Financial and Operational Review Financial and Operational Review - - PowerPoint PPT Presentation

Financial and Operational Review Financial and Operational Review

Year to 30 June 2004 Year to 30 June 2004

Dr Colin Dr Colin Goldschmidt Goldschmidt

Managing Director Managing Director 23 August 2004 23 August 2004

! !

Revenue growth… … … … … … … … .6.4% Revenue growth… … … … … … … … .6.4%

! !

EBITA growth… … … … … … … … … .13.5% EBITA growth… … … … … … … … … .13.5%

! !

EBITA margin… … … … … … … … … .18.9% EBITA margin… … … … … … … … … .18.9% (up 110 bps)

(up 110 bps)

! !

NPAT growth… … … … … … … … … … 41.0% NPAT growth… … … … … … … … … … 41.0%

! !

Core* EPS growth… … … … … … ..14.8% Core* EPS growth… … … … … … ..14.8%

! !

EPS growth… … … … … … … … … … … 38.2% EPS growth… … … … … … … … … … … 38.2%

! !

Full year dividend growth… … .20.0% Full year dividend growth… … .20.0%

2004 Financial Highlights 2004 Financial Highlights 2004 Financial Highlights

Core* = Before Core* = Before amortisation amortisation of intangibles

• f intangibles

2004 Guidance Delivered 2004 Guidance Delivered

EBITA EBITA Revenue Revenue

Full Year 2 0 0 4 Full Year 2 0 0 4

197 197 185 185 -

• 195

195 1,037 1,037 1,020 1,020 -

• 1,035

1,035

Actuals Actuals

$M $M

Sonic Guidance Sonic Guidance

$M $M

Sonic 2004 guidance unchanged since first released in August 200 Sonic 2004 guidance unchanged since first released in August 2003 3

Revenue Revenue

! !

Acquisitions completed in FY 2004 Acquisitions completed in FY 2004

! !

Omnilabs, SDSG Radiology, Haskell Pathology, Schottdorf (29 June Omnilabs, SDSG Radiology, Haskell Pathology, Schottdorf (29 June 2004) 2004)

! !

Organic revenue growth (excluding acquisitions) ~ 6% Organic revenue growth (excluding acquisitions) ~ 6%

! !

Australian pathology revenue growth in line with market Australian pathology revenue growth in line with market

! !

Australian radiology revenue growth in line with market Australian radiology revenue growth in line with market

! !

U.K. pathology revenue growth at double digit (excluding Omnilab U.K. pathology revenue growth at double digit (excluding Omnilabs) s) 6.4% 6.4% 974.8 974.8 1,037.4 1,037.4 Total Revenue Total Revenue

Grow th Grow th

(% ) (% )

2 0 0 3 2 0 0 3

($M) ($M)

2 0 0 4 2 0 0 4

($M) ($M)

Revenue Revenue

! !

Second half revenue in line with expected Second half revenue in line with expected seasonality seasonality

! !

Revenue will increase substantially in 2005 Revenue will increase substantially in 2005

! !

Schottdorf Schottdorf (full year) (full year)

! !

IPN (consolidated from 26 August 2004) IPN (consolidated from 26 August 2004)

! !

Sonic organic growth Sonic organic growth

! !

Possible new acquisitions Possible new acquisitions 489.3 489.3 527.5 527.5

H2 H2

$M $M

FY 2 0 0 3 FY 2 0 0 3 FY 2 0 0 4 FY 2 0 0 4 485.5 485.5 509.9 509.9

H1 H1

$M $M

Earnings Growth Earnings Growth

Core = Before Amortisation of Intangibles Core = Before Amortisation of Intangibles 41.0% 41.0% 40.9 40.9 57.6 57.6 NPAT ($M) NPAT ($M) 38.2% 38.2% 15.7 15.7 21.7 21.7 EPS (cents) EPS (cents) 13.8% 13.8% 137.4 137.4 156.3 156.3 Cash Generation ($M) Cash Generation ($M) 14.8% 14.8% 37.8 37.8 43.4 43.4 Core EPS (cents) Core EPS (cents) 17.6% 17.6% 99.5 99.5 117.0 117.0 Core NPAT ($M) Core NPAT ($M) 13.5% 13.5% 173.1 173.1 196.6 196.6 EBITA ($M) EBITA ($M)

Movem ent Movem ent

% %

FY 2 0 0 3 FY 2 0 0 3 FY 2 0 0 4 FY 2 0 0 4

Nine consecutive years of double Nine consecutive years of double-

• digit EPS growth!

digit EPS growth!

