19th May 2005 07:02
Synergy Healthcare PLC19 May 2005 For Immediate Release 19 May 2005 SYNERGY HEALTHCARE PLC ("Synergy" or the "Company") Preliminary results for the year to 3 April 2005 Synergy Healthcare plc (AIM: SYR), a leading provider of outsourced medicalsupport services, is pleased to announce its preliminary results for the yearended 3 April 2005. Highlights • Turnover growth up 122% to £71.9m (2004: £32.4m) including £36.2m from LTS in the Netherlands, acquired July 2004 • Profit before tax increased 117% to £8.4m (2004: £3.9m) • Profit before tax and goodwill amortisation up 133% to £9.7m (2004: £4.2m) including a £4.6m contribution from LTS • Net operating margins before tax and goodwill amortisation increased 1% from 12.7% to 13.7% • Cash flow from operating activities at £21.1m (2004: £6.9m) • Cash at bank of £14.1m and net funds of £2.9m • Seven contracts started in the year, with a further three to start in 2005/6 • Forward order book in excess of £500m • Hospital acquired infection - potential to introduce Dutch techniques into UK • Total dividend of 6.0p per share (2004: 3.8p) recommended representing a 58% increase • Basic EPS increased 39% to 16.5p (2004: 11.9p) Dr Richard Steeves, Chief Executive, commented: "Over the last five years Synergy has delivered compound annual growth inturnover and profit before tax and goodwill of 61% and 74% respectively. "The new financial year has started well with robust underlying levels ofactivity. This year we will introduce our surgical support services into theNetherlands' healthcare market whilst using Dutch expertise to address hospitalacquired infections in the UK. With a strong forward order book and stablemargins we look forward to reporting on another positive year for the Group." 19 May 2005 ENQUIRIES: Synergy Healthcare plcDr Richard Steeves, Chief Executive 01332 387 107Ivan Jacques, Group Finance Director 01332 387 140 Brewin DolphinMark Brady 01132 410130 Buchanan CommunicationsTim Anderson/ Mark Court/ Isabel Podda 020 7466 5000 CHAIRMAN'S STATEMENT I am pleased to report that Synergy Healthcare ("Synergy") has once againperformed well, with strong growth in revenues and earnings. The Group's sales increased by 122% from £32.4 million to £71.9 million. Profitbefore tax increased by 117% from £3.9 million to £8.4 million, whilst profitbefore tax and amortisation of goodwill rose 133% from £4.2 million to £9.7million. The acquisition of the Netherlands company Lips Textielservice Holding B.V.("LTS"), on 8 July 2004, represented a significant step in the Group'sdevelopment. LTS has performed in line with our expectations, both in terms ofprofitable trading and the generation of cash and has had a very positive impacton the Group's results. Trading throughout the year has also been strong in the UK where the Governmenthas continued to increase its expenditure on healthcare provision in the NHS andthrough private sector clinical providers. Government policy continues toencourage private sector providers of clinical and surgical support services.This has provided Synergy with opportunities to develop its business withexisting customers and gain new customers, including a number of IndependentSector Treatment Centres ("ISTCs"). Results and dividend Basic earnings per share were 16.5p, up 39% from 11.9p last year. Based onprofit before goodwill amortisation, basic earnings per share were 20.1p, up 57%from 12.8p last year. As a result of this positive performance, the Board is recommending that thefinal dividend be increased to 4.3p per share, making a total annual dividend of6.0p per share, an increase of 58%. If approved, the final dividend will be paid on 15 July 2005 to shareholders onthe register at 17 June 2005. Operations It has been a very important year in the development of Synergy, with theacquisition of LTS representing another transformational step. We are benefitingfrom LTS' experience of the Dutch market, which will be helpful in thedevelopment of the UK market. Additionally, we intend to sell Synergy'ssurgical support services into the Netherlands' healthcare market. The UK business has continued to grow and develop working closely with customersand other key stakeholders. The Group recognises the importance of working inpartnership with its customers to meet the outcomes that are most important tothem and their patients. We also recognise the importance of investing in training of our staff and inthe Group's infrastructure. The Board has continued to invest in businesscontrol systems and