Sonic Healthcare Limited · ASX:SHL
Sonic Healthcare — FY2008 Earnings Presentation
38 slides from Sonic Healthcare's earnings presentation, Aug 21, 2008
Slide 1: Financial and Operational Review
Financial and Operational Review Year to 30 June 2008 Colin Goldschmidt CEO and Managing Director 21 August 2008
Slide 2: FY 2008 Highlights
FY 2008 Highlights ` Outstanding performance with record result ` Strong revenue, earnings and cash flow growth ` Guidance achieved despite currency headwind ` S Synergy / margin i expansion i iin USA and d Germany G ` Sonic well set for ongoing growth
Slide 3: 2008 Financial Highlights
2008 Financial Highlights Growth 2008 vs 2007 Revenue 26% EBITA 17% NPAT 24% EPS 12% Cash Generation 24% Dividend (full‐year) 13%
Slide 4: FY 2008 Guidance Delivered
FY 2008 Guidance Delivered FY 2008 FY 2008 FY 2008 Constant currency Guidance Actuals basis* Revenue growth “20 – 25%” 26% 30% Earnings g pper share ggrowth “>12%” 12.2% 14.7% * FY 2008 actuals at FY 2007 currencyy exchange g rates
Slide 5: Revenue
Revenue Acq isitions impacting FY 2008 revenue Acquisitions re en e 2008 2007 G Growth th (A$M) (A$M) (%) Total Revenue 2,380 1,886 26% FY 2006/7 FY 2007/8 ACQUISITION J A S O N D J F M A M J J A S O N D J F M A M J AEL (USA) Medica (Switzerland) Sunrise (USA) Bioscientia (GER) ( ) Gemini (IPN – AUS
Slide 6: Revenue FY 2008
Revenue FY 2008 2008 2007 G Growth th (A$M) (A$M) (%) Total Revenue 2,380 1,886 26% ` Total organic revenue growth (excluding acquisitions) >7% ` A t li pathology Australian th l organic i revenue growth th ~8% ` US organic revenue growth >8% ` UK organic revenue growth >10% ` Germany and Switzerlan
Slide 7: Revenue Mix
Revenue Mix For full‐year full year ended 30.6.08 30 6 08 5% 14% Pathology Radiology Primary care ‐ IPN 81%
Slide 8: Sonic Revenue Mix
Sonic Revenue Mix F full‐year For f ll ended d d 30.6.08 30 6 08 IPN 5% Australian Pathology International 34% Pathology 47% Radiology 14%
Slide 9: Annual Revenue
Annual Revenue 3 000 3,000 2,500 2,000 1,500 A$M 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008
Slide 10: Acquisitions impacting FY'09 revenue
Acquisitions q impacting p g FY’09 revenue FY 2007/8 FY 2008/9 J A S O N D J F M A M J J A S O N D J F M A M J Sunrise (USA) Bioscientia (GER) Labor‐28 (GER) GLP Medical (GER) Clin Labs Hawaii (USA) Gemini (IPN – AUS) Others (small)
Slide 11: Earnings Growth
Earnings Growth FY 2008 FY 2007 Movement EBITDA (A$M) 478.6 405.7 18% EBITA (A$M) 402.7 343.6 17% NPAT (A$M) 245.1 198.1 24% EPS (diluted) (cents) 73.5 65.5 12% Cash Generation (A$M) 331.9 267.9 24%
Slide 12: Earnings per Share
Earnings per Share EPS and d EPS Growth G th 80.0 70.0 60.0 50.0 40.0 Cents per sshare pe ae 30.0 30 0 20.0 10.0 0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 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 65.5 73.5 EPS Growth (%) 14% 19% 24% 42% 30% 27%
Slide 13: Operating Margin
Operating Margin FY 2008 FY 2007 Movement EBITA Margin 16.9% 18.2% (130) bps* ` Acquisitions dilute margins ` Acquisition A i i i off b businesses i with i h lower l operating i margins i than h Sonic’s average existing margins ` Radiology division – low growth, cost pressures ` New Zealand patholog
Slide 14: Synergy – USA and Germany
Synergy – USA and Germany EBITA M Margin i expansion i H2 2008 vs H1 2008 USA ↑ 190 basis points Germany ↑ >200 basis points Includes northern hemisphere seasonal bias towards H2
