SSY.L Regulatory News (SSY)

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014 (MAR).

SCISYS PLCINTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2016

SCISYS PLC, AIM stock code: SSY, ('SCISYS', the 'Group' or the 'Company') - the supplier of bespoke software systems and IT based solutions for its clients' core business processes is pleased to announce its Interim Results for the six months ended 30 June 2016.

Financial and Operational Highlights:

· Operating profit at £1.1m (2015: loss of £1.1m).

· Revenue up 35% to £22.2m (2015: £16.5m).

· Strong closing half year order book of £35m (2015: £28m).

· Net funds of £1.4m (2015: net debt £1.9m).

· Interim dividend reinstated at 0.53 pence per share.

· Basic earnings per share at 2.8 pence (2015: loss per share of 4.9 pence).

· The South African Broadcasting Corporation buys dira! from M&B division.

· ESD provides support to Vodafone for the UK national 105 phone line service.

· Space division secures over £3.2m of new contracts, mainly from existing programmes. 

Mike Love, Chairman of SCISYS, commenting on the results, said:

"We are pleased with this bounce back to profitability and healthy organic growth in revenues at the half-year mark. At this point in time we fully anticipate that we can achieve the uplift in full year market expectations as announced in our trading update in August."

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About SCISYS:

Employing nearly 450 staff, SCISYS group is a leading developer of Information and Communications Technology services, e-Business, web and mobile applications and advanced technology solutions. The Company operates in a broad spectrum of market sectors including Media & Broadcast, Space, Government and Defence and Commercial sectors. SCISYS clients are predominantly blue chip and public sector organizations. Customers include the Environment Agency, the Ministry of Defence, Airbus Defence & Space, Arqiva, Vodafone, the European Space Agency, Eumetsat, the BBC, RNLI, AON, Interflora and the National Trust. The Company has UK offices in Chippenham, Bristol, Leicester and Reading and two offices located in Germany. More information is available at www.scisys.co.uk

Introduction

SCISYS is reporting strong results for the first half of 2016. Although revenues are at a record level, profitability during the first half has been hit by hedging losses as a result of wide currency fluctuations. However we expect significant benefit to be derived from the weaker pound for the remainder of the year if the euro-sterling exchange rate remains at current levels.

Our order book remains robust and at the end of June was £35m (2015: £28m), which is marginally behind our record opening order book for 2016 and 25% higher than June 2015.

This trading performance is reflected by a further strengthening of the Group's cash position.

Key financials

The Group's revenue totalled £22.2m (2015: £16.5m), a record historic first-half level, including £8.6m from ESD, £9.6m from Space, £3.5m from M&B and £0.4m from Xibis. In the six months ended 30 June 2016, the Group's operating profit was £1.1m (2015: loss of £1.1m). Basic earnings per share for the period recovered to 2.8 pence (2015: loss per share of 4.9 pence). A fuller explanation is available in the Finance review section.

Operating Review

Introduction

All divisions have performed well during the first half of 2016. Contracts were delivered on time and within budget and helped to improve our cash position. Major new contracts were won and added to our strong order book. There are strong prospects for future contract wins in all divisions during the second half, some of which have materialised already.

We do not expect any adverse operational consequences as a result of June's EU referendum outcome impacting any divisional opportunities in the short to medium term.

Enterprise Solutions & Defence (ESD) division

ESD has had an excellent first half year and has impressively substantiated the earlier signs of recovery. Based on the very strong order book at the beginning of the year and significant recurring revenues from well-established customers the Division has delivered revenues of £8.6m, 79% up on the first half of 2015.

Current projects are all in a healthy state, on plan in terms of cost and time to deliver, and have helped to achieve a very good contribution margin of 29%.

The 105 national power-cut phone line service provided by Vodafone for the Energy Networks Association (ENA) went live in April. SCISYS delivered the call routing component of the service, similar to the 101 and 111 systems previously supplied by SCISYS. Callers dialling the 105 number are put through to their local electricity network operator to report or receive information about power cuts and to report damage to electricity power lines and substations.

In September another significant contract was secured with the UK Ministry of Defence (MOD) to deliver further research and software development services to the Defence Science and Technology Laboratory (Dstl). The project extends SCISYS' reach into the area of tactical combat systems in surface warships as it will create and demonstrate a new decision support system for use by the Royal Navy.

Based on the strong order book and the successful delivery the Division is well positioned to end the year on a similarly strong footing.

Space division

During the first half of the year our Space division has secured over £3.2m of new contracts, mainly from existing programmes; these include the European satellite-navigation system, Galileo, and the European Space Agency's (ESA) rover mission to Mars, ExoMars.

With the launch of the first of two ExoMars missions, Europe is now on the way to Mars. This historic step was also supported by SCISYS Flight Dynamics experts working in the Flight Control Team of ExoMars at ESOC in Darmstadt.

Consequently, the Space division has been able to increase its revenues during the first half year to £9.6m, 22% ahead of the comparative period in 2015. Divisional contribution benefitted even more and moved the divisional contribution margin to 20%.

There are considerable bid opportunities with ESA, Eumetsat and also from German national and bilateral programmes that, if won, will secure revenues for the Space division for several years.

