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Synergy Health SYR Half Yearly Report

  Synergy Health (SYR) - Half Yearly Report

RNS Number : 9356Q
Synergy Health PLC
13 November 2012




Tuesday 13 November 2012

                                      

                              SYNERGY HEALTH PLC

                  ('Synergy', the 'Company' or the 'Group')

                                      

          INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2012

                                      

Synergy Health plc (LSE: SYR), a leading global provider of specialist
outsourced support services to health-related markets in the UK & Ireland,
Europe & Middle East, Asia & Africa and the Americas, announces its interim
results for the six months ended 30 September 2012.



                                   Six months ended  Six months ended    

                                   30 September 2012    2 October        

                                                           2011       % change
Revenue                                      £171.6m          £155.3m  + 10.5%
Adjusted operating profit*                    £26.6m           £23.1m  + 15.2%
Adjusted profit before tax*                   £23.8m           £20.6m  + 15.7%
Profit before tax                             £18.2m           £16.6m   + 9.8%
Adjusted basic earnings per share*            31.50p           28.42p  + 10.8%
Dividend per share (interim)                   7.90p            6.82p  + 15.8%
Operating cash flow                           £43.3m           £36.4m  + 18.9%
Net debt                                     £180.3m          £149.2m



Financial Highlights



· Strong reported revenue growth up 10.5% to £171.6 million

· Underlying revenue growth, excluding currency effects, up 14.2%

· Adjusted operating profit* up 15.2% to £26.6 million

· Adjusted EBITDA up 11.2% to £46.5 million

· Interim dividend up 15.8%, reflecting growth in underlying earlings

· Net debt increased to £180.3 million from £173.5 million at 1 April
2012, reflecting the payment of deferred contingent consideration for BeamOne
LLC ('BeamOne'), the acquisition of SRI/Surgical Express, Inc ('SRI') and
capital investments in new facilities in Costa Rica and France



Operational Highlights



· A solid first half with strong revenue growth in Asia & Africa and
the Americas offsetting weaker growth in Europe & Middle East and UK & Ireland

· UK & Ireland affected by a number of one-off events, including the
Olympics

· Good cost control has helped to lift Group operating margins by
0.6%

· The integration of both the Swiss gamma and X-ray facilities and
the small hospital sterilisation business in New York, has progressed well

· In July 2012 the Group completed the acquisition of SRI for £25.5
million

· The integration and turnaround of SRI is going well and is ahead of
plan

· The United States hospital sterilisation bid pipeline looks
promising, with bids in progress for revenue in excess of $60 million per
annum



Outlook



· Although the economic environment in Europe & Middle East and UK &
Ireland remains a challenge, we are increasing our investment in business
development and strengthening the senior team

· The Americas and Asia & Africa continue to show solid growth and we
expect to see further developments over the coming 18 months that will
increase the importance of these two regions

· The Group is progressing in line with the Board's expectations for
the full year



Richard Steeves, Chief Executive of Synergy Health, said:



"Despite the ongoing economic challenges, particularly in Europe, I am very
pleased with the resilience of the Group, and the progress that it continues
to make."



"Our strategy of bringing forward investment in the United States has been
well timed and will support our global growth objectives. The acquisition of
SRI has given Synergy a real presence and management depth, opening up a
number of new business development opportunities."







* Note: Adjusted operating profit, adjusted profit before tax and adjusted
basic earnings per share shown above exclude amortisation of acquired
intangibles and non-recurring items, as shown in the Group's consolidated
income statement and the accompanying notes. Operating cash flow excludes
non-recurring items.



Analyst Presentation:

There will be a meeting for analysts at 9.30am today, 13 November 2012, at the
Rubens Hotel, London SW1W 0PS.







For Further Information:



Synergy Health plc
Dr Richard Steeves, Chief Executive 01793 891851

Gavin Hill, Finance Director


Investec Bank plc
Patrick Robb                        0207 5975169

CHIEF EXECUTIVE'S REVIEW





Results

The Group has performed well despite a number of unique events affecting the
UK and strong currency headwinds in Europe, whilst maintaining a high degree
of focus on the integration of SRI in the United States.



Revenue for the period increased by 10.5% to £171.6 million (2011: £155.3
million). Strong cost control resulted in improved gross margins up 0.5% to
39.8% (2011: 39.3%) and improved adjusted operating margins by 0.6% to 15.5%
(2011: 14.9%). As a result, adjusted operating profit increased 15.2% to £26.6
million (2011: £23.1 million).



Underlying revenue, excluding currency effects, increased by 14.2%, whilst
underlying organic revenue (which also excludes acquisitions) increased by
2.2%. Underlying organic growth was strong in Asia & Africa and the Americas,
up 18.7% and 10.2% respectively. Underlying organic growth in UK & Ireland
increased by 2.2% whilst Europe & Middle East saw a decrease of 0.7%,
reflecting price deflation in our Dutch Linen business. Operating margins
however remain solid, with all regions maintaining or improving their
performance.



On 13 July we acquired SRI for a total consideration of £25.5 million, funded
through a combination of debt and a £22.4 million equity placing. The business
serves hospitals in the United States by providing hospital sterilisation
services, processing reusable surgical gowns, and distributing custom
procedure trays. The business has been delisted from Nasdaq and is in the
process of being fully integrated into our Americas region.



Cash flow has been characteristically strong during the period, increasing
18.9% to £43.3 million (2011: £36.4 million). Net debt increased by £6.8
million to £180.3 million, taking into account the partial funding of the SRI
acquisition, payment of deferred consideration of £10.5 million to the vendors
of BeamOne, and net capital expenditure of £23.6 million (2011: £27.6
million). We have a continued focus on lifting our operating returns on
capital employed, and during the period we saw an increase to 11.7% (2011:
11.5%).



Adjusted basic EPS was 31.50p (2011: 28.42p), a rise of 10.8%.





Dividend

The Board has declared an interim dividend of 7.90 pence per share (2011: 6.82
pence), an increase of 15.8% and in line with Synergy's policy to increase
dividends in line with underlying earnings. The dividend will be paid on 14
December 2012 to shareholders on the register on 23 November 2012.





Strategy and Business Review

Synergy is an international leader in the provision of outsourced
sterilisation services for hospitals and medical device manufacturers. In
addition, Synergy provides other niche outsourced services in related areas
such as healthcare linen and laboratories, and manufactures a range of
healthcare products. Our strategy is primarily based on cost leadership and
ensuring that our services are delivered more efficiently than those of our
competitors, including in-house operations. In addition to cost leadership, we
have been expanding the Group internationally to increase our geographic
reach.



Excluding the impact of currencies, globally Hospital Sterilisation Services
('HSS') grew at 24.4% with a contribution of approximately £3.9 million from
SRI. Excluding SRI, HSS grew by 11.6%. UK growth was slower in the period,
impacted by the Queen's Jubilee, industrial action at hospitals, and the
Olympics.



Applied Sterilisation Technologies ('AST') grew at 18.6% and 10.0% excluding
the acquisition of LEONI Studer Hard AG ('LSH'). Growth reduced slightly
towards the end of last year, particularly in Europe, and this lower rate has
persisted throughout the current financial year. In the UK and Europe we have
seen a slowdown in non-healthcare work particularly in microelectronics, and
this has continued into the second half of the year.



Healthcare linen services declined by 1.6% affected by the disruptive pricing
behaviour of our main competitor in the Netherlands. The Dutch market remains
difficult although we are maintaining our market share and protecting margins,
albeit on a declining revenue base. Our UK product manufacturing business saw
a reduction in revenue of 13.2% reflecting further rationalisation of the
business. However, the core segments of patient hygiene, infection control,
surgical and wound care performed in line with expectations and are achieving
profitable growth.

Although the first half of the year has seen its challenges with a number of
one-off events, the Group has performed well and in line with expectations. We
continue to focus much of our effort on Asia and the United States, where we
see significant growth opportunities. The potential outsourcing market in
Europe and the UK remains significant, but in the post-recession period we
have yet to unlock its potential.





Management

The Board has decided to expand the depth and experience of the leadership
team below the senior executive board, with an emphasis on business
development and risk management. A new business development director was
recently recruited for the UK & Ireland region, and similar positions will be
appointed in the remaining three regions during the second half of the year.
Last year we appointed a Director of Risk to continue the evolution of our
global risk management systems, and this role will now be supplemented with
senior risk managers in each of the four regions.





