SSY.L Regulatory News (SSY)

SciSys plcINTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2011

SciSys ("SciSys" or "the Group") (AIM:SSY), the supplier of IT services and business critical IT systems to meet its clients' operational requirements, is pleased to announce its Interim Results for the period ending 30 June 2011. Its clients are primarily in the Space, Government, Defence, Environment and Media/Broadcast sectors and are predominantly blue chip companies, government and quasi-government organisations. Customers include the Environment Agency, the Ministry of Defence, Astrium, Arqiva, Cable & Wireless Worldwide, the European Space Agency (ESA), OHB-System AG, the BBC, the RNLI, Deutsche Welle and the Coal Authority.

HIGHLIGHTS

Financial Highlights

·; Revenue up 5% to £22.0m (June 2010: £20.9m)

·; Professional fees up 11% to £18.7m (June 2010: £16.9m)

·; Adjusted operating profit up 50% to £1.2m (June 2010: £0.8m)

·; Profit before tax up 83% to £1.1m (June 2010: £0.6m)

·; Adjusted basic earnings per share up 8% to 2.6p (June 2010: 2.4p)

·; Basic earnings per share up 16% to 2.2p (June 2010: 1.9p)

·; Headquarters property freehold acquired for £5m

·; Group net debt at 30 June 2011 of £2.4m (30 June 2010: net cash: £2.8m) following property purchase

·; Working capital facilities' headroom of £6m (2010: £7m)

·; Declared interim dividend of 0.36p per share (2010: 0.33p)

Operational Highlights

·; Underlying value of various new contract wins from established and new customers year to date in excess of £20m

·; Major project deliveries completed by Environment and Government & Defence Divisions

·; Media Broadcast Division awarded contracts at BBC, NDR, VRT and others

·; Space Division selected for ESOC EFC1 framework and Galileo FOC

·; Application Support improves service delivery by implementing new service desk system

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

"The message on the cover of our 2010 annual report said that we were building momentum. It is in this context that I am pleased to report at the half year point in 2011 that revenues and profits are in line with our expectations for the full year. This reiterates that the Group is moving forward positively taking gradual but sustained steps to improve its margins. Nevertheless we remain cautious because the discretionary spending cuts and delayed decisions on new contract awards by the UK Government that we mentioned last year are still affecting the UK SITS sector. We are not immune but, with half of our revenues coming from outside the UK, we are managing this impact through the diversity of our customer base."

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Executive Chairman's Statement

Business Review

I am pleased to report that the interim results for the Group are in line with market expectations. We have had a successful first six months in 2011 despite the difficult and constrained economic environment in many of our key markets.

I can announce a further increase in operating margins and a corresponding increase in profits before tax taking into account finance costs, exceptional charges and all share based payments. Adjusted operating profits for the period were up by 50% at £1.2m with revenues up 5%. The Board is maintaining its progressive dividend policy.

SciSys has maintained a solid order book throughout the first six months of 2011 providing a firm foundation for the full year. Once again high levels of repeat business were won during the period from our established client base, including major contract wins from the BBC, the Environment Agency and ESA. The underlying value of the various new contract wins from established and new customers in the year to date is in excess of £20m.

It is particularly pleasing to see all the Divisions performing profitably.

Our Government & Defence division continues to win work from new customers and gain contracts from existing ones in the defence, criminal justice, policing, transport and central/local government markets. The RNLI project progresses well and has recently achieved a major project milestone. The system, which controls and monitors all aspects of the boat's operations, needs to have unusually high levels of resilience and availability, integrating with all manner of electronic components, such as radar, charting, video and audio. The UK digital switchover programme is scheduled to complete in 2012. In April 2011, SciSys successfully delivered the 1000th transmitter outstation sub-rack to Arqiva, to whom we are providing the Operational Support System (ARQOSS) for the management of the UK digital TV transmission service. In addition to supporting ARQOSS, SciSys manages the delivery of all outstation sub-racks and internal hardware components which gather data from the transmitter equipment on site and makes information available to the control centres for retrieval. The long deferred decision on the Warrior capability sustainment programme, a UK defence procurement programme to upgrade Warrior armoured vehicles for use by the Army, now seems to be nearer following announcements made by the Defence Secretary in UK parliament this summer. SciSys believes it is well positioned to win a major project from this programme.

