20th Nov 2007 07:02
Synergy Healthcare PLC20 November 2007 For Immediate Release20 November 2007 SYNERGY HEALTHCARE PLC ("Synergy" or the "Company") INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2007 Strong underlying growth and an increasing focus on infection control and China Synergy Healthcare plc (AIM: SYR), a leading provider of outsourcedsterilisation and infection control support services in Europe, Asia and SouthAfrica, announces interim results for the six months ended 30 September 2007. Financial highlights • Total revenue (including Isotron) up 52% to £102.0 million (2006: £66.9 million); underlying revenues up by 16.7% • Operating profit (before the amortisation of intangibles and non-recurring items) up 115% to £15.3 million (2006: £7.1 million) • Profit after taxation up 93% to £8.5 million (2006: £4.4 million) • Operating cash flow generated of £19.1 million (2006: £12.9 million), with net debt of £110.7 million (2006: £2.1 million) • Basic and adjusted earnings per share up 34.2% and 27.3% respectively to 15.98p (2006: 11.91p) and 16.53p (2006: 12.98p) • Interim dividend up 25% to 3.5p (2006: 2.8p) Operating highlights • Strong growth across the Group - Patient Care sales up 19.4%, Surgical up 14.2% and Commercial up 7.4% (on a like for like basis) • Improved Group operating margin (before intangible amortisation and non-recurring items) up 4.3% to 15.0% • Forward "order book" increased by £65 million to £765 million o Major UK Surgical contracts awarded o Three Chinese hospitals have signed a Memorandum of Understanding to outsource sterilisation to Synergy o Patient Care has been awarded a number of linen contracts in both the UK and the Netherlands • New sterilisation facilities opened in Venlo, Netherlands and Manchester, UK to drive second half growth • Dunstable to become operational again in December following its temporary closure due to fire last year • Strategy is to increase share in existing markets while targeting new, high growth international markets for infection control and sterilisation services Dr Richard Steeves, Chief Executive of Synergy Healthcare, commented: "Synergy has performed well during the first half with strong underlying salesand profit growth further boosted by the contribution from Isotron. Ourinvestments in new infection control technologies including our patientscreening service for MRSA are now beginning to make good progress, with take-upat several NHS hospitals. "The second half has started well across all our markets and we continue toprogress our international expansion, particularly in China. With the control ofinfection becoming increasingly important in all aspects of healthcare, there isstrong momentum for growth in each of the Group's businesses and the Board looksforward to another successful full year performance." Enquiries:Synergy Healthcare plc 01793 891851Dr Richard Steeves, Chief Executive Ivan Jacques, Finance Director Morgan Stanley 020 7677 2395Peter Moorhouse Investec 020 7597 5970Patrick Robb Financial Dynamics 020 7831 3113David Yates / Ben Brewerton / Emma Thompson SYNERGY HEALTHCARE PLC INTERIM RESULTS FOR THE 26 WEEKS ENDED 30 SEPTEMBER 2007 CHAIRMAN'S STATEMENT In the first half, Synergy continued its consistent track record of strongearnings per share growth. Sales are up 52% at £102.0 million, operatingprofits (before finance costs, amortisation of intangibles, and tax) are up 115%at £15.3 million, basic earnings per share are up 34.2% and adjusted basicearnings per share are up 27.3%. These results reflect a strong performance from all areas of the Group includingIsotron, which was acquired on 1 January 2007. The underlying business hascontinued to perform well, whilst a number of major new projects that willsustain the growth in future months and years were implemented. Our investmentsin new infection control technologies including our new patient screeningservice for MRSA are beginning to make progress in line with our strategy andbusiness model. Dividend The Board has declared an interim dividend of 3.5p per share (2006: 2.8p), anincrease of 25%. The dividend will be paid on 14 December 2007 to shareholderson the register on 30 November 2007. Business review The Group has performed well during the half year with strong underlying salesand profit growth further boosted by the contribution from Isotron. Before theacquisition of Isotron and excluding divestments, sales were up 16.7% whilstunderlying operating margins increased by 0.5%. Sales were up 14.1% on a likefor like basis (including Isotron but excluding divestments in the prior year),and operating margins improved 0.7%. The integration of Isotron has beencompleted and the Company is now focusing on implementing its strategy for thebusiness. The business is managed on a regional basis with a medium term strategy toincrease sales and profits derived from Europe other than the UK (the Rest ofEurope) and in particular Asia. During the first half of the year UK salesaccounted for 54.9% of the Group whilst sales from the Rest of Europe and Asiaaccounted for 42.1% and 3.0% respectively. UK operating profits afteramortisation and share charges accounted for 38.8% of the Group total whilst theRest of Europe and Asia accounted for 53.8% and 7.4% respectively. United Kingdom Sales in the UK were up 35.2% to £56 million (2006: £41.4 million) withoperating profits after amortisation and share scheme charges up 45.6% to £5.0million (2006: £3.5 million). The UK performed well, with good demand fromhealthcare providers, particularly for infection control services, including theaward of several new linen contracts, an increase in new Surgical contracts andan underlying growth in the number of patients treated by our customers. Rest of Europe Sales in the Rest of Europe were up 68.1% to £42.9 million (2006: £25.5million) with operating profits after amortisation and share scheme charges up106.4% to £7.0 million (2006: £3.4 million). A particularly strong performancefrom LTS saw record organic growth with a number of