Synectics (LSE:SNX) — Final Results

0:00 Good afternoon, and welcome to the SYNECTICS PLC Final Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll.

0:32 I would now like to hand you over to CEO, Paul Webb. Good afternoon. Thanks very much, Alex, and, thanks everyone who's taking the time to join us this afternoon. I'm as Alex said, I'm Paul Webb. I'm chief executive at SYNECTICS PLC. Been here for a number of years now, and so maybe familiar to some of you. I'd like to introduce my colleague. Allow my colleague to introduce herself. Thanks, Paul. Good afternoon, everyone. I'm Amanda Lander. I'm really pleased to have rejoined SYNECTICS, in the middle of last year,

1:07 when I was appointed as group finance director. Thanks very much, Amanda. So running order for the this afternoon, I'm gonna give you a brief overview, of the performance last year and touch on the headline results. Then I'll hand over to Amanda to take you through the financial results in more detail, our KPIs. And then he'll come back to me, and I'll talk through each of the the core

1:34 business unit areas and a little bit look at technology and finish with a a summary and an outlook. There are a few slides around the company, the company profile at the end of the presentation. If anyone's interested, look at them after. I'm not intending to to go through those on this presentation today. Okay. So overall, I mean, the 2022 was probably a little tougher than we'd expected. At this time last year, we'd hoped that we'd see some good recovery into the global gaming markets, particularly Asia, which was more challenging than we'd expected. But that said, we we did manage to to drive a good result, a significant turnaround in operating profits during the year. And we were able to complete the the program of consolidation that we started about three years ago, really. So we'd started before the pandemic to to tighten our operating footprint beginning with consolidating our remote head office into our main main operating site in Sheffield, and that's continued through the last few years.

2:47 This has been completed now at the end of last year with the disposal of a a small non core business, SSS managed services, which is a small managed service business. It's non core to our operations. There's been modest margins and not a significant contribution to the group overall. It's essentially a twenty four seven alarm receiving center, help desk, call center. It's a good business and a really well run little business, but we felt it'd be better and would thrive in in private hands, and we're able to conclude that during last year. So that allows us to focus the team now onto our core businesses, our SYNECTICS systems business, which is our global operating globally in certain markets, Systems technology business, essentially selling our own intellectual property, making security surveillance solutions for specific markets around the world. And our second business is our security business, a UK integration business focused on delivering security systems to end users in The UK market.

3:59 During the year, we were able to con continue strong performance around customer approval. The sort of customer relationships remain strong. We were able to continue investment in in technology, technology development. I'll come into that more a little bit later on. And overall, the business comes out of a difficult few years, really, in a stronger place than when we went into it. So we were able to show great resilience for the last few years in in in keeping the business keeping the cash position in the business strong and keeping all the fundamentals of the business sound. And we're really pleased to be able to to meet expectations and deliver results for this year, great turnaround in in operating profit on the back of some recovery in our revenues.

4:51 I'll do the headline results in just an outline, and Amanda will go through the numbers in more detail in a moment. So revenues increased. I should I should say actually that these headline results and most of the figures are underlying continuing operations. So they're the discontinued operation I mentioned, disposal of SSS is not in these headline numbers. We'll explain it a little later on. And this is underlying continuing operations. So as I say, revenue increased on the back of some recovery in some of the markets for SYNECTICS PLC. Go into that in more detail a little later on. Really pleased that there was a significant turnaround in underlying operating profit to $1,200,000 against a loss the prior year.

5:41 We have returned to profit in the second half of twenty twenty one. We were confident to continue that turnaround into this year. So very pleased to be able to deliver, results in line with expectations there. Earnings per share follow that. As I mentioned a few minutes ago, the cash position was strong all the way through the last three difficult years. We've maintained the cash position very strongly, good control over costs and no bank debt, no bank debt through the period. We do retain a facility as we're seeing a number of potential large projects over the next few years. There can be short term demands on working capital. So having that facility is is valuable to us. The order book at the end of the year was solid ahead of the prior year. That's ahead probably about another million or so now in a couple of months into into this new year. And we have a very strong pipeline of expected orders. So the the opportunities that we see out there in the market in in a number of our sectors are as strong as we've seen for four or five years, really.

