Chairman's statement
Syan Holdings Limited
CHAIRMAN’S STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2006
In the year ended 31 December 2006 we achieved a record level of turnover and EBITA
(Earnings before interest, taxation and amortisation) and we have a solid platform for
further growth.
Financial
The results for the year ended 31 December 2006 have been reported using the acquisition
accounting method as the basis of consolidation, as detailed in the accompanying notes to
the financial statements.
In 2006 the group achieved a profit after tax for the financial year of £1,102,857
(2005: £413,921). Turnover increased by 9.16% on 2005 to £41,969,991. Gross profit increased
by 8.18% on 2005 to £9,459,429 but the gross profit margin fell to 22.54% from 22.74% in 2005.
Administrative expenses increased by £74,620 on 2005 to £7,731,843. EBITA increased by
£747,711 on 2005 to £2,798,516. Profit on ordinary activities before taxation increased by
£654,721 on 2005 to £1,746,487 after an amortisation of goodwill charge of £1,070,930 (2005:
£964,220).
The acquisition of P R Systems Limited in May 2006 had a positive impact upon 2006,
increasing turnover by £2,185,508 and increasing EBITA by £321,886.
A continuing strong focus on working capital management also led to improved cash generation
in the year. Cash at bank and in hand as at 31 December 2006 was £4,313,932.
The Board is recommending the payment of an ordinary dividend of £200,507 in April 2007.
Acquisitions
In May 2006 Syan Limited acquired one of its long-term sales partners, P R Systems Limited.
This acquisition was consistent with our high-growth strategy of consolidating specialist IT
reselling and managed services companies. The integration of P R Systems Limited is still ongoing
without the loss of any major customer or key personnel. Following this acquisition we now have a
sales office at Knutsford, Cheshire.
Review of business
The results indicate that overall trading conditions were positive, but with varying trends
within each division.
- Our IT reselling activities had a strong performance but our managed services activities
achieved its operating profit budget by strict cost control and only won 6 new customer contracts.
- We relocated from our leasehold offices and data centre in High Wycombe, Buckinghamshire,
to our freehold office and principal data centre in Telford, Shropshire. This relocation should
save us some £250,000 per annum. Our registered office and headquarters is now at Telford, Shropshire.
- There was a complete change in our Accounts Department personnel following the relocation from
High Wycombe to Telford and we also changed our accounting system.
- We completed the building and commissioning of our second data centre at Newport, Shropshire
that is approximately 5.6 miles from our main data centre at Telford. This project was not without its
challenges including the principal building contractor going into liquidation towards the end of this
project. In 2006 we spent £1,106,634 on capital expenditure yet our depreciation charge was only
£545,142.
- Lakeview Inc. served notice of termination of our non-exclusive distribution agreement of their
MIMIX, high-availability software product, as they wanted to support their UK customers direct.
Lakeview Inc. have appointed us as a non-exclusive reseller of the high-availability software products
but at reduced rates of commission. This change of status will have an adverse impact upon profitability
from 2007 onwards but it is not material to the Group.
- Syan Technology Limited achieved a record profit in 2006 but did not achieve its EBITA budget
principally because of a delay in a major services contract scheduled for Q4/2006.
- As at 31 December 2006 headcount had dropped to 206 (2005: 214) as we focused on efficiency and
utilisation improvements.
Outlook for 2007
In 2007 we are expecting the challenging market conditions to continue. We will continue to look at
improving efficiency and utilisation, reducing wastage and containing costs.
We believe there is still much scope for cross selling and up selling into our enlarged customer base
for our portfolio of IT solutions. The group s strategic alliance partners and excellent customer referrals
continued to be the principal source of new contracts in 2006. We expect this trend to continue in 2007.
Recruitment of additional alliance partners will continue to be a focus for 2007.
The group s excellent facilities, staff, portfolio of IT solutions and methodologies are continuing to
attract interest in our markets. We will continue to invest in such assets.
We are continually seeking and evaluating potential acquisitions, and will pursue those that support our
focused growth strategy and return on capital targets.
We are committed to further developing our Energy and Environmental Policy during 2007 in order to minimise
our environmental impact.
The group remains very much a knowledge-based, people business. It is essential the group continue to
attract, motivate and retain the right staff. I would like to thank all of our staff for their tremendous
contribution in 2006.
Jeff Trendell
Chairman
2 March 2007
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