Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — Shareholder Meeting (November 2006)
27 slides from Sonic Healthcare's shareholder meeting presentation, Nov 15, 2006
Slide 1: Annual General Meeting
Annual General Meeting 15 November 2006 Dr Colin Goldschmidt CEO and Managing Director Sonic Healthcare
Slide 2: Agenda
Agenda z Review of FY 2006 Summary of financial performance Sonic’s operations through FY 2006 z Update and future outlook z Inside view of laboratory operations
Slide 3: FY 2006 Highlights
FY 2006 Highlights z Sonic delivers record earnings result z Sonic full-year guidance achieved z Australian Pathology performing strongly z Northern hemisphere entities tracking well z Result held back slightly by Imaging and NZ Pathology z Sonic in advanced negotiations with several acquisition tar
Slide 4: 2006 Financial Highlights
2006 Financial Highlights Growth 2006 vs 2005 Revenue 20% EBITA 21% NPAT 27% Operating Cashflow 15% EPS 20% Dividend (full-year) 14%
Slide 5: 2006 Guidance Delivered
2006 Guidance Delivered Full Year 2006 Sonic Guidance Actuals $M $M Revenue 1,600 - 1,670 1,656 EBITA 300 - 320 306
Slide 6: Revenue 2006
Revenue 2006 2006 2005 Growth ($M) ($M) (%) Total Revenue 1,656 1,381 20% z CPL acquisition in October 2005 had positive impact on revenue growth z Organic revenue growth (excluding CPL) ~7% z Australian pathology revenue growth 8.6% Strong revenue growth Melbourne Pathology, Douglass Hanly Moir,
Slide 7: Annual Revenue
Annual Revenue 2,000 1,800 1,600 1,400 $M 1,200 1,000 800 600 400 2001 2002 2003 2004 2005 2006 Revenue ($M) 628 860 975 1,037 1,381 1,656
Slide 8: Revenue Growth 2007
Revenue Growth 2007 z Revenue growth will be enhanced by Full year of CPL (acquisition in October 2005) Possible acquisitions in Europe and the USA though FY ‘07 z Australian pathology and radiology Anticipated organic growth ~5% z New Zealand pathology Growth rates are low Impact of poten
Slide 9: Earnings Growth
Earnings Growth Movement FY 2006 FY 2005 % EBITA ($M) 306.0 253.0 21% NPAT ($M) 172.0 135.4 27% EPS (cents) 58.6 48.9 20% Cash Generation ($M) 247.2 214.1 15% NOTE: All comparatives have been adjusted to conform with AIFRS, as required
Slide 10: Earnings per Share
Earnings per Share 60.0 50.0 40.0 Cents 30.0 per share 20.0 10.0 0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Core EPS (cents) 8.0 9.5 11.8 16.7 21.7 27.5 33.3 37.8 43.4 48.9 58.6
Slide 11: EPS Growth
EPS Growth 50% 42% 40% 30% 30% 27% 24% 21% 21% 20% 20% 19% 14% 14% 15% 10% 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Slide 12: Earnings Margins
Earnings Margins FY 2006 FY 2005 EBITA Margin 18.5% 18.3% z Australian pathology EBITA margin growth of 60 basis points z Global pathology EBITA margin growth, excluding CPL, of 50 basis points z Adverse impacts on Sonic margins in ’06 year Radiology margins impacted by wage pressures New Zealan
Slide 13: 2007 Guidance
2007 Guidance z Revenue growth Organic growth ~5% Revenue growth including CPL ~9% z Earnings growth Earnings per share growth ~10% Guidance excludes new acquisitions and possible DML outcomes
Slide 14: Final Dividend
Final Dividend 2006 2005 Change Interim Dividend $0.15 $0.13 15% Final Dividend $0.26 $0.23 13% Full Year Dividend $0.41 $0.36 14% z Dividend fully franked at 30% z Record Date 5 September 2006 z Payment Date 19 September 2006 z Dividend Reinvestment Plan remains suspended
Slide 15: Australian Pathology
Australian Pathology z Revenue growth of Australian pathology division strong z Market share gains in NSW and Victoria z Outperformance by large Australian labs z Sonic Australian pathology delivers margin expansion of 60 basis points Information sharing and synergy capture Strong pathologist an
Slide 16: New Sonic "Superlab"