6:46 The gross margin performance across both operating businesses has been very strong. I'll cover that in more detail in a little while. And we're really pleased to be able to recommend a final dividend of 2p a share. We we recommended and paid a dividend of 1.5 p last year. There was a small loss last year. We had a a profit in the second half, and the the the dividend was on the basis of expected continued performance, expected continued turnaround in those results. So very pleased to be able to recommend a payment of 2p per share, as a final dividend this year. Okay. I'll pass over to Amanda who will take you through the results in a little more detail.

7:31 Thanks, Paul. So Paul's mentioned the, revenue increase on the prior year, which is an increase of, just under 7%. That combined with the improved margins in both operating divisions has been reflected in the significant turnaround of the underlying operating profit to 1,200,000 and underlying diluted earnings per share to 6.9p. We've introduced recurring revenue to our presentation this year. That's defined as contracted annual revenue. So for example, software support contracts or service contracts. That's remained broadly consistent with prior year at 6,800,000 and accounts for about 17% of our total revenue in the year.

8:20 Something else just worth highlighting at this point, is that recurring revenue, and in particular, some multiyear contracts currently accounts for about, half of our order book value. Free cash flow, which is our cash flow from operations and after spend on capital expenditure, but before the cash impact of any of our non underlying exceptional items has increased significantly, from the prior year where it was an outflow of 300,000, to an inflow of 1,200,000, and that's driven predominantly by the improved profit position. Following a slight dip last year, and as people get used to the balance of of hybrid working and returning to office, we're really pleased that, we've seen an improvement again in employee engagement to 71.

9:13 We've maintained our highest ever net promoter score for a third year in a row, at 32. And total technology spend has remained broadly in line with prior year at 3,200,000, Although we've capitalized a slightly lower amount than normal at point 2,000,000, that's because we focus during 2022 more on project completion and improvements, neither of which we capitalized to the balance sheet. And so looking forward, into 2023 and ahead, we would expect, the total spend to increase again, as we revert back to pre pandemic levels and, invest further into our technology development.

9:57 Thanks, Paul. In terms of revenue, the increase in revenue, is a combination of a slight drop in the revenue from our security division offset with an increase in revenue from our systems division. And Paul will pick up on that a bit later, as part of the segmental review. The increase in the underlying, gross profit to 16,600,000, that reflects an improved margin to 42 and a half percent. That's due to, a few reasons. One, the increase in revenue itself. We have a relatively high level of fixed costs, within the gross profit base. So the increase in in revenue drops down to the, gross profit.

10:43 A slight change in sales mix year on year and also some continued savings, in that direct cost base have all contributed to the improvement in, underlying gross profit. We've incurred 700,000 of non underlying, items in the year. They relate to three things. The planned reorganization of the board, some legal costs, and some costs in relation to the, buyout of the defined benefit scheme, which we expect to complete later on in 2023. The profit on disposal of the business that we sold SSS of 800,000, that was also a non underlying items, but it's attributable to the discontinued operation, and so that's been presented separately, on the income statement.

11:33 There's an income tax credit of 300,000 that's been driven by, some changes in tax rates overseas, our r and d tax relief for the year, and, a correction of some prior year tax positions. So overall, that leaves a profit for the year from continuing operations of 600,000, which is a significant turnaround from the loss of 400,000 in the prior year.

12:03 So I'll briefly look at the, key balance sheet movements year on year. Fixed assets are slightly below the prior year. That's because depreciation has been, partially offset by an increase in our lease asset due to the renegotiation of one of our property leases. Intangibles have decreased by a million, predominantly due to the amortization charge. Also, we wrote off some goodwill in relation to the SSS business. Cash continues, as Paul has mentioned, to remain strong, and I'll look at that on the next slide. Other net current assets or our working capital position, there's been an increase there of just over, 3,000,000.