Regions

Americas

The Americas region has been the focus of much attention this year,
recognising an opportunity to develop the US HSS market. The Board brought
forward our entry to this market through the acquisition of SRI, which is the
largest provider of outsourced hospital sterilisation services, as well as
providing sterile reusable surgical gowns. Although loss-making on
acquisition, the integration and turnaround has gone well and we are
considerably ahead of plan, which enables us to focus the management team's
efforts on new business development.



Reported revenue for the region increased by 257% to £22.1 million (2011: £6.2
million) with underlying revenue up 247% before currency effects. Operating
profits increased 82% to £2.4 million (2011: £1.3 million), but operating
margins reduced to 10.8% as a result of margin dilution arising from the
acquisition of SRI.



Good progress has been made with SRI, splitting the business into two
operating units (HSS and Reprocessing of Surgical gown Packs ('RSP')) and
re-engineering its operations to improve efficiency. As a result, operating
margins rose from -1.6% on acquisition to 5.6%. The hospital sterilisation
outsourcing market looks poised to open up in the United States. We are now
the dominant player in the market with combined revenue of $36 million per
annum including SRI and MSI Surgical Solutions LLC ('MSI'), which was acquired
last year. The bid book has grown to in excess of $60 million per annum of
potential business, and we expect to have first contract wins towards the end
of the current fiscal year. Later this year, the RSP business will launch a
new range of products combining improved performance with reduced cost. SRI is
a well recognised service provider and leading advocate for environmentally
supportive products and services in the surgical market. We are exploring
whether the service could be extended to other surgical devices that could
have a limited reusable life to reduce both the economic and environmental
costs of surgery.



AST performed well, with growth of 16.5% on a constant currency basis. In the
late summer a second electron beam facility and a new ethylene oxide facility
were opened in Costa Rica, providing additional capacity. However, the primary
customer for the additional capacity has experienced regulatory challenges and
as a result the expected electron beam revenue growth will be delayed until
early next year. Elsewhere our facilities are experiencing high levels of
utilisation resulting in stable margins.





Asia & Africa

Asia & Africa, together with the Americas region, is one of Synergy's two high
growth regions. Reported revenue for the region increased by 17.4% to £9.6
million (2011: £8.2 million) and by 18.7% on a constant currency basis.
Operating profits were up 22.6% to £2.1 million (2011: £1.7 million) with
margins up 0.9% to 21.3% (2011: 20.4%).



Underlying HSS revenue in China increased by 24.3% with additional volumes
being processed through the Suzhou facility. New contracts in Chengdu and
Beijing are progressing towards implementation, with services expected to
start in the new fiscal year. Design and project planning is underway for a
new HSS unit that will service the healthcare campus in Hongqiao, with
services expected to start in early 2015. During the period we have been
advancing other opportunities, as well as discussing potential partnerships
with larger Chinese healthcare suppliers. Although our intention is to
continue to develop our network independently, we are exploring potential
parallel joint ventures that could broaden our network more quickly.



AST in China has grown by 19.1% with further utilisation of the Suzhou
facility. Growth was slower than expected because of reduced volumes from a
customer that was experiencing regulatory challenges. These issues have been
resolved and we expect to see much stronger growth in Q4. We have also
received outline regulatory approval for a new radiation facility in China,
but we are waiting for formal approval from local and regional authorities
before acquiring land and committing further investment.



AST is performing well in Malaysia, Thailand and South Africa. In Malaysia,
additional ethylene oxide capacity comes on line in Q4 and is largely
pre-sold. In South Africa we have built a new microbiology lab to broaden the
range of services we can offer in that country.



The new Regional CEO for the Asia & Africa region has recently completed a
strategic review; we remain confident that the region will continue to be one
of our two strong growth areas.





Europe & Middle East

The Europe & Middle East region presents a mixed picture, with AST growth
offset by price compression in the Dutch linen business, and a weakening
currency. Reported revenue decreased by 3.2% to £60.7 million (2011: £62.7
million), though on a constant currency basis revenue increased by 5.7%.
Operating margins were unchanged at 15.5% but operating profit declined by
3.5% to £9.4 million (2011: £9.7 million) reflecting lower revenue. On a
constant currency basis, operating profits grew 5.9%.



AST continues to operate well, although organic growth was 3.7% lower than our
global average, attributed to the economic slowdown in Europe. The new gamma
and X-ray facilities in Switzerland have continued to grow, with X-ray
achieving 80% growth on last year, prior to acquisition, albeit from a low
base. We are actively promoting the X-ray service, but to date have not
progressed plans for a second facility elsewhere in the world.



Our European HSS service is a small but steady business operating in Holland
and Belgium. We are bidding for new contracts in Germany, France and Holland,
and in the period won €0.2 million per annum of new work. Although China and
the USA are priority markets, we are steadily increasing the investment in our
business development teams with a view towards the medium term.



The Dutch linen market has continued to deteriorate as a result of the pricing
behaviour of our largest competitor and consequently we are continuing to see
price deflation. Given that the market largely operates on five-year
contracts, the value decline is likely to be of a long-term nature. We have
continued to reduce costs in our business, mitigating the impact on margin.





UK & Ireland

The first half of the year was a difficult period for the UK & Ireland region
with the impact of NHS industrial action, the Queen's Jubilee, and the
Olympics resulting in reduced activity levels. Overall the region operated
well under the circumstances, with reported revenue increasing by 1.2% to
£79.2 million (2011: £78.2 million). On a constant currency basis, revenue
increased by 2.2%. Margins were up 3.6% reflecting in part the removal of
unprofitable work within the product manufacturing business, together with
good cost control. Operating profits increased to £15.8 million (2011: £12.9
million).



HSS revenue growth slowed to 8.5% during the period, affected by the unusual
events during the half year as well as a lack of contract wins. A large number
of contracts were successfully renewed during the period. We are still
progressing a number of bids worth more than £10 million per annum, but
progress is very slow and is attributed to the broader issues the National
Health Service is facing. Similarly, our UK linen business grew at 2.1% with
steady margins. We recently appointed a new business development director,
reaffirming our commitment to this market.



The AST business grew at just 2.9%, held back by currency effects as well as
the impact of the economic slowdown affecting non-healthcare work. We are
doubling our ethylene oxide processing capacity in the UK this year since our
existing facility is full. For the foreseeable future, we will be focusing on
cost control in this region until economic conditions improve.



Our UK-based product manufacturing business continues to make good progress
through improving profitability at the expense of revenue growth. The new
management structure and strategy implemented in December 2011 are working
well, with underlying profitability now firmly established and revenue growth
improving internationally.



Outlook

Despite somewhat challenging circumstances, particularly in Europe and the UK,
Synergy finished the half year slightly ahead of the Board's expectations. The
Board is not expecting to see dramatic change in our regional markets, and
organic growth will continue to be held back by our Dutch linen business.
However, the opportunity to build on our SRI acquisition in the United States,
together with continued strong growth in Asia, leaves the Group in a strong
position to meet the Board's full year expectations.





Dr Richard Steeves

Group CEO

13 November 2012





FINANCE DIRECTOR'S REPORT



Overview

Our business delivered a good first half financial performance with reported
revenue growing 10.5% to £171.6 million and adjusted operating profit
increasing by 15.2% to £26.6 million. Excluding currency effects, underlying
revenue growth was 14.2% (2.2% organic). Our adjusted operating margin
increased by 60 basis points to 15.5%. Adjusted basic earnings per share grew
by 10.8% to 31.50p.



Cash generated from operations (before non-recurring items) increased by 18.9%
to £43.3 million, reflecting a conversion of adjusted EBITDA into operating
cash flow of 93.3%. Funding for acquisitions increased net debt to £180.3
million, representing a net debt to EBITDA ratio of 1.96 times, comfortably
within our banking covenant of 3.25 times.



Adjusted operating returns on average capital employed, on an annualised
basis, increased to 11.7% from 11.5% at the year end.



1.  Income statement

Synergy's income statement is summarised below.



