A property stock finding lots of value in central Europe
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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