Interim Results

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014 (MAR).

SCISYS PLC

(AIM: SSY)INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018

SCISYS PLC ("SCISYS"), the supplier of bespoke software systems, IT-based solutions and support services to the space, media & broadcast, government, defence and commercial sectors is pleased to announce its interim results for the half year to 30 June 2018. The Directors anticipate that SCISYS will deliver further year-on-year growth in 2018, and that trading results will be more evenly spread over the two halves of the financial year than in previous years.

Financial and Operational Highlights:

· Adjusted operating profit up to £2.5m (2017: £1.2m restated).

· Revenues up 13% to £28.7m (2017: £25.3m restated).

· Half-year order book approaching £100m (2017: £64m).

· Net debt reduced to £3.3m (2017: net debt £9.0m).

· Interim dividend up 10% at 0.65 pence per share (2017: 0.59p).

· Adjusted basic earnings per share 6.1p (2017: 1.4p).

· ESD division had a particularly strong first half year, with a number of key contract extensions.

· M&B division renewed a long-term BBC maintenance contract extension by at least 7 years.

· Early termination of Annova ring-fencing arrangements agreed with former owners to close out the earnout period and accelerate potential integration gains.

· BBC's flagship TV news programmes now running live on OpenMedia software.

· Space division had an excellent first half year and secured a €3.9m contract for the EGNOS programme.

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

"We are delighted by our continued solid operational performance and key contract renewals. In particular, our Space division's contract win with Airbus for developing the global navigational EGNOS V3 ground segment is encouraging evidence of our ability to continue participation in EU-funded programmes. Cash flow is healthy and our balance sheet increasingly strong. We expect our financial results to be more evenly spread over the year. The board also expects, based on current performance, to deliver further year-on-year growth for 2018."

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Notes to Editors:

About SCISYS:

Employing around 580 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 has 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.

Introduction

The Board of SCISYS is pleased with the Group's results for the first half of 2018. In particular - in contrast to the trend of previous years, where performance has weighed heavily towards the second half of the year - we expect 2018 revenues and profits to be more evenly spread throughout the year due to the anticipated phasing of order intake and the increasing proportion of time & materials contract work in the revenue mix.

Key financials

The Group's revenue totalled £28.7m (2017: £25.3m restated under IFRS 15). In the six months ended 30 June 2018, the Group's adjusted operating profit was £2.5m (2017: £1.2m restated). Adjusted basic earnings per share were 6.1p (2017: 1.4p). A fuller explanation is available in the Finance Review section.

Operating Review

Introduction

All divisions performed ahead of, or in line with, management's expectation during the first half of 2018, delivering contracts on time and within budget and generating improved operating cash flows. Across the Group we have secured important contract extensions for our support work with key customers, including the BBC, Vodafone, Siemens and several defence primes. We are seeing an increase in the number of contracts performed on a time-and-materials basis.

We still do not expect any adverse operational consequences as a result of Brexit. However, we continue to progress our contingency planning, including any re-domiciliation, in order to protect shareholder value and cement the Group's position when carrying out and bidding for both UK and EU-funded work after Brexit. We currently expect these contingency plans to be put into effect during the course of 2018.

Enterprise Solutions & Defence (ESD) division

ESD delivered an excellent first half year performance. The division continues to work on ongoing defence projects for the Ministry of Defence (MoD), as well as in the maritime sphere, securing key long-term support contract extensions with major primes. Current projects are running to plan and resulted in a contribution margin of 29%.

ESD secured a key systems-integration framework with UK Power Networks, a long-standing customer, for whom SCISYS also carries out support services for its billing systems.

The division won a new contract to develop a dashboard and reporting tool for Vodafone, for the 111 non-emergency number. It also signed a separate contract extension with Vodafone for continued non-emergency telecommunications work.

