RNS Number:0677T
Oasis Healthcare PLC
10 December 2003
For Immediate Release 10 December 2003
OASIS HEALTHCARE PLC
INTERIM RESULTS ANNOUNCEMENT
For the six months ended 30 September 2003
Oasis Healthcare Plc ("Oasis or the Company") the AIM-listed UK dental care
operator announces its interim results for the six months ended 30 September
2003.
HIGHLIGHTS
OASIS : the UK dentistry market leader with a national network of:
- 122 general and specialist practices under the 'Oasis' brand
- 5 cosmetic dentistry retail sites in Central London operating
under the 'Dentics' brand
- Over #73m annualised turnover primarily from private treatments
Financial
- Turnover increased by 103% to #36.7m (2002: #18.1m)
- EBITDA increased by 142% to #2.7m (2002 : #1.1m)
- EBITDA margin up to 7.3% (2002 : 6.0%)
- Profit pre-tax and goodwill increased by 79% to #0.6m (2002 : #0.3m)
- Net cash generated of #1.2m (2002 : #0.7m)
Operational
- Capital reorganisation completed in August 2003
- Substantial growth in private treatments to 62% of turnover
(2002 : 42%)
- Level of dental vacancies reduced to 6% : the best position
achieved to date
- Integration of Ora and Dencare acquisitions successfully
completed
Ron Trenter, Chairman said:
"Our results for the six months ended 30 September 2003 represent a period of
further strong growth for Oasis. We have created an excellent platform for
exploiting the attractive growth opportunities offered by the UK dental market."
For further information, please contact :
Malcolm Hughes (Chief Executive, Oasis Healthcare Plc) 01603 625 335
Tim Anderson (Buchanan Communications) 020 7466 5000
CHAIRMAN'S REVIEW
Our results for the six months ended 30 September 2003 represent a period of
further strong growth for Oasis. The major acquisitions of the previous
financial year have had a significant impact on the enlarged Group's
consolidated performance. Oasis now comprises a national network of 122 general
and specialist practices operating under the 'Oasis' brand, together with 5
retail sites in Central London specialising in cosmetic dentistry and operating
under the 'Dentics' brand. Your Board believes that we have created an excellent
platform for exploiting the attractive growth opportunities offered by the UK
dental market.
The proposed capital reduction exercise - which was approved at the Annual
General Meeting in July 2003 - was completed successfully as confirmed in our
announcement to the London Stock Exchange on 13 August 2003. As previously
stated, this exercise will enable your Board to consider commencement of
dividend payments to shareholders sooner than would otherwise have been the case
although it is not planned that any dividend will be payable in the current
financial year.
Results
Turnover for the six months ended 30 September 2003 was #36.7 million which
compares with turnover of #18.1 million achieved in the same period in the
previous year. This doubling of income principally reflects the contribution
from acquisitions of both independent practices and corporate competitors
completed in the financial year ended 31 March 2003.
Of this turnover, 62% derived from the provision of private treatments to
patients compared to 42% in the same period of the previous year. The mix of
Oasis activity has moved in line with our corporate strategy from a
predominantly NHS-led business at the time of our IPO in July 2000 to one
focused on private dentistry. We expect the private component of our business to
continue to increase.
Group EBITDA for the six months ended 30 September 2003 was #2.7 million (2002 :
#1.1 million). This represents an improvement in our operating margin from 6.0%
to 7.3% which demonstrates the benefits of operational gearing in our business
model. Central costs in the enlarged Group have reduced significantly as a
proportion of turnover and now account for only 5.1% of income compared with
over 6% for the previous year. This represents encouraging progress towards our
medium term target of being no greater than 5.0%.
Group profit before tax and goodwill amortisation for the six months ended 30
September 2003 was #0.6 million compared with #0.3 million for the same period
in the previous year. This result was achieved despite a significant increase in
the Group's interest and depreciation charges as a result of increased
utilisation of our borrowing facilities and our ongoing capital investment
programme.
Net cash inflow from operating activities for the six months ended 30 September
2003 was #1.2 million (2002 : #0.7 million). Given the seasonality of the dental
business due primarily to the impact of Summer holidays, cash generation tends
to be significantly greater in the second half of the financial year. We
continue to expect that Group EBITDA will convert fully to cash over the
financial year as a whole.
