TD SYNNEX

Global Specialists in 
Integrated Security Systems

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Synectics plc
Annual Report and Accounts for the year ended 30 November 2014

 
 
 
 
 
 
Introduction
Overview

We design, deliver and 
manage integrated security 
and surveillance systems for 
the world’s most demanding 
security environments

Innovating 

Integrating 

Protecting

Synectics’ business is to provide integrated electronic security systems and services 
to specialist high-end markets. Our systems are based on core proprietary technology, 
in particular system integration and command and control software. This technology is 
adapted for the specific needs of our target customer sectors, and provides fundamental 
differentiation from mainstream suppliers in the wider electronic security market.

We look to develop long-term strategic partnerships with our customers that have 
security and surveillance needs of sufficient complexity and scale that they value 
the sophistication of Synectics’ capabilities and expertise.

In this report

Introduction
01  Overview
02  Chairman’s Statement 

Strategic Review
04  Our Business
06  Our Markets
08  Our Global Positioning
10  Our Proprietary Technology

Performance Review
13  Group Financial Results
18  Our Divisions: Systems
20  Our Divisions: Integration & Managed Services

Governance
22  Board of Directors
24  Chairman’s Introduction
26  Corporate Governance Statement
29  Remuneration Committee Report
33  Audit Committee Report
34  Statutory Directors’ Report
38  Risks and Risk Management

Financial Statements
41 
Independent Auditor’s Report
42  Consolidated Income Statement
43  Consolidated Statement of Comprehensive Income
44  Consolidated Statement of Financial Position
45  Consolidated Statement of Changes in Equity
46  Consolidated Cash Flow Statement
47  Notes to the Consolidated Financial Statements
74  Company Balance Sheet
75  Notes to the Company Financial Statements

Other Information
80  Principal Subsidiaries
81  Advisers
82  Notice of Annual General Meeting

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

Headlines

 » Revenue £64.6 million (2013: £82.4 million)

 » Year-end order book £28.6 million 

 » Underlying loss* £2.4 million 

(2013: underlying profit* £7.1 million)

 » Loss before tax £3.7 million 

(2013: £28.1 million)

 » Cost base restructured to generate 
savings of £2.2 million per annum

(2013: profit before tax £6.6 million) 

 » Launch of new Synergy 3 command 

 » Underlying diluted EPS* (14.0)p 

(2013: 32.6p)

 » Diluted basic EPS (20.6)p (2013: 29.4p)

 » Net debt at 30 November 2014 £6.1 million 

(2013: net cash £1.2 million)

and control software platform

 » Opening of Synectics’ Operations 

Centre in North Lincolnshire

Financial overview

Revenue  
(£m)
-22%

m
1
.
9
6
£

m
3
.
1
6
£

m
0
.
7
7
£

m
4
.
2
8
£

m
6
.
4
6
£

Underlying (loss)/profit* 
before tax (£m)
-133%

m
5
.
3
£

m
6
.
2
£

m
1
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7
£

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7
.
5
£

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)
4
.

2

(

£

10

11

12

13

14

10

11

12

13

14

Underlying operating margin** 
(%)
-12.2%

Underlying diluted EPS*  
(p) 
-143%

%
8

.

8

%
4
7

.

%
)
4
.
3
(

%
1
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*   Underlying (loss)/
profit represents  
(loss)/profit before tax 
and 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). Underlying 
earnings per ordinary 
share are based on (loss)/
profit after tax but before 
non-underlying items.

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

Annual Report and Accounts 2014 Synectics plc 01

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Chairman’s Statement

“ Although the impact of the decline 
in the global oil & gas market last 
year was not foreseen, Synectics 
has fully addressed those issues 
within its control that contributed 
to the poor financial performance 
in 2014.”

David Coghlan
Chairman

Overview

Over the five years to 30 November 2013 Synectics made 
consistent and creditable progress in line with the objectives set 
by the Board. Underlying profits grew at a compound 49% per 
year, market leadership goals were achieved in core areas and 
the challenging targets set for medium-term Group operating 
margins were achieved.

Against that background, it is a matter of deep regret to report to 
shareholders that results for 2014 were poor. Synectics recorded 
an underlying loss on its operations and incurred substantial further 
one-off costs for actions taken to restore profitability as rapidly 
as possible.

The main reasons for this sharp negative turnaround fall into 
three categories:

1) Severe disruption in the global oil & gas market
The oil & gas industry is the largest end-user sector for Synectics’ 
specialised surveillance systems; in the 2013 financial year it 
represented 26% of total consolidated Group revenue. During 
2014 a combination of increasing unrest in the Middle East and 
a substantial decline in oil & gas prices led to serial delays by end 
customers in the normal progress of projects. Earlier delays were 
expected to partially unwind in the second half of the financial year 
but in fact did not. In the end, Synectics’ revenues in this sector 
in FY 2014 declined by £10 million, or 46%, compared with the 
previous year.

2) Management failings within part of Synectics’ 
Integration & Managed Services (‘IMS’) division
Changes introduced in 2013 by new management within the 
UK security integration activities of IMS led to high staff turnover 
and less effective oversight of large, complex projects. Several 
of these projects suffered reduced margins and one recorded 
substantial losses. Radical action was taken quickly to correct 
matters but the impact on IMS’ 2014 results of this lost margin, 
and the diversion of resources away from winning and delivering 
new business, was a reduction of around £8.2 million in revenues 
and £3.5 million in profits compared to 2013. 

02 www.synecticsplc.com

3) Increased costs and operational gearing from 
recent investments made to support further growth
Synectics undertook a major upgrade of its information technology 
systems in 2013 and 2014. In 2013, the Systems division also 
acquired a new factory and consolidated three existing operations 
into that new site, while, in recent years, the Group expanded its 
central capabilities in human resources, marketing, procurement 
and finance. These investments in systems, capacity and capability 
were designed to provide a scalable operating platform able to 
support growth in Synectics’ annual revenues to the £100 million 
level and beyond. The impact from disruption and additional costs 
on results for 2014 is difficult to quantify but significant. 

Steps were taken at the end of the year and during the first quarter 
of 2015 to reduce the Group’s overhead base by an annualised 
total of £2.2 million.

Fuller details of these issues and other factors affecting the year’s 
results are set out in the Business Review section below.

The actions taken to reduce the Group’s cost base and to address 
the management issues within the UK security integration activities 
are having the desired impact. Synectics is now leaner and more 
unified. The Group is better adapted to produce acceptable returns 
from lower revenues, though still benefiting from the recent 
improvements in systems and facilities that support our continued 
expectations of future growth in a fundamentally attractive market.

Results

In the year to 30 November 2014, Synectics’ consolidated revenue 
was £64.6 million (2013: £82.4 million). The Group made an underlying 
loss* before tax of £2.4 million (2013: profit £7.1 million). After charging 
£1.4 million (2013: £0.5 million) for exceptional and non-underlying 
costs, the consolidated loss before tax for the year was £3.7 million 
(2013: profit £6.6 million).

IntroductionOutlook

The Group’s order book on 30 November 2014 was £28.6 million, 
up marginally from the position a year earlier. Encouragingly, new 
orders in the first two months of the current year have been strong.

Although we do not expect any significant positive change 
in the underlying oil & gas market during 2015, there are signs 
that a number of projects that were put on hold in 2014 are being 
unblocked. This should mean that Synectics’ revenues from that 
sector in the current year, particularly in the second half, will be 
above the reduced level experienced in 2014. The Group’s second 
largest customer sector, gaming, has a strong pipeline of business 
expected for the year, especially from the Far East, though again 
this is likely to be weighted towards the second half. Activity levels 
in other sectors of the electronic surveillance market remain solid.

The IMS division has secured significant orders in the early months 
of 2015, and is seeing a growing pipeline of expected new business. 
Reduced overhead costs in several areas of the Group are also 
contributing to the forecast improvement in results.

The issues affecting 2014 have been fully addressed and clear 
recovery plans are in place. Synectics is positioned for a much 
improved performance in 2015 and the Board remains confident 
of its longer-term prospects.

David Coghlan 
Chairman

10 March 2015

Net debt at 30 November 2014 was £6.1 million 
(2013: net cash £1.2 million). In addition to the loss for the 
year, the other major impact on cash flow was an increase 
in working capital in the Systems division due to delays by 
Oil & Gas customers in progressing projects on originally 
contracted schedules. The latter effect is expected to unwind 
across 2015. Synectics has total debt facilities of £12 million.

As previously announced the Directors are not recommending 
payment of a dividend for the year. Our intention is to resume 
payments as soon as prudently possible.

People

2014 was the most difficult year in the Group’s recent history 
in terms of internal and external disruptions that placed unusual 
pressures on employees. In almost all cases our people responded 
with energy, common sense and exceptional commitment to the 
needs of our customers. Once again, I thank them sincerely.

Board changes

John Shepherd retired as Chief Executive and from the Board on 
31 January 2015. As noted at the beginning of this report, many good 
things were accomplished by the Group during John’s tenure and, 
on behalf of the Board and shareholders, I record here our gratitude 
for his contributions and wish him all the best for the future.

Paul Webb, who has been with Synectics since 2004, joined 
the Board in November 2014 and was appointed Chief Executive 
on 1 February 2015. Paul has been instrumental in the successful 
development of Synectics’ Systems division over recent years. 
He has a deep knowledge of our technology and markets, and the 
Board is confident he will provide outstanding executive leadership 
to the Group in the next phase of its development.

Strategy and financial objectives

In last year’s report I noted that Synectics had achieved the goals it 
publicly set itself in 2010, and that the Board intended during 2014 
to define our objectives for the next medium-term period. In light 
of events we deferred that process, and have now asked the new 
Chief Executive to lead his own review in the coming months. 
We expect to report on the results of that review and to set out 
the Group’s revised objectives in the second half of 2015.

*  Underlying (loss)/profit represents (loss)/profit before tax and 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). Underlying earnings per ordinary share is based 
on (loss)/profit after tax but before non-underlying items.

Annual Report and Accounts 2014 Synectics plc

03

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationOur Business

“ Our vision is clear and our 
strategy remains unchanged. 
The immediate challenge 
is to refresh the execution 
of that strategy to ensure 
we focus on what is 
critically important.” 

Paul Webb
Chief Executive

Overview

Our vision is clear and our strategy remains unchanged: 
to combine deep sector-specific market knowledge with 
proprietary technology. The immediate challenge is to refresh 
the execution of that strategy to ensure we focus on what 
is critically important.

 I am delighted to lead Synectics through this next phase of our 
development, and bring to my new role an intimate knowledge 
of our business, coupled with a deep understanding of our 
customers and markets built over many years.

 The immediate challenge is to refresh the execution of our strategy, 
and to ensure we focus on what is critically important for the 
development of our business.

 We have many exceptional and talented people in our business, 
and it is essential to me that we support and develop everyone 
to be customer-focussed, to always do the right thing, and to 
live our values.

Paul Webb
Chief Executive

10 March 2015

»  Our structure

Our business is split into two focussed divisions: Systems and 
Integration & Managed Services (‘IMS’).

Systems provides specialist electronic surveillance systems, based 
on its own proprietary technology, globally to end customers with 
large-scale and highly complex security requirements.

Integration & Managed Services focusses on delivering end-to-end, 
high integrity security and surveillance solutions, specialist mobile 
systems for transport operators, as well as service-led solutions 
for the management of facilities and security services.

»  Who we sell to

We focus on specific market sectors 

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.

Oil & Gas

Gaming

Infrastructure 
& High Security

Transport

Public Space

04 www.synecticsplc.com

Strategic Review»  Why customers partner with us

We have proprietary technologies

We invest in our research & development expertise 

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.

We have knowledgeable experts

Our 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.

We do this to ensure we understand our customers’ unique 
requirements and deliver innovative solutions that protect our 
customers’ critical infrastructures today and in the future. Synectics’ 
products and systems are developed by our in-house research 
& development team who have the skills and knowledge to tailor 
solutions to particular project requirements. We make sure our 
customers have easy access to our people, who are well known 
for their dedication, knowledge and common sense approach.

We support our customers and deliver service excellence

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

»  Our integrated offering

We meet customers’ increasingly sophisticated needs

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

CAD

We deliver end-to-end integrated electronic 
security systems

The scope of our services ranges from system consultation and 
design, through installation and maintenance, to a fully managed 
service solution. This can be delivered as an end-to-end solution 
or as a combination of services specifically selected in partnership 
with our customers to support their individual needs.

Consult

Design

Create

Integrate

Install

Commission

Maintain

Monitor

»  Our revenue model

We have a largely contract-based revenue model

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 by winning larger shares 
of bigger projects 

We achieve this by identifying major opportunities at an early 
stage and working with our customers to develop solutions 
that protect their investments.

Sales channels

We generate new business by working in partnership with global 
integrators, technology partners and resellers, as well as working 
directly with end users.

End users

Resellers

New contracts

Technology  
partners

Global  
integrators

Annual Report and Accounts 2014 Synectics plc

05

Performance ReviewGovernanceFinancial StatementsOther InformationStrategic ReviewIntroductionOur Markets

We focus on sectors where security 
and surveillance needs are a fundamental 
part of our customers’ operations

Overview

Deeper integration of all aspects of electronic security, 
surveillance and operational management systems is 
a key demand driver in our chosen market sectors.

Our response to this market need is to build on 
the core principle that inspired our name – synectics. 
We intelligently combine 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 the deep vertical industry knowledge 
of 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 
customer website: synecticsglobal.com

06 www.synecticsplc.com

  Oil & Gas

  Gaming

 Transport

   Infrastructure 

& High Security

  Public Space

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.

Although the market is 
experiencing global challenges, 
it continues to face complex 
demands to ensure the security 
of its sites: safety of on-site 
personnel, protection of offshore 
and onshore pipeline locations 
and 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. 

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 
continues to increase.

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.

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 
is opening up opportunities 
for growth in this sector.

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We have demonstrated 

We deliver turnkey/end-to-end 

A strong history and understanding 

success in delivering 

large-scale, integrated 

solutions for the most 

solutions in this market, based 

of supporting this sector, coupled 

on intuitive command and 

with flexibility and reliability, make 

control. Synectics’ strength in 

Synectics the first choice for 

demanding of transport 

design, integration, outsourced 

public surveillance applications. 

environments. Our 

management and processes 

solutions help operators 

enables us to assume an 

improve passenger safety 

ever-increasing responsibility 

and comfort, deter crime 

for the protection of critical 

and combat fraudulent claims.

and high security sites, 

infrastructure and employees.

Integration with third-party alarms 

from commercial properties can 

generate new revenue streams 

for customers.

Transportation environments 

National infrastructure is an 

Government authorities and 

face a variety of unique 

obvious target for disruption 

associated agencies in the public 

security challenges to ensure 

of essential services. Synectics 

space sector require specialist 

the efficient, safe and secure 

is ideally positioned to mitigate 

surveillance systems that enable 

transport of passengers 

this risk, through innovation, 

them to work together to resolve 

and cargo. The demand for 

technology, integration, remote 

incidents quickly, efficiently and 

intelligent and attractive public 

monitoring, alarm escalation 

effectively. Reduced budgets 

transportation solutions is high.

and provision of resource and 

with no reduction in duty of care 

response services as and 

for the public means delivering 

when needed. 

more with less.

Synectics’ capability to 

As many organisations 

The consolidation of control 

integrate legacy systems with 

move to consolidate their 

rooms and a reduction in budgets 

latest generation technology 

offerings, Synectics is in 

for non-critical services are driving 

using Synergy gives us 

an ideal position to offer 

the need for innovative support 

the opportunity to deliver 

end-to-end technology 

from the private sector. Synectics 

truly class-leading integrated 

and resource solutions to 

can be this partner of choice.

solutions to the transport market.

manage costs and improve 

the identification of 

potential threats.

