R&D investment likely flatten full-year performance warns security group
Security and surveillance group, Synectics, has announced a 15% rise in full-year profits despite a fall in revenue.
The Studley-based company said underlying pre-tax profit for the year to November 30, 2017 was £3m (2016: £2.6m), despite a small decline in revenue from £70.9m to £70.1m.
There wasn’t much cheer for shareholders as the company revealed that in order to try and secure growth by investing in product development, performance for the current year was likely to be flat.
The company has blamed the situation on the ongoing fallout in the oil and gas sector – one of its largest customer sectors.
It said management had taken action to maintain profitability in the sector by reducing costs, with the result it increased margins.
David Coghlan, chairman, said: “Management has taken action to maintain profitability in that area by reducing costs, and delivered a very creditable increase in operating margin in our oil & gas activities last year.
“The board remains convinced that the right course is to preserve the critical capability that underlies our leading market position in the sector, and indeed to focus on positioning the business to gain market share once the recovery is underway. “We believe the right balance has been struck in the interests of long-term value.”
However, investors were not so easily convinced as the company’s shares declined by more than 7%.
Other underlying factors influencing the results included a global gaming market that remained buoyant, increased demand from infrastructure customers, such as utilities, data centres and transport hubs, and a sharp decline in new bus deliveries in the UK.
It said it expected the trend of growing profitability within the various business operations to continue in the current financial year.
In addition, it said opportunities had been identified for innovative development of its core product set, using emerging technology applications being introduced in other fields to expand into current markets.
“Consistent with our growth strategy, the board has authorised a significant increase in R&D expense to capitalise on those opportunities. The increased expense for this investment means that the board’s current expectations are for reported profits in 2017/18 to be broadly flat compared to last year,” it said.
