Synectics (LSE:SNX) — Interim Results

0:01 Good morning, ladies and gentlemen, and welcome to the SYNECTICS PLC Investor Presentation. Questions are encouraged. They can be submitted at any time via the Q and A tab that's just situated on the right hand corner of your screen. Please just 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 will publish your responses where it's appropriate to do so on the Investor Meet company platform. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to the executive management team from SYNECTICS PLC. Amanda, good morning. Good morning, and thank you all for joining us. With me today is Paul Williams, our CFO. And today, we'll talk you through our performance for the first half of the year through to May 2026 and the factors affecting it.

0:51 And then importantly, we'll update you on our transformation strategy that we launched at the start of the year, the progress that we're making and why we believe those changes can support stronger growth from FY twenty seven onwards. I'd just like to give a brief introduction for those less familiar with SYNECTICS. We're a global provider of security, surveillance, and operational intelligence solution, operating in markets where security is critical. We have two businesses. SYNECTICS develops our proprietary technology and provides advanced security surveillance and operational intelligence solutions for business critical environments globally. And Ocular is an independent UK systems integrations business working directly with end customers predominantly in transport and security markets.

1:43 You can see some of our customers here. There are many others that we can't show for confidentiality reasons, but I think the important point that we'd like to know is the quality and the longevity of that customer base, within those demanding markets listed there in which we're trusted to operate. We operate in some very attractive and growing markets. And at the end of twenty twenty four, we estimated that our serviceable market was more than £2,000,000,000 and there are several, structural trends that are strengthening that opportunity today that I'd like to give you a brief overview of. Investment in critical infrastructure and energy resilience is increasing, so grid investment alone needs to rise materially through to 2030 to support the demand and resilience needed there.

2:32 The threat environment is becoming more demanding both physically and digitally, which is accelerating the shift in security from the more traditional monitoring towards resilience and rapid response with customers increasingly needing systems that help them detect, understand, and respond to incidents quickly. Regulation and cyber requirements continue to increase, particularly in the critical environments that we serve, which raises the importance trusted and independently assured technology. The geopolitical environment is a significant factor shaping cyber risk strategies and increasing the importance of cyber resilience and security solutions. And then finally, technology, including AI, is moving incredibly quickly.

3:19 AI is creating opportunities to create genuine operational value by reducing manual work, improving the speed of response, and extracting intelligence from surveillance. In addition to this, physical security, cybersecurity, data, and operational systems are increasingly converging onto integrated platforms. Our five p strategy is designed to align very closely with these market trends to create an AI enabled cyber secure operational intelligence platform focused on those critical markets where we already have deep expertise and trusted customer positions. Turning to the first half now, performance was in line with our expectations before the impact of delays to oil and gas orders and the related revenues following the conflict in The Middle East.

4:15 FY twenty six was already expected to be more second half weighted, and those oil and gas delays have made that weighting, somewhat more pronounced. I'll come back to, what we're seeing in The Middle East in a minute. Gross margin increased by around seven percentage points to 48%. We've continued to secure important new business and new customers across our priority markets, And you can see a couple of examples of those here. A $2,400,000, contract with a new with an iconic US casino customer, which is a brand new customer for us, and our first transport sector win in Southeast Asia as we look to extend our sectors in that region outside of gaming and energy. Both are strategically important wins with the potential to develop into broader customer and partner relationships over time as well.

5:08 Since the period end, oil and gas order intake has been positive, primarily from customers outside of The Middle East. Alongside that, we're making good progress against the strategy that's designed to transform SYNECTICS into a scalable product and partner led business, and I'll come back to that after Paul takes you through the numbers. And reflecting our confidence in the strategy and the group's strong financial position, we've maintained the interim dividend at 2.2p per share. I'd now just like to spend a minute explaining what we're seeing in The Middle East because it's affected our performance in the half, but it's also important strategically as we're increasingly targeting that region for growth beyond our traditional oil and gas business.

5:58 It's important to distinguish here between, what we're seeing with current project timing and the underlying investment environment. The conflict has disrupted the timing of some oil and gas projects, so far. SYNECTICS is typically, a small specialist part of a larger project, so the timing of our orders is dependent on the wider project schedules, some of which have moved to the right, as supply chains and delivery are disrupted. We're responding to that by staying very close to customer, by increasing our readiness to mobilize quickly as opportunities do convert, and then continuing to improve the competitiveness of COEX, which is our specialist energy camera range. Importantly, though, the underlying strategic investment, requirement in oil and gas hasn't disappeared.

6:49 So major regional oil and gas producers such as ADNOC, Saudi Aramco and Qatar Energy to name a few continue to commit to significant CapEx, and our own oil and gas pipeline, continues to remain substantial. Our Middle East strategy is now broader than oil and gas, and actually, the heightened security environment caused by the conflict is increasing investment in security in that region. We're seeing greater focus on resilience, on cybersecurity, critical infrastructure protection, and integrated threat response. These requirements align well with SYNECTICS, with our CAP cyber credentials, and our ability to bring different security systems, together to give customers a clear review of threats and to help them respond more effectively.