Strategic Review 
 
 
 
  Oil & Gas

  Gaming

 Transport

   Infrastructure 
& High Security

  Public Space

A proven track record 

and strong, long-lasting 

relationships within this 

We provide customers in this 

tightly regulated market with 

enterprise-class surveillance 

sector make Synectics the 

systems. Our systems can 

perfect partner. Highly skilled 

be seamlessly integrated, 

people enable us to interact 

are scalable and are designed 

with highly knowledgeable 

for performance, reliability 

customers throughout every 

and flexibility.

stage of the project. 

Although the market is 

Gaming environments are cash 

experiencing global challenges, 

intensive and require some of 

it continues to face complex 

the most complex surveillance 

demands to ensure the security 

solutions. Customers in this 

of its sites: safety of on-site 

market are keen to take up 

personnel, protection of offshore 

the fully integrated security 

and onshore pipeline locations 

solutions Synectics can offer 

and monitoring of hazardous 

to mitigate the risk of player 

and explosive areas. The market 

scams, fraudulent claims, 

demands solutions that comply 

staff collusion and other 

with the ever-changing landscape 

security infringements.

of the rigorous compliance 

legislation in this sector. 

As the need for comprehensive, 

Effective gaming surveillance 

reliable, integrated, multi-site 

systems must deliver on 

management systems continues 

performance and resiliency 

to grow, the value of Synectics’ 

to ensure the highest level 

reputation for delivering solutions 

of protection. Our evolved 

for demanding environments 

Synergy command and 

continues to increase.

control software platform 

is opening up opportunities 

for growth in this sector.

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.

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.

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

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

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

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.

As many organisations 
move to consolidate their 
offerings, Synectics is in 
an ideal position to offer 
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 are driving 
the need for innovative support 
from the private sector. Synectics 
can be this partner of choice.

Annual Report and Accounts 2014 Synectics plc

07

Performance ReviewGovernanceFinancial StatementsOther InformationStrategic ReviewIntroductionOur Global Positioning

We develop long-term strategic 
partnerships with our customers 
across the globe

“ With increasing demand for 
Synectics’ solutions around 
the globe, it is imperative that 
we have the right structure in 
place to support our customers 
and partners in the regions 
in which they operate and 
important that we strengthen 
our foundations to ensure 
that we deliver exceptional 
service and support.”

Paul Webb
Chief Executive

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

Our operations in the UK, Europe, the US, the 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. 

During 2014 Synectics consolidated its Asia and Pacific operations into 
a dedicated regional headquarters in Singapore providing focussed, local 
support for customers and partners across the Asia and Pacific markets.

Active in the region since 2004, Synectics had seen initial success in 
the Oil & Gas and Marine sectors and more recently we have also seen 
demand for our integrated security solutions develop in other sectors, 
with wins including big-name gaming properties in Singapore and the 
Philippines, and a Singapore infrastructure contract. 

Investment in the Singapore hub followed the launch of Synectics’ new 
Operations Centre in the UK, another key milestone in our worldwide 
growth strategy. 

The purpose-built facility includes a manufacturing space and 
dedicated factory acceptance testing (‘FAT’) area, designed to 
develop operation-ready systems for a wide range of large-scale 
projects. This expanded FAT space has been created to further 
enhance the customer experience, demonstrating Synectics’ ongoing 
commitment to delivering the highest quality systems and support.

5

strategic  
hubs

500+

employees

£65m

total sales

29.2%

gross margin

£28.6m

November 2014 
order book

08 www.synecticsplc.com

Strategic ReviewUS 
HUB

(CALIFORNIA)

UK 
HUB

GERMAN 
HUB

(MUNICH)

DUBAI 
HUB

SINGAPORE 
HUB

Operations 
by geography

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

North America

Our sales in this region remain 
strong as we continue to focus 
on securing system upgrades 
from our existing customers. 

United Kingdom 
and Europe

Our performance in the UK remains 
strong as the market for integrated 
security solutions continues to grow. 
Activity levels in our focus sectors 
of the electronic surveillance 
market remain solid.

Revenue
13.2% 
£8.5m

Revenue
69.1% 
£44.6m

Middle East

Asia and Pacific

During 2014 a combination of increasing 
unrest in the Middle East and a substantial 
decline in oil & gas prices led to serial 
delays by end customers in the normal 
progress of projects in this region. 
There are positive signs that projects 
are being unblocked in 2015. 

Sales in Asia were in line with projections, 
due to repeat business following the 
delivery of a substantial contract in 2013 
via our Singapore hub and revenue from 
a new client. Overall, the Asia and Pacific 
region and the market for gaming shows 
healthy signs of growth.

Revenue 
5.2% 
£3.3m

Revenue 
12.5% 
£8.1m

Annual Report and Accounts 2014 Synectics plc

09

Performance ReviewGovernanceFinancial StatementsOther InformationStrategic ReviewIntroductionStrategic Review
Our Proprietary Technology

We continue to invest in sector-focussed 
research & development to meet the 
fast changing market needs of 
our customers

Overview

Synergy 3

Synectics continues to invest in its proprietary technology base. 
During 2014, the Group spent a total of £2.5 million on technology 
development (2013: £2.3 million). Of this total, £1.4 million was 
capitalised and the remainder expensed to the Income Statement. 
£0.5 million of previously capitalised development costs were 
amortised in 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 
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.

In addition, we have development resource based in our German 
hub specifically focussed on transport sector application engineering. 
We also have a specialist electro-mechanical team and an environmental 
test facility located at our new UK Operations Centre.

By far the most notable development in 2014 was the delivery 
of the wide-scale roll-out of Synergy 3 – Synectics’ highly evolved 
command and control software platform for security and 
surveillance applications. 

Synergy 3 is the centrepiece of Synectics’ technology offering, 
a powerful, flexible and scalable alarm, video and process management 
system designed for critical security environments including oil & gas, 
gaming, transportation and high security. The highly customisable 
software provides both divisions with a unique selling proposition 
and wraps all of Synectics’ and original equipment manufacturers’ 
hardware solutions into distinctive turnkey offerings. 

Synergy 3 is an ideal bridge technology to bring our loyal, 
long-standing analogue customer base across to new IP-based 
applications. Its hybrid architecture is designed to record, control 
and present traditional encoded video along with a wide range 
of contemporary IP megapixel devices, all in a single, seamless 
operator environment. That benefit extends well beyond Synectics’ 
existing users. Synergy 3 also integrates to legacy analogue encoders 
from major video manufacturers whose customers now have the 
option to transition from proprietary hardware platforms to Synergy’s 
open standards and exceptional functionality. Budget-constrained 
security and surveillance managers can keep and use what they 
have now, but incrementally convert to IP with Synergy 3 while 
taking advantage of the most advanced alarm and video 
management software platform available. 

Synergy 3 also represents an evolutionary quantum leap from its 
field-proven predecessor, SynergyPro. With highly customisable 
operator layouts, user-defined workflows to automate and manage 
alarm processes, enhanced monitor wall control, extensive 
multi-system database aggregation and analysis tools (Dataveillance), 
virtualised failover and data resiliency protection, and over ten years 
of customer-driven GUI enhancements, Synergy 3 offers the most 
versatile, scalable and reliable integrated security management 
system on the market today.

10 www.synecticsplc.com

“ Customer feedback 

combined with our expert 
knowledge, our experience and 
our analysis of future market 
trends were all channelled 
into evolving Synergy 3.”

Paul Webb
Chief Executive

Synergy 3 delivers integrated, unified, layered 
security command and control; a comprehensive 
security management and surveillance platform. 

It is the foundation of Synectics’ end-to-end system 
solution and is designed for professional control 
rooms that require maximum flexibility, scalability 
and reliability.

Product developments

In 2014, Synectics also launched a new line of versatile storage 
servers and review clients for the Synergy platform that more 
efficiently and cost effectively support high definition, 360-degree, 
megapixel and 4K IP cameras from dozens of industry providers. 

Synectics expanded and enhanced its own line of HD IP cameras 
which support backfilling for data resiliency and offer powerful 
Xarina sensors that yield superior picture quality. 

We introduced a new breed of HD IP COEX™ C3000 camera 
stations with high definition image capture, and on-board 
compression technology which removes the need for separate 
encoder units. Specifically engineered for hazardous areas and 
extreme environments, including the high temperatures of the 
Middle East, the enhanced C3000 camera station can stream 
high quality 1080p video signals in temperatures up to +70°C 
and as low as -55°C. 

We also launched the latest T-series DVR, the hybrid T1600, 
which will enable transport operators to transition their systems 
to IP technology. The new on-vehicle hybrid recorder utilises the 
e1600 encoder technology platform.

HD IP COEX™ C3000

T-series DVR T1600

Annual Report and Accounts 2014 Synectics plc

11

Performance ReviewGovernanceFinancial StatementsOther InformationStrategic ReviewIntroductionPerformance Review  
and Governance

Performance Review

13  Group Financial Results

18  Our Divisions: Systems

20  Our Divisions: Integration & Managed Services

Governance

22  Board of Directors

24  Chairman’s Introduction

26  Corporate Governance Statement

29  Remuneration Committee Report

33  Audit Committee Report

34  Statutory Directors’ Report

38  Risks and Risk Management

12 www.synecticsplc.com

Performance Review
Group Financial Results

“ Our financial performance 
was poor; however, we have 
addressed this by taking 
the appropriate action 
and reducing our cost 
base accordingly.”

Nigel Poultney
Finance Director

Keeping track of Group performance

Group results for the year

Financial performance in the year was poor.

Total revenue for the year fell by 22% from £82.4 million 
to £64.6 million resulting in an underlying operating loss of 
£2.2 million compared to a profit of £7.2 million in 2013. 

The results were severely impacted by significant disruption in 
the global oil & gas markets owing to unrest in the Middle East 
and falling oil & gas prices; cost overruns leading to a significant 
loss on one large UK surveillance system integration project; and 
increased costs incurred to support future growth in business, 
as explained in the Chairman’s Statement on pages 2 and 3.

In addition £1.1 million of restructuring costs were incurred 
towards the end of the year as action was taken to reduce 
the Group’s cost base, and are included in £1.4 million of 
non-underlying items reflected in the Income Statement.

Overall cash outflow in the period was £8.2 million as a result 
of the trading losses, increased working capital levels arising 
primarily from increased stock and contract work-in-progress 
owing to the slowdown in activity in the Oil & Gas sector, and 
increased capital expenditure on Group infrastructure and product 
development projects. The Group finished the year with net debt 
of £6.1 million compared with net cash at 30 November 2013 
of £1.2 million. The net movement of £7.3 million comprised 
a reduction of cash and cash equivalents of £8.2 million, 
offset by a £0.9 million reduction in term debt. 

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

Key performance 
indicators

Our performance is 
measured principally 
using the following 
financial indicators.

Revenue (£m) 

Gross margin (%) 

-22%

-3.2%

m
0
7.
7
£

m
4
.
2
8
£

m
6
.
4
6
£

%
5
.
4
3

%
4
.
2
3

%
2
.
9
2

12

13

14

12

13

14

   Our key performance 
indicators continue on 
the following pages

Underlying operating 
(loss)/profit (£m)
-130%

m
2
7.
£

m
7
.
5
£

m
)
2
.
2
(
£

12

13

14
Operating (loss)/profit before 
non-underlying items* and 
goodwill impairment.

Annual Report and Accounts 2014 Synectics plc

13

GovernanceFinancial StatementsOther InformationIntroductionPerformance ReviewStrategic Review*  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.

2014

64.6

2013

82.4

Fav/(adv)

(17.8)

29.2%

32.4%

(3.2)%

 (2.2)

 (2.4)

(3.7)

7.2

7.1

6.6

(9.4)

(9.5)

10.3

(3.4)%

8.8%

(12.2)%

Group Financial Results continued

Key performance indicators

Measure

Revenue (£ million)

Gross margin %

Underlying operating (loss)/profit (£ million)

Operating (loss)/profit before non-underlying items*

Underlying (loss)/profit before tax (£ million)

(Loss)/profit before tax and non-underlying items*

(Loss)/profit before tax (£ million)

Underlying operating margin %

Ratio of underlying operating (loss)/profit to revenue

Diluted basic earnings per share (p)

Diluted underlying earnings per share (p)

Based on underlying (loss)/profit before tax

Order book (£ million)

Recurring revenue (£ million)

 (20.6)

(14.0)

 28.6

 15.7

29.4

32.6

28.1

15.6

(50.0)

(46.6)

0.5

0.1

5.5%

(7.3)

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 total revenue

24.4%

18.9%

Net (debt)/cash (£ million)

Cash balances net of loans

Working capital %

Working capital as % revenue

Free cash flow (£ million)

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

Cash conversion %

Ratio of free cash flow to underlying operating profit

(6.1)

1.2

24.3%

18.0%

(6.3)%

(5.2)

0.3

(5.5)

N/A

4.7%

N/A

Underlying (loss)/profit 
before tax (£m)
-133%

Underlying operating 
margin (%)
-12.2%

Diluted basic earnings 
per share (p)
-170%

 Diluted underlying 
earnings per share (p)
-143%

m
1
7.
£

m
7
.
5
£

m
)
4
.
2
(
£

%
8
.
8

%
4
7.

%
)
4
.
3
(

12

13

14

(Loss)/profit before tax, non-underlying 
items*, goodwill impairment and adjustments 
to deferred and contingent consideration.

12

14
13
 Ratio of underlying operating  
(loss)/profit to revenue.

14 www.synecticsplc.com

p
4
.
9
2

p
)
6
.
0
2
(

p
7
.
0
2

12

13

14

p
6
.
2
3

p
2
.
5
2

p
)
0
.
4
1
(

12

13
 Based on underlying (loss)/profit 
before tax.

14

Performance ReviewIncome Statement

Overall Group revenue for the year to 30 November 2014 
amounted to £64.6 million compared with £82.4 million 
in the previous year, a decrease of £17.8 million (21.6%).

Revenue split between our two business segments 
was as follows:

Revenue

Systems

Integration & 
Managed Services

2014
 £000

 2013
 £000

 Inc/(dec)
 £000

 Inc/(dec) 

31,876

 44,753

(12,877)

(28.8)%

33,746

 38,368

(4,622)

(12.0)%

Intra-Group

(1,028)

 (758)

(270)

Total revenue

64,594

82,363

(17,769)

(21.6)%

Revenues in the Systems division fell sharply by £12.9 million to 
£31.9 million. This was principally accounted for by a £10 million 
fall in sales to the Oil & Gas sector, which was severely impacted 
by political uncertainty in the Middle East and falling oil prices, 
and a £3 million reduction in sales to the Gaming sector, where 
results had been particularly strong in 2013 owing to around 
£9 million of sales revenue from a contract in Singapore.

Revenues in the IMS division were also down in 2014, falling 
by 12% to £33.7 million. This reduction fell entirely within the 
UK integration activities, where poor performance on a large 
surveillance system integration and installation contract also 
had an impact on new business. However, this was partly offset 
by increased activity within the mobile systems business, on 
the back of winning the contract to supply surveillance systems 
for Go-Ahead Group buses during the year, and also the UK 
managed services business, where capital equipment sales 
were stronger in 2014. 

Recurring revenue in the year was broadly flat at £15.7 million, 
representing approximately 24% of sales (2013: 19% on higher 
total sales).

The proportion of sales arising outside the UK (measured by 
the destination of the end user) contracted slightly during the 
year to 42% in 2014, compared with 45% in the previous year, 
which had been boosted by the substantial contract delivered 
through our Far East hub in Singapore.

