Synectics (LSE:SNX) — Interim Results

0:00 Good morning, and welcome to SYNECTICS PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they 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 it receives during the meeting itself. However, the company can 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. And I

0:32 would now like to hand you over to CEO, Paul Webb. Good morning to you. Thanks, Alex, and welcome, everyone. Thanks for your time this morning and joining us as we take you through the interim results of SYNECTICS PLC for this year. Before get into that, just for those of you who are less, familiar with us, I'll give you a a brief overview with the business. We we develop and deliver security and surveillance systems, but we're very focused on specific core markets where security is critical or fundamental to operations. Often regulated markets where our experience, our expertise is is highly valued, and we can often help customers ensure compliance with regulations as well.

1:19 And we deliver solutions that are often technically and logistically challenging to a high profile and and often blue chip customer base globally. Solutions are largely built on our own intellectual property, either our SYNECTICS command and control software platform or our COEX explosion protected camera range, specifically developed for the for the oil and gas market. We build long term relationships with our our end users and with our channel partners as well. And this is really, really important to us. We might be seen as a techy business, techy technology security business, but we're a very human business, and our values are very important to us. It's ultimately, what we do is protect people, keep people safe. And we know that, so do our customers. And our fantastic team of colleagues also really are aware of that, and it really comes through in the way we the way we interact with with our market, with our customers.

2:18 So we're a trusted brand in our sectors. We're known well in the sectors that we focus on, and we're really focused on serving our customers, understanding their needs and serving them well. So with that, I'll move on to our results and our headlines. I'll just touch on the headlines here because I'll ask Amanda to take you through the results in more detail in a few minutes. So a really strong set of results, really strong first half. We're really pleased with very solid revenue growth, about 20% revenue growth year on year from the previous year. And a strong first half, where typically the business has quite h two weighted results seasonally. Think naturally, we're second half weighted terms of the market seasonality.

3:07 So we're really pleased with the strong first half and built on a couple of projects and delivered a bit earlier than we previously expected. That's really good to see. Over the last couple of years, we've done a lot of work on the on the on the cost base, on the operating footprint of the business, and really good to see the operational gearing coming through now. You saw that in the second half of last year, but more strongly here. You know, almost half the revenue increase has dropped through to the bottom line. So substantial increase in operating profits with that 20% revenue increase. So see that gearing coming through. I'm very personally very pleased with the order book. It closed very strongly, some really strong order intake in April and May of the period. And across all sectors, we sat here six months ago talking about the 2023 results and the progress in 2023 was very much built on very buoyant oil and gas market, one of our core sectors.

4:06 We'll show you the segmental split in a few minutes. But this year, this period, pretty much momentum in all sectors. So we're very pleased with that. We'll show that in a minute. So a strong first half, very solid order book. So we're really comfortable that the results for this year will be comfortably in line with market expectations and say good project wins across all sectors. I mean, that's continued post period end with the announcement just last month of a major upgrade and expansion contract with a large casino resort in Asia. I'll tell you more about that later, but it's really fantastic. But the confidence in our systems and our capabilities and really shows that that market is starting to have momentum as well. The gaming market's been challenging. It was our largest market in 2019, largely closed down for a couple of years.

5:03 And whilst it's fully reopened, generating revenues, generating lots of footfall, the timing and appetite for capital investment has been a bit subdued, a bit delayed, but we've already seen that start to open up now as exemplified by that major project win. We continue to invest in our technology. It's really important to us. It's really important to maintain our position in those specialist sectors as the go to provider. Constant investment in bringing our technology forward is a critical part of that. Finally, the over the year, we've had a number of changes to our board. The appointment of Bob Holt just in in April as my executive chair. And we further strengthened the board in recent weeks by the appointment of John Kempster, who joined us just a couple of weeks ago and also chairs chairs the audit committee.

