Sonic Healthcare Limited (SHL) Earnings Call Transcript & Summary

Welcome to the Sonic Healthcare's Full year results presentation. I would now like to hand the conference over to your host today, Dr. Colin Goldschmidt. Please go ahead, Colin.

Thank you very much, Ben. And good morning to all and a warm welcome to everyone. This is Sonic Healthcare's results presentation for financial year 2020. That's for the period ending 30th of June 2020. My name is Colin Goldschmidt. I'm the CEO of Sonic Healthcare, and I'm joined by my 2 colleagues today, Chris Wilks, Sonic's CFO; and Paul Alexander, Sonic's Deputy CFO. Now I plan to take you through the result presentation, which I hope you have with you. And following that, we'll then revert to questions that you may have. All 3 of us will take the questions. Before we go to the slide pack, I was keen just to give a short introduction, I guess, to set the scene for the report that we give for this period. It was not long after the half year result in February of this year that the coronavirus hit us. And at Sonic Healthcare level, what has taken place over the past 6 months has been nothing short of unprecedented, which is a word everyone uses, and extraordinary. And we're keen to share with you today Sonic's journey over the course of those tempestuous months, is probably the best way to describe it. We'll obviously cover the numbers for FY 2020 as we normally do. But I'll share with you how Sonic has weathered the storm so far and come through it a stronger company; essentially how we fared in the pandemic over the past 6 months; how we handled the initial, pretty severe shock to the company in March and April when revenues in all 8 countries in which we operate fell, but fell rapidly and steeply. And despite that massive shock to our system, how Sonic staff responded so superbly, first, to reduce costs and preserve capital and then to set up, validate and begin offering a new and fairly complex test that is, of course, the COVID PCR test, which has now become so central in overall global pandemic control and management. Then from May onwards, our base business volumes and revenues began to recover progressively. And that positive trend has continued through to the present where, today, we are at or above pre-COVID base business levels, except for the U.S.A. and the U.K. where revenue recovery is not quite at that level, but the trends are positive. Our COVID testing has ramped up very significantly to meet a huge global demand, and we are now doing COVID testing in all 8 countries, with high-volume testing taking place in the U.S., Germany and here in Australia. I guess as a summary of Sonic's current position, the recovery in our base business revenues, augmented by our COVID testing, indicate that we've moved from a pretty difficult position in March and April back into a strong position today. From our current position and looking ahead, Sonic is secure and Sonic is strong, although I have to put the caveat on that we have no complacency about the possible uncertainties that lie ahead. And perhaps most importantly of all, through the 6 months of the pandemic to date, Sonic's people have made sacrifices for the company and have risen to the occasion in an incredible way. With all of the negative implications of this whole pandemic, Sonic really is a shining light. Our company has risen to the occasion magnificently as well and continues to make a very meaningful contribution on a global basis in this epic battle that we have against COVID-19. So if we could go to Slide 3, please, which is the first real slide in the deck. In order to best appreciate Sonic's performance to date and also going forward, we're keen to provide some information on Sonic's positioning in relation to COVID-19. And that's really what this slide is about. First of all, under the heading of Our Contribution, I want to make the statement that our core business is the provision of essential diagnostic and clinical health care services. And I guess as a result of that, Sonic is playing a central role in pandemic testing, which itself enables treatment for coronavirus. It enables contact tracing and enables isolation and quarantining, all of which are absolutely critical to pandemic control and management. And because testing plays such a vital role in pandemic control, our involvement in the pandemic has actually extended beyond the labs into the arena of public health policy and pandemic planning. And just going to the third sub-bullet point under contribution, our leaders around the world are actually supporting national- and state-based initiatives in partnership with governments and public health authorities. And it's fair to say that our leaders in all countries are in regular contact with federal health ministers, state premiers, governors, state health ministers, federal and state authorities and the like. This has been an incredible development in which Sonic is playing a very active part. And I guess these collaborations between a company like Sonic, a large private laboratory company and governments gives you an indication of the importance of Sonic's work, overall work in the COVID-19 pandemic. Now to date, we have completed 6 million COVID PCR tests on a global basis, and we'll speak more about our COVID testing through this presentation. In terms of our staff, our 37,000 staff are operating really at the frontline of the pandemic and, in no uncertain terms, are unsung heroes in the pandemic itself. There's very little publicity given to Sonic staff and all laboratory staff around the world, but it's in laboratories that the COVID testing actually takes place and it performs such a critical part of pandemic control. Because we're doing so much COVID testing, obviously, our focus has been very much on the safety of our staff and the safety of patients coming into our patient service centers given that we are handling infective specimens and coming into contact with potentially infective patients as well. Our staff are essentially working 24/7 around the clock which, again, is a difference that Sonic Healthcare has with many other companies. And in Australia, we're not just doing the testing, we're also having to do all the swab collections as well. We're also doing small amounts of swab collections in Germany. But in the rest of the world, collections are done by clinicians, hospitals, clinics, et cetera. So in Australia, we have a particular, I guess, task, and that is the collection of those swabs. In every way, we are leveraging Sonic's international expertise to optimize our response to the pandemic. And just to put some meat on that bone, within Sonic, you have scores of, for example, microbiologists. These are specialist pathologists who are specialized in microbiology, which is right in the space of coronavirus. We have infectious disease specialists all over our operations. We have hundreds of molecular biologists and senior scientists working for us all the time. We have experienced managers and CEOs that are working under the overall culture of medical leadership, which is really an invaluable and quite unique portfolio in the setting of a pandemic response. And just to give some more sense of the collaboration that's going on around Sonic. We're using that expertise to collaborate around test development, the validation of tests and different platforms. We're collaborating around swab collection. And just one example, we were the first company to publish a paper on a self-collection kit. That's how to take a swab yourself. And that was rushed through to publication from the Douglass Hanly Moir lab and Sullivan Nicolaides lab here in Australia. And bear in mind that everything I've said to date also means that Sonic has had to continue providing all our routine, usual services at the same time as the new COVID testing that we're doing as well. And so this has presented a huge challenge to our staff around the world, the fact that we're working in a pandemic and need to operate 24/7 and the introduction of a brand-new test at very high volume. Under the heading, Operations, just to note that all Sonic facilities have remained staffed and fully operational throughout the pandemic and that our management teams, in particular, but all our staff as well, have needed to respond and adapt very quickly to an almost completely new operating environment. So all of a sudden, it's not just the new test itself but huge additional volumes coming into most of our labs around the world required a lot of management expertise and adaptation. We've mobilized Sonic's resources and infrastructure to handle this pandemic in a very positive way. And I guess this reflects, in many ways, the long-standing investments that we've made in lab buildings, technology, IT, collection centers, equipment, people, and it goes on. All those investments have given us a very good foundation to pivot rapidly to handle the needs of the pandemic. And the final point there is just a mention of the challenge in procurement that existed around this pandemic: huge global demand, worldwide shortages of equipment and reagents and PPE gear, it goes on and on. And so big teams of Sonic have been working tirelessly every single day to ensure the supply chain is coming into Sonic labs around the world, and we've been able to fulfill the demands that have come our way as a result of that. Moving on to Slide 4, and we get to the numbers. And these are the headline numbers for FY 2020. And just to make the point that the numbers that we're talking about here are not including AASB 16, the new accounting standard. So our revenue for FY 2020 came in at AUD 6.86 billion, which is 11% up on the prior year. And our underlying EBITDA number came in at $1.109 billion, which is just a bit ahead of the updated guidance that we gave on the 24th of June, which was $1.075 billion. Underlying net profit was up 7% at $552 million. And I guess just to revise the point that up until mid-March, that's 8.5 months into the financial year, our performance was in line with the original guidance that we gave out in August last year of 6% to 8% constant currency underlying EBITDA growth. But of course, from mid-March, everything