19 Sep 2019 07:00
SCISYS Group PLC
("SCISYS", the "Group" or the "Company")
Interim results for the six months ended 30 June 2019
SCISYS Group PLC ("SCISYS" AIM SSY; ESM: SCC), the supplier of bespoke software systems, IT-based solutions and support services to the space, media & broadcast, government, defence and commerce sectors, is pleased to announce its interim results for the half year to 30 June 2019.
Financial and Operational Highlights:
·; Cash offer of 254.15p per share from CGI approved by shareholders in August
·; Revenues up 2% to £29.4m (2018: £28.7m)
·; Adjusted operating profit at £1.2m (2018: £2.5m)
·; Order book increased to £102.5m (2018: £92.2m)
·; Net debt reduced to £3.0m (2018: net debt £3.3m)
·; Adjusted basic earnings per share 2.2p (2018: 6.1p)
·; Enterprise Solutions and Defence (ESD) division delivered record first half results, building on previous contract extensions and wins
·; Space division in Germany secured further Galileo ground segment orders of €9.7m
·; Media Solutions division registered a strategic win with a major European broadcaster for newsroom software
Mike Love, Chairman of SCISYS, commenting on the results, said:
"We are pleased with our continued solid operational performance and my thanks goes out to the divisions and staff for achieving these results. Understandably, the takeover offer from CGI that was announced on 14 June significantly occupied SCISYS senior management and resulted in some exceptional expenditure. Notwithstanding this, we have delivered a creditable set of results for the period.
Our shareholders voted to approve the CGI takeover on 7 August which we expect to complete in the second half of 2019; we are currently working with CGI to obtain the necessary regulatory approvals for the bid to proceed to the final Court approval stage.
The business continues to perform in line with board expectations though, as already highlighted and in common with previous years, we expect our 2019 results to be more weighted towards the second half of the financial year."
For further information please contact:
SCISYS Group PLC | +44 (0)1249 466 466 | |
Mike Love | Chairman | |
Klaus Heidrich | Chief Executive Officer | |
Chris Cheetham
| Finance Director | |
finnCap (NOMAD & AIM Broker) | +44 (0)20 7220 0500 | |
Julian Blunt/James Thompson
Andrew Burdis
| Corporate Finance
Corporate Broking | |
Walbrook PR | +44 (0)20 7933 8780 | |
Tom Cooper/Paul Vann | +44 (0)797 122 1972 | |
tom.cooper@walbrookpr.com | ||
Davy (ESM Broker) | +353 1 679 6363 | |
John Frain | john.frain@davy.ie |
About SCISYS Group:
Employing around 670 staff, SCISYS Group is a leading developer of information and communications technology services, e-business, web and mobile applications, editorial newsroom solutions 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 organisations.
Customers include the Environment Agency, the Ministry of Defence, Airbus Defence & Space, Thales Alenia Space, Arqiva, Vodafone, the European Space Agency, Eumetsat, the BBC, Radio France, RTL, RNLI, Pets at Home, Siemens and the National Trust. The Company's registered office is in Dublin, with UK offices in Chippenham, Bristol, Leicester and Reading and German offices in Bochum, Dortmund, Darmstadt and Munich. More information is available at www.scisys.co.uk.
This announcement has been released by Natasha Laird, Company Secretary, on behalf of the Company.
Introduction
The Board of SCISYS is pleased with the Group's results for the first half of 2019. As indicated at the time of our AGM in June, we expect 2019 revenues and profit to be more heavily weighted towards the second half of the year. There have been a number of strategic contract wins by the divisions, coupled with solid operational performance, and we are continuing to see an increasing proportion of time & materials contract work in the revenue mix.
Key financials
In the six months ended 30 June 2019, revenue totalled £29.4m (2018: £28.7m) and Group adjusted operating profit was £1.2m (2018: £2.5m). Adjusted basic earnings per share were 2.2p (2018: 6.1p). Fuller details are presented in the Financial review section below.
Operating review and outlook
The three divisions performed broadly in line with management expectations during the first half of 2019, with a particularly strong performance by ESD adding to its enviable reputation for delivering complex IT implementation services. Notable contract successes include orders from Thales Alenia France worth €9.7m for Galileo ground segment work, won by Space Germany, strengthening its foothold in the Galileo project. The Media Solutions division continued to expand its client portfolio with the addition of a major European broadcaster through a key order for its proprietary OpenMedia newsroom software solution.
The business continues to perform in line with board expectations though, as already highlighted and in common with previous years, we expect our 2019 results to be more weighted towards the second half of the financial year.
