Thank you very much, and good morning, and welcome to everyone on the call. My name is Colin Goldschmidt. I'm the CEO of Sonic Healthcare. I'm joined today by Sonic's CFO, Chris Wilks, and Sonic's Deputy CFO, Paul Alexander. I plan to take you through the presentation as the first step in this call. After that, we'll take your questions and answer them as a group. Thank you very much for being on the call. We're talking today about Sonic's full year result for the FY 2021 year, ended 30th of June 2021. I trust you have the presentation in front of you. If I could ask you to go to slide number 3, which is the headlines slide, and we'll just go through the Sonic headlines for FY 2021.
Our revenue came in at AUD 8.8 billion, which is 28% up on the prior year. EBITDA at AUD 2.6 billion, which is about 80% up on the previous year. Our net profit at AUD 1.3 billion, which is around 150% up on the prior year. A key feature of Sonic as it stands today is the strength of our balance sheet, where our gearing is at record low levels, and we have substantial available liquidity currently at about AUD 1.5 billion. The dividend for the final dividend will be AUD 0.55 per share, franked to 65%. I do want to just make the point under the headline heading, and it really is a feature of our entire performance for the year, that in this pandemic, it's been a tough time for everyone, but a particularly tough time for Sonic Healthcare.
The company has risen to perform in an amazing way, and I want to take the opportunity right at the outset to acknowledge what I can only call the heroic efforts of all Sonic staff right around the world, 38,000 people who've contributed in a very meaningful way to this result. The next slide, which is slide 4, is an opportunity just to talk about Sonic and the pandemic, and where we sit with COVID-19 at the moment. Clearly, we have found ourselves right at the heart of this pandemic, and have risen in an amazing way to turn on COVID PCR testing throughout the world. Of course, the result is very much influenced by that particular testing that we're doing.
I guess it's fair to say that we're making a contribution to the whole pandemic effort, not just with our COVID testing, but to maintain our routine healthcare services as well. 138 million patients were serviced in financial year 2021, which is a huge volume, for not just our labs around the world, but also our imaging practices, our primary care practices, our occupational health practices as well. The sheer volume increases that we've had to deal with have been a challenge second to none for Sonic the business. The second point is the COVID PCR test that we're doing, it's approximately 30 million COVID tests performed since the beginning of the pandemic in March last year. We're doing these tests in approximately 60 separate labs right around the world.
I need to make the point here that to turn on COVID PCR testing was a huge undertaking, something that we did in a short space of time. It required the establishment of a brand-new test, the COVID PCR test, but also huge amounts of staffing, the facilities that were needed. Just the space itself, getting the required equipment and consumables. Of course, there's IT work associated with that, and particularly in Australia, where we've had to do the swab taking ourselves as well and set up many drive-through centers right around the country. We do a little bit of collection in Germany as well. Essentially other countries, we do not do the collection. Then, I guess thirdly, our contribution is also now in the space of vaccinations.
We've begun participating in Australia's vaccination program, at the moment confined to New South Wales, and I'll say a little bit more about that a bit further on. You can see from this that Sonic, unlike many other companies, is absolutely in the heart of pandemic activity. We've never been busier in the history of the company. I want to just also say that our contribution is very much underpinned by our longstanding and deeply embedded culture of medical leadership. That's a culture which puts the patient first and which puts quality first. Also our decades long commitment to investment in people and infrastructure. We need to emphasize both because Sonic, when the pandemic hit, was absolutely at the ready in terms of both people and infrastructure.
I guess it was vindication in some way of our strategy to keep our people absolutely at the top of their game, and also to keep our facilities ultra-modern and up to date as well. We could turn on this huge extra volume to assist with the pandemic effort. The result that we released today is very much influenced by our COVID testing, driving COVID revenue and earnings. As a general statement about our COVID testing, which we'll come to by country, is that we saw more COVID testing in the first half of FY 2021 than in the second half. The Delta variant hit, and this result does not really show the effect of Delta. What Delta is doing is we're seeing that our COVID testing volumes are now picking up fairly dramatically, and that really only began in July.
We've got a pattern of maximal activity in H1 FY 2021, slightly lower volumes in H2 FY 2021, and then going up again in H1 FY 2022. I also, just to end this slide, make the point that our staff around the world have literally been working 24/7 throughout this pandemic. There's no working from home when you're running labs and imaging practices and primary care centers and occupational health businesses. Despite lockdowns, our businesses have been pedal to the floor, working in our labs and in our other facilities at all times. If we could move to the next slide. This is a slide where we're wanting to show the relationship between our base business and our COVID revenue. Base business revenue and COVID revenue. Just to be clear, we're defining base business revenue as any revenue excluding COVID revenue.
It's all the work that we were doing before the pandemic. In the chart, if I could take you there, the dark blue represents our base business revenue, and the turquoise represents the COVID revenue in total. You'll see that if, firstly, just focusing in on our base business revenue, when you compare FY 2021, the year under review, we have grown 6% against FY 2020, and 4% against FY 2019. I guess the growth is slightly higher against FY 2020 because 2020 included the dip in our base business at the start of the pandemic. The other feature about our base business revenue is that we're seeing that it's now pretty resilient despite waves of COVID or lockdowns. As we go forward, we certainly expect our base business revenue to keep growing.
Looking at our COVID revenue, you'll see that in FY 2020, it's relatively small, and that's because pandemic only began in about March, well into the second half of last financial year. Of course, FY 2021 is a full year of COVID, which I'll just repeat again, we saw a slight dropping off in our COVID revenue in the second half, but now picking up again in FY 2022. Trying to predict what FY 2022 is going to be like in terms of both base business and COVID revenues is, of course, difficult, especially when we try and predict the COVID revenue. Delta is causing a real uptick in our volumes, but it's really too hard to say exactly what the revenue from COVID is going to be in FY 2022. We do think that our base business will continue to grow as it is.
Then, of course, a prediction for further out in terms of COVID testing. We do expect COVID testing to be part of our business into the foreseeable future. Hopefully when we get through this latest Delta wave right around the world, we still expect that COVID PCR testing will be there, but obviously that'll be at a baseline volume. It's too difficult to say exactly when we're going to reach that particular point. If I could take you to the next slide, please. That's the financial summary. We've already mentioned the first three numbers on that table. Just a comment about our cash generation. Cash generation is strong as expected with almost 100% conversion of EBITDA to gross operating cash flow. Just a comment on the cash flow growth.
I guess following the commencement of the pandemic, which was in the second half of FY 2020, we did institute a range of temporary measures to preserve cash. These were reversed in FY 2021. That would explain the slight discrepancy in the growth between our cash flow growth and our earnings growth that you see on the chart. On slide 7, which is titled FY 2022, just like we did the last financial year, we are not in position to provide earnings guidance for FY 2022. The reason for that is almost exclusively COVID-related unpredictability. As I've just mentioned, it's just too hard to actually say what is going to happen with our COVID volumes. Of course, COVID volumes and revenues are going to play a big part in our results going forward.
Our COVID testing is ongoing, and the Delta variant is driving volume increases right around the world. Our base business, as I mentioned, is increasingly resilient to pandemic waves. The reason for that is really that the growth drivers of healthcare are still there unchanged. Another important point is that our geographical spread mitigates against fluctuations in our base business revenue to a large extent, and also our business sector diversity. You'll see in this result a very strong performance from our imaging division, which was very welcome in the circumstances because there's no COVID testing in that division. We're also looking at a number of acquisition opportunities, and of course, if any of those come to fruition, they will influence our future results as well. The next slide, which is on dividends.
