REG - Synectics PLC - Final Results
27/02/2024 07:00
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RNS Number : 5209E Synectics PLC 27 February 2024
27 February 2024
Synectics plc
('Synectics', the 'Company' or the 'Group')
Final results for the year ended 30 November 2023
Strong results underpinned by growing demand from the oil and gas sector
Synectics plc (AIM: SNX), a leader in advanced security and surveillance
systems, announces its audited final results for the year ended 30 November
2023 ("FY 2023").
Financial highlights(1)
· Revenue increased 26% to £49.1 million (FY 2022: £39.1 million)
· Substantial increase in underlying operating profit(2) to £3.1
million (FY 2022: £1.2 million)
· Underlying EBITDA(3) increased to £4.8 million (FY 2022: £3.2
million)
· Underlying earnings per share(4) increased to 14.2p (FY 2022: 6.9p)
· Net cash at 30 November 2023 of £4.6 million with no bank debt(5) (30
November 2022: £4.3 million)
· Strong order book at 30 November 2023 of £29.2 million (30 November
2022: £24.4 million)
· Recommended final dividend increased by 50% to 3.0p per share (FY
2022: 2.0p)
(1) Following the disposal of a non-core business in November 2022, all
comparative figures in this announcement reflect continuing operations, unless
otherwise stated.
(2) Underlying operating profit represents profit before tax, finance costs
and non-underlying items; see note 4.
(3) Underlying EBITDA represents profit before finance costs, tax,
depreciation, amortisation and non-underlying items.
(4) Underlying earnings per share are based on underlying profit after tax but
before non-underlying items.
(5) Excluding IFRS 16 lease liabilities.
Operational highlights
· Strong results, exceeding market expectations, underpinned by growing
demand from the oil and gas sector
· Solid order book, reinforced by sound order intake and significant
contract wins across all sectors, with continued momentum into 2024
· Continued investment in technology development saw the release of new
AI and sector-specific features to the proprietary Synergy software platform,
and advancements to the COEX explosion-protected camera stations range
· Ongoing focus on specialist, core markets - gaming, oil and gas,
public space, transport and critical infrastructure - offers significant
growth opportunities
Post-period end events & outlook
· Extended agreement with National Grid, with contracts of £4.0 million
signed to upgrade more sites across its estate
· Key end markets continue to recover, and we are seeing opportunities
for both new projects and the renewal of existing infrastructure and systems
in all sectors
· Strong new business momentum delivered at the end of FY 2023 has
continued into H1 2024, underpinning the Board's confidence in the Company's
outlook for the medium term
Commenting on the results, Paul Webb, Chief Executive of Synectics, said:
"Synectics delivered a strong performance in FY 2023 and, operating in strong
and growing specialist markets, the Board is confident that the Company will
continue to deliver further progress in this year and beyond.
"Synectics has built a very strong reputation and is a trusted brand that
counts many high-profile businesses among its customers.
"In the year to date, the Company has seen continued sales momentum, driven by
a robust order book and a strong pipeline of new business opportunities,
underpinning the Board's confidence in the Company's outlook for the medium
term."
For further information, please contact:
Synectics plc Tel: +44 (0) 114 280 2828
Paul Webb, Chief Executive Officer
Amanda Larnder, Chief Financial Officer
info@synecticsplc.com (mailto:info@synecticsplc.com)
Shore Capital Tel: +44 (0) 20 7408 4090
Tom Griffiths / David Coaten / Rachel Goldstein
Vigo Consulting Tel: +44 (0) 20 7390 0230
Jeremy Garcia / Fiona Hetherington / Aisling Fitzgerald
synectics@vigoconsulting.com (mailto:synectics@vigoconsulting.com)
About Synectics
Synectics plc (AIM: SNX) is a leader in advanced security and surveillance
systems that help protect people, property, communities, and assets around the
world.
The Company's expertise is in providing solutions for specific markets where
security and surveillance are critical to operations. These include gaming,
oil and gas, public space, transport, and critical infrastructure.
Synectics has deep industry experience in these markets and works closely with
customers to deliver solutions that are tailored to meet their needs.
Technical excellence, combined with decades of experience and long-standing
customer relationships, provides fundamental differentiation from mainstream
suppliers and makes the Company a stand-out in its field.
Find out more at www.synecticsplc.com
(https://url.avanan.click/v2/___http:/www.synecticsplc.com___.YXAxZTpzaG9yZWNhcDphOm86OTc4YTc4Nzk4NGI2ODc3OTc4OWMxOWJjZTk2NzBmOTg6Njo3OTNkOjE2NGFjMDVmMTU0MTUyYWFkYzBhNjIzYmRjNzMxNDM5ZWJjZWE5NzhkNThjZWU5NGI1MGZkODIyMWYxZWYxMjU6cDpU)
Interim Chair's Statement
Synectics delivered a strong operational and financial performance in FY 2023,
exceeding the market's expectations. This excellent performance is testament
to the strength of the Company's proposition, the ongoing dedication of its
employees, the quality of its customer relationships, and the strategic focus
of its senior management team who continue to provide stability and guidance.