Earnings Earnings

! !

Second half EBITA in line with expected seasonality Second half EBITA in line with expected seasonality

! !

EBITA growth of 13.5% on revenue growth of 6.4% EBITA growth of 13.5% on revenue growth of 6.4%

! !

EBITA added $23.4 million EBITA added $23.4 million

! !

Revenue added $62.6 million Revenue added $62.6 million 90.8 90.8 82.4 82.4 FY 2 0 0 3 FY 2 0 0 3 103.1 103.1 93.5 93.5 FY 2 0 0 4 FY 2 0 0 4

H2 EBI TA H2 EBI TA

$M $M

H1 EBI TA H1 EBI TA

$M $M

Earnings Margin Growth Earnings Margin Growth

! !

Revenue growth with marginal profit Revenue growth with marginal profit

! !

Local entity cost management Local entity cost management

! !

Outstanding management teams throughout Sonic Outstanding management teams throughout Sonic

! !

Stability and commitment of CEOs, managers, Stability and commitment of CEOs, managers, pathologists/ radiologists pathologists/ radiologists ! !

Central Sonic synergy initiatives Central Sonic synergy initiatives

! !

Benchmarking, IT, purchasing, centralisation of testing Benchmarking, IT, purchasing, centralisation of testing 21.9% 21.9% 17.8% 17.8%

FY 2 0 0 3 FY 2 0 0 3

(% ) (% )

23.0% 23.0% 18.9% 18.9%

FY 2 0 0 4 FY 2 0 0 4

(% ) (% )

+ 110 bps + 110 bps + 110 bps + 110 bps

Movem ent Movem ent

(basis points) (basis points)

EBI TDA Margin EBI TDA Margin EBI TA Margin EBI TA Margin

Sonic EBITA Margin Expansion Sonic EBITA Margin Expansion

17.0% 17.8% 18.9%

14.0% 15.0% 16.0% 17.0% 18.0% 19.0% 20.0% 2002 2003 2004

FY 2005 margins will be diluted by FY 2005 margins will be diluted by Schottdorf Schottdorf and IPN and IPN

Final Dividend Final Dividend

$0.30 $0.30 $0.20 $0.20 $0.10 $0.10 2 0 0 4 2 0 0 4 $0.25 $0.25 $0.17 $0.17 $0.08 $0.08 2 0 0 3 2 0 0 3 20% 20% 18% 18% 25% 25% Change Change Full Year Dividend Full Year Dividend Final Dividend Final Dividend Interim Dividend Interim Dividend

! !

Dividend fully franked at 30% Dividend fully franked at 30%

! !

Record Date Record Date

! ! 6 September 2004 6 September 2004 ! !

Payment Date Payment Date

! ! 20 September 2004 20 September 2004 ! !

Dividend Reinvestment Plan remains suspended Dividend Reinvestment Plan remains suspended

Balance Sheet Summary Balance Sheet Summary

64 64 74 74 % % Gearing (Net IB Debt / Equity) Gearing (Net IB Debt / Equity) 831.3 831.3 847.8 847.8 $M $M Equity Equity 2.50 2.50 2.62 2.62 X X Net Interest Net Interest -

• bearing debt / EBITDA

bearing debt / EBITDA 561.3 561.3 641.3 641.3 $M $M Total Interest Total Interest -