12:49 About half of that is attributable to the disposal of the business. So SSS was in quite a significant net liabilities position, So that's therefore had the impact of, increasing our working capital position. About 1,000,000 of that movement is due to an increase in our contract assets or our accrued revenue position.

13:11 And that's because we're seeing, as Paul will come on to later, increased oil and gas opportunities. And some of those projects, they take generally longer to build and longer to deliver than other projects, so they sit in accrued revenue for a bit longer. We've also had, a few customer delays in the security business towards the end of the year. So that's meant, projects that we may have expected to have invoiced before the year end have actually just dropped into after the year end. And then finally, the other slight movement in that working capital, is reduction in our, deferred revenue, or our contract liabilities. And that's, simply a timing of the unwind of some of the revenue that we're seeing on our on our longer term contracts.

13:59 If I move on to the net tax assets, the overall position there has remained similar year on year. However, that is made up of a reduction of our deferred tax asset as we have utilized some of our previously recognized losses. As we've also recognized a current tax asset, in relation to the cash that we expect to receive, from one of our r and d relief claims. Provisions are, similar to the prior year, and the lease liability, remains again at a similar level due to the renegotiation of the property lease. And this slide, illustrates our cash flow for the year. There's been a net outflow of 400,000, that consists of 1,000,000 cash inflow from operations after those cash payments, relating to the non underlying items.

14:54 So really strong, cash generation from operations. That's been offset with a 1,400,000 outflow, from other activities. The point to highlight in terms of the cash flow from operations, the largest impacting item there is the increase in working capital that relates to the, accrued and deferred revenue movements, that I've already mentioned. And then in terms of the cash flow from other activities, tend to be similar to, what we would normally expect to see. 200,000 cash tax received overseas, capital expenditure of 300,000, which relates predominantly to the capitalization of the development costs. Net cash disposed of on a discontinued operation.

15:41 So we received a 100,000 cash upfront in relation to that business. We have a 100,000 deferred revenue at the end of the year. The net position, based on the cash that was in the business at the time is a 300,000 outflow. Lease payments of 900,000 and '20 21, final dividends that were paid during 2022. Thanks, Paul. Okay. Thanks, Amanda. So I'll just, have a quick look now at the segmental analysis, looking at the the different businesses. Systems, you see systems had reasonable recovery in the revenues last year. I'll go on to the details of what sectors that came in, what regions and sectors in a a few moments. But you'll see that the that modest increase in revenue really drops down to to generate significant turnaround in the operating profit. It's very highly geared business. So these modest revenue recoveries make a big difference.

16:45 And that said, the gross margin is also very strong. I mean, I think I said at the interims that the 50.4 that we reported for the first half was probably a a little flatter and a little higher than usual. And that's still the case. It's probably underlying gross margin is more like forty eight forty eight, 49% in there. And that's reflected on reflected by less sales of hardware on the back of our core systems. I think we'll see some recovery in that during this year where we're, for example, selling cameras on the back of our core system. That depresses the gross margin percentage, but helps with our our revenue and and gross profit overall. So you should probably see that coming back to very high forties during the course of this year. Those of you who followed us for a long time will realize that within systems, the gross margins were in the high thirties not that many years ago. We've been driving those forward through a number of different measures over the last years, getting into the early forties, mid forties, high forties now, tipping into 50% gross margin. That reflects significantly the the switch between more commodity hardware sales to much more software content and and software service professional services content in the mix of our system sales these days.

18:05 So we're very pleased with that. Our, I mean, our target gross margins for systems is at the high forties, and we expect to deliver an operating, margin of mid teens percent when the revenues recover a little more. Moving on to security. Security is our UK integration business. A little disappointed with the the revenue number. As Amanda said, some client led delays at the end of the year and a a supply chain issues meant that as a little below our expectations and forecast. But the gross margin, very strong there again. We've continued control of of the cost base, delivered an off rate and profit not far away from expectation on on slightly less revenues.