These results reflect the strength of the Company's broader strategy. In 2020,
we initiated a comprehensive restructuring programme whilst focusing on
maintaining our core market insight and technology skills in response to a
slowdown in our key end markets.
Continued progress and investment since then have ensured that we have
advanced our proposition and knowledge, positioning us well to capitalise on
the recovery in our core markets, which returned to growth in FY 2023.
Building on these foundations, the Company is ideally placed to capitalise
further on its specialist end markets. Our focus on tailored surveillance
systems - based on our flexible, open-architecture software platform and our
unique hardware - positions us for continued growth.
I assumed the role of Interim Chair in October 2023 following the retirement
in February 2023 of our long-serving Chair, David Coghlan, and the resignation
of his replacement Craig Wilson. Having been associated with the Company for
almost twenty years, I was delighted to take on the position, providing
continuity for the Board.
We were deeply saddened to hear of the passing of David Coghlan earlier this
month. David's contribution to the Company over his long tenure was
immeasurable, and he personified our values. On behalf of everyone in the
Company, we offer our sincere condolences to his family.
The search for a permanent Chair is progressing and a further announcement
will be made in due course. In addition, we recognise the need to strengthen
the Board and have commenced the search for a new independent Non-Executive
Director.
On behalf of the Board, I wish to thank our customers and every member of
staff for their contribution to the ongoing success of Synectics, and our
shareholders for their continued support.
Steve Coggins
Interim Chair
26 February 2024
Chief Executive Officer's Statement
Introduction and financial summary
Synectics delivered a strong performance in FY 2023 and, operating in strong
and growing specialist markets, the Board is confident that the Company will
continue to deliver further progress in FY 2024 and beyond.
Underlying operating profit(1) increased substantially to £3.1 million (FY
2022: £1.2 million) on the back of increased revenue, up 26% to £49.1
million (FY 2022: £39.1 million).
With a strong closing order book at 30 November 2023 of £29.2 million (30
November 2022: £24.4 million), the Company is confident that it is in a good
position to deliver further progress in the coming years.
As of 30 November 2023, net cash stood at £4.6 million (30 November 2022:
£4.3 million), with undrawn bank facilities of £3.0 million.
This financial performance underpins the recommended final dividend, which has
been increased by 50% to 3.0p per share (FY 2022: 2.0p), reflecting the
Board's confidence in the Company's prospects, and both profit growth and
balance sheet strength.
Subject to shareholders' approval at the Company's forthcoming Annual General
Meeting, the final dividend will be paid on 3 May 2024 to shareholders on the
register as at the close of business on 12 April 2024. No interim dividend
was paid during the year (2022: £nil).
(1) Underlying profit represents profit before tax, finance costs and
non-underlying items, see note 4.
Our global business
Synectics delivers solutions, which are often technically and logistically
challenging, for a diverse range of projects to high-profile customers
globally.
Synectics' software monitors and records over 150,000 channels in around 100
casino properties around the world, with projects including one of the largest
casinos in Las Vegas, and a bespoke solution for one of the largest and most
iconic casino resorts in the world.
Over the past decade, the Company has supplied more than 10,000 COEX
explosion-protected camera stations to the oil and gas market globally,
safeguarding refineries, pipelines, offshore vessels and platforms for the
likes of Saudi Aramco and Shell. Its COEX cameras are built to withstand
extreme environments and can function in ambient temperatures up to 70°C
without compromise.
The Company delivers solutions for key transport providers - including leading
providers such as Deutsche Bahn, Stagecoach and Irish Rail - with over 5
billion passenger journeys protected annually.
Furthermore, the Company's surveillance and security solutions monitor more
than 100 town and city centres, alongside venues, stadia, and tourist
attractions, including the Queen Elizabeth Olympic Park and the British
Museum. These solutions also serve to protect critical infrastructure for
customers including National Grid and Cadent Gas.
Business review
As referred to above in the interim Chair's statement, the Company previously
implemented a number of initiatives, including optimising the cost base and
rationalising the operational footprint. Since then, the Company maintained
its investment in the development of technology, reflecting its confidence in
the recovery and strength of opportunity in Synectics' end markets. The
measures taken ensured that Synectics' business has remained resilient whilst
its core markets suffered a distinct slowdown, meaning that the Company is now
very well positioned to capitalise on new opportunities as they emerge.
As core markets have started to recover, the Company has renewed its focus on
business development, to ensure it is deeply entrenched in its end markets and
to maximise its ability to participate in upcoming projects.
The Board is pleased to see the tangible results of these initiatives and is
committed to driving further growth from these strong foundations. The Company
has started the current financial year with a strong order book, and its focus
is on the successful execution of these projects as well as cultivating and
converting new business opportunities to ensure consistent and sustained
growth.
The Company's strategy remains to continue to drive growth through:
· leveraging expertise in its core specialist markets;
· extending partnerships with local partners in each market and
geography;
· recruiting, developing and retaining talent;
· investing in new technology and product development; and
· building on long-standing customer relationships to expand revenue
streams.