Table 1: Income statement

                                      Six months ended Six months ended      

                                     30 September 2012   2 October 2011      

                                                                             

                                                                        Change
                                                    £m               £m
Revenue                                          171.6            155.3 +10.5%
Gross Profit                                      68.2             61.0 +11.9%
Administrative expenses                         (41.6)           (37.9)
Adjusted operating profit                         26.6             23.1 +15.2%
Net finance costs                                (2.8)            (2.5)
Adjusted profit before tax                        23.8             20.6 +15.7%
Amortisation of acquired intangibles             (4.9)            (3.7)      
Non-recurring items                              (0.7)            (0.3)
Profit before tax                                 18.2             16.6  +9.8%
Tax                                              (3.5)            (3.4)
Profit for the period                             14.7             13.2 +11.6%
Effective tax rate ^1                            23.8%            23.1%
Adjusted earnings per share - basic             31.50p           28.42p +10.8%
Earnings per share - basic                      25.54p           23.66p  +7.9%
Adjusted earnings per share -                   30.94p           27.95p +10.7%
diluted
Earnings per share - diluted                    25.09p           23.27p  +7.8%
                                                                             
Dividend per share                               7.90p            6.82p +15.8%

^

^1 The effective tax rate is calculated excluding amortisation on acquired
intangibles and non-recurring items



1.1 Revenue

Reported revenue of £171.6 million (2011: £155.3 million) grew by 10.5%,
representing an underlying growth rate, excluding currency effects, of 14.2%
over the previous year. The change in currency exchange rates over the last 6
months (notably the weakening of the Euro against Sterling), against the
comparative period, has reduced reported revenue by £5.8 million.



Underlying revenue, excluding currency effects, grew across all our business
segments, with the UK & Ireland at 2.2%, Europe & Middle East at 5.7%, Asia &
Africa at 18.7% and the Americas AST business by 16.5%. Our total Americas
business, with the inclusion of MSI from the beginning of the financial year
and SRI from 13 July 2012, represented 12.9% (2011: 4.0%) of total half year
revenue.



Underlying organic revenue, which excludes currency effects and the impact of
acquisitions, increased by 2.2%. The UK & Ireland region grew by 2.2%, Europe
& Middle East contracted by 0.7%, Asia & Africa and the Americas grew by 18.7%
and 10.2% respectively. Our main service lines continue to experience good
underlying organic growth with AST growing by 10.0% and HSS at 7.8%. A fall in
Linen revenue in the Netherlands resulted in the small contraction of total
Europe & Middle East revenue as well as causing a reduction in total Linen
revenue of 1.6%.



1.2 Gross profit

Gross profit increased by 11.9% to £68.2 million (2011: £61.0 million),
representing a gross profit margin of 39.8%, an increase of 50 basis points
over the previous year.



1.3 Adjusted operating profit

Adjusted operating profit increased by 15.2% to £26.6 million, representing an
adjusted operating profit margin of 15.5%, an increase of 60 basis points over
last year (90 basis points excluding currency effects). Currency effects have
reduced reported adjusted operating profit by £1.4 million.



1.4 Non-recurring items

Net non-recurring items during the period of £0.7 million include SRI
acquisition transaction fees and restructuring costs, partially offset by a
gain on the sale of an investment property.



1.5 Net finance costs

The Group's net finance costs totalled £2.8 million (2011: £2.5 million), an
increase of £0.3 million. The principal reason for this increase is additional
loans raised to finance acquisition activity. The average interest rate of the
Group's debt is approximately 2.4%.



1.6 Adjusted profit before tax

Adjusted profit before tax was £23.8 million (2011: £20.6 million), an
increase of 15.7%. The adjusted profit before tax margin was 13.9% (2011:
13.2%), an increase of 70 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. The
increase relates to intangibles recognised on the acquisitions of SRI, LSH and
MSI.



1.8 Tax 

The tax charge (excluding amortisation of acquired intangibles) of £5.7
million (2011: £4.8 million) represents an effective tax rate of 23.8% (2011:
23.1%). The increase in the effective tax rate over the comparative period
primarily reflects a greater proportion of the Group's profits arising in the
United States, which has a higher tax rate than the current Group average,
following the acquisition of SRI.



1.9 Earnings per share (EPS)

Adjusted basic earnings per share and adjusted diluted earnings per share,
after adjusting for amortisation of intangibles and non-recurring items,
increased by 10.8% and 10.7% respectively. Afteramortisation of acquired
intangibles, basic and diluted earnings per share increased by 7.9% and 7.8%
respectively.



Undiluted weighted average shares have increased from 55.3 million to 57.1
million in the period, primarily due to the issue of 2.8 million shares in
June 2012.



    2.  Dividend

Synergy's policy is to increase the total dividend each year in line with the
increase in underlying earnings. The Board has proposed an interim dividend of
7.90p (2011: interim dividend of 6.82p per share), representing an increase on
the 2011 dividend of 15.8%.





3.  Cash flow

The Group cash flow is summarised below.



Table 2: Cash flow

                                             Six months ended Six months ended

                                                 30 September   2 October 2011

                                                         2012
                                                           £m               £m
Adjusted operating profit                                26.6             23.1
Non-cash items                                           19.9             18.7
Adjusted EBITDA                                          46.5             41.8
Working capital movement                                (3.2)            (5.4)
Operating cash flow before non-recurring                 43.3             36.4
items
Non-recurring items                                       0.3            (0.3)
Operating cash flow after non-recurring                  43.6             36.1
items
Interest                                                (2.8)            (2.6)
Tax                                                     (4.4)            (5.7)
Net maintenance expenditure on tangible and            (12.0)           (12.1)
intangible assets
Free cash flow                                           24.4             15.7
Acquisition of subsidiaries, net of cash               (25.5)           (25.9)
acquired
Payment of pre-acquisition dividend                     (3.3)                -
Net investment expenditure on tangible and             (11.6)           (15.5)
intangible assets
Financing                                                 5.1             14.5
Proceeds from share issue                                22.8              0.7
Dividends paid                                          (6.5)            (5.4)
Other                                                   (0.6)                -
Net increase/(decrease) in cash and cash                  4.8           (15.9)
equivalents



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) in the year
increased by 18.9% to £43.3 million (2011: £36.4 million), reflecting a
conversion of EBITDA into operating cash flow of 93.3% (2011: 87.1%).



3.2 Interest

Net interest paid was £2.8 million (2011: £2.6 million), in line with the
charge in income statement.



3.3 Tax

Tax paid was £4.4 million (2011: £5.7 million). Cash tax is slightly lower
than the equivalent income tax charge in the income statement as a result of
timing differences on payments and a refund of tax paid by LSH prior to
acquisition. In accordance with the acquisition agreement, the refund amount
is owed to the previous owners, as it arose due to a change in ownership. The
refund was included in the deferred contingent consideration recognised at the
time of acquisition. Following the Swiss tax authorities' agreement of the
final acquisition tax assessments, the deferred contingent consideration was
paid in October.

  3.4 Net expenditure on tangible and intangible assets

    The Group has increased its investment in new capacity during the course
    of the year, as well as continuing to upgrade and maintain its existing
    infrastructure. Total net capital additions of £23.6 million (2011: £27.6
    million) were made during the year.

    

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 main items of necessary ongoing capital expenditure are cobalt-60, the
radiation source for AST gamma sterilisation plants, textiles for the linen
business, and general replacement of plant and machinery around the Group.
Total maintenance capital expenditure was £12.0 million of which £4.2 million
and £5.7 million were spent on cobalt and textiles respectively.



Total investment capital expenditure was £11.6 million (2011: £15.5 million),
of which £7.3 million relates to the construction of new AST facilities with
the remaining balance spent on cobalt, property, plant and machinery, and IT
(principally on our new ERP project). Of the £7.3 million incurred on the
construction of new AST facilities and the expansion of existing ones, £3.1
million was spent on our new gamma facility in Marcoule, France, and £2.1
million on an additional electron beam facility in Costa Rica and the two new
ethylene oxide facilities in Costa Rica and Oldsmar, Florida.



Our ERP project is progressing well, having started site-by-site
implementation in the UK. The project will replace our financial systems
across the Group with a new standardised platform. Additionally, we are also
replacing the AST operating systems as part of the integrated ERP environment.



This level of capital expenditure is expected to increase in the second half
of the year as we commence loading cobalt into Marcoule, begin expansion of
the Thorne ethylene oxide plant in the UK and include a full six months of
SRI's capital expenditure requirements.



3.5 Financing

The movement in financing resulted primarily from increased borrowing to fund
the Group's acquisition of SRI.



3.6 Proceeds from Share Issue

On 7 June, the Group raised £22.4 million by way of an equity placing. The
proceeds were used as part payment for the equity of SRI. A further £0.4
million was raised as proceeds arising from the exercise of share options.



4  Acquisitions

With effect from 13 July 2012, the Group acquired SRI, a Nasdaq-listed
healthcare business for a cash consideration of £15.3 million (US$ 24.0
million). Including debt, total consideration paid was £25.5 million (US$ 40.0
million). Intangible assets arising on the acquisition have been recognised at
£0.5 million and will be amortised on a straight-line basis over their
expected lives. The acquisition gave rise to goodwill of £0.3 million.



