|Edison note out:
SCISYS is acquiring Germany-based ANNOVA Systems for an estimated deal value of £15.3m. ANNOVA is a leading supplier of software-based editorial solutions to the media sector. It has a track record of generating strong revenue growth and in 2015 won a landmark contract with the BBC, which underpins financial forecasts for 12 years. ANNOVA complements SCISYS’s dira! product offering for radio broadcasters, extends the group’s capabilities into television and creates cross-selling opportunities. The deal significantly boosts earnings, aided by cheap debt financing costs, and is value enhancing on our assumptions. Consequently, we believe the stock continues to look attractive on c 10x our FY17e earnings.
Forecasts: ANNOVA incorporated
We have added ANNOVA into our existing forecasts from year end. This results in a significant boost to revenue and adjusted operating profit while interest and tax also go up. Revenue rises by 17% in FY17 and FY18, adjusted operating profits go up by 39% and 37%, while EPS rise by 27% in each year. However, the group swings into a significant net debt position: we forecast £7.8m as at 31 December 2016, which rises to £13.5m after including the c £5.6m estimated earnout liabilities, which are on a discounted basis.
Valuation: ANNOVA leverages the opportunity
The stock trades on c 0.87x our FY17e revenue forecast and c 8.2x EBITDA, which is attractive if SCISYS can successfully exploit the M&B division’s strong BBC success story to drive cross-selling opportunities within Europe and extend the product outside Europe. Our DCF model – which is based on our forecasts, a conservative weighted average cost of capital (WACC) of 10% and a 10.7% long-term margin target – values the stock at 142p, or 28% above the current level.|
Scisys ups the Broadcast & Media ante with ANNOVA
It’s taken quite some time but Scisys has found a company that appeals and is acquiring ANNOVA Systems, a German-based supplier of software editorial solutions to large and medium sized broadcasters in Northern European. It is far from an unknown quantity as the two suppliers have a set of common customers.
ANNOVA’s OpenMedia product, which enables story centric workflows for news creation and distribution on any medium, complements the dira! audio playout software Scisys takes to market through its up and coming Media & Broadcast division. The combination will broaden the Scisys portfolio and create stronger positions in Germany and across Europe, while also enabling it to access a larger part of the media and broadcast technology market.
It appears to be a positive move on all fronts because Scisys expects ANNOVA to be “strongly earnings enhancing” from 2017. For the year to December 2015 ANNOVA reported revenue of €7.5m (vs. € 6.3m) with EDIT of €1.1m (vs. €1.4m). Its EBIT of 15% exceeds the Scisys average so it is expected to improve the overall Group margin profile. The sums Scisys is paying – an initial consideration of €11.35m (£9.7m) cash with a three year earn out of up to €16.48m (£14.09m) cash or shares, for a maximum of €27.83m (£23.8m) – seems reasonable.
Media & Broadcast is an up and coming segment within Scisys that has seen rising activity over the past year, including a landmark contract with the South African Broadcasting Corp (SABC), that followed hard on the heels of a contract with a UK radio broadcaster. The contracts were small but strategic, providing next gen broadcasting reference cases to help grow the division which is c20% of the business. One of the benefits of ANNOVA is that it signed a 12-year contract with the BBC in 2015 and this will be a highly valuable reference site.|
|For transparency I did sell my holdings into the rise this morning, thought acquisition news positive as well as recent trading updates, just took advantage of the unexpected strength, but likely to be buying back at some stage.|
|Acquisition. Strongly earnings enhancing from 2017. finnCap ups target price to 155p from 120p!|
Scisys: Emerging stronger
This year is going so much better for Scisys than last year. Its 2015 ‘perfect storm’ (see Management guiding Scisys through perfect storm) now feels like a distant memory. Following a wholly positive results announcement for H1 (see Scisys bounces back in H1), the second half of the year has now gone better than was expected. Adjusted operating profit and revenues for the year to end December are now predicted to be ahead of market guidance. The sterling to euro exchange rate movements have helped but Scisys also points to additional contract wins and improved efficiency in delivering existing projects. It appears the lessons learned last year, when the company had to deal with a problem contract, are being applied and resulting in better project performance in the rest of the business. Great to see Scisys back on form.|
|I've bought a new lot of 32 Red (TTR) - still have some that I have nearly trebled on.
32 Red runs gambling platforms allowing addicted
gamblers to be parted from their money in whichever way they fancy.
So if they prefer to lose
their money playing Poker, or love losing playing Bingo, no problem.
It looks cheap and no reason why it shouldn't head back to highs of 170 plus. It's got a deal
with ITV for "I'm A Celebrity" and Ant and Dec games and there is strong rising revenue
and profits. Looks a good gamble!|
|finnCap up tp by 20% from 100 to 120p|
|Not surprised at the strong update today. Ahead of forecasts. Still very undervalued imo.|
|Lot of room here to progress imo. SSY at a 50% discount against FTSE Sector. Low PEG and PSR.|
|Yes pleased to see SSY joining in now with the overall rally, after what seemed to be a potentially significant contract win.
