year. But you gotta bear in mind, that's gonna come in on a ramp up because you're not gonna hire everybody on day one. They're not all gonna come in in this financial year, and you'll actually start to get people to pay for themselves before you bring others in.

1:04:29 So, you know, it's not like we're we're trying to to sink the EBITDA of the business into an idea that might not pay off for us. We're we're investing very, very sensibly into a a project that if it works out well for us, will pay huge dividends. So I hope that answers your question. I think that's all we've got time for. Adam, thank you very much indeed, and and thank you to all the investors also that have taken the time to submit the questions both ahead of today's event and during the event. And any questions that we haven't got around to, I'll make available, obviously, to the company afterwards. Adam, Martin, know investor feedback is important, so I'll shortly redirect investors to provide you feedback. But perhaps I could just hand back to you for a few closing comments, before doing so. Yeah. I'd just like to take the time to, thank everybody for taking their time to come and join us and and listen to us once again, and we look forward to speaking to you again at the half year.

1:05:23 Stay safe. Thanks very much indeed both to, to Adam and to Martin. Could I please ask investors not to close this session? It should now be automatically redirected for the opportunity to provide feedback in order that the management team 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'd like to thank you for attending today's presentation. That now concludes today's session, and good morning to you all.