Scisys’ share price has been on a downward trajectory for the last couple of weeks. On 6th April, it stood at 110p. Its low point was Tuesday this week, when it stood at 91p. The reason? Press speculation regarding the future of existing contracts with UK firms for the European Union’s Galileo satellite navigation system project. There is a fear that the EU is calling for the right to cancel existing contracts with UK firms for the latest phase of work. The work is managed by the European Space Agency.
Scisys has, over the years, won several contracts through its British and German subsidiaries, both independently and in collaboration, to deliver key software systems for the programme (see Scisys maintains orbit with Thales contract extension and Striking year for Scisys). According to Scisys’ last annual report, the Galileo programme contributed €6m of revenues in the company’s FY16, representing c30% of the revenues of the space division, and 13% of total Group revenues. It’s, therefore, unsurprising that Scisys has sought to reassure, via a Board note today, that Brexit will not impact those revenues from Galileo. The main thrust is that it will be able to bid for work through either its UK or German offices. The company also expresses its confidence that a pragmatic solution will be found for Galileo that will benefit all parties (the EU, the UK Government and British industry). Moreover, Scisys points to new opportunities within the space sector that will benefit the Group, for example, via the UK Space Agency.
It is good news that Scisys can bid for Galileo contracts via its German subsidiary, Scisys Deutschland, because there remains considerable uncertainty around the impact of Brexit on UK suppliers to the Galileo programme (including British company, Surrey Satellite Technology). The day after the EU Referendum last year, SpaceNews published an excellent article on the potential for Brexit to disrupt the Galileo procurements – see Britain’s quitting the EU but will it be forced out of the EU space programs?. While the 22-nation European Space Agency is not a European Union organisation, the article explains that complications arise because the European Commission owns the Galileo positioning, navigation and timing network. The article also goes further, explaining other Brexit complications, like the fact that it may now be less attractive for international companies to invest in the UK to gain access to ESA and European Union space project funding.
Subscribers to TechMarketView can look forward to more reseach on the potential impact of Brexit as part of the TechMarketView subscription services over the next few days.
Posted by Georgina O'Toole at '10:04'
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