TIDMSSY
RNS Number : 3230B
SCISYS PLC
20 September 2018
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 2018
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 2018. The
Directors anticipate that SCISYS will deliver further year-on-year
growth in 2018, and that trading results will be more evenly spread
over the two halves of the financial year than in previous
years.
Financial and Operational Highlights:
-- Adjusted operating profit up to GBP2.5m (2017: GBP1.2m restated).
-- Revenues up 13% to GBP28.7m (2017: GBP25.3m restated).
-- Half-year order book approaching GBP100m (2017: GBP64m).
-- Net debt reduced to GBP3.3m (2017: net debt GBP9.0m).
-- Interim dividend up 10% at 0.65 pence per share (2017: 0.59p).
-- Adjusted basic earnings per share 6.1p (2017: 1.4p).
-- ESD division had a particularly strong first half year, with
a number of key contract extensions.
-- M&B division renewed a long-term BBC maintenance contract extension by at least 7 years.
-- Early termination of Annova ring-fencing arrangements agreed
with former owners to close out the earnout period and accelerate
potential integration gains.
-- BBC's flagship TV news programmes now running live on OpenMedia software.
-- Space division had an excellent first half year and secured a
EUR3.9m contract for the EGNOS programme.
Mike Love, Chairman of SCISYS, commenting on the results,
said:
"We are delighted by our continued solid operational performance
and key contract renewals. In particular, our Space division's
contract win with Airbus for developing the global navigational
EGNOS V3 ground segment is encouraging evidence of our ability to
continue participation in EU-funded programmes. Cash flow is
healthy and our balance sheet increasingly strong. We expect our
financial results to be more evenly spread over the year. The board
also expects, based on current performance, to deliver further
year-on-year growth for 2018."
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
------------------- ---------------------------
Julian Blunt Corporate Broking
------------------- ---------------------------
WalbrookPR +44 (0) 20 7933 8780
Tom Cooper/Paul Vann +44 (0)797 122 1972
tom.cooper@walbrookpr.com
---------------------------
Notes to Editors:
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 solutions 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, Thales Alenia Space, Arqiva, Vodafone, the
European Space Agency, Eumetsat, the BBC, Radio France, RTL, RNLI,
Pets at Home, Siemens and the National Trust. The Company has UK
offices in Chippenham, Bristol, Leicester and Reading and German
offices in Bochum, Dortmund, Darmstadt 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 2018. In particular - in contrast to the trend of
previous years, where performance has weighed heavily towards the
second half of the year - we expect 2018 revenues and profits to be
more evenly spread throughout the year due to the anticipated
phasing of order intake and the increasing proportion of time &
materials contract work in the revenue mix.
Key financials
The Group's revenue totalled GBP28.7m (2017: GBP25.3m restated
under IFRS 15). In the six months ended 30 June 2018, the Group's
adjusted operating profit was GBP2.5m (2017: GBP1.2m restated).
Adjusted basic earnings per share were 6.1p (2017: 1.4p). A fuller
explanation is available in the Finance Review section.
Operating Review
Introduction
All divisions performed ahead of, or in line with, management's
expectation during the first half of 2018, delivering contracts on
time and within budget and generating improved operating cash
flows. Across the Group we have secured important contract
extensions for our support work with key customers, including the
BBC, Vodafone, Siemens and several defence primes. We are seeing an
increase in the number of contracts performed on a
time-and-materials basis.
We still do not expect any adverse operational consequences as a
result of Brexit. However, we continue to progress our contingency
planning, including any re-domiciliation, in order to protect
shareholder value and cement the Group's position when carrying out
and bidding for both UK and EU-funded work after Brexit. We
currently expect these contingency plans to be put into effect
during the course of 2018.
Enterprise Solutions & Defence (ESD) division
ESD delivered an excellent first half year performance. The
division continues to work on ongoing defence projects for the
Ministry of Defence (MoD), as well as in the maritime sphere,
securing key long-term support contract extensions with major
primes. Current projects are running to plan and resulted in a
contribution margin of 29%.
ESD secured a key systems-integration framework with UK Power
Networks, a long-standing customer, for whom SCISYS also carries
out support services for its billing systems.
The division won a new contract to develop a dashboard and
reporting tool for Vodafone, for the 111 non-emergency number. It
also signed a separate contract extension with Vodafone for
continued non-emergency telecommunications work.
The division's other projects span a wide range of commercial
and public-sector customers and varied software projects, including
ongoing work for the RNLI, Coal Authority, Public Health England
and Edmundson Electrical. Our work with Siemens continues to expand
in the arena of software engineering for automatic train controls
and signalling systems. This has built a pipeline of opportunities
in the transport and logistics sector, part of which crystallised
with the recent Future Bus Systems win secured with Trapeze for
Transport for London. ESD has successfully maintained its roster of
existing, long-term customers.
