Synertec Corporation (ASX:SOP) FY19 results & outlook


by Rachael Jones

Synertec Corporation Limited (ASX:SOP) Managing Director, Michael Carroll & CFO, David Harris talk FY19 results, market conditions and the outlook for specialist engineering and compliance services.

Rachael Jones: Hello. I'm Rachael Jones: Jones for the Finance News Network. Joining me today in Melbourne from Synertec (ASX:SOP) is CEO Michael Carroll and CFO David Harris. Michael, David, welcome to the network.

Michael Carroll: Thank you.

David Harris: Thank you.

Rachael Jones: So Michael, first up, could you start by giving me an introduction to the company?

Michael Carroll: We formed the company 23 years ago, and two years ago we listed on the ASX. We're specialist engineers and solution providers to industries which are highly complex, highly regulated. We have about 55 people and we’ve done a lot of work internationally and locally, as well.

Rachael Jones: Thank you. Now before we talk about your results, could you tell me the key drivers for growth?

Michael Carroll: Sure. Our growth is coming from, we targeted specific industries about four or five years ago, and those industries are rail, LNG, water, and just generally large infrastructure projects which have a very large spend in the next five to 10 years. We've developed strategies to pick out niche markets within those industries and develop IP so we can deliver extra value to our clients.

Rachael Jones: Now, David, over to you, let's talk about your financial year 2019 results. What were the highlights?

David Harris: The highlights were definitely since listing only two years ago, 111 per cent revenue growth in FY 19. This really demonstrated our maturity as a business and in our systems and platforms to be able to deliver some large projects simultaneously, and also some great project diversification. So, we delivered projects in LNG, critical infrastructure, pharmaceutical, and shipping terminals.

On top of that, we also returned to positive earnings in FY19, and also some strong cash flows, net-positive cash flows. And also, I should mention that we have no debt, and we haven't been in a position where we've needed to raise capital thus far.

Rachael Jones: And what can you tell me about the highlights for operations?

David Harris: Yeah, I think also I mentioned that we returned to positive earnings during FY '19, and this is despite continuing to heavily invest in corporate development opportunities. We've formed some key strategic alliances and looked at some M&A opportunities, and we've also continued to develop very heavily in business development, both locally and internationally. And I think what we're most excited about operationally is we're seeing pull-through from a lot of these major projects that we've been delivering over the last two to three years, into our clients, either further into that project onto other projects, or we're now getting invited into their internal engineering teams.

Rachael Jones: Thanks, David. Now, let's talk about strategy and share price. How is the strategy?

Michael Carroll: Our strategy comprises looking at the target markets that we've identified and overlaying the geographies, the various geographies around the world, and in particular, the Asian geography; China, Japan. And you'll notice that our board has several, or two, in particular, Asian experts on it, and they will be helping us really fine-tune our strategy into the future.

David Harris: And in terms of the share price, we listed in August 2017 at four cents a share, and we've had steady share price growth to around five or five point three cents as we sit today. In December last year, we did a cleanup of our register through a small holding sale facility, and we now have about 520 shareholders on the register. And as we've gotten better at refining our communication to market, and a clear communication of our strategy, we've seen a pickup in trading volumes, particularly in the last six months.

Rachael Jones: And to the last question now, Michael, where would you like to see the company in one year's time?

Michael Carroll: One year's time, I'd like to think that we've got some project announcements which are in our target markets, and they're global. I'd also like to see that our alliances are starting to introduce us to opportunities which we would not have otherwise had access to.

Rachael Jones: Michael Carroll and David Harris. Thanks so much for the update today.

Michael Carroll: Thank you.

David Harris: Thanks, Rachael.