On 19 March 2012, the Group acquired LSH from LEONI AG. During the period,
deferred consideration of £0.3 million (CHF 0.4 million) was paid. Shortly
after the period, deferred contingent consideration of £2.4 million (CHF 3.7
million) was paid, relating to a tax refund caused by the change in ownership.



On 7 April 2011, the Group acquired BeamOne. In the period, deferred
contingent consideration of £10.5 million (US$ 16.4 million) was paid. The
acquisition gave rise to goodwill of £14.4 million. This is £4.5 million
higher than disclosed within our 2011 interim statements, due to the incorrect
inclusion of Florida ethylene oxide start-up costs within our estimate of
deferred consideration payable. The fair value of the acquisition
consideration has been restated in the comparative figures of the financial
statements, showing an increase to goodwill of £4.5 million over the
previously reported balance at 2 October 2011.



5  Net debt and funding

5.1 Net debt

Net debt increased in the period from £173.5 million to £180.3 million. The
increase in net debt is primarily a result of the Group's acquisitions in the
period. The movement in the net debt is reconciled below:



Table 3: Movement in net debt

                                          £m
Net debt as at 1 April 2012            173.5
Exchange rate impacts                  (4.0)
Free cash flow                        (24.4)
Investment capital expenditure          11.6
Proceeds from share issue             (22.8)
Acquisitions, including acquired debt   35.7
Payment of pre-acquisition dividend      3.3
Dividends paid                           6.5
Other items                              0.9
Net debt as at 30 September 2012       180.3



5.2 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 £105 million and a Euro denominated
multi-currency facility of €130 million. On the 1 June 2012 the Group signed a
two year Euro denominated multi-currency facility of €18 million with the same
covenants as in the July 2011 Agreement.



On 13 September 2012, the Group issued a bilateral private placement note of
€20.6 million. The Group has 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 financial covenants are broadly similar to those in the Agreement.



The Group remains comfortably within the financial covenants set out 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 30 September 2012

                       Level of fixed

          Level of debt  interest debt

                     £m             £m
Sterling           46.7            18%
Euros              92.8            18%
US Dollar          64.7            33%
Other               3.9              -
Total             208.1            22%



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 €137.5 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 $124.6 million. As at 30 September, 22% of the total debt was
held at fixed rates of interest.



6  Pensions

The Group operates three final salary schemes in the UK, one in the
Netherlands, one 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 30 September 2012, the net liability arising from our defined benefit
scheme obligations was £15.5 million (2011: £16.0 million) on a pension scheme
asset base of £56.1 million. A decrease in the deficit from the year end
reflects a fall in the expected inflation rate that more than offsets a
reduction in the discount rate. The latest triennial review is underway and we
expect to agree any changes to funding levels with the Trustees by the end of
March 2013.



Table 5: Defined benefit pension schemes

                                                      At 30    At 2  At 1

                                                  September October April

                                                       2012    2011  2012
                                                         £m      £m    £m
Synergy Healthcare plc Retirement Benefits Scheme       0.7     1.0   1.9
Shiloh Group Pension Scheme                             2.1     2.3   2.6
Vernon Carus Limited Pension and Assurance Scheme       9.3    10.7  10.6
Isotron BV Pension and Assurance Scheme                 2.4     1.5   2.2
Synergy Health Daniken, Switzerland                     0.5       -   0.5
Synergy Health Radeberg, Germany                        0.5     0.5   0.5
Balance sheet liabilities                              15.5    16.0  18.3





Gavin Hill

Group Finance Director

13 November 2012



Condensed consolidated income statement

For the period ended 30 September 2012



                             Six months ended 30 September              Six months ended 2 October

                                                    2012                                   2011
                            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         £'000         £'000     £'000          £'000         £'000     £'000
Continuing
operations                                                                                 
Revenue            6       171,578             -   171,578        155,303             -  155,303
Cost of sales           (103,366)             - (103,366)       (94,326)             - (94,326)
Gross profit               68,212             -    68,212         60,977             -   60,977
Administrative
expenses                                                                                   
-
Administration
expenses
excluding
amortisation
ofacquired
intangibles              (41,579)         (711)  (42,290)        (37,868)         (331)  (38,199)
- Amortisation
of acquired
intangibles                     -       (4,881)   (4,881)               -       (3,654)   (3,654)
                        (41,579)       (5,592)  (47,171)        (37,868)       (3,985)  (41,853)
Operating
profit             6        26,633       (5,592)    21,041         23,109       (3,985)   19,124
Finance income              2,473             -     2,473          1,678             -    1,678
Finance costs             (5,303)             -   (5,303)         (4,214)             -   (4,214)
Net finance
costs                     (2,830)             -   (2,830)         (2,536)             -   (2,536)
Profit before
tax                        23,803       (5,592)    18,211         20,573       (3,985)   16,588
Income tax         8       (5,677)         2,187   (3,490)         (4,760)        1,357   (3,403)
Profit for the
period                     18,126       (3,405)    14,721         15,813       (2,628)   13,185
Attributable
to:                                                                                        
Equity holders
of the parent              17,997       (3,405)    14,592         15,677       (2,628)   13,049
Non-controlling
interests                     129             -       129            136             -      136
                          18,126       (3,405)    14,721         15,813       (2,628)   13,185
Earnings per
share                                                                                      
Basic             10                              25.54p                               23.66p
Diluted           10                              25.09p                               23.27p





Condensed consolidated income statement

                                                   Period ended 1 April 2012
                                              Before    Amortisation
                                       amortisation     of acquired
                                         of acquired intangibles and
                                     intangibles and   non-recurring
                                       non-recurring           items
                                               items        (note 7)     Total
                               Note           £'000           £'000     £'000
Continuing operations                                                     
Revenue                            6         311,954               -   311,954
Cost of sales                             (187,577)               - (187,577)
Gross profit                                124,377               -   124,377
Administrative expenses                                                   
- Administration expenses
excluding amortisation
ofacquired intangibles                    (75,408)         (3,476)  (78,884)
- Amortisation of acquired
intangibles                                       -         (7,463)   (7,463)
                                          (75,408)        (10,939)  (86,347)
Operating profit                             48,969        (10,939)    38,030
Finance income                                4,455               -     4,455
Finance costs                              (10,008)               -  (10,008)
Net finance costs                           (5,553)               -   (5,553)
Profit before tax                            43,416        (10,939)    32,477
Income tax                         8         (9,858)           2,202   (7,656)
Profit for the period                        33,558         (8,737)    24,821
Attributable to:                                                          
Equity holders of the parent                 33,333         (8,737)    24,596
Non-controlling interests                       225               -       225
                                            33,558         (8,737)    24,821
Earnings per share                                                        
Basic                             10                                  44.51p
Diluted                           10                                  43.71p



Consolidated statement of comprehensive income

For the period ended 30 September 2012



                                  Six months ended
                                                       Six months Period ended
                                      30 September          ended
                                              2012                1 April 2012
                                                   2 October 2011
                                            £'000          £'000        £'000
Profit for the period                       14,721        13,185       24,821
Other comprehensive
income/(expense) for the period:                                           
Exchange differences on
translation of foreign operations          (9,229)        (3,512)      (9,210)
Cash flow hedges - fair value
movement in equity                         (1,550)        (1,384)      (1,341)
Cash flow hedges - derivative
instrument effective portion                 1,341            112          112
Actuarial (loss)/gain on defined
benefit pension plans                        1,550        (4,996)      (7,941)
Provision for deferred tax on
defined benefit pension plans                (527)         1,139        1,707
                                          (8,415)        (8,641)     (16,673)
Total comprehensive income for
the period                                   6,306         4,544        8,148
Attributable to:                                                           
Equity holders of the parent                 6,218         4,427        7,970
Non-controlling interests                       88           117          178
                                            6,306         4,544        8,148



Consolidated statement of financial position

At 30 September 2012



                                       At 30 September At 2 October At 1 April
                                                  2012         2011       2012