related technology to ensure that the Group retains itstechnical lead. I am particularly pleased to confirm that we shall be opening anew healthcare linen facility this summer to service the South-East Englandmarket. The establishment of this facility has been a key objective of the Groupsince flotation and we are confident that the facility will set a new qualitystandard for the industry, demonstrating Synergy's commitment to promotinghigher standards for our customers. Directors Robert Lerwill, currently chief executive of Aegis Group plc and a formerexecutive director of WPP Group plc and Cable & Wireless plc, joined the Boardas an independent non-executive Director in January 2005. Robert brings to theBoard a vast amount of operational and financial experience in the UK andoverseas, including the acquisition of businesses and their subsequentintegration. Employees Once again, Synergy's success during the year has been based on the hard workand professionalism of our employees. They are committed to providing a highlevel of service to our customers and improving standards of quality. I would also like to welcome our colleagues in the Netherlands to the Group, whohave been supportive through the integration process and have continued todeliver a high quality service to their customers since the acquisition. The Board recognises the important contribution from all our employees and wewould like to thank them for their endeavours throughout the year. Outlook The new financial year has begun well with good underlying activity levels plusthe start of new contracts. With a growing forward order book, and stablemargins we confidently look forward to another positive year for the Group. Stephen G WilsonChairman CHIEF EXECUTIVE'S REVIEW Once again this year has been busy for Synergy and rewarding for itsstakeholders. The year began with the acquisition of LTS and continued with itsintegration. During the year the UK business progressed a number of bidsculminating in the award of some significant new contracts, whilst the Dutchbusiness extracted cost synergies from its supply chain and now prepares for anexpansion into surgical support services. Despite having an exceptionally active year, the performance of Synergy has beenstrong against a changing market background. Group turnover grew by 122%including underlying organic growth in the UK of 10%. The UK growth rate dippedslightly with the end of seasonal spending patterns in the NHS, which previouslyfavoured the last quarter of the year. As a result the start of the firstquarter of the current year has been stronger than prior years. Operating profit before goodwill amortisation increased by 139% with Groupmargin increasing by 1% from 12.7% last year to 13.7%. Margins increased bothin the UK and the Netherlands as a result of cost synergies realised during theyear as well as the final full year effect of the implementation of Synergy'sTrakStar decontamination software systems across the UK surgical facilities. With seven contracts started in the year, a further three to start in 2005/6 andanother PFI in partnership with Balfour Beatty to start in the summer of 2006/7,Synergy starts the new financial year with a forward order book in excess of£500 million. Committed revenues for the year are in excess of £80 million. Synergy's track record is particularly strong over the past five years producinga compound annual growth in turnover and profit before tax and goodwill of 61%and 74% respectively. Whilst some of the growth has been attributed toacquisitions, overall EPS (pre-goodwill, fully diluted) has also grown at acompound rate of 27% over the same period. Acquisition of LTS The acquisition of LTS was a strategic milestone for Synergy as it paved the wayfor achieving several objectives. Firstly, LTS provides Synergy with a criticalmass in the Netherlands and a platform from which to look at further expansionin Continental Europe. Secondly, the Dutch market (together with other Beneluxand Scandinavian markets) has expertise in managing hospital acquired infectionswhich can be imported back to the UK to help raise awareness and best practice.Thirdly, the LTS customer base provides an opportunity for Synergy to expand itssurgical support services. The integration of LTS has gone smoothly and quickly. The cross border seniormanagement teams are working effectively together and the underlying aims andobjectives are on target or have been achieved. The success of the integrationis in part attributable to the quality of Synergy's