SYNERGY HEALTHCARE PLC RNS Number : 9111D Synergy Health PLC 30 October 2015
('Synergy', the 'Company' or the 'Group')
Synergy Health plc (LSE: SYR), a leading global provider of specialist outsourced support services to health-related markets, announces its interim results for the six months ended 27 September 2015.
Six months
ended 28 September
2014
Revenue | £206.3m | £197.5m | + 4.4% |
Adjusted operating profit1 | £33.1m | £31.6m | + 5.0% |
Adjusted profit before tax1 | £30.2m | £28.4m | + 6.4% |
Profit before tax | £7.8m | £24.7m | - 68.3% |
Adjusted basic earnings per share1 | 42.41p | 36.42p | + 16.4% |
Dividend per share (interim) | 15.8p | - | |
Operating cash flow1 | £49.1m | £44.8m | +9.6% |
Net debt | £156.3m | £172.8m |
Reported revenue growth of 4.4%. Underlying revenue growth, excluding currency effects, of 6.3%
Underlying adjusted operating profit increased by 8.8% on a constant currency basis. Adjusted operating profit1 margin increased by 10 basis points to 16.1%
Operating cash flow increased by 9.6% to £49.1 million with cash conversion of 89%
Special dividend of 15.8p paid on 20 October, prior to completion of the combination with ST ERIS Corporation ('ST ERIS'). No interim dividend was paid in 2014 due to the combination of Synergy and ST ERIS
Costs of £18.0 million relating to the combination of Synergy and ST ERIS are included within non-recurring items and acquisition-related costs
Adjusted EBIT DA increased by 6.0% to £55.0 million
Operational HighlightsStrong growth in Applied Sterilisation Technologies ('AST ') with revenue up 10.3% on a constant currency basis
Healthcare Services ('HS') revenue grew by 7.5% on a constant currency basis
with contract wins of £35 million. Strong pipeline with the bid book growing by a third to £300 million
Healthcare Solutions ('HCS') revenue declined by 1.6% on a constant currency basis. Contract wins of £4 million in the first half of the year, and a further £8 million subsequent to the half year
Expected completion of the combination with ST ERIS on 2 November 2015
OutlookCombination with ST ERIS will support Synergy's growth initiative in HS, especially within the US, while the enlarged AST business will deliver global services to our shared customer base
1Adjusted operating profit, adjusted profit before tax and adjusted basic earnings per share shown above exclude amortisation of acquired intangibles and non-recurring items and acquisition-related costs, as shown in the Group's consolidated income statement and the accompanying notes. Operating cash flow excludes non-recurring items and acquisition- related costs.
It is my pleasure to report what is expected to be our last set of results as Synergy Health. We have enjoyed another strong period of growth reflecting the strength of our strategy and its implementation. Reported revenue was up 4.4% to £206.3 million (2014: £197.5 million) and up 6.3% on a constant currency basis.
During the first half of the year we have made a number of investments in new capacity across our Applied Sterilisation Technologies and HCS businesses. We have been successful at winning new contracts, totalling £47 million for HS and HCS, alongside good growth across the AST business.
Adjusted operating margin improved 10 basis points during the first half of the year. As a result adjusted operating profit increased by 5.0% to £33.1 million (2014: £31.6 million) and up 8.8% on a constant currency basis.
Adjusted basic EPS was up 16.4% to 42.41 pence (2014: 36.42 pence). Basic EPS was down 72.8% to 8.43 pence (2014: 31.02 pence) as a result of non-recurring costs incurred to complete the combination with ST ERIS.
Net debt at the end of the period decreased to £156.3 million. Operating cash flow was
£49.1 million (2014: £44.8 million), increasing above the growth in operating profits due to good control of working capital.
We are working to complete the combination of Synergy with ST ERIS on 2 November 2015 in line with the revised timetable of principal events set out in the Company's announcement relating to the Scheme Court Hearing, published on 26 October 2015.
