Synergy Health reports 57.3% CAPEX growth and 7.5% Revenue growth

02 Jun 2015 • About Synergy Health ($SYR) • By InTwits

Synergy Health reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

Synergy Health has high CAPEX intensity: 5 year average CAPEX/Revenue was 13.4%. At the same time it's a lot of higher than industry average of 10.6%.
CAPEX is quite volatile: 55.4 in FY2015, 39.1 in FY2014, 12.4 in FY2013, 46.6 in FY2012, 44.6 in FY2011
The company has business model with low profitability: ROIC is at 9.1%
It operates with high leverage: Net Debt/EBITDA is 1.6x while industry average is 0.1x

Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Synergy Health ($SYR) key annual financial indicators

mln. £	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	287.3	312.0	361.2	380.5	408.8	7.5%
Gross Profit	109.7	124.4	140.7	155.7	175.1	12.4%
SG&A	63.4	78.9	87.0	97.7	116.3	19.1%
EBITDA	80.4	81.1	95.5	98.2	99.4	1.2%
Net Income	28.6	24.6	30.6	33.9	33.6	-1.1%
Balance Sheet
Cash	38.8	22.0	25.2	33.8	37.0	9.3%
Short Term Debt	139.4	6.4	3.1	3.9	3.2	-17.9%
Long Term Debt	11.7	189.1	199.3	177.5	194.8	9.8%
Cash flow
Capex	37.6	47.4	47.6	39.2	61.7	57.3%
Ratios
Revenue growth	0.3%	8.6%	15.8%	5.3%	7.5%
EBITDA growth	12.1%	0.8%	17.7%	2.9%	1.2%
Gross Margin	38.2%	39.9%	39.0%	40.9%	42.8%	1.9%
EBITDA Margin	28.0%	26.0%	26.4%	25.8%	24.3%	-1.5%
Net Income Margin	10.0%	7.9%	8.5%	8.9%	8.2%	-0.7%
SG&A, % of revenue	22.1%	25.3%	24.1%	25.7%	28.5%	2.8%
CAPEX, % of revenue	13.1%	15.2%	13.2%	10.3%	15.1%	4.8%
ROIC	9.2%	8.0%	8.5%	9.1%	9.1%	0.0%
ROE	10.3%	8.5%	9.7%	9.9%	9.6%	-0.3%
Net Debt/EBITDA	1.4x	2.1x	1.9x	1.5x	1.6x	0.1x

Revenue and profitability

The company's Revenue increased on 7.5% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased slightly on 0.98 pp from 23.4% to 24.4% in FY2015.

Gross Margin increased slightly on 1.9 pp from 40.9% to 42.8% in FY2015. SG&A as a % of Revenue increased on 2.8 pp from 25.7% to 28.5% in FY2015.

Net Income marign decreased slightly on 0.71 pp from 8.9% to 8.2% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 15.1% in FY2015. The company showed almost no change in CAPEX/Revenue from FY2012 to FY2015. It's average CAPEX/Revenue for the last three years was 12.9%.The company invested a large share of EBITDA (62.1%) to CAPEX.

Return on investment

The company operates at low ROIC (9.12%) and ROE (9.57%). ROIC showed almost no change in FY2015. ROE showed almost no change in FY2015.

Leverage (Debt)

Company's Net Debt / EBITDA is 1.6x and Debt / EBITDA is 2.0x. Net Debt / EBITDA jumped on 0.1x from 1.5x to 1.6x in FY2015. Debt increased on 9.2% in FY2015 while cash increased on 9.3% in FY2015.

Appendix 1: Peers in Health Care Equipment & Services

Below you can find Synergy Health benchmarking vs. other companies in Health Care Equipment & Services industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tristel ($TSTL)	6.0%	17.8%	-3.5%	27.6%
Md Medical Group Invest ($MDMG)	42.2%	39.7%	39.7%	26.9%
Ekf Diagnostics Holdings ($EKF)	234.1%	20.3%	22.0%	16.7%
Smith & Nephew ($SN.)	7.8%	-3.1%	5.2%	6.1%
Lifeline Scientific Inc ($LSIC)	9.6%	18.7%	10.2%	6.0%
Median (10 companies)	10.0%	14.5%	3.2%	5.5%
Synergy Health ($SYR)		8.6%	15.8%	5.3%	7.5%

Top companies by Gross margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Smith & Nephew ($SN.)	73.3%	74.1%	74.7%	74.8%
Tristel ($TSTL)	63.5%	67.9%	66.4%	69.8%
Immunodiagnostic Systems Hldgs ($IDH)	74.7%	74.7%	73.1%	68.1%
Omega Diagnostics Group ($ODX)	59.6%	63.0%	62.6%	63.6%
Lifeline Scientific Inc ($LSIC)	63.8%	60.6%	59.8%	61.3%
Median (10 companies)	59.8%	57.8%	56.5%	57.9%
Synergy Health ($SYR)	38.2%	39.9%	39.0%	40.9%	42.8%

