BBY Healthcare

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BBY Healthcare Life Sciences Conference
Healthcare Life Sciences Conference 29
November 2006 Dr Harry Unger CEO Vision Group
Holdings Limited
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Unique Doctor Partnership Company Diverse
Revenue Streams Payers
Vision Group
Doctor Surgical Consulting Revenue

• The coming decade will see further rapid growth
  in the importance of the silver market to
  manufacturers and retailers..
• Source Access Economics

Laser Refractive Revenue
Day Surgery Revenue

• The wealth of Australias mature consumers has
  the potential to introduce a spending bonanza of
  proportions not seen before
• Source Access Economics

Payers Medicare Health Insurance Patients
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VGH Company Structure
Structure of a Grouporate - a Doctor
Partnership
Board of Directors (5) Includes Medical Director
Chief Executive Officer
Medical DirectorDr Harry Unger
Chief Financial Officer
Medical Director
Chief Operating Officer
Directors of Ophthalmology
General Manager Operations
Finance Manager
Business Managers
Medical Staff
Directors of Nursing
Team Leaders
Practice Development
Assistant Accountant
Clerical Staff
Nursing Staff
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Vision Group Growth
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Business Sector and Manpower Growth
Refractive Market varies with consumer
confidence Highest margin sector of the business
Surgical capacity of partners in excess of
100 Focus on referral base to change patient mix
for growth.
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Planned Rapid Development

• 2001-2006 Achieved Establish the business
• v ASX listing 2004
• v Complete acquisitions resulting in strength
  in key demographic areas
• v Establish manpower of subspecialty experts
  and opinion leaders
• v Determine future areas of industry growth and
  new markets
• v Invest in the technology required to leverage
  the growth
• v Diversify the revenue streams
• v Balance the business between high margin
  discretionary lower margin non-discretionary
  
• 2007 Next Phase Leverage and grow the business
• Organic growth by expansion of services
  utilisation of unused capacity
• Acquire bolt on businesses that create synergies
  for existing clinics
• Enter new markets

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Ageing Demographics
Aging Demographics
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Cataract and AMD Incidence
Access Economics Study
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Business Development
Cataract Traditional Market
AMD (macular degeneration) The New Market
SourceAccess Economics
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Strategic Business Development Factors
Focus on new treatments now available for
retinal diseases
SourceAccess Economics
Focus on Queensland demographic
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Vision Group Locations Australia
Vision Group Locations Australia June 2006
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Vision Group Qld
Vision Group Queensland
North Queensland (Townsville) North Queensland
Day Surgical Centre Laservision Centre North
Queensland Hyde Park Eye Centre
Central Queensland Mackay Day Surgery Central
Queensland Eye Centre Mackay Central Queensland
Eye Centre Rockhampton Central Queensland Eye
Centre Gladstone Central Queensland Eye Centre
Bundaberg Central Queensland Eye Centre
Hervey Bay
Brisbane RiverCity Day Surgery RiverCity
Laservision RiverCity Eye Centre The Eye Centre
Mt Gravatt
Gold Coast Short Street Day Surgery The Eye
Centre Laservision Southport The Eye Centre
Southport The Eye Centre Robina The Eye Centre
Coolangatta
GOLD COAST
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Vision Group NSW
Vision Group Sydney NSW
Chatswood The Eye Institute Day
Surgery Refractive Consulting Cremorne
The Eye Institute Consulting Bondi
Junction The Eye Institute Refractive Consul
ting Drummoyne The Inner West Eye
Clinic Consulting Sydney CBD Ophthalmic
Associates Consulting Hurstville
Southline Eye Centre Day Surgery Refractive
Consulting Woollahra Sydney
Eastern Eye Centre Day Surgery
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Vision Group Vic
Vision Group Melbourne VIC
Camberwell Camberwell Eye Clinic Day
Surgery Consulting Footscray
Footscray Eye Clinic Day Surgery Consulting Bla
ckburn Blackburn South Eye
Clinic Consulting Coburg
Coburg Eye Clinic Consulting Melbourne
St Kilda Rd Laservision Refractive Box
Hill Eastern Eye Surgery Centre
Day Surgery Eastern Retinal
Clinic Consulting
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Strategic Investment in Equipment and Facilities
Investment in Equipment and Greenfield
Development in 2006 FY 3.5 M for the creation of
Brisbane RiverCity hub. Significant Capex spend
in 2006 FY for refractive c.2m and
retinal sectors of the business
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Vision Group Revenue and Margins
Over 80 of the revenue stream ..is
derived from the VGH salaried partners.
Consulting Revenue Consultations, Investigations
Medical Laser treatments Lower Margins
non-discretionary
Surgical Revenue Fees charged by doctors for
ophthalmic surgery, largely cataract Higher
Margins non-discretionary
Day Surgery Revenue Theatre fees from Health
Insurers and patient out-of-pocket High Margins
non-discretionary
Refractive Laser Surgery Cyclical, patient
out-of-pocket cost marketing is required
Highest Margins discretionary
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Consumer Confidence and Lasik Refractive Surgery
(USA)





