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Will the Sonic Healthcare (ASX:SHL) share price rise after 166% profit growth in HY21?

The Sonic Healthcare Ltd (ASX: SHL) share price will be one to keep an eye today after the pathology business announced major growth in its FY21 half-year result.

What did Sonic Healthcare report in HY21?

Sonic Healthcare reported that its revenue increased by 33% to $4.4 billion. The healthcare business said that there was a significant contribution from COVID-19 testing, leveraging existing infrastructure. More than 18 million COVID-19 PCR tests have been performed to date in around 60 Sonic laboratories globally.

The global base business revenue, excluding COVID-19 testing, was down 1% year on year. This was significantly less impacted than in the first few months of the pandemic.

Sonic reported that it managed to grow its profit margins in both laboratory and imaging operations. This led to EBITDA (EBITDA explained) rising by 89% to $1.3 billion. The bottom line showed net profit growth of 166% to $678 million.

Sonic balance sheet and HY21 dividend

The Sonic board decided to continue with its steady dividend growth, so a 36 cents per share dividend was declared – up 6%.

Sonic said that it had a strong balance sheet with record low gearing and $1.3 billion of available liquidity (before the payment of the dividend) which can be used for growth.

Focused on growth

The healthcare business says there are increasing acquisition, contract and joint venture growth opportunities. It’s currently bidding on “significant” opportunities in Australia, the UK, the USA and Alberta, Canada.

Sonic also said that it’s in a strong position for future growth for several reasons.

The first reason is because of its geographical diversification, providing increased opportunities for expansion. The second reason is that the underlying strong healthcare growth drivers are unchanged. The next reason is due to the leading market positions in Australia, Germany, the USA, the UK and Switzerland which it can leverage. The final reason is its culture and leadership teams.

Summary thoughts

Sonic Healthcare is expecting the strong demand for COVID-19 testing to continue into the foreseeable future. It’s a great, defensive business. So if you’re looking for a dependable long term option, Sonic could be one to think about. However, one would expect the COVID-19 testing revenue to slow down as more vaccines are rolled out.

Before you consider Sonic Healthcare, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.

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