business model and strategicvision, which has been readily adopted by the LTS team. This strategic visiontogether with the value that Synergy places on recognising all of thestakeholders in the business has resulted in four highly successful acquisitionsin the past nine years. Strategy Synergy is a leading provider of non-clinical, outsourced services to the NHSand now the Netherlands. Our strategy is to continue to invest in our serviceinfrastructure to enable us to competitively differentiate Synergy, whilst atthe same time looking for opportunities to expand the business through specificacquisitions to gain economies of scale as well as geographic expansion. Havingcompleted the LTS acquisition we are actively looking at opportunities tocontinue to expand. We continue to measure our progress against our strategic aims. The integrationof LTS has been a great success strategically providing a base not only for thesurgical expansion but also for further acquisitive growth. Synergy'scompetitive position has again strengthened this year with further investmentsin our technology and service infrastructure. In surgical for example, theTrakStar software has been further developed to expand our control of thedecontamination services, enabling Synergy to improve its quality and servicestandards. In the UK the competitive gap is particularly marked in the linen business wherewe have continuously invested in our facilities to reduce the risk of crossinfection. This year we open a new, modern facility to serve the South East ofEngland to further drive quality and service standards. Outlook UK Market In the UK, the healthcare market has begun implementing some significant changesthat will have an impact on Synergy over the coming years. These changesinclude the promotion of outsourcing, the further expansion of capacity andtherefore activity, as well as fundamental changes in the provision ofhealthcare with the introduction of market based reforms. These changes are expected to result in accelerated growth for Synergyparticularly in surgical support services. The start of the largedecontamination project in London will underpin growth in the UK business. Inaddition there is a tendency to aggregate services into clusters resulting inmuch larger contracts than previously, which in itself creates a barrier to newentrants. The market reforms will also create competitive pressure amongst someNHS hospitals. For those that are less financially certain, pricing will becomean issue whilst those that are more financially stable will differentiatethrough quality and service standards such as access times. Synergy continuesto demonstrate that its services assist Trusts with the development of quality,service standards and capacity utilisation and as a result we expect to seecontinued growth with sustainable margins. Dutch Market The Dutch healthcare market is structured differently from the UK withGovernment funded but independently operated hospitals. Like the UK, the Dutchare increasing patient choice leading hospitals to focus on differentiationthrough quality and risk management. Linen management services are virtually all contracted out and the market isrelatively mature. However, there is an increasing momentum towards furtheroutsourcing of non-clinical services such as surgical support services. Initialdiscussions have taken place with a number of LTS customers and we expect thatone or two services will progress during the current financial year. Research and Development Synergy's R&D activities have focused on software development together with somelimited microbiological work. The company intends to increase the level ofresource allocated to R&D to further progress the development of the Group. Theinvestment will be primarily focused on further developments in decontaminationtechnology. Training As the Group continues to gain scale increasing resources are being allocated totraining and development. During the year almost half of our supervisors andjunior managers have completed Institute of Leadership and Management trainingand this will be extended to all managers in the current year. At the same timea number of our sterile services technicians are working towards NationalVocational Qualifications in decontamination. It is our objective to increaseresources on training again this year as part of a wider strategy of competitivedifferentiation. The Team We have an exceptional team at Synergy, with a group of highly motivated andvery capable people. There is no greater competitive advantage