Final Results

SYNERGY HEALTH PLC

("Synergy", the "Company" or the "Group")

PRELIMINARY RESULTS FOR THE TWELVE MONTHS ENDED 29 MARCH 2015

Synergy Health plc (LSE: SYR), a leading global provider of specialist outsourced support services to health-related markets, announces its preliminary results for the year ended 29 March 2015.

Financial Highlights

· Reported revenue growth of 7.5%. Underlying growth, excluding currency effects, of 10.8%

· Adjusted operating profit growth of 5.3%. Underlying growth, excluding currency effects, of 9.4%

· Adjusted operating profit margin decreased by 30 basis points to 15.8% (2014: 16.1%), with increased expenditure on research and development

· Operating cashflow increased 1.6% to £99.6 million (2014: £98.0 million), with cash conversion of 92% (2014: 95%)

· Net debt increased to £161.1 million (2014: £147.6 million)

· Return on average capital employed ('ROCE') increased to 12.4% (2014: 12.0%)

· As a result of the proposed combination with STERIS Corporation ('STERIS'), the Board chose not to pay an interim dividend, and is not proposing to pay a final dividend (2014: 14.20p). The Board will continue to keep its dividend policy under review.

Operational Highlights

· Solid growth in Applied Sterilisation Technologies ('AST') with revenues up 19.4% on a constant currency basis. New capacity is being added across Europe, Asia and the Americas

· Healthcare Services ('HS') grew by 12.2% on a constant currency basis, with new contracts and an excellent start to the Sterilmed contract

· Synergy's largest ever HS contract in New York will now open in the first quarter of 2016

· Healthcare Solutions ('HCS') revenues declined by just 1.5% on a constant currency basis, reflecting a stronger year with improved market stability

· Order book maintained at £1.6 billion; HS bid book stands at £225 million

· After the close of the financial year, we won a further two major new US HS contracts, with a combined contract value of £17 million

Outlook

The new financial year has started well, with the benefit of new capacity in our AST business, new contracts in HS and a more positive outlook in our HCS businesses. The Group is well placed to sustain its growth over the medium and long term.

Richard Steeves, Chief Executive of Synergy Health, said:

"We have made good progress this year on our objectives. In the near term we will continue to focus on investing to deliver our strategy. I am personally very excited about the opportunities at hand, and look forward to seeing the continued growth of this business"

1 Note: Adjusted operating profit, adjusted profit before tax and adjusted earnings per share exclude amortisation of acquired intangibles, non-recurring items and acquisition-related costs, as shown in the Group's consolidated income statement and the accompanying notes. Operating cash flow is before non-recurring items and acquisition-related costs.

Further information:

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CHAIRMAN'S STATEMENT

The past twelve months have seen continued success in implementing our strategy, with good underlying revenue and trading profit growth despite adverse currency translations. Whilst there has been some distraction as a result of the proposed combination with STERIS Corporation ('STERIS'), we have continued to expand our services to new and existing customers across our markets maintaining our operational excellence, and forging ahead with our long-term investment opportunities. We have seen particularly strong growth from our global Applied Sterilisation Technology & Laboratory Services ('AST') business and we have laid the groundwork for similar growth from our Healthcare Services ('HS') business.

Financial Results

Synergy has delivered solid full year growth in 2015, with reported revenue of £408.8 million (2014: £380.5 million), representing an increase of 7.5%. Underlying revenue growth, after removing the impact of currency movements, was 10.8%. Adjusted operating profit was £64.6 million (2014: £61.3 million), representing an increase of 5.3%. Underlying operating profit growth was 9.4%. Adjusted operating margin decreased to 15.8% (2014: 16.1%).

Recommended combination with STERIS

On 13 October 2014 STERIS announced a recommended combination of Synergy and STERIS. The combination of Synergy with STERIS has considerable strategic merit for both organisations, creating a leading outsourced sterilisation network to further improve the service we provide to our customers. This could potentially accelerate the growth of both companies, leveraging STERIS's capabilities and infrastructure to make Synergy's products and services more successful, and Synergy's customer base and markets to cross-sell existing and new STERIS products.

As announced on the 29 May 2015, Synergy and STERIS intend to contest the US Federal Trade Commission's decision to block the proposed transaction. Both companies believe that the combination is procompetitive and in the best interest of all constituents of the two companies, including customers.

Shareholder return

Driven by the growth in revenue and operating profit, adjusted basic earnings per share ('EPS') before intangibles, amortisation, non-recurring items and acquisition-related costs were 75.50p (2014: 70.59p), an increase of 7.0%. After taking account of amortisation, non-recurring items and acquisition-related costs, basic earnings per share were 56.90p (2014: 57.81p), a decrease of 1.6%.

As a result of the proposed combination with STERIS, the Board chose not to pay an interim dividend to shareholders (2014: 8.57p), and is not proposing to pay a final dividend to shareholders (2014 total dividend: 22.77p). The Board will continue to keep its dividend policy under review. Synergy and STERIS have agreed that Synergy would be allowed to declare a special dividend of 15.80 pence per share. The timing of payment of such a dividend would be determined by the Board at a future date.

Business development

During the year we worked to mobilise the two largest contracts Synergy has ever won. On 27 July 2014 we successfully began a multi-year contract with Sterilmed (part of Johnson & Johnson), reprocessing single use medical devices, and I am pleased to say that we have exceeded the customer's expectations. Throughout the year we also worked on the North Shore HS project, but as a result of property-related planning delays, full service commencement has been delayed to the first quarter of 2016. Our work with major partners, such as Sterilmed and North Shore, is resonating with key decision makers in large health organisations in the US and worldwide, and I am pleased to report that we have recently won two further large US HS contracts worth £17 million.