Highest margin Business Sector Patients defer
the surgery Strong historic pattern of year on
year growth when market recovers
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6 HubsAcquisition Strategy

• Continued focus on leveraging acquisitions
  creating Spokes acting as referral clinics in
  areas surrounding Hubs or creating the Hubs
• Continued focus on strategically and financially
  compelling acquisitions
• Maintain the balance between discretionary and
  non-discretionary revenue

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4 Free Standing Day Surgeries
4 Freestanding Day Surgery Sites
Vision also operates standalone day surgeries
supported by equity incentivised Visiting Surgeons
Blackburn Eye Clinic
Hyde Park Clinic Townsville
Bondi Junction
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CQEC Mackay
Melbourne Eastern Eye Surgery Centre hub
Sydney Eastern Eye Centre hub
Townsville Mackay Day Surgery
hubs

• Visiting Surgeons

• VGH Consulting rooms

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7 Refractive Surgery Centres
7 Refractive Surgery Centres
TEI Chatswood TEI Bondi Junction
Laservision TEC Southport
Laservision Melbourne
QLD
VIC
NSW
Laservision Townsville
Southline Laservision
Laservision RiverCity

• Referral Base

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Doctor Manpower

• Vision continues to attract leading specialists
  at both junior and senior levels
• Successful listing has increased doctors desire
  to join the group
• Partnership offer business model provides
  incentives for Associates
• Continued interest from major practices across
  Australia
• Vision Group is a sponsor employer that can
  import specialist manpower
• Additional New Model
• Associate Partners acquired at 2 to 3 multiple
  (of surgical practice only) on an earn out
  basis for doctors at the end of their careers
  who will use VGH partners as their successors.

Visiting Surgeons utilise VGH Day Surgery
facilities and the majority hold VGH equity
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Absolute Medical Sovereignty and long-term
financial security

• Vision Group in association with RANZCO provides
  final year training programs and will facilitate
  overseas training for selected candidates.
  Encouraged to work in Public Hospitals and
  perform pro bono work in Australia and Third
  World countries
• Vision Group will tailor facilities to meet the
  requirements of new graduates, associates and
  partners without financial risk and facilitates
  growth derived from succession and support
• Guaranteed Minimum Salary and earn into
  attractive cash and equity package in one year

Recent Graduates
Associates and Mid-career Surgeons

• Vision Group creates a collegiate atmosphere in
  facilities having state-of-the-art diagnostic and
  surgical equipment and facilitates accelerated
  growth derived from succession and support
• Long-term financial security through equity
  holding partnership

Senior Surgeons

• Vision Group provides an opportunity to realise
  value from a business that historically had
  little or none, at the end of a surgeons career,
  by providing succession
• Depending on the practice, a number of options
  are available