The division's other projects span a wide range of commercial and public-sector customers and varied software projects, including ongoing work for the RNLI, Coal Authority, Public Health England and Edmundson Electrical. Our work with Siemens continues to expand in the arena of software engineering for automatic train controls and signalling systems. This has built a pipeline of opportunities in the transport and logistics sector, part of which crystallised with the recent Future Bus Systems win secured with Trapeze for Transport for London. ESD has successfully maintained its roster of existing, long-term customers.

The division continues to support the MoD with its Waterguard Project, enabling the MoD to be tax efficient and comply with HMRC regulations for military equipment export/import. Xibis, our web and mobile-app specialist subsidiary, now reports into the ESD division. Its revenues and margin targets remain on track. Xibis and EDS continue to collaborate on ongoing mobile-application development work for Pets at Home and Angel Trains.

Space division

Our Space division made an excellent start to 2018. It secured a key €3.9m win with Airbus Defence and Space (Airbus) for developing the global navigation EGNOS V3 ground segment infrastructure. Airbus is the prime contractor to the European Space Agency (ESA) and the European GNSS Agency. This regional satellite-based augmentation system is used to improve the performance of global navigational satellite systems. The division also secured contract extensions for its existing work for the EU-funded Galileo programme, and continued its ongoing work for ESA at the European Space Operations Centre in Darmstadt. The division's programme of work on Germany's flagship Heinrich Hertz satellite mission continues to perform to schedule.

The Space division also secured contract wins with the UK Space Agency for autonomous robotics software development and Earth Observation projects. Our robotics team has won a contract with a UK commercial customer for a remote tunnel inspection project, extending its robotics software platform.

It has made further inroads into the commercial space sector, for example by delivering simulation software to Astroscale Limited. The division is also developing fuel consumption optimisation algorithms and simulation software for Sky and Space Global and its Pearls nano-satellite project.

The Space division's projects ran well during the first six months of the year, including the Galileo programmes, where we are well positioned to secure new contracts in the second half of the year.

Media & Broadcast (M&B) division

M&B renewed its long-standing maintenance contract with the BBC in February, cementing its strong relationship with the BBC. M&B continues to support the BBC by providing radio audio editing, production and archiving systems, and is also working towards closer integration of dira! with the OpenMedia solution provided by Annova to the BBC. The roll out of its ViLoR solution is progressing well, through which local radio is hosted virtually using central datacentres.

The delivery of dira! radio production and playout systems to the South African Broadcasting Corporation (SABC) is on schedule and two channels went live at RTL, the French commercial network. M&B won a key contract with the British Library, under which SCISYS will deliver a national Digital Radio Archive Management solution that will capture and preserve a representative part of the UK's radio output. This demonstrates the adaptability of dira! beyond the broadcasting arena, as this project will use dira! modules.

As anticipated, the first half year's contribution was behind 2017 on higher revenues but M&B's performance is expected to improve in the second half year despite slow progress with the recently won weConnect project.

ANNOVA Systems

Annova has performed solidly during the first half of 2018 and the deployment of its OpenMedia software to the BBC's operation continued over the summer. Installation into the BBC's London W1 newsroom was successful, marking a key milestone in this flagship project.

The division continues to make advances on current projects, including those with the ARD group of German broadcasters, of which the recently won customer Radio Bremen is a member. It has maintained solid operational progress for its growing roster of clients, such as the German broadcasters MDR and NDR, Czech Radio, Radio France and Corus in Canada.

In common with M&B, Annova anticipated that it would report a weaker first six months than in 2017, although the division expects a significant improvement in performance in the second half of the year.

* other divisions are measured on their contribution to shared Group overheads whereas Annova currently remains largely independent, allowing the computation of a representative EBITA

While both M&B and Annova's first-half revenues are somewhat behind the board's expectations, the overall outlook for both divisions remains in line with Group expectations.

Finance Review

Results for the half year to 30 June 2018 show a significant step up from the comparative period for 2017. This was foreseen in the June AGM trading update, when the Directors signalled that financial results for the full year 2018 would be more balanced between the two halves than in recent years.