Integration of Ora and Dencare
The period to 30 September 2003 has largely been focused on fully integrating
the Ora and Dencare acquisitions within the larger Oasis dental practice estate.
In financial terms, the former Ora practices have performed in line with our
pre-acquisition profitability targets but the former Dencare sites - including
the Dentics cosmetic studios - have delivered a lower result than anticipated.
The latter primarily reflects performance issues at a limited number of
practices. Corrective actions have been taken in order to improve results at
these sites in the second half and early indications are encouraging.
Practice Estate Development
As set out in the Annual Report for the year ended 31 March 2003, Oasis is no
longer pursuing an acquisition-led business strategy although we remain
interested in purchasing high quality practices which offer us the opportunity
to address current gaps in our geographic coverage. In the period since
completion of the Ora and Dencare acquisitions, we have concentrated on organic
growth and development rather than actively pursuing new leads.
However, our enhanced profile within the sector has resulted in a continuing
flow of new enquiries from prospective practice vendors and a number of
transactions are now in progress. In each case, the practices meet our criteria
in terms of location, size, profitability and growth potential and we expect to
complete a limited number of such transactions before our financial year-end.
The Group is also continuing to seek opportunities to acquire sole or dual
practitioners who can be merged into existing Oasis practices operating in the
same locality.
Finally, we are evaluating the present network of practices to determine whether
or not all sites are capable of achieving our long-term targets in respect of
turnover growth, profitability and return on capital. A small number of older
practices in the enlarged Group may not be capable of generating satisfactory
returns without significant additional capital investment and shareholder
interests may be better served by considering disposals of such sites. This
evaluation exercise will be completed by the year-end.
Business Development Initiatives
We continue to direct our business development efforts across the three key
areas of increased private treatment provision, cost reduction initiatives and
computerisation. In each area, we have made good progress over the past six
months:
Expanding Private Dentistry Activities
The acquisitions of Ora and Dencare brought to the Group a significantly higher
level of private dental care than previously achieved in the Oasis practice
estate given that both of these operators were primarily Southern-based and
already well-advanced in promoting high quality elective dentistry to their
patients. The enlarged Group is now the leading UK provider in key treatment
areas such as implants and cosmetic dentistry, with the latter reinforced by our
addition of a further site to the Dentics business following the conversion of
the former Ora whitening spa on the fourth floor of Selfridges to a full
cosmetic dentistry suite under the 'Dentics' brand.
Additionally, Oasis has agreed new partnership arrangements with Denplan, the
UK's leading provider of private dental capitation and membership schemes. These
arrangements aim to reinforce our private development initiatives in those parts
of the practice estate where development away from a predominantly NHS focus is
still at a very embryonic stage. As well as offering our patients a much broader
range of treatments as our private development initiatives are implemented, the
Denplan partnership will also provide access to financial products which enable
the cost to patients of higher value treatments to be deferred via interest-free
schemes.
Finally, the Group has expanded its clinical organisation to ensure that the
much broader service requirements of its enlarged business can be satisfied. In
particular, we have established clinical lead roles in the key areas of
Restorative Dentistry (covering Endodontics, Periodontics and Cosmetic
Dentistry), Implants and Orthodontics. These roles have responsibility for
extending the range of high value specialist services currently offered within
Oasis as well as ensuring we optimise the level of internal referrals generated
from our general practitioners.
Cost Reduction Programme
We continue to take an aggressive approach to our purchasing activity to secure
the best terms from suppliers and we are confident that full year annualised
savings from actions taken to date will be around #0.3 million. The supplier
contracts we have renegotiated embrace all of the key product and service areas
which account for the bulk of the Group's purchasing requirements excluding
staff and direct property costs (ie rent and rates) and equate to approximately
10% of Group turnover.
In direct costs, the key contracts relate to dental consumables (eg impression
materials, local anaesthetics etc) and oral health products (eg toothbrushes,
mouth rinses etc) where we have consolidated the majority of our requirements
and secured an attractive agreement with a single supplier. In overhead
categories, new deals have been obtained for print and stationery, utilities and
financial services (eg insurances and banking), with other service providers
being required whenever practicable to operate on a contingent (ie
share-of-benefit) basis.
