IT services provider SciSys continues to make progress even though some of its government-related operations are finding it tough.
SciSys is moving staff from areas such as environmental where demand is weak to other parts of the business. Interim revenues fell from £22m to £19.6m but operating profit moved ahead from £1.2m to £1.3m.
SciSys is near to its target operating margin of 7% and it should achieve this in 2013. Getting rid of revenues which are effectively sub-contracted out to third parties on behalf of clients has helped to improve the operating margin. In 2010, these revenues accounted for nearly one-quarter of the total but in the first half of 2012 it was around 8%. The new target is an operating margin of 10% by 2018. This could be tougher to achieve.
The interim dividend was raised 11% to 0.4p a share. Net debt was £794,000 at the end of June 2012. The only reason SciSys has net debt is because it bought its Chippenham head office in early 2011. This saved £625,000 a year in rent. A tenant has been secured that will pay £85,000 a year over a 10 year period. A second tenant is on the cards. SciSys should have net cash by the end of 2012.
The order book is worth £25.3m and this does not include all of the potential value of the Warrior armoured vehicle contract, where the full agreement has not been concluded. The media and defence businesses have the best prospects at the moment. The support and maintenance division has won a contract with National Trust. Space should continue to be a solid contributor although it has been hit by the weak Euro.
New house broker finnCap forecasts an improvement in profit from £2.2m to £2.4m in 2012, rising to £3m in 2013. The shares are trading on less than nine times prospective 2012 earnings, falling to seven in 2013.
At 58p a share, SciSys is valued at £16.8m.
Download the latest AIM Journal from http://www.hubinvest.com/AIMPDFSeptember2012_36.pdf
© 2021 Aim Micro. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.