Sonic Healthcare (ASX:SHL) reported first-half FY2026 revenue of AUD 5.445 billion, EBITDA of AUD 907 million and net profit of AUD 262 million for the six months ended December 31, 2025, according to management’s earnings call presentation. Earnings per share were AUD 0.531. CEO and Managing Director Dr. Jim Newcombe said the company remains on track to achieve full-year earnings guidance, citing strong revenue growth and organic growth of 5%.
Management emphasized that improving EPS is a “top management priority,” tying that focus to return on invested capital. Newcombe also pointed to operating leverage and synergy realization across most of the business, alongside ongoing cost control efforts, including labor. The company is conducting an operating review of its U.S. business that includes rationalization of anatomical pathology operations, and it is progressing several capital management initiatives that could support future share buybacks.
Guidance maintained; depreciation outlook reduced
Interest expense guidance was tightened to an increase of 15% on a constant-currency basis versus the prior year, with an effective tax rate of 27%. Management noted the guidance excludes any gains from property sales, includes completed acquisitions only, assumes no regulatory changes and assumes current interest rates prevail.
On margins, management discussed “Adjusted EBITDA margins” that account for items such as acquisition costs, changes to Germany’s KV quota minimum level, the initial margin profile of the LADR acquisition, and the dilutive but improving margin profile of the Hertfordshire and West Essex (HWE) contract in the U.K. Sonic also cited margin pressure in the U.S. from low organic growth and restructuring costs. Overall, the company said adjusted EBITDA margins increased 30 basis points from the prior-year first half to the first half of FY2026.
Dividend increased; property transactions may fund buyback
Sonic declared an interim dividend of AUD 0.45 per share, up 2.3% from the prior-year interim dividend. The dividend is 60% franked, with a record date of March 5 and payment date of March 19.
Management reiterated capital management priorities, led by maintaining an investment-grade balance sheet, maintaining a progressive dividend with a medium-term payout target of 70% to 80% of net profit, pursuing selective acquisitions, and using surplus capital for share buybacks. The company reported a debt cover ratio of 2.5 and said recent increases in net debt related to the LADR Group and Cairo Diagnostics acquisitions. Sonic said it had approximately AUD 1 billion of headroom before the interim dividend payment.
The company outlined several initiatives, including a sale-and-leaseback process for its Brisbane Hub laboratory (Bowen Hills), targeted for completion in June 2026. Management said it expects a “significant gain on sale,” with potential tax capital gains partially sheltered by past capital losses. Sonic also said additional property transactions are under consideration and that it has a conditional heads of agreement to sell a separate surplus Australian property, with expected settlement next financial year.
In Q&A, CFO Chris Wilks said the Brisbane hub is one of the company’s largest property holdings and noted Sonic completed an AUD 80 million extension in 2024. Wilks described property yields of around 5% and said management believes the company can generate higher returns by redeploying capital while retaining operational control through lease structures. He also cited the company’s purchase of the former Costco site at Docklands in Melbourne for roughly AUD 100 million, with a further approximately AUD 80 million build-out planned through April–May 2027, and said that site could also be a future sale-and-leaseback candidate.
Regional operating highlights: Germany, Australia, U.S., and more
Germany: Sonic reported 40% revenue growth on a constant-currency basis, with organic growth of 5%. Management said organic growth was impacted by a change to the minimum KV quota for statutory insurance (EBM) effective January 1, 2025, which had an expected 1% revenue impact. Sonic said integration of LADR, which settled July 1, is proceeding across 16 work streams and that the first laboratory merger has been completed in Berlin. The company also noted completion of a major laboratory infrastructure investment cycle and said a new Bremen National Reference Laboratory is planned to go live in April 2026.
During Q&A, management said the proposed reform of Germany’s GOÄ private fee schedule remains uncertain in timing and impact, and the company declined to speculate. Sonic also provided a revenue mix for Germany, saying GOÄ represents about 30% of German revenue, EBM about 40%–45%, with the remainder from other negotiated or set-price work such as hospital outsourcing and clinical trial work.
