Sysgroup Regulatory News (SYS)

The information contained within this announcement is deemed by the company to constitute inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of the domestic law of the United Kingdom by virtue of the European Union (Withdrawal) Act 2018 (as amended) ("UK MAR"). Upon the publication of this announcement via the Regulatory Information Service, this inside information is now considered to be in the public domain.

5 April 2022

SysGroup plc

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

Acquisition of Truststream Security Solutions Limited

New Banking Facilities

SysGroup plc (AIM:SYS), the multi award-winning managed IT services, cyber security and cloud hosting provider, is pleased to announce the acquisition of 100% of the issued share capital of Truststream Security Solutions Limited ("Truststream"), a leading provider of managed cyber security services based in Edinburgh ("the Acquisition"). The Acquisition has been funded from the Group's existing cash resources supported by a new revolving credit facility provided by Santander.

Highlights

· Acquisition of Truststream, a fast growing provider of managed cyber security services based in Edinburgh, for an initial cash consideration of £4.8m and a maximum earn out consideration of up to £3.075m over a 24 month period.

o Truststream generated unaudited revenues of £3.2m and EBITDA of £0.8m in the year to 30 September 2021.

· The Acquisition will be funded from the Group's existing cash balance and a new revolving credit facility of £8.0m, further details of which are set out below.

· The Acquisition further enhances SysGroup's service offering and is complementary to the Group's core expertise and key areas of focus. In addition, the Acquisition will enable the Group to further strengthen its UK presence by opening up Scotland as an attractive hub for the Group.

· Recent investments in SysGroup's business systems and infrastructure are expected to enable Truststream to be integrated seamlessly into our single pane of glass business intelligence platform.

· The Acquisition is expected to be immediately earnings enhancing.

Acquisition

Information on Truststream

Established in 2011, Truststream is one of the UK's fastest growing providers of professional and managed cyber security services. The global managed security services market is forecast to grow by a CAGR of 7.9% through to 2027*. Truststream has a strong and growing client base across both the private and public sectors and is one of the UK's leading providers of security transformation services. Its offering covers all aspects of cyber security from analysis and threat detection, through protection architecture and implementation, to incident response and ongoing 24/7 support and training. Truststream has built long term sustainable relationships with key vendors and is identified as a leading partner of choice for market leading vendors by Gartner. Truststream has a number of relevant security accreditations, including ISO 9001 and ISO 27001.

In the year ended 30 September 2021, Truststream generated unaudited revenues of £3.2m (an increase of 61% year-on-year), EBITDA of £0.8m (an increase of 128% year-on-year) and profits before tax of £0.8m. Truststream enjoys high levels of recurring revenue which is supported by solid customer and vendor relationships; in its year ended 30 September 2021, Managed IT services comprised 63% of total revenues. Its net assets at 30 September 2021 were £0.4m.

The Company believes that there are significant cross selling opportunities between the client bases of both SysGroup and Truststream and that the expanded service offering will present an attractive proposition for both existing and prospective clients.

Acquisition terms

SysGroup has agreed to acquire 100% of the issued share capital of Truststream from Paul Sullivan, Bryan Thomson and others on a cash-free debt-free basis for an initial consideration of £4.8m in cash and a further deferred cash earn-out consideration payable following the first and second anniversary of the transaction of up to £3.075m, subject to the achievement of certain maintainable EBITDA performance targets in the first and second 12 month periods following the completion of the acquisition. Paul and Bryan will continue in their current roles as part of the wider SysGroup team for a minimum period of two years.

New Banking Facilities

The Company has re-financed its existing term loan facility of £1.75m and its undrawn acquisition revolving credit facility of £3.25m and replaced both with a new £8.0m revolving credit facility with Santander to provide additional financial flexibility for the Group. The new banking facility has a term of five years with covenants that will be tested quarterly relating to total net debt to Adjusted EBITDA leverage and minimum liquidity. The Group has drawn down £4.5m against the new facility towards the funding of the Truststream Acquisition.

Adam Binks, Chief Executive Officer, commented:

"I am delighted to announce the acquisition of Truststream. The addition of Truststream to the Group further supports our stated strategy to become the leading provider of managed IT services to the UK mid-market. The business strongly complements our existing portfolio of services and has high levels of recurring revenue.

In addition, cyber security remains a key priority for businesses of all sizes as threats become both more prevalent and more harmful. Our end-to-end offering means that we can help companies navigate the forever evolving technological landscape and provide best of breed solutions backed by the highest quality of ongoing security, monitoring and support.

Our investment in the Group's systems and infrastructure over the last few years means that we have the platform in place to be able to scale SysGroup and will continue to identify further complimentary acquisition opportunities in line with our stated strategy.

I'm excited to welcome the Truststream team and look forward to working with them all as part of the enlarged Group."

*Source - "Managed Security Services Market Outlook to 2025: Global Report" by Research and Markets

About SysGroup

SysGroup is a leading provider of managed IT services, cloud hosting, cyber security and expert IT consultancy. The Group delivers solutions that enable clients to benefit from industry leading technologies and delivers managed solutions with security, compliance and governance from the core. SysGroup focuses on a customer's strategic and operational requirements - enabling clients to free up resources, grow their core business and avoid the distractions and complexity of managing IT services.

The Group has offices in Edinburgh, Liverpool, London, Manchester, Newport and Telford.

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