As a result of the negotiations with STERIS, the Group has had to redirect internal resources away from other acquisition activity and some potential transactions have been delayed or postponed. However, organic growth has been improving, supported by our new gamma facility in Marcoule, France, doubling capacity in Saxonburg, US, adding a new facility in San Francisco and investing in plant and process improvements throughout our global network.

Further details of these investments are disclosed in the Operating Review, and in the financial statements. Acquisitions remain a key part of our strategy, and with our strong financial position we will continue to consider targeted bolt-on acquisitions and to evaluate strategic acquisitions to increase shareholder value.

The Board

In September 2014 the Board was further strengthened with the appointment of Bruce Edwards. Bruce was formerly the global Chief Executive Officer for DHL's Supply Chain division, and a member of the Board of Management. Bruce is a non-executive director of Ashtead plc and Greif Inc., a NYSE-listed packaging and container manufacturer. Bruce has joined the Audit, Remuneration and Nomination Committees.

The Board places great emphasis on governance and is mindful of its responsibility to promote the long-term interests of the company for all our stakeholders. This is described in detail in the corporate Governance section of our Annual Report.

Corporate responsibility

We give high priority to compliance and ethics, as well as health, safety and the environment. Our core values of achievement, integrity, accountability and innovation are central to the relationships we have with all our stakeholders, and underpin how we treat our customers, our suppliers, our staff, and the wider communities in which we operate.

Details of the Group's approach to corporate and social responsibility are disclosed in the Strategic review.

Our people

Investing in the skills and engagement of all our employees is a critical part of sustaining the long-term vitality of the Group. The Board continues to be delighted with the efforts and commitment of staff across the Group. I would once again like to thank all our staff for their dedication. Synergy's well-earned reputation for operational excellence, and its ability to deliver on its commitments to customers, is testament to the effectiveness of those efforts and the shared values to which we all subscribe.

Outlook

Synergy remains well placed to maximise its core competitive strengths, strong operational capabilities and internationally respected brand. The business has a number of opportunities for earnings-enhancing investment, and the Board is confident that these will deliver strong growth in shareholder value over the coming years.

Since the initial listing of Synergy in the summer of 2001 the business has produced compound revenue growth in excess of 20% per annum and adjusted EPS growth of 15% per annum. The strategies that we have set out for the continued development of our AST and HS businesses in a global market create the opportunity for Synergy to grow further and to extend a track record of which we are very proud.

The proposed combination with STERIS would create an even stronger combined group that would help to support the implementation of our strategy as well as create new opportunities. We enter a new chapter in Synergy's evolution, where our access to the US sales teams and infrastructure of STERIS would help to accelerate the HS outsourcing market, and the combined comprehensive, global AST network would be of significant value to our shared customer base.

The new financial year has started well. Looking further out the Board is confident that our expertise, our investments in new capacity, and our close collaboration with our customers will all deliver sustained growth over the medium and long term.

Sir Duncan Nichol

Chairman

2 June 2015CHIEF EXECUTIVE'S REVIEW

Introduction

Synergy is a global leader in outsourced sterilisation services for medical device manufacturers, hospitals and other industries. Worldwide, we operate a complete range of sterilisation technologies including gamma, ethylene oxide ('EtO'), electron beam, ion beam, steam and plasma. Across the healthcare industry, Synergy also provides other niche outsourced services such as laboratory services (pathology, toxicology, microbiology and food and allergen testing) and healthcare linen services. All of our core businesses have the benefit of significant barriers to entry, stable long-term contracts and good cash generation.

Financial performance

It is my pleasure to report another strong period of growth in line with our objectives. Reported revenue (after currency effects) was up 7.5% to £408.8 million (2014: £380.5 million), with revenue at constant currency up 10.8% over the same period last year.

Our business development activities during the year have resulted in long-term contracts with new customers worth £13.6 million. Of this, we have won contracts worth £4.9 million in the US and £8.7 million in the UK and Europe. Across the Group our forward order book has been maintained at £1.6 billion, with contract wins and renewals in HS partially offset by price erosion on linen management contracts in our HCS business.

Strategic performance

Our objective is to grow revenue and earnings by approximately 15% per annum through a combination of organic and acquisitive growth. We aim to achieve this objective, despite historically low levels of inflation in most of our global markets, through the application of our proven expertise in delivering value to our customers. The total addressable market for our services is significant; the global AST market is estimated to be worth £1.5 billion per annum, and the US and UK HS markets are estimated to be worth £1.8 billion and £0.3 billion per annum respectively.

Progress towards our objective in our AST and HS businesses has been in line with expectations. AST is generating strong results globally via enhanced organic growth rates and network and technology expansions to meet the needs of our key global customer partnerships. HS continues to build towards more significant growth as we convey our refined value proposition to existing and potential customers and expand our bid book further.

To address our growth targets we communicated a four-step plan to build on our US-UK operating axis. Our key objectives and strategies are to:

a) Grow AST by 10-12% per annum by continuing to internationalise the network through organic growth and acquisitions, whilst differentiating our services through technology and our people.

In the 2014/2015 financial year, our AST business grew by 19.4% year on year, on a constant currency basis.

