Pacific Smiles Group Limited – 2018 Full Year Results

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    Pacific Smiles Group Limited (ASX: PSQ) (“Pacific Smiles” or “the Company”) today announced its
    financial results for the full year ended 30 June 2018.
    Key Financial Highlights
    The key financial highlights from the result include:
     Patient Fees generated by the dentists working at dental centres owned and operated by
    Pacific Smiles were $164.5m, up 12.0% on the prior period
     Same Centre Patient Fees grew 5.1% for the period
     Revenue of $104.5m, up 14.3% on the prior period
     EBITDA (underlying) of $21.5m
    , up 2.9% on the prior period
     NPAT (underlying) of $9.3m1
    , down 9.7% on the prior period
     10 new dental centres opened, comprising 9 Pacific Smiles Dental Centres and 1 nib Dental
    Care Centre, bringing the total to 80 centres as at 30 June 2018
     Final dividend of 3.8 cps (fully franked) declared bringing full year dividends to 6.1 cps (FY17
    5.9 cps)
    Business Initiatives
    As Pacific Smiles continues to scale up and grow its presence via an expanding network of dental
    centres, various business initiatives are undertaken to continually improve the quality of the business
    and its competitive advantage in the market. During FY18, the significant business initiatives that
    were delivered included:
     Acquisition of Everything Dentures and Sculpt Lab
     Expansion of the nib Dental Care Centre network to advantage from the changes to the nogap
     Roll-out of 10 new dental centres in Figtree and Shellharbour in the Illawarra, Balgowlah in
    Sydney, Gungahlin and Woden in the ACT, Leopold, Greensborough and Glen Waverley in
    Victoria and Buddina and Runaway Bay in Queensland
     A total of 14 additional chairs commissioned in existing centres to meet patient demand
     Remodelled and upgraded new graduate dentist mentoring and training program
    Pacific Smiles Group Limited (ASX: PSQ)
    Level 1, 6 Molly Morgan Drive, Greenhills NSW 2323
    PO Box 2246 Greenhills NSW 2323
    P: 02 4930 2000 • F: 02 4930 2099
    ABN 42 103 087 449 / ACN 103 087 449
     Launch of business intelligence systems linked to data warehouse
     Implementation of new arrangements for IT help desk and servicing
     Improvement of systematic patient communications to drive improvements in frequency of
    patient attendance
    Business Performance
    Total patient fees for FY 2018 were $164.5m, representing growth of 12% for the period, compared to
    our guidance at the beginning of FY 2018 of 10-15% growth.
    Same centre patient fees growth improved to 5.1% compared to the prior year of 3.8%. Same centre
    patient fees growth was 3.3% in H1 2018. Trading improved in H2 2018 with same centre patient fee
    growth of 6.8% achieved. Despite the improvement in the second half, we were expecting higher
    growth in May and June especially in the context of lower growth in the prior period.
    Patient volumes at the Parramatta dental centre were steady following the right-sizing in October
    2017, which is a pleasing result. The ex-DEP centres in Parramatta and Town Hall are showing
    improved performance, however they continue to generate margins below the level expected of
    centres of their size and maturity. The Parramatta dental centre restructure resulted in the $2.3m oneoff
    impact of redundancy and impairment costs.
    EBITDA for the year was $21.5m (underlying), up by 2.9% on the prior year result of $20.9m
    (underlying). EBITDA to Patient Fees margin decreased from 14.2% to 13.1%. The key drivers were:
     IT investment - approximately $600k of incremental IT expenditure related to data connectivity
    and network infrastructure to support PSQ's "cloud first" IT roadmap
     Cohort mix – the proportion of centres in ramp up phase (i.e. faster growing but lower margin)
    increased as a percentage of the total. In FY 2018 the cohort of centres opened FY 2011 to
    FY 2016 inclusive comprised 38% of the total compared to 32% in FY 2017
     Labour efficiency – our mature centre cohort recorded patient fee growth of 2.0%, with
    expenses growing at approximately 4%. In future we are aiming to improve labour matching to
    the level of patient activity, through various initiatives including improved business intelligence
    New centres opened in FY 2017 increased EBITDA and are performing in line with other cohorts.
    EBITDA was impacted by start-up losses from 10 new centres opened in FY 2018 (FY 2017: 12), with
    5 opening in the second half of the financial year, of which 3 were in June 18.
    Higher depreciation costs associated with the rollout strategy of new centres, resulted in the
    underlying NPAT decreasing by 9.7% to $9.3m compared to $10.3 million for the prior year.
    Pacific Smiles continues to report high levels of patient satisfaction, with Net Promoter Score results
    above 75, a pleasing result and high by most benchmarks.
    Capital expenditure was $13.8m for the year, including $8.3m on 10 new centres, $1.1m for centre
    upgrades at Greenhills and Bribie Island and $0.5m for the Brisbane CBD centre rebranding to nib.
    The balance includes equipment replacements, commissioning of 14 additional surgeries in existing
    centres and IT infrastructure investments.
    The Board has declared a final fully franked dividend of 3.8 cents per share to be paid on 5
    th October
    2018. The record date for this dividend is 20th September 2018.
    Pacific Smiles provides the following update regarding the outlook for FY 2019, which is consistent
    with the update provided in June:
     EBITDA for FY 2019 is expected to be at least 10% up on prior year
     Total patient fee growth of 10% to 15%
     Same centre patient fee growth of >5% (same centre patient fee growth is approximately
    9.3% for the first 7 weeks of FY 2019)
     Opening at least 10 new dental centres, with a strong pipeline, including 4 sites already
    committed for FY 2019
     Dividend policy pay-out ratio in the range of 70-100% of NPAT for FY 2019
    On 7 August 2018 Pacific Smiles announced the appointment of Mr Philip McKenzie as Chief
    Executive Officer and Managing Director, effective 29 October 2018. Mr McKenzie will succeed Mr
    John Gibbs who has been in the leadership team at Pacific Smiles for the past 14 years, 11 of those
    in the capacity of CEO and Managing Director.
    Mr McKenzie brings to Pacific Smiles a pedigree of organic rollout allied healthcare experience and
    also a strong consumer background both in Australia and internationally. Mr McKenzie’s passion for
    purposeful culture and driving results through people was identified as an excellent fit for Pacific
    Bob Cameron AO, Chairman of the Board said: “On behalf of the Board, staff, dentists and all
    shareholders, we sincerely thank John Gibbs for his outstanding role in getting Pacific Smiles to
    where it is today as one of the most successful organic rollout dental models in the world. John’s
    extreme integrity and hard work have been hallmarks of his time leading the business. We look
    forward to John’s ongoing input as he facilitates the transition to a new leader “.
    Pacific Smiles is also pleased to announce the appointment of Mr Hilton Brett to the Board as Nonexecutive
    Director. Mr Brett has recently retired from his role as joint CEO of ASX listed retailer
    Accent Group, a business with 450 retail outlets and $800m of sales. With 12 years as an integral part
    of Accent’s successful growth, Mr Brett brings deep operational expertise to the Board, including
    direct experience in building teams, systems and processes to support the rollout of a large multi-site

    courtesy of Bell Direct

    ( DYOR )

    i hold PSQ

    i MIGHT add extras if the share dips enough

    ( i also hold AX1 ' free-carried )

  2. 29

    It is great when someone achieved such great results. I have always admired the dentists that have a big salary and of course do their job great. I met a new dentistry in my town impressed me too. By this I mean I never met doctors as kind as I did there. They were very nice to me and helped me defeat my fear of going to a dentist. I adore them. Like for real.

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