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Sonic Healthcare Reaffirms FY16 Guidance at AGM

Sonic Healthcare Reaffirms FY16 Guidance at AGM
Nov 19, 2015 Tags: SHL

Sonic Healthcare (ASX:SHL) held its Annual General Meeting (AGM) today and provided a trading update to its shareholders. SHL is tracking “in line with guidance” as the Company reaffirmed its FY16 guidance.

Sonic Healthcare expects EBITDA of A$815-840 million at constant currency rates and 20% growth at current currency rates. The guidance excludes further acquisitions and the board expects “normal earnings weighting to H2 more accentuated this year”. Interest expenses are expected to increase by 5-10% due to acquisitions completed.

During FY15 Sonic generated approximately 28% of its revenue in Australia and 72% overseas. The US is the biggest overseas market contributing $930m followed by Germany where Sonic generated $805m.

Assuming August foreign exchange rates, Sonic expects international revenue to accelerate during FY16. The UK market is flourishing as Sonic witnessed 25% revenue growth during FY15 and expects 40% during FY16 with robust performance YTD.

Domestic revenue is expected to grow at an “above-market” average pace, with strong growth in specialist and esoteric markets.

Retiring Chairman of Sonic Healthcare, Peter Campbell said: “The 2015 financial year presented some challenges to earnings for Sonic Healthcare, including a number of one-off, non-recurring expenses. When challenges arise, it is heartening to remember that Sonic provides essential healthcare services, is one of the largest and most efficient operators in each of its markets, has stable, experienced management and benefits from geographic market diversification.”

After 22 years as Sonic director Peter Campbell will retire and be succeeded by Mark Compton.

Wise-owl’s Take

Sonic Healthcare has experienced solid long-term growth thus far which is reflected in a bullish share price. Wise-owl is attracted to SHL’s revenue model and international diversification which is why we have recommended to buy SHL in September 2014. Wise-owl subscribers enjoy strong capital growth coupled with healthy semi-annual dividends.

Significant acquisitions during FY15 have eaten into profits and investors appeared a little concerned for the upcoming year, however today’s trading update is expected to boost sentiment.

We will inform our subscribers about any updates in regards to this position.

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