Visiting Surgeons

• Vision Group creates an opportunity to become an
  equity holder in the company by utilising its day
  surgeries whilst maintaining your own private
  consulting and surgical practice
• Visiting Surgeons participate in the Medical
  Advisory Committee and are instrumental in policy
  making for facility management, equipment
  purchases and patient care

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Doctor Acquisition Model
Acquisition and Escrow
Total Consideration at Acquisition
Full Partners
Cash

• 1 Practice Enhancement Fund (PEF) contribution.
  7.5 of total practice acquisition value.
• Long-term Escrow. 7.5 of total practice
  acquisition value.
• Short-term Escrow released 20 per annum pro rata
  to performance against base EBITA of business
  plan
• Out-performance Bonus from paid from over-budget
  EBITA plan and from the Practice Enhancement
  Fund.
• Dividends paid fully franked in cash. Dividend
  Re-Investment Plan available.
• 5 year Service Agreement.
• 3 year Business Plan.
• Non-compete provisions apply.

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Shares in VGH
Practice Enhancement Fund 7.5
Escrow Year 1 20
Escrow Year 2 20
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Escrow Year 3 20
Escrow Year 4 20
Escrow Year 5 20
Long-term Escrow 7.5
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Retention Incentives - Practice Enhancement Fund
Purpose Incentivise Successor Doctors and Key
Staff
VGH Model 7.5 of the total acquisition price
paid to a doctor / clinic is paid to the PEF
Doctors have partly prepaid for their own
succession and for staff career development and
motivation
Distribution and Funding Interest Free - Limited
Recourse Loans

• Dividends flowing to the shares are applied to
  partially repay the loan
• Term of Loans Exercise only at end of term
  only if in contract for the whole period
• Doctors 10 Years
• Key Staff 3 Years

Doctors Potential Successors become eligible
after 1 year of partnership

• 2006 8 Successor Partners have each received
  loans 500,000 value loan (vest in 10 years).
• 2006 Doctors received out-performance bonus
  issue as well from the fund

Key Staff and Doctors For contribution to
company management development
2006 50 Staff and 5 Doctors received loans (vest
in 3 years)
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Partner Out-Performance Model
Partner Out-Performance Model
Out-Performance Revenue, Succession and
Co-operation
Partner Value Long Short Term
EBITA above plan
40 Retained by VGH
40 Long Term Equity Investment
Equal Value Long Term PEF Loan
60 Paid to Partner
42 Short Term Cash or Equity
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Personal
30 Practice
Plus from Practice Pool
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Future Organic Growth
Conversion of Associates to Partners and Senior
Surgeon acquisitions
Increased Hub utilisation
Expansion of clinic services
Leverage unused partner and clinic capacity
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East Coast Strategic Plan in Place
Ring of Hub and Spoke clinics around Sydney and
Melbourne
Two new spoke clinics adding to utilisation of
North Sydney hub New hub acquired in South Sydney
Future Create new expand existing services in
all clinics
Hub created in Brisbane
Two spokes replaced by a hub with general
consulting, day surgery and refractive
services Expansion of services New retinal,
glaucoma and refractive services
commenced Future Addition of new clinics and
doctors to act as spokes and increase utilisation
Gold Coast clinics with highest market share

• Future
• High current utilisation requires the development
  of a new clinic to cope with retinal demand
• Recruit more manpower

Queensland regional clinics acquired with high
market share
Future Utilise existing capacity in partner base
to cope with high demand Recruit more full-time
manpower for the longer term
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Manpower Market Dynamics
Manpower Market Dynamics
Vocational training placements, Australia, by
specialist discipline, 1994 and 2002
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Positive Business Market Dynamics
Manpower leverage unused capacity and recruit
for regional clinics
Acquisition price multiple maintained for large
and small businesses
Bolt-on strategy Model expansion facilitates
seamless integration of new businesses
New Markets Continued interest from within
Australia and abroad
Technology Investment Criteria maintained
Aging Population and Baby Boomers remain the
target demographic
Focus on relationships with the optometry
referral base
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