It would have been great for shareholders if the David Symons article was accurate, but unfortunately he has used 2009 EBIT of $32m as his starting point, not the 2010 normalised amount of $26m. Remember, around $5m EBIT has been lost in 2010 due to the departures of the doctors since the 2009 financial year. Again, a 20% increase in doctor remuneration as a percentage of $80m of personal exertion revenue is $16m; therefore $26m 2010 EBIT less $16m in additional pay is $10m normalised EBIT in 2013.
Not much is left after payment of the interest bill on around $100m in debt.
Perhaps the illustrious doctor dominated Board will clarify for shareholders; dont bet on it.
We all look forward to meeting the Private Equity group that will presumably believe it is prudent to attempt to do the same thing the previous one did...Private Equity needs some certainty that it can flog it off again within 3 to 5 years. All the best to the new investor group that is game enough to take the 40 greedy doctors on board and their chances of fooling a fresh new set of investors several years later. Perhaps unfortunately for some, history repeats itself.
Maybe they'll achieve what the supposedly independent and incompetent directors didn't achieve over the last 2 years - recruit additional sub specialists from reputable foreign countries to reduce individual doctor bargaining power, such that if any one individual threatened to leave in the future, they could give them the one finger salute on the way out. This is the point that David Symons has missed as well - there was another weapon to fight the threat of departure other than increasing remuneration by the full extent of 100%; over time you break the concentration of power held by the few, enabling you to achieve an outcome that isn't as drastic as the one now shoved down shareholders throats. Perhaps too hard a task for the CEO; its an easier task to cut cheques for another $16 million a year to 40 doctors, or $400,000 each.
I can now go to bed reading the 2009 Annual report again; hang on!, what was that gem of a closing paragraph to the Chairmans and CEOs 2009 letter on page 5?: ...Vision Group has overcome those hurdles, restructured management, and taken tough initiatives to improve profitability in the longer term and protect earnings in the shorter term. Most importantly, Vision Group is implementing a well constructed and achievable strategy for growth. Signed Shane Tanner and Craig Stamp.
...Ahh! I now feel warm and fuzzy and can doze off.
VGH Price at posting:
23.0¢ Sentiment: LT Sell Disclosure: Not Held
