As members of the Australian Optometric Panel (AOP), the business principals have known each other and shared business knowledge and experience for over 20 years. As a result, the business philosophies and cultures of the group are similar and integration is not considered to be an insurmountable challenge. Further reinforcing this "similar business culture", all practices purchased have operated under the Eyecare Plus brand for almost 7 years. Each business unit is in a separate geographic area and none of them is in competition with the others. Their growth has been organic and through opening green field sites and/or practice acquisition. This strategic initiative will allow growth at a more rapid rate.
Operating Structure
The Group consists of a holding company (EPL), an operating subsidiary, which purchases and operates the optometry practice assets, and a finance subsidiary.
The directors and management believe that the increasing consolidation in the industry and the demographic trends toward female optometry graduates who may be less inclined to invest in a practice, provides an opportunity to establish a group of optometry practices led by optometrists and having its roots in independent optometry. The operating model for 'Eyecare Partners' business is one of local autonomous management within agreed budget and profit growth targets. Each practice (or practice group) will be overseen by a senior qualified optometrist. In most practices, the vendors will continue as the supervising optometrists in the practices.
There are currently 33 practices, located in Port Macquarie (3), Wauchope, Keperra, Springwood, Mackay, Proserpine, Airlie Beach, Gympie, Cootamundra, Young, Nowra, Ulladulla, Kiama, Ramsgate Beach, Bathust, Lithgow, Aspley, Karrinyup, Hillarys, Bendigo, Moonee Ponds, Oakleigh, Newton, Camberwell, Burwood, Hawthorn, Karalee, Boonah, St Ives, Robina and Mermaid Beach.
The businesses employ a range of employees on a full time and part time basis, including Optometrists, Optical Dispensers, Optical Technicians and other support staff. The practices have fully equipped consultation rooms with high quality examination equipment, including Digital fundus cameras, Zeiss/Humphrey Visual Field Testers and Medmont Corneal Topographers. In several locations a fully equipped lens fitting laboratory is included.
Full scope primary eye care is provided including eye examinations, contact lenses, behavioural optometry, low vision services and, in many cases, co-management of medical and post-operative conditions with local ophthalmologists.
Business Expansion Strategy
The key focus of EPL is to acquire individual optometry practices and facilities in Australia and attract new customers and optometrists to use the services available at these established facilities. The business model seeks to:
- Maintain and grow the revenue base of each practice
- Derive scale benefits from increasing the number of practices under management
- Improve management and software systems supporting the practices, and
- Provide a blend of senior management and clinical experience and expertise.
- Invoicing and collection of fees
- Recoupment of insurance rebates from health funds
- Accounting and budgeting services
- Acquisition of specialised equipment, and
- Marketing
In addition to providing premises and optometry facilities to practitioners, the business centralises a range of practice management, administrative, technology and other support services, including:
Organic – The Group’s practices have grown steadily for many years, through establishment of new sites and acquisition and re-branding of existing practices. It is anticipated this growth will continue in the years post acquisition, and revenues are anticipated to grow organically at a rate of approximately 5-6% per annum.
The industry as a whole has a long term historic growth rate of 4% (2% in volume growth and 2% in value added); however, the Vendors have been growing historically at the faster rate of over 7% per annum. The above market performance will continue due to business strategy of focusing on the higher end of the market, introducing the latest technology and clinical techniques, and improved product sales.
Acquisition – EPL aims to double in size in the first year of operation, and has already targeted several opportunities. The Company is targeting capital city locations as well as regional locations to increase its geographic diversity.
In general, EPL will target high performing single practices and small to medium groups of 2-10 practices. The Company will purchase the business assets and operations of the practices, and will retain the services of the vendor supervising optometrists through medium term (3 to 5 year) employment contracts. The employment contracts will be structured to include incentive programmes for increasing the turnover and profitability of the practices under supervision.
The profession is currently undergoing a demographic adjustment, with an increasing percentage of females (currently 42%) entering the workforce and a simultaneous ageing of the workforce with a high percentage of over 50 years of age (~40%.) This latter phenomenon is resulting in a number of optometrist principals preparing for and/or considering retirement options. Presently the major buyer of these businesses has been Luxottica and they are aggressive in their expansion plans. Independent optometrists appear to prefer to sell (and continue to work in the short to medium term) to one of their respected peers, however, until now there has been no large ‘independent’ group that would enable that transition.
This industry consolidation effect is coupled with the entry into the profession of “Generation Y”. Recent graduates appear reluctant to buy into a business. Their lifestyle choice is such that they want to be flexible, mobile and able to move practice every 5 years or so. This change is an advantage for EPL, since it reduces competition in the purchase of practices, and also ensures a pool of qualified individuals is available to staff practices on an employed basis. Thus, EPL’s culture should be an attractive proposition for a principal seeking to divest their business, and also prove an attractive employment proposition with an excellent working environment and mobility without the loss of continuity of employee benefits. Employees will be actively encouraged to become shareholders, engendering further loyalty and commitment to EPL.
The Company expects future acquisitions to be funded by a combination of cash and the issue of additional securities.