Primary Healthcare downgrades earnings for FY15

Primary Helathacre PRY has downgraded earnings for FY15 (again). The new CEO and management team continue to review operations although no clear strategy has been explained to the market. We remain cautious on this name. Specifically, PRY advised of a weaker 4Q FY15 due to lower patient volumes driven by weather impacts in NSW and a slow start to flu season. This equates to a modest underlying EBITDA hit to our estimates (we sit at A$401.5m), but shaves 3.6% off cons (A$414.8m), with underlying EPS down 5%. Also further asset impairment charges of A$30m will be bought to account in FY15. Of further concern is the changes to the ATO refund as prior guidance was calling for a A$130m cash refund. Now PRY and the ATO have agreed to offset doctor liabilities on practice sales against PRY tax refund for practice purchases, ensuring existing PRY clinicians are not disadvantaged by ATO ruling. So A$105m will be offset against approx A$155m of tax refund, resulting in a net tax refund to PRY of approx A$50m.