Vision Eye Institute Ltd reports disappointing result: Is it at bargain prices?

What: Australia’s largest provider of ophthalmic care for diagnosing and treating people with eye disorders and diseases Vision Eye Institute Ltd (ASX: VEI) has released its interim results for the half year to 31 December 2014.

Currently, the group provides services to around 78 doctors who offer a broad array of specialist eye care services such as corneal surgery, cataract surgery and glaucoma treatment. Interestingly, amongst the list of major shareholders in the company – which has attracted a number of bargain-hunting investors – is leading provider of general practitioner services Primary Health Care Limited (ASX: PRY).

So what: The latest results appear to continue a trend of underwhelming investors with the share price sinking around 5% by lunchtime to 67.5 cents.

For the half:

  • Revenue was flat at $54.9 million
  • Adjusted net profit after tax increased 8.5% to $6.7 million
  • No interim dividend has been declared
  • Net debt stood at $13 million
  • Return on capital employed slipped from 18.5% in the prior corresponding period to 18%

Now what: One of the most pleasing aspects of Vision Eye Institute’s results was the solid volume growth performance compared with the wider industry trend. This data suggests that in certain procedures, namely cataracts and intra-vitreal injections, the group is gaining market share.

Looking further forward to financial year (FY) 2016, Vision Eye Institute’s major growth strategy appears to centre on expanding its medical facility management services. This potential avenue for growth however is countered by an expected decline in business at its Gold Coast facilities.

Pleasingly, management revised up its guidance for FY 2015 from between $23.5 million and $25 million in earnings before interest, tax, depreciation and amortisation (EBITDA) to between $25 million and $26 million. Management also stated that it expects interest expense for FY 2015 of between $1.3 million and $1.4 million and for the company to pay a final dividend of at least 1.25 cents per share.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned.


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