CHANGE TO PSQ RESOLUTIONS
Dear PSQ shareholder, we have today lodged a notice of withdrawal with respect to two of our initially proposed resolutions, specifically the resolutions to remove Zita Peach and Mark Bloom from the PSQ Board.
After extensive consultation with shareholders, we believe this is the optimal approach to implement our PSQ Plus Recovery Plan. It will facilitate a phased transition of the PSQ Board and no loss of recent corporate memory. We also believe the proposed Board delivers gender and cultural diversity and has the right combined skillset to take PSQ forward. My proposed Board members and I will work positively with the remaining PSQ Board members to accelerate a turnaround under our PSQ Recovery Plan.
Dr. Alex Abrahams
Dear PSQ shareholder, we have today lodged a notice of withdrawal with respect to two of our initially proposed resolutions, specifically the resolutions to remove Zita Peach and Mark Bloom from the PSQ Board.
After extensive consultation with shareholders, we believe this is the optimal approach to implement our PSQ Plus Recovery Plan. It will facilitate a phased transition of the PSQ Board and no loss of recent corporate memory. We also believe the proposed Board delivers gender and cultural diversity and has the right combined skillset to take PSQ forward. My proposed Board members and I will work positively with the remaining PSQ Board members to accelerate a turnaround under our PSQ Recovery Plan.
Dr. Alex Abrahams
We strongly recommend Shareholders vote FOR all proposed resolutions at the EGM
PSQ Value Recovery - Complete Information Presentation on PSQ Plus Proposal
PSQ Value Recovery - Complete Information Presentation on PSQ Plus Proposal
Read our response to the current PSQ Board's rebuttal of our proposal
To install a new BOARD and restore shareholder value, vote FOR all resolutions at the EGM
SHARES purchased by close of market on Tuesday 13th December 2022 are eligible to vote at the AGM.
SHARES purchased by close of market on Tuesday 13th December 2022 are eligible to vote at the AGM.
FREQUENTLY ASKED QUESTIONS
Why are you so uncomfortable with the strategy endorsed by the existing board?
The strategy of rapid and unchecked centre expansion endorsed by the current Board at a time of unprecedented Covid-related complexity was illogical and has destroyed PSQ’s margin and profitability.
Revenue per chair and EBITDA per centre have declined by 25% and 65% respectively since 2019 and the Board’s 5-year targets published to the ASX on 17 November 2022 only predict further declines in Group EBITDA margin to 2027.
We require a more balanced channel mix to optimise reach and profitability. The channel mix has become increasingly unbalanced since 2019 with the shopping centre model now overrepresented in the portfolio, impacting group margin.
- PSQ management have accelerated the rollout of shopping centres from 27% to 70% in 2015 and 2022 respectively
- Smaller format centres operate on significantly lower margins due to fixed overheads being spread over fewer chairs and typically higher per square metre
- Phase 2 of PSQ Plus will reset the balance with a focus on larger centres in strategic locations
Could you expand on your 2-phase transformation plan and growth strategy beyond that timeframe?
Year 1: Reset and re-build the core foundations for growth
This will include stabilising the business as it stands, including (1) reviewing all centres and business units for “fit for purpose” and (2) re-evaluating underperforming centres that have limited prospects for long term success and considering alternative dental ecosystem opportunities for those centres. There will be a drive to increase revenue per chair by ~20% through targeted utilisation, pursuit of High Value Procedure Dentistry strategies and re-evaluating health fund fee caps. There will be an alignment of our organisational structure to prepare for this growth.
Year 2: Further strengthen our value proposition
Capitalising on expansion of centres should they meet threshold criteria, as well as commencing the introduction of high value procedure dental centres, larger health fund-branded centres and scoping for emergency dental centres. This will create new profitable revenue streams with lower occupancy costs and accelerate eventual sustainable earnings growth.
Year 3: Consolidate and drive further growth through expansion within the dental ecosystem and pursue a broader patient base on the east coast.
This includes expansion of PSQ’s portfolio of brands, the launch of four emergency dental clinics, particularly in areas where regular preventive care routines are not practised by the community. This will include lower socio-economic areas to address the one third of Australians who don’t see a dentist and increasing penetration of our new patient segments.
