Sonic Healthcare earnings growth may slow

Strong overseas business growth has helped boost Sonic Healthcare‘s full year profit, but the company admits earnings growth could slow in the current year.

The pathology and diagnostics services provider posted a 30 per cent rise in profit to $451 million for 2015/16, while revenue was up 20 per cent to $5.05 billion.

Chief executive Colin Goldschmidt said the company’s “banner year” was underpinned by growth overseas, particularly in Europe and the US.

“We have invested heavily in new, state-of-the-art laboratories around the world, greenfield imaging practices, and in equipment platforms and automation systems, creating ultra-modern facilities with the capacity for ongoing growth and efficiency capture,” Dr Goldschmidt said.

International earnings offset subdued growth in the Australian businesses, particularly medical centres and imaging, due to Medicare fee cuts in 2014.

The federal government pledged in May to freeze its plans to slash bulk-billing incentive payments to pathology and imaging providers until it had worked out how to tackle spiralling pathology centre rental costs charged by doctors’ surgeries.

Despite that, Sonic expects earnings before interest, tax, depreciation and amortisation (EBITDA) to rise by only five per cent in 2016/17, compared to a 13.8 per cent rise in 2015/16.

Dr Goldschmidt admitted the company was being conservative with its forecasts because it did not know the government’s plans for incentive payments – worth up to $3.40 per service for providers – or what it planned to do on pathology centre rental costs.

“We have assumed a steady state because we simply don’t know,” he told shareholders.

“We might have to update the guidance.

“One is good, one is bad, the two have to be put together when we know what they are and when they start.”

Dr Goldschmidt reassured investors that Sonic was prepared to cope with regulatory changes around the world and promised it would recover from any further fee cuts in Australia.

“Healthcare is going to be subject to regulatory change,” he said.

“We are in a growing industry and somebody has got to pay for it.”

Sonic Healthcare shares gained $1.37, or 6.2 per cent, to $23.51.


* Net profit up 30pct to $451.4m

* Revenue up 20pct to $5.05b

* Final dividend up three cents to 44 cents