Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — FY2004 Earnings Presentation
28 slides from Sonic Healthcare's earnings presentation, Aug 23, 2004
Slide 1: Financial and Operational Review
Financial and Operational Review Year to 30 June 2004 Dr Colin Goldschmidt Managing Director 23 August 2004
Slide 2: 2004 Financial Highlights
2004 Financial Highlights ! Revenue growth…………………….6.4% ! EBITA growth……………………….13.5% ! EBITA margin……………………….18.9% (up 110 bps) ! NPAT growth…………………………41.0% ! Core* EPS growth………………..14.8% ! EPS growth……………………………38.2% ! Full year dividend growth…….20.0% Core* = Before amortisation of intangibles
Slide 3: 2004 Guidance Delivered
2004 Guidance Delivered Full Year 2004 Sonic Guidance Actuals $M $M Revenue 1,020 - 1,035 1,037 EBITA 185 - 195 197 Sonic 2004 guidance unchanged since first released in August 2003
Slide 4: Revenue
Revenue 2004 2003 Growth ($M) ($M) (%) Total Revenue 1,037.4 974.8 6.4% ! Acquisitions completed in FY 2004 ! Omnilabs, SDSG Radiology, Haskell Pathology, Schottdorf (29 June 2004) ! Organic revenue growth (excluding acquisitions) ~ 6% ! Australian pathology revenue growth in line with market ! Aust
Slide 5: Revenue
Revenue ! Second half revenue in line with expected seasonality H1 H2 $M $M FY 2004 509.9 527.5 FY 2003 485.5 489.3 ! Revenue will increase substantially in 2005 ! Schottdorf (full year) ! IPN (consolidated from 26 August 2004) ! Sonic organic growth ! Possible new acquisitions
Slide 6: Earnings Growth
Earnings Growth Movement FY 2004 FY 2003 % EBITA ($M) 196.6 173.1 13.5% Core NPAT ($M) 117.0 99.5 17.6% Core EPS (cents) 43.4 37.8 14.8% NPAT ($M) 57.6 40.9 41.0% EPS (cents) 21.7 15.7 38.2% Cash Generation ($M) 156.3 137.4 13.8% Nine consecutive years of double-digit EPS growth! Core = Before Amort
Slide 7: Earnings
Earnings ! Second half EBITA in line with expected seasonality H1 EBITA H2 EBITA $M $M FY 2004 93.5 103.1 FY 2003 82.4 90.8 ! EBITA growth of 13.5% on revenue growth of 6.4% ! EBITA added $23.4 million ! Revenue added $62.6 million
Slide 8: Earnings Margin Growth
Earnings Margin Growth FY 2004 FY 2003 Movement (%) (%) (basis points) EBITA Margin 18.9% 17.8% +110 bps EBITDA Margin 23.0% 21.9% +110 bps ! Revenue growth with marginal profit ! Local entity cost management ! Outstanding management teams throughout Sonic ! Stability and commitment of CEOs, manager
Slide 9: Sonic EBITA Margin Expansion
Sonic EBITA Margin Expansion 20.0% 19.0% 18.9% 18.0% 17.8% 17.0% 17.0% 16.0% 15.0% 14.0% 2002 2003 2004 FY 2005 margins will be diluted by Schottdorf and IPN
Slide 10: Final Dividend
Final Dividend 2004 2003 Change Interim Dividend $0.10 $0.08 25% Final Dividend $0.20 $0.17 18% Full Year Dividend $0.30 $0.25 20% ! Dividend fully franked at 30% ! Record Date ! 6 September 2004 ! Payment Date ! 20 September 2004 ! Dividend Reinvestment Plan remains suspended
Slide 11: Balance Sheet Summary
Balance Sheet Summary 30.6.04 30.6.03 Receivables (current) $M 145.6 104.7 Intangibles (net) $M 1,162.2 1,111.1 Total Interest-bearing Debt $M 641.3 561.3 Equity $M 847.8 831.3 Gearing (Net IB Debt / Equity) % 74 64 Net Interest-bearing debt / EBITDA X 2.62 2.50 Interest Cover (EBITDA / Net Interest
Slide 12: 2005 Guidance
2005 Guidance 2004 Actuals 2005 Guidance Growth* $M $M % Revenue 1,037 1,290 – 1,330 26.3% EBITA 197 235 -245 21.8% 2005 Guidance " Growth* calculated using mid-point of 2005 guidance " Includes full year of Schottdorf " Includes IPN estimate from 26.8.04 " Intangibles amortisation $64 million " Ass
Slide 13: Pathology Operations
Pathology Operations ! Solid margin expansion in largest Australian entities ! Sullivan Nicolaides Pathology (Queensland) ! Melbourne Pathology (Victoria) ! Douglass Hanly Moir Pathology (New South Wales) ! New Zealand pathology ! Revenue growth rates lower than Australia ! Margin expansion set to c
Slide 14: Australian Pathology Funding Agreement
Australian Pathology Funding Agreement ! Recent Government announcement ! New Pathology Funding Agreement offer ! Capped ~5% compound annual growth ! 5 year term ! Pathology industry response to offer pending ! Previous 5% funding agreement (1999-2004) ! Expired 30.6.04, official interim extension !