Divisional Review
Synectics' Systems division develops and delivers its proprietary,
technology-led solutions to specialist markets globally - including gaming,
oil and gas, public space, transport and critical infrastructure - through
local systems integrators and channel partners. Capabilities centre around a
proprietary software platform, Synergy, that is tailored to the unique
requirements of each customer and specialist hardware for oil and gas markets
built on our COEX camera range.
Synectics' Security division delivers integrated solutions, service and
support directly to end-users in the UK and Ireland - principally within
public space, transport, and national infrastructure - utilising a combination
of proprietary technology and third-party products.
Systems division
The performance of Synectics' Systems division in the year was underpinned by
a very strong performance in the buoyant oil and gas market in EMEA and APAC,
which is expected to continue.
2023 2022
Revenues - EMEA £15.0m £10.6m
Revenues - North America £5.0m £7.6m
Revenues - Asia Pacific £12.0m £6.0m
Total revenue £32.0m £24.2m
Gross margin 46.4% 50.6%
Operating profit(2) £4.1m £1.9m
Operating margin 12.7% 7.8%
( )
(2) After research and development expenditure, but before non-underlying
costs (see note 4) and allocated central costs.
Having started FY 2023 with a strong order book, momentum in the oil and gas
sector was maintained with numerous project awards, including significant
contracts totalling £5.5 million, announced in April 2023, to implement
specialist camera stations for Saudi Aramco used in its Zuluf development
programme. Around half of this project was delivered in FY 2023, with the
remainder to be delivered in FY 2024. The oil and gas market remains very
active, and we anticipate a similar level of business in 2024.
The Company's collaboration with systems integrators and channel partners
remains critical to securing its involvement in future projects which are
anticipated to materialise in 2025 and beyond.
While revenues in EMEA and Asia Pacific both demonstrated solid growth in FY
2023, the Board is disappointed by the Company's performance in North America.
The revenue decrease is largely attributable to the continued delay in the
refurbishment of large casinos there.
More broadly, the Company saw continued recovery in the global gaming market
in FY 2023, particularly in Asia. One highlight was securing a $3.0 million
contract for an expansive new casino resort in the Philippines, delivered via
our integration partner, Empire Automation. The Board is confident that the
Company will be awarded more such projects in Asia in 2024, whilst recognising
that the timing of new projects is dependent on commercial discretionary
spending.
The appetite for significant refurbishments and new builds within the casino
market in North America has been relatively subdued compared to Asia, but
there are encouraging signs. The Company is well positioned to succeed when
investment decisions are made - there are lucrative projects expected to be
tendered, and Synectics can deliver a best-in-class solution to satisfy
individual requirements.
Sales into the public space sector - including transport and critical
infrastructure - continued to be challenging in FY 2023, largely due to
continued budget constraints. Despite these challenges, we successfully
secured contracts within our core public space domain, notably a contract
extension with the West Midlands Police, integrating cameras operated by the
National Highways Agency into their control room Synergy system, bolstering
operational response capabilities.
In addition to these core contracts, the Company expanded its reach into
adjacent sectors. In November 2023, it announced a £1.0 million contract for
the deployment of its security and surveillance solutions to a UK financial
services institution's back-office estate, including data, cash, alarm
receiving and disaster recovery centres. This aligns with the Company's
renewed focus on business development, as it actively explores adjacent
sectors where it can deliver significant value through its expertise in
integrating data from diverse sources into Synergy's unified user interface
and analytic capabilities.
Security division
The performance of Synectics' Security division in FY 2023 was sound, securing
and delivering numerous projects for public space, critical infrastructure,
and public transport customers.
2023 2022
Revenue £18.3m £16.6m
Gross margin 28.3% 26.4%
Operating profit(3) £1.3m £1.2m
Operating margin 7.1% 7.0%
( )
(3) Before non-underlying costs (see note 4) and allocated central costs.
Ongoing projects with the City of London and West Midlands police were
supplemented with numerous new projects for local authorities, and further
work for, among others, the Queen Elizabeth Olympic Park.
Further to completing a number of on-vehicle contracts in Ireland and the UK
during the year, customers, including WrightBus and Stagecoach, have
contracted Synectics to provide new on-vehicle CCTV systems, and the outlook
for new on-vehicle systems contracts in FY 2024 appears promising.
Post-year end, as announced on 30 January 2024, the Company was awarded
significant further contracts totalling £4.0 million for delivery in FY 2024
through its framework agreement with National Grid and it continues to focus
on improving market share of national infrastructure security improvement
projects.
There is potential for further progress in this division, and the Board is
currently undertaking a review of the Company's go-to-market strategy, in
order to better focus on the available opportunities.
Technology
The Company continues to develop its technology and solutions in collaboration
with its customers to meet their evolving and emerging requirements.