changed. And as you know, we withdrew our guidance and then gave additional guidance on the 24th of June. The impact of COVID-19, I've already touched upon, first of all, that our base businesses were severely affected in March, April and May with quite significant margin contraction. And then from May onwards, our base businesses began to recover such that by year-end, most divisions, excluding U.S. and the U.K., were back to pre-COVID levels. Our COVID testing, very importantly, ramped up aggressively, starting in about March 2020 and, of course, this served to partially and fully -- partially offset the revenue deficits from our base business. A very pleasing fact is that our balance sheet remains extremely strong. Our available liquidity at the moment is approximately $1.4 billion. And the Board has ratified a final dividend at $0.51 per share, which keeps it at the same level as the final dividend last year. But for the full year, the dividend is actually up by $0.01. Moving on to Slide 5, which is a table which now does include numbers under AASB 16. And I guess this table shows some more headline number details. You'll note that the EBITDA number under AASB 16 increases by about $300 million for this financial year. So EBITDA, under AASB, which is the statutory number, is $1.412 billion. And just a couple of other comments. First of all, the revenue growth has been augmented by the Aurora acquisition. The acquisition date was 30 January 2019. And the net profit growth was reduced by nonrecurring items in the prior year, so there was a gain of -- an after-tax gain of $50 million on the sale of GLP Systems, which was in the 2019 year, on which that growth is -- the number is reduced accordingly. And I guess the other point is our strong cash generation, which you'll see there at 26% above last year at over $1 billion, was assisted by a prepayment by U.S. Medicare for fees to be done and also our cash preservation initiatives. There's just one other point that I'd like to make on this slide, and it's about the earnings growth numbers, which you'll notice are below the revenue growth numbers for the year. This is mainly a result of the margin contraction that I've mentioned as a result of the steep and rapid falls in our revenues in March and April. And those sudden falls in revenue across the board, globally, like nothing we've ever experienced before, were amplified at bottom-line level. And then they have been recovered more progressively as we adjusted costs as COVID testing kicked in and as base volumes returned back to normal levels. So it's a timing effect at marginal profit level. So looking ahead into FY 2021, COVID revenue is now compensating, even overcompensating, for any residual shortfalls in our base business revenues. So the discrepancy between revenue and earnings growth will no longer be there going forward. Now moving on to Slide 6, which is, I guess, our outlook for 2021, which is very much governed by the fact that we are not providing formal guidance for 2021. And the reason for that relates directly and specifically to the unpredictability around the coronavirus pandemic. We can say, though, that our revenue growth in July and August 2020 are substantially higher than historical rates. And then we can also say that we are in the midst of strong COVID-19 testing, and that is currently augmenting our growth further. Our base laboratory businesses, as I mentioned earlier, are back to better than pre-COVID levels. And in July, they're up 5% on the prior year in most countries but still negative in the U.S. and U.K., but the trend is positive, and we expect those to reach pre-COVID levels in the near future. So the outlook is very much dependent on fluctuations in our base business and our COVID testing revenues, but these are not absolutely certain. And because of that uncertain environment, we need to make it clear that current revenue growth rates that we're giving for July, for example, may not be sustained. But in general, I guess we can say that there is an inverse relationship between base business and COVID testing volumes. So it's a logical fact that if base business levels fall then COVID testing volumes will tend to go up. And we have some examples of this taking place right now, for example, in Melbourne, where our base volumes are now slightly down because of lockdowns in Melbourne, but COVID testing volumes are going up. The rule is not always tight because in Germany, as another example, right now, base volumes are actually up as our COVID testing volumes. And so you have a situation where in Germany, for example, COVID testing is now up because returning holidaymakers are being tested for coronavirus, not affecting our base businesses, which are all above pre-COVID levels and above last year's levels as well. And I guess I could say also that it's highly unlikely to envisage a scenario where both base business and COVID testing levels are both down. Not impossible, but highly unlikely. So the final point here is that even though we're not giving guidance today, we will provide a market update at our AGM in November of this year. On to Slide 7, which is information about the dividend that I've already provided, the record and payment dates are there and franking to 30%, which is the same as the franking level for the interim dividend. I guess I can say that there's obviously been quite a bit of discussion at Board level about the dividend payment. But based on our strong balance sheet and earnings and cash flows, the Board has felt it appropriate to pay the dividend at the level of last year. Moving on to Slide 8, please, and that's our traditional pie chart of the split of Sonic's revenue. It's there for your information. I guess I could just add a couple of points. The pie itself is obviously larger than last year, 11% larger. The U.S.A. is now clearly Sonic's largest division. As foreshadowed previously, revenue growth in the U.S. was almost 30% for the year assisted by the Aurora acquisition. And there's also some foreign exchange tailwind in this chart, bearing in mind the chart is all expressed in Australian dollars. I guess there's one other minor point to mention, and that's the SCS & Other segment. So for those of you who are going to be comparing this pie chart to last year's pie chart, you'll notice that the $418 million is actually below the pie chart of the similar segment last year. And that's because last year, the Other segment included operating revenue from GLP Systems, which we sold in June 2019. I'm going to move through the country slides quite rapidly, just in the interest of time. So we're on to Slide 9 and the U.S.A. slide. As I mentioned, revenue growth was strong at 29%, which is 21% constant currency revenue growth, including that extra 7 months from the Aurora acquisition. At organic growth level, it's 3%. And there is also government grants to maintain essential services in the pandemic of USD 20 million included in that. The response to COVID-19, we're doing large numbers of COVID tests in the U.S., approximately 3 million to date, with market-leading turnaround times. We're testing in 12 separate labs of ours in the U.S., using multiple platforms deliberately to mitigate that global supply chain risk that I mentioned earlier. And we're expanding our capacity even further in collaboration with federal agencies to satisfy an increasing demand in the U.S. We've got a few points there on our baseline operations. We're moving ahead with our ThyroSeq initiative, which is the genetic test for thyroid cancer. I guess it's good news that the PAMA fee reductions, which we have flagged before, have now been deferred to January 2022. And there is also talk about a smallish fee cut to anatomical pathology -- Medicare fee cut to anatomical pathology. And our industry association in the states is lobbying hard against that. We've calculated that it will not be material in Sonic's numbers, approximately $7 million impact in total. Slide 10, the Australian Pathology or Australian Laboratory Division slide. 5% organic growth for the division, does not include any government subsidies at all. As far as our COVID-19 response goes, we are also doing large volumes of testing in our labs in Australia, currently in 8 Sonic laboratories, and capacity continuing to expand as well. To date, we have done over 1 million COVID PCR tests, and that represents about 20% of the national testing load. You may ask why is it only 20% and not Sonic's more like 40% of market share, and the reason for that is that the public hospital labs are very active in the COVID testing space. So state governments have set up COVID clinics, fever clinics, COVID collection centers, drive-through centers, et cetera, and are, I guess, fulfilling an important role in doing their share of the COVID testing for Australia. Sonic was awarded a national contract to cover COVID testing in all aged care facilities around Australia, which is a huge undertaking. And it's really a huge acknowledgment to our Sonic team because, to date, we've already covered more than 60% of all aged care facilities with testing. It's been a massive logistic exercise. And it's not just testing of the residents in those aged care centers but the staff as well. I mentioned earlier, the -- I'm going to call it the burden, that the Australian Laboratory Division carries in having to do swab collections for all the tests that we perform. This has been another massive task for our leadership teams throughout Australia, setting up dedicated COVID collection centers; trying to isolate COVID or potential COVID patients from non-COVID patients; setting up drive-through centers; and working through a massive logistic exercise around this. And I have to say it's been a wonderfully successful exercise, now fully set up and driving testing going forward as well. Three minor bullet points on non-COVID operations. We've completed the rollout of our Total Lab Automation system, that's to GLP Systems' automation system. Genetic testing continues to grow very strongly including prenatal testing which we're doing in 2 of our labs in Australia. And our bowel cancer contract -- National Bowel Cancer contract continues to fire strongly. And we're finding increasing participation rates, perhaps that was due to people doing the test during lockdowns, not sure, but it's all good for the Australian population. Slide 11, Sonic Healthcare Germany. 