SSY.L Regulatory News (SSY)

SCISYS PLC

(SSY: AIM)

Preliminary results for the year ended 31 December 2010

SciSys plc ("SciSys", "the Group" or "the Company"), the supplier of bespoke software systems, IT based solutions and support services to the Media Broadcast, Space, Government & Defence, Environment and Applications Support sectors, today announces Preliminary Results for the year ended 31 December 2010.

Financial Highlights:

·; Revenue up by 5% to £43.6m (2009: £41.7m);

·; Adjusted operating profit up by 24% to £2.1m (2009: £1.7m) before amortisation of intangible assets, share based payments and exceptional charges;

·; Operating profit £1.7m (2009: £0.6m);

·; Basic earnings per share 3.4p (2009: 1.2p);

·; Net cash position as at 31 December 2010 of £4.9m (2009: £2.4m).

·; Annual dividend increased to 1.1p (2009: 1.0p)

Operational Highlights:

·; Key contracts won in 2010 with Capgemini, ERTU, Polish Institute of Meteorology and Water Management (IMWM), Irish EPA, European Space Agency (GFC8 framework- ESOC), Cable & Wireless Worldwide and French Space Agency (CNES).

·; Support contract renewals and enhancement work across a wide range of customers including The National Archives, Transport for London, EDF Energy, Parliamentary ICT and Cable & Wireless Worldwide.

·; ISO270001 (Information Security Management) was achieved.

Commenting on the results, Mike Love, Executive Chairman of SciSys plc said:

"Like most companies in the ICT sector, SciSys faced some major challenges in 2010 caused by the spending reviews undertaken by UK government and the more difficult wider economic environment. I am pleased to report that overall the business performed ahead of our expectations in the second half of the year notwithstanding the uncertain and difficult market conditions."

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About SciSys plc

Employing nearly 450 staff, SciSys is a leading developer of Information and Communications Technology (ICT) services, e-Business and advanced technology solutions. The Company operates in a broad spectrum of market sectors including the Media Broadcast, Space, Government & Defence, Environment and Applications Support sectors. SciSys clients are predominantly blue chip and public sector organizations. Customers include the Environment Agency, the Ministry of Defence, Astrium, Arqiva, Cable & Wireless Worldwide, the European Space Agency, Eumetsat, the BBC, the Coal Authority and Transport for London. The company has UK offices in Chippenham, Bristol and Reading and three offices located in Germany. More information is available at www.scisys.co.uk.

EXTRACT FROM CHAIRMAN'S STATEMENT

I am pleased to confirm that 2010 was a year of success and that we continue to make good progress.

Like most companies in the ICT sector, SciSys faced some major challenges in 2010 caused by the spending reviews undertaken by the UK government and the more difficult wider economic climate. However, SciSys has succeeded in delivering an adjusted profit before tax of £2.1m, a 24% improvement on £1.7m in 2009. Our net cash increased by 96% from £2.5m to £4.9m, and at 5%, our adjusted operating margin showed improvement on the margin achieved in 2009 (4.0%); this was one of the key objectives for the year. The Finance Director's report provides more detail on the key financial results achieved during 2010.

While our first half results were positive and we believed that the business was likely to be resilient in the face of the spending reviews, we believed it prudent to give a note of caution when presenting our Interim Results by drawing investors' attention to the uncertainties faced by the Company in some of its markets during the second half of the year.

I can now report that overall the business performed ahead of expectations in the second half of the year notwithstanding the uncertain and difficult market conditions experienced.

Dividend

The Directors have confirmed that a final dividend of 0.77p per share will be paid subject to approval by shareholders at the Annual General Meeting. When added to the interim dividend of 0.33p per share, paid in November 2010, this gives a full year dividend of 1.1p per share. The proposed final dividend will be paid on 23 June 2011 to shareholders on the register at 13 May 2011. The shares will go ex dividend on 11 May 2011.

This represents an increase of 10% over the 1p per share dividend paid in 2009 and SciSys is pleased to continue demonstrating its commitment to a progressive dividend policy.

Outlook

The Company continues to trade well and entered 2011 with a comfortable order book across all business sectors. With net cash reserves of £4.9m SciSys is now back on a solid financial footing.

There is some uncertainty and pressure in the face of the UK government public sector spending cuts; however, it is encouraging to see some public sector contracts begin to filter through after the hiatus caused by the spending review. This, as well as the cost control measures taken in the last quarter of 2010, leads the Board to believe that the business is likely to enjoy further growth in sales, profits and net margins in 2011 in line with our long term strategy.

Mike Love

Chairman

EXTRACT FROM CHIEF OPERATIONS OFFICER'S STATEMENT

2010 was my first year in the role as Chief Operations Officer, accepting responsibility for the tactical and operational performance of the Group. I am therefore very pleased to provide this review of the success we have achieved over the year.

2010 has been an unpredictable and potentially difficult year for any organisation which relies on the UK government for a good proportion of its business. Despite these underlying negative market conditions that have touched all the market areas that SciSys operates in, I am pleased to report a successful year for SciSys; and that we have delivered against our predicted targets.

As reported to shareholders in the Interim Report, some of the large projects that we were expecting to contribute to in 2010 were put on hold. Our re-focussed strategy in finding alternative revenues to cover this shortfall has resulted in exceeding the original revenue expectations from these programmes. We still expect some of the deferred projects to be realised over the coming years. As well as winning business in a number of new areas, including in the private sector, we have successfully deployed staff with customers on a time and materials basis, in locations as diverse as Chippenham to Afghanistan.

