Sonic Healthcare: Transitioning out of Covid-19

About the author:

Author name:

By Dr Derek Jellinek

Job title:

Senior Analyst

Date posted:

18 August 2023, 10:00 AM

Sectors Covered:

Healthcare

• Sonic Healthcare's (ASX:SHL) FY23 results were mixed, as Covid-19-related costs remained elevated, impacting profitability, while revenue was broadly in-line.
• Notably, organic base testing (ex-Covid-19) was solid, up 7% in cc with good momentum (2H +9%; 1H +6%), while Radiology also showed strength, but Clinical Services was subdued, on lower Covid-19-related services.
• While a rapid decline in 2H Covid-19 testing revenue (-72% h/h) mis-matched opex (+3 h/h) pressuring OPM (-320bp h/h to 19.3%), management is accelerating the reduction in legacy pandemic costs.
• We believe this focus, along with numerous other near/medium term growth initiatives, supports a recovery in underlying profitability, reflected in guidance, although full bottom line improvement will take a bit longer.
• We have adjusted FY24-25 estimates, with our target price decreasing to (login to view). Add.

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