Synectics (LON: SNX), the Sheffield-based provider of video surveillance and security systems, saw its shares fall over 13% today after it reported that first-half revenue had fallen by more than a third and adjusted profit had dropped sharply against a tough prior-year comparator.
The stock fell to around 177p in early trade today, down from yesterday’s close of 207.5p, having traded between 176.5p and 192.5p over the session.
In interim results released this morning, Synectics said revenue for the six months to 31 May fell 37% to £22.2 million, from £35.5 million a year earlier, while adjusted EBITDA, profit before interest, tax, depreciation and one-off items, dropped to £1.0 million from £4.2 million. Chief executive Amanda Larnder said trading had “returned towards the Group’s more typical second-half weighting following the significant non-repeating gaming contract which benefited H1 last year.” The company also said conflict in the Middle East has created uncertainty around the timing and sequencing of some Energy sector projects, delaying certain contract awards and project activity.
The scale of the drop reflects a one-off £7.8 million gaming contract booked in the prior-year period that did not repeat, rather than a broader deterioration in the business. Gross margin actually improved to 48% from 41%, net cash stood at £10.5 million with no bank debt, and the order book, the value of confirmed but undelivered contracts, held broadly stable at £26.4 million versus £26.5 million in November. The board maintained the interim dividend at 2.2p per share, unchanged from a year earlier.
The results also brought boardroom changes, with Jon Kempster becoming interim chair and Peter Kear joining as senior independent non-executive director. Synectics said full-year adjusted EBITDA guidance of £3.7 million to £4.1 million remains subject to how much of its Energy sales pipeline converts into orders, though it noted that Oil & Gas order intake since the period end has already exceeded the total received during the first half, driven mainly by customers outside the Middle East.
That pipeline conversion, rather than the historical comparator, is now the key swing factor for the second half, with the company’s ‘5P’ strategy aimed at expanding its share of a serviceable market it puts at around £2 billion.