The provider of specialist cleaning services to hospitals surged after the group produced stunning figures for the year to the end of March. Pre-tax profits rose 61 per cent to £2.4m as sales more than doubled to £27.1m after bedding down the £11.5m acquisition of Hays Clinical Support Services in April 2002. Synergy's existing business - split between Healthtex, which hires out and cleans linen on seven-year contracts, and the higher margin surgical cleaning division where contracts last 15 years - also displayed decent organic growth as six new contracts were won. The group now boasts a strong forward book in excess of £160m and chief executive Dr Richard Steeves expects this to grow as its major sterile services market should shortly see substantial NHS-backed changes. To fund the Hays acquisition Synergy raised £12m via a placing at 210p. This meant adjusted earnings per share improved 27% to 10p per share, exceeding brokers' forecasts. Synergy should manage to repeat the trick this year. Ian Jermin of Baird envisages earnings of 11.1p, putting Synergy's shares on a prospective p/e of 16. Operating margins should improve as the Hays business continues to be rectified and more contracts to clean operating theatres are won. The stock still trades below last year's placing price - with £6.7m cash remaining this seems unfair. Buy.
Market cap: £39.3m
PE Forecast: 16
Share price: 178p
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