Sales by geographic 
destination of end user

 2014
 £000

 2013
 £000

Inc/(dec) 
 £000

UK

37,310

58% 45,284

55% (7,974)

Rest of Europe

7,336

11% 5,277

6% 2,059

UK and Europe – total

44,646

69% 50,561

61% (5,915)

North America

Middle East

Asia and Pacific

Rest of World

Total revenue

8,535

3,344

8,069

13% 5,062

6% 3,473

5% 5,739

7% (2,395)

13% 18,892

23% (10,823)

–

–

2,109

3% (2,109)

64,594

100% 82,363

100% (17,769)

Consolidated gross margins for 2014 fell by 3.2% overall, with 
the reduction arising wholly in the IMS division, largely as a result 
of the substantial loss-making UK integration contract, which 
reduced average margins in that division by around 3%, although 
initial start-up costs on a large contract in the Mobile Systems 
activities also had an impact. 

The full segmental analysis is as follows:

Gross margin %

Systems

Integration & Managed Services

Total Group

 2014

38.9%

19.3%

29.2%

 2013

 Inc/(dec) 

38.5%

24.7%

32.4%

0.4%

(5.4)%

(3.2)%

Underlying operating expenses in the year increased by 8.2% 
to £21.1 million largely as a result of increased investment in people 
and facilities as well as the full year impact of the Coex Asia acquisition.

Operating expenses

Underlying 
operating expenses

Non-underlying items:

Restructuring costs

Acquisition costs

Share-based 
payment charge

Amortisation of 
acquired intangibles

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

Total operating 
expenses

 2014
 £000

 2013
 £000

 Inc/(dec)
 £000

 Inc/(dec) 

21,079

19,482

1,597

8.2%

1,120

–

127

118

–

1,365

562

 265

78

123

(525)

503

558

(265)

49

(5)

525

862

22,444

19,985

2,459

12.3%

Order book (£m) 

Recurring revenue (£m) 

+2%

m
9
.
6
3
£

m
1
.
8
2
£

m
6
.
8
2
£

12

13

14

+1%

m
7
.
6
1
£

m
6
.
5
1
£

m
7
.
5
1
£

12

14

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 total revenue
+5.5%

%
7
1.
2

%
9
.
8
1

%
4
.
4
2

Net (debt)/cash (£m) 

-608%

m
6
4
£

.

m
2
1.
£

m
)
1
.
6
(
£

14

12

13

14

12

13

Cash balances net of loans.

Annual Report and Accounts 2014 Synectics plc

15

GovernanceFinancial StatementsOther InformationIntroductionPerformance ReviewStrategic Review 
 
Group Financial Results continued

Income Statement continued

Non-underlying operating expenses amounted to £1.4 million 
(2013: £0.5 million) and included restructuring costs of £1.1 million 
arising from a re-alignment of the Group’s operating cost base 
in the UK in response to the trading performance this year. This 
restructuring in conjunction with further cost reductions in the 
first quarter of this financial year will result in a reduction of 
approximately 10% of Synectics’ UK-based workforce and 
yield annualised savings of around £2.2 million.

Net finance costs in 2014 increased by £98,000 to £191,000 
as a result of operating with net debt for most of 2014 due 
to the Group’s investment in working capital and the trading 
losses incurred during the year.

Finance  
income/(costs)

Finance income

Finance costs

Net finance costs

 2014
 £000

246

(437)

(191)

 2013
 £000

245

(338)

(93)

 Inc/(dec)
 £000

1

(99)

(98)

 Inc/(dec)

0.4%

29.3%

105.4%

Consolidated underlying loss before tax was £2.4 million 
in 2014 compared with a profit of £7.1 million in the year 
to 30 November 2013.

Profits from the Systems division reduced to £1.0 million 
on the back of a 29% contraction in revenue and increased 
investment in operational facilities, whilst a 12% reduction in 
sales, together with a £1.0 million negative impact from the 
unprofitable integration contract already highlighted, resulted 
in a £1.1 million loss in the IMS division.

Underlying  
(loss)/profit

Systems

Integration & 
Managed Services

Central costs

Underlying operating 
(loss)/profit

Interest

Underlying (loss)/
profit before tax

 2014
 £000

1,031

(1,139)

(2,084)

(2,192)

(191)

 2013
 £000

7,009

 Inc/(dec)
 £000

 Inc/(dec) 

(5,978)

(85.3)%

2,223

(2,015)

(3,362)

(151.2)%

(69)

(3.4)%

7,217

(9,409)

(130.4)%

(93)

(98)

(105.4)%

(2,383)

7,124

(9,507)

(133.5)%

Research & development costs are charged to the division 
benefiting from the service provided by the Synectics Technology 
Centre, principally the Systems division. In 2014 £2.5 million was 
spent on research & development with £1.2 million charged to the 
Income Statement after capitalisation of £1.4 million of development 
costs. This compares with total expenditure of £2.3 million in 2013 
of which £1.0 million was capitalised.

Due to poorer performance in both divisions in 2014, the Group 
underlying operating margin was negative compared with a 
strongly profitable 8.8% in 2013.

Underlying operating margins

Systems

Integration & Managed Services

Total Group

 2014

3.2%

(3.4)%

(3.4)%

 2013

 Inc/(dec) 

15.7%

(12.5)%

5.8%

8.8%

(9.2)%

(12.2)%

As a result of the loss incurred during the year, a tax credit of 
£0.4 million has been recognised in 2014 compared with a charge 
of £1.7 million on profits arising in 2013.

At 30 November 2014 the Group recognised a deferred tax asset 
of £0.6 million in relation to tax losses which are expected to be 
offset against future taxable profits. Further tax losses of £2.7 million 
(30 November 2013: £1.9 million) are capable of offset against 
the future taxable profits of certain Group companies, but have 
not yet been recognised in the financial statements.

Diluted basic earnings per share for 2014 was (20.6)p compared with 
29.4p in the year ended 30 November 2013. However, the Directors 
believe that a better measure of performance is the diluted underlying 
earnings per share which is calculated on the underlying profit/loss 
before tax as defined above. Diluted underlying earnings per share 
was (14.0)p compared with 32.6p in 2013.

Earnings per share

Diluted basic 
earnings per share

Diluted underlying 
earnings per share

 2014
 p

 2013
 p

 Inc/(dec)
 p

 Inc/(dec) 

(20.6)

 29.4

(50.0)

(170)%

(14.0)

 32.6

(46.6)

(143)%

Working capital (%) 

Free cash flow (£m) 

-6.3%

-1,642%

%
3
.
4
2

m
5
.
6
£

m
3
.
0
£

)

m
2
.
5
(
£

%
0
.
8
1

%
3
.
3
1

12

13
Working capital as % of revenue.

14

12

13

14

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

16 www.synecticsplc.com

Performance Review 
 
Statement of Financial Position

The net assets of the Group amounted to £36.4 million at 
30 November 2014 (2013: £39.5 million) and can be summarised 
as follows:

Provisions at 30 November 2014 amounted to £1.2 million 
(2013: £0.2 million) and included £1.1 million in respect of 
restructuring costs which will mainly be settled in the first 
half of 2015.

Property, plant and equipment

Intangibles

Retirement benefit asset

Non-current assets

(Overdraft)/cash balances

Loans and borrowings

Net (debt)/cash

Other net current assets

Tax assets/(liabilities)

Provisions

Net assets

 2014
 £000

3,952

 2013 
 £000 

 2,641 

23,357

 22,672 

540

–

27,849

 25,313 

(2,417)

(3,659)

(6,076)

 5,774 

 (4,575)

1,199

15,682

 14,861 

Cash

The Group ended the year with net debt of £6.1 million at 
30 November 2014 (2013: net cash £1.2 million) including term 
loans of £3.7 million drawn to finance the acquisition of Indanet 
in 2012 and to purchase the property in Scunthorpe in 2013 
which are repayable in 2017 and 2018 respectively.

The movement in net debt during the year is reflected 
in the Statement of Financial Position as follows:

159

 (1,587)

Decrease in cash balances

(1,169)

 (244)

Increase in bank overdrafts

36,445

 39,542 

Net cash outflow

Loan repayments during the year

Effect of exchange rate changes

Increase in net debt

£000

(4,425)

(3,766)

(8,191)

804

112

(7,275)

Non-current assets at 30 November 2014 were £27.8 million 
compared with £25.3 million at 30 November 2013, and include 
a retirement benefit asset of £0.5 million arising from the surplus 
on the Group’s closed defined benefit scheme (see note 30 on 
page 69).

Total capital expenditure in the year increased to £3.6 million compared 
to £2.9 million in 2013, reflecting continued investment for the future 
development of the business. Major items were £1.2 million on 
development of the Scunthorpe property purchased in 2013 to 
consolidate two existing operations into one site, £0.3 million on a 
major upgrade of information technology systems and £1.4 million on 
technology development projects, including £0.8 million on Synergy 3, 
Synectics’ command and control software platform which was 
released during the year.

This capital expenditure of £3.6 million (2013: £2.9 million) 
compares with depreciation and amortisation charges of 
£1.5 million in the year (2013: £1.2 million).

Working capital levels rose by £0.8 million to £15.7 million at 
30 November 2014, despite lower activity levels during the year. 
In particular the slowdown in activity in the Oil & Gas sector 
has resulted in the business carrying higher than normal levels 
of stock and contract work-in-progress. This includes an amount 
of £2.5 million in respect of a single large contract which will 
unwind during 2015.

As a consequence, working capital expressed as a percentage 
of annual revenues increased from 18% in 2013 to 24% at 
30 November 2014.

Tax liabilities reduced significantly during the year as a result of tax 
payments of £1.4 million, mainly in respect of 2013 profits and the 
losses incurred during 2014. The net tax balance at 30 November 2014 
was £0.2 million and reflected a net current tax asset of £0.3 million 
(2013: liability £1.1 million) and a deferred tax liability of £0.1 million 
(2013: £0.5 million). The deferred tax balance recognises a deferred 
tax asset of £0.6 million in relation to the 2014 losses.

The net cash outflow of £8.2 million in the year is summarised 
in the table below. Major non-operating cash flow items include 
tax payments of £1.4 million, capital expenditure of £3.6 million 
as described above, scheduled loan repayments of £0.8 million 
and payment of the 2013 final dividend of £0.9 million.

Underlying operating (loss)/profit

Depreciation and amortisation charges

2014
 £000

 (2,192)

 1,435

2013
£000

 7,217 

 1,048 

Increase in working capital

 (833)

 (5,029)

Cash (used in)/from operations before 
non-underlying payments

Restructuring costs and acquisition 
expense payments

Cash (used in)/generated from operations

Interest paid (net)

Taxation paid

Capital expenditure

Acquisitions

(Loan repayments)/new borrowings

Issue of shares and share scheme 
interests realised in the year

Dividends paid

Effect of exchange rate changes

Net cash flow

 (1,590)

 3,236 

 (183)

 (1,773)

 (191)

 (1,426)

 (493)

 2,743 

 (93)

 (731)

 (3,622)

 (2,898)

 –

 (804)

 408

(928)

145

(8,191)

 (1,858)

 2,952 

 382

(1,336)

122

(717)

Nigel Poultney 
Finance Director

10 March 2015

Annual Report and Accounts 2014 Synectics plc

17

GovernanceFinancial StatementsOther InformationIntroductionPerformance ReviewStrategic ReviewPerformance Review
Our Divisions

Systems

Gaming 

Oil & Gas, Heavy 
Industrial and Marine

Infrastructure and 
High Security

Synectics’ Systems division provides specialist 
electronic surveillance systems based on its 
own proprietary technology globally to end 
customers with large-scale highly complex 
security requirements, particularly for oil 
& gas operations, gaming, infrastructure 
protection, high security and public spaces. 

Revenue

Gross margin

Operating profit*

Operating margin*

£31.9 million (2013: £44.8 million)

38.9% (2013: 38.5%)

£1.0 million (2013: £7.0 million)

3.2% (2013: 15.7%)

During 2014 the Systems division completed its major reorganisation, 
aimed at creating a much more unified, efficient and scalable business. 
The final step in that consolidation process was the physical relocation 
of the division’s two UK operations centres in Sheffield and Brigg into 
a single 54,000 sq ft freehold facility in North Lincolnshire. 
The move was completed towards the end of the first half of 
the financial year. 

Systems now operates under a single functional management 
structure, with headquarters, sales/marketing and technical 
development in Sheffield, operations in North Lincolnshire and 
sales/local operations/support hubs in the US, Germany, Singapore 
and the UAE. Although the costs of disruption in the final relocation 
stage were greater than initially envisaged, achieving this organisational 
objective is a significant milestone in the Group’s development.

Oil & Gas

Most of the reduction in revenues for the division compared with 
2013 arose in the Oil & Gas sector from customer-imposed delays 
both in progress on existing contracts and in the award of expected 
new contracts. These delays ultimately resulted in revenues for the 
year being reduced by £10 million compared with the previous year, 
with an obviously damaging impact on profitability.

We completed the development of our new HD camera stations, 
for hazardous areas and marine markets, as well as achieving the 
North American certification for our range of core products. Synergy 3, 
our latest generation of advanced command and control solutions, has 
also been implemented for the first time on a major oil & gas project.

Despite the challenging market conditions, Synectics secured 
a number of prestigious oil & gas projects including Shah Deniz, 
Jazan, Martin Linge, Curtis Island LNG and Ichthys.

Whilst market conditions remain difficult as a result of falling 
oil prices and continued political uncertainties, we expect 
solid performance during 2015. 

We will remain focussed on our core markets, Asia and Pacific 
and the Middle East, as well as increasing our expansion into the 
US. We will continue to identify opportunities within the marine 
market and develop our presence with major ship owners as 
well as expanding from our historical strengths within the 
Korean shipyards.

Gaming

Revenues from surveillance systems for the Gaming sector 
were also lower in 2014 than in 2013. In that case the reduction 
was expected, being due to an exceptionally strong performance 
in the prior year from delivery to a Far East client of the largest 
and most complex surveillance system ever supplied by Synectics. 
Initial follow-on sales from that system were delivered in 2014 
and substantial further sales are expected in 2015.

Successful delivery of that major system established an important 
reference site for Synectics and has generated additional business 
from new customers in the region that will be delivered during 
2015 and beyond.

We secured our first major Philippine casino client and we are well 
positioned to develop other business in the region with a number 
of pilot projects already underway.

North America’s strong 2014 sales were largely made to repeat 
customers including Penn Gaming, Seneca and OLG, which replaced 

18 www.synecticsplc.com

Revenue (£m) 

Gross margin (%) 

Operating profit (£m)* 

Operating margin (%)* 

-29%

m
9
.
8
3
£

m
8
.
4
4
£

m
9
1.
3
£

+0.4%

%
6
.
2
4

%
5
.
8
3

%
9
.
8
3

-85%

m
0
7.
£

m
0
.
6
£

-12.5%

%
3
.
5
1

%
7
.
5
1

m
0
1.
£

%
2
.
3

12

13

14

12

13

14

12

13

14

12

13

14

* Before non-underlying items and Group central costs.

legacy systems in existing casinos or installed Synectics products in 
their new properties. The entire industry is rapidly transitioning from 
analogue to HD IP cameras, which creates ongoing and recurring 
revenue opportunities with our casino clients. We have a proven 
formula of specifically focussing our service attention and sales 
resources on core customers and a few new and specially 
targeted opportunities.