The board of Sonic has resolved to pay a final dividend of AUD 0.55 per share. That's an increase of 7.8% on the final dividend last year. That brings our total dividend for the year to AUD 0.91 per share, which is 7.1% up on the prior year. This maintains our progressive dividend policy. It's getting close to now 30 years. I think our maiden dividend was 1994. It has never gone backwards. Of course, we're pretty proud of that record and certainly are determined to keep it going. The final dividend is franked to 65%. It was previously franked at 30%. That's a reflection of earnings in Australia. Record date, 8 September. Payment date, 22 September. Our dividend reinvestment plan remains suspended. The next slide, which is our pie chart showing our revenue split by division and by country.
There's not a whole lot to say about this relative to previous pie charts, except to say, firstly, that the entire pie has expanded by 28%. That's our revenue growth for the year. Excuse me. Also one thing to note is that we have experienced foreign exchange headwind over the course of the year, which amounts to AUD 375 million. That headwind has preferentially impacted the non-Australian divisions. On a relative basis, if you're looking at the percentages and the sizes of each country, I guess the non-Australian divisions have been pulled back relative to their constant currency growths. Another thing to note perhaps, that the non-laboratory divisions, that's imaging and Sonic Clinical Services, might be spuriously lower because of the great revenue increase in COVID testing, which didn't occur in their respective divisions. Okay. Now we're going to go through the country slides.
We're on slide 10 now. Starting off with our largest division, Sonic Healthcare USA. 34% organic growth in revenue, at a constant currency level. An incredible performance. Quite astonishing. Our base business in the U.S. grew at 5% relative to FY 2021. This result does not include any grant money at all. A grant that we did receive of $26 million U.S. has been repaid in full. In terms of our operations, it was very much dominated by high volume COVID PCR testing and some serology testing in 12 laboratories across the U.S.A. Like with most of our divisions, COVID testing volumes fell somewhat in the second half, but are now increasing quite dramatically with the Delta variant.
Have not quite got back to their peak levels from H1 FY 2021. The rate of increase is quite spectacular actually. We'll have to just track how that pans out going forward. We're also investigating several other non-medical, if we could call it that, COVID testing opportunities in travel and other areas. Just a couple of other points. We are expecting a small fee cut to the Medicare component of our total revenue. The U.S. Medicare component is around 20% of total revenue. This is the so-called PAMA legislation that's Protecting Access to Medicare Act, which will come in in January 2022. We estimate the impact to be around $8 million. It's an amount that's not going to be material in the scheme of our U.S. numbers.
A standout feature of our U.S. division is that labors which were implemented at the start of the pandemic have been maintained throughout the pandemic. When the pandemic subsides, and we hope that comes soon, we believe that we will have a more efficient operation than we had pre-pandemic. An excellent achievement by the leadership and all our staff in the U.S.A. Moving on to Germany. Sonic Healthcare Germany has also achieved outstanding results as a result of unbelievable performance. 50% organic growth at constant currency level is unbelievable. I cannot stress this enough. A 50% increase in revenue equates more or less to a 50% increase in volume. For our labs to suddenly cope with such huge volume increases, unprecedented in our history by a long way, is a huge feat.
Something that the whole of Sonic is very proud of, that we've done this in all our divisions. 50% increase in growth in Germany, with base business growing at approximately 5% over FY 2021. No government subsidies in the numbers at all. In Germany, we are the largest provider of COVID testing in the country, and we perform those tests in 30 Sonic labs right across the country of Germany. Another really important feature of our German division is that we've been working very closely with the German government throughout the pandemic to assist at many, many levels, to assist with track and tracing specific testing protocols like schools and aged care facilities, and more recently, and very importantly, to do whole genome sequencing to identify mutations, which in turn assists the tracking and tracing of positive cases.
We've also found in the pandemic, and especially in Germany, that with all this COVID testing we're doing, we've developed systems to streamline and make all our testing much more efficient. In Germany, we've got customized IT solutions for the testing itself, for results transmission, travel passes and the like. Couple of other points. We've completed the build of a new lab in Gießen, and this is a new lab that will facilitate a couple of mergers in the area. For the non-German participants on the call, Gießen is a university town in the state of Hesse to the north of Frankfurt, population around 100,000. We don't only serve the town of Gießen, we serve a fairly large area around Gießen as well.
Another point just to note is that our anatomical pathology division, which is relatively new in the scheme of our Sonic Healthcare Germany division, is growing strongly, including cervical screening testing, which is now part and parcel of that division. Slide 12. Our Australian laboratory division. 28% organic growth. Base business growth of 9%. There's no government subsidies in this result, including the Australian JobKeeper program. At the outset, I do want to just acknowledge the work and contribution, not just of Sonic Healthcare in Australia, but the whole pathology sector in Australia, both private labs and public labs, who have stepped up so amazingly to provide huge numbers of COVID testing here in Australia, and particularly now that we're in Sydney with a fairly heavy Delta wave taking place.
I mentioned earlier that Australian pathology labs are in a slightly different position in that we also have to organize all the swab taking. This is a huge part of what we do, not just the taking, but the setting up of safe facilities to do the testing, and in particular, all the drive-through centers that we operate. It's a huge logistic exercise to do all this. Requires lots of staffing, traffic management, IT management. There's a whole lot of stuff that goes into running drive-through centers, and to make them more efficient. We continue to work on them so that they are now even more efficient than they were before. At operational level, Sonic is one of the leading providers of COVID testing in Australia.
We continue with our national contract to provide COVID testing for nursing homes or aged care facilities around the country, which is a huge undertaking for us. Like Germany and the U.S., we've used the pandemic to bring in a whole range of innovations to meet the challenges of the pandemic, and these include IT enhancements for our drive-through centers, enhancements to data entry, providing results via text messages, travel certificates, telemedicine. It goes on. We've completed a new lab for Southern IML in Wollongong in New South Wales. This lab was well overdue and had commenced well before the pandemic. For the non-Australian participants on the call, Wollongong is a city to the south of Sydney on the coast, population around 300,000. Again, this lab doesn't just serve the city of Wollongong, but goes all the way down the New South Wales South Coast as well.
Couple of other points. Sonic has been awarded the Australian Bureau of Statistics contract. It's a pilot contract at this stage, which basically measures the health of the nation. Our bowel screening cancer, which is a national contract as well, has been renewed. We're seeing this is a fantastic service that we provide, and most people on the call would be familiar with it. You'll receive our packs in the mail. An incredible service. We're finding that volumes are actually going up with increasing participation right across the nation. Moving on to the next slide, which is U.K. and Ireland. Here we've achieved 62% organic revenue growth at constant currency level. Again, really incredible that we've stepped up to handle that sort of increase.
Perhaps the reason why this number, the revenue increase, is slightly larger than in other divisions is that FY 2021, the COVID testing revenues were relatively lower than in our other divisions, with COVID testing coming on in a slightly more delayed fashion, but now running at full steam ahead. Base business grew at 9%, and at operational level, we've really ramped up our COVID testing through the year, and volumes are staying high. In fact, if we look at H1 and H2 in the year, they are very similar. We were asked to set up a COVID PCR surge lab by NHS England to cover Greater London, and that opened in December 2020, and that's augmented our volumes as well. It's a privilege for us to be asked by NHS England to work with them, to determine COVID variants by genetic sequencing, as we've done in Germany.
