[PPT] - Annual General Meeting 24 November 2005 Dr Colin Goldschmidt CEO PowerPoint Presentation

SLIDE 1

Annual General Meeting

24 November 2005

Dr Colin Goldschmidt

CEO and Managing Director

SLIDE 2

Current Status

FY 2004/5 - Record financial results
FY 2005/6 - Tracking to Sonic’s guidance range

after 4 months

Service levels and reputation outstanding
Organic growth fuelled by strong global pathology

and radiology demand

Platforms for growth in UK, German, USA markets
Company in strong position to drive shareholder

value into the future

SLIDE 3

Financial Year 2005 Highlights

20% Dividend (full-year) 31% EPS 21% Core* EPS 40% Operating Cashflow 34% NPAT 33% EBITA 33% Revenue

Growth 2005 vs 2004

*Core = Before amortisation of intangibles

SLIDE 4

2005 Guidance Delivered

EBITA Revenue 261 245 - 260 1,382 1,330 - 1,370

Actuals

$M

Sonic Guidance

$M

Sonic issued a profit upgrade in February 2005

SLIDE 5

Revenue Growth

33.3% 1,037.4 1,382.4 Total Revenue

Growth

(%)

2004

($M)

2005

($M)

Acquisitions completed in FY 2005 – IPN, Endeavour Healthcare/Accord

Pathology

Organic growth (non-acquisition) in 2005 ~7%
CPL acquisition (30 September 2005) in USA will boost 2006 revenue growth
Strong organic revenue growth ongoing

SLIDE 6

Sonic Healthcare

Annual Revenue

200 400 600 800 1,000 1,200 1,400 1,600 1,800

$M

Revenue ($M) 33 41 47 58 89 133 147 174 387 628 860 975 1,037 1,382 1,635 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006(F)

= Forecast 2006 Revenue

SLIDE 7

Sonic Healthcare Revenue Split

IPN 5%

Pathology 75%

Radiology 20%

SLIDE 8

2006 Guidance

300 – 320 1,600 – 1,670

2006 Guidance

$M

261 1,382

2005 Actuals

$M

Growth

%

18.8% EBITA 18.3% Revenue

Sonic tracking to 2006 guidance range after 4 months
Growth calculated using mid-point of 2006 guidance
Includes full year of IPN
Includes CPL acquisition from 1 October 2005
Assumes constant currency exchange rates

SLIDE 9

Dividends

$0.36 $0.23 $0.13

2005

$0.30 $0.20 $0.10

2004

20% 15% 30%

Change

Full Year Dividend Final Dividend Interim Dividend

Dividend fully franked at 30%
Dividend Reinvestment Plan currently suspended

SLIDE 10

Full-year dividend

11 Year History

5 10 15 20 25 30 35 40 Cents per Share Dividend (cents) 3 4 5 9 14 15 17 20 25 30 36 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

SLIDE 11

Core Earnings per Share

2.1 16.7 21.7 27.5 33.3 37.8 43.4 52.6 8.0 6.7 7.0 11.8 9.5

5 10 15 20 25 30 35 40 45 50 55 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Cents per share

Core Earnings = Before amortisation of intangibles

SLIDE 12

10 Years Double-digit EPS Growth!

SHL - Core Earning per Share Growth (%)

14% 19% 24% 42% 30% 21% 14% 15% 21% 27%

0% 10% 20% 30% 40% 50% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Core EPS = Earnings per Share before Amortisation of Intangibles

SLIDE 13

$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00

31/01/90 31/07/90 31/01/91 31/07/91 31/01/92 31/07/92 31/01/93 31/07/93 31/01/94 31/07/94 31/01/95 31/07/95 31/01/96 31/07/96 31/01/97 31/07/97 31/01/98 31/07/98 31/01/99 31/07/99 31/01/00 31/07/00 31/01/01 31/07/01 31/01/02 31/07/02 31/01/03 31/07/03 31/01/04 31/07/04 01/31/05 07/31/05

