REPORTING SEASON: Sonic Healthcare Ltd (SHL)

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Figure 1: Sonic Healthcare Ltd 12 month chart

 

Sonic Healthcare’s profit improved and met guidance

–       Medical diagnostics provider, Sonic Healthcare (SHL) posted a largely expected $385million FY14 net profit. The result was driven partly by cost cutting measures and revenue growth

–       Revenue rose 12.3% (incl. currency moves) and by 6% once stripping out the impact of currency fluctuations. SHL earned half of its income offshore in FY14. Revenue across its three core Pathology businesses – Australia, the US and Europe edged higher. Locally, the number of Australians visiting their GPs seems to have eased slightly; perhaps due to confusion over the government’s planned $7 co-pay for doctor visits. The additional fee is yet to be implemented and faces stiff opposition in parliament.

–       Its US business was held back by weaker volumes following extreme weather from Dec 2013-Feb 2014. A rise in insured patients thanks to the Affordable Care Act (Obamacare) helped lift volumes and should be supportive in FY15. A US$60million cost cutting initiative has been beneficial for its North American earnings. In Europe, the €76million acquisition of German laboratory Labco S.A in Dec 2013 helped boost revenue in Germany by 12%. Labco has yearly revenue of ~€53m and operates five well-established labs in Germany

–       SHL will pay a 55% franked $0.40/s final dividend to investors on 23 Sept SHL has a 3.63% dividend yield

–       SHL expects ~5% growth in EBITDA in FY15 (earnings before interest, taxes, depreciation & amortisation) on a constant currency basis. EBITDA is often favoured over net profit as it is a more accurate representation of core performance .Guidance excludes the impact of future acquisitions

–       SHL shares fell following the result; however are still slightly outperforming the broader market this calendar year. Sonic Healthcare is the fourth biggest listed company in Australia’s healthcare industry

 

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Steven Daghlian, Market Analyst,