We've also opened up a new lab in Manchester. This is a highly automated lab. Again, this lab was in planning long before the pandemic and will assist our nationwide operations in the U.K. We're very much looking forward to opening up a hospital lab in the Cleveland Clinic London, which is due to open itself in the middle of the financial year. This is a hospital that undoubtedly will be a premier and highly prestigious private hospital in London, and we're honored to have been selected to do the lab testing for that hospital. Finally, our subscale Irish laboratory business was sold in the second half of last year, with a small gain on the sale. Just a couple of comments about our Irish business.
We commenced that business in 2010, basically as a greenfields operation. We set it up specifically in response to a contract that we won to provide cervical screening services for Ireland, so that's Pap smear services. At a later stage, we commenced operating non-cytology services, in other words, routine services, on a fairly small scale in anticipation of privatizations that appeared to be mooted for the Irish healthcare system, which is essentially a nationalized system. Unfortunately, those privatizations never materialized, and they have not materialized at all. Also, we ceased our cytology services in 2018. At the time when our contract ended. At the time of the sale of this business, our revenues were approximately EUR 10 million per annum. You'll see that was a lab that had prospects of growing, but didn't have them in the end.
We think it was the prudent move to sell the lab. Moving on to slide 14, which is Switzerland. 22% organic revenue growth with base business growing at 8%. A summary of our Swiss business, which is very solid and stable. We're participating in national COVID testing programs like school testing, and we've established much greater capacity through the course of the pandemic, in preparation for a fourth wave, which was expected and it's probably taking place in the form of Delta, which was not predicted earlier on. We've also modernized our Zurich laboratory over the course of the year with state-of-the-art workflow automation now in place. Slide 15 is Belgium. 30% organic growth, at constant currency level. Our base business in Belgium is down 3% on the prior year, taking slightly longer to recover. We expect it to keep recovering as we progress.
As per other countries, we found that we did more COVID testing in H1 than H2. Now our numbers are increasing again with the Delta outbreak in that country. We've also done quite a bit of work to grow our molecular and genetic testing outside of COVID testing. That includes our non-invasive prenatal testing or NIPT. We've also upgraded our main laboratory in Antwerp, which also now has new and very modernized lab automation equipment installed, replacing the previous generation that was there before. Moving on to Sonic Imaging, which is slide 16. A very pleasing result with 19% revenue growth, which includes the acquisition of a majority position in Epworth Medical Imaging. If you look at organic growth, it sits at 15% with EBITDA growth of 24%. It's really pleasing to see this degree of leverage in our imaging division.
Fantastic performance by the imaging division. As with all our other divisions, no government subsidies in these numbers. Through the year, we have moved to 80% ownership of Epworth Medical Imaging. Annual revenues of that business, this is in Melbourne, annual revenues are around AUD 45 million per annum, and that was from March 2021. We've also previously announced the acquisition of Canberra Imaging Group with revenues of about AUD 60 million per annum, and that acquisition will complete on 1 September 2021. It's not in the FY 2021 numbers. It'll be in FY 2022. We opened four greenfield sites in the financial year, we have an additional five greenfield sites planned for FY 2022.
I want to acknowledge outstanding performance by the imaging division, and even though they're not doing COVID testing, operating in a pandemic, imaging businesses has not been easy at all. Yet, our radiologists and all our technical and all staff have really risen to the occasion in a wonderful way. Slide 17, Sonic Clinical Services. This is our division in Australia that provides primary care services and occupational healthcare services. Revenue for the year was slightly down on the prior year, very much pandemic related. This is patients being reluctant to see GPs, essentially, during periods of lockdowns and when the pandemic was on. However, despite that slight drop in revenue, our earnings have been maintained, which is an outstanding result for the division. Again, no government subsidies in the result.
SCS or Sonic Clinical Services has now taken an important step into the area of vaccinations here in Australia. Whilst at the moment it's focused on New South Wales and particularly Sydney, this is an area of business that we would certainly hope we can carry forward into the future, medium and long-term. We're offering vaccination services at three levels in Australia. Number one, through our more than 200 medical centers right across the country, so that's national. All our GPs, over 2,000 of our GPs in those medical centers are offering vaccinations in their medical centers. Secondly, the contract that we won to provide vaccination services in New South Wales and Queensland, to nursing homes, that's nursing home residents and staff in those two states, is the second area. Thirdly, via mass vaccination centers, which are currently confined to Sydney.
We're currently operating five mass vaccination centers. The 5th and substantially largest of these is actually opening today or has opened today already. Fantastic facility. These are facilities that we're very proud of, covering large numbers of people, and we certainly hope to keep as many of these centers open for vaccinations in the first round, boosters going forward, and potentially to open many more mass vaccination centers as we go forward. Our vaccination services in these mass centers are assisted by a partnership which we've formed with St John Ambulance. St John Ambulance are helping us with some of the staffing in these mass vaccination centers. We have used Sonic's infrastructure in a very big way in these mass vaccination centers, so we're using doctors, nurses.
These mass vaccination centers require lots of different people, and our partnership with St John has been very, very fruitful and successful to date, and we're very happy to take it forward into the future. Slide 18 is our capital management slide, and I can only repeat what I said earlier, that our capital management is in good shape, balance sheet in very strong position. With our gearing ratio at 12.5%, that's the lowest it's been in 20 years. Debt cover down to 0.4 x. Can't remember it being that low ever before. We've had an opportunity to reduce debt to over AUD 1 billion over the year. This is redrawable debt. We have substantial headroom as well of approximately AUD 1.5 billion, and that's before the final dividend and settlement of Canberra Imaging Group.
Really the important point about our balance sheet is that it is primed and ready for growth of Sonic via acquisition, in particular. Of course, we remain very keen to look at opportunities going forward, and there are significant opportunities for us that we are currently looking at the moment. The next slide, which is titled Sustainability, we're very pleased to include a slide on Sonic's ESG or sustainability positioning. It's not only to outline our work in this area to date, but also to give you a sense of what our plans are for the future. In so many ways, sustainability meshes in with Sonic's overall responsibilities as a global healthcare company, and it also meshes in very well with our medical leadership culture, which really has care for our staff, and patient care right at its very center.
Over the past years, we have worked very diligently in this ESG and sustainability space, and we're now keen to take it a notch higher, and to bolster our efforts even further. I guess this slide, our overall message is that we have taken and continue to take sustainability pretty seriously. We certainly undertake to make it an essential and integral part of our business into the future. Just a few points on the slide itself. We've taken steps quite recently to strengthen our dedicated sustainability leadership in Sonic. We've appointed, recently, a sustainability manager, a sustainability director, and we're soon to convene a sustainability steering committee, which will be chaired by me as the CEO of Sonic, and will comprise our CEOs from around the world together with selected people from our global office here in Sydney.
The purpose of this will be to absolutely lock in a system which takes sustainability to every corner of the company. We are deadly serious about making sustainability an integral part of our day-to-day business. In terms of environmental responsibility, we're continuing to focus on emissions and energy reductions, and also to set targets for renewable energy use and targets to get to net zero greenhouse gas emissions. In terms of social responsibility, and that's the S in ESG, our core purpose, in fact, our mission as a company already was and has always been the provision of high quality, safe, and accessible medical services to the communities that we provide. It does fit very well with the social responsibilities that are now measured under sustainability and ESG programs.
