In contrast to some of ‘downgrades’ in earnings guidance in recent times Primary Health Care, the pathology and medical centre operator escaped relatively unmarked yesterday after the annual meeting was told earnings this financial year would not be much different to those for 2016-17.
The shares eased 1.6% to $3.50, a big difference to the whacking shares in services and testing group, ALS copped earlier in the week when analysts reckoned the company’s full year guidance was a bit light on compared with market estimates. ALS shares lost more than 15%.
Primary shareholders though escaped that sort of punishment after the meeting was told the opening of new centres and investments in new technology and businesses will dent its performance in the current financial year.
CEO Malcolm Parmenngs woulter told the meeting that the opening of four medical centres and one imaging site will impact Primary’s short-term performance.
He also said there will also be additional costs from the roll-out of technology programs and investments in the company’s Health & Co private medical centres and IVF operations, he said.
While in the first few months of the current financial year so far, GP recruitment has been softer-than-expected, the performance of the pathology business has been solid, but the company’s imaging was performing above last year.
As a result he forecast an underlying profit for the year of between $92 million and $97 million, which compares to a $92.1 million underlying profit in 2016-17.
Citi said in October that consensus analyst estimates of an underlying profit of $97 million were overly optimistic, citing revenue challenges, rising costs in Primary’s medical centres division and pathology collection centres, and the loss of a $30 million-per-year cancer screening contract from the second half of 2017/18.
Mr Parmenter said yesterday the loss of the bowel screening contract will not be material to the company in 2017-18, though “will be a headwind in the latter part of the year”.
That’s a hint that the closing months of the June half year could be tougher for Primary than things are now. But yesterday’s meeting was told that the June half is likely to see a stronger profit contribution than the current half year.
