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Healthscope Ltd (ASX:HSO) closes hospitals and downgrades earnings

In the wake of the competing takeover bids for Healthscope Ltd (ASX: HSO), the company has decided to shut two private hospitals in Geelong and Kew after a portfolio review, due to the hospitals not being viable.

After completing its review of 45 hospitals, in a statement to the ASX, the company revealed its plans to rationalise its portfolio by closing the underperforming hospitals, which together are expected to incur a ‘Hospital Operating EBITDA’ loss in FY18 of approximately $8 million.

The company’s updated FY18 earnings guidance expects that Hospital Operating EBITDA for FY18 would be between $340 million and $345 million, compared to previously being forecast to be in-line with FY17 Hospital Operating EBITDA of $359.4 million.

Reasons for a downgrade are due to “softer than planned market conditions in recent months and the continued impact of site-specific issues at Geelong Private, Cotham Private and Frankston Private hospitals”.

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Motley Fool contributor Rosemary Steinfort has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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