Sonic Healthcare

Share Price (Jan 1990 - Nov 2005)

SLIDE 14

Equity Raising / Share Purchase Plan

Successful capital raising of $225 million in October 2005
Proceeds used to retire debt associated with CPL acquisition
Priced at $14.54, a 3.5% discount to prior day’s closing price
Share Purchase Plan
Opportunity for loyal shareholders to participate in equity raising
Currently open, closes 1 December 2005
Purchase price set at $13.99 per share (lesser of placement price and 3% discount to market)
Maximum subscription per holder - $5,000
Senior syndicated debt facility
Re-negotiation under way
More flexibility and head room
Lower costs
Sonic now well placed to fund acquisitional growth

SLIDE 15

1997 1998 1999 2000 2001 2002 2003 2004 2005

Sonic Healthcare – International Expansion

United States 2005 United Kingdom 2002 Germany 2004 Hong Kong 2001 Australia 1987 New Zealand 1999

Sonic Core EPS performance

4

SLIDE 16

SLIDE 17

Sonic UK Pathology - History

Sonic acquires TDL in 2002
Sonic acquires Omnilabs in 2003
Omnilabs merges into TDL in 2004
TDL relocates to new laboratory facility in 2004
Sonic/TDL secures major public-private partnership with

UCLH in 2004

UK Government decision to outsource pathology and

radiology contracts from NHS to the private sector

SLIDE 18

UK Pathology - TDL

NHS outsourcing update
Pathology outsourcing tenders delayed due to election and focus on

radiology tenders and primary care outsourcing

Pathology tenders expected in first half 2006
TDL performing well in Harley Street market
TDL – UCLH joint venture progressing well
TDL referrals to Schottdorf successfully established

SLIDE 19

SLIDE 20

German Pathology - Schottdorf

Sonic acquired 56% interest in Schottdorf Group in 2004
Schottdorf business achieved outstanding results in FY 2005
Strong volume growth and efficiencies
Acquisition earnout of €8.1 million paid in full
Acquisition opportunities in private pathology sector
Evolving opportunities in German hospital pathology market

SLIDE 21

Sonic – Germany Synergies

UK – Germany synergies already established
Esoteric pathology specimens transported from TDL to Schottdorf daily
Additional revenue to Schottdorf
Lower testing costs for TDL
Better service delivery and turnaround times
Acquisition opportunities in Germany
Consolidation of market with efficiency gains
Schottdorf infrastructure with Sonic’s financial backing
German Public Hospital Pathology
Requires a combined Sonic-Schottdorf approach
A substantial opportunity

SLIDE 22

Sonic’s Experience in Germany

Excellent impression of German business market
Similar business culture and standards
Strong legal and accounting systems
No major legislative, tax or legal hurdles
Language
Not an issue
Everyone speaks excellent English!
Financing the transaction
Some difficulty in 2004
German banks had tightened exposure to mid-sized businesses
ANZ Bank played a key role in refinancing the leveraged position
Dresdner Bank joined and also provided debt funding for the deal
Formality – a steep learning curve for Australians!
Investment has performed well

SLIDE 23

SLIDE 24

Clinical Pathology Laboratories (CPL)

Sonic acquired 82% of CPL on 30 September 2005 for ~US$312 million
CPL is the largest regional independent laboratory in the USA
CPL’s core market is Texas, with newly established markets in Ohio

and Virginia (Washington DC area)

Annual revenue of ~US$190 M (~A$250 M) per annum
CPL has a proven, experienced and committed management team
Diverse and loyal customer base
15 year history of strong growth
CPL has a unique doctor-focused operating model
Sonic and CPL have very similar cultures and values

CPL offers a unique and compelling platform for Sonic in the US

SLIDE 25

CPL History

1948 – 1989 Forerunner of CPL, Austin pathologist group
1990 – 1997 Expansion into San Antonio, Dallas
1999 Acquisitions of Seguin Labs and Waco Medical Group Lab
2000 Acquisitions of labs in Houston, Dallas, Denton, Victoria
2001 CPL recapitalises with entry of private equity fund
2002 Expansion into Oklahoma, Arkansas, Louisiana
2003 Acquisition of labs in Ohio and Virginia
2004/5 Further small acquisitions in South West and Ohio

