Primary Health Care
Primary Health Care's underlying profit fell 6.7% year-on-year, impacted by difficult market conditions. The dividend decreased to 12.0cps (was 20.0cps) as a more conservative dividend policy was adopted (lower payout ratio).
Revenue from the company's Medical Centres division was flat, but earnings fell 11% to $86m. Investing in IVF, labour cost increases, a higher level of expensed costs (vs capitalised costs), and training efforts all impacted earnings. GP retention increased 35% (good), but Primary acknowledged it needs to acquire more doctors to feed revenue growth.
Revenue and earnings from the Pathology division both increased 6%. Higher volumes drove the revenue increase - a good outcome in the difficult operating environment. Margins held up as investment in specialist niche areas was offset by government cuts to tests such as Folate. Also assisting margins was cost cutting initiatives, such as laboratory rationalisation and procurement.
Volumes for the company's Imaging (radiology) division grew 3%, but this was offset net loss of hospital contracts and new immigration medical contracts. This resulted in revenue decreasing 1%. Earnings fell 27%, but the trend for H2 was much improved - assisted by site and labour rationalisation. Consequently, FY-17 bodes favourably.
Overall, the result was in line with our expectations, with the new management taking steps to transform the business, and to reinvest for future growth (which we look forward to seeing in coming periods).