TIDMSYR
RNS Number : 9111D
Synergy Health PLC
30 October 2015
Friday 30 October 2015
SYNERGY HEALTH PLC
('Synergy', the 'Company' or the 'Group')
INTERIM RESULTS FOR THE SIX MONTHS ENDED 27 SEPTEMBER 2015
Synergy Health plc (LSE: SYR), a leading global provider of
specialist outsourced support services to health-related markets,
announces its interim results for the six months ended 27 September
2015.
Six months Six months
ended ended % change
27 September 28 September
2015 2014
Revenue GBP206.3m GBP197.5m + 4.4%
Adjusted operating profit(1) GBP33.1m GBP31.6m + 5.0%
Adjusted profit before tax(1) GBP30.2m GBP28.4m + 6.4%
Profit before tax GBP7.8m GBP24.7m - 68.3%
Adjusted basic earnings per
share(1) 42.41p 36.42p + 16.4%
Dividend per share (interim) 15.8p -
Operating cash flow(1) GBP49.1m GBP44.8m +9.6%
Net debt GBP156.3m GBP172.8m
Financial Highlights
-- Reported revenue growth of 4.4%. Underlying revenue growth,
excluding currency effects, of 6.3%
-- Underlying adjusted operating profit increased by 8.8% on a
constant currency basis. Adjusted operating profit(1) margin
increased by 10 basis points to 16.1%
-- Operating cash flow increased by 9.6% to GBP49.1 million with cash conversion of 89%
-- Special dividend of 15.8p paid on 20 October, prior to
completion of the combination with STERIS Corporation ('STERIS').
No interim dividend was paid in 2014 due to the combination of
Synergy and STERIS
-- Costs of GBP18.0 million relating to the combination of
Synergy and STERIS are included within non-recurring items and
acquisition-related costs
-- Adjusted EBITDA increased by 6.0% to GBP55.0 million
Operational Highlights
-- Strong growth in Applied Sterilisation Technologies ('AST')
with revenue up 10.3% on a constant currency basis
-- Healthcare Services ('HS') revenue grew by 7.5% on a constant
currency basis with contract wins of GBP35 million. Strong pipeline
with the bid book growing by a third to GBP300 million
-- Healthcare Solutions ('HCS') revenue declined by 1.6% on a
constant currency basis. Contract wins of GBP4 million in the first
half of the year, and a further GBP8 million subsequent to the half
year
-- Expected completion of the combination with STERIS on 2 November 2015
Outlook
-- Combination with STERIS will support Synergy's growth
initiative in HS, especially within the US, while the enlarged AST
business will deliver global services to our shared customer
base
(1) Adjusted operating profit, adjusted profit before tax and
adjusted basic earnings per share shown above exclude amortisation
of acquired intangibles and non-recurring items and
acquisition-related costs, as shown in the Group's consolidated
income statement and the accompanying notes. Operating cash flow
excludes non-recurring items and acquisition-related costs.
CHIEF EXECUTIVE'S REVIEW
Results
It is my pleasure to report what is expected to be our last set
of results as Synergy Health. We have enjoyed another strong period
of growth reflecting the strength of our strategy and its
implementation. Reported revenue was up 4.4% to GBP206.3 million
(2014: GBP197.5 million) and up 6.3% on a constant currency
basis.
During the first half of the year we have made a number of
investments in new capacity across our Applied Sterilisation
Technologies and HCS businesses. We have been successful at winning
new contracts, totalling GBP47 million for HS and HCS, alongside
good growth across the AST business.
Adjusted operating margin improved 10 basis points during the
first half of the year. As a result adjusted operating profit
increased by 5.0% to GBP33.1 million (2014: GBP31.6 million) and up
8.8% on a constant currency basis.
Adjusted basic EPS was up 16.4% to 42.41 pence (2014: 36.42
pence). Basic EPS was down 72.8% to 8.43 pence (2014: 31.02 pence)
as a result of non-recurring costs incurred to complete the
combination with STERIS.
Net debt at the end of the period decreased to GBP156.3 million.
Operating cash flow was GBP49.1 million (2014: GBP44.8 million),
increasing above the growth in operating profits due to good
control of working capital.
Recommended Combination
We are working to complete the combination of Synergy with
STERIS on 2 November 2015 in line with the revised timetable of
principal events set out in the Company's announcement relating to
the Scheme Court Hearing, published on 26 October 2015.
Dividend
On 1 October 2015 the Board declared a special dividend of 15.8
pence per share. This was paid on 20 October 2015 to shareholders
on the register as at 9 October 2015. As a result of the proposed
combination with STERIS, the Board has decided not to pay a further
interim dividend, which would only have reduced the cash element to
be received by Synergy shareholders under the terms of the
combination with STERIS by an equal amount.
Business Line Review
Synergy is a leading provider of specialist outsourced support
services to health-related markets and an international leader in
the provision of outsourced sterilisation services for hospitals
and medical device manufacturers. We operate in three distinct
service lines:
Applied Sterilisation Technologies ('AST'), providing gamma,
electron beam, X-ray and ethylene oxide contract sterilisation
services to medical device manufacturers and related industries, as
well as a range of technical laboratory services;
Healthcare Services ('HS'), providing a range of outsourced
sterilisation services to hospital systems in the US, UK, Italy,
Netherlands and China, reusable sterile gowns and drapes in the US
('RSS'), and an international products business based in the UK;
and
Healthcare Solutions ('HCS'), providing healthcare linen rental
services in the UK and the Netherlands.
Applied Sterilisation Technologies
Reported revenue for the period increased by 5.5% to GBP70.7
million (2014: GBP67.0 million) and up 10.3% on a constant currency
basis. Adjusted operating profit was GBP25.2 million (2014: GBP23.3
million), increasing 13.6% on a constant currency basis. Operating
margin was marginally higher at 35.6%. During the traditionally
quieter second quarter, two European facilities were closed for
capacity upgrades. Both facilities will resume operations in the
second half, alongside the opening of a new electron-beam facility
in Petaluma, California. The global register of opportunities now
sits at GBP44 million, an increase of 33%, reflecting the
investment we have made in our business development team and
providing confidence for future growth.
Healthcare Services
Reported revenue grew by 11.0% to GBP92.1 million (2014: GBP83.0
million). Growth has been driven by the start of new contracts,
partially offset by the continued rationalisation of low margin,
non-core, product distribution services in the US. During the first
half we won contracts with a total value of GBP35 million of new HS
contracts. The global bid book is now standing at GBP300 million.
Adjusted operating profit was consistent with last year at GBP8.7
million (2014: GBP8.7 million), as the business invests in an
expanded operations team in advance of new instrument processing
contracts.
Healthcare Solutions
Reported revenue for the linen business was GBP43.4 million
(2014: GBP47.5 million). Underlying revenue for the period before
adverse currency effects was down 1.6% reflecting an improved
situation. During and subsequent to the period the business won new
contracts worth GBP12 million. A number of facilities across the
network are being upgraded with new automated plant and machinery
that has caused some short-term disruption but will yield future
capacity and productivity improvements. Operating margins were
marginally lower, reducing from 7.3% to 6.8%. Adjusted operating
profit was GBP3.0 million (2014: GBP3.5 million).
Synergy Team
I would like to take this opportunity to thank our team for
working so diligently over the last year whilst contending with the
distraction of the STERIS transaction. I am very proud of the team
that we have built at Synergy and the great work that has been done
creating one of the world's leaders in sterilisation and infection
control services. The hard work and dedication of our employees has
not only created a great business but has also had a significant
impact on improving patient safety and reducing risks for our
healthcare customers around the world.
Outlook
Synergy has enjoyed 24 years of unbroken growth. The combination
with STERIS will further enhance the prospects for both Synergy and
the enlarged Group. As I wrote last year, we now enter a new
chapter in Synergy's evolution, where our access to STERIS' U.S.
sales teams and infrastructure will help to accelerate the hospital
sterilisation outsourcing market, and the combined global AST
network will be of significant value to our shared customer base.
In the USA in particular there is unprecedented demand for our
Hospital Sterilisation Services where we offer a compelling
proposition to hospitals seeking to cost effectively improve
patient safety and regulatory compliance.
