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


You can see all of CommSec’s reporting season analysis by clicking here.

Steven Daghlian, Market Analyst,