contract wins together withthe contribution from three small bolt-on acquisitions. Asia and South Africa Asia and South Africa are new regions for Synergy following the acquisition ofIsotron. Sales for the region were £3.1 million whilst operating profits afteramortisation and share scheme charges were £1.0 million. The region hasbenefited from strong underlying growth although the performance was held backslightly as a result of the loss of a large customer in Thailand due to a fireat the customer's facility. The resulting volume loss has been picked up byother Isotron customers, most notably in Malaysia, resulting in a resumption ofsales growth. The business continues to focus on its strategy, taking advantageof positive macro economics as well as accommodating the needs of our largeglobal customers who are increasingly investing in the region. Much of Synergy's efforts have been focused in China where the Company hascommitted to the development of a sterilisation super centre in Suzhou, which islocated about 90 minutes to the west of Shanghai. It has had strong supportfrom the global customer base to help bring this facility on line as soon aspossible. For the first time Synergy will combine Isotron's commercialsterilisation and Surgical's hospital sterilisation facilities on the samefacility. Three large hospitals in Suzhou have signed a Memorandum ofUnderstanding to outsource their sterilisation services to Synergy, and weremain in discussion with a further three hospitals that are showing equal signsof interest. Patient Care Patient Care, which provides a range of services and products to help manage thepatient environment, saw sales increase 19.4% to £61.7 million (2006: £51.7million) driven by demand for all of its services across both the UK and theNetherlands. Operating margins improved 0.9% before Group overheads. Progresshas been strong within our linen management businesses with a number of contractwins in both the UK and the Netherlands. In the UK, the market is growingstrongly as the NHS appears to be accelerating the outsourcing of thisnon-clinical service. Our Dunstable facility recommences processing inmid-December which will provide additional capacity to support the anticipateddemand. At the same time the pricing environment continues to improve. In theNetherlands, LTS has won a number of new contracts in the primary care marketgenerating record organic growth topped up by three small bolt-on acquisitions.LTS is now looking to extend its activities into Belgium. The strategy to develop our infection control initiatives is making goodprogress with the NHS in particular implementing the hygiene code. Sales havegrown strongly and our new technologies are beginning to establish themselves.In the first half of the year seven acute hospitals in the UK have createdisolation facilities using our AirCleanseTM system and we expect to see thisnumber increase substantially during the second half of the year now that theconcept has been demonstrated. Assure, the range of anti-infection cleaningproducts using Byotrol, is also gaining traction as early adopters becomereference sites. The rapid MRSA screening service launched earlier this yearhas now established its first customer and the Department of Health isrecommending screening for all hospital admissions. The wound care business,including Exsudex, continues to progress well and will be launched in Europetowards the end of the financial year. In line with our strategy of growing the range of services within Patient Care,on 13 November we acquired Vernon-Carus Limited for £16.3 million together withthe assumption of £8.1 million of debt. The business is a major supplier to theNHS focusing on infection control and decontamination services. For the yearended 1 April 2007 it had sales of £33 million, operating profit (beforeexceptional item) of £1.0 million and profit before taxation of £0.2 million,with net assets of £8.5 million. Vernon-Carus will be integrated within PatientCare over the coming two months, and will result in a reduction in the plannedcapital expenditure for new facilities for Patient Care. Commercial Isotron, Synergy's commercial medical sterilisation and materials modificationbusiness, has performed satisfactorily lifting sales by 7.4% on a like for likebasis. Cost savings, following the acquisition, have resulted in a marginincrease before Group costs of 1.8%. Sales growth was marginally lower thanplanned driven by a mixture of one off events including the loss of a largecustomer in Thailand due to a fire at the customer's facility, stock reductionprogrammes by two of our largest global customers and a product recall byanother large multinational customer. The impact of these events had largelyfallen away by the start of the second half. At the time of acquiring Isotron we set out a strategy to lift sales growth inthe medium term with the addition of new capacity in fast growing markets. Thebusiness suffers from capacity constraints in some parts of Europe and we areaddressing these with targeted new capacity (such as Marcoule where all licenceshave now been approved) whilst also recognising that the majority of new growthwill come from the Asian markets. In addition to adding capacity we arerestructuring Isotron's approach to sales and marketing to focus on an outcomebased strategy in line with Synergy's business model. We also intend to developa more focused, segmental approach to our marketing, differentiating medicalsterilisation from our other industrial markets. A new Global Director of Salesand Marketing has recently been appointed and further changes to the businessmodel will be implemented over the coming 12 months. Much effort has been expended on completing the Venlo ETO facility in theNetherlands, which has completed its qualification work and will becomeoperational this week. The opening of Venlo is consistent with our strategy toexpand the use of other sterilisation technologies alongside of ourpredominantly gamma-based business. Our early experience at Venlo