Effective risk management is the bedrock of businesses that supply bespoke services - doing things that customers have not done before always has an element of uncertainty. 2010 saw us continue to maintain and improve our risk controls. This is evident in all business functions, from continuing to refine project controls, through to careful qualification of business development opportunities. A significant achievement in 2010 was the UK side of the business being awarded accreditation to ISO 27001, Information Security Management, proving our processes for protecting customer and our own data. Our German business aims to achieve the same accreditation during 2011.

Much of our work takes more than one year to deliver, especially in the space market place. For example, the European Space Agency (ESA) Cryosat-2 Mission was launched in 2010, with the first pieces of work being undertaken by SciSys in 2000, a full decade earlier. These programmes often span perturbations in the market, and have committed funding that would be very difficult to renege upon, thereby reducing our exposure to the immediate effect of shorter term market fluctuations.

Such long base line work requires unusually enduring relationships between the customer and the contractor and a strong commitment to the end goal. A good example is our continued success in winning and delivering work into the European Satellite Positioning System, Galileo, including the first delivery of any part of the ground segment. Much of our support work is also delivered on a long base line, with contracts running with specific service levels for multiple years.

In 2010, frame contract wins included those with the ESA operations centre, the French Space agency CNES, the Irish Environmental Protection Agency and the Met Office. In our support business, all expected support contracts were renewed along with an important change to the business model for one of our main support contracts; that being the Environment Agency where they "outsourced", and we are pleased to be part of the winning team led by Capgemini.

David Jones

Chief Operations Officer

EXTRACT FROM GROUP FINANCE DIRECTOR'S REPORT

I am pleased to report that SciSys delivered a strong second half performance in challenging market conditions, boosting profitability, further improving operating margins and significantly strengthening the Group balance sheet.

Total revenues increased by 5% to £43.6m (2009: £41.7m). Of this total, fees for professional services delivered directly by the Group grew by 2% to £33.3m (2009: £32.6m). The balance of revenues was predominantly derived from the relatively low margin resale of third party hardware, software products and sub-contracted services.

The underlying measure of trading performance, adjusted operating profit, which excludes charges relating to amortisation of intangible assets acquired in business combinations, costs of the Group's long term share incentive schemes (both non-cash items) and exceptional costs, rose 24% to £2.1m (2009: £1.7m). Statutory operating profit almost trebled to £1.7m (2009: £0.6m).

The adjusted operating profit margin improved to 5% (2009: 4%), on track towards achieving the target of 7% by 2013. The lion's share of the increase in profitability derived from the Media & Broadcast division, which increased its 2009 contribution by 51% on revenues up 40%. This growth in revenues was largely due to work for the BBC which started in earnest early in 2010, although considerable costs of sale were incurred in 2009. Redundancy costs also depressed prior year margins as the division was restructured to facilitate future expansion.

The aggregate contribution in 2010 from the Government & Defence and Environment divisions was 12% higher than in 2009 before the two divisions were separated. Given the considerable disruption to these markets pending the conclusions of the government spending review, this was a particularly creditable result and a much better outcome than had looked apparent earlier in the year. In the Application Support division, levels of contract renewals and order intake were encouraging but price pressure associated with the public sector spending squeeze hit margins and reported contribution was 12% lower than in 2009. Whilst professional fee revenue in the Space division grew 2% from 2009, margins were adversely impacted by the cost of restructuring the UK based operations and the divisional contribution fell by 28%.

Intangible assets recognised on the acquisition of VCS AG in 2007 were fully amortised by the end of 2009 so there was no charge in 2010 comparable with the £0.9m amortisation expense reported in the previous year.

Charges for share based payments arising from the Group's share incentive schemes and the issue of free shares to employees in 2009 totalled £0.1m (2009: £0.1m).

Exceptional costs of £0.3m related to restructuring expenses incurred predominantly in the Space division. In 2009, a similar restructuring programme in the Media & Broadcast division cost £0.2m.

Basic EPS rose 183% to 3.4p (2009: 1.2p). Adjusted basic EPS, calculated on the profit for the year before amortisation, share based payments and exceptional charges, was unchanged at 5.0p (2009: 5.0p).

The Group closed the year with net cash funds of £4.9m (2009: £2.4m). This position reflects particularly strong cash generation in the final quarter of the year. Up until this point, cashflow had been adversely affected by severe delays in receipt of payments from the European Space Agency, as a result of its problematic implementation of a new contractor payments system. The Euro further weakened against Sterling during 2010 but the Group minimised foreign exchange losses on Euro denominated income by entering into quarterly currency option hedging contracts. These instruments complemented the business' natural hedge where surplus UK Space income in Euros was swapped for Sterling received in Germany from the BBC.

The tax charge for the year was £0.6m (2009: £0.2m), all of which relates to the Group's operations in Germany. In the UK, SciSys has historic tax losses available for offset against any taxable profits generated and continues to benefit from tax credits under the HMRC's Research and Development scheme. Consequently, no UK corporation tax is expected to be payable under the present tax regime for the forthcoming few years at least.

Chris Cheetham

Finance Director Consolidated Income Statement for the year ended 31 December 2010

Consolidated Statement of Comprehensive Income for the year ended 31 December 2010

Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity (continued)

Consolidated Statement of Financial Position as at 31 December 2010

Consolidated Statement of Cash Flows for the year ended 31 December 2010

Annual report

The financial information set out in this preliminary announcement does not constitute SciSys' statutory accounts for the years ended 31 December 2010 and 31 December 2009. Statutory accounts for the year ended 31 December 2010 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 31 December 2009 have been delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) of the Companies Act 2006. This preliminary announcement has been prepared and approved by the Directors in accordance with International Financial Reporting Standards (IFRS) and its interpretations as adopted by the International Accounting Standards Board (IASB) and by the EU (Adopted IFRS).