Not so super Sonic
SONIC Healthcare says it can wear spending cuts across the northern hemisphere, as US and European leaders battle to rein in spiralling government debt.
SONIC Healthcare says it can wear spending cuts across the northern hemisphere, as US and European leaders battle to rein in spiralling government debt.But Sonic expects to feel interest rate pain on its $1.7 billion debt, with the ASX-listed pathology dynamo facing a sharp rise in interest costs.Sonic yesterday posted a 0.4 per cent rise in full-year net profit to $295 million. The figure was rosier in constant-currency terms, rising 6.1 per cent to $311 million.Chief executive Colin Goldschmidt said the high Australian dollar ripped about $200 million from revenue, which increased 3 per cent to $3.096 billion.Dr Goldschmidt said he expected the dollar's rise to ease this financial year and that the company was well placed to combat any health cuts across the northern hemisphere.European authorities have demanded that highly indebted countries such as Greece introduce tough spending cuts before they get any more bailout money."Being in healthcare is a positive, but . . . you need to also have the strength of critical mass," Dr Goldschmidt said."In Germany there could be small fee cuts, but remember we are in a strong position in Germany. There are many, many small and medium players that are really going to be hurt by any kind of fee cut."Germany contributed 18 per cent, or $541 million, to revenue for the year ending June 30.Sonic expects interest rate pain as the terms of loans, with some at rates as low as 2 per cent, borrowed before the financial crisis struck in 2008, end.It warned yesterday that its repayments would be 30 per cent higher than the $65 million in interest charges it paid in 2010-11.Macquarie Equities Research analyst Craig Collie said that while Sonic's result was in line with expectations, news about its higher interest charges surprised the market.The shares slid 23?, or 2 per cent, to $11.29, while the broader market climbed 2.2 per cent.Dr Goldschmidt said Sonic's Australian pathology business had rebounded in the second half, achieving 6 per cent revenue growth after suffering soft demand and government fee cuts for the past two years.He said a five-year funding deal struck with the federal government in July had created some certainty and the acquisition of Geoffrey Edelsten's Allied Medical Group had boosted the pathology division.Sonic had achieved most of the pathology referrals from Allied's 21 clinics, he said. Sonic subsidiary IPN bought the Allied clinics this year for an undisclosed sum. Analysts valued the deal between $75 million and $100 million.Sonic will pay a 35? final dividend, unchanged from the previous year, on September 21.