During the year, Synectics announced further releases of its Synergy software
platform, featuring enhanced data analysis tools, the integration of further
AI and sector-specific capabilities, improved user functionality and robust
measures to further strengthen the system's resilience against cyber threats.
The platform's open architecture not only underpins its current capabilities,
but also lays the groundwork for seamless integration of future upgrades and
the introduction of additional AI tools.
In addition to constantly developing its software offering, the Company's
product development team continues to release new and upgraded hardware, both
to support its software deployments and for specialist market applications -
such as the new-generation COEX camera station for oil and gas applications,
which is already enjoying success in the market.
In FY 2023, the Company spent a total of £3.2 million on technology
development (FY 2022: £3.2 million). Of this, £1.0 million was capitalised
(FY 2022: £0.2 million), and the remainder was expensed to the Income
Statement. £0.7 million of previously capitalised development cost was
amortised in the year (FY 2022: £1.0 million). These figures are included in
the results of the Systems division set out above.
ESG
The Company remains fully committed to ensuring the responsible operation of
the business, including safe, secure and ethical conduct at all times across
each of its locations. In FY 2023, the Company appointed specialist external
advisers to help it undertake a review to inform its future ESG strategies.
Phase one of this review, which was completed during the year, identified
areas of ESG significance to the Company and its stakeholders.
The results of the review are being analysed to build and define ESG
objectives and targets for the Company which align with our broader business
strategy. Once defined, these objectives and targets will form our
sustainability strategy which will be shared in future annual reports.
People
The Company has established an exceptional team and will continue to support
our employees in their professional growth. Continued investment in our people
remains a top priority for the Company.
In FY 2023, the Company invested in strengthening its technology development
team and latterly, its business development resources across key market
verticals - which is starting to deliver results.
Outlook
The Board is delighted with the Company's performance and progress in FY 2023
and believes that the Company has established a solid basis for further
growth.
Its continued investment in technology development has ensured that the
Company's solutions continue to meet the changing needs of its customers,
whilst also incorporating the latest technological developments, including the
integration of constantly evolving AI capabilities. This, along with a renewed
focus on business development, means that the Company has strengthened its
position as the go-to provider of security and surveillance solutions in the
strong and growing specialist markets that it serves.
Synectics has built a very strong reputation and is a trusted brand that
counts many high-profile businesses among its customers.
The Company remains committed to delivering sustained growth for its
shareholders and operational excellence for its customers, and - supported by
its market-leading technology and a blue-chip customer base - is well
positioned to capitalise on the opportunities in its growing end markets.
To date in FY 2024, the Company has seen continued sales momentum, driven by a
robust order book and a strong pipeline of new business opportunities,
underpinning the Board's confidence in the Company's outlook for the medium
term.
Paul Webb
Chief Executive Officer
26 February 2024
Consolidated Income Statement
For the year ended 30 November 2023
2023 2022
Underlying Non-underlying items (note 4) Underlying Non-underlying items
(note 4)
Total Total
Continuing operations Note £000 £000 £000 £000 £000 £000
Revenue 3 49,128 - 49,128 39,116 - 39,116
Cost of sales (29,121) - (29,121) (22,486) - (22,486)
Gross profit 20,007 - 20,007 16,630 - 16,630
Operating expenses (16,951) (302) (17,253) (15,478) (658) (16,136)
Operating profit 3,056 (302) 2,754 1,152 (658) 494
Finance costs (101) - (101) (133) - (133)
Profit before tax 2,955 (302) 2,653 1,019 (658) 361
Income tax (charge)/credit 5 (559) 69 (490) 153 125 278
Profit for the year from continuing operations 2,396 (233) 2,163 1,172 (533) 639
Discontinued operations(1)
Profit for year from discontinued operations - - - 22 804 826
Profit for the year 2,396 (233) 2,163 1,194 271 1,465
Profit for the year attributable to equity holders of the Parent Company from: 2,396 (233) 2,163 1,172 (533) 639
- Continuing Operations
- Discontinued Operations - - - 22 804 826
Earnings per share from continuing and discontinued operations 7
Basic 12.8p 8.7p
Diluted 12.8p 8.7p
Earnings per share from continuing operations 7
Basic 12.8p 3.8p
Diluted 12.8p 3.8p
1 Discontinued operations disclosed in the comparative figures relate to
the sale of SSS Management Services Limited on 30 November 2022.
