Half Yearly Report

SYNERGY HEALTH PLC

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

INTERIM RESULTS FOR THE SIX MONTHS ENDED 26 SEPTEMBER 2010

Synergy Health plc (LSE: SYR), a leading provider of specialist outsourced support services to health related markets in the UK and Ireland, Europe and the Middle East, Asia and Africa, announces its interim results for the six months ended 26 September 2010.

Financial Highlights

·; Underlying revenues up 2.5% to £133.7 million excluding non-core sales and currency effects

·; Adjusted* operating profit margin up 143 basis points to 14.9%

·; EBITDA up 5.6% to £37.4 million

·; Net debt reduced to £117.5 million from £133.4 million at 28 March 2010

·; Forward order book increased 5% to £890 million

Operational Highlights

·; Good underlying growth in all regions supported by strong performance in sterilisation: +7%; and decontamination: +16%

·; Preferred bidder on a £4 million p.a. UK decontamination bid; Leicester and Sheffield contracts remain on track to commence operations in February and May respectively

·; Growth in margins supported by restructuring activities and winding down of non-core business

·; Decontamination facility in China servicing more than 20 hospitals and healthcare institutions

·; Dunstable fire insurance claim decided in favour of Synergy

·; China operating unit won the "Most Promising New Business" award from the British Chamber of Commerce, Shanghai

Outlook

·; Reorganisation of management structure and investment in commercial teams has helped to increase bid pipeline

·; Continued progress in lifting margins and delivering strong free cash flow

·; Demand for our services is partially driven by increasing regulatory requirements

·; Challenging economic environment expected to encourage further outsourcing from the NHS given the very clear efficiency benefits that can be obtained

Richard Steeves, Chief Executive of Synergy Health plc, said:

"Synergy responded to the economic downturn in 2009 by focusing on improving margins and cash generation. We reorganised the management structure and have started to increase investment in our commercial teams. As a result, the first half has seen continued excellent margin progression and an increased bid pipeline.

"Our focus now is to convert the bid pipeline into further contract wins in the fourth quarter and into the next financial year. We start the second half of the year on course to meet the Board's expectations."

* Note: Adjusted operating profit, adjusted profit before tax and adjusted earnings per share shown above are before amortisation of acquired intangibles as shown in the Group's consolidated income statement and the accompanying notes.

Further information:

There will be a meeting for analysts at 10am today, 4 November 2010, at the offices of Financial Dynamics. For further information please contact Juliet Edwards on +44 (0)207 269 7125 or at [email protected].

For further information:

CHAIRMAN'S STATEMENT

Results

The first half of this year has progressed in line with the Board's expectations, reflecting improvements in our gross margins last year, increased focus on our core businesses and the winding down of non-core and lower margin businesses. As a result we have seen improved operating margins and good underlying growth in our core businesses, but with a marginal decline in reported revenue overall.

Underlying revenues (before currency impacts and the winding down of non-core activities) were up 2.5% to £133.7 million (2009: £130.4 million). Reported revenues were down 2.8% to £138.7 million (2009: £142.7 million). Gross margins improved by 2.1% to 37.8% (2009: 35.7%) reflecting the operating improvements made in the second half of 2009/10. Some of the gross margin improvements have been reinvested in the new regional structure and in our talent management and graduate programmes. After these investments, adjusted operating profit increased by 7.6% to £20.6 million (2009: £19.2 million) with a margin increase of 143 basis points to 14.9% (2009: 13.4%).

Operating cash flow during the period was £38.4 million (2009: £41.3 million), a decrease of 7.0% from the same period a year ago, when we experienced a working capital correction. Despite the construction of new decontamination facilities, tight control has been kept over capital expenditure and as a result net debt has reduced to £117.5 million from £133.4 million at 28 March 2010. At the same time our operating return on average capital employed during the period increased to 10.6%.

Basic adjusted EPS was 25.14p (2009: 20.63p), a rise of 21.9%.