7:38 So that's why for us continuing to establish a local presence in the region and developing the right partners, remains strategically important. So in the near term, yes, there is some timing uncertainty in oil and gas, But longer term in The Middle East, we continue to see substantial oil and gas opportunity alongside a broader security opportunity, which is increasingly aligned with our strategy. I'll now hand over to Paul who'll take you through h one in more detail. Thanks, Amanda. Yes. Just talking to the h one results then. As signaled at the year end, we indicated that the 2026 results would really not be impacted by the new strategy that we are in the the middle of now implementing.

8:31 So what we see here are a set of results that are very much sort of old SYNECTICS project driven to some extent. So quite susceptible to project timing differences that are not impacted by the new strategy yet as we see. We are that project driven variability in revenues is is in large part what we are addressing with the new strategy to move the revenue flows more towards product led, more recurring, better in quality, and sort of greater degree of predictability. In terms of the numbers themselves, we've seen a reduction in revenues from 35,000,000 in the first half of last year to 22,200,000 for the first half of twenty six.

9:17 Gross margins up, sorry, down from 14.5% to 10.6% in the half, but the margin itself up from 41%, as Amanda has said, up 6.8 percentage points to 47.8%. Revenue performance is, as we've said, reflective of the absence of that significant non repeating casino project from 2025. And to some extent, the delay order intake in revenue due to that ongoing disruption in the energy market It's a switch back towards a more normalized revenue phasing between towards the second half of the year that we typically see in prior years with SYNECTICS. Recurring revenues remained stable at just under 4,000,000, as new subscription based product features begin to launch in the second half of the year, with SYNECTICS and search capabilities that Amanda will speak to later in the presentation.

10:18 As as expected, we would not expect these revenues to begin to sort of accumulate in in the recurring revenues until full year '27 and a key part of the driver of growth going forward, but not expected to impact us in the first half of this year. Margin increase driven mainly due to sort of change in product mix. Again, a project led business such as SYNECTICS at the moment would typically see a different blend of products going through different projects as they go through delivery phase. And so we've seen a mix of more of higher margin sort of products going through in the first half of the year compared to what we would have seen this time last year. And we would expect typically that that would sort of normalize a little bit in the second half of the year as those projects sort of, again, that mix just changes a little bit across the second half of the year. So we wouldn't expect to extrapolate forward at the levels that we're seeing here in the first half of the year.

11:18 Adjusted EBITDA dropped down to £1,000,000 This is largely down to the decreased revenue flow in the first half of the year, but offset by those improved gross margins and some improvements to our operating expenses as well, just moving to a little bit of a reduction in operating costs from half to half. Looking at the systems business. What we're seeing here is revenues have dropped significantly as we would have expected given the check that driven predominantly by that leisure and hospitality sector with that large contract running through last year. A little bit of softness in APAC, leisure and hospitality as they recover their pipeline on the back of that large contract delivered last year. However, we expect that sort of that first half dip in APAC to be offset by an improvement in North America in leisure and hospitality on the back of a number of significant wins that we've announced and that Amanda spoke about at the top of the presentation coming through in the second half of the year into revenues.

12:24 And as we said that, we can also see a drop off in The Middle East driven oil and gas projects has impacted the first half of revenue for the systems business. In terms of gross margin improvement, we can see a significant improvement in gross margin driven, as I've mentioned, by that product mix moving towards those higher margin products and more of a maintenance blend in there, which is higher margin for us. However, we are also seeing some operational efficiencies coming through to the business a bit as we're starting to make some improvements to the way that we operate and the way that we deliver. Projects coming through some of those low hanging efficiency fruits now starting to be dealt within the business. And also, we've maintained some strong pricing disciplines across the year in the face of sort of some global increases in hardware costs, Computer memory and storage is increasing across the globe, and we have sort of again, we've been working proactively within our supply chain to sort of try to minimize the effect of that, but at the same time, sort of maintaining that pricing discipline, I think we're not seeing a degradation in margins as a consequence of those cost increases in our supply chain.

13:38 However, as I mentioned earlier, we would expect to see that mix just moving around a little bit again across the second half of the year and we would expect to see margins kind of just normalize a little bit from those first half levels in the second half of the year. Our order book coverage entering second half is where we would expect it to be at this stage, although there there remains a little bit of uncertainty around that ongoing impact of The Middle East on the energy sector. However, where possible, we have derisked as much of our outlook as we can from those particular for those particular projects. And I'll come back to talk about that a little bit in the in the outlook section. In terms of one of the advantages that we do have with the coax camera configurations that we're building up in our operations center in Stunthorpe is that we can lean into that supply chain a little bit. We can lean into that order book and some of those orders that we're expecting to convert in the second half of the year to sort of prebuild, partially build those camera configurations, meaning that where we when we receive those orders, we can convert to revenue quite quickly.

