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SCISYS PLC Half-year Report

21/09/2017 7:00am

UK Regulatory (RNS & others)


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TIDMSSY

RNS Number : 3505R

SCISYS PLC

21 September 2017

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014 (MAR).

SCISYS PLC

(AIM: SSY)

INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2017

SCISYS PLC ("SCISYS"), the supplier of bespoke software systems, IT-based solutions and support services to the space, media & broadcast, government, defence and commercial sectors is pleased to announce its interim results for the half year to 30 June 2017. The Directors anticipate that SCISYS will deliver full-year results at the upper end of current guidance, a view supported by the 30 June 2017 order-book value of GBP64m and buoyed by recent contract wins.

Financial and Operational Highlights:

   --   Adjusted operating profit up 18% to GBP1.3m (2016: GBP1.1m). 
   --   Revenues up 23% to GBP27.2m (2016: GBP22.2m). 
   --   Record half-year order book of GBP64m (2016: GBP35m). 

-- Net debt reduced from GBP10.2m at 31 December 2016 to GBP9.0m (30 June 2016: net funds GBP1.4m).

   --   Interim dividend up 11% at 0.59 pence per share (2016: 0.53p). 

-- Post-period end, December 2016 acquisition, ANNOVA, achieved major project milestone on flagship BBC contract, triggering payment of first earn out instalment in September.

-- ANNOVA's success exceeded expectations reflected in 2017 opening balance sheet, resulting in exceptional charge of GBP1.8m for revalued contingent consideration.

-- Exceptional charges and amortisation arising on ANNOVA acquisition produced statutory operating loss of GBP1.3m (2016: GBP1.1m profit) and basic LPS of 4.9p (2016: EPS 2.8p).

-- Adjusted basic earnings per share reduced to 1.4p (2016: 2.8p) due to the impact of tax on exceptional charges.

-- ANNOVA secured a succession of key contract wins with existing and new customers, including Canadian broadcaster, Corus TV.

-- M&B division gained its first French customer with RTL contract win and South African Broadcasting Corporation project entered large roll-out phase.

   --   ESD division secured one of seven coveted places on key Metropolitan Police Service framework. 
   --   Space division delivered 26% increase in first half-year contribution. 

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

"We are very pleased and buoyed by a solid operational performance and key contract wins across the Group resulting in our record order book. We are particularly pleased by the robust performance of ANNOVA; it is already evident that this acquired business is delivering significant strategic benefit to the Group. At this point in time we anticipate that we will deliver full-year results at the upper end of current guidance."

For further information please contact:

 
                                              +44 (0)1249 466 
 SCISYS PLC                                    466 
-------------------------------------------  --------------------------- 
     Mike Love           Chairman 
----------------------  -------------------  --------------------------- 
     Klaus Heidrich      Chief Executive 
                          Officer 
----------------------  -------------------  --------------------------- 
     Chris Cheetham      Finance Director 
----------------------  -------------------  --------------------------- 
 finnCap (NOMAD                               +44 (0)20 7220 
  & Broker)                                    0500 
-------------------------------------------  --------------------------- 
     Julian Blunt        Corporate Finance 
----------------------  -------------------  --------------------------- 
     Mia Gardner         Corporate Broking 
----------------------  -------------------  --------------------------- 
     WalbrookPR                               +44 (0) 20 7933 
      Tom Cooper/Paul                          8780 
      Vann                                     +44 (0)797 122 
                                               1972 
                                               tom.cooper@walbrookpr.com 
-------------------------------------------  --------------------------- 
 

Notes to Editors:

Employing around 500 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, Defence and Commerce. 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, Interflora and the National Trust. The Company has UK offices in Chippenham, Bristol, Leicester and Reading and German offices in Bochum, Darmstadt, Dortmund and Munich. More information is available at www.scisys.co.uk

Introduction

The Board of SCISYS is pleased with the Group's results for the first half of 2017, in particular with its record order book, which stands at GBP64m (2016: GBP35m), and the performance of the recently acquired ANNOVA business. As previously signalled, 2017 revenues and profits will be heavily weighted towards the second half of the year. This is a consequence of the phasing both in contract deliveries and the placing of new orders across the year, a pattern particularly pronounced within ANNOVA. We continue to expect an overall benefit from the weaker pound for the remainder of the year if the euro-sterling exchange rate remains at current levels.

Key financials

The Group's revenue totalled GBP27.2m (2016: GBP22.2m). In the six months ended 30 June 2017, the Group's adjusted operating profit was GBP1.3m (2016: GBP1.1m). Adjusted basic earnings per share were 1.4p (2016: 2.8p). A fuller explanation is available in the Finance Review section.

Operating Review

Introduction

All divisions performed well during the first half of 2017, delivering contracts on time and within budget and generating improved operating cash flows. Across the Group we won strategic contracts and gained significant new customers, including Corus TV in Canada and RTL radio in France. We entered the second half with strong prospects for noteworthy future contract wins in all divisions, some of which have already materialised.

We still do not expect any adverse operational consequences as a result of Brexit in the short to medium term but continue to explore options to optimise our future trading position and prepare contingency plans in response to the continued uncertainty.

Enterprise Solutions & Defence (ESD) division

ESD delivered a solid first half year and has expectations of a stronger second half. The division continues to work on ongoing defence projects for the Ministry of Defence, and on delivering further research and software development services to the Defence Science and Technology Laboratory (Dstl) among many other activities.

Current projects are running to plan and resulted in a creditable contribution margin of 23%, given the anticipated bias towards the second half year. The division's other projects span a wide range of commercial and public sector customers and varied software projects, including ongoing work for the Coal Authority, Vodafone, UKPN, Arqiva and Siemens.

