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Half-year Report

19th Sep 2019 07:00

RNS Number : 8479M

SCISYS Group PLC

19 September 2019

SCISYS Group PLC

("SCISYS", the "Group" or the "Company")

Interim results for the six months ended 30 June 2019

SCISYS Group PLC ("SCISYS" AIM SSY; ESM: SCC), the supplier of bespoke software systems, IT-based solutions and support services to the space, media & broadcast, government, defence and commerce sectors, is pleased to announce its interim results for the half year to 30 June 2019.

Financial and Operational Highlights:

·; Cash offer of 254.15p per share from CGI approved by shareholders in August

·; Revenues up 2% to £29.4m (2018: £28.7m)

·; Adjusted operating profit at £1.2m (2018: £2.5m)

·; Order book increased to £102.5m (2018: £92.2m)

·; Net debt reduced to £3.0m (2018: net debt £3.3m)

·; Adjusted basic earnings per share 2.2p (2018: 6.1p)

·; Enterprise Solutions and Defence (ESD) division delivered record first half results, building on previous contract extensions and wins

·; Space division in Germany secured further Galileo ground segment orders of €9.7m

·; Media Solutions division registered a strategic win with a major European broadcaster for newsroom software

Mike Love, Chairman of SCISYS, commenting on the results, said:

"We are pleased with our continued solid operational performance and my thanks goes out to the divisions and staff for achieving these results. Understandably, the takeover offer from CGI that was announced on 14 June significantly occupied SCISYS senior management and resulted in some exceptional expenditure. Notwithstanding this, we have delivered a creditable set of results for the period.

Our shareholders voted to approve the CGI takeover on 7 August which we expect to complete in the second half of 2019; we are currently working with CGI to obtain the necessary regulatory approvals for the bid to proceed to the final Court approval stage.

The business continues to perform in line with board expectations though, as already highlighted and in common with previous years, we expect our 2019 results to be more weighted towards the second half of the financial year."

For further information please contact:

SCISYS Group PLC		+44 (0)1249 466 466
Mike Love	Chairman
Klaus Heidrich	Chief Executive Officer
Chris Cheetham	Finance Director
finnCap (NOMAD & AIM Broker)		+44 (0)20 7220 0500
Julian Blunt/James Thompson Andrew Burdis	Corporate Finance Corporate Broking
Walbrook PR		+44 (0)20 7933 8780
Tom Cooper/Paul Vann		+44 (0)797 122 1972
		[email protected]
Davy (ESM Broker)		+353 1 679 6363
John Frain		[email protected]

About SCISYS Group:

Employing around 670 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's registered office is in Dublin, with 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.

This announcement has been released by Natasha Laird, Company Secretary, on behalf of the Company.

Introduction

The Board of SCISYS is pleased with the Group's results for the first half of 2019. As indicated at the time of our AGM in June, we expect 2019 revenues and profit to be more heavily weighted towards the second half of the year. There have been a number of strategic contract wins by the divisions, coupled with solid operational performance, and we are continuing to see an increasing proportion of time & materials contract work in the revenue mix.

Key financials

In the six months ended 30 June 2019, revenue totalled £29.4m (2018: £28.7m) and Group adjusted operating profit was £1.2m (2018: £2.5m). Adjusted basic earnings per share were 2.2p (2018: 6.1p). Fuller details are presented in the Financial review section below.

Operating review and outlook

The three divisions performed broadly in line with management expectations during the first half of 2019, with a particularly strong performance by ESD adding to its enviable reputation for delivering complex IT implementation services. Notable contract successes include orders from Thales Alenia France worth €9.7m for Galileo ground segment work, won by Space Germany, strengthening its foothold in the Galileo project. The Media Solutions division continued to expand its client portfolio with the addition of a major European broadcaster through a key order for its proprietary OpenMedia newsroom software solution.

CGI recommended cash offer and interim dividend

On 14 June 2019 CGI Group Holdings Europe Limited (CGI Bidco) announced its recommended cash offer, which offered shareholders 254.15p per share and values SCISYS at approximately £78.9m. SCISYS shareholders voted to approve this offer on 7 August 2019, which offer is being implemented by way of a Scheme of Arrangement under the Irish Companies Act 2014. After all regulatory approvals have been obtained and other conditions satisfied or otherwise waived, the Scheme must then be sanctioned by the High Court in order to take effect. SCISYS is in the process of obtaining such regulatory approvals. The Board expects completion to take place during the second half of 2019. While the Board cannot give a precise date for completion, shareholders will be updated in due course by way of regulatory announcement.

