Synergy Healthcare

BUY

10/06/2008 James Crux

Floated on AIM as a UK-based business with a £12.5m market cap seven years ago, Synergy Healthcare has evolved into an international sterilisation and infection control solutions play and will shortly move to the Official List to broaden its investor base.

News of the move accompanied exceptionally healthy annual results to March from Synergy, showing revenues increased 47.5% to £225m, with good organic growth augmented by acquisitions. Pre-tax profits powered ahead by 47.7% to £24.9m and from improved earnings of 35.5p (2007: 29.2p) the total dividend was lifted 20% to 10.1p.

Domestic highlights of a busy year included the implementation of a first new hospital sterilisation facility in Manchester (under the NHS National Decontamination Programme) and the reopening of the Patient Care business’s linen processing facility in Dunstable, providing capacity to accommodate £3m of new contracts.

But it is Synergy’s ongoing internationalisation that is exciting the market, with the company having last year opened a Dubai office, won a contract to provide hospital sterilisation services in Belgium and made further progress with its combined hospital and commercial sterilisation facility in China. These moves have further increased its exposure to a global healthcare market growing off the back of demographic change and increasing wealth, particularly in the regions of Asia in which Synergy is expanding.

Highly cash-generative, operating in high-entry-barrier markets and having increased its order book from £40m to more than £800m during its time on AIM, we think Synergy offers investors proven, resilient and highly visible long-term growth. Buy.

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