Cost-cutting and a one-off tax credit helped add lustre to Synergy Healthcare's results as the medical de-contamination specialist benefited from action last year to rebuild gross profit margins back to 2008 levels of 36.2 per cent, which was successfully achieved. Net debt was also reduced sharply, falling 22 per cent to £133m as cash generation improved.
This came on the back of a 7.5 per cent rise in underlying sales, although there was wide variation across the business: Africa and Asia grew revenues by more than 20 per cent, but the UK & Ireland, Synergy's main markets, came in below average with growth of only 3.1 per cent. The main priority here was to keep costs under control and to pick contracts that would not undermine the gross margin. Europe has proved a difficult market to crack, mainly because VAT rules give no incentive for hospitals to outsource services, but management said it had now developed a "contractual solution" to the VAT problem.
Chief executive Richard Steeves is targeting double digit EPS growth in the short-term, with more outsourcing possible in the UK for laundry and sterilisation services as budgets are stretched. Broker Investec Securities edged up adjusted pre-tax profit estimates for 2011 to £37.7m, giving EPS of 52.2p (2010: £32.6m/45.7p).
| ORD PRICE: | 622p | MARKET VALUE: | £ 341m | |
| TOUCH: | 620-625p | 12-MONTH HIGH: | 697p | LOW: 405p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 485p* | NET DEBT: | 50% | |
| Year to 28 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2006 | 117 | 10.6 | 20.4 | 7.0 |
| 2007 | 153 | 8.8 | 15.4 | 8.4 |
| 2008 | 225 | 18.9 | 28.2 | 10.1 |
| 2009 | 274 | 16.3 | 23.5 | 11.0 |
| 2010** | 286 | 24.5 | 40.6 | 13.2 |
| % change | +4 | +50 | +73 | +20 |
*Includes intangible assets of £239m, or 436p a share **Second interim dividend paid on 1 Apr 2010 in lieu of final dividend | ||||