5:57 It follows a period with a very long serving chair in David Coughlin, who who left the board due to ill health a year or so ago and the retirement of Steve Coggins earlier this year. So new and strong board moving forward. So looking forward to their input and their challenge over the next periods. Before I go on to to run through this sort of divisional performance of the group, I just wanted to really reaffirm that our strategy remains what it was when I spoke to you four or five months ago. But the the the security market is huge. It's dominated by huge multinational players, increasingly Chinese products, many famous names. And we're, you know, we're not playing in that market. We we we absolutely choose to focus on creating, converting new business in in core markets where we have market leading positions due to our our specific knowledge, our expertise, adaptation of our product suite to offer specific functionality to meet requirements of of that that market and rather than a more generic security platform offering.

7:10 And we rely on close collaboration with our channel partners and local service providers to develop our new business opportunities. And they they you know, these partners are critical to SYNECTICS, and the company really recognizes the importance of developing and extending these partnerships as well as building on long standing end user relationships. And we're, you know, we're formalizing investing in our partner program at the moment. And, of course, our own team are critical to our success. We have a fantastic team with a huge depth of expertise and depth of experience, many left by our customers and and some really bright new talent that I'm really pleased to have been able to bring into the business over the last year or two. I'll take this opportunity to thank every single one of them for their invaluable contributions to our business going forward.

8:01 So I'll take you on now and talk about, an overview of the two different divisions in the business. We have we have two divisions, our systems division, which is our technology based business, and our security division, which is an integrated business. And I'll I'll describe them in more detail as I as I give you the headline results from each of those two. Okay. So SYNECTICS Systems is a technology based business, operates, as I said, in focused markets globally, has a global footprint. Everything's developed and transacted through The UK, but a global footprint. And the solutions there are built on our own intellectual property, as I said before, either our software platform, command and control software, or our in the oil and gas market, our explosion protected camera stations, which are very specialized products.

8:51 Really pleased with the gross margins there. The gross margins are very strong with target there is sort of mid forties. Gross margin. Quite strong in the first half. We'll probably soften off by a point or two in the full year. But margins from the low forties into about 50% gross margin across the the product suite and the sectors there and blended it sort of 45%, 46%, 47% margin. So very happy with that, maintaining strong gross margins. In terms of operating margin, we're pretty much in the target zone now. Our target is mid teens operating margin. We're there now, stay there. As I say, the operational gearing has come through. So the revenue levels we're at now is seeing very strong operating margins from this division.

9:38 Very encouraged with the order intake. And as I said just a few minutes ago, the order intake was across all sectors really. Last year was built on a buoyant oil and gas market, which is still strong, still a lot of activity in that market and expect that to remain the case for at least the next couple of years. It is a cyclic market. It's but it it's strong and buoyant at the moment and stay likely to be for a while. But really good to see progress in the gaming sector, demand improving, Capital spend has been a bit subdued. The go ahead on on number of projects has been delayed, but we're seeing that to really start to get some momentum there moving forward, culminating in just a few weeks ago in this major award in in in Southeast Asia for a major casino upgrade and and expansion.

10:29 Our heritage market is public space or city center surveillance in The UK, and that's been challenging, that should we say, over the last quite a lot of years now, probably ten years, been very challenging. But we've been looking at and exploring adjacent markets. We've got some significant footprints into health care over the last year or two. And we've already established quite a strong position in in national infrastructure markets. We've been the incumbent provider to National Grid, the vast energy software solution in their central monitoring and and coordination station. Been the case for a number of years. And just a few months ago, we were awarded a similar project for another national utility, which is being deployed during this year. So we're really, really pleased with the the progress on the footprint we've got in that sector.

11:20 Our security division is a systems integration business, operates exclusively in The UK and and Ireland. It's a resell install service model, so different margins than the technology based business. But we're already really proud of the gross margins we are making in this sector. I mean, typically, a lot of peer companies in the integration space are making high teens or maybe 20 points margin. And we're targeting

11:49 mid-20s and obviously very strong performance in the first half. I think we'll see that soften in the full year. The full year, we'll see a couple of percentage points down in gross margin, but still really, really strong given the space it's operating in. And the operating margin target there is high single digits, 8% to 10%. Getting towards that, expect we'll probably just about get to the bottom of that target range by the end of this year and really focusing on getting towards 10% operating margin over the next year or two. Raisable momentum in the transport market. We have some good progress in on vehicle bus business in The UK and with a de facto solution for a couple of major major transport operators in The UK and Ireland at the moment.

