4 Jun 2015 07:00
SCISYS PLC
(SSY: AIM)
Trading update
SCISYS PLC (the "Group" or the "Company"), the supplier of bespoke software systems, IT-based solutions, web and mobile application development and support services to the Media & Broadcast, Space, Government, Defence and Commercial sectors, is providing the following update on trading.
SCISYS is experiencing difficulties in one major fixed price development project in its Enterprise Solutions and Defence (ESD) division. Having recently entered into the system integration phase it is now clear that the size and complexity of the project has been underestimated and the Company will have to make provisions in 2015 for the anticipated additional cost to complete.
While trading elsewhere in ESD and in the SCISYS Space and Media & Broadcast divisions is progressing in line with plans, the Board now believes that trading in the other parts of the business will not fully compensate for the provisions necessary to complete this problem project and meet current guidance.
In addition the Company continues to suffer from the strength of sterling over the weaker euro, which is having a negative impact on consolidated top line growth and the translation of profits denominated in euros.
The Board now believes that these two issues will lead to a substantial short fall in profits for 2015 compared to the guidance issued in March.
Over the five years from 2010 to 2014 SCISYS grew its operating profit from £1.7 million to £3.2 million and continues to be a strong niche player in providing system solutions that are critical to its customers' businesses. Its balance sheet remains strong and is underpinned by solid freehold property assets. The Group remains profitable but nevertheless may breach certain of its UK banking covenants at 30 June 2015, when these are tested in mid-August. The Company has consulted with its principal UK bank which remains supportive at this time.
The Board believes that the Group's stated strategy remains valid and that further growth in profits and margins can be resumed once the problems with this one project have been resolved but that the timescales to meet its stated targets will need to be revised.
Mike Love, Chairman of SCISYS, commented:
"The Board views a profits warning as deeply regrettable and wholly disappointing given the strong and robust results achieved in the preceding five years. Some of the factors behind this update in performance have been within the Company's control, but the exchange rate issue is not.
"We believe in general that our review processes and project controls across the Group are robust and that this failure in estimation and breakdown in controls is an isolated incident among many current successful projects.
"SCISYS remains fundamentally strong and confident in its long term ambitions."
For further information please contact:
SCISYS PLC | +44 (0)1249 466 466 | |
Mike Love | Chairman | |
Klaus Heidrich | Chief Executive Officer | |
Chris Cheetham | Finance Director | |
finnCap (NOMAD & Broker) | +44 (0)20 7220 0500 | |
Julian Blunt | Corporate Finance | |
Mia Gardner | Corporate Broking | |
WalbrookPR Tom Cooper/Paul Vann | +44 (0)20 3176 4722 +44 (0)797 122 1972 tom.cooper@walbrookpr.com |
About SCISYS:
Employing nearly 450 staff, SCISYS 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 Environment Agency, the Ministry of Defence, Airbus Defence & Space, Arqiva, Vodafone, the European Space Agency, Eumetsat, the BBC, RNLI, AON, Halfords, Interflora and the National Trust. The Company has UK offices in Chippenham, Bristol and Reading and two offices located in Germany. More information is available at www.scisys.co.uk