leads us tobelieve there is a strong demand. The team is also progressing with the plansfor our new medical device sterilisation facility in Suzhou, China. There hasbeen a recent delay to the granting of certain business licenses but we remainhopeful that any remaining issues will be resolved and construction can bestarted in the New Year, rather than December 2007 as originally planned. Ourfirst Chinese facility will provide gamma and ETO sterilisation technologies formedical devices and other industrial companies and will now also include asurgical instrument processing facility. Three local hospitals with a combined1860 beds have signed a Memorandum of Understanding to outsource hospitalsterilisation to Synergy. The start of the service will be dependent on thecompletion of the build project in Suzhou and is expected to be worth more than£1 million per annum. We are also in active dialogue with another threehospitals in Suzhou. We remain committed to further developments in Singapore,Vietnam and India in due course, but we have decided to prioritise China for thecoming months whilst at the same time building our management structure in Asiato support future growth. Surgical Sales in Surgical, which provides hospital sterilisation services in the UK andthe Netherlands, increased 14.2% to £15.6 million (2006: £13.6 million) whilstoperating margins before Group costs held steady on the comparable period. TheUK operations have benefited from new primary care contracts as well as ageneral improvement in the market driven by an increased number of patientsbeing treated. We expect to see a further uplift during the second half of theyear as hospitals strive to meet the 18 week maximum waiting target set by theGovernment. Our new facility in Manchester, won under the nationaldecontamination programme, opened on time on 5 November and we expect to havecompleted the full customer transfer early in the New Year. Our new contract inCentral Lancashire will reach financial close by the end of December 2007. Inthe Netherlands, the founding contract in Amsterdam has been extended to includeprocessing flexible endoscopes. This new service model, which may include arental option for endoscopes, is due to be launched in the UK at the end of thisfinancial year. New quality guidance from the UK's Department of Healthrequires hospitals to upgrade their decontamination of flexible endoscopes, andwe are preparing to meet this expected demand. Bidding for additional contracts in the UK, Netherlands and more recentlyBelgium remains active, and we are confident that our progress in this area willbe sustained. We announced earlier this autumn that we had been selected aspreferred bidder for another decontamination project with a fifteen yearcontract value in excess of £4.5 million per annum. In addition the businesshas won a number of Primary Care Trust contracts which start in December 2007.In the Netherlands progress with new contracts has been slower than we had hopedalthough we still expect to make progress in the near future. We continue toprogress a number of bids in the UK, but as the national programme winds down wewill extend the commercial team's focus to The Rest of Europe. Our presence inFrance, Germany and Ireland through Isotron is opening up these markets toSynergy. Financial Review The results are presented under IFRS following the Group's early adoption ofinternational accounting standards during 2006. Group turnover was £102.0 million (2006: £66.9 million) whilst operating profitbefore amortisation and non-recurring items was £15.3 million (2006: £7.1million) after share scheme charges of approximately £0.8 million (2006: £0.4million). Profit after tax before amortisation of intangibles and non-recurringitems increased 80% to £8.8 million (2006: £4.9 million). Basic earnings per share were up 34.2% to 15.98 pence (2006: 11.91 pence)whilst adjusted basic earnings per share increased by 27.3% to 16.53 pence(2006: 12.98 pence). The adjusted earnings per share adds back the amortisationof intangibles but is after deducting share scheme charges. On a fully dilutedbasis the adjusted earnings per share increased by 26.9% to 16.07 pence (2006:12.66 pence). The Group's effective tax rate for the period on earnings before theamortisation of intangibles and non-recurring items was 27% and this should besustainable over the full year. Net operating cash flow in the period rose to £19.1 million, representing a cashconversion rate of 125%. There were some adverse working capital movements inthe period, including a movement of £2.8 million in trade and other payables,the majority of which represents accruals for exceptional items made at the endof the last financial year which were paid in this year. The movement in tradeand other receivables reflects trade debtors, other receivables and prepayments,including an amount of £1.0 million of reorganisation costs paid on theinception of an NHS contract which is being recovered from the customer over thecontract term. There have been some other adverse movements in trade debtorswhich we expect to recover in the second half of the year. The Group continued to invest in its capital asset base and processing capacity,with capital expenditure payments during the period totalling £17.0 million.This includes investments in the new Surgical decontamination and sterilisationfacility at Manchester, the new Commercial sterilisation facility at Venlo inthe Netherlands and the reinstatement of the Dunstable facility. Synergy iscontinuing to pursue the Dunstable insurance claim through the legal process andremains optimistic about its prospects for recovery. The Group had net debt at the half year of £110.7 million, compared with £97.7million at the March year end. The Group has available bank facilities of over£160 million available for investments and general corporate purposes. Thefacilities include sufficient headroom to allow the Group to continue to growand invest, including its participation in the NHS' national decontaminationprogramme