Sheffield tech group Servelec scrambles for new contract wins as profits fall by 29%

Servelec, the Sheffield-headquartered technology group, has seen a loss in revenue and profits after reporting its results for the six months ending 30 June 2016.

Servelec, which provides software, hardware and services to the UK Healthcare, Local Government, Oil & Gas, Nuclear, Power and Utilities sectors, has two operating divisions; Servelec Health & Social Care and Servelec Automation.

During the first six months of 2016, the Group’s revenue decreased by 5% to £28.4m, compared to 2015’s £30m. Underlying operating profit also fell 29% to £4.5m (H1 2015: £6.3m).

Order entry reduced by 15% to £37.4m (H1 2015 £44.1m), which Servelec said is a result of market conditions that impacted the half year in both areas of the business.

Cash generation from operations reduced to £1.6m (H1 2015: £11.2m), and the cash position moved to a net debt position of £13.0m (H1: 2015 cash balance of £5.7m) due to costs of acquisitions in the half year amounting to £20.9m.

Servelec, however, has secured a range of new contract wins after the year’s first six months.

The Group’s Health & Social Care business won an an additional three contracts for Mosaic with local authorities in the south-west of England and one in the Channel Islands as well as the previously announced win with Cambridgeshire County Council.

In addition, the Automation business has been awarded several new contracts, including a framework contract with National Grid, and a contract to upgrade a Westinghouse control system at Sizewell B.

Alan Stubbs, chief executive officer, commented: “The Board is positive about the long term prospects for Servelec Group.

“Swift action has been taken to strengthen our sales team and reduce implementation resources in Healthcare and to reallocate resources across Controls and Technologies whilst maintaining our ongoing focus on reducing costs. Coupled with recent contract wins we are confident in achieving the revised market expectations for the year.

“Large contract wins in H2, which will be executed during 2016, 2017 and beyond together with a growing pipeline of opportunities mean that we are on track to return to growth in 2017.

“The events which triggered the previous trading update are issues of timing. The long term structural demand for our technology, products and services remains. Our customers value our products, services and our people such that Servelec continues to be their first choice when opportunities come to market.”

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