Since the start of this calendar year the Group has increased its investment in its commercial teams, which together with the reorganisation of the business into regions, is resulting in an improvement in the bidding pipeline. During the first half of the year £4 million p.a. of the starting bid book has been put into service and a further £4 million p.a. has reached preferred bidder ("PB") stage. As a result the forward order book has increased to £890 million (£850 million 28 Mar 2010). Meanwhile the bid pipeline has increased to around £25 million p.a. and £10 million p.a. for global decontamination and sterilisation services respectively, boding well for a return to stronger revenue growth next year. Whilst there is some risk that new contracts will be awarded later in the second half than originally planned, the impact on earnings in this financial year will be minimal.

I am also pleased to report that we succeeded in the court action over our insurance claim arising from the fire at Dunstable in 2007, and we expect to fully recover our losses.

Dividend

The Board has increased the interim dividend per share by 22.4% to 6.00p (2009: 4.90p), in line with Synergy's policy to increase dividends in line with underlying earnings. The dividend will be paid on 10 December 2010 to shareholders on the register on 12 November 2010.

Strategy and business review

Synergy embarked upon a strategy to become a global leader in applied sterilisation services within the healthcare market, providing outsourced sterilisation services for medical device manufacturers and providing decontamination services for hospitals and other healthcare providers. In addition the Group has been looking to extend its expertise in infection control with a range of products between hand hygiene, patient hygiene and other specialist products. Since the start of this year the Group has been reinvesting in its commercial development activities to lift growth after a period in which the business focused more heavily on cash generation and margin improvement. Much progress has been made in the last six months setting up the Company for a stronger period of growth.

Reviewing our business globally we are pleased to report that our sterilisation business has grown 7% on a like for like basis, with growth much stronger in the second quarter. Our strategy is to grow both organically and through acquisition to become the second largest global provider of these services. Our decontamination services have grown at 16%, which is lower than trend as a result of delaying two significant projects last year (to improve cash flow), that will now come on stream in 2011. Our strategy is to continue to expand our service model internationally, initially in Europe and China, but with an eye on other international markets. The bid pipeline is very strong and will enable organic growth rates to be lifted back up to the 20% trend rate, whilst at the same time we believe opportunities will arise to acquire assets in Europe, to accelerate the development of our network.

Our linen businesses are operating well, with improved margins but at the sacrifice of revenue growth. We believe our strategy of focusing on margins is fundamentally correct given the market conditions.

Our infection control strategy continues to be under review by the new management team. The business needs to improve its competitive positioning particularly in what are challenging markets for product based businesses.

Lastly, it is intended that the Group will seek in time to develop new health related markets. However, for the immediate future the Group will remain focused on its existing markets, ensuring that we meet our core internationalisation objectives.

The demand for our services is partially driven by increasing regulatory requirements in the UK, Europe and Asia, where governments are seeking to raise standards to reduce rates of hospital acquired infections and to improve patient safety. The current economic problems in Europe and the UK are having an impact on publicly funded healthcare markets, creating increased cost awareness. This more challenging economic environment has improved the prospects for our outsourcing businesses where we have very active bid pipelines, but it has adversely affected our product based business.

At the start of this financial year the Board took the decision to reorganise the senior leadership into three geographic regions to provide greater strategic oversight and to improve the commercial responsiveness. We recognised the importance of improving the effectiveness of implementing our internationalisation strategy. We are pleased to report that the new structure is proving to be effective, improving the bid pipeline as well as identifying a number of potential bolt-on acquisition targets. We remain very enthusiastic about our growth opportunities in all three regions and are confident in our strategy.

Regions

United Kingdom and Ireland

The UK and Ireland region is emerging strongly from a period of change and reorganisation that was prompted by the economic troubles of 2008/09. The Board took the decision to fundamentally restructure the UK in particular, exiting marginally profitable activities and focusing more heavily on the growth of the decontamination and sterilisation businesses. The principal changes have been the partial closure of the Harwell sterilisation facility and exiting gemstone processing, winding down a Scottish distribution business and exiting continence and other lower value added products. As a result of these changes, reported revenues of £79.3 million for the period declined by 5.1% (2009: 83.6 million) but more importantly, operating profits improved by 13.1% to £12.7 million, and operating margins increased 260 bps to 16.1% (2009: 13.5%). Underlying sales excluding the effects of currency and non-core businesses were up 2.4%.