Our success in Asia in this past year can be attributed to taking 
very good care of a few highly respected customers, delivering 
major projects on time and on budget, and building a competent 
Singapore-based support team with engineers also stationed in 
Manila and Macau. In addition, the market has enthusiastically 
embraced our new Synergy 3 command and control software 
platform, which has already been successfully installed in three 
major casino resorts. Surveillance and regulatory requirements 
vary widely across geographic regions and our integrated security 
management software and agile development team have proven 
to be flexible, scalable and reliable enough to meet every demand 
to date. Based on the exceptional capabilities of Synergy 3, Synectics 
is seen as a thought and technology leader in a part of the world 
where appearance, reputation and experience matter.

Contract highlight

Ohio Penn National Gaming casinos

We secured two new Ohio Penn National Gaming casinos, 
the latest additions to the firm’s extensive portfolio. Hollywood 
Gaming at Mahoning Valley and Hollywood Gaming at Dayton 
Raceway will offer almost 2,000 video lottery terminals (‘VLTs’), 
bars, dining, concession stands and entertainment, spread over 
state-of-the-art facilities spanning 133,000 sq ft. Penn National 
Gaming, one of Synectics’ long-standing corporate customers, 
is capitalising on advances in IP-based solutions for protecting 
its newest Hollywood premieres. At both locations, footage 
from close to 1,000 HD IP cameras, together with third-party 
transactional and alarm data, will be integrated within Synectics’ 
Synergy command and control platform to create a unified 
security and situational awareness solution. 

Infrastructure, High Security and Public Space

Synectics has a long track record of delivering solutions for 
infrastructure protection and high security environments where 
protecting people and assets are critical. In the first quarter of 
2015 we have been selected to supply a significant security and 
safety solution, using Synergy 3 to monitor and manage over 
5,000 devices, for a high profile project at a major transport 
hub in the Far East. As well as the first Synergy 3 deployment 
in the region, it provides entry to the market and provides the 
platform from which we can develop further opportunities.

Although the UK public space market remains challenging we have 
won key contracts with The British Museum and South Yorkshire 
Police to supply command and control systems. Both projects are 
being delivered working alongside our Integration & Managed 
Services division.

Transport

Indanet, our European transport operation, experienced good revenue 
growth during the year, in particular winning further repeat business 
from large existing customers BVG and Deutsche Bahn as well 
as new business with Skoda Transportation a.s.

Another key milestone for the Group was the award of an 
important contract to upgrade and service a regional control 
room for a German train station operator. The control room will 
be the first to be equipped with the full German language version 
of the latest evolution of Synergy 3. Indanet will provide hardware 
and software to modernise the control room, having installed the 
initial facilities six years ago.

Annual Report and Accounts 2014 Synectics plc

19

GovernanceFinancial StatementsOther InformationIntroductionPerformance ReviewStrategic ReviewPerformance Review
Our Divisions continued

Integration & 
Managed Services

Infrastructure and 
High Security

Transport

Public Space

Synectics’ Integration & Managed Services (‘IMS’) 
division is one of the leading UK providers of 
design, integration, turnkey 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

£33.7 million (2013: £38.4 million)

19.3% (2013: 24.7%)

Operating (loss)/profit*

£(1.1) million (2013: profit £2.2 million)

Operating margin*

(3.4)% (2013: 5.8%)

Within the IMS division, mobile systems and managed services 
performed acceptably during the year though, in the case of 
mobile systems, margins were adversely affected by start-up 
costs on a large new long-term contract. The largest area of activity 
within the IMS division, integrated systems, performed poorly. 

Integrated systems

2014 was a challenging year both financially and operationally. 
The most serious impact was from problems on a large surveillance 
system integration sub-contract, which is a small part of a major new 
construction project within the UK. Some of the issues arose from 
delays and inefficiencies caused by adverse weather, limited site 
access and the actions of other contractors. However, inadequate 
internal project management contributed materially to the losses on 
the contract. Although no other material projects in the year were 
loss making, several recorded margins below planned levels. There 
were also knock-on impacts on new business from the diversion 
of management resources to rectify this situation.

Firm action was taken by Group management to address the issues, 
including changes of senior management personnel and structure 
within the division. As part of these changes management has 
accelerated the closer integration of the managed services and 
integrated systems areas within the IMS division, providing 
operational benefits to both areas as well as reduced costs.

There has been a significant positive impact from the changes, 
although the knock-on effects of the disruption on winning 
new business extended through the second half.

Major wins for the division during the year included the installation 
of an electronic security solution in a custody suite for South Yorkshire 
Police as well as an upgrade of The British Museum security systems, 
both based on Synectics’ proprietary system software – Synergy. 

Our strategy remains unchanged. We will continue to focus 
on key market verticals that have unique compliance drivers 
that will benefit from our unique capabilities.

20 www.synecticsplc.com

Revenue (£m) 

Gross margin (%) 

-12%

m
5
.
9
3
£

m
4
.
8
3
£

m
7
.
3
3
£

-5.4%

%
4
.
5
2

%
7
.
4
2

%
3
.
9
1

Operating (loss)/profit 
(£m)*
-151%

m
7
.
2
£

m
2
.
2
£

m
)
1
1.
£
(

Operating margin (%)* 

-9.2%

%
7
.
6

%
8
.
5

%
)
4
.
3
(

12

13

14

12

13

14

12

13

14

12

13

14

Contract highlight

Wrightbus International

We won a significant contract to equip 51 Wrightbus International 
double-deck buses with on-board CCTV and recording systems, 
following a major order from Hong Kong operator New World First 
Bus Services Limited (‘NWFB’). Each state-of-the-art on-board 
system includes Synectics’ new T1600 digital recorder. Around 
1,000 vehicles in Hong Kong now carry Synectics equipment, 
pushing the boundaries of on-board technology. For example, 
the collaboration with NWFB included the integration of complete 
multimedia systems on their high-specification Cityflyer 
vehicles servicing the prestigious airport shuttle route.

* Before non-underlying items and Group central costs.

Managed services

Our managed services team had a positive year. During 2014 
we successfully mobilised Facilities Management (‘FM’) service 
contracts with a major UK building merchants and a national 
wholesale distributor. We also retained some significant contracts 
through a contract renewal and re-tender process which meant 
a 100% retention rate was achieved in our key customer base.

By combining our integrated systems and managed services 
market propositions we have developed a complete end-to-end 
security model from which our respective customers can benefit. 

We will continue to explore opportunities where customers are 
looking to maximise their return on investment from their security 
and FM services and further develop our unique proposition.

Mobile systems

Having secured a long-term contract in 2013 margins were 
affected by start-up costs. This is now performing well. 

Despite a first half dip in the UK bus and coach market our mobile 
systems activities had a strong second half – growing sales and 
securing a strong base and pipeline for 2015. We also successfully 
secured an upgrade contract with a regional tram operator and 
expanded our share of the UK bus and coach market with other 
regional operators.

We will continue to develop our market-leading position in the 
UK bus and coach business by sustaining existing relationships, 
targeting new contract opportunities, and unlocking opportunities 
to move up the value chain through product and service innovation. 

Annual Report and Accounts 2014 Synectics plc

21

GovernanceFinancial StatementsOther InformationIntroductionPerformance ReviewStrategic Review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 Remuneration Committee 
is made up solely of the three Independent 
Non-Executive Directors. That structure 
has been in place for nearly four years 
and follows the Code provisions for 
listed companies of any size.

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. 
Following retirement from Bovis, Dennis has held a number of 
non-executive roles and currently provides a wide range of consultancy 
services. He was awarded the CBE for his services within the industry.

22 www.synecticsplc.com

GovernanceSteve Coggins
Independent Non-Executive Director

Paul Webb
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.

joined the Group in 2004. Since then Paul has overseen the 
rapid growth of the Group’s industrial systems activities and, 
more latterly, led the consolidation of all of Synectics’ proprietary 
technology systems activities into a single operation. He has 
a degree in Physics from Imperial College London.

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.

Annual Report and Accounts 2014 Synectics plc

23

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewChairman’s Introduction

“ Much of the Group’s success 
has been underpinned by a 
strong corporate culture that 
comes down to a combination of 
integrity, openness, commitment 
and striving never to let a 
customer down.”

David Coghlan
Chairman

Introduction to governance

Since 2012 Synectics has been including 
in its Annual Reports a specific section 
collating the Board’s reports on the various 
elements of corporate governance. The 
formal reports on these matters are 
contained in the following sections. 

The purpose of this introduction is to provide a broader narrative 
account of Synectics’ governance in one or two specific areas.

In previous introductions I have provided a progress report 
on our continuing review of governance in general as well as 
an explanation of the rationale behind the Board’s approach 
to some important issues:

 » values and leadership; 

 » the composition, independence and effectiveness of the Board;

 » the Group’s share-based long-term remuneration plans; 

 » diversity; and

 » risk management.

Those comments remain an up-to-date reflection of core aspects 
of Synectics’ governance and, although I will not repeat them here, 
anyone wanting a fuller picture will find the detail in the Group’s 
2012 and 2013 Annual Reports, available on our corporate website. 

The issue I would like to address this year is Synectics’ culture, 
and how the Board is approaching its responsibilities in that regard.

The recently published annual report of the Financial Reporting 
Council (‘FRC’) sets out ‘good corporate culture’ as the FRC’s 
number one governance issue for consideration by companies 
and investors in 2015. The Council’s chairman refers to ‘the need for 
boards to think hard about assessing whether the culture practised 
within the company is in line with what they espouse. Boards should 
consider what assurance they have around culture…How can culture 
be maintained under pressure and through change?’ (my emphasis). 
Some of Synectics’ experiences during our last financial year have 
brought home how critical and how insightful that last question is.

24 www.synecticsplc.com

GovernanceThrough these steps and others we expect a tangible improvement 
in the level of the Board’s assurance that Synectics’ corporate 
culture is being properly maintained.

As a final point, I would like to provide an update on the composition 
of the Board. We believe that the right time has arrived to appoint 
an additional Independent Non-Executive Director. The Board has 
established a nominations sub-committee consisting of the Chairman 
and the Non-Executive Directors to oversee the recruitment process, 
which is now underway. We expect to make an appointment 
as soon as the right candidate is found. 

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

10 March 2015

Synectics’ roots go back over 25 years. In addition to the vision 
and talent of its founders, much of the Group’s continued success 
has been underpinned by a strong corporate culture. Articulated 
in different ways over the years, that culture comes down to a 
combination of integrity, openness, commitment and striving 
never to let a customer down.

The Board has long recognised its role in reinforcing Synectics’ 
culture both by the example of our actions and in our contacts with 
managers and other employees throughout the Group. Nevertheless, 
the Group has undergone a very substantial amount of change in the 
past few years, particularly with regard to senior management; with 
hindsight, it is now clear that through those changes the core culture 
became diluted in a small number of important areas. 

This example goes to the heart of the FRC’s question of how 
boards can gain assurance that a company’s culture is being 
properly maintained through a period of change. To address this 
risk, Synectics’ Board and Chief Executive have bolstered 
the Group’s processes by a number of actions, including:

 » The maintenance of our culture throughout the organisation 

is now an explicit personal objective for the CEO. 

 » The Board has input into, and reviews the results of, an annual, 
independently administered and anonymous employee survey.

 » From now on corporate culture will form part of the risk review 

agenda item at each Board meeting. 

 » The Chairman and Non-Executive Directors have been given 
the task of explicitly promoting and testing Synectics’ culture 
in contacts with staff at all levels. 

 » Monthly employee recognition awards will be linked more 
closely to achievements that demonstrate the Group’s 
culture in action.

Annual Report and Accounts 2014 Synectics plc

25

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance Review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 Group 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 until his retirement 
on 31 January 2015 and thereafter Paul Webb, assisted by 
senior management.

Peter Rae fulfils the role of the Senior Independent Director 
of the Group. 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 Group’s expense as required.

The Group 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 convened and participated in a separate full day’s 
discussion of the Group’s strategy and three-year plan.

26 www.synecticsplc.com

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 and 
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 2014, 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;

 » approval of financial statements and dividend policy;

 » risk management oversight and monitoring of Group 

risk registers;

 » review of internal controls and approval of internal audit plan;

 » 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 2013 evaluation. 

GovernanceDetails of attendance at Board and Board Committee meetings 
during the 2014 financial year was as follows: 

Total number of meetings

Board

Audit
 Committee

Remuneration
 Committee

DJ Coghlan 
Chairman

D Bate

SW Coggins
Chairman of 
Audit Committee

PM Rae
Chairman of 
Remuneration 
Committee

J Shepherd

NC Poultney

PA Webb (appointed 
6 November 2014)

9

9

9

8

9

9

1*

–

4

4

4

–

–

–

–

3

3

3

–

–

–

*  Number of meetings eligible to attend after appointment as an Executive 

Director: one.

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 considers 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.

Board Committees

The Group has two standing 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 29 to 33. 

The functions of a nominations committee are undertaken by 
the Group Board as a whole. Where necessary and appropriate, a 
nominations sub-committee is appointed temporarily to fulfil specific 
tasks. 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.

Board performance and effectiveness

Induction
The Group’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. 

Annual Report and Accounts 2014 Synectics plc

27

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewGovernance
Corporate Governance Statement continued

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 17, ten and nine years respectively. Each brings different and 
complementary high-level experience relevant to the current business 
and future development of the Group. During 2014, 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 Group 
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. It is the Board’s intention to 
appoint an additional Non-Executive Director during 2015.

Shareholder engagement

The Board welcomes dialogue with shareholders and actively 
engages with shareholders through face-to-face meetings and 
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 Group’s governance reporting, the 
Annual Report and Accounts includes 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

10 March 2015

28 www.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 2014. This report 
does not constitute a directors’ remuneration 
report in compliance with the requirements 
of the Code, as the Group 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; and

 » 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 Group’s website at www.synecticsplc.com/Investor_
Information/Corporate_Governance/Board_Committees. 

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 that 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 Group’s remuneration policy and practices 
is published in the Group’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.

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

During the past financial year the Remuneration Committee 
met three times and considered the 2013 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 
2014 for Executive Directors. For the 2014 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 upper 
limit of 60% was set for Paul Webb, appointed to the Board on 
6 November 2014, for the same period. An award of options 
under the Performance Share Plan on 5 March 2014, for senior 
managers other than the Executive Directors, was considered 
and approved. The Committee also approved exercises of 
options over shares, and sales of shares, in respect of the 
Group’s various incentive plans during the year.

Annual Report and Accounts 2014 Synectics plc

29

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewRemuneration Committee Report continued

Remuneration policy for Executive Directors

 » Other benefits – these principally comprise car benefits, life 

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.

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 35.

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 Group.

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 Group does not deduct for, or contribute 
to, a pension.

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

a) Remuneration

Salary
and fees
£000

Bonuses*

£000

2013
2014
Total 
 Total
Benefits  (excl pension)   (excl pension)
£000

£000

£000

Executive Directors

J Shepherd**

NC Poultney

PA Webb (appointed 6 November 2014)

Non-Executive Directors

DJ Coghlan 

PM Rae

SW Coggins 

D Bate

Total

250

170

16

75

30

30

30

601

–

–

–

–

–

–

–

–

40

30

2

11

–

–

–

83

290

200

18

86

30

30

30

315

207

–

86

30

30

30

684

698

2014 
Pension 
£000

2013
Pension 
£000

30

32

2

–

–

–

–

64

30

43

–

–

–

–

–

73

*   Bonuses are paid or accrued based on the achievement of agreed personal objectives and corporate performance metrics. No such bonuses were paid or accrued 

in the year ended 30 November 2014.

**  As compensation for loss of office on 31 January 2015, Mr Shepherd will receive £318,212 (which includes an amount relating to non-cash benefits).

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.