CGI recommended cash offer and interim dividend
On 14 June 2019 CGI Group Holdings Europe Limited (CGI Bidco) announced its recommended cash offer, which offered shareholders 254.15p per share and values SCISYS at approximately £78.9m. SCISYS shareholders voted to approve this offer on 7 August 2019, which offer is being implemented by way of a Scheme of Arrangement under the Irish Companies Act 2014. After all regulatory approvals have been obtained and other conditions satisfied or otherwise waived, the Scheme must then be sanctioned by the High Court in order to take effect. SCISYS is in the process of obtaining such regulatory approvals. The Board expects completion to take place during the second half of 2019. While the Board cannot give a precise date for completion, shareholders will be updated in due course by way of regulatory announcement.
In the light of the cash offer, no interim dividend is being proposed and the Board notes that any dividend would in any event reduce the cash offer made by CGI Bidco to shareholders upon completion.
Financial review
The Directors foreshadowed in the June AGM trading update that earnings for 2019 would revert to the customary pattern of being heavily weighted towards the second half of the year after the more balanced profile seen in 2018. The first-half results for 2019 support this indication in that adjusted operating profits were below the comparative figures for 2018 and at the level reported in 2017.
Total revenues were up 2% to £29.4m (2018: £28.7m) and the professional-fees component increased marginally to £27.7m (2018: £27.6m). The underlying measure of trading performance, adjusted operating profit - which excludes the costs of the Group's long-term share-incentive schemes, exceptional items and amortisation of intangible assets arising on business acquisition - was £1.2m (2018: £2.5m). Adjusted basic EPS, calculated on the profit for the period before post-tax exceptional items, share-based payments and amortisation of acquisition-related intangible assets, were 2.2p (2018: 6.1p).
The statutory operating profit was £0.1m (2018: £1.2m) after bearing amortisation costs of £0.6m (2018: £0.6m) relating to the December 2016 ANNOVA Systems GmbH ("Annova" - now SCISYS Media Solutions GmbH) acquisition and an exceptional charge of £0.5m (2018: £0.7m). Basic loss per share was 0.8p (2018: earnings of 2.6p).
The exceptional charge represented £0.3m to facilitate the reorganisation and integration of the Group's media operations under common management in Germany plus an initial £0.2m of legal and professional costs relating to CGI's offer to acquire SCISYS announced in June. Exceptional charges in the comparative 2018 period comprised a final earnout payment of £0.6m to Annova's former owners and the first £0.1m of legal and professional costs incurred for the Group's re-domiciliation to Ireland that was completed in November 2018.
Net cash flow from operations was £1.3m (2018: £3.1m). At the end of the reporting period, the Group had bank deposits of £6.0m (2018: £9.4m). Unutilised working capital facilities totalled £4.3m (2018: £4.2m). Group debt at the period end was £9.0m (2018: £12.7m). The resulting net debt was £3.0m, a reduction of £0.1m from the 2018 year-end position of £3.1m net debt (30 June 2018: £3.3m).
Following a buoyant sales performance in the final quarter of 2018, order intake for the first six months of 2019 continued strongly, with the closing order book up 4% from the opening value for the period of £98.6m at £102.5m (30 June 2018: £92.2m).
The tax charge for the period is distorted by the high level of non-tax deductible amortisation charges relative to the loss before tax and the fact that the majority of the tax charge relates to deferred tax chargeable at a rate of 33% in Germany.
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 2019. The new accounting standard, IFRS 16: Leases, has been adopted for the first time, adding c£3m to tangible fixed assets and lease liabilities but having an immaterial impact on operating profits.
Responsibility
SCISYS Group PLC Directors accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts stated therein and does not omit anything likely to affect the import of such information.
