A key risk is that of regulatory change.

Further changes to the Medicare Benefits Schedule could lead to reduced subsidy within the sector. Given Government budgetary pressures and a degree of inefficiency in the medical sector, it is almost certain we will see some degree of reform in this area over the coming years

There are also serious challenegs in turning around the medical centres division, which will also likely require some significant IT investment and better terms for GP partnerships (which will erode profitability). Primary has had a lot of trouble attracting new GPs and has a tarnished reputation. 

A lumpy history.

Looking ahead, i'm expecting an ~11c dividend, fully franked, which puts shares on an uninspiring yield of 3.1% (at time of writing). That dividend is unlikely to grow too much in the coming years, especially as the group looks to further reduce debt.

Profit has been declining in recent years, and is set to be essentially flat in the current. 

The business faces reasonable regulatory risks and is trying to trun around an ailing Medical Centres business.

Although I like the sector, and the pathology and imaging segments are attractive, I just don't see value at present (see my forecasts page)

Primary is an integrated healthcare business with operations spanning pathology (60% sales), imaging (20% sales) and medical centres (18% sales).

Primary handles around one-third of Australia's pathology work. And this area of the business is growing at mid-single digit type rates. Imaging is growing even better, with EBIT up 16% at the most recent half.

Medical centres are, however, struggling. The company has had trouble attracting and retaining GPs, and has had to move to more favourable (for the doctors) contracts. Revenue was mostly flat at the recent half but EBIT down 18%. It is still the highest margin segment, on 13.8% operating margins.