than a team thatis able to tangibly reflect what synergy means. With the growth of the business we have had several new people join the Groupand I would like to extend a warm welcome to them. At the same time I wouldlike to thank the entire team for their contribution to the Group and thesuccess that we have enjoyed this year. Dr Richard M SteevesChief Executive OPERATIONAL REVIEW - UK The business in the UK has progressed strongly with a 10% increase in sales anda 17% increase in operating profit. Net operating margin was ahead of last yearwith further improvements in the surgical elements of the business. Seven new contracts started in the year consisting of three linen, twodecontamination and two ISTC services as well as a couple of contract renewals.Recently the company has won additional new linen contracts including a nationalservice for the Nuffield group. This particular contract is reflective of themarket demand for improved service quality. The combined contract wins and renewals have resulted in the growth of the UKforward order book to £380 million continuing to provide the Group with goodforward earnings visibility. Much of the activity this year has been centred on four key projects. Healthtexare opening a new modern healthcare linen facility in the current financial yearin Dunstable. The facility, in line with all of Healthtex's facilities, isdedicated to healthcare linen. The new facility design has incorporated anumber of new features to improve process control and to continue to widen thegap between Synergy's processing quality and its main competitors. The second major project has been the development work for the decontaminationnational strategy. In addition to the pathfinder unit, Synergy is bidding on awave two project and is intending to increase its level of bidding activity inthe next nine projects under wave three. To a large extent Synergy has beenheld back by the NHS pre-qualification criteria that exclude all previousexperience in decontamination services. There is a clear understanding withinSynergy of the need to have new competitors enter the decontamination market sothat its services can be benchmarked in terms of quality and economics. Webelieve that this objective will be met shortly following the award of the fourwave one contracts this summer, and we remain confident that Synergy's scale andtechnological advantage maintains a very significant competitive gap inSynergy's favour. The third project has been the design of Synergy's fourteenth decontaminationunit for the London and Bart's PFI project. The new facility will be the mostmodern facility in the UK, employing Synergy's latest technology and will openin September. Around 90 technicians will transfer from the NHS to work in thenew service. The last project is the launch of a decontamination service focused on thePrimary Care Trust (PCT) market. Whilst Synergy is already a major serviceprovider to PCTs, the new service has been redesigned to widen its appeal tospecialist users such as podiatry, family planning and GP surgeries. The newservice will be launched in Nottingham and Birmingham during early summer andif successful will be expanded nationally to meet the demand for compliantservices by 2007. Looking ahead the UK business remains in a very strong position to continue toincrease its market share. The London and Bart's PFI starts in August withcombined service revenues of over £4 million, together with new ISTC anddecontamination services and the Nuffield linen service. Underlying activityremains strong, and with overall margins continuing to improve, the team looksforward to another successful year. OPERATIONAL REVIEW - NETHERLANDS LTS formally joined Synergy on the 8 July 2004. Integration of the seniormanagement teams was swift, with both teams having a common sense of purpose. Asenior operations board has been established to enable the combined team to setstrategy, benchmark and develop best practice. The underlying year has been successful in what amounts to a relatively maturelinen market. Sales were up 4.7% on the equivalent period last year whilstoperating profits improved by 9.0% with net operating margins increasing by0.6%. During the initial stages of the integration, £1.0 million of cost savingswere identified from the supply chain contributing towards the improved margins.A further £0.2 million has been targeted for the current financial year. During the year two operating sites in the city of Tilburg were merged togetherinto a single site reducing the number