Consolidated Income Statement
Unaudited | Unaudited | Audited | |
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | |
£'000 | £'000 | £'000 | |
Revenue (note 2) | 29,371 | 28,721 | 58,405 |
Operating costs | (29,252) | (27,509) | (55,912) |
Operating profit | 119 | 1,212 | 2,493 |
"Adjusted operating profit" being operating profit before share based payments, exceptional charges and amortisation arising on business combinations | 1,202 | 2,526 | 5,118 |
Exceptional items | (470) | (666) | (1,337) |
Amortisation of Intangibles | (595) | (626) | (1,252) |
Share based payments | (18) | (22) | (36) |
Operating profit | 119 | 1,212 | 2,493 |
Finance costs | (247) | (232) | (502) |
Finance income | (1) | (5) | 3 |
(Loss)/profit before tax | (129) | 975 | 1,994 |
Tax charge | (114) | (200) | (558) |
(Loss)/profit for the period attributable to equity holders of the parent | (243) | 775 | 1,436 |
(Loss)/earnings per share (note 5) | |||
Basic | (0.8)p | 2.6p | 4.9p |
Diluted | (0.8)p | 2.6p | 4.8p |
Consolidated Statement of Comprehensive Income
Unaudited | Unaudited | Audited | |
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | |
£'000 | £'000 | £'000 | |
(Loss)/profit for the period | (243) | 775 | 1,436 |
Other comprehensive income not recycling through the Income Statement | |||
Currency translation differences on foreign currency investments | (137) | 57 | 158 |
Total comprehensive (expense)/income for the period attributable to equity holders of the parent | (380) | 832 | 1,594 |
Consolidated Statement of Changes in Equity
For the six months ended | Share Capital | Share Premium | Merger Reserve | Capital Redemp-tion Reserve | Trans-lation Reserve | Retained Earnings | Total |
30 June 2019 (unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance as at 1 January 2019 | 7,420 | - | 5,850 | - | 2,048 | 11,216 | 26,534 |
Total comprehensive income for the period | |||||||
Profit for the period | - | - | - | - | - | (243) | (243) |
Other comprehensive income | |||||||
Foreign currency translation | - | - | - | - | (137) | - | (137) |
Total comprehensive income for the period | - | - | - | - | (137) | (243) | (380) |
Transactions with owners, recorded directly in equity | |||||||
Contributions by and distributions to owners | |||||||
Share based payments | - | - | - | - | - | 18 | 18 |
Issue of new shares | 15 | 23 | - | - | - | - | 38 |
Share options | - | - | - | - | - | 96 | 96 |
Total contributions by and distributions to owners | 15 | 23 | - | - | - | 114 | 152 |
Balance as at 30 June 2019 | 7,435 | 23 | 5,850 | - | 1,911 | 11,087 | 26,306 |
For the six months ended | Share Capital | Share Premium | Merger Reserve | Capital Redemp-tion Reserve | Trans-lation Reserve | Retained Earnings | Total |
30 June 2018 (unaudited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance as at 1 January 2018 | 7,329 | 268 | 943 | 83 | 1,890 | 15,133 | 25,646 |
Total comprehensive income for the period | |||||||
Profit for the period | - | - | - | - | - | 775 | 775 |
Other comprehensive income | |||||||
Foreign currency translation | - | - | - | - | 57 | - | 57 |
Total comprehensive income for the period | - | - | - | - | 57 | 775 | 832 |
Transactions with owners, recorded directly in equity | |||||||
Contributions by and distributions to owners | |||||||
Share based payments | - | - | - | - | - | 22 | 22 |
Share options | - | - | - | - | - | 57 | 57 |
Total contributions by and distributions to owners | - | - | - | - | - | 79 | 79 |
Balance as at 30 June 2018 | 7,329 | 268 | 943 | 83 | 1,947 | 15,987 | 26,557 |
Consolidated Statement of Changes in Equity continued
For the year ended | Share Capital | Share Premium | Merger Reserve | Capital Redemp-tion Reserve | Trans-lation Reserve | Retained Earnings | Total |
31 December 2018 (audited) | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
Balance as at 1 January 2018 | 7,329 | 268 | 943 | 83 | 1,890 | 14,931 | 25,444 |
Total comprehensive income for the period | |||||||
Profit for the period | - | - | - | - | - | 1,436 | 1,436 |
Other comprehensive income | |||||||
Foreign currency translation | - | - | - | - | 158 | - | 158 |
Total comprehensive income for the period | - | - | - | - | 158 | 1,436 | 1,594 |
Transactions with owners, recorded directly in equity | |||||||
Contributions by and distributions to owners | |||||||
Dividends paid | - | - | - | - | - | (655) | (655) |
Issue of new shares | 91 | 371 | - | - | - | - | 462 |
Share based payments | - | - | - | - | - | 36 | 36 |
Treasury shares | - | - | - | - | - | (6) | (6) |
Exercise of share options | - | - | - | - | - | (341) | (341) |
Group reconstruction on formation of Irish holding company | - | (639) | 4,907 | (83) | - | (4,185) | - |
Total contributions by and distributions to owners | 91 | (268) | 4,907 | (83) | - | (5,151) | (504) |
Balance as at 31 December 2018 | 7,420 | - | 5,850 | - | 2,048 | 11,216 | 26,534 |
Consolidated Statement of Financial Position
Unaudited | Unaudited | Audited | |
30 June 2019 | 30 June 2018 | 31 December2018 | |
£'000 | £'000 | £'000 | |
Non-current assets | |||
