Dr. Harry Unger on His Vision

Since leaving the Vision Group, Dr. Unger has set up Eyescan which he describes as a one-stop-shop combining Optometrists, Ophthalmologists and Optical Dispensers. It was created as a new model for high quality eye care combining state-of-the-art diagnostic imaging for the early detection and monitoring of eye disease coupled with the sale of quality spectacle frames and lenses.

But what are his thoughts on the twists and turns the troubled Vision Group has taken? We put a number of pertinent questions to Dr. Unger to which he has responded.

When did you come up with the concept for Vision Group and what was the original concept?

The problem here is that the common shareholders have seen a massive reduction in the value of their holdings and the erosion of dividend payments to nil

I recognised the need for Ophthalmologists to embrace a new model of practice in view of the escalating cost of lasers and diagnostic equipment because it was evident that these tools were required to deliver premium eye care. The vast majority of Ophthalmologists did not invest in new technologies nor did they consider the need to create their own succession by younger graduates so that there would be continuity of patient care. Moreover, unlike Optometry and just about every business, the goodwill pertaining to doctors’ practices had little if any value upon the sale of the business.

The concept of consolidation resulting in unified groups of specialist and sub-specialist Ophthalmologists working in large practices with co-located day surgeries was my model’s practice ideal. This model also created the benefit for the doctors who joined the company to realise the value of the goodwill they had created in their own practices.

In 2001, after three years of planning what the company and business model would look like, AMP backed my concept for consolidation in a private equity model that then listed on the Australian Stock Exchange (ASX) in 2004.

The Doctors signed five-year contracts that were structured so that they held a considerable percentage of shares in the company and that a large number of their shares were kept in escrow until they retired. Doctors could only redeem these shares after giving sufficient notice of their intention to retire and successfully passing their patients on to younger successors. Beyond their agreed negotiated salary, the doctors shared any personal financial out-performance equally with the company. This model was focussed on the principle that the interests of all stakeholders were always aligned.

It was always clear to me that the company would have to continuously adapt to future changes in the Ophthalmology and Optometry markets. I considered that the future workforce available would no longer be adequate to address the needs of an aging population and that a true partnership model between Ophthalmology and Optometry would need to evolve.

Take us through a very brief history of your establishment of Vision Group and what point did you bring it before leaving?

AMP private equity acquired 51 per cent of three Melbourne multi-doctor practices and two day-surgery centres of which I was one of four partners. Acquisitions of large practices were made in Melbourne, on the Gold Coast, in Townsville and Sydney prior to ASX listing and further practices were purchased after listing. By 2007, the company was represented in major coastal regional cities in Queensland and had multiple clinics, day surgeries and refractive laser centres in the three capital cities on the eastern seaboard.

Within a few months of listing in 2004, Vision Group became an ASX top 300 company. Major Institutional investors held large interests in the company, the share price steadily rose and the company paid fully franked dividends from the outset increasing from 10 cents per share in its first year to 13 cents per share in the third year after listing. I was CEO for six years; three-years during its private equity phase and a further three years after its ASX listing.

My personal plan, detailed from the outset in 2001, was that I would remain CEO until the company revenue reached 100 million and then take on the position of Executive Director of Strategy and Business Development to assist a new CEO who had both healthcare experience and a strong financial background. I groomed Neil Rodaway to be my successor from his position as COO and the board agreed that he was the right person for the CEO job. I then took the role that I had planned with the intent of staying with the company long-term and to assist Neil in areas in which I had greater experience and expertise.

Why did you leave and how did you feel about having to leave?

I was very disappointed that the company felt that I was no longer of value to it and that my future contribution was not required. Equally troubling was that the company felt the same way about Neil and that he was also to be replaced within 2 months of my departure by Craig Stamp.

How do you feel about the way the group has been run since your parting?

I think that since my departure two years ago followed two months later by that of CEO Neil Rodaway, and then the subsequent losses of CFO Mark Hansen and David Hoy the National Operations Manager and other key personnel, Vision Group became destabilised and focussed on matters that were not targeting company growth. Rapid change of leadership saw the newly appointed CEO Craig Stamp have a short stint in charge after struggling with issues that led to doctor departures, litigation and the closure of the central Queensland practices that had been key strategic and profitable acquisitions. He resigned from the CEO position but remained on the board and the former COO Geoff Thompson now heads the company in the CEO role.

The fundamentals of the business dynamics are strong; delivering non-discretionary medicine and surgery to an ageing population should provide a continuing basis for growth. It has been distressing to see this opportunity arrested by inertia and wasted for two years.

The absence of a clear new strategy that accommodates the changes that have occurred in the marketplace has been detrimental to the company and its shareholders.

It has also been shocking to witness the share price plummet and have the dividends firstly slashed and then actually disappear over this period.

As one of the major shareholders and the founder of Vision Group, what are your thoughts of the current administration, and the remuneration the board granted itself and doctor partners in the last financial year?

The Vision Group model that I conceived was one that aligned the interests of all shareholders. I think it’s fine to have all stakeholders benefit from company success. The problem here is that the common shareholders have seen a massive reduction in the value of their holdings and the erosion of dividend payments to nil.

It is important that the doctors are happy and remuneration is not the only factor. Some doctors have left the company or resigned despite the fact that remuneration is to be increased. There are a number of work practices that require change in order for the doctors to be happy with the company and for patient needs to be better served.

If the company is willing to adopt new ideas and refine their strategy then the board, doctors and all shareholders will derive benefits in the near term and that can be sustained for the longer term.

Do you have any faith that Vision Group can continue to operate in its current form?

Recent company announcements have outlined Vision Group’s problems with debt, banking covenants and goodwill impairment. These problems are magnified in the scenario of a very low share price resulting in the fact that Vision finds itself in a position where it is difficult to make acquisitions. Any significant acquisition would both increase debt and dilute existing shareholders’ value.

I have great concern with the recent announcement that Vision Group is prepared to sell off its day surgery businesses and essentially break up the company. Further, that there seems to be no urgency in the recruitment plans that have been put forward. There have been no new doctor acquisitions since Neil left the company and the facts are, that there has been a net loss of doctors and clinics over the last two years.

It is my view that changes in strategic focus coupled with work practice change need to be actioned urgently. If this is done quickly then the company can succeed.

How would you restructure the Group to make it successful once again?

My views in relation to the directional changes in Vision Group that are required have not altered since I put them to the board in 2007. The models required to implement them have changed significantly due in part to the massive upheaval in the Australian eyecare market, principally due to the rapid consolidation of Optometry and also because of the more frequent entry of new and expensive diagnostic and therapeutic technology that both Optometrists and Ophthalmologists cannot afford.

The restructure required would not destabilise the existing business but could potentially accelerate it to an unprecedented level. The intricacies of this restructure taking current conditions into account are clear to me and I have modelled them in detail. My ideas in relation to the implementation of strategic changes that would benefit Vision Group are beyond the scope of this article.

Should shareholders and the public (patients) have confidence in Vision Group today?

I believe that the current CEO Geoff Thompson is in an unenviable and difficult position, but he does have the opportunity, with the backing of the board, to create enormous change that can benefit all shareholders.

I still hold about one million VGH shares and have had ample opportunity to sell them. I am optimistic and passionate about the company that I founded and believe that if a new direction is taken then Vision Group can restore itself to being a premium company that I could again look on with pride.

It is evident to all observers that the company has disappointed and is now vulnerable. I would urge all shareholders to support the company by giving it a few months to announce a simple, affordable and logical strategy for change and growth that can be implemented quickly and sustained long-term.

Would you be prepared to work in some way with Vision Group again if they adopted your ideas for change?

Yes.