Sonic Healthcare : Preliminary Final Report

Lodged with the ASX under Listing Rule 4.3A

Page 1 of 21

Sonic Healthcare Limited ASX Appendix 4E 30 June 2017

$'000

Statutory % Change

Revenue from ordinary activities 5,122,143 1.4%

Profit after tax from ordinary activities attributable to members 427,773 (5.2)%

Dividends2017 2016 % Change

Final dividend (cents per share) 46¢ 44¢ Up 4.5%

Final dividend franked amount per security 9.20¢ 13.20¢

Interim dividend (cents per share) 31¢ 30¢ Up 3.3%

Interim dividend franked amount per security 6.20¢ 9.00¢

The final dividend is scheduled to be paid on 11 October 2017 to shareholders registered as at close of business on 11 September 2017 (the record date). The 2017 final dividend includes no conduit foreign income. The Company's Dividend Reinvestment Plan ("DRP") will operate for this dividend, with a discount of 1.5%. The pricing period for DRP purposes will be 10 trading days, starting on 14 September 2017 and concluding on 27 September 2017 (inclusive).

$'000

Less: Non-recurring gain on property sales - - (34,766)

Depreciation and lease amortisation (178,041) (172,447) (165,224) 7.8%

Amortisation of intangibles (56,400) (55,126) (54,528) 3.4%

Net interest expense (68,066) (65,243) (63,007) 8.0%

Income tax expense (138,190) (133,323) (131,644) 5.0%

Net (profit) attributable to minority interests (16,448) (14,647) (14,627)

Add: Non-recurring items after tax (net) 14,497 14,130 (11,163)

Basic earnings per share (cents per share) 102.7¢ 110.0¢

Diluted earnings per share (cents per share) 106.2¢ 102.1¢ 109.3¢ (2.8)% (6.6)% Underlying earnings per share (cents per share)2109.7¢ 106.6¢ 2.9%

1 For an explanation of "Constant Currency" refer to 2(a) in the Commentary on Results.

2 Underlying Revenue, EBITDA, Net Profit and Earnings Per Share = Revenue, EBITDA, Net Profit and Earnings Per Share adjusted to remove the impact of non-recurring items (after tax for Net Profit and Earnings Per Share) in the current and/or previous year.

3 EBITDA = Earnings before interest, tax, depreciation and intangibles amortisation.

An explanation of the figures reported above is provided in the following pages of this report.

Sonic Healthcare Limited ASX Appendix 4E 30 June 2017

1. Headlines

   • FY2017 result in line with previous guidance: underlying EBITDA growth of 5.3% (Constant Currency)

   • Underlying revenue growth of 5.8% (Constant Currency)

   • Underlying net profit growth 4.4% (Constant Currency)

   • Final dividend up 4.5% (full year up 4.1%)

   • Strong cash generation: 103% conversion of EBITDA to gross operating cash flow

   • Strong earnings growth in Sonic's Laboratory and Imaging divisions

   • Accretive acquisitions and hospital laboratory joint ventures to augment ongoing strong organic growth

2. Explanation of results

1. ) Constant currency

   As a result of Sonic's expanding operations outside of Australia, Sonic is increasingly exposed to currency exchange rate translation risk i.e. the risk that Sonic's offshore earnings and assets fluctuate when reported in AUD.

   The average currency exchange rates for the year to 30 June 2017 for the Australian dollar ("A$", "AUD" or "$") versus the currencies of Sonic's offshore earnings varied from those in the comparative period, impacting Sonic's AUD reported earnings ("Statutory" earnings). The underlying earnings in foreign currency are not affected.

   As in prior periods, in addition to the statutory disclosures, Sonic's results for the year have also been presented on a "Constant Currency" basis (i.e. using the same exchange rates to convert the current period foreign earnings into AUD as applied in the comparative period, being the average rates for that period). This facilitates comparability of the Group's performance, by providing a view on the underlying business performance without distortion caused by exchange rate volatility, so that an assessment can be made of the growth in earnings in local currencies. Constant Currency reporting also allows comparison to the guidance Sonic provides to the market about its prospective earnings.

   In preparing the Constant Currency reporting, the foreign currency elements of each line item in the Income Statement (including net interest expense and tax expense) are restated using the relevant comparative period average exchange rate. There is only this one adjustment to each line item so no reconciliation is required.

   The average exchange rates used were as follows:

   2017 Statutory	2016 and Constant Currency
   AUD/USD	0.7544	0.7285
   AUD/EUR	0.6921	0.6564
   AUD/GBP	0.5951	0.4921
   AUD/CHF	0.7476	0.7137
   AUD/NZD	1.0586	1.0903

   To manage currency translation risk Sonic uses "natural" hedging, under which foreign currency assets (businesses) are matched to the extent possible with same currency debt. Therefore:

   • as the AUD value of offshore assets changes with currency movements, so does the AUD value of the debt; and

   • as the AUD value of foreign currency EBIT changes with currency movements, so does the AUD value of the foreign currency interest expense.

     As Sonic's foreign currency earnings grow, debt is repaid, and interest rates change, the natural hedges have only a partial effect, so AUD reported earnings do fluctuate. Sonic believes it is inappropriate to hedge translation risk (a non- cash risk) with real cash hedging instruments.

     Sonic Healthcare Limited ASX Appendix 4E 30 June 2017

     COMMENTARY ON RESULTS For the year ended 30 June 2017 2. Explanation of results (continued)
2. Revenue

Total revenue growth for the year was 5.0% (or 5.8% excluding the non-recurring gain on sale of properties in FY2016) at Constant Currency exchange rates (i.e. applying the average rates for the 2016 year to the current year results) and 1.4% including exchange rate impacts.

The Laboratory division enjoyed revenue growth of 6% in the year (on a Constant Currency basis), including ~4% organic revenue growth.

Sonic's Australian Laboratory revenue growth of 5% included ~1% relating to an acquisition in South Australia completed in the prior year. Sonic's growth was significantly stronger than the Medicare market data (2.5%), driven by Sonic's brands and market positioning.

US organic revenue growth was ~3% on a Constant Currency basis, the highest level for several years. Sonic's largest US business, CPL (based in Texas), continues to grow strongly.

Sonic's European operations experienced strong revenue growth, including in Switzerland (~5% organic growth) and Germany (~5% organic growth). Belgian growth of ~1% was adversely impacted by recent fee changes. UK organic growth was ~4%.

Imaging revenue growth of 5% included ~1% relating to a small acquisition in NSW.

Revenue growth for Sonic's occupational health business (Sonic HealthPlus) was subdued due to the downturn in employment in the resources sector. Revenue growth of Sonic's medical centre business (IPN) was impacted by the Medicare rebate freeze, with fee indexation to be reintroduced progressively over the next few years.

Revenue was impacted by currency exchange rate movements, which decreased reported (Statutory) revenue by A$185M compared to the prior year.