14:42 So, again, it's just something that that will impact us a little bit in the second half of the year. We have that capability to sort of to to take revenue quickly once those orders are received. Although noting, again, I'll talk to this a little bit in the outlook section, noting that there's a little risk that some of those oil and gas opportunities will just push out into next year unless the orders are received within the next sort of couple of months. Moving on to talk about Ocular. Ocular's performance was a resilient performance in sort of relatively mixed market conditions, moving just slightly downward from £12,600,000 of revenue to 11,800,000 in the half. Significant order intake from Stagecoach during the year to highlights the benefit of that relationship and that long term strategic partnership with that customer, and we look forward to continuing to expand that relationship going forward.

15:35 In terms of margin improvement, yes, 5.4 percentage points up to just over 32%, which is a good level of margin for our systems integration business. Moved around a little bit by the fact that we were delivering a number of critical infrastructure projects this time last year, which is typically for us are at lower margin. And so as we see that product mix moving around a little bit, we've seen that improvement feeding through into the half for this year. Again, strong pricing discipline and proactive supply chain management are just helping us along the way with our profit margins or the margins on that part of the business. A little bit of a feed through then into EBITDA growth up to 1,200,000 from 1,000,000 last year. And looking forward, Ocular remains focused on disciplined execution and converting its pipeline across its core transport and regulated markets.

16:32 Moving on just to talk a little bit about the balance sheet and the capital allocation policy. We have a strong debt free balance sheet with healthy net cash at £10,500,000 at the half year. Core movements there from the year end where we reported £14,100,000 of cash, have a positive impact from or a small positive impact from our operating activities. We do have a reduction in working capital, particularly around supply chain during the half as we have sort of leaned into our our supply chain to sort of pre to prepurchase for inventory, a number of those hardware items that we need to fulfill our order book across the second half of the year, perhaps a little more than we would normally do because of those rising prices, Just making sure that we can secure the equipment that we need at the right time with about sort of typically sort of thirteen to fourteen week lead time at the moment. And also just making sure that we can get that in the right price as the prices continue to increase around us. So we're we're working proactively there, a little bit more cash tied up in inventory than we normally see.

17:40 And then we sort of, again, a little bit more CapEx gone through as we continue to invest in the products and our internal systems investments that we discussed at the year end and set out at the year end, a little bit of dividend going through and a little bit more cash just on tags of the nonrecurring and FX going through the business. So cash, where we expected it to be at the half year. And the key point here is that we have continued optionality within our capital and within our balance sheet to support growth and our shareholder returns going forward. We retain our dividend policy and announce it into a dividend of 2.2p per share payable later in early in September. In terms of our share purchase plan we announced, we continue to fund up to £1,500,000 for for our employee benefit trust to continue to purchase shares in the market for the fulfillment of our share incentive plans.

18:37 500,000 spent to date and the timing of some any of the further purchases on that just being considered alongside our wider strategic investments and capital allocation priorities. There is a little bit further information in the additional information slide parts of the presentation that that won't be presented today, but are certainly available for people to look at after this meeting if needed. And with that, I'll turn back over to Amanda to walk through the strategy, please. Great. Thanks, Paul. So what I'd like to do now is come back to, our transformation strategy and to show you what it is that we're changing and the progress that we've made so far. When we developed the strategy, our focus point was the fact that SYNECTICS, for many years has had strong technology, good customers, attractive markets.

19:33 What we haven't done consistently enough is translate those strengths into scalable growth. So being able to, grow revenue without the need to to keep increasing costs at such high levels. The five p strategy that I set out earlier in the year is designed to specifically address that, to deliver a sustainable business with higher revenues, with margin resilient resilience, improved quality of revenue, and accelerated growth, by ensuring that we build the right business model to be able to create opportunity from those growing markets. During h one, we established the delivery framework that sits behind the five Ps. We've put measurable delivery targets against each of these so we can measure our progress against them.

20:24 Overall, we're making good progress as highlighted, on the slide with most of the priorities on track, and partners making solid progress, and I'll explain a bit more, about those over the next few slides. The fundamental objective is simply to make synergy easier to deploy, easier for partners to deliver, more repeatable and capable of generating more recurring revenue. We've reduced average synergy deployment time from around twenty days to fifteen, and we're on track to make our five day target by the end of the year. Making synergy simpler and quicker to deploy is critical to enabling our partners to sell and to deliver it more independently and ultimately to scaling the business.

21:12 We've recently launched SCENE CHECK and SYNECTICSearch with further subscription offerings planned with infrastructure as a service and hybrid storage options to be launched later this year. These products solve very practical and important customer problems. When an incident happens in one of our critical environments, speed of response really does matter, and search can turn hours of manually reviewing video into minutes, helping operators to find the information that they need and to be able to respond much faster. And across an estate of hundreds or thousands of cameras, scene check automatically detects that each camera is still providing the view that it should, identifying cameras that may have been moved, blocked, or obscured without someone having to manually inspect every single one of those feeds. This gives customers much greater confidence in the integrity of their surveillance estate while significantly reducing the time and resource required to check it all.

