Annual Report 2020
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Annual Report 2020 ABN 24 004 196 909 Corporate Directory DIRECTORS AUDITOR Prof. M.R. Compton | Chairman PricewaterhouseCoopers Dr C.S. Goldschmidt | Managing Director Mr C.D. Wilks | Finance Director SOLICITORS Prof. S. Crowe Allens Dr P.J. Dubois Gilbert+Tobin Mr N. Mitchell Mr L.J. Panaccio BANKERS Ms K.D. Spargo Australia and New Zealand Banking Group Dr E.J. Wilson BNP Paribas Commerzbank COMPANY SECRETARY Commonwealth Bank of Australia Mr P.J. Alexander Crédit Industriel et Commercial DNB Asia PRINCIPAL REGISTERED OFFICE IN AUSTRALIA HSBC Level 22, Grosvenor Place, JPMorgan Chase Bank 225 George Street, Sydney Mizuho Bank New South Wales, 2000, Australia MUFG Bank P 61 2 9855 5444 National Australia Bank F 61 2 9878 5066 Westpac Banking Corporation W www.sonichealthcare.com E [email protected] STOCK EXCHANGE LISTINGS Sonic Healthcare Limited (SHL.AX) shares are SHARE REGISTRY listed on the Australian Securities Exchange. Sonic Computershare Investor Services Pty Limited Healthcare Limited also has a Level 1 sponsored Level 5, 115 Grenfell Street, Adelaide, American Depositary Receipt (ADR) facility managed South Australia, 5000, Australia. by BNY Mellon (the ‘Depositary’). Sonic Healthcare P 1300 556 161 (Within Australia) Limited’s ADRs are traded under the code SKHHY. P 61 3 9415 4000 (Outside Australia) F 1300 534 987 (Within Australia) F 61 3 9473 2408 (Outside Australia) W www.computershare.com E www.investorcentre.com/contact Verification of Unaudited Information in this Annual Report Cover Unaudited information in this Annual Report comprises all information included in the Annual Report other Phlebotomist/pathology than the Financial Report, the Remuneration Report within the Directors’ Report, the Directors’ Declaration, collector Natasha Ta the Independent Auditor’s Report and the Auditor’s Independence Statement. from Clinpath Pathology, The integrity of the unaudited information has been verified as materially accurate and/or reasonable using South Australia, collecting the following processes: a COVID-19 specimen Financial information in the unaudited information has been tied to the current and/or previous audited from a patient Financial Reports, or has been gathered using the same reporting and consolidation process as used for the Financial Report (which includes several review layers), or has been sourced from third parties. The unaudited information has been reviewed and approved by the Managing Director and Finance Director individually, the Audit Committee, and the Board as a whole. The independent auditor has read the unaudited information and has considered whether the information is materially inconsistent with the Financial Report or their knowledge obtained in the audit, or otherwise appeared to be materially misstated. The auditor had nothing to report in this regard. Forward-looking statements and opinions included in the unaudited information (which may be identified by the use of terminology including ‘expects’, ‘believes’, ‘targets’, ‘likely’, ‘should’, ‘could’, ‘intends’, ‘aims’, ‘is estimated’ or similar expressions) are not certainties, guarantees or predictions of future performance. Readers are cautioned not to place undue reliance on forward-looking statements or opinions. Contents Inset Pathologists Dr Peter Chairman’s Letter 03 McQuillan and Dr Mukta Rayoo from Melbourne CEO Report 04 Pathology consulting on a diagnosis Financial History 07 Directors’ Report 10 Auditor’s Independence Declaration 54 Corporate Governance Statement 55 Financial Report 68 Directors’ Declaration 152 Independent Auditor’s Report to the Members of Sonic Healthcare Limited 153 Shareholders’ Information 159 Sonic Healthcare produced a net profit for the 2020 financial year of A$528 million, on revenues of A$6.8 billion. Chairman’s Letter Dear Fellow Shareholders, Sonic’s Board now comprises seven Non-executive On behalf of Sonic Healthcare’s Board of Directors, I am Directors, six of whom are considered independent, plus two pleased to present the Company’s 2020 Annual Report. Executive Directors (being the Chief Executive Officer and the Chief Financial Officer). The Board includes a pathologist, Sonic Healthcare produced a net profit for the 2020 financial a radiologist, a medical specialist and a registered year of A$528 million, on revenues of A$6.8 billion. Despite general medical practitioner, in keeping with our Medical the impacts of the COVID-19 pandemic on the 2020 financial Leadership culture. results (which are described elsewhere in this Report), the Board has been able to support shareholders with a modest Prof. Crowe’s appointment has also resulted in the Board 1.2% increase in total dividends per share (to A$0.85) for the achieving its gender diversity objective to have at least 30% year, continuing our progressive dividend policy. female membership (now at 33%, up from 25% previously). Sonic’s balance sheet is very strong, underpinning the Board