30 www.synecticsplc.com

Governance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 2014:

Partnership shares

14 October 2010

7 April 2011

2 November 2011

20 April 2012

9 October 2012

3 April 2013

14 October 2013

4 April 2014

2 October 2014

Dividend shares

25 July 2011

2 November 2011

17 May 2012

9 October 2012

8 May 2013

4 October 2013

7 May 2014

Purchase 
price (p)

J Shepherd
Number 
of shares

NC Poultney
Number 
of shares

PA Webb
Number 
of shares

147.5

177.5

185.5

200.0

272.5

282.5

393.0

404.0

350.0

200.0

205.0

289.0

272.5

445.0

488.0

430.0

338

422

405

375

275

265

191

186

257

338

422

405

375

275

265

191

186

257

338

422

405

375

275

266

190

186

214

2,714

2,714

2,671

7

9

19

14

21

13

30

7

9

19

14

21

13

30

7

9

19

14

21

13

30

113

2,827

113

2,827

113

2,784

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 2014 and 10 March 2015.

Performance Share Plan
The following Executive Directors held an interest in the Company’s 
shares at 30 November 2014 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

PA Webb

9 October 2012

31 October 2013

Number of
shares

Issue price
(p)

Number of
shares

Issue price
(p)

15,000

10,000

10,000

272.5

272.5

272.5

5,000

5,000

5,000

510.0

510.0

510.0

*  The unvested nil-cost options in relation to Mr Shepherd will be treated 
in accordance with the standard leaver provisions of the PSP plan rules.

Executive Shared Ownership Plan
The following Directors held an interest in the Company’s shares at 
30 November 2014 through participation in the Quadnetics 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.

Date awarded

J Shepherd

NC Poultney

PA Webb

DJ Coghlan

7 July 2009*

7 March 2011

Number of 
shares

Issue price
(p)

Number of 
shares

Issue price
(p)

370,338

200,000

100,000

93,243

147.5

147.5

147.5

147.5

15,000

10,000

100,000

–

173.0

173.0

173.0

–

*  Share awards issued on this date were rolled over from share awards held 

under a previous version of the ExSOP.

Annual Report and Accounts 2014 Synectics plc

31

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewRemuneration Committee Report continued

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

At 1 December 2013

At 30 November 2014

Ordinary
 shares of 
20p each

610.0p

155.0p

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

Maximum

Minimum

c) Service contracts

Ordinary
 shares of 
20p each

610.0p

147.5p

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

PA Webb

J Shepherd

NC Poultney

By Order of the Board

Notice period

12 months

3 months

6 months

1 month

12 months

12 months

12 months

Peter Rae
Chairman of the Remuneration Committee

10 March 2015

32 www.synecticsplc.com

GovernanceGovernance
Audit Committee Report

The Audit Committee comprises: 

Internal controls

 » Steve Coggins, Chairman of the Committee, 

Independent Non-Executive Director;

 » Dennis Bate, Independent Non-Executive Director; and

 » 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 Group’s 
website at www.synecticsplc.com/Investor_Information/
Corporate_Governance/Board_Committees. 

During the last financial year the Committee met four 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 Group’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 Group’s response;

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

audit activities;

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. Details of the system of internal control, 
the principal risks facing the Group, and the strategies put in place 
to mitigate them, are set out in the Risks and Risk Management 
section on pages 38 and 39.

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.

 » review half-year and annual financial statements and formal 

Non-audit services

announcements relating to financial performance;

 » review the adequacy and effectiveness of the Group’s 
internal financial controls, and internal control and 
risk management systems;

 » consider compliance with relevant laws and regulations;

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.

 » consider findings of internal investigations and management’s 

response; and

By Order of the Board

 » 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 
2013 Annual Report and Accounts and the 2014 half-year results, 
recommended appointment of the auditor, and agreed the scope of 
the 2014 audit with the auditor. The Committee continued to review 
the enhanced risk and internal control reporting implemented during 
the previous year with presentations from the Group Financial 
Controller and the Finance Director. In addition the Board reviews 
a summary of the key risks and agreed mitigating actions taken 
from risk reviews prepared for each business. 

Steve Coggins
Chairman of the Audit Committee

10 March 2015

Annual Report and Accounts 2014 Synectics plc

33

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance Review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, 
the Strategic Review, the Performance Review and the 
Risks and Risk Management section, on pages 2 to 21 
and pages 38 and 39.

Review of business and future developments

The Consolidated Income Statement for the year ended 
30 November 2014 is set out on page 42.

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 2 
to 21. These reports together with the Chairman’s Introduction, 
the 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 38 and 39.

Group results and dividends

The consolidated loss after tax for the year was £3,358,000 
(2013: profit after tax of £4,917,000).

As a result of the loss reported for the year, and consistent 
with the decision to not pay an interim dividend (2013: 3.0p), 
the Directors do not propose to pay a final dividend for the 
year (2013: 5.5p).

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 £2.5 million (2013: £2.3 million), 
of which £1.2 million (2013: £1.3 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, with 17,794,439 shares 
in issue and listed on AIM of the London Stock Exchange as 
at 30 November 2014. No shares were held in treasury and 
1,427,464 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 11,348 shares in the Company were purchased by 
the employee benefit trust during the 2014 financial year.

34 www.synecticsplc.com

GovernanceDirectors’ interests

Interests of the Directors and their connected persons in the issued share capital of the Company as at 30 November 2014 were as follows:

DJ Coghlan

PM Rae

D Bate

J Shepherd

SW Coggins

NC Poultney

PA Webb (appointed 6 November 2014)

Significant shareholdings

2014
Number of
 shares held

2014
Interests in
share schemes

2014
Total interests
in shares

2013
Total interests 
in shares

1,501,303

93,243

1,594,546

1,594,546

218,302

146,000

66,272

13,080

13,000

–

1,957,957

–

–

408,165

–

227,827

217,784

947,019

218,302

146,000

474,437

13,080

240,827

217,784

218,302

146,000

473,964

13,080

240,354

–

2,904,976

2,686,246

As at the close of the market on 25 February 2015, the Company was aware of the following holdings, excluding Directors’ holdings, 
of 3% or more of the Company’s total issued share capital:

Whitehall Associated SA

Standard Life Investments Limited

Quadnetics Employees Benefit Trust

Charles Stanley (Rock Nominees)

Investec Wealth & Investment Limited

Chase Nominees Limited

Lion Nominees Limited

Board of Directors

Number
of shares

5,002,500

1,546,697

1,427,464

1,094,957

938,757

672,366

588,462

% of total 
voting rights 

Nature of 
interest

28.11%

8.69%

8.02%

6.15%

5.28%

3.78%

3.31%

Direct

Direct

Direct

Direct

Indirect

Indirect

Indirect

With the exception of Paul Webb, who was appointed to the Board on 6 November 2014, all Directors were in office throughout 
the financial year ended 30 November 2014. Subsequent to the year end, on 31 January 2015, John Shepherd retired from the Board. 
Details and biographies of the Directors are shown on pages 22 and 23.

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 2015 Annual General Meeting are Dennis Bate 
and Paul Webb.

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 Group’s auditor.

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 Group (‘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.

Annual Report and Accounts 2014 Synectics plc

35

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewStatutory Directors’ Report continued

Related party transactions

Policy on payment of suppliers

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. 
Details of any related party transactions are given in note 27 
to the financial statements.

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 Group; 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 546 people in 2014 (2013: 512).

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’s policy during the year was to pay suppliers in accordance 
with agreed terms. At 30 November 2014 the Group had 61 days’ 
purchases outstanding in trade payables (2013: 63 days’).

Charitable donations and activity

The Group made a donation of £2,800 (2013: £2,700) to charitable 
causes during the year.

Political donations

The Group 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. Further details regarding 
the adoption of the going concern basis can be found in note 1 
to the financial statements.

Annual General Meeting

The notice convening the Annual General Meeting is included with 
this Annual Report and Accounts on pages 82 to 84 and includes 
full details of the resolutions proposed.

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

Auditor

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 an annual staff survey. 
Details of the performance of the Group are shared with all 
employees at the appropriate time using the methods above.

The Group 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 on pages 29 to 32.

A resolution for the re-appointment of KPMG LLP as auditor 
of the Company is to be proposed at the forthcoming 
Annual General Meeting.

Post-balance sheet events

There are no post-balance sheet events to report.

36 www.synecticsplc.com

Governance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, the 
Strategic Report, the 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 
International Financial Reporting Standards (‘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.

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 Group’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 2 to 21, and pages 38 and 39, 
consists of the Chairman’s Statement, the Strategic Review, the 
Performance Review and the Risks and Risk Management section.

By Order of the Board

Nigel Poultney
Company Secretary

10 March 2015

Annual Report and Accounts 2014 Synectics plc

37

Financial StatementsOther InformationIntroductionStrategic ReviewGovernancePerformance ReviewGovernance
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.

The Directors believe the internal control environment is generally 
adequate and appropriate given the size and complexity of the Group. 
However, during the year it became clear that internal controls within 
part of the Group’s Integration & Managed Services division did not 
identify project management issues on a large, complex project on 
a timely basis. As a result, corrective action to address the issue was 
not taken sufficiently quickly to avoid significant cost overruns being 
incurred. When management became aware of the extent of the issue, 
radical action was taken quickly to correct matters. The Directors 
believe that measures have now been put in place to ensure that this 
cannot happen again.

In order to give additional assurance on controls, and to supplement 
the work undertaken by the external auditor, the Group uses the 
experience of its central accounting team to undertake a programme 
of internal audit approved by the Group’s Audit Committee.

38 www.synecticsplc.com

Project delivery risk and 
contractual liabilities

Geopolitical risk impacting project 
awards and timescales

Declining global energy prices impacting 
project awards and timescales

Reputational risk

Price and margin pressure

The electronic security industry in general is competitive 

We will continue to focus on customer sectors where electronic 

with continued pressure on sales and margins.

security systems have a critical cost of failure, or an extreme 

Technological risk

People skills and dependency

Exchange rate risk

Risk —  Factors that may impact  

Mitigation —  What we are doing 

the business

to minimise the risk

Where the Group’s product or service offering fails to meet agreed 

Project and service delivery are closely monitored and reviewed 

standards or timescales there is a risk that the Group will be exposed 

across Synectics. The Group maintains rigorous quality standards 

to cost overruns and claims for contractual liabilities as a result 

in all its operations and carefully assesses the terms on which it 

of this failure.

agrees to enter into contractual relationships at appropriate levels 

of responsibility.

Political instability has the potential to impact whether new projects 

The Group attempts to mitigate this risk through winning business 

go ahead, existing project timescales and the trading partners the 

globally in regions where project timescales are not impacted by 

Group chooses to work with. The Group’s trading performance, 

local political issues and ensuring detailed knowledge of projects 

particularly within the Oil & Gas sector, is potentially exposed to 

on which it is bidding.

delays in the scheduling of large-scale projects as a result of the 

changing geopolitical landscape in the Middle East. These delays 

could also detrimentally impact the Group’s working capital position.

Declining returns for companies investing in large energy-related 

The Group seeks to mitigate this risk through increased penetration 

infrastructure ventures may lead to projects being delayed or cancelled 

of markets which demand similarly resilient product qualities to the 

altogether. This could reduce demand for the Group’s specialist 

Oil & Gas sector. Recent contract wins in the Marine sector have 

products designed predominantly for the Oil & Gas sector, and hence 

demonstrated the cross-sector demand for products suitable for 

negatively impact performance. These delays could also detrimentally 

hazardous or extreme environments.

impact the Group’s working capital position.

The nature of the Group’s business and its customer base mean 

The Group addresses this risk by the Board and all levels of 

that Synectics is particularly dependent for future business on its 

management consistently emphasising that those attributes 

reputation in the marketplace, particularly for the quality and reliability 

are embedded in the culture of the Group, and by regularly 

of its products and services, and the overall integrity of its people.

seeking feedback from customers and employees.

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.

As the industry becomes increasingly technical and transitions to 

Synectics seeks to counter this risk through its investment in 

digital technology, there is a risk that products become obsolete 

research & development resources and a continued focus on 

or irrelevant.

customer-led development to ensure that the most appropriate 

product development paths are followed.

As with most businesses, particularly those operating in a technical 

The Group aims to offer appropriate remuneration packages and 

field, we are dependent on our employees with key managerial, 

incentive arrangements, and maintains certain key-man insurance 

engineering and technical skills.

policies, in order to mitigate this risk.

The Group operates internationally, giving rise to exposure from 

The Group manages this risk principally through forward exchange 

changes in foreign exchange rates.

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.

Project delivery risk and 

contractual liabilities

Geopolitical risk impacting project 

awards and timescales

Declining global energy prices impacting 

project awards and timescales

Reputational risk

Risk —  Factors that may impact  

the business

Mitigation —  What we are doing 
to minimise the risk

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 cost overruns and claims for contractual liabilities as a result 
of this failure.

Project and service delivery are closely monitored and reviewed 
across Synectics. 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.

Political instability has the potential to impact whether new projects 
go ahead, existing project timescales and the trading partners the 
Group chooses to work with. The Group’s trading performance, 
particularly within the Oil & Gas sector, is potentially exposed to 
delays in the scheduling of large-scale projects as a result of the 
changing geopolitical landscape in the Middle East. These delays 
could also detrimentally impact the Group’s working capital position.

Declining returns for companies investing in large energy-related 
infrastructure ventures may lead to projects being delayed or cancelled 
altogether. This could reduce demand for the Group’s specialist 
products designed predominantly for the Oil & Gas sector, and hence 
negatively impact performance. These delays could also detrimentally 
impact the Group’s working capital position.

The Group attempts to mitigate this risk through winning business 
globally in regions where project timescales are not impacted by 
local political issues and ensuring detailed knowledge of projects 
on which it is bidding.

The Group seeks to mitigate this risk through increased penetration 
of markets which demand similarly resilient product qualities to the 
Oil & Gas sector. Recent contract wins in the Marine sector have 
demonstrated the cross-sector demand for products suitable for 
hazardous or extreme environments.

The nature of the Group’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.

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.

Price and margin pressure

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

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.

Technological risk

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

Synectics seeks to counter 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.

People skills and dependency

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 aims to offer appropriate remuneration packages and 
incentive arrangements, and maintains certain key-man insurance 
policies, in order to mitigate this risk.

Exchange rate risk

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

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.

Read more about how the Group manages risk in the Corporate 
Governance Statement from page 26

The Audit Committee advises the Board of Directors on matters 
of risk management. They have their own report, which can be 
read on page 33

Annual Report and Accounts 2014 Synectics plc

39

Strategic ReviewFinancial StatementsOther InformationIntroductionGovernancePerformance ReviewFinancial Statements 
and Other Information

Financial Statements

41 

Independent Auditor’s Report

42  Consolidated Income Statement

43  Consolidated Statement of Comprehensive Income

44  Consolidated Statement of Financial Position

45  Consolidated Statement of Changes in Equity

46  Consolidated Cash Flow Statement

47  Notes to the Consolidated Financial Statements

74  Company Balance Sheet

75  Notes to the Company Financial Statements

Other Information

80  Principal Subsidiaries

81  Advisers

82  Notice of Annual General Meeting

40 www.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 2014, 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 37), 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 2014 and of the Group’s loss 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 LLP, Statutory Auditor 
Chartered Accountants 
One Snowhill 
Snow Hill Queensway 
Birmingham 
B4 6GH 

10 March 2015

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Annual Report and Accounts 2014 Synectics plc

41

 
 
 
 
Consolidated Income Statement
For the year ended 30 November 2014

Revenue

Cost of sales

Gross profit

Operating expenses

(Loss)/profit from operations

– Excluding non-underlying items

– Non-underlying items

Total (loss)/profit from operations

Finance income

Finance costs

(Loss)/profit before tax

– Excluding non-underlying items

– Non-underlying items

Total (loss)/profit before tax

Income tax credit/(expense)

(Loss)/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

2014
£000

2013
£000

2

3

7

4

10

11

4

12

14

14

14

14

64,594

82,363

(45,707)

(55,664)

18,887

26,699

(22,444)

(19,985)

(2,192)

(1,365)

(3,557)

246

(437)

(2,383)

(1,365)

(3,748)

390

(3,358)

(20.6)p

(20.6)p

(14.0)p

(14.0)p

7,217

(503)

6,714

245

(338)

7,124

(503)

6,621

(1,704)

4,917

30.9p

29.4p

34.2p

32.6p

42 www.synecticsplc.com

Financial StatementsFinancial Statements
Consolidated Statement of Comprehensive Income
For the year ended 30 November 2014

(Loss)/profit for the year

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

Re-measurement gain/(loss) on defined benefit pension scheme, net of tax

Effect of recognising the pension scheme surplus, net of tax

Effect of not recognising the pension scheme surplus, net of tax

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

2014
£000

2013*
£000

(3,358)

4,917

277

153

–

430

224

–

–

224

(201)

–

201

–

(65)

403

(403)

(65)

Total comprehensive (loss)/income for the year attributable to equity holders of the Parent

(2,704)

4,852

* Re-presented for the adoption of IAS19R ‘Employee Benefits’ (see note 1).