Consolidated Statement of Comprehensive Income
For the year ended 30 November 2023
2023 2022
£000 £000
Profit for the year from continuing operations 2,163 639
Items that may be reclassified subsequently to profit or loss:
Exchange differences on translation of foreign operations (28) 246
Gains on net investment in a foreign operation taken to equity - 41
(28) 287
Tax on items that may be reclassified - 110
Total comprehensive income for the year from continuing operations 2,135 1,036
Total comprehensive income for the year from discontinued operations - 826
Total comprehensive income for the year attributable to equity holders of the 2,135 1,862
Parent
Consolidated Statement of Financial Position
As at 30 November 2023
2023 2022
Note £000 £000
Non-current assets
Property, plant and equipment 3,739 4,598
Intangible assets 21,128 20,776
Deferred tax assets 5 2,262 2,741
27,129 28,115
Current assets
Inventories 5,069 4,219
Trade and other receivables 13,868 9,090
Contract assets 6,954 6,317
Tax assets - 425
Cash and cash equivalents 8 4,604 4,256
30,495 24,307
Total assets 57,624 52,422
Current liabilities
Trade and other payables (11,270) (8,111)
Contract liabilities (3,033) (1,875)
Lease liabilities (573) (683)
Tax liabilities (90) -
Current provisions (606) (796)
(15,572) (11,465)
Non-current liabilities
Non-current provisions (794) (746)
Lease liabilities (1,365) (2,137)
Deferred tax liabilities 5 (1,016) (1,072)
(3,175) (3,955)
Total liabilities (18,747) (15,420)
Net assets 38,877 37,002
Equity attributable to equity holders of the Parent Company
Called up share capital 3,559 3,559
Share premium account 16,043 16,043
Merger reserve 9,971 9,971
Other reserves (1,436) (1,436)
Currency translation reserve 912 940
Retained earnings 9,828 7,925
Total equity 38,877 37,002
Consolidated Statement of Changes in Equity
For the year ended 30 November 2023
Called up Share Currency
share premium Merger Other translation Retained
capital account reserve reserves reserve earnings Total
£000 £000 £000 £000 £000 £000 £000
At 1 December 2021 3,559 16,043 9,971 (1,436) 715 6,492 35,344
Profit for the year - - - - - 1,465 1,465
Other comprehensive income
Currency translation adjustment - - - - 287 - 287
Tax relating to components of other comprehensive income - - - - (62) 172 110
Total other comprehensive income - - - - 225 172 397
Total comprehensive income for the year - - - - 225 1,637 1,862
Transactions with owners in their capacity as owners
Dividends paid - - - - - (253) (253)
Credit in relation to share-based payments - - - - - 49 49
At 30 November 2022 3,559 16,043 9,971 (1,436) 940 7,925 37,002
Profit for the year - - - - - 2,163 2,163
Other comprehensive income
Currency translation adjustment - - - - (28) - (28)
Total other comprehensive income - - - - (28) - (28)
Total comprehensive income for the year - - - - (28) 2,163 2,135
Transactions with owners in their capacity as owners
Dividends paid - - - - - (338) (338)
Credit in relation to share-based payments - - - - - 78 78
At 30 November 2023 3,559 16,043 9,971 (1,436) 912 9,828 38,877
Consolidated Cash Flow Statement
For the year ended 30 November 2023
2023 2022
Note £000 £000
Cash flows from operating activities
Profit from continuing operations 2,163 639
Profit from discontinued operations - 826
Profit for the year 2,163 1,465
Income tax charge / (credit) 490 (306)
Finance costs 101 148
Depreciation and amortisation charge 1,779 2,186
Net foreign exchange differences 318 (212)
Non-underlying items 302 658
Profit arising on sale of discontinued operation, before transaction fees - (923)
Inventory write down 316 243
Cash flow relating to non-underlying items incurred in current or previous (539) (408)
years
Movement in provisions and other non-cash movement 41 (116)
Share-based payment charge 78 49
Operating cash inflow before movement in working capital 5,049 2,784
Increase in inventories (1,166) (526)
Increase in receivables and contract assets (5,686) (85)
Increase / (decrease) in payables and contract liabilities 4,403 (1,186)
Cash generated from operations 2,600 987
Tax received 434 242
Net cash generated from operating activities 3,034 1,229
Cash flows from investing activities
Purchase of property, plant and equipment (273) (86)
Capitalised development costs (950) (207)
Purchased software (171) (21)
Net cash disposed on discontinued operation - (268)
Proceeds from sale of property plant and equipment - -
Net cash used in investing activities (1,394) (582)
Cash flows from financing activities
Lease payments (835) (913)
Other interest paid (13) -
Dividends paid to equity holders of the parent 6 (338) (253)
Net cash used in financing activities (1,186) (1,166)
Net increase / (decrease) in cash and cash equivalents 454 (519)
Effect of exchange rates on cash and cash equivalents (106) 134
Cash and cash equivalents at the beginning of the year 8 4,256 4,641
Cash and cash equivalents at the end of the year 4,604 4,256
Notes to the financial statements
1 Basis of preparation
The information contained within this announcement has been extracted from the
audited financial statements which have been prepared in accordance with
UK-adopted International Accounting Standards and applicable law. They have
been prepared using the historical cost convention except where the
measurement of balances at fair value is required.
Going concern
The Directors have considered the Group's current activities and future
prospects, financial performance, liquidity position and risks and
uncertainties affecting the business, which are set out in the strategic
report, in assessing the appropriateness of the going concern assumption. The
Directors continue to monitor the effects of global events on the business and
will react accordingly if any material risks arise.