The division continues to support the MoD with its Waterguard
Project, enabling the MoD to be tax efficient and comply with HMRC
regulations for military equipment export/import. Xibis, our web
and mobile-app specialist subsidiary, now reports into the ESD
division. Its revenues and margin targets remain on track. Xibis
and EDS continue to collaborate on ongoing mobile-application
development work for Pets at Home and Angel Trains.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December
GBP'000 GBP'000 2017
Restated GBP'000
Restated
Revenue 9,556 8,113 16,978
Contribution value 2,790 1,853 4,307
Contribution margin 29% 23% 25%
Space division
Our Space division made an excellent start to 2018. It secured a
key EUR3.9m win with Airbus Defence and Space (Airbus) for
developing the global navigation EGNOS V3 ground segment
infrastructure. Airbus is the prime contractor to the European
Space Agency (ESA) and the European GNSS Agency. This regional
satellite-based augmentation system is used to improve the
performance of global navigational satellite systems. The division
also secured contract extensions for its existing work for the
EU-funded Galileo programme, and continued its ongoing work for ESA
at the European Space Operations Centre in Darmstadt. The
division's programme of work on Germany's flagship Heinrich Hertz
satellite mission continues to perform to schedule.
The Space division also secured contract wins with the UK Space
Agency for autonomous robotics software development and Earth
Observation projects. Our robotics team has won a contract with a
UK commercial customer for a remote tunnel inspection project,
extending its robotics software platform.
It has made further inroads into the commercial space sector,
for example by delivering simulation software to Astroscale
Limited. The division is also developing fuel consumption
optimisation algorithms and simulation software for Sky and Space
Global and its Pearls nano-satellite project.
The 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 new contracts in the second half of the
year.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
GBP'000 GBP'000 GBP'000
Restated Restated
Revenue 11,184 9,845 20,023
Contribution value 3,349 2,420 4,845
Contribution margin 30% 25% 24%
Media & Broadcast (M&B) division
M&B renewed its long-standing maintenance contract with the
BBC in February, cementing its strong relationship with the BBC.
M&B continues to support the BBC by providing radio audio
editing, production and archiving systems, and is also working
towards closer integration of dira! with the OpenMedia solution
provided by Annova to the BBC. The roll out of its ViLoR solution
is progressing well, through which local radio is hosted virtually
using central datacentres.
The delivery of dira! radio production and playout systems to
the South African Broadcasting Corporation (SABC) is on schedule
and two channels went live at RTL, the French commercial network.
M&B won a key contract with the British Library, under which
SCISYS will deliver a national Digital Radio Archive Management
solution that will capture and preserve a representative part of
the UK's radio output. This demonstrates the adaptability of dira!
beyond the broadcasting arena, as this project will use dira!
modules.
As anticipated, the first half year's contribution was behind
2017 on higher revenues but M&B's performance is expected to
improve in the second half year despite slow progress with the
recently won weConnect project.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
GBP'000 GBP'000 GBP'000
Revenue 3,848 3,539 8,715
Contribution value 604 728 2,635
Contribution margin 16% 21% 30%
ANNOVA Systems
Annova has performed solidly during the first half of 2018 and
the deployment of its OpenMedia software to the BBC's operation
continued over the summer. Installation into the BBC's London W1
newsroom was successful, marking a key milestone in this flagship
project.
The division continues to make advances on current projects,
including those with the ARD group of German broadcasters, of which
the recently won customer Radio Bremen is a member. It has
maintained solid operational progress for its growing roster of
clients, such as the German broadcasters MDR and NDR, Czech Radio,
Radio France and Corus in Canada.
In common with M&B, Annova anticipated that it would report
a weaker first six months than in 2017, although the division
expects a significant improvement in performance in the second half
of the year.
Six months ended Six months ended Year ended
30 June 2018 30 June 2017 31 December 2017
GBP'000 GBP'000 GBP'000
Revenue 3,957 3,610 7,291
EBITA* 206 283 510
EBITA margin* 5% 8% 7%
* other divisions are measured on their contribution to shared
Group overheads whereas Annova currently remains largely
independent, allowing the computation of a representative EBITA
While both M&B and Annova's first-half revenues are somewhat
behind the board's expectations, the overall outlook for both
divisions remains in line with Group expectations.
Finance Review
Results for the half year to 30 June 2018 show a significant
step up from the comparative period for 2017. This was foreseen in
the June AGM trading update, when the Directors signalled that
financial results for the full year 2018 would be more balanced
between the two halves than in recent years.
Total revenues were up 13% to GBP28.7m (2017: GBP25.3m as
restated in accordance with IFRS 15 - see below) and the
professional-fees component increased by 24% to GBP27.6m (2017:
GBP22.3m). 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 -
more than doubled to GBP2.5m (2017: GBP1.2m restated). 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 6.1 p (2017: 1.4p).
