Ricgordon: your financial logic is very sensible and it's precisely the point; the company is at a critical juncture where it should move to both reward select/specific higher performers and also recruit new young doctors (getting them to join without paying any goodwill), to neutralize the power of the group that wants to walk. The goal being to avoid a broad brush increase in remuneration that decimates profit for external sheholders. Further, they can consider handing over a greater share of additional client co-payments made to them where each doctor can get them, assisting to avoid slicing up the base fees paid and moneys re-imbursed by medicare per visit which underpins external shareholders' profit share of revenues.
Ultimately, we are talking about 40 odd (doctor) individuals; that's a single group 40 odd persons that can swing the valuation materially in either direction. We are not dealing with global uncontrollable economic and local competition risks that affect most other stocks. I encourage you to join the effort here in voicing your concern directly to the company on the issue of greed. You'd appreciate that we are talking about three independent directors and a CEO that are standing in front of a barrel of cash ($100m annual revenues) eyed off by the 40 doctors. They need external shareholders to remind them of the principle of property ownership; the practices were paid for by external shareholders and the goodwill ownership was transferred to external shareholders, period.
The doctor group is unlikely to suffer on a collapse as much as you suggest; they can regenerate their practice goodwill by simply walking across the road and setting it all up again, with the same customer base paid for by shaeholders and using the same equipment picked up for virtually nothing at a liquidator's auction that was again, sadly, once owned by external shareholders. To think they continue to work on premises using equipment that is still owned by external shaerholders...
On Tanner, read the several interviews he gave Christopher Webb and reconsider if the impression given was one where profit would be decimated as a result of the re-contracting process. You should also read broker forecasts over the last 18 months; if the effect was to be so material, then why weren't the forecasts updated given the effect was internally known as you've suggested? There is a direct and serious obligation under law for the Board to fulfil this duty.
Again, check 1300Smiles; professional medical practice ASX plays can be very successful if run correctly, particularly in a sector that has great underlying economics; high barriers to entry, strong long term demographic trends that favour increased patronage etc.
VGH Price at posting:
21.0¢ Sentiment: None Disclosure: Not Held
