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Business Description: Sonic Healthcare Limited (SHL) is an international medical diagnostics company, offering laboratory medicine/pathology and radiology services to the medical community. The company is structured as a decentralised federation of medically-led diagnostic practices, with the head office in Sydney, Australia.
Strategy Analysis: The domestic strategy is to retain cost leadership through the reinvestment of capital into new technology. The building of new facilities delivers cost savings through leveraging new technology. The international strategy is to add bolt on acquisitions to the growing hub and spoke network within Europe and the US. These international facilities have surplus capacity so any acquisitions will enable rationalisation of processing and leverage administration cost over a larger operation. SHL is also focused on more specialist diagnostic services and is developing centres of excellence for diagnosing complex medical conditions. SHL´s use of different brands means it can address niche specialist services as well as mass processing to leverage its skill set and reduce costs.
Sonic Healthcare reported NPAT up 5.4% to $150.63m for the half-year ended 31 December 2012. Revenues from ordinary activities were $1.7bn, up 3.4% from the same period last year. Diluted EPS was 38.0 cents compared to 36.5 cents last year. Net operating cash flow was $222.38m compared to $224.3m last year. The interim dividend declared was 25 cents compared with 24 cents last year. The company gave full year guidance in August 2012 of EBITDA growth of 5-10% over the 2012 level of $624.0m, on a constant currency basis (applying 2012 average currency exchange rates to 2013). After seven months of trading and allowing for larger than expected fee changes in Germany in the second half, unexpected anatomical pathology fee cuts in the USA, lower than expected growth in the USA, and Superstorm Sandy impacts, the company is expecting a full-year result at the lower end of the guidance range.
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