and other expansionary projects that are currently under review. The Group's net finance charge of £3.3 million represents an effective rate ofaround 6.5% on its debt. This includes a net amount relating to final salarypensions under IAS 19 of less than £0.1 million. The Group's debt includes neteuro-denominated debt of approximately £70 million, which is either held withinthe Continental European and Irish businesses directly or represents a hedgeagainst euro denominated assets. The level of debt that is held at fixed ratesof interest either within the loan agreement or through a swap transaction isslightly below half of the total debt. Strategy The Board has set out a clear strategy to continue to develop market share inits existing markets whilst at the same time seeking to take its infectioncontrol and sterilisation service models to international, high growth markets.The acquisition of Isotron has given Synergy a platform in Asia and Europe thatenables the fulfilment of this strategy in those regions primarily throughorganic growth. The Board has decided to prioritise the Asian market in theshort term as there are clear signs that the markets are ready for both ourhealthcare and commercial sterilisation services. We expect to focus ourcapital expenditure in the region as we seek to bring on new medical device andhospital sterilisation facilities. In Europe we will continue to expand ourhospital sterilisation business organically retaining our objective to be one ofthe main market leaders at the end of the decade, whilst maintaining our medicaldevice sterilisation leadership with selective, highly targeted investments innew capacity. Outlook The business has performed well during the first half of the year. With the newcontract wins the forward order book has increased by £65 million over the lastsix months to £765 million. The second half has started well with allgeographic markets strengthening in both the healthcare and commercial markets. The new Manchester Surgical unit and Venlo Commercial sterilisation facilitieshave both started on time in November and will add additional growth. TheCompany is gaining momentum in all of its markets and with the benefit of thewider management team from Isotron, the Board looks forward to anothersuccessful full year performance. Stephen WilsonChairman CONSOLIDATED INTERIM INCOME STATEMENTFOR THE PERIOD ENDED 30 SEPTEMBER 2007 6 months ended 30 September 2007 (unaudited) Before amortisation and Amortisation and non-recurring non-recurring items items Total Notes £'000 £'000 £'000Continuing operationsRevenue 5 102,022 - 102,022Cost of sales (64,613) - (64,613) ______ ______ ______ Gross profit 37,409 - 37,409 Administrative expensesAdministration expenses excludingamortisation of intangibles and sharescheme charges (21,325) - (21,325) Amortisation of intangibles - (2,328) (2,328)Share scheme charges (761) - (761) ______ ______ ______ (22,086) (2,328) (24,414) ______ ______ ______Operating profit 5 15,323 (2,328) 12,995 ______ ______ ______Profit on business disposal 11 - 993 993Finance income 530 - 530Finance costs (3,825) - (3,825) ______ ______ ______Net finance costs (3,295) - (3,295) ______ ______ ______Profit before tax 12,028 (1,335) 10,693Income tax 6 (3,220) 1,039 (2,181) ______ ______ ______Profit for the period 8,808 (296) 8,512 ______ ______ ______Attributable to: 8,785 (296) 8,489 Equity holders of the parentMinority interest 23 - 23 ______ ______ ______ 8,808 (296) 8,512 ______ ______ ______Earnings per shareFrom continuing and total operationsBasic 8 15.98pDiluted 8 15.53p ______ (continued from table above) 6 months ended 1 October 2006 (unaudited) Before amortisation and Amortisation and non-recurring non-recurring items items Total Notes £'000 £'000 £'000Continuing operationsRevenue 5 66,923 - 66,923Cost of sales (45,728) - (45,728) ______ ______ ______Gross profit 21,195 - 21,195Administrative expensesAdministration expenses excludingamortisation of intangibles and sharescheme charges (13,675) (74) (13,749) Amortisation of intangibles - (603) (603)Share scheme charges (388) - (388) ______ ______ ______ (14,063) (677) (14,740) ______ ______ ______Operating profit 5 7,132 (677) 6,455 ______ ______ ______Profit on business disposal 11Finance income 481 - 481Finance costs (720) - (720) ______ ______ ______Net finance costs (239) - (239) ______ ______ ______Profit before tax 6,893 (677) 6,216Income tax 6 (1,988) 181 (1,807) ______ ______ ______Profit for the period 4,905 (496) 4,409 ______ ______ ______Attributable to: 4,905 (496) 4,409 Equity holders of the parentMinority interest - - - ______ ______ ______ 4,905 (496) 4,409 ______ ______ ______Earnings per shareFrom continuing and total operationsBasic 8 11.91pDiluted 8 11.62p ______ Year ended 1 April 2007 (audited) Before Amortisation amortisation and and non-recurring non-recurring items items Total Notes £'000 £'000 £'000Continuing operationsRevenue 5 152,563 - 152,563Cost of sales (102,280) (3,975) (106,255) ______ ______ ______ Gross profit 50,283 (3,975) 46,308 Administrative expensesAdministration expenses excludingamortisation of intangibles and sharescheme charges (30,599) (1,990) (32,589) Amortisation of intangibles - (2,104) (2,104)Share scheme charges (913) - (913) ______ ______ ______ (31,512) (4,094) (35,606) ______ ______ ______Operating profit 5 18,771 (8,069) 10,702Finance income 1,906 - 1,906Finance costs (3,792) - (3,792) ______ ______ ______Net finance costs (1,886) - (1,886) ______ ______ ______Profit before tax 16,885 (8,069) 8,816Income tax 6 (4,891) 2,419 (2,472) ______ ______ ______Profit for the year 11,994 (5,650) 6,344 ______ ______ ______Attributable to:Equity holders of the parent 11,977 (5,650) 6,327Minority interest 17 - 17 ______ ______ ______ 11,994 (5,650) 6,344 ______ ______ ______ Earnings per shareFrom continuing and total operationsBasic 8 15.43pDiluted 8 15.01p ______ The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSESFOR THE PERIOD ENDED 30 SEPTEMBER 2007 6 months ended 6 months ended 12 months