In the light of the cash offer, no interim dividend is being proposed and the Board notes that any dividend would in any event reduce the cash offer made by CGI Bidco to shareholders upon completion.

Financial review

The Directors foreshadowed in the June AGM trading update that earnings for 2019 would revert to the customary pattern of being heavily weighted towards the second half of the year after the more balanced profile seen in 2018. The first-half results for 2019 support this indication in that adjusted operating profits were below the comparative figures for 2018 and at the level reported in 2017.

Total revenues were up 2% to £29.4m (2018: £28.7m) and the professional-fees component increased marginally to £27.7m (2018: £27.6m). 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 - was £1.2m (2018: £2.5m). 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 2.2p (2018: 6.1p).

The statutory operating profit was £0.1m (2018: £1.2m) after bearing amortisation costs of £0.6m (2018: £0.6m) relating to the December 2016 ANNOVA Systems GmbH ("Annova" - now SCISYS Media Solutions GmbH) acquisition and an exceptional charge of £0.5m (2018: £0.7m). Basic loss per share was 0.8p (2018: earnings of 2.6p).

The exceptional charge represented £0.3m to facilitate the reorganisation and integration of the Group's media operations under common management in Germany plus an initial £0.2m of legal and professional costs relating to CGI's offer to acquire SCISYS announced in June. Exceptional charges in the comparative 2018 period comprised a final earnout payment of £0.6m to Annova's former owners and the first £0.1m of legal and professional costs incurred for the Group's re-domiciliation to Ireland that was completed in November 2018.

Net cash flow from operations was £1.3m (2018: £3.1m). At the end of the reporting period, the Group had bank deposits of £6.0m (2018: £9.4m). Unutilised working capital facilities totalled £4.3m (2018: £4.2m). Group debt at the period end was £9.0m (2018: £12.7m). The resulting net debt was £3.0m, a reduction of £0.1m from the 2018 year-end position of £3.1m net debt (30 June 2018: £3.3m).

Following a buoyant sales performance in the final quarter of 2018, order intake for the first six months of 2019 continued strongly, with the closing order book up 4% from the opening value for the period of £98.6m at £102.5m (30 June 2018: £92.2m).

The tax charge for the period is distorted by the high level of non-tax deductible amortisation charges relative to the loss before tax and the fact that the majority of the tax charge relates to deferred tax chargeable at a rate of 33% in Germany.

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 2019. The new accounting standard, IFRS 16: Leases, has been adopted for the first time, adding c£3m to tangible fixed assets and lease liabilities but having an immaterial impact on operating profits.

Responsibility

SCISYS Group PLC Directors accept responsibility for the information contained in this announcement. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure such is the case), the information contained in this Announcement for which they accept responsibility is in accordance with the facts stated therein and does not omit anything likely to affect the import of such information.

Consolidated Income Statement

	Unaudited	Unaudited	Audited
	6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	£'000	£'000	£'000
Revenue (note 2)	29,371	28,721	58,405
Operating costs	(29,252)	(27,509)	(55,912)
Operating profit	119	1,212	2,493
"Adjusted operating profit" being operating profit before share based payments, exceptional charges and amortisation arising on business combinations	1,202	2,526	5,118
Exceptional items	(470)	(666)	(1,337)
Amortisation of Intangibles	(595)	(626)	(1,252)
Share based payments	(18)	(22)	(36)
Operating profit	119	1,212	2,493
Finance costs	(247)	(232)	(502)
Finance income	(1)	(5)	3
(Loss)/profit before tax	(129)	975	1,994
Tax charge	(114)	(200)	(558)
(Loss)/profit for the period attributable to equity holders of the parent	(243)	775	1,436

(Loss)/earnings per share (note 5)
Basic	(0.8)p	2.6p	4.9p
Diluted	(0.8)p	2.6p	4.8p