We, of course, will continue in the same space with our Catalyst program, where we're currently supporting six very underprivileged hospitals in underprivileged areas of Africa, and we're also involved with indigenous and other charities as well. Finally, just responsibility for our people. We will continue to focus on our employee health, which has always been a huge driver for us as a business. We will keep our safety record as good as it's always been. We have an impeccable track record in terms of staff safety. At the same time, we're going to be strengthening our goals in terms of diversity, inclusion, training, and development in those areas. By the way, all of this will be written up in our corporate responsibility report for 2021, which will be published nearer to Sonic's AGM time in November.
Moving on to the final slide, that's slide 20. This slide provides a summary of where we see Sonic Healthcare now and how we plan to progress our growth and wellbeing into the future. At the end of this presentation, as CEO of Sonic, I do want to say how enormously proud I am of how our company has stepped up to meet the challenges of the pandemic. We really do have outstanding leaders and outstanding staff right around the world, really, there couldn't have been a tougher challenge than this pandemic to showcase the dedication and I guess the willingness of Sonic's people to respond to what I can only call a call to arms of the pandemic. It's been an incredible year for Sonic Healthcare.
Very hard to convey, but I know if there are Sonic staff listening to this, they will know exactly what I am talking about. A summary of Sonic is that we will continue to make a very material contribution, not just to the pandemic, but to the health of the communities we serve. We are providing essential services in the healthcare space in the seven countries in which we operate. We are very much leveraging the long-term investments that we have made in people, in equipment and facilities, and supply chains. We are supporting the global pandemic, and will continue to do so through high volume COVID testing, through serology testing, even through rapid antigen testing, and certainly through vaccination services wherever that is feasible.
In terms of the growth of Sonic going forward, I've mentioned that our base business is showing increasing resilience to pandemic waves, that's because the healthcare drivers are still absolutely intact. There's also an element of catch-up that was lost at the beginning of the pandemic that we're seeing as well. We certainly expect the demand for COVID PCR testing to continue into the foreseeable future. Excluding this current Delta wave, we believe COVID PCR testing will be part of the lab menu going forward. I mentioned earlier that our geographical diversification is providing stability for Sonic's base business revenue and I guess our COVID testing revenues as well as we go forward. I've also mentioned that acquisitions are very much on our mind, we're very pleased that we have balance sheet power to look at some substantial acquisitions going forward.
It certainly is our view at management and board level that the funds that are available to Sonic are best used via reinvestment in the company. Synergistic acquisitions and to set the business into even stronger position than it is today is our preferred way going forward. These opportunities that we see exist in Australia and in the U.S. and in Europe. We're certainly looking forward to pursuing those, and hopefully some of them will come to fruition. The final point is that the driving force behind this year's outstanding result. It's not just this year, it's all our achievements, really. It is in fact our medical leadership culture and the outstanding commitment of our 38,000 staff right around the world. I do want to thank all the staff at this point, because I know some would be on this call.
Thank you very much, and I might hand you back to Zoe at the moment to take some questions. Thank you.
Thank you. We will now begin the question and answer session. Should you wish to ask a question during the question and answer session, please register by pressing star, then one on your telephone keypad. If you would like to cancel your registration, please press star and then two. If you are on a speakerphone, please take out your handset to ask your question. Your first question comes from David Low with JP Morgan. Please go ahead.
Thank you very much. Colin, if I could start with where you ended, just with capital management and M&A opportunities. It would seem to me that a lot of your competitors have also seen their balance sheets improve pretty dramatically through the pandemic, and that might just lead to greater competition for those assets that are out there. I was just wondering if you might comment on how competitive the landscape is and whether you're seeing any upward pressure on the prices of assets you'd like to acquire?
Yeah. Obviously, competition for acquisitions is out there. We're competing with industry players, and we're competing with private equity funds. We're very aware of that. However, Sonic does bring to the table certain features which some sellers are very interested in. We will just have to compete. Now, we have a track record of growth through M&A over many, many years. It's always been competitive. It's never been easy. We will use whatever we have at our means to achieve these acquisitions. Of course, exercise the same discipline that we have exercised over the years. We're not going to do anything untoward. I certainly don't think that our acquisition history is over at all. Not at all.
No, I don't think I was implying that. I guess the related question, however, is you do have a balance sheet now, which is very strong, and the other option is to return some funds to shareholders. I think we heard that message that the board and the management team don't view that as a sensible use of capital.
Yes. We certainly think it's in the best interest of shareholders that we deploy our capital to reinvest in the business through synergistic acquisitions to grow the business further. That has really been our strategy to date, and we certainly see big opportunities for Sonic going forward, which hopefully will not disappoint shareholders at all.
Sorry, just keep harping on this. The dividend payout ratio is much lower than it has been, and I heard the commentary about progressive dividends. Neither do you see that as an option to refund some of this to shareholders in the current environment?
David, this is a decision that's been made at board level.
Sure.
All options were weighed up, and I guess this was the preferred course that the board has taken. Certainly at management level, we're fully in agreement with that decision. We think this is the best thing for Sonic, the best thing for Sonic shareholders.
Okay. I don't mean to be accusatory. I'm just wanting to make sure we understand.
No, that's fine.
One last question. Going to change topics. We haven't heard much about Aurora anatomical pathology business in the U.S. Maybe the pandemic's not the best environment for them. Could I get you to give us a bit of an update on how that's progressing and whether it's going according to plan, please?
It absolutely is so. We've been quite surprised that it's been pretty resilient through the pandemic. We've even, in one or two of those labs, instituted some COVID testing, but the base business being anatomical pathology has gone pretty well. We did suffer some downturn through the year due to the pandemic, as would be expected, because we had that elsewhere. Basically, we're very happy with the progress of that acquisition and our anatomical pathology division in general in the U.S. All going good.
Great. That's all I have. Thank you very much.
Thank you.
Thank you. Your next question comes from Chris Cooper with GS. Please go ahead.
Morning. Thank you. Colin, you commented that German volumes are in line with the value growth of 50%. I just wanted to confirm whether that comment's true across the other regions, too. Basically, you're not seeing any change in mix or revenue per test generally right now.
Chris, that is an approximation. Don't go and do any serious modeling on that basis. Revenue and volume are not exactly equivalent. By and large, the answer is yes. It's consistent throughout.
Okay. The 4% growth in volumes in fiscal 20 21 vs fiscal 2019. Sorry, the 4% growth in revenue in fiscal 20 21 over fiscal 20 19, that's also synonymous with volume growth as well.
Approximately, yes.
Got it. Thank you. Just on COVID testing. Look, you've obviously reiterated your view that COVID testing is going to remain a sizable part of this business going forward. I appreciate there's huge uncertainty here, but could flu be a reasonable sort of analog here in terms of potential contribution to the overall test mix over the sort of mid to long term?
Yeah. There's a lot of unknowns there, Chris. COVID testing could become incorporated into a respiratory panel, where instead of testing for flu and other respiratory viruses, we also test for COVID, or it could be tested for separately. I think the consensus is that COVID is here to stay. It's not going to go away, and therefore, there will be testing needed into the future, I guess a bit like flu and the other respiratory viruses, yes.
If we assume on a pre-pandemic basis, flu maybe constituted, let's call it a high single-digit percentage of the overall test mix. Would that be around where you're thinking for where COVID is going to be in a couple of years' time?
Cannot say, Chris, sorry. This is why we can't put out guidance. We just don't know. It's quite possible that COVID is treated slightly differently from flu. There might be more demand and need to do COVID testing rather than flu. We don't know what other variants might eventuate, whether there'll be mutations. Let's hope they're not anymore as bad as Delta. There's so many unknowns that it's just impossible to predict. I think what we can say is that there will be COVID testing into the long-term future.
