Primary Health Care flags $575 million writedown, warns on profit

Medical centre and laboratory operator Primary Health Care on Friday flagged writedowns and said it expected underlying profit for the year to June 30 to be at the lower end of its guidance, sending shares to a two-month low.

The country’s biggest owner of doctor’s surgeries is heavily reliant on government subsidies and has struggled to retain medical staff since some lucrative rebates were frozen in 2015.

Its stock price was also roiled when chief executive, Peter Gregg, resigned in January after the corporate regulator filed court proceedings alleging he falsified documents while an executive at Leighton Holdings. Mr Gregg has denied the allegations.

Primary now forecasts underlying net profit after tax to be $92 million, the bottom of its previously given range, but slightly higher than the $91.5 million predicted by nine analysts surveyed by Thomson Reuters I/B/E/S.

The company also said it expected to book a non-cash impairment of approximately $575 million, mostly against the value of its medical centres, as the division has been underperforming.

To reduce its reliance on government subsidies and exposure to policy changes, Primary has been seeking to expand beyond general-practice services at medical centres and grow its medical imaging business.

“However, the transition is taking longer than expected and has not yet translated into an uplift in medical centres’ profit performance,” Primary’s acting chief executive officer Malcolm Ashcroft said in a statement.

“This has necessitated the impairment review.”

Shares in the company fell 5 per cent to $3.42 in early trade, their steepest intraday decline in five months, before recovering most of that fall. The broader S&P/ASX 200 index fell 0.6 per cent in morning trade.

Reuters

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