Computerisation
Over the past six months, we have continued the development of our
practice-based software systems which enable both appointment book management
and clinical record-keeping to be undertaken efficiently as well as providing
core operating and financial data. We aim to complete computerisation of the
entire Oasis practice estate by the end of the next financial year. In terms of
our central IT system, our development efforts are concentrating on enhancing
data capture from the practice estate and moving progressively towards a
real-time environment in respect of yielding up-to-date financial, operational
and clinical information. This continuing investment is a key requirement in
enhancing our control systems and will enable performance management to be
optimised.
Clinical Manpower
Over the six months period to 30 September 2003, we have made encouraging
progress in reducing the level of current dental vacancies to below 30 full-time
equivalent (FTE) positions. This represents approximately 6% of our dental
manpower, the best position achieved by the Group to date.
Our UK recruitment activities continue to incorporate a wide range of
advertising activities within the professional media together with specialist
agency-led initiatives, both of which have generated a steadily increasing flow
of recruitment leads. This is supported by our own participation in local,
regional and national meetings, together with workshops and seminars organised
by various relevant bodies within the dental profession, including at
under-graduate level within the dental schools. However, it remains the case
that the UK alone is unlikely to provide a sufficient supply of dentists to
satisfy our requirements and we have continued to investigate opportunities
worldwide to source additional manpower. We expect this overseas sourcing effort
to be a significant contributor to our dental recruitment efforts beyond the
short term.
Whilst it remains the case that the limited availability of dentists is still
the most significant challenge to operators in the UK market, we are cautiously
optimistic that our improving performance in attracting and retaining new
dentists can continue. In our view, the rewards package and career development
opportunities we offer, supported by our commitment to provide modern surgery
facilities through our ongoing capital investment programme, will enable us to
position Oasis strongly in the highly competitive dental recruitment market.
Funding Position
Net debt at 30 September 2003 was #41million of which #34 million is represented
by term debt, with the balance mainly comprising overdraft and asset finance
facilities. This compares with net debt of #39.6 million at 31 March 2003. Your
Board continues to believe that the term loan facilities obtained from Bank of
Scotland - all bar #5 million of which carry an interest margin of only 1.25%
above LIBOR - have provided the most cost-effective means of financing the
Company's growth.
As we have previously advised shareholders, we have taken appropriately prudent
steps to protect Oasis from any significant upward movements in interest rates
by locking in almost half of the term debt at a LIBOR of 4.0% for three years to
31 March 2006. The balance of term debt is already locked in at just below 4.0%
LIBOR until 31 December 2003 when we will consider whether or not the prevailing
interest rate climate warrants the negotiation of a further long-term fixed rate
agreement.
Regulatory Developments
The plan to devolve the provision of NHS dentistry from the Department of Health
at a national level to local Primary Care Trusts (PCTs) under the Government's "
Options For Change" initiative has progressed forwards in parallel with the
progress of the Health and Social Care Bill through Parliament. There are still
a number of key areas relating to the new commissioning arrangements which come
into force from April 2005 that have yet to be finalised but these are likely to
be addressed over the next 3-6 months.
In principle, it is clear that PCTs will seek contracts with local providers -
specifically dental practices rather than individual dentists - to cover their
identified requirements in terms of general and specialist dental services. The
initial contract term is expected to be for three years and then renewable
annually thereafter. Despite our focus on private dentistry, we expect Oasis to
still be a significant participant in the new NHS arrangements and we believe
there may be material benefits for the Group from the partnership opportunities
with PCTs which appear likely to emerge.
Outlook
Oasis has experienced three years of rapid acquisition-led growth which has
enabled the Group to be transformed from a start-up proposition to its current
status as market leader, with annualised turnover in excess of #73 million.
Whilst we will continue to seek opportunities to acquire high quality
independent practices, the primary focus of the Group over the next 12-18 months
will be in ensuring opportunities for organic development and growth are fully
exploited.
