Sonic Healthcare Annual Profit Falls 53% as Covid-19 Boost Ebbs

By David Winning

SYDNEY--Sonic Healthcare said its annual profit fell by 53% as the boost from Covid-19 testing faded, although a recovery in its base laboratory business in key markets cushioned the decline.

Sonic said its net profit totaled 685 million Australian dollars (US$447.3 million) in the 12 months through June, down from A$1.46 billion a year earlier. The profit fall coincided with a surge in inflation in key markets, including Australia, the U.S. and Europe.

Still, directors of the company declared a final dividend of 62 Australian cents a share, up from a payout of 60 cents a year earlier.

Sonic's performance is normalizing after two years of extraordinary profits in the 2021-2022 fiscal years when governments around the world relied on its network of laboratories to diagnose patients with Covid-19 and assess the spread of the virus within national borders. Profit margins on Covid-19 tests were higher than the company's traditional pathology business.

"Earnings and margins for the year were impacted by the dramatic reduction in Covid revenues, particularly in the second half," Sonic said in a regulatory filing on Thursday.

Illustrating how the pandemic boost has ebbed, Sonic said revenue from Covid-19 services dropped by 80% to A$478.2 million when currency swings are stripped out. In contrast, annual revenue from its base business rose by 8.7% to A$7.51 billion.

Sonic said its earnings before interest, tax, depreciation and amortization--or Ebitda--fell by 41% to A$1.68 billion in fiscal 2023 at constant exchange rates.

However, Sonic expects an improvement in the current year. The company said it expected Ebitda to total between A$1.7 billion and A$1.8 billion in the 12 months through June, 2024.

Providing Covid-19 testing services during the pandemic led to acceleration in cash flow that Sonic was able to use to raise shareholder returns and make bolt-on acquisitions.

Among deals announced in fiscal 2023, Sonic acquired the Swiss laboratory network of Synlab Group and Medical Laboratories Duesseldorf in Germany. The company said at the time of each deal that they would make a swift contribution to its earnings per share.

Still, some analysts believe Sonic has plenty of capacity for more acquisitions. In a research note last month, Macquarie estimated the company's warchest could reach A$2.5 billion at the end of the 2024 fiscal year.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 16, 2023 19:33 ET (23:33 GMT)

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