22:13 The final area is product innovation and competitiveness, and we've delivered a number of our key developments for the year, and we're on track with the longer term roadmap. We've also achieved caps verification for SYNECTICS, which is an independent UK government backed cyber assurance standard for physical security systems. CAPS significantly strengthens our position in critical infrastructure and other high security environments where cyber resilience is increasingly important. The next part of the strategy, are five p's of partners and the two p's of partners and market presence is about how we take those products to market more effectively, and there are three things here.

22:59 Firstly, partners allow us to reach significantly more customers without having to increase our own sales and delivery resource at the same time. Progress here has been slightly slower than we'd originally planned because we identified that we needed to develop stronger strategic account management capability internally. So we've been strengthening that capability before accelerating the new partner acquisition so we can ensure that we achieve strong growth from our new partners. Outside of that, good progress has been made around 30% of our priority partner account plans are now complete. Our new certification program, has been fully designed and is now live with the first 15 partner representatives progressing through it.

23:49 The second part here is creating and converting demand. So historically, we haven't really been systematic enough about where we deploy our commercial resource or how we create demand. We've now developed clear strategies for our priority markets. We're refreshing how we position and communicate the SYNECTICS brand, and we've launched our first coordinated global digital demand generation campaigns, which are already producing early engagement. The aim is to make sure that we're targeting the right customers with a much clearer proposition, generating more qualified opportunities and ultimately improving conversion. And then the third area, here is building our recurring revenue.

24:35 So we're looking at all the ways we will increase the recurring element of our revenues. That includes the new subscription propositions that we've started launching, also our existing software support agreements that we sell alongside SYNECTICS, where we've already developed a new framework, and we are reviewing the commercial model and pricing that goes alongside that. We'll also be developing our hybrid cloud transition plan, including what that could mean for the way we deliver and charge for synergy over time. And I've mentioned our infrastructure as a service and hybrid storage that, are parts of that. We'll bring all of these elements together into recurring revenue growth plan, with targets during q four.

25:25 We want to be able to grow revenue without our costs and organize complexity increasing at the same rate. So firstly, we are simplifying the way that the business operates. We've established our value streams within the business and the overarching future design of the business model. We're now redesigning the underlying processes, and we deliberately want to simplify those processes before automating them as there's little value in us just sort of automating the, current inefficient processes. The second area here is, systems data and automation. Our ERP implement implementation is now progressing well with a go live day expected by the end of the year.

26:11 We've established a dedicated data capability for the first time, and AI is already delivering productivity benefits in those areas where we don't need to wait for the wider process work to be completed. So that's areas such as software development, testing, and documentation, as well as bid preparation. And then finally here, capability and accountability. We've strengthened the leadership team. We have our full SLT complement now in place. We've strengthened areas such as marketing and data, and all of our employees now have objectives aligned to the strategy and formal performance reviews. All of this is building the capability and the operating discipline that we need to be able to deliver the strategy and support the future growth.

27:04 So everything that we've talked about so far is activity and progress progress against those strategic initiatives. What I wanted to, give you here was a very early example of how some of those initiatives, are beginning to work together in a real market. So this slide is a case study, about our North American gaming team. All of these indicators have have emerged, for that team within the last few weeks. So on the product front, as I've mentioned, we launched TeamCheck as a subscription proposition. Our first coordinated digital campaign supported that supported that launch and generated six inbound casino inquiries within a matter of days, which are now progressing into demonstrations.

27:50 And partners, the newly engaged strategic partner identified more than six opportunities within its first few weeks with us, individually ranging from around $700,000 to $1,800,000. We're also seeing a strong increase in opportunities for an existing partner following much more structured account management with that partner. And we're seeing the product work as well affect our delivery times, A couple of significant recent upgrades that would have previously required around three days of our engineering effort were both completed in a day using the new upgrade tools. These are very early indicators in one sector and in one region. And as Paul said, we're not expecting the financial benefits of this broader strategy to start impacting the current year.

28:40 But what they do do is give us early confidence in the direction that we're taking with our new strategy, and they show the sorts of progress that we expect to see more broadly across the entire business as these capabilities begin to mature. So with that, I'll hand back over to Paul as we turn to the outlook and summary. Thanks, Amanda. So in terms of our outlook, for the year, we have a, the outlook, as the headline says, that remains achievable with some uncertainty around those energy projects and the timing, particularly those sort of driven out of The Middle East. We have had a positive start to the second half with strong order intake and revenue conversion post period, certainly consistent with that second half weighting.

29:32 So a significant improvement entering the second half of the year with period seven and period eight. We have a stable order book with a mix of sectors and regions, certainly reducing that reliance on the Middle East oil and gas projects in our forecast, and I'll talk about that in a moment. Certainly more prudent on oil and gas in the near term, but still some dependency for the guidance itself. But the pipeline for oil and gas, as Amanda mentioned, remains strong overall. That high breakeven point that we have in the business that we talked about before, We remain sort of whilst this strategy, this part of underlying reason for the strategy that we're implementing is to take out some of that inefficiency that we have sort of embedded within the business. And as that's in a period of lower revenue in the first half of the year, which we've seen, we would typically see that high breakeven point impacting through to our EBITDA generation.