The core businesses in the region are performing well. The sterilisation business grew at 7.7% on a constant currency, like for like basis. Much of the growth has been achieved in Ireland where the new electron beam facility is operating well. In addition, the country has seen the benefit of new contracts that have been secured by the new global commercial team established in June this year. We expect to see a slightly faster growth rate in the second half of the year as additional new contracts move from validation into routine processing.

The decontamination business grew at a healthy 15.4%, which is slightly slower than trend as a result of delaying the start of the Leicester and Sheffield facilities with combined revenues of around £8 million p.a. During the first half of the year around £4 million p.a. of work that was at PB is now in service and a further £4 million p.a. has moved from the bid pipeline into PB with an expectation of reaching financial close in November. Although somewhat slower than expected, the Irish decontamination tender is now moving forward again although it is difficult to predict the outcome given the uncertainties in the Irish economy. Overall we expect to see annual growth in this service return to trend rates of around 20% as three major projects collectively worth £12 million p.a. come on stream between February 2011 and September 2011.

Revenues in the linen business have remained flat as the team continues to concentrate on maintaining margins rather than increasing market share. The strategy is proving successful and contributing to the overall improvement in the margins for the region. We are seeing the NHS prepare for further outsourcing, motivated by the very clear efficiency benefits that can be obtained. We expect tenders and contracts to be awarded towards the end of the fourth quarter.

Our small pathology and occupational health service saw revenues begin to grow again, albeit at a very modest rate. Around half of the business is derived from occupational testing, which has been affected by the poor economic conditions in the UK economy.

Lastly, our products based infection control business has continued to witness considerable margin pressure and price deflation as a result of the poor economic conditions in the UK. The devaluation of Sterling against the US dollar has resulted in cost increases for all competitors, but rather than lifting prices, the multitude of competitors are chasing market share and driving down margins. As a result of these conditions the business is not making an adequate contribution to the Group and it is therefore necessary to review the strategy for the business. Our expectation is that these conditions will remain for the foreseeable future and accordingly we are lowering our cost base in the UK to respond to market conditions, whilst investing in our international operations where we have a currency advantage.

The UK and Ireland region remains very important to Synergy and whilst the overall market for health related activities has an element of uncertainty around it, the drive to generate efficiencies whilst also attaining regulatory compliance, will continue to encourage potential customers to outsource.

Europe and the Middle East

The Europe and Middle East region is stable with a sterilisation business largely operating at capacity and a mature Dutch healthcare linen business. Revenues for the region were down slightly at £53.8 million (2009: £54.8 million), but up a modest 1.6% before currency effects. Operating profits were up 5.1% to £9.0 million (2009: £8.6 million) with margins up 110 bps to 16.7% (2009: 15.6%).

The sterilisation service saw underlying revenue growth of 6.9%, with the main uplift coming from filling our Dutch ethylene oxide ("EtO") facility in Venlo following the forced closure of a local competitor for breaching environmental regulations. The region is reviewing its growth prospects for the medium term and as previously announced, will be expanding capacity in Venlo as well as building the new gamma facility in Marcoule, France. We will also now focus on expanding our EtO capacity to meet the demand for high quality and reliable services.

The decontamination business operating in Holland and Belgium remained stable. The team are now actively bidding on new services in the German market, where we aim to establish a presence on the back of our existing sterilisation expertise. We will also seek to acquire loss making assets from our competitors should the opportunity arise.

Our Dutch linen business is mature, operating in a consolidated market where all of the services have been outsourced. Overall, underlying revenues have remained stable, reflecting the measures taken by Dutch hospitals to control costs and improve efficiencies.