12:42 Work across police forces, local authorities, etcetera. It's still the mainstay of the business. The core of the business is delivering that. No exciting new projects there, but we continue to to do quite a lot of work in that area, quite a lot of interest, quite a lot of ongoing support and upgrade expansion work there. I suppose the standout headline announced early in the year was a project for National Grid. This is completely separate from the National Grid central control software system that we've talked about before, and I mentioned just now that our system business have. This is physical works on the ground for I think they were contracted for 20 sites across The UK. I think this 4,000,000 contract relates to about 13 sites in The UK, and we'll be deploying physical security upgrades on the ground on those sites over the rest of this year.

13:37 Important to note that almost none of that 4,000,000 revenue was traded in the first half. The bulk of it should trade out in the second half. It will probably drag into early twenty twenty five, but that underpins an expected uptick in revenue in the second half in this division. So we're very pleased with that. I should notice note as well that I mentioned it briefly when we spoke a few months ago that we're looking at the go to market strategy for for this integration business. That's that's our summer project, really. So we're looking closely at reshaping and refocusing the sales team and the whole approach to market. And I think, you know, we see real opportunity to to to relaunch into the industry, this division with a more focused identity. And that will happen in the late autumn this year and look forward to telling you more about that next time.

14:32 Okay. Thanks for your time. I'll pass over to Amanda now, who will take you through our results. Thanks, Paul. Good morning, everyone. I'll start with some financial KPIs and a high level summary of the underlying income statement for the first half of twenty twenty four. I'll pull out some of the highlights and then I'll go through some more detail on the following slides. So to echo Paul, we're extremely pleased with the strong financial performance in the half. Revenue up 20% to 26,300,000. That reflects revenue progression in both businesses, but particularly by our systems business where revenues have increased 26% compared to h one twenty three. Gross profit was up 23% to 11,200,000, and gross margin continues to remain strong, slightly up on the first half of last year.

15:23 So this half, really has been a period of significantly improved profitability as higher revenues combined with our high operational gearing and continued strong gross margins has meant underlying EBITDA and operating profit have increased by 67% and a 183% respectively. Our operating margins, particularly in systems, as Paul just mentioned, are really starting to increase now and at a group level has increased to 8.2%. This is after taking into account a planned increase in operating expenses of 8%, and I'll look at that in a bit more detail shortly. Underlying EPS was 10p up from 3.7p in the comparative period.

16:07 So move on to revenue. I'll start on the right hand side of this slide showing how our revenues are split by sector. So overall, the split, is relatively similar to h one twenty three, which highlights that there's been revenue progression in all of the sectors since the comparative period of last year. Oil and gas is now about a quarter of the group's revenues. I'm putting that into context, going back, a couple of few years ago, it was about 10 to 15%. The security business is now just over a third of the group's revenues. And then moving to the left hand side of the slide, I'll pick up a couple of points to note from the revenue bridge by region. So within EMEA, revenues are up 46 to 8,900,000 in the half. That's predominantly due to oil and gas where revenue has nearly doubled in the region.

17:01 And in addition, as Paul, did mention, generally public space transport and infrastructure still does remain more challenging. But as we've secured some of those national infrastructure contracts, that's led to revenue progression by over 20% in PSTI. We're seeing encouraging signs in the gaming market with a healthy order intake and revenue growth in North America was 26% in the half and we expect to see continued growth in gaming going forwards. And the security business, that's seen a modest steady revenue growth, for the last five or six periods now actually. Revenue for this half increasing 1,000,000 to 9,700,000, and that relates predominantly to the, on vehicle, business within the security business.

17:53 K. So I looked now at the revenue profile. So this graph highlights revenue in the last five periods, and it's worth noting at this stage the strong performance of, the systems business over that time where revenues for the half have nearly doubled since what they were three years ago in the first half of twenty twenty one. From a group perspective, revenue for this half was only 3% lower than in the second half of last year, which in itself was considerably up on previous periods. So this highlights the strong start that we've had to this year, which has been supported by the early delivery of a number of projects. So this means, as Paul mentioned, that we expect to have more evenly weighted revenues between half one and half two than we would normally see, with the potential that there's some increased operational capacity for additional projects in the second half.