10% revenue growth in FY 2020 and 6% organic revenue growth for the period, and there are no government subsidies included in that number. As far as our COVID-19 response go, we're very proud to say that our labs in Germany were amongst the very first in the whole of Europe to commence COVID testing. That was in late February -- or in February, and running -- ramping up from then going forward, to the point that we're now doing COVID testing in 24 separate labs in Germany and capacity is still expanding. To date, we've completed approximately 1.6 million COVID tests, PCR tests, and that represents about 20% of the entire German COVID testing load, an incredible achievement and a huge acknowledgment to our leadership team and staff in Germany as well. There are a few points on non-COVID operations, which I won't go into right now, just again, in the interest of time. Moving on to Slide 12, please. In Switzerland, our revenue growth was strong at 14% but 5% organic revenue growth at constant currency level. The ramp-up of our COVID testing in Switzerland was fairly late compared to Germany, for example, and really only started ramping up late in the fiscal year. A couple of points about operations in Lausanne and Zug, for your information. And moving on to Slide 13, our U.K. slide. 9% revenue growth, of which 5% was organic at constant currency level. We did receive approximately GBP 6.5 million worth of government grants in support of essential services during the pandemic. So that's included in the revenue number for the U.K. Our COVID-19 response, our base business in the U.K. was perhaps more severely impacted in March and April, probably due to the fact that we have a greater weighting to hospitals in our private business in the U.K. So remember hospitals right around the world were repurposed for COVID-19 patients. And that meant that elective surgery and all sorts of routine undertakings in private hospitals essentially ceased. This is obviously now coming back, and there is a bounce-back. So the other thing that happened in the U.K. was that initially, testing, whilst it was a little late in the U.K., did not involve private labs in the first instance. So the ramp-up, like Switzerland, in COVID testing in the U.K. came late in the fiscal year as well. But since then, we've been ramping up our COVID testing after the end of the financial year and ramping up capacity even more as we speak today. So our central laboratory, the Halo building in London is providing COVID testing for both the private sector and the public sector, and we expect that to grow quite significantly going forward. We've also made a few points, for your information, about non-COVID business, which again I won't go into on this call. If we could move to Slide 14, which is Belgium. Our revenue growth there was 1% and negative 2% organic revenue growth at constant currency level, quite a severe impact on our business from the pandemic. We've implemented COVID testing in our Antwerp laboratory, relatively low volumes in FY 2020. So in other words, a late start as well, but volumes now increasing quite significantly. And again, we've got a couple of points about our base business there as well. Moving on to Sonic Imaging on Slide 15. Revenue growth was 4% for the year, I guess, driven by investments in greenfield sites and also new equipment. We had a 6% EBITDA decline. And the phenomenon that took place in our Imaging division is similar to what I described about the margin compression in our laboratory division as well. So a huge hit to top line occurred in March and April, with amplified hit to bottom line and then a slow recovery of baseline business, but of course, in the Imaging division without the assistance of COVID testing. A big effort was made by our Imaging division in terms of cost reductions given that there was no compensation from COVID testing. And I'm pleased to say that July and August revenues and earnings are now significantly above historical growth levels. So there appears to be some sort of rebound phenomenon, certainly a bounce-back in the Imaging division, which is really good news. And from July 1 of this year, most of the items or tests that we do, examinations that we do are subject to a small indexation amount as well. Slide 16 on Sonic Clinical Services. The revenue growth for the year was essentially flat. And we can put that down to the COVID pandemic. We were not eligible for government subsidies. That's the job keeper subsidy for the Australians on the call. And in terms of the COVID-19 response, of course, SCS manages many medical centers, and we do know that patients essentially stop going to see their doctors in fairly large numbers, probably out of fear of infection more than anything else and because of lockdowns. And as a result, we have implemented a fairly widespread telehealth consultation, certainly during the lockdown period, following the implementation of a specific fee by the Australian Medicare system for telehealth consultations. That telehealth consultation phenomenon does continue. Whether it continues long-term into the future, it remains to be seen, but it's certainly a feature of the pandemic itself. We've also had to do a huge amount of work in our medical centers to ensure the safety of patients and, of course, our staff as well. And also to revise that SCS is the largest operator of medical centers in Australia, 227 medical centers and almost 2,500 GPs working in those centers. And our efforts remain ongoing to work on a slow and measured consolidation of those centers and rationalization of those centers. And in fact, the 227, I think, is slightly down on the previous number last year. Slide 17 is a slide on capital management. And really, it shows Sonic's very strong balance sheet. I guess -- our debt is currently sitting at just over $2 billion. Our gearing ratio has come down pleasingly to 26%. Interest cover is pleasingly up at 11.5%, and really a great number, the debt cover is now 1.8x, which is the lowest it's been in 20 years. And the reason for that is a combination of the equity we raised for the Aurora acquisition, which was a little more than we needed for the Aurora acquisition itself. There's been no M&A activity of note in the recent past, and also our cash preservation initiatives, managing creditors, prepayment of Medicare, U.S. Medicare, et cetera, have all contributed to this very good number. We've currently got headroom of around $1.4 billion. That is before the final dividend is paid. Slide 18, which is the final slide. And I guess we've just split this into a COVID-19 summary, where I can say that Sonic Healthcare is responding magnificently to the call to combat COVID-19. I also want to take the opportunity, when we're talking about COVID-19, to really acknowledge fully Sonic's leaders and staff for the role they're playing in the pandemic. It's really been quite amazing to see how quickly and how expertly Sonic's people have responded to this crisis because, at very short notice, we've had to adapt our business completely in an expert and professional way to respond to the pandemic and I guess, in so doing, provide a crucial public service around the world to combat COVID-19. It might be out of place, but I'm going to make special mention of our 3 largest laboratory divisions, that's Australia, Germany and the U.S.A. In Germany and Australia, Sonic really led the way in each country with high-volume COVID testing. And Sonic's early and extensive testing in those countries played a very critical role in the good outcomes that have been achieved to date in both countries. I just always put the caveat that we've still got a long way to go with the pandemic. And to add to this, Sonic's Australian Laboratory Division also had the job of collecting specimens for COVID testing. So for the 1 million COVID tests that we've done to date in Australia, we've taken 1 million COVID swabs. That's a massive achievement in itself with staff working under very difficult conditions like outdoor drive-throughs in full PPE gear, et cetera, putting their our own health on the line in a real way. And let me turn to the work of our Sonic U.S. division. It's been incredible, because in the U.S., we have turned on massive COVID testing volumes at very short notice. And simultaneously, our U.S. division has led the way in Sonic in terms of cost control and the response to a very speed-based business for in those early months of the pandemic. It's not just the 3 large lab divisions that have made such a big contribution, it's all of Sonic's 10 divisions, including Imaging and Sonic Clinical Services. All of our people have had to work continuously during very difficult times and have come through with flying colors. And I have to say, and I think I'm speaking on behalf of everyone working at Sonic, how proud I am to be part of this company. Certainly, as the CEO of Sonic, I feel immensely proud to lead such a fine organization. If we move on from the COVID-19 summary to the outlook position, the demand for Sonic services are increasing. And they're noncyclical in nature. Our geographical diversification continues to be vitally important for the strength of the company. It provides risk mitigation and gives us opportunities for growth. We have incredible experience and commitment from our leadership teams in all countries of our operation. And I have to say, through the pandemic, this has been utterly invaluable. A hugely experienced, committed team of leaders working under an embedded strong culture of medical leadership has been a godsend for us. Our balance sheet is strong, and it underpins our global operations and very much our future growth. And we continue to focus very much on ongoing organic and acquisitional growth. And the bottom line of this presentation, I can say that Sonic is well placed for future success. Thank you very much. Ben, can I hand back to you, please, to coordinate the question section of this presentation?