We continue to invest in organic growth opportunities to secure additional capacity to meet our customers' needs, across a range of technologies. Our growth projects include a new gamma sterilisation pallet plant in the UK and additional processing capacity in the Netherlands, additional EtO chambers in Ireland and the Czech Republic, and enhanced electron beams in Italy and the US.

Synergy has the most comprehensive network of AST facilities outside of the United States and these investments further strengthen the service we can offer to our key global medical device customers.

b) Grow HS by 10-20% per annum by focusing our outsourcing growth in the US and UK, whilst offering easily scalable HS technologies to a broader market.

In the 2014/2015 financial year, our HS business grew by 12.2% year on year, on a constant currency basis.

Synergy is the largest provider of HS outsourcing globally, and has the scale to differentiate itself from in-house solutions and commercial competitors by continuing to invest in new technology. We continue to develop our surgical instrument management software, SynergyTrak™, supported by advances in radio-frequency identification ('RFID') technologies, which together increase operating room utilisation, reduce patient risk, and enable our customers to optimise their instrument inventories.

In July 2014 we began a multi-year contract with Sterilmed (part of Johnson & Johnson), reprocessing single use medical devices. The contract was implemented well, albeit two months later than originally envisaged, and our expertise in this market has been well received by the customer. Our North Shore project will commence full service delivery in the first quarter of 2016.

Our business development teams are fully focused on using the efficiencies, cost-savings and risk reductions realised in our work with Sterilmed and North Shore, to further penetrate the US HS market. During the year we won £7.4 million of new customer business, and since the year end we have won two further HSS contracts worth £17 million. The bid book across both the UK and US businesses remains well in excess of £225 million per annum.

c) Expand our HCS business into service adjacencies to broaden their growth prospects and reduce our dependency on pure linen management.

Whilst the UK service has done well, increasing revenue and winning contracts worth over £5.1 million, the Dutch service saw a further contraction in their market as the Dutch health service restructures long-term care. The current strategy for this service is very much based on cost leadership, so that at any given price, we intend to make a higher margin than our competitors. Our focus in the new financial year is to restore revenue growth.

d) Expand Synergy's services into a third market with strong adjacencies to both the AST and HS businesses.

One of our key objectives is to deepen the relationships that we have with our customers by broadening our range of available services. Our expansion into the reprocessing of reusable devices for Sterilmed serves as one example of this. Similarly, we have a range of laboratory services that could be globally scaled to provide a wider range of services to our AST customers. Whilst this objective remains valid, our focus during the year has been on the STERIS combination and certain restrictions during this period have prevented us from moving this objective forward.

Recommended Combination with STERIS

On 13 October 2014 STERIS Corporation ('STERIS') announced a recommended combination of Synergy and STERIS. Whilst the combination of Synergy with STERIS has considerable strategic merit for both organisations, the preparatory work for the Federal Trade Commission has absorbed a considerable amount of management time during the year. We have worked hard to minimise the impact of these corporate activities on the Group but inevitably they have absorbed management time.

Leadership

At the start of this year the Board decided to restructure the Group, replacing our regional structure with a service line structure, and introducing a Chief Operating Officer ('COO') role to oversee day-to-day operations, leaving the CEO to focus on strategy and long term planning. This structure has enabled us to implement our strategy effectively and to deliver global organic growth whilst maintaining our strong reputation for operational excellence and delivering a service that generates outstanding value for our customers.

Financial strength

Synergy is a robust business with an internationally diversified business providing value-added services underpinned by long-term contracts. Cash generation remains strong, with adjusted EBITDA increasing by £5.3 million to £108.6 million (2014: £103.3 million), before non-recurring items. Net debt increased to £161.1 million, marginally increasing gearing to 1.6 times EBITDA (2014: 1.53 times), well below our internal ceiling of net debt versus EBITDA of 2.5 times.

Synergy team

I would like to take this opportunity to recognise the great work that has been done by the Synergy team this year as we continue to build a world leader in sterilisation and infection control services. We have a strong set of core values (achievement, integrity, accountability and innovation), which not only sustain a great and growing business, but also have a significant impact on improving patient safety and reducing risks for our healthcare customers around the world.

Outlook

The strategies that we have set out for the continued development of our AST and HS businesses in a global market create an opportunity for Synergy to grow further, and to extend a track record of which we are very proud.

We have made good progress this year on our objectives. In the near term we will continue to focus on investing to deliver our strategy. I am personally very excited about the opportunities at hand, and look forward to seeing the continued growth of this business.

Dr Richard Steeves

Group Chief Executive Officer

2 June 2015

BUSINESS LINE REVIEW 

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:

· Applied Sterilisation Technologies ('AST'), providing gamma, electron beam, ion beam and ethylene oxide contract sterilisation services to medical device manufacturers and related industries, as well as a range of technical laboratory services;

· Healthcare Services ('HS'), providing a range of outsourced sterilisation services to hospital systems in the US, UK, Italy, Netherlands and China, reusable sterile gowns and drapes in the US ('RSS'), and an international products business based in the UK; and

· Healthcare Solutions ('HCS'), providing healthcare linen rental services in the UK and Netherlands.

Applied Sterilisation Technologies

Reported revenue for the period was up 14.2% to £137.5 million (2014: £120.4 million) and up 19.4% on a constant currency basis. Underlying organic revenue for the period was up 10.5%. Volume growth has been a key driver of stronger operating margins of 34.4%, filling new capacity added in the year and recovering volumes in Costa Rica. The margin improvements led to a 15.2% increase in adjusted operating profit to £47.3 million (2014: £41.0 million).

