Sonic Healthcare Limited (ASX: SHL) is an Australian-based pathology and diagnostic company that has been growing through acquisitions for years. The company's full year results, released on Tuesday this week, showed healthy performance from its Australian assets, strong growth overseas, and plenty of cash in the bank for new growth in the year to come.
A closer look at Sonic Healthcare
SHL operates in Australia, the United States (US), New Zealand, Germany, Belgium, Ireland and Switzerland, with Australia and the US each providing 24% of SHL's revenue, and Germany 20%.
In January it completed the purchase of Aurora Diagnostics in the US, and the company reports that its integration is "proceeding to plan". This boosted revenue growth to 18% in the US, but even without the Aurora acquisition, the company's organic US growth was 5%. The US should be expected to represent an even larger portion of SHL's revenue in future, with CEO Dr Colin Goldschmidt mentioning to shareholders that the growth of the US business to match Australian revenue was exactly as forecast a year ago.
He stated:
Our US business will move clearly into the number one revenue position as our largest division in FY 2020 and beyond, because our expectation is that there is fairly significant growth ahead in that market.
Dr Goldschmidt also added that the company's pipeline for acquisition and hospital laboratory opportunities is strong and commented that it is "certainly in the midst of something very exciting in the US market in terms of potential growth."
Sonic's interest in other countries also performed well. There was similar 5% organic revenue growth here in Australia, 9% in the UK and Ireland, 3.5% in Germany, and 4% in Switzerland. Overall earnings before interest, taxes, depreciation, and amortisation were up 13%.
A final dividend of 51 cents per share was announced, up 4.1% on last year. This brings SHL's total dividends for the year to 84 cents, 3.7% higher than 2018. Dr Goldschmidt was careful to point out on Tuesday that the company's dividend has never gone backwards, adding that the "Board of Sonic remains very committed to this progressive dividend policy under which we aim obviously to increase the dividend per share each year."
Sonic funded the acquisition of Aurora Pathology in the US by raising $700 million from shareholders. However, growth in the foreseeable future shouldn't have to rely on further capital raisings, with SHL holding approximately $1 billion available for future growth by acquisition.
Sonic Healthcare's geographical diversification insulates it from any unexpected instability in any one market, and gives the company the flexibility to pursue growth wherever the best opportunities lie. Plenty of cash on the balance sheet gives it the ability to act on that without having to come to shareholders in another capital raising, and a growing dividend should earn the company consideration from any income-focused investors.
Foolish takeaway
The Sonic Healthcare share price rose sharply after the results were announced, from a close of $27.65 the day before the release to open at $29.64 on Wednesday. It has pulled back just slightly since then, currently trading at $28.66, but I expect to see Sonic Healthcare have a very good year from here.