Your first question comes from David Low from JPMorgan.

Can we start with COVID testing? I mean there's been some interesting trends recently. We've seen the rate of testing declining in the U.S., declining in Australia, continuing to grow in Germany. Any particular insights as to why those trends might be playing out and what you're expecting in the future, understanding that's difficult to predict?

Yes. And you've hit on one of the reasons why we feel it's not prudent for us to give guidance for FY 2021. The demand for COVID testing varies by country and varies by pandemic stage and progression. So as I mentioned in the presentation, we've had a very strong baseline, if I could call it that, COVID volume in Germany. It's now increased somewhat because of returning holidays -- holidaymakers following their summer vacation. In the U.S., yes, it's true that there have been some reports of a slight fall in overall demand for COVID testing. There are various theories about this. One is the reported port turnaround times by some operators, we don't consider Sonic part of that, where people are saying, if I have to wait 4, 5, 6 or even a week for my test, I may as well not have it. Is that the reason for reduced COVID testing? Don't know. And in Australia, it's -- I guess we see demand increasing despite the fact that really, it's only Victoria that's in the midst of a wave at the moment. So testing has actually increased in New South Wales and Queensland, running parallel with what's going on in Victoria where, itself, the volumes have increased quite dramatically. So you can see that there are different factors driving volume growth of COVID testing in different countries and even different areas of a country. And it's impossible to predict what might happen going forward.

Could we interpret that as meaning that in AGM, you're probably not going to give guidance either?

I don't want to commit to that, but we will certainly be in position to give a market update. It may not be guidance, but it will certainly be some indication of how we performed financial year 2021 to date. Again, I can't predict what the world is going to be like in November. Things are changing almost on a daily basis. So we'll have to leave it until then or sooner before we come back to the market with some more information.

If I could just switch to the routine business. So this 5% volume growth is pretty impressive. Do you think that that's a catch-up issue? And I was wondering if you could just touch on the Aurora business as well given anatomical seems likely to have been hit harder by the pandemic than perhaps other routine testing, please.

Yes. And I'll start with that one first. It is true that our anatomical pathology divisions were hit harder and fell more steeply. But the interesting thing is that they have recovered faster and have risen more steeply as well. And I guess it's logical when you think about it, generally, anatomical pathology tests are absolutely essential, despite the fact that people are actually putting off or skipping tests of all kinds. So what we're finding right now is that the anatomical pathology division has rebounded very strongly. And we expect that to continue, if not to rebound. Because you've got to consider that all colonoscopy ceased, that means bowel biopsies and gastric biopsies suddenly stopped. That means there's a whole lot of bowel cancer out there undiagnosed, a whole lot of gastric issues that remain undiagnosed. Same applies for urology, same applies for cervical biopsies and pap smears, same applies for skin lesions, pigmented skin lesions. And there's a publicity now that the incidence of melanoma might increase because pigmented skin lesions are still going to be out there, but were not -- have been delayed or put off. So in terms of anatomical pathology, it's just been an interesting thing, and we believe that the volumes will continue. The base business growth of -- the strong growth that we're experiencing right now is very pleasing. And it's in a similar vein that specialists and GPs and elective surgeries in hospitals all need to get back to normal levels. So having been put off for months during this pandemic, there's a pent-up demand, an essential demand, for clinical procedures and lab tests and radiology and everything in health care. So this is one of the less spoken about issues that have come about from this pandemic, is all the health care that's actually waiting to be done, that still needs to be done. Unfortunately, Sonic is right in that space. So whilst we're doing COVID testing, pandemic-related, we're also in the health care space and will be doing the nonpandemic, if I could call it that, routine health care work as well as it bounces back. And we're seeing that in July and August in our base business.