Slide 15: Currency Exchange Impact
Currency Exchange Impact 2008 Actual vs 2008 restated at 2007 FX rates 2008 Actual 2008 @ 2007 FX FY’08 Guidance Revenue growth 26% 30% 20 –25% 25% EPS growth 12.2% 14.7% >12% Revenue impact for year ~A$77 million NPAT impact for year ~A$5.5 million EPS impact for year 1.7 cents (75.2 vs 73.5
Slide 16: Dividend
Dividend 2008 2007 Change Interim Dividend $0.20 $ $0.17 $ 18% Final Dividend $0.32 $0.29 10% Full Year Dividends $0.52 $0.46 13% ` Dividend fully franked at 30% ` Record Date 12 September 2008 ` Payment Date 9 October 2008 ` Dividend Reinvestment Plan reinstated
Slide 17: Full-year dividend
Full‐year dividend 14 Year History 60 50 40 Cents p per 30 Share 20 10 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Dividend (cents) 3 4 5 9 14 15 17 20 25 30 36 41 46 52
Slide 18: Dividend Reinvestment Plan (DRP)
Dividend Reinvestment Plan (DRP) ` DRP activated for the first time since 2004 ` Complements capital management strategy in light of recent and ongoing acquisitional growth ` Fully underwritten by Citi ` Total DRP raising ~$107 million ` Discount 2.5% ` Shares allotted on 9.10.08
Slide 19: Debt Summary
Debt Summaryy 30.6.08 30.6.07 Net Interest‐bearing Interest bearing Debt A$ M 1 238 1,238 1 139 1,139 Gearing (Net IB Debt/Market Cap.) % 25.5 25.2 Net et Debt ebt / EBITDA X 2.59 59 2.81 8 Interest cover (EBITDA / Net Interest) X 7.38 8.04 Forecast net debt at 30 September p 2008 – A$1,670 $ , mill
Slide 20: Debt Structure
Debt Structure ` Senior debt facility upsized November 2007 to A$1,750 million (7 banks) ` New A$160 million facility (July 2008) with 2 existing banks ` Headroom post‐settlement of announced acquisitions (incl. IPN) ~A$310 million ` A$500 million senior debt tranche expires 15.3.09 – expect to refi
Slide 21: FY 2009 Guidance
FY 2009 Guidance FY 2009 Guidance Revenue Growth >15% Earnings per share >10% Variables: ` Foreign exchange rates ` Interest rates ` Assumes underwritten DRP ` E l d new acquisitions Excludes i iti
Slide 22: Operational Summary
Operational Summary Australian Pathology USA Germany NZ Pathology UK Switzerland IPN Radiology
Slide 23: Australian Pathology
Australian Pathology ` Revenue growth of Australian pathology division ~8% ` Anticipate p ongoing g g market strength g and synergies y g ` Australian Medicare reimbursement status ` Rebate cuts in May 2008 budget ` MOU ends 30 June 2009 ` Pathology strategic review by inter‐departmental committee `
Slide 24: Cost Indices and Medicare Rebates for Pathology
Cost Indices and Medicare Rebates for Pathology A t li 1985‐2007 Australia: 1985 2007 ate
Slide 25: USA
USA ` Sonic Healthcare USA performing strongly ` Organic growth (excluding acquisitions) >8% ` Ongoing strong growth in New York area ` Synergy activity escalating ` Internal mergers, centralisation, purchasing, IT, sales, marketing ` Margin g expansion p of 190 basis p points ((H2 ‘08 vs H1 ’08)) `
Slide 26: Sonic Healthcare Germany
Sonic Healthcare Germany C t l and Central d branch b h laboratories l b t i Bioscientia Schottdorf Labor‐28 Augsburg GLP Medical
Slide 27: Germany
Germany ` S i H Sonic Healthcare lth G Germany ` Schottdorf and Bioscientia organic revenue growth ~8% ` Labor‐28 (Berlin) – settled 1 July 2008 ` GLP Medical (Hamburg) – settlement expected September 2008 ` Synergy benefits ` >€10 million over 2‐5 years (Schottdorf/Bioscientia) – 25% already locked