Property, plant and equipment | 12,770 | 9,165 | 9,411 |
Goodwill | 16,018 | 15,902 | 16,075 |
Other intangible assets | 3,324 | 4,467 | 3,981 |
Other receivables | 196 | 94 | 196 |
Deferred tax assets | 729 | 23 | 456 |
33,037 | 29,651 | 30,119 | |
Current assets | |||
Inventories | 94 | 133 | 79 |
Trade and other receivables | 26,851 | 25,210 | 21,466 |
Corporation tax receivable | 794 | 500 | 100 |
Cash and cash equivalents | 5,953 | 9,394 | 8,065 |
33,692 | 35,237 | 29,710 | |
Total assets | 66,729 | 64,888 | 59,829 |
Equity | |||
Issued share capital | 7,435 | 7,329 | 7,420 |
Share premium account | 23 | 268 | - |
Merger reserve | 5,850 | 943 | 5,850 |
Retained earnings | 11,087 | 15,987 | 11,216 |
Translation reserve | 1,911 | 1,947 | 2,048 |
Other reserves | - | 83 | - |
Equity attributable to equity holders of the parent | 26,306 | 26,557 | 26,534 |
Current liabilities | |||
Trade and other payables | 26,211 | 21,954 | 17,205 |
Overdrafts and loans | 4,409 | 2,469 | 5,278 |
Corporation tax payable | 323 | 731 | 910 |
Deferred income | 926 | 211 | 449 |
31,869 | 25,365 | 23,842 | |
Non-current liabilities | |||
Loans | 4,511 | 10,263 | 5,886 |
Other payables | 923 | 914 | 937 |
Provisions | 1,526 | 929 | 1,402 |
Deferred tax | 1,594 | 860 | 1,228 |
8,554 | 12,966 | 9,453 | |
Total liabilities | 40,423 | 38,331 | 33,295 |
Total equity and liabilities | 66,729 | 64,888 | 59,829 |
Consolidated Statement of Cash Flows
Unaudited | Unaudited | Audited | |
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | |
£'000 | £'000 | £'000 | |
Cash flow from operating activities | |||
(Loss)/profit before tax | (129) | 975 | 1,994 |
Net finance costs | 248 | 237 | 499 |
Operating profit | 119 | 1,212 | 2,493 |
Increase in trade receivables | (5,404) | (3,607) | (2,540) |
Decrease in trade payables | 5,707 | 4,038 | 3,059 |
Deferred consideration | - | 616 | - |
Depreciation and amortisation | 1,685 | 1,224 | 2,594 |
Share based payments | 18 | 22 | 36 |
Net tax payments | (1,301) | (371) | (257) |
Net cash flow from operating activities | 824 | 3,134 | 5,385 |
Cash flow from investing activities | |||
Investment in associate | - | (20) | - |
Proceeds from disposal of property, plant and equipment | - | - | 34 |
Purchase of plant, property and equipment | (558) | (244) | (1,463) |
Interest received | (1) | (5) | 3 |
Net cash flow from investing activities | (559) | (269) | (1,426) |
Cash flows from financing activities | |||
Dividends paid | - | - | (655) |
Interest paid | (247) | (232) | (502) |
Issue of new shares | 38 | - | 462 |
Investment in own shares | - | - | (6) |
Exercise of share options | 96 | 57 | (341) |
Debt repayments | (2,686) | (1,244) | (2,793) |
Net cash flow from financing activities | (2,351) | (1,419) | (3,835) |
Net increase in cash and cash equivalents | (2,086) | 1,446 | 124 |
Cash and cash equivalents at the start of the period | 8,065 | 8,021 | 8,021 |
Exchange and other movements | (26) | (73) | (80) |
Cash and cash equivalents at the end of the period | 5,953 | 9,394 | 8,065 |
Cash and cash equivalent deposits held in non-UK based banks | 4,601 | 9,025 | 7,769 |
Net bank deposit with UK based banks | 1,352 | 369 | 296 |
5,953 | 9,394 | 8,065 |
Notes to the Unaudited Interim Report
For the six months to 30 June 2019
1 | Basis of preparation of Interim Financial Information & Statement of Compliance
SCISYS Group PLC (the "Company") is a company incorporated in Ireland. The entities consolidated in the half year financial statements of the Company for the six months to 30 June 2019 comprise the Company and its subsidiaries (together referred to as the "Group"). The Group reports its financial results in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU").
This interim results announcement is prepared in accordance with the IFRS accounting policies expected to be applied by the Group at 31 December 2019. These policies are set out by the Group in its consolidated financial statements for the year ended 31 December 2018 and available on the Group's website at www.scisys.co.uk. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 'Interim Financial Reporting' and is therefore not fully compliant with IFRS. There is one new standard or interpretation endorsed by the EU during 2019. IFRS 16 Leases (see Note 8) has had an impact on the financial results and presentation.
The interim financial information for the six months ended 30 June 2019 is unaudited and does not include all of the information required to constitute statutory accounts within the meaning of section 333 of the Companies Act 2014. It should therefore be read in conjunction with the audited financial statements for the year ended 31 December 2018. These published accounts have been reported on by Ernst & Young, the Group's auditors, and have been delivered to the Registration Office. The report of the auditor was (1) unqualified; (2) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (3) did not contain a statement under section 336 (4), 336 (5), 336 (8) or section 305 to 312 of the Companies Act 2014.