When assessing the going concern assumption, the Directors have reviewed the
year-to-date actual results, as well as detailed financial forecasts and the
Group's funding position for the period through to August 2025. This review
includes in-depth scenario modelling and stress testing of budget and strategy
planning.
There has been further recovery in the gaming market, particularly in Asia,
during the year, although performance in North America remains disappointing.
Going forward, increased opportunities are expected in both the North
American and Asian gaming markets, although it is recognised that the timing
of new projects is dependent on commercial, discretionary spending. The oil
and gas market has been very positive and the high levels of activity are
expected to continue throughout 2024. Whilst sales into the public space
sector continue to be challenging, largely due to budgetary constraints, the
Company has continued to secure some significant contracts and is expecting to
continue to do so throughout 2024.
The Directors consider that the Group benefits from a level of diversification
within the sectors and geographies in which it operates that helps mitigate an
element of macro-economic risk. The Directors believe that the Group operates
in a resilient industry enabling it to continue its profitable growth
trajectory. In addition, there is further resilience from the Group's
operating model with strong customer and supplier relationships, recurring
revenues and high levels of repeat business.
Forecasting and stress testing
The Directors have undertaken a rigorous budgeting and forecasting process
with management to understand the impact of the economic environment on the
future of the business. The assumptions used in the financial forecasts are
based on recent financial performance, management's extensive industry
experience and reflect expectations of future market conditions.
The base case shows a positive cash balance throughout the year with no
requirement to utilise the £3.0 million overdraft facility. Sensitivity and
stress testing has been performed on the base case model; various plausible
but severe downside scenarios were applied which considered general downturns
resulting in reductions in revenue and margins and the related impact on
working capital. Under these downsides, the Directors have not considered any
mitigating factors that would be applied. The scenario testing applied
confirmed that, even with no mitigating factors, the overdraft facility would
not need to be utilised and that there would be sufficient headroom within the
facility throughout the outlook period. The base case was then reverse stress
tested and the level of deterioration required for the Group to become close
to the banking headroom was deemed to be highly unlikely.
Cash and funding position
Positive cash balances were maintained throughout the year which ended the
year at £4.6 million (2022: £4.3 million). Undrawn overdraft facilities of
£3.0 million were held throughout the year. Despite the central forecast
indicating that the Group should not require to draw upon the overdraft
facilities for the foreseeable future, management is in the process of
renewing, as a matter of prudence, the overdraft facility of £3.0 million
with Lloyds Bank until March 2025. Whilst the renewal process is still
underway at the time of signing these accounts, the bank has indicated that
the facilities are expected to renew as normal.
Conclusion
Based on the analysis above, the Group has sufficient liquidity headroom
throughout the forecast period and therefore the Directors have a reasonable
expectation that the Group has adequate resources to continue in operational
existence for the outlook period without material uncertainty. Accordingly,
the Directors conclude it is appropriate to continue to adopt the going
concern basis in preparing the financial statements.
2 Segmental
Continuing operations Systems £000 Security £000 Central£000 Total £000 Systems £000 Security £000 Central £000 Total £000
Revenue
Total 32,015 18,261 - 50,276 24,201 16,595 - 40,796
Intra-Group (1,148) - - (1,148) (1,680) - - (1,680)
External revenue 30,867 18,261 - 49,128 22,521 16,595 - 39,116
Expenses
Cost of inventories recognised as an expense (11,896) (9,144) (1) (21,041) (6,490) (8,401) (36) (14,927)
Employee benefit expenses (9,739) (5,231) (1,678) (16,648) (8,728) (4,791) (1,645) (15,164)
Amortisation of intangible assets (707) (1) (7) (715) (997) (1) (5) (1,003)
Depreciation of tangible assets - owned (244) (30) (31) (305) (321) (26) (13) (360)
Depreciation of tangible assets - right of use (575) (184) - (759) (548) (177) - (725)
Net foreign exchange losses (327) (1) 4 (324) (2) (6) 9 1
Write down of inventories recognised as an expense (213) (103) - (316) (87) (156) - (243)
Rental income received - 50 - 50 - - - -
Payroll support - - - - 50 - - 50
Other (3,115) (2,317) (582) (6,014) (3,518) (1,871) (204) (5,593)
Underlying operating profit 4,051 1,300 (2,295) 3,056 1,880 1,166 (1,894) 1,152
Non-underlying items
Legal costs (156) - (51) (207) (250) - (85) (335)
Pension buy-out costs - - (81) (81) - - (92) (92)
Restructuring costs (10) - (4) (14) - - (231) (231)
Total operating profit 3,885 1,300 (2,431) 2,754 1,630 1,166 (2,302) 494
Total assets 24,033 9,019 - 33,052 18,978 9,330 - 28,308
Total liabilities (12,814) (5,744) - (18,558) (10,541) (4,550) - (15,091)
Total segmental net assets 11,219 3,275 - 14,494 8,437 4,780 - 13,217
Goodwill - - 19,651 19,651 - - 19,707 19,707
Cash and borrowings - - 4,604 4,604 - - 4,256 4,256
Unallocated - - 128 128 - - (178) (178)
Total net assets 11,219 3,275 24,383 38,877 8,437 4,780 23,785 37,002
No single customer contributed 10% or more to the Group's revenues in either
year.
