Unprecedented disruptions results in revenue drop for security and surveillance firm
Advanced security and surveillance business, Synectics reports a strong order book but a continued drop in revenue in its results for the six months to 31 May.
The Sheffield-based business has highlighted that Covid-19 had a “substantial impact” on the business, with many of its customers suffering “unprecedented disruptions” due to the pandemic.
As a result of the disruption caused to the its markets, it has recorded a 32% drop in revenue and is operating at a loss. Despite this, the business reported a solid cash position at the end of the period with £4.6m and confirmed facilities of £5m in place if required.
The firm attributes the fall in revenue in no small part to the shutdown of the casino and gaming market, which amounted to 30% of its revenue last year.
The sector saw both upgrade work and major projects put on hold, and Paul Webb, chief executive at Synectics explained it likely won’t be back until calendar year 2021.
He said that although Singapore Casino had reopened last week, many others were yet to follow suit while in the US, California – where the firm’s operations are centred – has just announced a further lockdown.
In addition, the continued decline in the UK bus market, which impacted the Group’s full year results published in February, was exacerbated by the major market impact of Covid-19.
However, the business was awarded a major contract renewal with Stagecoach recently and predicts an increase in activity as manufacturers return to production.
Webb believes potential Government support for the industry and a move to replace the ageing diesel fleets with new more environmentally friendly vehicles could lead to a small resurgence in the sector and create future opportunities.
In contrast to both these areas however Government related infrastructure and high security business performed well. Webb highlights that progress has continued on schedule with the “large and strategically important” Deutsche Bahn Berlin.
He said that throughout the pandemic the business has focused on ensuring investment in R&D continued.
He said: “We’ve been able to keep our technology development and R&D investment at the original planned rate. Which will put us in a really good place as we come into the sort of post-Covid world.”
Webb added that despite furloughing 30% of its workforce in April – predominantly from its North Lincolnshire factory – the Sheffield R&D team had remained fully effective throughout the crisis.
Alongside this the business has made some changes to its structure and footprint, including moving and merging its head office from Studley to Sheffield, as well as merging its German operations around Berlin.
Webb said: “We’ve taken the opportunity to properly look at the operational footprint, which tightens the cost base and puts us in the right place to take advantage of the opportunities that come our way as we go into 2021.”
Looking to the future the board expects that although maintenance and upgrade revenues from the gaming market will restart, the majority of projects and major upgrades will be delayed until the 2021 calendar year.
David Coghlan, chairman, added: “There is still a high degree of uncertainty around revenue forecasts, even for the relatively short-term future.
“Nevertheless, the Board expects Synectics will produce a noticeably improved underlying trading result in the second half of this financial year compared to the first half.”