In the short term, cost savings from exercising our increased purchasing
leverage and from implementing overhead reductions will provide the principal
driver of margin improvement. Thereafter, the expansion of our private
treatment activity to address the continuing growth in demand for higher value
dentistry, especially cosmetic and specialist treatments, will increasingly
provide the impetus for future growth in turnover and profits.
We remain optimistic that Oasis can deliver an attractive return on capital from
its leading position in the UK dental market.
Ron Trenter
Chairman
PROFIT AND LOSS ACCOUNT
For the 6 months ended 30 September 2003
6 months 6 months Year
ended 30 ended 30 ended 31
September September March
2003 2002 2003
#'000 #'000 #' 000
Turnover 36,678 18,082 46,870
Group operating profit/(Loss) 558 265 (1,026)
Net interest payable (1,147) (361) (1,242)
Loss on ordinary activities before taxation (589) (96) (2,268)
Taxation on ordinary activities 8 25 686
(Loss) on ordinary activities after taxation and (loss) for (581) (71) (1,582)
the period
(Loss) per share
(Loss) per share (0.71)p (0.12)p (2.47)p
Diluted (loss) per share (0.71)p (0.12)p (2.47)p
The group has no recognised gains or losses other than the profits/losses above
and therefore no separate statement of total recognised gains and losses has
been presented.
UNAUDITED GROUP
BALANCE SHEET
at 30 September 2003
As at As at As at
30 30 31
September September March
2003 2002 2003
#'000 #'000 #'000
Fixed assets
Intangible assets 43,106 17,747 44,155
Tangible assets 12,853 8,025 12,130
55,959 25,772 56,285
Current assets
Stock 1,047 552 1,192
Debtors 5,947 4,357 5,415
Deferred taxation 714 - 692
Cash at bank and in hand 393 1,128 704
8,101 6,037 8,003
Creditors: amounts falling due within one year (15,388) (6,167) (13,048)
Net current (liabilities) (7,287) (130) (5,045)
Total assets less current liabilities 48,672 25,642 51,240
Creditors: amounts falling due after more than one year (33,662) (13,919) (35,497)
Provision for liabilities and charges (452) (138) (604)
Net assets 14,558 11,585 15,139
Capital and reserves
Called up share capital 816 590 816
Share premium account 13,569 12,523 17,362
Profit and loss account 173 (1,528) (3,039)
Equity shareholders' funds 14,558 11,585 15,139
UNAUDITED GROUP
CASH FLOW STATEMENT
for the 6 months ended 30 September 2003
6 months 6 months Year
ended 30 ended 30 ended 31
September September March
2003 2002 2003
#'000 #'000 #'000
Net cash inflow from operating activities 1,240 667 1,902
Returns on investment and servicing of finance
Interest received 413 - 94
Interest paid (1,062) (263) (982)
Interest elements of hire purchase payments (94) (33) (142)
Net cash (outflow) from returns on investments and (743) (296) (1,030)
servicing of finance
Capital expenditure
Purchase of tangible fixed assets (1,540) (2,166) (3,726)
Government grants received 5 - -
Net proceeds of sale of tangible fixed assets - - 226
Net cash (outflow) from capital expenditure (1,535) (2,166) (3,500)
Acquisitions
Purchase of subsidiary undertakings (60) - (7,955)
Net overdrafts acquired with subsidiary undertakings - - (1,536)
Purchase of businesses (71) (4,355) (7,112)
Net cash (outflow) from acquisitions (131) (4,355) (16,603)
Cash (outflow) before financing (1,169) (6,150) (19,231)
Financing
Issue of ordinary shares - 35 65
(Decrease)/increase in debt (500) 6,774 28,924
Settlement of subsidiary's debt - - (9,772)
Capital element of hire purchase payments (495) (144) (605)
Payment of deferred consideration (805) (403) (650)
Net cash (outflow)/inflow from financing (1,800) 6,262 17,962
(Decrease)/increase in cash in the period (2,969) 112 (1,269)
RECONCILLIATION OF OPERATING PROFIT TO
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES
6 months 6 months Year
ended 30 ended 30 ended 31
September September March
2003 2002 2003
#'000 #'000 #'000
Operating profit 558 265 412
Depreciation on tangible fixed assets 920 406 1,080
Amortisation of goodwill 1,202 432 1,304
Government grant amortisation (20) (19) (38)
Profit on sale of tangible fixed assets - - 30
(Decrease)/increase in stocks 145 (108) (171)
(Increase) in debtors (552) (1,259) (701)
(Decrease)/increase in creditors (1,013) 950 950
Net cash inflow from operating activities before exceptional 1,240 667 2,886