I remain very excited about the opportunities at hand, and look
forward to seeing continued growth of the combined
organisation.
Richard Steeves
Group Chief Executive Officer
30 October 2015
FINANCE DIRECTOR'S REPORT
Overview
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Our business delivered a strong first half financial performance
with reported revenue growing 4.4% to GBP206.3 million (2014:
GBP197.5 million) and adjusted operating profit increasing by 5.0%
to GBP33.1 million (2014: GBP31.6 million). Excluding currency
effects, underlying revenue growth was 6.3% and adjusted operating
profit grew by 8.8%. Adjusted operating margin increased by 10
basis points to 16.1%. Adjusted basic earnings per share grew by
16.4% to 42.41p.
Strong cash generation across the business resulted in cash
generated from operations (before non-recurring items and
acquisition-related costs) increasing by 9.6% to GBP49.1 million
(2014: GBP44.8 million), reflecting a conversion of adjusted EBITDA
into operating cash flow of 89% (2014: 86%). Net debt decreased to
GBP156.3 million from GBP161.1 million at the year end,
representing a net debt to EBITDA ratio of 1.44 times which is
comfortably within our banking covenant of 3.25 times.
Adjusted operating returns on average capital employed, on an
annualised basis, increased to 12.7% from 12.4% at the year
end.
1. Income statement
The Group's income statement is summarised below.
Table 1: Income statement
Six months Six months Change
ended ended
27 September 28 September
2015 2014
GBPm GBPm
Revenue 206.3 197.5 +4.4%
------------------------------ -------------- -------------- -------
Gross Profit 87.3 87.0
Administrative expenses (54.2) (55.4)
------------------------------ -------------- -------------- -------
Adjusted operating profit 33.1 31.6 +5.0%
Net finance costs excluding
acquisition-related costs (2.9) (3.2)
------------------------------ -------------- -------------- -------
Adjusted profit before tax 30.2 28.4 +6.4%
Amortisation of acquired
intangibles (4.4) (4.3)
Non-recurring items and
acquisition-related costs (18.0) 0.6
Profit before tax 7.8 24.7 -68.3%
Tax (3.0) (6.3)
------------------------------ -------------- -------------- -------
Profit for the period 4.8 18.4 -73.9%
------------------------------ -------------- -------------- -------
Effective tax rate (1) 17.5% 23.9%
Adjusted earnings per share
- basic 42.41p 36.42p +16.4%
Earnings per share - basic 8.43p 31.02p -72.8%
Adjusted earnings per share
- diluted 41.63p 36.12p +15.3%
Earnings per share - diluted 8.27p 30.75p -73.1%
Dividend per share 15.8p -
------------------------------ -------------- -------------- -------
(1) The effective tax rate is calculated excluding amortisation
on acquired intangibles and non-recurring items and
acquisition-related costs
1.1 Revenue
Reported revenue of GBP206.3 million (2014: GBP197.5 million)
increased by 4.4%, representing an underlying growth rate,
excluding currency effects, of 6.3% over the previous year. The
movement in currency exchange rates over the last year (notably a
weakening of the Euro against Sterling) has depressed reported
revenue by GBP3.6 million.
Underlying revenue, excluding currency effects, grew by 10.3% in
AST and 7.5% in HSS, with a decline of 1.6% in Healthcare
Solutions.
1.2 Gross profit
Gross profit was marginally higher at GBP87.3 million (2014:
GBP87.0 million), representing a gross profit margin of 42.3%. The
increase in gross profit was depressed by the prior period
acquisition of Bioster.
1.3 Adjusted operating profit
Adjusted operating profit increased by 5.0% to GBP33.1 million
(2014: GBP31.6 million), representing an adjusted operating profit
margin of 16.1%, an increase of 10 basis points. Currency effects
have reduced reported adjusted operating profit by GBP1.2 million,
with growth of 8.8% on a constant currency basis.
1.4 Non-recurring items and acquisition-related costs
Non-recurring items and acquisition-related costs during the
period were GBP17.6 million, of which GBP18.0 million were costs
relating to the STERIS combination with the balance being a small
credit from the excess of insurance proceeds for the Rawang
insurance claim over and above the written down value of damaged
assets.
Against the STERIS combination costs of GBP18.0 million we have
recognised legal and transaction fees of GBP11.8 million, of which
GBP7.6 million were contingent on the successful completion of the
transaction. In addition, and also contingent on completion, we
have recognised accelerated share option costs of GBP6.2
million.
1.5 Net finance costs
The Group's net finance costs before acquisition-related costs
totalled GBP2.9 million (2014: GBP3.2 million), a reduction of
GBP0.3 million against the comparative period. An
acquisition-related cost of GBP0.4 million has been expensed in the
period, relating to the accelerated amortisation of financing
arrangement fees.
1.6 Adjusted profit before tax
Adjusted profit before tax was GBP30.2 million (2014: GBP28.4
million), an increase of 6.4%, (10.7% excluding currency effects).
The adjusted profit before tax margin was 14.6% (2014: 14.4%), an
increase of 20 basis points.
1.7 Amortisation of acquired intangibles
Amortisation of acquired intangibles relates to intangible
assets identified on acquisitions, being the value of customer
relationships and brands.
1.8 Tax
The tax charge (excluding amortisation of acquired intangibles,
non-recurring items and acquisition-related costs) of GBP5.3
million (2014: GBP6.8 million) represents an effective tax rate of
17.5% (2014: 23.9%). The reduction in tax charge compared to the
prior period is largely due to the completion of a prior period tax
audit, plus impact of a reduction in the main UK rate of
corporation tax from 21% to 20%.
The amortisation of acquired intangibles, non-recurring items
and acquisition-related costs generated a tax credit of GBP2.3
million, resulting in a net tax charge of GBP3.0 million (2014:
GBP6.3 million). This represents an effective tax rate (after
amortisation of acquired intangibles, non-recurring items and
acquisition-related costs) of 38.4% (2014: 25.4%). This increase in
the overall effective tax rate is caused by some of the costs
relating to the combination with STERIS not being deductible for
tax.
1.9 Earnings per share
Adjusted basic earnings per share and adjusted diluted earnings
per share, after adjusting for amortisation of intangibles and
non-recurring items and acquisition-related costs, increased by
16.4% and 15.3% respectively. After amortisation of acquired
intangibles, non-recurring items and acquisition-related costs,
basic and diluted earnings per share decreased by 72.8% and 73.1%
respectively, due to costs relating to the STERIS combination.
Year on year, undiluted weighted average shares have increased
from 58.9 million to 59.1 million.
2. Dividend
On 1 October 2015 the Board declared a special dividend of 15.8
pence per share. This was paid on 20 October 2015 to shareholders
on the register as at 9 October 2015.
3. Cash flow
The Group's cash flow is summarised below.
Table 2: Cash flow
Six months Six months
ended ended
27 September 28 September
2015 2014
GBPm GBPm
Adjusted operating profit 33.1 31.6
Non-cash items 21.9 20.3
------------------------------------------------------------------------------ -------------- --------------
Adjusted EBITDA 55.0 51.9
Working capital movement (5.9) (7.1)
------------------------------------------------------------------------------ -------------- --------------
Operating cash flow before non-recurring items and acquisition-related costs 49.1 44.8
Non-recurring items and acquisition-related costs (6.1) (3.8)
Operating cash flow after non-recurring items and acquisition-related costs 43.0 41.0
Interest (2.6) (3.0)
Tax (4.4) (2.9)
Net maintenance expenditure on tangible and intangible assets (11.9) (13.8)
Free cash flow 24.1 21.3
Acquisition of subsidiaries, net of cash acquired (1.0) (10.6)
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Disposal of subsidiaries, net of cash acquired (0.2) (6.7)
Net investment expenditure on tangible and intangible assets (17.7) (18.1)
Financing (13.3) 29.4
Proceeds from share issue 0.6 -
Dividend to non-controlling interest - (0.1)
Dividends paid - (8.4)
Other (1.5) (1.0)
------------------------------------------------------------------------------ -------------- --------------
Net (decrease)/increase in cash and cash equivalents (9.0) 5.8
------------------------------------------------------------------------------ -------------- --------------
Note: Adjusted EBITDA is earnings before interest, tax,
depreciation, intangible amortisation and other non-cash items
3.1 Cash generated from operations
Cash generated from operations (before non-recurring items and
acquisition-related costs) in the year increased by 9.6% to GBP49.1
million (2014: GBP44.8 million), reflecting a conversion of EBITDA
into operating cash flow of 89% (2014: 86%).
