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Scisys bounces back

RESULTS: Strong trading in the second half and an unusually low tax charge helped IT project manager Scisys post strong full-year financial results
March 27, 2014

Specialist IT-services provider Scisys (SSY) bounced back from a difficult first half to post strong full-year financial results for 2013. Solid trading in the second half helped adjusted operating profits rise 19 per cent year on year, while adjusted EPS climbed 31 per cent thanks to an unusually low tax charge (related to writing down intangibles from acquisitions).

IC TIP: Buy at 81p

Scisys provides complex, mission-critical IT infrastructure to the public sector and occasionally the private sector. Constrained government budgets forced the company to “reposition” itself in the first half and “realign the business in line with government procurement changes”, says executive deputy chairman David Jones. That resulted in £1.2m of restructuring costs last year, causing the fall in reported profits in the table below.

The cost-cutting and business reorganisation nevertheless quickly boosted the operating margin to 9 per cent in the second half, compared with 7 per cent across the whole of 2012, and is helping the company to target new contracts more effectively. “Pleasingly,” notes Mr Jones, “the positive momentum from the second half has continued into the first quarter.”

Broker finnCap expects adjusted pre-tax profits of £3.2m this year, giving flat adjusted EPS of 8.8p, from £3.0m and 8.8p in 2013. This is because of an expected return to normal tax rates.

SCISYS (SSY)

ORD PRICE:81pMARKET VALUE:£ 24m
TOUCH:79-82p12-MONTH HIGH:83pLOW: 62p
DIVIDEND YIELD:1.8%PE RATIO:18
NET ASSET VALUE:66p*NET DEBT:14%

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
200941.70.51.21.00
201043.61.63.41.10
201142.32.06.11.21
201239.12.05.71.32
201342.61.54.61.46
% change+9-25-19+11

Ex-div:11 Jun

Payment:17 Jul

*Includes intangible assets of £7m, or 24p a share