Difficult UK market prompts profit warning at surveillance tech company
Surveillance technology business Synectics has issued a profit warning this morning, blaming UK market conditions which it says remain difficult.
In a trading update for the year ending 30 November 2019, the listed Studley-based company said is annual results are now anticipated to be “materially below” market expectations.
The company said its core systems division, supplying Synectics’ high end proprietary surveillance systems globally, has performed well in the year so far and is expected to generate results ahead of the board’s expectations.
However, this positive momentum has been more than offset by continued weakness in the group’s UK integration businesses in security and mobile transport, it said.
Based on the pipeline of expected new orders, and customer schedules initially indicated, the group had anticipated a significant improvement in revenue and profits from its integration and managed service division in the second half of this year.
However, the weak performance reported at the half year has continued. UK market conditions remain difficult and, with apparent uncertainty among Synectics’ private and particularly public sector customers, the pattern of order deferrals and customer-led delays in the progress of existing contracts continues.
The group said: “In addition, the group’s on-vehicle security activities were expected to deliver an acceptable positive profit contribution in the current financial year. However, with the disruption from the bankruptcy of a bus manufacturer customer and new bus registrations in the UK market continuing to be substantially down year-on-year, this will not now be the case.
“By contrast, the group’s core Systems division, with the majority of its revenues generated outside the UK, has made solid progress throughout the year and its results are expected to be ahead of the board’s expectations. Synectics has made substantial progress in its target market sectors of transport and infrastructure and high security and continues to achieve excellent results from its Gaming surveillance activities in the Far East and North America.”
Work on the breakthrough major European transport infrastructure project announced in July 2019 is progressing as planned and is expected to be delivered in 2020.
The overall market for oil & gas infrastructure remains subdued and the group’s revenues in the sector remain at a similar level to last year and well below historical levels.
The company said: “The group’s increased investment in Research & Development continues, with more resources being dedicated to its next-generation software solutions, as well as further enhancements to its Synergy software platform and cyber security resilience.
“The board sees increasing opportunities to capitalise on emerging software technology applications to expand Synectics’ position at the forefront of the market for complex surveillance solutions and is determined that the group will continue to invest appropriately to grasp those opportunities.”