Our fully integrated, pan European, Space division has now successfully delivered all its projects for the Galileo test satellites (Galileo IOV). The Galileo programme is Europe's initiative for a state-of-the-art global satellite navigation system, providing a highly accurate, guaranteed global positioning service under civil control. The first two operational satellites are scheduled to be launched in October this year. The division has also been awarded significant follow on contracts, both in UK and in Germany, for the Galileo FOC (full operational capability) - the operational rollout across 18 satellites of the Galileo navigation systems. In Germany the division achieved another important contract win - the EFC1 frame contract for ESOC (part of the European Space Agency) and has established itself as one of the largest and leading manpower suppliers in flight dynamics. At the beginning of the year the Space division, through a relationship with Atos, was selected to work with the French space agency CNES as a framework contractor for on-board software. This is the first time SciSys has been selected by CNES.

The Environment division continues to deliver on its projects with the Environment Agency. The next phase of the Carbon Reduction Commitment system, reflecting the changes made to the scheme, was delivered on time at the beginning of April. Other regulation systems are also being developed to match legislative changes and UK government environmental initiatives. The Inferis solution being developed by SciSys in partnership with The Coal Authority has been recognised by IBM as one of the top worldwide government solutions using IBM technology in 2010/11. Work on the Inferis system continues with testing of the next major release starting in October 2011. We anticipate that it is this division that will face the severest pressure going forward from the UK public sector spending cuts.

Early in the year our Media Broadcast division announced the receipt of orders for its flagship dira!® product from Norddeutscher Rundfunk Radio (NDR), the BBC Academy in Wood Norton and from VRT, the public broadcaster for the Flemish community in Belgium. These orders formed part of a successful first half to the year with operational roll outs of its dira!® system at Sharjah Radio, which went live "On Air" within 10 weeks of the order being placed, and further successful deliveries to the BBC as part of its Salford Quays and West 1 projects.

The Application Support division continues to benefit from repeat business but has during the period also secured new business as well. It has been involved with Cable & Wireless Worldwide (C&WW) in making the first delivery in a major project to roll out the 101 service for the police forces nationwide. 101 is a telephone number that is being provided to citizens for non emergency calls to the police thus taking pressure off the 999 emergency service. The Home Office and the police forces have now committed to a national roll-out. Further work has been completed for electricity utilities upgrading their billing systems to meet changes required by Ofgem to the way electricity is billed using half hourly metering.

The division also recently implemented a new service desk system which enables customers to log incidents through an on-line web portal and track progress at any time of day. The system supports the processes embodied in the IT Infrastructure Library® (ITIL), the de facto standard approach to IT Service Management worldwide.

During the first half of 2011 SciSys became a full member of the new Microsoft Partner Network. Microsoft has recently revised its approach to partnership making it more stringent and specific to the services supplied, and SciSys is pleased to be one of the first to display the new partner mark. This provides a significant credential to our customers who use Microsoft technology.

There have been no changes to Directors or senior management within the Group. Continuity of leadership from within forms a strategic element in the succession planning for the Group.

During the period reported, SciSys completed the freehold purchase of its headquarters building for a consideration of £5.04 million. The property, located in Chippenham Wiltshire, provides office accommodation of 44,000 square feet over two storeys. We consider that this acquisition will have an immediate positive impact on profitability by removing a substantial rent liability.

The Company continues to make good progress on a series of internal projects whose objective is to move the Group further towards becoming a tightly integrated pan European ICT company. Current projects include creating a coordinated CRM system, identifying and implementing a standard project management and cost control process as well as considering the appropriate branding for the Group.