of facilities in the Netherlands from 14to 13. The management team continue to look at opportunities to improve theoperational performance of the network and this may extend to greater servicespecialisation of some of the facilities. During the second half of the year we have stepped up our development work forthe expansion of surgical support services into the Netherlands. Our firstproposal for surgical services to an acute hospital saw Synergy short listedfrom eight to two bidders. Service trials are scheduled for July before a finalaward is made and we are optimistic the service will be successful. Theinterest in decontamination services is also increasing. We have held meetingswith several of LTS' acute hospital customers and there is a clear objective toreview the merits of outsourcing surgical support services following the lead inthe UK. One of the discussions has progressed to a more advanced state and welook forward to reporting progress later in the year. To support the expansion of surgical services a new, focused subsidiary will beestablished in the Netherlands. The company will then recruit a specialisedmanagement team to support the commercial development and implementation of thesurgical strategy. The new financial year has started well with robust underlying levels ofactivity. The business continues to work towards improving margins throughimproved business processes and extracting further synergies following thecentralisation of cross border purchasing. The majority of the effort of thesenior team however, will be working to establish surgical support services as acornerstone of our Netherlands operations. FINANCIAL REVIEW Turnover Group turnover for the year grew by 122%, with a large part of the increase inturnover coming from the acquisition of LTS. Additionally organic growth in theUK has continued at the rate of 10% year on year. LTS contributed £36.2 millionof turnover during the year with UK providing £35.7 million. The UK organic growth was driven by new contract wins across the business,together with an increase in volumes processed, as the NHS acute hospital trustsexpanded their own capacity to meet waiting-list targets. A number of ISTCs have become Synergy customers during the year fordecontamination and sterilisation of surgical instruments (referred to assurgical services). Additionally, there has been increased demand for surgicalservices from NHS Primary Care Trusts ("PCTs") and private clinics. This isexpected to be a growing source of revenue as clinics and surgeries will berequired to be supported by a service that is compliant with Europeanregulations by 2007. Synergy is the only private-sector service provider, with anetwork across England, which is able to provide such a service. Operating profit Operating profit increased by 124% to £8.6 million from £3.8 million. Operatingprofit before goodwill amortisation increased by 139%. LTS contributed £5.0million of this operating profit at a net margin of 13.8%. Additionally, UKprofits grew organically by 17% from £4.1 million to £4.8 million and net marginbefore goodwill amortisation rose from 12.7% to 13.5%. Administrative costs have risen slightly less than the rise in turnover,following the acquisition. Central overheads and plc costs have not risen atthe same rate as the growth in turnover, although we have increased the size andexperience of the senior management team over the past twelve months. This resulted in a Group net margin before goodwill amortisation of 13.7%, animprovement on last year's margin of 12.7%. Taxation The taxation charge for the year of £3.0 million represents an effective rate of36.1% compared with the standard UK rate of 30%. This is affected by the impactof non-deductible items, mainly relating to goodwill and because the rate ofcorporate tax in the Netherlands is higher than the UK. Looking at the taxationcharge compared with profit before goodwill amortisation, the rate is 32.1%. Thetax charge is a mixture of UK and Dutch corporate taxes, approximately halfrelating to each country. The Netherlands standard corporate tax rate was 34.5%to 31 December 2004 and has now decreased to 31.5% for the year to 31 December2005. The Group has provided for deferred tax arising from accelerated capitalallowances, which has mainly resulted from the Group's investment in plant andmachinery at its linen management and sterile services facilities. Cash flow and liquidity The Group's operations have continued to be cash generative, with net cash flowfrom operating activities