IFRS 15: Revenue from contracts with customers has been
implemented with effect from 1 January 2018 and comparative figures
for 2017 have been restated to reflect retrospective application of
this new standard. Under IFRS 15, only the mark-up on pass-through
costs of third-party products and services -- where SCISYS acts as
an "Agent" rather than a "Principal" - is reported as revenue,
whereas previously the revenues and the related third-party cost of
sales were reported gross. The reduction in previously reported
revenues for the first half of 2017 was GBP1.9m (2017 full year:
GBP3.8m) while the impacts on reported professional fees and
profits were negligible.
The statutory operating profit was GBP1.2m (2017: GBP1.3m loss)
after bearing amortisation costs relating to the December 2016
ANNOVA Systems GmbH ("Annova") acquisition of GBP0.6m (2017:
GBP1.0m) and an exceptional charge of GBP0.7m (2017: GBP1.6m
net).
The exceptional charge comprised two components. The first
element recognised the contractual liability for a fixed and final
earnout payment of GBP0.6m to Annova's former owners. This sum is
consideration for early termination of the acquisition ring-fence
agreement, enabling accelerated achievement of potential
medium-term benefits in our combined media-sector operations by the
removal of constraints on collective management. Second, there was
a GBP0.1m exceptional charge for external professional advice in
relation to the development and implementation of the Group's
contingency plans to mitigate any adverse impact of Brexit on
cross-border operations, particularly in the space sector.
Exceptional charges in the comparative 2017 period comprised a
one-off R&D tax credit of GBP0.2m and a GBP1.8m charge to
reflect increased contingent consideration payable to Annova's
former owners.
Basic earnings per share were 2.6p (2017: Loss per share
4.9p).
Net cash flow from operations increased to GBP3.1m (2017:
GBP2.7m). At the end of the reporting period, the Group had bank
deposits of GBP9.4m (2017: GBP7.2m). Unutilised working capital
facilities totalled GBP4.2m (30 June 2017: GBP4.7m). Group debt at
the period end was GBP12.7m (2017: GBP16.2m). The resulting net
debt was GBP3.3m, a reduction of GBP2.6m from the 2017 year-end
position of GBP5.9m net debt (30 June 2017: GBP9.0m).
Following a buoyant sales performance in the final quarter of
2017, order intake for the first six months of 2018 has remained
strong. The M&B division's renewal of its BBC maintenance
contract announced in February lifted the order book value over
GBP100m for the first time and the level has been maintained
marginally below this threshold throughout the first half of the
year (2017: GBP64m).
The effective tax rate for the period of 21% reflects the
anticipated rate for 2018 as a whole (2017: 17%).
The half-year accounts are presented on a basis consistent with
policies to be adopted for the Annual Report & Accounts for the
year ending 31 December 2018.
Dividend
Our dividend for the full year to 31 December 2017 was 2.16
pence per share, in line with our strategy of progressive dividend
growth. I can now confirm that an interim dividend of 0.65 pence
per share will be paid on 8 November 2018 to shareholders on the
register as at 12 October 2018. The shares are expected to go
ex-dividend on 11 October 2018.
Outlook
The second half of 2018 has started with strategic contract wins
and solid performances deliveries on key projects. We are seeing
healthy revenue growth, while cash flows remain strong.
Following the early end of the ring-fencing agreement with
Annova's former owners, we have started the internal integration
project of our Annova and M&B divisions, which are planned to
operate as one division from 2019 onwards.
Based on current performance on projects, a buoyant order book
and our new business pipeline, the Directors are confident that
SCISYS will achieve year-on-year growth in 2018 and that the future
prospects of the Group continue to look highly encouraging.
