Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — H1 FY2009 Earnings Presentation
30 slides from Sonic Healthcare's earnings presentation, Feb 24, 2009
Slide 1: Half Year Results
H lf Year Half Y R Results lt For the period ending 31 December, 2008 Dr Colin Goldschmidt CEO, Sonic Healthcare 24 February 2009
Slide 2: Highlights
Highlights ` R Record d results lt ffor h half‐year lf period i d ` Strong organic revenue growth in main global markets ` Australian laboratory division 8% ` USA laboratory division 6% ` German laboratory division 7% ` Synergy y gy capture p on track in USA and Germanyy ` USA margins ↑ 200 basis po
Slide 3: Financial Highlights
Financial Highlights Actual Growth H1 ‘09 H1 ‘09 vs H1 ‘08 Revenue A$M 1,439 28% EBITDA A$M 262 18% EBITA A$M 217 17% NPAT A$M 137 21% EPS cents 38 8 38.8 12% Interim Dividend cents 22 10%
Slide 4: Revenue Growth
Revenue Growth 6 Months ended 6 Months ended 31 Dec 2008 31 Dec 2007 Growth (A$M) (A$M) Total Revenue 1 439 1,439 1 127 1,127 28% ` Divisional revenue growth rates ` Laboratory – 31% (organic and acquisitions) ` Radiology – 5% ` Primary care (IPN) – 41% (organic and acquisitions) ` Exchange rate mov
Slide 5: Organic Revenue Growth
Organic Revenue Growth Organic Revenue Growth* Acquisitions excluded Australia – Laboratory 8% USA 6% Germany 7% UK 16% Australia – Radiology 5% * Revenue growth rates in local currencies
Slide 6: Acquisitions impacting FY'09 revenue
Acquisitions q impacting p g FY’09 revenue FY 2007/8 FY 2008/9 J A S O N D J F M A M J J A S O N D J F M A M J Sunrise (USA) Bioscientia (GER) Labor‐28 (GER) GLP Medical (GER) Clin Labs Hawaii (USA) Gemini (IPN – AUS) Others (small)
Slide 7: Revenue Mix
Revenue Mix F half‐years For h lf ended d d 31 December D b 2007 and d 2008 6 Months to 31 December ‘07 6 months to 31 December ‘08 5% 6% 15% 12% Laboratory Laboratory Radiology Radiology Primary care ‐ IPN Primary care ‐ IPN 80% 82% Total Revenue H1 ‘08 = A$1,127M Total Revenue H1 ‘09 = A$1,439M
Slide 8: Earnings Growth
Earnings Growth 6 Months ended 6 Months ended Growth 31 December ‘08 31 December ‘07 EBITDA (A$M) 261.8 221.1 18.4% NPAT (A$M) 136.5 113.3 20.5% EPS (diluted) (cents) 38.8 34.7 11.8% Cash generation (A$M) 187.7 174 0 174.0 7.8% 7 8% Cash generation ¾ In line with cash profit ¾ Growth rate on previou
Slide 9: Earnings Margins
Earnings Margins 6 Months ended 6 Months ended 31 December ‘08 31 December ‘07 EBITDA margin 18.2% 19.6% EBITA margin 15.0% 16.5% Net p profit margin g 9.5% 10.1% ` Low margin acquisitions dilute pre‐existing Sonic margins ` Australian laboratory margins down 90 bps for half ` Fee cuts announced in
Slide 10: 2009 Full-Year Guidance
2009 Full Full‐Year Year Guidance FY 2009 Guidance Revenue growth >15% Earnings per share growth >10% ` Sonic 2009 guidance unchanged since August 2008 ` Sonic tracking in line with guidance after 7 months of trading
Slide 11: Currency Exchange Impact
Currency Exchange Impact H1 ‘09 actuals vs H1 ‘09 restated at H1 ‘08 FX rates: Revenue impact for half‐year: ↑ A$62 million NPAT impact for half‐year: ↑ A$5.1 million EPS impact for half‐year: ↑1.5 cents FX earnings impact mitigated by FX interest impact
Slide 12: Interim Dividend
Interim Dividend H1 ‘09 H1 ‘08 Change Interim Dividend A$0.22 A$0.20 10% ` Dividend franked to 60% ` Record Date 12 March 2009 ` Payment Date 26 March 2009 ` Di id d R Dividend Reinvestment i Pl suspended Plan d d
Slide 13: Debt Summary
Debt Summaryy 31 D Dec ‘08 30 JJun ‘08 Net Interest‐bearing Debt A$ M 1,536 1,238 Covenant Formula Actual Covenant As per bank definitions For period to 31 Dec ‘08 Limit Gearing ratio Net debt / Net debt + equity % 36.5 <55 Interest cover EBITA / Net interest expense X 5.7 >3.25 Debt cover Net debt
Slide 14: Debt Update
Debt Update ` Debt tranche (~A$500 million) refinanced in Dec ‘08 (expiry 30 Apr ‘10) ` Other main debt facilityy expiry p y dates in 2011 and 2012 ` Facility limits denominated in foreign currencies (mainly USD and EUR) ` Debt drawn in foreign currencies ` Off shore assets funded in local currency
Slide 15: Interest Expense
Interest Expense p 6 Months ended 6 Months ended 31 Dec 2008 31 Dec 2007 Growth (A$M) (A$M) (A$M) Net interest expense 44 7 44.7 31 6 31.6 13 1 13.1 ` Interest expense growth Increased debt levels to fund acquisitions A$ +8.3 million Exchange rate movements A$ +5.3 million Interest rate/margin chang
Slide 16: Australian Pathology