• bearing Debt

bearing Debt 5.93 5.93 1,111.1 1,111.1 104.7 104.7

3 0 .6 .0 3 3 0 .6 .0 3

X X $M $M $M $M 6.98 6.98 1,162.2 1,162.2 145.6 145.6

3 0 .6 .0 4 3 0 .6 .0 4

Interest Cover (EBITDA / Net Interest) Interest Cover (EBITDA / Net Interest) Intangibles (net) Intangibles (net) Receivables (current) Receivables (current) Undrawn Undrawn senior debt facilities ~ $ 90 million (after IPN consideration) senior debt facilities ~ $ 90 million (after IPN consideration)

2005 Guidance 2005 Guidance

235 235 -

• 245

245 1,290 1,290 – – 1,330 1,330 2 0 0 5 Guidance 2 0 0 5 Guidance $ M $ M 197 197 1,037 1,037 2 0 0 4 Actuals 2 0 0 4 Actuals $ M $ M Grow th* Grow th* % % 21.8% 21.8% EBI TA EBI TA 26.3% 26.3% Revenue Revenue

2005 Guidance 2005 Guidance

" " Growth* calculated using mid Growth* calculated using mid-

• point

point

• f 2005 guidance
• f 2005 guidance

" " Includes full year of Schottdorf Includes full year of Schottdorf " " Includes IPN estimate from 26.8.04 Includes IPN estimate from 26.8.04 " " Intangibles amortisation $64 million Intangibles amortisation $64 million " " Assumes no new acquisitions Assumes no new acquisitions " " Assumes constant exchange rates Assumes constant exchange rates

Pathology Operations Pathology Operations

! !

Solid margin expansion in largest Australian entities Solid margin expansion in largest Australian entities

! !

Sullivan Sullivan Nicolaides Nicolaides Pathology ( Pathology ( Queensland Queensland) )

! !

Melbourne Pathology (Victoria) Melbourne Pathology (Victoria)

! !

Douglass Douglass Hanly Moir Hanly Moir Pathology (New South Wales) Pathology (New South Wales) ! !

New Zealand pathology New Zealand pathology

! !

Revenue growth rates lower than Australia Revenue growth rates lower than Australia ! !

Margin expansion set to continue Margin expansion set to continue

! !

Synergies between Sonic entities Synergies between Sonic entities

! !

Cost management at local level Cost management at local level

! !

Ongoing organic revenue growth Ongoing organic revenue growth ! !

FY 2005 Margins FY 2005 Margins

! !

Omnilabs Omnilabs turnaround will benefit TDL margins in FY ‘05 turnaround will benefit TDL margins in FY ‘05

! !

Group pathology margins to be diluted by Group pathology margins to be diluted by Schottdorf Schottdorf addition addition

Australian Pathology Funding Agreement Australian Pathology Funding Agreement

! !

Recent Government announcement Recent Government announcement

! !

New Pathology Funding Agreement offer New Pathology Funding Agreement offer

! !

Capped ~ 5% compound annual growth Capped ~ 5% compound annual growth

! !

5 year term 5 year term ! !

Pathology industry response to offer pending Pathology industry response to offer pending

! !

Previous 5% funding agreement (1999 Previous 5% funding agreement (1999-

• 2004)

2004)

! !

Expired 30.6.04, official interim extension Expired 30.6.04, official interim extension

! !

Close monitoring and fine adjustments to fees over period Close monitoring and fine adjustments to fees over period

! !

After 5 years, variance of $3.4 million on $6.2 billion total ou After 5 years, variance of $3.4 million on $6.2 billion total outlays tlays ! !

Agreement is for funding of entire private pathology industry Agreement is for funding of entire private pathology industry

! !

Market share movements unaffected by funding agreement Market share movements unaffected by funding agreement

! !

Industry growth calculated on Medicare component of billing only Industry growth calculated on Medicare component of billing only

Radiology Operations Radiology Operations

! !

Solid performance at larger practices Solid performance at larger practices

! !

Queensland Queensland X X-

• Ray

Ray

! !

SKG Radiology SKG Radiology ! !

Consolidation/ closure of under Consolidation/ closure of under-

• performing branches

performing branches

! !

IT IT

! !

Roll Roll-

• out of new in
• ut of new in-
• house radiology IT

house radiology IT

! !

Electronic report delivery, same platform as pathology, embraced Electronic report delivery, same platform as pathology, embraced by referrers by referrers

! !

