Underlying profits surge as Synectics ‘moves up food chain’

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STRONG demand from casinos, oil and gas developments and banks helped security technology group Synectics to a record order book and surging underlying profits.

The group, which develops, sells and manages CCTV and security systems, was boosted by strong performance from its Sheffield-based network systems arm.

The division, which provides electronic surveillance systems posted a record six months of trading. Revenues of £10.1m in the six months to the end of May were up a third on the same period a year earlier. Underlying operating profits at the division soared from £1.9m to £2.9m, helping its operating margin to improve to 28.8 per cent from 24.7 per cent.

Network systems’ growth helped Synectics, which recently changed its name from Quadnetics, to underlying pre-tax profits of £2.8m, up from £1.8m in 2011, before restructuring, acquisition and amortisation charges. Group revenues of £38.4m compared with £34m a year earlier. While second half performance is likely to be weaker, due to customers’ cyclical spending patterns, chief executive John Shepherd said Synectics is increasingly “moving up the food chain”. “This is another strong set of results which reflect the continuation of the momentum generated in 2011,” he said.

He added the order book, which has grown to £40.6m from £26.1m a year earlier, gives better visibility. “It’s a trend and we are specifically targeting bigger contracts with big customers in a process that I call moving up the food chain – the big multi-national corporations like Procter & Gamble, Lloyds and Goldman Sachs. (Previously) we had a lot of small customers or would be winning small bits of business from big customers.”

Robert Sanders, analyst at house broker Westhouse Securities, said: “It is evident that management’s strategy of increasing margins through greater use of its own intellectual property in its solutions (both software and hardware) is continuing to be reflected in the numbers.”