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Global Specialists in Integrated 
Security Systems

Synectics plc
Annual Report and Accounts for the year ended 30 November 2013

 
 
 
 
 
 
 
 
 
 
 
 
We design and deliver integrated, 
end-to-end security and surveillance 
control systems for the world’s most 
demanding security environments

Innovating

Integrating

Protecting

Security, surveillance and 
operations management 
systems are converging.  
We design and build powerful, 
intuitive command and control 
systems that solve complex 
problems which are completely 
adaptable to the individual 
requirements of the 
customers we serve.

_0_SYNE_ar13_cover.indd   5

26/03/2014   13:34:12

Introduction
In this report

Introduction
02  Our Performance

04  Chairman’s Statement

Strategic Review
06  Our Markets

08  Our Business Model

12  How We Deliver It

13  Divisional Structure

14  Our Progress 

Performance Review
16  Group Financial Results

22  Division: Systems

26  Division: Integration & Managed Services

30  Risks and Risk Management

Governance
32  Board of Directors

34  Chairman’s Introduction 

36  Corporate Governance Statement

39  Remuneration Committee Report

44  Audit Committee Report

45  Statutory Directors’ Report

Financial Statements
49  Independent Auditor’s Report

50  Consolidated Income Statement

51  Consolidated Statement of Comprehensive Income

52  Consolidated Statement of Financial Position

53  Consolidated Statement of Changes in Equity

54  Consolidated Cash Flow Statement

55  Notes to the Consolidated Financial Statements

86  Company Balance Sheet

87  Notes to the Company Financial Statements

Other Information
93  Principal Subsidiaries

94  Advisers

95  Notice of Annual General Meeting

This section introduces the Group and presents  
an overview of the last twelve months supported  
by a timeline of key contract wins and acquisitions

The Strategic Review provides an in-depth explanation 
of the security systems and services that Synectics 
provides, as well as our position within the current  
market landscape

The Performance Review includes discussion about  
the highlights of 2013 and KPIs for the Group and  
each division

Governance is introduced by the Chairman and includes 

reports from each of the Board committees and the 

Statutory Directors’ Report

This section presents the accounts for the year ended  
30 November 2013

This section presents other information relevant 
to the Group

Visit our investor website for up to the minute news 
and announcements:

Synectics plc  Annual Report and Accounts 2013

01

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Our Performance

2013: A year of strong 
performance and important 
strategic milestones

Financial highlights
 » Revenue up 7% to £82.4 million (2012: £77.0 million) 

Operational highlights
 » Secured a number of complex major system 

 » Underlying profit* before tax up 26% to £7.1 million 

contracts with large global blue chip customers

(2012: £5.7 million) 

 » Profit before tax up 41% to £6.6 million (2012: £4.7 million)

 » Underlying diluted EPS* up 29% to 32.6p (2012: 25.2p) 

 » Diluted basic EPS up 42% to 29.4p (2012: 20.7p)

 » Recommended increased final dividend of 5.5p per 

share (2012: 5.0p) making 8.5p for the year (2012: 7.5p) 

 » Underlying operating margin** 8.8% (2012: 7.4%) 

 » Net cash at 30 November 2013: £1.2 million 

(2012: £4.6 million)

 » Year-end order book £28.1 million (2012: £36.9 million)

 » Implemented improved organisational structure, 
providing the scalable platform necessary for 
future growth

 » Continued investment in research & development 
culminating in the launch of a new and upgraded 
command and control platform post year end 

 » Full acquisition of Indanet completed

 » Far Eastern operational hub established with  

£7 million contract win and subsequent acquisition 
of Coex Services Asia Pte Ltd in Singapore

Our year at a glance: Key contracts and acquisitions

Shell GTL 
Pearl Project

A contract to protect the 
Shell GTL Pearl Project in 
Qatar. A state-of-the-art 
surveillance contract for 
the world’s largest 
‘Gas to Liquids’ plant

Singapore Contract

Luton Borough Council

A large system contract for a major 
client in Singapore. The £7 million 
contract involved the design and 
delivery of a fully integrated 
surveillance recording solution 
and a control room replacement 
and upgrade

First CCTV control room outsourcing 
project with Luton Borough Council. 
The partnership contract involves 
managing and staffing of the 
Council’s control room, along with 
the maintenance of access control 
systems and the provision of ad-hoc 
guarding services

Dec

Jan

Feb

Mar

Deutsche Bahn

A framework contract with 
German railways Deutsche 
Bahn to deliver an onboard 
network solution for 
215 Bombardier double-decker 
trains across Berlin and other 
regions in Germany

Avon and 
Somerset Police

A £2.7 million contract to deliver a 
fully integrated security management 
solution for three main operational 
police custody centres, and a 
tri-force shared tactical firearms 
training facility

Acquisition of Indanet 

Completed the acquisition of 
the remaining 49% of the issued 
share capital of Indanet AG

02

Synectics plc  Annual Report and Accounts 2013

Introductionwww.synecticsplc.comOur year at a glance: Key contracts and acquisitions

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Revenue (£m)
+7%

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Underlying Profit* 
Before Tax (£m)
+26%

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Underlying Operating 
Margin** (%)
+1.4%

%
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Underlying Diluted EPS* 
(p)
+29%

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  *  Underlying profit represents profit before tax, non-underlying items (which comprise restructuring 
costs, acquisition costs, share-based payment charge, amortisation of acquired intangibles and 
reclassification of available-for-sale financial assets to profit or loss), impairment of goodwill and 
adjustments to deferred and contingent consideration. Underlying earnings per ordinary share are 
based on profit after tax but before non-underlying items, impairment of goodwill and adjustments to 
deferred and contingent consideration.

**  Underlying operating margin represents underlying operating profit as a percentage of revenue, where 
underlying operating profit represents underlying profit before tax before charging finance income and 
finance costs.

Stagecoach Group

Go-Ahead Group

Stadler

Stagecoach extended our successful 
ten-year relationship. The continued 
partnership, worth more than £5 million 
over three years, will initially see 
1,660 new vehicles equipped with the 
latest on-vehicle CCTV solutions

Secured a £5 million, three-year contract 
with the international public transport 
company, Go-Ahead Group. Synectics will 
supply, install, maintain and support 
CCTV systems on Go-Ahead’s fleet of 
4,600 buses and develop an integrated 
software solution to combine Go-Ahead’s 
on-vehicle CCTV with other critical 
business systems

Stadler placed two new orders with 
Indanet – an IP video system on all 
new Fast Light Innovative Trains (‘FLIRT’) 
for the North Germany Railway and a 
new CCTV system for two new metro 
trains for the Berlin public transport 
operator, BVG

May

Jun

Jul

Sept

Nov

Acquisition of Coex Services Asia 

Australian Liquid Natural Gas Plant 

Completed the acquisition of the outstanding 80% shareholding of 
Coex Services Asia Pte Limited, based in Singapore. Coex Services 
Asia is now taking the lead in integrating our sales and engineering 
personnel from other customer sectors to form a new Far East 
operating hub for all of Synectics’ activities

Awarded contracts worth more than £2.5 million for security 
systems for a large Liquid Natural Gas project in Australia. 
The systems will provide offshore visual surveillance of the 
facilities using COEX™ hazardous area and marine camera 
stations, which will be encoded, recorded, monitored and 
controlled by Synectics’ hardware and software

Synectics plc  Annual Report and Accounts 2013

03

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
 
 
 
 
 
 
 
 
 
Chairman’s Statement

“
Synectics produced another 
good performance in 2013. 
Sales were buoyant in our 
core specialist markets of oil 
& gas and gaming surveillance 
systems, particularly in the 
Far East and Middle East.”

David Coghlan
Chairman

Introduction
Synectics produced another good performance in 2013. 
Sales were buoyant in our core international specialist 
markets of oil & gas and gaming surveillance systems, 
particularly in the Far East and Middle East.

Early in the year we completed the final major step in 
reorganising our activities into two divisions. All of 
Synectics’ proprietary technology-led activities were 
brought together into a single Systems division, and the 
services-led activities into our Integration & Managed 
Services division. The new structure has already shown 
significant benefits in increased co-operation between 
business sectors allowing the Group to pursue bigger, 
more integrated contracts.

Synectics has also been undertaking a major upgrade 
of its information technology systems. This upgrade 
was implemented in the Integration & Managed 
Services division in 2013 and will be continued across 
the Group’s UK operations in 2014.

We expect the current year to be focused on consolidating 
these significant organisation and infrastructure 
investments. Therefore the Board expects results for 
the current year to be at a similar level to 2013. Further 
details are set out in the Outlook section opposite.

Results
For the year to 30 November 2013, Synectics’ consolidated 
revenue grew by 7% to £82.4 million (2012: £77.0 million). 
The Group made an underlying profit before tax* of 
£7.1 million, an increase of 26% compared with 2012. 
The underlying operating margin was 8.8% (2012: 7.4%). 
Underlying diluted earnings per share increased by 29% 
to 32.6p (2012: 25.2p). Further details on operating 
performance are set out in the divisional performance 
reviews opposite. 

Group profit before tax was £6.6 million (2012: £4.7 million), 
after exceptional and non-underlying items totalling 
£0.5 million (2012: £0.9 million).

Net cash at 30 November 2013, after deducting all 
borrowings, was £1.2 million (2012: £4.6 million). The cash 
outflow for the year derived primarily from an increase in 
working capital from the timing of customer payments 
under major oil & gas and gaming contracts, acquisition 
payments and the purchase of new premises for the 
Systems division’s new operations centre. 

Dividend
In view of the increased profits for the year and our strong 
Balance Sheet, the Board has decided to recommend an 
increase in the final dividend from 5.0p to 5.5p, payable 
on 7 May 2014 to shareholders on the register on 
28 March 2014. If approved by shareholders, this will 
bring the total dividend for the year to 8.5p, an increase 
of 13% over the prior year.

Research & Development
Total Group expenditure on technology development 
in 2013 was £2.7 million (2012: £2.0 million). Of this, 
£1.0 million was capitalised, and the remainder expensed 
to the Income Statement. £0.3 million of previously 
capitalised development was amortised during the year.

The Synectics Technology Centre operates within the 
Systems division as a consolidated development unit 
for the Group as a whole. The focus continues to be 
on developing products that are specifically directed 
to the needs of Synectics’ core target customer sectors. 
We aim for the Group’s development roadmap to operate 
in a well-controlled environment that will enable us 
simultaneously both to deliver on time our planned new 
product introductions and to support globally the bespoke, 
large-scale and innovative projects that our customers are 
increasingly looking for.

People
2013 was another year where organisational changes, 
consolidation of operating units, new systems and 
managing growth without necessarily having all the required 
resources in place at the outset, all placed considerable 
strain on the energy and goodwill of many of our employees.

*

Profit before tax, restructuring 
costs, acquisition costs, 
share-based payment 
charge, amortisation 
of acquired intangibles 
and reclassification of 
available-for-sale financial 
assets to profit or loss, 
impairment of goodwill and 
adjustments to deferred and 
contingent consideration.

04

Synectics plc  Annual Report and Accounts 2013

Introductionwww.synecticsplc.comP
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.

Synectics combines 
best-of-breed hardware, 
software, integration and 
service to deliver reliable, 
flexible and affordable 
turn-key solutions for the 
fast-changing needs of critical 
security environments.

See our full range of products on our 
website: www.synecticsplc.com

Once again the commitment and talent shown by Synectics’ 
people in dealing with these pressures successfully, for the 
benefit of the Group and our customers, was extraordinary. 
On behalf of the Board and of our shareholders, I pass 
on to them our very sincere thanks.

Strategy and Financial Objectives
Synectics’ strategy remains as it has been for some time, 
that is to combine deep sector-specific market knowledge 
with proprietary technology, particularly software, to 
provide, maintain and manage sophisticated high-end 
electronic surveillance systems that are increasingly 
adapted to the specialist needs of the customer sectors 
we target – Oil & Gas, Gaming, Transport, Banking & 
Finance, Critical Infrastructure and Public Space.

Over the past three to four years the Group has 
implemented substantial organisational restructuring 
and internal process improvements to enable us to 
service our specialist target markets globally in an 
effective, scalable and profitable manner. We are now 
much better positioned to do that. One result has been 
that 45% of Synectics’ revenues in 2013 were derived 
from outside the UK, up from 17% in 2008. More 
tellingly, 80% of last year’s revenues within the higher 
margin Systems division came from customers outside 
the UK.

In 2010 the Board publicly set an objective for the Group 
to achieve a consolidated operating margin of 8-10%, 
within a reasonable time frame and given normal economic 
conditions. During 2013 Synectics achieved that objective, 
with an underlying operating profit margin of 8.8%. 
The subsidiary profitability objectives set for our different 
business areas have also largely been met. We believe 
that further progress in raising margins is achievable, 
though the Group’s current financial priority is revenue 
growth in our core target customer sectors. Having 
reached the objectives laid out three years ago, the 
Board intends during 2014 to define goals for the next 
medium-term phase of the Group’s development.

Outlook
After strong order intake earlier in the year, several parts 
of the Group have subsequently been experiencing delays 
in receipt of anticipated large orders. The value of the 
Group’s consolidated order book at 30 November 2013 
was £28.1 million, compared with £36.9 million a year 
earlier. Delays are continuing to some extent, but bid 
activity for large projects in the oil & gas and gaming 
sectors remains solid, and an increased pace of sales 
is anticipated from several new products being launched 
in the second quarter of 2014, including an important 
new generation of Synectics’ core command and 
control software.

As well as achieving rapid profits growth over the past two 
years, Synectics has implemented extensive strengthening 
of its management, organisation structure and information 
technology systems. Such improvements have been 
essential to provide the platform necessary to achieve 
the Group’s future growth plans. The emphasis this year 
is on bedding in and consolidating the changes.

Taken together, these factors lead the Board to expect 
another good performance in 2014, with results likely 
to be at a similar level to 2013. The pattern of our current 
order pipeline suggests that trading will be significantly 
skewed towards the second half. 

Last year’s major Far East contract success and new 
operations hub, and the market leadership position 
Synectics has now secured within the global oil & gas 
surveillance market, have established clear opportunities 
that underpin the Board’s expectation of substantial 
further growth over the coming two to three years.

David Coghlan
Chairman

26 February 2014

Synectics plc  Annual Report and Accounts 2013

05

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
 
 
 
 
 
 
 
 
 
 
 
 
Our Markets

Deeper integration of all aspects of 
electronic security systems and process 
management is a major evolutionary 
trend in our chosen market sectors 

Our focus is on sectors where security 
and surveillance needs are mission 
critical: Oil & Gas, Gaming, Transport, 
Banking & Finance, Critical 
Infrastructure, and Public Space. 

All of these sectors are growing and we estimate they 
account for around 40% of the global market. 

Our response to this market need is to build on the core 
principle that inspired our name. Synectics intelligently 
combines disparate technologies in creative ways to 
provide total solutions that are greater than the sum of 
their parts. Underpinned by decades of customer-driven 
system development including our proprietary command 
and control software platform, Synergy™ and deep 
vertical industry knowledge by our in-house research 
& development team, we excel at delivering complex 
projects that require tailored solutions with high reliability, 
scalability and flexibility.

Find out more about our markets on our 
website: www.synecticsplc.com

Oil & Gas

Gaming

A proven track record and strong 
long-lasting relationships within 
this sector make Synectics the 
perfect partner. Highly-skilled 
people enable us to interact with 
highly knowledgeable customers 
throughout every stage of 
the project. 

We provide customers in this 
tightly regulated market with 
enterprise-class surveillance 
systems. Our systems can 
be seamlessly integrated, 
are scalable and are designed 
for performance, reliability 
and flexibility.

This market faces many complex 
challenges to ensure the security 
of its sites: safety of on-site 
personnel, protection of offshore 
and onshore pipeline locations 
and the monitoring of hazardous 
and explosive areas. The market 
demands solutions that comply 
with the ever changing landscape 
of the rigorous compliance 
legislation in this sector. 

Gaming environments are cash 
intensive and require some of 
the most complex surveillance 
solutions. Customers in this 
market are keen to take up the 
fully integrated security solutions 
Synectics can offer to mitigate 
the risk of player scams, 
fraudulent claims, staff collusion 
and other security infringements.

As the need for comprehensive 
reliable, integrated, multi-site 
management systems continues 
to grow, the value of Synectics’ 
reputation for delivering solutions 
for demanding environments will 
increase and open up further 
opportunities in the market. 

Effective gaming surveillance 
systems must deliver on 
performance and resiliency 
to ensure the highest level 
of protection. Our evolved 
Synergy™ command and 
control software platform 
will open up opportunities 
for growth in this sector.

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06

Synectics plc  Annual Report and Accounts 2013

Strategic Reviewwww.synecticsplc.com 
 
 
 
P
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Transport

Banking & Finance

Critical Infrastructure

Public Space

We have demonstrated success 
in delivering large-scale, integrated 
solutions for the most demanding 
of transport environments. Our 
solutions help operators improve 
passenger safety and comfort, 
deter crime and combat 
fraudulent claims.

We combine flexible, robust 
hardware with our ‘open 
architecture’ Synergy™ 
command and control software 
platform to create 
comprehensive banking 
security solutions.

We deliver turn-key/end-to-end 
solutions in this market, based 
on intuitive command and 
control. Synectics’ strength in 
design, integration, outsourced 
management and process 
enable us to assume an 
ever-increasing responsibility 
for the protection of critical sites, 
infrastructure and employees.

A strong history and 
understanding of supporting this 
sector, coupled with flexibility 
and reliability, make Synectics 
the ideal choice for public 
surveillance applications. 

Integration with third party 
alarms from commercial 
properties can generate new 
revenue streams for customers.

Transportation environments 
face a variety of unique security 
challenges to ensure the 
efficient, safe and secure 
transport of passengers 
and cargo. The demand for 
intelligent and attractive 
public transportation 
solutions is high.

In the banking environment 
Data Centre perimeter detection, 
monitoring of areas with 
sensitive data, access control, 
biometrics, analytics and the 
need to connect systems and 
trigger actions via a command 
and control software platform 
are key demand drivers within 
this sector.

National infrastructure is an 
obvious target for disruption of 
essential services. Synectics 
is ideally positioned to mitigate 
this risk, through innovation, 
technology, integration, remote 
monitoring, alarm escalation 
and provision of resource and 
response services as and 
when needed. 

Government authorities and 
associated agencies in the public 
space sector require specialist 
surveillance systems that enable 
them to work together to resolve 
incidents quickly, efficiently and 
effectively. Reduced budgets 
with no reduction in duty of care 
for the public means delivering 
more with less.

Synectics’ capability to integrate 
legacy systems with latest 
generation technology using 
Synergy™ gives us the 
opportunity to deliver truly 
class-leading integrated 
solutions to the transport market.

Synectics’ combined capability 
to meet the demand for Data 
Centre protection, outsourced 
remote monitoring and turn-key 
cash-in-transit solutions present 
growth opportunities 
for the Group.

As many organisations move to 
consolidate their offerings, 
Synectics is in an ideal position 
to offer an end-to-end technology 
and resource solutions to 
manage costs and improve the 
identification of potential threats.

The consolidation of control 
rooms and a reduction in 
budgets for non-critical services 
is driving the need for innovative 
support from the private sector. 
Synectics can be this partner 
of choice.

Synectics plc  Annual Report and Accounts 2013

07

www.synecticsplc.com 
 
 
 
 
 
 
 
 
 
Our Business Model

Delivering end-to-end 
integrated security 
systems and services…

We target specific 
sectors

delivering end-to-end 
integrated electronic 
security systems

We utilise our deep sector-specific 
market knowledge to develop 
long-term strategic partnerships 
with customers with security and 
surveillance needs of sufficient 
complexity and scale that they value 
the sophistication of Synectics’ 
capabilities and expertise.

We develop specialist application 
software command and control 
systems, surveillance products and 
managed services that support the 
needs of our customers. From system 
consultation and design through 
installation and maintenance to a fully 
managed or outsourced service solution.

Key sectors include:

Providing a range of products:

Oil & Gas

Banking & Finance

Gaming

Critical Infrastructure

Synectics’ IP HD  
360 camera

Transport

Public Space

Find out more about our latest products  
on our website: www.synecticsplc.com

08

Synectics plc  Annual Report and Accounts 2013

Strategic Reviewwww.synecticsplc.comP
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Our business is 
fully integrated: 
from system 
consultation and 
design through 
installation and 
maintenance to 
a fully managed 
or outsourced 
service solution.

based on proprietary 
technologies

and supported by 
excellent service

Our open systems are based on core 
proprietary technology, in particular 
integration software. This technology 
is developed for our specific target 
customer sectors, and provides 
fundamental differentiation from 
mainstream suppliers in the wider 
electronic security market.

Synectics is committed to providing 
complete customer service with a 
range of pre and after sales support 
as well as a full range of services 
provided in-house during the project 
engineering phase.

to meet increasingly  
sophisticated needs

Customers are increasingly looking 
for us to deliver integrated solutions 
uniquely tailored for their needs, 
whilst demanding reliability and a high 
level of control for systems in a range 
of demanding security environments. 

We invest in our research & 
development expertise to understand 
these unique requirements and deliver 
innovative solutions that protect our 
customers’ critical infrastructures 
today and in the future.

Our integrated offering:

CAD

Consult

Design

Create

Integrate

Install

Commission

Maintain

Monitor

Synectics plc  Annual Report and Accounts 2013

09

www.synecticsplc.com 
 
 
 
 
 
 
 
 
 
Our Business Model continued

…to companies in our target 
sectors across the globe

We have concentrated our resources 
in five key geographic operational 
hubs, positioned to maximise our 
ability to serve customers in the  
global sectors we target.

Each sector is global, large in its own right and growing. 
As a result our business is becoming increasingly global. 
Our operations in the UK, Europe, the US, Middle East 
and the Far East are already benefiting from the 
software-based surveillance opportunities that are 
unfolding. With our strong proprietary technology focus, 
we are well-positioned to take advantage of these 
opportunities. We intend to accelerate the application 
and development of our successful business model 
into overseas markets and at home, focusing on those 
customer sectors where the system performance 
requirements are very demanding and fundamental 
to their operational needs.

North America

Our solutions are becoming 
the product of choice in  
many entertainment resorts 
and cruise liners and we  
are investing in routes  
to market for our next 
generation solutions in 
oil & gas, marine and urban 
surveillance programmes.

US 
HUB
(SANTA 
BARBARA)

5

strategic 
hubs

Operations 
by geography

Our sales are 
measured by 
geographic 
destination of  
the end-user.

North America

Our sales remain strong but 
with casino construction 
forecast to remain flat we will 
continue to focus on system 
upgrades from recurring 
customers and capitalise on 
oil & gas opportunities in  
the region.

United Kingdom 
and Europe

Our performance in the UK 
remains strong and the 
market for integrated 
surveillance solutions 
continues to show signs  
of growth.

Middle East

7% of global sales came  
from the Middle East and  
the market for oil & gas 
continues to show healthy 
signs of growth.

Revenue
6.1% 
£5.1m

Revenue  
61.4% 
£50.6m

Revenue  
7.0% 
£5.7m 

10

Synectics plc  Annual Report and Accounts 2013

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UK

The UK remains the home  
of Synectics. Our operations 
sit at the heart of our global 
activities – Synectics’ global 
support centre and research 
& development facilities  
are based in the UK and  
the new UK operations  
centre will serve our key  
geographic hubs.

UK 
HUB

GERMAN 
HUB
(MUNICH)

Europe

With 100% ownership of 
Indanet in Munich, Germany, 
we have the platform for 
growth in all of our target 
sectors as well as their core 
transport sector.

500+

employees

Far East

During 2013 we acquired 
100% of Singapore-based 
Coex Services Asia. Sales  
of our EX explosion-rated, 
marine and hazardous area 
surveillance products into the 
Far East oil & gas installations 
and shipyards continue  
to grow. We are extending  
the portfolio to the full range  
of Synectics products and 
services via this new 
operational hub.

UAE 
HUB

Middle East

During 2013 our operational 
centre was established in 
Dubai to provide close 
customer service and support 
in this very active area. We 
continue to win significant 
projects in the region.

SINGAPORE 
HUB

£82m

total sales

Asia and Pacific

Rest of  the World

The substantial contract 
delivered through the Far East 
hub in Singapore contributed 
to our growth in this region. 
The market remains robust 
with many large projects 
planned in the region.

Sales continue to grow 
in this region, in part 
supported by strengthened 
partnerships with global 
transport operators.

Revenue  
22.9% 
£18.9m

Revenue  
2.6% 
£2.1m

Synectics plc  Annual Report and Accounts 2013

11

www.synecticsplc.com 
 
 
 
 
 
 
 
 
 
How We Deliver It

We sell and service integrated 
security solutions through  
a global network

Unlike some of our competitors, 
Synectics has direct involvement in 
the design, creation, commissioning 
and support of integrated security 
systems. This gives us unique insight 
into all aspects of the service 
support cycle.

Customers value our talented people, commitment, 
insight and agility. Our highly knowledgeable experts 
maintain end-user contact in order to fully explore the 
ways in which our systems can help improve wider 
business processes.

Sales channels

In addition to direct sales with end-users, we work with 
resellers, technology partners and international global 
integrators to generate new business.

Our revenue model

We have a largely contract-based revenue model with 
cycles of one to five years. By continuing to innovate 
and keeping close to our customers we benefit from 
high contract renewal levels, helping to secure our 
income streams for the longer term. 

We drive revenue growth by winning larger shares 
of bigger projects – by identifying major opportunities 
at an early stage and by working with customers to 
develop solutions which protect their investments.

End-users

Resellers

New Contracts

Technology  
Partners

Global 
Integrators

£28.1m
November 2013 
order book

19%
recurring revenue 
as a % of sales

12

Synectics plc  Annual Report and Accounts 2013

Strategic Reviewwww.synecticsplc.comStrategic Review
Divisional Structure

In order to develop a more effective 
and scalable business, we integrated 
our service offering into two focused 
divisions during 2013: 

Systems

Synectics’ specialist Systems division has brought 
all Synectics’ proprietary technology-led activities 
together to focus on designing integrated end-to-end 
surveillance command and control systems for the 
world’s most demanding security environments. 
It excels at complex projects that require innovative 
tailored solutions with high reliability and flexibility, 
for Oil & Gas, Gaming, Transport, Banking & Finance, 
Critical Infrastructure, and Public Space applications.

Integration & Managed Services

The Integration & Managed Services division 
focuses on delivering end-to-end, high integrity 
security and surveillance solutions, specialist mobile 
systems for transport operators, as well as managed 
services, which offer a range of flexible, scalable, 
service-led solutions for the management of facilities 
and security related services.

Contract highlight:
Gorgon Project 

Synectics has successfully delivered surveillance 
systems for a further phase of the Chevron-
managed Gorgon project. Located 130km off the 
North West coast of Australia, the Greater Gorgon 
Gas Field is the largest single natural gas resource 
in Australia with hydrocarbon reserves estimated 
at approximately 40 trillion cubic feet. Synectics 
is providing a complete solution.

