RNS Number:8916L
Synergy Healthcare PLC
04 June 2003

                             Synergy Healthcare plc



             Preliminary results for the 52 weeks to 30 March 2003



Synergy Healthcare is a leading provider of outsourced medical support services
within the UK.

                         A year of substantial progress


                                                 FY               FY             Change

                                               2003             2002                  %
Turnover                                      27.1m            12.7m             +  114
Operating profit (adjusted*)                   3.1m             1.5m              +  98
Profit before tax                              2.3m             1.5m              +  61
Basic earnings per share                      7.42p            7.42p
Basic earnings per share (adjusted            9.98p            7.85p              +  27
*)
Dividends per share                            2.9p             2.4p              +  21

*adjusted for non-recurring costs and goodwill



Highlights



*   Strong balance sheet with #6.7 million cash



*   Acquisition of Hays Clinical Support Services in April 2002 now fully
    integrated.



*   Improved Group operating margins following the implementation of
    TrakStar and the integration of the acquisition



*   Market for sterile services developing rapidly - strong forward order
    book > #160m



*   6 new contracts awarded together with the opening of two new clean
    rooms



*   DOH Decontamination strategy to be published  on 12 June 2003 with
    expected market developments



Dr Richard Steeves, Chief Executive, commented:



"The demand for outsourced services is growing rapidly and Synergy is focusing
on those services that have a significant value added content and where the
company can achieve technical leadership.  Both the Healthtex and Surgical
businesses have achieved these objectives and we will continue to invest in
these operations to sustain this position."



"The first quarter of the new financial year has started well.  Activity levels
within the Healthtex business remain high and the Surgical operation continues
to develop its market presence.  The Group is confident of another successful
year."

4 June 2003

ENQUIRIES:

Synergy Healthcare plc                                      Tel:  01332 387 100

Dr Richard Steeves
Julia Wilson


College Hill                                                Tel:  020 7457 2020

Nicholas Nelson/Corinna Dorward




                              CHAIRMAN'S STATEMENT



The year under review was one of substantial progress for Synergy Healthcare
("Synergy").  The financial results for the year were excellent and the Group is
well positioned to take advantage of further opportunities in the surgical
market following the acquisition of Hays Clinical Support Services ("HCSS") at
the start of the year.



Results and dividend



Group turnover for the year has increased 114.3% to #27.1m with 16.1% organic
growth and #12.4m contributed by HCSS.  Gross margins were maintained at 32.7%.
 Operating margins in the continuing business increased from 13.2% to 13.7%.
The Environmental business, with turnover of #0.5m and an operating loss of
#0.14m, was closed in the year.  Non-cash closure costs amounted to #255,000.



Group operating profit before goodwill amortisation and non-recurring costs
amounted to #3.1m.  The non-recurring costs related to the re-organisation of
the Group following the acquisition of HCSS.



Basic earnings per share remained level at 7.42p (2002: 7.42p).  Adjusted basic
earnings per share increased 27.1% from 7.85p to 9.98p.



Based on this strong performance the Board is recommending that the final
dividend is increased by 25% to 2.0p per ordinary share.  This increases the
total dividend for the year by 20.8% from 2.4p to 2.9p.



The final dividend, if approved will be paid on 18 July 2003 to shareholders on
the Register of Members at the close of business on 20 June 2003.



Cash flow and capital investment



Cash flow from operating activities totalled #6.3m, an increase of #3.2m on last
year.



Capital investment included the new instrument processing facility in
Wolverhampton and a new clean room  and training facility in Derby.  Further
investment was also made in the Healthtex business to increase the operating
efficiency and capacity of existing plants.



Acquisition



In April 2002 the Group raised #12m, through a share issue, to fund the
acquisition of HCSS.  Following the acquisition, the Group is now the leading
provider of sterile services in the UK and is well positioned to take advantage
of the opportunities that are now presented in this market following the
strategic review of all NHS in house facilities by the Department of Health.



The business is already benefiting from the cross selling opportunities
resulting from the enlarged customer base and significant progress has been made
improving operating margins from 7.2% at the time of acquisition to 10.2% for
the year.