3.2 Interest
Net interest paid was GBP2.6 million (2014: GBP3.0 million).
3.3 Tax
Tax paid was GBP4.4 million (2014: GBP2.9 million). The increase
against last year was because of a tax refund in the comparative
period.
3.4 Net expenditure on tangible and intangible assets
The Group continued to invest in new capacity during the period,
as well as upgrading and maintaining its existing infrastructure.
Total net capital additions of GBP29.6 million (2014: GBP31.9
million) were made during the period.
We analyse capital expenditure between 'maintenance' and
'investment' expenditure. Maintenance capital expenditure is the
capital required to replace the existing capital base. Investment
capital expenditure enhances the capacity or efficiency of the
Group's capital base.
The items of necessary on-going capital expenditure are
cobalt-60, the radiation source for AST gamma sterilisation plants,
textiles for the linen business, and reusable surgical products.
Total maintenance capital expenditure was GBP11.9 million (2014:
GBP13.8 million), of which GBP5.3 million related to cobalt-60,
GBP5.1 million to textile linen and GBP1.5 million to reusable
surgical products in the US.
Total investment capital expenditure was GBP17.7 million (2014:
GBP18.1 million). Total expenditure in AST was GBP11.9 million,
including GBP3.0 million on our new pallet irradiator in Bradford,
GBP1.3 million on increasing processing capacity within the gamma
facilities in the Netherlands, GBP1.8 million on a new electron
beam in Italy and GBP2.5 million on our new electron beam facility
in Petaluma, California. Expenditure of GBP1.2 million on the new
North Shore facility in New York was the largest component of
investment in HS. Investment in upgrading plant and machinery that
improves productivity and lifts capacity in our linen facilities in
the UK and selected sites in the Netherlands results in total
investment in the Linen business of GBP2.5 million.
4 Net debt and funding
4.1 Net debt
Net debt decreased in the period from GBP161.1 million at the
end of March 2015 to GBP156.3 million. The movement in the net debt
is reconciled below:
Table 3: Movement in net debt
GBPm
---------------------------------- -------
Net debt as at 30 March 2015 161.1
Exchange rate impacts 0.3
Free cash flow (24.1)
Investment capital expenditure 17.7
Acquisitions, including acquired
debt 0.9
Pre-acquisition liabilities 0.2
Dividends paid (0.6)
Other items 0.8
Net debt as at 27 September 2015 156.3
---------------------------------- -------
4.2 Funding
The Group has in place a 5 year unsecured multi-currency
revolving facilities agreement ('the Agreement'), which was signed
on 26 July 2011. The Agreement has been entered into with a group
of 7 banks and comprises a Sterling denominated multi-currency
facility of GBP105 million and a Euro denominated multi-currency
facility of EUR130 million. The Group remains comfortably within
the financial covenants set out in the Agreement.
On 13 September 2012, the Group issued a bilateral private
placement note of EUR20.6 million. The Group at that point also put
in place an uncommitted shelf facility with the same lender,
allowing it to draw up to $48.5 million over a 2.5 year period. The
remaining shelf facility was utilised during September 2013 when
two further notes were issued, one for GBP10.0 million, and a
second note for EUR25.1 million. The financial covenants are
broadly similar to those in the Agreement.
The debt is split between Sterling, Euros and US Dollars with
the currency mix and level of fixed interest debt within each
currency as follows:
Table 4: Composition of gross debt as at 27 September 2015
Level of fixed
Level of debt interest debt
GBPm GBPm
----------- ---------------- ---------------
Sterling 14.4 100%
Euro 86.5 41%
US Dollar 83.4 28%
Total 184.3 40%
----------- ---------------- ---------------
The Euro denominated debt, which is predominantly held in the
UK, is held to hedge the Group's Euro denominated net assets
(excluding goodwill and intangibles) of EUR187.9 million. The US
Dollar denominated debt is held as a hedge of the Group's US Dollar
denominated net assets (excluding goodwill and intangibles) of
$191.6 million. As at 27 September 2015, 40% of the total debt was
held at fixed rates of interest.
5 Pensions
The Group operates three final salary schemes in the UK, one in
the Netherlands, two in Germany, and one in Switzerland. The Group
also operates several defined contribution schemes.
In the UK the Group is required to maintain a final salary
pension scheme for employees who have transferred from the NHS,
which has to be acceptable to the Government Actuary's Department.
With the exception of NHS transferees, the Group's defined benefit
schemes are closed to new entrants and future accruals; active
members have been transferred to deferred status and invited to
join the Group's UK defined contribution scheme.
At 27 September 2015, the net liability arising from our defined
benefit scheme obligations was GBP16.2 million (29 March 2015:
GBP20.3 million) on a pension scheme asset base of GBP68.2 million.
A reduction in the deficit from the year end is primarily due to a
fall in liabilities following an increase in the discount rate.
Table 5: Defined benefit pension schemes
At 27 At 28 At 29
September September March
2015 2014 2015
GBPm GBPm GBPm
Synergy Healthcare plc Retirement
Benefits Scheme 3.1 2.7 3.9
Shiloh Group Pension Scheme 3.6 3.2 4.5
Vernon Carus Limited Pension
and Assurance Scheme 6.8 8.5 9.2
Isotron BV Pension and Assurance
Scheme 0.7 0.8 0.7
Synergy Health Daniken, Switzerland 1.2 0.8 1.3
Synergy Health Germany 0.8 0.7 0.7
------------------------------------- ----------- ----------- -------
Balance sheet liabilities 16.2 16.7 20.3
------------------------------------- ----------- ----------- -------
Gavin Hill
Group Finance Director
30 October 2015
Condensed consolidated income statement
For the period ended 27 September 2015
Six months ended 27 September 2015 Six months ended 28 September 2014
======================================= =======================================
Before Amortisation Before Amortisation
amortisation of acquired amortisation of acquired
of acquired intangibles of acquired intangibles
intangibles and intangibles and
and non-recurring and non-recurring
non-recurring items non-recurring items
items (note 7) Total items (note 7) Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
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======================================================== ==== ============= ============= ========= ============= ============= =========
Continuing operations
======================================================== ==== ============= ============= ========= ============= ============= =========
Revenue 6 206,290 - 206,290 197,506 - 197,506
======================================================== ==== ============= ============= ========= ============= ============= =========
Cost of sales (118,933) - (118,933) (110,558) - (110,558)
======================================================== ==== ============= ============= ========= ============= ============= =========
Gross profit 87,357 - 87,357 86,948 - 86,948
======================================================== ==== ============= ============= ========= ============= ============= =========
Administrative expenses
======================================================== ==== ============= ============= ========= ============= ============= =========
* Administration expenses excluding amortisation of
acquired intangibles (54,247) (17,550) (71,797) (55,402) 594 (54,808)
======================================================== ==== ============= ============= ========= ============= ============= =========
- Amortisation of acquired intangibles - (4,364) (4,364) - (4,298) (4,298)
======================================================== ==== ============= ============= ========= ============= ============= =========
(54,247) (21,914) (76,161) (55,402) (3,704) (59,106)
======================================================== ==== ============= ============= ========= ============= ============= =========
Operating profit 6 33,110 (21,914) 11,196 31,546 (3,704) 27,842
======================================================== ==== ============= ============= ========= ============= ============= =========
Finance income 1,255 - 1,255 2,066 - 2,066
======================================================== ==== ============= ============= ========= ============= ============= =========
Finance costs (4,193) (450) (4,643) (5,252) - (5,252)
======================================================== ==== ============= ============= ========= ============= ============= =========
Net finance costs (2,938) (450) (3,388) (3,186) - (3,186)
======================================================== ==== ============= ============= ========= ============= ============= =========
Profit before tax 30,172 (22,364) 7,808 28,360 (3,704) 24,656
======================================================== ==== ============= ============= ========= ============= ============= =========
Income tax 8 (5,267) 2,268 (2,999) (6,770) 518 (6,252)
======================================================== ==== ============= ============= ========= ============= ============= =========
Profit for the period 24,905 (20,096) 4,809 21,590 (3,186) 18,404
======================================================== ==== ============= ============= ========= ============= ============= =========
Attributable to:
======================================================== ==== ============= ============= ========= ============= ============= =========
Equity holders of the parent 25,079 (20,096) 4,983 21,467 (3,186) 18,281
======================================================== ==== ============= ============= ========= ============= ============= =========
Non-controlling interests (174) - (174) 123 - 123
======================================================== ==== ============= ============= ========= ============= ============= =========
24,905 (20,096) 4,809 21,590 (3,186) 18,404
======================================================== ==== ============= ============= ========= ============= ============= =========
Earnings per share
======================================================== ==== ============= ============= ========= ============= ============= =========
Basic 10 8.43p 31.02p
======================================================== ==== ============= ============= ========= ============= ============= =========
Diluted 10 8.27p 30.75p
======================================================== ==== ============= ============= ========= ============= ============= =========
Condensed consolidated income statement
Period ended 29 March 2015
=============================================
Before Amortisation
amortisation of acquired
of acquired intangibles and
intangibles and non-recurring
non-recurring items
items (note 7) Total
Note GBP'000 GBP'000 GBP'000
========================================================= ==== ================ ================ =========
Continuing operations
========================================================= ==== ================ ================ =========
Revenue 6 408,824 - 408,824
========================================================= ==== ================ ================ =========
Cost of sales (233,761) - (233,761)
========================================================= ==== ================ ================ =========
Gross profit 175,063 - 175,063
========================================================= ==== ================ ================ =========
Administrative expenses
========================================================= ==== ================ ================ =========
* Administration expenses excluding amortisation of
acquired intangibles (110,502) (5,812) (116,314)
========================================================= ==== ================ ================ =========
- Amortisation of acquired intangibles - (8,606) (8,606)
========================================================= ==== ================ ================ =========
(110,502) (14,418) (124,920)
========================================================= ==== ================ ================ =========
