Capitol Health [ASX:CAJ] has climbed 20% higher today after selling off assets and a proposed share buy-back.
Why did Capitol Health’s Share Price rise today?
Capitol Health finished a review that has seen the company sell off its NSW radiology assets to I-Med. The deal, totalling $81.5 million, is expected to be finalised close to the end of August.
The company has stated that it struggled to integrate the range of different business arms of the NSW properties. It noted poor performance that resulted in a $7.1 million loss in earnings from the acquisition in the 2016 financial year alone.
Capitol has also stated plans to reduce overhead costs as they reorient the business’ future.
What next for Capitol Health?
Managing Director, Andrew Harrison clarified the company’s future direction by stating,
‘We will seek to strengthen our position in the Victorian market through new clinic openings, investment in equipment and additional modalities, deploying funds through new earnings accretive acquisitions, and actively considering capital management initiatives that deliver shareholder value.’
If Capitol Health don’t conduct a new acquisition upon completion of the transaction, then they will likely conduct a share buy-back. The company will look to acquire 52.3 million shares, the maximum amount allowed without shareholder approval, and may seek approval for further shares.
In more good news for investors, the company plans to restore dividend payments in the 2018 financial year. It seems management and the investors are in favour of the new direction, at least for now.
Junior Analyst, Money Morning
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