Employees



All of Synergy's employees have once again shown their commitment to the Group
and the progress we have made this year is the result of their dedication and
enthusiasm.



The Board recognises the contribution that they have made both to the financial
result for the year and also to building successful partnerships with our
customers.  I thank them all on behalf of the Board.



Outlook



The first quarter of the new financial year has started well.  Activity levels
within the Healthtex business remain high and the Surgical operation continues
to develop its market presence.  The Group is confident of another successful
year.



S G Wilson

Chairman




                            CHIEF EXECUTIVE'S REVIEW



Synergy is  an innovative supplier of services to healthcare providers.
Healthtex is the largest focused supplier of linen management services to the
NHS whilst the Surgical business is the largest provider of sterile and other
surgical support services.  The market for both of these core services is
growing  as the capacity of the NHS is increased together with increasing levels
of outsourcing.



Performance review

It has been an excellent year maintaining performance within the existing
business whilst integrating HCSS, which was acquired on 30 April 2002.  Sales
for the Group increased 114.3% to #27.1m with an underlying organic growth rate
of 16.1% within Synergy and 9.6% within HCSS.  Group profits before tax
increased by 60.9% after deducting exceptional costs associated with the
acquisition of HCSS and the closure of the Environmental business.  Operating
profitability for the continuing business increased from 13.2% to 13.7%.



Healthtex performed well during the year with very positive customer feedback
regarding the quality of its services.  As expected, overall sales growth was
lower this year increasing by 7.9% compared with 14.4% last year.  The rate of
outsourcing is accelerating however and growth is expected to return to
historical levels in the coming year.  The programme of capital investment
within this business continued increasing both quality and overall
profitability.



The Surgical business also performed well with sales increasing by 16.6% on a
like for like basis.  Profitability within the business has improved following
the successful integration of HCSS and the release of cost synergies.  The
Surgical business has continued to invest in new innovative technology to
support its growth. Quality and service levels continue to set industry
standards and customer feedback is exceptionally positive.



The market for sterile services is developing rapidly.  The Department of
Health's plan for outsourcing sterile services is progressing in line with
Synergy's expectations and the overall growth rate will accelerate in the medium
term.  Synergy's network of clean rooms is proving to be strategically important
and the expansion of this network will continue.



The Environmental business underwent a strategic review early in the year.  The
market fundamentals have not improved and this factor, together with a lack of
scale, resulted in a decision to close the business.  The closure has resulted
in a non-cash exceptional cost of #255,000 in the year.



During the year the Group successfully renewed three contracts and won an
additional six contracts.



Strategy

Synergy is a leading provider of outsourced medical support services within the
UK.  The demand for outsourced services is growing rapidly and Synergy is
focusing on those services that have a significant value added content and where
the company can achieve technical leadership.  Both the Healthtex and Surgical
operations have achieved these objectives and we will continue to invest in
these businesses to sustain this position.





The Board is committed to developing the Group both organically and through
acquisition.  As the NHS consolidates its supplier base Synergy will aim to be
in the top 50 suppliers by increasing market share of existing services as well
as examining opportunities to expand into adjacent healthcare support services.



People

The last year has been challenging with the integration of HCSS together with
setting new standards in quality and service for our customers.  This year will
see the opening of a new training college for the Group, which will include a
highly specialised programme for the Surgical business.  This additional
investment in training and education is a commitment by the Board to the ongoing
development of the team and recognition of the value that is created by our
highly motivated employees.





R M Steeves
Chief Executive






CONSOLIDATED PROFIT AND LOSS ACCOUNT

For the 52 weeks ended 30 March 2003

                                                
                                                  Continuing pre    Discontinued,         2003         2002
                                                   non-recurring    non-recurring
                                                 costs and asset  costs and asset
                                                      impairment       impairment        Total        Total
                                                          #'000             #'000        #'000        #'000
Turnover
Continuing operations                                     14,230               -        14,230       12,261


Acquisitions                                              12,360               -        12,360            -
Discontinued operations                                        -             521           521          389

                                                          26,590             521        27,111       12,650
Cost of sales                                            (17,665)           (588)      (18,253)      (8,520)