30:31 The second half of the year as we expect that revenue to shift through to more delivery in the second half of the year as we're starting to see through period seven and period eight. A high breakeven point will sort of that revenue clearance, therefore, will sort of fall through into EBITDA more significantly than it would in the first half of the year. So again, consistent with how we expect the revenues and the profitability to fall weighted into the second half of the year as a consequence of that high breakeven point. We continue to see strong energy pipeline, as I mentioned. And we are taking steps within our operations teams to sort of make sure that we can mobilize and deliver those projects at pace as and when those those customer orders feed through and start to convert into the second half of the year. So that that's, again, rapid revenue recognition on those once the orders are received for them to, again, underpin that second half outlook.

31:30 And we remain of the view, of course, that our underlying strategic investment requirement remains, and we continue to be confident in the scale and the opportunity of that opportunity and scale and size of that opportunity pipeline and the nature of that and the quality of it as well. In terms of the full year outlook, we've sort of introduced a little bit of a range around expected EBITDA for the year, 4,100,000 at the original guidance. We still have a pathway to achieve that. However, we introduced a slight reduction to that to $3,700,000 to accommodate those the potential for some of those Middle East oil and gas opportunities to be delayed. So our outlook is effectively 4.1 internally, subject to a number of those oil and gas opportunities being ordered through in sort of in the next sort of couple of months, before October, November time frame before they start to fall over into the following year. So to the extent that those are received, and we expect to be at the upper end of that range, to the extent that those oil and gas orders continue to be delayed, we'll be at the lower end of that range.

32:43 And with that, I'll talk to turn back to Amanda. Thank you. So to to summarize then, at the year end, I described f y twenty six as a transition year, and hopefully, what we've shown you today gives you a clearer picture of what we mean by that. We are building and embedding those capabilities to change our underlying business model, making our products easier to deploy, developing stronger partner and commercial channels, increasing recurring revenue and simplifying the way that we operate so that we can grow without our costs increasing at the same rate. From FY twenty seven onwards, we expect the financial benefits of those changes to become increasingly visible.

33:32 What we're looking for is faster revenue growth, a greater proportion of higher quality and recurring revenues, and ultimately better profitability as the business grows. Some of those benefits are already starting to emerge that the North American case study that I highlighted, none of those opportunities and activity would have been present without the new five p strategy that we're now executing against. And as those capabilities start to mature, we expect the contribution to build progressively and significantly as we progress into FY '27 and beyond. So then that brings me back to, our overall investment proposition. We believe that SYNECTICS starts from very strong foundations.

34:20 We operate in attractive and growing markets. We have differentiated proprietary technology, long standing relationships with blue chip customers, trusted positions in markets where, security is critical, and a strong balance sheet from which to invest in growth. And these markets aren't easy for new competitors to establish themselves. Customers need proven technology, specialist expertise, and increasingly cyber and other certifications. And once our technology is embedded across these large critical security estates, replacing it can involve significant cost, complexity, and operational risk. What we haven't historically done well enough is translate those strengths into sustained scalable growth, and that's really what we're doing now.

35:10 So it's still obviously early. We've still got a lot to focus on for the rest of the year, but I hope we've shown you today, demonstrates that we're making tangible progress, against what we had planned to do, both in building those capabilities and obviously with early visibility of some of those indicators. So our focus for the rest of the year will be to continue to execute that strategy, with the view to translating into stronger financial performance from FY 2027 onwards. Well, thank you for listening. That's the end of the main presentation, and Paul and I will be happy to take questions. Perfect. Amanda, Paul, if I may just jump back in there. And thank you very much indeed for your presentation this morning. Ladies and gentlemen, please do continue to submit your questions just by using the Q and A tab that's situated on the right hand corner of your screen. And for just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, can all be accessed via your investor dashboard.

36:08 Guys, as you can see there, we have received a number of questions, and thank you to all of those on the call for taking the time to submit their questions. But guys, at this point, if I may just hand back to you to address those where appropriate. And if I pick up from you at the end, that'd be great. Thank you. Yes. Great. Thank you. Okay. I'll start with the first question. With all the casinos in America and in noting your recent contract win there, how do you go about attracting and indeed winning contracts there? Is there a sales team based there? Would you have good old fashioned salespeople on the ground visiting casinos, etcetera? Yes. So we have a dedicated North American sales team. We use a combination of direct customer relationships where we will where we go and visit casinos, and we've got very good relationships with a lot of those casinos.

