A tough comparator and Middle East-linked delays hit the surveillance specialist's top line, but tighter margins and a bulging energy pipeline point to a stronger second half.
Synectics (AIM: SNX) has reported a sharp fall in first-half revenue and profit, as the security and surveillance specialist lapped a bumper gaming contract from the prior year and absorbed delays to energy-sector orders linked to the conflict in the Middle East. Revenue for the six months to 31 May fell 37% to £22.2m, while adjusted EBITDA dropped to £1.0m from £4.2m, tipping the group to a small adjusted loss per share.
The decline was largely anticipated by the market, given the absence of a one-off £7.8m gaming deal that flattered last year's comparative period, and investors appeared to focus instead on the underlying improvement in profitability: gross margin rose seven percentage points to 48%, reflecting a better mix of business, tighter cost control and the clearing of lower-margin legacy contracts.
Beneath the headline drop, Synectics continued to add new business, including a £1.5m contract with Stagecoach and a traffic-monitoring award from a Southeast Asian government, alongside a US$2.4m US casino deal signed after the half-year end. The balance sheet remains solid, with net cash of £10.5m and no bank debt, allowing the board to hold the interim dividend at 2.2p despite the profit decline.
Management pointed to a marked pick-up in energy order intake since the half-year close, already surpassing the whole of the first half's total, with demand increasingly sourced from customers outside the Middle East as geopolitical disruption to that region's projects persists.
The results form part of Synectics' ongoing '5P' transformation programme, which the company has billed as a year of investment in FY26 ahead of an anticipated acceleration in growth from FY27. Full-year adjusted EBITDA guidance of £3.7m to £4.1m leaves room for either outcome, with the range hinging largely on how quickly the energy order pipeline converts into delivered revenue.
This report is based on Synectics’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Jakub Żerdzicki on Unsplash.
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