ended 30 September 1 October 1 April 2007 2007 2006 (audited) (unaudited) (unaudited) £000 £000 £000 Exchange differences on translation of foreign operations 2,274 (884) 2,327Cash flow hedges - derivative instrument effective portion (31) - 57Actuarial (losses)/gains on defined benefit pension schemes 739 - (412)Less: provision for deferred tax (207) - 123 ______ ______ ______Net income recognised directly in equity 2,775 (884) 2,095Profit for the period 8,512 4,409 6,344 ______ ______ ______Total recognised income and expense for the period 11,287 3,525 8,439 ______ ______ ______Attributable to:Equity holders of the Company 11,258 3,525 8,419Minority interest 29 - 20 ______ ______ ______ 11,287 3,525 8,439 ______ ______ ______ The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED BALANCE SHEETAT 30 SEPTEMBER 2007 At At At 30 September 2007 1 October 2006 1 April 2007 (unaudited) (unaudited) (audited) Note £000 £000 £000ASSETSNon-current assetsGoodwill 150,504 30,690 146,966Other intangible assets 46,425 13,704 46,086Property, plant and equipment 139,413 52,284 129,788Trade and other receivables - 68 - ______ ______ ______ 336,342 96,746 322,840 ______ ______ ______Current assetsInventories 5,484 4,825 4,948Trade and other receivables 37,866 19,547 32,595Cash and cash equivalents 4,300 7,887 4,790Available for sale investments 126 126 126 ______ ______ ______ 47,776 32,385 42,459 ______ ______ ______Total assets 384,118 129,131 365,299 ______ ______ ______EQUITYCapital and reserves attributable to theCompany's equity holdersShare capital 15 333 232 332Share premium account 15 59,868 59,270 59,479Translation reserve 15 5,690 214 3,422Cash flow hedging reserve 15 26 - 57Merger reserve 15 106,757 430 106,757Retained earnings 15 26,447 18,077 19,913 ______ ______ ______Equity attributable to equity holders of the parent 199,121 78,223 189,960Minority interest 280 - 251 ______ ______ ______Total equity 199,401 78,223 190,211LIABILITIESCurrent liabilitiesBank overdraft - - 41Interest bearing loans and borrowings 9,309 2,628 4,042Trade and other payables 40,464 27,462 44,325Current tax liabilities 3,965 2,430 2,145Deferred government grant - 115 - ______ ______ ______ 53,738 32,635 50,553 ______ ______ ______Non-current liabilitiesInterest bearing loans and borrowings 105,687 7,337 98,359Retirement benefit obligations 2,270 1,870 2,999Deferred tax liabilities 16,265 5,612 16,060Provisions 13 6,583 3,280 6,913Deferred government grant 174 174 204 ______ ______ ______ 130,979 18,273 124,535 ______ ______ ______Total liabilities 184,717 50,908 175,088 ______ ______ ______Total equity and liabilities 384,118 129,131 365,299 ______ ______ ______ The accompanying accounting policies and notes form part of these financialstatements. CONSOLIDATED INTERIM CASH FLOW STATEMENTFOR THE PERIOD ENDED 30 SEPTEMBER 2007 6 months ended 6 months ended 12 months ended 30 September 2007 1 October 2006 1 April 2007 (unaudited) (unaudited) (audited) £000 £000 £000Cash flows from operating activitiesCash generated from operations 19,142 12,945 35,486Interest paid (3,046) (533) (1,927)Income tax paid (984) (2,085) (6,075) ______ ______ ______Net cash generated from operating activities 15,112 10,327 27,484 ______ ______ ______Cash flows from investing activitiesAcquisition of subsidiary, including overdraft (6,253) (520) (78,281)acquiredDisposal of subsidiary 1,200 100 150Purchases of property, plant and equipment (PPE) (17,688) (7,782) (21,032)Purchase of intangible assets (840) - (1,258)Proceeds from sale of PPE - 28 3Purchases of investments - (126) (126)Interest received - 364 731 ______ ______ ______Net cash used in investing activities (23,581) (7,936) (99,813) ______ ______ ______Cash flows from financing activitiesDividends paid (2,973) (1,852) (2,890)Proceeds from borrowings 11,540 - 68,053Repayments of borrowings - (3,049) -New hire purchase loans - - 2,200Repayment of obligations under hire purchase (926) (557) (1,402)loansDividend paid to minority shareholders - - (66)Proceeds from issue of shares 390 99 308 ______ ______ ______Net cash used in financing activities 8,031 (5,359) 66,203 ______ ______ ______Net decrease in cash and bank overdrafts (438) (2,968) (6,126)Cash and bank overdrafts at beginning of period 4,749 11,051 11,051Exchange differences (11) (196) (176) ______ ______ ______Cash and bank overdrafts at end of period 4,300 7,887 4,749 ______ ______ ______Net cash and cash equivalents comprises: Cash at bank 4,300 7,887 4,790Overdraft - - (41) ______ ______ ______ 4,300 7,887 4,749 ______ ______ ______ Cash generated from operationsProfit for the period 8,512 4,409 6,344Adjustments for:- depreciation and impairments 11,380 6,630 16,141- amortisation of intangible assets 2,328 603 2,104- equity settled share based payments 688 388 906- gain on disposal of discontinued operations (993) - -- (profit)/loss on sale of tangible fixed assets - (21) 2,325- finance income (530) (481) (1,906)- finance costs 3,825 720 3,792- income tax expense 2,181 1,807 2,472Changes in working capital:- inventories (691) (345) 822- trade and other receivables (4,745) 235 82- trade and other payables (2,813) (1,000) 2,404 ______ ______ ______Cash generated from operations 19,142 12,945 35,486 ______ ______ ______ The accompanying accounting policies and notes form part of these financialstatements. NOTES TO THE INTERIM RESULTSFOR THE PERIOD ENDED 30 SEPTEMBER 2007 1 General information Synergy Healthcare plc ("the Company") and its subsidiaries (together "the Group") are providers of outsourced sterilisation and infection control supportservices in the UK, Rest of Europe, Asia and South Africa. The Company isregistered in the United Kingdom under company registration number 3355631 andits registered office is Newmarket Drive, Derby, DE24 8SW. These consolidated interim financial statements have been approved for issue bythe Board of Directors on 20 November 2007. 