David, just going back to your point around U.S. COVID volumes, whilst there might be a short-term slight low in the volumes in the U.S., it is government policy, in fact, to increase those volumes. And in fact, we are working with the government at the moment to increase our capacity at the request of government for additional COVID PCR testing. So chances are, the government will encourage that rate to go up as we go forward.

Your next question comes from Chris Cooper from Goldman Sachs.

Again, on the base business, look, I appreciate the virus progression has differed materially by region. But beyond that, is there any structural reason why the U.S. and U.K. shouldn't follow a similar recovery trend to the others, albeit a little bit later? I mean put another way, I know it's impossible to predict with any certainty, but would you be surprised if they were still tracking negatively by the end of 2020?

The answer is, yes, I would be surprised. And yes, we do expect them to recover. They're just lagging a bit behind. I guess it's that inverse relationship that I spoke about earlier. You've got to appreciate that in the U.S. and the U.K., pandemic activity is more intense than it is in our other countries. And therefore, base business levels are probably a bit lower. There's lockdown -- shutdowns, not full lockdowns in many U.S. countries. And the U.K. is only recently opening up. And we're seeing a return to normal business in the U.K., probably a bit faster than the U.S. So the answer is yes, we certainly expect base business to be returning to normal by the end of the calendar year.

Got it. And 2 quick questions on COVID testing. Obviously, we've seen PAMA deferred here, which is helpful. What are your expectations for reimbursement of COVID tests as we go through the next 12 months? Is it reasonable to assume some pressure to PCR as we go through the period?

Yes. Chris, this is a question we can't answer. I don't know. I mean there's many points we can make about the fees for COVID testing. We put out that there's a lot of expense that goes into doing a COVID test. It's not a test that you just bung on a machine and get a yes-no answer, nothing like that. And I guess there's all the stuff around COVID testing that needs to be factored into the fee. So we're certainly hoping that the current fee levels are maintained. There's been some revision, minor revisions, that have taken place already, and we don't expect any further. But this is one of the variables in our decision not to put out guidance. And the answer -- we simply don't know the answer to your question at this point.

Okay. And just lastly, on -- just shifting away from PCR, I guess, I'd just be curious to get your thoughts on serology testing from here. I mean lots of debate in terms of whether it does have a bigger role to play. I'm just interested to hear what you think about that, and I guess particularly whether that answer might change depending on if and when we get a vaccine.

Yes. And so this is obviously an important question, and I'm not going to claim to be the world expert to answer it, but I can say that the take-up of the serology test has not been near the expectation that there was several months ago. And there's good reason for that, and that is that the antibody response to infection, in other words, the immunity levels that are achieved following infection are not as clear-cut as everyone would have expected. And so therefore, the utility of that antibody test is not as great as we would have hoped. It might have some implication for the vaccine, yes. And it depends who you talk to. Again, that there's many elements to the success of a vaccine, whether antibody testing will be valuable following a vaccine application, so you get a vaccine, you want to do a test to know has it taken, am I immune? And then the question is does this serology test actually give you that answer. And this is one of the big unknown areas right now in the COVID pandemic situation. What we have found with the serology test is that we're doing reasonably big volumes in the U.S. and probably U.S. only. We're doing a fair number in Germany as well and a small number elsewhere. But -- and we're also doing some in the U.K., but we don't expect the volumes to be anything like the COVID PCR volumes. And time needs to play out as to the future utility of this test, particularly as it relates to the vaccine, as you raised.

Your next question comes from Steve Wheen of Evans & Partners.

I just wanted to ask in response to if and when a vaccine comes out just Sonic's positioning to be perhaps at the forefront of administering that vaccine. Is that something that you're prepared for and any dialogue with government as to preparations around that yet?

Steve, we probably would not be in the frontline of vaccine administration. It's not really our job. That will fall to GPs and health clinics. And that's not what we do, is give the vaccine. But there will be testing required around the application of vaccine, as we've just been talking about, and that's where we will come into play because people will want to know has the vaccine taken, am I immune? And the only way you can do that is by checking for antibodies. And so I suspect that there will be an integral role for lab companies like Sonic, what -- if and when a vaccine becomes available, but not in the administration of it.

Our medical center operation in Australia will be.

Will be, yes. That's Australia only.

Yes. Yes. Okay. I mean I was looking at that specifically just in light of its flat revenue that, that might be something that might help improve some of the visitation around those centers.

Yes. Probably. Assuming the vaccine. Yes.

Can I also just ask to the government grants that you've received to date, are they repeatable? Or is there sort of -- what's the -- how are they structured in terms of -- this is obviously going on longer than perhaps was originally expected. So are there follow-up payments that can come through from those governments?

Yes, look, there is some potential for that, Steve. We're in some discussions. I think Colin alluded before to the fact that we're talking to federal agencies about ramping up capacity. And so there are some grants that we're talking to federal agencies in the U.S. about having some funding to create more capacity for COVID testing. So there is a chance that -- I think there's one that's been announced by Colin for about USD 6.5 million, just a week or so ago that we have received, but there's others as well that are in discussions. So you can probably expect a little more coming through in the FY '21 year in that space, but it's fairly targeted to creating capacity for testing.

Your next question comes from Andrew Goodsall from MST Marquee.

I think overnight the FDA just listed a few items associated with PCR test on shortage including reagents. I was wondering whether you've seen any on testing levels just because you're getting access for those products and whether that's sort of easing going forward.

Sorry, Andrew, there was a bit noisy. Are you asking whether there's a shortage?

Yes. So the FDA listed that quite a number of supplies that are needed for PCR test are on shortage. And so just wondering whether you've had adequate access or whether you could be doing more test, if not for shortage for sort of those reagents or access to those reagents.

Yes. So in response to that question, Andrew, thanks for that. I can just again call out the work done by Sonic's procurement teams around the world, mainly because ever since this pandemic broke, we've had to literally work day and night with all the supply companies, and there's a range of them, to try and ensure adequate supplies for our laboratories. There are allocations made by country, by some of the supplying companies. And then within a country, there are allocations made to various testing facilities. And in some cases, governments have actually taken control of the distribution of reagents and equipment for COVID testing. So we've had to work within all those constraints to try and ensure that we can satisfy the demand that comes our way. We are -- in no significant way, have we been constrained. So if you take our high-volume testing countries, Germany, U.S., Australia, I think we could do a little bit more in the path in the U.S. where demand has exceeded our capacity, but we're in the midst of major ramp-ups all over our testing facilities, all over the world. And so it hasn't been a major issue for us. I understand the FDA would be saying that because in the U.S., the demand is huge. And there's talk that the U.S. wants to achieve 1 million COVID tests per day. I don't know how that's going to be achieved, but that is the stated aim. And part of the grant that Chris just mentioned is to help some labs, and Sonic was fortunately one of those, to increase its capacity using different platforms to those that are mainstream where there might be less demand out of the mainstream. So we haven't found it to be a major problem for us to date. And I think we can rely on our procurement teams going forward to continue doing the great job they're doing in securing supplies so that we do match supply with demand.

