SHL has pretty much fully normalised from the pandemic, and even started to grow again in places like the UK, Ireland, Belgium.

The US numbers below are bolstered through acquisition, the other geographies are relatively “cleaner” in their underlying read throughs. Europe is growing again, in aggregate. Imagine continues to perform well.

Clinincal services remains a fairly small part of the business.

Zooming out again, we can see that SHL is more less exactly “on trend”, as if the pandemic had never been, relative to 2019 EBIT.

Sonic’s cashflows are immense…

…the balance sheet is in great nick. There will be ongoing M&A, as usual.

It did miss street consensus estimates, and consequently, there was a bunch of price target downgrades.

That FY24 street estimate has now been dropped by 4.35%, to its new current number of 1.76bn. The company guidance range is $1.7b-$1.8b, so it was a decent enough miss.

It is also worth keeping in mind that the Q&A conference call seemed to suggest the earnings are 2H weighted, which might mean disappointment at the next half too.

We are not at all fussed. SHL trades at 22x, has a gross yield of 4.56%, and is a long run compounder, in our view. The broader market ex banks is closer to 20x, so it is a slight premium, for a much higher than average quality company.

In the current, highly uncertain macroeconomic environment, we think those are good characteristics to have.

Some last thoughts. The below is quite interesting. Pathology and diagnostic imaging have long been thought to be highly amenable to AI. Take a country like India, where the population is huge, they get cancer at the same rate as the rest of us, but there are not remotely enough clinicians around to help diagnose and implement a cancer treatment plan. It is a tragedy. AI and its various initiatives are the only way to help.

But you can also imagine it means more patients and more services at a potentially lower cost. And that would be a very good thing.

SHL also discussed a new billing system, which normally we would not be excited over, to the point of bothering to include it in a note, but SHL did seem to say that given quirks in the US and Australian insurance payments systems (as in, literally, what they pay for) seemed complex, and that SHL would frequently give up on trying to get paid for services rendered. Thus it seemed like the new system might be quite a handy little kicker to earnings, in time.

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