Over the past twelve months the AST business has focused on investing to secure future growth, in parallel with initiatives to improve operational efficiency and productivity.

Our new gamma facility in Marcoule, France is filling capacity as planned. We have invested in greater volumes of cobalt isotopes in our plants in Ireland, France, and the Netherlands to enhance productive capacity, allowing our gamma irradiation sites to process customer product at a faster speed. Our ethylene oxide ('EtO') plants in Thorne, UK, and Venlo, the Netherlands, have delivered strong revenue growth year on year, and we expect to be able to build on this in the next twelve months with new EtO capacity in the Czech Republic. Construction of a new pallet gamma irradiator in Bradford, UK, is well advanced and is scheduled to complete in the first quarter of 2016.

In the Americas, we have seen significant organic growth of close to 16%. We are doubling capacity at our Saxonburg facility, adding a new facility in San Francisco and investing in plant and process innovation along with new productivity initiatives to increase the throughput of our existing electron beams. 

Our gamma irradiation businesses in Thailand and Malaysia and our EtO business in China, have all experienced strong growth. This growth is mainly derived from existing business; this has in places been complemented by volumes won from customers relocating their manufacturing from Europe. In Rawang, Malaysia, our plant has fully recovered from the incident which interrupted processing during April 2014. All damaged equipment has been replaced under the Group's insurance arrangements, and all local permits and licences renewed. Customer processing recommenced on 4 May 2015.

Following the acquisition of Nordion, a supplier of cobalt isotopes, by Sterigenics Inc, we have worked to diversify our cobalt supply and have already received a number of deliveries of cobalt from alternative suppliers. 

AST's strategy continues to focus resources on selected key global customer partnerships. We work with these customers to deliver a superior, value-added service that is differentiated from our competitors, and as a result these customers have contributed a disproportionate share of our 19.4% revenue growth.

With continual month-on-month revenue growth, we have confidence that we can maintain our organic growth revenue targets of 10-12% per annum. Our AST global bid book now sits at £33 million per annum, reflecting the investments we have made in our business development team, and giving us confidence in the strong future growth we expect from our AST business.

Healthcare Services

Reported revenue grew by 10.8% to £175.8 million (2014: £158.7 million) and was up 12.2% at constant currency. Growth has been driven by the start of new contracts, partially offset by a re-weighting of the US HS business as it moves away from the low margin reusable surgical solutions business, into the higher margin instrument business.

Operating profit grew by 9.4% to £18.4 million (2014: £16.8 million), with underlying growth of 10.0%. During the year we won £7.4 million of new customer business and a further £17 million per annum has been won since the year end.

One of our objectives for the HS business is to develop scalable technologies for the HS market. In the second half of FY15, we launched a new initiative in the UK to reduce operating costs with the use of our latest SynergyTrakTM software and RFID technology. The initial reception has been positive, generating new leads and opportunities worth more than £1.5 million per annum at this early stage. Now that the result of the UK general election has removed uncertainty, we expect to see an increase in outsourcing. In the US we have won a number of new Accuset (instrument rental and sterilisation) contracts, with particular customer enthusiasm about the potential to access RFID technologies in processing surgical instruments and trays.

In our UK-based healthcare products business, revenue and operating profits are both ahead of target. International sales are growing well, particularly in the Middle East. We are capitalising on the coalescing of our products business with the rest of our HS business, starting with the integration of RFID into our surgical products. The use of RFID tracking devices on consumables in the operating room will contribute to improved patient safety.

On 27 July 2014 we began a multi-year contract with Sterilmed (part of Johnson & Johnson), reprocessing single use medical devices. Synergy is responsible for receiving, production and distribution of products. The contract has been implemented well, and Synergy's processing expertise in this market segment has been well received.

Our North Shore project was delayed slightly as a result of the protracted planning process in New York. We now expect to commence full service delivery in the first quarter of 2016.

The efficiencies, cost-savings and risk reductions offered to our customers through our work with major partners such as Sterilmed and North Shore, continue to generate interest in the US healthcare market. Our business development team is managing a large number of outsourcing proposals which we are confident will convert to full outsourcing contracts in due course. At the end of the year our HS bid book was valued at £225 million. Evidence for the growth potential in this market is shown by the signing of two major US CSSD outsourcing contracts subsequent to the year end, worth a combined £17 million in revenue.

Capitalising on our strong bid book and maintaining our focus on operational excellence will both be key to delivering our objective of growing Healthcare Services by 10-20% per annum, and to continuing to develop scalable HS solutions for a broader market.

Healthcare Solutions

Reported revenue for our Healthcare Solutions linen business was £95.5 million (2014: £101.4 million), a decrease of just 1.5% at constant currency, reflecting increasing stability in the Netherlands business and a strong performance from the UK business. Adjusted operating profit was £6.6 million (2014: £9.4 million), with the lower margins attributed to the Dutch market.

Linen rental is an essential service that is typically outsourced by healthcare providers on long-term contracts. Synergy has a strong track record developing services that offer superior quality whilst providing best value for money rather than the lowest price. In recent years healthcare providers have come under enormous financial pressure however, and this has required Synergy to innovate with new products and processes. Cost leadership is the dominant strategy, and generally has been well executed, creating a sustainable competitive advantage.

The two geographic markets have historically operated separately but under Synergy's new management structure, there has been an opportunity to share best practice and extract further cost synergies in purchasing. These savings will be wide ranging and when combined with sharing best practice, will provide more support for the maintenance of margins.