Dividend

The Directors indicated at the AGM in May 2011 that the Board expected to maintain its progressive dividend policy at the interim stage, subject to the continued strength of trading. They can now confirm that an Interim dividend of 0.36p per share will be paid on 17 November 2011 to shareholders on the register as at 21 October 2011. The shares are expected to go ex-dividend on 19 October 2011.

Financial Director's Statement

I am pleased to report that SciSys made further progress towards achieving its corporate objectives with higher revenues, strong growth in profitability and improved operating margins. The total revenue for the Group was £22.0m (June 2010: £20.9m). Adjusted operating profit, before share based payment charges and non-recurring items, was £1.2m (June 2010: £0.8m) and adjusted basic earnings per share were 2.6p (June 2010: 2.4p). The adjusted operating margin was 6% (2010: 4%). The statutory profit from operations was £1.1m (June 2010: £0.7m). The profit before tax for the period was £1.1m (June 2010: £0.6m) and the basic earnings per share were 2.2p (June 2010: 1.9p).

The share based payment charge shown on the face of the Income Statement reflects the costs of the Group's share incentive schemes. The charge does not affect the Group cash flow. Non-recurring items represent restructuring costs incurred in aligning future operating costs with anticipated income.

In May, SciSys completed the purchase of the freehold in the Group's corporate headquarters premises in Chippenham at a price of £5.0m. The purchase was financed by a combination of a 5 year £2.5m bank loan, a shareholder loan of up to £1.0m repayable over up to 3 years, and surplus cash resources. An additional short term bridging loan of £1.0m to cover a reversing VAT liability on the purchase was repaid as planned in August. As well as securing a net annual operating costs saving of £0.5m, owning the freehold allows SciSys greater flexibility to rent out surplus office space until expansion room is needed.

At the end of the reporting period, the Group had bank deposits (comprising cash and cash equivalents less overdrafts) of £2.5m (June 2010: £3.7m). Unutilised working capital facilities totalled £2.9m (June 2010: £4.3m). Group debt excluding bank overdrafts at the period end was £4.9m (June 2010: £0.9m).

The resulting liquidity position was net debt of £2.4m (June 2010: net cash £2.8m), although the effective net debt figure is only £1.4m because the £1.0m short term bridging loan was balanced by the receivable VAT repayment. Sterling weakened against the Euro during the half year to June 2011 which increased the reported value of Euro cash deposits held in Germany.

SciSys continues to benefit from the tax credit system for UK expenditure on Research & Development. Together with the utilisation of brought forward tax losses, this takes the UK Group companies out of a tax paying position. In Germany, the corporation tax charge is based on profits calculated in accordance with German accounting principles. A series of successful project completions in the period produced a temporary peak in German accounting profits, which lifted the effective Group tax rate to 38% of pre-tax profit for the half year (June 2010: 11%).

The half year accounts are presented on a basis consistent with policies to be adopted for the Annual Report and Accounts for the year ended 31 December 2011.

Outlook

The first half of 2011 was tough but successful and a lot has been achieved in the efficient delivery of our current projects and in winning new ones. We are operating in line with expectations. While we are cautious for the rest of 2011, recognising the continuing economic uncertainties which inevitably impact on the European software and ICT services sector, we remain optimistic that our year end position will reflect the steady progress the Group has made over the past three years. We are also alert to the volatility in the Euro exchange markets which is likely to continue. We consider that income and cost are well balanced in the Group between Sterling and the Euro which will act as a natural hedge and reduce the risks associated with any weakness in the Euro to Sterling exchange rate over the coming months. We remain committed to gradual margin improvement and using the second half of 2011 to further build up our order book for a successful 2012.

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of changes in Equity

Consolidated Statement of changes in Equity (continued)

Consolidated Statement of changes in Equity (continued)

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Notes to the Unaudited Interim Report