18:51 Again, our our target gross margin in the security businesses, mid twenties, 25 points is our is our target there, so outperform that during during the year. And that should be able to deliver an operating margin in single digits, 9% is the is the target there. And that should be achievable in relatively short order with a modest revenue increase this year. On the bottom of the slide, you can see the discontinued business. That's a decent amount of revenue. That's our our call center, our managed service business. But it's delivered sort of plus or minus 50 operating profit for the last few years. So it makes little difference, not material difference to our operating results, making the margins on the whole business stronger in terms of gross margin percentage. You can see the effect of that on this slide and say all the results going forward without that discontinued business.

19:55 I'll move on to talk about the the the two principal business units in a bit more detail. Starting with the systems business. The systems business is, selling our own technology, usually as complete turnkey solutions or semi turnkey solutions into a number of markets around the world, gaming, oil and gas, transport infrastructure, the high security public space in a number of regions around the world. I'll I'll come on to the regional report in a few minutes. As I already mentioned, the operating profit significant turnaround with the gearing in the business as the revenues continue to recover from the pandemic period. We'll see further growth and improvements, further recovery in the revenues here over the next months and years ahead.

20:44 And we are really pleased to that the gross margins improved materially. As I said, probably slightly flatter in the underlying gross margins, but still very, very significant progress there over the last few years. And the savings in direct costs were maintained as planned through the through the year. Talking a little bit about the markets that we operate in. The, the global gaming market that I think is we were here this time last year. We're probably hoping that, we'd see recovery during 2022 in the global gaming market. That wasn't quite the case. It continued to be significantly impacted by extended closures, lack of travel, etcetera, particularly in Asia. But we need to realize that the the loss of the play gaming operators are truly global operations. So that meant that, you know, the effect of the last few years is still being felt by major operators and projects and capital investments still continue to be postponed.

21:44 We see that changing now. The bellwether ready for the Asian gaming market is the performance over the Chinese New Year period last month. Most travel restrictions were removed just in time for that. Some were reintroduced over that period. I'm pleased to say they're pretty much all moved now. That said, Macau is as the principal revenue generating region in in in Asia. So this numbers and gross gaming revenue at about 40% of pre pandemic levels in the two year lunar New Year period last month. So, yes, some recovery. That's about what they were expecting and targeting, but still far away from fully back to normal. We expect significant return to normal spend later this year, but the timing of that must be a little uncertain.

22:42 Against that activity levels in the oil and gas market, particularly in the second half of the of twenty twenty two, really started to gather some momentum. That translates into some pretty decent performance in the year. So it it improved our trading results in the in the last half, particularly, a decent amount of oil and gas projects on the order book. As Amanda said, they some of those take longer to convert into revenue. There's a lot of physical build around explosion protected cameras, but they will trade out in the first months of this year. But the the pipeline of expected orders, the projects we can see out there that will go ahead over this next year is as strong as we've seen for many years, probably as strong as we've seen since 2014, 2015.

23:28 The global events affecting that, but significant activity in the oil and gas market. Other markets, the sort of public space and transport infrastructure markets, modest, reasonable growth. And they're they're strong markets for the long term, but activity levels were pretty much as expected. If I look at it regionally, some progress in revenues in EMEA. Essentially, that's the our UK business, some some work in in in Mainland Europe, in Germany, and oil and gas projects in The Middle East. Revenue slightly ahead. That was mostly oil and gas performance in the in the last quarter, modest performance in the public space sector during the year.

24:17 That said that a landmark really in the year was the deployment of a new SYNECTICS. SYNECTICS our core command and control system. Last year, we talked about a contract award with West Midlands Police for a new event control suite that was successfully deployed in the first half of twenty twenty two, and that was done in in preparation for the Commonwealth Games. What we did beyond the deployment into that police headquarters was use the very latest generation of our SYNECTIC web enabled feature, the web based features to allow multi agency collaboration across that event. So that that allowed the police event control suite to to take camera feeds and data and intelligence from transport operators, from state operators, from the the city council, and really was the centerpiece of very successful and safe games in the region.