Total revenues were up 13% to £28.7m (2017: £25.3m as restated in accordance with IFRS 15 - see below) and the professional-fees component increased by 24% to £27.6m (2017: £22.3m). 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 - more than doubled to £2.5m (2017: £1.2m restated). 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 6.1 p (2017: 1.4p).

IFRS 15: Revenue from contracts with customers has been implemented with effect from 1 January 2018 and comparative figures for 2017 have been restated to reflect retrospective application of this new standard. Under IFRS 15, only the mark-up on pass-through costs of third-party products and services -- where SCISYS acts as an "Agent" rather than a "Principal" - is reported as revenue, whereas previously the revenues and the related third-party cost of sales were reported gross. The reduction in previously reported revenues for the first half of 2017 was £1.9m (2017 full year: £3.8m) while the impacts on reported professional fees and profits were negligible.

The statutory operating profit was £1.2m (2017: £1.3m loss) after bearing amortisation costs relating to the December 2016 ANNOVA Systems GmbH ("Annova") acquisition of £0.6m (2017: £1.0m) and an exceptional charge of £0.7m (2017: £1.6m net).

The exceptional charge comprised two components. The first element recognised the contractual liability for a fixed and final earnout payment of £0.6m to Annova's former owners. This sum is consideration for early termination of the acquisition ring-fence agreement, enabling accelerated achievement of potential medium-term benefits in our combined media-sector operations by the removal of constraints on collective management. Second, there was a £0.1m exceptional charge for external professional advice in relation to the development and implementation of the Group's contingency plans to mitigate any adverse impact of Brexit on cross-border operations, particularly in the space sector.

Exceptional charges in the comparative 2017 period comprised a one-off R&D tax credit of £0.2m and a £1.8m charge to reflect increased contingent consideration payable to Annova's former owners.

Basic earnings per share were 2.6p (2017: Loss per share 4.9p).

Net cash flow from operations increased to £3.1m (2017: £2.7m). At the end of the reporting period, the Group had bank deposits of £9.4m (2017: £7.2m). Unutilised working capital facilities totalled £4.2m (30 June 2017: £4.7m). Group debt at the period end was £12.7m (2017: £16.2m). The resulting net debt was £3.3m, a reduction of £2.6m from the 2017 year-end position of £5.9m net debt (30 June 2017: £9.0m).

Following a buoyant sales performance in the final quarter of 2017, order intake for the first six months of 2018 has remained strong. The M&B division's renewal of its BBC maintenance contract announced in February lifted the order book value over £100m for the first time and the level has been maintained marginally below this threshold throughout the first half of the year (2017: £64m).

The effective tax rate for the period of 21% reflects the anticipated rate for 2018 as a whole (2017: 17%).

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 2018.

Dividend

Our dividend for the full year to 31 December 2017 was 2.16 pence per share, in line with our strategy of progressive dividend growth. I can now confirm that an interim dividend of 0.65 pence per share will be paid on 8 November 2018 to shareholders on the register as at 12 October 2018. The shares are expected to go ex-dividend on 11 October 2018.

Outlook

The second half of 2018 has started with strategic contract wins and solid performances deliveries on key projects. We are seeing healthy revenue growth, while cash flows remain strong.

Following the early end of the ring-fencing agreement with Annova's former owners, we have started the internal integration project of our Annova and M&B divisions, which are planned to operate as one division from 2019 onwards.

Based on current performance on projects, a buoyant order book and our new business pipeline, the Directors are confident that SCISYS will achieve year-on-year growth in 2018 and that the future prospects of the Group continue to look highly encouraging.