Annual Report and Accounts 2014 Synectics plc

43

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther Information 
Financial Statements
Consolidated Statement of Financial Position
As at 30 November 2014

Non-current assets

Property, plant and equipment

Intangible assets

Retirement benefit asset

Current assets

Inventories

Trade and other receivables

Tax assets

Cash and cash equivalents

Total assets

Current liabilities

Loans and borrowings

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 the Parent Company

Called up share capital

Share premium account

Merger reserve

Other reserves

Currency translation reserve

Retained earnings

Total equity

Note

2014
£000

2013
£000

15

16

30

17

18

19

21

20

22

21

22

12

23

3,952

23,357

540

2,641

22,672

–

27,849

25,313

12,624

25,627

373

1,349

39,973

67,822

9,735

27,695

–

5,774

43,204

68,517

(4,553)

(815)

(22,569)

(22,569)

(72)

(1,147)

(1,118)

(147)

(28,341)

(24,649)

(2,872)

(3,760)

(22)

(142)

(97)

(469)

(3,036)

(4,326)

(31,377)

(28,975)

36,445

39,542

3,559

16,043

9,971

3,539

15,765

9,971

(2,656)

(2,797)

351

9,177

36,445

127

12,937

39,542

The financial statements on pages 42 to 73 were approved and authorised for issue by the Board of Directors on 10 March 2015 and were 
signed on its behalf by:

Paul Webb 
Chief Executive 

Nigel Poultney
Finance Director

Company number: 1740011

44 www.synecticsplc.com

Financial Statements
Consolidated Statement of Changes in Equity
For the year ended 30 November 2014

At 1 December 2012

Profit for the year

Other comprehensive loss

Currency translation adjustment

Total other comprehensive loss

Total comprehensive (loss)/income for the year

Dividends paid (note 13)

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

Issue of ordinary shares

Share scheme interests realised in the year

Acquisition of Coex Services Asia Pte Limited

At 30 November 2013

Loss for the year

Other comprehensive income

Currency translation adjustment

Re-measurement gain on defined benefit pension scheme, 
net of tax

Total other comprehensive income

Total comprehensive income/(loss) for the year

Dividends paid (note 13)

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

Issue of ordinary shares

Share scheme interests realised in the year

Called up
share
capital
£000

Share
premium
account
£000

3,514

15,721

Merger
reserve
£000

9,565

Other
reserves
£000

(3,239)

–

–

–

–

–

–

5

–

20

–

–

–

–

–

–

44

–

–

3,539

15,765

–

–

–

–

–

–

–

20

–

–

–

–

–

–

–

–

278

–

–

–

–

–

–

–

–

–

406

9,971

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

442

–

(2,797)

–

–

–

–

–

–

–

–

141

Currency
translation
reserve
£000

192

–

(65)

(65)

(65)

–

–

–

–

–

127

–

224

–

224

224

–

–

–

–

Retained
earnings
£000

9,387

4,917

–

–

4,917

(1,336)

78

–

(109)

–

Total
£000

35,140

4,917

(65)

(65)

4,852

(1,336)

78

49

333

426

12,937

39,542

(3,358)

(3,358)

–

430

430

224

430

654

(2,928)

(2,704)

(928)

127

–

(31)

(928)

127

298

110

At 30 November 2014

3,559

16,043

9,971

(2,656)

351

9,177

36,445

Annual Report and Accounts 2014 Synectics plc

45

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNote

2014
£000

2013
£000

(3,358)

(390)

(246)

437

1,515

38

–

127

(1,877)

(2,889)

2,068

925

(1,773)

1

(1,426)

(3,198)

4,917

1,704

(245)

338

1,187

(16)

(191)

78

7,772

(2,533)

(586)

(1,910)

2,743

12

(731)

2,024

(2,021)

(1,570)

–

–

(1,361)

(240)

15

(1,858)

(1,008)

(335)

(3,622)

(4,756)

(804)

2,952

110

298

(192)

(928)

(1,516)

145

(8,191)

5,774

(2,417)

333

49

(105)

(1,336)

1,893

122

(717)

6,491

5,774

12

10

11

15

5

16

16

19

Consolidated Cash Flow Statement
For the year ended 30 November 2014

Cash flows from operating activities

(Loss)/profit for the year

Income tax (credit)/expense

Finance income

Finance costs

Depreciation and amortisation charge

Loss/(profit) on disposal of non-current assets

Other non-underlying items

Share-based payment charge

Operating cash flows before movement in working capital

Increase in inventories

Decrease/(increase) in receivables

Increase/(decrease) in payables and provisions

Cash (used in)/generated from operations

Interest received

Tax paid

Net cash (used in)/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

(Repayment of)/proceeds from borrowings

Share scheme interests realised in the year

Issue of shares

Interest paid

Dividends paid

Net cash (used in)/from financing activities

Effect of exchange rate changes on cash and cash equivalents

Net decrease 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

46 www.synecticsplc.com

Financial StatementsFinancial Statements
Notes to the Consolidated Financial Statements
For the year ended 30 November 2014

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 74 to 79.

The consolidated financial statements of the Company as at and for the year ended 30 November 2014 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 2014:

Endorsed

Amendment to IAS 19

Amendments to IFRS 7

Defined benefit plans

Offsetting Financial Assets and Financial Liabilities

Effective for periods 
beginning on or after:

1 January 2013

1 January 2013

With effect from 1 December 2013 the Group has adopted IAS 19 (Revised) Employee Benefits which introduces a number of changes 
to accounting for defined benefit plans. The key change is the removal of expected returns on plan assets from the income statement 
and its replacement with a requirement to recognise interest on the net defined benefit asset/liability, calculated using the discount 
rate used to measure the defined benefit obligation.

As this is the first year that the Group has recognised the retirement benefit asset, the adoption of IAS19R does not impact the prior 
year financial statements, other than the re-presentation of prior year disclosures in line with the revised standard.

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 2014 have been adopted in 2014. 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 10

IFRS 11

IFRS 12

IAS 27

IAS 28

Amendments to IAS 32

Amendments to IAS 36

Amendments to IAS 19

Consolidated Financial Statements

Joint Arrangements

Disclosure of Interests in Other Entities

Separate Financial Statements

Investments in Associates and Joint Ventures

Offsetting financial assets and financial liabilities

Recoverable amount disclosures for non-financial assets

Defined benefit plans

Effective for periods
beginning on or after:

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 January 2014

1 February 2015

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 2014 and/or 1 December 2015 as appropriate. 

None of these standards, interpretations or amendments is expected to have a material impact on profit, earnings per share or net 
assets in future periods.

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

IFRS 15 Revenue from contracts with customers

IFRS 9 Financial Instruments

Annual Report and Accounts 2014 Synectics plc

47

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

1 Principal accounting policies continued
Going concern
The Group’s business activities, together with factors likely to affect its future development, performance and position, and information 
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 2 to 21 and on pages 38 and 39.

As detailed in note 21, the Group has secured banking facilities in place which are used to meet the day-to-day working capital 
requirements. There are various covenants attached to these facilities. The Directors have considered the financial position of the 
Group at 30 November 2014 and the projected cash flows and financial performance of the Group for at least twelve months from 
the date of approval of these financial statements.

The Group’s forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group 
would be able to operate within the terms of its current facilities.

As a consequence, the Directors believe that the Group is well-placed to manage its business risks successfully and have adequate 
resources to continue in operation as a going concern for the foreseeable future. Accordingly, they continue to adopt the going 
concern basis in preparing the Annual Report and Accounts.

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.

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. 

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Financial Statements1 Principal accounting policies continued
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.

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.

Annual Report and Accounts 2014 Synectics plc

49

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

1 Principal accounting policies continued
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.

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.

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Financial Statements1 Principal accounting policies continued
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.

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 the assets 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.

Annual Report and Accounts 2014 Synectics plc

51

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther Information 
 
 
Notes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

1 Principal accounting policies continued
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.

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 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.

Loans and borrowings
Loans and borrowings comprise bank term loans and bank overdrafts.

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Financial Statements1 Principal accounting policies continued
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. 

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.

Defined benefit plans
Accounting for pensions requires the Group to use actuarial valuations. An actuarial valuation involves making various assumptions 
that may differ from actual developments in the future. These include the determination of the discount rate, mortality rates and future 
pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit asset or obligation is 
highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date. The Group has recognised 
an asset in respect of the scheme surplus at the balance sheet date. Future economic benefits are available to the Group in the form 
of reduction in future contributions or a cash refund. Further details regarding the defined benefit plan are given in note 30.

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.

Annual Report and Accounts 2014 Synectics plc

53

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

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 and 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. 

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

2014
£000

31,876

33,746

65,622

2013
£000

44,753

38,368

83,121

(1,028)

(758)

64,594

82,363

No single customer contributed 10% or more to the Group’s revenues in 2014. In 2013, included in revenues arising from the Systems 
segment, is approximately £8.5 million which arose from sales to the Group’s largest customer in the year.

Underlying operating (loss)/profit

Systems

Integration & Managed Services

Total segmental underlying operating (loss)/profit

Reconciliation to consolidated underlying operating (loss)/profit:

Central costs

Underlying operating (loss)/profit 2014

Systems

Integration & Managed Services

Total segmental underlying operating loss

Reconciliation to consolidated underlying operating loss:

Central costs

2014
£000

1,031

(1,139)

(108)

2013
£000

7,009

2,223

9,232

(2,084)

(2,192)

(2,015)

7,217

Underlying

operating Restructuring
costs
£000

(loss)/profit*
£000

Share-based Amortisation
of acquired
intangibles
£000

payment
charge
£000

Total (loss)/
profit from
operations
£000

1,031

(1,139)

(108)

(74)

(278)

(352)

(2,084)

(2,192)

(768)

(1,120)

(50)

(37)

(87)

(40)

(127)

–

–

–

907

(1,454)

(547)

(118)

(118)

(3,010)

(3,557)

54 www.synecticsplc.com

Financial Statements2 Segmental analysis continued

Underlying operating profit 2013

Systems

Integration & Managed Services

Total segmental underlying operating profit

Reconciliation to consolidated underlying operating profit:

Central costs

Underlying

operating Restructuring
costs
£000

profit*
£000

Acquisition 
costs
£000

Share-based Amortisation
of acquired
intangibles
£000

payment
charge
£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

*  Underlying operating (loss)/profit represents operating (loss)/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). 

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

Cash and borrowings

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

28,899

16,454

45,353

19,491

1,349

1,629

2014
Liabilities Net assets
£000

£000

(10,635)

18,264

(11,478)

(22,113)

4,976

23,240

–

19,491

(7,425)

(1,839)

(6,076)

(210)

67,822

(31,377)

36,445

Assets
£000

24,863

18,143

43,006

19,567

5,944

Liabilities
£000

2013
Net assets
£000

(10,030)

14,833

(13,298)

4,845

(23,328)

19,678

–

19,567

(5,647)

297

68,517

(28,975)

39,542

Revenue
2014
£000

Total
assets
2014
£000

Capital
additions
2014
£000

Revenue
2013
£000

Total
assets
2013
£000

44,646

60,847

1,835

50,561

60,681

8,535

3,344

8,069

–

3,118

22

3,835

–

95

–

91

–

5,062

5,739

18,892

2,109

2,313

–

5,523

–

Capital
additions
2013
£000

1,407

154

–

9

–

 64,594

67,822

2,021

82,363

68,517

 1,570

Annual Report and Accounts 2014 Synectics plc

55

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

3 Net operating expenses

Distribution costs

Administrative expenses (before non-underlying costs)

Non-underlying costs (note 4)

Total administrative expenses

4 Non-underlying items

Restructuring costs 

Acquisition costs

Share-based payment charge

Amortisation of acquired intangible assets 

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

2014
£000

294

20,785

1,365

22,150

22,444

2014
£000

1,120

–

127

118

–

1,365

2013
£000

384

19,098 

503

19,601

19,985

2013
£000

562

265

78

123

(525)

503

Note

a

b

c

a.  The restructuring costs incurred during the year ended 30 November 2014 relate predominantly to severance costs arising from a review of the Group’s cost base. 

In 2013 restructuring costs arose from the internal reorganisation of the Group’s businesses into two divisions.

b.  Acquisition costs incurred during 2013 related to the acquisition of the remaining 49% outstanding share capital of Indanet and the remaining 80% of Coex Services 

Asia Pte Limited (‘CSA’) (note 5).

c.  The profit arising on the reclassification of available-for-sale assets to profit or loss in 2013 relates to the equity investments in the unlisted shares of CSA and O&G 
Vision Pte Limited (‘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 (prior year)
a) Indanet
In July 2011 Synectic Systems GmbH acquired 100% of the issued share capital of Indanet AG (‘Indanet’). In February 2013, the entire 
outstanding share capital in Indanet was purchased for a total consideration of €1.64 million in cash. Total consideration paid for the entire 
share capital of Indanet amounted to €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 2013 to fund this final payment. 

b) Coex Services Asia Pte Limited
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 had been paid, comprising £1.3 million in 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. In the 2013 results, the movements in the fair value of the financial assets were recorded 
directly in equity as an unrealised gain and were reclassified to the Income Statement, together with the associated deferred tax liability, 
as part of the acquisition accounting.

56 www.synecticsplc.com

Financial Statements 
5 Acquisitions (prior year) continued
The fair value recognised in 2013, 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

No changes have arisen from the provisional fair values disclosed in the prior year.

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 
30 November 2013.

If the acquisition of CSA had been completed on the first day of the 2013 financial year, Group revenues for 2013 would have been 
£84.3 million and Group profit from operations would have been £7.0 million.