                                                 £'000        £'000      £'000

                                  Note                    restated          
Non-current assets                                                        
Goodwill                                      212,777      209,852    218,305
Other intangible assets                        55,252       47,236     60,893
Property, plant and equipment                 265,608      232,827    254,442
Investment property                                 -          965        960
Investments                                       417          450        637
Trade and other receivables                     1,696        1,600      1,551
Total non-current assets                      535,750      492,930    536,788
Current assets                                                   
Inventories                                    16,994       13,872     11,211
Trade and other receivables                    62,176       50,800     53,651
Cash and cash equivalents                      25,982       22,122     21,986
Total current assets                          105,152       86,794     86,848
Total assets                                  640,902      579,724    623,636
Capital and reserves attributable                                   
to the Group's equity holders                                    
Share capital                                     364          344        346
Share premium account                          87,761       64,188     64,952
Translation reserve                            27,087       41,945     36,275
Cash flow hedging reserve                     (1,550)      (1,384)    (1,341)
Merger reserve                                106,757      106,757    106,757
Retained earnings                              93,660       77,232     83,842
Equity attributable to equity                                          290,831
holders of the parent                         314,079      289,082
Non-controlling interest                          910          761        822
Total equity                                  314,989      289,843    291,653
Current liabilities                                              
Interest bearing loans and                       4,368                   6,398
borrowings                                                   6,386
Trade and other payables                       76,700       65,538     84,012
Derivative financial instruments                1,550        1,384      1,341
Current tax liabilities                         5,884        9,487      7,338
Short-term provisions               11           3,057        6,321      3,385
Total current liabilities                      91,559       89,116    102,474
Non-current liabilities                                          
Interest bearing loans and                     201,902                 189,051
borrowings                                                 163,071
Retirement benefit obligations                 15,549       16,048     18,312
Deferred tax liabilities                        7,819        9,244     11,536
Provisions                          11           8,838       12,099     10,335
Deferred government grants                        246          303        275
Total non-current liabilities                 234,354      200,765    229,509
Total liabilities                             325,913      289,881    331,983
Total equity and liabilities                  640,902      579,724    623,636

Consolidated cash flow statement

For the period ended 30 September 2012



                                       At 30 September At 2 October At 1 April
                                                  2012         2011       2012

                                                 £'000        £'000      £'000

                                                         restated          
Profit for the period                           14,721       13,185     24,821
Adjustments                                     27,354       22,950     57,538
Cash generated from operations                  42,075       36,135     82,359
Income tax paid                                (4,364)      (5,716)   (12,976)
Net cash generated from operating
activities                                      37,711       30,419     69,383
Cash flows from investing activities                                       
Acquisition of subsidiaries - net of
cash                                          (25,456)     (25,829)   (66,208)
Purchase of property, plant and
equipment (PPE)                               (24,166)     (27,328)   (47,363)
Purchase of intangible assets                    (115)        (425)    (2,808)
Proceeds from sale of PPE                        2,268           34        265
Receipt of government grants                         -          107        128
Purchase of financial assets                     (840)            -          -
Interest received                                  987          278      1,652
Net cash used in investing activities         (47,322)     (53,163)  (114,334)
Cash flows from financing activities                                       
Dividends paid                                 (6,513)      (5,432)    (9,206)
Proceeds from borrowings                        69,284       44,270     93,508
Repayment of borrowings                       (62,759)     (28,504)   (47,497)
                                                            (1,304)
Repayment of hire purchase loans and
finance leases                                 (1,406)                (2,949)
Interest paid                                  (3,742)      (2,834)    (6,713)
Proceeds from issue of shares                   22,827          658      1,421
Payment of pre-acquisition dividend            (3,283)            -          -
Net cash generated in financing
activities                                      14,408        6,854     28,564
                                                                           
Net increase/(decrease) in cash and
bank overdrafts                                  4,797     (15,890)   (16,387)
Cash and bank overdrafts at beginning
of period                                       21,986       38,781     38,781
Exchange differences                             (801)        (769)      (408)
Cash and bank overdrafts at end of
period                                          25,982       22,122     21,986



                                                                            

                                       At 30 September At 2 October At 1 April
                                                  2012         2011       2012

                                                £'000        £'000      £'000
Cash generated from operations                                   
Profit for the period                           14,721       13,185     24,821
Adjustments for:                                                           
- depreciation and impairments                  18,849       17,231     35,254
- amortisation of intangible assets              4,881        3,729      7,803
- equity-settled share-based payments              804        1,022      2,306
- (profit)/loss on BeamOne                       (129)            -
consideration                                                              290
- (profit)/loss on sale of tangible              (502)          467
fixed assets                                                               817
- finance income                               (2,473)      (1,678)    (4,455)
- finance costs                                  5,303        4,214     10,008
- income tax expense                             3,490        3,403      7,656
Changes in working capital:                                                
- inventories                                    1,001        (392)      2,280
- trade and other receivables                      593        1,891    (2,722)
- trade, other payables and provisions         (4,713)      (5,813)    (2,252)
Cash generated from recurring                   41.825       37,259
operations                                                              81,806
Increase/(decrease) in working capital             250      (1,124)
from non-recurring items                                                   553
Cash generated from operations                  42,075       36,135     82,359

Condensed consolidated statement of changes in equity

For the period ended 30 September 2012



                                                                              Total
                                                                       attributable
                                             Cash                         to equity
                                             flow                           holders
                   Share   Share  Merger  hedging Translation Retained       of the Non-controlling   Total
                 capital premium reserve reserves     reserve earnings       parent        interest  equity
                  £'000   £'000   £'000    £'000       £'000    £'000        £'000           £'000   £'000
Balance at 3
April 2011           344  63,531 106,757    (112)      45,438   72,634      288,592             644 289,236
Profit for the
period                 -       -       -        -           -   13,049       13,049             136  13,185
Other
comprehensive
income/(expense)       -       -       -  (1,272)     (3,493)  (3,857)      (8,622)            (19) (8,641)
Total
comprehensive
income for the
period                 -       -       -  (1,272)     (3,493)   9,192        4,427             117   4,544
Transactions
with owners of
the Company
recognised
directly in
equity:                                                                                           
Dividends paid         -       -       -        -           -  (5,432)      (5,432)               - (5,432)
Issue of shares        -     657       -        -           -        -          657               -     657
Share-based
payments (net of
tax)                   -       -       -        -           -      838          838               -     838
Balance at 2
October 2011         344  64,188 106,757  (1,384)      41,945   77,232      289,082             761 289,843
Profit for the
period                 -       -       -        -           -   11,547       11,547              89  11,636
Other
comprehensive
income/(expense)       -       -       -       43     (5,670)  (2,377)      (8,004)            (28) (8,032)
Total
comprehensive
income for the
period                 -       -       -       43     (5,670)    9,170        3,543              61   3,604
Transactions
with owners of
the Company
recognised
directly in
equity:                                                                                           
Dividends paid         -       -       -        -           -  (3,774)      (3,774)               - (3,774)
Issue of shares        2     764       -        -           -        -          766               -     766
Share-based
payments (net of
tax)                   -       -       -        -           -    1,214        1,214               -   1,214
Balance at 1
April 2012           346  64,952 106,757  (1,341)      36,275   83,842      290,831             822 291,653
Profit for the
period                 -       -       -        -           -   14,592       14,592             129  14,721
Other
comprehensive
income/(expense)       -       -       -    (209)     (9,188)    1,023      (8,374)           (41) (8,415)
Total
comprehensive
income for the
period                 -       -       -    (209)     (9,188)   15,615        6,218              88   6,306
Transactions
with owners of
the Company
recognised
directly in
equity:                                                                                      
Dividends paid         -       -       -        -           -  (6,512)      (6,512)               - (6,512)
Issue of shares       18  22,809       -        -           -        -       22,827               -  22,827
Share-based
payments (net of
tax)                   -       -       -        -           -      715          715               -     715
Balance at 30
September 2012       364  87,761 106,757  (1,550)      27,087   93,660      314,079             910 314,989





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, Wilts, SN5 6NX.



These condensed consolidated interim financial statements were approved for
issue by the Board of Directors on 13 November 2012.



                 2 Summary of significant accounting policies

Basis of preparation

These condensed consolidated interim financial statements of the Group are for
the six months ended 30 September 2012.



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 1 April 2012. 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 1 April 2012 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.



The condensed consolidated interim financial statements for the six months to
30 September 2012 have not been audited or reviewed by auditors pursuant to
the Auditing Practices Board guidance on Review of Interim Financial
Information.



The consolidated interim financial statements for the six months to 2 October
2011 incorporated a £4.5 million error understating both goodwill and deferred
consideration payable on the acquisition of BeamOne. The error was caused by
the incorrect inclusion of Florida ethylene oxide start-up costs within the
calculation of deferred consideration payable. Both goodwill and deferred
consideration payable have been restated in the comparative figures throughout
these financial statements.



With the acquisition of SRI, the segmental information presented in note 6
contains fresh disclosure relating to the USA; comparative figures for prior
periods have been restated to reflect this.