Maybe just to add to that, Colin, the -- obviously, the supply companies have been rapidly ramping up their own production capability. And so you mentioned before, there's probably that drop-off in demand in the U.S. It was probably a function largely of some supply constraints, which meant that the turnaround times were slower. That's now improving. I think people like Roche have quadrupled their production in the last few months. So I think we're now coming to a point where the supply constraint will be not as big an issue as it has perhaps in the last few months.

And this is just such an interesting point because as you consider that this pandemic, by that word, is global, and more and more and more countries are turning on COVID testing, so you've got the whole global population crying out for COVID testing and equipment and supplies around that. It's an unbelievable phenomenon when you think about it.

In the early days of this -- of the pandemic, the U.S. Air Force was flying freighters into Northern Italy just to get -- pick up swabs. The whole thing was kind of out of control, but it has settled down a lot since then.

That's a comprehensive insight. Just slightly change tactic at the SI business, on our numbers, you're slightly ahead of market in terms of the growth of the revenue line. I know that the [ Northeast ] area is just probably not overly reliable. But just going forward, just -- are you expecting that to exit Victorian shutdown? Are you sort of expecting that to stabilize into a traction line perhaps a recovery during -- just trying to get a feel for that one.

Yes. So I think, Andrew, as Colin alluded to, the growth in our Imaging business has been quite strong in recent months. To what extent that is a bounce-back for things that didn't happen whilst communities were in lockdown, et cetera, is a little unclear. The Melbourne situation, at the moment, as you're probably aware, we have very limited involvement in Imaging in Melbourne, other than through a small joint venture. So that's not having much of an impact on our growth. But the rates are strong and possibly above market, although it's always hard to judge what the market rate is given the timing of the Medicare data. But I don't know the amount of outside of Medicare.

Okay. Perfect. And so, I think you sort of think that would sort of reasonably stable now and should continue to sort of parallel with recovery...

Yes. That's what we think, Andrew.

Your next question comes from Lyanne Harrison of Bank of America.

Just to continue in that vein on discussions around COVID testing. You called out what your market share was in Australia and in Germany. But can you give us some color in terms of what you think the market share is in the United States? And also just to follow on, on that, in those 3 key markets, how much additional capacity do you currently have? And how much can you increase it by? And if so, what sort of CapEx investment might we expect for financial year '21?

Okay. So the first question about U.S. market share, we don't know the answer to that question. We've been given estimates, and we don't know even what the total COVID testing volume is in the U.S. I'm not even going to put out numbers to you. We think we are batting above our average there. We think we're doing more tests than our market share in non-COVID business. In fact, we're pretty sure of that, but I don't know the exact numbers, so I won't give it to you. In terms of setting up capacity going forward, our aim is to match supply with demand. And we're doing everything we can to expand capacity, particularly in the U.S. where demand remains very strong but also in other countries. We're finding demand has increased in Germany. We're setting up more facilities in Australia. In Australia, I think our setup is adequate to handle the demand at the moment, including what's going on in Victoria. Because remember, we can assist each other, our labs in Australia. But our lab in Melbourne is doing fairly high volumes there as well. Now your final question about the CapEx related to expanding that volume is not material in the scheme of things because we -- yes, there are additional pieces of equipment that are required. But in the scheme of our normal CapEx expenditure and in terms of our return on capital, this is not an issue for us at all. The big problem, thus far, has been the supply of reagents from supplying companies. That's been more of an issue than anything internal in Sonic, like CapEx or the space or anything like that.

Okay. So in terms of the U.S. market share, you mentioned you didn't have any color on what that might be. But can you give us a sense of how many tests per day, COVID test per day you're conducting in the U.S.?

Yes. So we're not giving that information out, as you can expect. And we've given you -- and the reason for that is not to be acute, it's just that it's an environment that is unpredictable. And so for us, we don't want to give out that specific information just for fear that we will be misleading, and we don't want to do that at all. So we've given you what we've done to date, and I guess it's going to be up to you to sort of figure out what's happened. We've mentioned that it's ramped up over a period of time. But we don't want to commit to anything per day because those numbers change. They can go down, and it might go up as well.

I think perhaps just to add to what you said before, Colin. If you look at -- I think, Quest and LabCorp have announced some of their numbers up to a certain point. And if you look at the relative size, we probably are doing more than our normal market share of the COVID testing in the U.S. market. But look, as Colin said, it's hard to tell because you don't know how accurate or exactly when the cutoff of those testing volumes were. So -- but yes, from a high level, it does look like we're doing more than our market share.

Okay. And just a follow-up question, I'm just trying to understand the mix that we might see in 2021. How does the COVID testing gross margin in the key geographies compare to your gross margins for routine testing?

When you say growth margin...

Gross margin.

Gross margin, okay. That's a question that's virtually impossible to answer because it depends on so many different factors, which platform you're using to do the test, whether you're doing collection as part of that service as we do in Australia, that we do a little bit there as well. Obviously, fee level is important. So there's a lot of variables in that. And so there is no single answer there.

Okay. But best guess, would you say it would be higher or lower?

And volume is another variable as well. So it will depend on the levels of volume.

Okay. That's fine. I understand you won't share. But if you think about current volume, do you get a sense that it might be higher or lower than routine testing?

We don't want to give out that information. I know you're trying to tease it out of us, but sorry about that.

Your next question comes from Sean Laaman of Morgan Stanley.

Just looking at across the industry, clearly, there will be a very different profit outcome if it wasn't for COVID testing, which is true for everyone. But I think this might have bought some time for some of those smaller scale operators. And I'm just wondering what -- how you think about the pace and scale of M&A in a post-COVID world.

Sean, I think that's a very interesting question because you are dead right that under the pandemic scenario, you would have expected that M&A opportunities would have been enhanced. And I still believe that it will be. But there are many labs who might have been in that position who have turned on COVID testing as a means to, I guess, shore up their fortunes. And they're providing a good job in doing that. So that's quite important because it helps the global and national interest as well. I think we've got to wait and see what happens going forward. The fact that smaller labs are doing COVID testing doesn't exclude them from sale processes and doesn't exclude them from our interest in them. And so I guess, the M&A activity has slowed down dramatically as expected because of the pandemic. And as soon as we get an opportunity, we will be back in the fray because we are very interested in looking for opportunities all over the world. And it's just -- it's not appropriate right now to be doing that. So -- and we'll have to wait and see how players, individual players, I guess, turn out with their COVID testing, even though they might be doing them in fairly small volumes, because an astute buyer will recognize that, at some point, that COVID testing will decline. I don't think -- even though I can't be sure, I don't think it will be there forever. It's an important part of any lab's business right now. And many people say it will go on for years, but maybe not at the current levels. And so these factors have got to be taken into account in any M&A situation.

