Strong euro could benefit full-year numbers for SCISYS

Bespoke software systems supplier SCISYS updated the marker ahead of releasing its interim results in September on Tuesday.

The AIM-traded company said it has maintained the “encouraging start to the year” reported at the AGM on 9 June.

It said this favourable trading picture is reflected in “buoyant cash flows” for the period.

“These transformed a £1.0m net debt position at the start of 2016 into £1.4m net cash at 30 June,” the board said in a statement.

“The group's order book has remained strong, well ahead of the equivalent position in June 2015, and is underpinned by a sizeable pipeline of prospective new business opportunities.”

SCISYS’ board said it does not expect any adverse consequences as a result of June's EU referendum outcome, adding that if the euro-sterling exchange rate stays in a broad range around its current level for the remainder of 2016, its current full year expectations will be significantly exceeded even after allowing for costs of approximately £0.5m incurred in the first half-year for currency hedging.

“As in previous years, the group's full year trading performance is expected to show a bias towards the second half of the year.”

SCISYS said approximately half of its business is conducted in euros, and it 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.

“Following the Brexit referendum vote the value of the pound fell sharply against the euro,” the board explained.

“This resulted in an adverse revaluation at 30 June of the company's 2016 and 2017 hedging contracts and will create a £0.5m charge in the income statement for the first half of the year.”