Going concern

The Directors have reviewed the Group's medium-term forecasts through to
November 2013 along with reasonable possible changes in trading performance
and foreign currencies, to determine whether the committed banking facilities
are sufficient to support the Group's projected liquidity requirements, and
whether the forecast earnings are sufficient to meet the 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 accounting policies adopted in the preparation of the condensed
consolidated interim financial statements are consistent with those followed
in the preparation of the Group's annual financial statements for the period
ended 1 April 2012. No new standards or interpretations have been adopted
since the preparation of the Group's annual financial statements for the
period ended 1 April 2012.



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.



                         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
1 April 2012.



                         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 1 April 2012.



                                 5 Estimates

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 1 April 2012.



During the 6 months ended 30 September 2012, 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 four operating segments, and information on these
segments is reported to the chief operating decision maker ('CODM') forthe
purposes of resource allocation and assessment of performance. The chief
operating decision maker has been identified as the Board of Directors. The
four operating segments are: the UK & Ireland, Europe & Middle East, Asia &
Africa, and the Americas.



The segments derive their revenue from the same range of products and services
- being the provision of healthcare services, applied sterilisation
technologies, and hospital sterilisation services. 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 about these divisions is presented below:

                             UK & Ireland    Europe &  Asia &
                                          Middle East  Africa Americas   Total
Six month period ended 30            2012        2012    2012     2012    2012
September 2012                      £'000       £'000   £'000    £'000   £'000
Revenue from external
customers                          79,169      60,711   9,605   22,093 171,578
Segment profit                     15,812       9,386   2,050    2,393  29,641
Segment depreciation                6,236       9,406   2,137    1,070  18,849
Segment assets                    230,918     245,224  85,227   79,533 640,902



                                            Europe &  Asia &
                            UK & Ireland Middle East  Africa Americas    Total
                                    2011        2011    2011     2011     2011
                                   £'000       £'000   £'000    £'000    £'000
Six month period ended 2
October 2011                                              restated restated
Revenue from external
customers                         78,243      62,691   8,184    6,185  155,303
Segment profit                    12,862       9,727   1,672    1,316   25,577
Segment depreciation               6,033       8,875   1,977      346   17,231
Segment assets                   244,219     208,420  86,126   40,959  579,724



                                                                     
                                             Europe &  Asia &
                             UK & Ireland Middle East  Africa Americas   Total
                                     2012        2012    2012     2012    2012
Period ended 1 April 2012           £'000       £'000   £'000    £'000   £'000
Revenue from external
customers                         158,254     123,254  17,444   13,002 311,954
Segment profit                     28,272      19,493   3,831    3,213  54,809
Segment depreciation               12,323      17,946   4,176      834  35,279
Segment assets                    238,101     252,832  85,384   48,319 623,636

                      6 Segmental information continued

The table below reconciles the total segment profit above, to the Group's
operating profit and profit before tax:

                                                     At 2 October At 1 April
                                     At 30 September
                                                2012         2011      2012
                                               £'000        £'000      £'000
Total segment profit                          29,641       25,577     54,809
Unallocated amounts:                                                     
- Corporate expenses                         (3,008)      (2,468)    (5,840)
- Non-recurring costs                          (711)        (331)    (3,476)
Amortisation of acquired intangibles         (4,881)      (3,654)    (7,463)
Operating profit                              21,041       19,124     38,030
Net finance costs                            (2,830)      (2,536)    (5,553)
Profit before tax                             18,211       16,588     32,477



The table below analyses the Group's revenue from external customers between
the three principal product/service groups:



                                                   At 2 October At 1 April
                                   At 30 September
                                              2012         2011      2012
                                             £'000        £'000      £'000
Healthcare solutions                        80,306       77,857    153,745
Hospital sterilisation services             38,046       30,502     62,822
Applied sterilisation technologies          53,226       46,944     95,387
                                          171,578      155,303    311,954



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.



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. With the acquisition of SRI, the table
below now incorporates data for the USA; figures have been restated for the
comparative periods to reflect this.



                  At 30                 At 2                At 1           
               September              October                April
                    2012                                                    
                   £'000                 2011                2012
                                        £'000               £'000           

                                     restated    restated restated    restated
                Revenue Non-current  Revenue Non-current  Revenue Non-current
                              assets               assets               assets
            
UK                71,002     145,553   70,850     149,333  143,511     148,611
Netherlands       48,096     121,074   53,305     132,728  104,042     128,022
USA               20,808      40,180    6,184      23,440   13,002      24,987
Rest of           31,672     228,526   24,964     186,014   51,399     233,571
World
                 171,578     535,333  155,303     491,515  311,954     535,191



                            7 Non-recurring items

In the period to 30 September 2012, non-recurring items of £711,000 have been
charged in arriving at operating profit. This charge is principally comprised
of £780,000 of acquisition transaction costs and restructuring costs relating
to the acquisition of SRI, offset by a gain realised on the disposal of an
investment property.



In the period to 2 October 2011, non-recurring items of £331,000 were charged
in arriving at operating profit. This charge was comprised of costs of
acquisition, and restructuring costs at the Group's healthcare solutions
business, offset by the final settlement of an insurance claim.



In the year to 1 April 2012, non-recurring items of £3,476,000 were charged in
arriving at operating profit. This charge was comprised of costs of
acquisition, and restructuring costs at the Group's healthcare solutions
business.

                                    8 Tax

                                                       At 2 October At 1 April
                                       At 30 September
                                                  2012         2011      2012
                                                £'000        £'000      £'000
Current tax:                                                               
UK tax                                             536        1,250      2,727
Overseas tax                                     4,359        3,522      5,843
Adjustment in respect of prior periods               -            -        953
Total current tax                                4,895        4,772      9,523
Deferred tax:                                                              
Origination and reversal of temporary
differences                                    (1,129)        (901)         65
Adjustment in respect of prior periods               -            -    (1,255)
Effect of rate change                            (276)        (468)      (677)
Total deferred tax                             (1,405)      (1,369)    (1,867)
Total tax in income statement                    3,490        3,403      7,656



The Group's effective tax rate for the period on earnings before non-recurring
items and the amortisation of acquired intangibles was 23.8% (2011: 23.1%) and
this should be sustainable over the full year.



UK corporation tax is calculated at 24% (2011: 26%) of the estimated
assessable profit for the year. Taxation for overseas operations is calculated
at the local prevailing rates.



The 2012 Budget on 21March 2012 announced that the Finance Bill 2012 would
legislate for a reduction in UK corporation tax rate to 23% for the year
commencing 1 April 2013 and that Finance Bill 2013 would include legislation
to reduce the rate further to 22% in the year commencing 1 April 2014. Finance
Bill 2012 was substantively enacted on 3 July 2012. These reductions in tax
rate will further reduce the company's future current tax charge accordingly.
The deferred tax liability has been calculated based on the rate of 23%
substantively enacted at the balance sheet date. 



The further 1% rate reduction due to take place in April 2014 will further
reduce the Group's future current tax charge and reduce the Group's deferred
tax liability accordingly, but as this has not yet been substantively enacted
the impact of this has not been recognised. 



Deferred tax

The reduction in the deferred tax liability is as a result of recognising
deferred tax assets on the acquisition of SRI.



                                 9 Dividends

                                                       At 2 October At 1 April
                                       At 30 September
                                                  2012         2011      2012
                                                 £'000        £'000      £'000
Amounts recognised as distributions to                            
equity holders in the period:                                               
Final dividend for the period ended 3
April 2011 of 9.84p per share                        -        5,432      5,432
Interim dividend for the period ended
1 April 2012 of 6.82p per share                      -            -      3,774
Final dividend for the period ended 1
April 2012 of 11.18p per share                   6,512            -          -
                                               6,512        5,432      9,206

A proposed interim dividend for the year ending 31 March 2013 of 7.90p per
share was approved by the Board of Directors on 13 November 2012.