New Sonic “Superlab” Sydney, Australia z Building works well underway and ahead of schedule z Project tracking to budget z Completion in second half of calendar 2007 z 17,000 square metres of lab and office space z State-of-the-art design and workflows z Designed for high volume and high efficiency
Slide 17: Sonic Imaging
Sonic Imaging z Radiology division revenue growth at market growth level z Queensland X-Ray continues to outperform z Margins impacted negatively by wage pressures World-wide shortage of Radiologists and technicians “Head-hunting” of Radiologists Renegotiation of employment contracts z Apollo
Slide 18: Sonic Imaging - Future
Sonic Imaging - Future z Demand for radiology services increasing – CT and MRI z Solutions to wage pressure issues Sonic has an outstanding team of Radiologists and radiology technicians Novel incentive-based productivity model in process New model will drive revenue growth, improve efficiency
Slide 19: Medicare Funding Agreements
Medicare Funding Agreements Australian Pathology and Radiology z Expenditure on pathology and radiology (other than MRI) have exceeded the reimbursement “cap” z Additional funding is justified where increased outlays are due to changes in government policy z Fee negotiations (pathology and radiology
Slide 20: IPN
IPN z Strong financial result for FY ’06 z Operational rejuvenation Dr Malcolm Parmenter, CEO – energy and great vision for IPN GP numbers growing in existing centres Increasing GP approval of IPN model z Solid future growth expected Focus on filling existing centres New centres Financia
Slide 21: New Zealand Laboratory Contract Update
New Zealand Laboratory Contract Update z Sonic operates 4 laboratory companies in N.Z z Diagnostic Medlab (DML) - Auckland Contract awarded to Labtests Auckland from 1 July 2007 Sonic/DML in legal challenge over contract decision z Medlab South – Christchurch and South Island Christchurch – no
Slide 22: DML Auckland Community Laboratory Contract
DML Auckland Community Laboratory Contract z DML challenges decision to award contract to new operator Judicial Review postponed to February 2007 z DML’s case Process to award contract was flawed Quality of service will be reduced Conflict of interest associated with decision z Transition ri
Slide 23: Off-shore Pathology
Off-shore Pathology z TDL – The Doctors Laboratory (U.K.) Strong revenue and EBITA growth in FY 2006 Margin expansion due to enhanced operational performance TDL-UCLH partnership progressing well Growth anticipated to continue z Schottdorf Group (Germany) Solid performance through ’06 year
Slide 24: UK Pathology – NHS Outsourcing
UK Pathology – NHS Outsourcing z Public Private Partnership with UCLH operating well Improved efficiencies A showcase for other NHS opportunities z Lord Carter report on NHS outsourcing Recommends change to current system Encourages private sector involvement Proposes pilot schemes z Outso
Slide 25: Update FY '07
Update FY ‘07 z After first quarter trading, Sonic expects to achieve its full-year guidance z Second half expected to be significantly stronger than first half Private fee increases in late first half FY ’07 DVA fee increase effective 1 November 2006 (increased from 85% to 100% of Schedule Fee)
Slide 26: Future Growth Off-shore acquisitions
Future Growth Off-shore acquisitions z Sonic has completed ~50 acquisitions in its 20 year history All successfully integrated into Sonic structure Measured approach the key to successful acquisition strategy z 3 major off-shore acquisitions TDL (UK) - 2002 Schottdorf (Germany) -2004 CPL (
Slide 27: Sonic Healthcare The Future
Sonic Healthcare The Future z Forming partnerships with like-minded diagnostic organisations world-wide z Expanding presence in Europe and USA z Fostering staff fulfilment and service excellence z Maintaining financial strength
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