Synergy Health IMS

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 issued their first quarter IMS today and, like many companies that have a large proportion of their business overseas (in SYR's case ~60%), are suffering from currency headwinds.  Underlying sales, excluding currency effects, was in line with the Board's expectations with revenue at £99.1m, 2.6% above last year.  Reported revenue declined by 1.1% to £95.6m.

Applied Sterilisation Technologies had a very good quarter and showed underlying growth of +13.6%, despite a fire in June in their Malaysian gamma facility.  Hospital Sterilisation Services declined by -1.3% and Healthcare Solutions declined by -4.2%.

Reported operating margin declined by 0.2% (0.1% on an underlying basis) as a result of currency effects and increased investment in research & development.  The company had highlighted the likely reduction in operating margins at the time of their prelims, commented on here. 

Management's outlook for the year remains positive due to progress with new contracts and sentiment in their core service lines and markets, although they are facing obvious currency headwinds.

At the time of the prelims I stated "...I have held SYR for 9 years now and they have been a good growth stock, with their share price over that time growing by over 14% compound per annum.  Today at 1311p they look fully priced at 16.8x this year's forecast EPS of 77.9p.  Those forecasts are for 10.4% growth for this year and just 5.8% to 82.4p in 2016.  There may be better prospects elsewhere, so I may part company with my longest held growth stock..."  I still hold the stock, but since then the share price has moved up to 1360p and the consensus forecast (probably due to the effects of currency headwinds) has declined to 76.7p and so on a P/E of 17.7 I may look again at either reducing my holding or exiting completely.