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Monday / July 15.
HomeminewsVision Group: Where to Now?

Vision Group: Where to Now?

Vision Group (VGH), Australia’s largest private ophthalmic practice, has had a rollercoaster ride over the past six months, its shares plunging to a low of 12.5 cents on Wednesday 7 July before recently making a modest recovery.

The publicly listed company’s shares have begun to rally slightly going from 14 cents last Friday, 23 July to 30 cents at yesterday’s close (Tuesday 27 June). It will be worth watching the ASX over the next week or so for any announcements from the Vision Group which may further affect its share price.

At least the share price is now headed in the right direction after what could be termed a winter of discontent.

All-time Low
It’s Wednesday 7 July and the Vision Group (VGH) price on the ASX has dropped to an all-time low of AUD$0.125 cents.

The issues of doctor remuneration and contracting have been key catalysts for this uncertainty; issues which according to the new CEO Mr. Geoff Thompson are garnering his “undivided attention”

No, that’s not a mistake. We didn’t shift the decimal point… The price as of Wednesday, 7 July, was 0.125 cents. That’s more than a 97 per cent avalanche from the high of AUD$5.05 which the stock reached in September 2005 when investors were clammering for a piece of one of the hottest stocks in town.

The price now reflective of the uncertainty that has plaqued the company in the past 12 months.

The issues of doctor remuneration and contracting have been key catalysts for this uncertainty; issues which according to the new CEO Mr. Geoff Thompson are garnering his “undivided attention”.

“Every effort is being made to finalise a sustainable model for doctor remuneration and recontracting, alongside a suitable capital position for the company.” Mr. Thompson said.

Vision Group’s leadership has appeared unstable over the past four years with four CEOs at the helm. In May this year, Mr. Thompson, the former CFO of the Vision Group took over from Mr. Craig Stamp and the board agreed on a AUD$500k per annum salary plus ‘short term incentives’, etc. At the time, the share price was teetering at around AUD$0.52.

“While it is disappointing my predecessor Craig Stamp stood down, he has remained as part of the management team before transitioning to his non-executive position on the Board.” Mr. Thompson said.

On 25 June, the new CEO announced his grand ‘100 Day Plan’ to the market which included a list of Vision Group’s eight priorities, including the further alignment of doctor remuneration with the performance of the company and a longer-term capital strategy.

Investors rallied…no, actually, they started a fire-sale after reading the company’s forthright and somewhat grim prognosis which advised that ”… the company advises that recent doctor departures and potential changes in the doctor remuneration model are likely to result in a material decline in the company’s profitability in the short to medium term”.

Whilst this resulted in a sharp fall in Vision’s share price, it did signal that Mr. Thompson was prepared to meet Vision Group’s issues head on, accepting the analogy that “the night is often darkest before the dawn,” he said.

In the week following the ASX announcement VGH stock dropped a further 50 per cent. Then it dropped again the following week, and by Wed 7 July, the price had crumbled to its all-time low of 0.125. At 12.5 cents the market was placing a value of AUD$9 million on the Vision Group brand, a figure significantly less than its earnings.

When asked whether the wheels had fallen off, or had there been a mutiny, Mr. Thompson declared, “We do not accept suggestions that Vision Group no longer has the business model or leadership to achieve long-term success. We are fully committed to ensuring revenue, operating profit and shareholder value are increased in the medium to long term.”

Assets and Liabilities
The balance sheet paints the picture. According to the ASX, as at 30 June 2009, VGH posted assets of just under AUD$28 million, 10 per cent higher than the previous year, but its liabilities show debts due of AUD$115 million and total liabilities of nearly AUD$130 million.

However, Mr. Thompson provided us with the latest published accounts as at 31 December 2009, which reveal “the company posted total assets of AUD$255 million and total liabilities of AUD$121 million (including debt of AUD$107 million which was down 9 per cent from AUD$116 million at 30 June 2009). Vision Group’s net assets at 31 December 2009 were reported as AUD$134 million.

With escalating debt and doctors demanding higher wages to stay on it is clear the new CEO has the job ahead of him. It’s not as if the supply of ophthalmologists is as unlimited as an unskilled labourer.

A lot of faith has been placed in Vision Group by its investors, many of whom had emailed and phoned mivision expressing their alarm at the company’s plight.

One such investor expressed their frustration in the Vision Group by saying: “Shareholder wealth destruction (is) at its worst, by a group of doctor ophthalmologists who had recently complained to the Health Minister that they were being unfairly targeted by the proposed 2009 federal Medicare rebate changes as being selfish and overpaid. This, from a group of doctors making hundreds of thousands of dollars each per year, operating from surgeries that have been paid for and funded by external shareholders.”

“The CEO’s primary responsibility is to serve his ordinary shareholders, those that pay his salary. What a debacle,” the investor said.

There is no doubt Mr. Thompson has a massive job ahead of him to restore the plummeting fortunes and confidence in the Vision Group.

“I eagerly anticipate the moment when the Board can approve and communicate to the market a new model for doctor remuneration and recontracting, strategies to strengthen the capital position of Vision Group and initiatives to grow revenue and operating profit,” Mr. Thompson said.

“With this important milestone in sight, we remain committed to the strategic and operational direction that has been established for the company.”

Going Forward
Mivision will continue to monitor Vision Group as it implements its vision for the future. The next few months are a critical period for the Vision Group. As new announcements are made to the market, we will also provide updates to the Vision Group story on our website (mivisionclean2.flywheelsites.com) and include new information in our electronic direct mail each month.