21st Jan 2009 07:00
21 January 2009
SYNERGY HEALTH PLC
("Synergy", "the Company" or "the Group")
Q3 Interim Management Statement
Synergy (SYR.L), a leading provider of outsourced healthcare support services in the UK, Continental Europe, Asia and South Africa, is pleased to provide an update on its progress since 28 September 2008.
Overall trading has been in line with the Board's revised expectations following the announcement of the interim results on 30 October 2008. Sales in the third quarter increased 15.5% on the same period last year to £67.9 million (Q3 2007/8: £58.8m). Sales for the nine months to 28 December 2008 increased 24.9% to £201.0 million (YTD 2007/8: £160.9m). Sales in the operating regions were as follows:
|
Sales Q3 08 |
Sales Q3 07 |
Growth |
|
|
United Kingdom |
£38.4 million |
£34.6 million |
11.0% |
|
Rest of Europe |
£27.5 million |
£22.6 million |
21.7% |
|
Asia and South Africa |
£2.0 million |
£1.6 million |
25.0% |
Synergy remains on course to recover Group net operating margins to levels previously achieved by autumn of this year.
Importantly Synergy has won new contracts worth £6.5 million per annum during the quarter including £2.5 million of new linen services work across the Netherlands and the UK, and £4.0 million of new decontamination services work across three acute hospitals and two primary care trusts. One of these contracts includes taking over the management of an NHS decontamination facility that was built as a super centre model ahead of the national programme. The Company is continuing to develop the UK decontamination market and expects to report further progress in the coming quarter.
Health related sales have to date been relatively unaffected by the current economic crisis. There continues to be a slow down in the Company's drug and alcohol testing laboratory business in the UK and the industrial use of our sterilisation processes for applications like materials modification. However, these two areas accounted for only £2.4 million (2007/08 £2.2 million) of the Group's sales this quarter.
Synergy remains on schedule to open a number of new facilities in the coming months including the new eBeam facility and specialist EtO facility in Ireland, the combined sterilisation & decontamination facility in China and a new decontamination facility in the North West of England. A significant part of the budgeted revenues for these new facilities is underpinned by long term contracts with large customers.
Significant progress has been made within the Decontamination business and Synergy expects margins within this business to have fully recovered by the end of the next quarter. Margins in Healthcare Solutions are set to improve towards the end of this year as energy costs reduce. We are also expecting to push through price rises in the coming months in order to offset the impact on costs of the rapid devaluation of Sterling. At an operational level we continue to take steps to increase efficiency and reduce costs by further rationalising facilities. One Dutch Healthcare Solutions facility was closed in December and one will close early in the new financial year together with a Healthcare Solutions' facility in the UK.
The debt position remains comfortably within covenants agreed with the Company's syndicate of banks, with net debt at £167.4 million at the end of the 3rd quarter (£153.3m at the end of Q2). The increase in net debt is primarily driven by an increase in the Sterling value of Euro denominated debt arising from the devaluation of Sterling. As a mitigating action €30.1 million of debt was converted to Sterling during December at an average exchange rate of approximately 1.15 Euros to UK pounds' Sterling, leaving €70.5 million (£66.5 million) in Euros.
The level of investment expenditure next year will be at a lower level than this year as we focus on improving margins and returns from recent investments and the existing portfolio. However, we shall continue to invest in our people to improve the quality of Synergy's businesses on a sustainable basis and to support this we have recently appointed a director of strategic human resources, a new position in the Group. Under her leadership we are extending international graduate recruitment and increasing our investment in management development programmes to support Synergy's medium term growth aspirations in both the UK and international markets.
Despite the difficult economic environment, Synergy expects to continue making progress in the next quarter and the Board's expectations for the results for the full year to 30 March 2009 remain unchanged.
Enquiries:
|
Synergy Health plc |
01793 891891 |
|
Dr Richard Steeves, Chief Executive Ivan Jacques, Finance Director |
|
|
Morgan Stanley |
020 7677 2395 |
|
Peter Moorhouse |
|
|
Investec |
020 7597 5970 |
|
Patrick Robb |
|
|
Financial Dynamics |
020 7831 3113 |
|
David Yates / Ben Brewerton |
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