2 Summary of significant accounting policies Basis of preparation These September 2007 interim consolidated financial statements of the Group arefor the six months ended 30 September 2007. The interim condensed consolidated financial statements for the 6 months to 30September 2007 have been prepared on the basis of the accounting policies setout in the Group's latest annual financial statements for the year ended 1 April2007. These accounting policies are drawn up in accordance with adoptedInternational Accounting Standards (IAS) and International Financial ReportingStandards (IFRS) as issued by the International Accounting Standards Board. The comparative figures for the financial year ended 1 April 2007 are not theGroup's statutory accounts for that financial year. Those accounts have beenreported on by the Group's auditors and delivered to the registrar of companies.The report of the auditors was unqualified and did not contain a statementunder section 237 (2) or (3) of the Companies Act 1985. The interim condensed consolidated financial statements do not include all theinformation and disclosures required in the annual financial statements andshould be read in conjunction with the Group's annual financial statements as at1 April 2007. The interim condensed consolidated financial statements for the 6 months to 30September 2007 have not been audited or reviewed by auditors pursuant to theAuditing Practices Board guidance on Review of Interim Financial Information. Significant accounting policies The accounting policies adopted in the preparation of the interim condensedconsolidated financial statements are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 1April 2007 except for the adoption of new standards and interpretations, notedbelow. Adoption of these Standards and Interpretations did not have any effecton the financial position or performance of the Group. • IFRS 7 Financial Instruments:Discloures: The Group will adopt this standard for the first time during the current financial year. This standard requires disclosures that enable users to evaluate the significance of the Group's financial instruments and the nature and extent of risks arising from those financial instruments. As IFRS 7 is a disclosure standard, there is no impact of that change in accounting policy on the interim condensed consolidated financial statements. Full details of the change will be disclosed in our annual report for the year. • IFRIC 9 Reassessment of Embedded Derivatives: The Group adopted this interpretation as of 2 April 2007, which states that the date to assess the existence of an embedded derivative is the date that an entity first becomes party to the contract, with reassessment only if there is a change to the contract that significantly modifies the cash flows. • IFRIC 10 Interim Financial Reporting and Impairment: The Group adopted IFRIC Interpretation 10 as of 2 April 2007, which requires that an entity must not reverse an impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity instrument or a financial asset carried at cost. The consolidated interim financial statements have been prepared under thehistorical cost convention. 3. Financial Risk Management The Group's financial risk management objectives and policies are consistentwith those disclosed in the consolidated financial statements as at and for theyear ended 1 April 2007. 4. Estimates The preparation of interim financial statements requires management to makejudgements, estimates and assumptions that affect the application of accountingpolicies 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 interimfinancial statements, the significant judgements made by management in applyingthe Group's accounting policies and the key sources of estimation uncertaintywere the same as those that applied to the consolidated financial statements asat and for the year ended 1 April 2007. During the six months ended 30 September 2007 management reassessed itsestimates in respect of: o the recoverable amount of certain property, plant and equipment o the recoverable amount of goodwill 5. Segment Information At 30 September 2007, the Group is organised into three geographical divisions;the UK, Rest of Europe, Asia and South Africa. These divisions are the basis onwhich the Group reports its primary segment information. The segment results for the six months ended 30 September 2007 are as follows: Asia and Rest of South Eliminations & UK Europe Africa Unallocated items Group £000 £000 £'000 £000 £000 Total gross segment sales 55,978 42,911 3,133 - 102,022 ______ ______ ______ ______ ______Operating profit beforeamortisation and share schemecharges 6,559 8,379 1,141 5 16,084Amortisation of intangibles (972) (1,196) (160) - (2,328)Share scheme charges (549) (198) (14) - (761) ______ ______ ______ ______ ______Operating profit afteramortisation and share schemecharges 5,038 6,985 967 5 12,995 ______ ______ ______ ______Profit on business disposal 993Finance costs - net (3,295) ______Profit before income tax 10,693Income tax expense (2,181) ______Profit for the period 8,512 ______ The segment results for the six months ended 1 October 2006 are as follows: Asia and Rest of South Eliminations & UK Europe Africa Unallocated items Group £000 £000 £'000 £000 £000 Total gross segment sales 41,395 25,528 - - 66,923 ______ ______ ______ ______ ______Operating profit before amortisation, share scheme chargesand non-recurring items 3,680 3,840 - 7,520 Amortisation of intangibles (147) (456) - - (603)Share scheme charges - - - (388) (388)Non-recurring items (74) - - - (74) ______ ______ ______ ______ ______Operating profit afteramortisation, share scheme chargesand non-recurring items 3,459 3,384 - (388) 6,455 ______ ______ ______ ______Finance costs - net (239) ______Profit before income tax 6,216Income tax expense (1,807) ______Profit for the period 4,409 ______ The segment results for the year ended 1 April 2007 are as follows: Asia and Rest of South Eliminations & UK Europe Africa Unallocated items Group £000 £000 £'000 £000 £000 Total gross segment sales 91,484 60,102 1,396 (419) 152,563 ______ ______ ______ ______ ______ Operating