RNS: Trading Update
Tuesday, 29 September 2020
Synectics plc (AIM: SNX), a leader in the design, integration and support of advanced security and surveillance systems, provides the following update on trading.
The global Covid-19 pandemic has continued to impact activity across all of Synectics’ markets, but has particularly affected its largest market sector, global casinos and gaming, where the recovery in the second half of the Company’s financial year is now unlikely to take place as previously expected.
Trading and forecasts in other sectors of the Group’s business have, in aggregate, remained largely in line with the Board’s previous expectations. However, the ongoing interruption to gaming activity around the world means that consolidated revenues and underlying results in the second half of the Group’s financial year to 30 November 2020 are now likely to be lower than those in the first half.
The Company had expected that easing of travel restrictions and the re-opening in early summer of casinos in the US and Asia would result in some recovery during the second half of this year. However, it has become increasingly evident that the vast majority of planned surveillance system projects and upgrades in this sector will now be delayed beyond 2020.
Progress on the large and strategically important command and control system contract for the Berlin S-Bahn has been good. The first two customer milestones have been met and the project is on track for live operation in January 2021. This project incorporates the next generation of Synectics’ core Synergy software platform, with capabilities applicable to a significantly larger and higher-level potential market in the public transport and infrastructure sector than Synergy has previously addressed. Levels of current bid activity and interest from customers and prospective global IT integrator partners continue to suggest that both the market opportunity and the competitive environment are favourable for the new Synergy offering.
Work is progressing as planned to consolidate the operations of Synectics’ Integration and Managed Services division, as reported in the Company’s interim statement on 14 July 2020. This consolidation includes the closure or downsizing of several operating sites, with a consequent reduction in costs and sharpened focus on specialised and long-term customers for whom Synectics can provide a valuable differentiated service. The new combined business, “Synectics Security”, launched in September has been well received. The consolidation will be completed by the end of this financial year.
Given the increased uncertainty in the timing of market recovery from Covid impacts, management’s forecasts and plans are now based on the assumption that demand in affected sectors will remain weak for some time to come.
Synectics’ priorities continue to be: to protect the health and well-being of its employees and customers; to provide ongoing support to its customers; and to manage the business for the long term by prudent actions to preserve cash and maintain the employee skill base essential to develop, sell, deliver and support its core technology and services.
Much attention is being paid to balancing and securing these objectives.
The Group’s net cash balance as at 31 August 2020 was £7.3 million (31 May 2020: £4.6 million), with additional undrawn bank facilities of £5 million. This increased cash results largely from lower working capital needed to support reduced revenues, a position that will unwind, at least in part, as revenues recover to more normal levels.
The Company will issue a further trading update in early December following its year end.
Paul Webb, Chief Executive of Synectics, commented:
“With our ongoing investment in advanced product development and deep customer relationships, Synectics is well positioned across our global markets for long-term success. Given the impact of Covid-19 across many of the sectors we work in, our focus has been to support our customers and people, while acknowledging the inevitable impact this has had on our short-term trading and financial performance.
“We remain confident in our long-term growth prospects as our software and technology capabilities continue to open up new opportunities in evolving markets for our security and surveillance technology.”
For further information, please contact:
Paul Webb, Chief Executive
David Coghlan, Chairman
David Bedford, Finance Director
Tel: +44 (0) 114 280 2828
Tom Griffiths / Henry Willcocks
Tel: +44 (0) 20 7408 4050
Tel: +44 (0) 161 694 3979