Contract highlight:
Luton Borough Council

Synectics developed an innovative outsourced 
service solution for Luton Borough Council by 
taking a holistic view of their security service 
delivery. The partnership harnesses our expertise 
in design, technology, installation and maintenance 
and managed services whilst enabling local 
authorities to professionalise and streamline their 
public security and CCTV systems to deliver best 
value to police, businesses and the local community. 

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Read more about the Systems 
division from page 22

Read more about the Integration & 
Managed Services division from page 26

www.synecticsplc.com

Synectics plc  Annual Report and Accounts 2013

13
13

www.synecticsplc.com 
 
 
 
 
 
 
 
 
 
Our Progress

“
2013 has been another good 
year of positive progress for 
Synectics which has resulted 
in us delivering once again our 
best underlying PBT.”

John Shepherd
Chief Executive

Where we are heading

Our vision is to become a leading 
global supplier of integrated 
surveillance and security systems, 
which are a fundamental part of our 
customers’ operations. 

Our strategy is to combine deep 
sector-specific market knowledge 
with proprietary technology, 
particularly software, to provide, 
maintain and manage sophisticated 
electronic security systems that are 
increasingly adapted to the needs of 
the specialist customer sectors we 
target: Oil & Gas, Gaming, Transport, 
Banking & Finance, Critical 
Infrastructure and Public Space.

John Shepherd
Chief Executive

26 February 2014

Find out how we 
measure our 
performance 
from page 16

1 —
Integrating our business

We are integrating our business units into 
one company.

We have consolidated our activities into two divisions.

The new structure has already shown significant benefits in increased 
co-operation between business sectors allowing the Group to pursue 
bigger, more integrated contracts. 

We are on target to successfully migrate two UK assembly, testing and 
system acceptance operations into one new facility in North Lincolnshire. 

We are removing old business and cultural barriers. More open 
dialogue between senior management is already creating tangible 
revenue growth, margin enhancement and cost reduction initiatives. 

 » Acquired Coex Services Asia Pte Limited 

 » Concluded the early acquisition of Indanet

 » Won Luton Borough Council Contract – first outsourcing model

 » Implemented an Integrated Services Model – managing processes 

for our back and front office functions to improve service 
performance, reduce costs and improve the customer experience

We will continue to develop a ‘one company’ culture that builds on our 
core principles and values and create a unified company ethos which 
will facilitate a far greater degree of internal collaboration.

s
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Synectics plc  Annual Report and Accounts 2013

Strategic Reviewwww.synecticsplc.com 
 
 
 
 
 
 
 
 
 
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Women’s development 
programme

We continue to invest in a 
proactive and collaborative model, 
‘An Inspirational Journey’ which  
focuses on building confidence, 
recognising capabilities and 
developing contacts. It aims  
to encourage women to exceed 
their own expectations.

2 —
Exploiting opportunities

3 —
Investing in growth

We are exploiting global opportunities from 
five strategic geographic operational hubs.

We are investing in technology, facilities and 
business management capability to create 
sustainable long-term growth.

We have established five operational hubs at strategic locations 
around the globe and are building operational centres of excellence 
to support them. We acquired Coex Services Asia in Singapore and 
in November we delivered the first phase of a large system contract 
for a major client in Singapore which helped establish the Far East 
operational hub.

Indanet has adopted Synectics’ proprietary systems technologies 
into its portfolio to enable them to access other Synectics’ core 
market sectors.

We continue to strengthen our team of experts and support 
organisational initiatives to develop the Synectics team. 

We invested in the evolution of Synectics’ core command and control 
software platform which will be launched in the second quarter of 2014.

The Group is implementing internal process improvements to enable 
us to service our specialist target markets globally in an effective, 
scalable and profitable manner. 

 » Secured a large system contract for a major client

 » Appointed industry and sector specialists and strengthened the 

 » Delivered the Outsourcing Services contract for 

Luton Borough Council

business development team

 » lncreased investment in research & development to £2.7 million

 » Won a contract to deliver a state-of-the-art surveillance 

 » Started major programme of investment in IT infrastructure upgrades

solution for the world’s largest ‘Gas to Liquids’ plant in Qatar

 » Acquired major new fit-for-purpose facility in North Lincolnshire, UK 

 » Secured a contract with Go-Ahead Group

for Systems

 » Extended a number of successful long-term relationships with 

key sector clients

We will pursue opportunities in our core sectors through our global 
hubs. We will exploit key customer relationships across multiple 
sectors. We will further develop the Synectics brand. 

During 2014 we will continue to implement best practice 
processes. We will continue our programme of increased 
investment in people, facilities, systems, process 
improvements and research & development.

Synectics plc  Annual Report and Accounts 2013

15

www.synecticsplc.com 
 
 
 
 
 
 
 
 
 
Group Financial Results

“
Financial performance in 
2013 was again strong with 
underlying profit before 
tax increasing by 26% to 
£7.1 million as sales increased 
by 7% to £82.4 million.”

Nigel Poultney 
Finance Director

Keeping track of 
Group performance

Group results for the year
Financial performance in 2013 was again strong with profit 
before tax growing by 41% to £6.6 million and underlying 
profit before tax increasing by 26% to £7.1 million as sales 
increased by 7% to £82.4 million.

Cash generation was weaker than in 2012 with free 
cash flow in the year of £0.3 million as working capital 
increased at 30 November 2013 as a result of a number 
of large projects completing around the year-end date, 
and increased capital investment during the year. 
Year-end net cash was £1.2 million (2012: £4.6 million).

Other key performance indicators are discussed in more 
detail on the following pages.

In February the Group completed the acquisition of the 
remaining 49% outstanding share capital in Indanet AG 
for £1.4 million and subsequently changed its corporate 
structure to that of a GmbH to streamline its management 
processes. In July the company acquired the remaining 
80% outstanding share capital in Coex Services Asia Pte 
Ltd (‘CSA’) for an initial net consideration of £0.5 million in 
cash, £0.4 million in Synectics shares and the transfer of 
the Group’s 20% interest in O&G Vision Pte Ltd (‘O&G’), 
a sister company to CSA, valued at £0.1 million.

During the year the Group continued the consolidation 
of its businesses so that the Group now comprises two 
divisions, Systems and Integration & Managed Services 
(‘IMS’). Therefore the segmental information reported 
below and throughout this Annual Report and Accounts 
reflects this organisational structure, with 2012 results 
restated accordingly. 

Key performance 
indicators

Our performance is measured 
principally using the following 
financial indicators.

Our Key Performance 
Indicators continue 
on the following pages

Revenue (£m)
+7%

m
0
7.
7
£

.

m
4
2
8
£

m
1
.
9
6
£

Gross margin (%)
-2.1%

%
9
1.
3

%
5
4
3

.

%
4
.
2
3

11

12

13

11

12

13

16

Synectics plc  Annual Report and Accounts 2013

Performance Reviewwww.synecticsplc.comKey performance indicators

Measure

Revenue (£ million) 

Gross margin % 

Underlying operating profit (£ million)

Operating profit before non-underlying items*  
and goodwill impairment  

Underlying profit before tax (£ million)

Profit before tax, non-underlying items*, goodwill impairment 
and adjustments to deferred and contingent consideration 

2013

82.4

2012

77.0

Inc/(dec)

5.4

Inc/(dec)

7%

32.4%

34.5%

(2.1%)

 7.2 

 7.1 

5.7

5.7

1.5

1.4

Underlying operating margin %

8.8%

7.4%

1.4%

Ratio of underlying operating profit to revenue 

Diluted basic earnings per share (p) 

Diluted underlying earnings per share (p)

Based on underlying profit before tax 

Order book (£ million) 

Recurring revenue (£ million)

Contracted sales where a service is delivered over a future 
time period and revenues are recognised in the relevant 
future accounting period 

 29.4 

 32.6 

 28.1 

 15.6 

20.7

25.2

36.9

16.7

8.7

7.4

(8.8)

(1.1)

26%

26%

42%

29%

(24%)

(7%)

Recurring revenue as % of total revenue 

18.9%

21.7%

(2.8%)

Net cash (£ million)

Cash balances net of loans 

Working capital % 

Working capital as % revenue 

 1.2 

4.6

(3.4)

(74%)

18.0%

13.3%

4.7%

Free cash flow (£ million)

 0.3 

6.5

(6.2)

(95%)

Cash flow from operations less capital expenditure, but 
before any payments in respect of non-underlying items 

Cash conversion %

4.7%

113.8%

(109.1%)

Ratio of free cash flow to underlying operating profit 

*

Non-underlying items 
comprise restructuring costs, 
acquisition costs, share-based 
payment charge, amortisation 
of acquired intangibles and 
reclassification of 
available-for-sale financial 
assets to profit or loss.

Underlying operating 
profit (£m)
+26%

m
2
7.
£

m
7
.
5
£

m
5
.
3
£

Underlying profit  
before tax (£m)
+26%

m
1
7.
£

m
7
.
5
£

m
5
.
3
£

Underlying operating margin 
(%)
+1.4%

%
8
8

.

%
4
7.

%
1
.
5

11

12

13

Operating profit before 
non-underlying items* and 
goodwill impairment.

11

12

13

Profit before tax, non-underlying items*, 
goodwill impairment and adjustments to 
deferred and contingent consideration.

11

13
12
Ratio of underlying operating 
profit to revenue.

Synectics plc  Annual Report and Accounts 2013

17

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Group Financial Results continued

Income Statement
Overall Group revenue for the year to 30 November 2013 
amounted to £82.4 million compared with £77.0 million 
in the previous year, an increase of £5.4 million (7%).

Revenue split between our two business segments was 
as follows:

 2013 
£000 

 2012 
£000 

 Inc/
(dec) 
£000 

 Inc/
(dec) 

 44,753 

 38,913 

 5,840  15.0%

Revenue 

Systems 

Integration & Managed 
Services 

Sales by 
geographic 
destination 
of end-user

 2013 
£000 

 2012 
£000 

Inc/
(dec) 
£000 

UK 

45,284

55% 48,390

63% (3,106)

Rest of Europe 

5,277

6% 6,961

9% (1,684)

UK and Europe 
– total 

North America 

Middle East 

50,561

61% 55,351

72% (4,790)

5,062

5,739

6%

7,192

9% (2,130)

7% 10,647

14% (4,908)

Asia and Pacific

18,892

23% 3,157

4% 15,735

Rest of World 

2,109

3%

692

1% 1,417

 38,368   39,460 

 (1,092)

(2.8%)

Total revenue

82,363

100% 77,039

100% 5,324

Consolidated gross margins for 2013 fell by 2.1% largely 
as a result of the impact of the large Far Eastern contract 
in the Systems division, noted above. 

The full segmental analysis is as follows:

Gross margin % 

Systems 

 2013 

 2012 

 Inc/
(dec)

38.5% 42.6% (4.1%)

Integration & Managed Services 

24.7% 25.4% (0.7%)

Total Group 

32.4%  34.5% 

(2.1%)

Intra-Group 

Total revenue 

 (758)

 (1,334)

 576 

82,363

77,039

5,324

6.9%

The Systems division reported strong sales growth 
in the year primarily as a result of the contribution from 
the significant contract won through our Singaporean 
subsidiary with a new customer in the Far East, which 
we announced in March, and continuing growth in its 
oil & gas sector activities.

Conversely sales from the IMS division contracted 
by 2.8% mainly as a result of reduced activity in the 
managed services business which principally addresses 
the multi-site retail sector.

For the first time 2013 saw sales of our proprietary 
products and technology, through the Systems division, 
outstripping the sales of the IMS division. 

Recurring revenue in the year fell from £16.7 million 
(21.7% of total sales) to £15.6 million (18.9% of total sales) 
largely as a result of reduced contracted sales in the 
managed services business.

The proportion of sales arising outside the UK (measured 
by the destination of the end-user) continued to grow 
reaching 45% in 2013, compared with 37% in the 
previous year, boosted by the substantial contract 
delivered through our Far East hub in Singapore.

Diluted basic earnings 
per share (p)
+42%

p
4
9
2

.

p
7
.
0
2

p
0
.
0
1

11

12

13

 Diluted underlying 
earnings per share (p)
+29%

p
6
2
3

.

p
2
.
5
2

p
2
.
6
1

11

12

13
Based on underlying profit 
before tax.

Order book (£m)
-24%

.

m
9
5
3
£

.

m
9
6
3
£

m
1
.
8
2
£

11

12

13

18

Synectics plc  Annual Report and Accounts 2013

Performance Reviewwww.synecticsplc.com 
 
 – 

3,993

(3,993)

Underlying profit 

19,985 26,078

(6,093)

(23.4%)

Finance income/(costs) 

Finance income

Finance costs

 2013 
£000 

245

(338)

Net underlying finance costs

(93)

 2012 
£000 

244

(297)

(53)

 Inc/
(dec) 
£000 

 Inc/
(dec) 

1

0.4%

(41) 13.8%

(40) 75.5%

Adjustment to deferred and 
contingent consideration

Net total

–

4,252

(4,252)

(93)

4,199

(4,292)

Consolidated underlying profit before tax was £7.1 million 
in 2013 compared with £5.7 million in the year to  
30 November 2012.

Profit from the Systems division grew by 17.5% on the 
back of 15.0% revenue growth, whilst reduced sales in 
the IMS division led to lower profitability mainly in the 
managed services activities.

 2013 
£000 

 2012 
£000 

 Inc/
(dec) 
£000 

 Inc/
(dec) 

Systems 

7,009

5,964

1,045

17.5%

Integration & 
Managed Services 

2,223

2,653

(430)

(16.2%)

Central costs 

(2,015)

(2,906)

891 (30.7%)

Underlying operating profit 

7,217

5,711

1,506

26.4%

Interest 

Underlying profit 
before tax 

(93)

(53)

(40) 75.5%

7,124

5,658

1,466

25.9%

Research & development costs are charged to the division 
benefiting from the service provided by the Synectics 
Technology Centre, principally the Systems division. 
In 2013 £2.7 million was spent on research & development 
with £1.7 million charged to the Income Statement after 
capitalisation of £1.0 million of development costs. 
This compares with total expenditure of £2.0 million 
in 2012 of which £0.6 million was capitalised.

Underlying operating expenses fell by 6.7% to £19.5 million 
largely as a result of reduced payroll costs and professional 
fees included in central costs.

 2013 
£000 

 2012 
£000 

 Inc/
(dec) 
£000 

 Inc/
(dec) 

19,482 20,877

(1,395)

(6.7%)

562

265

973

 – 

(411)

265

78

119

(41)

123

116

7

(525)

–

503

1,208

(525)

(705)

Operating expenses 

Underlying 
operating expenses

Non-underlying items:

Restructuring costs

Acquisition costs

Share-based 
payment charge

Amortisation of 
intangible assets

Reclassification of 
available-for-sale assets 
to profit or loss 

Impairment of 
Indanet goodwill

Total operating 
expenses

Non-underlying operating expenses amounted to 
£0.5 million (2012: £1.2 million) and included restructuring 
costs of £0.6 million arising from the reorganisation and 
consolidation of the Group’s activities into two divisions, 
and acquisition costs of £0.3 million incurred in acquiring 
the outstanding share capital not previously held by the 
Group in both Indanet and CSA.

These amounts were offset by £0.5 million representing 
the value of the Group’s 20% stake in both CSA and O&G 
prior to the acquisition of CSA, which was credited to the 
Income Statement at the point of acquisition in 
accordance with step accounting principles.

Finance costs in 2012 were distorted by the recognition of 
a £4.3 million credit arising from the renegotiation of the 
deferred and contingent consideration conditions of the 
Indanet acquisition. If this item is disregarded then net 
finance costs in 2013 increased by £40,000 to £93,000. 
The increase arises as a result of a reduced net cash 
position and the additional debt taken on during the year 
as described below.

Recurring revenue (£m)
-7%

.

m
4
5
1
£

.

m
7
6
1
£

m
6
.
5
1
£

11

12

13
Contracted sales where a service is delivered over 
a future time period and revenues are recognised 
in the relevant future accounting period.

Recurring revenue  
as % of sales
-2.8%
%
3
.
2
2

%
7
1.
2

%
9
.
8
1

11

12

13

Working capital %
+4.7%

%
0
8
1

.

%
6
.
6
1

%
3
.
3
1

11

12
Working capital as % of revenue.

13

Synectics plc  Annual Report and Accounts 2013

19

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
 
 
Group Financial Results continued

Group underlying operating margins continued to advance 
in the year to reach 8.8% compared with 7.4% in 2012.

Underlying operating margins 

 2013 

 2012 

 Inc/
(dec) 

Systems 

15.7% 15.3% 0.4% 

Integration & Managed Services 

5.8% 6.7% (0.9%)

Total Group 

8.8%

7.4% 1.4% 

Property, plant and equipment 

The tax charge for 2013 was £1.7 million compared with 
£1.3 million in 2012. The underlying tax rate (being the 
percentage ratio of the tax charge for the period to 
underlying profit before tax, after adding back the tax 
effect of non-underlying items), was 23.5% (2012: 27.5%) 
and benefited from both reduced UK corporation tax rates 
and a lower average tax rate applicable to the Group’s 
Singaporean subsidiary.

At 30 November 2013 the Group had total tax losses 
of £1.9 million (2012: £0.6 million) of which none has 
yet been recognised in the financial statements.

Diluted basic earnings per share for 2013 were 29.4p 
compared with 20.7p in the year ended 30 November 2012.

However, the Directors believe that a better measure of 
performance is the diluted underlying earnings per share 
which is calculated on the underlying profit before tax as 
defined above. This earnings per share measure improved 
by 29% to 32.6p compared with 25.2p in 2012.

Earnings per share 

Diluted basic earnings 
per share 

Diluted underlying 
earnings per share 

 2013 
p 

 2012 
p 

 Inc/
(dec) 
p 

 Inc/
(dec) 

 29.4 

 20.7 

 8.7  42.0% 

 32.6 

 25.2 

 7.4  29.4% 

Statement of Financial Position
The net assets of the Group amounted to £39.5 million 
at 30 November 2013 (2012: £35.1 million) and can be 
summarised as follows:

Intangibles 

Non-current assets

Bank balances 

Other net current assets 

Tax liabilities 

Provisions 

Loans and borrowings 

Net assets 

 2013 
£000 

 2012 
£000 

 2,641 

 1,680 

 22,672   20,669 

 25,313   22,349 

 5,774 

 6,491 

 14,861 

 10,244 

 (1,587)

 (613)

 (244)

 (1,481)

 (4,575)

 (1,850)

 39,542 

 35,140 

Non-current assets at 30 November 2013 were £25.3 million 
compared with £22.3 million at 30 November 2012. 

Total capital expenditure in the year amounted to £2.9 million 
compared to £1.4 million in 2012, reflecting continued 
investment in the future development of the business. 
Major items were £0.8 million spent on a property in 
Scunthorpe to accommodate the growth in the oil & gas 
sector activities and the reorganisation of the Systems 
division, £1.0 million on technology development projects, 
and £0.2 million on MIS systems within the IMS division.

This compares with depreciation and amortisation 
charges of £1.2 million (2012: £1.1 million).

The Balance Sheet value of goodwill increased by 
£1.2 million as a result of the CSA acquisition.

Working capital levels rose by £4.6 million to £14.9 million 
at 30 November 2013, principally as a result of several 
large contracts in progress around the year-end date, and 
lower than typical levels of working capital at the previous 
year end.

Net cash (£m)
-74%

m
6
4
£

.

m
3
1.
£

m
2
1.
£

11

13
Cash balances net of loans.

12

Free cash flow (£m)
-95%

Cash conversion %
-109.1%

m
5
6
£

.

12

m
3
.
0
£

13

m
7
.
2
£

11

%
8
3
1
1

.

%
9
.
6
7

11

12

%
7
.
4

13

Cash flow from operations less capital 
expenditure, but before any payments 
in respect of non-underlying items.

Ratio of free cash flow to 
underlying operating profit.

20
20

Synectics plc  Annual Report and Accounts 2013
Synectics plc  Annual Report and Accounts 2013

www.synecticsplc.com

Performance Reviewwww.synecticsplc.comWorking capital expressed as a percentage of annual 
revenues increased from 13% in 2012 to 18% at 
30 November 2013.

Tax liabilities increased as a result of the increased 
tax charge on higher annual profits, with an increased 
proportion of overseas profits being paid in arrears rather 
than during the year in which the taxable profits arose.

Provisions at 30 November 2013 reduced to £0.2 million 
(2012: £1.5 million) after payment of £1.4 million of 
deferred and contingent consideration for Indanet in 
February 2013.

Cash
The Group ended the year with net cash balances of 
£1.2 million at 30 November 2013 (2012: £4.6 million) 
after deducting loans of £4.6 million drawn to finance 
the acquisition of Indanet and to purchase the property 
in Scunthorpe.

The net cash outflow of £0.7 million in the year 
is summarised in the table opposite. 

Major items include capital expenditure of £2.9 million 
described above, and net cash outlays of £1.9 million to 
acquire the outstanding 49% and 80% of Indanet and 
CSA respectively, which were financed in part by drawing 
£3.0 million on the Group’s loan facilities with its UK banks.

Tax payments of £0.7 million in 2013 were substantially 
lower than in 2012. Payments in 2012 included £0.5 million 
of US tax held over from 2011, whilst 2013 benefited from 
the deferral of certain overseas tax payments into 2014.

Dividend payments increased to £1.3 million 
(2012: £1.1 million).

Free cash flow, that is cash flow generated from operations 
less capital expenditure (but excluding any cash flows 
in respect of non-underlying items), was £0.3 million 
(2012: £6.5 million) and represents a cash conversion 
rate of 5% (2012: 114%), being the ratio of free cash 
flow to underlying operating profit.

Cash flows

Underlying operating profit 

Depreciation and amortisation charges

Change in working capital 

Cash from operations before  
non-underlying payments 

Non-underlying items 

Cash generated from operations 

Interest paid

Taxation paid

Capital expenditure 

Acquisitions 

New borrowings 

Issue of shares and share scheme interest 
realised in the year 

Dividends paid

Effect of exchange rate changes 

Net cash flow 

Cash at the beginning of the year 

Cash at the end of the year 

Free cash flow 

Cash conversion 

2013 
£000

7,217

1,048

2012 
£000

5,711

1,014

(5,029)

1,191

3,236

7,916

(493)

(570)

2,743

7,346

(93)

(53)

(731)

(1,745)

(2,898)

(1,417)

(1,858)

2,952

–

81

382

249

(1,336)

(1,140)

122

72

(717)

3,393

6,491

5,774

338

3,098

6,491

6,499

5% 114%

Nigel Poultney 
Finance Director

26 February 2014

www.synecticsplc.com

Synectics plc  Annual Report and Accounts 2013

21

IntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Division: Systems

Division: Systems

Synectics’ Systems division provides 
specialist video-based electronic 
surveillance systems and technology 
globally to end customers with 
large-scale highly complex security 
requirements, particularly for oil & gas 
operations, gaming and critical 
infrastructure protection. 

Revenue
Gross margin
Operating profit*
Operating margin*

£44.8 million (2012: £38.9 million)
38.5% (2012: 42.6%)
£7.0 million (2012: £6.0 million)
15.7% (2012: 15.3%)

At the beginning of 2013 all of the Group’s proprietary 
Synectics branded surveillance systems activities were 
brought together under a single operating and 
management structure. This move has included the 
integration of Systems’ two UK assembly, testing and 
system acceptance operations into one new facility near 
Scunthorpe, which will open in the first half of 2014.

Given this level of change and inevitable disruption, the 
division produced a good overall performance for the year.

The main highlight of the year was the award by a new 
customer in the Far East of the first phase of what we 
believe to be the largest and most technically demanding 
single-site physical surveillance system in the world. The 
system was delivered on time last November, and has 
since been operating successfully at the customer’s 
location. Final acceptance testing is expected to be 
complete shortly. The contract provides for significant 
continuing maintenance and upgrade work, and we 
anticipate additional follow-on orders. We expect this 

system to act as a powerful reference site for future sales 
in the region and elsewhere.

Also in the Far East, Synectics completed the acquisition 
of the outstanding 80% shareholding of Coex Services 
Asia Pte Limited, based in Singapore. Coex Services Asia 
has acted for many years as Synectics’ agent and partner 
in the region for the oil & gas sector. The very capable 
management team from Coex Services Asia is now taking 
the lead in integrating our sales and engineering personnel 
from other customer sectors to form a new Far East 
operating hub for all of Synectics’ activities.

Further progress was made in cementing Synectics’ 
position as the leading supplier of surveillance systems 
to the several massive LNG developments taking place 
off the coast of Australia. During the year, we delivered 
a further phase of the Chevron-managed Gorgon project, 
and were confirmed as the chosen video surveillance 
supplier for the £25 billion Ichthys project, led by the 
Japanese oil company Inpex.

Oil & Gas, Heavy Industrial and Marine
2013 was another record year for the oil & gas team who 
once again delivered an outstanding performance and a 
significant number of projects including Gorgon and the 
TAKREER Inter-Refineries Pipeline project expansions. 

The global market for oil & gas continues to show healthy 
signs of growth. We anticipate 2014 will present new 
challenges as competition intensifies, but with strong 
customer and primary contractor relationships and a 
number of major projects in the pipeline, we remain 
confident and predict positive results in 2014.

Going forward Synectics will continue to maintain 
momentum in its core markets, Middle East and 
Asia-Pacific, whilst actively pursuing opportunities 
in the US as part of our market entry strategy, having 
strengthened our business development resource. 

*

Before non-underlying items 
and Group central costs.

22

Synectics plc  Annual Report and Accounts 2013

Performance Reviewwww.synecticsplc.comRevenue (£m)
+15%

m
8
.
4
4
£

m
9
.
8
3
£

m
7
.
8
2
£

Gross margin (%)
-4.1% 

%
5
.
2
4

%
6
.
2
4

%
5
.
8
3

Operating profit (£m)
+18% 

Operating margin (%)
+0.4% 

m
0
7.
£

m
0
.
6
£

m
8
.
3
£

%
3
.
5
1

%
7
.
5
1

%
4
.
3
1

11

12

13

11

12

13

11

12

13

11

12

13

2014 will also see the launch of a revised range of 
COEX™ camera stations with HD resolution, and 
in-built IP functionality developed specifically for 
high temperature operation.

The shipping and marine sector is critical to the 
global economy and we continue to see real growth 
opportunities in this market. 

We are actively promoting a technology shift in the 
shipping and marine sector which is to combine the 
image-capture quality of evolving camera stations with 
enhanced integration capabilities of intelligent monitoring 
and control systems, so that shipping and marine 
companies can keep assets secure while also enhancing 
overall operational efficiencies.

We are actively building on last year’s successful 
performance working with the dominant Korean 
shipyards and are rapidly developing a good reputation 
in this market.

In 2013 Synectics delivered and commissioned solutions 
for eight LNG carriers, six specialist vessels, two navy 
vessels and 16 container ships.

