ASX 200 drops, Sonic acquires, Challenger down

The ASX 200 dropped today, with Sonic’s acquisition being a highlight.

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The S&P/ASX 200 Index (ASX: XJO) dropped by around 0.4% today to 7,359 points.

Here are some of the highlights from the ASX today:

Sonic Healthcare Ltd (ASX: SHL)

The Sonic share price went up close to 1% today after announcing an acquisition.

Sonic Healthcare is going to acquire Canberra Imaging Group (CIG). The company called this a significant and positive step in the development of its imaging division in Australia. This acquisition will broaden its footprint, deepen its talent pool, increase the revenue of the division by around 10% and offer the potential opportunity for synergy benefits.

CIG has annual revenue of around $60 million. It was described by Sonic as the leading radiology practice in Canberra. It has 15 radiologists and approximately 200 other staff that operate 10 service sites across nine locations.

The CIG business has one fully-funded (via Medicare), two partially-funded and two unlicensed MRI scanners and also operates of two private PET CT scanners in Canberra. Sonic also said that it’s the only private operator of an angiography and inverventional day suite in the area.

This deal will be funded by the ASX 200 share with cash and/or debt and be immediately earnings per share (EPS) accretive.

Sonic Healthcare CEO Dr Colin Goldschmidt said:

Canberra Imaging Group is a high-quality imaging practice, with outstanding radiologists, management and staff, and with a culture that is strongly aligned with Sonic’s medical leadership model. CIG has a proven track record in the greater Canberra market, with a history of strong organic growth based on personalised and excellent customer service.

Challenger Ltd (ASX: CGF)

The Challenger share price fell more than 1% in reaction to a business update.

The ASX 200 share reaffirmed its FY21 profit guidance, it expects FY21 normalised net profit before tax to be at the bottom end of its guidance range between $390 million to $440 million.

Challenger CEO and managing director Richard Howes said that the business has emerged from a period of significant disruption in a strong position and with a clear strategy to drive its next phase of growth. He said:

Over the past three years we’ve faced a confluence of disruptive external events and have emerged in strong shape, with a significant capital buffer, a market leading funds management offering and diversified revenue flows in our life business.

We are now continuing to build on our strong foundations to capture the opportunities the high growth retirement market presents.

Mr Howes also pointed out that, when completed, the MyLife MyFinance bank will be a key focus for the business as it creates an opportunity to further diversify the product offering for customers and accelerate Challenger’s strategy to build direct customer relationships.

Challenger has revised its target capital range to 1.3 times to 1.7 times the APRA prescribed capital amount (PCA), extending the upper end of the range and outlining an intention to operate at around 1.6 times.

The ASX 200 share has also revised its pre-tax return on equity target to the RBA cash rate plus 12%.

Seven West Media Ltd (ASX: SWM)

The Seven West share price soared more than 23% after giving an update.

It said that trading conditions in the fourth quarter of FY21 have been positive, with a strong rebound in advertising revenue compared to last year. Seven’s advertising revenue including broadcaster video on demand (BVOD) is estimated to grow more than 45% in the quarter.

Seven said that early indications suggest ongoing positive momentum into the September quarter. It also said that since April, Seven has been increasing its television audience share year on year across key demographics.

Digital earnings continue to grow strongly, with Seven digital expected to contribute earnings before interest, tax, depreciation and amortisation (EBITDA) of more than $60 million in FY21, up 130% year on year. Digital earnings are expected to more than double in FY22.

Cost control remains an ongoing focus for Seven West Media, with costs expected to come in line with guidance at the lower end of the range.

The group now expects underlying EBITDA to be between $250 million to $255 million.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Challenger Limited. The Motley Fool Australia has recommended Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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