3 Revenue from contracts with customers
Disaggregated revenue information
Set out below is the disaggregation of the Group's revenue from contracts with
customers:
Systems Security 2023
Revenue by contract location 2023 £000 £000 £000
Continuing operations
UK and Europe 9,128 18,013 27,141
North America 5,001 - 5,001
Middle East & Africa 4,750 238 4,988
Asia Pacific 11,988 10 11,998
30,867 18,261 49,128
Revenue by contract location 2022 Systems Security 2021
Continuing operations £000 £000 £000
UK and Europe 7,225 16,511 23,736
North America 7,570 - 7,570
Middle East & Africa 1,790 68 1,858
Asia Pacific 5,936 16 5,952
22,521 16,595 39,116
Contract balances
2023 2022
£000 £000
Contract assets 6,954 6,317
Contract liabilities (3,033) (1,875)
Contract assets relate to revenue earned from ongoing projects. As such, the
balance of this account varies and depends on the number of ongoing projects
at the end of the year. The timing of payment in respect of both contract
assets and liabilities varies depending on the nature and terms of each
individual contract, with payment sometimes being before and sometimes after
satisfaction of the corresponding performance obligations. No expected credit
loss has been recognised in relation to the contract asset as the Group's
historical and forward-looking experience shows that no credit losses have
been incurred. The change in contract assets is due to the timing of major
projects at the year end and has increased due to the increase in oil and gas
projects which typically take longer to build.
Contract liabilities relate to short-term advances received to deliver ongoing
projects. The change in contract liabilities relates to the timing of the
contracts of some major multi-year service and maintenance contracts.
£1.6 million (2022: £2.9 million) of the contract liabilities balance at 1
December 2022 was recognised as revenue during the year. No revenue was
recognised in the current year in relation to performance obligations
satisfied, or partially satisfied in previous years.
Performance obligations
The transaction price allocated to the remaining performance obligations
(unsatisfied or partially unsatisfied) as at 30 November 2023 that are
expected to be recognised over more than one year is £5.9 million (2022:
£7.4 million). These performance obligations relate predominantly to the
provision of service and maintenance contracts and are as follows:
2023 2022
£000 £000
Less than two years 3,326 3,065
Two to five years 2,043 3,804
More than five years 569 526
4 Non-underlying items
2023 2022
Continuing operations £000 £000
Costs associated with legal matters 207 335
Costs associated with restructuring 14 231
Costs associated with the buy-out of the defined benefit pension scheme 81 92
302 658
Cost associated with legal matters relates to a confidential legal matter in
the US which has now been settled. No further costs will be incurred in
relation to this.
Restructuring costs incurred during 2022 relate to the Board of Directors.
Costs associated with the buy-out of the defined benefit pension scheme
represent costs incurred by the Group in relation to winding up the scheme.
5 Taxation
2023 2022
Tax charge / (credit) £000 £000
Current income tax
UK tax - -
Overseas tax 91 1
Adjustments in respect of prior periods - (717)
Total current tax charge / (credit) 91 (716)
Deferred tax
Origination and reversal of temporary differences 431 (142)
Adjustments in respect of prior periods (32) 552
Total deferred tax charge 399 410
Income tax charge / (credit) reported in the consolidated income statement 490 (306)
Further analysed as tax relating to:
Underlying profit 559 (153)
Non-underlying items (69) (153)
Reconciliation of tax charge/(credit) for the year
The corporation tax assessed for the year differs from the standard rate of
corporation tax in the UK of 23% (2022: 19%). The differences are explained
below:
2023 2022
£000 £000
Profit before tax from continuing operations 2,653 361
Profit before tax from a discontinued operation - 798
Total profit before tax 2,653 1,159
Tax on profit on ordinary activities before tax at standard rate of 23% (2022: 610 220
19%)
Effects of:
Differences in overseas tax rates (98) (77)
Tax losses not recognised 125 161
Utilisation of previously unrecognised tax losses (94) (43)
Research and development (83) (99)
Other differences (15) (6)
Effect of changes in tax rates and tax laws 33 (142)
Expenses / (income) not deductible for tax purposes 44 (155)
Adjustment in respect of prior periods (32) (165)
Total tax charge / (credit) for the year 490 (306)
Income tax credit attributable to continuing operations 490 (278)
Income tax attributable to a discontinued operation - (28)
490 (306)
The Group's tax rate is sensitive to a geographic mix of profits and reflects
a combination of higher rates in the US and lower rates in Singapore and
Macau. The Group's effective tax rate in 2023 has also been impacted by
R&D tax relief and current year losses.
