A rough day for Primary Healthcare (PRY) and its shareholders yesterday as a profit surprise left the market unimpressed.
In fact shares in Primary Health Care nosedived on news the company had cut its full-year net profit hopes and trimmed interim dividend after revealing an unexpectedly weak first half performance.
The firm blamed a disastrous first-half performance on its medical centre business, where earnings fell 36% due to lower doctor recruitment. Primary shares fell all day and ended the day off nearly 12% at $3.41. That was in a market that jumped 0.9% on the back of some good results.
An franked interim dividend of 4.8c per share will be paid, down from 5.6 cents a share a go.
Primary said underlying net profit after tax (NPAT) was $41.9 million for the six months ended December 31.
Revenue dipped by 0.7% to $808.7 million for the half.
It saw a solid performance in imaging, an increase in pathology and savings in interest costs from capital recycling, but these were offset by the poor performance in its medical centres and bulk billing division.
As a result the company now expects underlying net profit for fiscal 2017 to be in the range of $92 million to $102 million, subject to trading conditions in the remainder of the year and the outcome of any government policy reviews in health and the Medicare rebate freeze.
Primary had previously forecast net earnings to exceed the $96.8 million underlying net profit from continuing operations in 2015-16.
The release surprised the market – Primary had been expected to release its results on Friday, but after two days of reviewing the company’s financials, the board decided to bring forward the results release date.
Chief executive Peter Greg called on more clarity from the government in several areas including the medicare rebate freeze, Medicare Benefits Schedule review, the proposed bulk billing incentive cuts in pathology and imaging and the potential regulation rents in the pathology sector.
"The results were delivered in an environment of difficult healthcare policy where the Medicare rebate freeze and government policy changes contributed to on‐going uncertainty," Mr Greg said.
The board said it was continuing its search for a new CEO after Mr Gregg resigned in January following news that ASIC, the corporate regulator is proceeding with legal action against him relating to the falsification of company documents in 2011 while he was at construction group Leighton Holdings (now known as CIMIC).
Earnings from Primary’s medical centres-bulk billing division, the largest unit in the company fell a surprise 36% at $26.9 million for the six months to December 31, with no certainty of an improvement this half year.
That poor result was driven in part by the transition to new recruitment contracts and the Primary’s difficulty in attracting GPs to bulk billing thanks to the Federal government freeze on increased Medicare rebates.
The bulk billing weakness was partly offset by a strong performance in the company’s imaging unit, where earnings grew 59% to $14.3 million. That clearly was not enough.
