# PSQ - Pacific Smiles Group



## System (20 November 2014)

Pacific Smiles Group Limited (PSQ) owns and operates the Pacific Smiles Dental Centres and the nib Dental Care Centres which are located throughout Australian Capital Territory, New South Wales, Victoria and Queensland.

http://www.pacificsmilesgroup.com.au


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## galumay (28 June 2018)

Another business that seems to have slipped under the radar of ASF! I noticed it this morning checking the ASX price sensitive announcements, it announced a trading update with downwards revisions of growth and profit, the SP fell about 11% which seemed an over reaction to me so I ran my ruler over it, but once again I found the price even after the re-rating to be too rich and so i passed on another interesting company that otherwise met many of my criteria for an investible business!


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## divs4ever (17 August 2022)

Pacific Smiles Group announces FY22 results
Results summary:
• Patient fees $226m, down 6% on prior corresponding period (FY21), reflecting
COVID disruption and 10.1% decline in same-centre fee growth
• Group revenue $139.5m, down 8.9%
• Underlying1 EBITDA $11.3m, down 65.9%
• 19 new centres opened, 127 Pacific Smiles centres at period end (up 16.5%)
• Underlying net loss of $3.2m, compared to net profit of $14.0m in FY21
• FY23 YTD performance suggests steady return to pre-Covid business volumes
Dentist service organisation Pacific Smiles Group (Pacific Smiles) (ASX: PSQ) today
released its financial results for the 12 months ended 30 June 2022, reporting declines in
revenue and underlying EBITDA compared to the prior period as Covid related interference
materially disrupted dental centre operations.
The company reported an 8.9% decline in group revenue to $139.5m for the period from
patient fees of $226m, which were down 6% on the previous year. This decline is attributed
primarily to the impact of Covid-related lockdowns and outbreaks, which limited practitioner
hours and patient attendance due to higher appointment cancellations and practitioner
absences. Same-centre patient fees were down 10.1% for the period.
Underlying EBITDA was down 65.9% to $11.3m for the period, reflecting reduced patient
fees against a largely fixed cost base as well as the $3.1m impact of net JobKeeper
payments in FY21 that were not provided in FY22.
Pacific Smiles reported an underlying net loss of $3.2m for the period, compared to net profit
of $14.0m in the prior period. No final or interim dividend was declared for FY22.
All Pacific Smiles centres were kept open during the year, both to maximise staff retention
ahead of an expected rebound in demand and to support dentists who chose to continue to
practice.
Nineteen new centres and four HBF-owned centres were opened, taking the total number of
centres (excluding six HBF centres) to 127 as at period end. The company installed 72 new
dental chairs during the year, including 15 in existing centres taking the total to 534 as at
period end.
1 Underlying results excludes the impact of the Australian accounting standard (AASB 16)
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
E: investor.relations@pacificsmiles.com.au
www.pacificsmilesgroup.com.au
ABN 42 103 087 449 / ACN 103 087 449
2
While FY22 has been a challenging year, Pacific Smiles’ network of dental centres are
ideally positioned to capture the uplift in appointments from a rebound in demand as Covid
effects recede in the wider economy.
The company reported positive same-centre revenue growth in November 2021, May 2022
and June 2022, when Covid-related lockdowns, restrictions and outbreaks were absent or
receding.
Pacific Smiles Chief Executive Officer, Phil McKenzie, said: “Operating conditions in
FY22 were clearly challenging in the face of Covid disruption, especially in our key markets
of NSW and Victoria. While we were disciplined in managing staffing and costs, inevitably the
Covid headwinds affected patient fees, EBITDA and profit for the year.
We made a conscious decision to keep all of our centres open during the pandemic and also
continued to invest in new centres in excellent locations, well positioned within our network.
