Worth a read. As reported on 25 July 2011 in Mivision:At the...

Worth a read. As reported on 25 July 2011 in Mivision:

At the beginning of a new financial year Vision Group's (VGH) share price plummeted to an all time low of 0.073 (Monday 4 July) - nearly 97 per cent down on the company's 2004 float price of $2.30.

When the company first went public, investors rallied to the idea of a corporatised ophthalmology model and within a year, by September 2005, the share price hit a high of $5.05. At the time the company had some big stakeholders including AMP, Challenger, Fidelity, Fisher Funds, Hyperion and Perpetual.

That was a long time ago and now, it's a very different story. For existing shareholders, particularly the 70 per cent or so who make up the general public, the news since has only been bad.

About a third of the company's shareholders are doctor partners within the group. While on paper their capital assets have been dramatically eroded, at least they are - or will soon be - benefiting from the 100 per cent increase in salary rates that the company's board introduced last year in a bid to keep them on side.

So, is this the end for Vision Group as a publicly listed company, or is there a brighter future? mivision spoke to Geoff Thompson, the Group's Chief Executive Officer.

Mr. Thompson remains unphased by the rapidly declining share price and still says the doctors who have partnered with the Group see a brighter future ahead.

When mivision asked him about the likelihood of the company being privatised by the doctor partners he showed no sign of concern. "As far as I'm aware, there is no move by doctor partners to mount an acquisition of the company," he said.

"We have an outstanding internationally recognised group of doctors that really believe in the future... you'd be interested in seeing how good they feel about the company... it's a thriving business of doctors and staff working collaboratively together."

Mr. Thompson says that by returning to the fundamental concept of the company, over time Vision Group will begin to deliver results and the share price will gain ground.

"It's fair to say that Vision Group has been through a substantial change over the last few years," he told mivision on the eve of the financial year-end.

"The focus I've brought since becoming CEO in May 2010 is to go back to the fundamentals of what Vision Group is all about when the idea was first formed... We've spent an enormous amount of time working with the doctors to understand what makes the concept successful."

According to Mr. Thompson, that concept is much more than the share price - it's about the corporate vision. "What's really happening is we're practicing medicine... patient care, the way in which our doctors practice in clinical matters, research, charitable contributions and investments in technology is what's important."

While all that sounds extremely positive, unfortunately for the Vision Group, the share price is yet to reflect that optimism.

Last year there would have been great optimism when Mr. Thompson introduced his strengthening strategy.

Strengthening Strategy
A significant aspect of the strengthening strategy has been a change to doctor remuneration, that the company hopes will bring its doctors' pay structures more in line with those in private practice.

Already Mr. Thompson says 17 of the 39 doctors have migrated to the new structure and just two have dropped out of the business all together. More are expected to migrate as current contracts expire. While he acknowledges that this will incur additional costs for Vision Group, Mr. Thompson says the end result will be more satisfied, committed doctor partners.

Management Reinforced
Another aspect of the strengthening strategy Mr. Thompson says was a company growth strategy launched early this calendar year. Rather than growing through acquisitions, the plan was to focus on capitalising on the strengths of the Group's day surgeries, optometric and GP referral growth, business-to-business strategies, marketing, doctor incentives and attracting new doctors to the business.

"All of these strengths will work together to take the company forward," he said. "They're sensible because they take advantage of the quality of our doctors but they don't cost money."

Business Building
While Vision Group won't be acquiring new practices, it is spending a lot of money on a television marketing campaign to promote the group.

"It's not what you'd expect," said Mr. Thompson. "It's a campaign that is more about our vision - it emphasises the fact that everyone in their life will need some sort of ophthalmic treatments and shows how the eye care industry touches people's lives."

The company is also working with a large group of GPs to pilot a program that will help them manage patients with eye care problems. The program aims to help GPs more effectively triage those patients and the result should be more business for optometrists. "Often a GP will refer a patient to an ophthalmologist and it is not necessary, so we're working with the GP group to help them refer to optometrists instead. We're able to do this because we have the same geographic reach (as the doctor group)."

The Group says it also plans to establish partnerships with national corporations, such as airlines, that require ongoing ophthalmologist services "where eye healthis an important part of their organisation, we can provide the eye care service," says Mr. Thompson.

Financial Ghosts
While advertising and business-to-business marketing make up a significant part of the company's "strengthening strategy", the third aspect of the strengthening strategy is managing financial ghosts.

Again, Mr. Thompson remains optimistic despite the negative commentary the company's financial position has attracted. He says that just like a lot of companies that grow through acquisition, there was debt behind the company, however, he is happy with the company's progress in amortising that debt and repaying the interest. "We have good working relationships with the banks and we're progressively bringing our debts down," he said.

Confronting Negativity
Mr. Thompson believes much of the profession's negative feeling towards Vision Group, stems from the early days of the company when there was a perception that doctors were selling out to the corporate dollar and perhaps not focusing on patient care.

"But in patient surveys, I struggle to find negative comment about the care patients receive from doctors or support staff."

He said, along with investment in technology, patient care and clinical practice is 'key' to the group's success.

He added that as a large organisation, Vision Group has the financial capacity and resources to invest in new breakthrough technologies that make a difference to the future of eye care. "Many of the criticisms levelled at us are about us being in it for the dollar, but it's a holistic thing about providing the services - If you don't have a group of this size, it's not financially viable to invest in the new technology."

Mr. Thompson added that the company's financial resources also enable it to invest in considerable medical research and support charitable projects in indigenous Australia, and developing countries such as Burma.

Mr. Thompson's optimistic view of the company's future is sure to be carefully scrutinised by shareholders, patients, and other stakeholders looking for better results in 2012. We look forward to talking again with Mr. Thompson once the company's latest financial results are released