Not only are the latest results from Synectics (SNX) impressive as the table below indicates, but with operating margins rising from 5.1 to 7.4 per cent last year, this means that the surveillance and security systems specialist is on course to hit its margin target of between 8 and 10 per cent.
A key driver is the company's ability to take on bigger contracts which are often better because they include more follow-on work. Three years ago, a £1m contract was a cause for celebration; today £1m-£3m contracts are quite usual. Synectics also scores well in being able to integrate its software into third party security systems. The stand-out performance in these latest results came from industrial systems which reported a doubling of revenues to £15.9m, operating profits up from £1.3m to £3.2m and a surge in operating margins from 15.8 to 20.4 per cent. The unit provides turnkey surveillance systems for oil and gas facilities and won important contracts in Abu Dhabi.
Nor is the good news over. The year-end order book stood at £36.9m, and since then Synectics has won a £2.7m order to develop security solutions for the Avon and Somerset Police. The company's chief executive, John Shepherd, forecasts "a strong performance" this year, and broker finnCap suggests this means a 10 per cent rise in sales to produce adjusted pre-tax profits of £6.5m and EPS of 29p (from £5.7m and 25.2p in 2012).
SYNECTICS (SNX) | ||||
|---|---|---|---|---|
| ORD PRICE: | 366p | MARKET VALUE: | £64.3m | |
| TOUCH: | 360-372p | 12-MONTH HIGH: | 372.5p | LOW: 272.5p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 17 | |
| NET ASSET VALUE: | 200p† | NET CASH: | £4.6m | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 79.2 | 4.39 | 21.6 | 7.0 |
| 2009 | 70.2 | 0.47 | 1.7 | 7.0 |
| 30 Nov | ||||
| 2010* | 61.3 | 1.36 | 6.4 | 7.0 |
| 2011 | 69.0 | 2.46 | 10.2 | 7.0 |
| 2012 | 77.0 | 4.71 | 21.6 | 7.5 |
| % change | +12 | +91 | +112 | +7 |
Ex-div: 13 March Payment: 8 May *18 months †Includes intangible assets of £20.7m, or 118p a share. | ||||