Deferred tax
The deferred tax in the Consolidated Statement of Financial Position relates
to the following:
Property, Other
plant and temporary
equipment differences Losses Total
Deferred tax (liability)/asset £000 £000 £000 £000
At 1 December 2021 (438) (411) 2,752 1,903
(Charged)/credited to the Income Statement (125) 221 (506) (410)
Credited to the Statement of Comprehensive Income - 110 - 110
Currency translation adjustment (3) 4 65 66
At 30 November 2022 (566) (76) 2,311 1,669
(Charged)/credited to the Income Statement 19 (92) (326) (399)
Credited to the Statement of Comprehensive Income - - - -
Currency translation adjustment - (2) (22) (24)
At 30 November 2023 (547) (170) 1,963 1,246
Factors that may affect future tax charges
Deferred tax assets of £2.0 million (2022: £2.3 million) have been
recognised in relation to legal entities which suffered a tax loss in the
current or preceding periods. The assets are recognised based upon future
taxable profit forecasts for the entities concerned.
The Group has further losses which may be available to be carried forward for
offset against the future taxable profits of certain Group companies amounting
to approximately £3.8 million (2022: £4.0 million). No deferred tax asset
(2022: £nil) in respect of these losses has been recognised at the year end
as the Group does not currently anticipate being able to offset these against
future profits. There is no time limit in which the tax losses are required to
be utilised.
In addition to the above, the Group has capital losses of approximately £17.8
million (2022: £17.8 million) available for offset against future taxable
gains. No deferred tax asset in respect of these losses has been recognised in
these financial statements as there is insufficient certainty that the asset
will be recovered against future capital gains.
6 Dividends
The following dividends were paid by the Company during the year:
2023 2022
Pence Pence
per share £000 per share £000
Final dividend paid in respect of prior year but not recognised as a liability 2.0 344 1.5 267
in that year
Interim dividend paid in respect of current year - - - -
2.0 344 1.5 267
Total dividend paid, net of shares held by the share trust 2.0 338 1.5 253
Proposed final dividend for the year ended 30 November 3.0 515 2.0 356
Subject to shareholders' approval at the Company's forthcoming Annual General
Meeting to be held on 24 April 2024, the Directors recommend a final dividend
of 3.0p per share (2022: 2.0p) to be paid on 3 May 2024 to shareholders on the
register as at the close of business on 12 April 2024 (the shares being marked
ex-dividend on 11 April 2024). No interim dividend was paid during 2023 (2022:
£nil).
7 Earnings per share
2023 2022
Pence per Pence per Pence per Pence per
share share share share
Continuing Discontinued
operations operations Total
Basic earnings per share 12.8 3.8 4.9 8.7
Diluted earnings per share 12.8 3.8 4.9 8.7
Underlying basic earnings per share 14.2 6.9 0.2 7.1
Underlying diluted earnings per share 14.2 6.9 0.2 7.1
Profit per share has been calculated by dividing the profit attributable to
equity holders of the Parent after taxation for each financial year by the
weighted average number of ordinary shares in issue and ranking for dividend
during the year.
The calculations of basic and underlying earnings per share are based upon:
Continuing operations 2022
2023 Total
2022
£000 £000 £000
Earnings for basic and diluted earnings per share 2,163 639 1,465
Non-underlying items 302 658 (118)
Impact of non-underlying items on tax credit for the year (69) (125) (153)
Earnings for underlying basic and underlying diluted earnings per share 2,396 1,172 1,194
2023 2022
000 000
Weighted average number of ordinary shares - basic calculation 16,889 16,888
Dilutive potential ordinary shares arising from share options 1 2
Weighted average number of ordinary shares - diluted calculation 16,890 16,890
8 Cash and cash equivalents
2023 2022
£000 £000
Cash at bank and in hand 4,604 4,256
Balances are held with large international banking groups with 'A' credit
ratings.
9 Company Information
The financial information set out herein does not constitute statutory
accounts as defined in Section 434 of the Companies Act 2006 as it does not
contain all the information required to be disclosed in the financial
statements prepared in accordance with UK-adopted International Accounting
Standards. The financial information for the year ended 30 November 2023 has
been extracted from the Group's audited financial statements which were
approved by the Board of Directors on 26 February 2024 and which, if adopted
by the members at the Annual General Meeting, will be delivered to the
Registrar of Companies for England and Wales.
The financial information for the year ended 30 November 2022 has been
extracted from the Group's audited financial statements which have been
delivered to the Registrar of Companies for England and Wales.
The reports of the auditors on both these financial statements were
unqualified, did not include any references to any matters to which the
auditors drew attention by way of emphasis without qualifying their report and
did not contain a statement under Section 498(2) or Section 498(3) of the
Companies Act 2006.
Copies of these results, and the full financial statements when published,
will be available on the Company's website at www.synecticsplc
(http://www.synecticsplc) .com and at the Company's registered office:
Synectics plc, Synectics House, 3-4 Broadfield Close, Sheffield, S8 0XN.
Forward-looking statements
This report may contain certain statements about the future outlook for
Synectics plc. Although the Directors believe their expectations are based on
reasonable assumptions, any statements about future outlook may be influenced
by factors that could cause actual outcomes and results to be materially
different.
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