Consolidated Statement of Comprehensive Income

	Unaudited	Unaudited	Audited
	6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	£'000	£'000	£'000
(Loss)/profit for the period	(243)	775	1,436
Other comprehensive income not recycling through the Income Statement
Currency translation differences on foreign currency investments	(137)	57	158
Total comprehensive (expense)/income for the period attributable to equity holders of the parent	(380)	832	1,594

Consolidated Statement of Changes in Equity

For the six months ended	Share Capital	Share Premium	Merger Reserve	Capital Redemp-tion Reserve	Trans-lation Reserve	Retained Earnings	Total
30 June 2019 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 January 2019	7,420	-	5,850	-	2,048	11,216	26,534
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	(243)	(243)
Other comprehensive income
Foreign currency translation	-	-	-	-	(137)	-	(137)
Total comprehensive income for the period	-	-	-	-	(137)	(243)	(380)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Share based payments	-	-	-	-	-	18	18
Issue of new shares	15	23	-	-	-	-	38
Share options	-	-	-	-	-	96	96
Total contributions by and distributions to owners	15	23	-	-	-	114	152
Balance as at 30 June 2019	7,435	23	5,850	-	1,911	11,087	26,306

For the six months ended	Share Capital	Share Premium	Merger Reserve	Capital Redemp-tion Reserve	Trans-lation Reserve	Retained Earnings	Total
30 June 2018 (unaudited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
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
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

Consolidated Statement of Changes in Equity continued

For the year ended	Share Capital	Share Premium	Merger Reserve	Capital Redemp-tion Reserve	Trans-lation Reserve	Retained Earnings	Total
31 December 2018 (audited)	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 1 January 2018	7,329	268	943	83	1,890	14,931	25,444
Total comprehensive income for the period
Profit for the period	-	-	-	-	-	1,436	1,436
Other comprehensive income
Foreign currency translation	-	-	-	-	158	-	158
Total comprehensive income for the period	-	-	-	-	158	1,436	1,594
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(655)	(655)
Issue of new shares	91	371	-	-	-	-	462
Share based payments	-	-	-	-	-	36	36
Treasury shares	-	-	-	-	-	(6)	(6)
Exercise of share options	-	-	-	-	-	(341)	(341)
Group reconstruction on formation of Irish holding company	-	(639)	4,907	(83)	-	(4,185)	-
Total contributions by and distributions to owners	91	(268)	4,907	(83)	-	(5,151)	(504)
Balance as at 31 December 2018	7,420	-	5,850	-	2,048	11,216	26,534

Consolidated Statement of Financial Position

	Unaudited	Unaudited	Audited
	30 June 2019	30 June 2018	31 December2018
	£'000	£'000	£'000
Non-current assets
Property, plant and equipment	12,770	9,165	9,411
Goodwill	16,018	15,902	16,075
Other intangible assets	3,324	4,467	3,981
Other receivables	196	94	196
Deferred tax assets	729	23	456
	33,037	29,651	30,119
Current assets
Inventories	94	133	79
Trade and other receivables	26,851	25,210	21,466
Corporation tax receivable	794	500	100
Cash and cash equivalents	5,953	9,394	8,065
	33,692	35,237	29,710
Total assets	66,729	64,888	59,829
Equity
Issued share capital	7,435	7,329	7,420
Share premium account	23	268	-
Merger reserve	5,850	943	5,850
Retained earnings	11,087	15,987	11,216
Translation reserve	1,911	1,947	2,048
Other reserves	-	83	-
Equity attributable to equity holders of the parent	26,306	26,557	26,534
Current liabilities
Trade and other payables	26,211	21,954	17,205
Overdrafts and loans	4,409	2,469	5,278
Corporation tax payable	323	731	910
Deferred income	926	211	449
	31,869	25,365	23,842
Non-current liabilities
Loans	4,511	10,263	5,886
Other payables	923	914	937
Provisions	1,526	929	1,402
Deferred tax	1,594	860	1,228
	8,554	12,966	9,453
Total liabilities	40,423	38,331	33,295
Total equity and liabilities	66,729	64,888	59,829