The preparation of these consolidated half year financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated half year financial statements, the significant judgements made by management in applying the Group's accounting policies and the key areas of estimation were the same as those that applied to the consolidated financial statements for the year ended 31 December 2018.
The Interim Report was approved by the Directors on 18 September 2019. |
2 | Segmental analysis
The management structure and reporting of financial information to the chief operating decision maker (the Board) is the basis used to define operating segments.
The Group provides IT services to commercial and public sector organisations through the following three divisions: Space Enterprise Solutions & Defence (ESD) Media Solutions
Media Solutions includes Media & Broadcast (M&B) and ANNOVA Systems (renamed SCISYS Media Solutions) from 1 January 2019)
Divisional results, assets and liabilities represent items directly attributable to a division. Unallocated expenses comprise central overheads and corporate expenses. Assets and liabilities which are allocated to operating divisions comprise trade receivables, contract assets, inventories and contract liabilities. |
2 | Segmental analysis continued | ||||
Information about reportable segments | |||||
Space | ESD | Media Solutions | Total | ||
External revenues | £'000 | £'000 | £'000 | £'000 | |
6 months ended 30 June 2019 (unaudited) | |||||
Professional fees revenue | 10,281 | 9,920 | 7,500 | 27,701 | |
Other revenue | 430 | 972 | 84 | 1,486 | |
External revenue for reportable segments | 10,711 | 10,892 | 7,584 | 29,187 | |
Other external revenue | 184 | ||||
Consolidated revenue | 29,371 | ||||
6 months ended 30 June 2018 (unaudited) | |||||
Professional fees revenue | 11,100 | 8,862 | 7,635 | 27,597 | |
Other revenue | 84 | 694 | 170 | 948 | |
External revenue for reportable segments | 11,184 | 9,556 | 7,805 | 28,545 | |
Other external revenue | 176 | ||||
Consolidated revenue | 28,721 | ||||
Year ended 31 December 2018 (audited) | |||||
Professional fees revenue | 21,293 | 17,966 | 16,442 | 55,701 | |
Other revenue | - | 1,925 | 380 | 2,305 | |
External revenue for reportable segments | 21,293 | 19,891 | 16,822 | 58,006 | |
Other external revenue | 399 | ||||
Consolidated revenue | 58,405 |
2 | Segmental analysis continued | ||||
Information about reportable segments | |||||
Space | ESD | Media Solutions | Total | ||
Timing of revenue recognition | £'000 | £'000 | £'000 | £'000 | |
6 months ended 30 June 2019 (unaudited) | |||||
Point in time | 655 | 637 | 353 | 1,645 | |
Performance over time | 10,054 | 10,255 | 7,232 | 27,541 | |
Total | 10,709 | 10,893 | 7,585 | 29,187 | |
6 months ended 30 June 2018 (unaudited) | |||||
Point in time | 157 | 608 | 368 | 1,133 | |
Performance over time | 11,027 | 8,948 | 7,437 | 27,412 | |
Total | 11,184 | 9,556 | 7,805 | 28,545 | |
Year ended 31 December 2018 (audited) | |||||
Point in time | 335 | 1,220 | 633 | 2,188 | |
Performance over time | 20,958 | 18,671 | 16,189 | 55,818 | |
Total | 21,293 | 19,891 | 16,822 | 58,006 | |
Space | ESD | Media Solutions | Total | ||
Certainty of revenues | £'000 | £'000 | £'000 | £'000 | |
6 months ended 30 June 2019 (unaudited) | |||||
100% - contract completed and paid | 9,078 | 9,274 | 4,909 | 23,261 | |
Contract completed, awaiting payment | 592 | 60 | 1,357 | 2,009 | |
Point in time, benefit transferred | 4 | 242 | 174 | 420 | |
Performance over time | 1,035 | 1,317 | 1,145 | 3,497 | |
Total | 10,709 | 10,893 | 7,585 | 29,187 | |
6 months ended 30 June 2018 (unaudited) | |||||
100% - contract completed and paid | 10,008 | 7,225 | 4,567 | 21,800 | |
Contract completed, awaiting payment | 614 | 220 | 517 | 1,351 | |
Point in time, benefit transferred | 140 | 78 | 161 | 379 | |
Performance over time | 422 | 2,033 | 2,560 | 5,015 | |
Total | 11,184 | 9,556 | 7,805 | 28,545 | |
Year ended 31 December 2018 (audited) | |||||
100% - contract completed and paid | 19,126 | 14,243 | 13,672 | 47,041 | |
Contract completed, awaiting payment | 1,203 | 235 | 1,837 | 3,275 | |
