Primary Health Care (PRY) shares reacted mildly to yesterday’s earnings guidance trim from the company.
Primary told the ASX in an update that it will miss its annual profit guidance, blaming a string of write downs within the medical centres business.
The shares lost 2.33% to end at $3.73. Perhaps that was due to the standout day in the wider market yesterday with the ASX 200 rallying hard and ending up close to 2%. Or perhaps it was also due to the strong rally in primary shares this year – up 76% from the low of $2.16 in early February.
Primary has already detailed some of these problems so yesterday’s update wasn’t as big a surprise as it might have been, nor were the figures terribly shocking.
The company said yesterday it now expects to report an underlying profit after tax of $104 million for the year ended June 30, compared with $119.1 million in the 2014-15 year.
Previously, Primary had expected to meet the bottom end of its forecast range of $110 million to $115 million.
Primary also told the ASX that it expects to book about $98 million in after-tax, non-cash write-offs to reflect the carrying values of a number of balance sheet items, including its IT systems, some centre closures and property.
Of the write-offs, Primary said $66 million will be booked in 2015-16 and $32 million allocated to prior years.
However, directors said the impact on the group’s 2016 net profit will be partially offset by $30 million in profit on the disposals of Medical Director and Transport Health, in addition to other items reported in the group’s interim results earlier this year.
In February, Primary booked gains from the stake sale in Vision Eye and a tax settlement.
Primary chief executive Peter Gregg said yesterday the company is focused on getting its house in order.
"We are focused on setting the right foundations for the long-term, cleaning up the balance sheet and taking a more conservative approach to our asset values and levels of provisioning," he said in a statement.
Mr Gregg said the changes don’t impact the group’s cash position or compliance with its banking covenants.
"Primary is improving its balance sheet strength with more than $300 million of gross proceeds generated in fiscal 2016 from its capital recycling initiatives," Mr Gregg said.
Primary is due to report its annual results on August 17.
