Sonic Healthcare collapses following downward profit revision

Shares in global pathology and radiology group Sonic Healthcare (ASX:SHL) fell more than 11% after the company turned a previous profit surge into a full-blown downgrade.

Shares fell to a daily low of $23.58 before regaining ground to trade around $24.36 at midday, down 8.5%.

The drop came after the company warned that the weakness seen in mid-term earnings had become a real decline.

Sonic said: “It now forecasts (with two months of trading underway) fiscal 2024 earnings before interest, taxes, depreciation and amortization (“EBITDA”) of approximately $1.6 billion on revenues of ‘approximately 8.9 billion dollars.

This was after the February interim statement maintained the guidance issued last August and at the AGM later in the year for EBITDA of $1.7 billion to $1.8 billion, but with the implementation guard that it was “now seen as more likely to achieve EBITDA towards the lower end of the range”. range.”

The lower end of the range is down $100 million, or $200 million, from the high of the previous range.

Sonic said the weakness came despite strong “organic revenue growth” of 6% for the January-April period.

But it said “earnings growth was lower than expected, partly due to inflationary pressures on the business, and exacerbated by exchange rate headwinds.”

“In addition, a number of margin improvement initiatives scheduled for completion in the second half of fiscal 2024 have been slower to come to fruition than expected and will contribute to further earnings growth over the course of the year. fiscal year 2025.

“Inflationary pressures are expected to ease in the future, with overall inflation rates in Sonic’s core markets already reduced to a range of 1.4% to 3.6%.”

And there are no big growth forecasts for 2025 either. Sonic said that based on preliminary forecasts, “Based on a constant currency forecast for fiscal 2024, Sonic expects to achieve EBITDA of approximately A$1.70 billion to A$1.75 billion for the 2025 financial year.”

“FY2025 guidance includes negative impacts from potential US PAMA fee reduction ($15 million), initial losses on UK Hertfordshire & West Essex NHS contract ($A10 million) ) and an equity-accounted loss for ($5 million). Guidance for fiscal 2025 will be updated/confirmed upon Sonic’s full-year results release in August 2024.”

CEO Dr. Colin Goldschmidt said in Tuesday’s update that “fiscal year 2024 was one of transition for Sonic Healthcare, moving away from pandemic conditions to a more normal business environment.”

“Our ongoing strong revenue growth, both organic and non-organic, amid inflationary cost pressures, have combined to delay the completion of our programs to more closely align labor costs. works on post-pandemic conditions. These unique business conditions have also made forecasting more difficult. our income is unusually difficult this year.

“Overall, the company remains in a very strong position, both financially and in terms of market positioning. We remain well positioned to grow our revenues and profits in the future, including realizing over the next two years the synergies and improved investment returns achieved this year. »

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