25:19 We have produced a a bit of a case study on this. We've done a fairly technical one, but there will be something in the annual report published in a couple of weeks, which is less technical giving you a sort of an idea of the the user benefits of this type of deployment and the capabilities of these multi agency systems. So on the back of work we did in Berlin over the last couple of years, linking mobile assets into control rooms and and and static assets, the work in London last year, building a fully cloud based system for the city of London. And this multi agency work, collaborative work we've done with Westminster Police provides some really great reference projects and reference programs for other smart city transport infrastructure convergent projects over the next few years. So we're really excited about that as a third leg of our of our long term growth plans with very immediate opportunities in oil and gas, pent up demand in in the gaming market, which would start to free up in the next few months, and some real great opportunities to take these converged smart city capabilities into broader markets over the next few years.

26:38 Looking at North America, steady progress there in gaming. Most of the most of the work during the year in gaming was updates and upgrades to existing customer systems quite a few extended support contracts. Most of the our customers in the region extended their support contracts. As as Amanda said, this year, particularly, we noted and we're driving multiyear renewals. Previously, we'd had a lot of annual renewals.

27:10 We were able to convince a number of our customers in the value of signing up for multiyear support. So significant amount of that on our order book as we as we turn the year, and that's more more of a characteristic going forward. So that's really driving the growth of our recurring revenue. And and also activity in oil and gas, most of our focus in in North America is is gaming, but we have a few channels supplying our specialist explosion protected camera stations into the oil and gas market in North America. And almost under the radar, no major large projects, but quite a significant uptick in the number of camera stations delivered into that region over the year. Asia Pacific progress was was modest, not unexpected.

28:00 We had hoped at the start of the year, we'd see some recovery there. The the modest amount of growth that was there came from oil and gas markets in the last months.

28:12 As I've already covered, the gaming market was still heavily affected pretty much through the whole year. That said against that backdrop, we were awarded a contract for a new large new integrated resort in The Philippines. Is the second property for a resort operator in The Philippines. We we did their first property with them in 2015. We're pretty confident that we'd be selected for their new build property. We should start the construction just pre pandemic.

28:42 Obviously, construction was paused, but that restarted last year, and it's now slated to open, soft opening late twenty twenty three. And at the very end of last year, we got the contract to provide the SYNECTICS system for that resort. It'll be delivered later this year. Initial contract on the order book at the end of the year is for the core command and control system. We've been working with the customer in the last weeks to to survey the site and look at the full deployment. We expect to get significant increase in that order value over the next few weeks and to deliver and deploy all the camera stations and some further channel licenses and and recording over the year. So that's silver lining in a very challenging year last year, but very pleased that that will be in and out during this year.

29:36 And as I mentioned, oil and gas activity is still gathering momentum. We've got a very strong pipeline of expected projects there, so we should see further progress in oil and gas across all regions.

29:51 I'll move on to the security division. We already covered some of this. Little disappointing with the revenue finally, a little bit softer than we'd expected, but gross margin remained strong and high and probably higher than our target levels. That's really good. Still controlling operating costs, so the underlying operating profit is pretty much in line with our expectations. Some projects were customer side delays in the last half of the year. No real problems. Just the the progress of particularly some of the multiyear projects a little slower than we'd probably previously expected. And the slightly weaker revenue in the last quarter due to some supply chain issues, essentially, with rearview cameras on our own vehicle division, third party supply of product that was unavailable in the last few months of the year meant that some of that revenue was left in the old book and is trading out in the first months of this year.

