Shares for laboratory, pathology, and radiology developer Sonic Healthcare [ASX:SHL] were soaring well above 11% in share price on Thursday morning.
The company released its financial report for the half-year 2023, admitting revenue and NPAT went down 14.2% and 53.8%, respectively.
The company did measure its metrics against the first half of 2020; however, in discounting ramped-up sales related to COVID, the company made 50% more in profit.
SHL shares were trading around $32.44 by midday on Thursday, having ballooned 11% in the week. On a longer-term scale, however, the stock is still moving under the red line at a 14.5% annual decrease.
Source: tradingview.com
Sonic Healthcare works through first-half revenue differences
Today the biotech revealed revenue for the 2023 half-year fell 14% in relation to earnings the same time the year before by totalling $4.1 billion, and net profit also fell 54% to $382 million.
However, the group also compared its base revenue pre-COVID, which actually painted a different picture in the form of a 9% half-on-half improvement, with a total of $3.7 billion. COVID-19 revenue has now fallen 72% to $379 million.
Despite the revenue downturn, the biotech still decided it would lift its interim dividend by 5%, offering its shareholders 42 cents a share, base business margins still being ultimately in line with pre-pandemic levels.
Sonic calculated base business revenue — not including COVID testing — had organic growth of 6% in the first half of 2022 and a further 8% increase versus the first half of 2020 on a constant currency basis.
The company’s gearing levels now approach historical lows, supporting the business with A$1.5 billion in available liquidity for funding future growth.
Source: SHL
Sonic Healthcare, a deeper dive
Reductions in revenue related to COVID-related services translate to the loss of a lucrative avenue, yet the company pointed out that several acquisition and contract opportunities are currently progressing.
Dr Colin Goldschmidt, Sonic’s CEO, commented that the COVID-related revenue drop ‘tends to mask its performance in the company’s core business, which, on a relative scale continues to perform at a solid and steady rate.’
Sonic’s Australian Pathology business, for example, performed particularly well, up 16% in January 2023 versus January 2020.
Goldschmidt concluded:
‘Taking a longer-term view, our net profit for the half-year is an amazing 50% higher than in the most recent pre-pandemic comparable period, being H1 FY 2020.
‘Organic revenue growth continues to be a core focus and strategy for all of Sonic’s businesses, leveraging our Medical Leadership culture to drive market share growth, especially in the specialist and hospital referrer sub-markets. We are well-positioned to capitalise on the accelerating trend towards higher value tests and modalities in both laboratory medicine and radiology.’
Goldschmidt also said that combining the reduced COVID revenue with the current inflation situation has pushed the business to focus more on its cost management than usual. However, it also pointed out its business margins remain strong and are still in line with pre-pandemic levels.
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