Sysgroup Regulatory News (SYS)

14 February 2017

SysGroup plc

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

Payment of Deferred Consideration and Issue of Equity

On 10 December 2014 the Group announced the acquisition of Q4Ex Limited ("Q4Ex"), which has since become the Merchant and Distribution division of the Group.

The terms of the acquisition (the "Initial Terms") made provision for deferred and contingent consideration of up to £1,456,000 payable subject to the achievement of certain financial hurdles set (the "Earn-out Consideration"). The Earn-out Consideration comprised three payments being two tranches of up to £520,000 and a further payment of up £416,000, all of which was to be satisfied through the issue of new ordinary shares ("Earn-out Shares"). The Earn-out Shares are to be issued at an effective fixed price of 68p per ordinary share, following the share consolidation completed in July 2016.

The Group has today entered into a deed of variation to the Initial Terms with the vendors of Q4Ex (the "Revised Terms"), which provides the Non-Executive Directors of the Board of SysGroup with the discretion to settle a portion of the Earn-out Consideration in cash at effective fixed price of 59p per Earn-out Share (the "Cash Price"). No other terms were amended.

In February 2016 the vendors of Q4Ex received the £520,000 of Earn-out Shares for the period ended 29 February 2016. Q4Ex has since performed in line with management expectations and has exceeded the financial hurdles set for the second earn-out period to 30 September 2016, triggering the maximum earn-out of £520,000 for the period. The Non-Executive Directors have elected to settle the Earn-out Consideration through the issue of 340,981 Earn-out Shares and the balance through the payment of £250,000 at the Cash Price.

The Board expects, subject to final review, Q4Ex to exceed the financial targets for the period to 31 December 2016, which will trigger a final payment of Earn-out Consideration of £416,000. The Board currently intends to settle Earn-out Consideration through the issue of Earn-out Shares. A further announcement will be made in due course.

Change in Directors' holdings

In light of the issue of the Earn-out Shares, the percentage holdings of the directors of the Group will be as follows:

Notes:

1. The Group's share capital of 22,492,132 ordinary shares of 1p each as enlarged by the 340,981 Earn-out Shares, which are expected to be admitted to trading on AIM on 17 February 2017 ("Enlarged Share Capital").

2. Christopher Evans is a vendor of Q4Ex and received 109,114 Earn-out Shares

3. Representative of Livingbridge VC LLP

Admission to trading and total voting rights

Application has been made to the London Stock Exchange for the Earn-out Shares to be admitted to trading on AIM. Admission is expected to take place on 17 February 2017. The Earn-out Shares will rank pari passu with the existing issued Ordinary Shares.

Following the issue of the Earn-out Shares, the Company will have 22,492,132 Ordinary Shares, with each Ordinary Share carrying the right to one vote. The Company has no Ordinary Shares held in treasury. The total of 22,492,132 Ordinary Shares may therefore be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

About SysGroup

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

The Group has offices in Liverpool, Coventry, London and East Sussex.

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