We are very committed to developing the European and Middle Eastern markets and see a clear opportunity to further develop our sterilisation, decontamination and products businesses in Europe. The reorganisation of the senior management team is now settled and we are progressing developments on a number of fronts.

Asia and Africa

The region and particularly Asia, is seen as an important growth engine for Synergy in the medium term. Whilst there are challenges expanding from a relatively small base, we remain very enthusiastic about the market potential. Reported revenues were up 29.9% to £5.6 million (2009: £4.3 million). Underlying revenues before exchange rate gains were up 15.7%, with good growth across the region. Adjusted operating profits were stable, with operating margins drawn down by the start-up costs in China as well as the establishment of new infrastructure in Hong Kong to support the region's expansion.

After a difficult period last year in which growth in the medical device market collapsed, sterilisation activity levels have picked up from the start of this financial year and have remained at a steady pace, albeit lower than experienced prior to the global economic downturn. Much effort is being focused on drawing new medical device customers into our Chinese sterilisation facility, which is now operating well and will be a source of revenue growth for the next few years. We have plans to expand our sterilisation presence in the region through a combination of further new facilities and selective acquisitions.

Our new decontamination facility in Suzhou, China, which was opened ahead of the introduction of new decontamination regulations in December 2009, is now processing surgical instrumentation for more than 20 hospitals and healthcare institutions. This new facility, which is one of the best that Synergy has built anywhere in the world, is the first outsourced and fully accredited facility in China. This has been recognised by the British Chamber of Commerce, Shanghai, who awarded us the British Business Awards 2010 "Most Promising New Business". The service has been well received by both the local healthcare community and the Jiangsu Ministry of Health. We have plans to expand our network within the Province and the Ministry of Health has been helpful in guiding Synergy to cities that are regarded as higher priority.

Outlook

The Board is pleased with the progress that has been made during the first half of the year. As expected, margins have progressed further building on the improvement that was achieved last year. From the start of this year our focus has been on building the bid book and ultimately lifting revenue growth and we expect to see further improvements during the fourth quarter of this year and into the next financial year. With the exception of the products based infection control business, we start the second half of the year in a good position and remain on course overall to meet the Board's expectations.

Finance Review

Overview

Our business delivered a first half financial performance in line with the Board's expectations with reported revenue falling by 2.8% and adjusted operating profit increasing by 7.6%. Our results were impacted by currency and non-core business: excluding these, underlying revenue growth was 2.5% and adjusted operating profit growth 11.2%. Our adjusted operating margin increased by 143 basis points. Adjusted operating profit and adjusted profit before tax are stated before amortisation of acquired intangibles.

Operating cash flow decreased by 7.0% to £38.4 million (2009: £41.3 million) reflecting timing of working capital movements. Net debt reduced by £15.9 million to £117.5 million from the 2010 year end position. Adjusted operating returns on average capital employed increased to 10.6%.

1. Income statement

Synergy's income statement is summarised in Figure 1.

Figure 1: Adjusted income statement

1 The effective tax rate is calculated excluding amortisation on acquired intangibles

1.1 Currency translation and non-core operations

Changes in currency exchange rates over the last 6 months have had a small adverse impact on Synergy's reported results. In order to present the underlying growth of the business in the year, the translational effect of currency exchange rates on revenue, adjusted operating profit, net finance costs, adjusted profit before tax and net debt is presented in the Finance Review. The currency effect has been calculated by translating non-Sterling earnings for the half year ended 26 September 2010 into Sterling at the average foreign exchange rates for the half year ended 27 September 2009. Owing to the geographical mix of revenue and cost, primarily in Sterling, Euro and US Dollar, the net impact of translational currency effects has not been significant to the Group's profit. Additionally, the Group has revenues and income from operations that it is winding down and exiting, primarily relating to business streams within the UK's Healthcare solutions business. These have been excluded in deriving the underlying performance of the business.