Operating profit 6 64,561 (14,418) 50,143
========================================================= ==== ================ ================ =========
Finance income 4,291 - 4,291
========================================================= ==== ================ ================ =========
Finance costs (10,855) - (10,855)
========================================================= ==== ================ ================ =========
Net finance costs (6,564) - (6,564)
========================================================= ==== ================ ================ =========
Profit before tax 57,997 (14,418) 43,579
========================================================= ==== ================ ================ =========
Income tax 8 (13,346) 3,445 (9,901)
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October 30, 2015 06:30 ET (10:30 GMT)
========================================================= ==== ================ ================ =========
Profit for the period 44,651 (10,973) 33,678
========================================================= ==== ================ ================ =========
Attributable to:
========================================================= ==== ================ ================ =========
Equity holders of the parent 44,542 (10,973) 33,569
========================================================= ==== ================ ================ =========
Non-controlling interests 109 - 109
========================================================= ==== ================ ================ =========
44,651 (10,973) 33,678
========================================================= ==== ================ ================ =========
Earnings per share
========================================================= ==== ================ ================ =========
Basic 10 56.90p
========================================================= ==== ================ ================ =========
Diluted 10 56.37p
========================================================= ==== ================ ================ =========
Consolidated statement of comprehensive income
Six months ended Six months ended Period ended
27 September 28 September 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
=========================================================== ================ ================ ============
Profit for the period 4,809 18,404 33,678
=========================================================== ================ ================ ============
Other comprehensive income/(expense) for the period:
=========================================================== ================ ================ ============
Items that are or may be reclassified to profit or loss
=========================================================== ================ ================ ============
Exchange differences on translation of foreign operations (11,960) (7,297) (9,838)
=========================================================== ================ ================ ============
Cash flow hedges - fair value movement in equity (378) (758) (623)
=========================================================== ================ ================ ============
Cash flow hedges - reclassified and reported in net profit 623 830 830
=========================================================== ================ ================ ============
Related tax movements (49) (14) (41)
=========================================================== ================ ================ ============
(11,764) (7,239) (9,672)
=========================================================== ================ ================ ============
Items that will never be reclassified to profit or loss
=========================================================== ================ ================ ============
Actuarial gain/(loss) on defined benefit pension plans 3,122 (1,823) (6,491)
=========================================================== ================ ================ ============
Related tax movements (624) 330 1,296
=========================================================== ================ ================ ============
2,498 (1,493) (5,195)
=========================================================== ================ ================ ============
(9,266) (8,732) (14,867)
=========================================================== ================ ================ ============
Total comprehensive income for the period (4,457) 9,672 18,811
=========================================================== ================ ================ ============
Attributable to:
=========================================================== ================ ================ ============
Equity holders of the parent (4,234) 9,571 18,730
=========================================================== ================ ================ ============
Non-controlling interests (223) 101 81
=========================================================== ================ ================ ============
(4,457) 9,672 18,811
=========================================================== ================ ================ ============
Consolidated statement of financial position
At 27 September 2015 At 28 September 2014 At 29 March 2015
Note GBP'000 GBP'000 GBP'000
================================================== ==== ==================== ==================== ================
Non-current assets
================================================== ==== ==================== ==================== ================
Goodwill 211,447 215,326 214,545
================================================== ==== ==================== ==================== ================
Other intangible assets 40,056 47,108 44,657
================================================== ==== ==================== ==================== ================
Property, plant and equipment 12 291,351 283,644 290,929
================================================== ==== ==================== ==================== ================
Investments 1,494 910 949
================================================== ==== ==================== ==================== ================
Trade and other receivables 2,029 2,842 1,940
================================================== ==== ==================== ==================== ================
Total non-current assets 546,377 549,830 553,020
================================================== ==== ==================== ==================== ================
Current assets
================================================== ==== ==================== ==================== ================
Inventories 14,060 14,625 12,887
================================================== ==== ==================== ==================== ================
Asset held for sale 3,144 2,733 3,192
================================================== ==== ==================== ==================== ================
Trade and other receivables 76,359 81,400 75,308
================================================== ==== ==================== ==================== ================
Cash and cash equivalents 28,042 38,436 36,952
================================================== ==== ==================== ==================== ================
Total current assets 121,605 137,194 128,339
================================================== ==== ==================== ==================== ================
Total assets 667,982 687,024 681,359
================================================== ==== ==================== ==================== ================
Capital and reserves attributable to the Group's
equity holders
================================================== ==== ==================== ==================== ================
Share capital 370 369 369
================================================== ==== ==================== ==================== ================
Share premium account 90,566 89,951 90,517
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October 30, 2015 06:30 ET (10:30 GMT)
================================================== ==== ==================== ==================== ================
Translation reserve 2,987 17,433 14,898
================================================== ==== ==================== ==================== ================
Cash flow hedging reserve (302) (606) (498)
================================================== ==== ==================== ==================== ================
Merger reserve 106,757 106,757 106,757
================================================== ==== ==================== ==================== ================
Retained earnings 158,530 132,091 145,582
================================================== ==== ==================== ==================== ================
Equity attributable to equity holders of the
parent 358,908 345,995 357,625
================================================== ==== ==================== ==================== ================
Non-controlling interests 2,507 2,446 3,256
================================================== ==== ==================== ==================== ================
Total equity 361,415 348,441 360,881
================================================== ==== ==================== ==================== ================
Current liabilities
================================================== ==== ==================== ==================== ================
Interest bearing loans and borrowings 135,906 2,808 3,230
================================================== ==== ==================== ==================== ================
Trade and other payables 85,070 81,391 78,049
================================================== ==== ==================== ==================== ================
Derivative financial instruments 378 758 623
================================================== ==== ==================== ==================== ================
Current tax liabilities 8,783 10,350 8,274
================================================== ==== ==================== ==================== ================
Short-term provisions 11 253 2,354 1,570
================================================== ==== ==================== ==================== ================
Total current liabilities 230,390 97,661 91,746
================================================== ==== ==================== ==================== ================
Non-current liabilities
================================================== ==== ==================== ==================== ================
Interest bearing loans and borrowings 48,387 208,433 194,787
================================================== ==== ==================== ==================== ================
Retirement benefit obligations 16,161 16,672 20,315
================================================== ==== ==================== ==================== ================
Deferred tax liabilities 3,460 8,245 5,307
================================================== ==== ==================== ==================== ================
Trade and other payables 271 852 338
================================================== ==== ==================== ==================== ================
Provisions 11 7,697 6,503 7,821
================================================== ==== ==================== ==================== ================
Deferred government grants 201 217 164
================================================== ==== ==================== ==================== ================
Total non-current liabilities 76,177 240,922 228,732
================================================== ==== ==================== ==================== ================
Total liabilities 306,567 338,583 320,478
================================================== ==== ==================== ==================== ================
Total equity and liabilities 667,982 687,024 681,359
================================================== ==== ==================== ==================== ================
Consolidated cash flow statement
At 27 September At 28 September At 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
================================================ =============== =============== ===========
4,809 18,404 33,678
================================================ =============== =============== ===========
Adjustments 38,145 22,536 62,653
================================================ =============== =============== ===========