Top companies by EBITDA margin, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Immunodiagnostic Systems Hldgs ($IDH)	34.1%		35.3%	34.1%
Md Medical Group Invest ($MDMG)	44.4%	41.7%	28.0%	28.9%
Smith & Nephew ($SN.)	27.1%	27.8%	26.9%	25.2%
Abbott Laboratories ($ABT)	22.6%	21.8%	19.6%	20.5%
Tristel ($TSTL)	11.8%	17.0%	13.7%	20.1%
Median (10 companies)	15.8%	17.0%	14.9%	19.1%
Synergy Health ($SYR)	28.0%	26.0%	26.4%	25.8%	24.3%

Top companies by CAPEX/Revenue, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Md Medical Group Invest ($MDMG)	62.3%	65.2%	42.8%	43.4%
Puricore ($PURI)	1.5%	2.4%	3.2%	15.4%
Bioquell ($BQE)	9.6%	7.6%	8.8%	8.9%
Smith & Nephew ($SN.)	7.5%	6.4%	7.8%	8.1%
Abbott Laboratories ($ABT)	3.8%	8.4%	5.8%	5.3%
Median (10 companies)	7.3%	5.7%	4.5%	5.2%
Synergy Health ($SYR)	13.1%	15.2%	13.2%	10.3%	15.1%

Top companies by ROIC, %


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Tristel ($TSTL)	4.0%	6.5%	3.5%	15.9%
Smith & Nephew ($SN.)	25.5%	22.0%	18.6%	14.7%
Immunodiagnostic Systems Hldgs ($IDH)	21.7%			12.3%
Lifeline Scientific Inc ($LSIC)	12.1%	1.9%	11.2%	11.7%
Md Medical Group Invest ($MDMG)	45.2%	19.9%	9.5%	11.0%
Median (10 companies)	13.0%	4.3%	5.3%	9.7%
Synergy Health ($SYR)	9.2%	8.0%	8.5%	9.1%	9.1%

Top companies by Net Debt / EBITDA


Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Md Medical Group Invest ($MDMG)	0.8x	0.2x	0.2x	2.0x
Smith & Nephew ($SN.)	0.1x	0.3x	0.2x	1.4x
Abbott Laboratories ($ABT)	1.0x	2.1x	0.8x	0.9x
Bioquell ($BQE)	-0.5x	-0.2x	-0.3x	-0.3x
Lifeline Scientific Inc ($LSIC)	-3.6x	-4.4x	-0.6x	-0.3x
Median (9 companies)	-0.3x	0.1x	-0.2x	-0.3x
Synergy Health ($SYR)	1.4x	2.1x	1.9x	1.5x	1.6x

Synergy Health stock price chart

Synergy Health financials

mln.	FY2010	FY2011	FY2012

Revenue	286.4	287.3	312.0
EBITDA	71.749	80.447	81.087
Net income	22.032	28.617	24.596
CAPEX	27.911	37.599	47.363
Debt	139.7	151.1	195.4
Cash	6.275	38.781	21.986

About Synergy Health

Synergy Health plc provides outsourced sterilization services for medical device manufacturers, hospitals, and other industries worldwide. The company operates through the UK & Ireland, Europe & the Middle East, Asia & Africa, and the Americas segments. It offers hospital sterilization services for reusable medical and surgical equipment used in operating theatres. The company also provides a range of sterilization technologies, including gamma irradiation; electron, ion, and X-ray beam treatments; and ethylene oxide sterilization solutions for the medical devices, pharmaceuticals, and industrial sectors. In addition, it offers reusable surgical solutions comprising gowns, towels, and stainless products to hospitals and surgery centers; and laboratory services, including hematology, immunology, biochemistry, microbiology, environmental monitoring, and substance identification, as well as drug and alcohol testing services. Further, the company provides pharmaceutical laboratories for chemical and microbiological analysis; linen management services for healthcare facilities. Additionally, it offers infection prevention and control products, such as disinfectants, detergent wipes, cleaning and disinfection products, anti microbial hand sanitizing mousse, clinical waste containers, and sharps; patient hygiene solutions, including skin cleansings and bed bath systems; and custom procedure packs and trays, single use instruments, consumables, X ray detectable swabs, and bags for endoscopic retrieval of tissue. The company also offers wound care solutions, including tubular bandages, garments, and hosiery and liner kits; and IT services. Synergy Health plc was founded in 1991 and is headquartered in Swindon, the United Kingdom.