Okay. Final question on balance sheet. Look, you mentioned, of course, there's lots of opportunities out there. We definitely agree, and probably more so in terms of accretive opportunities than I think we've seen for some time in the pathology space. Can you just give us some commentary on what sort of areas interest you in particular?
Without talking out of school because of not making any announcements, we're obviously interested in businesses that are directly in our space or associated with our space where there are synergies. Our space means the lab business, and the imaging business in particular. That's where it is. There are opportunities. We're not about to branch off into some unrelated business, even healthcare. There are a lot of businesses that are directly in our space and that are very close to our space, which do make sense for us.
It's probably worth mentioning there could be other geographies that we move into.
New geographies, absolutely.
Yeah.
Yep.
Okay, thanks very much.
Thank you.
Thank you. Your next question comes from Andrew Goodsall with MST Marquee. Please go ahead.
Thanks very much, and congratulations on the result and achievement. I was just trying to understand if you're seeing any patterns in the sort of surges. Obviously, we look at the test charts and we can see peaks and troughs. Just, I guess, trying to see if there's any patterns that we could use in terms of modeling, and understand when you do see those troughs, what your base business does, whether that steps up. I guess it's something we can't see in the half, but I guess it takes place across the half.
Yeah. Just, I guess, talking in general mainly, our base business appears to be fairly consistent and resilient. You've got to take a whole of Sonic here because we do have smoothing out because of the geographical diversification. In terms of COVID testing, it is interesting, your question, because here in New South Wales in particular, where Sydney is in the heart of this Delta wave, we have seen COVID testing rise dramatically. In fact, way beyond the peak of FY 2021, the highest month that you can find in FY 2021. Now that we're in July and August, we're seeing testing volumes substantially higher than in FY 2021. If you then go to the U.S., for example, and by the way, the U.S. and Europe, and New South Wales are more or less in sync now with the Delta wave or the Delta variant.
We were out of sync last year. We're in sync, at least in Sydney and maybe Melbourne as well. We're in sync now. If you go to the U.S., what you're finding is that the COVID volumes are going up fairly substantially, but they have not yet reached the peaks of FY 2021. What we're seeing in the U.S. is that our base business is pretty resilient, and I think with the opening up that's happened in the U.S. and Europe in tandem with the Delta wave going on, people are more relaxed about seeing their doctors. Base business is being maintained fairly well in the northern hemisphere because of opening up. What will happen to base business here in Sydney will tell us some more about what's going to happen in this Delta wave. We don't yet know.
So far base business is down a little bit, but reasonably holding up. You can tell from what I'm saying, Andrew, that there is no real clear trend. You can't really do a model on our COVID testing, and that's why we're not putting out guidance. It's just very, very difficult to do. All we can tell you is what's happening in this Delta wave. This Delta wave has changed the trend. The trend was clearly up in H1, this is COVID testing revenue, up in H1 FY 2021, slightly lower in H2, we were expecting it then to hit a baseline and stay at that baseline. Delta has completely disrupted that. Suddenly, in the northern hemisphere and here in Sydney and New South Wales, not just Sydney, that trend is gone.
It just gives you an indication of how difficult this is to predict. Sorry to give a long-winded answer there.
No, that's helpful. Just trying to understand if I can think about any patterns there. I guess my follow-up question was just trying to understand, where we've seen a few nations start to talk about, I guess funding for COVID PCR on a more permanent basis, dropping prices or potentially putting it in with a, I guess, a panel of tests, including the flu. I just want to know whether, A, that's changed under Delta or they've pushed some of those thoughts back or whether, I guess you sort of think eventually everyone's going to go to that more standard, potentially slightly lower priced arrangement.
Again, this is very hard to predict. We've seen a slight reduction in the fee that we get for COVID PCR testing in Germany, but not elsewhere yet. It's possible that the fee comes down a bit. I do want to stress that the PCR test is not a straightforward test. It's a difficult test that does require high quality staff and equipment and huge endeavor. It really does. We're certainly hoping that labs that have really stood ready and responded won't be disappointed at the fees going forward. Impossible to answer your question at this stage.
Andrew, the message we get from governments around the world is more that they want us to maintain our capacity. They don't want to see labs dialing back the capacity because of the risk of things like this Delta outbreak or wave. I think it's a bit early to be thinking that they'll be looking to significantly reduce fees. They need labs to be ready to go when these sorts of waves hit.
No, that's great. Thank you very much.
Thanks.
Thank you. Your next question comes from Sean Laaman with Morgan Stanley. Please go ahead.
Thank you. Good morning, Colin, Chris, and Paul. Hope you're all well. Colin, my question's more regarding Sonic's perhaps permanent role in the containment of COVID going forward. Just to flip gears for a minute, if we look at the vaccine situation, the government sort of procured what they thought was appropriate, and no one could forecast sort of the fluctuations around medical opinion on AZ, for example. I think where the job could have been better is on the distribution because I don't think the logistics were really well thought through.
Thinking about going forward, if we get to the target vaccination rates of 70%-80%, we might start considering opening up borders. Then I guess sort of in potential preparation for that event, above and beyond what Sonic might already provide at the minute, is there any discussions with respect to contracting, with respect to Sonic potentially playing, I guess, if you like, call it a border cop role? What revenue opportunity might be available to the company in that sense?
This, a great question, and it's early days, but we are very much investigating what sort of role we can play in terms of testing, travel passports, vaccination and testing, and then linking in with international air carriers. It's a big and complicated area, and I don't think any country has fully worked it all out. We do think that Sonic could play a role, but it's still early days. We see ourselves in the space, because we do cover COVID PCR testing. We can do rapid antigen testing, and we certainly are involved with vaccination in an early stage in the mass vaccination sense of the word. Yes, we are looking at it all, and we're doing quite a lot of work at the moment in the travel space.
If that's particularly where you were aiming your question, and not just in Australia, but right around the world. We're trying at this point to find ways of linking our global operations to international carriers, for example, who are looking for global players to help them with, for example, COVID testing before people board planes. There's, of course, the border issues about entering countries, vaccination passports, rapid testing, whether it's PCR or antigen rapid testing. All of this is yet to unfold, and I hope it comes soon, and we'll certainly be involved there ourselves if we can.
It's worth saying, Colin, we've already won some contracts and talking to lots of corps about screening of staff so that the businesses like mining companies can feel comfortable that they're not going to have an outbreak within their workforce. That's another area that's growing at some pace already.
Thanks, Chris. Just as a follow-up to that, Colin, you did call out on your German slide or during that discussion, you've customized some IT, I guess, requests to serve patient apps. I'm wondering, and travel passports, et cetera, is that something that proliferates? I mean, what does it actually mean? Just to get some granularity around that would be really interesting.
Yeah. In Germany, our apps are related to testing only. We're not linking to vaccination apps. Over here in Australia, where we have the opportunity to do both testing and vaccination, we're busy working on that particular issue. Can we play a part in a travel passport certificate, an app that has all of this? It's quite likely that governments are going to do this, but it's possible that we can play a role there. We're involved. When I mention apps, we're talking here about linking results directly to patients, and providing apps in that space rather than in the vaccination space or in the combined space. It's still probably early days.
Thank you, Colin. That's all I have.
Thank you.
Thank you. Your next question comes from David Stanton with Jefferies. Please go ahead.
Good morning, team, and thanks for taking my questions. In the past, you've given us some help regarding tax rate, potential interest expense, and potential CapEx spend. I'm just wondering if you could give us any kind of color regarding that for FY 2022 over FY 2021, please.