items
Exceptional items - - (964)
Net cash inflow from operating activities 1,240 667 1,902
ANALYSIS OF NET DEBT
at 30 September 2003
At 31 Cash flow Non-cash At 30
March changes September
2003 2003
#'000 #'000 #'000 #'000
Cash 704 (311) - 393
Overdraft (2,099) (2,658) - (4,757)
(1,395) (2,969) - (4,364)
Debt:
Bank loan due within one year (1,000) 500 (1,250) (1,750)
Bank loan due after more than one year (33,471) - 1,218 (32,253)
Hire purchase obligations (2,170) 495 (138) (1,813)
Deferred consideration (1,543) 805 (34) (772)
(39,579) (1,169) (204) (40,952)
(LOSS)
PER SHARE
for the 6 months ended 30 September 2003
6 months 6 months Year
ended 30 ended 30 ended 31
September September March
2003 2002 2003
#'000 #'000 #'000
Loss attributable to shareholders 581 71 1,582
Weighted average number of shares in issue 81,646,081 58,915,622 63,939,466
Total shares for calculating diluted loss per share 81,646,081 58,915,622 63,939,466
The calculation of basic (loss) per share is based on loss after taxation and
the weighted average of ordinary shares of 1p each in issue during the period.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. The group has only one category of dilutive potential ordinary shares:
those share options granted where the exercise price is less than the average
market price of the company's ordinary shares during the period. Since the group
has made a loss in the six months ended 30 September 2003, there is no dilution
effect of the dilutive potential ordinary shares.
NOTES TO THE INTERIM
FINANCIAL INFORMATION
1 The Interim financial information has been prepared on the basis of the
accounting policies set out in the Company's statutory accounts for the twelve
months ended 31 March 2003.
2 The comparative figures for the twelve months ended 31 March 2003 have been
taken from but do not constitute the Company's statutory accounts for that
financial year. Those accounts have been reported on by the Company's auditors
and delivered to the Registrar of Companies. The report of the auditors was
unqualified and did not contain a statement under Section 237 Companies Act
1985.
3 Copies of this Interim Report are available free of charge from Oasis
Healthcare Plc, 69-75 Thorpe Road, Norwich, NR1 1UA - Tel: 01603 625335 - and
can also be downloaded from the Company website, www.oasis-healthcare.com
INDEPENDENT REVIEW REPORT
TO OASIS HEALTHCARE PLC
We have been instructed by the company to review the financial information which
comprises of the profit and loss account, summarised balance sheet as 30
September 2003, summarised cashflow statement, comparative figures and
associated notes. We have read the other information contained in the interim
report and considered whether it contains any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of management and applying analytical
procedures to the financial information and underlying financial data and, based
thereon, assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review excludes audit
procedures such as tests of controls and verification of assets, liabilities and
transactions. It is substantially less in scope than an audit performed in
accordance with United Kingdom Auditing Standards and therefore provides a lower
level of assurance than an audit. Accordingly we do not express an audit opinion
on the financial information.
This report has been prepared for and only for the company and for no other
purpose. We do not, in producing this report, accept or assume responsibility to
any other purpose or any other person to whom this report is shown or in to
whose hands it may come save where expressly agreed by our prior consent in
writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2003.
PricewaterhouseCoopers LLP
Chartered Accountants
Norwich
9 December 2003
Notes:
a. The maintenance and integrity of the Oasis Healthcare Plc website is the
responsibility of the Directors; the work carried out by the auditors does not
involve the consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the interim report
since they were initially presented on the website.
b. It should be noted that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
This information is provided by RNS
The company news service from the London Stock Exchange
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