IT services provider SciSys is on its way to achieving its target operating margins of 7%.
Revenues slipped back from £43.6m to £42.3m in 2011 but underlying operating profit increased from £2.14m to £2.37m. That is an operating margin of 5.6%. It will improve further this year and the 7% figure could be achieved in 2013.
Underlying pre-tax profit improved £2.04m to £2.21m in 2011. The tax charge more than halved to £249,000. The annual dividend has increased 10% to 1.21p a share.
The biggest improvement in profitability came from the space business. The government, broadcast and support divisions all improved profitability. This more than offset the sharp decline in the environment division. Staff have been moved to the busier areas of the business while environment business remains weak.
SciSys was cash neutral at the end of 2011, down from net cash of £4.85m at the end of 2010. The business generated cash but SciSys spent £5m on the freehold of its Chippenham head office. This will reduce rent costs by £500,000 a year and help SciSys move nearer to the operating margin target. There is also going to be some rental income from spare space to offset a higher interest charge on cash borrowed to buy the property.
House broker Canaccord Genuity forecasts a 2012 profit of £2.7m on revenues of £43m. That assumes an operating margin of 6.7%.
At 53p a share, SciSys is valued at £15.4m.
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