We also received Det Norske Veritas (‘DNV’) type approval 
for our COEX™ range of camera stations in 2013.

Gaming 
In 2013 Systems’ performance in the gaming sector 
produced the best overall results to date. North American 
and UK sales remained strong but with few new casino 
builds last year, our major wins were focused on system 
replacements and upgrades from key repeat customers. 

While we expect to win several new gaming customers 
in the coming year, new casino construction remains 
relatively flat in the US, so the majority of Systems’ 
business will once again come from recurring gaming 
customers. We will focus on servicing and supporting 
core clients while cultivating new opportunities through 
resellers, tradeshows and PR.

Converting ageing analogue systems to hybrid and 
IP-based technologies and upgrading existing systems 
to Synectics’ new Synergy3™ software platform present 
key opportunities which we expect to drive demand 
from new and existing customers.

The biggest gains in 2013 came from the Asia-Pacific 
region where we delivered and deployed a 5,000 channel 
system in one of the world’s largest and most demanding 
gaming properties. In addition, Synectics made further 
inroads into the cruise ship market with new system sales 
to Star and Norwegian cruise lines. Synectics also secured 
its first casino project in the Philippines which has already 
led to another significant regional win for 2014. 

On the heels of these initial successes in Southeast 
Asia, we are pursuing and quoting other major gaming 
opportunities in Macau, Singapore and the Philippines 
which we expect to bear fruit in 2014 and beyond. 
The Asia-Pacific gaming market remains quite robust 
with large new or expansion projects planned in Macau, 
Manila and Korea. Synectics’ new encoders and IP cameras 
have been well received in the region, high profile 
customers are pleased with Synectics’ performance and 
Synergy™, our command and control software platform, 
remains amongst the most capable and popular in the 
industry. Synectics’ new Synergy3™ command and 
control software platform is designed to enhance our 
competitive position. 

Several of Synectics’ established Asian and North American 
corporate customers are also developing casino properties 
in the UK, Spain and throughout Europe. We are actively 
collaborating with various influencers and sales teams 
to leverage key top level relationships to our global 
advantage in all regions. 

Overall, Synectics continues to grow its customer base 
and product reputation and maintains a top tier brand 
presence in the global gaming market.

P
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Synectics plc  Annual Report and Accounts 2013

23

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
 
 
 
 
 
 
 
 
 
Division: Systems continued

Critical Infrastructure, High Security 
and Public Space
Synectics has a long track record of delivering solutions 
for critical infrastructure protection, high security, 
and environments where protecting people and 
assets is critical.

We continued to deliver innovative solutions to a number 
of critical infrastructure projects during 2013, including 
a complex multi-site system for a major utilities provider.

As we see this market developing to require even more 
intelligent integration, Synectics is ideally placed to deliver 
end-to-end solutions in this market and we believe we are 
building a unique and powerful capability here – developing 
from video surveillance to a more evolved command and 
control system, bringing together disparate systems 
across multiple sites.

Transport – Europe
This market is addressed by our European operation, 
Indanet, based in Munich. In the early part of 2013 we 
concluded the acquisition of the remaining 49% of its 
outstanding shares, two full years ahead of plan, allowing 
us to take full management control and accelerate 
integration with the rest of the Group.

The European transport market is growing fast with 
an estimated 11 billion passenger journeys last year 
in Germany alone. Operators face a variety of safety 
and security threats such as crime, vandalism, 
environmental and dangerous passenger situations. 

Indanet works closely with leading transport operators 
such as Berlin BVG, Frankfurt VGF, Munich SWM and 
Deutsche Bahn, as well as suppliers such as Siemens 
Transportation and Stadler to help them address these 
threats by enabling quick and effective action via 
centralised command and control systems. These 
systems perform advanced analytics on data collected 
from video and other sensors which in turn helps 
operators predict and prevent problems before they 
arise. These capabilities lead to a reduction in crime, 
faster law enforcement response and cleaner stations 

as well as helping passenger transport companies to 
attract and retain business and improve the well-being 
of passengers on their trip.

For Mobile Train Solutions we expect to see significant 
investments in IP-based technologies in the European 
market during 2014. This technology forms the basis for 
more intelligent train systems which integrate many 
aspects of surveillance, passenger information and train 
equipment status reporting systems. Indanet’s Data-Hub 
Spider solution is already being implemented by 
Deutsche Bahn on its Regional Trains. 

The adoption of Synectics’ proprietary system technologies 
into the Indanet portfolio will enable them to access other 
market sectors throughout the European region.

Research & Development
The Synectics Technology Centre (‘STC’) operates as 
a centralised development unit for the Group as a whole 
and has played a key role in helping Synectics secure 
and deliver a number of major project successes during 
the year. 

In order to improve our ability to meet highly complex 
bespoke project specific development requirements we 
continued to strengthen the STC team and invested in 
developing more standardised proprietary system 
components during 2013. 

Synectics delivers the same underlying platforms across 
all sectors with shared hardware, firmware and software 
with only minor sector-specific modifications.

A number of new developments have been launched 
in 2013, these include:

EcoNaSS
In many environments the recurring costs of powering 
and cooling the equipment and data centres needed for 
enterprise video storage systems is high. The EcoNaSS 
product was introduced to significantly reduce these 
costs by using intelligent hard drive powering techniques 
to ensure only drives being written to or read from are 
active at any time. Coupled with a linear file system to 

24

Synectics plc  Annual Report and Accounts 2013

Performance Reviewwww.synecticsplc.comP
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prolong hard drive life and reduce power consumption 
even when writing data, the EcoNaSS draws less than 
70W of power to provide a useable 45TB of storage. 
This typically produces energy savings of 50% on average.

Synergy Reporting Engine
KPI Reporting has long been an important aspect of our 
customers’ operations yet obtaining the relevant data and 
producing the reports has been a largely manual process 
of gathering data from numerous systems to create the 
required outputs. The updated Synergy Reporting Engine 
allows system managers to produce complex reports 
simply via either a range of pre-defined templates, or 
by creating their own report styles and data sets in the 
key system operational areas of Incident Management, 
User Activity Logging, Video Exports and Reviews and 
Fault Handling.

Most importantly the user creating the reports needs 
no IT skills such as database knowledge or third party 
reporting tools.

During 2014 we will launch several exciting new products:

 » next generation of our flagship Synergy™ security 

management software platform providing improved 
user interface and tiered levels of functionality to suit 
varying operational requirements. The next generation 
of the Synergy™ platform has been undergoing 
extensive on-site beta testing during the latter part 
of 2013 with a launch scheduled for Spring 2014;

 » new enterprise storage platforms to significantly 
increase the volume of video data throughput. 
This will become increasingly important with the 
continuing industry shift to HD and the forthcoming 
introduction of UltraHD cameras;

 » new on-vehicle hybrid recorder utilising the e1600 

encoder technology platform;

 » new Video Management System (‘VMS’) keyboard 

controllers; and

 » improved HD camera products based on class 
leading sensor technology also with UltraHD 
resolution capability.

Contract highlight: 

Synectics has designed and delivered a critical system 
for a multi-purpose construction vessel, destined to 
support projects in Brazil. To ensure operators have the 
complete picture, the system solution incorporates 
more than 50 monitor locations, many using Synectics’ 
Micro Display Wall Units to show multiple camera 
feeds. Integration to remotely operated underwater 
vehicle (ROV) control and pipe laying systems, as 
well as interfaces to the vessel’s video conferencing 
facilities, are also included within the design and scope 
of this system. 

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Division: Integration & Managed Services

Division: Integration  
& Managed Services

Synectics’ Integration & Managed 
Services (‘IMS’) division is one of  
the leading UK providers of design, 
integration, turn-key supply, monitoring 
and management of large-scale 
electronic security systems. Its main 
markets are in critical infrastructure, 
transport, public space and multi-site 
systems. Its capabilities include a 
nationwide network of service engineers, 
UK government security-cleared 
personnel and facilities, and an 
in-house 24-hour monitoring centre 
and help desk. The IMS division 
supplies proprietary products and 
technology from Synectics’ Systems 
division as well as from third parties.

Revenue
Gross margin
Operating profit*
Operating margin*

£38.4 million (2012: £39.5 million)
24.7% (2012: 25.4%)
£2.2 million (2012: £2.7 million)
5.8% (2012: 6.7%)

The divisional reorganisation, management changes and 
new MIS systems implemented in 2013 had a significant 
impact on the Integration & Managed Services division, 
particularly in the critical infrastructure and public space 
systems integration sectors. Despite these changes, 
significant successes were delivered in winning a major 
new national multi-year supply and maintenance contract 
for Go-Ahead Group in the transport sector, expansion of 
our ongoing contract with Magnox for nuclear sites, and 
a number of contracts for UK prisons and police facilities. 

Particularly pleasing was the success of our pilot local 
government CCTV control room management outsourcing 
project for Luton Borough Council. We believe this area 
offers substantial opportunities in the consolidation of 
adjacent local authority CCTV control rooms into single 
centres, generating substantial savings for the authorities 
and improved operating effectiveness.

*

Before non-underlying items 
and Group central costs.

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-3% 

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Gross margin (%)
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The IMS division was also recognised by the international 
security industry for its role in the protection of competitors 
and the public at the Olympics sailing events in Dorset in 
2012, receiving the coveted ‘Security Project of the Year’ 
at the UK’s premier security equipment trade show, 
IFSEC 2013.

Financial performance for the year was held back by the 
profile of our multi-year managed services contracts being 
more weighted towards early years, where lower margins 
are usual, and by delays in closing out a large integration 
project. The latter issue has been closely addressed as 
part of the organisational and MIS changes referred to 
above and should not recur.

As a result of the restructuring, the level of intra-Group 
co-operation within different sectors of the IMS division, 
and between the IMS division and the Systems division 
has already increased markedly. The ability of the 
organisation to act effectively in cross-selling and in 
combining customer offerings across system design, 
supply, integration, maintenance and outsourced 
management is a critical element of the Group’s strategy. 

We expect tangible benefits to flow from this approach 
in the current year, and an improved result from the 
IMS division for 2014.

Justice & Blue Light
In 2013 the IMS division secured a major contract with 
Avon & Somerset Police to develop and deliver security 
and CCTV solutions. Success in this sector is the result 
of a strong consultancy approach – working closely with 
clients, consultants and providers of complementary 

technology to deliver fully integrated multi-discipline 
security management solutions across a wide range of 
locations, including custody suites and training facilities. 
We are actively working with over 25% of all Police Forces 
and as spending on security technology within the 43 UK 
Police Forces continues we are well-placed to further 
develop new business in 2014.

High Security
The IMS division strengthened its sales team to focus 
on the opportunities within this sector and relationships 
are developing positively with a number of organisations. 
The specialist team has not only increased the number of 
relationships in this sector, but is also using cross-Group 
innovation to deliver services that are unique in the market 
and have the potential to disrupt traditional security models.

Banking & Finance
In the Banking & Finance sector there is an increasing 
trend to look to outsource security services to Facilities 
Management providers, as well as invest in security 
technology, to reduce manpower and other operating 
costs. This is in part driven from US parent company 
initiatives, a trend we expect to see continue over the 
next year. In response to this initiative, we have taken 
steps to strengthen relationships with key clients in the 
sector. The IMS division is now recognised as a strategic 
partner adding value in the area of risk mitigation.

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Division: Integration & Managed Services continued

Public Space & Commercial
The IMS division continues to deliver added value 
solutions to a large number of local and central 
government security operations throughout the UK. 
As budgets for non-essential services are coming under 
increasing pressure, our position in the market remains 
strong and we are able to provide additional service 
beyond the traditional CCTV installation market which 
has grown significantly in recent years.

Managed Services
2013 saw the first full year of operation of the Luton 
control room which was outsourced to Synectics in early 
2013. Our specialist team has received repeated praise 
for support given to local police forces in apprehending 
suspected criminals, and we have delivered on the value 
adding promises we made at the outset of the contract. 
Despite the challenging budgetary restrictions being 

imposed on local authorities, the IMS division continues 
to win more business in this sector. 

A key focus area in 2013 was to engage and secure 
contracts with new clients in both the Security and 
Facilities Management arenas via a revised sales 
strategy and market proposition. As a result six new 
clients were secured.

The outlook for 2014 remains positive as we further 
develop our integrated security solution offering.

Transport – UK, EMEA, APAC
2013 was a very successful year for our UK-based 
Mobile Systems team. We retained a major contract 
with Stagecoach and won a further new strategic contract 
with Go-Ahead, from a key competitor. We also expanded 
our sales in exports and other diversified markets.

Contract highlight: 

Synectics is developing a strategically-driven 
partnership with Go-Ahead Group, one of the UK’s 
top five bus operators. Synectics will supply, install, 
maintain and support CCTV systems on Go-Ahead’s 
fleet of 4,600 buses as well as develop an integrated 
software solution using the latest technology and a 
specialist security control-hub to combine Go-Ahead’s 
on-vehicle CCTV with other critical business systems. 
The solution will enable Go-Ahead’s comprehensive 
CCTV equipment to deliver added business benefits – 
reduce costs, improve efficiency and make surveillance 
footage easier to access and utilise.

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The two big contract awards, each worth more than 
£5 million over three years, provide an excellent foundation 
for growth and opportunities in the UK bus and coach 
market and have propelled us to a market leading position 
in the UK.

The export market for Synectics’ mobile systems 
is expanding significantly. The Mobile Systems team 
has made good progress working in partnership with 
Alexander Dennis to supply CCTV and multi-media 
systems to the Asia-Pacific region, particularly  Hong Kong. 
Our overseas sales in this sector increased by 110% 
in 2013. We anticipate continuing strong demand 
particularly from Asia and the Middle East and are  
working closely with bus manufacturers and overseas 
operators to capitalise on these opportunities.

Market opportunities are continuing to develop in other 
transport sectors with market and product diversification 
in blue light, rail and tram, and cash-in-transit. The Mobile 
Systems team secured a number of key sales in the year 
and is at an advanced stage on a number of potential 
opportunities for 2014. 

Growth in the rail and tram market is expected to accelerate. 
With the largest market being EMEA, and with existing 
relationships with operators, we are well-placed to make 
further inroads in this market.

In 2013 our overseas sales 
in this sector increased by 

110% 

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Risks and Risk Management

Understanding and managing  
key risks to the Group

The Group seeks to understand and 
manage the various risks that arise 
from its operations. The Group is 
subject to a variety of risks which may 
have an adverse impact on the 
business, results of operations, cash 
flow, turnover, profitability, assets, 
liquidity and capital reserves. 

The principal risks facing the Group, 
and the strategies put in place to 
mitigate them, are described here.

The Board of Directors, advised by the Audit Committee, 
has overall responsibility for the Group’s system of internal 
control and for reviewing its effectiveness. Responsibility 
for implementing sound and effective systems of internal 
control has been delegated by the Board to senior 
management. The purpose of the system of internal 
control is to manage rather than eliminate the risk of 
failure to achieve business objectives and can only provide 
reasonable, but not absolute, assurance against material 
misstatement or loss. 

The Directors have established an organisational structure 
with clear operating procedures, lines of responsibility and 
delegated authority. In particular there are clear procedures 
for capital investment appraisal and approval, contract risk 
appraisal and financial reporting within a comprehensive 
financial planning and accounting framework. 

Given the size and growth of the Group a dedicated 
internal audit function has been put in place during 
the year to give additional assurance on controls and 
supplement the work undertaken by the external auditor.

Reputational risk

Risk
Things which may impact 
the business

The nature of the Company’s business and 
its customer base mean that Synectics is 
particularly dependent for future business on 
its reputation in the marketplace, particularly 
for the quality and reliability of its products 
and services, and the overall integrity of  
its people.

Price & margin 
pressure

The electronic security industry in general 
is competitive with continued pressure 
on sales and margins.

Technological  
risk

People skills & 
dependency

Exchange 
rate risk

Contractual 
liabilities

Integration risk

As the industry becomes increasingly 
technical and transitions to digital technology, 
there is a risk that products become obsolete 
or irrelevant.

As with most businesses, particularly those 
operating in a technical field, we are 
dependent on our employees with key 
managerial, engineering and technical skills.

The Group operates internationally giving 
rise to exposure from changes in foreign 
exchange rates.

Where the Group’s product or service offering 
fails to meet agreed standards or timescales 
there is a risk that the Group will be exposed 
to claims for contractual liabilities as a result 
of this failure.

The implementation of the Group’s strategic 
business plan is challenged by the risks of 
managing two different business models.

30

Synectics plc  Annual Report and Accounts 2013

Performance Reviewwww.synecticsplc.comMitigation
What we are doing to minimise the risk

The Group addresses this risk by the Board and all levels of management consistently emphasising that those attributes 
are embedded in the culture of the Group, and by regularly seeking feedback from customers and employees.

We will continue to focus on customer sectors where electronic security systems have a critical cost of failure, or an 
extreme environmental requirement, rather than the mass volume markets. In addition we will maintain a core of 
increasingly software-based proprietary technology giving higher margin opportunities, and focus on developing 
recurring revenues.

Synectics has countered this risk through its investment in research & development resources, and a continued focus 
on customer led development to ensure that the most appropriate product development paths are followed.

The Group aims to offer appropriate remuneration packages and incentive arrangements, as well as maintaining certain 
key-man insurance policies, in order to mitigate this risk.

The Group manages this risk principally through forward exchange contracts. As the Group expands its sales and other 
activities outside the UK, these policies will be further developed to manage the impact of currency variations.

The Group maintains rigorous quality standards in all its operations and carefully assesses the terms on which it agrees 
to enter into contractual relationships at appropriate levels of responsibility.

We have taken steps to reorganise Synectics plc around the two business models, with clear senior level accountability 
for each model.

Read more about how the 
Group manages risk in the 
Corporate Governance 
Statement from page 36

The Audit Committee 
advises the Board of 
Directors on matters of risk 
management. They have 
their own report, which can 
be read on page 44

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Board of Directors

The Board of Directors

Board composition

The Board of Synectics comprises, 
in addition to the Chairman, three 
independent Non-Executive Directors 
and two Executive Directors. 
Membership of each of the Audit 
Committee and the Remuneration 
Committee is made up solely of the 
three independent Non-Executive 
Directors. That structure has been in 
place for nearly three years, and 
follows the Code provisions 
for listed companies of any size.

Non-Executive Directors

Executive Directors

David Coghlan
Chairman

has degrees in Law and in Finance from the 
University of New South Wales in Sydney  
and an MBA from Wharton in Philadelphia.  
He was formerly a partner at strategy 
consultants Bain & Company. He is currently 
a director of AIM-quoted SCISYS plc and 
chairman and/or a director of several other 
companies, mainly in the electronics 
technology field.

Dennis Bate CBE
Independent Non-Executive Director

has 53 years of experience in the construction 
industry, of which 38 years were spent with 
Bovis, most latterly as board director 
responsible for Bovis’ operations in the UK 
and Eastern Europe, and then Bovis’ Lend 
Lease operations. He was awarded the CBE 
for his services within the industry.

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Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comNon-Executive Directors

Executive Directors

Steve Coggins
Independent Non-Executive Director

John Shepherd
Chief Executive

has held various senior roles in both sales and 
marketing and general management in the 
information technology arena including Senior 
Vice-President at both Amdahl (now part of 
Fujitsu) and at Silicon Graphics. Earlier he 
spent time at IBM and also in engineering 
computing in the aircraft industry.

has a degree in Electronic Engineering 
from the University College of North Wales 
and he is a fellow of the RSA. He is a former 
Managing Director of Smiths Detection 
Division, former CEO of First Technology plc 
and former Non-Executive Chairman of 
FTSA Holdings Ltd.

Peter Rae
Senior Independent Director

Nigel Poultney
Finance Director

is an Independent Non-Executive Director 
and is a graduate of Cambridge University, 
and formerly Chief Executive of S.W. Wood plc 
(now Wyndeham Press plc). He has current 
interests in a wide range of engineering and 
other businesses.

has a degree in Business Studies from  
Aston University, and qualified as a Chartered 
Accountant with Deloitte, Haskins and Sells 
in 1981. He joined Synectics plc in 1991, 
having previously worked for Dairy Crest 
and the RTZ group.

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www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Chairman’s Introduction

“
The Board continues to support 
wholeheartedly the letter and 
spirit of the UK Corporate 
Governance Code, and it 
remains our intent to follow 
Code provisions wherever 
we sensibly can.”

David Coghlan
Chairman

Introduction to governance

Our 2012 Annual Report included 
for the first time a specific section 
reporting on the evolving approach 
of Synectics’ Board to the Company’s 
corporate governance. We view this 
change as an important and very 
positive step in the development of 
our communication with shareholders.

In the introduction to that section last year, I provided a 
progress report on our continuing review of governance 
matters in general as well as a lengthy explanation of the 
rationale behind the views and actions the Board has 
taken on three critically important issues:

 » Values and Leadership; 

 » The Composition, Independence and Effectiveness 

of the Board; and 

 » The Group’s Share-Based Long-Term 

Remuneration Plans. 

A year on, those comments remain both current and 
centrally relevant to the overall picture of Synectics’ 
governance. I won’t repeat them here, but any 
shareholder wishing to will find the 2012 Annual Report 
available on our corporate website.

In this year’s introduction, I would like to focus primarily on 
explaining the Board’s views and policies, and the actions 
we are taking, on two other important governance areas: 
diversity and risk management.

Diversity
Synectics’ policy on diversity has been for a long time 
to recruit the best available candidate for each position, 
while recognising that decision making within our senior 
management teams will be better if such teams incorporate 
diverse viewpoints, backgrounds and experience. Baldly 
stated, that sounds trite and obvious. The crux of the 
issue is what we are doing in practice to assess and 
improve the Group’s performance on this dimension.

Our approach is to:

 » foster a Company culture that is open, respectful of 

individuals and intolerant of any form of discrimination;

 » ensure that performance appraisals of executive 

managers clearly include their progress in recruiting 
and developing well-balanced, effective teams; and

 » help managers, through the Group HR function, to 
recognise that we are all subject to unconscious 
biases that should be explicitly understood in 
recruitment decisions.

A major part of the reason that the Board rotates  
its meetings around the Group operations, and that  
Non-Executive Directors make site visits outside of formal 
meetings, is to help us to assess directly how the various 
senior management teams work together. These are in 
reality subtle and complex matters where the judgement 
and experience of individual Directors are crucial in helping 
the Board to identify issues that may need attention.

A disappointing proportion of the public diversity debate 
has been overly simplistic, for example, often conflating 
gender balance, where a number can be measured, a 

34

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Governancewww.synecticsplc.com©
C
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A
u
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l
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a

Synectics develops long-term 
strategic partnerships with 
our customers and specifically 
organisations that have the 
security and surveillance 
needs of sufficient complexity 
and scale that they value 
the sophistication of our 
capabilities and expertise.

See a selection of contract highlights  
on our website: www.synecticsplc.com

1

Grant Thornton International 
Business Report 2012.

target set and a box ticked, with diversity in the true 
sense. Nevertheless, in 2013 the Board reviewed Synectics’ 
position on that metric. As at 30 November 2013, 29% of 
our senior managers across the Group were female. This 
compares with a recent survey showing a figure for senior 
managers across all UK businesses of 20%1. It is also 
worth noting that two of our female senior managers are 
Operations Directors, usually an area with a strong male 
bias, especially in technical engineering businesses.

During 2013 we continued our support of the ‘Inspirational 
Journey’ initiative aimed at developing our female senior 
managers. The ‘Journey’ aims to provide women with 
greater choice and control in their career, encouraging 
them to exceed their own expectations in pushing 
themselves forward.

This does not mean we are satisfied. Our strategy is for 
Synectics to continue to expand internationally, which 
will mean the challenge of encouraging and managing 
the degree of real diversity the Company needs will 
only grow.

Risk management
During 2012 Steve Coggins was appointed as Chairman 
of the Audit Committee, with a brief that included taking 
a fresh look at our approach to risk management at 
Board level.

One result from that process was an extensive and 
thorough review across last financial year of the risks that 
Synectics faces, both at operating unit and Group levels. 
Specifically, this involved interviews with senior managers 
and with all Directors covering their individual views 
ranking both the likelihood and potential impact of the 
whole range of identified risks. This was then collated 
and discussed by the Board to produce a consensus 
list and ranking which is now monitored and updated 
as necessary at each Board meeting.

In addition, in July 2013 the Audit Committee approved 
a revised and strengthened internal audit programme, 
as described in the Audit Committee Report on page 44.

Synectics is also in the process of implementing IT 
systems upgrades across major parts of the business, 
which will enable enhanced management reporting 
and control, as well as significantly improved business 
continuity plans in the event of a catastrophic failure 
on one or more of our sites.

Collectively these actions have contributed to an improved 
control environment across the Group.

Again, we are not satisfied and there is more to be done, 
particularly as our geographic spread continues to 
increase. The Board does believe, however, that we have 
moved forward substantially in this area over the past year.

As a final point, I would like to provide an update on the 
Board itself. Last year I reported that we were keeping 
under review the right time to make an additional  
Non-Executive Director appointment. It is now our 
intention to initiate a search for such an appointment 
towards the end of 2014.

The Board continues to support wholeheartedly the letter 
and spirit of the UK Corporate Governance Code, and it 
remains our intent to follow Code provisions wherever 
we sensibly can within the constraints of the Group’s size 
and resources.

David Coghlan
Chairman

26 February 2014

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Corporate Governance Statement

The corporate governance disclosures 
include the Chairman’s Introduction, 
the Corporate Governance Statement, 
the Remuneration Committee Report 
and the Audit Committee Report.

The Board
The Board comprises a Non-Executive Chairman, three 
Non-Executive Directors and two Executive Directors. 
The Company believes the size and composition of the 
Board give it sufficient independence, balance and 
broad experience to provide effective oversight of 
Synectics’ strategy, performance, resources and 
standards of conduct. The strong representation of 
Non-Executive Directors on the Board demonstrates 
its independence, provides a greater depth of 
experience and facilitates challenge. 

The roles of the Chairman and the Group Chief Executive 
are undertaken by separate individuals. The Chairman, 
David Coghlan, is responsible for leadership of the 
Board and ensuring that there is effective communication 
with shareholders. The day-to-day leadership and 
management of the business are undertaken by the 
Group Chief Executive, John Shepherd, assisted by 
senior management.

Peter Rae fulfils the role of the Senior Independent 
Director of the Company. He was appointed based on his 
ability to perform the role and his deep knowledge and 
experience of the Group. He supports and deputises for 
the Chairman on matters relating to Directors and 
engagement with shareholders.

The Company Secretary, in conjunction with the Chairman, 
ensures that accurate, timely and clear information is 
provided to the Board in order for informed decisions 
and discussions to take place. The Company Secretary 
is responsible for advising the Board on governance 
matters and regulatory requirements. The appointment 
and removal of the Company Secretary is a matter reserved 
for the Board. All Directors have direct access to the 
Company Secretary and to independent professional 
advice at the Company’s expense as required.

The Company purchases and maintains Directors’ and 
Officers’ liability insurance in respect of the Group, the 
Company and its Directors throughout each financial year.