Figure 2: Income statement bridge

1.2 Revenue

Revenue of £133.7 million (2009: £130.4 million) represents a growth rate, excluding non-core business and currency effects, of 2.5% over the first half of 2009. Excluding only the impact of non-core business, the underlying organic growth rate was 1.4% for the year. Underlying revenues grew across all our business segments (excluding non-core business and currency effects) with the UK and Ireland at 2.4%, Europe and Middle East at 1.6%, and Asia and Africa at 15.7%.

1.3 Gross profit

Gross profit increased by 3.0% to £52.4 million (2009: £50.9 million) representing a gross profit margin of 37.8%, an increase of 211 basis points over the first half of 2009.

1.4 Adjusted operating profit

Adjusted operating profit increased by 7.6% to £20.6 million representing an adjusted operating profit margin of 14.9%, an increase of 143 basis points over last year (121 basis points excluding non-core business and currency effects).

1.5 Non-recurring items

There have been no non-recurring items reported in the period.

After the half year we received a summary court judgement in our favour on the insurance claim arising from the fire at the Dunstable facility in early 2007. Subject to the outcome of a potential appeal and our assessment of costs relating to the fire and claim, we will report non-recurring profit and cash proceeds as part of our year end results.

1.6 Net finance costs

The Group's net finance costs were £2.5 million compared with £4.3 million in the previous half year, a decrease of £1.8 million. The decrease is largely due to the natural cessation of fixing arrangements taken out when interest rates were significantly higher. The average interest rate cost over the main syndicated facility and other group facilities is estimated at 3.3%.

1.7 Adjusted profit before tax

Adjusted profit before tax was £18.1 million (2009: £14.9 million), an increase of 21.9%. The adjusted profit before tax margin was 13.1% (2009: 10.4%), an increase of 264 basis points.

1.8 Amortisation of acquired intangibles

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

1.9 Tax

The tax charge (excluding amortisation of acquired intangibles) of £4.3 million (2009: £3.6 million) represents an effective rate of 23.6% (2009: 24.4%), broadly consistent with 2009. The effective rate is lower than the standard UK rate, mainly reflecting a geographical mix of profits from territories with lower rates of taxation.

1.10 Earnings per share (EPS)

The growth in adjusted basic earnings per share and adjusted diluted earnings per share, after adjusting for amortisation of intangibles, was 21.9% in each case. After amortisation of acquired intangibles, basic and diluted earnings per share increased by 30.1% and 30.2% respectively.

On 27 October, the Board proposed an interim dividend of 6.00p per share (2009: interim dividend of 4.90p per share). This represents an increase of 22.4% over last year's dividend, reflecting the Board's policy to increase dividends broadly in line with earnings.

3. Cash flow

Figure 3 summarises the Group cash flow.

Figure 3: Cash Flow

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

3.1 Operating cash flow

Operating cash flow generated in the year decreased by 7.0% to £38.4 million (2009: £41.3 million) reflecting timing differences on working capital flows, following a correction last year. The conversion of EBITDA into cash of 103% (2009: 117%) remains very strong, highlighting the continued focus on working capital efficiency.

3.2 Interest

Net interest paid was £2.7 million (2009: £4.3 million), reflecting lower borrowing costs and a reduction in net debt.

3.3 Tax

Tax paid was £0.5 million (2009: £0.2 million received). Cash tax is below the equivalent charge in the income statement as a result of timing differences on payments made on account. Over time we would expect cash tax to move closer to the income statement charge.

3.4 Net expenditure on tangible and intangible assets

Total maintenance capital expenditure was £10.4 million of which £4.6 million and £4.2 million were spent on textiles and cobalt respectively.

Total investment capital expenditure was £8.0 million, of which £3.8 million relates to construction on new UK decontamination facilities, and £2.0 million relates to cobalt.

3.5 Financing

The movement in financing resulted primarily from a net repayment of borrowings on the revolving credit facility.

4 Net debt and funding

4.1 Net debt

Strong cash generation helped net debt reduce during the period from £133.4 million to £117.5 million.