Computerised Computerised radiology radiology – – push towards soft copy reporting push towards soft copy reporting ! !

Ongoing upgrades to latest imaging equipment Ongoing upgrades to latest imaging equipment

! !

New CEO appointed at SKG Radiology New CEO appointed at SKG Radiology

! !

Dr Paul Sprague, founding radiologist of SKG Dr Paul Sprague, founding radiologist of SKG

Radiology Industry Radiology Industry

! !

Radiology Funding Radiology Funding

! !

Medicare growth for FY ‘04 = 4.1% (per HIC statistics) Medicare growth for FY ‘04 = 4.1% (per HIC statistics)

! !

Non Non-

• MRI imaging 3% rebate increase June ‘04

MRI imaging 3% rebate increase June ‘04

! !

Nuclear Medicine 6% rebate increase Feb ‘04 Nuclear Medicine 6% rebate increase Feb ‘04

! !

Scope for further fee increases if trend continues Scope for further fee increases if trend continues ! !

MRI MRI

! !

Controlled expansion of MRI Controlled expansion of MRI licences licences, preferable because , preferable because funding capped funding capped

! !

23 new MRI 23 new MRI licences licences to be issued in FY ‘05 to be issued in FY ‘05

! !

MRI rebate reduced in August ’04 to fund additional MRI rebate reduced in August ’04 to fund additional licences licences ! !

Trend to private billing increasing industry wide Trend to private billing increasing industry wide

The The Schottdorf Schottdorf Group Group

! !

Founded by Dr Bernd Founded by Dr Bernd Schottdorf Schottdorf in 1972 in 1972

! !

Operates throughout Germany Operates throughout Germany

! !

Nine major laboratory locations Nine major laboratory locations

! !

Seven satellite laboratories Seven satellite laboratories

! !

Head office and central laboratory in Augsburg (near Munich) Head office and central laboratory in Augsburg (near Munich)

! !

The largest single laboratory in Sonic group The largest single laboratory in Sonic group

! !

Super Super-

• efficient, high quality

efficient, high quality

! !

High volume routine testing High volume routine testing

! !

Broad range of in Broad range of in-

• house

house specialised specialised testing testing

! !

Histopathology Histopathology outsourced

• utsourced

! !

Consistent growth of new referring doctors Consistent growth of new referring doctors

! !

Currently services ~ 14,000 doctors and 160 hospitals Currently services ~ 14,000 doctors and 160 hospitals

International health expenditure International health expenditure

46.7 46.7 14.0 14.0 4,090 4,090 USA USA 68.7 68.7 9.3 9.3 2,095 2,095 Canada Canada 77.4 77.4 10.4 10.4 2,339 2,339 Germany Germany 84.5 84.5 6.7 6.7 1,347 1,347 UK UK 77.4 77.4 7.6 7.6 1,352 1,352 New Zealand New Zealand 68.7 68.7 8.4 8.4 1,750 1,750 Australia Australia

Public sector Public sector contribution contribution % % Proportion of Proportion of GDP GDP % % Am ount spent Am ount spent per head per head $ A $ A Country Country

Ref: International health: how Australia compares, AIHW 1998, p127

! !

Dr Bernd Dr Bernd Schottdorf Schottdorf – – Executive Chairman Executive Chairman

! !

Mrs.

• Mrs. Gaby Schottdorf

Gaby Schottdorf – – CEO CEO

! !

• Mr. F.
• Mr. F. Schabert

Schabert – – Financial Controller Financial Controller

! !

Pathologists Pathologists – – Specialists in laboratory medicine Specialists in laboratory medicine

! !

Managers, scientists, ancillary staff Managers, scientists, ancillary staff

! !

Sales teams Sales teams – – spread throughout Germany spread throughout Germany

! !

Each manages a geographic location Each manages a geographic location

! !

Maintain existing customer base Maintain existing customer base

! !

Introduce new tests Introduce new tests

! !

Introduce new customers Introduce new customers

Schottdorf Schottdorf Group Group – – Key Personnel Key Personnel

! !