37:01 And we use channel partners as well to develop those opportunities. Partners are particularly important because they also already have relationships with the casino operators, and they may be delivering the wider security project as well. So our objective is to make SYNECTICS the preferred surveillance platform, which then significantly extends the reach of our own sales team as well. And particularly in America, it's also quite a close knit industry. So our track record there and existing customer references are very valuable and that very much contributed to that recent recent contract win. Custom casino operators need to have a high degree of trust in the technology and the supplier, and so successful installations do frequently lead to introductions and opportunities elsewhere.

38:01 Next question, what do investors most misunderstand about your business? Why is the value of the business not reflected in the share price? I think I think the thing that's probably least visible to investors or has been historically at least is is what sits underneath the financial performance of the business, probably both in terms of strengths and what has historically held it back. SYNECTICS has always relied on individual projects. So from the outside, you see quite lumpy financial performance and relatively limited growth without necessarily having understood why the business hasn't been able to grow. Hopefully, we've, begun to articulate that so you can understand what we're doing now.

38:50 Underneath that as well, know, as we shared today, we have long standing blue chip customers' proprietary technology and and established positions in in attractive markets where barriers to entry are high. So I think that partly answers the valuation question as well as we continue to demonstrate the progress against the strategy and continue to show you the changes that we are making are are beginning to work. I would expect that the underlying value and then the potential of the business to become much clearer to investors. K. Have have you personally invested in shares of the company? When can investors expect to see more management and board share purchases? Both Paul and I have personally invested in SYNECTICS, including buying shares since taking our current roles.

39:44 Unless I can't really make commitments about future personal purchases on behalf of the board or the management team. But, you know, everybody's personal circumstances are different. There's also quite a lot of restrictions on when as directors we are able to deal. Speaking personally, I'm very invested in the success of the business and very focused on making sure we build the long term shareholder value that I believe this business can create. Next question. What is your competitive advantage and why is it defensible? So I think I've touched on the competitive advantage a couple of times as well as in the investment proposition slide there. But but I guess to summarize, our competitive advantage really comes from the specialist nature of the markets we choose to operate in. We don't compete in the commoditized CCTV markets.

40:41 We focus on those critical environments with demanding requirements. So the things like cyber assurance, strict certifications, including hazardous area certifications, very large camera estates with thousands of cameras, proven resilience, domain specific integrations, etcetera. So, I mean, I guess our advantage isn't necessarily that competitors can't replicate very specific individual features. It's that meeting all of those requirements and establishing credibility in these markets is extremely difficult and takes years of pro proven performance as well as compliance with very strict certifications, and that significantly narrows the number of suppliers that can credibly compete.

41:29 How is AI changing the game for you? What are the opportunities? Again, we've briefly touched on AI, but it would create opportunity for us in two main areas. Firstly, in our products, it allows us to turn surveillance into much more useful operational intelligence. For example, helping customers find information faster, automating manual tasks, making better decisions, ultimately driving more value from surveillance systems. Internally, I've mentioned some of the benefits where we're seeing, AI in place already, but the larger opportunity will come for us as we progress through our operating model work. Once we've redesigned and simplified our processes, we'll then be in a position to then identify where not just AI, but AI and further automation can really improve productivity across the business.

42:25 With shares at the current levels, do you think the company is vulnerable to a takeover bid? What do you plan to do to raise the share price? I mean, we can't really speculate about potential takeover activity. But in terms of the share price, I think, you know, to reiterate here, we've got a clear strategy designed to address the things that we know have historically held SYNECTICS back from growing. And what we've tried to do at the year end and today is is to give investors greater visibility into what we're doing and why the progress that we're making against it. So as we continue to deliver the strategy, demonstrate those changes, I would expect that the underlying value then then becomes reflected in the business. When you look to the future of SYNECTICS, what is it that gives you the most excitement?

43:17 I think for me, it's the opportunity to build a very different SYNECTICS from the one that we have today, you know, a much stronger and more resilient business that's recognized for innovation in those critical markets, has a much broader global presence, and consistently delivers the financial performance that I know this business is capable. And the great thing is we have a lot of those ingredients altogether already, and so achieve that's what makes that opportunity so exciting because we can see how we can get to achieving that. Paul, anything extra that excites you about the future of SYNECTICS? I think about you, it's the ability to transform the the revenue flows for myself to make them more predictable, more recurring in nature, which is kind of like a lot of where my background is. I can I reckon the value of that I know? These businesses.

44:14 So so yeah. No. It's it's that ability to just transform the shape of the business. And the market itself is never gonna go away. And it's only gonna get more exciting from a technology perspective and being able to to offer a product that that really sort of, that really plays into that and supports that and and ultimately makes people safer, I think, going forward as well. It's it's something to be proud of as well. So I'm so I'm that's where I'm coming from. So I'm good at that. The the project, I think, overall is what excites me. K. How is your competitive landscape evolving? How are you adapting to market changes? I'd I'd refer here to the market slide that we at the beginning. I think this summarizes that quite well. You know, we're seeing increasing security threats, much greater focus on cyber resilience, regulation, you know, rapid technology, development, and the convergence of those technologies onto one platform. So we've ensured that our strategy is aligned with those market requirements.