Role of the Board
Great importance is placed on a well-informed and decisive 
Board. Board meetings are held regularly throughout the 
year. In 2013, seven scheduled Board meetings and two 
additional Board meetings were held. In addition, as it 
does each year, the Board also convened and participated 
in a separate full day’s discussion of the Group’s strategy 
and three-year plan.

The Board has adopted a schedule of matters reserved for 
its consideration and those delegated to Board Committees. 
The Board’s responsibilities include setting the Group’s 
overall business and commercial strategy; setting and 
monitoring business objectives to achieve the strategy; 
setting and monitoring annual budgets, financial and 
capital plans; and considering Group policies and any 
major investments or organisational changes.

Agenda items scheduled for every Board meeting include 
strategy, operations, human resources, finance and 
governance. The agenda is reviewed and agreed by the 
Chairman to ensure that the Board addresses the right 
issues at the right times and that sufficient time is allowed 
for appropriate consideration and debate.

Following Board Committee meetings, the Board receive 
copies of the Committees’ minutes at the next Board 
meeting and can raise any queries or concerns with the 
Committee chairmen.

Board meetings
Board meetings are scheduled in different Group offices to 
give the Board the opportunity to meet local management 
and employees, and to develop greater business knowledge 
and depth of awareness of business specific opportunities 
and threats. All Directors receive papers sufficiently in 
advance of meetings to enable due consideration. 

During 2013, matters dealt with by the Board included:

 » review and monitoring of Group strategy and progress 

against business objectives;

 » operational and financial performance of the Group;

 » group budgets and three-year plan;

 » financial statements and approval of dividends;

 » review and approval of acquisitions; 

 » risk management oversight and monitoring of Group 

risk registers;

36

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comBoard Committees
The Company has two Board Committees: a Remuneration 
Committee and an Audit Committee. The roles and activities 
of those committees are included in the respective 
committee reports on pages 39 to 44. 

The functions of a nominations committee are undertaken 
by the Group Board as a whole. Given the size of the Group, 
and the size and composition of its Board, the Directors 
believe it is both practical and beneficial for matters of 
Board composition and recruitment, Board performance 
evaluation, Executive and Non-Executive succession 
planning, and training and development to be undertaken 
by the Board as a whole. All such matters are regularly 
scheduled on the Board’s agenda and are discussed 
thoroughly and robustly, incorporating the detailed 
perspectives and experience of all Directors directly. 

Board appointments
All Non-Executive Directors are provided with a Letter 
of Appointment on acceptance of the appointment, 
which includes the terms and conditions of their role. 
The Letters of Appointment are updated as appropriate 
from time to time and are available on request from 
the Company Secretary.

Diversity
The Group recognises the benefits of having a diverse 
Board, senior management team and workforce in 
general and seeks to recruit and develop the best-qualified 
candidates to support and achieve the Group’s long-term 
strategic and business objectives. The Group monitors 
and encourages diversity across the whole workforce in 
terms of gender, skills, culture, disability and ethnicity and 
believes such diversity contributes to the success of the 
Group. Further comments on this area are included in the 
Chairman’s Introduction on the previous page. 

 » review of internal controls and approval of internal 

audit plan;

 » review of pension arrangements in light of  

auto-enrolment;

 » board and senior management succession planning;

 » approval of large contracts and bids;

 » approval of large capital expenditure projects;

 » committee reports and recommendations;

 » remuneration of Executive Directors and 

senior management;

 » review of corporate governance reporting; and

 » board and Committee evaluation and progress 

of actions from 2012 evaluation.

Details of attendance at Board and Board Committee 
meetings during the 2013 financial year were as follows:

Total number of meetings

Board 
meetings

Audit 
Committee

Remuneration 
Committee

9

9

9

9

9

9

–

3

3

3

–

–

–

4

4

4

–

–

DJ Coghlan  
Chairman

D Bate

SW Coggins  
Chairman of 
Audit 
Committee

PM Rae 
Chairman of 
Remuneration 
Committee

J Shepherd

NC Poultney

Directors’ conflicts of interest
A Conflicts Register is maintained by the Company 
Secretary to monitor and manage any potential conflicts 
of interest. Training on the Companies Act 2006 has been 
given to all Directors on the provisions and Directors are 
reminded of their duties at each Board meeting. Any 
conflicts are declared at the first Board meeting at which 
the Director becomes aware of a potential conflict and 
then recorded in the Conflicts Register. The Board consider 
all conflicts in line with the provisions set out in the Articles 
and non-conflicted Directors can authorise conflicts with 
or without limits and conditions. The Directors are required 
to review their interests recorded in the Conflicts Register 
on an annual basis.

Synectics plc  Annual Report and Accounts 2013

37

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Corporate Governance Statement continued

Board performance and effectiveness
Induction
The Company’s policy is for all new Directors to undertake 
a formal and comprehensive induction to the Group upon 
joining the Board. The induction process is undertaken by 
the Company Secretarial department. On acceptance of 
appointment all Directors are provided with an induction 
pack, which includes: their appointment letter and terms; 
latest accounts and constitutional documents; protocol for 
conflicts of interest, price-sensitive information, Directors’ 
duties and data protection; Group Model Code and Group 
policies; Board meeting procedures and Matters 
Reserved; Board minutes for the previous twelve months; 
and meeting dates and contact details. Substantive 
induction to the Group’s businesses is provided through 
meetings with senior management and site visits to the 
Group’s operations.

Performance evaluation
The Board undertakes a self-assessment process 
annually. This includes evaluation of the performance and 
effectiveness of the Board, of its Committees and of each 
Director. The process is led by the Chairman and involves 
detailed questionnaires and one-to-one reviews of the 
collective and individual performance of Directors. The 
results of the Board and Committee evaluations are 
debated and challenged, robustly and openly, in a Board 
meeting and actions for improvement are agreed. 
Progress against these actions is then monitored and 
reported on throughout the following year. The 
performance of the Chairman is reviewed in the 
Chairman’s absence by the Board, led by the Senior 
Independent Director. Directors’ individual performance 
and development objectives are set to support individual 
and business needs, as well as the action plan for the 
Board and Committees. 

Independence
As part of the appraisal of each Director, the independence 
of all Non-Executive Board members is reviewed and 
evaluated annually. Peter Rae, Steve Coggins and 
Dennis Bate have served on the Board for sixteen, nine 
and eight years respectively. Each brings different and 

complementary high-level experience relevant to the 
current business and future development of the Group. 
During 2013 and at all times previously each has addressed 
all issues facing the Board with a high level of candour, 
robustness and insight. Their in-depth knowledge of the 
Group and the electronic surveillance industry, gained 
from their tenure, combined with their different and 
complementary skills and knowledge developed from other 
directorships, provide valuable independent perspectives 
and contribute to the success of the Company and to the 
performance and effectiveness of the Board. For these 
reasons, each of the three Non-Executive Directors is 
considered by the Board to be independent.

Shareholder engagement
The Board welcomes dialogue with shareholders and 
actively engages with shareholders through face-to-face 
meetings, written queries, and at the Company’s Annual 
General Meeting. Individual meetings are conducted with 
those substantial shareholders who so request following 
the announcement of final and half year results. The 
Group’s brokers are requested to collate all responses 
from such investor meetings and to pass these to the 
Board. In addition, the Chairman apprises all Board 
members of any other significant shareholder feedback 
or discussions. As part of the continued review of the 
Company’s governance reporting, these 2013 Annual 
Report and Accounts include expanded narrative 
governance disclosures that take into account the 
views of shareholders expressed through the 
engagement process.

By Order of the Board

David Coghlan
Chairman

26 February 2014

38

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.com 
Governance
Remuneration Committee Report

This report provides information 
about the Remuneration Committee, 
the remuneration policies approved 
and applied by the Board, and the 
actual remuneration of Directors for 
the year ended 30 November 2013. 
This report does not constitute a 
directors’ remuneration report in 
compliance with the requirements 
of the Code or the Companies Act 
2006, as the Company is exempt 
from such requirements.

Unaudited information

Remuneration Committee
The Group’s Remuneration Committee comprises:

 » Peter Rae, Chairman of the Committee, Senior 

Independent Director

 » Dennis Bate, Independent Non-Executive Director

 » Steve Coggins, Independent Non-Executive Director.

The Committee members are independent Non-Executive 
Directors and have no personal or financial interests, 
other than as shareholders, in the matters considered 
by the Committee.

The Remuneration Committee operates within the remit 
delegated by the Board, which is set out in formal terms 
of reference. The remuneration of Non-Executive 
Directors is a matter for the Chairman and the Executive 
members of the Board. No Director or manager is involved 
in any decision regarding their own remuneration. A copy 
of the terms of reference can be obtained from the 
Company Secretary or from the Company’s website at 
www.synecticsplc.com/Investor_Relations/Corporate_
Governance/Board_Committees. 

During the last financial year the Committee met four 
times. Neither the Executive Directors nor the Chairman 
attend other than by invitation of the Remuneration 
Committee and are not present at any discussion of their 
own remuneration.

The principal duties of the Remuneration Committee 
are to:

 » recommend to the Board for approval overall Group 

remuneration policies, and the specific remuneration 
each year for all Directors and senior management, 
including bonuses, incentive payments and share 
options and awards;

 » ensure Executive Directors and senior executive 

management are provided with appropriate incentives 
to encourage enhanced performance in a fair and 
reasonable manner;

 » approve the design of, and determine targets for, any 

performance-related pay schemes;

 » review the design of all share incentive plans for 
approval by the Board and, where appropriate, 
shareholders; 

 » determine whether awards will be made under any 

share incentive plans, including the size of the award 
and the performance targets to be used;

 » determine the policy for pension arrangements for 

Executive Directors and senior executive management;

 » ensure that contractual terms on termination and any 
payments made are fair, that failure is not rewarded 
and the duty to mitigate loss is fully recognised;

 » consider applicable legislation, regulation, best practice 
guidance and recommendations, and developments 
on remuneration policy and remuneration reporting;

 » review remuneration trends at individual subsidiaries 
and the Group as a whole, and oversee any major 
changes in employee benefit structures across 
the Group;

 » select and appoint any remuneration consultants to 

advise the Committee, if required; and 

 » review the Committee’s performance, constitution and 
terms of reference to ensure it operates effectively and 
to recommend any changes to the Board for approval. 

The Committee Chairman reports formally to the Board on 
the Committee’s proceedings after each meeting; ensures 
that an annual report of the Company’s remuneration 
policy and practices is published in the Company’s Annual 
Report and Accounts; and (from 2012) ensures each year 
that the Remuneration Committee Report, which contains 
the Directors’ remuneration, is put to shareholders for 
approval at the Annual General Meeting.

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The Committee is authorised by the Board to seek 
any information it requires from any employee of the 
Company in order to perform its duties and to obtain 
external professional advice at the Company’s expense.

During the past financial year the Remuneration 
Committee met four times and considered the 2012 
bonus awards and salary increases for the Executive 
Directors and senior executive management. 
The Committee approved the discretionary executive 
bonus scheme to take effect in the financial year 2013 
for Executive Directors. For the 2013 financial year, the 
upper limits on bonuses were set at 75% of base 
salary for the Chief Executive and 60% for the Finance 
Director. An award of options under the Performance 
Share Plan on 29 October 2013 was considered and 
approved. The Committee also approved exercises of 
options over shares, and sales of shares, in respect of 
the Company’s various incentive plans during the year.

Remuneration policy for Executive Directors
Executive Directors are employed by the Group and are 
required to devote substantially the whole of their time to 
its affairs. The policy of the Board is to provide competitive 
packages reflective of the industry in which it operates 
to attract, retain and motivate high calibre individuals as 
Executive Directors and to ensure that their remuneration 
packages (consisting of basic salary, performance-related 
bonuses, pension arrangements and other benefits 
including interests in share schemes) reflect their 
responsibilities, performance and experience, and 
encourage and reward superior performance. The policy 
is also aimed at ensuring employees are rewarded fairly 
for their individual contributions to its performance and 
encourage appropriate behaviours in line with the Group’s 
attitude to risk.

The principal elements of the Executive Directors’ 
remuneration packages are as follows:

 » Basic salary – the Group aims to pay competitive 

market salaries and to recognise individual 
development and progression through the annual 
salary and personal review processes. Salaries are 
reviewed annually.

 » Annual performance-related bonuses – in line with 

the scheme covering other senior members of staff, 
performance-related bonuses for the Executive 

Directors are based on the achievement of specific 
financial targets for the Group and agreed 
personal objectives.

 » Pension arrangements – the Group makes contributions 

into money purchase schemes on behalf of the 
Executive Directors. Pension payments are only 
made on the basis of basic salary.

 » Other benefits – these principally comprise car 
benefits, life assurance and membership of the 
Group’s healthcare scheme.

 » Long-term incentive arrangements – the Group 

operates various share plans in which the Executive 
Directors participate. Details of the share plans are 
given in note 24 to the financial statements. Directors’ 
interests in the shares of the Group are detailed in the 
shareholdings disclosure on page 46.

Executive Directors are not entitled automatically to 
compensation payments for loss of office, other than 
payment in lieu of their contractual notice period if 
legally required.

Executive Directors do not hold directorships in other 
companies and accordingly no remuneration is due 
to the Company.

Remuneration policy for 
Non-Executive Directors
Non-Executive Directors are independent of the Group 
and are expected to spend an average of approximately 
two days a month on the Group’s business. They are not 
restricted from undertaking additional directorships, 
subject to avoiding any conflicts of interest.

After considering recommendations from the 
Chairman, the Board determines the remuneration 
of the Non-Executive Directors excluding the Chairman. 
The remuneration of the Chairman is determined by 
the Remuneration Committee. Non-Executive Directors 
receive fees which are reviewed annually in light of their 
responsibilities, experience and contribution to the 
Group’s affairs, as well as market rates. Non-Executive 
Directors do not receive any performance-related pay 
or rewards, and the Company does not deduct for, 
or contribute to, a pension.

40

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comAudited information

Details of the Directors’ emoluments are given below and form part of the audited financial statements.

a) Remuneration

Executive Directors

J Shepherd

NC Poultney

Non-Executive Directors

DJ Coghlan 

PM Rae

SW Coggins 

D Bate

Total

Salary and 
fees 
 £000

Bonuses*
£000

Benefits 
£000

2013  
Total (excl 
pension) 
£000

2012  
Total (excl 
pension) 
£000

2013 
Pension 
£000

2012 
Pension 
£000

250

156

75

30

30

30

571

35

21

–

–

–

–

56

30

30

11

–

–

–

71

315

207

86

30

30

30

698

450

250

88

25

25

25

863

30

43

–

–

–

–

73

29

43

–

–

–

–

72

*

Bonuses were paid or 
accrued in the year ended 
30 November 2013 for 
specific achievement of 
agreed personal objectives 
and corporate 
performance metrics.

Pension contributions shown above reflect pension payments into money purchase arrangements. There were no other 
pension payments or accrued pension benefits arising under money purchase schemes in respect of Directors.

b) Share schemes
The Directors’ interests in the Company’s share schemes are presented below. No new options were granted to, 
or exercised by, any Director between 1 December 2013 and 26 February 2014.

Performance Share Plan
The following Executive Directors held an interest in the Company’s shares at 30 November 2013 through awards made 
under the Synectics’ Performance Share Plan (the ‘PSP’), which was established on 9 October 2012, as set out below 
and in note 24.

Under the rules of the PSP, selected employees are awarded an interest over a certain number of Company shares 
which only vest after a three-year period, at nil cost to the employees. The number of shares that vest at the end 
of the three-year period is dependent on the Company meeting certain performance thresholds linked to the 
FTSE AIM All Share Total Return Index. The performance conditions are identical to those that applied under the 
Executive Shared Ownership Plan (below).

No rights under this scheme were exercised by Directors during the year.

Date awarded

J Shepherd

NC Poultney

9 October 2012

31 October 2013

Number of 
shares

Issue price  
(p)

Number of 
shares

Issue price 
(p)

15,000

10,000

272.5

272.5

5,000

5,000

510.0

510.0

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Executive Shared Ownership Plan
The following Directors held an interest in the Company’s shares at 30 November 2013 through participation in the 
Quadnetics Group Executive Shared Ownership Plan (the ‘ExSOP’), which was established on 7 July 2009, having 
superseded an earlier scheme established in 2005, as set out below and in note 24. The last awards under the ExSOP 
were made in March 2011.

Under the provisions of the ExSOP, shares are jointly owned by nominated senior employees and by an employees’ 
share trust on terms, similar to a share option scheme, whereby the value of appreciation in the Company’s share price 
over a minimum three-year period accrues to the relevant employee, provided the Company meets certain performance 
thresholds linked to the FTSE AIM All Share Total Return Index. No rights under this scheme were exercised by Directors 
during the year.

*

Share awards issued on this 
date were rolled over from 
share awards held under 
a previous version of 
the ExSOP.

Date awarded

J Shepherd

NC Poultney

DJ Coghlan

7 July 2009*

7 March 2011

Number of 
shares

Issue price  
(p)

Number of 
shares

Issue price  
(p)

370,338

200,000

93,243

147.5

147.5

147.5

15,000

10,000

–

173.0

173.0

–

Employees’ Share Acquisition Plan
The Executive Directors also participate in the Quadnetics Employees’ Share Acquisition Plan (the ‘ESAP’) which was 
adopted on 23 April 2010. Deductions from salary are used to buy partnership shares in Synectics plc at the end of each 
six-month accumulation period. The Trustee of the ESAP will use any dividend income paid on these shares to buy further 
shares to be held in the scheme as dividend shares.

Partnership shares can be withdrawn from the Scheme by the employee at any time, but withdrawals before the fifth 
anniversary after purchase are subject to income tax; withdrawals after the fifth anniversary of their purchase date can 
be made in full and are not subject to income tax. Dividend shares are required to be held in trust for a period of three 
years following the purchase date. Employees who leave the Group are required to withdraw all of their shares in the 
Scheme and are subject to the same rules.

The Executive Directors had the following interests over Company shares held in the ESAP at 30 November 2013:

Partnership shares

14 October 2010

7 April 2011

2 November 2011

20 April 2012

9 October 2012

3 April 2013

14 October 2013

Dividend shares

25 July 2011

2 November 2011

17 May 2012

9 October 2012

8 May 2013

4 October 2013

Purchase 
price 
(p)

J Shepherd  
Number of 
shares

NC Poultney  
Number of 
shares

147.5

177.5

185.5

200.0

272.5

282.5

393.0

200.0

205.0

289.0

272.5

445.0

488.0

338

422

405

375

275

265

191

338

422

405

375

275

265

191

2,271

2,271

7

9

19

14

21

13

83

7

9

19

14

21

13

83

2,354

2,354

42

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comEmployees’ Share Acquisition Plan continued
The mid-market price of the Company’s shares at the beginning and end of the financial year were as follows:

At 1 December 2012

At 30 November 2013

The maximum and minimum share prices during the year were as follows:

Maximum 

Minimum 

Ordinary 
shares of  
20p each

284.5p

610.0p

Ordinary 
shares of  
20p each

615.0p

284.5p

c) Service contracts
There are no Directors’ service contracts with notice periods in excess of one year. The notice periods under the service 
agreements for Executive Directors and letters of appointment for Non-Executive Directors, are as follows:

DJ Coghlan
D Bate
SW Coggins
PM Rae
J Shepherd
NC Poultney

By Order of the Board

Peter Rae
Chairman of the Remuneration Committee

26 February 2014

Notice period

12 months

1 month

1 month

1 month

12 months

12 months

Synectics plc  Annual Report and Accounts 2013

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Audit Committee Report

The Audit Committee comprises: 

 » Steve Coggins, Chairman of the Committee, 

Independent Non-Executive Director

 » Dennis Bate, Independent Non-Executive Director

 » Peter Rae, Senior Independent Director. 

All of the Committee members are independent 
Non-Executive Directors and have no personal or 
financial interests, other than as shareholders, in 
the matters considered by the Committee.

The Audit Committee has formal terms of reference 
which set out its duties delegated by the Board. A copy 
of the terms of reference can be obtained from the 
Company Secretary or from the Company’s website at 
www.synecticsplc.com/Investor_Relations/Corporate_
Governance/Board_Committees. 

During the last financial year the Committee met 
three times. Neither the Executive Directors nor the 
Chairman attend meetings other than by invitation of 
the Committee members. The Committee invites the 
auditor to attend meetings.

The Committee is authorised by the Board to obtain 
external professional advice at the Company’s expense 
in order to perform its duties. 

The main function of the Audit Committee is to assist the 
Board in fulfilling its oversight responsibilities. Its principal 
duties are to:

 » make recommendations to the Board on the 

appointment, re-appointment or removal of the 
external auditor and the amount of their remuneration;

 » discuss and agree the scope of the audit and 
review the auditor’s management letter and 
the Company’s response;

 » review and agree the scope and work of the Group’s 

internal audit activities;

 » review half year and annual financial statements and 

formal announcements relating to financial performance;

 » review the statement on internal control systems and 
recommend the statement to the Board for approval;

 » consider compliance with relevant laws 

and regulations;

 » consider findings of internal investigations and 

management’s response; and

 » review the Committee’s terms of reference and 
recommend any proposed changes to the Board 
for approval.

During the financial year the Audit Committee approved 
the 2012 Annual Report and Accounts and the 2013 half 
year results, recommended re-appointment of the auditor, 
and agreed the scope of the 2013 audit with the auditor. 
In addition, the Committee spent considerable time on 
re-assessing the Board’s approach to setting and monitoring 
internal controls and overall risk management within the 
Group. Specifically, the Committee led a number of Board 
discussions on risk and controls and arranged for specific 
presentations to the Board by the Group Financial 
Controller and the Finance Director on expanding the 

scope of activities and analysis undertaken on these 
issues. One example of improved oversight as a result 
of this expanded review process during the year was the 
identification and quantification of risks associated with 
dependencies on certain component suppliers, and agreed 
actions to mitigate certain of those risks. The Board reviews 
a summary of the key risks and agreed mitigating actions 
taken from risk reviews prepared for each business. 

Internal controls
The conclusions of the Committee’s review and 
assessment of internal controls are set out in the 
Risk and Risk Management section on pages 30 to 31.

Audit independence
The Audit Committee and the Board place great emphasis 
on the objectivity of the external auditor in its reporting 
to shareholders.

The audit partner and senior manager are present at 
Audit Committee meetings as required to ensure full 
communication of matters relating to the audit. The overall 
performance of the auditor is reviewed annually by the 
Audit Committee, taking into account the views of 
management, and feedback is provided when necessary 
to senior members of the audit firm unrelated to the audit. 
The Audit Committee also has discussions with the auditor, 
without management being present, on the adequacy 
of controls and on any judgemental areas. The scope of 
the forthcoming year’s audit is discussed in advance by 
the Audit Committee. Audit fees are approved by the 
Audit Committee.

Assignments of non-audit work have been and are 
subject to controls by management that have been 
agreed by the Audit Committee so that audit 
independence is not compromised. 

Other than audit, the Board is required to give prior approval 
of work carried out by the auditor and its associates in 
excess of £50,000. Part of this review is to determine 
that other potential providers of the services have been 
adequately considered. These controls provide the Audit 
Committee with confidence in the independence of the 
auditor in its reporting on the audit of the Group.

Non-audit services
The Audit Committee is satisfied that the current provision 
of non-audit services by the Group’s auditor does not 
impair its independence or objectivity. That conclusion 
is based on the relatively low amount of fees for 
non-audit services in comparison to audit services 
(see note 6 to the financial statements), and on specific 
discussions with the auditor.

By Order of the Board

Steve Coggins
Chairman of the Audit Committee

26 February 2014 

44

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comGovernance
Statutory Directors’ Report

The following matters are reported by 
the Directors in accordance with the 
Companies Act 2006 requirements 
in force at the date of these Annual 
Report and Accounts.

Principal activities
The principal activities of Synectics plc (the ‘Company’) 
and its subsidiary companies (the ‘Group’) are set out 
within the Strategic Report which comprises the 
Chairman’s Statement, Strategic Review and the 
Performance Review on pages 4 to 31.

Review of business and future developments
The Consolidated Income Statement for the year ended 
30 November 2013 is set out on page 50. 

A review of the Group’s business activities during the 
year and its prospects for the future can be found in the 
Chairman’s Statement, the Strategic Review, and the 
Performance Review on pages 4 to 31. These reports 
together with the Chairman’s Introduction, Corporate 
Governance Statement, the Remuneration Committee 
Report and the Audit Committee Report, are incorporated 
into this report by reference and should be read as part of 
this report.

Key performance indicators
The Directors measure the Group’s performance 
principally using the following financial indicators 
(as reflected in this Annual Report):

 » Revenue;

 » Gross margin %;

 » Underlying operating profit and underlying profit 

before tax;

 » Operating margin %, being the ratio of underlying 

operating profit to revenue;

 » Diluted basic earnings per share;

 » Diluted underlying earnings per share (based on 

underlying profit after tax);

 » Order book;

 » Recurring revenue (being contracted sales where a 
service is delivered over a future time period and 
revenues are recognised in the relevant future 
accounting period);

 » Recurring revenue as a % of total revenue;

 » Net cash balance;

 » Working capital %;

 » Free cash flow; and

 » Cash conversion %.

Principal risks and uncertainties
Details of the principal risks and uncertainties considered 
by the Board to affect the Group, and the related risk 
mitigation actions, are given on pages 30 to 31.

Group results and dividends
The consolidated profit after tax for the year was 
£4,917,000 (2012: £3,367,000).

The Directors recommend a final dividend of 5.5p per share 
(2012: 5.0p per share), totalling £947,000 on 7 May 2014 
to shareholders registered on 28 March 2014. Together 
with the interim dividend of 3.0p per share paid on 
20 September 2013, this brings the total dividend 
for the year to 8.5p per share (2012: 7.5p per share) 
amounting to £1,466,000 in total (2012: £1,297,000).

Financial instruments
Details of financial instruments to which the Group is a 
party are shown in note 31 to the financial statements.

Research & development expenditure
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 £2.7 million (2012: £2.0 million), of which 
£1.6 million (2012: £1.4 million) has been written off to 
the Income Statement.

Share capital
The Company’s issued ordinary share capital comprises 
a single class of ordinary shares of 20p each, which 
17,694,891 shares were in issue and listed on the 
Alternative Investment Market of the London Stock 
Exchange as at 30 November 2013. No shares were 
held in treasury and 1,492,564 shares were held by the 
Company’s employee share trusts. Details of movements 
in the issued share capital can be found in note 23 to 
the financial statements. No securities were issued 
in connection with a rights issue during the year.

Each share carries the right to one vote at general meetings 
of the Company. All issued shares are fully paid up and 
carry no additional obligations or special rights. There are 
no restrictions on transfers of shares in the Company, or 
on the exercise of voting rights attached to them, other 
than those which may from time to time be applicable 
under existing laws and regulations.

