Primary Health Care, the country’s second-largest health-care company by market value, has chopped its interim payout after a 44% fall in first half earnings, thanks to higher borrowing costs tied to the purchase of Symbion Health last year.
Dividend was cut to 7c a share from 22c and the dividend reinvestment program will operate with a 2.5% discount.
Despite the fall and cash saving, Primary stuck to its 2009 outlook.
"The need for healthcare services remains in difficult economic times," Primary said.
"Opportunities presented by a resilient industry and the material synergies set to be realised from the integration of the Symbion operations lead to continued confidence.
"Primary reconfirms its EBITDA (earnings before interest, tax, depreciation and amortisation) guidance of $350 million for the 12 months ending 30 June, 2009."
Primary reported net earnings after tax for the December 31 half of $11.5 million, down sharply from the $20.4 million in the prior corresponding period.
Primary said profit from continuing operations rose 83% to $37.4 million, from $20.4 million in the prior corresponding period as the benefits of the Symbion takeover flowed in.
The result included $25.9 million in restructuring and borrowing costs.
The impact of the Symbion takeover can be seen from total operating earnings before interest tax, depreciation and amortisation which jumped to $155 million, up from $59 million, while trading revenue for the first half was $660.78 million, up from $148.26 million.
Primary paid $2.1 billion in cash for Symbion last year.
"Management’s focus continues to be on the integration of Symbion’s Medical Centre, Pathology and Imaging activities whilst maintaining the organic growth of the Primary Medical Centre business.
"The combined Group is on track to realise an identified $95-105 million of synergies by the end of FY2010 and meet its target of 50 large scale Medical Centres by 31 December 2009," the company told the ASX yesterday.
"During the period Primary completed the sale of the Symbion Consumer and Symbion Pharmacy businesses (C&P), with cash proceeds of $765 million applied to the reduction of debt during the period.
"Primary has taken up its option to roll its $1.538billion syndicated debt facility until February 2010."
"A one-off fee of $11.25m is payable on 13 February 2009 for exercising this option. The margin charged during the option period will be 1.75% above applicable BBSY.
"Primary currently has $1.1bn hedged until March 2009 at an all inclusive rate of 10.1%. The Company will benefit from a substantial fall in interest rates post March 2009. Primary has a strong banking syndicate supported by all four large domestic banks."
Primary said that, in the first half, margins had improved in all divisions on a like-for-like basis.
The company rolled out more of its large-scale medical centres, with 43 now operational and the integration of the Symbion medical centres was progressing and ahead of expectation.
Fourteen centres now had been merged into the Primary operations, and 70% of GPs at the merged centers had been retained.
Primary said it merged the NSW-based SDS and Laverty pathology laboratories, with benefits expected to flow in the second half.
A focus in the second half would be further automation of laboratories in Queensland (QML) and Western Australia (Western Diagnostic).
In the first half, Primary shut seven Symbion radiology sites that were making losses or where the lease had ended and consolidated six Primary sites into others.
The shares traded higher in yesterday’s stronger market. The shares finished up more than 4% at $4.87.
