reports
SCISYS Group - GBP23m of new business since mid-December
SCISYS has released a confident trading update and we are maintaining our forecasts. Cash flow was healthy, with net debt of £3.1m slightly better than the £3.7m we expected. The order book (c £100m at end-FY18) has been bolstered by c £23m of contract wins since mid-December, of which c £8m were after the period end. The move to redomicile to an EU country before the final Brexit deal is already paying off, as c £18m of this business was only winnable if the group parent company was bas...
SCISYS - Strong H1 but more balanced year is expected
SCISYS has reported a strong H1 with professional fees jumping 24%. However, this was off a weak H117 and some business was brought forward from H2. Consequently, we are forecasting a more balanced H1/H2 in FY18. We have increased our FY18 revenues by £3.0m to reflect this balancing, but we have maintained our profit forecasts. All divisions posted record revenues, the order book remains robust at close to £100m and net debt continues to decline. Management’s goal of £60m in revenues and do...
SCISYS - An “impressive start†to 2018
SCISYS has released an upbeat AGM trading update, noting that progress has been made across all its four divisions. The order book has reached £100m, up from £91.3m at end-FY17, boosted in particular by the renewal of M&B’s BBC support contract. Cash flow was strong, with net debt declining by £4m over the first five months of the year, in what is typically a subdued period for cash generation. We have increased our FY18 operating cash flow forecast, while conservatively maintaining our oth...
SCISYS - Space division shines
SCISYS posted strong FY17 results, with revenues rising by 25%, including c 9% organic growth and c 5% at constant currencies. The Space division stood out, generating 18% growth in both revenue and contribution. Operating profit (excluding associates) rose by 41% to £4.5m, partly benefiting from hedging arrangements, and the operating margin expanded by 90bp to 7.9%. The outlook is encouraging with the order book 41% ahead at a record £91.3m. We have cautiously maintained our profit forecasts...
SCISYS - Space division is flying in spite of Brexit
2017 was a transitional year for SCISYS, with the key Space division flying and ANNOVA’s integration progressing in line with expectations. The attainment of an €18m prime contractor role in H2 is a significant endorsement of SCISYS Space’s proprietary PLENITER software suite, with which SCISYS is targeting the commercial space sector. In August, ANNOVA achieved a key milestone with its BBC contract, which means it is trading ahead of initial management targets. This comes on the back of H...
Solid order book growth and pipeline strong
In an in line update, SCISYS reports that its order book grew by 4% over Q1, while net debt fell by £2.4m as at end-April. Cash flow was boosted by the receipt of overdue payments from the MOD and a tax credit from HMRC that were deferred from 2016. All business units have been performing well and we note that this year is likely to be more H2 weighted than is typical due to the acquired ANNOVA. Noting management’s goal to achieve £60m in revenues and double-digit operating margins within three ...
Operating profit beats by 4%, solid outlook
Both FY16 revenue and adjusted operating profit were 4% ahead of our forecasts, while EPS beat by 8% on a favourable tax charge. The acquisition of ANNOVA Systems, a leading supplier of software-based editorial solutions to the television sector completed at the end of the period. ANNOVA underpins our financial forecasts and complements SCISYS’s dira! product offering for radio broadcasters, creating cross-selling opportunities. Management has reintroduced its goal to achieve £60m in revenues an...
Ford Equity International Rating and Forecast Report
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Deal beefs up media & broadcast operations
SCISYS is acquiring Germany-based ANNOVA Systems for an estimated deal value of £15.3m. ANNOVA is a leading supplier of software-based editorial solutions to the media sector. It has a track record of generating strong revenue growth and in 2015 won a landmark contract with the BBC, which underpins financial forecasts for 12 years. ANNOVA complements SCISYS’s dira! product offering for radio broadcasters, extends the group’s capabilities into television and creates cross-selling opportunities. T...
Outperformance continues
Management says that due to continued strong trading in H2, FY16 revenues and adjusted operating profits are anticipated to be ahead of current market guidance. The group has been benefiting from contract wins while a weakening sterling against the euro has additionally benefited its Space and Media & Broadcast units. Consequently, we have upgraded our forecasts, which comes on top of the significant upgrades we made after the interims in September. Given the potential for margin recovery and th...
