Midas: Synergy poised for boost from NHS

 

Barely a week goes by without news of someone in hospital catching a horrendous bug that leaves them more unwell than when they were admitted.

The Government is sufficiently worried about these superbugs that it recently created a hygiene code to encourage hospitals to be cleaner. Hospitals are also under pressure to cut costs and outsource non-core activities.

That is where Synergy Healthcare comes in. The company floated in 2001, valued at £12.8m. Having lifted earnings by at least 33% a year, it is now worth £440m.

Synergy, run by its founder, Canadian biochemist Richard Steeves, operates in two key areas. It sterilises equipment and it has begun to work with hospitals to cut infections. It is the leading provider of sterilisation services in the UK, but even so, it has only 13% market share as hospitals have traditionally done this in-house.

But Synergy should increase its share fairly rapidly as hospitals start outsourcing more. The group is also extending its reach to Europe and Asia, particularly China.

On the infection front, Synergy has pioneered a holistic approach to the problem. In the past, solutions have tended to focus on one or two ideas, such as making sure that people who come into contact with patients wash their hands.

Synergy has adopted more sophisticated techniques, tracking risks in hospitals to see where and how infections are transmitted, sterilising the air in high-risk areas and working with healthcare providers in a more comprehensive way than before.

Annual results out last month showed profit before tax rising 33% to £16.9m and the dividend increasing by 20% to 8.4p.

•• Midas verdict: This company is wellmanaged and is in a fast-growing market. But at 830p, the shares trade at a discount compared with similar groups. This seems unjust. Buy.

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Adding value atTrifast wins friends in City

Trifast is a nuts and bolts business. It makes them and sells them worldwide to companies such as Electrolux and Sharp.

Some of its products are low-cost, commodity-type goods. But increasingly it is moving out of this competitive part of the market and into specialised areas where it can add value for customers and make more money. One of its more complex products, for instance, is the self-clinch fastener, which is used in flatscreen computers and televisions. This is a fast-growing sector and Trifast is a key supplier to the market.

The company operates in Europe, Asia and the US and has strong ambitions in all three continents. It believes there is particular potential in North America.

Trifast bought Serco Ryan nearly two years ago and chief executive Steve Auld came with the business. A keen and focused salesman, Auld is keen to expand Trifast over the next three years.

Recent results showed a 12% increase in turnover to £130m for the year to March 31. Auld is aiming for £250m by 2010, while ensuring that profits grow substantially.

One way in which he intends to do this is by expanding the firm's manufacturing capacity. Trifast makes 16% of everything it sells. Auld wants to increase that to 25% and lift margins.

•• Midas verdict: The shares, at 84½p, have trodden water for most of this year. But City brokers are enthusiastic, many believing the stock is worth 110p and probably more. Buy.