Following an intense procurement process, in May 2017, ESD secured a strategic success as one of only seven organisations to gain a place on the Metropolitan Police Solution Provider Framework. Notable other framework successes include agreements with Siemens and a G-Cloud framework for government procurement.

Based on the strong order book, the successful delivery and exciting opportunities in the pipeline, the division is well positioned to end the year on a strong footing.

 
                 Six months   Six months     Year ended 
                   ended 30     ended 30    31 December 
                  June 2017    June 2016           2016 
                    GBP'000      GBP'000        GBP'000 
--------------  -----------  -----------  ------------- 
 Revenue              7,901        8,598         16,652 
--------------  -----------  -----------  ------------- 
 Contribution 
  value               1,809        2,526          4,462 
--------------  -----------  -----------  ------------- 
 Contribution 
  margin                23%          29%            27% 
--------------  -----------  -----------  ------------- 
 

Space division

The division delivered an excellent performance during the first half year as it continued to build on previous success in contributing to the Galileo satellite navigation programme, various programmes for the European Space Agency (ESA), and also in delivering its proprietary commercial PLENITER software suite for the planning, implementation, control and operation of complete satellite missions.

In February 2017, the division won a EUR1.9m contract with the international technology group, GMV, for the design and implementation of a mission control system to support the EUMETSAT Polar System Earth observation programme and recently renewed its customer relationship with Japan's Meteorological Agency.

Space division's projects ran well during the first six months of the year, including the Galileo programmes, where we are well positioned to secure substantial contract extensions in the second half of the year. New project starts include the software design, coding and verification activities for aspects of the ESA's rover mission to Mars, ExoMars. The division also continues to be a major player in Earth-observation programmes, and work has commenced with Airbus Defence and Space for its delivery to the ongoing French-German MERLIN satellite climate mission.

 
                 Six months   Six months     Year ended 
                   ended 30     ended 30    31 December 
                  June 2017    June 2016           2016 
                    GBP'000      GBP'000        GBP'000 
--------------  -----------  -----------  ------------- 
 Revenue             11,561        9,601         19,874 
--------------  -----------  -----------  ------------- 
 Contribution 
  value               2,423        1,917          4,157 
--------------  -----------  -----------  ------------- 
 Contribution 
  margin                21%          20%            21% 
--------------  -----------  -----------  ------------- 
 

Media & Broadcast (M&B) division

M&B secured its first win in South Africa in April 2016 with a EUR2m contract for South Africa Broadcasting Corporation (SABC) for implementation of its proprietary dira! radio solution. The pilot phase completed in January 2017 and the next phase is to equip 5 channels at SABC in Johannesburg, after which the system will be rolled out to 15 regional locations across South Africa. The activity is expected to pick up during the second half of the year.

M&B continues to develop its dira! product, with the latest innovations being delivered to a large UK media broadcaster. The division gained its first French customer and added a major private broadcaster to its portfolio by securing a contract with RTL in May.

The outlook for the full year is encouraging as the project deliveries are expected to gain momentum over the forthcoming months. In turn, we anticipate that this will rebuild M&B's contribution margin towards previous levels.

 
                 Six months   Six months     Year ended 
                   ended 30     ended 30    31 December 
                  June 2017    June 2016           2016 
                    GBP'000      GBP'000        GBP'000 
--------------  -----------  -----------  ------------- 
 Revenue              3,539        3,503          8,026 
--------------  -----------  -----------  ------------- 
 Contribution 
  value                 728          959          2,512 
--------------  -----------  -----------  ------------- 
 Contribution 
  margin                21%          27%            31% 
--------------  -----------  -----------  ------------- 
 

ANNOVA Systems

ANNOVA has demonstrated its growing success with a number of recent contract wins based on its proprietary OpenMedia product, one of the leading newsroom computer systems worldwide. Impressively, ANNOVA has won an initial contract with Corus Entertainment, the biggest media-content company in Canada. Corus is adding OpenMedia to its award-winning Global News operations across the country.

In August, ANNOVA won a strategic contract with German ARD-aktuell to develop a portal for ARD's programmes - including its primetime news programme, Tagesschau - based on the OpenMedia Newsboard product. This complemented the earlier award of a EUR2.5m contract with a major German public broadcaster for replacement of a competitor's installation.

ANNOVA achieved a key commercial milestone in its flagship long-term contract with the BBC in August. Following the successful live operation of its solution on pilot customer sites, OpenMedia will now be rolled out across the BBC estate.

Given the progress made by ANNOVA since its acquisition to date, the outlook for the full year and the medium term future are highly encouraging.

 
                 Six months   Six months     Year ended 
                   ended 30     ended 30    31 December 
                  June 2017    June 2016           2016 
                    GBP'000      GBP'000        GBP'000 
--------------  -----------  -----------  ------------- 
 Revenue              3,610          n/a            n/a 
--------------  -----------  -----------  ------------- 
 EBITA*                 283          n/a            n/a 
--------------  -----------  -----------  ------------- 
 EBITA margin*           8%          n/a            n/a 
--------------  -----------  -----------  ------------- 
 

* other divisions are measured on their contribution to shared Group overheads whereas ANNOVA currently remains largely independent, allowing the computation of a representative EBITA

Finance Review

Results for the half year to 30 June 2017 continue to show encouraging progress, partly from the initial inclusion in the consolidated figures of results for ANNOVA Systems ("ANNOVA"), which SCISYS acquired on 31 December 2016.

Total revenues were up 23% to GBP27.2m (2016: GBP22.2m) and the professional fees component increased by 22% to GBP22.4m (2016: GBP18.4m). The underlying measure of trading performance, adjusted operating profit, which excludes the costs of the Group's long-term share incentive schemes, exceptional items and amortisation of intangible assets arising on business acquisition, was up 18% at GBP1.3m (2016: GBP1.1m). Adjusted basic EPS, calculated on the profit for the period before post-tax exceptional items, share-based payments and amortisation of acquisition-related intangible assets, were 1.4p (2016: 2.9p). As highlighted in our AGM statement in June, we anticipate that the second half-year financial performance will be substantially stronger than the first half.