CPL has shown strong organic growth over the past 15 years

SLIDE 26

CPL Geographic Markets

CPL South West

CPL’s core market
Texas, Oklahoma, Arkansas, Louisiana
South West laboratory market estimated at US$1.3 billion annually
CPL has around 15% share of Texas market (population 22 million)
Major referrals from Austin, Dallas and San Antonio
Extensive network of local pathologist relationships
Strong and recognised reputation for excellent customer service

CPL Mid-Atlantic

Acquisition of Fairfax Medical Laboratories, Chantilly, Virginia
Full service laboratory, medium size
Services local area, including Washington D.C.
Expansion opportunities in D.C., Baltimore and other areas

CPL Mid-West

Acquisition of Pathology Laboratories, Inc (PLI), Toledo, Ohio
Full service laboratory, medium size
Potential to service Detroit, Cleveland, Chicago

SLIDE 27

CPL Management

CPL has an experienced and dedicated management team,

committed to growing the business with Sonic

Dr Robert Connor, M.D., Chairman, CEO, Medical Director

Qualified and practising pathologist
Became Chairman and CEO of CPL in 1990
Has driven the medical leadership model of CPL – both pathologists and clinicians

Mr David Schultz, B.S.B.A., President, Chief Operating Officer

Long-standing career in laboratory management
Highly respected management profile in US laboratory industry

Dr Connor and Mr Schultz have worked together at CPL for 16

years and are the architects of CPL’s unique strategy

CPL management have a track record of strong growth CPL’s management culture and operating model are critical

differentiators in the independent pathology sector

SLIDE 28

Ownership Structure

Initial equity structure: Sonic 82%, CPL management 18%
Non-Sonic shareholders
Largest shareholders: Dr Robert Connor (CEO) and Mr David Schultz (COO)
Other minority shareholders include Pathologists and senior managers
Sonic will move progressively to acquire 100% of CPL over a 3 year

period (2009-2012), using a mechanism geared to EBITDA

Significant incentive for CPL management to continue to drive

growth and profitability of the business

SLIDE 29

Corporate Values and Operating Models

Sonic Healthcare Sonic Healthcare CPL CPL

Medical practice / Medical

leadership

Respect & honesty Responsibility & accountability Personalised service for Doctors Commit to service excellence Federation model Pathologist interaction with

clinicians

Uncompromising integrity Accountability Focus on the physician Service comes first “Franchise Model” by region

Sonic Healthcare and CPL are “like-minded” organisations

SLIDE 30

The United States Pathology Market

The US is the largest pathology market in the world
US$40 billion revenue in 2003
Laboratory testing is linked to the entire US healthcare system
Hospital care, GP and specialist services, nursing homes, home healthcare etc
Pathology expenditure in the US
~3.0% of overall US health services expenditure
Estimated future growth rates of approximately 7% p.a. through to 2013

Total public and private laboratory revenue. Washington G2 Reports

30.7 32.9 35.4 38.1 40.1 43.0 46.1 49.4 52.9 56.6 60.7 65.0 69.6 74.5 79.8 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Laboratory industry revenue Laboratory industry revenue

CAGR = 7.1%

SLIDE 31

US Laboratory Market Segments

Other labs 7% Physician

wned labs

7% Hospital based labs 54% Independent clinical labs 32%

Laboratory Industry Share by Test Revenue, 2003 Laboratory Industry Share by Test Revenue, 2003

Source: Washington G2 Reports

Hospital Labs………………...~8,500 Independent Labs……….......~5,000 Physician Office Labs….…~110,000 Other Labs…………………..~58,000

SLIDE 32

Independent Laboratory Sector: Revenue Trend

9.5 10.6 11.7 12.4 13.0 3 6 9 12 15 1999 2000 2001 2002 2003 US$ B The independent laboratory sector grew at an average of 6.9% per annum (1999 – 2003)