Annual Report and Accounts 2014 Synectics plc

57

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

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

2014
£000

41

112

40

20

213

2013
£000

41

100

51

26

218

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 (Loss)/profit from operations

(Loss)/profit from operations is stated after charging:

Amortisation of intangible assets

Depreciation of property, plant and equipment

Research & development expenditure

Rental payments under operating leases:

– plant, machinery and vehicles

– other

2014
£000

807

708

2013
£000

538

649

1,172

1,251

920

424

1,131

377

8 Directors’ and key management personnel’s remuneration
The Directors consider that the key management personnel of the business comprises its Board of Directors, whose remuneration 
is shown in the Remuneration Committee Report on page 30, 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:

2014
Number

2013
Number

249

279

18

546

2014
£000

18,821

2,152

466

127

228

270

14

512

2013
£000

19,529

2,176

488

78

21,566

22,271

Reportable segment (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

58 www.synecticsplc.com

Financial Statements10 Finance income

Bank interest receivable 

Interest income on pension scheme assets

11 Finance costs

Interest payable on bank overdrafts

Interest payable on bank loans

Interest on pension scheme liabilities

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

Estimated recoverable deferred tax asset

Total deferred tax

Total tax (credit)/charge for the year

2014
£000

4

242

246

2014
£000

100

95

242

437

2014
£000

(246)

391

(130)

15

223

12

(640)

(405)

(390)

Reconciliation of tax (credit)/charge for the year
The corporation tax assessed for the year differs from the standard rate of corporation tax in the UK of 21.67% (2013: 23.33%). 
The differences are explained below:

(Loss)/profit on ordinary activities before tax

Tax on (loss)/profit on ordinary activities before tax at standard rate of 21.67% (2013: 23.33%)

Effects of:

Expenses not deductible for tax purposes

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 (credit)/charge for the year

2014
£000

(3,748)

(812)

264

(47)

323

–

–

(118)

(390)

2013
£000

12

233

245

2013
£000

27

78

233

338

2013
£000

987

512

93

1,592

215

(103)

–

112

1,704

2013
£000

6,621

1,545

42

(237)

467

(45)

(58)

(10)

1,704

Annual Report and Accounts 2014 Synectics plc

59

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

12 Taxation continued
Factors that may affect future tax charges
Legislation reducing the main rate of UK corporation tax to 20% from 1 April 2015 was substantively enacted during the previous period. 
Accordingly deferred tax has been provided for at 20% (2013: 20%) as it is expected that the majority of the deferred tax balance will be 
settled after 1 April 2015.

Deferred tax (liability)/asset

At 1 December 2012

Income Statement

Currency translation adjustment

At 30 November 2013

Income Statement

Statement of Comprehensive Income

Currency translation adjustment

At 30 November 2014

Property, 
plant and 
equipment 
£000

Other 
temporary 
differences 
£000

Retirement
benefit 
asset 
£000

Losses 
£000

(184)

(159)

2

(341)

(54)

–

(5)

(147)

47

(28)

(128)

(181)

–

37

(400)

(272)

–

–

–

–

–

(110)

–

(110)

–

–

–

–

640

–

–

640

Total
£000

(331)

(112)

(26)

(469)

405

(110)

32

(142)

Deferred tax assets of £0.6 million have been recognised in relation to legal entities which suffered a tax loss in the current period. 
The assets are recognised based upon future taxable profit forecasts for the entities concerned.

The Group has further tax losses available to be carried forward for offset against the future taxable profits of certain Group companies 
amounting to approximately £2.7 million (2013: £1.9 million). No deferred tax asset (2013: £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 (2013: £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.

A deferred tax liability of £110,000 has been recognised in relation to the Group’s defined benefit asset during the year (note 30).

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

There is no proposed final dividend for the year ended 30 November 2014. 

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

2014

Pence
per share 

5.5

–

5.5

–

2013

Pence
per share 

5.0

3.0

8.0

5.5

£000

950

–

950

928

–

£000

858

519

1,377

1,336

947

2014
Pence
per share

2013
Pence
per share

(20.6)

(20.6)

(14.0)

(14.0)

30.9

29.4

34.2

32.6

Earnings per ordinary share have been calculated by dividing the (loss)/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.

60 www.synecticsplc.com

Financial Statements14 Earnings per ordinary share continued
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 (credit)/charge for the year

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 options1

Weighted average number of ordinary shares – diluted calculation

2014
£000

(3,358)

1,365

(295)

2013
£000

4,917

503

30

(2,288)

5,450

2014
000

2013
000

16,320

15,929

–

789

16,320

16,718

1  Under IFRS no allowance is made for the dilutive impact of share options which reduce a loss. The basic and diluted EPS measures are therefore the same for the 

year ended 30 November 2014.

15 Property, plant and equipment

Cost

At 1 December 2012

Additions

Disposals

Transfer between categories and from intangibles

Currency translation adjustment

At 30 November 2013

Additions

Disposals

Currency translation adjustment

At 30 November 2014

Depreciation

At 1 December 2012

Charge for the year

Disposals

Transfer between categories

Currency translation adjustment

At 30 November 2013

Charge for the year

Disposals

Currency translation adjustment

At 30 November 2014

Net book value

At 30 November 2014

At 30 November 2013

Short
Freehold
land and
leasehold
buildings improvements
£000 

£000 

Plant,
equipment
and motor
vehicles
£000 

311

766

–

–

–

1,077

1,074

–

–

1,384

3,131

157

–

(142)

–

647

(107)

181

(2)

1,399

3,850

110

(12)

1

837

(410)

19

Total
£000

4,826

1,570

(107)

39

(2)

6,326

2,021

(422)

20

2,151

1,498

4,296

7,945

45

6

–

–

–

51

29

–

–

80

2,071

1,026

729

88

–

(52)

–

765

101

(10)

(1)

855

643

634

2,372

3,146

555

(107)

52

(3)

649

(107)

–

(3)

2,869

3,685

578

(374)

(15)

708

(384)

(16)

3,058

3,993

1,238

981

3,952

2,641

Annual Report and Accounts 2014 Synectics plc

61

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther Information 
Notes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

16 Intangible assets

Cost

At 1 December 2012

Additions

Transfer between categories

Currency translation adjustment

At 30 November 2013

Additions

Disposals

Currency translation adjustment

At 30 November 2014

Amortisation and impairment

At 1 December 2012

Charge for the year

Currency translation adjustment

At 30 November 2013

Charge for the year

Currency translation adjustment

Disposals

At 30 November 2014

Net book value

At 30 November 2014

At 30 November 2013

Capitalised
Acquired development
costs
£000

intangibles
£000

Purchased
software
£000

Goodwill
£000

Total
£000

27,909

2,525

(39)

53

30,448

1,601

(9)

(159)

3,624

1,008

–

–

4,632

1,361

–

(11)

1,244

335

(39)

–

1,540

240

(9)

–

5,982

1,771

31,881

2,323

269

–

2,592

472

7

–

757

146

–

903

217

–

(9)

7,240

538

(2)

7,776

807

(50)

(9)

3,071

1,111

8,524

2,911

2,040

660

637

23,357

22,672

22,342

1,182

–

36

23,560

–

–

(117)

23,443

3,993

–

–

3,993

–

(41)

–

3,952

19,491

19,567

699

–

–

17

716

–

–

(31)

685

167

123

(2)

288

118

(16)

–

390

295

428

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

2014
£000

2013
£000

10,302

10,378

4,580

4,609

4,580

4,609

19,491

19,567

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.

62 www.synecticsplc.com

Financial Statements16 Intangible assets continued
The key assumptions used in the cash flow projections are as follows:

 » working capital unwind in 2015;

 » terminal value applied after ten years assuming a seven (2013: ten) times multiple; and

 » pre-tax discount rates.

Systems

Integration & Managed Services

Transport Systems

2014
%

9.9

9.5

9.1

2013
%

8.9

9.2

8.4

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. 

Notwithstanding the current year’s results, 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.

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

2014
£000

5,782

1,110

4,441

11,333

1,291

12,624

2014
£000

2013
£000

2,585

1,341

5,066

8,992

743

9,735

2013
£000

1,291

743

2014
£000

2013
£000

15,493

13,103

(273)

(502)

15,220

7,599

2,051

757

12,601

12,544

1,636

914

25,627

27,695

Trade receivables are non-interest bearing and generally have 30 to 90-day terms. At 30 November 2014 the Group had 61 days’ sales 
outstanding in trade receivables (2013: 70 days’).

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

Annual Report and Accounts 2014 Synectics plc

63

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

18 Trade and other receivables continued
Movement in allowance for doubtful debts

At 1 December

Provided

Amounts utilised

At 30 November

2014
£000

502

146

(375)

273

As at 30 November 2014, trade receivables of £5,430,000 (2013: £4,541,000) 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

For the purpose of the Consolidated Cash Flow Statement, cash and cash equivalents comprise the following:

Cash at bank and in hand

Bank overdraft

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

Cash at bank earns interest at 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.

2013
£000

1,041

39

(578)

502

2013
£000

2,661

1,343

537

4,541

2013
£000

5,774

2013
£000

5,774

–

5,774

2014
£000

4,405

484

541

5,430

2014
£000

1,349

2014
£000

1,349

(3,766)

(2,417)

2014
£000

9,208

1,207

223

11,931

22,569

2013
£000

8,410

816

529

12,814

22,569

21 Loans and borrowings

Bank term loan facilities

Bank overdraft

Total

64 www.synecticsplc.com

2014

Non-
current
£000

2,872

–

2,872

Current
£000

787

3,766

4,553

Total
£000

3,659

3,766

7,425

Current
£000

815

–

815

2013

Non-
current
£000

3,760

–

Total
£000

4,575

–

3,760

4,575

Financial Statements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 of the loans 
and borrowings are as follows:

€3.7 million term loan facility

£1.5 million term loan facility

£8.0 million overdraft

Value drawn
000

€2,900

£1,350

£3,766

Maturity 

Interest
rate

Security

30 September 2017

EURIBOR +2.75% Group assets

26 November 2018

LIBOR +2.5%  Group assets

On demand

Base +2.75% Group assets

During the year €0.8 million of the Euro and £150,000 of the Sterling bank loans respectively were repaid.

22 Provisions

At 1 December 2012

Utilised in year

Charge to Income Statement

Acquisition during year

At 30 November 2013

Utilised in year

Charge to Income Statement

At 30 November 2014

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

Current

Non-current

Deferred and
contingent
Restructuring consideration
£000

£000

Property
£000

–

–

126

–

126

(183)

1,120

1,063

1,408

(1,408)

–

49

49

–

–

49

73

(14)

10

–

69

(16)

4

57

2014
£000

1,147

22

1,169

Total
£000

1,481

(1,422)

136

49

244

(199)

1,124

1,169

2013
£000

147

97

244

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 carried forward at 30 November 2014 will be utilised within four years. The restructuring 
provision relates to severance costs incurred in the year and is expected to be utilised in the year ending 30 November 2015.

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

Ordinary shares of 20p each

Allotted, called up and fully paid

2014

2013

Number

£000

Number

£000 

17,794,439

3,559 17,694,891

3,539

Share capital increased by 99,548 shares in the year as a result of share options being exercised under the Quadnetics Group EMI Share 
Option Scheme (note 24).

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 1,427,464 shares held under the Group Executive Shared Ownership Plan (‘ExSOP’) at 30 November 2014 
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 £3,379,214 (2013: £3,520,214) has been deducted from other reserves. The nominal 
value of these shares is £285,493 (2013: £298,513). Other reserves also includes a capital redemption reserve of £8,000 (2013: £8,000).

Annual Report and Accounts 2014 Synectics plc

65

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

24 Options over shares of Synectics plc
The Group operated four share schemes in the year: the Quadnetics Group 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 were 99,548, all of which were exercised in the year ended 30 November 2014.

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 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 Scheme holds 38,823 ordinary shares at 30 November 2014, 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

4 April 2014

7 May 2014

2 October 2014

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

21 April 2017

18 May 2015

Partnership

10 October 2017

Dividend

10 October 2015

Partnership

Dividend

Dividend

Partnership

Partnership

Dividend

Partnership

4 April 2018

9 May 2016

5 October 2016

15 October 2018

5 April 2019

8 May 2017

3 October 2019

Purchase/
base price

2014
Number
of shares

2013
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

404.0p

430.0p

350.0p

3,461

4,657

70

4,307

95

4,275

198

3,509

150

3,754

231

149

3,806

3,949

357

5,855

4,245

5,872

86

5,472

118

5,979

249

5,033

193

5,756

304

199

5,548

–

–

–

Shares held at end of year

38,823

39,054

At 30 November 2014 the shares held by the ESAP Scheme had a market value of £60,176 (2013: £238,229).

Movements during the year were as follows:

Shares held at 1 December 2013

Shares acquired during the year

Withdrawals from the scheme during the year

Shares held at 30 November 2014

Number of
shares

39,054

11,348

(11,579)

38,823

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. 

66 www.synecticsplc.com

Financial Statements24 Options over shares of Synectics plc continued
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. If the Company’s share 
performance matches the Index, then 25% of the awarded shares will vest and between these points vesting will be pro-rata.

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 2014 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 2013

Vested shares sold or transferred in year

Shares held at 30 November 2014

Relevant
share price

2014
at date of Number of
shares

award

2013
Number of
shares

Exercise dates

8 July 2012 onwards

147.5p

798,081

801,081

8 March 2014 onwards

173.0p

142,400

200,000

486,983

486,983

1,427,464

1,488,064

Number of
shares

1,488,064

(60,600)

1,427,464

Dividends have been waived in respect of the 486,983 shares not specifically allocated to employees.

Synectics Performance Share Plan
The Synectics Performance Share Plan (the ‘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 2014 are exercisable as follows:

Date awarded

9 October 2012

31 October 2013

5 March 2014

Relevant
share price

2014
at date of Number of
shares

award

Exercise dates

9 October 2015 onwards

31 October 2016 onwards

5 March 2017 onwards

272.5p

510.0p

437.5p

88,250

65,500

22,500

2013
Number of
shares

97,250

78,500

–

176,250

175,750

Annual Report and Accounts 2014 Synectics plc

67

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

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 October 2013 March 2014
awards

awards

awards

142,250

78,500

25,500

Nil

£2.725

20%

3.5%

2.1%

3 years

4 years

Nil

£5.10

25%

2.2%

3.0%

3 years

5 years

Nil

£4.375

30%

2.3%

3.1%

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

2014
£000

127

–

2013
£000

78

–

26 Contingent liabilities
Certain subsidiary companies have agreed to guarantee a number of bank bonds, issued by Barclays Bank PLC and Lloyds Bank plc, 
amounting to a total of £1.2 million at 30 November 2014 (2013: £1.1 million). 

27 Related party transactions
 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 80.

 During the year Synectic Systems Group Limited made purchases of £80,251 (2013: £1,043,241) from a company in which a director of 
both Synectic Systems Group Limited and Synectics plc has an indirect interest. The balance prepaid by Synectic Systems Group Limited 
at 30 November 2014 was £7,251 (2013: £50,160).

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

68 www.synecticsplc.com

Financial Statements27 Related party transactions continued
Transactions with key management personnel:

Salary and fees

Benefits

Bonus

Loss of office

Total short-term remuneration

Post employment benefits

Share-based payments

2014
£000

784

100

–

318

1,202

85

30

2013
£000

746

90

106

–

942

94

33

1,317

1,069

As compensation for loss of office on 31 January 2015, Mr Shepherd will receive £318,212 (which includes an amount relating 
to non-cash benefits).

28 Capital commitments
At the year end capital commitments not provided for in these financial statements amounted to £105,730 (2013: £209,000).

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

2014
£000

1,622

2,696

1,208

5,526

2013
£000

2,088

3,415

1,491

6,994

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

30 Pension commitments 
The Group operates a defined benefit pension scheme and a number of defined contribution schemes.

a) Defined benefit scheme
The Group 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 past employees and 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 2014. The major assumptions used by the 
actuary are shown below.

The Group has paid contributions of £5,000 (2013: £72,128) in the year.

Annual Report and Accounts 2014 Synectics plc

69

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

30 Pension commitments continued
The disclosures below relate to the defined benefit section, with the contributions to the defined contributions section being disclosed 
in section b) on page 72.