The statutory operating loss was GBP1.3m (2016: GBP1.1m profit) after bearing amortisation costs relating to the ANNOVA acquisition of GBP1.0m (2016: GBPnil) and net exceptional items of GBP1.6m (2016: GBPnil). Exceptional items comprised two elements, a one-off R&D tax credit of GBP0.2m and a charge of GBP1.8m to reflect an uplift in consideration payable to ANNOVA's former owners as the acquired business surpassed its forecasts. Further explanation of these items is provided below. Basic loss per share was 4.9p (2016: EPS 2.8p).

The average euro-sterling exchange rate for the period was EUR1.16/GBP, which represents a 10% uplift from the comparative 2016 value of EUR1.28/GBP. Although this movement contributed to record first-half revenues, a historic high was also reached on a constant-currency basis.

Approximately half of the Group's business is conducted in euros. SCISYS mitigates its exposure to exchange-rate movements by entering into hedging contracts to convert forecast surplus euros into sterling at fixed forward rates. Such contracts are revalued quarterly on a mark-to-market basis. The net charge in the income statement for hedging contracts that matured in the period and on revaluation of future contracts was GBP0.1m (2016: GBP0.7m).

The total purchase price payable for the ANNOVA acquisition is heavily dependent on an earn-out payable over three years, linked both to average profitability and achievement of key commercial milestones in its flagship contract with the BBC. ANNOVA successfully obtained customer acceptance for a critical phase of this project three months earlier than had been provided for in the acquisition balance sheet. This triggered payment of a first earnout instalment of EUR2.0m in September 2017, of which 10% was satisfied in new SCISYS PLC shares, with the balance paid in cash from existing Group resources. As a result of ANNOVA's outperformance, the anticipated total contingent consideration payable was reassessed at 30 June 2017, resulting in an exceptional GBP1.8m charge for the first half year.

Net cash flow from operations increased to GBP2.7m (2016: GBP2.2m). At the end of the reporting period, the Group had bank deposits of GBP7.2m (30 June 2016: GBP5.6m). Unutilised working capital facilities totalled GBP4.7m (30 June 2016: GBP4.6m). Group debt at the period end was GBP16.2m (30 June 2016: GBP4.2m). The resulting net debt was GBP9.0m, a reduction of GBP1.2m from the 2016 year-end position of GBP10.2m net debt (30 June 2016: GBP1.4m net cash).

The effective tax rate for the period of 17% reflects the anticipated rate for 2017 as a whole (2016: 15%). SCISYS continues to benefit from the tax-credit system for UK expenditure on R&D in SMEs, receiving credits in the form of cash rebates from HM Revenue & Customs. Up to and including 2016 these were incorporated into the net tax charge. An accounting standard change requires R&D tax credits from 2017 to be treated as deductions from operating expenses. SCISYS anticipates that it will no longer qualify for the SME tax credit scheme in 2018 as it expects to exceed the headcount eligibility threshold. Accordingly, the above-the-line tax credit of GBP0.2m in the current period is treated as an exceptional item.

The half-year accounts are presented on a basis consistent with policies to be adopted for the Annual Report & Finance Statements for the year ending 31 December 2017.

Dividend

Our dividend for the full year to 31 December 2016 was 1.96 pence per share in line with our strategy of progressive dividend growth. I can now confirm that an interim dividend of 0.59 pence per share will be paid on 9 November 2017 to shareholders on the register as at 13 October 2017. The shares are expected to go ex-dividend on 12 October 2017.

Outlook

The second half of 2017 has started with some excellent new contract wins and significant deliveries on key projects. We are seeing healthy top-line growth while cash flows remain strong.

While our immediate focus is on exploiting the opportunity offered by the recent acquisition of ANNOVA, we continue to look for opportunities to acquire companies where there is a good market, product and cultural fit.

Based on current performance on projects and our new business pipeline, the Directors remain fully confident of meeting the upper end of full-year expectations, as well as the future prospects of the Group.

Chairman

Mike Love

Consolidated Income Statement

 
                                        Unaudited    Unaudited         Audited 
                                         6 months     6 months            Year 
                                               to           to           ended 
                                          30 June      30 June     31 December 
                                             2017         2016            2016 
                                          GBP'000      GBP'000         GBP'000 
 Revenue (note 2)                          27,175       22,223          45,744 
 Operating costs                         (28,504)     (21,165)        (42,974) 
 Share of results of associates                15           13              17 
------------------------------------  -----------  -----------  -------------- 
 Operating (loss)/profit                  (1,314)        1,071           2,787 
 "Adjusted operating profit" 
  being operating profit before 
  share based payments, exceptional 
  charges and amortisation arising 
  on business combinations                  1,252        1,090           3,231 
 Exceptional items (note 3)               (1,561)            -           (458) 
 Amortisation of Intangibles                (991)            -               - 
 Share based payments                        (14)         (19)              14 
 Operating (loss)/profit                  (1,314)        1,071           2,787 
------------------------------------  -----------  -----------  -------------- 
 Finance costs                              (388)         (99)           (186) 
 Finance income                                 6            1               1 
------------------------------------  -----------  -----------  -------------- 
 (Loss)/profit before tax                 (1,696)          973           2,602 
 Tax credit/(charge) (note 4)                 282        (146)           (380) 
------------------------------------  -----------  -----------  -------------- 
 (Loss)/profit for the period 
  attributable to equity holders 
  of the parent                           (1,414)          827           2,222 
------------------------------------  -----------  -----------  -------------- 
 