Employee share plans
During the year, the Company has remained within its 
headroom limits for the issue of new shares for share 
plans as set out in the rules of the plans. The Company 
uses an employee benefit trust to acquire partnership 
shares (at the end of each accumulation period) and 
dividend shares in the market, when permitted. A total 
of 13,034 shares in the Company were purchased by 
the employee benefit trust during the 2013 financial year.

Synectics plc  Annual Report and Accounts 2013

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www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Statutory Directors’ Report continued

Directors’ interests
Interests of the Directors and their connected persons in the issued share capital of the Company as at 30 November 2013 
are as follows:

DJ Coghlan

PM Rae

D Bate

J Shepherd

SW Coggins

NC Poultney

2013  
Number of  
shares held

2013  
Interests in  
share 
schemes

2013  
Total 
interests  
in shares

2012
Total
interests  
in shares 

1,501,303

93,243

1,594,546

2,094,546

218,302

146,000

66,272

13,080

13,000

1,957,957

–

–

407,692

–

227,354

728,289

218,302

146,000

473,964

13,080

240,354

218,302

146,000

461,174

13,080

234,864

2,686,246

3,167,966

Significant shareholdings
As at the close of the market on 21 February 2014, the Company was aware of the following holdings, excluding 
Directors’ holdings, of 3% or more of the Company’s total issued share capital:

Investec Wealth & Investment Ltd

Quadnetics Employees Benefit Trust

Standard Life Investments Ltd

Old Mutual Plc

Whitehall Associated SA

Nutraco Nominees Ltd UKREITS Account

Number of 
shares

% of total 
voting rights 

Nature of 
interest

1,901,958

1,483,714

1,384,398

1,061,517

1,000,000

664,332

10.75%

8.38%

7.82%

5.99%

5.65%

3.75%

Indirect

Direct

Direct

Indirect

Direct

Indirect

Board of Directors
The Directors were all in office throughout the financial year ended 30 November 2013. There have been no changes to 
the Board of Directors subsequent to the year end. Details and biographies of the Directors are shown on pages 32 and 33.

The powers of the Company’s Directors and rules that apply to changes in the Directors are set out in the Company’s 
Articles of Association (the ‘Articles’). Any changes to the Articles would require the consent of the Company’s shareholders.

In accordance with the Articles, one-third of the Directors are required to retire by rotation at each Annual General Meeting 
and, being eligible, offer themselves for re-election. The Directors proposed for re-election at the 2014 Annual General 
Meeting are DJ Coghlan and SW Coggins.

Directors’ indemnity
As permitted by the Articles, each of the Directors has the benefit of an indemnity which is a qualifying third party 
indemnity as defined by section 234 of the Companies Act 2006. The indemnity was in force throughout the financial 
year, and is currently in force. No indemnity is provided for the Company’s auditor.

46

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comConflicts of interest

The Articles permit the Board to consider and, if it sees 
fit, authorise situations where a Director has an interest 
that conflicts, or may possibly conflict, with the interests 
of the Company (‘Situational Conflicts’). The Board 
operates an effective formal system for Directors 
to declare Situational Conflicts and for them to be 
authorised by the non-conflicted Directors if thought 
appropriate and subject to limits or conditions.

Related party transactions
Internal controls are in place to ensure that any related 
party transactions involving Directors or their connected 
persons are carried out on an arm’s length basis and are 
properly recorded. There were no related party transactions 
during the year or up to the date of this report.

Essential contracts or arrangements
The Group has a number of contractual agreements with 
suppliers in support of its business activities. Whilst the 
loss of certain of these arrangements may cause temporary 
disruption, there are none, for which mitigation plans have 
not been put in place, which are individually considered 
to be essential to the Group’s business.

Change of control provisions
There are no significant agreements which contain 
provisions entitling other parties to exercise termination 
or other rights in the event of a change of control of the 
Company; and no provisions in the Directors’ service 
agreements or employees’ contracts that provide for 
compensation for loss of office or employment occurring 
because of a takeover.

Employment policies
The Group employed an average of 512 people in 2013 
(2012: 474).

The Group has established employment policies that 
comply with current legislation and codes of practice, 
including in the areas of health and safety and equal 
opportunities. The Group consults employees on 
developments and changes to take account of their views 
when making decisions that may impact their interests.

The Group makes every effort to recruit and continue the 
employment, training and promotion of those persons 
who are or become disabled. 

Employee engagement
The Group engages with its employees regularly through 
various media: email alerts, focus groups, monthly bulletins, 
team briefings, an annual senior management conference 
and annual staff survey. Details of the performance of the 
Group are shared with all employees at the appropriate 
time using the methods above.

The Company operates a HMRC approved share 
incentive plan to encourage employees to take a 
greater interest in the Group’s performance through 
share ownership. Details are set out in the 
Remuneration Committee Report.

Policy on payment of suppliers
The Group’s policy during the year was to pay suppliers 
in accordance with agreed terms. At 30 November 2013 
the Group had 63 days’ purchases outstanding in trade 
payables (2012: 52 days’).

Charitable donations and activity
The Company made a donation of £2,700 (2012: £1,510) 
to charitable causes during the year. 

Political donations
The Company made no political donations during the year 
and its policy is not to make such donations. 

Going concern
The financial statements have been prepared on a going 
concern basis. The Directors have reviewed the Group’s 
objectives, policies and processes for managing its 
capital, financial risk management, financial instruments, 
exposure to credit and liquidity risk, and financial forecasts. 
As a result of this review the Directors have a reasonable 
expectation that the Group has adequate resources to 
continue in operational existence for the foreseeable 
future. For this reason the Directors continue to adopt the 
going concern basis in preparing the financial statements. 

Annual General Meeting
The notice convening the Annual General Meeting 
is included with this Annual Report and Accounts 
on pages 95 and 96 and includes full details of the 
resolutions proposed.

Synectics plc  Annual Report and Accounts 2013

47

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Statutory Directors’ Report continued

The Directors are responsible for keeping adequate 
accounting records that are sufficient to show and explain 
the Parent Company’s transactions and disclose with 
reasonable accuracy at any time the financial position of 
the Parent Company and enable them to ensure that its 
financial statements comply with the Companies Act 
2006. They have general responsibility for taking such 
steps as are reasonably open to them to safeguard the 
assets of the Group and to prevent and detect fraud and 
other irregularities. 

The Directors are responsible for the maintenance and 
integrity of the corporate and financial information included 
on the Company’s website. Legislation in the UK governing 
the preparation and dissemination of financial statements 
may differ from legislation in other jurisdictions.

Responsibilities statement
The Directors confirm that to the best of their knowledge:

 » the financial statements, prepared in accordance with 
IFRSs as adopted by the EU, give a true and fair view 
of the assets, liabilities, financial position and profit or 
loss of the Company and the undertakings included 
in the consolidation taken as a whole;

 » the Strategic Report includes a fair review of the 

development and performance of the business and 
the position of the Company and the undertakings 
included in the consolidation taken as a whole, 
together with a description of the principal risks 
and uncertainties that they face; and

 » the Annual Report and financial statements, taken 

as a whole, are fair, balanced and understandable and 
provide the information necessary for shareholders 
to assess the Company’s performance, business 
model and strategy.

Strategic Report approval
The Strategic Report, set out on pages 4 to 31, consists 
of the Chairman’s Statement, Strategic Review and 
Performance Review.

By Order of the Board

Nigel Poultney
Company Secretary

26 February 2014

Auditor
The Group’s auditor, KPMG Audit Plc, notified the 
Company it was in the process of transferring its audit 
work to KPMG LLP.  The Board has recommended 
KPMG LLP be appointed as auditor and a resolution 
concerning its appointment will be put to shareholders 
at the Annual General Meeting.

Post-balance sheet events
There are no post-balance sheet events to report.

Disclosure of information to auditor
Having made the required enquiries, so far as the 
Directors are aware, there is no relevant audit information 
(as defined by section 418(3) of the Companies Act 2006) 
of which the Company’s auditor is unaware and each 
Director has taken all steps that ought to have been taken 
to make himself aware of any relevant audit information 
and to ensure that the Company’s auditor is aware of 
that information.

Directors’ Responsibilities Statement
The Directors are responsible for preparing the Annual 
Report, Strategic Report, Directors’ Report and the Group 
and Parent Company financial statements in accordance 
with applicable law and regulations. 

Company law requires the Directors to prepare Group 
and Parent Company financial statements for each financial 
year. As required by the AIM Rules of the London Stock 
Exchange they are required to prepare the Group financial 
statements in accordance with IFRSs as adopted by the 
EU and applicable law and have elected to prepare the 
Parent Company financial statements in accordance with 
UK Accounting Standards and applicable law (UK Generally 
Accepted Accounting Practice).

Under company law the Directors must not approve the 
financial statements unless they are satisfied that they 
give a true and fair view of the state of affairs of the Group 
and Parent Company and of their profit or loss for that period. 
In preparing each of the Group and Parent Company 
financial statements, the Directors are required to: 

 » select suitable accounting policies and then apply 

them consistently; 

 » make judgements and estimates that are reasonable 

and prudent; 

 » for the Group financial statements, state whether they 

have been prepared in accordance with IFRSs as 
adopted by the EU; 

 » for the Parent Company financial statements, state 
whether applicable UK Accounting Standards have 
been followed, subject to any material departures 
disclosed and explained in the financial 
statements; and 

 » prepare the financial statements on the going concern 
basis unless it is inappropriate to presume that the 
Group and the Parent Company will continue 
in business. 

48

Synectics plc  Annual Report and Accounts 2013

Governancewww.synecticsplc.comFinancial Statements
Independent Auditor’s Report
To the Members of Synectics plc

We have audited the financial statements of Synectics plc for the year ended 30 November 2013, which comprise the Consolidated Income Statement, 
the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes 
in Equity, the Consolidated Cash Flow Statement, the Parent Company Balance Sheet, and the related notes. The financial reporting framework 
that has been applied in the preparation of the Group financial statements is applicable law and International Financial Reporting Standards (IFRSs) 
as adopted by the EU. The financial reporting framework that has been applied in the preparation of the Parent Company financial statements is 
applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit 
work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s 
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company 
and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed. 

Respective responsibilities of Directors and auditor 
As explained more fully in the Directors’ Responsibilities Statement (set out on page 48), the Directors are responsible for the preparation of the 
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial 
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with 
the Auditing Practices Board’s Ethical Standards for Auditors. 

Scope of the audit of the financial statements 
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at  
www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements 
In our opinion: 

 » the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 November 2013 

and of the Group’s profit for the year then ended; 

 » the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU; 

 » the Parent Company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and

 » the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. 

Opinion on other matter prescribed by the Companies Act 2006 
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are 
prepared is consistent with the financial statements. 

Matters on which we are required to report by exception 
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: 

 » adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from 

branches not visited by us; or 

 » the Parent Company financial statements are not in agreement with the accounting records and returns; or 

 » certain disclosures of Directors’ remuneration specified by law are not made; or 

 » we have not received all the information and explanations we require for our audit. 

Stuart Smith (Senior Statutory Auditor) 
for and on behalf of KPMG Audit Plc, Statutory Auditor  
Chartered Accountants  
One Snowhill  
Snow Hill Queensway  
Birmingham  
B4 6GH 

26 February 2014

Synectics plc  Annual Report and Accounts 2013

49

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Consolidated Income Statement
For the year ended 30 November 2013

Revenue

Cost of sales

Gross profit

Operating expenses

Profit from operations

– Excluding non-underlying items and impairment of goodwill

– Non-underlying items

– Impairment of Indanet goodwill

Total profit from operations

Finance income

Finance costs

Profit before tax

– Excluding non-underlying items, impairment of goodwill and adjustment to deferred and contingent consideration

– Non-underlying items

– Impairment of Indanet goodwill

– Adjustment to Indanet deferred and contingent consideration

Total profit before tax

Income tax expense

Profit for the year attributable to equity holders of the parent

Basic earnings per ordinary share

Diluted earnings per ordinary share

Underlying basic earnings per ordinary share

Underlying diluted earnings per ordinary share

Note

2013
£000

2012
£000

2

3

7

4

5

10

11

4

5

5

12

14

14

14

14

82,363

77,039

(55,664)

(50,451)

26,699

26,588

(19,985)

(26,078)

7,217

(503)

–

6,714

245

(338)

7,124

(503)

–

–

6,621

5,711

(1,208)

(3,993)

510

244

3,955

5,658

(1,208)

(3,993)

4,252

4,709

(1,704)

(1,342)

4,917

30.9p

29.4p

34.2p

32.6p

3,367

21.6p

20.7p

26.3p

25.2p

50

Synectics plc  Annual Report and Accounts 2013

Financial Statementswww.synecticsplc.comFinancial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 November 2013

Profit for the year

Items that will not be reclassified subsequently to profit or loss:

Actuarial (losses)/gains

Effect of not recognising the pension scheme surplus

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

Available-for-sale financial assets:

– Gains arising during the period, net of tax

– Less: reclassification adjustments for gains included in profit, net of tax

2013
£000

4,917

(264)

264

–

(65)

403

(403)

(65)

2012
£000

3,367

34

(34)

–

96

–

–

96

Total comprehensive income for the year attributable to equity holders of the parent

4,852

3,463

Synectics plc  Annual Report and Accounts 2013

51

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
 
 
Consolidated Statement of Financial Position
As at 30 November 2013

Non-current assets

Property, plant and equipment

Intangible assets

Current assets

Inventories

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities

Trade and other payables

Tax liabilities

Current provisions

Non-current liabilities

Loans and borrowings

Non-current provisions

Deferred tax liabilities

Total liabilities

Net assets

Equity attributable to equity holders of Parent Company

Called up share capital

Share premium account

Merger reserve

Other reserves

Currency translation reserve

Retained earnings

Total equity

Note

2013 
£000

2012 
£000

15

16

17

18

19

20

22

21

22

12

23

2,641

22,672

25,313

9,735

27,695

5,774

43,204

68,517

1,680

20,669

22,349

7,202

26,504

6,491

40,197

62,546

(22,569)

(23,462)

(1,118)

(147)

(282)

(1,433)

(23,834)

(25,177)

(4,575)

(1,850)

(97)

(469)

(48)

(331)

(5,141)

(2,229)

(28,975)

(27,406)

39,542

35,140

3,539

15,765

9,971

3,514

15,721

9,565

(2,797)

(3,239)

127

12,937

39,542

192

9,387

35,140

The financial statements on pages 50 to 85 were approved and authorised for issue by the Board of Directors on 26 February 2014 and were 
signed on its behalf by:

John Shepherd 
Chief Executive 

Nigel Poultney
Finance Director   

Company Number: 1740011

52

Synectics plc  Annual Report and Accounts 2013

Financial Statementswww.synecticsplc.com 
 
 
 
 
 
Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 November 2013

At 1 December 2011

Profit after tax for the year

Dividends paid (note 13)

Credit in relation to share-based payments (note 25)

Currency translation adjustment

Issue of ordinary shares

Share scheme interests realised in the year

At 30 November 2012

Profit after tax for the year

Dividends paid (note 13)

Credit in relation to share-based payments (note 25)

Currency translation adjustment

Issue of ordinary shares

Share scheme interests realised in the year

Acquisition of Coex Services Asia Pte Ltd

At 30 November 2013

Called up  
share 
capital 
£000

Share 
premium
 account 
£000

Merger 
reserve 
£000

Other 
reserves 
£000

Currency
translation
reserve 
£000

3,514

15,719

9,565

(3,486)

–

–

–

–

–

–

–

–

–

–

2

–

–

–

–

–

–

–

–

–

–

–

–

247

96

–

–

–

96

–

–

3,514

15,721

9,565

(3,239)

192

–

–

–

–

5

–

20

3,539

–

–

–

–

44

–

–

15,765

–

–

–

–

–

–

406

9,971

–

–

–

–

–

442

–

–

–

–

(65)

–

–

–

Retained
earnings 
£000

7,041

3,367

 (1,140)

119

–

–

–

Total 
£000

32,449

3,367

(1,140)

119

96

2

247

9,387

4,917

35,140

4,917

(1,336)

(1,336)

78

–

–

(109)

–

78

(65)

49

333

426

(2,797)

127

12,937

39,542

Synectics plc  Annual Report and Accounts 2013

53

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96 
Consolidated Cash Flow Statement
For the year ended 30 November 2013

Cash flows from operating activities

Profit for the year

Income tax expense

Finance income

Finance costs

Depreciation and amortisation charge

(Profit)/loss on disposal of non-current assets

Impairment of goodwill

Other non-underlying items

Share-based payment charge

Operating cash flows before movement in working capital

(Increase)/decrease in inventories

Increase in receivables

(Decrease)/increase in payables and provisions

Cash generated from operations

Interest received

Tax paid

Net cash from operating activities

Cash flows from investing activities

Purchase of property, plant and equipment

Sale of property, plant and equipment

Acquisition of subsidiaries, net of cash acquired

Capitalised development costs

Purchased software

Net cash used in investing activities

Cash flows from financing activities

New borrowings

Share scheme interests realised in the year

Issue of shares

Interest paid

Dividends paid

Net cash from/(used in) financing activities

Effect of exchange rate changes on cash and cash equivalents

Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

54

Synectics plc  Annual Report and Accounts 2013

Note

2013 
£000

2012 
£000

4,917

1,704

(245)

338

1,187

(16)

–

(191)

78

7,772

(2,533)

(586)

(1,910)

2,743

12

(731)

2,024

3,367

1,342

(244)

(3,955)

1,109

21

3,993

403

119

6,155

257

(3)

937

7,346

7

(1,745)

5,608

(1,570)

(530)

15

(1,858)

(1,008)

(335)

11

–

(562)

(336)

(4,756)

(1,417)

2,952

333

49

(105)

(1,336)

1,893

122

(717)

6,491

5,774

81

247

2

(60)

(1,140)

(870)

72

3,393

3,098

6,491

12

10

11

15

5

16

16

19

Financial Statementswww.synecticsplc.comFinancial Statements
Notes to the Consolidated Financial Statements
For the year ended 30 November 2013

1  Principal accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been applied 
consistently to all the periods presented unless otherwise stated.

a)  Basis of preparation
These financial statements have been prepared in accordance with IFRS as adopted by the EU (‘adopted IFRS’), and with those parts of the 
Companies Act 2006 applicable to companies reporting under adopted IFRS. The Company has elected to prepare its Parent Company financial 
statements in accordance with UK GAAP; these are presented on pages 86 to 92.

The consolidated financial statements of the Company as at and for the year ended 30 November 2013 comprise the Company and its 
subsidiaries, and the Group’s interest in jointly controlled entities.

These financial statements have been prepared using the historical cost convention except where the measurement of balances at fair value 
is required as set out below. The following policies are those that the Group considers to be its principal accounting policies in respect of its 
consolidated results.

Standards and interpretations effective in the current period
The following standards and interpretations have been adopted in the financial statements as they are mandatory for the year ended 
30 November 2013:

Endorsed

Amendment to IAS 12

Amendment to IAS 1

Deferred Taxes: Recovery of underlying assets

Presentation of other items of comprehensive income

Effective for periods  
beginning on or after:

1 January 2012

1 July 2012

The adoption of the standards and interpretations above has not had a material impact on the Group’s financial statements.

In addition to the above, amendments to a number of standards, under the annual improvements project to IFRS, which are mandatory for the year 
ending 30 November 2013, have been adopted in 2013. None of these amendments have had a material impact on the Group’s financial statements.

The following standards and interpretations are available for early adoption but have not been applied by the Group in these financial statements:

Endorsed

IFRS 13

Amendments to IAS 19

Amendments to IFRS 7

IFRS 10

IFRS 11

IFRS 12

IAS 27

IAS 28

Amendments to IAS 32

Amendments to IAS 36

Fair Value Measurement

Defined Benefit Plans

Offsetting Financial Assets and Financial Liabilities

Consolidated Financial Statements

Joint Arrangements

Disclosure of Interests in Other Entities

Separate Financial Statements

IAS 28 Investments in Associates and Joint Ventures

Offsetting Financial Assets and Financial Liabilities

Recoverable amount disclosures for non-financial assets

Effective for periods  
beginning on or after:

1 January 2013

1 January 2013

1 January 2013

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

The Directors anticipate that all of the above standards, interpretations and amendments will be adopted in the Group’s financial statements 
for the year commencing 1 December 2013 and/or 1 December 2014 as appropriate. 

Except for the amendment to IAS 19 none of these standards, interpretations or amendments is expected to impact profit, earnings per share 
or net assets in future periods.

The amendment to IAS 19 makes significant changes to the recognition and measurement of the deferred pension expense and termination benefits 
and disclosures of all employee benefits. It is anticipated that the amendment will impact the pension cost recognised in the Income Statement. 

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The following standards are not yet effective and have not been adopted early by the Group:

IFRS 9 Financial Instruments 
Amendments to IAS 19: Defined benefit plans – Employee contributions

These standards are not expected to have a material impact on the financial statements of the Group.

Going concern
After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue 
in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual 
Report and Accounts.

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group should be able 
to operate within the level of its current financing arrangements. The Group holds cash balances and is not reliant on debt within its capital structure. 
There is limited exposure to credit, liquidity and foreign currency risk, as detailed in note 31.

Further information on the Group’s business activities, together with the factors likely to affect its future development, performance and position, 
and on the financial position of the Group, its cash flows and liquidity position, are described in the reports which together make up the Strategic Report 
on pages 4 to 31.

b)  Basis of consolidation
Subsidiaries are entities over which the Group has the power to govern the financial and operating policies so as to obtain benefit from their activities. 
Subsidiaries are fully consolidated from the date that control commences until the date that control ceases.

Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated in full 
on consolidation.

A joint venture is a contractual arrangement whereby the Group undertakes an economic activity that is subject to joint control. Joint control exists 
when the strategic financial and operating policy decisions relating to the activity require the unanimous consent of the parties sharing control.

The Group’s interest in jointly controlled entities are accounted for using the equity method. Under this method the Group’s share of the profits 
less losses of jointly controlled entities is included in the Consolidated Income Statement and its interest in their net assets is included in investments 
in jointly controlled entities in the Consolidated Statement of Financial Position. Where the share of losses exceeds the interests in the entity, the 
carrying amount is reduced to nil and recognition of further losses is discontinued. Interest in the entity is the carrying amount of the investment 
together with any long-term interest that, in substance, forms part of the net investment in the entity.

c)  Business combinations and goodwill
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of the business combination 
is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments 
issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s 
identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 ‘Business Combinations’ are 
recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in 
accordance with IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’, which are recognised and measured at fair value less 
costs to sell. Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities 
and contingent liabilities is recognised as goodwill. Acquisition-related costs are recognised in profit or loss as incurred.

Adjustments are made to fair values to bring the accounting policies of acquired businesses into alignment with those of the Group. The costs 
of integrating and reorganising acquired businesses are charged to the post-acquisition Income Statement.

Goodwill is subsequently carried at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to 
each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill 
has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the 
recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the 
carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each 
asset in the unit. An impairment loss recognised for goodwill would not be reversed in a subsequent period.

Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

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d)  Revenue
Revenue, which excludes value added tax, is measured at the fair value of the consideration received or receivable. Revenue is reduced for rebates 
and other similar allowances. 

Sale of goods
Revenue from the sale of goods is recognised when the Group has transferred to the buyer the significant risks and rewards of ownership 
of the goods, which primarily takes place on delivery of the goods.

Installation contract income
Revenue and profits attributable to contracts are included in the Income Statement as the contracts proceed in proportions relevant to their state 
of completion, less amounts recognised in previous years.

Contract balances
Contract balances are stated at cost, net of amounts transferred to cost of sales in respect of work recorded as revenue, after deducting foreseeable 
losses and payments on account not matched with revenue. Provision is made for any losses as soon as they are foreseen. Amounts recoverable 
on contracts, which are included in receivables, are stated at the net sales value of the work done less payments on account. Excess payments on 
account are included in current liabilities.

The Group sells certain products bundled with maintenance or other services to be delivered over a predetermined period of time. Where the 
commercial substance is that the individual components operate independently of each other such that each component represents a separable 
good or service that can be provided to customers, either on a stand-alone basis or as an optional extra or, alternatively, where one or more of the 
components may be capable of being provided by another supplier, these are considered as identifiable and separate components to which general 
revenue recognition criteria can be applied separately. Once the separate components have been identified, the amount received or receivable 
from the customer is allocated based on the individual component’s fair value.

Maintenance contracts
Income receivable from maintenance contracts is recognised in revenue on a straight-line basis over the contract term. Income from maintenance 
contracts which relates to periods subsequent to the year end is included in current liabilities as deferred income.

e)  Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. 
All other leases are classified as operating leases.

Assets acquired under finance leases, including hire purchase agreements where applicable, are capitalised and depreciated in accordance with 
the Group’s depreciation policy or over the term of the lease if shorter. The capital element of future lease payments is included in the Statement 
of Financial Position as obligations under finance leases. Lease payments are apportioned between finance charges and reduction of the lease 
obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to income.

Payments made under operating leases are recognised in the Income Statement on a straight-line basis over the term of the lease. 

Benefits received as an incentive to sign a lease, whatever form they may take, are credited to the Income Statement on a straight-line basis 
over the lease term.

f)  Foreign currency
The individual financial statements of each Group entity are presented in the currency of the primary economic environment in which the entity 
operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each Group entity 
are expressed in Sterling (‘£’), which is the presentation currency for the consolidated financial statements. 

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) 
are recorded at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in 
foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated 
in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are 
measured in terms of historical cost in a foreign currency are not retranslated.

Exchange differences are recognised in the Income Statement in the period in which they arise.

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For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations are expressed 
in Sterling using exchange rates prevailing at the balance sheet date. Income and expense items are translated at the average exchange rates 
for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions 
are used. Exchange differences arising, if any, are classified as equity and recognised in the Group’s foreign currency translation reserve. Such 
exchange differences are recognised in the Income Statement in the period in which the foreign operation is disposed of. 

Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation 
and translated at the rates prevailing at the balance sheet date.

g)  Retirement benefit costs
Group employees are members of various pension schemes, all of which operate on a money purchase basis. Contributions to these schemes 
are charged to the Income Statement as an expense when employees have rendered service entitling them to the contributions.

The Group also operates a retirement benefit scheme, which has deferred defined benefit members. The expected return on the scheme’s 
assets and the expected increase in the present value of the scheme’s liabilities during the period are included in the Income Statement as 
other finance income and charges as appropriate. Actuarial gains and losses are recognised in the Consolidated Statement of Comprehensive 
Income. Pension scheme liabilities and, to the extent that they are recoverable, pension scheme assets are recognised in the Statement of 
Financial Position and represent the difference between the market value of the scheme’s assets and the present value of the scheme’s 
liabilities, net of deferred taxation. 

