Synectics to shed 10% of UK workforce

WARWICKSHIRE-based security and surveillance group, Synectics is to shed 10% of its UK-based workforce after seeing full-year revenues plunge more than 20%.

In a market update, the Studley group said a slowdown in the oil and gas sector, delays in the introduction of a new project, together with disruption from a factory move had conspired to impact performance.

“Consolidated revenues for the year just ended are estimated to have been approximately £65m, a decline of just over 20% compared to the previous year. Underlying results for the year ended November 30, 2014 are likely to be in line with the board’s expectations set out in the trading statement on October 27,” it said.

“As reported in the trading statement, this decline in revenues and profits has been primarily the result of two factors: serial delays by some customers in planned projects in the Oil & Gas surveillance market and the impact of significant problems encountered in the delivery of a large project within Synectics’ Integration and Managed Services division. The group also suffered the organisational disruption of a major factory move during the year.”

It added: “Synectics has taken firm action in response to the weaker trading and increased levels of working capital experienced in 2014. Although a recovery of revenues and profits is expected during 2015, the board believes that a re-alignment of the group’s operating cost base in the UK is necessary.

“Management have therefore implemented a restructuring that will result in a reduction of approximately 10% of Synectics’ UK-based workforce. The ongoing savings in personnel costs will be around £2.1m per year and the total one-off costs of the restructuring approximately £1.3m. The majority of these restructuring costs will be accounted for in the 2014 financial year and the remainder in the first half of 2015.”

The troubled major project within the IMS division has also now been successfully delivered and signed off by the customer, it added.

The impact from delayed contracts in the Oil & Gas sector have had a substantial effect on levels of stock and work in progress as planned delivery dates have been delayed by customers, which in turn has had a significant impact on the group’s cash position.
The group’s net debt as at November 30, 2014 was £6m, compared to net cash of £1.2m a year earlier. Bank borrowings as at November 30, 2014 comprised a balance on two term loans totalling £3.7m and a net overdraft of £2.3m on current accounts. The group’s overdraft facility was renewed in October 2014 at an increased level well in excess of the November 30, 2014 overdrawn balance. The group said it expected to generate positive cash flows in 2015 and did not anticipate needing any increase in its current banking facilities.

The group’s consolidated order book now stands at £28.6m, compared with £28.1m at the same point in 2013. This was augmented in the first week of the new financial year with the receipt of an anticipated but delayed order worth £1.6m for an existing high security UK infrastructure customer.

The group is now choosing to focus on the positive and added that while it did not anticipate any near term improvement in commodity prices nor in the political situation in the Middle East, it did see an “unblocking” of a number of projects within its Oil & Gas sector that should result in trading for 2015 being stronger than in 2014.