                            10 Earnings per share



                                                       At 2 October At 1 April
                                       At 30 September
                                                  2012         2011      2012
                                                £'000        £'000      £'000
Earnings                                                                   
Earnings for the purposes of basic                   
earnings per share being net profit
attributable                                    14,592

to equity holders of the parent                              13,049     24,596



                                                          Shares Shares Shares
                                                           '000   '000   '000
Number of shares                                                             
Weighted average number of ordinary shares for the
purposes of basic earnings per share                      57,135 55,155 55,257
Effect of dilutive potential ordinary shares:                              
Share options                                              1,031    933  1,013
Weighted average number of ordinary shares for the
purposes of diluted earnings per share                    58,166 56,088 56,270
Earnings per ordinary share                                                
Basic                                                     25.54p 23.66p 44.51p
Diluted                                                   25.09p 23.27p 43.71p



                                                        £'000   £'000   £'000
Adjusted earnings per share                                                
Operating profit                                        21,041  19,124  38,030
Amortisation of acquired intangible assets               4,881   3,654   7,463
Non-recurring items                                        711     331   3,476
Adjusted operating profit                               26,633  23,109  48,969
Net finance costs                                      (2,830) (2,536) (5,553)
Adjusted profit on ordinary activities before taxation  23,803  20,573  43,416
Taxation on adjusted profit on ordinary activities     (5,677) (4,760) (9,858)
Non-controlling interest                                 (129)   (136)   (225)
Adjusted net profit attributable to equity holders of
the parent                                              17,997  15,677  33,333
Adjusted basic earnings per share                       31.50p  28.42p  60.32p
Adjusted diluted earnings per share                     30.94p  27.95p  59.24p



                                      

                                11 Provisions

                                              Environmental
                                       Cobalt                    Other
                               disposal costs     provision provisions   Total
                                        £'000         £'000      £'000   £'000
At 3 April 2011                         4,182         3,399      3,499  11,080
Additional provision in the
period                                    19             -       122    141
Reclassification from current
liabilities                                 -             -        938     938
Unwinding of discounting                    -           47          -     47
Utilised in the period                  (169)             -       (62)   (231)
Acquired with businesses
during the period                           -             -       760    760
Exchange differences                     (29)          (83)        20   (92)
At 2 October 2011                      4,003        3,363     5,277 12,643
Additional provision in the
period                                    117             -      1,102   1,219
Unwinding of discounting                    -           119          -     119
Utilised in the period                      -         (372)      (277)   (649)
Acquired with businesses
during the period                         633             -          -     633
Exchange differences                     (68)         (143)       (34)   (245)
At 1 April 2012                         4,685         2,967      6,068  13,720
Additional provision in the
period                                    179             -         46     225
Unwinding of discounting                    -            55          -      55
Utilised in the period                      -           (4)    (1,785) (1,789)
Exchange differences                     (79)         (131)      (106)   (316)
At 30 September 2012                    4,785         2,887      4,223  11,895
Included in current
liabilities                                                              3,057
Included in non-current
liabilities                                                              8,838
                                                                       11,895



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.

The majority of the environmental provision relates to an amount agreed with
the vendor of Lips Textielservice Holding BV as part of the acquisition
completion accounts. To the extent that the environmental provision has not
been utilised by 31 December 2012 it is to be paid to the vendor during
January 2013, together with interest at the rate of Euribor plus 0.75%. All
interest to date has been accrued and reflected in the income statement.

Other provisions include provisions against vacated properties and other
restructuring costs.



                       12 Property, plant and equipment

During the period ended 30 September 2012, the Group purchased assets with a
total cost of approximately £23.1 million (2 October 2011: £29.2 million).

          13 Note to the consolidated statement of changes in equity

                                                      Total
                                               attributable
                     Cash                         to equity
                     flow                           holders
                  hedging Translation Retained       of the Non-controlling   Total
                 reserves     reserve earnings       parent        interest  equity
                    £'000       £'000    £'000        £'000           £'000   £'000
Other
comprehensive
income/(expense)
for the

6 months to 2
October 2011:                                                                
Exchange
differences on
translation of
foreign
operations              -    (3, 493)        -      (3,493)            (19) (3,512)
Net movements on
cash flow hedges
-

derivative
instrument
effective
portion           (1,272)           -        -      (1,272)               - (1,272)
Actuarial loss
on defined
benefit pension
plans                   -           -  (4,996)      (4,996)               - (4,996)
Provision for
deferred tax on
defined benefit
pension plans           -           -    1,139        1,139               -   1,139
                 (1,272)     (3,493)  (3,857)      (8,622)            (19) (8,641)
                                                                            
Other
comprehensive
income/(expense)
for the

6 months to 1
April 2012:                                                                  
Exchange
differences on
translation of
foreign
operations              -     (5,670)        -      (5,670)            (28) (5,698)
Net movements on
cash flow hedges
-

derivative
instrument
effective
portion                43           -        -           43               -      43
Actuarial loss
on defined
benefit pension
plans                   -           -  (2,945)      (2,945)               - (2,945)
Provision for
deferred tax on
defined benefit
pension plans           -           -      568          568               -     568
                      43     (5,670)  (2,377)      (8,004)            (13) (8,032)
                                                                            
Other
comprehensive
income/(expense)
for the

6 months to 30
September 2012:                                                              
Exchange
differences on
translation of
foreign
operations              -     (9,188)        -      (9,188)            (41) (9,229)
Net movements on
cash flow hedges
-

derivative
instrument
effective
portion             (209)           -        -        (209)               -   (209)
Actuarial gain
on defined
benefit pension
plans                   -           -    1,550        1,550               -   1,550
Provision for
deferred tax on
defined benefit
pension plans           -           -    (527)        (527)               -   (527)
                   (209)     (9,188)    1,023      (8,374)            (41) (8,415)

                                      

                    14(a) Acquisition of subsidiary - SRI

With effect from 13 July 2012, the Group acquired the entire issued share
capital of SRI/Surgical Express Inc ('SRI'), a Nasdaq-listed healthcare
business incorporated in Florida, as part of our strategy to enter the US HSS
market.



The fair value of the net assets acquired and the related consideration were
as follows:



                                Fair value

                                     £'000
Property, plant and equipment        9,102
Circulating inventory                5,944
Intangible assets                      478
Deferred taxation                    5,424
Inventories                          6,731
Trade and other receivables          9,228
Cash and cash equivalents              583
Trade and other payables          (12,308)
Loans                             (10,208)
Fair value of assets acquired       14,974
                                        
Cash consideration                  15,308
                                        
Goodwill arising on acquisition        334



The goodwill arising on the acquisition of SRI is attributable to the
assembled workforce and the synergies generated following the integration of
SRI into the Group.

In accordance with 'IFRS3 (revised) Business Combinations', management have
made adjustments to the carrying value of net assets acquired to arrive at the
fair values disclosed above. The most significant of these is a reduction in
the carrying value of property, plant and machinery and circulating inventory,
where book value on acquisition was higher than fair value.



Total transaction costs of £434,000 were incurred on the acquisition of SRI
and have been expensed within non-recurring items.



The SRI business contributed £13,900,000 to revenue and £779,000 to operating
profit during the period. Had the business been owned for the entire period,
it would have contributed £33,000,000 to revenue, and losses of £411,000 to
operating profit.



Summary of cash flows associated with the acquisition of SRI:



Cash consideration                        15,308
Cash acquired with business                (583)
Acquisition of subsidiaries - net of cash 14,725



                    14(b) Acquisition of subsidiary - MSI

In the previous financial year, on 21 March 2012, the Group acquired the
entire issued share capital of MSI Surgical Solutions LLC ('MSI'), a company
incorporated in the US, as part of our strategy to enter the US hospital
sterilisation market.



The fair value of the net assets acquired and the related consideration were
as follows:



                                Fair value
                                     £'000
Property, plant and equipment          204
Intangible assets                    1,918
Inventories                             28
Trade and other receivables            421
Cash and cash equivalents               41
Trade and other payables             (136)
Loans                                (194)
Fair value of assets acquired        2,282
                                        
Cash consideration                   3,874
Total consideration                  3,874
                                        
Goodwill arising on acquisition      1,592



The goodwill arising on the acquisition of MSI is attributable to the
assembled workforce and the synergies generated following the integration of
MSI into the Group.

In accordance with 'IFRS 3 (revised) Business Combinations', management made
adjustments to the book value of net assets acquired toarrive at the fair
values disclosed above. The most significant of these were the recognition of
intangible assets (customer lists). In the period, adjustments were made to
provisional fair values, increasing previously reported goodwill by £51,000.



Total transaction costs of £32,000 were incurred in the acquisition of MSI and
were expensed within non-recurring items.



The MSI business contributed £1,195,000 to revenue and £268,000 to operating
profit for the period to 30 September 2012.



Summary of cash flows associated with the acquisition of MSI:



Cash consideration                        3,874
Cash acquired with business                (41)
Acquisition of subsidiaries - net of cash 3,833



                    14(c) Acquisition of subsidiary - LSH

In the previous financial year, on 19 March 2012, the Group acquired the
entire issued share capital of LEONI Studer Hard AG ('LSH'), an AST business
incorporated in Switzerland, as part of our strategy to expand the geographic
coverage of our AST business. Since acquisition the company has been renamed
Synergy Health Daniken AG.