The UK linen business operates from large-scale facilities in Derby, Sheffield and Dunstable, and primarily focuses on acute hospital linen services. The business had a good year, with strong growth and sustained margins, and several new NHS contracts won. The market does have available opportunities for first-time outsourcing, with around a dozen NHS linen facilities still in operation. Given the typical small scale of these facilities, we would expect to see a greater scrutiny of these services during 2016 and a move towards outsourcing in time.

Our Netherlands linen business operates from eight medium sized facilities that are increasingly focusing on acute hospital services, together with fifteen smaller processing facilities for patient clothing. The business is adapting to changes caused by the Dutch health service's restructuring of national long-term care arrangements and the competitive price war that started three years ago. Over the last three years we have slipped from a market leadership position to the second largest supplier in the Netherlands. To address this strategic challenge, we have refreshed the leadership and focused heavily on productivity, with the delivery of 'lean' processes across the business to improve efficiency both in production and in back-office functions. In certain key facilities we have also been upgrading our automation to industry leading standards.

It is our ambition to regain our leadership position in the Dutch market, using the innovation and knowhow from the combined linen business and indeed from the wider Group, supporting our objective to deliver an improvement in margin.

FINANCE DIRECTOR'S REPORT

The business performed well in 2015, although currency effects negatively impacted our reported results. Reported revenue grew 7.5% to £408.8 million (2014: £380.5 million), and adjusted operating profit increased by 5.3% to £64.6 million (2014: £61.3 million). Excluding currency effects, underlying revenue growth was 10.8%, with organic growth of 6.6%. Adjusted operating profit, at constant currency, grew by 9.4%, £2.5 million higher than reported. Adjusted operating margin reduced by 30 basis points to 15.8% with increased investment in R&D. Adjusted basic earnings per share grew by 7.0% to 75.50p.

Cash generated from operations (before non-recurring items and acquisition-related costs) increased by 1.6% to £99.6 million, with an increase in working capital to support the start-up of new contracts and particularly Sterilmed. This reflected a conversion of adjusted EBITDA into operating cash flow of 92%. The acquisition of Bioster S.p.A. contributed to the increase in net debt to £161.1 million from £147.6 million at the year end, representing a net debt to EBITDA ratio (for banking covenant purposes) of 1.60 times, comfortably within our banking covenant of 3.25 times.

Transaction costs relating to the STERIS acquisition up to 29 March 2015 contributed to non-recurring and acquisition-related costs of £5.8 million.

Adjusted operating returns on average capital employed, on an annualised basis, increased to 12.4% (2014: 12.0%).

Adjusted operating profit is stated before amortisation of acquired intangibles, non-recurring items and acquisition-related costs.

1. Income statement

Synergy's income statement is summarised below:

Table 1: Income statement

1 The effective tax rate is calculated excluding amortisation on acquired intangibles, non-recurring items and acquisition-related costs

1.1 Revenue

Reported revenue of £408.8 million (2014: £380.5 million) grew by 7.5%, representing an underlying growth rate, excluding currency effects, of 10.8% over the previous year. The movement in average currency exchange rates over the last year (notably a strengthening of Sterling against the Euro) has depressed reported revenue by £12.8 million.

Underlying revenue, which excludes currency effects, grew by 19.4% in AST (10.5% organic) and 12.2% in HS (8.7% organic), with a decline of 1.5% in Healthcare Solutions.

1.2 Gross profit

Gross profit increased by 12.4% to £175.1 million (2014: £155.7 million), representing a gross profit margin of 42.8%, an increase of 190 basis points over the previous year.

1.3 Adjusted operating profit

Adjusted operating profit increased by 5.3% to £64.6 million (2014: £61.3 million), representing an adjusted operating profit margin of 15.8%, a reduction of 30 basis points against last year. Currency effects have reduced reported adjusted operating profit by £2.5 million.

1.4 Non-recurring items

Net non-recurring items and acquisition-related costs during the period were £5.8 million, of which £4.5 million were acquisition-related costs, primarily with respect to the STERIS acquisition. Other costs relate to operational and restructuring costs, partially offset by some one-off credits relating to property disposals and a cessation gain on a component of the Group's retirement benefit obligations.

Synergy has contracted with advisors to obtain financial advice in connection with the proposed combination with STERIS. Transaction fees up to a maximum of £7.6 million could be payable, contingent upon certain performance milestones. At the balance sheet date, these criteria have yet to be met. In preparing these accounts, the Directors have given due consideration to the likelihood of these performance criteria being met.

1.5 Net finance costs

The Group's net finance costs totalled £6.6 million (2014: £6.6 million), remaining broadly flat over the period.

1.6 Adjusted profit before tax

Adjusted profit before tax was £58.0 million (2014: £54.7 million), an increase of 6.0%. The adjusted profit before tax margin fell to 14.2% (2014: 14.4%).

1.7 Amortisation of acquired intangibles

Amortisation of acquired intangibles relates to intangible assets identified on acquisitions, being the value of customer relationships and brands.

1.8 Tax

The tax charge (excluding tax on non-recurring items and on the amortisation of acquired intangibles) of £13.3 million (2014: £12.9 million) represents an effective tax rate of 23.0% (2014: 23.6%). The decrease in the effective tax rate over the comparative period primarily reflects the reduction in the UK corporation tax rate.