Gross profit/(loss)                                        8,925             (67)        8,858        4,130

Net administrative expenses                               (5,722)            (68)       (5,790)      (2,582)
Non-recurring costs                                            -            (252)         (252)           -
Goodwill                                                    (249)              -          (249)         (56)

Total net administrative                                  (5,971)           (320)       (6,291)      (2,638)
expenses

Continuing operations                                      1,898            (252)        1,646        1,565
Acquisitions                                               1,056               -         1,056            -
Discontinued operations                                        -            (135)         (135)         (73)

Operating profit/(loss)                                    2,954            (387)        2,567        1,492

Loss on closure of
discontinued operations                                        -            (255)         (255)           -

Profit/(loss) on ordinary
activities
before interest                                            2,954            (642)        2,312        1,492

Net interest                                                                                32          (35)

Profit on ordinary activities
before taxation                                                                          2,344        1,457

Taxation on profit on ordinary
activities                                                                                (751)        (470)

Profit for the financial year                                                            1,593          987
Dividends                                                                                 (639)        (709)

Retained profit for the year                                                               954          278

Earnings per ordinary share
Basic                                                                                     7.42p        7.42p
Diluted                                                                                   7.11p        7.07p
Adjusted basic                                                                            9.98p        7.85p
Adjusted diluted                                                                          9.57p        7.48p



There were no recognised gains and losses other than the profit for the
financial year.





CONSOLIDATED BALANCE SHEET

At 30 March 2003


                                                                       2003                            2002
                                                      #'000           #'000           #'000           #'000
Fixed assets
Intangible assets                                                      4,989                             864
Tangible assets                                                       17,175                           7,851

                                                                      22,164                           8,715
Current assets
Stocks                                                 1,252                             358
Debtors                                                3,839                           2,469
Cash at bank and in hand                               6,653                           5,360

                                                      11,744                           8,187
Creditors: amounts falling due
within one year                                       (7,949)                         (4,535)

Net current assets                                                     3,795                           3,652

Total assets less current liabilities                                 25,959                          12,367

Creditors: amounts falling due
after more than one year                                              (1,422)                           (384)

Provisions for liabilities and charges                                  (644)                           (334)

                                                                      23,893                          11,649

Capital and reserves
Called up share capital                                                  138                             101
Share premium account                                                 21,061                           9,808
Merger reserve                                                           430                             430
Profit and loss account                                                2,264                           1,310

Shareholders' funds                                                   23,893                          11,649






CONSOLIDATED CASH FLOW STATEMENT

For the 52 weeks ended 30 March 2003


                                                                                              as restated


                                                                                2003                 2002
                                                                               #'000                #'000

Net cash inflow from operating activities                                     6,314                3,079

Returns on investments and servicing of finance
Interest received                                                               118                  132
Interest paid                                                                    (8)                 (96)
Finance lease interest paid                                                     (78)                 (71)

Net cash inflow/(outflow) from returns on investments
and
servicing of finance                                                             32                  (35)


Taxation                                                                       (340)                (339)

Capital expenditure and financial investment
Purchase of tangible fixed assets                                            (4,241)              (3,223)
Sale of tangible fixed assets                                                     8                   21

Net cash outflow from capital expenditure
and financial investment                                                     (4,233)              (3,202)


Acquisitions
Acquisition of business                                                     (10,929)                   -

Equity dividends paid                                                          (456)                (450)

Management of liquid resources
Sale/(purchase) of short term deposits                                          750               (5,250)

Net cash inflow/(outflow) from management of
liquid resources                                                                750               (5,250)

Financing
Issue of ordinary share capital                                              12,080                9,333
Issue costs                                                                    (790)                (666)
Repayment of borrowing                                                            -               (1,892)
Capital element of finance lease rentals                                       (385)                (263)

Net cash inflow from financing                                               10,905                6,512


Increase in cash                                                              2,043                  315



NOTES



1        Basis of preparation

The Preliminary announcement has been prepared in accordance with applicable
accounting standards and under the historical cost convention.