 (Loss)/earnings per share (note 
  6) 
 Basic                                     (4.9)p         2.8p            7.6p 
 Diluted                                   (4.8)p         2.7p            7.5p 
------------------------------------  -----------  -----------  -------------- 
 

Consolidated Statement of Comprehensive Income

 
                                          Unaudited    Unaudited         Audited 
                                           6 months     6 months            Year 
                                                 to           to           ended 
                                            30 June      30 June     31 December 
                                               2017         2016            2016 
                                            GBP'000      GBP'000         GBP'000 
 (Loss)/profit for the period               (1,414)          827           2,222 
 Other comprehensive income 
  not recycling through the Income 
  Statement 
 Currency translation differences 
  on foreign currency investments                54          826           1,105 
 Total comprehensive (expense)/income 
  for the period attributable 
  to equity holders of the parent           (1,360)        1,653           3,327 
--------------------------------------  -----------  -----------  -------------- 
 

Consolidated Statement of Changes in Equity

 
                                                                    Capital 
 For the six                  Share       Share      Merger     Redemp-tion    Trans-lation     Retained 
  months ended              Capital     Premium     Reserve         Reserve         Reserve     Earnings      Total 
 30 June 2017 
  (unaudited)               GBP'000     GBP'000     GBP'000         GBP'000         GBP'000      GBP'000    GBP'000 
 Balance as at 
  1 January 2017              7,272         143         943              83           1,521       12,751     22,713 
 Total comprehensive 
  income for the 
  period 
 Loss in the 
  period                          -           -           -               -               -      (1,414)    (1,414) 
 Other comprehensive 
  income 
 Foreign currency 
  translation                     -           -           -               -              54            -         54 
 Total comprehensive 
  income for the 
  period                          -           -           -               -              54      (1,414)    (1,360) 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Transactions 
  with owners, 
  recorded directly 
  in equity 
 Contributions 
  by and distributions 
  to owners 
 Share based 
  payments                        -           -           -               -               -           14         14 
 Treasury shares                  -           -           -               -               -        (361)      (361) 
 Share options                    -           -           -               -               -           74         74 
 Total contributions 
  by and distributions 
  to owners                       -           -           -               -               -        (273)      (273) 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Balance as at 
  30 June 2017                7,272         143         943              83           1,575       11,064     21,080 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 
 
                                                                    Capital 
 For the six                  Share       Share      Merger     Redemp-tion    Trans-lation     Retained 
  months ended              Capital     Premium     Reserve         Reserve         Reserve     Earnings      Total 
 30 June 2016 
  (unaudited)               GBP'000     GBP'000     GBP'000         GBP'000         GBP'000      GBP'000    GBP'000 
 Balance as at 
  1 January 2016              7,272         143         943              83             416       11,199     20,056 
 Total comprehensive 
  income for the 
  period 
 Profit in the 
  period                          -           -           -               -               -          827        827 
 Other comprehensive 
  income 
 Foreign currency 
  translation                     -           -           -               -             826            -        826 
 Total comprehensive 
  income for the 
  period                          -           -           -               -             826          827      1,653 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Transactions 
  with owners, 
  recorded directly 
  in equity 
 Contributions 
  by and distributions 
  to owners 
 Share based 
  payments                        -           -           -               -               -           19         19 
 Total contributions 
  by and distributions 
  to owners                       -           -           -               -               -           19         19 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Balance as at 
  30 June 2016                7,272         143         943              83           1,242       12,045     21,728 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 

Consolidated Statement of Changes in Equity continued

 
                                                                    Capital 
 For the year                 Share       Share      Merger     Redemp-tion    Trans-lation     Retained 
  ended                     Capital     Premium     Reserve         Reserve         Reserve     Earnings      Total 
 31 December 
  2016 (audited)            GBP'000     GBP'000     GBP'000         GBP'000         GBP'000      GBP'000    GBP'000 
 Balance as at 
  1 January 2016              7,272         143         943              83             416       11,199     20,056 
 Total comprehensive 
  income for the 
  period 
 Profit in the 
  period                          -           -           -               -               -        2,222      2,222 
 Other comprehensive 
  income 
 Foreign currency 
  translation                     -           -           -               -           1,105            -      1,105 
 Total comprehensive 
  income for the 
  period                          -           -           -               -           1,105        2,222      3,327 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Transactions 
  with owners, 
  recorded directly 
  in equity 
 Contributions 
  by and distributions 
  to owners 
 Dividends paid                   -           -           -               -               -        (671)      (671) 
 Share based 
  payments                        -           -           -               -               -         (14)       (14) 
 Exercise of 
  share options                   -           -           -               -               -           15         15 
 Total contributions 
  by and distributions 
  to owners                       -           -           -               -               -        (670)      (670) 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 Balance as at 
  31 December 
  2016                        7,272         143         943              83           1,521       12,751     22,713 
-----------------------  ----------  ----------  ----------  --------------  --------------  -----------  --------- 
 