Consolidated Statement of Cash Flows

	Unaudited	Unaudited	Audited
	6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	£'000	£'000	£'000
Cash flow from operating activities
(Loss)/profit before tax	(129)	975	1,994
Net finance costs	248	237	499
Operating profit	119	1,212	2,493
Increase in trade receivables	(5,404)	(3,607)	(2,540)
Decrease in trade payables	5,707	4,038	3,059
Deferred consideration	-	616	-
Depreciation and amortisation	1,685	1,224	2,594
Share based payments	18	22	36
Net tax payments	(1,301)	(371)	(257)
Net cash flow from operating activities	824	3,134	5,385
Cash flow from investing activities
Investment in associate	-	(20)	-
Proceeds from disposal of property, plant and equipment	-	-	34
Purchase of plant, property and equipment	(558)	(244)	(1,463)
Interest received	(1)	(5)	3
Net cash flow from investing activities	(559)	(269)	(1,426)
Cash flows from financing activities
Dividends paid	-	-	(655)
Interest paid	(247)	(232)	(502)
Issue of new shares	38	-	462
Investment in own shares	-	-	(6)
Exercise of share options	96	57	(341)
Debt repayments	(2,686)	(1,244)	(2,793)
Net cash flow from financing activities	(2,351)	(1,419)	(3,835)
Net increase in cash and cash equivalents	(2,086)	1,446	124
Cash and cash equivalents at the start of the period	8,065	8,021	8,021
Exchange and other movements	(26)	(73)	(80)
Cash and cash equivalents at the end of the period	5,953	9,394	8,065
Cash and cash equivalent deposits held in non-UK based banks	4,601	9,025	7,769
Net bank deposit with UK based banks	1,352	369	296
	5,953	9,394	8,065

Notes to the Unaudited Interim Report

For the six months to 30 June 2019

1	Basis of preparation of Interim Financial Information & Statement of Compliance SCISYS Group PLC (the "Company") is a company incorporated in Ireland. The entities consolidated in the half year financial statements of the Company for the six months to 30 June 2019 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 2019. These policies are set out by the Group in its consolidated financial statements for the year ended 31 December 2018 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 is one new standard or interpretation endorsed by the EU during 2019. IFRS 16 Leases (see Note 8) has had an impact on the financial results and presentation. The interim financial information for the six months ended 30 June 2019 is unaudited and does not include all of the information required to constitute statutory accounts within the meaning of section 333 of the Companies Act 2014. It should therefore be read in conjunction with the audited financial statements for the year ended 31 December 2018. These published accounts have been reported on by Ernst & Young, the Group's auditors, and have been delivered to the Registration Office. The report of the auditor was (1) unqualified; (2) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (3) did not contain a statement under section 336 (4), 336 (5), 336 (8) or section 305 to 312 of the Companies Act 2014. 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 2018. The Interim Report was approved by the Directors on 18 September 2019.

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 three divisions: Space Enterprise Solutions & Defence (ESD) Media Solutions Media Solutions includes Media & Broadcast (M&B) and ANNOVA Systems (renamed SCISYS Media Solutions) from 1 January 2019) 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	Media Solutions	Total
	External revenues	£'000	£'000	£'000	£'000
	6 months ended 30 June 2019 (unaudited)
	Professional fees revenue	10,281	9,920	7,500	27,701
	Other revenue	430	972	84	1,486
	External revenue for reportable segments	10,711	10,892	7,584	29,187
	Other external revenue				184
	Consolidated revenue				29,371
	6 months ended 30 June 2018 (unaudited)
	Professional fees revenue	11,100	8,862	7,635	27,597
	Other revenue	84	694	170	948
	External revenue for reportable segments	11,184	9,556	7,805	28,545
	Other external revenue				176
	Consolidated revenue				28,721
	Year ended 31 December 2018 (audited)
	Professional fees revenue	21,293	17,966	16,442	55,701
	Other revenue	-	1,925	380	2,305
	External revenue for reportable segments	21,293	19,891	16,822	58,006
	Other external revenue				399
	Consolidated revenue				58,405

2	Segmental analysis continued
	Information about reportable segments
		Space	ESD	Media Solutions	Total
	Timing of revenue recognition	£'000	£'000	£'000	£'000
	6 months ended 30 June 2019 (unaudited)
	Point in time	655	637	353	1,645
	Performance over time	10,054	10,255	7,232	27,541
	Total	10,709	10,893	7,585	29,187
	6 months ended 30 June 2018 (unaudited)
	Point in time	157	608	368	1,133
	Performance over time	11,027	8,948	7,437	27,412
	Total	11,184	9,556	7,805	28,545
	Year ended 31 December 2018 (audited)
	Point in time	335	1,220	633	2,188
	Performance over time	20,958	18,671	16,189	55,818
	Total	21,293	19,891	16,822	58,006