18:46 Contracted recurring revenue, so that's our software support agreements and maintenance contracts. That's remained relatively steady over the periods. It's 3,700,000 in this half. I've also shown on the graph our revenues that we classify as repeat revenues. So these are naturally occurring orders with our existing customers at our at our existing sites. For example, spares, service call outs, other types of follow on sales. So whilst they're not contracted revenues, we can guarantee that we'll have a reasonable amount of these types of orders. So considering both recurring and repeat sales together, these accounts, now for about 30% of our revenues. The bottom graph, illustrates the order book at the period end points.

19:34 Order intake in the period has been good, so the strong order book has been maintained since the year end. And then the lighter gray area demonstrates the amount expected to be traded in the second half, and that's more than 60% of the order book. And based on this order book and the pipeline of opportunities, we're confident in the continued growth of the business. Gross profit increased by 2,100,000 to 11,200,000 in the period with 23% growth in both divisions. And gross margins have remained very strong. They're at record levels for the business and have increased by just under one percentage point.

20:14 And you can see the biggest impact to the margin is the revenue growth. So the direct staff costs within our gross margin, they're semi fixed. So we'll start to see the increase in the margin now that the in line with the sales increasing. There's also been an increase in staff costs. So parts of this relates to pay rises, and the rest of it relates to the increase in headcount from our recruitment drive in the second half of twenty twenty three. This was something that we mentioned at the year end, recruiting an additional some additional members there to cope with the increased demand and expected ongoing growth in oil and gas. So by the end of twenty four, that impact will just become a permanent part of the margin.

21:02 And then there's a very, very small impact of sales mix and foreign exchange. And as Paul mentioned, it's worth just noting that we do expect the margins to normalize somewhat throughout the rest of the year, probably finishing a percent or two lower than where we are with current margins.

21:22 Moving on to operating profits, up a 183% to 2,200,000. There's there's really three things to consider when looking at that. So first of all, the increase in gross profit that I've just mentioned. Then there's an increase in staff costs of 1,100,000, and that's split into three key areas. Firstly, pay rises, which are implemented in January. Secondly, bonus accruals, which are normally accrued in the second half of the year due to our usual seasonal weighting of results. And thirdly, the increased investment in people that we kicked off in the second half of twenty twenty three. And there's also been some further recruitment on that in the first half of this year. So most of this recruitment relates to two main areas to support the future growth of the business, those being technology development and sales and business development.

22:18 And we will continue to further invest in certain areas of the business going forward into the second half of the year. And then the other point to note is that the other nonstaff related overheads, you can see they remain pretty much in line with last year due to some continued cost control there and our increase of 100,000 relates predominantly to some software licenses.

22:49 In terms of cash, we finished the period with a great cash position of 6,400,000 and no bank debts. Most of that came from the improved profitability. Cash from operations in the half was nearly 3,000,000. We also had a working capital inflow of 900,000, and that was made up of a couple of things. So in 2023, there was significant weighting of the revenue to the last quarter of the year. So that meant there was a high amount of invoicing that was then sat in debtors at year end, most of which is unwound now. So this has been somewhat offset by two things really, an increase in stock to support continued oil and gas activity and and longer lead times that we're generally seeing in the supply chain, as well as the delivery this half of the large oil and gas Saudi Aramco project or or a large portion of that, which has increased working capital by about 3,000,000 at the period end. And again, we're starting to see that unwind now.

23:49 Beyond operating cash flows, there aren't many other significant cash flows. We're focusing on investment in technology, and total technology spend has increased in the half by 200,000 to 1,800,000. Of that 600,000 has been capitalized on the balance sheet, so the increase in cost there really has been offset by the increase in capitalization. 200,000 cash outflow relates to non underlying items in restructuring transformation costs, and I'll I'll come back to that a little bit later in the q and a. And we paid a final dividend to shareholders in May of 3p per share. Reflecting the strong performance in the period and the confidence we have looking forward, we're pleased to propose to reinstate an interim dividend to shareholders of 2p per share.

