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Sonic Healthcare lifts dividend despite sharp drop in Covid-related earnings

Sonic Healthcare (ASX:SHL) has increased its dividend despite significant declines in earnings during the first half of December, triggered by the easing of the Covid pandemic. The company experienced a substantial decrease in revenue from Covid testing, which plummeted by 90% to $39 million compared to the same period in 2022. EBITDA fell by 20% to $727 million, while net profit dropped by 47% to just over $202 million. Despite these challenges, the company raised its dividend to 43 cents per share, marking a 2.4% increase from the previous half-year.

Revenue saw a modest 5% increase to $4.31 billion, slightly surpassing market estimates. However, directors cautioned that full-year earnings are likely to be towards the lower end of the EBITDA guidance range of $1.7 to $1.8 billion. Sonic Healthcare remains optimistic about its base business revenue, which grew by 6.1% compared to the previous year.

Cost-cutting initiatives are underway, and the company is exploring further acquisition and contract opportunities. CEO Dr. Colin Goldschmidt emphasized that 2024 is a year of transition for Sonic Healthcare, as the effects of the Covid pandemic wane, and the company returns to normal operations. Despite lower earnings due to reduced Covid-related revenue, Sonic Healthcare’s base business revenue, excluding Covid services, experienced significant growth, particularly through strategic acquisitions. Organic base business revenue also showed strong growth across various regions, indicating a positive outlook for the company’s future performance.