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Sonic Healthcare Reports Negative Earnings

Sonic Healthcare Reports Negative Earnings
Aug 18, 2015 By Ben Visser

Sonic Healthcare (ASX:SHL) reported its full FY15 results today. Revenue experienced growth however net profits suffered declines.

Sonic Healthcare is an international medical diagnostics company, offering laboratory medicine/pathology and radiology services to the medical community. The company is structured as a decentralised federation of medically-led diagnostic practices, with the head office in Sydney, Australia and provides services and infrastructure in eight countries.

Sonic experienced healthy growth in the German, UK and Switzerland market with growth in the US improving. The company reported revenue of $4,201 million, up 7.3 per cent on the previous year, however EBITDA and Net Profit came in at $731 million and $363 million, down 1.0 and 5.6 percent on the previous year. The reduction in net profits is largely attributed to difficult conditions on the Australian laboratory market.

The company entered into a Dividend Reinvestment Plan (DRP) Shortfall Placement Agreement with CBA Equities Limited that will involve CBA Equities subscribing for shares with value up to 100% of any shortfall in the DRP participation by Sonic shareholders. There is no guarantee that the full DRP shortfall will be funded. 

The objective behind the DRP and DRP Shortfall Placement is to fine tune Sonic’s capital structure following acquisitions completed in July 2015, and will reset Sonic’s balance sheet for further growth. 

Looking into 2016, Sonic expects EBITDA of $815 – 840 million for FY16 on a constant currency basis (applying 2015 average currency rates to translate offshore earnings for 2016), equivalent to $850 – 875 million at current exchange rates. 

Sonic’s CEO, Dr Collin Goldschmidt commented, “Sonic Healthcare performed with great credit in FY2015, despite challenging conditions in the Australian laboratory market. Our US business is set for strong earnings growth in the year ahead, following the successful restructure of CBLPath and the return of stronger growth to the US laboratory market. Sonic’s European businesses produced outstanding results in FY2015 and our Imaging and medical centre businesses also performed admirable. The company is poised for strong revenue and earnings growth in FY2016, a result of ongoing strong organic growth in all key markets and the positive effect of recent acquisitions and contract wins in Europe.”

Sonic's share price performed well over the last twelve months, however has experienced some declines in recent months due to negative earnings. Following results today the company’s share price decline approximately 1.5 per cent. Going forward the company’s revenue will be exposed to significant currency risks however positive earnings will be the most important factor driving the share price.

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Ben Visser Author: Ben Visser Aug 18, 2015

Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.

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