The attendant labour costs associated with continuing to operate in a softer trading
environment, along with the investment in new centres exacerbated the impact on earnings.
However, it has also set the business up to be able to service the inevitable return of
patients, many of whom have not been to the dentist during the pandemic, and more
normalised operating schedules for dentists.
We are cautiously optimistic that the worst of the pandemic is behind us. Our centres are
reporting signs of increasing demand for oral care in our key demographic of families with
young children, which is encouraging,” he said.
In February the company advised that Andrew Knott had been appointed to the Board as a
non-executive director. Mr Knott had previously been US-based President - Verizon with
global marketing services group Publicis Group and has held senior marketing and
transformation roles with JP Morgan Chase & Co, National Australia Bank and McDonald’s.
Business performance
Covid effects contributed to a 63.5% decline in the EBITDA to patient fees margin, from
13.7% to 5.0%. The combined effect of softer same-centre fees on a high proportion of fixed
costs, the FY21 JobKeeper contribution, lower EBITDA from centres opened in FY21 and
start-up losses associated with new centres in FY22, were a drag on the FY22 operating
margin.
Net capital expenditure of $22.8m for the year was deployed mainly to new centres ($13.7m),
technology upgrades ($3.5m), relocation and expansion of existing centres ($3.1m), as well
as dental chairs, replacement of surgical equipment and centre refurbishments.
As at 30 June, borrowings had increased to $18.5m after existing facilities were drawn down
to finance the rollout of new centres. Pacific Smiles has a strong balance sheet, with $21.5m
of headroom available in its debt facilities and net assets of $69.8m (excluding the impact of
AASB 16). Our debt facilities were extended for a further three years during the year.
By fiscal year end there were more than 850 dentists working from Pacific Smiles centres,
with a retention rate above 85%. Patient satisfaction was high, with the company reporting a
patient net promoter score above 85. Staff retention dipped slightly, attributed to Covidrelated disruption.
3
In a key sustainability initiative, the company has committed to sourcing 25% renewable
energy in 2023 from our direct energy contracts with retailers and to transitioning to FSCcertified packaging in procurement of dental consumables.
Outlook and guidance
In the fiscal year to date (up to and including 16 August) the company reported patient fees
of $32.9m, year-on-year patient fee growth of 35.3% and same-centre fee growth of 28.4%.
The company has issued FY23 guidance, that in the absence of any deterioration in Covidrelated disruption above current levels, it expects patient fees in the range of $270m to
$285m and underlying EBITDA in the range of $24m to $27m.
Pacific Smiles expects to open five new centres and two new HBF Dental centres in FY23.
Mr McKenzie said: “Pacific Smiles’ growth strategy centred on culture, operational
excellence, innovation and network growth is on track. Year-to-date business performance
indicates that business activity and volume is returning to pre-pandemic levels. We expect a
return to growth in FY23 but at a more uniform rate and over a longer period than we saw in
the post-lockdown surge in FY21. Our network and proposition geared to young families
position the group well for a rebound in demand as conditions normalise.
“In the near term our focus is on lifting utilisation of capacity across the network of dental
centres, while investing in the dentist, patient and employee experience as we pursue our
long-term goal of reaching 250 dental centres and more than 800 dental chairs nationwide,”
he said.
ENDS
Investor presentation
Pacific Smiles will host a conference call for investors to discuss the half-year results at
11:00 am AEST, Wednesday 17 August. Pre-Registration Link: https://s1.cconf.com/diamondpass/10024043-exr31s.html
Complete full-year results materials will be released to the ASX and will be available on the
company website via the following link: http://investors.pacificsmilesgroup.com.au/Investors/.
Authorised for release by the Board of Directors.