24:41 And then moving on to capital capital allocation. So our strong balance sheet and healthy liquidity means we can invest in the growth of the business, and I thought it would be useful to highlight some of the key areas here. So investments to deliver organic growth in established We know the markets are buoyant at the moment, so focusing on development of our partner program and the refresh of securities go to market strategy. Throughout this year and next year, we're replacing our business systems, which are all quite disparate at the moment with one overall system. So that will improve business efficiencies going forward. Increased investment in technology to support longer term growth and Paul touch on that in a minute.

25:29 The introduction of subscription pricing, so we'll be looking at that throughout the next six to nine months, which should provide more flexibility to our customers and will also increase longer term contracted recurring revenue. And then alongside making these investments in our growth, we'll continue to pay a dividend to shareholders, which will increase in line with our earnings. Thanks, Paul. Thanks, Amanda. In terms of our technology investment, I mean, it's really, really important for us. We spend, a lot of time and effort developing, the products and continuing to evolve the products to meet all the emerging requirements of our customers.

26:16 About half of our technology spend is maintaining the products at the forefront of the industry, so it's still the product to choose and continually making upgrades, enhancements, new features onto the onto the product portfolio in order to meet that. And it it is really it is really important. And always, the customers are looking at our solutions and thinking we'll anticipate their emerging needs. And we're developing a lot of things in line with emerging needs of customers. We don't just invent cool stuff and hope people buy it. We solve problems for customer set that we know very, very well. In terms of the product portfolio, if you like, it's based around two areas.

27:01 Our command and control systems, the SYNECTIC branded products, which we we sell into most markets and the coax explosion protected cameras, which as we sold into the oil and gas market based specialists there. In terms of those coax cameras, during the period, we've added embedded analytics into the cameras. So some of the analytics and the AI technology can be process of the camera rather than the central control. And a broader compatibility, we've we've verified and validated the camera range with a range of competitive control systems. Because on both sides, we we we're trying to be open protocol, open architecture. Our control system supports over 80 brands of cameras and other other systems in there. And likewise, our our camera stations will work with most of the market leading competitive branded products out there, and that's really important for us and for our customers, really, to make sure our customers have choice always.

28:04 Ongoing integrations, lots of new integrations delivered in the period, including AI. It seems like almost every month, we get asked to, can you integrate this new emerging startup AI analytics platform? And that's well, yes, we can, and we do so really on a project by project basis. And important to note here, we don't develop any of our own AI technology. We integrate best in breed, and we think that's really important for our customers that they're not tied into one technology or or one strand. We can always support the best in breed. And, yeah, diff different technologies, different platforms that are suitable for different applications.

28:49 And and probably every six months, every year, we'd recommend a different one for certain use cases. A lot of investment, a lot of money sunk into developing

28:59 AI type algorithms. So we choose principally to to integrate third parties for the benefits of our end users. A lot of progress during the period on remote access and camera sharing, taking the taking the use of the system beyond the control room into mobile and web based applications.

29:21 So I'll spend a moment now just talking about the areas where we're continuing to invest, where our spend's really focused, really investing, as I said, in supporting the current product and making sure it's always relevant, but also to allow further growth looking at emerging requirements and making sure the product is you know, keeps on moving forward in that way. So a lot of effort onto cloud services. We have a fully cloud compliant system. We we we supplied City of London Police a couple of years ago now with a entirely cloud based system. It's one of the first and largest enterprise scale surveillance systems that's fully in the cloud. There's nothing on the street down in in London. It's just some screens. We

30:11 the whole system's deployed in the cloud, and we manage it from Sheffield. So the whole management and support of that system is done from our team in Sheffield. But that said, we see lots of opportunity for deploying cloud services in slightly different configurations, maybe more hybrid configurations. So a lot of development work going on to to make the the the platform and the configurability of that, more relevant to a broader range of customers going forward. I talked about integrations, and we do integrations almost every day, every week. But we've been looking at AI, and we've been watching, and deploying, AI integrations to customers for quite a few years now and looking at what areas, we can really get the most benefit from or our customers can get the most benefit from.

