As a result of its outstanding performance during the last three months of the year, the Synergon Group managed to achieve its original profit target in the face of the unfavourable market trends in 2005. A profit after taxation of HUF 502 million was generated at a net sales level of HUF 19.6 billion, 3 percent lower than during the previous year. 37 percent of the Company's annual sales were generated during the fourth quarter, which, apart from the seasonal effect typical of the industry, was due to the fact that, as expected, government institutions finally utilised part of their reserved budget open until the end of the year.

Therefore, in the sector-by-sector breakdown of sales, there was no significant difference compared to the proportions during the previous year. However, the proportion of one-off hardware and software purchases increased at the charge of complex, long-term government administration projects. In 2005, the powerful investment demand of financial institutions represented a significant potential for Synergon, which it exploited successfully. The steady demand for the upgrading of data and information services and the expansion of alternative service-providers on the telecom market ensured an increase of the share of the sector in the income structure. The liberalisation of the Croatian telecommunication market added further potential during the year.

Synergon and SAO continued to generate the highest income, between them accounting for 65 percent of the Group's overall sales. SAO performed outstandingly throughout the year, achieving results exceeding both those of the base period and the target through high-contribution system support and operation activities. The sales of the Business Solutions Division also exceeded the target, due primarily to the Division's performance at the end of the year, far surpassing previous expectations. While network communication activities, accounting for the major part of Synergon's sales, delivered somewhat lower than expected, this setback was diminished, in terms of contribution, by the higher service content of sales. The other business units (Hardware, SAP and Retail) also performed excellently during the fourth quarter, which, however, was insufficient to fully make up for the shortfalls generated during the previous quarters.

Last year, an extremely advantageous change followed the reorganisations of 2004, i.e. the net sales of the Croatian operating company were 50 percent higher than during the previous year. Fibex's sales also continued to grow dynamically; as a result of the 45-percent growth, the company was able to increase its market share on its existing markets while, at the same time, it successfully entered new market segments, too. In order to ensure efficient long-term operation, considerable reorganisations were carried out at Infinity, which resulted in the loss of market share at certain areas; this was the main reason for the app. 20-percent drop in sales. Following the program, which also included significant cost-efficiency measures, the operation of the Czech operating company grew steady by the middle of the year and, while the company recognised a loss for 2005 as a whole, it started to generate profit during the second half of the year.

One of the most significant strategic moves of last year was the regional system integrator agreement concluded with the Chinese Huawei Co. Ltd. Under our cooperation with one of the most dynamically growing manufacturers of telecommunication equipment and network solutions, we have begun to exploit regional business potentials in both the telecom and the manufacturing sectors. With the increasing awareness of the Huawei brand name in Hungary, Synergon envisages a dynamic increase of the proportion of the products of the Chinese partner to be incorporated into its network solutions during 2006.

The Synergon Group plans both organic and acquisitional expansion for 2006. Major steps have been taken toward these aims during the last year, however, the conditions of successful completition of the planned acqusitions in Romania and/or Slovakia will expectedly improve this year. Several factors encourage organic expansion, including infrastructure development for data communication on the telecommunication market, the increasing need for network building and upgrade of enterprise resource planning systems of business associations (especially of medium sized enterprises), the further expansion of the financial sector enjoying constant excess liquidity, and the increased ratio of utilized EU funds. Based on these considerations the Synergon Group expects a two-digit percentage increase in price incomes for 2006, not including acquisition, which will clearly effect the amount of expected profits for this year.

Financial results of Synergon Information Systems plc. for the 12-month period January 1st - December 31st 2005 (.pdf - 254 KB)
Unaudited, consolidated data collated in accordance with the International Financial Reporting Standards