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( DYOR )

i hold PSQ ( 'free-carried ' )

will watch this for a top-up opportunity ( but that target is unlikely to be above $1 )


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## galumay (17 August 2022)

Yes, @divs4ever, i have a range of IV around $1.10 so similar to you. I have never held, but always followed.

Despite the poor year and results its up today, so I think we are no chance!


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## divs4ever (11 November 2022)

Pacific Smiles Group Limited (ASXSQ)
11 November 2022
Postponement of Annual General Meeting to 28 November 2022
Pacific Smiles Group (ASXSQ) (the “Company”) hereby gives notice that, in accordance with clause
5 of the Company Constitution, the Board has resolved to postpone the Company’s Annual General
Meeting (AGM) previously scheduled to be held on Tuesday, 22 November 2022 at 4.30pm (AEDT) to
Monday, 28 November 2022 at 9.00am (AEDT). Additionally, the Board has made the decision to hold
the postponed AGM as a hybrid meeting at Level 5, 126 Phillip Street Sydney NSW 2000 and virtually
(see details below).
The Board has made the decision to postpone the AGM to give shareholders time to consider the
materials being prepared by the Company for the upcoming Extraordinary General Meeting (EGM),
which are expected to be published next week, prior to the proxy deadline for the AGM.
As announced on 7 November 2022, the EGM has been requisitioned by Dr Alexander J Abrahams,
who holds approximately 8.04% of the shares in the Company, to consider a proposal to remove each
of the current seven (7) directors of the Company to be replaced by four (4) new directors put forward
by Dr Abrahams, including himself.
The Company is aware that Dr Abrahams has been making various public assertions about the
performance of the Company and his plans for the business, which appear to be incomplete and
underdeveloped. The Board does not believe that Dr Abrahams’ plans are in the best interests of
shareholders and accordingly strongly oppose Dr Abrahams’ proposed resolutions. The Company is
preparing materials that will enable shareholders to make a balanced assessment of the proposed
resolutions. This information will be made available to shareholders in the notice of meeting for the
EGM, expected to be circulated next week, in support of the Board’s opposition to the proposed Board
spill.
The Company confirms that, other than the date of the AGM and the addition of a physical venue for the
AGM, there have been no changes to the notice of meeting for the AGM or the Proxy Form previously
sent to the shareholders on 20 October 2022. The Board will accept Proxy Forms received no later than
9.00am (AEDT) on Saturday, 26 November 2022. Proxies already cast in relation to the AGM remain
valid unless withdrawn prior to the AGM. The directors have determined pursuant to Regulation 7.11.37
of the Corporations Regulations 2001 (Cwlth) that the persons eligible to vote at the AGM are those
Shareholders registered by 7.00pm (AEDT) on Saturday, 26 November 2022.

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( DYOR )

i hold PSQ ( 'free-carried ' )

will read the proposals first , but am unlikely to vote for the board changes so far

will watch this for a top-up opportunity ( but that target is unlikely to be above $1 )


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## kenny (11 November 2022)

A good summary in the AFR;
https://www.afr.com/street-talk/founder-vs-new-brigade-in-pacific-smiles-boardroom-battle-20221107-p5bw81

I think this is the start of an interesting time for PSQ. I'm not a holder but do wonder if these actions will attract the attention of Private Equity to again run their rulers over the business. It has certainly underperformed; whether through external circumstances or management. Chair utilisation is paramount and is a good proxy for both clinician productivity and patient satisfaction.

Thinking beyond this, where do you see fair value for a PE firm to snap this up? TDM Growth Partners sold some 8% of their stake last May at $2.40/share.


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## divs4ever (12 November 2022)

i reduced  my PSQ holding in November 2021 @ $3.00  . rescuing the cash invested in PSQ ( my av. buying price was just under $1.33  )

 now one reason for my eliminating the cash risk ( apart this being my usual strategy when given the opportunity ) was caution as PSQ management  was expanding the business  in difficult  times ( during Covid restriction uncertainty and a likely reduction in cheap credit )

 my last parcel was bought in April 2019 ( @ $1.07 )  but my first buy was in  July 2017 (  @ $1.655 )

now since PSQ  has paid it's latest div. was in April 2021  , PSQ  has to be thought of as a 'growth stock' rather than an ' income stock ' 

Morningstar™ Consensus​Morningstar Consensus

CURRENT20232024EPS ($)-0.020.040.08DPS ($)0.000.030.05Franking100.00----

 as the current debt obligations and rising interest rates  are liable to demand existing debt be repaid  more quickly than originally planned 

 now i am not saying that is an unwise strategy ( in fact i think it is quite rational ) but what about ME  , if i have cash at risk in a company ( and i don't , currently )  i strongly prefer it generating an income for me .

so for those considering buying into PSQ currently  , you have a vague estimate  of divs. in the coming years PROVIDING health restrictions go away , interest rates don't rocket out of control ( and they might )

 now Australia has an aging  ( and possibly shrinking ) population  and some old fogeys ( like me ) have dentures  so unlike some other branches of healthcare  , growth without acquisitions is not guaranteed  in an aging population .

how long are you prepared to sit and wait  for that expansion policy   to produce fruit .

 PLEASE NOTE - i did not sell out completely , as i often do when i think a company  'has lost it's way '  but was unwilling to have investment  cash at risk  with uncertain rewards , negotiating difficult times 

 and as above  now there is an unhappy share-holder trying to replace some of the company directors  causing some disruption and distraction 

 how much risk do you take on , in uncertain times ?? ( and at what buy-in price ?? )


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