Pension scheme liabilities are determined on an actuarial basis using the projected unit credit method and are discounted at a rate using the 
current rate of return on a high quality corporate bond of equivalent term and currency to the liability. Past service cost is recognised immediately 
to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits 
become vested.

h)  Share-based payments
In accordance with IFRS 2, equity-settled share-based payments are measured at fair value at the date of grant. The fair value is recognised as 
an employee expense on a straight-line basis over the vesting period, based on the Group’s estimate of the number of shares that will eventually 
vest. The fair value of the options granted is calculated using an option pricing model which is based on the Black-Scholes model, taking into 
account the terms and conditions upon which the options were granted.

For cash-settled share-based payment transactions, the fair value of the amount payable to the employee is recognised in the Income Statement 
with a corresponding movement in liabilities. The fair value is initially measured at grant date and spread over the period during which the employees 
become unconditionally entitled to payment. The fair value is measured based on an option pricing model taking into account the terms and 
conditions upon which the instruments were granted. The liability is revalued at each balance sheet date and settlement date with any changes 
to fair value being recognised in the Income Statement. 

Transactions of the Company-sponsored Executive Shared Ownership Plan are treated as being those of the Company and are therefore reflected 
in the Parent Company and Group financial statements. In particular the scheme’s purchases of shares in the Company are debited directly to equity, 
within ‘Other reserves’.

i)  Taxation
The income tax expense is the sum of current tax and deferred tax.

Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the Consolidated Income 
Statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that 
are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively 
enacted by the balance sheet date.

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Deferred tax
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding 
tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally 
recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the 
extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and 
liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) 
of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests 
in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference 
will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments 
and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits 
of the temporary differences and they are expected to reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that 
sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset 
realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred 
tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to 
recover or settle the carrying amount of its assets and liabilities.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and 
when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a 
net basis.

Current and deferred tax for the period
Current and deferred tax are recognised as an expense or income in the Income Statement, except when they relate to items credited 
or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for 
a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or in determining 
the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the 
cost of the business combination.

j)  Dividends
Dividends proposed by the Directors and unpaid at the end of the year are not recognised in the financial statements until they have been 
approved by shareholders at a General Meeting of the Company. Interim dividends are recognised when they are paid.

k)  Property, plant and equipment
All property, plant and equipment assets are stated at cost less accumulated depreciation.

Depreciation is calculated so as to write off the cost of fixed assets, other than freehold land which is not depreciated, less their estimated 
residual values, on a straight-line basis over the estimated useful life, commencing on the first day of the month after being brought into use. 
The principal annual rates used for this purpose are:

 » Freehold buildings  

– 2%

 » Short leasehold improvements 

– over the term of the lease

 » Plant, equipment and motor vehicles   – 10% to 33%

Residual values, remaining useful lives and depreciation methods are reviewed annually and adjusted if appropriate.

Gains or losses on disposal are included in the Income Statement.

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l)  Research & development costs
Research costs are written off to the Income Statement as incurred.

Development costs are capitalised and held as ‘Intangible assets’ in the Statement of Financial Position when the costs relate to a clearly defined 
project; the costs are separately identifiable; the outcome of such a project has been assessed with reasonable certainty as to its technical feasibility 
and its ultimate commercial viability; the aggregate of the deferred costs plus all future expected costs in bringing the product to market is exceeded 
by the future expected sales revenue; and adequate resources are expected to exist to enable the project to be completed. Amortisation is 
charged to match revenue generated, over the useful life of the product, from the commencement of commercial sales, which is usually over 
a period of three to five years.

Amortisation periods and methods are reviewed annually and adjusted if appropriate.

Development expenditure that does not meet these criteria is written off to the Income Statement as incurred.

m) Other intangible assets
Other intangible assets, such as purchased computer software, are shown at historical cost less accumulated amortisation and impairment losses.

Amortisation is charged to the Income Statement on a straight-line basis from the date they are available for use over the estimated useful lives 
of the intangible asset. The useful life of purchased software is three to five years.

Amortisation periods and methods are reviewed annually and adjusted if appropriate.

Impairment of tangible and intangible assets other than goodwill 
At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets, other than goodwill, to determine 
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the 
asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount 
of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable 
and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units.

Recoverable amount is the higher of fair value less costs to sell and value-in-use. In assessing value-in-use, the estimated future cash flows are 
discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks 
specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset 
(or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in income. 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate 
of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been 
determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is 
recognised immediately in income.

n)  Inventories
Inventories are valued at the lower of cost and net realisable value on a first in first out basis. In the case of finished goods, cost includes all direct 
expenditure and production overheads based on the normal level of activity. Where necessary, an appropriate allowance is made for obsolete, 
slow-moving and defective inventories.

o)  Provisions
Provisions are recognised in the Statement of Financial Position when there is a present legal or constructive obligation as a result of a past event, 
and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, 
taking into account the risks and uncertainties surrounding the obligation.

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Deferred consideration relating to business combinations
Deferred consideration relating to business combinations is initially measured at fair value at the date of acquisition and at subsequent reporting 
dates measured in accordance with the appropriate accounting standard, with the corresponding gain or loss being recognised in profit or loss.

Restructuring
A restructuring provision is recognised when the Group has developed a detailed formal plan for the restructuring and has raised a valid 
expectation in those affected that it will be carried out.

Onerous contracts
Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where 
the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected 
to be received under it.

p)  Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity 
instrument in accordance with the substance of the contractual arrangement. The Group does not apply hedge accounting.

Cash and cash equivalents
Cash and cash equivalents comprise cash held by the Group and short-term bank deposits and bank current accounts, net of bank overdrafts, 
with an original maturity of three months or less at acquisition.

Trade and other receivables
Trade receivables are initially recognised at fair value. Subsequent to initial recognition, they are measured at amortised cost less any impairment loss.

Trade and other payables
Trade and other payables are initially recognised at fair value. Subsequent to initial recognition, they are measured at amortised cost.

q)  Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments 
issued by the Group are recorded at the proceeds received, net of direct issue costs.

r)  Judgements in applying the Group’s accounting policies
In the process of applying the Group’s accounting policies, management make various judgements that can significantly affect the amounts 
recognised in the financial statements. The critical judgements are considered to be the following:

Revenue recognition
Following detailed quantification of the Group’s assets, liabilities and revenue deriving from contracts, the Directors are satisfied that revenue 
is recognised when, and to the extent that, the Group obtains the right to consideration, which is derived on a contract-by-contract basis from 
an assessment of the fair value of the goods or services provided as at the reporting date as a proportion of the total fair value of each contract. 
Where products and maintenance are bundled in a contract some judgement may be required to identify the separate components which are 
recognised in accordance with general revenue recognition criteria.

Capitalisation of development costs
It is Group policy to capitalise and amortise development expenditure for the production of new or substantially improved products 
and processes if the product or process is technically and commercially feasible and the Group has sufficient resources to complete 
development. Such expenditure is amortised over the period which the Directors expect to obtain economic benefits. This policy includes 
judgements regarding the initial recognition of the asset based upon market research and expected future net revenues. It also includes 
estimations regarding the period of amortisation. 

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s)  Significant estimates
In the application of the Group’s accounting policies the Directors are required to make estimates and assumptions about the carrying amounts 
of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical 
experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period 
in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects 
both current and future periods. To date there has been no material impact on the carrying value of assets or liabilities from such estimates.

Impairment of goodwill
Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which goodwill is allocated. 
The value-in-use calculation includes estimates about future financial performance and long-term growth rates and requires management to 
select a suitable discount rate in order to calculate the present value of those cash flows. The key assumptions used in the impairment review 
are disclosed in note 16 to the financial statements.

Deferred tax
The Group has recognised deferred tax assets in respect of unutilised losses and other temporary differences arising in certain of the Group’s 
businesses. This requires management to make decisions on the recoverability of such deferred tax assets based on future forecasts of taxable 
profits. If these forecast profits do not materialise, or there are changes in the tax rates or to the period over which the losses or temporary 
differences might be recognised, the value of the deferred tax asset will need to be revised in a future period.

The Group has losses for which no value has been recognised for deferred tax purposes in these financial statements, as future economic benefit 
of these temporary differences is not probable. If appropriate profits are earned in the future, the temporary difference may result in a benefit to 
the Group in the form of a reduced tax charge in a future period.

Provisions
Provisions are recognised in the Statement of Financial Position when there is a present legal or constructive obligation as a result of a past 
event, and it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made 
of the obligation. Provisions for restructuring are recognised when the Group has an approved restructuring plan that has either commenced 
or been announced publicly. Future operating costs are not provided for.

2  Segmental analysis
IFRS 8 requires operating segments to be determined based on the Group’s internal reporting to the Chief Operating Decision Maker (‘CODM’). 
The CODM has been determined to be the Chief Executive as he is primarily responsible for the allocation of resources to the segments and the 
assessment of the performance of each of the segments. Segment information is presented in respect of the Group’s strategic operating segments. 
The operating segment reporting format reflects the differing economic characteristics and nature of the services provided by the Group and is 
the basis on which strategic operating decisions are made by the CODM.

The management of the Group’s operations, excluding Central functions, is organised within two strategic operating segments, Systems and 
Integration & Managed Services. These, together with Central functions, comprise the Group’s three reportable segments. No operating 
segments have been aggregated to form these reportable segments. 

During the year, an internal reorganisation resulted in a change to the Group’s reportable segments. Previously there were six reportable segments, 
including Central functions: Integration & Managed Services, Network Systems, Transport Systems, Industrial Systems, Research & Development 
Costs and Central Costs. Network Systems, Industrial Systems, Research & Development Costs and the German element of Transport Systems 
have been combined to form a single new operating segment, Systems. Integration & Managed Services has been combined with the UK element 
of Transport Systems to form the new segment, Integration & Managed Services. Prior year comparatives have been restated accordingly. The 
acquisition of Coex Services Asia Pte Limited (note 5) has been allocated to the Systems segment.

The reorganisation was undertaken to create a more effective and scalable organisation. The Synectics Technology Centre, in which the research 
& development activities of the Group are co-ordinated, has become an integral part of the Systems division such that the single management 
structure is capable of dealing more quickly and effectively with the day-to-day competition for scarce technical resources between customer 
projects and the Group’s longer-term development roadmap.

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The CODM uses underlying operating profit, as reviewed at monthly Operational Review meetings, as the key measure of the segments’ results 
as it reflects the segments’ underlying trading performance for the period under evaluation. Underlying operating profit is a consistent measure 
within the Group. 

Revenue

Systems

Integration & Managed Services

Total segmental revenue

Reconciliation to consolidated revenue:

Intra-Group sales

2013 
£000

44,753

38,368

83,121

2012 
£000

38,913

39,460

78,373

(758)

(1,334)

82,363

77,039

Included in revenues arising from the Systems segment is approximately £8.5 million which arose from sales to the Group’s largest customer. 
No other single customer contributed 10% or more to the Group’s revenues in either 2013 or 2012.

Underlying operating profit

Systems

Integration & Managed Services

Total segmental underlying operating profit

Reconciliation to consolidated underlying operating profit:

Central costs

2013 
£000

7,009

2,223

9,232

(2,015)

7,217

2012 
£000

5,964

2,653

8,617

(2,906)

5,711

Underlying operating profit 2013

Systems

Integration & Managed Services

Total segmental underlying operating profit

Reconciliation to consolidated  
underlying operating profit:

Central costs

Underlying 
operating 
profit*
£000

Restructuring
costs  
£000

Acquisition
 costs 
£000

Share-based 
payment 
charge 
£000

Amortisation
of acquired
intangibles
£000

Gain on
financial 
asset
£000

Total profit 
from 
operations
£000

7,009

2,223

9,232

(2,015)

7,217

(562)

–

(562)

–

(562)

(63)

–

(63)

(202)

(265)

(39)

(11)

(50)

(28)

(78)

–

–

–

(123)

(123)

525

–

525

–

525

6,870

2,212

9,082

(2,368)

6,714

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Underlying operating profit 2012

Systems

Integration & Managed Services

Total segmental underlying operating profit

Reconciliation to consolidated underlying operating profit:

Central costs

Underlying
operating 

profit* 
£000

Acquisition 
and 
restructuring 
costs
 £000

Share-based 
payment 
charge 
£000

Amortisation 
of acquired 
intangibles 
£000

Impairment 
of Indanet 
goodwill 
£000

Total
profit from 
operations
£000

5,964

2,653

8,617

(2,906)

5,711

–

–

–

(973)

(973)

(41)

(34)

(75)

(44)

(119)

–

–

–

–

–

–

(116)

(116)

(3,993)

(3,993)

5,923

2,619

8,542

(8,032)

510

*  Underlying operating profit represents operating profit before non-underlying items (restructuring costs, acquisition costs, share-based payment charge, amortisation of acquired intangibles and reclassification 

of available-for-sale financial assets to profit or loss) and impairment of goodwill. 

Net assets 
Net assets attributed to each business segment represent the net external operating assets of the respective businesses excluding goodwill, 
bank balances and debt which are shown as unallocated amounts, together with central assets and liabilities. 

Systems

Integration & Managed Services

Total segmental net assets

Reconciliation to consolidated net assets:

Goodwill

Unallocated

Systems

Integration & Managed Services

Total segmental net assets

Reconciliation to consolidated net assets:

Goodwill

Unallocated

By geographical segment  
Geographical location of contract:

United Kingdom  
and Europe

North America

Middle East

Asia and Pacific

Rest of World

Assets 
£000

24,863

18,143

43,006

19,567

5,944

68,517

Assets 
£000

19,850

17,024

36,874

18,349

7,323

62,546

Revenue 
2013 
£000

50,561

5,062

5,739

18,892

2,109

Total 
assets 
2013 
£000

60,681

2,313

–

5,523

–

Capital 
additions 
2013 
£000

 Revenue 
2012 
£000

1,407

154

–

9

–

55,351

7,192

10,647

3,157

692

Liabilities 
£000

2013 
Net assets 
£000

(10,030)

14,833

(13,298)

(23,328)

4,845

19,678

–

19,567

(5,647)

297

(28,975)

39,542

Liabilities 
£000

(11,637)

(12,318)

2012 
Net assets 
£000

8,213

4,706

(23,955)

12,919

–

(3,451)

(27,406)

Total
assets 
2012 
£000

59,957

2,589

–

–

–

18,349

3,872

35,140

Capital 
additions 
2012 
£000

435

95

–

–

–

 82,363

68,517

 1,570

77,039

62,546

530

64

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com 
 
3  Net operating expenses

Distribution costs

Administrative expenses (before non-underlying costs)

Non-underlying costs (note 4)

Impairment of Indanet goodwill (note 5)

Total administrative expenses

4  Non-underlying items 

Restructuring costs 

Acquisition costs

Share-based payment charge

Amortisation of intangible assets 

Reclassification of available-for-sale assets to profit or loss 

2013 
£000

384

2012 
£000

315

19,098

20,562

503

–

19,601

19,985

2013 
£000

562

265

78

123

(525)

503

1,208

3,993

25,763

26,078

2012 
£000

973

–

119

116

–

1,208

Note

a

b

c

a.   The restructuring costs incurred during the year ended 30 November 2013 arose from the internal reorganisation of the Group’s businesses into two divisions (page 13). 

In 2012 restructuring costs related to the reorganisation and subsequent disposal of our UK defence activities, and included £0.4 million in respect of accelerated amortisation to fully write off goodwill and 
capitalised development costs relating to this activity.

b.  Acquisition costs incurred during the year relate to the acquisition of the remaining 49% outstanding share capital of Indanet and the remaining 80% of Coex Services Asia Pte Ltd (‘CSA’) (note 5).

c.  The profit arising on the reclassification of available-for-sale assets to profit or loss relates to the equity investments in the unlisted shares of CSA and O&G Vision Pte Ltd (‘O&G’) which were designated as 

available-for-sale assets immediately prior to the acquisition of the remaining issued share capital of CSA. £525,000 was reclassified to profit as part of the acquisition accounting (note 5).

5  Acquisitions
a)  Indanet
In July 2011 Synectic Systems GmbH agreed to acquire 100% of the issued share capital of Indanet AG (‘Indanet’), a leading German provider of 
integrated surveillance and security management systems to the transport industry, for a maximum total consideration of €10 million. Under the 
original terms of the acquisition, consideration of €2 million in cash was paid on completion for an initial tranche of shares equivalent to 51% of 
Indanet’s issued share capital, and further consideration of between €1 million and €8 million for the remaining 49% of Indanet would be payable 
in three tranches between 2013 and 2015, dependent on Indanet’s profits for the period from completion to 31 May 2015.

In February 2013, it was agreed to vary the original acquisition terms so that the entire outstanding share capital in Indanet was purchased for 
a total consideration of €1.64 million in cash. Therefore total consideration paid for the entire share capital of Indanet was €3.64 million and no 
further deferred or contingent consideration payments are required to be made. €1.7 million was drawn on the Group’s bank term loan facility 
in the period to fund this final payment (note 21). The acquisition was accounted for during 2011 as a 100% acquisition as the agreement to 
acquire the remaining 49% of shares was irrevocable. Therefore, no further acquisition entries are required in respect of this transaction.

The acquisition has resulted in the following accounting adjustments:

Deferred and contingent consideration

At 1 December 2011

IAS 39 charge

Adjustment to reflect renegotiated terms

Currency translation adjustment

At 30 November 2012

Payment in February 2013

At 30 November 2013

£000

5,981

266

(4,518)

(321)

1,408

(1,408)

–

In addition to the above adjustments to the deferred and contingent consideration, the Indanet goodwill was impaired in 2012 by £3,993,000.

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5  Acquisitions continued
b)  Coex Services Asia Pte Ltd
On 21 June 2013 the Group acquired the remaining 80% of the issued share capital of CSA, a private Singaporean company supplying surveillance 
systems in the Far East, primarily to the oil & gas sector, for a maximum total consideration of up to £2.1 million. 

Initial consideration of £1.8 million has been paid, comprising £1.3 million cash, £0.4 million in ordinary shares in Synectics plc and the transfer of 
the Group’s 20% interest in O&G valued at £0.1 million. Further consideration of up to £0.3 million in cash is dependent on the profit performance 
of CSA in the two years following acquisition. 

The acquisition is expected to accelerate the Group’s expansion into the Asia and Far East markets and should provide enhanced opportunities for 
the sale of Synectics’ integrated surveillance control systems into this region.

Immediately prior to the date of acquisition, the Group held a 20% shareholding in CSA and O&G which was classified as available-for-sale financial 
assets held at fair value of £525,000. The movements in the fair value of the financial assets were recorded directly in equity as an unrealised gain 
and have been reclassified to the Income Statement, together with the associated deferred tax liability, as part of the acquisition accounting.

The fair value recognised, which is not materially different to the book value, in respect of the identifiable assets acquired and liabilities assumed 
is as set out in the table below:

Property, plant and equipment

Financial assets

Financial liabilities

Net identifiable assets

Goodwill

Total consideration

Satisfied by:

Cash

Equity instruments (101,403 ordinary shares of Parent Company)

Equity instruments (20% shareholding in O&G)

Contingent consideration arrangement

Total consideration transferred

Value of existing 20% shareholding

Net cash outflow arising on acquisition

Cash consideration

Less: cash balances acquired

£000

8

1,476

(426)

1,058

1,267

2,325

1,320

426

70

54

1,870

455

2,325

1,320

(870)

450

The fair values shown are provisional and may be amended if information not currently available comes to light.

The fair value of the financial assets includes trade receivables with a fair value of £456,000.

The goodwill of £1.27 million arising from the acquisition can be attributed to the benefit of expansion into the Asia and Far East markets and the 
synergy benefits to the Group of the acquisition.

The contingent consideration arrangement of up to S$500,000 is dependent on CSA’s profits for the period from completion to 21 June 2015. 
S$100,000 has been provided for such consideration in the fair value assessment above. 

In connection with the acquisition of the remaining 80% of the equity interest in CSA, Synectics plc issued 101,403 ordinary shares based on 
the market value at the effective date of acquisition on 1 June 2013 of £4.20. The fair value of these shares is the published price of the shares 
at this date.

Acquisition-related costs (included in non-underlying operating expenses) amounted to £63,000.

CSA contributed £1.1 million revenue and £169,000 to the Group’s operating profit for the period between the date of acquisition and the balance 
sheet date.

If the acquisition of CSA had been completed on the first day of the financial year, Group revenues for the period would have been £84.3 million 
and Group profit from operations would have been £7.0 million.

66

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com6  Auditor’s remuneration

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts

Fees payable to the Company’s auditor for other services to the Group:

– the audit of the Company’s subsidiaries pursuant to legislation

– tax compliance services 

– other tax advisory services

– other 

2013 
£000

41

100

51

26

–

218

2012 
£000

40

105

30

19

26

220

Amounts paid to the Company’s auditor and its associates in respect of services to the Company, other than the audit of the Company’s financial 
statements, have not been disclosed separately as the information is required instead to be disclosed on a consolidated basis.

7  Profit from operations

Profit from operations is stated after charging:

Amortisation of intangible assets

Depreciation of property, plant and equipment

Research & development expenditure

Cost of inventories recognised as an expense

Impairment 

Rental payments under operating leases:

– plant, machinery and vehicles

– other

2013 
£000

2012 
£000

538

649

1,643

42,721

–

1,131

377

673

436

1,432

31,617

3,993

1,125

675

8  Directors’ and key management personnel’s remuneration
The Directors consider that the key management personnel of the business comprises of its Board of Directors, whose remuneration is shown 
in the Remuneration Committee Report on page 41, and members of the Executive Management Team. Details of the remuneration for key 
management personnel are set out in note 27.

9  Employee information
The average number of persons (including Executive Directors) employed by the Group during the year was:

Class of business (see note 2)

Systems

Integration & Managed Services

Central

Staff costs (for the above persons)

Wages and salaries

Social security costs

Pension costs

Share-based payment charge

2013 
Number

2012 
Number

228

270

14

512

195

268

11

474

2013 
£000

2012 
£000

19,529

2,176

488

78

17,959

2,010

472

119

22,271

20,560

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£000

12

233

245

2012 
£000

7

237

244

2013 
£000

2012 
£000

27

78

233

338

–

–

338

2013 
£000

987

512

93

1,592

215

(103)

112

7

53

237

297

266

(4,518)

(3,955)

2012 
£000

852

541

(227)

1,166

35

141

176

1,704

1,342

10  Finance income

Bank interest receivable 

Expected return on pension scheme assets

11  Finance costs

Interest payable on bank overdrafts

Interest payable on bank loans

Interest on pension scheme liabilities

IAS 39 charge on deferred and contingent consideration (note 5)

Adjustment to Indanet deferred and contingent consideration (note 5)

12  Taxation

Tax charge

Current taxation:

UK tax

Overseas tax

Adjustments in respect of prior periods

Total current tax

Deferred taxation:

Origination and reversal of temporary differences

Adjustments in respect of prior periods

Total deferred tax

68

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com12  Taxation continued
Reconciliation of tax charge for the year
The corporation tax assessed for the year differs from the standard rate of corporation tax in the UK of 23.33% (2012: 24.67%). The differences 
are explained below:

Profit on ordinary activities before tax

Tax on profit on ordinary activities before tax at standard rate of 23.33% (2012: 24.67%)

Effects of:

Expenses not deductible for tax purposes and temporary differences

Net effect of different rates of tax in overseas businesses

Tax losses not recognised

Income not taxable

Rate change on deferred tax balance

Adjustment in respect of prior periods

Total tax charge for the year

2013 
£000

6,621

1,545

42

(237)

467

(45)

(58)

(10)

2012 
£000

4,709

1,162

38

94

208

(64)

(10)

(86)

1,704

1,342

Factors that may affect future tax charges
Legislation reducing the main rate of UK corporation tax to 21% from 1 April 2014 and to 20% from 1 April 2015 was substantively enacted during 
the period. Accordingly, current tax has been provided for at a rate of 23.33% and deferred tax has been provided for at 20% (2012: 23%) as it is 
expected that the majority of the deferred tax balance will be settled after 1 April 2015.

Deferred tax liability

At start of year

Charge to Income Statement

Currency translation adjustment

At end of year

The deferred taxation balances comprise:

Fixed asset temporary differences

Other temporary differences

2013 
£000

(331)

(112)

(26)

(469)

2013 
£000

(341)

(128)

(469)

2012 
£000

(133)

(176)

(22)

(331)

2012 
£000

(184)

(147)

(331)

The Group has tax losses available to be carried forward for offset against the future taxable profits of certain Group companies amounting 
to approximately £1.9 million (2012: £0.6 million). No deferred tax asset (2012: £nil) in respect of these losses has been recognised at the year 
end as the Group does not currently anticipate being able to offset these against future profits in order to realise any economic benefit in the 
foreseeable future. 

In addition to the above, the Group has capital losses of approximately £19 million (2012: £19 million) available for offset against future taxable gains. 
No deferred tax asset in respect of these losses, which would amount to £3.8 million, has been recognised in these financial statements as there 
is insufficient certainty that the asset will be recovered against future capital gains.

Synectics plc  Annual Report and Accounts 2013

69

www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–9613  Dividends
The following dividends were paid by the Company during the year:

Final dividend paid in respect of prior year but not recognised as liabilities in that year

Interim dividend paid in respect of current year

Total dividend paid, net of Treasury share dividends 

Proposed final dividend for the year ended 30 November

2013

Pence 
per share 

5.0

3.0

8.0

5.5

2012

Pence 
per share 

4.5

2.5

7.0

5.0

£000

791

439

1,230

1,140

858

£000

858

519

1,377

1,336

947

The proposed final dividend for the year ended 30 November 2013 has not been approved by shareholders and as such has not been included as a 
liability as at 30 November 2013. Subject to approval, this is expected to be paid on 7 May 2014 to shareholders on the register at 28 March 2014. 
This will give a total dividend for the year of 8.5p (2012: 7.5p).

14  Earnings per ordinary share

Basic earnings per ordinary share

Diluted earnings per ordinary share

Underlying basic earnings per ordinary share

Underlying diluted earnings per ordinary share

2013 
Pence 
per share

2012 
Pence 
per share

30.9

29.4

34.2

32.6

21.6

20.7

26.3

25.2

Earnings per ordinary share have been calculated by dividing the profit attributable to equity holders of the parent after taxation for each financial 
year by the weighted average number of ordinary shares in issue and ranking for dividend during the year.