Leading market position Leading market position

! !

One of four major national operators One of four major national operators ! !

Growth and profitability Growth and profitability

! !

Ongoing volume growth Ongoing volume growth

! !

Growth of new doctors Growth of new doctors

! !

Revenue and earnings growth Revenue and earnings growth ! !

Strong reputation Strong reputation

! !

Long Long-

• standing customer relationships

standing customer relationships

! !

Efficient workflow and logistics network Efficient workflow and logistics network

! !

Outstanding management team Outstanding management team

! !

Synergy potential Synergy potential

! !

With TDL With TDL

! !

With other Sonic labs With other Sonic labs ! !

Platform for future growth Platform for future growth

! !

Germany Germany

! !

Europe Europe

Schottdorf Schottdorf Group Group – – Key Investment Features Key Investment Features

Schottdorf Schottdorf Group Group – – Acquisition Details Acquisition Details

! !

Acquisition structure Acquisition structure

! !

Sonic equity 55.9% Sonic equity 55.9%

! !

Schottdorf Schottdorf equity 44.1% equity 44.1% ! !

Purchase price ~ €28.5 million Purchase price ~ €28.5 million

! !

€ 8.13 million € 8.13 million earnout earnout tied to current year performance tied to current year performance (ending 31 December 2004) (ending 31 December 2004) ! !

Options to Dr and Mrs. Options to Dr and Mrs. Schottdorf Schottdorf

! !

3 million SHL options 3 million SHL options

! !

$6.75 strike price $6.75 strike price ! !

Debt facilities Debt facilities

! !

€45 million plus €3 million working capital €45 million plus €3 million working capital

! !

Existing mezzanine debt refinanced Existing mezzanine debt refinanced

! !

€40 million senior debt (€30 million non €40 million senior debt (€30 million non-

• recourse to Sonic)

recourse to Sonic)

! !

Lenders: Lenders: Dresdner Dresdner Bank and ANZ Bank Bank and ANZ Bank

! !

€5 million mezzanine debt €5 million mezzanine debt

! !

Revenue €100 Revenue €100-

• 105 million (year to 31.12.04)

105 million (year to 31.12.04)

! !

Expect Expect earnout earnout to be triggered in full to be triggered in full

! !

Earnout Earnout payable ~ May’05 payable ~ May’05

! !

Earnout Earnout assumed as liability in assumed as liability in Sonic’s Sonic’s ’04 accounts ’04 accounts ! !

Business tracking strongly Business tracking strongly

Schottdorf Schottdorf Group Group – – Current Status Current Status

U.K. Pathology U.K. Pathology -

• TDL

TDL

! !

TDL business stable and strong TDL business stable and strong

! !

Double digit revenue growth Double digit revenue growth

! !

Margin expansion in ’05 post Margin expansion in ’05 post -

• Omnilabs

Omnilabs merger merger ! !

Relocation to new laboratory and UCLH merger Relocation to new laboratory and UCLH merger

! !

Completed successfully in H2, FY ’04 Completed successfully in H2, FY ’04

! !

Capital and operational costs higher than normal Capital and operational costs higher than normal

! !

Staffing almost back to normal levels Staffing almost back to normal levels ! !

TDL TDL – – UCLH joint venture fully operational UCLH joint venture fully operational

! !

State State-

• of
• f-
• the

the-

• art automated laboratory

art automated laboratory

! !

Showcase for future public Showcase for future public-

• private partnerships

private partnerships ! !

Growth Growth

! !

Private pathology market growth Private pathology market growth

! !

New public New public-

• private opportunities

private opportunities

! !

TDL TDL – – Schottdorf synergies Schottdorf synergies

IPN IPN

! !

Sonic’s Sonic’s partial bid for IPN successful partial bid for IPN successful

! !

Sonic equity now 72% Sonic equity now 72%

! !

Acquisition cost ~ $43 million Acquisition cost ~ $43 million ! !

IPN to remain independent IPN to remain independent

! !

Independently listed Independently listed

! !

Independently managed Independently managed

! !

Sonic Board representation Sonic Board representation ! !