Yeah. Hi, David, it's Paul. Difficult to do given we're not quite sure what components or how our profit will be composed in FY 2022. Obviously, there are different tax rates in our different countries. That plays a part there. I guess having not given earnings guidance, it's difficult to give tax guidance. Probably your best guide is to look at this year, and assume a similar sort of level.
It could vary a bit either way, just depending on where the majority of our profits fall. That's on the tax side. Interest, again, that's really going to depend on the level of cash that we generate. Again, profitability. Difficult one to pitch. You obviously have seen the significant decrease in the FY 2021 year with debt coming down. Of course, if we make acquisitions, that will send it the other way. We wouldn't guide to that at this stage. Yeah, look, I think you can sort of get an idea of what the rate is on our debt. I think we gave an indication of that at the half. You're just going to have to make your assumptions around cash flow, depending on your assumptions around profitability. That's a tough one.
Understood.
Maybe on the CapEx side, I'll answer that one. That's complicated a bit by the AASB 16 effect on the depreciation number. If you work back to what our maintainable CapEx has been in the past, which has kind of been at the level of depreciation plus or minus 5% or 10%, something like that. The year gone was about in line with that, and that included about AUD 40+million- expenditure on COVID testing platforms. In the year to come, we're expecting it to be similar again to that sort of number, about what maintainable CapEx will be, about this level of depreciation plus about 5%. That includes, we're now ramping up our expenditure in the cybersecurity area. There's about a AUD 20 million planned spend in that space for this coming year.
Understood. Very clear. Thank you. Again, no one's going to hold you to it, but knowing what we know today, I'd be interested in your views on overall base business growth in FY 2022. Should we be thinking around the 4% number that we saw in 2021 compared to pre-COVID levels?
I think that's fair enough. Something like that, sort of.
That's kind of the level that we have with our normal drivers. Depends a bit on lockdowns and the like, but that's a reasonable assumption.
Understood. Thank you very much, guys.
Thank you.
Thank you. Your next question comes from Steven Wheen with [Jarden]
Good morning.
Please go ahead.
Yeah.
Right. Good morning. Just wanted to add to that question from David just with regards to the businesses that have come from COVID, in particular genome sequencing, perhaps the serology tests that are emerging, and maybe even the vaccination assistance. Have you got any way that you can kind of demonstrate or indicate how material they may be to contribute on a going forward basis? Are these really meaningful drivers for growth to your base business over time?
Steve, at the moment, they are not material in the scheme of our total results. Especially if you take genome sequencing, that's going to remain a niche and highly technical part of our business.
Serology testing is a bit of an unknown. We're doing more serology testing in the U.S. than elsewhere, it has not come into its own as one might have expected to measure immunity levels. I guess the jury is out on serology testing. In terms of vaccination revenue, this would be confined to Australia at the moment, we're certainly hoping to take this forward, it could become a meaningful part of the Sonic Clinical Services business going forward. Again, we're at the very early stages of vaccination here in Australia, as you know. We've set up incredible systems to put in place in these mass vaccination centers, of course, we have GPs all around the country.
Over 2,000 GPs plus mass vaccination centers, and if you assume that vaccination is here to stay, which it is, then it could become a significant part of the Sonic Clinical Services business.
Even the nursing homes.
The nursing homes could be an ongoing business.
They'll need boosters every year.
Yes.
Yeah, great. Thanks for that. Just, I guess, a comment relative to your base business. Considering the extraordinary numbers that you've been doing from PCR testing, has that had any effect on your efficiency of your base business? Just surprised, I guess, to a degree that 4% growth is sort of what you'd expect going forward, particularly because there would be some amount of catch-up. Perhaps I'm thinking there is some sort of ramifications from your labs doing those levels of volumes of PCR testing.
Just to get the picture clear, when we do COVID testing, it involves. I'm going to exclude the collection of the COVID swab just for a second. It involves our couriers. These big volumes of COVID testing impact couriers. They impact what we call the front end of the lab. That's the pre-analytical stage, the data entry, the specimen reception, and they impact the molecular lab that does the test. Outside of that, let's say for example, you're looking at the microbiology lab or the hematology lab, the actual volumes do not impact those labs. The capacity to do additional base business in our regular departments remains intact. We've had to staff up those areas that I've just mentioned to cope with the COVID testing. Of course, it has created a huge challenge, so I don't want to underplay it at all.
It certainly leaves the rest of the lab, that's the analytical parts of the lab, open and available to do their normal work. If the volumes go up 4% or 5% or 6%, we would handle it as we normally would. The challenge will be for us at the front end of the lab, where all specimens have to go through that stage before they get to the testing stage. Of course, just finally, you've also got things like IT and procurement and management. There's a whole lot of other work that's required to deal with the big volumes as well. I'm hoping that gives you an answer that we are now set up to do high volume COVID testing and to cope with growth in our base business as well, where it shouldn't be a problem.
Great. Thanks, Colin.
You shouldn't take that 4% as some sort of hard and fast guidance, right?
Yeah.
That was thrown out by an analyst, and we've said that.
It's not unreasonable.
We're not giving guidance, but that doesn't sound unreasonable. Will it be 4? Will it be 6? Will it be something different? We don't know. Colin's point is that our growth of our base business is not impacted by the level of COVID testing we're doing.
There could be some bounce back from some of the tests that have fallen behind, where people are probably undiagnosed in the market right now.
Yeah, that's the sense that I was trying to get, whether there really is a level of catch-up that could take place through your business.
It's very hard to predict that. We think there will be, especially in the anatomical pathology side of the business, but we think that was actually happening until Delta hit. Again, this is not something that's very clearly measurable within the rest of our volume.
Right. Thanks for your answer.
Thank you.
Thank you. Your next question comes from Saul Hadassin with Barrenjoey Capital. Please go ahead.
Thank you. Good morning, Colin, Chris, Paul. Colin, can I just ask you, at the first half result, there was a comment that you mentioned that Sonic was currently bidding on some significant opportunities, a mix of contracts and acquisitions in Australia, the U.K., and the U.S.A. as it relates to the Alberta, Canada tender. Can you comment on what's happened in each of those regions as related to those opportunities that you were working on at the time?
Yes. It continues. We are still working on contract and acquisition opportunities, in those countries that you mentioned. In terms of the Canada opportunity, which was in Alberta, we made the decision in December. When was it? No, sorry. No.
March.
March. Sorry, after the half year result. To withdraw from that process. That was a decision made very astutely by our management team based on the opportunity that we saw ahead of us. We elected to withdraw from that process. The rest of them are all still in train. Some new opportunities that have arisen since the half year result. That statement stands to this day. Perhaps you're a bit disappointed that they didn't happen in the six months to date. Stay tuned. Things take a while, especially in the pandemic.
Yeah, sure. Understood. I guess the question was, they're still in train, would there be an expectation of some updates within this fiscal year, 2022? Is that a reasonable timeframe?
I think that's probably quite-
Possibly, yeah.
Some of the main ones we're referring to.
Yeah, possibly.
Okay.
You're pushing it, Saul.
Yeah, I know. I like to. Just a second question, if I could. Colin, just the strength of the COVID testing and the revenue generation that it's translated to. Can you just comment on, I know you've spoken about PAMA in the U.S., but as it relates to Australian and German funding for base business, can you give us any thoughts or updates on what your expectations are re funding of base business in light of the context of contribution by governments to COVID testing? Thanks.