The calculations of basic and underlying earnings per share are based upon: 

Earnings for basic and diluted earnings per share

Non-underlying items

Impact of non-underlying items on tax charge for the year

Impairment of Indanet goodwill

Net adjustment to Indanet deferred and contingent consideration

Earnings for underlying basic and underlying diluted earnings per share

Weighted average number of ordinary shares – basic calculation

Dilutive potential ordinary shares arising from share options

Weighted average number of ordinary shares – diluted calculation

2013
£000

4,917

503

30

–

–

5,450

2013
000

2012
£000

3,367

1,208

(216)

3,993

(4,252)

4,100

2012
000

15,929

15,613

789

630

16,718

16,243

70

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com15  Property, plant and equipment

Cost:

At 1 December 2011

Additions

Disposals

Transfer between categories, and from intangibles

Currency translation adjustment

At 30 November 2012

Additions

Disposals

Transfer between categories, and from intangibles

Currency translation adjustment

At 30 November 2013

Depreciation:

At 1 December 2011

Charge for the year

Disposals

Transfer between categories

Currency translation adjustment

At 30 November 2012

Charge for the year

Disposals

Transfer between categories

Currency translation adjustment

At 30 November 2013

Net book value:

At 30 November 2013

At 30 November 2012

Freehold 
land and 
buildings 
£000 

Short 
leasehold
 improvements
£000 

Plant, 
equipment 
and motor 
vehicles
£000 

Total 
£000

311

1,221

3,834

5,366

–

–

–

–

311

766

–

–

–

85

–

78

–

445

(985)

(188)

25

1,384

3,131

157

–

(142)

–

647

(107)

181

(2)

530

(985)

(110)

25

4,826

1,570

(107)

39

(2)

1,077

1,399

3,850

6,326

39

6

–

–

–

45

6

–

–

–

51

1,026

266

566

92

–

71

–

729

88

–

(52)

–

765

634

655

3,143

3,748

338

(966)

(121)

(22)

2,372

555

(107)

52

(3)

436

(966)

(50)

(22)

3,146

649

(107)

–

(3)

2,869

3,685

981

759

2,641

1,680

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16  Intangible assets 

Cost:

At 1 December 2011

Additions

Transfer between categories

Disposals

Currency translation adjustment

At 30 November 2012

Additions

Transfer between categories

Currency translation adjustment

At 30 November 2013

Amortisation:

At 1 December 2011

Charge for the year

Exceptional impairment charge (note 5)

Transfer between categories

Disposals

At 30 November 2012

Charge for the year

Currency translation adjustment

At 30 November 2013

Net book value:

At 30 November 2013

At 30 November 2012

 Acquired 
intangibles 
£000

Capitalised 
development 
costs
£000

Purchased 
software 
£000

Goodwill 
£000

Total 
£000

22,892

737

3,365

1,021

28,015

–

–

(192)

(358)

22,342

1,182

–

36

23,560

–

–

3,993

–

–

3,993

–

–

3,993

19,567

18,349

–

–

–

(38)

699

–

–

17

716

48

119

–

–

–

167

123

(2)

288

428

532

562

–

(303)

–

3,624

1,008

–

–

336

110

(224)

1

1,244

335

(39)

–

898

110

(719)

(395)

27,909

2,525

(39)

53

4,632

1,540

30,448

1,961

443

–

–

(81)

2,323

269

–

2,592

2,040

1,301

817

111

–

50

(221)

757

146

–

903

637

487

2,826

673

3,993

50

(302)

7,240

538

(2)

7,776

22,672

20,669

Annual test for impairment of goodwill
During the year, the Group assessed the recoverable amount of goodwill by comparing it to the value-in-use of the cash-generating units to which 
it relates. Goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (‘CGUs’) that are expected to benefit 
from that business combination. The carrying amount of goodwill was allocated to the CGUs as follows:

Systems

Integration & Managed Services

Transport Systems

2013 
£000

10,378

4,580

4,609

2012 
£000

9,160

4,580

4,609

19,567

18,349

The recoverable amount of the CGUs is determined based on a value-in-use calculation which uses cash flow projections based on financial 
budgets and business plans approved by the Directors covering a three-year period. Cash flows beyond that period have been extrapolated using 
a steady 2.25% per annum growth rate, which the Directors consider to be specific to the business and does not exceed the UK long-term 
average growth rate, and is therefore considered appropriate to apply to each of the CGUs.

72

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com16  Intangible assets continued
The key assumptions used in the cash flow projections are as follows:

 » No material changes in working capital

 » Terminal value applied after ten years assuming a ten (2012: eight) times multiple

 » Pre-tax discount rates:

Systems

Integration & Managed Services

Transport Systems

2013 
%

8.9

9.2

8.4

2012 
%

9.1

9.5

8.6

The discount rates used have been based upon divisional specific risks such as the nature of the market served, cost profiles and the barriers 
to entry into each market segment, as well as other macro-economic factors. 

The Directors believe that, based on sensitivity analysis performed, even in the current economic conditions any reasonably possible change in the 
key assumptions on which the recoverable amounts are based would not cause the CGUs’ carrying amounts to exceed the recoverable amounts.

In 2012, as a result of Indanet’s rate of progress falling behind the plans set out at the time of its acquisition, the recoverable value of the Systems’ CGU, 
to which Indanet is allocated, declined, resulting in an impairment of £3,993,000 to the goodwill value.

17  Inventories

Raw materials and consumables

Work in progress

Finished goods for resale

Contract balances

Contract balances comprise:

Net costs incurred

18  Trade and other receivables

Trade receivables

Allowance for doubtful debts

Amounts recoverable on contracts

Other receivables

Prepayments

2013 
£000

2,585

1,341

5,066

8,992

743

9,735

2013 
£000

2012 
£000

4,427

227

2,372

7,026

176

7,202

2012 
£000

743

176

2013 
£000

13,103

(502)

12,601

12,544

1,636

914

2012 
£000

17,181

(1,041)

16,140

8,855

670

839

27,695

26,504

Trade receivables are non-interest bearing and generally have a 30 to 90 day term. At 30 November 2013 the Group had 70 days’ sales outstanding 
in trade receivables (2012: 66 days’). Trade receivables included £nil (2012: £356,174) due from related parties.

Due to their short maturities, the fair value of trade and other receivables approximates to their book value.

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Movement in allowance for doubtful debts

At 1 December

Provided

Amounts utilised

At 30 November

2013 
£000

1,041

39

(578)

502

2012 
£000

679

385

(23)

1,041

As at 30 November 2013, trade receivables of £4,541,000 (2012: £5,963,000) were past due but not impaired. The ageing analysis of these trade 
receivables is as follows:

Up to three months past due

Three to six months past due

Over six months past due

19  Cash and cash equivalents

Cash at bank and in hand

The fair value of cash and cash equivalents approximates to their book value.

Cash at bank earns interest based on the daily bank base rate.

20  Trade and other payables

Trade payables

Other taxation and social security

Other payables

Accruals and deferred income

Due to their short maturities, the fair value of trade and other payables approximates to their book value.

21   Loans and borrowings

Bank term loan facilities

Other loans

Total loans

2013 
£000

2,661

1,343

537

4,541

2013 
£000

5,774

2013 
£000

8,410

816

529

12,814

22,569

2013 
£000

4,575

–

4,575

2012 
£000

4,208

1,324

431

5,963

2012 
£000

6,491

2012 
£000

9,476

731

125

13,130

23,462

2012 
£000

1,623

227

1,850

74

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com21   Loans and borrowings continued
The fair value of financial liabilities is not substantially different from the carrying value. The terms and debt repayment details are as follows:

€3.7 million term loan facility

£1.5 million term loan facility

Value drawn 
000

€3,700

£1,500

Date 
repayable 

Interest 
rate

31 January 2016

EURIBOR +2.25%

26 November 2018

LIBOR +1.75%

Security

None

None

During the period €1.7 million was drawn against the Euro bank term loan facility, and the other loan held at 30 November 2012 was repaid as part 
of the acquisition for the remaining issued share capital of Indanet (note 5).

In addition, a new £1.5 million facility was drawn down to finance the purchase of an additional property as part of the internal reorganisation (note 2).

22  Provisions

At 1 December 2011

Utilised in year

Charge to Income Statement

IAS 39 charge on deferred and contingent consideration

Adjustment to Indanet deferred and contingent consideration (note 5)

Currency translation adjustment

At 30 November 2012

Utilised in year (note 5)

Charge to Income Statement

Acquisition during year (note 5)

At 30 November 2013

Provisions have been analysed between current and non-current as follows:

Current

Non-current

Deferred and
 contingent 
consideration 
£000

Restructuring 
£000

Property
£000

5,981

–

–

266

(4,518)

(321)

1,408

(1,408)

–

49

49

37

(37)

–

–

–

–

–

–

126

–

126

54

(10)

29

–

–

–

73

(14)

10

–

69

2013 
£000

147

97

244

Total 
£000

6,072

(47)

29

266

(4,518)

(321)

1,481

(1,422)

136

49

244

2012 
£000

1,433

48

1,481

The Group has a number of properties where the Directors believe that dilapidation costs may be incurred or where the property is sublet and 
the Directors believe that they may not be able to fully recover future rental costs, and therefore appropriate cost provisions have been made. 
It is anticipated that the property cost provision and the restructuring provision carried forward at 30 November 2013 will be utilised within five 
years and one year respectively.

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The number of allotted, called up and fully paid shares is as follows:

Ordinary shares of 20p each

Allotted, called up and fully paid

2013

2012 

Number

£000

Number

£000 

17,694,891

3,539

17,571,488

3,514

Share capital increased by 123,403 shares in the year as a result of 22,000 share options being exercised under the Quadnetics Group EMI Share 
Option Scheme (note 24) and 101,403 shares being issued as part of the acquisition of CSA (note 5).

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings 
of the Group. The 1,492,564 shares held under the Group Executive Shared Ownership Plan (‘ExSOP’) at 30 November 2013 are treated as 
Treasury shares and are therefore excluded from the basic earnings per share calculation.

The merger reserve has been created in accordance with sections 612 and 613 of the Companies Act 2006 whereby the premium on ordinary 
shares in the Company issued to acquire shares has been credited to the merger reserve rather than the share premium account.

The cost of own shares held within the ExSOP of £3,520,214 (2012: £3,962,214) has been deducted from other reserves. The nominal value 
of these shares is £298,513 (2012: £366,842). Other reserves also includes a capital redemption reserve of £8,000 (2012: £8,000).

24  Options over shares of Synectics plc 
The Group operated five share schemes in the year: the Quadnetics Group EMI Share Option Scheme, the Protec plc EMI Share Option Scheme, 
the Quadnetics Employees’ Share Acquisition Plan, the Quadnetics Executive Shared Ownership Plan and the Synectics Performance Share Plan.

Quadnetics Group EMI Share Option Scheme
The Quadnetics Group EMI Share Option Scheme was adopted on 27 December 2001. It is administered by the Board but is now closed 
as the size of the Group exceeds the limits imposed by HM Revenue & Customs. 

Options outstanding at 30 November 2013 are exercisable as follows, subject to the holder still being employed by the Group at the time of exercise:

Date granted

5 March 2004

30 September 2004

Outstanding options at 30 November 2013

Exercise dates

5 March 2006 – 4 March 2014

30 September 2006 – 29 September 2014

Option 
price

300.0p

280.0p

Number 
of options

95,833

3,715

99,548

Options outstanding at 30 November 2012 were 121,548. Options over 22,000 shares were exercised in the year.

Protec plc EMI Share Option Scheme
The Protec plc EMI Share Option Scheme was adopted on 9 May 2001. It is administered by the Board but the Scheme was closed to new 
members on 31 December 2005 following the acquisition of Protec plc by Synectics plc. The holders of Protec EMI options at the time 
of the acquisition were able to elect to convert these options into options of the same value over ordinary shares in Synectics plc in a ratio 
of one Synectics’ share for every 43 Protec shares. As a result, former Protec EMI option holders held options over a further 581 ordinary 
shares at 30 November 2012, all of which lapsed in the year ending 30 November 2013. 

76

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com24  Options over shares of Synectics plc continued
Quadnetics Employees’ Share Acquisition Plan
The Quadnetics Employees’ Share Acquisition Plan (the ‘ESAP’) was adopted on 23 April 2010. Deductions from salary are used to buy partnership 
shares in Synectics plc at the end of each six month accumulation period. The Trustee will use any dividend income paid on these shares to buy 
further shares to be held in the scheme as dividend shares. 

Partnership shares can be withdrawn from the Scheme by the employee at any time, but withdrawals before the fifth anniversary after purchase 
are subject to income tax; withdrawals after the fifth anniversary of their purchase date can be made in full and are tax free. Dividend shares are 
required to be held in Trust for a period of three years following the purchase date. Employees who leave the Group are required to withdraw all 
of their shares in the Scheme and are subject to the same rules.

The Scheme holds 39,054 ordinary shares at 30 November 2013, which were acquired by the Scheme Trustee as follows:

Effective date of purchase

14 October 2010

7 April 2011

25 July 2011

2 November 2011

2 November 2011

20 April 2012

17 May 2012

9 October 2012

9 October 2012

3 April 2013

8 May 2013

4 October 2013

14 October 2013

Shares held at end of year

Type of shares

Partnership

Partnership

Dividend

Third or fifth  
anniversary of  
the purchase date

15 October 2015

8 April 2016

26 July 2014

Partnership

3 November 2016

Dividend

3 November 2014

Partnership

Dividend

Partnership

Dividend

Partnership

Dividend

Dividend

21 April 2017

18 May 2015

10 October 2017

10 October 2015

4 April 2018

9 May 2016

5 October 2016

Partnership

15 October 2018

At 30 November 2013 the shares held by the ESAP Scheme had a market value of £238,229 (2012: £87,620).

Movements during the year were as follows:

Shares held at 1 December 2012

Shares acquired during the year

Withdrawals from the scheme during the year

Shares held at 30 November 2013

Purchase/
base price

2013 
Number 
of shares

2012 
Number 
of shares

147.5p

177.5p

200.0p

185.5p

205.0p

200.0p

289.0p

272.5p

272.5p

282.5p

445.0p

488.0p

393.0p

4,245

5,872

86

5,472

118

5,979

249

5,033

193

5,756

304

199

5,548

39,054

4,745

6,495

95

6,072

132

6,909

276

5,715

216

–

–

–

–

30,655

Number of 
shares

30,655

13,034

(4,635)

39,054

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Quadnetics Executive Shared Ownership Plan
The Quadnetics Executive Shared Ownership Plan (the ‘ExSOP’) was formed in July 2009. Under the provisions of the ExSOP, shares (the ‘ExSOP 
shares’) are jointly owned by nominated senior employees and by an employees’ share trust, on terms, similar to a share option scheme, whereby 
the value of appreciation in the Company’s share price over a minimum three-year period accrues to the relevant employee, provided the Company 
meets certain performance thresholds. 

In summary, none of the awarded ExSOP shares will vest unless the total return (dividends plus share price appreciation) on the Company’s 
shares is better than the performance of the FTSE AIM All Share Total Return Index over the three-year period from award. The shares will vest 
fully if the Company’s performance beats the index by more than 5% over that period, with pro-rata vesting for out-performance up to 5%. 

In March 2011, 293,000 shares available in the Trust as a result of employees leaving the Group were transferred to the corporate Trustee of the Plan 
at £1.73 each as joint owner together with certain employees, being the mid-market price of the Company’s ordinary shares immediately prior to 
the transfer.

ExSOP shares outstanding at 30 November 2013 are exercisable as follows: 

Date awarded

7 July 2009

7 March 2011

Balance of shares in respect of leavers

Movements during the year were as follows:

Shares held at 1 December 2012

Vested shares sold or transferred in year

Shares held at 30 November 2013

Exercise dates

8 July 2012 onwards

8 March 2014 onwards

Relevant 
share price 
at date of
award

147.5p

173.0p

2013 
Number of
shares

2012 
Number of
shares

801,081

1,218,809

203,000

213,000

488,483

402,403

1,492,564

1,834,212

Number of
shares

1,834,212

(341,648)

1,492,564

Dividends have been waived in respect of the 488,483 shares not specifically allocated to employees.

Synectics Performance Share Plan
The Synectics Performance Share Plan (‘PSP’) was formed on 9 October 2012.

Under the PSP, selected employees are entitled to exercise an option to receive a certain number of Synectics plc shares at any time after a three-year 
vesting period, at no cost to themselves. The number of shares that are awarded at the end of the three-year period is dependent on the achievement 
of certain performance criteria.

The performance criteria are identical to those that apply under the existing ExSOP. Provided that the total return on Synectics plc shares has 
out-performed the FTSE AIM All Share Total Return Index (the ‘Index’) by 5% or more in the three years following the award, beneficiaries will be 
entitled to receive the full number of shares awarded. If Synectics plc’s share performance matches the Index, then 25% of the awarded shares 
will vest and between these points vesting will be pro-rata. If the total return on Synectics plc shares underperforms the Index, then no entitlement 
will vest. The limit on the number of shares over which interests may be awarded also remains unchanged.

It is intended that if the performance criteria are met in full or part, the appropriate number of shares will be transferred to the employees from 
unallocated Synectics plc shares already held within the employee benefit trust established for the existing ExSOP.

PSP shares outstanding at 30 November 2013 are exercisable as follows:

Date awarded

9 October 2012

31 October 2013

Exercise dates

9 October 2015 onwards

31 October 2016 onwards

Relevant 
share price 
at date of
award

272.5p

510.0p

2013 
Number of
shares

97,250

78,500

2012 
Number of
shares

142,250

–

175,750

142,250

78

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com25  Share-based payment charge
The fair value of services received in return for share options granted or awards made under the Group’s share schemes are measured by reference 
to the fair value of the share options granted or share scheme shares awarded.

For the equity-settled share scheme awards, the estimate of the fair value of the services received for accounting purposes is measured based 
on an adjusted Black-Scholes model using the following assumptions:

Quadnetics ExSOP

Number of jointly owned shares awarded

Share price on date of award

Amount paid by employee for each ExSOP award

Carrying cost

Volatility

Expected dividend yield

Risk free interest rate

Anticipated exercise date

Expected life of ExSOP

Synectics PSP

Number of share options awarded

Exercise price

Share price on date of award 

Expected volatility

Expected dividend yield

Risk free interest rate

Vesting period

Expected life of option

March 2011  
awards

293,000

£1.780

0.2p

1.75% of the initial market value

35%

4%

1.9%

8 March 2014

3 years

October 2012 
awards

October 2013 
awards

142,250

78,500

Nil

£2.725

20%

3.5%

2.1%

3 years

4 years

Nil

£5.10

25%

2.2%

3.0%

3 years

5 years

The expected volatility is based wholly on the historic volatility.

Share options and share scheme awards are granted under a service condition and also, for grants to employees under the ExSOP and PSP, 
a performance measure based around the Company’s share price relative to the FTSE AIM All Share Total Return Index.

The total charge recognised for the year arising from share-based payments is as follows:

Equity-settled share-based payments

Total carrying value of liabilities

2013 
£000

78

–

2012 
£000

119

–

26  Contingent liabilities
Certain subsidiary companies have agreed to guarantee a number of bank bonds, issued by Barclays Bank PLC and Lloyds TSB Bank plc, 
amounting to a total of £1.1 million at 30 November 2013 (2012: £1.6 million). 

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1)  Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not 

disclosed in this note. The principal subsidiaries and divisions within the Group are listed on page 93.

  All transactions with related parties were at arm’s length.

2)  Transactions with key management personnel:

Salary and fees

Benefits

Bonus

Total short-term remuneration

Post employment benefits

Share-based payments

2013 
£000

746

90

106

942

94

33

2012 
£000

850

89

423

1,362

95

67

1,069

1,524

28  Capital commitments
At the year end capital commitments not provided for in these financial statements amounted to £209,000 (2012: £nil).

29  Operating lease commitments
The Group had total outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:

Within one year

Within two to five years

In excess of five years

The Group’s lease commitments primarily relate to land and buildings and vehicles.

2013 
£000

2,088

3,415

1,491

6,994

2012 
£000

1,634

3,079

837

5,550

80

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com30  Pension commitments 
The Group operates a defined benefit pension scheme and a number of defined contribution schemes.

a) Defined benefit scheme
The Company operates the Quadrant Group plc Retirement Benefit Scheme. This scheme includes both a defined benefit section in respect of 
past employees of the Group and a defined contributions section in respect of one current employee. The accrual of benefits in the defined benefit 
section ceased in 1996 and the liabilities relate only to members with preserved benefits or pensions in payment. A full actuarial valuation was 
carried out by a qualified independent actuary, independent of the scheme’s sponsoring employer, as at 30 June 2013. These results have been 
updated on an approximate basis to 30 November 2013. The major assumptions used by the actuary are shown below.

The Company has paid contributions of £72,128 (2012: £62,264) in the year.

The disclosures below relate to the defined benefit section, with the contributions to the defined contributions section being disclosed in section b).

Reconciliation of opening and closing balances of the present value of the defined benefit obligations

Defined benefit obligations at start of year

Interest cost

Actuarial (gains)/losses

Benefits paid

Defined benefit obligations at end of year

Reconciliation of opening and closing balances of the fair value of plan assets

Fair value of plan assets at start of year

Expected return on assets

Actuarial (losses)/gains

Contributions by the Company

Benefits paid

Fair value of plan assets at end of year

Total expense recognised in Income Statement

Expected return on plan assets

Interest cost

Total expense recognised in Income Statement

2013 
£000

5,629

233

(15)

(282)

5,565

2013 
£000

5,996

233

(266)

72

(282)

5,753

2013 
£000

(233)

233

–

2012 
£000

5,159

237

620

(387)

5,629

2012 
£000

5,450

237

641

62

(394)

5,996

2012 
£000

(237)

237

–

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(Losses)/gains recognised in the Consolidated Statement of Comprehensive Income

Difference between expected and actual return on plan assets

Experience losses arising on the defined benefit obligations

Effects of changes in the demographic and financial assumptions underlying the present value of the defined benefit obligations

Total actuarial (losses)/gains (before restriction due to some of the surplus not being recognisable)

Effect of limit on amount of surplus recognised due to some of the surplus not being recognisable

Total amount recognised in the Consolidated Statement of Comprehensive Income

2013 
£000

(266)

(203)

205

(264)

264

–

2012 
£000

641

(27)

(580)

34

(34)

–

The cumulative amount of actuarial gains and losses recognised in the Consolidated Statement of Comprehensive Income since the adoption 
of IAS 19 is £nil.

Assets 

Equity

Bonds

Cash

Total assets

2013 
Fair value of
plan assets
£000 

2012 
Fair value of
plan assets
£000 

2011 
Fair value of
plan assets
£000 

146

5,611

(4)

5,753

118

5,874

4

5,996

19

5,431

–

5,450

As at 30 November 2013, the fair value of the assets shown above include holdings of £45,000 in Synectics plc shares which constitute 
employer-related investments. There are no further amounts in assets which represent the Company’s own financial instruments or any 
property occupied by, or other assets used by, the Company.

Actual return on plan assets 
The actual return on the plan assets over the year ending 30 November 2013 was a loss of £33,000.

Principal actuarial assumptions

Inflation

Inflation (CPI)

Rate of discount

Allowance for revaluation of deferred pensions of CPI or 5% pa if less

Allowance for commutation of pension for cash at retirement

2013 
% per 
annum

2012 
% per 
annum

2011 
% per 
annum

3.70

2.80

4.30

2.80

–

3.00

2.50

4.00

2.50

–

3.20

2.70

4.90

2.70

–

82

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com30  Pension commitments continued
The mortality assumptions adopted at 30 November 2013 imply the following life expectancies at age 65: 

Male currently age 45

Female currently age 45

Male currently age 65 

Female currently age 65

Present value of defined benefit obligations, fair value of assets and surplus

Fair value of plan assets

Present value of defined benefit obligations

Surplus in plan

Unrecognised surplus

Asset to be recognised

Years

24.6

27.0

22.7

25.2

2011 
£000

5,450

5,165

285

(285)

–

2013 
£000

5,753

5,565

188

(188)

–

2012 
£000

5,996

5,629

367

(367)

–

The Company estimates that additional contributions of £5,083 will be paid to the plan during the year ending 30 November 2014.

History of experience gains and losses

Fair value of plan assets

Present value of defined benefit obligations

Surplus in plan

30 Nov 
2013 
£000

5,753

5,565

188

30 Nov  
2012 
£000

5,996

5,629

367

30 Nov 
2011 
£000

5,450

5,165

285

31 May 
2010 
£000

5,029

4,885

144

31 May
 2009
£000

4,339

4,322

17

Experience adjustment on plan assets

Experience adjustment on defined benefit obligations

(266)

(203)

641

(27)

350

–

597

124

(352)

–

Expected long-term rates of return
The expected long-term rate of return on cash is determined by reference to the rate of return of gilts at the balance sheet dates. The expected 
long-term return on bonds is determined by reference to UK long dated government and corporate bond yields at the balance sheet date. 
The expected long-term rate of return on equities is based on the rate of return on bonds with an allowance for out-performance.

The expected long-term rates of return applicable for each period are as follows:

Equity

Bonds

Cash

Overall for scheme

Period 
commencing 
1 December 
2012 
% per 
annum

Period 
commencing 
1 December 
2011 
% per 
annum

6.30

3.90

2.40

3.95

6.80

4.48

2.70

4.49

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b) Defined contribution schemes
Contributions made by the Company to the defined contribution section of the Quadrant Group plc Retirement Benefit Scheme amount to 
£50,000 in the year (2012: £49,000).

There are also a number of other defined contribution pension schemes operated by various companies within the Group. The Group’s total 
expense for these other schemes in the year was £438,000 (2012: £423,000). 

31  Financial instruments 
Capital risk management
The Group manages its capital to ensure that it will be able to continue as a going concern while maximising the return to shareholders. The capital 
structure of the Group consists of cash held in interest bearing current accounts (note 19), loans and borrowings on fixed terms (note 21) and 
equity attributable to equity holders of the parent, comprising issued share capital (note 23), reserves and retained earnings. The Group is not 
subject to any externally imposed capital requirements. The Group’s dividend policy depends on both the earnings profile and investment 
opportunities together with wider macro-economic factors.

Foreign currency risk
The Group operates internationally giving rise to exposure from changes in foreign exchange rates, with the US Dollar, the Euro and the Singapore 
Dollar being the main foreign currencies in which the Group operates. The Group’s policy is to manage transaction exposure in respect of the Group’s 
UK subsidiaries through the use of forward exchange contracts, which are entered into in respect of forecast foreign currency transactions when 
the amount and timing of such forecast transactions becomes reasonably certain. The Group had no commitments in respect of forward exchange 
contracts at either 30 November 2013 or 30 November 2012.

At 30 November 2013, the Group entities based in the UK had the following forecast foreign currency transactions during the next two years 
which have not been hedged, principally due to either natural hedges being available of receipts against payments or to significant uncertainty 
over the timing of the transactions:

Receipts

2013 
$000

770

2012 
$000

2,231

 The Group is exposed to fluctuations in exchange rates on the translation of profits earned by its overseas subsidiaries. These profits are translated 
at average exchange rates for the year which is an approximation to rates at the date of transaction. The Group’s overseas subsidiaries account 
for approximately 8.5% (2012: 3.8%) of the Group’s net assets as follows:

United States

Germany

Singapore

Total

2013 
%

2.0

1.5

5.0

8.5

2012 
%

2.0

1.8

–

3.8

Translation exposure in respect of these assets is not hedged.

At 30 November 2013 the Group held cash balances of $1,539,000 (2012: $746,000), €162,000 (2012: €82,000) and S$1,431,000 (2012: S$2,730,000).

