Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — FY2003 Earnings Presentation
30 slides from Sonic Healthcare's earnings presentation, Aug 25, 2003
Slide 1: Financial Results 2002/03
Financial Results 2002/03 Colin Goldschmidt Managing Director 25 August 2003
Slide 2: 2003 Highlights
2003 Highlights ! Revenue growth 13% ! NPAT growth 20% ! EBITA margin expansion 0.7% (70 basis points) ! EPS growth 13.5% " Double digit EPS growth for 8 consecutive years " 564% EPS growth over last 10 years ! Full year dividend of $0.25 per share " Growth of 25% over last year " Yield 3.8%, fully
Slide 3: 2003 Guidance Delivered
2003 Guidance Delivered Sonic Guidance Sonic Actuals Full Year 2003 Revenue $970 - 980M $974.8M EBITA $172 - 176M $173.1M EBITA % 17.75 - 18.00% 17.76% Sonic 2003 guidance unchanged since first released in August 2002
Slide 4: Revenue
Revenue 2003 2002 Growth ($M) ($M) (%) Total Revenue 974.8 859.8 13.4% ! Acquisitions have contributed to revenue growth ! Organic revenue growth ~ 5.9% (excluding acquisitions) ! Australian and UK pathology particularly strong
Slide 5: Sonic Revenue Contribution by Division
Sonic Revenue Contribution by Division Radiology Pathology
Slide 6: Australian Medicare Growth Data
Australian Medicare Growth Data FY2003 v FY2002 Services Episodes Total Fees Paid (Tests/Items) (Patients) ($) Australian Pathology 4.2% 2.4% 4.6% Australian Imaging 3.7% n/a 5.0% ! Medicare data reflect broad industry growth rates ! Pathology " Enrichment of episodes (test growth > episode growth)
Slide 7: Annual Revenue
Annual Revenue 10 Year History 1,200 975 1,000 860 800 628 $M 600 387 400 174 147 200 133 58 89 47 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Revenue ($M) 47 58 89 133 147 174 387 628 860 975
Slide 8: Earnings
Earnings 2003 2002 Change EBITDA $M 213.9 183.7 16.4% EBITA $M 173.1 146.7 18.0% Core NPAT* $M 99.5 83.2 19.6% NPAT $M 40.9 33.8 21.0% Core EPS* cents 37.8 33.3 13.5% *Core = Before Amortisation of Intangibles
Slide 9: Cash Generated
Cash Generated 160 146.7 137.4 140 120 100 $M 80 67.1 60 40 20 0 2001 2002 2003 Cash Generated ($M) 67.1 146.7 137.4 ! Continued strong cash generation ! 2002 cash generated unusually high due to change in Medicare payment system from 28 days to 14 days
Slide 10: EBITA
EBITA 10 Year History 200.0 173.1 180.0 160.0 146.7 140.0 110.6 120.0 $M 100.0 69.4 80.0 60.0 35.9 40.0 25.4 18.4 13.8 20.0 4.7 8.0 0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 EBITA ($M) 4.7 8.0 13.8 18.4 25.4 35.9 69.4 110.6 146.7 173.1
Slide 11: Core NPAT
Core NPAT 10 Year History 120 99.5 100 83.2 80 56.4 $M 60 40 32.7 21.5 20 14.7 11.2 8.6 4.4 5.2 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Core NPAT ($M) 4.4 5.2 8.6 11.2 14.7 21.5 32.7 56.4 83.2 99.5 Core NPAT = Net Profit After Tax before Amortisation of Intangibles
Slide 12: Core EPS
Core EPS 10 Year History 40.0 35.0 30.0 25.0 Cents 20.0 per share 15.0 10.0 5.0 0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Core EPS (cents) 6.7 7.0 8.0 9.5 11.8 16.7 21.7 27.5 33.3 37.8 # Core EPS growth over 10 years = 564% # Consecutive double-digit EPS growth last 8 years Core EPS = Di
Slide 13: Earnings Margins
Earnings Margins 2003 2002 EBITDA Margin 21.9% 21.4% EBITA Margin 17.8% 17.1% ! Margin expansion in FY2003 " Revenue growth and marginal profit " Ongoing cost management in practices " Inter-practice synergies " Improved performance at Melbourne Pathology " TDL (UK) strong performance " SciGen demer
Slide 14: Final Dividend
Final Dividend 2003 2002 Change Interim Dividend $0.08 $0.04 100% Final Dividend $0.17 $0.16 6% Full Year Dividend $0.25 $0.20 25% ! Final Dividend " 17 cents per share, fully franked ! Full-year Dividend " 25 cents per share, fully franked " 20 cents in 2002 " Increase of 25% ! Record Date: 17 Sept
Slide 15: Dividend Reinvestment Plan (DRP)
Dividend Reinvestment Plan (DRP) ! DRP re-activated (applicable to 2003 final dividend) ! 5% discount to market (average of 5 days following record date) ! Elections to be made by record date – 17 September 2003 ! New election forms to be mailed to shareholders
Slide 16: Dividend
Dividend 10 Year History 30.0 25.0 20.0 Cents per 15.0 Share 10.0 5.0 0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Dividend (cents) 2.0 3.0 4.0 5.0 9.0 14.0 15.0 17.0 20.0 25.0
