Synergy Health interims

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)

Synergy announced their interims today and declared that revenue for the period increased by 12.0% to £192.1m, and underlying revenue, excluding currency effects, increased by 9.0%.

Adjusted operating profit increased by 9.8% to £29.2m and adjusted EPS was 33.54p up 8.5%; reported EPS was 28.27p up 15.3%. The interim dividend was increased by 8.5% to 8.57p.

By geographic regions - UK and Ireland revenue increased by 1.5% to £81.5m, on a constant currency basis revenue increased by 0.9%. Margins increased slightly by 0.2% to 20.2% and operating profit increased by 2.6% to £16.5m.

Europe & the Middle East revenue decreased by 1.1% to £59.5m, although on a constant currency basis decreased by 6.3%, due to the effect of weak prices in the Dutch linen market, reflecting predatory pricing by competitors. Operating margins were largely unchanged at 15.4% but operating profit declined by 1.7% to £9.1 million reflecting the lower revenue.

The Americas revenue increased by 87.6% to £41.4m, with revenue on a constant currency basis increasing by 81.4%. Operating profit increased 95.6% to £4.7m, with operating margins increasing by 0.4% to 11.2%.

Revenue for Asia and Africa increased by 7.6% to £9.7m and by 5.0% on a constant currency basis. Operating profit increased by 4.5% to £2.0m with margins decreasing by 0.6% to 20.7%.

 

It was good to see that despite some of the issues in Europe gross margins for the Group showed a slight improvement from 39.8% to 40.0%.  

  

Free cash flow (FCF) at £15.1m up by 17% on last year continues to be a strong feature of Synergy's business.  They do supply a split between maintenance capital expenditure and capital expenditure for expansion and on that basis FCF is £22.7m, similar to last year.  Net debt was reduced from £177.3m at the beginning of the year to £168.8m and gearing fell from 51.5% to 50%.

 

Management state that the Dutch linen service is depressing growth and there is a risk that this will continue to impact the Group in the second half of the year, although they currently anticipate that earnings for the year will be in line with the their expectations.

Still worth holding for the opportunities in the USA and Asia and the benefits of their strong FCF.