Consolidated Statement of Financial Position

 
                                   Unaudited    Unaudited        Audited 
                                     30 June      30 June    31 December 
                                        2017         2016           2016 
                                     GBP'000      GBP'000        GBP'000 
------------------------------- 
 Non-current assets 
 Property, plant and equipment         9,295        8,885          9,057 
 Goodwill                             15,950        7,894         15,593 
 Other intangible assets               5,810           70          6,848 
 Other receivables                        87            -             85 
 Interests in associates                 108           84             90 
 Deferred tax assets                     311           29            282 
-------------------------------  -----------  -----------  ------------- 
                                      31,561       16,962         31,955 
 Current assets 
 Inventories                             434          331            261 
 Trade and other receivables          20,524       13,781         19,621 
 Corporation tax receivable            1,027          775          1,098 
 Cash and cash equivalents             7,166        5,617          6,915 
                                      29,151       20,504         27,895 
-------------------------------  -----------  -----------  ------------- 
 Total assets                         60,712       37,466         59,850 
-------------------------------  -----------  -----------  ------------- 
 Equity 
 Issued share capital                  7,272        7,272          7,272 
 Share premium account                   143          143            143 
 Merger reserve                          943          943            943 
 Retained earnings                    11,064       12,045         12,751 
 Translation reserve                   1,575        1,242          1,521 
 Other reserves                           83           83             83 
 Equity attributable to equity 
  holders of the parent               21,080       21,728         22,713 
-------------------------------  -----------  -----------  ------------- 
 Current liabilities 
 Trade and other payables             17,826       10,359         14,310 
 Bank overdrafts and loans             3,707          804          3,804 
 Corporation tax payable                  31          446            190 
 Deferred income                         245          307            459 
-------------------------------  -----------  -----------  ------------- 
                                      21,809       11,916         18,763 
 Non-current liabilities 
 Bank loans                           12,514        3,416         13,355 
 Other payables                        3,627            -          3,408 
 Deferred tax                          1,682          406          1,611 
-------------------------------  -----------  -----------  ------------- 
                                      17,823        3,822         18,374 
 Total liabilities                    39,632       15,738         37,137 
 Total equity and liabilities         60,712       37,466         59,850 
-------------------------------  -----------  -----------  ------------- 
 

Consolidated Statement of Cash Flows

 
                                          Unaudited    Unaudited         Audited 
                                           6 months     6 months            Year 
                                                 to           to           ended 
                                            30 June      30 June     31 December 
                                               2017         2016            2016 
                                            GBP'000      GBP'000         GBP'000 
-------------------------------------- 
 Cash flow from operating activities 
 (Loss)/profit before tax                   (1,696)          973           2,602 
 Net finance costs                              382           98             185 
--------------------------------------  -----------  -----------  -------------- 
 Operating (loss)/profit                    (1,314)        1,071           2,787 
 Increase in trade receivables              (1,077)      (1,604)         (3,992) 
 Increase in trade payables                   1,717        2,706             579 
 Deferred consideration                       1,561            -           3,318 
 Depreciation and amortisation                1,515          352             781 
 Share of profit of associate                  (15)         (13)            (17) 
 Share based payments                            14           19            (14) 
 Tax credits/(payments)                         296        (303)         (1,250) 
 Net cash flow from operating 
  activities                                  2,697        2,228           2,192 
--------------------------------------  -----------  -----------  -------------- 
 Cash flow from investing activities 
 Acquisition of subsidiary                        -            -         (9,723) 
 Cash acquired with subsidiary                    -            -           2,202 
 Proceeds from disposal of property, 
  plant and equipment                             1            -               - 
 Purchase of plant, property 
  and equipment                               (789)        (284)           (663) 
 Exercise of share options                       74            -              15 
 Interest received                                6            1               1 
 Net cash flow from investing 
  activities                                  (708)        (283)         (8,168) 
--------------------------------------  -----------  -----------  -------------- 
 Cash flows from financing activities 
 Dividends paid                                   -            -           (671) 
 Interest paid                                (388)         (99)           (186) 
 Investment in own shares                     (361)            -               - 
 Loans received                                 260            -           9,906 
 Debt repayments                            (1,308)        (516)           (939) 
 Net cash flow from financing 
  activities                                (1,797)        (615)           8,110 
--------------------------------------  -----------  -----------  -------------- 
 Net increase in cash and cash 
  equivalents                                   192        1,330           2,134 
 Cash and cash equivalents at 
  the start of the period                     6,666        3,625           3,625 
 Exchange and other movements                   308          662             907 
 Cash and cash equivalents at 
  the end of the period                       7,166        5,617           6,666 
--------------------------------------  -----------  -----------  -------------- 
 Cash and cash equivalent deposits 
  held in non-UK based banks                  5,522        3,370           6,709 
 Net bank deposit/(overdraft) 
  with UK based banks                         1,644        2,247            (43) 
                                              7,166        5,617           6,666 
--------------------------------------  -----------  -----------  -------------- 
 

Notes to the Unaudited Interim Report

For the six months to 30 June 2017

 
 1             Basis of preparation of Interim Financial Information 
                & Statement of Compliance 
 
                SCISYS PLC (the "Company") is a UK company incorporated 
                in England & Wales. The entities consolidated 
                in the half year financial statements of the 
                Company for the six months to 30 June 2017 comprise 
                the Company and its subsidiaries (together referred 
                to as the "Group"). The Group reports its financial 
                results in accordance with International Financial 
                Reporting Standards ("IFRS") as adopted by the 
                European Union ("EU"). 
 
                This interim results announcement is prepared 
                in accordance with the IFRS accounting policies 
                expected to be applied by the Group at 31 December 
                2017. These policies are unchanged from those 
                set out by the Group in its consolidated financial 
                statements for the year ended 31 December 2016 
                and available on the Group's website at www.scisys.co.uk. 
                As permitted, this interim report has been prepared 
                in accordance with the AIM rules and not in 
                accordance with IAS 34 'Interim Financial Reporting' 
                and is therefore not fully compliant with IFRS. 
                There are no new standards or interpretations 
                endorsed by the EU during 2017 that impact on 
                the financial results or presentation. 
 
                The interim financial information for the six 
                months ended 30 June 2017 is unaudited and does 
                not include all of the information required 
                to constitute statutory accounts within the 
                meaning of section 434 of the Companies Act 
                2006. It should therefore be read in conjunction 
                with the audited financial statements for the 
                year ended 31 December 2016. These published 
                accounts have been reported on by the Group's 
                auditors and have been delivered to the Registrar 
                of Companies. The report of the auditors was 
                (1) unqualified; (2) did not include a reference 
                to any matters to which the auditors drew attention 
                by way of emphasis without qualifying their 
                report and (3) did not contain a statement under 
                section 498 (2) or (3) of the Companies Act 
                2006. 
 
