MENU

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.

Looking for long-term income stocks like Primary Health Care? Here are 3 of our favourite dividend ideas --FREE!

The Australian Financial Review says "good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit." Get "3 Stocks for the Great Dividend Boom" in our special FREE report. Click here now to find out the names, stock symbols, and full research for three of our favourite income ideas, all completely free!

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

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.