Primary Health cautions on slow grind

Primary Health Care managing director Edmund Bateman says avoiding a recession at the time of the global financial crisis may have locked the Australian economy into a drawn-out recovery, as opposed to a painful but short-term hit.

Primary Health Care managing director Edmund Bateman says avoiding a recession at the time of the global financial crisis may have locked the Australian economy into a drawn-out recovery, as opposed to a painful but short-term hit.

Dr Bateman said the economy was unlikely to improve soon from the "hard place" where it was languishing. "It is slowly grinding uphill," he said.

If the country had plunged into recession at the time of the economic downturn, it might have bounced back more quickly, he said.

Instead, the nation would experience a "10-year recovery, instead of what might have been a short-term, very painful outcome".

The uncertain economy was affecting non-urgent medical expenditure, such as dentistry - even though Dr Bateman warned this was "counterproductive" in terms of long-term health outcomes.

Primary Health Care customers had paid fewer visits to the dentist so far this year. The economic environment and removal of government funding for the Chronic Disease Dental Scheme had taken a bite out of dental revenues.

Dr Bateman told shareholders at Primary's annual meeting in Sydney on Friday that in the first four months of the financial year, patients were visiting their general practitioners in line with expectations. But dental revenues were "running below prior year levels".

Despite the dental downturn, Dr Bateman said the company was on track to meet guidance provided in August of earnings-per-share growth of 7-13 per cent in the 2013-14 financial year.

Previously, the federal government's CDDS paid more than $4000 for dental treatment through Medicare for patients whose teeth problems were so severe that it was affecting their health. The scheme ended on November 30, 2012.

The managing director of listed dental provider 1300Smiles, Daryl Holmes, told shareholders on Thursday that the removal of the scheme had also affected his company.

"CDDS had grown to provide almost 20 per cent of the revenue collected by all of the dentists in Australia," he said.

Dr Bateman said it was common for patients to put off dental work during tough or uncertain times.

"People are a bit reluctant to spend if they don't have to," he said. "They'll defer it."

But the lacklustre economy has also helped Primary, with the company announcing a refinancing of its syndicated bank debt facility earlier this week.

The facility was due to mature in February 2015, but the $1.25 billion refinancing now provides an extended profile for the company, with half maturing in January 2017 and the other half in November 2018.

The refinancing was "opportunistic", Dr Bateman told shareholders.

"The price was right. We saw an opportunity that was present in the current market from the banks who want to lend to good risks. Therefore we get a better price."

Dr Bateman said he was not sure that would be the case in the near future. "I can't foretell the future, but my sense is this was a good time.

"It allows you to plan the business without worrying about the unknown of refinancing or the costs at said time [in the future]," he said.

Primary shares were up 1ยข on Friday at $5. The stock has gained 4 per cent this week, largely following the news of the refinancing.

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