Vision Eye Institute Ltd (ASX: VEI) gave investors a nice surprise late on Tuesday when it released a trading update, forecasting higher-than-expected earnings for the year just ended. The shares rose 6.9% to close the session at 78 cents.
The company, which is Australia's largest provider of ophthalmic care, has been a somewhat volatile performer for investors in recent years and has generally underwhelmed investors with its earnings results most recently. At its half-year results presentation, for instance, it reported flat revenue of $54.9 million, an 11% decline in profit after tax and no dividend.
The Results
Before the closing bell yesterday however, management said it expects earnings before interest, tax, depreciation and amortisation (EBITDA) for the 2015 financial year to be around $27 million, which compares to previous EBITDA guidance of between $25 million and $26 million.
The result was bolstered by the company's nine day surgeries consisting of 11 theatres which the company said helped bolster its balance sheet and improve its income stream, whilst also providing a solid platform for future earnings growth.
Encouragingly, it also allowed the company to double its final dividend compared to last year's with management expecting to declare a distribution of 2.5 cents per share. Furthermore, it also expects to resume the former dividend policy of regular interim and final dividends with a target payout ratio to be set between 30% and 50% of net earnings.
The Outlook
Management also provided an outlook for the 2016 financial year, forecasting EBITDA of $26 million without taking into account additional acquisitions in the Day Surgery sector.
The group's chairman Shane Tanner said "the company is actively evaluating a number of growth opportunities in the Day Surgery market and is confident of further announcements in coming months. Vision has minimal net debt and has significant capacity available to fund such growth as it occurs."
The Takeover
In something of a shock announcement, Vision Eye received a takeover offer from Pulse Health Limited (ASX: PHG) earlier in the month. What made the offer so strange is that Pulse Health is considerably smaller than Vision Eye while Primary Health Care Limited (ASX: PRY) was also seen by many investors as the most likely suitor, considering it owns roughly 22% of the business.
In yesterday's update, management stated that the 'hostile' takeover offer was still 'uncertain, speculative, and highly conditional'. At this point, Vision Eye has urged shareholders to take no action and to instead wait for its statement explaining the concerns shared by the Board which should be posted to the market early next week. Watch this space for any updates on the matter.