31:01 And our SYNECTIC platform is it has fantastic, forensic video search capabilities. It's even pre AI that that some of the features and functions in the in the in the product suite are really, really powerful and really make that post event video searching much easier for our customers. But we're accelerating that now, and we'll be launching a a native synergy AI component, subscription component later this year, built in in collaboration with a third party technology developer. To say, we're not developing the AI algorithms ourselves. We're all at work on the front end and the and the usability of it is being done by our team. It looks fantastic. It's already in place in our demo room. It's definitely gonna be a huge benefit to a lot of our customer base. And really focusing on making sure the use of AI is not just headline grabbing, but it's really beneficial to to customers who use that. So a a lot of effort on that, and really excited to look forward to that native Synergy AI release later in the year.

32:09 Amanda mentioned, subscription model. We can provide subscription based, software right now, but we we we tend to do complete turnkey or semi turnkey projects with a lot of hardware, other services included. And so there's a lot of pushback. There's not a huge demand at the moment for subscription based software that we wanna be ready for that. We can as I say, we can do it now. It's probably a bit clunky. We need to relicense sites if there's any changes in the subscription, but work's going on in the background to to improve the licensing engine, and that will be in the next or next but one major release. Quite a few of their services are already on subscription to cloud services. Some of the analytics and mobile and web applications are, by their very nature, subscribed to services, but the the call software is essentially perpetual a license at the moment. But the intention is to change that to the principal offering will be subscription based for the software going forward.

33:12 And the other areas where we're investing is around the mobile applications that enhancing the the the web

33:19 the web access and technology increasingly. I mean, our our systems tend to be quite control room centric where people are proactively managing safety and security of people and assets. But increasingly, we're seeing the demand for take taking that out of the control room. So collaboration with field operatives who may be using the mobile device and linked into the control room so they can participate more participate more interactively with the control room staff from the field. So a lot a lot of work going to that and some some really cool stuff in the front end development that some of our bright new team in the development center are really bringing that forward and and making all those front end modules really usable, really high functionality, and and really accessible to an increasing number of new users.

34:14 Before I summarize, I'll just touch on a couple of the projects that we've mentioned already and that we've announced during the year. So really pleased to to be able to announce just a few weeks ago now a major upgrade and expansion to one of the most iconic casino resorts in in the world, but in in in Southeast Asia. It's probably been overdue for a couple of years. It's something that we've started talking about around lockdown. And maybe that's that's relevant to the whole sort of opening up of the gaming sector. This, you know, is one of the the largest and best funded operators in the world, only just now being able to sanction the capital spend to to upgrade the system, which has probably been overdue for a year or two. But that's that's coupled with a major program of expansions.

35:05 So there's significant expansion gonna go on in this resort. I'm really, really pleased that we're we're we're signed up to deliver that. We'll be doing that principally in 2025. We got the contract now, but

35:19 the the deployment on the ground will happen from about February 25 through October, possibly expansions going on beyond that for another year or two. So it's a fantastic reference. It's a fantastic vote of confidence in our system and that our system ten years after it was first deployed there is still the market leading system that's, the system of choice for, the preeminent gaming customer in the world. So really, really pleased with that. I talked about utilities. So we're making further progress in there. National we've been working with for quite a few years now. Did a major upgrade for National Grid just a couple of years ago. This is a very similar deployment for another major UK utility provider.

36:05 So we're really, really pleased they chose us and looking forward to completing the deployment of that later in this year and looking at other utilities as well at the moment because I think our solution is fantastic. It's really, really fits really well. We've honed the solution over the last couple of years by working very closely with National Grid to the point where it really is now the the best solution for these sort of centralized control of of a very disparate utilities network across the country. And finally, Delta Bingo, we started to see some, as Amanda said, we had some revenue increase year on year in North America gaming, from a very modest base last year. That sector was but shut down for a couple of years, starting to see momentum there now. But the

36:53 one I wanted to pull out is is Delta Bingo, which is 17 very small casino sites across two states in North America. And, typically, we've not been able to compete in in these areas where the solution is quite expensive for for these very, very small sites, but we really want to have a go. I tried to find someone that would work for for this type of operator. And So so we put together a solution that has 17 very small compact versions of our SYNECTICS system with a central management system. So we're able to provide all the enterprise scale scale capabilities that we offer to these very large casinos to this group by basically joining all 17 sites into one.

