On Wednesday 4 August Vision Group announced a significant new strategic direction for the company that aims to promote growth of both practices and group revenue over the coming years, but not everyone is excited about the proposed changes.
Mivision has received complaints from major private Vision Group shareholders claiming the proposed business plan favours doctor partners at the expense of private shareholders. Mivision received one particular email from a shareholder citing figures which they claim would leave “minimal profits for shareholders”.
Vision Group Holdings Ltd announced in its Strategic Update:
- A substantial change to the doctor remuneration structure to facilitate longevity of doctor engagement and growth
- A credit approved term sheet, amending the existing debt facility, has been agreed with the Company’s banks
- A re-capitalisation and debt reduction process, involving the whole or part of the Company, or the Company’s day surgeries, is to be pursued by the Company with the assistance of Credit Suisse (Australia) Limited
- Unaudited preliminary results for the year ending 30 June 2010, including prospective goodwill adjustments
Full details of the above points are outlined in the presentation Vision Group Holdings Limited Strategic Update, 4 August 2010. Click here to view the full pdf.
To fund the process, which is expected to increase short term costs and reduce near term earnings, Vision Group has re-negotiated finance arrangements with its existing banking syndicate.
The company, which has secured approximately 10 per cent revenue of the ophthalmology market in Australia, has a network of 40 doctor partners with 450 staff operating from nine clinics along the eastern seaboard. All clinics have a Day Surgery situated at the same premises or within very close proximity.
The main thrust of Vision Group’s strategic plan is a new remuneration package for doctors that the company believes will be more competitive with comparable medical roll-ups.
Vision Group believes the new remuneration model, coupled with strengthened leadership and management initiatives, will incentivise doctors to improve business performance and manage costs. It will also make the group significantly more attractive to doctors considering joining the company and to those renewing their existing contracts. In the past few months three clinics have closed in Central Queensland following doctor departures.
The revised remuneration model is based on 65 per cent of a doctor’s personal exertion Earnings Before Interest and Tax (i.e. EBIT from consulting and surgical procedures, but excluding EBIT from day surgery.) This new level of remuneration will be paid to Doctors following completion of their original acquisition related contractual commitments and therefore will be staged over a number of years. Doctors who have already completed their acquisition contracts and previously re-contracted with the company will also be entitled to the new level of remuneration.
The company will enter a six to nine month period of restructuring during which time it aims to reduce costs, form speciality groups to focus on marketing, research and performance, and introduce best practice sharing between regions. The company then expects to move into a growth phase that will see the acquisition of new doctor practices, doctor recruitment and expansion of current treatments and specialities.
To fund the process, which is expected to increase short term costs and reduce near term earnings, Vision Group has re-negotiated finance arrangements with its existing banking syndicate.
In addition, the company has announced a plan to recapitalise and engaged Credit Suisse to commence a formal process to seek expressions of interest in relation to a potential transaction involving the whole or part of the company or the company’s day surgeries. Day surgeries currently account for 30 per cent of Vision Group’s annual revenue.
Vision Group insists the company’s operations will not be interrupted during the process and that clinics will continue to deliver the highest quality ophthalmic care from its consulting facilities, day surgeries and refractive and eye surgery centres.
| Vision Group Answers Pertinent Questions |
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In response to Vision Group Holdings Ltd Strategic Update released Wednesday 4 August 2010, mivision put a number of poignant questions to Vision Group CEO, Mr. Geoff Thompson. Below are the questions and Mr. Thompsons in-depth answers. Vision Group is asking doctors to re-sign, but if a partial or full sale is expected, what security do they have over their future? How will the sale of the day surgeries impact current doctor practices? If day surgery accounts for 30 per cent of Vision Group’s revenue, how will the sale of Day Surgeries impact the overall future of Vision Group? Do you agree that Vision Group’s latest statement is an admission that you have been operating a completely flawed business model? Do you agree that Vision Group has lost ophthalmologists and have been unable to attract specialists due to lack of remuneration? Can you explain in lay terms what the new remuneration package is (65 per cent of doctors’ personal exertion EBIT) and how does this improve the remuneration package? How many more doctors would you ideally like to attract and do you think there are enough out there who would be willing to accept the new terms? You say you want specialists who are able to generate high revenue. Please explain? How has the debt level increased to such a point and how confident are you that you can bring it down to a reasonable level? When will the share price of the company reflect the increased confidence in the restructured company? What will Vision Group do to make its brand better known and in the process increase its patient turnover? Lastly, when will we be expecting some major news on doctor resignings? |