They did seem rather upbeat when releasing their interim results in September, said that all divisions performing to or exceeding budget, also expect to see positive impact on profitability from weaker pound in second half.|
|Good to see the share price moving up now and joining in the rally with the rest of the market. :-)|
|I've bought back in today interceptor2 after selling out a while ago.
The contract announcement today looks to be quite significant imo. The next trading update might make interesting reading.
I like the chart too which now looks like it is turning back up after hitting trend support.|
|Contract win announcement this morning.
Wonder why the price hasn't responded yet :o)
|SCISYS reported a strong H1, with revenues up 35% to a record £22.2m and the group returned comfortably to profit, despite being held back by currency hedging due to the slide in the pound against the euro. The performance partly reflects the impact of a problem project in H115, which led to deferrals. The group has also been winning new business and had a strong closing order book at £35m. Cash flow was very strong, with the group returning to a net cash position of £1.4m from £1.0m net debt at end-December. We have upgraded our adjusted operating profit forecasts by 12% in FY16 and 8% in FY17. Given the potential for margin recovery and the improving growth profile, in combination with a strong balance sheet, we believe the stock looks attractive on c 12x our FY17e earnings.
|Thanks for the article AISHAH.
Strong breakout here today.|
It was good news pretty much all around at Scisys as it revealed results for the first half of 2016 (to June 30), and a marked contrast to the dreadful ‘perfect storm’ effect of the year ago period (see here).
Revenue was up 35% to £22.1m while operating profit reversed from a £1.1m loss to a £1.1m profit, despite an FX hit impacting hedging contracts in the immediate aftermath of the EU exit vote – essentially Scisys took all the H216 and FY17 pain in June 2016, but will reap top line rewards going forward). The company also improved its cash position, swapping £1.9m of net debt for £1.2m of net cash. In a nutshell, H1 was all about the “bounce back” as chairman Mike Love described it.
Speaking with the management team it is apparent there is no shortage of activity within the company and all three core divisions moved forward. Enterprise Solutions and Defence revenue was up 79%, Space rose 22% and Media and Broadcasting saw a 12% uplift, with margin improvements across all three too.
CEO Klaus Heidrich highlighted several areas of activity that show the company is making active use of its expertise to colonise adjacent areas, such as the rapidly growing commercial space flight sector. Of particular note is the post period contract – a “stunning win” according to Heidrich - with new internet telecommunications enterprise OneWeb for the Pleniter product which will be used to plan a major mission of several hundred satellites. Scisys has also partnered with PTScientists and their “Mission to the Moon” as part of the Google Lunar-X-Price competition. Its marine defence contract with the MoD was also a standout in ESD, and the contracts with South Africa Broadcasting Corp and a large UK radio broadcaster also helped drive performance within the up and coming Media and Broadcasting division.
What was also interesting was that although the contribution of the acquired Xibis business is tiny, technology transfer and cross customer conversations are happening between it and ESD, as Xibis apparently infuses ESB with new ideas and mobile and web approaches. This is definitely a development to watch.|
|Yes very good results here, I am surprised that they didn't highlight an adjusted PBT and EPS figure, adding back the £500k from currency hedging in the first half, it is a fair calculation imo.
Adjusted EPS is 4.3p, by adding back the £500k and deducting tax at 15%.
They say that if sterling remains at these lower levels during the second half, then there will be a good currency gains. So same performance again in H2 would see basic eps of 4.3p and then additional profits over this on currency gains.
Edit, Last four years H1/H2 weighting = 45/55|
|Very pleased with those results! :-)|
|Hopefully that is the bottom of the move now printed.
|Nice delayed trade for 17k shares at 85p. Looks good here imo.|
The good news for Scisys keeps rolling in this year (see Scisys – strong start to 2016 continues). Its Enterprise Solutions & Defence (ES&D) division was at the centre of an ‘annus horribilis’ for Scisys last year, when it suffered due to a problem contract (see Scisys back on form in 2016). But today, Scisys announces a new contract to add to the proof that the division is moving on and building business in new areas.
Scisys has won a contract with the Ministry of Defence (MoD)’s Defence Science & Technology Laboratory (Dstl) to deliver further research and development services. The contract, which was awarded through the MoD's Framework Agreement for Technical Support Design & Engineering, comprises an initial one-year phase of work valued at £1.2 million, with the potential for this to grow to £3 million as subsequent phases begin during the next two years. Scisys highlights that this is another win in maritime defence – an area that has become a focus recently. The company will create and demonstrate a new decision support system for the Royal Navy, enabling it to tackle increasingly complex air threats.
Of course, following issues delivering a fixed price contract last year, Scisys is keen to highlight that it already has a strong reputation for delivery of “innovate R&D” with Dstl. Now it has another opportunity to solidify that reputation.|
|Opened a new position in here this morning.|
|The drop on Friday was surprising with the low volume of transactions. Nice MOD contract announced today will strengthen sentiment, and then we have interims to look forward to later this month.
Agree with others here about the impressive cash generation which reversed a £1.0m Net position at the star of the year, to a reported Net cash position of £1.4m last month.
|Surprising drop on low volume?|