Point in time, benefit transferred | 85 | 884 | 177 | 1,146 | |
Performance over time | 879 | 4,529 | 1,136 | 6,544 | |
Total | 21,293 | 19,891 | 16,822 | 58,006 |
2 | Segmental analysis continued | ||||
Information about reportable segments continued | |||||
Space | ESD | Media Solutions | Total | ||
Profit/(loss) before tax | £'000 | £'000 | £'000 | £'000 | |
6 months ended 30 June 2019 (unaudited) | |||||
Reportable segment contribution | 1,014 | 3,382 | 526 | 4,922 | |
Other contribution | 250 | 250 | - | 500 | |
Contribution | 1,264 | 3,632 | 526 | 5,422 | |
Central overheads | (4,220) | ||||
Total adjusted EBITA | 1,202 | ||||
Exceptional items and share based payments | (488) | ||||
EBITA | 714 | ||||
Amortisation of intangible assets comprising acquired software solution | (227) | ||||
Amortisation of intangible assets comprising acquired order book | (368) | ||||
Operating profit | 119 | ||||
Finance costs | (247) | ||||
Finance income | (1) | ||||
Loss before tax | (129) | ||||
6 months ended 30 June 2018 (unaudited) | |||||
Reportable segment contribution | 3,311 | 2,790 | 810 | 6,911 | |
Other contribution | 38 | - | - | 38 | |
Contribution | 3,349 | 2,790 | 810 | 6,949 | |
Central overheads | (4,423) | ||||
Total adjusted EBITA | 2,526 | ||||
Exceptional items and share based payments | (688) | ||||
EBITA | 1,838 | ||||
Amortisation of intangible assets comprising acquired software solution | (258) | ||||
Amortisation of intangible assets comprising acquired order book | (368) | ||||
Operating profit | 1,212 | ||||
Finance costs | (232) | ||||
Finance income | (5) | ||||
Profit before tax | 975 | ||||
Year ended 31 December 2018 (audited) | |||||
Reportable segment contribution | 5,098 | 5,809 | 3,089 | 13,996 | |
IFRS 15 adjustment | (20) | (58) | - | (78) | |
Contribution | 5,078 | 5,751 | 3,089 | 13,918 | |
Central overheads | (8,800) | ||||
Total adjusted EBITA | 5,118 | ||||
Exceptional items and share based payments | (1,373) | ||||
EBITA | 3,745 | ||||
Amortisation of intangible assets comprising acquired software solution | (737) | ||||
Amortisation of intangible assets comprising acquired order book | (515) | ||||
Operating profit | 2,493 | ||||
Finance costs | (502) | ||||
Finance income | 3 | ||||
Profit before tax | 1,994 |
2 | Segmental analysis continued | ||||
Information about reportable segments continued | |||||
Space | ESD | Media Solutions | Total | ||
Group assets | £'000 | £'000 | £'000 | £'000 | |
As at 30 June 2019 (unaudited) | |||||
Reportable segment - non-current assets | 3,524 | 1,110 | 11,384 | 16,018 | |
Reportable segment - current assets | 11,118 | 8,897 | 4,549 | 24,564 | |
14,642 | 10,007 | 15,933 | 40,582 | ||
Other - non-current assets | 17,019 | ||||
Other - current assets | 9,128 | ||||
Total assets | 66,729 | ||||
As at 30 June 2018 (unaudited) | |||||
Reportable segment - non-current assets | 3,507 | 1,110 | 11,285 | 15,902 | |
Reportable segment - current assets | 9,905 | 7,659 | 5,983 | 23,547 | |
13,412 | 8,769 | 17,268 | 39,449 | ||
Other - non-current assets | 13,749 | ||||
Other - current assets | 11,690 | ||||
Total assets | 64,888 | ||||
As at 31 December 2018 (audited) | |||||
Reportable segment - non-current assets | 3,531 | 1,110 | 11,434 | 16,075 | |
Reportable segment - current assets | 9,387 | 5,832 | 3,213 | 18,432 | |
12,918 | 6,942 | 14,647 | 34,507 | ||
Other - non-current assets | 14,044 | ||||
Other - current assets | 11,278 | ||||
Total assets | 59,829 | ||||
Space | ESD | Media Solutions | Total | ||
Group liabilities | £'000 | £'000 | £'000 | £'000 | |
As at 30 June 2018 (unaudited) | |||||
Reportable segment - current liabilities | 5,047 | 6,125 | 979 | 12,151 | |
Other - non-current liabilities | 8,554 | ||||
Other - current liabilities | 19,718 | ||||
Total liabilities | 40,423 | ||||
As at 30 June 2018 (unaudited) | |||||
Reportable segment - current liabilities | 2,533 | 4,191 | 3,275 | 9,999 | |
Other - non-current liabilities | 12,966 | ||||
Other - current liabilities | 15,366 | ||||
Total liabilities | 38,331 | ||||
As at 31 December 2018 (audited) | |||||
