This morning, medical diagnostics giant Sonic Healthcare Ltd (ASX: SHL) reported FY24 results.
As expected, the FY24 results were weak, but the normalisation of COVID-related revenue largely drove this.
Sonic, has indeed, had a couple of tough years. Its share price fell from $46.25 in December 2021 to $23.58 in June 2024. But since then, it has rebounded approximately 17%.
Today, the company guided for a 10% profit growth in the new financial year.
Can Sonic Healthcare shares pass the 'recovery test'? Let's find out!
Robust base revenue growth in FY24
Some of the highlights from the result included:
- Revenue increased by 9.8% to $8.97 billion despite normalising COVID-19-related revenue, down 87% to $62.4 million
- Base business revenue, excluding the abnormal COVID-19 impact, was up 15.9% to $8.9 billion, led by organic growth and key acquisitions
- Earnings before interests, taxes, depreciation, and amortisation (EBITDA) fell 6% to $1.6 billion, excluding the gain related to the sale of West Division USA
- Net profit after tax (NPAT) fell 25% to $511 million
- The company declared the final dividend of 63 cents per share, bringing the total FY24 dividend to $1.06 per share, up 2% year-over-year
While revenue growth faced pressure due to the absence of COVID-19-related businesses, base business revenue increased by 16% compared to last year. This growth was attributed to a 6% organic growth and strategic acquisitions.
The company's 6% organic growth in its base business revenue was impressive. The company highlighted the strong growth in Australia (10%), Germany (7%), and the UK (9%). Management believes "these levels to be in line or better than market growth."
Sonic made several acquisitions in FY24, including Medisyn and Dr Risch in Switzerland, pathologyWatch in the USA, and the UK's Hertfordshire & West Essex contract. The company estimates a revenue impact of approximately $655 million from these acquisitions completed through FY24.
Looking back on FY24, Sonic's CEO, Dr Colin Goldschmidt, said:
The 2024 financial year can be summarised as a transition period for Sonic Healthcare, as we moved away from the impacts o the pandemic towards business as usual
This seems to summarise the past couple of years well.
FY25 guidance
Sonic guided for FY25 EBITDA of $1.7 billion to $1.75 million, approximately 10% growth at the midpoint. The company confirmed that July 2024 EBITDA is in line with its targets.
Commenting on the FY25 outlook, Dr Goldschmidt commented:
Inflationary pressures, particularly on labour costs, have impacted our results for FY 2024 and there will be some annualisation of these effects into the first part of FY 2025.
These impacts are expected to ease going forward, with headline inflation rates in Sonic's main markets now in the range of 1.3% to 3.8%.
In managing our costs, especially labour costs, we remain mindful of the necessity to maintain the high quality of the essential healthcare services we provide, as well as to support our ongoing strong organic growth.
The Sonic Healthcare share price is up 1% today after reporting FY24 results and FY25 guidance.