1.9 Earnings per share ('EPS')

Adjusted basic EPS and adjusted diluted EPS, after adjusting for amortisation of intangibles and non-recurring items, increased by 7.0% and 7.4% respectively. After amortisation of acquired intangibles, non-recurring items and acquisition related costs, basic and diluted EPS decreased by 1.6% and 1.2% respectively.

Undiluted weighted average shares have increased from 58.7 million to 59.0 million.

As a result of the proposed combination with STERIS, the Board chose not to pay an interim dividend to shareholders (2014: 8.57p), and is not proposing to pay a final dividend to shareholders (2014 total dividend: 22.77p). The Board will continue to keep its dividend policy under review.

3. Cash flow

The Group cash flow is summarised below.

Table 2: Cash flow

Note: Adjusted EBITDA is earnings before interest, tax, depreciation, intangible amortisation and other non-cash items

3.1 Cash generated from operations

Cash generated from operations (before non-recurring items and acquisition-related costs) in the year increased by 1.6% to £99.6 million (2014: £98.0 million), reflecting a conversion of EBITDA into operating cash flow of 92% (2014: 95%). Free cash flow increased by 4.3% to £57.7 million (2014: £55.3 million).

3.2 Interest

Net interest paid was £5.4 million (2014: £5.2 million). The difference from last year was primarily due to timing differences on interest payments.

3.3 Tax

Tax paid was £10.4 million (2014: £10.2 million), reflecting a slight reduction in the effective tax rate on a higher tax base.

3.4 Net expenditure on tangible and intangible assets

The Group has increased its investment in new capacity during the course of the year, as well as continuing to upgrade and maintain its existing infrastructure. Total net capital additions of £61.7 million (2014: £40.3 million) were made during the year.

We analyse capital expenditure between 'maintenance' and 'investment' expenditure. Maintenance capital expenditure is the capital required to sustain the revenue-generating capacity of the Group. Investment capital expenditure enhances the capacity or efficiency of the Group's capital base.

The items of necessary ongoing capital expenditure are cobalt-60, the radiation source for AST gamma sterilisation plants, textiles for the linen business, and reusable surgical products. Total maintenance capital expenditure was £22.8 million (2014: £24.3 million), of which £8.2 million was spent on cobalt, £11.0 million on textiles and £3.6 million on reusable surgical products.

Total investment capital expenditure was £38.9 million (2014: £16.0 million). Total expenditure in AST was £17.6 million, including £7.0 million on the freehold purchase on our Costa Rica e-beam facility, £2.7 million on the rebuild of the damaged Rawang facility in Malaysia, £0.9 million on a second e-beam in Saxonburg, US and £0.6 million on a new EtO chamber in the Czech Republic. We also commenced work on our new pallet irradiator in Bradford, UK, a warehouse expansion in Radeberg, Germany and a combined heat and power unit in Tullamore, Ireland. Capital invested in three new HS facilities in China and costs associated with our new North Shore contract in the US contributed to total HS expenditure of £7.0 million. Investment in a new line in our Dunstable linen facility, along with refresh of plant and machinery, resulted in total expenditure in the HCS linen business of £5.1 million. The remaining balance of £9.2 million was spent on cobalt to increase our average cobalt base, supporting new work in Marcoule, France and Thailand; linen investment to support new contracts; and investment in a new IT data centre for the Group.

Total intangible additions were £1.7 million, relating primarily to investment on our SynergyTrakTM development.

3.5 Financing

The movement in financing reflects a withdrawal of debt on our multi-currency revolving credit facilities, to fund the Bioster acquisition.

4. Acquisitions

On 15 May 2014, the Group acquired the entire issued share capital of Bioster S.p.A. and associated companies ('Bioster'), a company operating ethylene oxide and electron beam sterilisation facilities in Italy, Slovakia and the Czech Republic for a consideration of £10.6 million (net of cash required). On 3 November 2014, the Group acquired 70% of the issued share capital of IDtek Track-and-Trace SA ('IDtek'), a company incorporated in Switzerland for a consideration of £2.7 million.

5. Net debt and funding

5.1 Net debt

Net debt increased in the period from £147.6 million to £161.1 million. The increase in net debt is primarily a result of the financing for acquisitions of £18.8 million (including acquired debt) and investment in tangible and intangible assets of £38.9 million, partially offset by the Group's free cash generation in the period of £57.7 million:

Table 3: Movement in net debt

5.2 Funding

The Group has in place a five-year unsecured multi-currency revolving facilities agreement ('the Agreement'), which was signed on 26 July 2011. The Agreement has been entered into with a group of 7 banks and comprises a Sterling denominated multi-currency facility of £105 million and a Euro denominated multi-currency facility of €130 million. On 1 June 2012 the Group signed a two-year Euro denominated multi-currency facility of €18 million with the same covenants as in the July 2011 Agreement. This facility expired on 31 May 2014.

On 13 September 2012, the Group issued a bilateral private placement note of €20.6 million. At that time the Group also put in place an uncommitted shelf facility with the same lender, allowing it to draw up to $48.5 million over a 2.5-year period. The financial covenants are broadly similar to those in the Agreement. The remaining shelf facility was utilised during September 2013 when two further notes were issued, one for £10.0 million, and a second note for €25.1 million.

The Group remains comfortably within the financial covenants set out in the Agreement.