Mike Love,
Chairman
Consolidated Income Statement
Unaudited Unaudited Unaudited
Restated Restated
6 months 6 months Year ended
to to 31 December
30 June 30 June 2017
2018 2017
GBP'000 GBP'000 GBP'000
----------- --------------
Revenue (note 2) 28,721 25,269 53,337
Operating costs (27,509) (26,601) (48,792)
Share of results of associates - 15 39
--------------------------------------------- ----------- ----------- --------------
Operating profit/(loss) 1,212 (1,317) 4,584
----------- --------------
"Adjusted operating profit" being operating
profit before share based payments,
exceptional charges and amortisation
arising on business combinations 2,526 1,249 4,491
Exceptional items (666) (1,561) 2,075
Amortisation of Intangibles (626) (991) (1,982)
Share based payments (22) (14) -
----------- --------------
Operating profit/(loss) 1,212 (1,317) 4,584
--------------------------------------------- ----------- ----------- --------------
Finance costs (232) (388) (718)
Finance income (5) 6 8
--------------------------------------------- ----------- ----------- --------------
Profit/(loss) before tax 975 (1,699) 3,874
Tax (charge)/credit (200) 282 (593)
--------------------------------------------- ----------- ----------- --------------
Profit/(loss)for the period attributable
to equity holders of the parent 775 (1,417) 3,281
--------------------------------------------- ----------- ----------- --------------
Earnings/(loss) per share (note 5)
Basic 2.6p (4.9p) 11.3p
Diluted 2.6p (4.8p) 11.0p
--------------------------------------------- ----------- ----------- --------------
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Unaudited
Restated Restated
6 months 6 months Year ended
to to 31 December
30 June 30 June 2017
2018 2017
GBP'000 GBP'000 GBP'000
----------- --------------
Profit/(loss) for the period 775 (1,417) 3,281
Other comprehensive income not recycling
through the Income Statement
Currency translation differences on
foreign currency investments 57 54 369
----------- --------------
Total comprehensive income/(expense)
for the period attributable to equity
holders of the parent 832 (1,363) 3,650
------------------------------------------ ----------- ----------- --------------
Consolidated Statement of Changes in Equity
Capital
For the six months Share Share Merger Redemp-tion Trans-lation Retained
ended Capital Premium Reserve Reserve Reserve Earnings Total
30 June 2018 (unaudited) GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Adjusted balance
as at 1 January
2018 7,329 268 943 83 1,890 15,133 25,646
Total comprehensive
income for the period
Profit for the period - - - - - 775 775
Other comprehensive
income
Foreign currency
translation - - - - 57 - 57
Total comprehensive
income for the period - - - - 57 775 832
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Share based payments - - - - - 22 22
Treasury shares - - - - - - -
Share options - - - - - 57 57
Total contributions
by and distributions
to owners - - - - - 79 79
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Balance as at 30
June 2018 7,329 268 943 83 1,947 15,987 26,557
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Restated
Capital
For the six months Share Share Merger Redemp-tion Trans-lation Retained
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
Adjustment on initial
application of IFRS15
(net of tax) - - - - - (3) (3)
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Adjusted balance
as at 1 January
2017 7,272 143 943 83 1,521 12,748 22,710
Total comprehensive
income for the period
Loss for 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 11,061 21,077
-------------------------- ---------- ---------- ---------- -------------- -------------- ----------- ---------
Consolidated Statement of Changes in Equity continued
Restated
Capital
Share Share Merger Redemp-tion Trans-lation Retained
For the year ended Capital Premium Reserve Reserve Reserve Earnings Total
31 December 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
Adjustment on initial
application of IFRS15
(net of tax) - - - - - (68) (68)
------------------------ ---------- ---------- ---------- -------------- -------------- ----------- ---------
Adjusted balance
as at 1 January
2017 7,272 143 943 83 1,521 12,683 22,645
Total comprehensive
income for the period
Profit for the period - - - - - 3,349 3,349
Other comprehensive
income
Foreign currency
translation - - - - 369 - 369
Total comprehensive
income for the period - - - - 369 3,349 3,718
------------------------ ---------- ---------- ---------- -------------- -------------- ----------- ---------
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Dividends paid - - - - - (586) (586)
Issue of new shares 57 125 - - - - 182
Treasury shares - - - - - (471) (471)
Exercise of share
options - - - - - 158 158
Total contributions
by and distributions
to owners 57 125 - - - (899) (717)
------------------------ ---------- ---------- ---------- -------------- -------------- ----------- ---------
Balance as at 31
December 2017 7,329 268 943 83 1,890 15,133 25,646
------------------------ ---------- ---------- ---------- -------------- -------------- ----------- ---------
Consolidated Statement of Financial Position
Unaudited Unaudited Unaudited
Restated Restated
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
---------------------------------------
Non-current assets
Property, plant and equipment 9,165 9,295 9,261