		Space	ESD	Media Solutions	Total
	Certainty of revenues	£'000	£'000	£'000	£'000
	6 months ended 30 June 2019 (unaudited)
	100% - contract completed and paid	9,078	9,274	4,909	23,261
	Contract completed, awaiting payment	592	60	1,357	2,009
	Point in time, benefit transferred	4	242	174	420
	Performance over time	1,035	1,317	1,145	3,497
	Total	10,709	10,893	7,585	29,187
	6 months ended 30 June 2018 (unaudited)
	100% - contract completed and paid	10,008	7,225	4,567	21,800
	Contract completed, awaiting payment	614	220	517	1,351
	Point in time, benefit transferred	140	78	161	379
	Performance over time	422	2,033	2,560	5,015
	Total	11,184	9,556	7,805	28,545
	Year ended 31 December 2018 (audited)
	100% - contract completed and paid	19,126	14,243	13,672	47,041
	Contract completed, awaiting payment	1,203	235	1,837	3,275
	Point in time, benefit transferred	85	884	177	1,146
	Performance over time	879	4,529	1,136	6,544
	Total	21,293	19,891	16,822	58,006

2	Segmental analysis continued
	Information about reportable segments continued
		Space	ESD	Media Solutions	Total
	Profit/(loss) before tax	£'000	£'000	£'000	£'000
	6 months ended 30 June 2019 (unaudited)
	Reportable segment contribution	1,014	3,382	526	4,922
	Other contribution	250	250	-	500
	Contribution	1,264	3,632	526	5,422
	Central overheads				(4,220)
	Total adjusted EBITA				1,202
	Exceptional items and share based payments				(488)
	EBITA				714
	Amortisation of intangible assets comprising acquired software solution				(227)
	Amortisation of intangible assets comprising acquired order book				(368)
	Operating profit				119
	Finance costs				(247)
	Finance income				(1)
	Loss before tax				(129)
	6 months ended 30 June 2018 (unaudited)
	Reportable segment contribution	3,311	2,790	810	6,911
	Other contribution	38	-	-	38
	Contribution	3,349	2,790	810	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
	Year ended 31 December 2018 (audited)
	Reportable segment contribution	5,098	5,809	3,089	13,996
	IFRS 15 adjustment	(20)	(58)	-	(78)
	Contribution	5,078	5,751	3,089	13,918
	Central overheads				(8,800)
	Total adjusted EBITA				5,118
	Exceptional items and share based payments				(1,373)
	EBITA				3,745
	Amortisation of intangible assets comprising acquired software solution				(737)
	Amortisation of intangible assets comprising acquired order book				(515)
	Operating profit				2,493
	Finance costs				(502)
	Finance income				3
	Profit before tax				1,994

2	Segmental analysis continued
	Information about reportable segments continued
		Space	ESD	Media Solutions	Total
	Group assets	£'000	£'000	£'000	£'000
	As at 30 June 2019 (unaudited)
	Reportable segment - non-current assets	3,524	1,110	11,384	16,018
	Reportable segment - current assets	11,118	8,897	4,549	24,564
		14,642	10,007	15,933	40,582
	Other - non-current assets				17,019
	Other - current assets				9,128
	Total assets				66,729
	As at 30 June 2018 (unaudited)
	Reportable segment - non-current assets	3,507	1,110	11,285	15,902
	Reportable segment - current assets	9,905	7,659	5,983	23,547
		13,412	8,769	17,268	39,449
	Other - non-current assets				13,749
	Other - current assets				11,690
	Total assets				64,888
	As at 31 December 2018 (audited)
	Reportable segment - non-current assets	3,531	1,110	11,434	16,075
	Reportable segment - current assets	9,387	5,832	3,213	18,432
		12,918	6,942	14,647	34,507
	Other - non-current assets				14,044
	Other - current assets				11,278
	Total assets				59,829

