What will a new CEO bring to the table at Primary Health Care Limited?

The managing director and founder of Primary Health Care Limited (ASX: PRY), Dr Edmund Bateman, informed the market yesterday that he would retire from his role on 30 January 2015, becoming a non-executive director.

After a period of sick leave that commenced in September and saw shares fall sharply, the announcement apparently confirms that illness is behind Dr Bateman’s departure with the board wishing him well as he focusses on his health.

With shareholders receiving disappointing results over the past 10 years, having lost 22% of their initial investment before dividends during this time, the biggest question now must be if a new CEO will improve the company’s performance.

An external consultant agency has been retained to assist with the search, which will potentially canvass internal and external candidates for the role. Dr Bateman’s sons James and Henry are the Chief Operating Officer and General Manager for Medical Centres respectively, and could make strong candidates on their own merits.

Considering that Dr Bateman owns 4% of the company and will remain as a board member after his retirement, another big question is the degree of influence he will retain over company decisions. Given his status as the founder and the magnitude of his business experience, this influence is likely to be substantial and more so if an internal candidate is promoted.

While I’m not suggesting this would necessarily be a bad thing, it’s something investors who are hoping for a new approach will have to bear in mind.

Excluding potential turmoil and changes of direction that could be brought about by a new CEO, the outlook for Primary’s main business continues to look solid, with growth forecasts supported by an ageing, unhealthy population and technological improvements increasing demand for pathology services.

A strong 4.4% fully franked dividend also means there’s plenty to like for income-focussed investors.

Ultimately the upcoming retirement of Dr Bateman is not a cause for alarm, though investors will still want to watch closely to see if the company continues down its current path or makes changes under new management.

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Motley Fool contributor Sean O'Neill doesn't own shares in any company mentioned.

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