Source: Washington G2 Reports

SLIDE 33

The Sonic Healthcare Federation

Group purchasing
Benchmarking
IT synergies
E-Health
Shared marketing
Quality Control
Management Training
Inter-referrals
Lab design / Workflow
Work exchange
Financial strength
Collegiate interaction

Local identity preserved Management autonomy Central synergy resource

Sonic’s Australian Model

SLIDE 34

Global Federation Model

Australia / New Zealand North America Europe / UK Sonic Head Office

SLIDE 35

Sonic Board of Directors

Mr Barry Patterson (Chairman)
Dr Colin Goldschmidt (Managing Director)
Mr Chris Wilks (Finance Director)
Mr Peter Campbell
Mr Colin Jackson
Dr Philip Dubois
Dr Hugh Scotton
Mr Lou Panaccio
Company Secretary – Mr Paul Alexander

SLIDE 36

Sonic Board of Directors

Non-executive Directors
Mr Barry Patterson – Chairman
Mr Peter Campbell
Mr Lou Panaccio
Executive Directors
Dr Colin Goldschmidt – Managing Director
Mr Chris Wilks – Finance Director
Mr Colin Jackson – Commercial Director, Chairman IPN
Dr Philip Dubois – Chair Sonic Radiology Executive, Radiology industry
Dr Hugh Scotton – Radiologist, Medical profession
Sonic Healthcare Model
A Healthcare company
Medical Leadership philosophy
~300 pathologists, ~150 radiologists
Doctors are our customers

SLIDE 37

IPN

Sonic holds 72% interest in IPN
IPN results consolidated into Sonic from 26.8.04
IPN acquisition of Endeavour Healthcare
Completed on 26.11.04
18 Medical Centres acquired (Sydney and Perth)
Integration into IPN structure successful
Loan of $8 million from Sonic to fund the acquisition
Sonic - IPN collaboration
Pathology referrals for Sonic and sub-tenancy income for IPN
Banking, purchasing, marketing etc
Sonic executives join IPN Board
IPN delivers maiden profit in FY 2005
Appointment of new CEO imminent
Mr Ralph Shreeve – outgoing CEO
Mr Colin Jackson – IPN Chairman

SLIDE 38

New Sonic “Super Lab” – Sydney

DHM Central Lab / Sonic Head Office

Rationale
DHM and Sonic moved into current building in 1994
DHM’s revenue has increased 5-fold since 1994
Sonic’s revenue has increased from ~$50 million to ~$1,600 million since 1994
Space issues for both DHM and Sonic Headquarters
Requirements
Facility to satisfy growth needs for next 20 years
Facility to support next major phase of synergy / centralisation
Facility to support Sonic Healthcare head office
Building
To be located at rear of current facility (95 Epping Road / Giffnock Avenue)
17,000 sqm state-of-the-art laboratory and office space (80% increase on current)
5 levels of lab and office, 3 levels of underground car parking
Expected cost - $70 million
Scheduled commencement early 2006
Scheduled completion second half of 2007
Existing building will be leased to outside parties

SLIDE 39

Commit to service excellence
Treat each other with respect and honesty
Demonstrate responsibility and accountability
Strive for continuous improvement
Maintain confidentiality

Sonic Core Values

How we should behave

SLIDE 40

Sonic Foundation Principles

What our customers want

Technical and Operational Excellence Professional and Academic Expertise

Medical Practice Medical Leadership

Satisfying Patient Needs Personalised Service for Doctors

SLIDE 41

Future

Sonic Australian businesses in strong position
Excellent pathology and radiology businesses
Extensive infrastructure
Outstanding relationships with medical profession
Strong offshore growth prospects
CPL opens a major new growth market in the USA
TDL/Sonic UK set for extended growth path
Schottdorf tracking well
Acquisitions in Germany, Europe and USA
Sonic well-placed to drive superior shareholder value

SLIDE 42