Cash generated from operations 42,954 40,940 96,331
================================================ =============== =============== ===========
Income tax paid (4,379) (2,873) (10,378)
================================================ =============== =============== ===========
Net cash from operating activities 38,575 38,067 85,953
================================================ =============== =============== ===========
Cash flows from investing activities
================================================ =============== =============== ===========
Acquisition of subsidiaries - net of cash (954) (10,624) (13,247)
================================================ =============== =============== ===========
Disposal of subsidiaries - net of cash (181) - -
================================================ =============== =============== ===========
Acquisition of investments - - (495)
================================================ =============== =============== ===========
Purchase of property, plant and equipment
(PPE) (28,893) (32,087) (61,727)
================================================ =============== =============== ===========
Purchase of intangible assets (993) (1,104) (1,718)
================================================ =============== =============== ===========
Proceeds from sale of PPE 271 1,257 1,742
================================================ =============== =============== ===========
Payment of pre-acquisition liabilities - (6,676) (6,676)
================================================ =============== =============== ===========
Interest received 237 820 1,604
================================================ =============== =============== ===========
Net cash used in investing activities (30,513) (48,909) (80,517)
================================================ =============== =============== ===========
Cash flows from financing activities
================================================ =============== =============== ===========
Dividends paid - (8,372) (8,372)
================================================ =============== =============== ===========
Dividend paid to non-controlling interest - (134) (134)
================================================ =============== =============== ===========
Proceeds from borrowings 28,886 45,119 62,655
================================================ =============== =============== ===========
Repayment of borrowings (40,843) (14,068) (45,504)
================================================ =============== =============== ===========
Repayment of hire purchase loans and finance
leases (1,326) (1,631) (2,944)
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================================================ =============== =============== ===========
Interest paid (2,804) (3,788) (7,052)
================================================ =============== =============== ===========
Proceeds from issue of shares 50 43 609
================================================ =============== =============== ===========
Proceeds from issue of shares - non-controlling
interest 509 - 416
================================================ =============== =============== ===========
Net cash (used in) / from financing activities (15,528) 17,169 (326)
================================================ =============== =============== ===========
5,110
================================================ =============== =============== ===========
Net (decrease)/increase in cash and bank
overdrafts (7,466) 6,327 32,263
================================================ =============== =============== ===========
Cash and bank overdrafts at beginning of
period 36,952 32,263 (421)
================================================ =============== =============== ===========
Exchange differences (1,484) (486) 36,952
================================================ =============== =============== ===========
Cash and bank overdrafts at end of period 28,002 38,104 33,678
================================================ =============== =============== ===========
At 27 September 2015 At 28 September 2014 At 29 March 2015
GBP'000 GBP'000 GBP'000
======================================================== ==================== ==================== ================
Cash generated from operations
======================================================== ==================== ==================== ================
Profit for the period 4,809 18,404 33,678
======================================================== ==================== ==================== ================
Adjustments for:
======================================================== ==================== ==================== ================
- depreciation and impairments 20,344 19,805 39,532
======================================================== ==================== ==================== ================
- amortisation of intangible assets 5,036 4,817 9,677
======================================================== ==================== ==================== ================
- equity-settled share-based payments 5,102 650 2,213
======================================================== ==================== ==================== ================
- loss on sale of tangible fixed assets 373 1 931
======================================================== ==================== ==================== ================
- gain on sale of subsidiary (100) -
======================================================== ==================== ==================== ================
- loss on impairment of subsidiary 139 -
======================================================== ==================== ==================== ================
- curtailment and cessation gains on defined benefit
pension schemes - (932) (932)
======================================================== ==================== ==================== ================
- finance income (1,255) (2,066) (4,291)
======================================================== ==================== ==================== ================
- finance costs 4,643 5,252 10,855
======================================================== ==================== ==================== ================
- income tax expense 2,999 6,252 9,901
======================================================== ==================== ==================== ================
Changes in working capital:
======================================================== ==================== ==================== ================
- inventories (1,078) (956) (504)
======================================================== ==================== ==================== ================
- trade and other receivables (3,402) (8,545) (241)
======================================================== ==================== ==================== ================
- trade, other payables and provisions 5,344 (1,742) (4,488)
======================================================== ==================== ==================== ================
Cash generated from operations 42,954 40,940 96,331
======================================================== ==================== ==================== ================
Condensed consolidated statement of changes in equity
Total
attributable
Treasury Cash to equity
share flow holders
Share Share reserve Merger hedging Translation Retained of the Non-controlling Total
capital premium GBP'000 reserve reserves reserve earnings parent interest equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Balance at 30
March
2014 368 89,909 - 106,757 (664) 24,708 123,025 344,103 2,473 346,576
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Profit for the
period - - - - - - 18,281 18,281 123 18,404
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Other
comprehensive
income/(expense):
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Translation of
foreign
operations - - - - - (7,275) - (7,275) (22) (7,297)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Net movements on
cash
flow hedges - - - - 58 - - 58 - 58
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Actuarial movement
net of tax - - - - - - (1,493) (1,493) - (1,493)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Total
comprehensive
income for the
period - - - - 58 (7,275) 16,788 9,571 101 9,672
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Transactions with
owners of the
Company
recognised
directly
in equity:
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Movement in
non-controlling
interest (NCI) - - - - - - - - (128) (128)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Dividends paid - - - - - - (8,372) (8,372) - (8,372)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
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October 30, 2015 06:30 ET (10:30 GMT)
Issue of shares 1 42 - - - - - 43 - 43
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Share-based
payments
(net of tax) - - - - - - 650 650 - 650
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Balance at 28
September
2014 369 89,951 - 106,757 (606) 17,433 132,091 345,995 2,446 348,441
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Profit for the
period - - - - - - 15,288 15,288 (14) 15,274
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Other
comprehensive
income/(expense):
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Translation of
foreign
operations - - - - - (2,535) - (2,535) (6) (2,541)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Net movements on
cash
flow hedges - - - - 108 - - 108 - 108
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Actuarial movement
net of tax - - - - - - (3,702) (3,702) - (3,702)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Total
comprehensive
income for the
period - - - - 108 (2,535) 11,586 9,159 (20) 9,139
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Transactions with
owners of the
Company
recognised
directly
in equity:
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Dividends paid - - - - - - - - - -
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Movement in NCI - - - - - - - - 6 6
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
NCI recognised in
the period - - - - - - - - 803 803
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
NCI recognised in
the period:
acquisition - - - - - - - - 21 21
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Issue of shares - 566 - - - - - 566 - 566
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Share-based
payments
(net of tax) - - - - - - 1,905 1,905 - 1,905
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Balance at 29
March
2015 369 90,517 - 106,757 (498) 14,898 145,582 357,625 3,256 360,881
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Profit for the
period - - - - - - 4,983 4,983 (174) 4,809
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Other
comprehensive
income/(expense):
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Translation of
foreign
operations - - - - - (11,911) - (11,911) (49) (11,960)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Net movements on
cash
flow hedges - - - - 196 - - 196 - 196
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Actuarial movement
net of tax - - - - - - 2,498 2,498 - 2,498
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Total
comprehensive
income for the
period - - - - 196 (11,911) 7,481 (4,234) (223) (4,457)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Transactions with
owners of the
Company
recognised
directly
in equity:
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
NCI recognised in
the period - - - - - - - - 884 884
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
NCI derecognised
on
disposal - - - - - - - - (1,416) (1,416)
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Movement in NCI - - - - - - - - 6 6
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Issue of shares 1 49 - - - - - 50 - 50
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Share-based
payments
(net of tax) - - - - - - 5,467 5,467 - 5,467
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
Balance at 27
September
2015 370 90,566 - 106,757 (302) 2,987 158,530 358,908 2,507 361,415
------- ------- --------- -------- -------- ----------- --------- ------------ --------------- --------
The accompanying accounting policies and notes form part of
these financial statements.