Australia pathology: Sonic reported organic revenue growth of 5% in the first half. Management cited Medicare schedule fee indexation of 2.4% that applied to 30% of pathology fees from July 1, as well as ongoing private billing for selected tests, including vitamin B12. The company highlighted specialist and hospital segment strength, including commencement of services at Hollywood Private Hospital in Perth. Sonic also said it acquired and began fitting out a new hub lab in Melbourne’s Docklands to consolidate four facilities and create capacity. A major laboratory platform procurement process completed in the half was described as delivering substantial savings.
Regarding wage pressures, Newcombe said Sonic expects the impact of the Fair Work Commission phlebotomist changes to be less than AUD 2 million for the financial year, including a one-off leave provision adjustment, and said this was reflected in guidance. He added the company is awaiting the final determination from the Fair Work Commission’s Gender Undervaluation Review for health professionals and noted the company’s industry body is discussing potential funding offsets with the Department of Health.
United States: Sonic said underlying organic growth, adjusted for the Alabama major payer contract loss and planned anatomical pathology restructuring, was 2%. Management said its wind-down of Alabama operations has been completed and that it is rationalizing nine anatomical pathology practices, aiming to complete the work in the current financial year. In Q&A, management said anatomical pathology is about one-third of U.S. revenue, roughly $400 million out of approximately $1.4 billion.
Sonic also discussed its “Advanced Diagnostics” division, combining Cairo Diagnostics, ThyroSeq and other esoteric testing, which it said is maturing toward a nationwide offering. The company said its digital pathology rollout is proceeding to schedule, with more than 60% of dermatopathology volume on its PathologyWatch platform. Management noted PAMA fee cuts were recently deferred and that industry lobbying continues.
Wilks told analysts that benefits from the company’s enhanced U.S. revenue collection system (XIFIN) are materializing more slowly and are likely to be less than previously expected. He added Sonic remains optimistic the benefits will ultimately flow through, but indicated the timing may shift more into 2027 rather than FY2026.
Switzerland: Sonic reported organic growth of 2% on a constant-currency basis, noting the prior-year comparison included 6% growth due to a respiratory illness epidemic. Management said synergy realization is proceeding to plan, with lab mergers completed in Geneva, Lausanne, Zurich and Ticino. The company said major hub lab mergers in Bern (second half of this financial year) and Lucerne (next financial year) are on schedule.
United Kingdom: Sonic reported organic growth of 24%, driven by the HWE NHS contract that commenced in March. The company said its new hub lab in Watford is expected to go live in July. Sonic also referenced winning new contracts, including an 11-year term at the Royal National Orthopaedic Hospital commencing in November, and it noted the acquisition of Cellular Pathology Services, a small London anatomical pathology laboratory, completed in November.
Radiology and clinical services: Sonic said its radiology division achieved organic revenue growth of 7% and EBITDA growth of 5% once normalized for IT cost reallocation, supported by Medicare fee indexation of 2.4% from July 1 and a focus on higher-value modalities such as CT, MRI and PET-CT. Sonic Clinical Services posted 5% revenue growth, primarily driven by the acquisition of National Skin Cancer Clinics, with EBITDA growth of 20% off a low base.
FX, working capital, and cash flow items raised in Q&A
Management addressed currency impacts, stating that if current exchange rates prevail, Sonic is unlikely to see the same level of FX tailwind in the second half as in the first half, and noted the second half would be an FX headwind under current rates. However, management said it still expects a full-year FX tailwind based on current rates, though more modest than previously discussed, and declined to provide a precise figure.
On cash flow and working capital, management cited an ongoing issue tied to Change Healthcare, an outsourced U.S. billing and payments provider that suffered a cyber breach in February 2024. Management said the disruption affected billing and collections for an extended period, inflating debtors, and noted advances from Change Healthcare-related parties are reflected in creditors, with part repaid. Sonic said it expects the situation to resolve by June 30.
About Sonic Healthcare (ASX:SHL)
Sonic Healthcare Limited offers medical diagnostic services to medical practitioners, hospitals, community health services, and their collective patients. The company provides laboratory medicine/pathology testing services, such as biochemistry, cytopathology, genetics, haematology, histopathology, immunoserology, microbiology, molecular pathology, prenatal testing, toxicology, and ancillary functions; and radiology services, including magnetic resonance imaging, computed tomography (CT), ultrasound, X-ray, mammography, nuclear medicine, PET CT, interventional procedures, and bone mineral densitometry.
