RNS: Post-Close Trading Update
Tuesday, 15 December 2020
Synectics plc (AIM: SNX), a leader in the design, integration and support of advanced security and surveillance systems, today issues a post-close trading update for the financial year ended 30 November 2020.
Trading has continued largely in line with the Board’s revised expectations as set out in the Company’s trading update released on 29 September 2020, and underlying results for the second half of the Group’s financial year ended 30 November 2020 are now expected to be broadly similar to those in the first half.
The Covid-19 pandemic, as previously stated during 2020, has affected activity across all of Synectics’ markets, in particular, the Group’s largest market sector, global casinos and gaming. As reported in the Company’s interim results, released on 14 July 2020, disruption to gaming activity across all regions has had a more prolonged adverse impact on the Group’s revenues than customer projections during the summer had led the Board to expect at that time. However, trading and forecasts in other market sectors have continued to be largely in line with the Board’s expectations.
Progress on the large and strategically important contract with Deutsche Bahn for Berlin’s S-Bahn has continued to go well. The project, for a ‘next generation’ operational management system, remains on track for its scheduled deployment in early January 2021. To strengthen its growing German business with major public transport operators, as announced in early December, Synectics’ German office has been relocated to Berlin and Dr Kerstin Wendt has been appointed as the new regional head. These moves will improve local client support and contribute to Synectics’ ability to capitalise on market interest in Synergy’s evolving capabilities in major urban transport developments.
While continuing to support customers, invest in technology development and manage the implications of Covid-19, the Board has taken the opportunity to review and refine business strategy to better enable the Group’s long-term growth opportunities. The Group’s Systems division has been restructured, coming together under a single, unified global management organisation that will improve customer support and reduce the overall cost base of global operations.
Work has progressed, as planned, on consolidating the operations of Synectics’ Integration and Managed Services division, which was completed on 1 December 2020. This consolidation has included 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”, was launched in September 2020 and has been well received by customers.
The costs of restructuring both the Group’s divisions, totalling approximately £2 million, will be reported as non-underlying items in the Group’s audited financial statements for the year to 30 November 2020. Annual cost savings are estimated to be approximately £2.4 million with the benefit being fully realised in the Company’s current financial year, ending 30 November 2021.
The Group’s net cash balance as 30 November 2020 was £6.9 million (30 November 2019: £3.6 million), with additional undrawn bank facilities of £5.0 million. This increased cash balance 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.
Given the ongoing uncertainty in the timing of market recovery from Covid-19 impacts, the Board’s forecasts and plans continue to be based on the assumption that demand in affected sectors will remain weak in the near-term, though clearly more optimistic scenarios are possible. There has been growing interest in the areas of development in which Synectics is continuing to invest, particularly from large government-related urban transport and critical infrastructure projects.
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. The Group’s audited final results for the year ended 30 November 2020 are expected to be released on or around 2 March 2021.
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. We remain confident in our 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 / David Coaten
Tel: +44 (0) 20 7408 4050