Slide 15: Radiology Operations
Radiology Operations ! Solid performance at larger practices ! Queensland X-Ray ! SKG Radiology ! Consolidation/closure of under-performing branches ! IT ! Roll-out of new in-house radiology IT ! Electronic report delivery, same platform as pathology, embraced by referrers ! Computerised radiology –
Slide 16: Radiology Industry
Radiology Industry ! Radiology Funding ! Medicare growth for FY ‘04 = 4.1% (per HIC statistics) ! Non-MRI imaging 3% rebate increase June ‘04 ! Nuclear Medicine 6% rebate increase Feb ‘04 ! Scope for further fee increases if trend continues ! MRI ! Controlled expansion of MRI licences, preferable be
Slide 17: The Schottdorf Group
The Schottdorf Group ! Founded by Dr Bernd Schottdorf in 1972 ! Operates throughout Germany ! Nine major laboratory locations ! Seven satellite laboratories ! Head office and central laboratory in Augsburg (near Munich) ! The largest single laboratory in Sonic group ! Super-efficient, high quality !
Slide 18: International health expenditure
International health expenditure Amount spent Proportion of Public sector Country per head GDP contribution $A % % Australia 1,750 8.4 68.7 New Zealand 1,352 7.6 77.4 UK 1,347 6.7 84.5 Germany 2,339 10.4 77.4 USA 4,090 14.0 46.7 Canada 2,095 9.3 68.7 Ref: International health: how Australia compares
Slide 19: Schottdorf Group – Key Personnel
Schottdorf Group – Key Personnel ! Dr Bernd Schottdorf – Executive Chairman ! Mrs. Gaby Schottdorf – CEO ! Mr. F. Schabert – Financial Controller ! Pathologists – Specialists in laboratory medicine ! Managers, scientists, ancillary staff ! Sales teams – spread throughout Germany ! Each manages a geo
Slide 20: Schottdorf Group – Key Investment Features
Schottdorf Group – Key Investment Features ! Leading market position ! One of four major national operators ! Growth and profitability ! Ongoing volume growth ! Growth of new doctors ! Revenue and earnings growth ! Strong reputation ! Long-standing customer relationships ! Efficient workflow and log
Slide 21: Schottdorf Group – Acquisition Details
Schottdorf Group – Acquisition Details ! Acquisition structure ! Sonic equity 55.9% ! Schottdorf equity 44.1% ! Purchase price ~€28.5 million ! € 8.13 million earnout tied to current year performance (ending 31 December 2004) ! Options to Dr and Mrs. Schottdorf ! 3 million SHL options ! $6.75 strike
Slide 22: Schottdorf Group – Current Status
Schottdorf Group – Current Status ! Revenue €100-105 million (year to 31.12.04) ! Expect earnout to be triggered in full ! Earnout payable ~ May’05 ! Earnout assumed as liability in Sonic’s ’04 accounts ! Business tracking strongly
Slide 23: U.K. Pathology - TDL
U.K. Pathology - TDL ! TDL business stable and strong ! Double digit revenue growth ! Margin expansion in ’05 post-Omnilabs merger ! Relocation to new laboratory and UCLH merger ! Completed successfully in H2, FY ’04 ! Capital and operational costs higher than normal ! Staffing almost back to normal
Slide 24: IPN
IPN ! Sonic’s partial bid for IPN successful ! Sonic equity now 72% ! Acquisition cost ~$43 million ! IPN to remain independent ! Independently listed ! Independently managed ! Sonic Board representation ! Pathology referrals ! Potential to capture additional pathology referrals ! Potential for radi
Slide 25: Sonic IT
Sonic IT ! Roll-out of Sonic proprietary software ongoing ! Laboratory Information System – Apollo LIS ! Radiology Information System – Apollo RIS ! Apollo LIS roll-out: Pathology ! ~ 70 of Sonic Australian pathology now using Apollo ! Remaining entities will launch in next 2 years ! Apollo RIS roll
Slide 26: Sonic FY '04 Summary
Sonic FY ’04 Summary ! Sonic growth FY ’04 v FY ‘03 ! EBITA growth-------------13.5% ! Core NPAT growth--------17.6% ! Core EPS growth----------14.8% ! EBITA margin growth-----110bps ! Sonic exceeds FY ’04 guidance ! Revenue, EBITA, EBITA margin ! Offshore growth ! TDL/Sonic UK set for extended grow
Slide 27: Future Growth
Future Growth ! Australia ! Market growth in diagnostics ~5% p.a. ! Market share growth, especially pathology ! Synergistic acquisitions ! Marginal profit from revenue growth ! New Zealand ! Market growth ! Market share growth ! U.K. - TDL ! Ongoing private pathology growth ! Further joint ventures
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