37:38 So all the analysis, the data valence type enterprise solutions are available to this operator across many sites, but all centralized into one platform. We won this on capability rather than price. We were still more expensive than our direct competitors, but the customer chose us and our solution because of the the the capabilities that it offers. So whilst we don't have any immediate further prospects for this, I think this really does open the door to to to potential of other similar projects in the in the medium term. So I'm very excited to to have won that and to be delivering that later this year. So thanks for your time, everyone. I'll just summarize now and give you give you a quick summary. I mean, really strong results for the first half.

38:27 We're really, really pleased with that. The the results for the year comfortably, we're comfortably trading in line with expectations, and it will be a much more evenly weighted performance this year than it has been over previous years. Particularly pleased with the strong order book and, the fact that that's across all markets, all sectors, all geographies, so really good progress and momentum everywhere. So last year, we talked about the results being based on a point oil and gas market. Now I think we're seeing momentum in all the markets we operate in and significant headroom in all those markets for further growth. We're really pleased to be able to continue our investment in the things that are important to us. And the strong cash position, as Amanda explained earlier, allows us to do all the things we want to do within the business.

39:14 So we're pushing on. We're doing that, improving the business going forward.

39:19 Really pleased that we were able to reinstate the interim dividend for the first time since the pandemic, and we're committed to maintaining that and and delivering the right sort of return to our shareholders as we as we mentioned before. And, but finally, man, you know, we're confident we'll meet the market expectations for this year and beyond. We got a fantastic basis for 2025 with, some very big contracts in the order book and some great prospects in front of us. So thanks very much for your attention this morning, and, hopefully, your support ongoing as we continue to deliver the results expected of us. Fantastic, Paul. Amanda, thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the top right corner of your screen.

40:08 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 your investor dashboard. And, Paul, Amanda, as you can see, we have received a number of presubmitted and live questions from investors. And if I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Okay. Thanks, Amanda. Do you wanna take the first one? Yes. I will do. Could you please provide some detail on the 235,000 charged as non underlying item related costs associated with restructuring and transformation why these are specifically identified as non underlying items.

40:55 So there's been a lot of work across the business in the last three to four years to really look at and reduce the cost base of the business. So tidying up the operations. That's ranged over the year over the last couple of years from things like moving and closing offices, restructuring teams into different areas, just dealing with some of the perhaps older legacy costs that are still ongoing. So we're finalizing some of that restructuring in the current year. There's just a little bit to finish off. So we have seen some a few of those costs come through. Expect to see a bit more in the second half of the year. In addition to that, the reason we've put restructuring and transformation, we've got some transformation costs there as well. And we're receiving some external transformation support and advice in relation to the refresh of the security business, the security go to market strategy. And so that's what that bit specifically relates to.

41:57 Thanks, Amanda. Next question is about one of our large shareholders, Downing. And the question is that they're seeking to I understand that Downing is seeking to wind up their fund and sell out of existing positions and what we're doing about that. Well, it's a so so Downing are winding up one of their market cap funds that holds our holding at the moment for our understanding. We met with them last week is they are transferring the hold in SYNECTICS into a different fund. I think that fund will wind up, but it's currently being transferred. And that's not very visible to external investors, but, encouraging, Downing to to make that known to the market that they are not winding up their position in SYNECTICS.

42:46 I think there was a modest movement mismatch last week, but but they are intending to transfer the entire holding into a different fund that has long term a long term holding there. They still believe in the value in the business, and then we're gonna deliver what we say we're gonna do, which we will in the next few years. Next question is what's our aspirational targets for revenue in the next three or five years' time? Well, a few years ago, pre pandemic, we were talking about our aspiration to get to 100,000,000, turnover 10,000,000 EBIT. The work we've done in recent years around the the cost base means we don't need to get to that level of revenue to get that level of profitability.

43:34 And our focus is not on revenue growth, but on sustainable profit growth. Everything we do is about sustainability. You know? We got long term customers, long term partners, repeat customers. But I think that that sort of 10 bit EBIT tart 10,000,000 EBIT target over the next three or five years is is within our sights more so than a revenue target, if if that answers the question. How do you manage a question from James. How do you manage partnerships, channel partners, system integrators when it comes to driving business development? Well, we've always we've always worked the systems part of the business has always worked through local service partners, channel partners, system integrators.