30:49 As I've mentioned before, we're really focused on

30:53 higher value added business in this area. There's plenty of of business in the sector in sort of mid teens type gross margin. Fitting cameras on walls and pulling cables is an area we've been trying to focus away from, doing more complex, more technical based projects, and that's been good progress in that over the last few years. So margins of 17% a few years ago, now consistently in the mid twenties, which where we wanna keep it. And some of the opportunities I mentioned earlier on the back of London and West Midlands, the the the the interest out there in the world, there in the market for more converged systems is definitely growing. And while there may not be any specific projects in the very short term, there there's a lot of interest from many many agencies to look at some of these early deployments over the next months and years ahead.

31:51 I'll move on to a very briefly about technology development. As Amanda said, almost all of the expenditure there this year was expensed. A very modest amount was capitalized. This is not just r and d. It's technology overall. A lot of it goes into supporting our existing projects and products. Probably a quarter of our spend in this area is directly cost of sales on projects. About a quarter of it is genuine r and d or new product development, and about half of it is maintaining our current product platform and portfolio to to to keep on keep on developing features and functionalities to meet our customers' emerging and evolving needs. It's been the backbone of the business for many years. It's keeping the keeping the platform relevant so that we have many long term advocate customers who who use the system update and upgrade it on a regular basis.

32:50 Again, Amanda said earlier, we intend to have already started increasing the expenditure in that area. We've managed to hire replacements for the vacancies we had during last year. It's a very challenging time hiring in the technology development sector a year ago. It's much more normalized now. So we're very pleased to be able to do that, see some new blood come back into the business and some returners for people who'd been lured away where the grass maybe looks greener at some points last year. A few of those have returned to us, so we're very pleased with that. And you'll see the the

33:22 gross expenditure in this year now increase closer to pre pandemic levels around 4,000,000 or maybe even a little higher. And you will see a little bit more of that capitalized next year as we're focused on some new productization and some new functionality, not just completing existing project projects. In terms of what we did with those completion of projects, there there was a significant focus around cybersecurity, which has been ongoing for a few years. We've now got the product platform, basically, cybersecurity out of the box. So everything's locked down when you get it. So it's as secure as it can be. Lots of web based features and continuing to develop the the cloud evidence enhancements that we'd, introduced into London the the previous year.

34:15 So lots of ongoing lots of ongoing progress on those features already in place, but we we have quite an exciting road map of of new features and and productization of some of the early adopters requirements over this year. So with a with a a stronger team with some fresh new blood in that team as well, we're really excited about the progress we can make next year around the technology platform. And before we move on to take some questions, let me just summarize and give you a little little outlook statement. And we're really pleased with the how the company's managed to navigate its way through a very difficult last few years. We really believe that the business comes out of this period stronger and with a robust platform to for further development in the future.

35:07 The business is is really sound. The customer relationships are very strong. We got some really great people. Whilst we've recognized that there are some real concerns in the supply chain, we've done a very good job of managing those. And, you know, with the the completion of our consolidation program with the disposal of the SSS business, we've got a much tighter operating pro footprint to move forward. I mean, the markets we work in, the security technology industry is fundamentally attractive. It's got long term growth prospects, and and the the core markets we work in are recovering or in root health. So we've got a sound order book, a strong pipeline of opportunities in those markets, and we're very confident of further profitable growth during this year.

35:55 Noting that the timing of some of the larger projects is difficult to predict with any accuracy and the constraints of the global supply chain was not causing us any real problems,

36:09 but the lead times are longer out there in the market. So noting that the timing of performance in the the back end of this year is gonna be dependent on a couple of things like the timing of the orders and the and the lead times in the supply chain. So very confident of further growth this year. The pace of that growth may be moderated a little bit by some of the constraints in markets. That's great, Paul and Amanda. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A can be accessed via investor dashboard. Paul, Amanda, as you can see, we have received a number of questions throughout today's presentation.