profit before amortisation, share schemecharges and non-recurring items 9,517 9,751 416 - 19,684 Amortisation of intangibles (738) (1,289) (77) - (2,104)Share scheme charges (738) (171) (4) - (913)Non-recurring items (5,965) - - - (5,965) ______ ______ ______ ______ ______Operating profit after amortisation, share schemecharges and non-recurring items 2,076 8,291 335 - 10,702 ______ ______ ______ ______Finance costs - net (1,886) ______Profit before income tax 8,816Income tax expense (2,472) ______Profit for the period 6,344 ______ The Group's secondary segment information relates to its business segments;Patient Care, Surgical, Commercial and Managed Equipment Services. The followingtable provides an analysis of the Group's sales by business segment,irrespective of the origin of the goods and services: Sales revenue by business segment 6 months to 6 months to Year ended 30 September 07 1 October 06 1 April 07 £000 £000 £000Patient Care 61,665 51,654 107,710Surgical 15,562 13,632 29,687Commercial 24,795 - 11,828Managed Equipment Services - 1,637 3,338 ______ ______ ______ 102,022 66,923 152,563 ______ ______ ______ 6. Income tax 6 months ended 6 months ended 12 months ended 30 September 07 1 October 06 1 April 07 £000 £000 £000 Current tax - UK 820 1,150 1,625Current tax - Overseas 2,109 1,179 2,665Adjustment in respect of prior years - - 177 ______ ______ ______ 2,929 2,329 4,467 ______ ______ ______Deferred tax :Origination and reversal of temporarydifferences (408) (522) (2,118)Adjustment in respect of prior years - - 123Impact of change in corporation tax rate (340) - - ______ ______ ______ (748) (522) (1,995) ______ ______ ______Total tax in income statement 2,181 1,807 2,472 ______ ______ ______ 7. Dividends 6 months ended 6 months ended 12 months ended 30 September 2007 1 October 2006 1 April 2007 £000 £000 £000Amounts recognised as distributions toequity holders in the period:Final dividend for the year ended 1 April2007 of 5.6p (2006: - 5.00p) per share 2,973 1,852 1,852 Interim dividend for the year ended 1 April2007 of 2.8p - - 1,038 ______ ______ ______Proposed interim dividend for the year ended30 March 2008 of 3.5p (2007: 2.8p) per share 1,863 1,038 - ______ ______ ______ The proposed interim dividend was approved by the Board on 20 November 2007 andhas not been included as a liability in these financial statements. 8. Earnings per share 6 months ended 6 months ended 12 months ended 30 September 2007 1 October 2006 1 April 2007 £000 £000 £000EarningsEarnings for the purposes of basic earningsper share being net profit attributable toequity holders of the parent 8,489 4,409 6,327 ______ ______ ______ 6 months ended 6 months ended 12 months ended 30 September 2007 1 October 2006 1 April 2007 Shares Shares Shares '000 '000 '000Number of sharesWeighted average number of ordinary sharesfor the purposes of basicearnings per share 53,137 37,026 40,999Effect of dilutive potential ordinaryshares:Share options 1,529 921 1,145Weighted average number of ordinary sharesfor the purposes of dilutedearnings per share 54,666 37,947 42,144 ______ ______ ______Earnings per ordinary shareBasic 15.98p 11.91p 15.43p ______ ______ ______Diluted 15.53p 11.62p 15.01p ______ ______ ______ 6 months ended 6 months ended 12 months ended 30 September 2007 1 October 2006 1 April 2007 £000 £000 £000Adjusted earnings per shareOperating profit 12,995 6,455 10,702Amortisation of intangibles 2,328 603 2,104Non-recurring items - 74 5,965 ______ ______ ______Adjusted operating profit 15,323 7,132 18,771Net finance costs (3,295) (239) (1,886) ______ ______ ______Adjusted profit on ordinary activities before taxation 12,028 6,893 16,885 Taxation on adjusted profit on ordinary activities (3,220) (2,088) (4,891) Minority interest (23) (17) ______ ______Adjusted profit for the financial period 8,785 4,805 11,977 ______ ______ ______Adjusted basic earnings per share 16.53p 12.98p 29.21p ______ ______ ______Adjusted diluted earnings per share 16.07p 12.66p 28.42p ______ ______ ______ 9. Share-based payments The Group operates five separate share option schemes for employees anddirectors of the Group. The following table summarises the options outstandingby scheme at 30 September 2007 which have been valued in accordance with theprovisions of IFRS 2. Options outstanding at Weighted averageScheme 30 September 2007 option price (£) Vesting conditions The approved share option plan 440,463 5.11 4 yearsThe unapproved share option plan 880,898 5.08 4 yearsSharesave Scheme 400,298 4.38 3,5 or 7 yearsThe Performance Share Plan and PhantomPerformance Share Plan 186,351 0.01 3 yearsLong-Term Incentive Plan 1,075,708 0.01 50% EPS growth 50% position in TSR table (continued from table above) Fair value charge in Weighted average 6 months to 30 remaining life in September 2007Scheme years £'000 The approved share option plan 8.23 71The unapproved share option plan 5.21 42Sharesave Scheme 2.07 45The Performance Share Plan and Phantom Performance Share Plan 1.46 212Long-Term Incentive Plan 1.52 391 ______ ______ 761 ______ The fair value of services received in return for share options granted toemployees is measured by reference to the fair value of share options granted.The estimate of fair value of the services received is measured based on aBlack-Scholes model for the approved, unapproved and Sharesave schemes and forthe EPS element of the LTIP Scheme. A model following similar principles to theMonte Carlo model has been used to calculate the fair value of the TSR elementof the LTIP scheme. 