Sonic Healthcare Limited (SKHCF) Q2 2025 Earnings Call Transcript

2025-02-20 08:34:57 ET

Sonic Healthcare Limited (SKHCF)

Q2 2025 Earnings Call

February 19, 2025 18:00 ET

Company Participants

Colin Goldschmidt - Chief Executive Officer and Managing Director

Chris Wilks - Chief Financial Officer

Conference Call Participants

Andrew Goodsall - MST Marquee

David Low - JPMorgan

Lyanne Harrison - Bank of America

Mathieu Chevrier - Citi

David Stanton - Jefferies

Saul Hadassin - Barrenjoey

Steve Wheen - Jarden

Craig Wong-Pan - RBC

Laura Sutcliffe - UBS

Andrew Paine - CLSA

Presentation

Operator

Good day and thank you for standing by. Welcome to the Sonic Healthcare Financial Half Year Ended 31st December, 2024 Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. It is now my pleasure to hand you over to the Chief Executive Officer and Managing Director, Dr. Colin Goldschmidt. Please go ahead, sir.

Colin Goldschmidt

Thank you, Amber and good morning ladies and gentlemen and welcome to Sonic Healthcare’s half year result for the period ending 31 December, 2024. I’m joined today by my long-standing colleagues, Chris Wilks, CFO of Sonic; Paul Alexander, Deputy CFO of Sonic Healthcare; and Dianne Ayers, Senior Executive, Investor Relations and Financial Analysis.

I trust you’ve got the presentation in front of you. And perhaps before we go to the deck itself, I’d like to just take a minute just to give you my view about the current company status and performance and how we see this result, particularly in the context of future performance of Sonic Healthcare. In many ways, this result reflects that Sonic has turned the corner in terms of our financials and that we’re back on track following the massive disruption to the business over the pandemic and immediate post-pandemic periods.

In the post-pandemic period to-date, and that’s about 2 years, it’s only 2 years, it’s not even 2 years since the pandemic ended, there’s been an incredible effort in Sonic from our leaders and all our staff worldwide to right-size the company, particularly in terms of labor cost. And that labor cost needed to be massively increased during the pandemic to respond to a huge operational – unprecedented as it was operational call to perform millions and millions of COVID tests, as you all know. So, it might have taken a bit longer to do this right-sizing than we or perhaps shareholders would have liked, but we’re just about there right now and if I could say that dialing down labor costs in a healthcare services company like Sonic needs to be done carefully and judiciously so that our services to patients and clinicians are maintained at first rate levels and are not compromised in any way. And I’m actually pleased to say that our services have not been compromised and have remained outstanding at all times, which actually has been to the benefit of our reputation and standing worldwide.

Fortunately, we’ve experienced strong organic growth throughout these periods. And so combining strong organic growth with labor costs now at close to steady-state level, we have operating leverage in the company once again, allowing us to deliver healthy EBITDA, net profit growth, earnings per share growth, and importantly, margin expansion once again. And we certainly do expect this to continue into future periods. And of course, finally, if you add to this the upside we expect from our recent M&A activity, particularly in Switzerland and Germany, it does feel like we’re in clear air once again as we move ahead from here.

Okay. So, if I could take you to the deck, please, and we’ll start with Slide 4, where we give you our headline numbers, Sonic’s revenue for the half was at $4.669 billion, which is up 8%. EBITDA up 12% at $827 million. All in Australian dollars, this is. Net profit up 17% at $237 million, strong cash generation from operations at $620 million, which is up 37% on the prior period, and earnings per share growth at 15% at $0.492 per share. We confirm that we are on track to achieve the full year guidance that we issued in August of last year. And with 8% revenue growth overall, we’re very pleased with the strong organic revenue growth of 6.1% for the half versus PCP. Our EBITDA margin was up 60 basis points in the period. And if you exclude the zero margin – initially zero margin acquisitions of the recent past, that’s Dr. Risch Group and PathologyWatch, our EBITDA margin expansion was actually 90 basis points up. And as I’ve mentioned just before, we’re now seeing the benefit of organic revenue growth and tight cost control, particularly at labor level, driving margin expansion, and we certainly expect that to go on from here....

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