And one more quick one. So whenever we get to the back end of COVID testing, how easy a process is it to sort of manage -- I guess manage out whatever increased resources you might have needed to add during the ramp-up phase? So is there kind of a lingering cost for a while? Or do things kind of -- do you envisage things kind of calm down, I guess, or tail down along with the revenue side?

I don't think this is going to be a problem because the COVID test is a molecular test. It's a test that -- whilst I mentioned, it's a complex test, there are a family of tests that are very closely aligned in a way. So yes, we have had to take on additional staff at the front end of our labs to do all the data entry work, to do all the specimen receiving. And also, obviously, in the labs that do the testing itself and, of course, people to do swab collections if there are some -- but this will be nothing new to us, and it won't be a problem should that eventuate. So I don't see it as an issue.

Your next question comes from Gretel Janu of Crédit Suisse.

I just wanted to ask a question about reimbursement. So apart from what you called out in the U.S. anatomical pathology, do you see any other further reimbursement pressure in any of your regions? And can you give us an update for Germany and what you saw in terms of quotas in the half?

Yes. So other than what we've already discussed, the outlook on the regulatory side is stable, I think, is probably the best word for it across our different geographies. The quota levels in Germany remains relatively stable through the FY '20 year. As you know, there's quite a delay there. So we won't actually know the final quota level for the June quarter for some months to come. So we've had to make a conservative estimate around that. But yes, stable, I think, is probably the key word.

And then just in terms of cost, can you give us some commentary just in terms of the outlook for cost in the pathology business, any of the costs that you took out during shutdowns? Can any of those be maintained? Or are they all back to normal now and kind of offset by the increase in consumable costs?

So that's a very good question. And we think it depends where you're talking because it's not the same line across the Sonic world. In some of our markets, the costs that have come out, there will be a retention of some of the savings. Now obviously, with ramping up of COVID testing, we've had to take on additional staff. But it has presented an opportunity, the whole pandemic, to review our staffing in general. And I think we will come out -- when I said at the beginning that we'll come out a stronger company, that was one of the things that I'm alluding to. I think we will come out stronger and leaner in some way to answer the point that you're making.

Your next question comes from David Stanton of Jefferies.

Firstly, I know you don't want to give guidance, and understandably, for F '21. But historically, you have given us some help below EBITDA in terms of what you're thinking. I wonder if you could sort of talk to, where you can, your thoughts on F '21 in terms of CapEx, tax rate and potentially D&A and interest, please.

Maybe I'll give you a bit of an answer to that. So to CapEx, you'll see in the 4E that our CapEx, as we had guided previously, was down a bit on previous year. I think there's -- in this environment, there's reasonable control, reasonably good control over CapEx. There's a question before about the whole COVID equipment's cost, I think we'll probably find, at the end of the day, with support we're getting from governments around the world, that will at least offset the cost of that. So I think we shouldn't see any blowout in CapEx and that we -- and it should be reasonably stable, probably at around the levels that we've seen for the year gone, plus a bit for growth, but ignoring the COVID growth. Things like interest, we have often given some guidance. David, again, because we can't give guidance for '21, we're not quite sure about the cash gen and what that will do to our net debt levels. But if anything, I think we'll probably be down on interest cost for FY '21. How much, we don't know. Tax rate, you'll see our tax rate, we've normally guided to about 25%. I think that shouldn't be any different. Again, it depends a little bit on where profits are made, and we've got some differential tax rates around the world. And so that will have a bearing as it flows through. So that's probably about all I can tell you without going outside of what we've said in the 4E.

And just to follow-up on that. D&A, there shouldn't be a blowout in that. But we're...

No. The only blowout we've got is the AASB 16 and getting your head around how that all works. And we've had a -- you have to see -- you'll start digesting those new numbers, which are in line with what we guided to in December. And just a bit of a sing-out to our -- to the team here at Sonic that's put all that together because we've probably -- we think we've probably got one of the largest leasing portfolios of -- in corporate Australia with 4,500 leases in a country. So all the effort that's gone into bringing Sonic to AASB 16 compliance, setting up the systems to do that around the world has been amazing, all done sort of throughout this COVID period. So thank you to the finance team for all the effort that's gone into that. You might notice in the 4E that the effect of AASB 16 on net profit is a little more than what we've guided to back a year ago, and that very much relates to the gain on the sale of the Hawaii laboratory building, which is a nonrecurring item. Had it not been for that item, the net profit impact would have been in single-digit millions, which is the sort of guidance we gave at the time.

Understood. And Colin, my final question, we've seen an increasing focus on -- in the U.S., in particular, on point of care, sort of saliva tests to diagnose COVID at least in the first instance. If that rolls out increasingly, as some commentators believe it will, what does that mean for the PCR testing on a medium-term view in the U.S. in particular? Does it decrease it? Does it maintain PCR testing rates or increase -- indeed increase PCR testing rates? I'd be interested in your thoughts.

Yes. So David, at the moment, the point-of-care instruments, unfortunately, are not all that reliable. So the level of false negative results are pretty high. And on that basis, I think they have limited utility and, therefore, usage. If a point-of-care test comes out that is much more reliable and cheaper because, at the moment, the test is still too expensive, then yes, it could have an effect on conventional COVID testing volumes. We would hope to be involved in that space ourselves, though. And so I guess this is the same question that gets asked about the point-of-care testing of any other tests as well. People talk about point-of-care instruments, but none of them have really penetrated markets substantially. It is quite possible that at some stage, a point-of-care test does come into use for coronavirus. And I think that will be a good thing for the world. Whether you want to have a confirmatory test, if it's positive, so that would feed into PCR testing. And what do you do if you're negative and you know that it's a 10% false negative rate or whatever that percentage is? There's the problem with the point-of-care testing at the moment. So I'm sorry not to give you a definitive answer, but I think the jury is out. I don't think at the moment, point-of-care instruments are having much impact on the PCR testing done in labs.

Your next question comes from Hashan De Silva of CLSA.

Just one question from me and that would be the increasing use of telehealth. Just trying to think about how GP practice will change going forward. Do you see any opportunities to significantly reduce the physical centers and the cost of that business and changing the way that, that business actually delivers their service?