The debt is split between Sterling, Euros and US Dollars with the currency mix and level of fixed interest debt within each currency as follows:

Table 4: Composition of gross debt as at 29 March 2015

The Euro denominated debt, which is predominantly held in the UK, is held to hedge the Group's Euro denominated net assets (excluding goodwill and intangibles) of €176.5 million. The US Dollar denominated debt is held as a hedge of the Group's US Dollar denominated net assets (excluding goodwill and intangibles) of $189.6 million. As at 29 March 2015, 37% of the total debt was held at fixed rates of interest.

6. Pensions

The Group operates three final salary schemes in the UK, one in the Netherlands, two in Germany, and one in Switzerland. The Group also operates several defined contribution schemes.

In the UK the Group is required to maintain a final salary pension scheme for employees who have transferred from the NHS, which has to be acceptable to the Government Actuary's Department. With the exception of NHS transferees, the Group's defined benefit schemes are closed to new entrants and future accruals; active members have been transferred to deferred status and invited to join the Group's UK defined contribution scheme.

At 29 March 2015, the net liability arising from our defined benefit scheme obligations was £20.3 million (2014: £16.9 million) on a pension scheme asset base of £70.5 million. An increase in the deficit from the previous year end is primarily due to a fall in the discount rate that is only partially mitigated by a reduction in the inflation rate. The net effect is an increase in liabilities that is not offset by a corresponding rise in the asset base.

Table 5: Defined benefit pension schemes

Gavin Hill

Group Finance Director

2 June 2015

Consolidated income statement

For the period ended 29 March 2015

Consolidated statement of comprehensive income

For the period ended 29 March 2015

Consolidated statement of financial position

At 29 March 2015

Consolidated cash flow statement

For the period ended 29 March 2015

Statement of changes in equity

For the period ended 29 March 2015

Statement of changes in equity, continued

The cash flow hedging reserve debit of £498,000 (2014: £664,000 debit and 2013: £1,385,000 debit) represents the fair value gains and losses on hedging arrangements that are effective and qualify for cash flow hedge accounting. The brought forward reserve of £664,000 debit unwound during the year and revaluation of existing instruments at the balance sheet date gave rise to the closing reserve. The movement on cash flow hedges credit of £166,000 includes a £41,000 debit relating to deferred taxation.

The share-based payment credit of £2,555,000 (2014: £2,129,000) includes a debit of £2,000 (2014: debit £357,000) relating to deferred taxation and a credit of £344,000 (2014: credit £1,374,000) relating to current taxation.

1 General information

Synergy Health plc ('the Company') and its subsidiaries (together 'the Group') deliver a range of specialist outsourced services to healthcare providers and other customers concerned with health management. The Company is registered in the United Kingdom under company registration number 3355631 and its registered office is Ground Floor Stella, Windmill Hill Business Park, Whitehill Way, Swindon, Wilts, SN5 6NX.

The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) made up to the nearest weekend to 31 March each year. The current accounting period is 52 weeks in length (2014: 52 weeks in length).

The financial statements are rounded to the nearest thousand pounds and have been prepared and approved by the Directors in accordance with International Financial Reporting Standards as adopted for use in the EU ('IFRS').

Statutory accounts for the year ended 29 March 2015 will be filed with the Registrar of Companies following the Company's Annual General Meeting. Statutory accounts for the year ended 30 March 2014 have been delivered to the Registrar of Companies. The auditors have reported on those accounts and their report was unqualified and did not contain statements under S498(2) or S498(3) of the Companies Act 2006.

2 Summary of significant accounting policies

Basis of preparation

Other than as set out below, the financial information for the period to 29 March 2015 has been prepared on the basis of the accounting policies set out in the Group's latest annual financial statements for the period ended 30 March 2014. These accounting policies are drawn up in accordance with the recognition and measurement requirements of International Financial Reporting Standards (IFRS) as adopted for use in the European Union.

Going concern

In adopting the going concern basis for preparing the financial statements the Directors have considered the Group's business activities as set out in the strategic review and regional review, the financial position of the Group and its cash flows and borrowing requirements as set out in the Finance Director's review, and the Group's principal risks and uncertainties. Based on the Group's cash flow forecasts and projections, the Board is satisfied that the Group will be able to operate within the level of its facilities for the foreseeable future. For this reason the Group continues to adopt the going concern basis in preparing its consolidated financial statements.

Critical accounting estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. Where estimates and associated assumptions are made they are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Key areas of judgement, and estimate uncertainty, are set out below.

+ Impairment tests have been undertaken with respect to goodwill using commercial judgement and a number of assumptions and estimates have been made to support their carrying amounts. Sensitivity analysis as at 29 March 2015 has indicated that no reasonable foreseeable change in the key assumptions used in the impairment model will result in a significant impairment charge being recorded in

Critical accounting estimates and judgements continued

the financial statements. In addition, a more detailed review has been carried out on certain Group assets, focusing on whether these assets required impairment. Following the review, no impairment was judged to be required.

+ The designation of certain items of income and of cost as 'non-recurring' in nature, and their separate disclosure as such in the primary statements of the Group's consolidated accounts. The recognition of certain contingent transaction costs and their assessed likelihood to materialise, as measured against known delivery milestones.

+ In relation to the Group's property, plant and equipment, useful economic lives and residual values of assets have been established using historical experience and an assessment of the nature of the assets involved.

+ In relation to the Group's cobalt provision, costs of future disposal are based on contractual arrangements with third parties and latest disposal cost estimates.

+ The Group's cobalt depreciation policy is based on the actual physical decay of the cobalt-60 isotope.