37:05 If I could just hand back to you to read out those questions and give responses where appropriate to do so, and I'll pick up from you both at the end. Thank you. Thanks, Alex. So I'll read them out, and I'll get Amanda to answer where appropriate or I'll answer. First question we got is regarding our forecast and directly related to my last statement around Outlook. So our broker, Shore Capital, amended the forecast that were previously in the market last week. The question is really do we can we comment on that? And do we agree with the forecast change? I I think I do agree the the the the forecast that were in the market prior to last week were essentially created a couple of years ago when the expectation was that or the hope was that we'd see a significant recovery in the global gaming market in 2022.

38:01 I think given my comments that, that that we will get growth, we will see some progress during this year, we feel pretty optimistic about delivering to those, you know, getting towards those previous numbers. But, there are constraints around timing. There are constraints around lead times that mean that it's probably prudent that, the new forecast from Shore Capital is essentially a base case, and we have plenty of opportunity to to perform beyond that. But it's a it's a it's a very appropriate and sensible base case for our forecast as we as we move forward. If you got anything to add to that, Amanda. I'd agree, Paul. I think the key piece around the forecast for the current year, as you said, is is is in particular around the the uncertain timing of of some of the opportunities that we know are out there.

38:52 Remind the revised forecast that 2,300,000 base case PBT is is doubling the profit that we achieved this year, which is a big turnaround from the previous year. So I think significant progress to achieve that, but plenty of opportunity to to go beyond. Second question we got here was the update on the forecast growth in Asia, specifically casinos. I think I've covered that. This was a bit before I mentioned that. You know, we we Asia was our largest market within systems pre pandemic, there's a potential to be so again. We should see significant growth. There are some big project opportunities in Asia. Timing's unclear.

39:39 There are some casino projects which are planned, but probably haven't got corporate budgetary sanction yet. We'd expect progress in those during the year and, update you later. So timing, difficult to predict. But over the 2324 of the next year or two, I think that we see significant recovery in casino markets. Let me take the next one, Paul. Next question is, could we please guide regarding the dividend policy? Thoughts regarding any surplus cash that may arise over the next year or so, and where would we channel this into buyback shares, for example, acquisitions. So we reinstated the dividend in 2021, 1.5p to acknowledge the second half profit.

40:31 We increased this for, 2022 to 2p, again reflecting the performance. We have a progressive dividend policy. We would expect to continue this, in line with the results of the business. In relation to the cash specifically, in the short term, at least, I'd probably expect that there would be, more pressure on the cash balance. That's due in part due to the, increasing investment in the technology that Paul's spoken about, as well as the higher level of, oil and gas projects, which, do tend to be more working capital intensive for a longer period of time. However, there are no plans to, buy back shares. We've got no planned acquisitions at the moment, although we do remain open on this, should we feel that, you know, it was of the right opportunity for the business.

41:27 Excellent. There's a question around the background to the previous CFO and the appointment of Amanda during last year. My comment to that really is the the departure of the previous CFO was our decision in the middle of last year, and we were delighted that Amanda was able to rejoin us, on July 4, I think I remember, last year. So, but it was our decision to to make that change last year. The next question is about what sectors are driving your growth and which are not. Target margin margins you're targeting. Well, I've I've sort of covered that. So, I mean, we expect recovery in the gaming sector this year and and the following year. We expect growth in the oil and gas market back to, you know, to the extent we haven't seen for three or four years, more modest growth in the public space, transportation infrastructure sectors, but progress in those. They are midterm. They are attractive markets, but not immediately significant growth in there. And the target margins, I've covered the the gross margins were high forties.

42:48 They're quite similar across each of the systems markets, possibly slightly lower typically in oil and gas where there's more physical hardware, but but still in the well into the mid high forties. And the operating margins, as I've said, mid teens in systems, high single digit in security. So that just reexplains what largely covered before. Geographical revenue split. How do you see geographical revenue split changing over time? In the in the short order, we see recovery in in in game in Asia. Asia's was much more significant in our revenue split.

