Synectics lowers guidance as casino sector struggles
Security and surveillance technology company Synectics updated the market on its trading on Tuesday, reporting that the Covid-19 pandemic had continued to impact activity across all of its markets, but had particularly affected its largest market sector, global casinos and gaming.
The AIM-traded firm said the recovery in the second half of its financial year was now unlikely to take place, as it had previously expected.
Trading and forecasts in other sectors of its business had remained largely in line with its previous expectations, the board said.
“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 are now likely to be lower than those in the first half,” the directors said in their statement.
“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 suburban railway system had been good, the board said.
It explained that the first two customer milestones had been met, with the project on track for live operation in January.
Synectics said the project incorporated “the next generation” of its core ‘Synergy’ software platform, with capabilities applicable to a “significantly larger and higher-level” potential market in the public transport and infrastructure sector than it had previously addressed.
Levels of current bid activity and interest from customers and prospective global IT integrator partners continued to suggest that both the market opportunity and the competitive environment were “favourable” for the new Synergy offering, the board said.
Work was also progressing as planned to consolidate the operations of Synectics' integration and managed services division, as it reported in its interim statement in July.
“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 board said.
“The new combined business, ‘Synectics Security’, launched in September has been well received.”
It said the consolidation would be completed by the end of the current financial year.
Given the increased uncertainty in the timing of market recovery from Covid impacts, the firm’s management said its forecasts and plans were now based on the assumption that demand in affected sectors would remain weak for some time.
Its net cash balance as at 31 August was £7.3m, up from £4.6m at the end of May, with additional undrawn bank facilities of £5m.
The company said the increased cash was largely the result of lower working capital needed to support reduced revenues - a position that would unwind, at least in part, as revenues recovered to more normal levels.
“With our ongoing investment in advanced product development and deep customer relationships, Synectics is well positioned across our global markets for long-term success,” said chief executive officer Paul Webb.
“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.”
Synectics said it would issue a further trading update in early December, following its year-end.
At 1005 BST, shares in Synectics were down 1757% at 107.16p.