                The preparation of these consolidated half year 
                financial statements requires management to 
                make judgements, estimates and assumptions that 
                affect the application of accounting policies 
                and the reported amounts of assets and liabilities, 
                income and expense. Actual results may differ 
                from these estimates. In preparing these consolidated 
                half year financial statements, the significant 
                judgements made by management in applying the 
                Group's accounting policies and the key areas 
                of estimation were the same as those that applied 
                to the consolidated financial statements for 
                the year ended 31 December 2016. 
 
                The Interim Report was approved by the Directors 
                on 14 September 2017. 
 
 2   Segmental analysis 
 
      The management structure and reporting of financial 
      information to the chief operating decision 
      maker (the Board) is the basis used to define 
      operating segments. 
 
      The Group provides IT services to commercial 
      and public sector organisations through the 
      following five divisions: 
      Space 
      Enterprise Solutions & Defence (ESD) 
      Media & Broadcast (M&B) 
      ANNOVA 
      Xibis 
 
      Divisional results, assets and liabilities represent 
      items directly attributable to a division. Unallocated 
      expenses comprise central overheads and corporate 
      expenses. Assets and liabilities which are allocated 
      to operating divisions comprise trade receivables, 
      amounts recoverable on contracts, inventories 
      and payments received on account. 
 
 
 
      Segmental analysis 
 2     continued 
      Information 
       about reportable 
       segments 
                              Space        ESD        M&B      Xibis     ANNOVA      Total 
      External 
       revenues             GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
     -------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      6 months 
       ended 30 
       June 2017 
       (unaudited) 
  Professional 
   fees revenue               8,631      6,394      3,326        368      3,610     22,329 
  Other revenue               2,930      1,507        213         34          -      4,684 
                                                                                 --------- 
  External 
   revenue for 
   reportable 
   segments                  11,561      7,901      3,539        402      3,610     27,013 
 -----------------------  ---------  ---------  ---------  ---------  --------- 
  Other external 
   revenue                                                                             162 
  Consolidated 
   revenue                                                                          27,175 
 -----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      6 months 
       ended 30 
       June 2016 
       (unaudited) 
  Professional 
   fees revenue               7,831      6,836      3,416        311          -     18,394 
  Other revenue               1,770      1,762         87         48          -      3,667 
                                                           ---------  ---------  --------- 
  External 
   revenue for 
   reportable 
   segments                   9,601      8,598      3,503        359          -     22,061 
 -----------------------  ---------  ---------  ---------  ---------  --------- 
  Other external 
   revenue                                                                             162 
  Consolidated 
   revenue                                                                          22,223 
 -----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      Year ended 
       31 December 
       2016 (audited) 
  Professional 
   fees revenue              16,293     13,284      7,541        460          -     37,578 
  Other revenue               3,581      3,368        485        412          -      7,846 
                                                           ---------  ---------  --------- 
  External 
   revenue for 
   reportable 
   segments                  19,874     16,652      8,026        872          -     45,424 
 -----------------------  ---------  ---------  ---------  ---------  --------- 
  Other external 
   revenue                                                                             320 
  Consolidated 
   revenue                                                                          45,744 
 -----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
      Segmental analysis 
 2     continued 
      Information 
       about reportable 
       segments 
       continued 
                                  Space        ESD        M&B      Xibis     ANNOVA      Total 
      (Loss)/profit 
       before tax               GBP'000    GBP'000    GBP'000    GBP'000    GBP'001    GBP'000 
     -----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      6 months 
       ended 30 
       June 2017 
       (unaudited) 
  Reportable 
   segment contribution           2,087      1,809        728         44        283      4,951 
  Other contribution                336          -          -          -          -        336 
                                                                                     --------- 
  Contribution                    2,423      1,809        728         44        283      5,287 
 ---------------------------  ---------  ---------  ---------  ---------  --------- 
  Central overheads                                                                    (5,610) 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
  EBITA                                                                                  (323) 
  Amortisation 
   of intangible 
   assets                                                                                (991) 
  Finance costs                                                                          (388) 
  Finance income                                                                             6 
  Loss before 
   tax                                                                                 (1,696) 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      6 months 
       ended 30 
       June 2016 
       (unaudited) 
  Reportable 
   segment contribution           1,885      2,526        958          5          -      5,374 
  Other contribution                 32          -          1          -          -         33 
                                                               ---------  ---------  --------- 
  Contribution                    1,917      2,526        959          5          -      5,407 
 ---------------------------  ---------  ---------  ---------  ---------  --------- 
  Central overheads                                                                    (4,336) 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
  EBITA                                                                                  1,071 
  Finance costs                                                                           (99) 
  Finance income                                                                             1 
  Profit before 
   tax                                                                                     973 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      Year ended 
       31 December 
       2016 (audited) 
  Reportable 
   segment contribution           4,229      4,512      2,512        104          -     11,357 
  Other contribution               (72)       (50)          -          -          -      (122) 
                                                               ---------  ---------  --------- 
  Contribution                    4,157      4,462      2,512        104          -     11,235 
 ---------------------------  ---------  ---------  ---------  ---------  --------- 
  Central overheads                                                                    (8,448) 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
  EBITA                                                                                  2,787 
  Finance costs                                                                          (186) 
  Finance income                                                                             1 
  Profit before 
   tax                                                                                   2,602 
 ---------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
      Segmental analysis 
 2     continued 
      Information about reportable 
       segments continued 
 
