14th Oct 2008 07:00
|
Tuesday 14 October 2008 |
SYNERGY HEALTH PLC
("Synergy" or "the Company")
H1 2008 Trading Update
Synergy Health plc (LSE: SYR), a leading provider of outsourced healthcare support services in the UK, Continental Europe, Asia and South Africa, today provides an update on trading prior to the release of its results for the six months ended 28 September 2008.
The Company has continued to benefit from a resilient healthcare market despite the downturn in the world economy. Overall sales are up approximately 31% on last year to £133 million, in line with the growth reported after the first quarter (14.7% excluding Vernon Carus). Sales growth to 28 September for the three main businesses was:
|
Healthcare Solutions and Linen Services (formerly Patient Care) |
38% |
|
Decontamination Services (formerly Surgical) |
33% |
|
Sterilisation Services (Isotron) |
9.4% |
Overall, we remain confident that sales for the full year will be substantially in line with consensus market forecasts. However, operating margins in the first half have been impacted by the higher than anticipated start-up costs of the new Decontamination Services units as well as higher energy and transportation costs that have affected all three businesses, particularly the UK Linen Management business. While our contracts generally provide for indexation in line with RPI, there has been a lag between improvements in pricing and the rapid increase in energy costs seen during the half. As a consequence, Group net operating margins for the half year are expected to be about 1% lower than the planned 14.5% in the first half.
We remain very focused on restoring operating margins in the second half. This will be achieved as our new services reach steady state and price increases offset moderating energy costs. We will also continue to focus on maximising efficiencies in our more established businesses such as completing the closure of one of our UK linen facilities at the end of October.
Net debt at 28 September was approximately £154 million, broadly unchanged from the first quarter, and the business continues to enjoy plenty of headroom with its current banking facilities.
Medium Term Outlook
Sales growth is expected to remain robust in all of our operating markets. Our Sterilisation business should continue to see positive momentum as we fill capacity at the facility at Venlo in the Netherlands and we bring the new Irish specialist ETO and eBeam facilities on stream in 2009, as well as the new Chinese facility which we will open as planned in Spring 2009.
Demand for our Decontamination Services also remains very strong in all the markets in which we operate and we expect to see continued growth through new contract wins, although these are likely to be outside the UK's National Decontamination Programme ("NDP"). We have certain reservations about the NDP and, as we highlighted earlier this year, our marketing effort is being channelled outside of this programme with continued success. We continue to see China as one of our brightest prospects with the Chinese Government recently announcing an increased focus on healthcare with a commitment to build 300 hospitals per year for the foreseeable future. Our Healthcare Solutions and Linen Services are also expected to continue to grow, benefiting from continued outsourcing and increased focus on infection control.
Interim Results for the six months ended 28 September 2008 are expected to be announced on 30 October 2008.
Dr Richard Steeves, Chief Executive of Synergy Health, commented:
"We are pleased that we have continued to win new contracts across all of our businesses and that demand for our services has remained strong. Although we have faced some headwinds in the first half in the form of higher energy and business start-up costs, we believe that the pro-active steps that we are taking will restore margins over the coming 12 months. With an international spread of businesses and increasing demand for outsourced healthcare services in all markets in which we operate, we remain confident about the wider prospects for the group despite the more challenging macro-economic environment."
Enquiries:
|
Synergy Health plc |
|
|
Dr Richard Steeves, Chief Executive Ivan Jacques, Finance Director |
01793 891851 |
|
Morgan Stanley |
020 7677 2395 |
|
Peter Moorhouse |
|
|
Investec |
020 7597 5970 |
|
Patrick Robb |
|
|
Financial Dynamics |
020 7831 3113 |
|
David Yates / Ben Brewerton |
Related Shares:
SYR.L