Slide 17: Balance Sheet Summary
Balance Sheet Summary 2003 2002 Receivables (current) $M 111.4 108.6 Intangibles (net) $M 1,111.1 1,189.7 Total Interest-bearing Debt* $M 561.3 515.3 Equity $M 831.3 837.5 Interest Cover (EBITDA / Net Interest) X 5.93 5.82 Interest-bearing debt / EBITDA X 2.62 2.81 Gearing (Net IB Debt / Equity) % 6
Slide 18: 2004 Guidance
2004 Guidance 2003 Actuals 2004 Guidance Growth* $M $M % Revenue 974.8 1,020 – 1,035 5.4% EBITA 173.1 185 - 195 9.8% 2004 Guidance $ Growth* calculated using mid-point of 2004 guidance $ Includes Omnilabs acquisition (loss in first half) $ Intangibles amortisation $59-60 million $ Assumes no new acq
Slide 19: Corporate Governance
Corporate Governance ! Sonic working towards compliance with ASX recommendations ! Nominations Committee " Established 3 July 2003 " 2 Independent Directors / 1 Executive Director " Function to review Board structure ! Audit Committee " 2 Independent Directors / 1 Executive Director from July 2003 "
Slide 20: Australian Pathology Funding Agreement
Australian Pathology Funding Agreement ! Agreement expires 30 June 2004 " Negotiations commencing on new agreement ! Tracking within parameters of current agreement " Cumulative variance $4.3 million less than agreed outlays after 4 years ! No fee reduction envisaged
Slide 21: Australian Radiology Funding Agreement
Australian Radiology Funding Agreement ! New 5 year Memorandum of Understanding commenced 1 July 2003 ! Funding growth rates " 2003/4 – 5.5% " 2004/5 – 5.3% " 2005/6 – 5.0% " 2006/7 – 5.0% " 2007/8 – 5.0% ! Magnetic Resonance Imaging (MRI) funding included in agreement
Slide 22: Sonic IT
Sonic IT ! Sonic has developed proprietary Pathology and Radiology software ! Sonic IT department staffed by ~60 IT professionals " Headed by Dr Alan Lloyd, Chief Systems Officer ! Pathology IT System (“Apollo”) " Sullivan & Nicolaides Pathology roll-out successful (May 2003) " Installation complete
Slide 23: Benefits of Proprietary Software
Benefits of Proprietary Software ! Cost reductions " Software development " Standardisation ! Efficiency enhancements ! Facilitation of centralisation ! Benchmarking ! Flexibility ! Product differentiation ! Competitive advantage
Slide 24: UK Pathology
UK Pathology Omnilabs Acquisition ! Omnilabs acquisition from MIA completed in July 2003 ! TDL/Omnilabs merger " Partial merger scheduled for September 2003 (into TDL existing sites) " Full merger scheduled for December 2003 (new Whitfield St laboratory) ! Losses until merger complete " Incorporated
Slide 25: Whitfield St Laboratory
Whitfield St Laboratory ! Floor space 3,400 m² in total " ~700m² for Autolab " Balance split between TDL and UCLH operations ! Consolidation of 5 existing TDL/Omnilabs sites ! Fitout of Whitfield St facility in progress " Relocation expected December 2003 ! Significant excess capacity " TDL continue
Slide 26: TDL-UCLH Joint Venture
TDL-UCLH Joint Venture ! Major strategic move for Sonic ! A significant Public Private Partnership in the NHS ! Joint venture agreement for automated pathology " First of its kind in the UK ! JV structured as a cost sharing arrangement " Cost savings from scale, automation, lab design, workflow etc
Slide 27: Sonic International Strategy
Sonic International Strategy ! To partner with established players in suitable offshore markets ! TDL platform an ideal base for expansion in UK " Private Pathology Market " NHS Market " Omnilabs and UCLH transactions provide evidence of incremental growth opportunities ! European pathology markets
Slide 28: Sonic Healthcare Today
Sonic Healthcare Today ! Large and complex business " ~$1 Billion annual revenue " > 11,000 employed staff ! Excellent customer services ! Image of practices underpins Sonic’s value ! Operational management " Stable and experienced " Committed and passionate " Managing normal ebbs and flows " Pro-ac
Slide 29: Future Strategy
Future Strategy ! Australia and New Zealand " Organic growth and marginal profit " Efficiency gains from existing operations " Synergistic “bolt-on” acquisitions ! UK pathology " TDL organic growth and marginal profit " TDL/Omnilabs/UCLH merger benefits " NHS and Private market expansion ! European
Slide 30: Thank you
Thank you eas HEALTHCARE