The principal accounting policies of the Group are set out in the Group's 2002
annual report and financial statements.  The policies in this preliminary
announcement have remained unchanged from the 2002 financial statements, expect
that the policy in respect of cash and liquid resources has changed.  Cash at
bank and in hand includes cash in hand, deposits repayable on demand, and short
term deposits.  To the extent that these short term deposits mature after one
working day from the balance sheet date, they are included as liquid resources
in the cash flow statement.  In this respect, the directors have revised their
previous definition of liquid resources and the comparative cash flow statement
has been restated accordingly, and now complies with Financial Reporting
Standard Number 1.  The effect of this is to restate #5,250,000 from cash to
liquid resources in the 2002 cash flow statement.





2        EXCEPTIONAL ITEM

The exceptional loss on closure of discontinued operations, stated after
operating profit, relates to an impairment loss on the write-down of the
tangible fixed assets within the Environment of business.





3        DIVIDENDS
Equity dividends:                                                                      2003         2002
                                                                                      #'000        #'000
Ordinary shares - special dividend (2002:3.4p)                                            -          320
Ordinary shares - interim dividend of 0.9p per share paid (2002:0.8p)                   197          130
Ordinary shares - proposed final dividend of 2p per share (2002:1.6p)                   442          259
                                                                                        639          709





4                    earnings per share
                                                                                       2003         2002
                                                                                      #'000        #'000
Basic and diluted earnings per share
Profit for the financial year                                                         1,593          987

                                                                                     Number       Number

Weighted average number of ordinary shares in issue during the year              21,482,355   13,298,858

Basic earnings per share                                                              7.42p        7.42p

Diluted earnings per share                                                            7.11p        7.07p

                                                                                     Number       Number
Reconciliation of average number of ordinary shares used for
basic and diluted earnings per share
Weighted average number of ordinary shares used for basic earnings per share     21,482,355   13,298,858
Weighted average number of shares under option                                      928,491      661,038

Weighted average number of ordinary shares used for diluted earnings per share   22,410,846   13,959,896








                                                                                      2003         2002
                                                                                     #'000        #'000
Adjusted earnings per share
Operating profit                                                                     2,567        1,492
Non-recurring costs                                                                    252            -
Goodwill                                                                               249           56

Adjusted operating profit                                                            3,068        1,548
Net interest                                                                            32          (35)

Adjusted profit on ordinary activities before taxation                               3,100        1,513
Taxation on adjusted profit on ordinary activities                                    (956)        (470)

Adjusted profit for the financial period                                             2,144        1,043

Adjusted basic earnings per share                                                     9.98p        7.85p

Adjusted diluted earnings per share                                                   9.57p        7.48p





5                    Net cash inflow from operating activities
                                                                                      2003          2002
                                                                                     #'000         #'000

Operating profit                                                                     2,567         1,492
Depreciation                                                                         2,698         1,836
Loss on sale of tangible fixed assets                                                   20             4
Amortisation of goodwill                                                               249            56
Increase in stocks                                                                    (282)         (133)
Decrease/(increase) in debtors                                                         195        (1,235)
Increase in creditors                                                                  867         1,059

Net cash inflow from operating activities                                            6,314         3,079





6        Reconciliation of net cash flow to movement in net funds
                                                                                      2003          2002
                                                                                             as restated
                                                                                     #'000         #'000

Increase in cash in the year                                                         2,043           315
Cash outflow from financing                                                              -         1,892
Cash outflow from finance leases                                                       385           263
Cash (inflow)/outflow from liquid resources                                           (750)        5,250

Change in net funds resulting from cash flows                                        1,678         7,720
Inception of finance leases                                                         (1,640)          (86)

Movement in net funds in the year                                                       38         7,634
Net funds at 1 April 2002                                                            4,748        (2,886)

Net funds at 30 March 2003                                                           4,786         4,748





7                    The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined in section 240 of
the Companies Act 1985



The financial information has been extracted from the Group's 2003 statutory
financial statements upon which the auditor's opinion is unqualified and does
not include any statement under section 237 of the Companies Act 1985.

8          The financial statements for the year ended 30 March 2003 will be
posted to shareholders on 17 June 2003, and will be delivered to the Registrar
of Companies following the Company's Annual General Meeting.






                      This information is provided by RNS
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