LONDON (ShareCast) - (Sharecast News) - Security and surveillance systems designer Synectics said in a trading update on Tuesday that activity levels in its major end-user markets were gathering further momentum, particularly in oil and gas, and in US gaming.

The AIM-traded firm said the recovery was less evident, however, in casinos and gaming resorts in the Asia-Pacific region, where leisure travel was still subdued.

Although there were signs of increased customer activity in the area, firm business remained "patchy", the board said, and difficult to predict.

Trading in the first half to 31 May was in line with the board's expectations, and produced a "considerable positive turnaround" year-on-year, with operating profits expected to be at a "broadly similar level" to the seasonally-stronger second half last year.

Operating profit for the six months was estimated to be about £0.4m, swinging from a loss of £0.8m, on revenues of £23m, up from £22m a year ago.

Net cash at period end on 31 May totalled £3.9m, up from £3.5m.

Synectics said the improved results were largely driven by revenue growth of about 20% in the company's core systems division, as markets severely affected by the Covid-19 pandemic began their recovery.

Although the division experienced some disruption to its supply chains from "prevalent global issues", proactive management meant that there was no material impact on delivery schedules or margins.

The systems division's gross margins in the first half held up "strongly", reflecting both the passing on of cost increases, and further progress in the group's strategy of increased software content in its deliveries.

Good progress was made in the first half on the group's large projects for advanced infrastructure surveillance, the board said, including Deutsche Bahn in Berlin and the cloud-based deployment of Synergy for the City of London Corporation and the City of London Police.

It said those continued to act as "important reference sites" for Synectics' core advanced technology.

In the period, the group's UK-focused integration division Synectics Security experienced a decline in revenues compared to the same period last year, due to customer-led delays on several major projects that had been expected to be largely completed in the half.

However, an improvement in the mix of business resulted in higher gross margins and an operating profit in the first half, expected to be at a "similar level to the satisfactory result" achieved in the same period last year.

Overall, the board said it was pleased with Synectics' performance in the first half, and continued to expect further acceleration in the trajectory of improvement in the second half of the financial year.

"A strong team performance has meant we have been able to deliver our goals for this period despite increasing challenges in the supply chain and with markets still subdued," said chief executive officer Paul Webb.

"We have all been working through our 'return to work' challenges, and are in good shape now to push on together and deliver further improved results in the second half of this financial year and beyond."

Synectics said it would provide a further update on trading, and announce its unaudited interim results for the six months ended 31 May on 12 July.

At 1037 BST, shares in Synectics were flat at 105p.

Reporting by Josh White at Sharecast.com.

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