Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — H1 FY2008 Earnings Presentation
30 slides from Sonic Healthcare's earnings presentation, Feb 26, 2008
Slide 1: Half Year Results
Half Year Results For the period ended 31 December, 2007 Dr Colin Goldschmidt CEO, Sonic Healthcare 26 February 2008
Slide 2: Highlights - Financial
Highlights - Financial • Revenue ↑ 28% to A$1, 127 million • Net Profit ↑ 21% to A$113.3 million • Cash generation ↑ 26% to A$174.0 million • EPS growth 11.2% • Interim dividend 20 cents (fully franked) • Full-year guidance unchanged
Slide 3: Highlights - Operational
Highlights - Operational • Largest incremental revenue phase in Sonic’s history • Australian pathology operations strong • Robust US growth set to continue • US operational synergies commenced • Integration of German labs underway • Further US and European acquisitions ahead • Ongoing earnings growt
Slide 4: Revenue Growth
Revenue Growth • Laboratory revenue growth 33% • Incorporates strong organic growth and acquisitions • Impacted by foreign currency and low growth rate of New Zealand market • Radiology revenue growth 4% • No acquisitions • Primary care (IPN) revenue growth 27% • Organic growth and acquisitions
Slide 5: Organic Revenue Growth
Organic Revenue Growth * Revenue growth rates in local currencies
Slide 6: Revenue Mix
Revenue Mix For half-year ended 31.12.07
Slide 7: Revenue – Pathology/Laboratory
Revenue – Pathology/Laboratory For half-year ended 31.12.07
Slide 8: Half-year Revenue Growth
Half-year Revenue Growth 881
Slide 9: Vigorous Growth Phase
Vigorous Growth Phase • Transformational growth • An international diagnostics company • Operations in 6 countries • >16,000 employees world-wide • Over the past 2-3 years: • ~A$1 billion added to annualised revenues • Sonic’s annualised revenue has almost doubled • USA annualised revenue now >A$500
Slide 10: Earnings Growth
Earnings Growth 6 Months ended 6 Months ended HEALTHCARE BL12.0/ 31.12.06 % EBITA ($’000) 185,776 160,191 16.0% EBITDA ($’000) 221,088 190,280 16.2% NPAT ($’000) iis) 299 93,528 21.1% EPS (cents) 34.7 aie 11.2% Cash Generation (S’000) 174,048 138,118 26.0% SONIC
Slide 11: Earnings Margins
Earnings Margins • Margin dilution due to: • Low margin acquisitions – AEL (Jan’07), Mullins (Apr’07), Sunrise (Jul’07), Bioscientia (Sep’07) • Radiology – Low revenue growth with margin contraction • New Zealand pathology – Flat revenue growth with margin contraction • Establishment costs of US cor
Slide 12: 2008 Full-Year Guidance
2008 Full-Year Guidance Sonic 2008 guidance unchanged since 23 August 2007 Sonic tracking in line with 2008 guidance after 7 months trading Currency exchange has impacted revenue, EBIT and EPS
Slide 13: Stronger growth offsets currency impact
Stronger growth offsets currency impact • Full-year guidance issued August 2007 • Guidance issued using FY 2007 currency rates • Calculated full-year FX impact at FY ‘07 rates • Revenue impact ↓~A$65 million • EPS growth impact ↓~240 basis points • EBITA impact ↓~A$10 million • Today, with half-year
Slide 14: Currency Exchange Impact
Currency Exchange Impact H1‘08 Actual vs H1’08 at H1‘07 constant FX Revenue impact for half-year ~A$40 million NPAT impact for half-year ~A$2 million
Slide 15: Interim Dividend
Interim Dividend • Dividend fully franked at 30% • Record Date 11 March 2008 • Payment Date 26 March 2008 • Dividend Reinvestment Plan remains suspended
Slide 16: Debt Summary
Debt Summary • Senior debt facility upsized Nov ‘07 to A$1,750 million • Bridge debt facility A$400 million to be repaid 31.3.08 • Headroom post-bridge repayment ~A$450 million • Debt held in foreign currencies as “natural” hedge • No exposure to Australian interest rate increases
Slide 17: Radiology
Radiology • Revenue growth 3.6% • Competition • MRI licence allocations • Static Medicare rebate levels • Earnings • H1 ‘08 EBITDA ↓3.5% • H1 ‘08 EBITDA margin (20.7%) ↓150 bps • Positive future outlook • Cost pressures stabilising • Radiologist shortage easing • Sonic-wide synergies (purchasing, IT
Slide 18: IPN
