The Sonic Healthcare Ltd (ASX: SHL) share price rose 3% today after the healthcare company released its half-year results to the market for the period ending 31 December 2018.

Sonic Healthcare is one of Australia’s largest healthcare businesses, it provides laboratory services, pathology, and radiology services. It is actually the world’s third-largest pathology/laboratory medicine company. It has operations in Australia, USA, Germany, Belgium, Switzerland, the United Kingdom, Ireland and New Zealand.

Key Results

Sonic Healthcare reported:

  • Revenue up 9% to $2.9 billion
  • EBITDA up 7% to $471 million (click here to learn what EBITDA means)
  • Net profit up 7% to $223 million
  • Cash from operations of $369 million
  • Interim dividend up 3% to 33 cents per share, franked at 20%

Management Commentary

Sonic Healthcare has performed well in the half-year, with our US, Swiss and Australian laboratory operations achieving particularly strong earnings growth,” Sonic Healthcare CEO, Dr Colin Goldschmidt, said. “I am especially proud that the revenue of our US business grew 8% organically in the half, which we believe is well above market… We believe there is significant upside to come from both initiatives, and we are working on a number of additional potential hospital laboratory opportunities, as well as pursuing other avenues of organic and acquisitional growth.”

FY19 Guidance Upgraded After Aurora

Probably the most optimistic piece of information from today’s update was that the company bedded down its US acquisition of Aurora Diagnostics back in January 2019 (after the period ended). Mr Goldschmidt described the takeover as, “tremendously exciting”. He attributed the company’s global success to their “Medical leadership culture… [which] recognises that pathologists are the natural leaders within laboratories”.

For its 2019 financial year, Sonic’s management had guided for a 3%-5% increase in underlying EBITDA to $962 million in constant currency. Managemenhasve since revised their forecast to include the Aurora acquisition with growth now expected to be 6-8%, meaning underlying EBITDA could come in between $1.02 billion and $1.04 billion in constant currency.

Rask Perspective

The healthcare sector is an appealing industry to invest in with strong tailwinds. However, Sonic Healthcare is outside of my circle of competence and has a mediocre return on capital, so it is not a stock I am interested in adding to my portfolio. Other shares to add to your watchlist include CSL Ltd (ASX: CSL) and Nanosonics Ltd (ASX: NAN). We covered CSL in more detail in this article.


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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).