in the year totalling £21.1 million. This represents acash conversion ratio of 215% of operating profit before goodwill amortisation.Cash inflows from operating activities were strong across both the UK and theNetherlands. Working capital has decreased by £2 million over the year. This is mainly due toan increase in creditors in LTS, due to seasonal and timing differences.Notwithstanding this, trade creditor days were 33 days at the year-end comparedwith 52 days last year. Debtors calculated as a number of days turnover at theyear-end was 42 days, across both countries. The pattern of operating profits before goodwill amortisation and cash flow fromoperating activities, over the past three years, is summarised in the chartbelow: 2003 2004 2005 £'000 £'000 £'000 Operating profit 2,816 4,110 9,817Cash generation 6,314 6,927 21,063 Net funds after deducting debt relating to finance leases and loans totals £2.9million, compared with £4.3 million last year, prior to the acquisition. Thegroup enters 2005 with a healthy cash position, no net debt and a strong balancesheet. Acquisition Under the terms of the LTS acquisition, on 8 July 2004, LTS had loans secured onfreehold property assets of £10.0 million. The acquisition was funded by raising£37.5 million of equity, through the placing and open offer of ordinary shares,with £36.3 million remaining after costs. Since the date of acquisition, 8 July2004, the Group has moved from being in a position of having net debt ofapproximately £5.0 million, to the position at 3 April of net cash of £2.9million. Capital expenditure The Group continues to place strong emphasis on capital investment where thisraises productivity and to increase capacity to meet market demand. The largestproject currently underway is the development of a healthcare facility in theSouth-East of England, to meet the demands of the UK's largest concentration ofNHS and private hospitals. The project is now moving towards completion andshould be open by the middle of this summer. The project will be funded by acombination of operating cash flows and finance leases. Other main items of investment capital expenditure during the year include thenew surgical facility at Homerton University Hospital, opened in May 2005, andcontinued investment in the Group's IT systems. Maintenance capital expenditure is continuously required to maintain thecirculating inventory, mainly linen-rental stocks, and to ensure existingfacilities are well equipped to meet customer demand and quality requirements. Return on capital employed has moved from 19% to 18% (based on operating profitbefore goodwill over shareholders funds less net cash) following theacquisition. Systems and reporting procedures The application of technology to improve productivity and provide betterinformation for decision-making is a vital part of our business. The Group has consistent controls and procedures across the UK business.Following the acquisition of LTS, effort has been concentrated on integratingthe business with the UK, to ensure consistency of management reporting andprocedures. This has largely been completed. Additionally, controls overexpenditure and entering into new contracts have been aligned with the UK. The next step is to implement the Group's financial system in the Netherlands.This will ensure that accounting and business processes are consistent acrossboth countries and will provide LTS with a more flexible and sustainable systemto support the development of the business. IFRS As the Group is listed on the AIM market, there is no legal requirement toreport under International Financial Reporting Standards ("IFRS") until the yearcommencing in April 2007. However, the Group is one of the larger companieslisted on AIM and is carefully considering whether it should make the switch atan earlier date, having regard to views of investors and analysts. The Group has looked at the main areas where IFRS is most likely to have animpact on its earnings and financial position. These are as follows: • Goodwill: goodwill is currently amortised and this will be replaced with annual impairment testing (IFRS 3). • Share-based payments (IFRS 2): the Group has a policy of awarding share options to employees who make a significant contribution to business performance and is proposing the introduction of a long-term incentive scheme for senior executives which would make awards of shares. An annual charge will have to be made to operating profits for the fair value of these awards. The charge would not have been