Pathology referrals Pathology referrals

! !

Potential to capture additional pathology referrals Potential to capture additional pathology referrals

! !

Potential for radiology referrals Potential for radiology referrals ! !

IPN to succeed in own right IPN to succeed in own right

! !

IPN financials to be consolidated into IPN financials to be consolidated into Sonic’s Sonic’s from 26.8.04 from 26.8.04

! !

Sonic to work with IPN to capture synergies Sonic to work with IPN to capture synergies

! !

Sonic to assist Sonic to assist IPN’s IPN’s growth and competitiveness growth and competitiveness

! !

Sonic/ IPN in discussion with Sonic/ IPN in discussion with IPN’s IPN’s bankers regarding bankers regarding

• ngoing funding
• ngoing funding

Sonic IT Sonic IT

! !

Roll Roll-

• out of Sonic proprietary software ongoing
• ut of Sonic proprietary software ongoing

! !

Laboratory Information System Laboratory Information System – – Apollo LIS Apollo LIS

! !

Radiology Information System Radiology Information System – – Apollo RIS Apollo RIS ! !

Apollo LIS roll Apollo LIS roll-

• out: Pathology
• ut: Pathology

! !

~ 70 of Sonic Australian pathology now using Apollo ~ 70 of Sonic Australian pathology now using Apollo

! !

Remaining entities will launch in next 2 years Remaining entities will launch in next 2 years ! !

Apollo RIS roll Apollo RIS roll-

• out: Radiology
• ut: Radiology

! !

Queensland Queensland X X-

• Ray,

Ray, Castlereagh Castlereagh Imaging, Imaging, Illawarra Illawarra Radiology Group Radiology Group – – successful launches through FY ‘04 successful launches through FY ‘04 ! !

Long term benefits from Apollo software Long term benefits from Apollo software

! !

Standardisation of systems Standardisation of systems

! !

Standardisation of software development Standardisation of software development

! !

Pooling of resources Pooling of resources

! !

Enhanced efficiency of centralisation of testing Enhanced efficiency of centralisation of testing

! !

Competitive advantage Competitive advantage

Sonic FY ’04 Summary Sonic FY ’04 Summary

! !

Sonic growth FY ’04 v FY ‘03 Sonic growth FY ’04 v FY ‘03

! !

EBITA growth EBITA growth-------------

• ------------ 13.5%

13.5%

! !

Core NPAT growth Core NPAT growth--------

• ------- 17.6%

17.6%

! !

Core EPS growth Core EPS growth----------

• --------- 14.8%

14.8%

! !

EBITA margin growth EBITA margin growth-----

• ---- 110bps

110bps ! !

Sonic exceeds FY ’04 guidance Sonic exceeds FY ’04 guidance

! !

Revenue, EBITA, EBITA margin Revenue, EBITA, EBITA margin ! !

Offshore growth Offshore growth

! !

TDL/ Sonic UK set for extended growth path TDL/ Sonic UK set for extended growth path

! !

Schottdorf Schottdorf, outstanding company, platform , outstanding company, platform for further European growth for further European growth

! !

25 25-

• 30% of

30% of Sonic’s Sonic’s earnings sourced offshore earnings sourced offshore in FY ‘05 in FY ‘05

Future Growth Future Growth

! !

Australia Australia

! !

Market growth in diagnostics ~ 5% p.a. Market growth in diagnostics ~ 5% p.a.

! !

Market share growth, especially pathology Market share growth, especially pathology

! !

Synergistic acquisitions Synergistic acquisitions

! !

Marginal profit from revenue growth Marginal profit from revenue growth

! !

New Zealand New Zealand

! !

Market growth Market growth

! !

Market share growth Market share growth

! !

U.K. U.K. -

• TDL

TDL

! !

Ongoing private pathology growth Ongoing private pathology growth

! !

Further joint ventures with NHS Further joint ventures with NHS

! !

Germany Germany -

• Schottdorf

Schottdorf Group Group

! !

Well positioned for growth in German market Well positioned for growth in German market

! !

Platform for further European expansion Platform for further European expansion