Forget the reasonable profit result – all media and analysts wanted to know from Primary Healthcare and its major shareholder and CEO, Dr Ed Bateman – was ‘what about Symbion?' And all the company had to say was summed up in a slide in its presentation.
At its annual results presentation yesterday, Primary posted a slide saying it had not ruled out its options related to that investment but declined to say more.
•"Investment in Symbion Health
•" Investment of $363m – 13.65% of Symbion
•" No options ruled out
•" No comment beyond the above," the slide said, helpfully.
And, try as they did to find out more, there was nothing concrete added to the sumof knowledge about what Bateman and PRY want from Symbion and its intended dance partner, Healthscope.
But everyone there knew that something was wanted.
The speculation and size of the investment served to highlight the risks the company is taking.
All it will take is for Symbion and Healthscope to decide to stare down Primary and call its bluff and the whole merger deal could be off.
Consequently, this would make Primary worse off with losses on its investment which has been made around $4.17 to $4.20 per share.
Primary paid interest charges of $12.06 million last financial year – noticeably more from the $7.9 million in 2006 because of investments in companies like Symbion.
Being forced to hold on to its stake in SYB will see that bill repeated this year.
EBITDA was boosted by the $6 million from the share market plays in 2007. A year earlier it was around $490,000. EBITDA from operations (before things life the profit on the investments), was up 12.6%.from $93.5 to $107.1 million.
Adding in the non-operational income from investments, interest rate swaps etc, was a more impressive $20 million, or 20.3% to $114.3 million in 2007.
But it was still distorted by the gain on investments.
It helped produce the 19.5% rise in net earnings to $56.76 million for the 2006-07 year.
Sales rose 13.4% per cent to $273.24 million, while net profit including minority interests rose 19.8% to $56.90 million.
Basic earnings per share rose from 39.37 cents to 45.76 cents per share and the fully franked final dividend increased from 22.0 cents to 24.0 cents per share. That took the total dividend from 42.0 cents to 45.0 cents per share for the year.
Dr Bateman said, "A result that is pleasing with the improvement in medical centre operating margins, both year-on-year and half-on-half and at a time of continued roll-out of new medical centres.
"Four new centres opened during the year, three in Queensland and one in Victoria with a further five centres scheduled for opening in the next 6 months. The Primary Health Care Group now has 35 multi-disciplinary medical centres Australia-wide.
"The Primary model continues to generate growth rolling out new centres, while also improving returns from existing centres. There are currently 6 additional centre sites being considered for development in calendar year 2008.
"These sites are subject to Council approvals and in final stages of negotiation and/or documentation.
"Recently, Primary has seen a significant increase in the number of GPs joining the group. For the year to 30 June 2007 93 practices were acquired. Since 1 July 2007 a further 42 practices have contracted to join Primary.
"The net profit on the sale of investments of $7.1m before tax includes the sale of shares in sundry listed entities of $6.0m and the sale and leaseback of the Forest Hill medical centre $0.7m.
"Since 30 June 2007 a significant investment was made in the Ordinary Shares of Symbion Health. Interest expense has increased 61% to $12.1m. Borrowing costs include interest and bank costs in relation to investment holdings during the year. The Group has sufficient cash flow and current bank financing available to meet its medical centre roll-out program."
So the game is still afoot. PRY shares closed up 5c at $12.02, SYB shares were down a cent at $4.05 and HSP shares ended up7c at $5.47.