Mike Love,

Chairman

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Changes in Equity continued

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Notes to the Unaudited Interim Report

For the six months to 30 June 2018

Contingent consideration payable for the Annova acquisition is linked both to average profitability over a 3-year earn out period and achievement of key commercial milestones. The exceptional charge recognised in 2018 represents the contractual liability for a fixed and final earn out payment to Annova's former owners. The sum is consideration for early termination of the acquisition ring-fence agreement enabling accelerated achievement of potential medium-term benefits in combined media-sector operations by the removal of constraints on collective management. The anticipated total contingent consideration payable is reassessed at the end of each half-year reporting period based on the latest trading forecasts.

The "Other" exceptional item relates to charges for external professional advice regarding the development and implementation of the Group's contingency plans to mitigate any adverse impact of Brexit on cross-border operations, particularly in the space segment.

Up to and including 2016 R&D tax credits were incorporated into the net tax charge but from 2017 these are treated as deductions from operating expenses. 2017 was also the final year in which the Company qualified for the SME tax credit scheme as it has subsequently exceeded the headcount threshold for eligibility. Consequently the non-recurring high credit in 2017 was treated as an exceptional item.

The charge for taxation for the six months ended 30 June 2018 reflects an effective rate for the period consistent with the anticipated rate for the full year.

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

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

The Group has initially applied IFRS15 and IFRS 9 with effect from 1 January 2018. Under the transition method chosen, comparative information has been restated following the change in accounting policy. The Group has included additional line items as their omission would make the financial statements potentially misleading.

Implementation of the new IFRS 15 standard had a minor impact on the phasing of anticipated operating profits, although reported revenues and costs are more significantly reduced when compared with the previously applied treatment because the Company acts as an agent in certain circumstances.

If IFRS 15 had been applied in 2017, revenues would have been £3.827,000 lower for the full year and £1,906,000 lower for the six months ended 30 June 17. Operating profits for 2017 would have been £68,000 lower for the full year and £3,000 lower for the six months ended 30 June 2017.

The Group IFRS 15 policy deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entities contracts with customers.

With effect from 1 January 2018 the Group takes into account principal v agent considerations. In situations where the Group acts in the capacity of an agent, simply passing the third party goods and services to customers through its books, only the mark-up element is disclosed as revenue, whereas previously the full contract value was recognised and included as "Other revenue" in the segmental analysis, Note 2.

Where the customer simultaneously receives and consumes the benefit revenue is recognised in line with performance of the service.

For the delivery of unique customer solutions, recognition of Performance Over Time revenues is subject to an enforceable right to payment (cost plus profit) if the customer were to terminate without the Company's default before expiry of the natural contract term.

Revenue from consultancy and other professional services that have been identified as being Performance Over Time are recognised by reference to the degree of completion of the contract. The input measure used to calculate Performance Over Time for a performance obligation is by reference to own labour costs incurred by the balance sheet date as a percentage of the total estimated own labour costs to completion of the performance obligation. Revenues associated with subcontractors or bought-in goods that contribute to a performance obligation are recognised when the customer's goods are purchased and when the subcontractor's deliverables are accepted.

Where the Company's own licenced products and configuration services are required to create the customer's unique solution, without which the customer obtains no benefit, the licences and services are recognised together as a single performance obligation. If Performance over Time applies these revenues are recognised over time on as for professional service revenues. Licences sold without the need for configuration services (e.g. additional concurrent users) are recognised at the Point in Time when the licences are transferred to the customer.

Maintenance services are considered to be Service Warranty and involve standing ready to provide the services for handling calls, defect fixing and delivery of new releases to the customer on a regular basis. Revenue is recognised evenly over the time period (eg. at one twelfth of the annual charge per month).

Revenues for enhancements to systems already owned by customers are recognised as Performance Over Time as for professional services.

Interim Report

The Interim Report will be posted to shareholders shortly and for those shareholders who have elected to receive communications electronically it will be available to view on the SCISYS website at www.scisys.co.uk. Copies will also be available at SCISYS PLC's Registered Office at Methuen Park, Chippenham, Wiltshire, SN14 0GB.