The movement in the net debt is reconciled below:

Figure 4: Movement in net debt

4.2 Funding

The main banking agreement comprises a facility of £160 million which is split equally between a bullet facility and revolving credit facility, repayable in January 2012. The Group remains comfortably within the covenants set out in the agreement.

Under the terms of this agreement the Group can borrow up to £232 million, provided this does not exceed 3.0 times EBITDA. At 26 September 2010, the Group had available facilities of £199 million. This includes £160 million under the main syndicated facility, together with finance leases, local lending lines in overseas subsidiaries and overdrafts.

The debt is held mainly in Sterling and Euros, with the currency mix and the level of fixed interest debt within each currency being as follows:

Figure 5: Composition of gross debt

The Euro denominated debt which is held in the UK is held as a hedge against the Group's Euro-denominated net assets of £222 million. As at 26 September 2010, 27.1% of total debt was held at fixed rates of interest.

5 Pensions

The Group operates three final salary schemes in the UK and one in the Netherlands.

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's Actuary Department. The UK schemes are closed to new entrants. Isotron's pension scheme in the Netherlands includes defined benefit and defined contribution elements.

At 26 September 2010, the net liability arising from our defined benefit scheme obligations was £19.1 million (2009: £14.1 million).

The asset base has not risen in line with the increase in liabilities. This is due to a reduction in the discount rate and changes to inflation assumptions.

Figure 6: Defined benefit pension schemes

The total pension charge for the half year ended 26 September 2010 of £0.7 million was in line with the 2009 half year charge of £0.8 million.

Risks

The Directors consider that the principal risks and uncertainties affecting the Group and its performance during the current financial year remain those outlined in the Annual Report for the year ended 28 March 2010.

The principal risks are:

·; Financial - includes risks of macroeconomic instability impacting currency volatility and input costs, increased energy costs, failure to meet financial business plans, interest rate risk, credit risk and liquidity risk.

·; Operational - threats to the continuity of business operations. Key risks include unexpected loss of capacity and IT systems' disruption.

·; People - includes the loss of talented employees and health and safety issues.

·; Commercial - includes risks associated with investment in emerging markets and the integrity of security systems covering data and intellectual property.

The Group's risk management policies are fully documented in the Group's Annual report for the year ended 28 March 2010.

Chairman

CONDENSED CONSOLIDATED INCOME STATEMENT

The accompanying accounting policies and notes form part of these financial statements.

CONDENSED CONSOLIDATED INCOME STATEMENT

The accompanying accounting policies and notes form part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying accounting policies and notes form part of these financial statements.

CONDENSED STATEMENT OF FINANCIAL POSITION

The accompanying accounting policies and notes form part of these financial statements.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

The accompanying accounting policies and notes form part of these financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

The accompanying accounting policies and notes form part of these financial statements.

NOTES TO THE HALF YEAR RESULTS

1 General information

Synergy Health plc ("the Company") and its subsidiaries (together "the Group") deliver a range of specialists services including outsourced sterilisation and infection control support services to healthcare providers and others concerned in health management, in the UK, Europe and Middle East, Asia and Africa. 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, Swindon, Wiltshire, SN5 6NX.

These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on 4 November 2010.

2 Summary of significant accounting policies

Basis of preparation

These September 2010 condensed consolidated interim financial statements of the Group are for the six months ended 26 September 2010.

The condensed consolidated interim financial statements for the six months to 26 September 2010 have been prepared on the basis of the accounting policies set out in the Group's latest annual financial statements for the year ended 28 March 2010. 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.

The comparative figures for the financial year ended 28 March 2010 are not the Group's statutory accounts for that financial year. Those statutory accounts have been reported on by the Group's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The condensed consolidated interim financial statements for the six months to 26 September 2010 have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on Review of Interim Financial Information.

Going concern

The directors have reviewed the Group's medium-term forecasts through to November 2011 along with reasonable possible changes in trading performance and foreign currencies arising from these uncertainties to determine whether the committed banking facilities are sufficient to support the Group's projected liquidity requirements, and whether the forecast earnings are sufficient to meet the covenants associated with the banking facilities.