43:33 That should get back towards that over the next year or two. We don't particularly plan to expand our footprint into lots of other regions. The the the reach from from our North American hub, we can reach North America Our Asian, we got two hubs in Asia, essentially Singapore, but we got a satellite in Macau. Can reach most of that market there from there in Europe and UK. So we don't plan to expand our operating footprint. We've done reverse really in sort of consolidating our operating footprint, but but we certainly will be looking at other markets, whether it be adjacent regional markets or adjacent end user type markets, so over this next year. The the last year or so has been about recovery and regaining position in markets. I think that's still the case to a degree in 2023, but we use some time during this year to explore again areas where we feel we wanna put growth resources into.

44:41 We we are looking at the market landscape anew. Our figures for the market sizes and opportunities are pre pandemic, so they've been re researched as we speak. So at the moment, no specific plans to expand footprint. I would see steady growth in North America and some reasonable return to pre pandemic towards pre pandemic revenue levels in Asia. So that's what I see. Do you wanna take the next one about Asking about capital capital allocation priorities.

45:27 If we had an extra one, well, one one million, I guess, available to spend, how would we best likely to deploy it? Any specific geographies or increased returns to shareholders? We'll see if we've I've covered that slightly in the the dividend and cash question. I'd also add, obviously, we have planned increased investment in technology as we've mentioned, so that's that's key to, the future of the business. We've also had minimal spend on on our CapEx, over the last couple of years, and this would look we'd look to increase this, going forwards. There's a couple of projects internally that'd be a significant, operational benefit to the business.

46:16 So that would definitely be an area to spend the investment. Paul, did you want to add anything from a sector geography perspective? Yeah. Said, As we already highlighted that the the first priority is to is on technology development that underpins everything we do, and, that's already in place. We are reviewing the market opportunities beyond our focus on recovery. So the specific regions or sectors we invest more in sales efforts are undetermined at the moment, but it's essentially the the geographies and sectors that we that we operate in there. I think there are there are opportunities in all of those. But where we can see further growth probably is around the smart city transport convergence we've been talking about for a number of years. It's starting to become a reality.

47:13 So I feel that there will be significant opportunities in that area, which is exactly where and how is probably still under review. We probably lost some momentum during the pandemic on investigating and exploring those broader adjacent markets, but we're certainly all all fired up to go back into that now after a couple of years of recovery. I suppose the last question I can see on here is related really where's the r and d focusing. Is it on cloud or recurring opportunities? So quite a lot of investment in cloud based technology. The collaboration type multi agency use, so linking other systems into ours has been a big focus this year. Product ties in that over 2023 is is a key thing. We have three major projects in the last three years, all of which have got elements that are relevant to broader application.

48:14 They need productizing so that we can take them easily to to other customers. So that that that's what's happening right at this moment. And and, yes, that's most of our markets are still driven by capital investments, but the the idea to to transform some of the some of the the projects we're doing into more OpEx, more recurring revenue rather than being a big cap deployment. It's something that's in our minds. It's in some of our customers' minds. Though I would say most of the markets we operate in are still very much capital project driven, But it's something that's very much in our minds as the big parts of the world move towards a more OpEx model. We're we're certainly not close to that as we go forward.

49:04 That's great. Paul and Amanda, thank you for being so generous with your time today. And I believe you have addressed all the questions that came in from investors today. And, of course, the company will review all questions submitted today, and we will publish those responses on our Investor Meet company platform. But Paul, perhaps before redirecting investors to provide you with a feedback, which I know is particularly important to you and the company, could I please ask you for a few closing comments? Yes. Thank you, Axel. I think know, performance this year and over the last few years, testimony to the underlying strength of the business that we've able to keep it so healthy through the last few years. The markets we're in are attractive. The the market some of the markets we're in recovering or strong at the moment. We've got a really sound order book, a really strong pipeline of opportunity. So confident of a further profitable growth over the year ahead.

49:58 That's great. Paul and Amanda, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of SYNECTICS PLC, we would like to thank you for attending today's presentation. That concludes today's session. Good afternoon to you all.