LONDON (Alliance News) - Shares in Scisys PLC are down Thursday morning despite posting a rise in pretax profit in 2014, as it warned that the strength of sterling, uncertainty in public funding ahead of the UK general election and contract deferrals means it expects its performance in 2015 to be flat.
However, Scisys reiterated its longer-term target of double-digit margins by the end of 2018, underpinned by top line growth.
The software systems and services provider posted a pretax profit of GBP3.0 million, doubled from GBP1.5 million a year before, as a decline in revenue to GBP40.4 million from GBP42.6 million due to the strengthening of sterling was offset by lower operating costs, and exceptional charges not recurring.
The company undertook "significant" restructuring in 2013, which helped it to significantly reduce its costs, but also caused disruption in its enterprise solution and defence division, causing it to miss its targets.
The division's revenue declined to GBP13.5 million from GBP14.5 million. Scisys had expected the division to be broadly in line with the previous year, but the restructuring proved more difficult than expected, leading to amongst other issues some defence programmes slipping out of 2014.
Problematic projects have now been completed or are back on schedule, Scisys said, and it is confident the division is positioned for future growth.
In its media and broadcast division revenue was in line at GBP8.1 million, as fewer-than-expected contract wins was offset by contract renewals and maintenance revenues.
The space division saw revenue fall to GBP18.6 million from GBP19.8 million, mostly due to the weakening of the euro, and German national programmes being deferred.
Scisys said it has started 2015 with a "reasonable order book", it is finding the first half challenging so it is remaining cautious in its guidance. Some contracts have been deferred, hitting revenues, and the further strengthening of sterling against the euro could compound this.
However, it expects a better second half, as it has secured some other contract wins and renewals. Additionally, its 2015 results will be boosted by a full year's contribution from Xibis Ltd, which it acquired last December.
In order to "demonstrate its commitment to a progressive dividend policy", Scisys proposed a final dividend of 1.17 pence, taking its total dividend for the year to 1.61 pence, up from 1.46 pence a year before.
"We continue to see a number of opportunities both in the UK and on mainland Europe which we are confident we can convert into contract wins," said Chairman Mike Love in a statement. "Scisys remains in a good position for the current financial year and beyond."
Shares in Scisys are trading down 8.0% at 85.98 pence Thursday morning.
By Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
Copyright 2015 Alliance News Limited. All Rights Reserved.