Again, a very interesting question. And again, I'm not going to try and be the seer who predicts the future. But I do know that there are a significant number of GPs who like the idea of telehealth. But I don't think it's going to mean the end of medical centers at all because, at the end of the day, there are a sizable proportion of all patients that need to be seen with the healing hands put on the patient face-to-face with a doctor. And so I think it will end up being a useful addition to how GPs practice. We're hoping that the telehealth item number in Australia continues because it's a useful thing, especially for things like repeat prescriptions and stuff like that. And I think it's a logical way to go. Some specialists even use telehealth during the pandemic, but I think they believe that they would rather have the patient come and see them. There is no substitute for seeing the patient. It is fundamental to the practice of medicine. So we can't eliminate it completely at all.

Perfect. If I could sneak one more in there. Just thinking of the margin impact on a normalized basis of the rollout of the GLP Systems in Australia and potential rollout globally. If you could provide any color on the margin improvement there.

So the issue here, Hashan, is that we're talking about the automated section of our lab. It's one part of a big operation. I can't give you the impact on the overall business margins other than to say it will improve the margins. But it's probably not going to be all that significant in the total scheme of a big lab business or the whole of Sonic. It's just not -- it's not big enough because this is one of many things that we do to improve our efficiency.

Next question comes from John Deakin-Bell from Citigroup.

Colin, an exhaustive list of questions, I'll be extremely brief. Just trying to ascertain that market share in the U.S. testing, I know it's difficult. The CDC says it's been 75-odd million tests, which would give you a 4% market share. But let me ask a question another way. Is there any reason why the type of numbers you've been doing wouldn't be continued going forward, i.e., did you get a jump on the competition and have they caught up? Or do you see the market last month and this month kind of steady state versus at the beginning of the testing regime in the U.S.?

Look, we -- John, to answer your question, we don't see any letup in the demand. It does fluctuate slightly. It's a sort of gentle rolling demand. So there is no major change from early on when we set up testing. Our U.S. division did move quite rapidly. As you know, the U.S. started testing a little bit late in general. So in the early days, the CDC pushed its test, and it was run by a small number of government labs actually until the main labs, the national labs, including Sonic, met with the Vice President, Mike Pence, and the testing was then thrown open to private labs. And of course, once that happened, you had Quest, LabCorp, Sonic, BioReference Lab, setting up testing in a big way very rapidly. And then, of course, with the pandemic marching ahead at great speed in the U.S., demand did not -- supply did not meet the demand that was there. And so other labs started setting up testing. And you've got a situation now in the U.S. where there are hundreds, if not thousands, of labs offering PCR testing. The big labs, including Sonic, are the ones who are doing the testing in big volumes. And so we don't see any reason why demand will slow. And in fact, I mentioned earlier that there is a desire in the states to increase the testing to 1 million a day. Now I don't think that's going to happen, but it's not impossible. And the grant money that Chris mentioned has been specifically targeted at that. It's to help us improve our capacity using nonmainstream suppliers, which is a good thing. So just looking ahead, without any certainty, because we haven't given guidance, we believe that the testing demand in the states will continue, if not increase going forward.

And just to be clear, that 3 million tests performed to date on your slide, that's to date as in the 20th of August? Or is that through to the end of June?

Wow, now you're getting precise, John. To date. It's to date. That's what it says.

Your next question comes from David Bailey from Macquarie Bank.

I'm just wondering if you could be able to quantify the impact of COVID-19 testing for FY '20 revenues and EBITDA either in dollar terms or growth.

David, look, we haven't announced that. And so that's obviously a pretty sensitive number. So it's not something that we can go into detail. I think you've got to sort of try and make some assumptions yourself based on some of the information we've given, including what we just clarified to John Deakin-Bell about the fact that we've -- that the numbers we've given, that 6 million, is a to-date number from the start, so today effectively. So yes, I guess it's up to you guys to make your assessments on what that means.

Fair enough. And then just following up from Gretel's question actually, just thinking about staff costs. As base volumes recover, just wanted to understand how much you're able to offset some of the volume declines with lower staff costs as in April, May, June? And how we should expect some those staff costs to come back as those base volumes recover? I'm just trying to understand the variable fixed mix of both within the staff cost base and then maybe the overall cost base as well.

Yes. So how we've handled this is not quite the same in each country. But in general, what we did right at the beginning was to try and match the lower volumes of base business to our staffing costs. And we employed a range of options, bearing in mind that we didn't want to lose jobs. In general, there were options like standing down or furlough as it's called elsewhere. We encouraged people to take leave. We reduced overtime dramatically. We reduced variable hours like casual staff and part-time staff as well. So -- and we knew that the base volumes would begin to come back. And so we -- whatever we did in those early stages was designed to allow us to bring staff back as soon as the volumes return. That was a critically important thing for us. And of course, then you've got, in addition to this, handling the additional volumes coming from COVID testing. So all in all, as a general answer to your question, I can say that we have very, I guess, carefully matched as best we can our cost to the prevailing volumes of work at that time. I mean it hasn't been precise because there's always a bit of a lag. It's very difficult to respond to a steep fall in revenue loss like we experienced in March. Suddenly, it's almost falling off a cliff, and you've got a lot of fixed cost, and you've got to run the labs 24 hours a day anyway because you're running all sorts of other tests even at lower volume. But we managed to do that very, very well. And I do take my hat off to all our leaders around the world, especially in the U.S., where the task was bigger and required a lot of planning because, in the U.S., the falls were a bit steeper than elsewhere. And so the response of our U.S. management team was incredible in how you take a large division, almost AUD 2 billion of revenue now. And having to adjust that downwards was an unprecedented achievement in the history of Sonic, and we did that to a lesser extent in our other divisions. So I think we're quite happy with the way it's turned out now because with volumes coming back, it was critical for us that we weren't caught short. We want to deliver outstanding services, we think, with very good turnaround times in every single test we do, and we've been able to achieve that.

So just to clarify, we should probably expect a relatively close approximation of those costs coming back with volumes over the course of fiscal '21?

Yes. Save that extra comment I made that I think we're going to come through this a little leaner.

And your final question comes from Saul Hadassin from UBS.

A quick one from me. Just noticed you spent $100 million on business acquisitions during the year. I think half of that was probably the Steinberg minority in the first half. But what was the other $50 million that you spent on? And was there any contribution to EBITDA from those acquisitions?

If you have a look on the German side, Saul, you'll see that we mentioned the acquisition of Pathology Hamburg on 1 April 2020. That's the majority of the second half number. And given we only owned it for 3 months, there wasn't a significant impact at all.

And that is the final question for today. I will now hand back to Dr. Colin Goldschmidt for any closing remarks.

Thank you, Ben. And just to say thank you very much, everyone, for hanging around this long if you have hung around, and we'll speak to you again soon. Thanks. Signing off. Bye-bye.