Yeah. Saul, it's all very stable. We didn't put that on every slide, and maybe we could've. I think there's an appreciation by governments right around the world of the contribution being made by labs, medical labs. Because labs have stepped up in such an enormous way, that other than that PAMA potential cut, which has been in train for years now, there is nothing on the horizon in any of our countries that we're aware of. It's regulatory environment stable.
Actually, Saul, just to add to the PAMA position. I think, Colin, when you were going through that slide, you mentioned 20% of our revenue was related to Medicare. It's more like in the post Aurora acquisition.
It's less.
12 or 13%.
Perhaps I should say 20% of our base business.
Business, yeah.
Yeah
U.S. business.
True.
Got it. Okay, thank you. That's all I had.
Thank you.
Thank you. Your next question comes from Gretel Janu with Credit Suisse. Please go ahead.
Thanks. Good morning, all. Firstly, on the base business, have you seen any significant changes in test mix or test per patient or payer mix at all relative to pre-COVID, that we should be aware of?
Not that I'm aware of. I'm just thinking around the world. No. The base business has remained consistent in terms of its mix and volume. No change that I'm aware of.
Okay, understood. Just thinking about the rapid antigen test. Clearly we've seen them get higher rates of adoption offshore relative to Australia. I guess, how much share do you think that these could take from PCR testing rates? What exact role could you have in that type of testing?
Yeah, we are already involved to some extent with rapid antigen testing, particularly at industrial sites like mines, for example. Our reservation about rapid antigen testing is all around the science, that is the low sensitivity and specificity of those tests, meaning that when you talk low sensitivity, there'll be a significant number of false negatives, and that's a critically important issue in the control of a pandemic. That's not to say that there may not be a place for rapid antigen testing, but it needs to just be borne in mind that the sensitivity and specificity are nothing like the PCR test, which is an unbelievably accurate test and hugely sensitive to the presence of COVID-19. We're keeping an open mind.
Yes, it's possible that rapid antigen tests take up some of the place of PCR testing only because they are rapid, and I guess easier and possibly a bit cheaper. We've just got to stay sanguine about this, that if anyone thinks that a rapid antigen test can replace a PCR test, I think that's a mistaken view, because of the low sensitivity of the test relative to PCR. The sensitivity of the test is low where viral load is low, where perhaps you want to actually try and identify people early or in the recovery phase of the infection. It is true that they come into their own with people carrying high viral loads. In other words, the people who are most infective, you'd be able to identify those people with a rapid antigen test.
I think there's still so much debate going on about rapid antigen tests right around the world. We, as a lab company, are keeping an open mind about it and will participate where it does make sense going forward.
It's probably worth mentioning also that the positive rapid antigen results are generally confirmed by PCR as well.
Correct.
The use of one triggers the other as well.
Understood. Thank you. Just finally, on costs, you did say that in the U.S. you've been able to maintain your labor savings there. Is that consistent with your other regions as well? I'm just trying to get a sense in terms of where margins potentially could normalize, once we see more normalized COVID tests.
I think the phenomenon is more marked in the U.S. than elsewhere. Perhaps, the situation in our U.S. division was more conducive to making those labor cuts, the industrial environment in particular. I don't think you should extrapolate that exactly to all our other markets. That was very much a U.S.-centric phenomenon.
Thanks very much.
Okay.
Thank you. Your next question comes from John Deacon-Bell with Citigroup. Please go ahead.
Thank you. Look, just to continue on the cost question. In your 4E, you had consumables up 45%, which makes sense. Labor up 6%, perhaps a bit subdued because with FX, it might have been a bit higher. Can you just give us a feel for that comment you made earlier, Colin, about the front end being impacted? You said you'd added in some costs for that. Can you just give us a feel for of the 6% growth, what was permanent, if you like? If revenues decline back to lower levels, does some of this come out or are we at a higher base permanently going forward? Where do you think that'll go from here?
Yeah, I will make a comment about the labor and then hand to Chris, who can talk about the consumable side of it. The front end labor cost is very flexible. We often use part-time casual staff, and we flex it and we expand and contract it with seasonality as well. That cost won't remain in place, should COVID disappear. Let's hope it does. Even if COVID testing drops to a baseline level, we will match the front end, to match the number of accessions or patient specimens coming through. Chris, maybe I will hand to you.
Yeah, just on the consumables. That pretty much is just the impact of the COVID kits. John, as you might imagine, during the pandemic too, the labs weren't in a great position to negotiate particular rates. It was a matter of trying to get hold of whatever sources of tests you could get hold of at the time. We're seeing now with some inversion of the supply and demand, some repricing of those kits. I think going forward, the cost of those kits will be relatively lower, but the actual cost of the kit is quite a high percent of the reimbursement amount. That's had an effect on the % of the consumables, the % of revenue as well. I think we'll see that come down, probably more than in line with the volume changes because of some reduction in pricing in the coming months.
In terms of the underlying labor cost, should we just assume kind of inflation? There's no other real large changes should occur, right?
No. It should be back to the pre-pandemic level with a bit of benefit coming through from the U.S. side of things, as we've discussed.
Got it. Okay, thanks for that.
Thank you.
Thank you. Your next question comes from Lyanne Harrison with Bank of America. Please go ahead.
Yep, good morning, all. Thank you for taking my questions. I want to come back to U.S. COVID-19 testing. How is Sonic positioned in those high COVID-19 states or the high unvaccinated states where we're seeing that surge in the Delta variant currently? Is Sonic getting similar testing share compared to where it was in FY 2021? Is it varied from that, given that you may not have labs positioned in those states?
That's a good question. I can't cover every single state, but I do know that in Texas and in Tennessee, those are two states right in the thick of the pandemic in the U.S., where if you look at the case numbers at the moment, they are higher on a per capita basis than elsewhere. As it happens, we have big labs in both of those states. We are picking up testing in those states. Arizona is another state where the numbers are high, and we don't have a lab to do COVID testing in Arizona. Certainly, the Texas and surrounding states market, which is the Southwest of the U.S., is covered by our big lab in Austin, Texas. The Tennessee and surrounding areas where COVID, particularly the Delta variant is rife at the moment, we cover in our lab in Memphis.
I think that just happened to be a quirk of fate, that our two labs are in the space. Perhaps it does explain why our COVID volumes are growing at the rate they are growing at the moment. They are growing at a great pace, but have not yet, as I mentioned earlier, reached the peak levels of FY 2021. Whether they get there or not, I guess remains to be seen.
Okay, thank you. Just my follow-up question, coming back to margins. Would you say that, given the scale to weigh, there is a possibility that we could get further margin expansion, given that you're probably less likely this time around to have constraints around reagents and like?
I'm going to give this one to Paul.
Lyanne, we can't answer that question for all the reasons we've already really spoken about. You're right, there are some cost savings to be had around the consumables and even on things like freight costs, et cetera, compared to the early stages of the pandemic. There's just too many moving parts there to comment.
Okay. Thank you very much.
Thank you.
Thank you. Your next question comes from Rod Sleath with Rimor Equity Research. Please go ahead.
No question.
Rod.
Rod's not there.
Hey, can you hear me?
Hi, Toby. Oh, yeah.
Hello, can you hear me? Sorry about that.
Yeah.
I have these new earbuds, and I just pressed a button on the side of them accidentally and lost you. First of all, I just wanted to say thank you very much for all the tests that you've conducted in the last 18 months. That's been fabulous, obviously, for all of us. With regard to questions, look, this first question might be a stupid question, but with regard to the 65% franking on the dividend for this year, is that suggesting that you have disproportionately high profitability in Australia in FY 2021 versus earlier years?