Notes to the financial statements
1 General information
Synergy Health plc ('the Company') and its subsidiaries
(together 'the Group') deliver a range of specialist outsourced
services to health-related markets. The Company is registered in
England and Wales under company registration number 3355631 and its
registered office is Ground Floor Stella, Windmill Hill Business
Park, Whitehill Way, Swindon, Wiltshire, SN5 6NX.
These condensed consolidated interim financial statements were
approved for issue by the Board of Directors on 30 October
2014.
2 Summary of significant accounting policies
Basis of preparation
These condensed consolidated interim financial statements of the
Group are for the six months ended 27 September 2015.
The condensed consolidated interim financial statements have
been prepared on the basis of the accounting policies set out in
the Group's latest annual financial statements for the period ended
29 March 2015. These accounting policies are drawn up in accordance
with the recognition and measurement requirements of International
Financial Reporting Standards (IFRS) as adopted for use in the
European Union.
The information for the period ended 29 March 2015 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that
period has been delivered to the Registrar of Companies. The
auditors' report on those accounts was (i) unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying the report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
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The condensed consolidated interim financial statements for the
six months to 27 September 2015 have not been audited or reviewed
by auditors pursuant to the Auditing Practices Board guidance on
Review of Interim Financial Information.
Going concern
The Directors have reviewed the Group's medium-term forecasts
through to October 2016 along with reasonable possible changes in
trading performance and foreign currencies. The Directors have also
reviewed the funding arrangements put in place by STERIS to support
the Group should the proposed combination proceed.
Absent the proposed combination with STERIS, elements of the
Group's committed banking facilities would fall due for renewal in
July 2016. The Directors have good reasons to believe that they
would be renewed.
The purpose of these reviews has been for the Directors to
determine whether, with or without the proposed combination with
STERIS, committed banking facilities would be available sufficient
to support the Group's projected liquidity requirements, and
whether the forecast earnings would be sufficient to meet covenants
associated with the banking facilities.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future, and have
continued to adopt the going concern basis in preparing the
condensed consolidated interim financial statements.
Significant accounting policies
The condensed consolidated interim financial statements have
been prepared under the historical cost convention except that
derivative financial instruments are stated at their fair value.
Except as described below, the accounting policies adopted in the
preparation of the condensed consolidated interim financial
statements are the same as those followed in the preparation of the
Group's annual financial statements for the period ended 29 March
2015.
3 Statement of compliance
These condensed consolidated interim financial statements have
been prepared and approved by the Directors in accordance with
International Accounting Standard (IAS) 34 'Interim Financial
Reporting' as adopted by the EU (adopted IAS 34) and with the
Disclosure and Transparency Rules of the UK Financial Services
Authority. These condensed consolidated interim financial
statements have not been audited or reviewed by the Group's
auditors in accordance with International Standard on Review
Engagements 2410 issued by the Auditing Practices Board. They do
not include all of the information required for full annual
financial statements, and should be read in conjunction with the
consolidated financial statements of the Group as at and for the
period ended 29 March 2015.
4 Financial risk management
The primary risks arising from the Group's financial instruments
are interest rate risk, foreign currency risk, credit risk and
liquidity risk. These risks and the Group's financial risk
management objectives and policies are consistent with that
disclosed in the consolidated financial statements as at and for
the period ended 29 March 2015.
5 Estimates (continued)
The preparation of the condensed consolidated interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies 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 interim financial
statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of
estimation and uncertainty were the same as those that applied to
the consolidated financial statements as at and for the period
ended 29 March 2015.
During the 6 months ended 27 September 2015, management
reassessed its estimates in respect of actuarial assumptions in
relation to the Group's defined benefit pension schemes using
professional advice and relevant market benchmark data for discount
rates and inflation.
6 Segmental information
The Group is organised into three operating segments: Applied
Sterilisation Technologies and Laboratory Services ('AST'),
Healthcare Services ('HS'), and Healthcare Solutions ('HCS').
Information on these segments is reported to the chief operating
decision maker ('CODM') for the purposes of resource allocation and
assessment of performance. The chief operating decision maker has
been identified as the Board of Directors. The CODM monitors the
performance of the operating segments based on adjusted operating
profit, being operating profit excluding the impact of amortisation
on acquired intangibles and non-recurring items. Segment
information is presented below.
AST HS HCS Total
Six month period ended 27 2015 2015 2015 2015
September 2015 GBP'000 GBP'000 GBP'000 GBP'000
================================ ======== ======== ======== ========
Revenue from external customers 70,733 92,111 43,446 206,290
================================= ======== ======== ======== ========
Segment profit 25,162 8,719 2,950 36,831
================================= ======== ======== ======== ========
Segment depreciation 9,350 3,714 7,280 20,344
================================= ======== ======== ======== ========
Segment assets 425,498 148,689 93,795 667,982
================================= ======== ======== ======== ========
AST HS HCS Total
2014 2014 2014 2014
Six month period ended 28 September 2014 GBP'000 GBP'000 GBP'000 GBP'000
========================================= ======== ======== ========= ========
Revenue from external customers 67,031 82,956 47,519 197,506
========================================== ======== ======== ========= ========
Segment profit 23,272 8,704 3,450 35,426
========================================== ======== ======== ========= ========
Segment depreciation 9,026 3,048 7,731 19,805
========================================== ======== ======== ========= ========
Segment assets 446,592 142,155 98,277 687,024
========================================== ======== ======== ========= ========
AST HS HCS Total
2015 2015 2015 2015
Period ended 29 March 2015 GBP'000 GBP'000 GBP'000 GBP'000
========================================= ======== ======== ========= ========
Revenue from external customers 137,496 175,832 95,496 408,824
========================================== ======== ======== ========= ========
Segment profit 47,294 18,351 6,575 72,220
========================================== ======== ======== ========= ========
Segment depreciation 17,963 6,086 15,483 39,532
========================================== ======== ======== ========= ========
Segment assets 435,501 151,373 94,485 681,359
========================================== ======== ======== ========= ========
The table below reconciles the total segment profit above, to
the Group's operating profit and profit before tax:
At 27 September At 28 September At 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
===================================== =============== =============== ===========
Total segment profit 36,831 35,426 72,220
===================================== =============== =============== ===========
Unallocated amounts:
===================================== =============== =============== ===========
- Corporate expenses (3,721) (3,880) (7,659)
===================================== =============== =============== ===========
- Non-recurring costs (17,550) 594 (5,812)
===================================== =============== =============== ===========
Amortisation of acquired intangibles (4,364) (4,298) (8,606)
===================================== =============== =============== ===========
Operating profit 11,196 27,842 50,143
===================================== =============== =============== ===========
Net finance costs (3,388) (3,186) (6,564)
===================================== =============== =============== ===========
Profit before tax 7,808 24,656 43,579
===================================== =============== =============== ===========
6 Segmental information continued
IFRS 8 Operating Segments requires the Group to disclose
information about the extent of its reliance on its major
customers. The Group has no single customer making up more than 10%
of total revenue.
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The table below analyses the Group's revenue from external
customers, and non-current assets other than financial instruments,
investment properties, and deferred taxation, by geography.