		Space	ESD	Media Solutions	Total
	Group liabilities	£'000	£'000	£'000	£'000
	As at 30 June 2018 (unaudited)
	Reportable segment - current liabilities	5,047	6,125	979	12,151
	Other - non-current liabilities				8,554
	Other - current liabilities				19,718
	Total liabilities				40,423
	As at 30 June 2018 (unaudited)
	Reportable segment - current liabilities	2,533	4,191	3,275	9,999
	Other - non-current liabilities				12,966
	Other - current liabilities				15,366
	Total liabilities				38,331
	As at 31 December 2018 (audited)
	Reportable segment - current liabilities	2,587	928	1,264	4,779
	Other - non-current liabilities				9,453
	Other - current liabilities				19,063
	Total liabilities				33,295

2	Segmental analysis continued
	Information about reportable segments continued
		UK	Rest of Europe	Other	Total
	Geographical split	£'000	£'000	£'000	£'000
	6 months ended 30 June 2019 (unaudited)
	Revenue from external customers by location of customers	15,600	12,656	1,115	29,371
	As at 30 June 2019
	Non-current assets:
	Intangible assets	1,110	18,232	-	19,342
	Tangible assets	4,535	8,235	-	12,770
	Other long term assets	-	925	-	925
	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	1,110	19,259	-	20,369
	Tangible assets	5,917	3,248	-	9,165
	Other long term assets	-	117	-	117
	Year ended 31 December 2018 (audited)
	Revenue from external customers by location of customers	32,035	23,499	2,871	58,405
	As at 31 December 2018
	Non-current assets:
	Intangible assets	1,110	18,946	-	20,056
	Tangible assets	4,582	4,829	-	9,411
	Other long term assets	398	254	-	652

3	Exceptional items
		Unaudited	Unaudited	Audited
		6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
		£'000	£'000	£'000
	Brexit restructuring	42	50	745
	Increase in contingent consideration	-	616	621
	German corporate reorganisation	239	-	350
	Takeover offer costs	189	-	-
	R&D tax credits	-	-	(379)
	Exceptional items	470	666	1,337

Since 2007 the Board has gauged the underlying performance of business using an adjusted operating profit measure that excludes the costs of the Group's long-term share incentive schemes, exceptional items and any amortisation of intangible assets arising on business acquisition. Internal reporting is exclusively based on adjusted performance measures to facilitate comparison between financial years and publicly available research notes on SCISYS published by financial analysts focuses on these same measures.

The Brexit restructuring charge reflects external professional advice and costs in relation to the development and implementation of the Group's contingency plans to mitigate any potential adverse impact of Brexit on cross-border operations, particularly in the space sector. Costs principally relate to the establishment of the new ultimate holding company, SCISYS Group PLC, incorporated in Ireland, at the top of the Group structure by means of a Scheme of Arrangement approved by the members and the High Court.

Contingent consideration payable for the Annova acquisition was linked both to average profitability over a 3-year earn out period and achievement of key commercial milestones. The liability for forecast consideration payments was reviewed biannually to reflect prevailing business projections. When the anticipated total contingent consideration payable for Annova was reassessed at 31 December 2017, it resulted in an exceptional credit. The exceptional charge recognised in 2018 represents a fixed and final earnout payment to Annova's former owners in consideration for early termination of the acquisition ring-fence agreement. This enables accelerated achievement of potential medium-term benefits in combined media sector operations by the removal of constraints on collective management.

The German arm of the Group is in the process of being re-organised to simplify the corporate structure and facilitate the merger of the Annova and M&B divisions under common management. Costs incurred comprise of legal and professional fees, external change consultancy charges and costs for rationalisation of the divisional management team.

Takeover offer costs comprise legal and professional fees incurred in relation to the off by CGI to acquire the Group, announced on June 2019.