No, Rod, it's not really. You've got to look at the payout ratio as it's actually been commented on earlier on the call. It just means that given the payout ratio overall is low, the fact that our profits in Australia are up and therefore tax payments are up, we're able to increase that franking percentage.
Perfect.
It's not clear yet whether we'll be able to hold that level going forward. We thought whilst we can, we'd get the value of those credits out to our shareholders as quickly as possible.
Sure. Perfect. That's great. I was wondering if you could perhaps expand a little on the growth that you've seen in the imaging business with that 15% underlying organic growth.
Yes. This is partly Sonic growing market share, but partly an industry-wide phenomenon. We've seen a fair strong growth in imaging right around Australia. The reason for it remains under discussion. Nobody knows for sure. One of the theories is that all specialists are unable to travel and therefore at work, 100% of GPs and specialists, therefore seeing more patients. That was one. I'm not saying these are definites. These are theories.
Sure.
That was one. Yeah, we see that our growth rate, that 15% organic, is slightly higher than the Medicare rates, and so we think it's a combination of strong market growth and market share growth.
I guess just while we're on imaging as well, if we look at some of your competitors in Australia, I-MED, the smaller end, IDX, they are starting to introduce AI algorithms into their processes and procedures. Have you begun doing that at this stage? Otherwise, do you have a strategy for the introduction of AI into medical imaging? That's the first question. Secondly, on a longer term basis, if AI becomes more pronounced in medical imaging, does it actually have the potential to move that business model closer to, not as far as, but closer to the pathology business model, whereas you don't have to have eventually a very expensive professional looking at every result?
We are very engaged in the AI space, and starting off with our imaging division. We are expecting to make an announcement in the first half of the year, sometime in the coming months, we will make a formal announcement about it. We have formed a relationship which we believe is a very attractive one for us, which will not only cover imaging, but also extend into our lab division, the pathology side of it. It is quite an exciting thing that we're involved with at the moment. Unfortunately, we're not yet in position to make that announcement, but we will shortly. In terms of the response, our feeling is, and I think this is a worldwide feeling, that AI will not replace a radiologist.
AI will make the job a little easier and faster, but it will always require the radiologist to make the final diagnosis and to make the correlation with the clinical findings. I think the idea of having AIX-radiologist just won't happen. Also you've said, will it bring it closer to pathology? Now, in the pathology space or in the lab space, I'm going to call it for the overseas participants on the call, our view is that pathologists are absolutely essential. We have taken the view over decades that labs are not factories where you can just churn results out of instruments. In order to provide the best quality, you have to have pathologists in the automated areas of the lab. By that, I mean hematology, chemistry, microbiology, genetics, et cetera.
Obviously, you need them for anatomical pathology to diagnose cancers and other tissue-based conditions. This is a fundamental issue in the diagnostic space, is that you will always need, according to Sonic and probably most operators in the space, you will always need the medical professionals fully involved. We don't actually see necessarily radiologists falling off through the use of AI, but it'll certainly make us more efficient, because the diagnoses will be assisted by the AI process. That's already being used in a number of places already.
That's great. Thank you very much.
Yeah.
Thank you. Your next question comes from John Copley with Evans and Partners. Please go ahead.
Maybe on mute again. Jonathan? No question there, Zoe.
Can you hear me?
Oh, now we can. Yes.
Sorry. Thank you.
Apologies for that, good morning. I was just hoping you'd be able to quantify the opportunity that exists in FY 2022 from the COVID vaccine rollout, given that Sonic has a reasonable level of clarity on what the target vaccination rate is, and that you have some lived experience running a few mass vaccination centers. Thank you.
Jonathan, we're really not in a position to even give you an estimate of this. All we can say is that on the current trajectory, it's the three areas that we're involved in, through our GP centers around the whole country, through potential contracts for nursing homes in selected states, and then through mass centers, which we're only operating in Sydney at the moment. We're getting an early idea. We've only been involved for a number of months. It's very early on in the piece. As soon as we get a sense of what this trajectory is going to be, we will inform the market as much as we can.
It's one of those things where we can see an opportunity where we have the infrastructure and the people, to be able to offer a service in this space, and we're very keen to take it further and make a contribution in that space, and it could become a material part of our clinical business going forward. It's as much as we can say, and I'm really sorry if that's not going to satisfy you entirely.
No, you're right. It doesn't entirely, but I understand that's all you can say at this point in time. Thanks very much, sir. That's all from me.
Thank you.
Thank you. Your next question is a follow-up question from Lyanne Harrison with Bank of America. Please go ahead.
Getting a long pause, Lyanne. You might be on mute as well.
Sorry, that's me.
Yeah.
I think I was on mute. Just to follow up on John's question. If I think about the SCS business and what you're doing in vaccination, is there a risk that your base SCS business will decrease as some of your staff are, I guess, transferred to helping roll out the vaccine in Australia? Also wanting to understand margins for that SCS business, is the vaccines at a lower margin because you're not getting the patient gap payments to support that?
Lyanne, I just want to say unequivocally that our business is predominantly providing clinical services. The vaccination component is something very new, and we would never compromise our routine clinical services via staff cuts or anything like that. That comes first and foremost. The reason that we've entered into a partnership with St John Ambulance Australia is to assist us with the staffing of the mass vaccination centers. As I mentioned earlier, that's been a very, very fruitful and successful collaborative process.
It was designed specifically to address the issue that you're raising, because for us to actually muster fairly large numbers of staff, mainly for the mass vaccination centers, would have been very difficult at short notice, whereas St John were able to provide us with suitable people to augment our medical and other staff. In terms of providing GP vaccinations, that hasn't compromised our normal services. I think GPs normally give vaccinations anyway. They're giving flu vaccinations and other vaccinations as part of their daily jobs. In terms of providing vaccinations in nursing homes, we've been able to accommodate that within the normal staffing that we have, for Sonic Clinical Services, and that's gone particularly well. Remember those, we need to go out to the aged care facility, and vaccinate the residents on-site as opposed to a vaccination center where people come to you.
It has gone very well. Now, in terms of your second part of your question, which was to do with margins. Again, it's too early for us to say because we entered into this initiative with the intent of making a contribution to helping out the Australian population. However, at the end of the day, we are a business and the fees that we are getting for the vaccinations have been set. They are fees that are not in any way exorbitant, but on the other hand, we're not losing money. Remember also that mass vaccination centers are very volume-dependent. There's a lot of infrastructure that you've got to put in place in terms of people and equipment. If you start off with low volumes, it's that high fixed cost. It's very volume dependent essentially. As you ramp up volumes, so the numbers get better.
I just want to make the point very clear that we're not entering the vaccination market as a cutthroat commercial endeavor at all. We want to make a contribution, and we believe that we have the infrastructure to do that, we're happy to leave it at that for the time being.
Okay. Thank you very much.
Thanks.
Thank you. Your next question comes from Shane Ponraj with Morningstar. Please go ahead. Oh, hey, good morning.
Morning.
My question. John and Lyanne took that then. Thanks.
Okay. Thank you.
Thank you. There are no further questions at this time. I will now hand back to Colin Goldschmidt for closing remarks.
Thank you very much. No further closing remarks. I think we've covered it all. I just want to thank everyone for attending the call. Have a good day. Thank you. Bye-bye.
That does conclude our conference. Thank you for participating. You may now disconnect.