The Group's committed banking facilities are due for renewal in January 2012 and no matters have been brought to the attention of the Directors to suggest that renewal may not be forthcoming.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, and have continued to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

Significant accounting policies

The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 28 March 2010 except for the adoption of new standards and interpretations, noted below. Adoption of these standards and interpretations did not have any effect on the financial position or performance of the Group.

IFRIC 16 Hedges of a Net Investment in Foreign Operation

IFRIC 17 Distributions of Non Cash Assets to Owners

IFRIC 18 Transfers of Assets from Customers

Amendments to IFRS 2 Group Cash Settled Share-based Payment Transactions

Revised IFRS 3 Business Combinations

Amendments to IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

Amendments to IFRS 8 Operating Segments

Amendments to IAS 7 Statement of Cash Flows

Amendments to IAS 17 Leases

Amendments to IAS 27 Consolidated and Separate Financial Statements

Amendments to IAS 32 Classification of Rights Issues

Amendments to IAS 36 Impairment of Assets

Amendments to IAS 39 Financial Instruments: Recognition and Measurement 

The condensed consolidated interim financial statements have been prepared under the historical cost convention except that derivative financial instruments are stated at their fair value.

3. Statement of compliance

These condensed consolidated interim financial statements have been prepared and approved by the Directors in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting as adopted by the EU (adopted IAS 34) and with the Disclosure and Transparency Rules of the UK Financial Services Authority. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 28 March 2010.

4. Financial risk management

The primary risks arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks and the Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 28 March 2010.

5. Estimates

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

Except as described below, in preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 28 March 2010.

During the 6 months ended 26 September 2010, management reassessed its estimates in respect of actuarial assumptions in relation to the Group's defined benefit pension schemes using professional advice and relevant market benchmark data for discount rates and inflation.

6. Segment Information

The Group is organised into three operating segments, and information on these segments is reported to the chief operating decision maker (CODM) for the purposes of resource allocation and assessment of performance. These three operating segments are: UK and Ireland, Europe and Middle East, and Asia and Africa.

The segments derive their revenues from the same range of products and services - being the provision of healthcare services, sterilisation services, and decontamination services.

Segment information about these divisions is presented below:

The comparative figures for the previous six month period are shown below:

The segment information for the year ended 28 March 2010:

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

IFRS 8 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 revenues from external customers between the three principal product / service groups:

7. Non-recurring items

There were no non-recurring items in the six months to 26 September 2010 (Six months ended 27 September 2009: nil; year ended 28 March 2010: £1.9 million).

8. Income tax

The Group's effective tax rate for the period on earnings before the amortisation of intangibles was 23.6 per cent (2009: 24.4 per cent) and this should be sustainable over the full year.

9. Dividends

The proposed interim dividend for the year ending 3 April 2011 was approved by the Board on 27 October 2010 and has not been included as a liability in these financial statements.

10. Earnings per share

11. Bank overdrafts and loans

During the period, the Group reduced its net loan borrowings by £15.9 million (2009: decrease of £22.4 million). The loan bears interest at market rates as adjusted for interest hedging arrangements. At 26 September 2010 £32.1 million of the Group's total borrowings were covered by fixed interest arrangements (2009: £90.0 million), and £54.3 million of the Group's gross debt was denominated in Euros (£71.5 million).

12. Provisions

13. Property, plant and equipment Additions and disposals

During the six months ended 26 September 2010, the Group purchased assets with a total cost of approximately £18.4 million.

Statement of Directors' Responsibilities

We confirm that to the best of our knowledge:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

This report has been approved by the Board of Directors and signed on its behalf by

Robert E Lerwill

Chairman

4 November 2010

The condensed consolidated interim financial statements for the six months ended 26 September 2010 will be available on the Company's website on 26 November 2010.

Financial Calendar

Registered office

Synergy Health plc

Ground Floor Stella

Windmill Hill Business Park

Swindon

Wiltshire SN5 6NX

Website: www.synergyhealthplc.com