The following table details the Group’s sensitivity to a 10% fall in the relevant foreign currencies: 

Profit or loss

Other equity

Total

USD impact

Euro impact

SGD impact

2013
£000

33

99

132

2012
£000

158

40

198

2013
£000

(130)

(172)

(302)

2012
£000

–

–

–

2013
£000

205

161

366

2012
£000

–

–

–

84

Synectics plc  Annual Report and Accounts 2013

Financial StatementsNotes to the Consolidated Financial Statements continuedFor the year ended 30 November 2013www.synecticsplc.com 
 
 
31  Financial instruments continued
The table below shows the extent to which the Group had significant monetary assets and liabilities in currencies other than the local currency 
of the Company in which they are recorded. Foreign exchange differences on the retranslation of these assets and liabilities are recognised 
in the Group Income Statement.

Sterling

US Dollars

Euros

Canadian Dollars

Saudi Arabian Riyals

Total

Functional currency of Group operation

2013

Sterling
£000

–

543

56

–

44

SGD 
£000

568

783

–

–

–

643

1,351

2012

Sterling
£000

–

433

67

5

40

545

Credit risk
Credit risk refers to the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations, resulting in financial 
loss to the Group, and arises principally from the Group’s receivables from customers and interest bearing current accounts. Management has 
a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring 
credit using information supplied by independent rating agencies where available. The Group also uses other publicly available information and 
its own trading records to rate major customers. The credit risk on current accounts is limited because the counterparties are banks with high 
credit-ratings assigned by international credit-rating agencies.

At the balance sheet date, there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the 
carrying amount of each financial asset in the Consolidated Statement of Financial Position.

Liquidity risk
Liquidity risk is the risk that the Group does not have sufficient cash to meet its financial obligations as they fall due. The Group ensures that 
sufficient cash and undrawn facilities are available to fund ongoing operations and to meet its medium-term capital and funding obligations, 
and to meet any unforeseen obligations and opportunities.

At the year end, the Group had net funds of:

Current accounts

Loans and borrowings (note 21)

2013 
£000

5,774

(4,575)

1,199

2012 
£000

6,491

(1,850)

4,641

The level of the Group’s bank overdraft facilities is reviewed annually and at 30 November 2013 the Group had undrawn overdraft facilities 
of up to £4 million, on which interest would be payable at the rate of bank base rate + 2%.

Financial liabilities of the Group principally comprise trade creditors falling due for payment within twelve months of the balance sheet date 
(2012: twelve months) and bank loans which fall due for payment within five years of the balance sheet date.

Due to the significant amount of cash held in current accounts, taken together with the undrawn bank overdraft facility, the Group’s exposure 
to liquidity risk at 30 November 2013 and 30 November 2012 was negligible.

Interest risk 
Interest bearing assets comprise cash held in current accounts, earning interest at bank base rate. During the year these bank deposits bore 
interest at base rate of 0.5% (2012: 0.5%). The Group benchmarks the rates being obtained in order to maximise its returns, within the credit 
risk framework referred to above.

The Group’s short-term financial liabilities are all non-interest bearing. The interest rates for bank loans are set out in note 21.

The Group’s funds did not carry any significant interest rate risk at 30 November 2013 or 30 November 2012.

A 0.5% fall in interest rates would not have a material impact on the results of the Group.

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Company Balance Sheet
As at 30 November 2013

Fixed assets

Plant, equipment and motor vehicles

Investments in subsidiary undertakings

Current assets

Debtors

Creditors: amounts falling due within one year 

Net current assets

Total assets less current liabilities

Creditors: amounts falling due after more than one year 

Loans and borrowings

Provisions for liabilities and charges

Non–current liabilities

Net assets

Capital and reserves

Called up share capital

Share premium account

Merger reserve

Other reserves

Profit and loss account

Equity shareholders’ funds

Note

2013
£000

2012
£000

5

6

7

8

8

9

10

11

12

12

12

12

191

19,261

19,452

136

19,211

19,347

29,622

25,366

(4,856)

(6,469)

24,766

44,218

(6,669)

(4,575)

(47)

(11,291)

32,927

3,539

15,765

9,971

18,897

38,244

(4,459)

(1,623)

(51)

(6,133)

32,111

3,514

15,721

9,565

(1,516)

(1,849)

5,168

32,927

5,160

32,111

The financial statements on pages 86 to 92 were approved and authorised for issue by the Board of Directors on 26 February 2014 and were 
signed on its behalf by:

John Shepherd 
Director  

Company Number: 1740011 

Nigel Poultney
Director

86

Synectics plc  Annual Report and Accounts 2013

Financial Statementswww.synecticsplc.com 
 
 
 
 
 
Notes to the Company Financial Statements
For the year ended 30 November 2013

The principal activity of the Company was to act as a holding company for its trading subsidiaries.

1  Principal accounting policies
The financial statements have been prepared in accordance with applicable Accounting Standards in the United Kingdom (‘UK GAAP’). 
A summary of the more important Company accounting policies, which have been consistently applied, is set out below.

a)  Basis of accounting
The financial statements are prepared in accordance with the historical cost convention.

b)  Turnover
Turnover, which excludes value added tax and trade discounts, represents the value of goods and services supplied during the year. 

c)  Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net assets purchased at the date of acquisition, and is capitalised 
as a fixed asset and amortised on a straight-line basis over its estimated useful life of up to 20 years.

d)  Tangible fixed assets
Tangible fixed assets are stated at cost less accumulated depreciation.

Depreciation is calculated so as to write off the cost of fixed assets, less their estimated residual values, on a straight-line basis over the expected 
useful economic lives of the assets concerned, commencing on the first day of the month after being brought into use. The principal annual rates 
used for this purpose are 10% – 33%.

e)  Leased assets
Rentals payable under operating leases are written off to the profit and loss account on a straight-line basis over the term of the lease.

f)  Taxation
The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the 
treatment of certain items for taxation and accounting purposes.

Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to pay less tax, 
at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise from the inclusion of 
income and expenditure in taxation computations in periods different from those in which they are included in the financial statements. Deferred tax 
assets are recognised to the extent that it is more likely than not that they will be recovered. Deferred tax balances are not discounted.

g)  Pension costs
Company employees are members of two pension schemes, both of which operate on a money purchase basis. Contributions to these schemes 
are charged to the profit and loss account as incurred.

The Company also operates a retirement benefit scheme, which has deferred defined benefit members. The expected return on the scheme’s 
assets and the expected increase in the present value of the scheme’s liabilities during the period are included in the profit and loss account as 
other finance income or charges as appropriate. Actuarial gains and losses are recognised in the statement of total recognised gains and losses. 
Pension scheme liabilities and, to the extent that they are recoverable, pension scheme assets are recognised in the balance sheet and represent 
the difference between the market value of the scheme’s assets and the present value of the scheme’s liabilities, net of deferred taxation.

Pension scheme liabilities are determined on an actuarial basis using the projected unit method and are discounted at a rate using the current rate 
of return on a high quality corporate bond of equivalent term and currency to the liability.

h)  Foreign currency
Transactions denominated in foreign currency are translated into Sterling at the exchange rates prevailing at the date of the transaction. Monetary 
assets and liabilities in foreign currencies are retranslated into Sterling at rates of exchange ruling at the end of the financial period or, if appropriate, at 
the forward contract rate. Exchange differences arising on these transactions are taken to the profit and loss account in the period in which they arise.

i)  Dividends
Dividends proposed by the Directors and unpaid at the end of the year are not recognised in the financial statements until they have been 
approved by shareholders at a General Meeting of the Company. Interim dividends are recognised when they are paid.

j)  Employee share schemes
Transactions of the Company-sponsored ExSOP are treated as being those of the Company and are therefore reflected in the Parent Company 
financial statements. In particular the scheme’s purchase of shares in the Company are debited directly to equity.

Synectics plc  Annual Report and Accounts 2013

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www.synecticsplc.comIntroductionPages 01–05Strategic ReviewPages 06–15Performance ReviewPages 16–31GovernancePages 32–48Financial StatementsPages 49–92Other InformationPages 93–96Notes to the Company Financial Statements continued
For the year ended 30 November 2013

2  Directors’ remuneration
Directors’ remuneration is shown in the Remuneration Committee Report on page 41.

3  Employee information
The average number of persons (including Executive Directors) employed by the Company during the year was:

Class of business

Central

Staff costs (for the above persons)

Wages and salaries

Social security costs

Pension costs

Share-based payment charge

2013
Number

2012
Number

14

11

2013
£000

1,537

193

221

28

2012
£000

1,239

193

187

46

1,979

1,665

4  Dividends
The following dividends were paid by the Company during the year:

Final dividend paid in respect of prior year but not recognised as liabilities in that year

Interim dividend paid in respect of current year

Total dividend paid, net of Treasury share dividends 

Proposed final dividend for the year ended 30 November

2013

2012

Pence per
share

5.0

3.0

8.0

5.5

£000

858

519

1,377

1,336

947

Pence per
share

4.5

2.5

7.0

5.0

£000

791

439

1,230

1,140

858

The proposed final dividend for the year ended 30 November 2013 has not been approved by shareholders and as such has not been included as 
a liability as at 30 November 2013. Subject to approval, this is expected to be paid on 7 May 2014 to shareholders on the register at 28 March 2014. 
This will give a total dividend for the period of 8.5p (2012: 7.5p).

5  Plant, equipment and motor vehicles

Cost:

At 1 December 2012

Additions

Disposals

Intra-Group transfers

At 30 November 2013

Depreciation:

At 1 December 2012

Charge for the year

Disposals

Intra-Group transfers

At 30 November 2013

Net book value:

At 30 November 2013

At 30 November 2012

88

Synectics plc  Annual Report and Accounts 2013

£000

305

334

(53)

(241)

345

169

47

(53)

(9)

154

191

136

Financial Statementswww.synecticsplc.com6 

Investments in subsidiary undertakings

Cost at 1 December 2012

Additions:

– Share-based payments capital contribution

At 30 November 2013

Provision for impairment as at 1 December 2012 and 30 November 2013

Net book value:

At 30 November 2013

At 30 November 2012

£000

27,393

50

27,443

(8,182)

19,261

19,211

At 30 November 2013 the Company held the following direct shareholdings in its subsidiaries which had been active during the year:

Subsidiary and activity

Synectic Systems Group Limited

Class of share

Country of
incorporation

% held at 
30 Nov 2013

Ordinary shares

UK

100%

–  Design and manufacture of video systems control products, integrated digital CCTV systems and 

CCTV equipment and systems for extreme or hazardous environments

Quadrant Security Group Limited

–  Design, installation and maintenance of CCTV security systems and integrated security systems

Ordinary shares

SSS Management Services Limited 

–  Security management and support services

Synectic Systems, Inc. 

Ordinary shares

UK

UK

100%

100%

–  Design and supply of video systems control products and integrated digital CCTV systems

Common stock

USA

100%

Synectic Systems GmbH
–  German holding company

Details of the principal subsidiaries are shown on page 93.

Ordinary shares

Germany

100%

7  Debtors

Trade debtors

Deferred taxation 

Other debtors

Amounts due from subsidiaries

Corporation tax receivable

Prepayments and accrued income

Deferred taxation

At 1 December 2012

Charge to profit and loss account

At 30 November 2013

2013
£000

5

15

83

2012
£000

–

18

21

29,385

25,169

101

33

104

54

29,622

25,366

2013
£000

2012
£000

18

(3)

15

24

(6)

18

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For the year ended 30 November 2013

7  Debtors continued
The deferred taxation balances comprise:

Fixed asset timing differences

Other timing differences

8  Creditors

Amounts falling due within one year

Bank overdrafts

Trade creditors

Amounts owed to subsidiaries

Other taxation and social security

Other creditors

Accruals and deferred income

Amounts falling due after more than one year

Amounts owed to subsidiaries

2013
£000

5

10

15

2013
£000

4,025

310

1

61

50

409

4,856

6,669

11,525

2012
£000

16

2

18

2012
£000

5,748

92

10

12

7

600

6,469

4,459

10,928

The bank overdrafts are part of a Group offset arrangement and the overall bank balances were positive at 30 November 2013.

9  Loans and borrowings

Bank term loan facilities

The loans are a non-current liability; the terms are as follows:

2013
£000

4,575

2012
£000

1,623

€3.7 million term loan facility

£1.5 million term loan facility

Value drawn 
000

€3,700

£1,500

Date 
repayable 

Interest 
rate

31 January 2016

EURIBOR +2.25%

26 November 2018

LIBOR +1.75% 

Security

None

None

During the period €1.7 million was drawn against the Euro bank term loan facility, and the other loan held at 30 November 2012 was repaid as part 
of the acquisition for the remaining issued share capital of Indanet (note 5 of the Group financial statements).

In addition, a new £1.5 million facility was drawn down to finance the purchase of an additional property as part of the internal reorganisation 
(note 2 of the Group financial statements).

90

Synectics plc  Annual Report and Accounts 2013

Financial Statementswww.synecticsplc.com10  Provisions

At 1 December 2012

Utilised in year

Charge to profit and loss account

At 30 November 2013

Property
£000

51

(14)

10

47

The Company has a property that it currently sublets, where the Directors believe that they may not be able to fully recover future rental costs, 
and therefore appropriate cost provisions have been made. The provision carried forward at 30 November 2013 will be utilised over the remainder 
of the lease period which runs to 6 November 2014.

11  Called up share capital
The number of allotted, called up and fully paid shares is as follows:

Ordinary shares of 20p each

Allotted, called up and fully paid

2013

2012

Number

 £000 

Number

 £000 

17,694,891

3,539

17,571,488

3,514

Share capital increased by 123,403 shares in the year as a result of 22,000 share options being exercised under the Quadnetics Group EMI 
Share Option Scheme (see note 24 of the Group financial statements) and 101,403 shares being issued as part of the acquisition of CSA 
(see note 5 of the Group financial statements).

12  Reserves
The movements on equity shareholders’ funds during the year were as follows:

At 1 December 2012

Profit after tax for the year

Dividends paid (note 4)

Credit in relation to share-based payments

Issue of ordinary shares

Share scheme interests realised in the year

Acquisition of Coex Services Asia Pte Ltd

At 30 November 2013

Called up
share
capital
£000

Share
premium
account
£000

3,514

15,721

Merger
reserve
£000

9,565

Other
reserves
£000 

(1,849)

–

–

–

5

–

20

3,539

–

–

–

44

–

–

15,765

–

–

–

–

–

406

9,971

Retained
earnings
£000

5,160

1,266

Total
£000

32,111

1,266

(1,336)

(1,336)

78

–

–

–

78

49

333

426

–

–

–

–

333

–

(1,516)

5,168

32,927

Cumulative goodwill written off directly to the profit and loss account at 30 November 2013 was £593,000 (2012: £593,000). 

The consolidated result attributable to the shareholders of Synectics plc for the year includes a profit of £1,266,000 (2012: £1,937,000) which 
has been dealt with in the financial statements of the Company. Synectics plc has taken advantage of the legal dispensation under section 408 
of the Companies Act 2006 allowing it not to publish a separate profit and loss account.

13  Contingent liabilities
The Company has agreed, in some instances jointly with subsidiary companies, to guarantee borrowings, annual operating lease rentals 
and performance bonds amounting to £1.1 million at 30 November 2013 (2012: £1.6 million). 

14  Capital commitments
At 30 November 2013 capital commitments not provided for in these financial statements amounted to £209,000 (2012: £nil).

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Notes to the Company Financial Statements continued
For the year ended 30 November 2013

15  Operating lease commitments
The Company is committed to making operating lease payments during the next year as follows:

Operating leases which expire:

Within one year

Within two to five years

In excess of five years

Land and 
buildings
£000 

2

–

25

27

2013

 Other
£000 

5

66

–

71

Total
£000 

Land and 
buildings
£000 

7

66

25

98

–

27

–

27

2012

 Other
£000 

–

32

–

32

Total
£000 

–

59

–

59

16  Pension commitments
Employees of the Company are members of the defined contribution section of a defined benefit pension scheme (the Quadrant Group plc 
Retirement Benefit Scheme) and two defined contribution schemes operated by the Group. For further details of the Quadrant Group plc 
Retirement Benefit Scheme, see note 30 of the Group financial statements.

Defined contribution schemes
Contributions made by the Company to the defined contribution section of the Quadrant Group plc Retirement Benefit Scheme amount to 
£50,000 in the year (2012: £49,000).

In addition, the Company’s total expense for other defined contribution pension schemes during the year was £171,000 (2012: £138,000).

92

Synectics plc  Annual Report and Accounts 2013

www.synecticsplc.comOther Information
Principal Subsidiaries

The principal subsidiaries and divisions within the Group during the year were as follows:

Quadrant Security Group Limited
Design, installation, maintenance and management 
of advanced integrated CCTV and security systems.

Synectics Mobile Systems
Development and supply of CCTV systems for bus 
manufacturers and operators.

www.qsg.co.uk

3 Attenborough Lane
Chilwell
Nottingham NG9 5JN
Tel: +44 (0) 115 925 2521

Axis 6, Rhodes Way
Radlett Road
Watford
Hertfordshire WD24 4YW
Tel: +44 (0) 1923 211550

9 Hadrian Court
Team Valley Industrial Estate
Gateshead
Tyne and Wear NE11 0XW 
Tel: +44 (0) 191 487 2342

www.synx.com

Unit 2, Wyder Court
Millennium City Park
Off Bluebell Way
Preston PR2 5BW
Tel: +44 (0) 1253 891222

Synectic Systems, Inc.
Developers of integrated software solutions and products 
for complex security and surveillance networks.

www.synx.com 

4180 Via Real, Suite A
Carpinteria
California 93013
USA 
Tel: +1 805 745 1920

SSS Management Services Limited
Total security outsourcing support and management 
services to retail and multi-site customers.

www.sss-support.co.uk

Shannon House
245 Coldharbour Lane
Aylesford
Kent ME20 7NS 
Tel: +44 (0) 1622 798200

Indanet GmbH
Provider of integrated surveillance and security 
management systems to the European transport industry.

www.indanet.de

Machtlfinger Straße 13
81379 München 
Tel: +49 89 748862-0

Synectic Systems Group Limited
Design and development of advanced surveillance 
technology, operating through the divisions shown below:

Synectics Systems (Asia) Pte Limited
Provision of specialist video-based electronic systems 
and technology, for use in high security applications.

www.synx.com

Synectics House
3-4 Broadfield Close
Sheffield S8 0XN
Tel: +44 (0) 114 255 2509

Moat Road
Lysaghts Way
Normanby Enterprise Park
Scunthorpe
North Lincolnshire DN15 9ZZ

www.synx.com

10 Ubi Crescent
#06-80 Ubi Techpark (Lobby E)
Singapore 408564 
Tel: +65 6841 2891

Coex Services Asia Pte Limited
Design and supply of video systems control products 
and systems for extreme or hazardous environments.

10 Ubi Crescent
#06-80 Ubi Techpark (Lobby E)
Singapore 408564 
Tel: +65 6841 289

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Advisers

Secretary and Registered Office
NC Poultney 
Synectics plc
Studley Point
88 Birmingham Road
Studley
Warwickshire B80 7AS
Tel: +44 (0) 1527 850080

Email: legalandsecretarial@synecticsplc.com

Bankers
Lloyds TSB Bank plc
125 Colmore Row
Birmingham B3 3SF

Stockbrokers
Westhouse Securities Limited
Heron Tower 
110 Bishopsgate 
London EC2N 4AY

Auditor
KPMG Audit Plc
One Snowhill
Snow Hill Queensway
Birmingham B4 6GH

Registrars and Transfer Office
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham BR3 4TU

Corporate Communications
Buchanan Communications Limited
107 Cheapside
London EC2V 6DN 

94

Synectics plc  Annual Report and Accounts 2013

Other informationwww.synecticsplc.comOther Information
Notice of Annual General Meeting

Notice is hereby given that an Annual General Meeting of Synectics plc will be held at Westhouse Securities Limited, Heron Tower, 110 Bishopsgate, 
London EC2N 4AY on 30 April 2014 at 11.00am for the following purposes:

Ordinary Business
To consider and, if thought fit, to pass the following Resolutions as Ordinary Resolutions:

1.  To receive and adopt the Reports of the Directors and Audited Accounts for the year ended 30 November 2013.

2. 

 To declare a final dividend for the year ended 30 November 2013 of 5.5p per ordinary share to be paid on 7 May 2014 to members whose 
names appear on the register of members at the close of business on 28 March 2014.

3.  To re-elect as a Director DJ Coghlan who, being eligible, submits himself for re-election.

4.  To re-elect as a Director SW Coggins who, being eligible, submits himself for re-election.

5. 

 To appoint KPMG LLP as auditor of the Company to hold office from conclusion of the Annual General Meeting until the conclusion of the 
next Annual General Meeting and to authorise the Directors to set its remuneration. 

Special Business
To consider and, if thought fit, to pass the following Resolutions. Resolutions 6 and 9 will be proposed as Ordinary Resolutions and Resolutions 7 
and 8 as Special Resolutions:

6. 

 That, in substitution for the existing general authorities granted at the last Annual General Meeting of the Company, in accordance with 
section 551 of the Companies Act 2006 (‘the Act’), the Directors be and are hereby generally and unconditionally authorised to exercise all 
powers of the Company to allot shares in the Company or to grant rights to subscribe for or convert any security into shares in the Company 
up to an aggregate nominal amount of £1,179,659 (being approximately 33% of the present issued share capital of the Company) provided 
that this authority (unless previously revoked or renewed) shall expire on the conclusion of the next Annual General Meeting of the Company 
after the passing of this resolution save that the Company may before such expiry make an offer or agreement which would or might require 
such shares to be allotted or rights to subscribe for or convert securities into shares to be granted after such expiry and the Directors may allot 
shares and grant rights to subscribe or convert securities into shares in pursuance of such offer or agreement as if the authority conferred 
hereby had not expired.

7.  That,

(1)   conditionally upon the passing of Resolution 6 and in substitution for all existing powers, in accordance with section 570 of the Act, the 

Directors be and are hereby given power to allot equity securities (as defined in section 560 of the Act) for cash pursuant to the authority 
conferred by Resolution 6 and be empowered pursuant to section 573 of the Act to sell ordinary shares (as defined in section 560 of the Act) 
held by the Company as treasury shares (as defined in section 724 of the Act) for cash as if section 561(1) of the Act did not apply to any such 
allotment or sale provided that this power shall be limited to allotment of equity securities and the sale of treasury shares:

a) 

 in connection with or pursuant to an offer by way of rights, open offer or other pre-emptive offer in favour of the existing holders of 
ordinary shares in the capital of the Company and other persons entitled to participate therein in proportion (as nearly as may be) to 
such holders’ holdings of such shares (or, as appropriate, to the numbers of shares which such other persons are for these purposes 
deemed to hold) subject only to such exclusions or other arrangements as the Directors may deem necessary or expedient to deal 
with fractional entitlements or legal problems under the laws of any territory or the requirements of any recognised regulatory body 
or stock exchange; and

b) 

 (otherwise than pursuant to sub-paragraph (a) of this proviso) up to an aggregate nominal amount of £176,948, being approximately 
5% of the Company’s present issued share capital;

and the power hereby granted shall expire on the conclusion of the next Annual General Meeting of the Company after the passing of this 
Resolution save that the said power shall allow and enable the Directors to make an offer or agreement before the expiry of that power 
which would or might require equity securities to be allotted or treasury shares to be sold after such expiry and the Directors may allot 
equity securities or sell treasury shares in pursuance of such an offer or agreement as if the power conferred hereby had not expired.

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Notice of Annual General Meeting continued

8. 

 That the Company be and is hereby generally and unconditionally authorised pursuant to section 701 of the Act to make one or more market 
purchases (as defined in section 693(4) of the Act) of its ordinary shares of 20p each on such terms and in such manner as the Directors shall 
determine, provided that:

(1)   the maximum number of ordinary shares hereby authorised to be acquired is 1,769,489 (representing 10% of the present issued ordinary 

share capital of the Company);

(2)   the minimum price which may be paid for such shares is 20p per share (exclusive of all expenses);

(3)   the maximum price which may be paid for such shares is, in respect of a share contracted to be purchased on any day, an amount 

(exclusive of expenses) equal to 5% above the average middle market quotations for an ordinary share of the Company as derived from 
the AIM Appendix to the Daily Official List of the London Stock Exchange on the five dealing days immediately preceding the day on 
which the share is contracted to be purchased; and

(4)   the power hereby granted shall expire on the conclusion of the next Annual General Meeting of the Company after the passing of this 

Resolution or, if earlier, on 31 December 2015 provided that the Company may make a contract to purchase its ordinary shares under the 
authority hereby granted prior to the expiry of such authority which will or may be executed wholly or partly after the expiry of such 
authority, and may make a purchase of its ordinary shares in pursuance of such contract.

9.  To approve the Remuneration Committee’s Report containing the Directors’ remuneration for the year ended 30 November 2013.

By Order of the Board  

NC Poultney
Secretary

26 February 2014

Notes:

Registered office 
Studley Point 
88 Birmingham Road, Studley 
Warwickshire B80 7AS 

1. 

2. 

3. 

4. 

 Further to Regulation 41 of the Uncertificated Securities Regulations 2001 only those shareholders registered in the register of members of 
the Company as at 6.00pm on 28 April 2014 shall be entitled to attend or vote at this meeting in respect of the number of shares registered in 
their name at that time. Changes to entries on the register after this time will be disregarded in determining the rights of any person to attend 
or vote at the meeting.

 Any member entitled to attend and vote at the Annual General Meeting may (unless they have, pursuant to article 89 of the Company’s 
Articles of Association, nominated someone else to enjoy such a right, in which case only the person so nominated may exercise the right) 
appoint a proxy (who need not be a member) to attend or vote instead of him. A shareholder may appoint more than one proxy in relation to 
the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that 
shareholder. A proxy need not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy 
instructions accompanies this notice. A member submitting a proxy is not precluded from attending the meeting and voting if they wish to do 
so. To be effective, proxy forms and the power of attorney or other authority (if any) under which it is signed, or a notarially certified copy of 
such power of authority, must be received at the office of the Registrars of the Company, Capita Asset Services, PXS, 34 Beckenham Road, 
Beckenham BR3 4TU, not less than 48 hours before the time appointed for the holding of the meeting, or any adjournment thereof.

 Copies of the Directors’ service agreements will be available for inspection at the Registered Office of the Company during normal working 
business hours on each business day and will be available for inspection on the day of the Annual General Meeting for 15 minutes prior to and 
during the continuance of the meeting.

 In the case of joint holdings, the vote of the senior holder shall be accepted to the exclusion of the other joint holders, whether in person or by 
proxy. For this purpose, seniority shall be deemed by the order of the names of the holders as entered in the Company’s Register of Members 
in respect of relevant joint holdings.

96

Synectics plc  Annual Report and Accounts 2013

www.synecticsplc.com 
 
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Synectics plc
Studley Point 
88 Birmingham Road  
Studley, Warwickshire  
B80 7AS, United Kingdom

Telephone: +44 (0)1527 850080  
Email: info@synecticsplc.com

www.synecticsplc.com