Reportable segment - current liabilities | 2,587 | 928 | 1,264 | 4,779 | |
Other - non-current liabilities | 9,453 | ||||
Other - current liabilities | 19,063 | ||||
Total liabilities | 33,295 |
2 | Segmental analysis continued | ||||
Information about reportable segments continued | |||||
UK | Rest of Europe | Other | Total | ||
Geographical split | £'000 | £'000 | £'000 | £'000 | |
6 months ended 30 June 2019 (unaudited) | |||||
Revenue from external customers by location of customers | 15,600 | 12,656 | 1,115 | 29,371 | |
As at 30 June 2019 | |||||
Non-current assets: | |||||
Intangible assets | 1,110 | 18,232 | - | 19,342 | |
Tangible assets | 4,535 | 8,235 | - | 12,770 | |
Other long term assets | - | 925 | - | 925 | |
6 months ended 30 June 2018 (unaudited) | |||||
Revenue from external customers by location of customers | 15,438 | 12,206 | 1,077 | 28,721 | |
As at 30 June 2018 | |||||
Non-current assets: | |||||
Intangible assets | 1,110 | 19,259 | - | 20,369 | |
Tangible assets | 5,917 | 3,248 | - | 9,165 | |
Other long term assets | - | 117 | - | 117 | |
Year ended 31 December 2018 (audited) | |||||
Revenue from external customers by location of customers | 32,035 | 23,499 | 2,871 | 58,405 | |
As at 31 December 2018 | |||||
Non-current assets: | |||||
Intangible assets | 1,110 | 18,946 | - | 20,056 | |
Tangible assets | 4,582 | 4,829 | - | 9,411 | |
Other long term assets | 398 | 254 | - | 652 |
3 | Exceptional items | |||
Unaudited | Unaudited | Audited | ||
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | ||
£'000 | £'000 | £'000 | ||
Brexit restructuring | 42 | 50 | 745 | |
Increase in contingent consideration | - | 616 | 621 | |
German corporate reorganisation | 239 | - | 350 | |
Takeover offer costs | 189 | - | - | |
R&D tax credits | - | - | (379) | |
Exceptional items | 470 | 666 | 1,337 |
Since 2007 the Board has gauged the underlying performance of business using an adjusted operating profit measure that excludes the costs of the Group's long-term share incentive schemes, exceptional items and any amortisation of intangible assets arising on business acquisition. Internal reporting is exclusively based on adjusted performance measures to facilitate comparison between financial years and publicly available research notes on SCISYS published by financial analysts focuses on these same measures.
The Brexit restructuring charge reflects external professional advice and costs in relation to the development and implementation of the Group's contingency plans to mitigate any potential adverse impact of Brexit on cross-border operations, particularly in the space sector. Costs principally relate to the establishment of the new ultimate holding company, SCISYS Group PLC, incorporated in Ireland, at the top of the Group structure by means of a Scheme of Arrangement approved by the members and the High Court.
Contingent consideration payable for the Annova acquisition was linked both to average profitability over a 3-year earn out period and achievement of key commercial milestones. The liability for forecast consideration payments was reviewed biannually to reflect prevailing business projections. When the anticipated total contingent consideration payable for Annova was reassessed at 31 December 2017, it resulted in an exceptional credit. The exceptional charge recognised in 2018 represents a fixed and final earnout payment to Annova's former owners in consideration for early termination of the acquisition ring-fence agreement. This enables accelerated achievement of potential medium-term benefits in combined media sector operations by the removal of constraints on collective management.
The German arm of the Group is in the process of being re-organised to simplify the corporate structure and facilitate the merger of the Annova and M&B divisions under common management. Costs incurred comprise of legal and professional fees, external change consultancy charges and costs for rationalisation of the divisional management team.
Takeover offer costs comprise legal and professional fees incurred in relation to the off by CGI to acquire the Group, announced on June 2019.
