On 26 October 2018, Primary Health Care Ltd (ASX: PRY) revealed that it will compensate certain past and present employees for incorrect payments under the modern awards since July 2011. The company has identified this issue during a review of its payroll system. The total remediation costs of $18 million will be paid by the company as part of compensation. Following this news, the share price of the company decreased by 5.657 percent as on 26 October 2018.
According to the company’s release the average annual remediation of impacted employees, including superannuation and on-costs, is $400 per person. The company is planning to pay interest on the amounts owed and will not seek recovery of any overpayments identified during the review.
Company’s chief executive Mr. Malcolm Parmenter said the company deeply regret this matter and apologize to the current and former employees of Primary. The company will contact everyone who has been impacted, regardless of the size of the amounts owing, and to remediate the issue as transparently and as soon as possible.
In FY 2018, the company delivered underlying revenue of $1.7 billion which is 4.9% higher than the last year, and the company also reported an underlying net profit after tax of $87.5 million. The Free cash flow during the period increased by over 5 percent to $146.6 million. The Company’s growth expenditure was $76.6 million in FY 2018 which was used primarily to fund the acquisition of BPI and new clinics in Health & Co, fit-out costs and equipment for four new medical centres, an IVF and day surgery in Perth, Kawana Imaging Centre, as well as other hospital and high-end Imaging sites.
The company invested $40.9 million in restructuring and strategic initiatives which delivered cost savings and mitigate risks and recorded $5.1 million of non-recurring items. As a result, the company recorded an FY 2018 statutory profit after tax of $4.1 million, up from the impairment-driven loss of $516.9 million in FY 2017.
The long-term drivers for healthcare are positive as there is a strong underlying demand for healthcare in Australia, underpinned by a growing and ageing population, increasing numbers of people living for longer with chronic illness, rising patient expectations and expanding wealth per capita. It is expected that healthcare delivery in the future will occur more in the home and community facilities rather than inexpensive overnight hospital facilities.
In the recently held annual general meeting, the company included a special resolution to shareholders to approve a change of Company’s name to Healius Limited. As per the company, the new name signifies what the company wants the future to be and central to this future is developing a workplace of choice where engaged and valued people can operate.
In the last six months, the share price of the company decreased by 24.47 percent as on 25 October 2018, traded at a PE level of 161.180x. PRY’s shares traded at $2.585 with a market capitalization of circa $1.7 billion as on 26 October 2018 (AEST 1:57 PM).
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