Problems with a major fixed-price contract have pushed annual profits down by 80% at Chippenham-based specialist IT firm SciSys.
The firm, which develops complex IT projects for clients in sectors such as space, defence and the media, was hit hard last year by the troublesome project for an unnamed client. 
Millions of pounds were wiped off SciSys’ stock market value on one day when it issued a profits warning over the contract crisis and said it was at risk of breaching its banking covenants.
At the half-year stage the contract debacle pushed the firm into a £1.1m loss on revenues down by 22%.
Now SciSys has revealed that annual profits in the 12 months to December 31 fell to £614,000 from £3m in the previous year. Full-year revenues were down by 4% at £36.1m.
But directors said the all difficulties linked to the development project had been resolved and it was now benefitting from a series of new contract wins.
These include a £4m contract to develop a Customs Compliance Management Information System for the UK Ministry of Defence and an EU-funded contract from Thales Alenia Space France valued at over €5m (£3.96m) for the Galileo Ground Mission Segment;
It was also appointed as the supplier for the Second Large Scale Framework Agreement by the BBC across radio divisions using its dira! product, which incorporates next-generation technology to enable ‘cloud-hosted’ radio production and infrastructure.
As a result its 2016 opening order book was worth £6.9m more at £37.2m.
Chairman Mike Love said: “SciSys advised investors in June 2015 that it was experiencing difficulties in one major fixed price development project in its Enterprise Solutions & Defence (ESD) division.
“We made provisions at that juncture for the anticipated additional costs to complete the project and issued revised market guidance for the then anticipated full year's trading performance.
"In the interim the issues with the problem project have been fully resolved and concluded in a manner satisfactory to both the company and the customer.
“During the second half we started seeing a healthy recovery in trading with a number of significant contract wins announced at the end of 2015. We are seeing an encouraging start to 2016 and anticipate a healthy first half.”
However, he said the volatile sterling/euro exchange rate remained a factor.
Chief executive Klaus Heidrich said the firm’s highest priority had been getting back on track during the second half to demonstrate it was “fundamentally strong and could recover quickly from an isolated failure”.
He added: “We were always confident that the project setback happened in isolation. We resolved it swiftly and delivered a strong performance across all parts of the business during the second half of the year.
“Having conducted a thorough review of project controls we concluded that they were both appropriate and operating effectively. However, we have implemented enhanced risk-management procedures during the sales process to ensure that potential exposures in the future can be identified and mitigated at an early stage.
“The board is confident of the underlying strength of SciSys – first and foremost because of our long-term customer relationships, which remain the solid foundation of our business across all divisions. Major wins from our long-term clients across our divisions have demonstrated the resilience in our business model.”
The firm employs nearly 450 staff 450 across its offices in Chippenham, Bristol, Leicester and Reading and two in Germany.
Its clients are predominantly blue-chip and public sector organisations and include the Environment Agency, the Ministry of Defence, Airbus Defence & Space, Vodafone, the European Space Agency, Eumetsat and the BBC.