45:21 What and where is your focus right now? I think I think we've probably covered most of that. Obviously, our immediate focus is continuing to deliver the strategy, delivering h two result, and then putting ourselves in the strongest possible position as we enter f y twenty seven. What features on Synergy AI suites? We need to keep adding features and innovating. I know you added, what, three words? That's quite a minor feature update. Please give us an update and tell us more ideas for features that you have in mind, including Synergy Search. Synergy Search, as I mentioned, has obviously now gone live. More broadly, one of the things that we've deliberately done this last year is to get the overall product strategy and road map right.

46:08 We didn't want to simply launch a series, if you like, of disconnected AI features that customers won't necessarily pay for just because AI is moving quite quickly. We wanted to be very clear about customer problems that we're solving and how each development supports the longer term direction of synergy and business. And, obviously, that is increasingly towards an AI enabled cyber secure operation intelligence platform. Now we have a much clearer view of that road map, so I won't go into individual future features for now for competitive reasons, but AI innovation will remain an important part of the evolution of SYNECT. Can you provide an indication of your main competition in each systems and ocular and what percentage win rate on tenders in each segment?

47:04 So the competitive landscape is is quite different across the two businesses. In SYNECTICS, competition varies by market. We compete with global security platforms providers across sectors as well as more specialist competitors in areas such as as energy and those hazardous cameras. And Ocular is an integrator, so its competitors are primarily other UK security systems integrators. On the win rates, historically, we haven't measured the conversion consistently or accurately enough across all of our markets and and the different routes to market to give what I call a meaningful comparison number for each of the businesses today.

47:51 And that's one of the things that we've already changed as part of the strategy. Generally, becoming much more disciplined about what opportunities we're pursuing, how they're qualified, how we measure conversion. We set a target of franchise at the end of f y twenty seven. Although I think that the important point as well for us isn't that it's just bit more. It's to it's to really focus on the markets and the opportunities where we have strongest ability to win. Next question, I'll hand that one over to you, Paul. So this is with 10,000,000 in cash, is this being invested short term effectively? So you should be getting sort of 3% plus on this, but based on last year's interest fearing the accounts, it appears to be less than half of that. Should this is an easy gain?

48:45 Well, I mean, we do obviously have a well established and active treasury management system within the business that's designed to make sure that our capital is available to support our operational and strategic needs wherever it happens to be needed. I think necessary that you could just take the balance sheet figure of 10,000,000 and assume that that's all available to put on deposit. We have working capital requirements across the business as well. And that cash resides across different countries. We do operate pooling. And, yes, we do put cash on overnight deposit, and we we achieve competitive rates on that. So I think that we're we're doing everything we can on that. So there's no no more easy gains around it. We're we're already on it, I think, to spin. So that one. Would you like to pick up the next one, Amanda?

49:36 Yeah. I think you cup couple there. So is h one trading and the adjusted down EBITDA essentially a soft profit warning for 2026, the the answer to that is no. We're being very transparent with our expectations and our outlook for the second half of the year. We we have a pathway to to deliver the the market guidance that's out there at 4.1. However, we have also indicated clearly that there is a little bit of a downside risk on that relating to some specific oil and gas Middle East related opportunities that are still sort of delayed at the bottom end of our pipelines or or within our order book for delivery. Subject to us being able to to push those forward and translate them into revenue within the the next couple of months, then we would expect to be at the upper end of that range to the extent that we can.

50:29 And those continue to be delayed a little bit, and we expect to be at the bottom end of that range. And that's as clear as we can really be on that. Do we have a potential pipeline revenue figure? This would be contracts tended for but not yet won or with a percentage factored in based on the likelihood of winning bid. If so, why is this never published? The answer to that is is yes. The answer to that is that I can I can say that consistent with the messaging around the strength of our order book and strength of our pipeline is is robust and a bit ahead of where it was this time last year? We don't publish that figure, I think, because of the sort of some of the larger projects that are in there and those timing effects on them. And to some extent, we're less in control of when that order book when those pipeline opportunities convert, to some extent, we're we're there's an element of movement around that that doesn't serve anybody to necessarily publish those figures and for them to sort of be be relatively mobile in terms of timing on them. So that's around those larger some of those larger projects.

51:36 So that's that's typically why we don't tend to publish that number. K. How big is the SYNECTICS sales force? How do new contracts materialize? E. G. Existing customers contact you versus you approach new customers, etcetera. So our direct sales team is quite small. It's about 25 people globally across both businesses, and that's one of the reasons partners and market presence are such important parts of our strategy so that we we don't depend on simply adding more and more stable people for future growth. New business, we've we've I think we briefly touched on this with the America question, but it comes through a combination of routes. We have long standing customers who come back to us for upgrades, expansions, new sites.

