Scisys optimistic after problem contract resolved

Preliminary results from Scisys confirmed a strong second half recovery that lifted the numbers above expectations

Scisys, which recently won a £4m contract to develop a customs compliance management information system for the UK Ministry of Defence, reinstated the full year dividend with a payment of 1.78p.

Revenues last year however fell 4% at constant currency to £36.1m and earnings per share sank to 1.3p from 7.7p due to the impact of a problem contract.

Having suffered a significant project over-run in the first half last year, Scisys pared back expectations to ensure it had the headroom to resolve client contracts.

Contracts were resolved to both parties' satisfaction, releasing provisions made and, coupled with a stronger revenue performance in H2, delivered a full year performance slightly ahead of the forecasts.

Chairman Mike Love said trading was on the up and said: "Scisys advised investors in June 2015 that it was experiencing difficulties in one major fixed price development project in its enterprise solutions & defence (ESD) division.

"We made provisions at that juncture for the anticipated additional costs to complete the project and issued revised market guidance for the then anticipated full year's trading performance."

For the second half of the year Love said there had been a healthy recovery in trading indicated by a number of significant contract wins announced at the end of last year.

"We are seeing an encouraging start to 2016 and anticipate a healthy first half," he said. "However, the volatile sterling/euro exchange rate remains a factor."

Looking forward, Love said the order book was more than 20% ahead of its value at the end of 2014 and that the board expected "significant opportunities to materialise" during the first half 2016 across all our divisions; some of which have already materialised.

Confidence is high at the company now, with the dividend, suspended at the time of the Interims to give room to resolve the rogue contract, not only re-introduced but now inflated such that the proposed full year dividend includes the foregone interim dividend and is ultimately 10% higher than last year's total payout.