renewal, development and diversity remain areas of Company’s operations and ready to support future growth. active consideration for the Sonic Board. Robust cash generation in 2020 facilitated a reduction in As is the case each year, I heartily recommend that you read net interest bearing debt of A$277 million (after payments Sonic’s latest Corporate Responsibility Report, available for acquisitions and dividends), resulting in Sonic’s gearing on our website. This Report describes how Sonic cares being well below our long-term average. In fact, the ratio of for its people, the environment, its own communities and Net Debt to EBITDA was at the lowest level in 20 years, a solid communities in acute need. Sonic’s standing as a socially position to be in during these uncertain times. responsible company continues to be recognised by In relation to Board renewal, development and diversity, external parties, including through ongoing inclusion in the a number of important changes have occurred in the last FTSE4Good Index Series. The Board is very proud of Sonic’s twelve months. The Board selected Mr Neville Mitchell as efforts in these critical areas, and hopes that shareholders feel the new (from 1 October 2019) Chair of the Audit Committee, this pride as well. succeeding Mr Lou Panaccio, who retired from the Chair The COVID-19 pandemic has challenged and continues to position he has held for almost 10 years. Mr Panaccio will challenge Sonic’s leaders, the doctors and other healthcare remain a member of the Committee and has worked closely professionals we serve, their patients and our staff in ways with Mr Mitchell to ensure a seamless transition. that are without precedent. The response from all parts of the Professor Suzanne Crowe AO joined the Board from 6 April organisation has been nothing short of magnificent. Sonic’s 2020 as an independent, Non-executive Director. Prof. Medical Leadership culture and values that underpin all we Crowe is a qualified medical specialist in Infectious Disease. do each day have risen to the fore, and our people continue Whilst Suzanne had agreed to join our Board several months to play a crucial role in combatting the pandemic. I have never earlier, the timing of her commencement could hardly have been more proud to be part of this Company, and I thank been more beneficial, with her insights into the COVID-19 every one of our 37,000 staff for their courage, dedication and pandemic of great utility to the Board and the Company over expertise. I include in this expression of thanks the directors of the last six months. Suzanne’s appointment was consistent the Company who have shown their usual great dedication, with, and continues to enrich, Sonic’s Medical Leadership diligence and expertise in a rapidly changing environment culture and strategy. with many unknowns as the pandemic unfolded. Their skill and leadership is also to be commended. Dr Philip Dubois, who has been an Executive Director on the Board since 2001, retired from his executive position with the I would also like to thank you, our shareholders, for your Company in June 2020. Philip is therefore now considered continuing support of the Company and the Board. a Non-executive Director. He has advised that he will retire from the Sonic Board by the end of his current three year term (November 2022). Professor Mark Compton AM Chairman SONIC HEALTHCARE | ANNUAL REPORT 2020 03 CEO Report Sonic Healthcare’s 2020 financial year was dominated by the Since year-end, revenue growth rates have been substantially impact of the COVID-19 pandemic, both in terms of the effect higher than usual, boding well for the 2021 year, although it on the Company’s financial results, but more importantly, the is uncertain how long these high growth rates will continue impact on our people and communities. The response to the as they are dependent on potential fluctuations in both base pandemic of our leadership teams and 37,000 staff around business and COVID-19 testing revenues. the world has been truly inspiring. Financial highlights for the 2020 financial year included: Throughout the pandemic to date, our operations have ¡ Underlying* revenue growth of 11.5% to A$6,839 million continued seamlessly to provide our essential routine, ¡ Underlying* EBITDA growth of 5.4% to A$1,109 million non-COVID healthcare services. In addition, our practices ¡ Underlying* net profit growth of 6.5% to A$552 million and people have risen to play crucial frontline roles in ¡ Statutory net profit of A$528 million combating the pandemic. Our staff in Australasia, the USA ¡ Full year dividends up 1.2% to A$0.85 per share and Europe have used their experience, expertise and * Underlying numbers exclude the impacts of the new lease accounting company infrastructure to go from zero to testing thousands standard AASB 16, which came into effect for Sonic from 1 July 2019, as of patients every day for COVID-19 in a matter of weeks. To well as non-recurring gains and costs in the current and previous year.