Slide 28: Germany – Fee Reforms
Germany – Fee Reforms ` Private fee schedule (GOA) ` No changes expected ` Public fees / Statutoryy health system y ` Direct billing of sickness funds by labs from 1 October 2008 ` GP discounts no longer possible ` Will lead to higher average fee, added admin costs, possible lower volumes ` Self‐ref
Slide 29: Switzerland
Switzerland ` Strong result for year ` Solid revenue/earnings growth, with margin expansion ` Strong management team ` Acquisition of Labor Prof. Krech ` Completed 1 July 2008 ` 2 small labs: Zurich lab to close, Kreuzlingen lab to downsize ` Synergies ` Prof. Krech lab fold‐in benefits ` Purchasing
Slide 30: Switzerland – Fee reforms
Switzerland – Fee reforms ` Swiss government draft proposal to realign laboratory fee relativities Swiss Laboratory Market ` Price reductions for high‐volume routine tests ` Price increases for manual and esoteric tests ` No resemblance to 10% across‐the‐board reductions in 2006 Private labs ` Forma
Slide 31: UK
UK ` Robust revenue and earnings growth ` Harley Street market growth strong ` NHS contracts ` UCLH contract progressing well ` Ealing contract operating well (commenced 1 July 2008) ` Termination of Beds and Herts tender process ` Further outsourcing opportunities
Slide 32: New Zealand Pathology
New Zealand Pathology ` Revenue and earnings flat ` Outstanding laboratories, managers, pathologists ` Reimbursement structures forcing service contraction ` Auckland laboratory contact appeal process ` Court of Appeal Appeal, Wellington, Wellington May 5‐14 ` Appellant – Lab Tests Auckland (Healths
Slide 33: Radiology
Radiology ` Difficult market conditions persisted through FY 2008 ` Cost and competitive pressures ` Medicare reimbursement rates flat for >10 years ` EBITA margin compression of 1.6% ` Revenue growth ~2% ` Competition and lower private billing levels ` Industry issues have stabilised ` Cost pressur
Slide 34: IPN
IPN ` IPN continues to perform strongly ` Financial highlights ` Revenue up 29% to A$123 million ` EBITDA up 32% to A$19.9 million ` Net profit up 27% to A$8.7 million ` Ongoing growth via recruitment and acquisition ` GP numbers have increased by 132 to 843 at year end ` Medical centres have increa
Slide 35: IPN – Acquisition of minority interests
IPN – Acquisition of minority interests ` Sonic currently owns 71.47% of IPN equity ` Scheme of Arrangement underway to acquire outstanding 28.53% ` Fully supported by IPN Independent Directors ` Recommended by Independent Expert ` Proxies in favour already received from larger shareholders ` Scheme
Slide 36: Future Growth
Future Growth ` European laboratory market ` German synergies flowing ` UK and d Switzerland S i l d strong ` Organic and acquisitional growth ` USA laboratory market ` Synergies flowing ` Organic and acquisitional growth ` Australian pathology market ` Annual revenue >$800 million ` Ongoing strong
Slide 37: The Sonic Difference
The Sonic Difference ` S i culture Sonic lt embraced b d by b staff t ff and d customers t globally l b ll ` Medical Leadership ` Federation structure ` Personalised service ` Respect for our >20,000 people ` Sonic model underlies success to date ` Strong, loyal and flexible leadership teams ` Staff
Slide 38: Thank you
AEA Lr HEALTHCARE Thank you > SONIC HEALTHCARE