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Primary Health flags $575m writedowns hit

Simone Ziaziaris  |  21 Jul 2017Text size  Decrease  Increase  |  

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SYDNEY - [AAP] Primary Health Care (ASX: PRY) will take a $575-million hit in its full-year results after deciding to write down the value of its medical centres as it repositions its bulk billing business.

The company on Friday said the non-cash impairments relate primarily to its Medical Centres unit, which in February booked a 36 per cent drop in earnings before interest and tax as bulk billing revenue fell.

That disappointing performance contributed to a 69 per cent fall in first-half profit.

Primary said it also expects its full-year underlying profit to come in at the lower end of its already downgraded guidance at about $92 million, compared to $96.8 million in 2016.

Acting chief executive Malcolm Ashcroft said the business overhaul was taking longer than expected and had not yet translated into an improvement in the medical centres' profit performance.

"This has necessitated the impairment review of the carrying value of goodwill in Medical Centres," Mr Ashcroft said.

He added that Primary is streamlining both the corporate and divisional head offices, which will generate approximately $6 million in pre-tax annualised savings.

"The substantial reduction in the capital cost of healthcare practitioners and on-going capital expenditure discipline has enabled us to continue to reduce debt and to self-fund our requirements including investing in our growth plans across the business," Mr Ashcroft said.

"We remain confident that the building blocks are in place for the repositioning of our Medical Centres division and that this repositioning will, in itself, deliver significant value creation to Primary."

At 1025 AEST, shares in the medical centre and pathology operator were 0.83 per cent lower at $3.57.

 

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