SSY.L Regulatory News (SSY)

SCISYS PLC

(SSY: AIM)

Trading update

SCISYS PLC ("SCISYS" or the "Group" ), the supplier of bespoke software systems, IT-based solutions and support services to the Media & Broadcast, Space, Government, Defence and Commercial sectors, is pleased to release the following trading statement, which will be read out at its AGM to be held at noon today:

SCISYS can report that it has made an impressive start to 2018, delivering on contracts that formed part of its record opening order book, winning notable new contracts and generating strong cash flow. As signalled at the time of announcement of the 2017 results, our financial performance for 2018 is expected to be more evenly balanced between the two halves of the year than in 2017, where results were skewed greatly towards the second half. All divisions continue to grow their teams on the strength of their pipelines of new business opportunities.

In addition to the landmark €3.9m order announced in April with Airbus Defence & Space to develop the ground-control infrastructure for the EGNOS satellite-navigation augmentation system, our Space division has further extended its footprint in the EU's Galileo satellite navigation programme. The Group has not experienced resistance from awarding authorities on EU space programmes where SCISYS has been bidding.

Our Media & Broadcast (M&B) division reported in February that it had secured an enhanced service contract for the BBC until at least 2025 and has subsequently added six new German broadcasters to its customer base for rollout of its weConnect gateway functionality to exchange media content within the ARD group of public broadcasters. ANNOVA Systems, acquired in December 2016, has signed contracts with German Hessischer Rundfunk and French L'Equipe 24, who are both new customers.

The Group's Enterprise Solutions & Defence (ESD) division has successfully extended its support agreements with Vodafone to 2020 and Capgemini to 2021, for the 111 non-emergency NHS number and the Environment Agency applications, respectively. In addition, ESD continues to expand its activities providing on-site consultancy teams to key customers in both the commercial and defence/security arenas, increasing the number of staff deployed by 95% in the last 12 months.

To accelerate delivery of potential synergies between the complementary M&B and ANNOVA businesses, the Board is advancing its plans for the closer integration of the two operations. To facilitate this process - and at the request of ANNOVA's vendors - SCISYS has today agreed to the early termination of the ring-fence arrangement established for ANNOVA's acquisition on 31 December 2016 that could otherwise remain in force until 31 December 2019 (the "Ring-Fence Termination"). In consideration for the vendors surrendering their entitlement to potential additional earnout payments, SCISYS will pay the vendors a fixed sum of €0.7m and repay a subordinated vendor loan of €2.5m six months early. Both cash payments will be made on 28 December 2018. While the Group already benefits from cross-fertilisation of the overlapping customer bases, the Directors believe that further medium-term gains can be accelerated by removing the constraints on collective management imposed by the ring-fence agreement. The Ring-Fence Termination amounts to a related-party transaction within the meaning of the AIM Rules between SCISYS and the ANNOVA vendors, one of whom (Michael Schüller) is currently a director of ANNOVA and one of whom (Silvio Klötzig) has been a director of ANNOVA within the last 12 months. The Board considers, having consulted with the Company's nominated adviser, finnCap Ltd, that the Ring-Fence Termination is fair and reasonable insofar as the Company's shareholders are concerned.

The Group order book currently stands above £100m, up from £91.3m at the last year end, with the M&B division's BBC support contract renewal included in this figure.

The Directors continue to monitor the progress of Brexit negotiations between the EU and UK closely, with a focus on potential implications for our Space business. As outlined in our 2017 Annual Report and Financial Statements, the Board has various contingency plans in place involving the redomiciliation of SCISYS PLC to the EU. The Board is confident that this will protect the Group's participation in EU-funded programmes, such as Galileo and EGNOS, regardless of the outcome of negotiations. Contrary to some recent commentary in the financial press, SCISYS is not directly engaged in security-sensitive Public Regulatory Service (PRS) activities on the Galileo programme, which is a particular area where future involvement of UK companies has been threatened, as SCISYS' activities are directed at other areas of the Galileo programme.

Cash generation remains strong. Group net debt fell to £1.9m by the end of May, from the 2017 closing position of £5.9m. Cash flow has been improved further by a shift in the mix of business away from traditional fixed-price contracts with deferred invoicing milestones towards monthly-billed, on-site contract work in ESD and large Space assignments that attract advance payments.

In view of the Group's buoyant order book, an impressive pipeline of new business prospects and continued strong cash conversion, the Directors are confident that SCISYS is well placed to deliver year-on-year progress during 2018 and beyond.

Investor Lunch Programme:

SCISYS will be holding Investor Lunches for Private Client Investment Managers and Private Investors in London on 29 June 2018 and Bristol on 5 July 2018. Those wishing to attend should contact Tom Cooper on tom.cooper@walbrookpr.com or 020 7933 8780 or 0797 122 1972 for further details.

For further information please contact:

About SCISYS:

Employing around 580 staff, SCISYS group is a leading developer of Information and Communications Technology services, e-Business, web and mobile applications, editorial newsroom 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, Arqiva, Vodafone, the European Space Agency, Eumetsat, the BBC, RNLI, Pets at Home, Siemens and the National Trust. The Company has UK offices in Chippenham, Bristol, Leicester and Reading and German offices located in Bochum, Dortmund, Darmstadt and Munich. More information is available at www.scisys.co.uk.