Goodwill 15,902 15,950 15,913
Other intangible assets 4,467 5,810 5,173
Other receivables 94 87 92
Interests in associates - 108 -
Deferred tax assets 23 311 26
--------------------------------------- ----------- ----------- -------------
29,651 31,561 30,465
Current assets
Inventories 133 434 321
Contract assets 12,795 10,478 10,256
Trade and other receivables 12,415 10,043 11,091
Corporation tax receivable 500 1,027 450
Cash and cash equivalents 9,394 7,166 8,021
-----------
35,237 29,148 30,139
--------------------------------------- ----------- ----------- -------------
Total assets 64,888 60,709 60,604
--------------------------------------- ----------- ----------- -------------
Equity
Issued share capital 7,329 7,272 7,329
Share premium account 268 143 268
Merger reserve 943 943 943
Retained earnings 15,987 11,061 15,133
Translation reserve 1,947 1,575 1,890
Other reserves 83 83 83
Equity attributable to equity holders
of the parent 26,557 21,077 25,646
--------------------------------------- ----------- ----------- -------------
Current liabilities
Trade and other payables 11,944 11,995 10,452
Contract liabilities 10,010 5,831 7,026
Bank overdrafts and loans 2,469 3,707 2,290
Corporation tax payable 731 31 347
Deferred income 211 245 240
--------------------------------------- ----------- ----------- -------------
25,365 21,809 20,355
Non-current liabilities
Bank loans 10,263 12,514 11,667
Other payables 914 3,627 -
Provisions 929 - 1,572
Deferred tax 860 1,682 1,364
--------------------------------------- ----------- ----------- -------------
12,966 17,823 14,603
Total liabilities 38,331 39,632 34,958
Total equity and liabilities 64,888 60,709 60,604
--------------------------------------- ----------- ----------- -------------
Consolidated Statement of Cash Flows
Restated Restated
Unaudited Unaudited Unaudited
6 months 6 months Year ended
to to 31 December
30 June 30 June 2017
2018 2017
GBP'000 GBP'000 GBP'000
-------------------------------------------
Cash flow from operating activities
Profit/(loss) before tax 975 (1,699) 3,874
Net finance costs 237 382 710
------------------------------------------- ---------- ---------- -------------
Operating profit/(loss) 1,212 (1,317) 4,584
(Increase)/decrease in trade receivables (1,068) 9,404 8,520
Increase in contract assets (2,539) (10,478) (10,256)
Increase/(decrease) in trade payables 1,055 (4,114) (921)
Increase in contract liabilities 2,983 5,831 7,026
Deferred consideration 616 1,561 (1,626)
Depreciation and amortisation 1,224 1,515 3,081
Share of profit of associate - (15) (39)
Share based payments 22 14 -
Tax (payments)/credits (371) 296 147
Net cash flow from operating activities 3,134 2,697 10,516
------------------------------------------- ---------- ---------- -------------
Cash flow from investing activities
Investment in associate (20) - 82
Proceeds from disposal of property,
plant and equipment - 1 4
Purchase of plant, property and equipment (244) (789) (1,259)
Exercise of share options 57 74 158
Interest received (5) 6 8
Net cash flow from investing activities (212) (708) (1,007)
------------------------------------------- ---------- ---------- -------------
Cash flows from financing activities
Dividends paid - - (586)
Interest paid (232) (388) (718)
Issue of new shares - - 182
Investment in own shares - (361) (471)
Loans received - 260 262
Debt repayments (1,244) (1,308) (3,716)
Net cash flow from financing activities (1,476) (1,797) (5,047)
------------------------------------------- ---------- ---------- -------------
Net increase in cash and cash equivalents 1,446 192 4,462
Cash and cash equivalents at the start
of the period 8,021 6,666 6,666
Exchange and other movements (73) 308 (3,107)
Cash and cash equivalents at the end
of the period 9,394 7,166 8,021
------------------------------------------- ---------- ---------- -------------
Cash and cash equivalent deposits held
in non-UK based banks 9,025 5,522 6,435
Net bank deposit with UK based banks 369 1,644 1,586
9,394 7,166 8,021
------------------------------------------- ---------- ---------- -------------
Notes to the Unaudited Interim Report
For the six months to 30 June 2018
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 2018 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 2018. These policies are set out by
the Group in its consolidated financial statements for the
year ended 31 December 2017 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 two new standards
or interpretations endorsed by the EU during 2018. IFRS 15
Revenue from contracts with customers (see Note 8) has had
an impact on the financial results and presentation whereas
IFRS 9 Financial Instruments has been adopted but has not had
an impact on either measurement or disclosures.
The interim financial information for the six months ended
30 June 2018 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 2017. These published accounts
have been reported on by KPMG, the Group's previous 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 2017.
The Interim Report was approved by the Directors on 19 September
2018.
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 four divisions:
Space
Enterprise Solutions & Defence (ESD) (Includes Xibis from
1 January 2018)
Media & Broadcast (M&B)
ANNOVA Systems (Annova)
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,
contract assets, inventories and contract liabilities.