UK R&D tax credits were considered exceptional in 2017 for two reasons. Firstly, from 2017 the tax credits are disclosed as above-the-line deductions from operating charges instead of offsetting tax charges as previously reported so would otherwise distort comparisons of operating profit with earlier years. Secondly, SCISYS was correctly projected to exceed the qualification criteria for the SME tax credit scheme in 2018, with a consequential sharp reduction in the value of credit claims. The 2017 provision of £450,000 for anticipated credits proved to be conservative and the supplementary receipt is shown as a further exceptional credit in 2018
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4 | Taxation | |||
Unaudited | Unaudited | Audited | ||
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | ||
£'000 | £'000 | £'000 | ||
Current tax charge | 21 | 702 | 1,148 | |
Deferred tax (charge)/credit | 93 | (502) | (590) | |
Total tax charge | 114 | 200 | 558 |
5 | (Loss)/earnings per share
The calculation of the Group basic and diluted (loss)/earnings per ordinary share is based on the following data: |
Unaudited | Unaudited | Audited | ||
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | ||
£'000 | £'000 | £'000 | ||
(Loss)/profit attributable to shareholders | (243) | 775 | 1,436 | |
Number of shares | '000 | '000 | '000 | |
Basic weighted average number of shares | 29,593 | 29,366 | 29,154 | |
Diluted weighted average number of shares | 30,235 | 30,005 | 30,085 | |
Basic | (0.8)p | 2.6p | 4.9p | |
Diluted | (0.8)p | 2.6p | 4.8p |
The weighted average number of shares for the calculation of basic (loss)/earnings per share excludes own shares held in treasury.
The weighted average number of shares for the calculation of diluted (loss)/earnings per share includes own shares held in treasury together with CSOP and unapproved share options outstanding during the period. |
6 | Adjusted earnings per share | |||
Unaudited | Unaudited | Audited | ||
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | ||
Basic | 2.2p | 6.1p | 13.1p | |
Diluted | 2.2p | 5.9p | 12.8p |
In order to present a measure of earnings per share which is more representative of the Group's underlying operating performance, earnings are adjusted to be net of the post-tax costs shown in the highlighted box on the face of the Income Statement.
The calculation of the Group adjusted basic and diluted earnings per ordinary share is based on the number of shares in Note 5 and the following earnings data: |
Unaudited | Unaudited | Audited | ||
6 months to30 June2019 | 6 months to30 June2018 | Year ended 31 December 2018 | ||
£'000 | £'000 | £'000 | ||
(Loss)/profit attributable to shareholders | (243) | 775 | 1,436 | |
Adjusted for: | ||||
Exceptional items | 470 | 666 | 1,337 | |
Corporation tax | (79) | (203) | - | |
Amortisation of intangible assets | 595 | 626 | 1,252 | |
Deferred tax | (101) | (106) | (213) | |
Share based payments | 18 | 22 | 36 | |
Adjusted earnings | 660 | 1,780 | 3,848 |
| The weighted average number of shares for the calculation of adjusted basic earnings per share excludes own shares held in treasury. The weighted average number of shares for the calculation of adjusted diluted earnings per share includes own shares held in treasury together with CSOP and unapproved share options outstanding during the period. |
7 | Dividends
For year ended 31 December 2018 the Company paid a final dividend of 1.73 pence per share in July 2019. No interim dividend is proposed for 2019.
|
8 | Post balance sheet events
CGI Group Holdings Europe Limited has made a cash offer, unanimously recommended by the SCISYS Group PLC ("SGP") board pursuant to which it will acquire the entire issued and to be issued ordinary share capital of SGP, Under the terms of the acquisition, SGP shareholders will be entitled to receive for each SGP share 254.15 pence in cash. CGI Group Holdings Europe Limited is a wholly owned indirect subsidiary of CGI Inc. The cash offer is intended to be implemented by a scheme of arrangement under chapter 1 of part 9 of the Companies Act 2014 (Ireland) and shareholders approved the scheme of arrangement at a general meeting on 7 August 2019.
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9 | Impact of changes in accounting policies
|
Impact of IFRS 16 Leases
IFRS 16 Leases is applicable for periods beginning on or after 1 January 2019. Under the terms of IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
Under the new standard, all leases have to be recognised on the balance sheet in the form of a right-of-use asset and a lease liability. This is applicable to the Group in 2019, which recognises the right of use for leased assets including property, vehicles and IT.
The standard contains two recognition and measurement exemptions. Short-term leases can be excluded with a lease term of 12 months or less. Low-value leases where the underlying asset has a low value when new, can also be excluded. If either exemption is applied, the leases are accounted for by recognising payments on a straight-line basis. The exemptions are optional and the Group has taken both.
The right-of-use asset is initially measured at the amount of lease liability, plus any initial direct costs incurred by the lessee in connection with the lease and payments made at or prior to commencement. The lease liability is derived from the present value of the lessee's minimum lease payments. The present value is discounted at the interest rate charged by the lessor to the lessee. If unknown the Group can use its incremental borrowing rate.
This impacts the income statement as the Group recognises an interest element of what was previously operating leases as financing activities. Rental expense is replaced by interest expense and depreciation. The distribution of expense for the leases over the lease term is no longer even but digressive. This is because interest expense at the commencement of a lease is greater than towards the end. This front-loading effect will be more pronounced for any long-term leases. This in turn can influence loan covenants, credit ratings, internal budgeting processes and profit related pay. |