Rising Interest Costs and Regulatory Risks Shadow Sonic Healthcare’s Growth Outlook
Sonic Healthcare reported solid FY2025 results with revenue up 7.6% and a steady profit increase, while declaring a 63-cent final dividend. The company’s recent German acquisition and ongoing synergy efforts set the stage for robust earnings growth in FY2026.
- Revenue rises 7.6% to A$9.645 billion
- Profit after tax edges up 0.5% to A$514 million
- EBITDA grows 8% excluding one-off gain, margin expands 40 basis points
- Final dividend maintained at 63 cents, 35% franked
- Acquisition of LADR Laboratory Group completed, strong FY2026 earnings guidance
Solid Growth Amid Global Expansion
Sonic Healthcare Limited has delivered a steady financial performance for the year ended 30 June 2025, posting a 7.6% increase in revenue to A$9.645 billion. Profit after tax rose marginally by 0.5% to A$514 million, reflecting a mature business balancing organic growth with strategic acquisitions and cost efficiencies.
The company’s underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 8% when excluding a one-off gain from the prior year’s sale of its US West division. This growth was accompanied by a 40 basis point expansion in normalised EBITDA margins, driven by a 5% organic revenue increase and ongoing cost reduction initiatives.
Geographic and Segment Highlights
Sonic’s laboratory services in Australia and New Zealand, Europe, and the United Kingdom showed robust organic growth, particularly in the UK where a new NHS outsource contract commenced in March 2025. While US laboratory revenue declined slightly due to the prior divestment, the company’s radiology segment in Australia experienced a strong 10% organic revenue increase, benefiting from higher-value diagnostic modalities and targeted private billing.
The acquisition of Germany’s LADR Laboratory Group, completed on 1 July 2025, marks a significant expansion in Sonic’s European footprint. This deal, alongside synergy initiatives from recent acquisitions, is expected to underpin strong earnings growth in FY2026.
Financial Position and Dividend Policy
Sonic’s balance sheet remains solid with net assets rising to A$8.47 billion. Cash generated from operations increased by 21%, supported by lower tax payments compared to the prior year. However, net interest expense rose by 25%, reflecting higher debt from acquisitions and increased interest rates.
The company declared a final dividend of 63 cents per share, franked to 35%, maintaining its progressive dividend policy. The Dividend Reinvestment Plan remains suspended for this payout.
Outlook – Confident Growth Ahead
Looking forward, Sonic Healthcare projects FY2026 EBITDA in the range of A$1.87 billion to A$1.95 billion on a constant currency basis, representing up to 13% growth. This translates to an expected earnings per share increase of approximately 19%, driven by organic growth, synergies from the LADR acquisition, and ongoing initiatives in the US and Europe.
The company cautions that this guidance excludes potential US regulatory changes, such as PAMA fee reductions, which are currently expected to be deferred or cancelled. Sonic also continues to manage currency translation risks through natural hedging strategies rather than cash hedging instruments.
Bottom Line?
With strategic acquisitions and operational efficiencies in place, Sonic Healthcare is poised for a strong FY2026, though currency and regulatory uncertainties remain key watchpoints.
Questions in the middle?
- How will Sonic’s integration of LADR Laboratory Group impact margins and cash flow in FY2026?
- What is the potential financial impact if US PAMA fee reductions are reinstated?
- How will the unresolved Change Healthcare advances affect Sonic’s US operations and cash collections?