2 Segmental analysis continued
Information about reportable
segments
Space ESD M&B Annova Total
External revenues GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- --------- --------- --------- --------- ---------
6 months ended 30 June
2018 (unaudited)
Professional fees revenue 11,100 8,862 3,678 3,957 27,597
Other revenue 84 694 170 - 948
---------
External revenue for reportable
segments 11,184 9,556 3,848 3,957 28,545
------------------------------------- --------- --------- --------- ---------
Other external revenue 176
Consolidated revenue 28,721
------------------------------------- --------- --------- --------- --------- ---------
6 months ended 30 June
2017 (unaudited)
Professional fees revenue 8,631 6,762 3,326 3,610 22,329
Other revenue 2,930 1,541 213 - 4,684
IFRS 15 Adjustment (1,716) (190) - - (1,906)
------------------------------------- --------- --------- --------- --------- ---------
Restated other revenue 1,214 1,351 213 - 2,778
---------
External revenue for reportable
segments 9,845 8,113 3,539 3,610 25,107
------------------------------------- --------- --------- --------- ---------
Other external revenue 162
Consolidated revenue 25,269
------------------------------------- --------- --------- --------- --------- ---------
Year ended 31 December
2017 (unaudited)
Professional fees revenue 18,629 14,164 7,958 7,291 48,042
Other revenue 4,842 3,193 757 - 8,792
IFRS 15 Adjustment (3,448) (379) - - (3,827)
------------------------------------- --------- --------- --------- --------- ---------
Restated other revenue 1,394 2,814 757 - 4,965
---------
External revenue for reportable
segments 20,023 16,978 8,715 7,291 53,007
------------------------------------- --------- --------- --------- ---------
Other external revenue 330
Consolidated revenue 53,337
------------------------------------- --------- --------- --------- --------- ---------
2 Segmental analysis continued
Information about reportable
segments continued
Space ESD M&B Annova Total
Profit/(loss) before tax GBP'000 GBP'000 GBP'000 GBP'001 GBP'000
--------------------------------- --------- --------- --------- --------- ---------
6 months ended 30 June
2018 (unaudited)
Reportable segment contribution 3,311 2,790 604 206 6,911
Other contribution 38 - - - 38
--------- --------- --------- --------- ---------
Contribution 3,349 2,790 604 206 6,949
------------------------------------- --------- --------- --------- ---------
Central overheads (4,423)
------------------------------------- --------- --------- --------- --------- ---------
Total adjusted EBITA 2,526
Exceptional items and
share based payments (688)
------------------------------------- --------- --------- --------- --------- ---------
EBITA 1,838
Amortisation of intangible
assets comprising acquired
software solution (258)
Amortisation of intangible
assets comprising acquired
order book (368)
------------------------------------- --------- --------- --------- --------- ---------
Operating profit 1,212
Finance costs (232)
Finance income (5)
Profit before tax 975
------------------------------------- --------- --------- --------- --------- ---------
6 months ended 30 June
2017 (unaudited)
Reportable segment contribution 2,087 1,853 728 283 4,951
IFRS 15 adjustment (3) - - - (3)
------------------------------------- --------- --------- --------- --------- ---------
Restated reported segmental
contribution 2,084 1,853 728 283 4,948
Other contribution 336 - - - 336
---------
Contribution 2,420 1,853 728 283 5,284
------------------------------------- --------- --------- --------- ---------
Central overheads (4,035)
------------------------------------- --------- --------- --------- --------- ---------
Total adjusted EBITA 1,249
Exceptional items and
share based payments (1,575)
------------------------------------- --------- --------- --------- --------- ---------
EBITA (326)
Amortisation of intangible
assets (991)
------------------------------------- --------- --------- --------- --------- ---------
Operating loss (1,317)
Finance costs (388)
Finance income 6
Loss before tax (1,699)
------------------------------------- --------- --------- --------- --------- ---------
Year ended 31 December
2017 (unaudited)
Reportable segment contribution 4,891 4,274 2,625 510 12,300
IFRS 15 adjustment (68) - - - (68)
------------------------------------- --------- --------- --------- --------- ---------
Restated reported segmental
contribution 4,823 4,274 2,625 510 12,232
Other contribution 22 33 10 - 65
---------
Contribution 4,845 4,307 2,635 510 12,297
------------------------------------- --------- --------- --------- ---------
Central overheads (7,806)
------------------------------------- --------- --------- --------- --------- ---------
Total adjusted EBITA 4,491
Exceptional items and
share based payments 2,075
------------------------------------- --------- --------- --------- --------- ---------
EBITA 6,566
Amortisation of intangible
assets comprising acquired
software solution (1,246)
Amortisation of intangible
assets comprising acquired
order book (736)
------------------------------------- --------- --------- --------- --------- ---------
Operating profit 4,584
Finance costs (718)
Finance income 8
Profit before tax 3,874
------------------------------------- --------- --------- --------- --------- ---------
2 Segmental analysis continued
Information about reportable
segments continued
Space ESD M&B Annova Total
Group assets GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- --------- --------- ---------
As at 30 June 2018 (unaudited)
Reportable segment - non-current
assets 3,507 1,110 3,380 7,905 15,902
Reportable segment - current
assets 9,905 7,659 2,938 3,045 23,547
---------
13,412 8,769 6,318 10,950 39,449
-------------------------------------- --------- --------- --------- ---------
Other - non-current assets 13,749
Other - current assets 11,690
Total assets 64,888
-------------------------------------- --------- --------- --------- --------- ---------
As at 30 June 2017 (unaudited)
Reportable segment - non-current
assets 3,500 1,090 3,380 7,980 15,950
Reportable segment - current
assets 9,093 4,113 1,139 5,163 19,508
IFRS 15 adjustments (3) - - - (3)
-------------------------------------- --------- --------- --------- ---------
Restated reportable segments
- current
assets 9,090 4,113 1,139 5,163 19,505
---------
12,590 5,203 4,519 13,143 35,455
-------------------------------------- --------- --------- --------- ---------