Net defined benefit asset

Fair value of scheme assets

Present value of scheme liabilities

Net defined benefit asset

Effect of not recognising the scheme surplus

Net defined benefit asset recognised in the balance sheet

Associated deferred tax liability

2014
£000

6,409

2013
£000

5,753

(5,869)

(5,565)

540

–

540

(110)

188

(188)

–

–

Future economic benefits are available to the Group in the form of reduction in future contributions or a cash refund. Any surplus ultimately 
repaid by the Trustees would be subject to a tax charge deducted at source. Consequently, an asset of £540,000 has been recognised 
at the balance sheet date along with the associated deferred tax liability of £110,000, with the net of these being the £430,000 increase 
in the Consolidated Statement of Comprehensive Income.

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

Defined benefit obligations at start of year

Interest cost

Re-measurements:

– (gains)/losses due to scheme experience

– gains due to changes in demographic assumptions

– losses/(gains) due to financial assumptions

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

Interest income

Return on plan assets, excluding amounts recognised in interest income

Contributions by the Company

Benefits paid

Fair value of plan assets at end of year

Gains/(losses) recognised in the Consolidated Statement of Comprehensive Income

Return on plan assets, excluding amounts recognised in interest income

Re-measurements

Total actuarial gains/(losses)

Effect of not recognising the scheme surplus

Effect of recognising the scheme surplus

Total amount recognised in the Consolidated Statement of Comprehensive Income

2013
Re-presented*
£000

5,629

233

190

–

(205)

(282)

2014
£000

5,565

242

(1)

(190)

489

(236)

5,869

5,565

2013
Re-presented*
£000

5,996

233

(266)

72

(282)

5,753

2013
Re-presented*
£000

(266)

15

(251)

251

–

–

2014
£000

5,753

242

645

5

(236)

6,409

2014
£000

645

(298)

347

–

193

540

The cumulative amount of actuarial gains and losses recognised in the Consolidated Statement of Comprehensive Income since the 
adoption of IAS 19 is £540,000 (2013: £nil).

* Re-presented for the adoption of IAS19R ‘Employee Benefits’ (see note 1).

70 www.synecticsplc.com

Financial Statements30 Pension commitments continued
Assets

Equity

Bonds

Cash

Total assets

2014

2013

2012
Fair value of Fair value of Fair value of
plan assets
plan assets
plan assets
£000 
£000 
£000 

151

6,255

3

146

5,611

(4)

118

5,874

4

6,409

5,753

5,996

As at 30 November 2014, the fair value of the assets shown above include holdings of £37,000 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 ended 30 November 2014 was £888,000.

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

The mortality assumptions adopted at 30 November 2014 imply the following life expectancies at age 65: 

Male currently age 45

Female currently age 45

Male currently age 65 

Female currently age 65

2014
% per
annum

3.20

2.30

3.60

2.30

–

2013
% per
annum

3.70

2.80

4.30

2.80

–

2014
Years

24.0

26.4

22.2

24.5

2012
% per
annum

3.00

2.50

4.00

2.50

–

2013
Years

24.6

27.0

22.7

25.2

Analysis of the sensitivity to the principal assumptions of the present value of the defined benefit obligation
The sensitivities shown are approximate and each sensitivity considers one change in isolation. The inflation sensitivity includes the 
impact of changes to the assumptions for revaluation and pension increases. The average duration of the defined obligation at the period 
ending 30 November 2014 is 13 years.

Discount rate

Rate of inflation

Rate of mortality 

Change in assumption

Decrease of 0.25%

Increase 0.25% pa

Increase in life expectancy of one year

Change in liability

Increase by 3.1%

Increase by 0.1%

Increase by 3.4%

The Company estimates that no additional contributions will be paid to the plan during the year ending 30 November 2015.

History of experience gains and losses

Fair value of plan assets

Present value of defined benefit obligations

Surplus in plan

30 Nov
2014
£000

6,409

5,869

540

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

Experience adjustment on plan assets

Experience adjustment on defined benefit obligations

–

1

(266)

(203)

641

(27)

350

–

597

124

Annual Report and Accounts 2014 Synectics plc

71

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Consolidated Financial Statements continued
For the year ended 30 November 2014

30 Pension commitments continued
b) Defined contribution schemes
Contributions made by the Company to the defined contribution section of the Quadrant Group plc Retirement Benefit Scheme amount 
to £39,000 in the year (2013: £50,000).

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 £427,000 (2013: £438,000). 

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), bank overdrafts (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 2014 or 30 November 2013.

At 30 November 2014, 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

2014
$000

1,403

2013
$000

770

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 0.6% (2013: 8.5%) of the Group’s net assets as follows:

United States

Germany

Singapore

Total

2014
%

1.9

(4.1)

2.8

0.6

2013
%

2.0

1.5

5.0

8.5

Translation exposure in respect of these assets is not hedged.

At 30 November 2014 the Group held foreign currency cash balances of $2,941,000 (2013: $1,539,000) and S$907,000 (2013: S$1,431,000), 
and was overdrawn by €1,333,000 (2013: €162,000 cash).

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

USD impact

Euro impact

SGD impact

2014
£000

112

152

264

2013
£000

33

99

132

2014
£000

(348)

(239)

(587)

2013
£000

(130)

(172)

(302)

2014
£000

61

130

191

2013
£000

205

161

366

Profit or loss

Other equity

Total

72 www.synecticsplc.com

Financial Statements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 Consolidated Income Statement.

Sterling

US Dollars

Euros

Saudi Arabian Riyals

Total

2014

Sterling
£000

–

(323)

(2,185)

–

SGD
£000

75

771

–

–

(2,508)

846

2013

Sterling
£000

–

543

56

44

643

SGD
£000

568

783

–

–

1,351

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 (debt)/funds of:

Current accounts

Loans and borrowings (note 21)

2014
£000

1,349

(7,425)

(6,076)

2013
£000

5,774

(4,575)

1,199

The level of the Group’s bank overdraft facilities is reviewed annually and at 30 November 2014 the Group had undrawn overdraft facilities 
of up to £4.2 million, on which interest would be payable at the rate of bank base rate +2.75%.

Financial liabilities of the Group principally comprise trade creditors falling due for payment within twelve months of the balance sheet 
date (2013: twelve months), bank overdraft repayable on demand and bank loans which fall due for final repayment within four years 
of the balance sheet date.

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% (2013: 0.5%). The Group benchmarks the rates being obtained in order to maximise its returns, within 
the credit risk framework referred to above.

The interest rates for bank loans and overdrafts are set out in note 21 and in this note respectively.

The Group’s funding position did not carry any significant interest rate risk at 30 November 2014 or 30 November 2013.

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

Annual Report and Accounts 2014 Synectics plc

73

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationFinancial Statements
Company Balance Sheet
As at 30 November 2014

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

2014
£000

2013
£000

5

6

7

8

8

9

10

11

12

12

12

12

527

19,348

19,875

191

19,261

19,452

29,347

29,622

(5,875)

(5,671)

23,472

43,347

(5,691)

(2,871)

(767)

23,951

43,403

(6,669)

(3,760)

(47)

(9,329)

(10,476)

34,018

32,927

3,559

16,043

9,971

(1,406)

5,851

34,018

3,539

15,765

9,971

(1,516)

5,168

32,927

The financial statements on pages 74 to 79 were approved and authorised for issue by the Board of Directors on 10 March 2015 and were 
signed on its behalf by:

Paul Webb 
Director 

Nigel Poultney
Director

Company number: 1740011

74 www.synecticsplc.com

Financial Statements
Notes to the Company Financial Statements
For the year ended 30 November 2014

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 participates in a retirement benefit scheme, the Quadrant Group plc 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.

The contributions to this scheme have been accounted for on a defined contribution basis as the Company is unable to identify its 
share of the underlying assets and liabilities. Refer to the Group financial statements for further details in relation to the scheme.

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.

Annual Report and Accounts 2014 Synectics plc

75

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Company Financial Statements continued
For the year ended 30 November 2014

1 Principal accounting policies continued
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.

2 Directors’ remuneration
Directors’ remuneration is shown in the Remuneration Committee Report on page 30.

3 Directors

Number of Executive Directors

Directors’ emoluments

Salaries and benefits

Pension benefits under defined contribution plan

Compensation for loss of office

2014
Number

3

2013
Number

2

2014
£000

508

64

318

890

2013
£000

522

73

–

595

Detailed information on the emoluments, pensions, option holdings and shareholdings for each Director is shown in the Remuneration 
Committee Report on pages 29 to 32.

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

There is no proposed final dividend for the year ended 30 November 2014.

5 Plant, equipment and motor vehicles

2014

2013

Pence per
share

5.5

–

5.5

–

£000

950

–

950

928

–

Pence per
share

5.0

3.0

8.0

5.5

Cost

At 1 December 2013

Additions

At 30 November 2014

Depreciation

At 1 December 2013

Charge for the year

At 30 November 2014

Net book value

At 30 November 2014

At 30 November 2013

76 www.synecticsplc.com

£000

858

519

1,377

1,336

947

£000

345

395

740

154

59

213

527

191

Financial Statements6 Investments in subsidiary undertakings

Cost

At 1 December 2013

Share-based payments capital contribution

At 30 November 2014

Provision for impairment as at 1 December 2013 and 30 November 2014

Net book value

At 30 November 2014

At 30 November 2013

£000

27,443

87

27,530

(8,182)

19,348

19,261

At 30 November 2014 the Company held the following direct shareholdings in its subsidiaries which had been active during the year:

Subsidiary and activity

Synectic Systems Group Limited
–  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

SSS Management Services Limited 
–  Security management and support services

Synectic Systems, Inc. 
–  Design and supply of video systems control products and integrated digital CCTV systems

Synectic Systems GmbH
–  German holding company

Details of the principal subsidiaries are shown on page 80.

% held at
Class of share incorporation 30 Nov 2014

Country of

Ordinary shares

UK

100%

Ordinary shares

Ordinary shares

UK

UK

100%

100%

Common stock

USA

100%

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 2013

Credit/(charge) to profit and loss

At 30 November 2014

The deferred taxation balances comprise:

Fixed asset timing differences

Other timing differences

2014
£000

–

26

80

2013
£000

5

15

83

28,896

29,385

317

28

101

33

29,347

29,622

2014
£000

2013
£000

15

11

26

2014
£000

16

10

26

18

(3)

15

2013
£000

5

10

15

Annual Report and Accounts 2014 Synectics plc

77

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther InformationNotes to the Company Financial Statements continued
For the year ended 30 November 2014

8 Creditors

Amounts falling due within one year

Bank overdrafts

Loans and borrowings (note 9)

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

The bank overdrafts are part of a Group offset arrangement.

9 Loans and borrowings

Current (note 8)

Non-current

Total

2014
£000

2013
£000

4,524

4,025

787

320

2

67

13

162

5,875

815

310

1

61

50

409

5,671

5,691

11,566

6,669

12,340

2014
£000

787

2,871

3,658

2013
£000

815

3,760

4,575

Loans and borrowings comprise the Company’s bank term loan and overdraft facilities. The terms and debt repayment details are as follows:

€3.7 million term loan facility

£1.5 million term loan facility

£8.0 million overdraft

Value drawn
000

€2,900

£1,350

£4,524

Maturity 

Interest
rate

Security

30 September 2017

EURIBOR +2.75% Group assets

26 November 2018

LIBOR +2.5%  Group assets

On demand

Base + 2.75% Group assets

During the year €0.8 million of the Euro and £150,000 of the Sterling bank loans respectively were repaid.

10 Provisions for liabilities and charges

At 1 December 2013

Utilised in year

Charge to profit and loss account

At 30 November 2014

Restructuring
£000

Property
£000

–

(36)

768

732

47

(16)

4

35

Total
£000

47

(52)

772

767

The above property provision is a dilapidation provision in relation to a property that the Company had previously leased. The lease 
terminated in the year. The restructuring provision relates to severance costs incurred in the year. Both provisions will be utilised 
in the year ending 30 November 2015.

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

2014

2013

Number

£000 

Number

£000 

17,794,439

3,559 17,694,891

3,539

Share capital increased by 99,548 shares in the year as a result of share options being exercised under the Quadnetics Group EMI Share 
Option Scheme (see note 24 of the Group financial statements).

78 www.synecticsplc.com

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

At 1 December 2013

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

At 30 November 2014

Called up
share
capital
£000

Share
premium
account
£000

3,539

15,765

Merger
reserve
£000

9,971

Other
reserves
£000

(1,516)

–

–

–

20

–

–

–

–

278

–

–

–

–

–

–

–

–

–

–

110

Retained
earnings
£000

5,168

1,484

(928)

127

–

–

Total
£000

32,927

1,484

(928)

127

298

110

3,559

16,043

9,971

(1,406)

5,851

34,018

Cumulative goodwill written off directly to the profit and loss account at 30 November 2014 was £593,000 (2013: £593,000). 

The consolidated result attributable to the shareholders of Synectics plc for the year includes a profit of £1,484,000 (2013: £1,266,000) 
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 £1.2 million at 30 November 2014 (2013: £1.1 million). 

14 Capital commitments
At 30 November 2014 capital commitments not provided for in these financial statements amounted to £nil (2013: £209,000).

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

2014

2013

Land and
buildings
£000 

Other
£000 

Total
£000 

Land and
buildings
£000 

Other
£000 

Total
£000 

–

26

–

26

6

65

–

71

6

91

–

97

2

–

25

27

5

66

–

71

7

66

25

98

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 amounted 
to £39,000 in the year (2013: £50,000).

In addition, the Company’s total expense for other defined contribution pension schemes during the year was £81,000 (2013: £171,000).

Annual Report and Accounts 2014 Synectics plc

79

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther 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

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

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

sss-support.co.uk

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

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

synecticsglobal.com

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

Moat Road 
Normanby Enterprise Park 
North Lincolnshire DN15 9BL 
Tel: +44 (0) 1652 688908

synecticsmobile.com

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

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

synecticsglobal.com

4180 Via Real, Suite A 
Carpinteria 
California 93013 
USA 
Tel: +1 888 755 6255

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

indanet.de

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

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

synecticsglobal.com

10 Ubi Crescent 
#06-80 Ubi Techpark (Lobby E) 
Singapore 408564 
Tel: +65 6749 6166

80 www.synecticsplc.com

Other InformationOther Information
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 Bank plc
125 Colmore Row
Birmingham B3 3SF

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

Auditor
KPMG LLP
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 

Annual Report and Accounts 2014 Synectics plc

81

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther Information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 19 May 2015 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 2014.

2.  To re-elect as a Director D Bate who, being eligible, submits himself for re-election.

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

4. 

 To reappoint KPMG LLP as auditor of the Company to hold office from the 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 5 and 8 will be proposed as Ordinary Resolutions 
and Resolutions 6 and 7 as Special Resolutions:

5. 

 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 £1,174,432 (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.

6.  That,

(1)   conditionally upon the passing of Resolution 5 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 5 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 or practical 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 £177,944, 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.

82 www.synecticsplc.com

 
 
 
 
 
  
 
7. 

 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 1,779,443 (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 2016 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.

8.  To approve the Remuneration Committee’s Report containing the Directors’ remuneration for the year ended 30 November 2014.

By Order of the Board

NC Poultney
Secretary

10 March 2015

Registered office 
Studley Point 
88 Birmingham Road, Studley 
Warwickshire B80 7AS 

Annual Report and Accounts 2014 Synectics plc

83

IntroductionStrategic ReviewPerformance ReviewGovernanceFinancial StatementsOther Information 
 
 
 
Other Information
Notice of Annual General Meeting continued

Notes
1. 

 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 17 May 2015 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.

2. 

3. 

4. 

 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.

84 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