52:26 Our own teams proactively develop new customers and relationships and projects. And then partners and integrators also introduce us into new opportunities. And obviously, this is the area we've spoken about that we'd like to significantly improve. Increasingly, and as we've mentioned, we're also now starting to use digital marketing to create new demand rather than relying purely on relationship led selling. So the model that we're building around the sales team is about making that relatively small team much more effective by giving it significantly greater reach through some of those other areas that we've spoken about. The recently announced AI features sound very impressive.

53:12 How does this compare with other competitor offerings? Can any of it be patented? So, I mean, AI functionality is developing very quickly across the industry. So I wouldn't suggest that capabilities that we're developing are completely unique to SYNECTICS. That being said, those where there are overlapping and and similar things to compare that competitors have, you know, each have their own strengths individually. What I'm pleased about particularly is that we're developing relevant AI capabilities alongside our planned roadmap and alongside much larger competitors in the market. And we're applying ours specifically to the critical environments that we know extremely well so we can make them much more specific to our end customers.

54:03 And and both search and scene check are good examples of that. On patents, some AI innovations can be patented, but, obviously, they're only one way of protecting the IP and it's an IP isn't necessarily and patents aren't necessarily appropriate for every development, So we consider the appropriate protection as part of our product development process. Next three, I can do. Yep. Does the 3,700,000 lower end assume any meaningful resumption of delayed Middle East projects? I think I've dealt with that early on just talking about that outlook range on EBITDA. It is there are a specific number of oil and gas Middle Eastern contracts and or opportunities that we're just tracking that that would give us that range of 400 k around the EBITDA level. So it is a it's not a general resumption. It's a specific number of opportunities that if they fall one side of the order book in the second half of the year, then they'll be on the upper end of the range. On the other side, then we'll be at the lower end of the range. It's as simple as that. So it's a linear thing.

55:17 As sustainable as the gross margin improvement and the sustainable level, historically, the business has operated around sort of 41%, 42% gross margin. We will see that number, I think, in the outlook a little I think it's a little bit higher than that as we sort of will first half of the year is obviously around about 47.8%, and I indicated earlier that, that will sort of settle back towards a more normalized level in the second half of the year. But for the full year overall, I think we'll be running slightly ahead of historical averages on gross margin. I think going forward, as we look to embed more recurring revenue flow into the business, we'll see that longer term trend increasing above those historical sort of averages.

56:02 But at this stage, in terms of that will be related to the recurring revenue growth that we see into the full year 'twenty seven, 'twenty eight onwards. Can you quantify how much recurring revenue SYNECTICS has? Yes. I think it was in the numbers earlier in the deck. We were at just under $4,000,000.3800000 dollars at the half year. We'll be around about $7.8 I guess, just under 8 at the at the full year. We don't expect much development of the recurring revenue business across '26, as we indicated, until those recurring revenue subscription based products start to generate growth within '27, '28 and beyond. So roughly around about 15% of our revenue is recurring in nature.

56:53 Okay. And I hope that was the last of those. Okay. Shall I pick up this one then? Was the contract announced today one of the delayed ones? No. The one today is not Middle East related, so that's, completely separate to those, but was a really good, win for that team. So very pleased with that one today. Can you disclose what the average, contract order size is, and how much of the business is large or one off contracts versus smaller contracts. I mean, the the across both businesses, the the average contract is is in the range of of 200,000 to about 500,000.

57:40 That would be the the the sort of typical size that we would generally see. It's not unusual to have contracts ranging in in the 1 to 3,000,000 mark. They're quite typical as well. In terms of those large one off contracts like we saw last year, obviously, they're they're they're quite infrequent and tend to tend to be based on something like a significant new build or something like that happening. Anything you'd add to that, Paul? No. No. I think the other thing. And then do you wanna take the last one? Yeah. Apologies if I missed it, but was there a projected ARR for full year '27? And what is the associated OpEx with that recurring revenue?

58:28 The answer to that question is no. There isn't a projected ARR specifically for full year '27 yet. I think as Amanda mentioned, a little further up the deck, that plan for recurring revenue will be will be set out across we've built across q four as part of that strategic plan. That was the intended timing for that, and we should be in a position to say a little bit more around that at the year end going forward. Perfect, guys. If I may just jump back in at this point, I thank you very much indeed for addressing all of those questions that came in from investors this morning. And of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended. But Amanda, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great.

59:20 Yeah. Thank you. I mean, obviously, I'd like to thank everybody today for joining us and for all of the, good questions that were submitted. Hopefully, today has given you a clearer picture of what it is that we're changing and and why we're becoming confident in that opportunity ahead. We're making good progress, in line with the timetable that we had set out, and we're starting to see some early signs that those changes that we're making are working. So our focus now is simply to keep delivering that and to build the stronger, more sustainable business that we know SYNECTICS can become. So thank you to everybody again for their continued support. Thanks, Ruby. That's great. Amanda, Paul, thank you once again for updating investors this morning. On behalf of the management team of SYNECTICS PLC, we would like to thank you for attending today's presentation.

1:00:19 That now concludes today's session. So good afternoon to you all.