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Servelec Group plc - Year End Trading Update

Servelec, the UK-based technology and software group, announces a scheduled Trading Update for the full year to 31 December 2016. Trading is in line with the Board’s expectations. 

  • In Healthcare, the strategy of pursuing opportunities in other parts of the UK outside of North New and North Refresh is bearing fruit, combined with a reduction in overhead
  • In Social Care, the market remains strong and our strategy of making acquisitions to strengthen our product portfolio further is delivering additional contract wins as planned
  • In Automation, Servelec Controls has been awarded two long anticipated contracts from Centrica which will deliver opex reduction via a step towards remote operations
  • In Technologies, framework contracts and product sales are starting to come through and global RTU sales are building as anticipated along with sales of other products through these channels

 

Health & Social Care

The Board expects Servelec Health & Social Care division will announce results in line with our expectations. The measures taken in our Health & Social Care business following the June update to reduce operational headcount whilst strengthening sales resources have contributed to the delivery of the full year results.

Following a positive first half, Servelec continued its high win rate of opportunities in the Social Care market and has been contracted for its Mosaic product by Bournemouth County Council, States of Jersey, Dorset County Council and South Gloucestershire County Council. These wins together with a growing pipeline of opportunities provide our Social Care business with good potential to grow in 2017.

The Health & Social Care business has also benefitted from a strong performance from Synergy, a business acquired in April 2016. It was particularly pleasing that Synergy won contracts from Kent County Council and Warwickshire County Council for multiple modules.

The NHS Scotland contract win in 2016 for the provision of a RiO system covering Child Health across the country together with the two contracts for our Flow product with Hywel Dda University Health Board and Betsi Cadwaladr University Health Board provide a positive start to 2017 for our Healthcare business.  Healthcare has strong visibility of the available sales opportunities for RiO, Flow and Oceano for 2017 / 2018 including those in the Republic of Ireland, Northern Ireland, Scotland and Wales.

As the markets across Health and Social Care continue to come together Servelec is aligning product development and service delivery across its Health & Social Care business. Product development is in line with the market trends focusing on mobile working and portal usage to improve staff effectiveness and efficiency

 

Automation

Both businesses within Servelec Automation have benefitted from contract wins and the Board expects the division to announce results for 2016 in line with our expectations.

The second of a series of long-anticipated contracts for Servelec Controls has now been confirmed by Centrica which provides a step towards full remote operations for a gas platform in the north east Irish Sea by deploying a specially developed Servelec Controls system. Pent-up demand in the UK water industry is unlocking, albeit slowly, with the award of several framework contracts under AMP6 to Servelec Technologies.

Having won a single-vendor position on three Framework Lots with Anglian Water at the end of 2016, Servelec Technologies was also confirmed by Affinity Water as preferred bidder to replace their regional telemetry system and upgrade over 350 Remote Telemetry Units. Outside the water industry, the company won a contract to upgrade Heathrow Airport’s SCADA system and provide support throughout a five-year contract. Global order entry and the pipeline of sales prospects via the company’s global distribution channel, which trades into overseas markets, have increased on prior year with significant orders received from various territories including China and the Middle East. The scope presented by the global distribution channel of Servelec Technologies offers a considerable opportunity for our business over the next five years.

In our 2016 interim results, we noted that a £2.6m receivable, relating to revenue taken in 2015, on the Combined Heat & Power Plant in the Mardin region of Turkey was still outstanding. Although this receivable remains unpaid we have seen tangible evidence that the customer’s project refinancing is progressing.  Our end client is, we believe, nearing the end of financial negotiations with QNB Finansbank to release the next tranche of funding.  These negotiations have taken considerable time, due in part to the acquisition of Finansbank by QNB (Qatar National Bank) which completed 16 June 2016 and the subsequent review of all banking arrangements. The site has been in shutdown since June but has recently reopened and the Board remains positive that the situation will be resolved and outstanding monies collected although it is unlikely that we will receive payment before the announcement of our results in March. The Board is closely monitoring the situation and confirms that no contribution has been booked in 2016 nor included in our internal forecasts for 2017.

Cash generation has again been positive and net debt at 31 December 2016 was £9.6m (at the half year net debt was £13m) and is expected to reduce further during 2017.

 

Alan Stubbs, CEO of Servelec Group plc, commented,                                                 
“We are pleased to confirm that the full year results will be in line with the Board’s revised expectations. During 2016 the business has made significant strides forward in terms of product development, acquisitions, market development and staff development. The Board is pleased with the positive signs apparent across our businesses and whilst challenges persist in some of our markets we are confident in the future outlook for the Group.”

Servelec Group plc will release its preliminary results for the full year ended 31 December 2016 on 7 March 2017.

Category: investor, trading update, Servelec Group, Financial reporting, financial results, year end, Full Year