                                 Space        ESD        M&B      Xibis     ANNOVA      Total 
      Group assets             GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
     ----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 30 June 
       2017 (unaudited) 
  Reportable 
   segment - 
   non-current 
   assets                        3,500          -      3,380      1,090      7,980     15,950 
  Reportable 
   segment - 
   current assets                9,093      3,971      1,139        142      5,163     19,508 
                                                                                    --------- 
                                12,593      3,971      4,519      1,232     13,143     35,458 
 --------------------------  ---------  ---------  ---------  ---------  --------- 
  Other - non-current 
   assets                                                                              15,611 
  Other - current 
   assets                                                                               9,643 
  Total assets                                                                         60,712 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 30 June 2016 
       (unaudited) 
  Reportable 
   segment - 
   non-current 
   assets                        3,424          -      3,380      1,090          -      7,894 
  Reportable 
   segment - 
   current assets                6,950      4,609      1,416        172          -     13,147 
                                                              ---------  ---------  --------- 
                                10,374      4,609      4,796      1,262          -     21,041 
 --------------------------  ---------  ---------  ---------  ---------  --------- 
  Other - non-current 
   assets                                                                               9,068 
  Other - current 
   assets                                                                               7,357 
  Total assets                                                                         37,466 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 31 December 
       2016 (audited) 
  Reportable 
   segment - 
   non-current 
   assets                        3,466          -      3,380      1,090      7,657     15,593 
  Reportable 
   segment - 
   current assets                6,657      6,836      1,534        288      3,209     18,524 
                                                              ---------  ---------  --------- 
                                10,123      6,836      4,914      1,378     10,866     34,117 
 --------------------------  ---------  ---------  ---------  ---------  --------- 
  Other - non-current 
   assets                                                                              16,362 
  Other - current 
   assets                                                                               9,371 
  Total assets                                                                         59,850 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 
                                 Space        ESD        M&B      Xibis     ANNOVA      Total 
      Group liabilities        GBP'000    GBP'000    GBP'000    GBP'000    GBP'000    GBP'000 
     ----------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 30 June 
       2017 (unaudited) 
  Reportable 
   segment - 
   current liabilities           1,773      1,549        375          -      2,133      5,830 
  Other - non-current 
   liabilities                                                                         17,823 
  Other - current 
   liabilities                                                                         15,979 
  Total liabilities                                                                    39,632 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 30 June 2016 
       (unaudited) 
  Reportable 
   segment - 
   current liabilities             699        966        418         22          -      2,105 
  Other - non-current 
   liabilities                                                                          3,822 
  Other - current 
   liabilities                                                                          9,811 
  Total liabilities                                                                    15,738 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
      As at 31 December 
       2016 (audited) 
  Reportable 
   segment - 
   current liabilities           1,050      1,360        265          -      1,788      4,463 
  Other - non-current 
   liabilities                                                                         18,374 
  Other - current 
   liabilities                                                                         14,300 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
  Total liabilities                                                                    37,137 
 --------------------------  ---------  ---------  ---------  ---------  ---------  --------- 
 
 
 2    Segmental analysis continued 
      Information about reportable 
       segments continued 
                                                      Rest 
                                           UK    of Europe     Other     Total 
      Geographical split              GBP'000      GBP'000   GBP'000   GBP'000 
     ------------------------------  --------  -----------  --------  -------- 
      6 months ended 30 June 
       2017 (unaudited) 
  Revenue from external 
   customers by location 
   of customers                        12,299       14,319       557    27,175 
      As at 30 June 2017 
      Non-current assets: 
  Intangible assets                         -       21,760         -    21,760 
  Tangible assets                       5,910        3,385         -     9,295 
  Interests in associates                   -          108         -       108 
  Other receivables                         -           87         -        87 
  Deferred tax assets                       -          311         -       311 
 ----------------------------------  --------  -----------  --------  -------- 
      6 months ended 30 June 
       2016 (unaudited) 
  Revenue from external 
   customers by location 
   of customers                        10,956       10,917       350    22,223 
      As at 30 June 2016 
      Non-current assets: 
  Intangible assets                     1,090        6,874         -     7,964 
  Tangible assets                       5,975        2,910         -     8,885 
  Interests in associates                   -           84         -        84 
  Deferred tax assets                       -           29         -        29 
 ----------------------------------  --------  -----------  --------  -------- 
      Year ended 31 December 
       2016 (audited) 
  Revenue from external 
   customers by location 
   of customers                        22,052       22,605     1,087    45,744 
      As at 31 December 2016 
      Non-current assets: 
  Intangible assets                         -       22,441         -    22,441 
  Tangible assets                       5,904        3,153         -     9,057 
  Interests in associates                   -           90         -        90 
  Other receivables                         -           85         -        85 
  Deferred tax assets                       -          282         -       282 
 ----------------------------------  --------  -----------  --------  -------- 
 
 
 3    Exceptional items 
                                   Unaudited    Unaudited         Audited 
                                    6 months     6 months            Year 
                                          to           to           ended 
                                     30 June      30 June     31 December 
                                        2017         2016            2016 
                                     GBP'000      GBP'000         GBP'000 
     --------------------------  -----------  -----------  -------------- 
  Acquisition costs                        -            -           (458) 
      Contingent consideration       (1,786)            -               - 
      R&D tax credits                    225            -               - 
  Exceptional items                  (1,561)            -           (458) 
 ------------------------------  -----------  -----------  -------------- 
 

Contingent consideration payable for the ANNOVA acquisition is linked both to average profitability over a 3-year earn out period and achievement of key commercial milestones. ANNOVA outperformed the first-year expectations that were reflected in projected amounts payable in the acquisition balance sheet. The anticipated total contingent consideration payable was reassessed at 30 June 2017, resulting in the exceptional charge.