Australian Pathology ` Revenue growth of Australian pathology division 8% ` Medicare market growth 4.9% ` Robust organic growth in Sydney, Brisbane, Melbourne, Perth ` Market share gains ` Establishment of new centres of excellence ` Dermatopathology in Brisbane ` G Gynaecological l i l pathology th
Slide 17: Australian Pathology: Medicare Reimbursement
Australian Pathology Medicare Reimbursement ` Medicare rebate cuts in 2008 Federal Budget ` Effective from 1 July ’08 ` Impacted Sonic revenue and EBIT by ~A$5 A$5 million ` Increasing patient co‐payments to mitigate fee cuts ` Review of Medicare pathology funding in progress ` Outcome in May 2009 F
Slide 18: New Zealand Pathology
New Zealand Pathology ` NZ earnings decline under new fixed price contracts ` Diagnostic Medlab (DML) ` Earnings reduced, d d margins significantly f l ddown ` Volumes up ~5% ` Fixed price contract of NZ$72M p.a. ` Healthscope contract value is NZ$65M p.a. (FY ’09) and NZ$67M (FY ‘10) ` DML has addi
Slide 19: Auckland Laboratory Contract
Auckland Laboratory Contract ` Leave to appeal denied – announced 12 February 2009 ` Contract represents <2% of Sonic’s revenue and earnings ` Existing Auckland infrastructure (loyal staff staff, lab lab, collection network) owned or employed by Sonic ` Not clear how new contract can be implemented
Slide 20: Sonic Healthcare USA
Sonic Healthcare USA ` Strong financial and operational performance ongoing ` Organic growth (excluding acquisitions) 6% ` Hawaiian lab acquisition (CLH) ` Smooth integration into Sonic USA structure ` Ongoing synergy activity ` Underlying margin expansion of 200 basis points (excluding Hawaiian acq
Slide 21: Sonic Healthcare Germany
Sonic Healthcare Germany ` Financial performance ` Organic revenue growth of 7% ` Underlying margin expansion >100 basis points ` Synergy benefits ` Expect >€10M synergy benefits over 2‐5 years (Schottdorf/Bioscientia) : >50% locked in ` Expect additional >€5M synergy benefit over 2‐3 years (Labor 2
Slide 22: Germany – Fee Reforms
Germany – Fee Reforms ` “Direct billing” reform for routine labs ` Commenced 1 October 2008 ` Eliminates discounts to GPs ` Average fee increase, slight volume reduction, higher admin costs – net impact as budgeted ` Significant one‐off implementation costs in half ` Outstanding management effort al
Slide 23: Switzerland
Switzerland ` Solid financial performance ` Acquisition q of Prof. Krech laboratoryy ` Completed 1 July 2008 – comprised two small labs ` Zurich lab closed and Kreuzlingen lab downsized – both fully integrated into main Medica lab in Zurich ` Synergies flowing earlier than anticipated ` Outstanding
Slide 24: Switzerland – Fee reforms
Switzerland – Fee reforms Swiss Laboratory Market ` New government fee schedule published ` Fee reductions for high‐volume routine tests ` Fee increases for manual and esoteric tests Private ` New “case fee” per request labs GP labs 30% ` Timeline 40% ` Phased in over 2 years, commencing 1 July 2009
Slide 25: UK
UK ` Strong revenue and earnings growth (16%) ` Harley Street market growth solid ` NHS work now represents ~20% of revenue ` Further outsourcing opportunities being pursued ` Dedicated management team driving growth
Slide 26: Sonic Imaging
Sonic Imaging ` Sonic Imaging financials ` Sonic Australian imaging revenue growth 6% ` Strong revenue growth at Queensland X‐Ray and Castlereagh Imaging ` Margin contraction of ~100 basis points ` Sonic awarded 3 new MRI licences in H1 ’09 ` Hunter Valley, NSW (1) ` Perth, WA (2) ` Future strategy
Slide 27: Australian Radiology Industry
Australian Radiology Industry ` I d t conditions Industry diti remain i difficult diffi lt ` No Medicare rebate increase per examination for >10 years ` Minimal economies of scale available in radiology ` Inevitable cost increases in radiology practices – labour, equipment ` Closure of unprofitable
Slide 28: IPN
IPN ` Sonic’s acquisition of IPN minorities completed September 2008 ` IPN business integrated smoothly into Sonic structure ` Focus on extracting relevant synergies ` EBITDA growth ~30% 30% (including Gemini acquisition) ` IPN/Sonic model provides market differentiation
Slide 29: Summary
Summary ` Sonic Healthcare in strong position ` Resilient business model and infrastructure ` S lid growth Solid h set to continue i – Australia, A li Europe, E USA ` Market share gains in Australian laboratory division ongoing ` Synergy activity in USA and Europe active and ongoing ` Stable debt po
Slide 30: Thank You
SONIC HEALTHCARE THANK YOU © She + > SONIC HEALTHCARE