UK R&D tax credits were considered exceptional in 2017 for two reasons. Firstly, from 2017 the tax credits are disclosed as above-the-line deductions from operating charges instead of offsetting tax charges as previously reported so would otherwise distort comparisons of operating profit with earlier years. Secondly, SCISYS was correctly projected to exceed the qualification criteria for the SME tax credit scheme in 2018, with a consequential sharp reduction in the value of credit claims. The 2017 provision of £450,000 for anticipated credits proved to be conservative and the supplementary receipt is shown as a further exceptional credit in 2018

4	Taxation
		Unaudited	Unaudited	Audited
		6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
		£'000	£'000	£'000
	Current tax charge	21	702	1,148
	Deferred tax (charge)/credit	93	(502)	(590)
	Total tax charge	114	200	558

5	(Loss)/earnings per share The calculation of the Group basic and diluted (loss)/earnings per ordinary share is based on the following data:

	Unaudited	Unaudited	Audited
	6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	£'000	£'000	£'000
(Loss)/profit attributable to shareholders	(243)	775	1,436
Number of shares	'000	'000	'000
Basic weighted average number of shares	29,593	29,366	29,154
Diluted weighted average number of shares	30,235	30,005	30,085
Basic	(0.8)p	2.6p	4.9p
Diluted	(0.8)p	2.6p	4.8p

The weighted average number of shares for the calculation of basic (loss)/earnings per share excludes own shares held in treasury.

The weighted average number of shares for the calculation of diluted (loss)/earnings per share includes own shares held in treasury together with CSOP and unapproved share options outstanding during the period.

6	Adjusted earnings per share
		Unaudited	Unaudited	Audited
		6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	Basic	2.2p	6.1p	13.1p
	Diluted	2.2p	5.9p	12.8p

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	Audited
	6 months to30 June2019	6 months to30 June2018	Year ended 31 December 2018
	£'000	£'000	£'000
(Loss)/profit attributable to shareholders	(243)	775	1,436

Adjusted for:
Exceptional items	470	666	1,337
Corporation tax	(79)	(203)	-
Amortisation of intangible assets	595	626	1,252
Deferred tax	(101)	(106)	(213)
Share based payments	18	22	36
Adjusted earnings	660	1,780	3,848

The weighted average number of shares for the calculation of adjusted basic earnings per share excludes own shares held in treasury. The weighted average number of shares for the calculation of adjusted diluted earnings per share includes own shares held in treasury together with CSOP and unapproved share options outstanding during the period.

Dividends

For year ended 31 December 2018 the Company paid a final dividend of 1.73 pence per share in July 2019. No interim dividend is proposed for 2019.

Post balance sheet events

CGI Group Holdings Europe Limited has made a cash offer, unanimously recommended by the SCISYS Group PLC ("SGP") board pursuant to which it will acquire the entire issued and to be issued ordinary share capital of SGP, Under the terms of the acquisition, SGP shareholders will be entitled to receive for each SGP share 254.15 pence in cash. CGI Group Holdings Europe Limited is a wholly owned indirect subsidiary of CGI Inc. The cash offer is intended to be implemented by a scheme of arrangement under chapter 1 of part 9 of the Companies Act 2014 (Ireland) and shareholders approved the scheme of arrangement at a general meeting on 7 August 2019.

Impact of changes in accounting policies

Impact of IFRS 16 Leases

IFRS 16 Leases is applicable for periods beginning on or after 1 January 2019. Under the terms of IFRS 16, a contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Under the new standard, all leases have to be recognised on the balance sheet in the form of a right-of-use asset and a lease liability. This is applicable to the Group in 2019, which recognises the right of use for leased assets including property, vehicles and IT.

The standard contains two recognition and measurement exemptions. Short-term leases can be excluded with a lease term of 12 months or less. Low-value leases where the underlying asset has a low value when new, can also be excluded. If either exemption is applied, the leases are accounted for by recognising payments on a straight-line basis. The exemptions are optional and the Group has taken both.

The right-of-use asset is initially measured at the amount of lease liability, plus any initial direct costs incurred by the lessee in connection with the lease and payments made at or prior to commencement. The lease liability is derived from the present value of the lessee's minimum lease payments. The present value is discounted at the interest rate charged by the lessor to the lessee. If unknown the Group can use its incremental borrowing rate.

This impacts the income statement as the Group recognises an interest element of what was previously operating leases as financing activities. Rental expense is replaced by interest expense and depreciation. The distribution of expense for the leases over the lease term is no longer even but digressive. This is because interest expense at the commencement of a lease is greater than towards the end. This front-loading effect will be more pronounced for any long-term leases. This in turn can influence loan covenants, credit ratings, internal budgeting processes and profit related pay.

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 [email protected] or visit www.rns.com.

END

IR CKFDPNBKDACD

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