“We also see opportunities in radiology in Australia, and there could be a number of opportunities that come our way in the next one or two half-year periods,” he told The Australian Financial Review.
Dr Goldschmidt’s comments came on Wednesday as Sonic stuck to full-year guidance for earnings before interest, tax, depreciation and amortisation (EBITDA) growth of between 6 per cent and 8 per cent on a constant currency basis.
This guidance may prove to be conservative after Sonic made a good start to the year, and is tipping a strong second half.
“The first month has come in pretty good, so there is chance we could outperform the guidance – but that is not what we are telling the market,” he said.
The $15 billion company, which provides laboratory, pathology and radiology services in eight countries, reported that net profit jumped 12 per cent to $254.4 million in the six months ended December 31 on a constant currency basis, and excluding the impact of new accounting standards.
Revenue rose 12.4 per cent to $3.34 billion, while organic revenue growth increased about 5 per cent, boosted by acquisitions and and currency exchange rate movements, which added nearly $83 million to the revenue line.
The company reported record results for the half year, boosted by the $US540 million purchase of Florida-based Aurora Diagnostics, which completed in January, and was the largest in its history.
There is chance we could outperform the guidance – but that is not what we are telling the market.
Colin Goldschmidt, Sonic CEO
There are a range cost synergies as part of this deal rolling out across IT, procurement and administration, but also revenue synergies.
The company has been focused on expanding its US footprint in the area of anatomical pathology – the examination of human tissue samples.
Dr Goldschmidt played down the fact that Sonic is not part of the preferred lab network of UnitedHealthCare in the key US market, but rivals such as LabCorp and Quest Diagnostics are members.
“When you are on a preferred network the rate if often lower than more regional deals. We are happy to sit on the sideline. We dont expect any change to our market share or referrals.”
Sonic has been battling fee cuts in the US and Germany, where sales rose 37 per cent and 5 per cent respectively. The US is now Sonic’s biggest sales generator where the group penned an exclusive 15-year licensing agreement for ThyroSeq – a thyroid cancer genomic test.
Dr Goldschmidt said there had not been any impacts from coronavirus testing, although more people in the northern hemisphere were getting tests done as they were worried about the virus.
Australian pathology grew organic sales by 7 per cent, including robust growth in genetic testing. Sonic Imaging increased sales by 8 per cent, while Sonic Clinical Services (which includes medical centres IPN) was up 3 per cent.
The board declared a partially franked dividend of 34¢, payable on March 25, and higher than a year ago at 33¢.
Altas Funds Management chief investment officer Hugh Dive said while some are worried about the Protecting Access to Medicare Act (PAMA) cuts in the US, overall the result was as expected.
“The stock is up over 32 per cent this last year. This new half, they might benefit from more testing for coronavirus,” he said.
“One of the benefits of having such large offshore earnings is there a bit of a tailwind from the falling currency against the British pound, the euro and the US dollar. Looking ahead this will help boost dividends paid in Australian dollars to shareholders.”