significant last year, but would increase in future years if performance targets are met. • Deferred tax (IAS 12): full provision for deferred tax will be required on any revalued properties. Deferred tax on properties in the Netherlands is already fully reflected under Dutch GAAP in the accounts of LTS, but adjusted in the consolidated accounts as it is not currently required under UK GAAP. This will also have to be reflected in the Group's consolidated accounts under IFRS, but will not impact earnings. • Pensions (IAS 19): the Group is currently in the process of transitioning to FRS 17 and is considering the impact of the alternative treatment under IAS 19. The Group will continue to monitor the development of the IFRS regime and itspotential impact on its earnings and balance sheet. The most significant changesfrom an earnings perspective relate to goodwill and share-based payments. Ivan M JacquesGroup Finance Director CONSOLIDATED PROFIT AND LOSS ACCOUNTFor the year ended 3 April 2005 Before Before Goodwill Goodwill Total Goodwill Goodwill Total 2005 2005 2005 2004 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000TurnoverContinuing operations 35,718 35,718 32,418 32,418 Acquisitions 36,173 36,173 - - 71,891 71,891 32,418 32,418 Cost of sales (47,524) (47,524) (21,117) (21,117) Gross profit 24,367 24,367 11,301 11,301 Net administrative expenses (14,550) (14,550) (7,191) (7,191)Goodwill - continuing operations - (273) (273) - (268) (268)Goodwill - acquisitions - (951) (951) - - - Total net administrative expenses (14,550) (1,224) (15,774) (7,191) (268) (7,459) Continuing operations 4,820 (273) 4,547 4,110 (268) 3,842 Acquisitions 4,997 (951) 4,046 - - -Operating profit 9,817 (1,224) 8,593 4,110 (268) 3,842 Net interest (144) - (144) 46 - 46 Profit on ordinary activitiesbefore taxation 9,673 (1,224) 8,449 4,156 (268) 3,888 Taxation on profit on ordinaryactivities (3,101) 54 (3,047) (1,309) 54 (1,255) Profit for the financial year 6,572 (1,170) 5,402 2,847 (214) 2,633Dividends (2,204) - (2,204) (840) - (840) Retained profit for the year 4,368 (1,170) 3,198 2,007 (214) 1,793 Earnings per ordinary shareBasic 16.51p 11.91pDiluted 16.17p 11.66pAdjusted basic 20.08p 12.79pAdjusted diluted 19.67p 12.52p All activities relate to continuing operations. CONSOLIDATED BALANCE SHEETAt 3 April 2005 2005 2004 £'000 £'000 £'000 £'000Fixed assetsIntangible assets 28,708 4,721Tangible assets 45,426 19,920 74,134 24,641Current assetsStocks 1,217 1,133Debtors 12,235 5,697Cash at bank and in hand 14,100 7,105 27,552 13,935Creditors: amounts falling duewithin one year (22,042) (9,857) Net current assets 5,510 4,078 Total assets less current liabilities 79,644 28,719 Creditors: amounts falling dueafter more than one year (9,844) (2,131) Provisions for liabilities and charges (2,706) (888) 67,094 25,700 Capital and reservesCalled up share capital 230 138Share premium account 58,914 21,075Merger reserve 430 430Profit and loss account 7,520 4,057 Shareholders' funds 67,094 25,700 CONSOLIDATED CASH FLOW STATEMENTFor the year ended 3 April 2005 2005 2004 £'000 £'000 Net cash inflow from operating activities 21,063 6,927 Returns on investments and servicing of financeInterest received 532 140Interest paid (537) (4)Finance lease interest paid (139) (100) Net cash (outflow)/inflow from returns on investments andservicing of finance (144) 36 Taxation (2,541) (1,092) Capital expenditure and financial investmentPurchase of tangible fixed assets (11,456) (4,200)Sale of tangible fixed assets 113 69 Net cash outflow from capital expenditureand financial investment (11,343) (4,131) AcquisitionsAcquisition of business (32,648) -Overdraft acquired with business (877) - (33,525) - Equity dividends paid (1,217) (685) Management of liquid resourcesSale of short term deposits - 4,500 Net cash inflow from management ofliquid resources - 4,500 FinancingIssue of ordinary share capital 37,778 14Issue costs (1,193) -Repayment of borrowings (1,202) -Capital element of finance lease rentals (681) (617) Net cash inflow/(outflow) from financing 34,702 (603) Increase in cash 6,995 4,952 OTHER PRIMARY FINANCIAL STATEMENTSFor the year ended 3 April 2005 Consolidated statement of total recognised gains and losses 2005 2004 £'000 £'000 Profit for the financial year 3,198 1,793Currency translation differences 265 - Total gains recognised in the financial year 3,463 1,793 Statement of movement in shareholders' funds 2005 2004 £'000 £'000 Profit for the year 5,402 2,633Dividends (2,204) (840) 3,198 1,793Issue of shares in the year 37,931 14Currency translation differences 265 - Net increase in shareholders' funds 41,394 1,807Shareholders' funds at 28 March 2004 25,700 23,893 Shareholders' funds at 3 April 2005 67,094 25,700 NOTES 1 BASIS OF PREPARATION The preliminary announcement has been prepared in accordance with applicableaccounting standards and under the historical cost convention. The principal accounting policies of the Group are set out in the Group's 2004annual report and financial statements. The policies in this preliminaryannouncement have remained unchanged from the 2004 financial statements. 