Significant progress has been made with SCISYS's proprietary PLENITER product which provides reusable functional modules to operate complete satellite missions. In a post period event OneWeb, a new internet telecommunications enterprise which is preparing to build, deploy and operate the World's biggest satellite constellation to provide global internet access for all, has chosen PLENITER to plan its mission of several hundred satellites.

As an ongoing commitment to innovation in space, SCISYS and PLENITER have become partners of the PTScientists and their "Mission to the Moon" in the frame of the Google Lunar-X-Price competition.

Media & Broadcast (M&B) division

M&B secured its first win in South Africa in April. A €2m contract for South Africa Broadcasting Corporation demonstrates dira!'s international reputation hard won over many years with state broadcasters in Europe. This was the second major win during the period, adding to a £2m contract with a major UK radio broadcaster won in February.

Although won well into the first 6 months of 2016, both contracts, together with the robust repeat business and smaller wins from the existing client base, have helped to deliver a healthy performance for the first half year. With its strengthened order book position the outlook for MBS during the second half year is encouraging.

Xibis Limited

Xibis has broken even during the first half but has sufficient wins and quality near prospects that can be delivered during the second half to meet its expected budgeted full year profit and revenue targets.

Finance review

Results for the half year to June 2016 demonstrate that SCISYS has bounced back from last year's setbacks and built on the recovery witnessed in the second half of 2015.

Total revenues were up 35% to £22.2m (2015: £16.5m) and the professional fees' component increased by 40% to £18.4m (2015: £13.1m). Despite absorbing a foreign exchange expense of £0.5m that relates to future periods the Group generated an operating profit of £1.1m (2015: £1.1m loss). Basic earnings per share for the period were 2.8p (2015: 4.9p loss per share).

The average euro-sterling exchange rate for the period was €1.28/£, which represents an 8% uplift from the comparative 2015 value of €1.38/£. This movement boosted revenues to a record historic first-half level.

Approximately half of the Group's business is conducted in euros. SCISYS mitigates its exposure to exchange rate movements by entering into hedging contracts to convert forecast surplus euros into sterling at fixed forward rates. Such contracts are revalued quarterly on a mark-to-market basis. Following June's referendum vote for the UK to leave the EU the value of the pound fell sharply against the euro. This gave rise to an adverse revaluation at 30 June of the Company's remaining 2016 and 2017 hedging contracts and resulted in a £0.5m charge in the income statement for the first half of the year.

While currency hedging contracts restrict losses when spot rates move adversely, potential gains from favourable fluctuations are also limited and the Company realised a loss of £0.2m on trades that matured in the period.

The uplift in trading performance was reflected in buoyant cash flows. At the end of the reporting period, the Group had bank deposits (comprising cash and cash equivalents less overdrafts) of £5.6m (30 June 2015: £3.0m). Unutilised working capital facilities totalled £4.6m (30 June 2015: £3.1m). Group debt excluding bank overdrafts at the period end was £4.2m (30 June 2015: £4.9m). The resulting net cash was £1.4m, £2.4m higher than the 2015 year-end position of £1.0m net debt (30 June 2015: £1.9m net debt).

The effective tax rate for the period of 15% reflects the anticipated rate for 2016 as a whole. Tax rates between the first halves of 2015 and 2016 are not comparable due to last year's losses. SCISYS continues to benefit from the tax-credit system for UK expenditure on Research & Development. Credits are received in the form of cash rebates from HM Revenue & Customs, and this serves to offset the relatively high corporate tax rates experienced by our German business.

The half-year accounts are presented on a basis consistent with policies to be adopted for the Annual Report & Accounts for the year ending 31 December 2016.

Dividend

Our final dividend for full year to 31 December 2015 was 1.78 pence per share and put us back on track in our stated strategy of progressive dividend growth of around 10% per annum. I can now confirm that an interim dividend of 0.53 pence per share will be paid on 10 November 2016 to shareholders on the register as at 14 October 2016. The shares are expected to go ex-dividend on 13 October 2016.

Outlook

We are pleased with this bounce back to profitability and healthy organic growth in revenues at the half-year mark. At this point in time we fully anticipate that we can achieve the uplift in full year market expectations as announced in our trading update in August.

Given the strength of our short term pipeline we expect the top line momentum achieved during the first six months to continue for the rest of the year. Our closing order book position and recent contract wins provide a solid foundation for the second half of the year. All divisions are performing to or are exceeding budget. As has been seen in previous years, we anticipate a stronger trading performance in the latter half of the year, and continued organic growth well in line with our medium-term objectives. We also expect to see positive impacts on profitability from the weaker pound if this continues for the second half.

We continue to look for opportunities to acquire companies where there is a good market, product and cultural fit.

Based on current performance on projects and order pipeline, the Directors remain fully confident in the future prospects of the Group.

Chairman

Mike Love

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity continued

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Notes to the Unaudited Interim Report

For the six months to 30 June 2016

The weighted average number of shares for the calculation of basic earnings per share excludes own shares held in treasury.

The weighted average number of shares for the calculation of diluted earnings per share includes own shares held in treasury together with EMI, CSOP and unapproved share options outstanding during the period.