+ In relation to the Group's defined benefit pension schemes, actuarial assumptions are established using relevant market benchmark data and with the advice of external qualified actuaries. Pension deficit valuations are most sensitive to changes in the underlying discount rate and inflation assumptions.

+ Customer-related intangibles that are acquired as part of an acquisition are valued based on the forecast discounted cash flows arising from these customers taking account of historically observed customer attrition rates.

The Group operates in a number of countries, all of which have their own tax legislation. Deferred tax assets and liabilities are recognised at the current tax rate which may not be the tax rate at which they unwind. The Group has available tax losses, some of which have been recognised and some of which have not, based upon management's judgement of the ability of the Group to utilise those losses.

3 Segmental information

The Group is organised into three operating segments: Applied Sterilisation Technologies and Laboratory Services ('AST'), Healthcare Services ('HS'), and Healthcare Solutions ('HCS'). This represents a change from the reportable segments adopted in previous years, following a restructuring of the Group's internal organisation on 1 April 2014. The comparative information disclosed below for previous periods has been restated.

Information on these segments is reported to the chief operating decision maker ('CODM') for the purposes of resource allocation and assessment of performance. The chief operating decision maker has been identified as the Board of Directors. The CODM monitors the performance of the operating segments based on adjusted operating profit, being operating profit excluding the impact of amortisation on acquired intangibles and non-recurring items. Segment information is presented below.

3 Segmental information continued

The table below reconciles the total segment profit above, to the Group's operating profit and profit before tax:

IFRS 8 'Operating segments' requires the Group to disclose information about the extent of its reliance on its major customers. The Group has no single customer making up more than 10% of total revenues.

The table below analyses the Group's revenue from external customers, and non-current assets other than financial instruments, deferred taxation and rights under insurance, by geography:

4 Profit before tax

Profit before tax has been arrived at after charging:

Non-recurring items of £5,812,000 (2014: £3,254,000) have been charged in arriving at operating profit. The table and accompanying notes provide further details:

Net non-recurring items and acquisition-related costs during the period were £5.8 million. Acquisition-related professional fees and other costs amounted to £4.5 million. The most significant component of this was £2.9 million relating to the proposed combination with STERIS. Operational and restructuring costs of £2.5 million primarily relate to the settlement of prior period claims and facility closure costs in the Dutch Linen business.

4 Profit before tax continued

In the prior year, non-recurring items of £3.3 million were charged in arriving at operating profit. The table below and accompanying notes provide further details:

Net non-recurring items and acquisition-related costs during the period were £3.3 million. £1.4 million related to acquisition transaction fees. The most significant component of this cost was £0.6 million (net of the reimbursement of costs under an exclusivity agreement) relating to an ultimately unsuccessful acquisition. Within the Netherlands, we have incurred restructuring costs of £1.8 million on the closure of two laundries and two wash centres, along with the conversion of a laundry to a wash centre.

A more detailed analysis of auditors' remuneration is provided below:

The principal non-audit service was for transaction-related advisory fees, and amounted to £398,000 for the period.

5 Staff costs

The average number of monthly employees employed by the Group during the year, including Executive Directors, was as follows:

Their aggregate remuneration comprised:

Details of the Directors' aggregate emoluments can be found in the Annual Report on Remuneration.

6 Finance income

7 Finance costs

8 Taxation

UK corporation tax is calculated at 21% (2014: 23%) of the estimated assessable profit for the year. Taxation for overseas operations is calculated at the local prevailing rates. The UK corporation tax rate reduced from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015). These changes were substantively enacted on 2 July 2013. This will reduce the Company's future current tax charge accordingly. The deferred tax liability at 29 March 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

The charge for the year can be reconciled to the profit before tax per the income statement as follows:

9 Dividends

As a result of the proposed combination with STERIS, the Board chose not to pay an interim dividend, and is not proposing to pay a final dividend (2014: 14.20p). The Board will continue to keep its dividend policy under review.

10 Earnings per share

11 Property, plant and equipment

During the period ended 29 March 2015, the Group purchased tangible fixed assets with a total cost of approximately £62.1million (2014: £37.7 million).

12 Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. A number of the Group's subsidiaries have minority shareholders, and where the Group has transactions in the year, or outstanding balances receivable or payable with these parties, these are classified as related party transactions and shown in the table below.

12 Related party transactions continued

The remuneration of key personnel (including Directors) of Synergy Health plc was:

Key personnel (including Directors) comprise the Executive and Non-Executive Directors, and four senior executives (2014: three). The four senior executives comprise two executives directly responsible for two of the Group's operating regions, plus the Group HR Director and the Group Company Secretary.

13 a) Acquisition of subsidiary - IDtek

On 3 November 2014, the Group acquired 70% of the issued share capital of IDtek Track-and-Trace SA ('IDtek'), a company incorporated in Switzerland, gaining control of the company and its subsidiaries.

IDtek provides RFID-led solutions to a wide range of industries including energy and automotive sectors, and it is our intention to utilise its expertise and intellectual property to develop new services for the healthcare market.

The provisional fair value of the net assets acquired and the related consideration were as follows:

The goodwill arising on the acquisition of the business is attributable to the synergies generated following the integration of IDtek into the Group, and has been allocated to the HS segment.

In accordance with IFRS 3 (revised) 'Business combinations', management have made adjustments to the book value of net assets acquired to arrive at the fair values disclosed above.

Total transaction costs of £97,000 were incurred in the acquisition and were expensed within non-recurring items and acquisition-related costs.

Summary of cash flows: