Sonic Healthcare Raises Dividend Despite 25% Annual Profit Fall

By David Winning

SYDNEY--Sonic Healthcare said its annual profit fell by 25% as inflationary pressures weighed on its network of pathology laboratories and it felt the sting of unfavorable currency swings.

Sonic said its statutory net profit totaled 511.1 million Australian dollars (US$344.6 million) in the 12 months through June, down from A$685 million a year earlier. Revenue totaled A$8.97 billion, up 9.8%.

Still, directors of the company raised the final dividend to 63 Australian cents a share, from a payout of 62 cents a year earlier.

A weak result was expected after Sonic in May downgraded its earnings guidance for the 2024 fiscal year, citing currency headwinds, inflation, and the slow delivery of initiatives to improve margins. In particular, Sonic said it was taking longer to align labor costs with conditions in the aftermath of the Covid-19 pandemic.

While headline inflation rates in Sonic's major markets have softened, supporting future earnings, they remain too hot for policymakers in some countries. In Australia, anxiety over price pressures has led its central bank effectively to rule out cuts to interest rates in the near term, even as the European Central Bank and counterparts in the U.K. and Switzerland loosened monetary policy.

Sonic on Thursday reported earnings before interest, tax, depreciation and amortization--or Ebitda--of A$1.60 billion in fiscal 2024, excluding a A$32.3 million gain on the sale of the West division in the U.S. That met revised guidance of around A$1.6 billion provided to investors in May, but is below the A$1.68 billion Ebitda achieved in fiscal 2023.

Sonic has described fiscal 2024 as a year of transition, and that it will benefit in future years from investments made using cash flow that strengthened during the pandemic when it was paid by governments to provide lab-testing services. Those investments have included the acquisitions of Swiss laboratory network of the Dr Risch Group and Utah-based Pathology Watch.

It reaffirmed forecasts for Ebitda to rebound to between A$1.70 billion and A$1.75 billion in the 12 months through June, 2025, assuming constant exchange rates. Still, initial losses on an NHS contract in the U.K. and a potential fee cut in the U.S. will limit the earnings recovery.

Write to David Winning at david.winning@wsj.com

(END) Dow Jones Newswires

August 21, 2024 19:19 ET (23:19 GMT)

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