Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — FY2006 Earnings Presentation
31 slides from Sonic Healthcare's earnings presentation, Aug 22, 2006
Slide 1: Financial and Operational Review
Financial and Operational Review Year to 30 June 2006 Dr Colin Goldschmidt CEO and Managing Director Sonic Healthcare 22 August 2006
Slide 2: 2006 Highlights
2006 Highlights z Sonic delivers record earnings result z Sonic full-year guidance achieved z Net profit up 27% z Earnings per share up 20% z Full-year dividend up 14% z Australian Pathology performing strongly z Northern hemisphere entities tracking well z Result held back slightly by Imaging and N
Slide 3: 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 4: 2006 Guidance Delivered
2006 Guidance Delivered Full Year 2006 Sonic Guidance Actuals $M $M Revenue 1,600 - 1,670 1,656 EBITA 300 - 320 306
Slide 5: Revenue 2006
Revenue 2006 2006 2005 Growth ($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 6: Annual Revenue
Annual Revenue 1,800 1,600 1,400 1,200 $M 1,000 800 600 400 2001 2002 2003 2004 2005 2006 Revenue ($M) 628 860 975 1,037 1,381 1,656
Slide 7: 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 N. America though FY ‘07 z Australian pathology and radiology Anticipated organic growth ~5% z New Zealand pathology Growth rates are low Impact of po
Slide 8: 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 9: 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 10: 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 11: 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 12: 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 acquisitions and possible DML outcomes
Slide 13: 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 14: Balance Sheet Summary
Balance Sheet Summary 30.6.06 30.6.05 Receivables (current) $M 188.4 146.1 Intangibles (net) $M 1,690.2 1,271.6 Total Interest-bearing Debt $M 810.7 656.6 Equity $M 1,302.3 945.3 Gearing (Net IB Debt / Equity) % 57 66 Net Interest-bearing debt / EBITDA X 2.06 2.07 Interest Cover (EBITDA / Net Intere
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 Douglass Hanly Moir Pathology (NSW) Sullivan Nicolaides Pathology (Queensland) Melbourne Pathology (Victoria) z Sonic Australian path
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- World-wide shortage of radiologists and technicians “Head- “Head-hunting” Renegotiation of employment contracts z Apollo RI
Slide 18: Sonic Imaging Revenues
Sonic Imaging Revenues Australian Imaging 17% New Zealand Imaging 1% Rest of Sonic (non-Imaging revenue) 82%
Slide 19: 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 technicians Novel incentive- incentive-based productivity model in process New model will drive revenue gro
Slide 20: 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 justified where increased outlays are due to changes in government policy z Fee negotiations (pathology and radiology) c
Slide 21: 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 22: New Zealand Laboratory Industry
New Zealand Laboratory Industry z New Zealand healthcare is provided and funded by 21 District Health Boards North Island – 15 DHBs South Island – 6 DHBs z DHB structure Board of ~12 members CEO and executive management team 3 statutory committees z Population covered by individual DHBs ra
Slide 23: Sonic's New Zealand Labs
Sonic’s New Zealand Labs z Sonic operates 4 laboratories in New Zealand Diagnostic Medlab (DML) – Auckland Medlab Central – Palmerston North / Hawke’s Bay Valley Diagnostic – Lower Hutt / Wellington Medlab South – Christchurch / South Island z Contract / tender updates Diagnostic Medlab –
Slide 24: Sonic NZ Revenue
Sonic NZ Revenue New Zealand DML Pathology 4% 7% Rest of Sonic Rest of 93% Sonic 93%
Slide 25: DML
DML Auckland Community Laboratory Contract z DML – A world-class pathology company Has been in operation for 70 years Employs ~750 staff Processes ~10,000 patients per day (~32,000 tests per day) Represents ~A$12 million (~4%) of Sonic’s EBITA One of Sonic’s most efficient laboratory opera
Slide 26: DML Contract
DML Contract Sonic Healthcare Position z Contract decision is wrong and based on flawed process z Risk to Auckland community health Sonic’s Auckland lab is not for sale or lease High- High-volume start- start-up laboratory operation never attempted before, anywhere in the world High- High-volu
Slide 27: DML Contract
DML Contract The Reaction z Overwhelming opposition to contract decision z Auckland public 75,000 have already signed petition opposing the decision Letters to press, DHBs, politicians 5,000 participated in march and rally against DHB decision (Saturday (Saturday 19 August) z Auckland doctors
Slide 28: 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- TDL-UCLH partnership progressing well Growth anticipated to continue z Schottdorf Group (Germany) Solid performance through ’06
Slide 29: 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 30: Future Growth
Future Growth z Core laboratory business remains Sonic’s “engine room” for growth z Focus on revenue growth, margin expansion and EPS growth z Sonic’s growth will be fuelled by ongoing organic growth and off-shore acquisitions
Slide 31: Thank You
SONIC HEALTHCARE i “We take it personally” Thank You