Other - non-current assets 15,611
Other - current assets 9,643
Total assets 60,709
-------------------------------------- --------- --------- --------- --------- ---------
As at 31 December 2017
(unaudited)
Reportable segment - non-current
assets 3,511 1,090 3,380 7,931 15,912
Reportable segment - current
assets 9,185 6,633 1,446 2,862 20,126
IFRS 15 adjustments (68) - - - (68)
-------------------------------------- --------- --------- --------- --------- ---------
Restated reportable segments
- current
assets 9,117 6,633 1,446 2,862 20,058
12,628 7,723 4,826 10,793 35,970
-------------------------------------- --------- --------- --------- ---------
Other - non-current assets 14,553
Other - current assets 10,081
Total assets 60,604
-------------------------------------- --------- --------- --------- --------- ---------
Space ESD M&B Annova Total
Group liabilities GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- --------- --------- --------- --------- ---------
As at 30 June 2018 (unaudited)
Reportable segment - current
liabilities 2,533 4,191 699 2,576 9,999
Other - non-current liabilities 12,966
Other - current liabilities 15,366
Total liabilities 38,331
-------------------------------------- --------- --------- --------- --------- ---------
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 31 December 2017
(unaudited)
Reportable segment - current
liabilities 1,164 3,231 727 1,905 7,027
Other - non-current liabilities 14,603
Other - current liabilities 13,328
Total liabilities 34,958
-------------------------------------- --------- --------- --------- --------- ---------
2 Segmental analysis continued
Information about reportable
segments continued
Rest of
UK Europe Other Total
Geographical split GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- --------
6 months ended 30 June 2018
(unaudited)
Revenue from external customers
by location of customers 15,438 12,206 1,077 28,721
As at 30 June 2018
Non-current assets:
Intangible assets - 20,369 - 20,369
Tangible assets 5,917 3,248 - 9,165
Other long term assets - 117 - 117
----------------------------------------- -------- -------- -------- --------
6 months ended 30 June 2017
(unaudited)
Revenue from external customers
by location of customers 12,299 14,319 557 27,175
IFRS 15 adjustment (190) (1,716) - (1,906)
Restated revenue from external
customers by location of customers 12,109 12,603 557 25,269
----------------------------------------- -------- -------- -------- --------
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 long term assets - 398 - 398
----------------------------------------- -------- -------- -------- --------
Year ended 31 December 2017
(unaudited)
Revenue from external customers
by location of customers 28,485 27,273 1,406 57,164
IFRS 15 adjustment (379) (3,448) - (3,827)
Restated revenue from external
customers by location of customers 28,106 23,825 1,406 53,337
----------------------------------------- -------- -------- -------- --------
As at 31 December 2017
Non-current assets:
Intangible assets - 21,086 - 21,086
Tangible assets 5,847 3,414 - 9,261
Other long term assets - 118 - 118
----------------------------------------- -------- -------- -------- --------
3 Exceptional items
Unaudited Unaudited Unaudited
6 months 6 months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------- ----------- ---------- -------------
R&D tax credits - 225 450
Contingent consideration (616) (1,786) 1,625
Other (50) - -
Exceptional items (666) (1,561) 2,075
------------------------------ ----------- ---------- -------------
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. The exceptional
charge recognised in 2018 represents the contractual liability for
a fixed and final earn out payment to Annova's former owners. The
sum is consideration for early termination of the acquisition
ring-fence agreement enabling accelerated achievement of potential
medium-term benefits in combined media-sector operations by the
removal of constraints on collective management. The anticipated
total contingent consideration payable is reassessed at the end of
each half-year reporting period based on the latest trading
forecasts.
The "Other" exceptional item relates to charges for external
professional advice regarding the development and implementation of
the Group's contingency plans to mitigate any adverse impact of
Brexit on cross-border operations, particularly in the space
segment.
Up to and including 2016 R&D tax credits were incorporated
into the net tax charge but from 2017 these are treated as
deductions from operating expenses. 2017 was also the final year in
which the Company qualified for the SME tax credit scheme as it has
subsequently exceeded the headcount threshold for eligibility.
Consequently the non-recurring high credit in 2017 was treated as
an exceptional item.
4 Taxation
Unaudited Unaudited Unaudited
6 months 6 months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- --------------
Current tax charge/(credit) 702 (114) 617
Deferred tax credit (502) (168) (24)
Total tax charge/(credit) 200 (282) 593
--------------------------------- ----------- ----------- --------------
The charge for taxation for the six months ended 30 June 2018
reflects an effective rate for the period consistent with the
anticipated rate for the full year.
5 Earnings/(loss) per share
The calculation of the Group basic and diluted earnings/(loss)
per ordinary share is based on the following data:
Restated Restated
Unaudited Unaudited Unaudited
6 months 6 months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- ----------- --------------
Profit/(loss) attributable to shareholders 775 (1,414) 3,349
IFRS15 adjustment - (3) (68)
-------------------------------------------- ----------- ----------- --------------
Restated profit/(loss) attributable
to shareholders 775 (1,417) 3,281
-------------------------------------------- ----------- ----------- --------------
Number of shares '000 '000 '000
-------------------------------------------- ----------- ----------- --------------
Basic weighted average number of
shares 29,366 29,005 29,154
Diluted weighted average number
of shares 30,005 29,677 29,723
-------------------------------------------- ----------- ----------- --------------
Basic 2.6p (4.9)p 11.3p
Diluted 2.6p (4.8)p 11.0p
-------------------------------------------- ----------- ----------- --------------
The weighted average number of shares for the calculation of
basic earnings/(loss) per share excludes own shares held in
treasury.
