Sysgroup's revenue leaps after marketing investment

Sysgroup swung to an interim loss on Monday after investment in marketing outweighed an increase in first half revenue.

For the six-month period ended 30 September the IT services outfit’s revenue jumped to £5.8m, up 47.3% on the same period last year, with losses before tax of £0.4m as opposed to the £0.1m interim profit achieved last year.

The swing to a loss occurred as the AIM traded company booked a 42.9% increase in cost of sales to £2.2m and a 68.3% jump in administrative expenses to £3.9m due to the addition of the Rockford IT business and increased investment in sales, marketing and group support functions.

Recurring managed IT services made up 77.8% of revenue, up from 72.8%.

Adam Binks, chief executive of Sysgroup, said: "We have focussed on execution and I am pleased to report that the group has made steady progress in the first half of the year during my first period as CEO. The increasing proportion of recurring revenue demonstrates the ongoing success of our strategy and position as a consultative led provider of managed IT services and cloud hosting."

Sysgroup had cash and cash equivalents of £1.2m at 30 September, down from £2.7m at the same point last year.

For the immediate future, the company reported a strong pipeline of opportunities and argued that its focus on the UK market should provide “a level of resilience” against the current environment and political uncertainty ahead of Brexit.

"We have continued to invest in our business, our people, our brand and in systems and as a result have a more sales focused workforce all working towards the same common goals. We are beginning to see the results of this investment through a strengthened pipeline and remain confident in delivering full year performance in line with current market expectations," said Binks.

Sysgroup’s shares were up 2.41% at 42.50p at 0856 GMT.