At 29
At 27 September At 28 September March
2015 2014 2015
GBP'000 GBP'000 GBP'000
Revenue Non-current Revenue Non-current Revenue Non-current
assets assets assets
UK 81,289 146,662 78,762 146,101 160,610 144,360
=============== ================ ============ ================ ============ ========= ============
Netherlands 35,264 100,340 41,982 110,642 82,306 100,042
=============== ================ ============ ================ ============ ========= ============
USA 46,750 52,922 37,348 42,964 82,702 48,969
=============== ================ ============ ================ ============ ========= ============
Rest of World 42,987 246,453 39,414 250,123 83,206 259,649
=============== ================ ============ ================ ============ ========= ============
206,290 546,377 197,506 549,830 408,824 553,020
=============== ================ ============ ================ ============ ========= ============
7 Non-recurring items and acquisition-related costs
In the period to 27 September 2015, non-recurring items of GBP18
million have been charged in arriving at operating profit. The
table and accompanying notes provide further details:
GBP'000
---------------------------------------------- ------------------------------
Transaction costs incurred on the proposed combination with
STERIS 11,810
--------------------------------------------------------------------- -------
Share-based payment costs accelerated by the proposed combination
with STERIS 6,191
--------------------------------------------------------------------- -------
Gain on settlement of insurance claim (638)
--------------------------------------------------------------------- -------
Restructuring costs 109
--------------------------------------------------------------------- -------
Other acquisition related transaction fees 78
--------------------------------------------------------------------- -------
2015 non-recurring charge 17,550
--------------------------------------------------------------------- -------
Accelerated amortisation of financing arrangement fees 450
--------------------------------------------------------------------- -------
18,000
--------------------------------------------------------------------- -------
In the period to 28 September 2014, non-recurring items of
GBP594,000 were credited in arriving at operating profit. This
included costs of GBP285,000 related to acquisition transaction
fees and a GBP932,000 cessation gain on a component of the Group's
retirement benefit obligations.
In the year to 29 March 2015, non-recurring items of
GBP5,812,000 were charged in arriving at operating profit.
GBP4,515,000 related to acquisition transaction fees. The most
significant component of this cost was GBP2,900,000 relating to the
proposed combination with STERIS. Operational and restructuring
costs were GBP2,510,000 million, primarily relating to the
settlement of prior period claims and facility closure costs in the
Dutch Linen business.
8 Tax
At 27 September At 28 September At 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
================================================== =============== =============== ===========
Current tax:
================================================== =============== =============== ===========
UK tax 1,459 2,191 4,775
================================================== =============== =============== ===========
Overseas tax 3,473 4,300 9,576
================================================== =============== =============== ===========
Adjustment in respect of prior periods - - (2,285)
================================================== =============== =============== ===========
Total current tax 4,932 6,491 12,066
================================================== =============== =============== ===========
Deferred tax:
================================================== =============== =============== ===========
Origination and reversal of temporary differences (1,933) (239) (2,235)
================================================== =============== =============== ===========
Adjustment in respect of prior periods - - 70
================================================== =============== =============== ===========
Effect of rate change - - -
================================================== =============== =============== ===========
Total deferred tax (1,933) (239) (2,165)
================================================== =============== =============== ===========
Total tax in income statement 2,999 6,252 9,901
================================================== =============== =============== ===========
8 Tax (continued)
The Group's effective tax rate for the period on earnings before
non-recurring items and the amortisation of acquired intangibles is
17.5% (2014: 23.9%). The reduction in the rate compared to the
prior period is due to the completion of a tax audit, with no
material adjustment required. Excluding the impact of the tax
audit the recurring tax rate over the full year would have been
23.4% (2014: 23.9%). UK corporation tax is calculated at 20% (2014:
21%) of the estimated assessable profit for the year. Taxation for
overseas operations is calculated at the local prevailing
rates.
Tax credits of GBP2.2m arose in respect of amortisation of
acquired intangibles and non-recurring items (2014: GBP0.5m). This
represents an effective overall tax rate (after amortisation of
acquired intangibles and non-recurring costs) of 38.4% (2014:
25.4%). This increase in overall effective tax rate is due to some
of the non-recurring costs related to the recommended combination
between Synergy Heath and STERIS not being deductible for tax.
A number of changes to the UK corporation tax system were
announced in the Chancellor's Budget on 8 July 2015. These include
reductions to the main rate of corporation tax to reduce the rate
to 19% from 1 April 2017 and to 18% from 1 April 2020. As the
changes had not been substantively enacted at the balance sheet
date their effects are not included in these financial statements.
The changes are not expected to have a material impact on the
Group's deferred tax balances.
9 Dividends
At 27 September At 28 September At 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
======================================================================= =============== =============== ===========
Amounts recognised as distributions to equity holders in the period:
======================================================================= =============== =============== ===========
Final dividend for the period ended 30 March 2014 of 14.20p (2013:
12.80p) per share - 8,372 8,372
======================================================================= =============== =============== ===========
No dividend (interim or final) was paid for the year ended 29
March 2015. On 20 October 2015 the Directors paid an interim
dividend for the year ending 3 April 2016 of 15.80 pence (2014:
nil).
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10 Earnings per share
At 27 September At 28 September At 29 March
2015 2014 2015
GBP'000 GBP'000 GBP'000
======================================================================= =============== =============== ===========
Earnings
======================================================================= =============== =============== ===========
Earnings for the purposes of basic earnings per share being net profit
attributable
to equity holders of the parent 4,983 18,281 33,569
======================================================================= =============== =============== ===========
Shares Shares Shares
'000 '000 '000
========================================================================================== ======= ====== ======
Number of shares
========================================================================================== ======= ====== ======
Weighted average number of ordinary shares for the purposes of basic earnings per share 59,132 58,940 58,998
========================================================================================== ======= ====== ======
Effect of dilutive potential ordinary shares:
========================================================================================== ======= ====== ======
Share options 1,109 495 554
========================================================================================== ======= ====== ======
Weighted average number of ordinary shares for the purposes of diluted earnings per share 60,241 59,435 59,552
========================================================================================== ======= ====== ======
Earnings per ordinary share
========================================================================================== ======= ====== ======
Basic 8.43p 31.02p 56.90p
========================================================================================== ======= ====== ======
Diluted 8.27p 30.75p 56.37p
========================================================================================== ======= ====== ======
GBP'000 GBP'000 GBP'000
================================================================= ======= ======= ========
Adjusted earnings per share
================================================================= ======= ======= ========
Operating profit 11,196 27,842 50,143
================================================================= ======= ======= ========
Amortisation of acquired intangible assets 4,364 4,298 8,606
================================================================= ======= ======= ========
Non-recurring items 17,550 (594) 5,812
================================================================= ======= ======= ========
Adjusted operating profit 33,110 31,546 64,561
================================================================= ======= ======= ========
Net finance costs, excluding acquisition-related finance costs (2,938) (3,186) (6,564)
================================================================= ======= ======= ========
Adjusted profit on ordinary activities before taxation 30,172 28,360 57,997
================================================================= ======= ======= ========
Taxation on adjusted profit on ordinary activities (5,267) (6,770) (13,346)
================================================================= ======= ======= ========
Non-controlling interest 174 (123) (109)
================================================================= ======= ======= ========
Adjusted net profit attributable to equity holders of the parent 25,079 21,467 44,542
================================================================= ======= ======= ========
Adjusted basic earnings per share 42.41p 36.42p 75.50p
================================================================= ======= ======= ========
Adjusted diluted earnings per share 41.63p 36.12p 74.80p
================================================================= ======= ======= ========
11 Provisions
Cobalt Other
disposal costs provisions Total
GBP'000 GBP'000 GBP'000
================================================== =============== =========== ========
At 30 March 2014 5,877 4,349 10,226
=================================================== =============== =========== ========
Additional provision in the period - - -
================================================== =============== =========== ========
Unwinding of discounting 20 190 210
=================================================== =============== =========== ========
Utilised in the period - (2,412) (2,412)
=================================================== =============== =========== ========
Reclassification to other non-current liabilities - 969 969
=================================================== =============== =========== ========
Exchange differences (54) (82) (136)
=================================================== =============== =========== ========
At 28 September 2014 5,843 3,014 8,857
=================================================== =============== =========== ========
Additional provision in the period 241 627 868
=================================================== =============== =========== ========
Unwinding of discounting (20) (190) (210)
=================================================== =============== =========== ========
Utilised in the period (144) (6) (150)
=================================================== =============== =========== ========
Reclassification to other non-current liabilities - 38 38
=================================================== =============== =========== ========
Exchange differences 42 (54) (12)
=================================================== =============== =========== ========
At 29 March 2015 5,962 3,429 9,391
=================================================== =============== =========== ========
Additional provision in the period 12 24 36
=================================================== =============== =========== ========
Unwinding of discounting - - -
================================================== =============== =========== ========
Utilised in the period (116) (1,302) (1,418)
=================================================== =============== =========== ========
Exchange differences (52) (7) (59)
=================================================== =============== =========== ========
At 27 September 2015 5,806 2,144 7,950
=================================================== =============== =========== ========
Included in current liabilities 253
=================================================== =============== =========== ========
Included in non-current liabilities 7,697
=================================================== =============== =========== ========
7,950
The cobalt disposal provision recognises a potential
decommissioning liability in respect of certain types of cobalt
used in some of the Group's AST sites. It is anticipated that the
provision will be utilised as the cobalt to which the provision
relates reaches the end of its useful economic life. Other
provisions include provisions against vacated properties and other
restructuring costs.