DividendOn 1 October 2015 the Board declared a special dividend of 15.8 pence per share. T his was paid on 20 October 2015 to shareholders on the register as at 9 October 2015. As a result of the proposed combination with ST ERIS, the Board has decided not to pay a further interim dividend, which would only have reduced the cash element to be received by Synergy shareholders under the terms of the combination with ST ERIS by an equal amount.
Synergy is a leading provider of specialist outsourced support services to health-related markets and an international leader in the provision of outsourced sterilisation services for hospitals and medical device manufacturers. We operate in three distinct service lines:
Reported revenue for the period increased by 5.5% to £70.7 million (2014: £67.0 million) and up 10.3% on a constant currency basis. Adjusted operating profit was £25.2 million (2014:
£23.3 million), increasing 13.6% on a constant currency basis. Operating margin was marginally higher at 35.6%. During the traditionally quieter second quarter, two European facilities were closed for capacity upgrades. Both facilities will resume operations in the second half, alongside the opening of a new electron-beam facility in Petaluma, California. T he global register of opportunities now sits at £44 million, an increase of 33%, reflecting the investment we have made in our business development team and providing confidence for future growth.
Reported revenue grew by 11.0% to £92.1 million (2014: £83.0 million). Growth has been driven by the start of new contracts, partially offset by the continued rationalisation of low margin, non-core, product distribution services in the US. During the first half we won contracts with a total value of £35 million of new HS contracts. T he global bid book is now standing at £300 million. Adjusted operating profit was consistent with last year at £8.7 million (2014: £8.7 million), as the business invests in an expanded operations team in advance of new instrument processing contracts.
Reported revenue for the linen business was £43.4 million (2014: £47.5 million). Underlying revenue for the period before adverse currency effects was down 1.6% reflecting an improved situation. During and subsequent to the period the business won new contracts worth £12 million. A number of facilities across the network are being upgraded with new automated plant and machinery that has caused some short-term disruption but will yield future capacity and productivity improvements. Operating margins were marginally lower,
reducing from 7.3% to 6.8%. Adjusted operating profit was £3.0 million (2014: £3.5 million).
I would like to take this opportunity to thank our team for working so diligently over the last year whilst contending with the distraction of the ST ERIS transaction. I am very proud of the team that we have built at Synergy and the great work that has been done creating one of the world's leaders in sterilisation and infection control services. T he hard work and dedication of our employees has not only created a great business but has also had a significant impact on improving patient safety and reducing risks for our healthcare customers around the world.
Synergy has enjoyed 24 years of unbroken growth. T he combination with ST ERIS will further enhance the prospects for both Synergy and the enlarged Group. As I wrote last year, we now enter a new chapter in Synergy's evolution, where our access to ST ERIS'
U.S. sales teams and infrastructure will help to accelerate the hospital sterilisation outsourcing market, and the combined global AST network will be of significant value to our shared customer base. In the USA in particular there is unprecedented demand for our Hospital Sterilisation Services where we offer a compelling proposition to hospitals seeking to cost effectively improve patient safety and regulatory compliance.
I remain very excited about the opportunities at hand, and look forward to seeing continued growth of the combined organisation.
Richard Steeves
Group Chief Executive Officer 30 October 2015
Our business delivered a strong first half financial performance with reported revenue growing 4.4% to £206.3 million (2014: £197.5 million) and adjusted operating profit increasing by 5.0% to £33.1 million (2014: £31.6 million). Excluding currency effects, underlying revenue growth was 6.3% and adjusted operating profit grew by 8.8%. Adjusted operating margin increased by 10 basis points to 16.1%. Adjusted basic earnings per share grew by 16.4% to 42.41p.
Strong cash generation across the business resulted in cash generated from operations (before non-recurring items and acquisition-related costs) increasing by 9.6% to £49.1 million (2014: £44.8 million), reflecting a conversion of adjusted EBIT DA into operating cash flow of 89% (2014: 86%). Net debt decreased to £156.3 million from £161.1 million at the year end, representing a net debt to EBIT DA ratio of 1.44 times which is comfortably within our banking covenant of 3.25 times.
Adjusted operating returns on average capital employed, on an annualised basis, increased to 12.7% from 12.4% at the year end.
T he Group's income statement is summarised below.
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