SysGroup shows transformation progress in H1

SysGroup has shared half-year numbers, lifting the lid of its transformation efforts, but warned that the firm still has more work to do.

Following the financial update, the managed service player’s share price tumbled this morning, with indications that full-year numbers will be in line with expectations, which it had previously warned would be down year on year.

Headline numbers showed that revenue for the six months to 30 September 2024 was only slightly down, coming in at £10.16m, compared with £10.96m last year. Adjusted earnings before interest, taxes, depreciation and amortisation dropped to £440,000 from £1.57m.

During its fiscal first half, the channel player has been shifting towards “growth-oriented accounts” that are more aligned with its core service offerings. Managed service revenues increased in the six months to account for 84% of total revenue.

SysGroup also used the first six months of its financial year to invest in technical capabilities to ensure it could support customers across both Amazon Web Services (AWS) and Microsoft Azure cloud environments. The business also bolstered its research and development capabilities with access to expertise in India and eastern Europe.

Other highlights included the business gaining AWS Advanced Tier Service Partners status (Level 3), being approved as one of only two UK Zscaler Managed Security Service Partners and being promoted to CyberArk’s Advanced Partner top tier partner status.

Last month, the firm moved to bolster its security capabilities further by acquiring the trade and assets of Crossword Consulting.

In the summer, the firm indicated that it recognised the potential of artificial intelligence (AI) and was investing in that area.

Heejae Chae, executive chair of SysGroup, said the business had been making significant changes to improve its long-term prospects.

“The past six months have been the most transformative and pivotal period for the group. The equity raised in June [£11.2m by way of an oversubscribed equity placing] provided us with a robust financial foundation enabling strategic investments in the technology and capabilities necessary to accelerate our mission of becoming the partner of choice for small and medium-sized businesses on their data journey,” he said.

“We have successfully developed five technology towers, including comprehensive cloud solutions across AWS and Azure,” added Chae.

“We have made significant progress in our transformation journey, addressing legacy challenges and establishing a strong foundation for sustainable growth. By re-earning customer trust, we have secured major transformation projects, with managed IT services now accounting for 86% of our revenues, up from 84% last year, further strengthening our financial stability,” he said.

The first-half update indicated that although the business had made positive strides in moving to high-growth accounts, it still relied on a few high-value projects, which meant it was vulnerable to market conditions that produced longer sale cycles.

Chae’s comments on the second half were relatively upbeat given the expectations, and drew investor attention to the efforts being made to secure a more positive long-term outlook.

“Our pipeline remains strong and well-positioned for further growth as our brand awareness continues to expand. Additionally, our strong balance sheet has empowered us to execute our growth strategy, including the recent acquisition of Crossword Consulting,” he said.