12 Property, plant and equipment
During the period ended 27 September 2015, the Group purchased
assets with a total cost of approximately GBP31.2 million
(28 September 2014: GBP32.9 million).
13(a) Prior period acquisition of subsidiary - Bioster
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On 15 May 2014, the Group acquired the entire issued share
capital of Bioster S.p.A. and associated companies ('Bioster').
Bioster Group operates ethylene oxide and electron beam
sterilisation facilities in Italy, Slovakia, and the Czech
Republic, providing sterilisation services to the medical device,
pharmaceutical and packaging industries. In addition, it operates a
hospital sterilisation services ('HSS') business in Italy.
The fair value of the net assets acquired and the related
consideration were as follows:
Fair value
GBP'000
================================ ==========
Property, plant and equipment 15,845
================================ ==========
Intangible assets 3,351
================================ ==========
Investments 9
================================ ==========
Inventories 80
================================ ==========
Trade and other receivables 11,871
================================ ==========
Cash and cash equivalents 280
================================ ==========
Borrowings due within one year (3,517)
================================ ==========
Trade and other payables (14,952)
================================ ==========
Corporation tax payable (122)
================================ ==========
Bank overdraft (1,902)
================================ ==========
Borrowings due after one year (4,073)
================================ ==========
Other provisions (1,007)
================================ ==========
Deferred taxation liabilities (1,892)
================================ ==========
Fair value of assets acquired 3,971
================================ ==========
Cash consideration 9,020
================================ ==========
Goodwill arising on acquisition 5,049
================================ ==========
The goodwill arising on the acquisition of the business is
attributable to the assembled workforce and the synergies generated
following the integration of Bioster into the Group.
In accordance with IFRS 3 (revised) Business Combinations
management have made adjustments to the local book values of net
assets acquired to arrive at the fair value disclosed above. The
most significant of these adjustments include the recognition of
intangible assets (customer lists), the recognition of deferred
taxation liabilities, and the application of IFRS to the
recognition of assets under finance leases and the associated
finance lease liabilities.
Total transaction costs of GBP530,000 were incurred in the
acquisition of Bioster Group and were expensed within non-recurring
items and acquisition-related costs.
During the period, the Bioster Group contributed GBP8,238,000 to
revenue and GBP1,212,000 to operating profit.
Summary of cash flows:
GBP'000
========================================== =======
Cash consideration 9,020
========================================== =======
Net overdraft acquired with business 1,622
========================================== =======
Acquisition of subsidiaries - net of cash 10,642
========================================== =======
13(b) Prior period acquisition of subsidiary - IDtek
On 3 November 2014, the Group acquired 70% of the issued share
capital of IDtek Track-and-Trace SA ('IDtek'), a company
incorporated in Switzerland, gaining control of the company and its
subsidiaries. IDtek provides RFID-led solutions to a wide range of
industries including energy and automotive sectors, and it is our
intention to utilise its expertise and intellectual property to
develop new services for the healthcare market.
The provisional fair value of the net assets acquired and the
related consideration were as follows:
Fair value
GBP'000
-------------------------------- ----------
Property, plant and equipment 13
-------------------------------- ----------
Intangible assets 730
-------------------------------- ----------
Inventories 33
-------------------------------- ----------
Trade and other receivables 533
-------------------------------- ----------
Cash and cash equivalents 288
-------------------------------- ----------
Trade and other payables (497)
-------------------------------- ----------
Corporation tax payable (53)
-------------------------------- ----------
Deferred taxation liabilities (146)
-------------------------------- ----------
Long-term payables (202)
-------------------------------- ----------
Minority interest (396)
-------------------------------- ----------
Fair value of assets acquired 303
-------------------------------- ----------
Cash consideration 2,286
-------------------------------- ----------
Deferred consideration 419
-------------------------------- ----------
Total consideration 2,705
-------------------------------- ----------
Goodwill arising on acquisition 2,402
-------------------------------- ----------
The goodwill arising on the acquisition of the business is
attributable to the synergies generated following the integration
of IDtek into the Group, and has been allocated to the HS
segment.
In accordance with IFRS 3 (revised) 'Business combinations',
management have made adjustments to the book value of net assets
acquired to arrive at the fair values disclosed above.
Total transaction costs of GBP111,000 were incurred in the
acquisition and were expensed within non-recurring items and
acquisition-related costs.
Summary of cash flows:
Summary of cash flows:
GBP'000
========================================== =======
Cash consideration 2,286
========================================== =======
Cash acquired with business (288)
========================================== =======
Acquisition of subsidiaries - net of cash 1,998
========================================== =======
Summary of deferred consideration
GBP'000
================================================== ====================
At 29 March 2015 458
============================================================= =========
Amounts paid (440)
============================================================= =========
Adjustments (7)
============================================================= =========
Exchange differences (11)
============================================================= =========
As at 27 September 2015 -
============================================================= =========
14 Post balance sheet events
On 2 October the shareholders of Synergy Health plc voted to
approve the combination of Synergy and STERIS Corp.
On 20 October 2015 the Directors paid an interim dividend for
the year ending 3 April 2016 of 15.80 pence (2014: nil).
On 26 October all outstanding Synergy share options vested, and
for non-SAYE options were exercised and converted to Synergy shares
on the same day, according to the option-holders' instructions.
Also on the 26 October, trading on the London Stock Exchange in
Synergy shares was suspended.
On 28 October, a hearing took place at the High Court where all
outstanding Synergy shares were cancelled, barring only the one
share held by New STERIS Limited.
There were no other material events subsequent to the year end
and up to 30 October 2015, the date of approval of the Financial
Statements by the Board.
Forward-looking statements
Certain information included in this announcement is
forward-looking and involves risks, assumptions and uncertainties
that could cause actual results to differ materially from those
expressed or implied by forward-looking statements. Forward-looking
statements cover all matters which are not historical facts and
include, without limitation, projections relating to results of
operations and financial conditions and the Company's plans and
objectives for future operations, including, without limitation,
discussions of expected future revenue, financing plans, expected
expenditures, risks associated with changes in economic conditions,
the strength of the markets in the jurisdictions in which the Group
operates, and changes in exchange and interest rates.
Forward-looking statements can be identified by the use of
forward-looking terminology including terms such as "believes",
"estimates", "anticipates", "expects", "forecasts", "intends",
"plans", "projects", "goal", "target", "aim", "may", "will",
"would", "could", or "should" or, in each case, their negative or
other variations or comparable terminology. Forward-looking
statements are not guarantees of future performance. All
forward-looking statements in this announcement are based upon
information known to the Company on the date of this announcement.
Accordingly, no assurance can be given that any particular
expectation will be met and readers are cautioned not to place
undue reliance on forward-looking statements, which speak only at
their respective dates. Additionally, forward-looking statements
regarding past trends or activities should not be taken as a
representation that such trends or activities will
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