The fair value of the net assets acquired and the related consideration were
as follows:



                                  Fair value
                                       £'000
Property, plant and equipment         23,344
Intangible assets                      9,912
Inventories                               17
Trade and other receivables            1,088
Cash and cash equivalents                554
Trade and other payables             (4,839)
Retirement benefit obligations         (520)
Other provisions                       (633)
Deferred tax liabilities             (2,194)
Corporation tax liabilities            (991)
Fair value of assets acquired         25,738
                                          
Cash consideration                    37,100
Deferred consideration                   268
Deferred contingent consideration      2,595
Total consideration                   39,963
                                          
Goodwill arising on acquisition       14,225

The goodwill arising on the acquisition of LSH is attributable to the
assembled workforce and the synergies that can be generated following the
integration of LSH into the Group, and to gaining access to new sterilisation
technologies.



In accordance with 'IFRS 3 (revised) Business Combinations', management made
adjustments to the book value of net assets acquired toarrive at the fair
values disclosed above. The most significant of these were the recognition of
intangible assets (customer lists), the recognition of prospective tax assets,
and provisions for dividends declared prior to acquisition. In the period,
adjustments were made to provisional fair values, increasing previously
reported goodwill by £201,000.



On acquisition, the quantum of deferred contingent consideration was linked to
the uncertain value of a non-operating tax asset recognised in deferred tax
liabilities above. During the period, the value of the tax asset was
determined, driving a revision of deferred contingent consideration, tax
assets, and goodwill against figures previously reported. The deferred
contingent consideration was settled during October 2012.



Total transaction costs of £193,000 were incurred in the acquisition of LSH
and were expensed within non-recurring items.



The LSH business contributed £3,725,000 to revenue and £981,000 to operating
profit for the period to 30 September 2012.



Summary of cash flows associated with the acquisition of LSH:



Cash consideration                        37,100
Cash acquired with business                (554)
Acquisition of subsidiaries - net of cash 36,546



                14(d) Acquisition of subsidiary - Sterilgamma

In the previous financial year, on 11 July 2011, the Group acquired the entire
issued share capital of Sinagama II Technologies Sdn Bhd ('Sterilgamma'), a
company incorporated in Malaysia, as part of our strategy to expand the
geographic coverage of our AST business. Since acquisition the company has
been renamed Synergy Sterilisation KL (M) Sdn Bhd. Sterilgamma operates from a
number of AST plants across Malaysia.



The fair value of the net assets acquired and the related consideration were
as follows:



                                Fair value
                                     £'000
Property, plant and equipment        7,421
Intangible assets                    3,531
Inventories                              5
Trade and other receivables          1,380
Cash and cash equivalents            1,502
Trade and other payables             (754)
Taxation liabilities               (1,822)
Loans                                 (76)
Fair value of assets acquired       11,187
                                        
Cash consideration                  11,387
Assumption of vendor debt              883
Total consideration                 12,270
                                        
Goodwill arising on acquisition      1,083



The goodwill arising on the acquisition of Sterilgamma is attributable to the
assembled workforce and the synergies that can be generated following the
integration of Sterilgamma into the Group.

In accordance with 'IFRS 3 (revised) Business Combinations', management made
adjustments to the book value of net assets acquired toarrive at the fair
values disclosed above. The most significant of these were the recognition of
intangible assets (customer lists) and adjustments tothe carrying value of
assets not deemed to be recoverable. In the period, no adjustments were made
to previously reported fair values.



Total transaction costs of £34,000 were incurred in the acquisition of
Sterilgamma and were expensed within non-recurring items.



The Sterilgamma business contributed £2,048,000 to revenue and £712,000 to
operating profit for the period to 30 September 2012.



Summary of cash flows associated with the acquisition of Sterilgamma:



Cash consideration                         11,387
Cash acquired with business               (1,502)
Acquisition of subsidiaries - net of cash   9,885



                  14(e) Acquisition of subsidiary - BeamOne

In the previous financial year, on 7 April 2011, the Group acquired all of the
members' interests of BeamOne LLC ('BeamOne'), an AST business incorporated in
the US, as part of our strategy to expand the geographic coverage of our AST
business. Since acquisition the company has been renamed Synergy Health AST
LLC. BeamOne operated from sites in San Diego, California; Denver, Colorado;
Lima, Ohio; Saxonburg, Pennsylvania; and a fifth site in Costa Rica.



The fair value of the net assets acquired and the related consideration were
as follows:



                                                                  Fair value
                                                                       £'000
Property, plant and equipment                                          5,462
Investments                                                              429
Intangible assets                                                     10,953
Trade and other receivables                                            2,558
Cash and cash equivalents                                                596
Trade and other payables                                             (2,692)
Other provisions                                                       (760)
Loans                                                                (4,330)
Fair value of assets acquired                                         12,216
                                                                          
Cash consideration                                                    16,540
Deferred consideration                                                10,210
Total consideration                                                   26,750
Increase in deferred consideration recognised in income statement        161
                                                                          
Goodwill arising on acquisition                                       14,373



The acquisition of BeamOne was included as a post balance sheet event in the 3
April 2011 financial statements. When presenting this note, a number of
estimates were made before the completion of a fair value exercise, which were
subsequently replaced with fair value figures in the 2011 interim financial
statements.

In accordance with IFRS 3 Business combinations (revised), management made
adjustments to the book value of net assets acquired toarrive at the fair
values disclosed above. The most significant of these were the recognition of
intangible assets (customer lists) and adjustments tothe carrying value of
property restitution provisions.



The acquisition of BeamOne gave rise to goodwill of £14.4 million,
attributable to the assembled workforce and the synergies that can be
generated following the integration of BeamOne into the Group, and also to
gaining access to the US market. This is £1.4 million higher than the goodwill
disclosed within our 2011 interim statements, due to two factors; a £3.1
million increase to our calculation of fair value ascribed to customer
relationship intangible assets, and a £4.5 million increase to total
consideration due to the incorrect inclusion of Florida ethylene oxide
start-up costs within the calculation of deferred consideration payable. The
fair value of the acquisition consideration has been restated in the
comparative figures throughout these financial statements, showing an increase
to goodwill of £4.5 million over the previously reported balance at 2 October
2011.



In accordance with 'IFRS 3 (revised) Business Combinations', the amount of
consideration due to be paid was been estimated at the balance sheet date. The
movement in this estimate at each reporting date since the date of acquisition
has been recognised in non-recurring items within the income statement. The
deferred contingent consideration was settled during June 2012.



Total transaction costs in the prior period were covered by accruals booked
within non-recurring items in the previous year.



The BeamOne business contributed £6,576,000 to revenue and £1,666,000 to
operating profit for the period to 30 September 2012.



Summary of cash flows associated with the acquisition of BeamOne:



Cash consideration                        16,540
Cash acquired with business                (596)
Acquisition of subsidiaries - net of cash 15,944



                          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 revenues, 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 continue in the future. Other than in
 accordance with its legal or regulatory obligations (including under the UK
   Listing Rules and the Disclosure and Transparency Rules of the Financial
 Services Authority), the Company undertakes no obligation to publicly update
     or revise any forward-looking statement, whether as a result of new
 information, future events or otherwise. Nothing in this announcement shall
    exclude any liability under applicable laws that cannot be excluded in
                          accordance with such laws.

                                      

                   Statement of Directors' Responsibilities

We confirm that to the best of our knowledge:



• the condensed consolidated interim financial statements have been prepared
in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
and,



• the interim management report includes a fair review of the information
required by:



(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principal risks and uncertainties for the remaining
six months of the year; and



(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.



This report has been approved by the Board of Directors and signed on its
behalf by:



Richard Steeves

Chief Executive

13 November 2012



The condensed consolidated interim financial statements for the six months
ended 30 September 2012 will be available on the Company's website on 13
November 2012.



Financial Calendar



Group results
Full year results announced              5 June 2013
                                                  

AGM                                     25 July 2013
                                                  

Dividend dates
Interim dividend for 2013 announced 13 November 2012
Interim dividend for 2013 payable   14 December 2012
Final dividend for 2013 announced        5 June 2013
Final dividend for 2013 payable      September 2013



Registered office

Synergy Health plc

Ground Floor Stella, Windmill Hill Business Park

Swindon, Wiltshire SN5 6NX



Website: www.synergyhealthplc.com

                     This information is provided by RNS
           The company news service from the London Stock Exchange

END


IR BKBDKOBDDNDD -0- Nov/13/2012 07:00 GMT