44:24 Almost all of our projects are delivered through partners like that. And it's possibly been a little bit gentleman's handshake and agreements with people. We've been formalizing that program. That's really important to us. The channel partners are really important. Local service partners are absolutely the mainstay of our business. So what we've been doing through this year is is formalizing that and and putting in place of various tiers. I think some of our investments, Amanda mentioned investment in driving organic growth over this next year or two, we could be doing some co marketing opportunities with these partners as well. So, I mean, it's a constant thing managing those partnerships and relationships. So we're formalizing more so, and you'll see that on our website now. You'll be able to see the the partners and our commitment to them. Formalizing that, increasing co marketing opportunities, and actually driving to get some new channel partners on board in areas where we see growth opportunities. So it's a massive part. It force multiplies our sales team. We got a relatively small sales team for the size of the business, but, yeah, working with channel partners is an essential part to of that.

45:42 So do you expect continued sequential revenue growth with h two being higher than h one is the next question. So this year, we expect the half to be very, very evenly weighted with similar revenues in both halves of the year. Generally, we tend to see the second half weighting due to global seasonal holidays, shutdowns, factory shutdowns, things like that. So in any normal year, we would still expect to see a slightly higher second half weighting generally than the first. That being said, again, even looking into next year, we've got good visibility of the next year, obviously, significant contract wins, etcetera. So next year might be slight would probably be slightly out of pattern with the usual seasonal waiting as well.

46:34 You can take the next one as well about staff numbers and staff costs. Okay. Will the increased staff numbers be able to cope with further growth in the business over the next few years or should we expect similar increases in staff costs in future periods? So as you know, we've invested a lot over the last couple of years in our staff. That's to cope with increased oil and gas, and it's also really to support the future growth. So particularly sales business development and technology development. Now the business does have a very, as as we've kind of said earlier, high operational gearing. So as revenues increase, you we can maintain we can maintain higher revenues at that existing level of staff, and that's when you really start to see, those increase in revenues drop down into profits.

47:27 So, I guess the short answer to that question is once we stabilize the business at this level of staff costs, we'll then be able to take those, increase in revenues, going forward generally. Thanks, Amanda. Last question from Peter is, have you explored the aviation slash passenger industry? Well, pre pandemic, we actually did a did a an airport in Southeast Asia, actually. We did a terminal there, which was which was quite exciting for us. And, subsequently, we haven't really built on that. The whole transport infrastructure market we see is attractive. The sort of combination of on vehicle linking into sort of the core infrastructure is important for us. We're we're the incumbent provider for all transport infrastructure in Berlin.

48:19 So the underground and the overground railway in Berlin use our system, and we're exploring various other things in in The UK. We are actually presenting at an aviation event in in Asia this week. So it's not something that we've we've given up on. I think that we do have an offering that's relevant into this transport infrastructure market, including aviation. But we're exploring and and and deepening our footprint in there. If we go in there, we'll do it with partners. So we'll do it with partners. And so you can have a look at our website because there's lots of fantastic things we're doing in terms of webinars and events and stuff around the aviation and transport industry on our website, say, including I'm pretty sure it's even today or tomorrow that we're we're we're participating in speaking at a at a aviation event in in Asia this week.

49:14 That's great, Paul. Amanda, thank you for addressing all those questions for investors today. And And, of course, the company can review all questions submitted today, and we'll polish those responses on the Investor Me Company platform. But Paul, before redirecting investors to provide you with their feedback, which I know is particularly important to the company, could I please ask you for a few closing comments? Yeah. Thanks, Sam. Great performance in in the period, and we're already certain that we're gonna have fantastic results for the year. Really strong robust order book and a great pipeline of new business opportunities for both next year and a few years ahead. And coupled with our reputation in the market as a trusted partner, it means we're really excited about the opportunities across all our growing end markets.

50:01 So Perfect. Perfect. Paul, Amanda, thank you once again for updating investors today. Could I please ask investors not to close this session as we will now be automatically redirected to provide your feedback and order that the board 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'd like to thank you for attending today's presentation, and good morning to you all. Thanks, Alex. Thanks, everyone, for your time this morning.