Millions of pounds have been wiped off the value of SciSys, the specialist IT firm with a base in Bristol after it warned of a major collapse in its profits this year.
In a statement to the London Stock Exchange, the Chippenham-headquartered firm – which counts governments, the BBC and space agencies among its customers – blamed difficulties in a large contract being handled by its enterprise and defence division for the expected profits shortfall.
While other parts of the business were trading well, they will not fully compensate for the losses, it said. The group – which has its roots in the European Space Agency and has operations in Germany – also said it was being hit by the pound’s strength against the euro. 
It said these two issues would “lead to a substantial short fall in profits for 2015 compared to the guidance issued in March”.
It also warned that it may breach some of its UK banking covenants when they are tested in mid-August. Scisys said it had consulted with its principle UK bank, which it remained supportive.
SciSys stressed in its statement that in the five years to 2014 it grew its operating profit from £1.7m to £3.2m and continued to be a strong niche player in providing system solutions that are critical to its customers’ businesses. Its balance sheet remained strong and was underpinned by solid freehold property assets.
It said the contract causing the problem was a major fixed-price development project which had recently entered the system integration phase. It was now clear that the size and complexity of the project had been underestimated, which meant it would now have to make provisions this year for the anticipated additional cost to complete it.
SciSys employs 450 staff across its offices in Brislington, Chippenham, Leicester and Reading and two in Germany. It develops complex IT projects in sectors such as space, defence and media for clients spanning the European Space Agency, the BBC, Airbus and the Ministry of Defence.
In the firm’s statement, its veteran chairman and founder Mike Love, pictured, said: “The board views a profits warning as deeply regrettable and wholly disappointing given the strong and robust results achieved in the preceding five years.
“Some of the factors behind this update in performance have been within the company’s control, but the exchange rate issue is not.
“We believe in general that our review processes and project controls across the group are robust and that this failure in estimation and breakdown in controls is an isolated incident among many current successful projects.
“SciSys remains fundamentally strong and confident in its long-term ambitions.”
SciSys shares, which had opened at 82.5p yesterday, fell by more than 38% within hours of the profits warning before recovering slightly. They opened at 58p this morning.
