LONDON (Alliance News) - Synectics PLC Monday warned that it expects its underlying profit for the second half of its financial year to be "significantly" below market expectations of GBP5.0 million, after it was hit by contract award delays and extended delivery periods for contracts it had already won, the company's third profit warning of the year.
In a statement, the surveillance technology and networked security systems provider said it has been experiencing continued delays both in the award of large expected contracts and from the extension by customers of delivery periods for contracts already won, primarily in the oil & gas market sector. Additionally, its UK security integration activities in the fourth quarter is now likely to be below its previous expectations, mainly due to the lengthening of procurement cycles for larger projects, mostly within the UK public sector.
"The company therefore expects to incur an underlying loss for the full financial year, though smaller than that already reported for the first half. The board will not be recommending payment of a final dividend for the year," it said in a statement.
The company's financial year runs until November 30.
"Although the customer-imposed delays on existing contracts have resulted in continuing high working capital requirements, the group continues to trade within its banking facilities," it added.
Synectics said it expects the issues to continue into its next financial year, but expects an improvement as that year continues.
"Initial outline budgets for the 2015 financial year suggest that trading in the oil & gas sector will be somewhat stronger in the first half compared with the current year, though not back to more normal levels until the second half," it said.
"The board's current expectations for consolidated underlying results in the year ending 30 November 2015 are for a small loss in the first half, but a return to solid profits in the second half and for the year as a whole," it added.
Synectics also said Chief Executive John Shepherd, who recently turned 60, will retire during the first half of the 2015 financial year and Paul Webb will be succeed him at that time. Webb is currently managing director of Synectics' systems division.
"In the board's view, and I'm sure that of other shareholders, a third profits warning in a year for Synectics is unacceptable, even after five years of solid profits growth. Some of the factors behind this poor performance have been outside the company's control, but others were not. Action is being taken to ensure future profitability is not dependent on the timing of revenue recovery in certain sectors," Chairman David Coghlan said in a statement.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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