2 DIVIDENDS Equity dividends: 2005 2004 £'000 £'000 Ordinary shares - interim dividend of 1.7p per share paid (2004: 1.1p) 620 243Ordinary shares - proposed final dividend of 4.3p per share (2004: 2.7p) 1,584 597 2,204 840 3 EARNINGS PER SHARE 2005 2004 £'000 £'000Basic and diluted earnings per shareProfit for the financial year 5,402 2,633 Number Number Weighted average number of ordinary shares in issue during the year 32,726,883 22,099,378 Basic earnings per share 16.51p 11.91p Diluted earnings per share 16.17p 11.66p Number NumberReconciliation of average number of ordinary shares used forbasic and diluted earnings per shareWeighted average number of ordinary shares used for basic earnings per share 32,726,883 22,099,378Weighted average number of shares under option 681,935 479,099 Weighted average number of ordinary shares used for diluted earnings per share 33,408,818 22,578,477 2005 2004 £'000 £'000Adjusted earnings per shareOperating profit 8,593 3,842Goodwill 1,224 268 Adjusted operating profit 9,817 4,110Net interest (144) 46 Adjusted profit on ordinary activities before taxation 9,673 4,156Taxation on adjusted profit on ordinary activities (3,101) (1,330) Adjusted profit for the financial period 6,572 2,826 Adjusted basic earnings per share 20.08p 12.79p Adjusted diluted earnings per share 19.67p 12.52p 4 NET CASH INFLOW FROM OPERATING ACTIVITIES 2005 2004 £'000 £'000 Operating profit 8,593 3,842Depreciation 9,743 3,253(Profit)/loss on sale of tangible fixed assets (23) 32Amortisation of goodwill 1,224 268Exchange differences (265) -Decrease in stocks 179 119Decrease/(increase) in debtors 44 (1,858)Increase in creditors 1,568 1,271 Net cash inflow from operating activities 21,063 6,927 5 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2005 2004 £'000 £'000 Increase in cash in the year 6,995 4,952Cash outflow from financing 1,202 -Cash outflow from finance leases 681 617Cash inflow from liquid resources - (4,500) Change in net funds resulting from cash flows 8,878 1,069Inception of finance leases - (1,522)Loans acquired on acquisition (10,000) -Exchange differences (302) - Movement in net funds in the year (1,424) (453)Net funds at 29 March 2004 4,333 4,786 Net funds at 3 April 2005 2,909 4,333 6 ACQUISITIONS On 8 July 2004 the company acquired LIPS Textielservice Holding B.V. for a totalconsideration of €50,000,000 (£33,320,419), comprising cash of €48,000,000(£31,974,420) and the issue of 498,518 shares at £2.70 per share. Costs of£673,535 were incurred in relation to the transaction. LIPS TextielserviceHolding B.V. provides linen management services principally to healthcareproviders in the Netherlands. Cash Consideration Acquisition Total shares costs capitalised £'000 £'000 £'000 £'000 Total consideration comprised 31,974 1,346 674 33,994 Total Fair value of Goodwill consideration assets arising acquired £'000 £'000 £'000 Total goodwill capitalised in the year comprised 33,994 8,783 25,211 The acquisition during the year made the following contributions to, andutilisation of, group cash flows: 2005 £'000 Net cash inflow from operating activities 11,657Capital investment and financial investment (8,206)Increase in cash 3,451 Analysis of net outflow of cash in respect of acquisition: 2005 £'000Cash consideration 31,974Acquisition costs 674Overdraft acquired with business 877 33,525 7 The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in section 240 of the Companies Act 1985. The financial information has been extracted from the Group's 2005 statutory financial statements upon which the auditors' opinion is unqualified and does not include any statement under section 237 of the Companies Act 1985. 8 The financial statements for the year ended 3 April 2005 will be posted to shareholders on 31 May 2005, and will be delivered to the Registrar of Companies following the Company's Annual General Meeting. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
SYR.L