Delivers a range of specialist outsourced services to healthcare providers and other clients concerned with health management. Such as hospital sterilisation services; applied sterilisation technologies for single-use medical devices; reusable surgical solutions for daily delivery of sterile reusable gowns and towels; clinical pathology, toxicology and microbiological services; chemical and microbiological analysis; linen management services for healthcare facilities and product solutions designed for infection prevention and control, patient hygiene, surgical procedures and wound care. I have a holding in my growth portfolio (epic code: SYR)
Announced today results for the year ended 31 March 2013. In brief reported revenue was £361.2m up by 15.8%; excluding currency effects the growth was 18.5%, but if we exclude the impact of acquisitions sales increased by just 1.0%. Gross profit margin was 39.0% and showed a decrease of 90 basis points over the previous year, due to the dilution effect of the US based SRI acquisition in June last year. This acquisition was loss making on purchase and the management have turned the business around within a very short time frame, so that by the year-end was achieving operating margins of almost 10%.
Expansion within the US, came at the right time for Synergy, as its UK and Dutch markets struggled for growth. Over a third of turnover now emanates from outside the two original markets of UK and Holland. This is likely to increase over the next few years as the US operation grows, although the USA is the largest healthcare market in the world outsourcing of sterilisation is in its infancy, plus their plans for further expansion in China, the fastest growing healthcare market in the world.
Synergy have for the past 3 years shown good cash flow generation and this year was no exception. Their operating cash flow was up 26% on last year and free cash flow at £34.4m was 137% above last year, although last year did have a large spend on capital expenditure for increased capacity within the business (£31m compared to £24m this year).
Adjusted EPS was 65.45p up 10.5% and dividend for the full year at 20.7p increased by 15%. The Board state that they are confident that they will enjoy another successful year of growth in line with their objectives.
Synergy trade on an historic P/E of 16.9 and a price to book value (P/BV) of just 1.9, their ROE is low though at about 10%. This low ROE is mainly due to the investment in capital required in Europe, in the US the hospitals own the facilities, so this ratio may improve in the future.
Over the past 5 years Synergy has produced an owners' earnings growth (growth in book value and dividends) of 10.1% pa and a free cash flow return of 10.9% pa. I have owned Synergy for 8 years and capital growth and dividends received (not reinvested) have returned a compound 15.4% pa. They are operating in a key sector of the health care market, with decontamination and sterilisation being a topical niche.
One of the world’s largest retailers. I have a holding in my income portfolio (epic code: TSCO)
Issued an IMS today, announcing that group sales grew 2.7% (excluding petrol), although LFL sales were down by 2.2%; in the UK sales were down 0.9% on a LFL basis and International sales down 4.6%. Conditions outside of the UK remain challenging, but they state that they have broadly maintained their performance from the fourth quarter of last year.
This is just at the start of Clarke's multi-year strategy, although some progress is being made, it is too early to tell whether he is on the right track. Tesco seemed to have suffered more than Sainsbury's and Waitrose from the horse meat problems; which probably underlines the perception in customer's minds of Tesco's obsession with cost-cutting at the expense of quality.
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