Synectics (SNX) 2024 gross margin of 42.9% seems a bit high if they were just a camera installer. That's my main point, but I've also scraped up some other info from the Annual Report.
Revenue of £55.8 million included £7.5 million of recurring revenue, or 13.4%. The recurring revenue is defined as "Contracted annual revenue, typically software support, subscriptions, maintenance and service contracts". Recurring revenue only increased by 6.0%, less than the 13.6% growth of total revenue.
From the Segmental Analysis, the biggest of the two segments is Synectic Systems, with revenue of £34,460k, after deducting £1,421k of Intra-Group revenue from Systems' External customers revenue (of £35,881k). The £1,421k must be internal sales from Ocular to Systems. So, 34,460/55,809 gives Systems revenue of 61.7% of the total revenue (excluding Intra-Group). The description of Synectic Systems includes "Capabilities centre around a proprietary software platform, Synergy, that is tailored to the unique requirements of each client; and specialist hardware for oil & gas markets.". The other division, Ocular, utilises "a combination of proprietary technology and third party products.". I think the important part of all that is that revenue of the biggest division is claimed to "centre around a proprietary software platform". The gross margins were, Synectic Systems 49.4%, and Ocular 29.2%, up by 3.0% and 0.9% from 2023.
The Total operating profit of the Systems division was £5,818k, for an operating margin of 16.2% (for that division, using its total revenue). But, there are £2,865k of central costs. Portioned to the divisions by revenue (61.7% Systems, 38.3% Ocular), that's £1,817k Systems and £1,126k Ocular, giving £4,001k operating profit (less a portion of central costs) for Systems, and a 11.6% operating margin. While it's pointless comparing those operating margins to software companies (huge variation, some very negative), I think it's OK when "Capabilities centre around a proprietary software platform", and higher than you'd expect for a camera installer. That's just my guess, I've no experience to draw on here.
R&D - "The Group has continued to invest in research & development of both software and hardware products for surveillance applications during the year incurring total costs of £3.7 million (2023: £3.2 million), of which £2.5 million (2023: £2.2 million) has been expensed to the Income Statement.". That £3.7m was 6.6% of total (company) revenue (more than I'd expect for a camera installer).
BTW there's room for mistakes here, particularly around the Systems operating margin, where I've forgotten if I used external revenue or the lower revenue figure with Intra-Group deducted (it's getting late).
Hi Paul. The 30th April Report doesn't list the starters, just the mains, so SXS nor the very many other starters that day show up in search (except for the ones in Alan's report). Sorry to highlight dreary admin, but search is very useful and it'd be a shame to lose all those comments down a black hole.
I do realise that to the residents of Bournemouth anything north of Winchester is alien territory, but I would respectfully point out that James Cropper is based in Kendal, Cumbria.
For those in the south of England, Cumbria is a county in the north of England, which is actually different from Scotland.
Synectics (SNX) 2024 gross margin of 42.9% seems a bit high if they were just a camera installer. That's my main point, but I've also scraped up some other info from the Annual Report.
Revenue of £55.8 million included £7.5 million of recurring revenue, or 13.4%. The recurring revenue is defined as "Contracted annual revenue, typically software support, subscriptions, maintenance and service contracts". Recurring revenue only increased by 6.0%, less than the 13.6% growth of total revenue.
From the Segmental Analysis, the biggest of the two segments is Synectic Systems, with revenue of £34,460k, after deducting £1,421k of Intra-Group revenue from Systems' External customers revenue (of £35,881k). The £1,421k must be internal sales from Ocular to Systems. So, 34,460/55,809 gives Systems revenue of 61.7% of the total revenue (excluding Intra-Group). The description of Synectic Systems includes "Capabilities centre around a proprietary software platform, Synergy, that is tailored to the unique requirements of each client; and specialist hardware for oil & gas markets.". The other division, Ocular, utilises "a combination of proprietary technology and third party products.". I think the important part of all that is that revenue of the biggest division is claimed to "centre around a proprietary software platform". The gross margins were, Synectic Systems 49.4%, and Ocular 29.2%, up by 3.0% and 0.9% from 2023.
The Total operating profit of the Systems division was £5,818k, for an operating margin of 16.2% (for that division, using its total revenue). But, there are £2,865k of central costs. Portioned to the divisions by revenue (61.7% Systems, 38.3% Ocular), that's £1,817k Systems and £1,126k Ocular, giving £4,001k operating profit (less a portion of central costs) for Systems, and a 11.6% operating margin. While it's pointless comparing those operating margins to software companies (huge variation, some very negative), I think it's OK when "Capabilities centre around a proprietary software platform", and higher than you'd expect for a camera installer. That's just my guess, I've no experience to draw on here.
R&D - "The Group has continued to invest in research & development of both software and hardware products for surveillance applications during the year incurring total costs of £3.7 million (2023: £3.2 million), of which £2.5 million (2023: £2.2 million) has been expensed to the Income Statement.". That £3.7m was 6.6% of total (company) revenue (more than I'd expect for a camera installer).
BTW there's room for mistakes here, particularly around the Systems operating margin, where I've forgotten if I used external revenue or the lower revenue figure with Intra-Group deducted (it's getting late).
Hi Paul. The 30th April Report doesn't list the starters, just the mains, so SXS nor the very many other starters that day show up in search (except for the ones in Alan's report). Sorry to highlight dreary admin, but search is very useful and it'd be a shame to lose all those comments down a black hole.
I do realise that to the residents of Bournemouth anything north of Winchester is alien territory, but I would respectfully point out that James Cropper is based in Kendal, Cumbria.
For those in the south of England, Cumbria is a county in the north of England, which is actually different from Scotland.
Here endeth the geography lesson!