IPN • IPN delivers record half-year result • Strong revenue and earnings growth • Doctor numbers up 25% to 765 • Significant ongoing growth ahead • Unique model with professional independence • Model presents clear market differentiation • IPN’s continued growth provides ongoing benefits for Sonic’s
Slide 19: New Zealand Pathology
New Zealand Pathology • Represents 5% of Sonic’s total revenue • Revenue growth flat • New contracts following national RFP process in 2007 • Government sponsored programs to dampen demand • Earnings growth slightly negative • Auckland laboratory contract • Court of Appeal hearing set down for May •
Slide 20: Australian Pathology
Australian Pathology • Australian pathology division tracking strongly • H1’08 revenue growth 9% (organic growth 8.4%) • H1’08 margin expansion 40 basis points • Higher margins expected in second half • Sonic large labs continue to outperform • Dedicated, experienced managers and pathologists • Mark
Slide 21: New DHM Lab Facility, Sydney
New DHM Lab Facility, Sydney • Project completed within budget • Smooth relocation into new lab November 2007 • New lab will facilitate enhanced operations • New workflow with efficiency gains • Accommodate anticipated market growth • Centralisation of testing • A stunning laboratory showpiece • Inv
Slide 22: UK Pathology
UK Pathology • TDL performing strongly • Organic revenue growth 17.1% (excluding Ealing contract) • Private pathology market buoyant • Ealing contract commenced • Pathology provision for Ealing Hospital and Primary Care NHS Trusts • First NHS contract since Lord Carter report on NHS pathology • Cont
Slide 23: Germany
Germany • Bioscientia acquisition completed in September 2007 • A premier national laboratory in Germany • Substantial overlap with Schottdorf business • Integration of Bioscientia into Sonic structure complete • Acquisition of outstanding Schottdorf minority interests • Completed 31 December 2007 •
Slide 24: Synergy Activity in Germany
Synergy Activity in Germany Schottdorf - Bioscientia • Management teams working well together • Meetings of respective CEOs, CFOs • Management meetings: sales, couriers, lab, IT, pathologists • Purchasing • New “lowest value” consumables agreements signed • All suppliers under evaluation • Sonic glo
Slide 25: Switzerland
Switzerland • Sonic acquired Medica laboratory in May 2007 • Smooth integration into Sonic completed • Committed, experienced management team • Dr Franz Kaeppeli and team • Solid H1 ‘08 results • Strong organic market growth • Revenue and earnings growth strong • Performance in line with expectation
Slide 26: USA
USA • Fertile ground for Sonic expansion • Revenue growth 76% (H1’08 vs H1’07) • Organic revenue growth 10.5% (H1’08 vs H1’07) • New acquisition opportunities ahead • Sonic model and culture providing differentiation • Sonic annualised USA revenue >A$500 million • Corporate office established in Aus
Slide 27: Sonic Healthcare USA
Sonic Healthcare USA Labs and Operating Markets North Dakota Minnesota Washington Montana Michigan Maine V Wisconsin NH Oregon South Dakota Idaho Michigan Mass. Wyoming New York Nebraska C R Iowa Pennsylvania Illinois Ind Ohio Nevada Utah NJ Colorado Kansas W.Va. Kentucky California Missouri Virgini
Slide 28: Sunrise Medical Laboratories
Sunrise Medical Laboratories Share of Physician Office market in New York City area • Sonic acquired Sunrise in July 2007 • Largest regional lab in NY, with >350 employees • Effective, passionate leadership team, headed by Larry Siedlick • Strong organic growth ongoing • 20% revenue growth in calend
Slide 29: US Synergy Activity
US Synergy Activity • AEL corporate office closed down • AEL Dallas lab closed, tests referred to Austin and Memphis • Centralisation of maximum outsourced tests from all Sonic labs to CPL Austin • Centralise all remaining outsource work to single esoteric lab • Standardised financial reporting • In
Slide 30: Future Growth
Future Growth • Sonic’s robust expansion set to continue • Sonic revenue has doubled in past 2-3 years • Rapid growth set to continue apace • Deeply embedded culture and values driving momentum • Sonic has 3 main current growth markets • Australian pathology market • USA laboratory market • German (