The weighted average number of shares for the calculation of
diluted earnings/(loss) per share includes own shares held in
treasury together with EMI, CSOP and unapproved share options
outstanding during the period.
6 Adjusted Earnings per Share Restated Restated
Unaudited Unaudited Unaudited
6 months 6 months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
----------------------------- ----------- -----------
Basic 6.1p 1.4p 9.8p
Diluted 5.9p 1.3p 9.6p
--------------------------------- ----------- ----------- -------------
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
5 and the following earnings data:
Unaudited Unaudited Unaudited
6 months 6 months
to to Year ended
30 June 30 June 31 December
2018 2017 2017
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------- ----------- --------------
Profit/(loss) attributable to shareholders 775 (1,414) 3,349
IFRS15 adjustment - (3) (68)
Restated profit/(loss) attributable
to shareholders 775 (1,417) 3,281
Adjusted for:
Exceptional items 666 1,561 (2,075)
Corporation tax (203) (589) -
Amortisation of intangible assets 626 991 1,982
Deferred tax (106) (168) (337)
Share based payments 22 14 -
-------------------------------------------- ----------- ----------- --------------
Adjusted earnings 1,780 392 2,851
-------------------------------------------- ----------- ----------- --------------
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.
7 Dividends
For year ended 31 December 2017 the Company paid a final dividend
of 1.57 pence per share in July 2018. The Board is recommending
payment of an interim dividend for 2018 of 0.65 pence per
share, to be paid on 8 November 2018 to shareholders on the
register as at 12 October 2018.
8 Impact of changes in accounting policies
Impact of IFRS 15 Revenue from contracts with customers
The Group has initially applied IFRS15 and IFRS 9 with effect
from 1 January 2018. Under the transition method chosen,
comparative information has been restated following the change in
accounting policy. The Group has included additional line items as
their omission would make the financial statements potentially
misleading.
Implementation of the new IFRS 15 standard had a minor impact on
the phasing of anticipated operating profits, although reported
revenues and costs are more significantly reduced when compared
with the previously applied treatment because the Company acts as
an agent in certain circumstances.
If IFRS 15 had been applied in 2017, revenues would have been
GBP3.827,000 lower for the full year and GBP1,906,000 lower for the
six months ended 30 June 17. Operating profits for 2017 would have
been GBP68,000 lower for the full year and GBP3,000 lower for the
six months ended 30 June 2017.
The Group IFRS 15 policy deals with revenue recognition and
establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and
uncertainty of revenue and cash flows arising from the entities
contracts with customers.
With effect from 1 January 2018 the Group takes into account
principal v agent considerations. In situations where the Group
acts in the capacity of an agent, simply passing the third party
goods and services to customers through its books, only the mark-up
element is disclosed as revenue, whereas previously the full
contract value was recognised and included as "Other revenue" in
the segmental analysis, Note 2.
Where the customer simultaneously receives and consumes the
benefit revenue is recognised in line with performance of the
service.
For the delivery of unique customer solutions, recognition of
Performance Over Time revenues is subject to an enforceable right
to payment (cost plus profit) if the customer were to terminate
without the Company's default before expiry of the natural contract
term.
Revenue from consultancy and other professional services that
have been identified as being Performance Over Time are recognised
by reference to the degree of completion of the contract. The input
measure used to calculate Performance Over Time for a performance
obligation is by reference to own labour costs incurred by the
balance sheet date as a percentage of the total estimated own
labour costs to completion of the performance obligation. Revenues
associated with subcontractors or bought-in goods that contribute
to a performance obligation are recognised when the customer's
goods are purchased and when the subcontractor's deliverables are
accepted.
Where the Company's own licenced products and configuration
services are required to create the customer's unique solution,
without which the customer obtains no benefit, the licences and
services are recognised together as a single performance
obligation. If Performance over Time applies these revenues are
recognised over time on as for professional service revenues.
Licences sold without the need for configuration services (e.g.
additional concurrent users) are recognised at the Point in Time
when the licences are transferred to the customer.
Maintenance services are considered to be Service Warranty and
involve standing ready to provide the services for handling calls,
defect fixing and delivery of new releases to the customer on a
regular basis. Revenue is recognised evenly over the time period
(eg. at one twelfth of the annual charge per month).
Revenues for enhancements to systems already owned by customers
are recognised as Performance Over Time as for professional
services.
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR BLGDCLXBBGIC
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