Up to and including 2016 R&D tax credits were incorporated into the net tax charge but from 2017 these are to be treated as deductions from operating expenses. SCISYS anticipates that it will no longer qualify for the SME tax credit scheme in 2018 as it expects to exceed the headcount eligibility threshold so the above-the-line tax credit in the current period is treated as an exceptional item.

The 2016 acquisition costs represent fees paid to professional advisors and statutory charges relating to the acquisition of ANNOVA that do not qualify for capitalisation as costs for issuing debt or equity instruments.

 
 4    Taxation 
                                       Unaudited    Unaudited         Audited 
                                        6 months     6 months            Year 
                                              to           to           ended 
                                         30 June      30 June     31 December 
                                            2017         2016            2016 
                                         GBP'000      GBP'000         GBP'000 
     ------------------------------  -----------  -----------  -------------- 
  Current tax (credit)/charge              (114)          109             393 
  Deferred tax (credit)/charge             (168)           37            (13) 
  Total tax (credit)/charge                (282)          146             380 
 ----------------------------------  -----------  -----------  -------------- 
 
 
       The charge for taxation for the six months ended 
        30 June 2017 reflects an effective rate for 
        the period consistent with the anticipated rate 
   5    for the full year. 
 
        Impairment of goodwill 
 
        Goodwill is tested for impairment every half 
        year based on management's estimation of the 
        value in use of the cash generating units (CGUs) 
        to which the goodwill has been allocated. The 
        value in use calculation is dependent upon management's 
        estimate of future cashflows expected to arise 
        from the CGU and a suitable discount rate. 
 
        Management has considered the estimates of cashflows 
        and applicable discount rates and has concluded 
        that no impairment is necessary at 30 June 2017. 
 
 
 6   (Loss)/earnings per share 
 
      The calculation of the Group basic and diluted 
      (loss)/earnings per ordinary share is based 
      on the following data: 
 
 
                                    Unaudited    Unaudited         Audited 
                                     6 months     6 months            Year 
                                           to        to 30           ended 
                                      30 June         June     31 December 
                                         2017         2016            2016 
                                      GBP'000      GBP'000         GBP'000 
 -------------------------------  -----------  -----------  -------------- 
  (Loss)/profit attributable 
   to shareholders                    (1,414)          827           2,222 
 -------------------------------  -----------  -----------  -------------- 
  Number of shares                       '000         '000            '000 
 -------------------------------  -----------  -----------  -------------- 
  Basic weighted average number 
   of shares                           29,005       29,043          29,047 
  Diluted weighted average 
   number of shares                    29,677       31,016          29,577 
 -------------------------------  -----------  -----------  -------------- 
  Basic                                (4.9)p         2.8p            7.6p 
  Diluted                              (4.8)p         2.7p            7.5p 
 -------------------------------  -----------  -----------  -------------- 
 

The weighted average number of shares for the calculation of basic (loss)/earnings per share excludes own shares held in treasury.

The weighted average number of shares for the calculation of diluted (loss)/earnings per share includes own shares held in treasury together with EMI, CSOP and unapproved share options outstanding during the period.

 
 7    Adjusted Earnings per Share 
                                      Unaudited    Unaudited         Audited 
                                       6 months     6 months            Year 
                                             to        to 30           ended 
                                        30 June         June     31 December 
                                           2017         2016            2016 
     ----------------------------- 
  Basic                                    1.4p         2.9p            9.2p 
  Diluted                                  1.3p         2.9p            9.0p 
 ---------------------------------  -----------  -----------  -------------- 
 
 
   In order to present a measure of earnings per 
    share which is more representative of the Group's 
    underlying operating performance, earnings are 
    adjusted to be net of the post-tax costs shown 
    in the highlighted box on the face of the Income 
    Statement. 
 
    The calculation of the Group adjusted basic 
    and diluted earnings per ordinary share is based 
    on the number of shares in Note 6 and the following 
    earnings data: 
 
 
                                 Unaudited    Unaudited         Audited 
                                  6 months     6 months            Year 
                                        to        to 30           ended 
                                   30 June         June     31 December 
                                      2017         2016            2016 
                                   GBP'000      GBP'000         GBP'000 
 ----------------------------  -----------  -----------  -------------- 
  (Loss)/profit attributable 
   to shareholders                 (1,414)          827           2,222 
 
  Adjusted for: 
  Exceptional items                  1,561            -             458 
  Corporation tax                    (589)            -               - 
  Amortisation of intangible 
   assets                              991            -               - 
  Deferred tax                       (168)            -               - 
  Share based payments                  14           19            (14) 
 ----------------------------  -----------  -----------  -------------- 
  Adjusted earnings                    395          846           2,666 
 ----------------------------  -----------  -----------  -------------- 
 
 
   The weighted average number of shares for the 
    calculation of basic earnings per share excludes 
    own shares held in treasury. 
 
    The weighted average number of shares for the 
    calculation of diluted earnings per share includes 
    own shares held in treasury together with EMI, 
    CSOP and unapproved share options outstanding 
    during the period. 
 
 
 8    Dividends 
 
       For year ending 31 December 2016 the Company 
       paid a final dividend of 1.43 pence per share 
       in July 2017. The Board is recommending payment 
       of an interim dividend for 2017 of 0.59 pence 
       per share, to be paid on 9 November 2017 to 
       shareholders on the register as at 13 October 
       2017. 
 
      Interim Report 
 
      The Interim Report will be posted to shareholders 
      shortly and for those shareholders who have elected 
      to receive communications electronically it will 
      be available to view on the SCISYS website at 
      www.scisys.co.uk. Copies will also be available 
      at SCISYS PLC's Registered Office at Methuen Park, 
      Chippenham, Wiltshire, SN14 0GB. 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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