Outlook underpinned by strong order book
SCISYS reported a strong H1, with revenues up 35% to a record £22.2m and the group returned comfortably to profit, despite being held back by currency hedging due to the slide in the pound against the euro. The performance partly reflects the impact of a problem project in H115, which led to deferrals. The group has also been winning new business and had a strong closing order book at £35m. Cash flow was very strong, with the group returning to a net cash position of £1.4m from £1.0m net debt at...
Encouraging start to FY16 is extended
SCISYS says it has maintained the encouraging start to the year, as reported at the AGM in June. Strong cash generation has continued, with net cash rising from £0.3m at end-April to £1.4m at end-June. Around half of group revenues are in euros, and if the euro-sterling exchange rate remains around current levels throughout FY16, SCISYS has indicated that current FY16 consensus forecasts will be significantly exceeded even after allowing for hedging impacts. We will review our forecasts followin...
Update: Indicators are pointing in the right direction
SCISYS’s trading update indicates that last year’s problems continue to drift into the distance, as the group returns to its strong project disciplines of the past and indicators continue to point in the right direction. Q1 trading was in line and, supported by a healthy order book, management anticipates a similar good performance in the traditionally stronger H2. Cash flow was particularly robust in Q1, with the group swinging around from a £1m net debt position at end-FY15 to £0.3m net ...
Outlook: Margin recovery
FY15 results reveal that the difficult H1 is firmly behind it, as SCISYS bounced back with a strong H2. In H1, SCISYS was hit by difficulties in a major fixed-price development project, but this was fully resolved in October. The group has a healthy order book of £37.2m, c 23% ahead of a year earlier, of which £25.8m is scheduled for delivery in FY16. Hence 69% of FY16 revenues are already in the bag and the group has a healthy pipeline of new business. SCISYS has a medium-term goal to return ...
Update: Back on track with a solid H2
SCISYS has released an underlying positive trading update, which shows the difficult H1 is now firmly behind it. H2 trading was encouraging and FY16 guidance has been maintained, supported by a strong order book and healthy pipeline. Cash generation was stronger than we expected with the group ending the year with £1.0m net debt (we forecasted £1.4m). SCISYS has a long-term goal to generate revenues of £60m+ and double-digit margins, although we noted in September that the target for this has...
Update: Contract underpins FY16 earnings
SCISYS has been awarded a significant £4m four-year contract to develop, support and host a business/regulatory application for the UK Ministry of Defence (MoD). The new contract indicates that momentum is returning to the business in the wake of the contract hiccup earlier this year, which has since been rectified. The contract will boost the year-end order book and underpins our forecasts for FY16 and beyond. SCISYS has a long-term goal to generate revenues of £60m+ and double-digit margins,...
Update: Looking to a brighter FY16
While the H115 numbers are marked by an untypical problem project, the underlying picture is looking brighter at SCISYS. The group has been winning some good business, such as a renewed framework contract with the BBC, and it has a healthy pipeline of opportunities, while some modest strengthening of the euro also helps. The long-term goal to generate revenues of £60m+ and double-digit margins remains in place, though the target has clearly slipped back from FY18. Nevertheless, this objective k...
Flash note: Banking covenants position is resolved
In June, SCISYS revealed that it had been hit by cost overruns at a fixedprice development project. Also, as a result of the weak euro and the subsequent consensus forecast cuts, SCISYS said it might be in breach of its UK banking covenants. Following negotiations with the group’s UK banks, the covenant issue has now been favourably resolved. This is partly due to the group’s strong balance sheet, which includes the freehold property on its Chippenham HQ. Consequently, this leaves the shares...
Update: Project hiccup
SCISYS has revealed that it has been hit by cost overruns at a fixed-price development project. We note this is the group’s first significant problem project since FY07, as it has been managing its projects more effectively since then, having put more rigorous procedures in place. Trading across the rest of group has been broadly in line with expectations. However, SCISYS has also been affected by the recent strength in sterling against the euro. We have cut our forecasts, and SCISYS says it m...
Outlook: Operating margins rise to a record 8.3%
FY14 revenue was held back by the weak euro, but adjusted PBT was in line with our forecasts as costs remained under control. Hence, margins continued to expand and management is maintaining its target of double-digit margins by FY18. We have eased our forecasts due to the continuing strength of sterling against the euro, and amid some uncertainties in public sector budgets ahead of the UK general election. Nevertheless, the stock looks attractive trading on c 9x our FY16 EPS, while our DCF valu...
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