10. Acquisition of subsidiaries Acquisition of Bombeke On 16 April 2007, the Group acquired the entire issued share capital of BombekeHoldings B.V. ("Bombeke"), a company registered in the Netherlands. Bombekeprovides linen management services in the South of the Netherlands. The net assets acquired and the related consideration were as follows: Book value Adjustments Fair value £'000 £'000 £'000Property, plant and equipment 2,100 - 2,100Intangible assets - 1,225 1,225Inventories 29 - 29Trade and other receivables 472 - 472Trade and other payables (380) (136) (516)Bank overdraft (914) - (914)Current tax liabilities (109) 35 (74)Deferred tax liabilities (217) (313) (530) ______ ______ ______ 981 811 1,792 ______ ______ ______Goodwill 1,028 ______Total consideration 2,820 ______Satisfied by:Cash 2,786Directly attributable costs 34 ______ 2,820 ______Analysis of net outflow of cash in respect of acquisition:Cash consideration 2,786Acquisition costs 34Overdraft acquired with business 914 ______ 3,734 ______ Provisional fair values have been allocated to the acquired assets of Bombeke. The above fair value adjustments are stated net of tax, where appropriate, at aneffective tax rate of 25.5%, the prevailing rate in the Netherlands. The most significant adjustments relate to the recognition of customerrelationship intangible assets acquired with the business. The goodwill arising on the acquisition of Bombeke is attributable to theassembled workforce and the synergies that can be generated following theintegration of Bombeke into the Group. Acquisition of Regilabs On 5 April 2007, the Group acquired the entire issued share capital of RegilabsB.V. ("Regilabs"), a company registered in the Netherlands. Regilabs provideslaboratory services in the Netherlands. The fair value of the acquisition undertaken in the year was as follows: Book value Adjustments Fair value £'000 £'000 £'000Property, plant and equipment 83 - 83Intangible assets - 151 151Inventories 16 - 16Trade and other receivables 224 - 224Trade and other payables (178) - (178)Cash 43 - 43Deferred tax liabilities - (38) (38) ______ ______ ______ 188 113 301 ______ ______ ______Goodwill 284 ______Total consideration 585 ______Satisfied by:Cash 525Directly attributable costs 60 ______ 585 ______Analysis of net outflow of cash in respect of acquisition:Cash consideration 525Acquisition costs 60Cash acquired with business (43) ______ 542 ______ The above fair value adjustments are stated net of tax, where appropriate, at aneffective tax rate of 25.5%, the prevailing rate in the Netherlands. The most significant adjustments relate to the recognition of customerrelationship intangible assets acquired with the business. Other adjustmentswere required following an assessment of the fair value of the acquiredcompany's identified assets and liabilities. The goodwill arising on the acquisition of Regilabs is attributable to theassembled workforce and the synergies that can be generated following theintegration of Regilabs into the Isotron laboratory business in the Netherlands. 11. Disposal of subsidiary On 2 April 2007 the Group disposed of the entire issued share capital of SynergyManaged Equipment Services Limited ("SMES"). The net assets at the date ofdisposal and at 1 April 2007 were as follows: £'000Property, plant and equipment 125Inventories 220Trade and other receivables 378Cash and cash equivalents 15Current tax liability (93)Trade and other payables (438) 207 ______Gain on disposal 993 ______Total consideration 1,200 ______Satisfied by:Cash 1,315 Directly attributable costs (115) ______ 1,200 ______ The impact of SMES on the Group's results in the current and prior period is notdisclosed on the grounds of materiality. 12. Bank overdrafts and loans During the period, the Group increased its net loan borrowings by £10.6millionpartly to fund capital expenditure and otherwise to finance working capital.The loan bears interest at market rates. £73.4million of the Group's gross debt is denominated in Euros. 13. Provisions Cobalt Environmental Other disposal costs provision provision Total £'000 £'000 £'000 £'000 At 1 April 2007 2,132 1,911 2,870 6,913Additional provision in the year - 55 - 55Utilised in the year - - (455) (455)Exchange differences - 60 10 70 ______ ______ ______ ______At 30 September 2007 2,132 2,026 2,425 6,583 ______ ______ ______ ______ 14. Property, plant and equipment Additions and disposals During the 6 months ended 30 September 2007, the Group purchased assets with atotal cost of approximately £17.0 million. 15. Statement of changes in equity Share Merger Other Share capital Premium Reserves Reserves £'000 £'000 £'000 £'000 Balance at 3 April 2006 231 59,172 430 1,098Issue of shares 1 98 - -Total recognised income and expense - - - (884)Dividends paid - - - -Share based payments (net of deferred tax) - - - - ______ ______ ______ ______Balance at 2 October 2006 232 59,270 430 214Issue of shares 100 209 106,327 -Total recognised income and expense - - - 3,265Dividends paid - - - -Share based payments (net of deferred tax) - - - -Amount arising on acquisition - - - - ______ ______ ______ ______Balance at 2 April 2007 332 59,479 106,757 3,479Issue of shares 1 389 - -Total recognised income and expense - - - 2,237Dividends paid - - - -Share based payments (net of deferred tax) - - - - ______ ______ ______ ______Balance at 30 September 2007 333 59,868 106,757 5,716 ______ ______ ______ ______ (continued from table above) Total attributable to equity Retained holders of the Minority earnings parent interest Total equity £'000 £'000 £'000 £'000 Balance at 3 April 2006 15,050 75,981 - 75,981Issue of shares - 99 - 99Total recognised income and expense 4,409 3,525 - 3,525Dividends paid (1,852) (1,852) - (1,852)Share based payments (net of deferred tax) 470 470 - 470 ______ ______ ______ ______Balance at 2 October 2006 18,077 78,223 - 78,223Issue of shares - 106,636 - 106,636Total recognised income and expense 1,629 4,894 20 4,914Dividends paid (1,038) (1,038) (66) (1,104)Share based payments (net of deferred tax) 1,245 1,245 - 1,245Amount arising on acquisition - - 297 297 ______ ______ ______ ______Balance at 2 April 2007 19,913 189,960 251 190,211Issue of shares - 390 - 390Total recognised income and expense 9,021 11,258 29 11,287Dividends paid (2,973) (2,973) - (2,973)Share based payments (net of deferred tax) 486 486 - 486 ______ ______ ______ ______Balance at 30 September 2007 26,447 199,121 280 199,401 ______ ______ ______ ______ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SYR.L