Overall, our model is one of an integrated dental ecosystem that combines a targeted focus on patient needs in discrete segments, the dentistry life cycle and the development and inclusion of our team.
How does your plan differ from the existing strategy of PSQ?
Our transformation and growth strategy “PSQ Plus” differs in the following ways:
- Our plan is centred around building a business that reflects a broader dental ecosystem reflecting different patient needs to attend the dentist (e.g., urgent care, preventive care and procedure care). We will marry the patients’ needs with dentists’ capability to create targeted services that include a focus from emergency dental right through to high-value procedure dental centres with IV sedation
- Our centre channel mix will be rebalanced in line with the dental ecosystem strategy and will also shift focus from centre numbers to chair numbers. This diversifies us away from an over-reliance on less profitable shopping centres to grow both revenue and profit margin
- We leverage our deep sector understanding and experience and strong execution track record at both a management and Board level. Our Board and identified CEO have the right combination of dental expertise, a strong track record of successful execution and a focus on sustainable shareholder returns to successfully deliver our plan. Whilst there may be some strategy similarities with the existing Board’s strategy, the current Board’s execution of its existing plan has failed dismally, which raises questions regarding the credibility of delivering their 5-year targets published on 17 November 2022
- Under PSQ Plus, we also have a detailed plan to leverage both human and new digital tech capabilities to enhance patient service delivery and clinic efficiency
Why are you so confident of successfully executing your plan?
With the existing management, including the new proposed CEO and the proposed Board, we bring a distinctive combination of successful dental business growth, listed company experience and relevant business development expertise.
I founded the business, so I know the business and sector extremely well and have a track record of execution and delivery of earnings growth. My family is the largest shareholder in PSQ, I am highly invested and aligned with the interests of all shareholders in restoring shareholder value.
Whilst our proposed new Board is initially small, we will progressively add Board members with relevant additional skills at the appropriate time rather than appoint new Board members prematurely
Haven’t the share prices of many companies fallen since the Covid outbreak?
The fact remains that the PSQ share price declined 50% in the year prior to my request for an EGM, despite the pandemic easing.
The mean analyst target price for PSQ is down 33% from six months ago. The issue is not Covid’s impact but in my view it was the poor decision to accelerate at such an uncertain time, that was then compounded by Covid disruptions of dentist availability.
Professional analysts and investors appear to have lost confidence in the company’s ability to execute on its growth strategy. This reflects the poor absolute and relative performance of the company during and since the pandemic.
Why do we need a culture and operational review if the engagement is high?
Since lodging my request for EGM, I have been inundated by support from PSQ dentists and staff. They have cited countless concerns about the current model and disregard for company culture and operational missteps, including:
- Unrelenting focus on growth at the expense of existing practices, dentists and staff;
- Inconsistent support from Head Office;
- Inadequate staffing ratios for specialised procedures;
- Frequent IT systemic failure in the rollout of cloud-based systems; and
- Treating all centres in the same way irrespective of their location and dentist capability.
Whilst NPS is trending up, we believe it’s from a significant deficit position. We have a clear plan to accelerate the rebuild of operational excellence and the team morale on which a successful business depends. We will seek to create an environment that is inclusive and safe for people to speak up without fear of retribution. We seek to move forward with people who act with integrity and seek to serve patients and dentists.
Who will the new CEO be?
We have identified a high calibre proposed CEO to revitalise PSQ.
Whilst their identity is still confidential and as you would expect commercially sensitive, the proposed CEO possesses the following attributes:
- Extensive experience in strategic leadership in the healthcare sector;
- A track record in delivering turnaround strategies and change management, and
- A successful history in leading the development and deployment of innovative healthcare operating models and technology platforms.
The proposed Board is very confident the new CEO has the right credentials to execute the PSQ Plus recovery plan. The intended candidate is merely one element to the transformation plan.
What will the dividend policy of the new Board be?
The dividend policy we foresee will be to pay fully franked dividends twice per year and in the range of 50-75% of Net Profit After Tax.
The responsible range allows for retention of cash for capital requirements whilst providing an income steam for investors, in line with PSQ practice for the first 17 years of trading.
How did you select the peer companies you used to benchmark PSQ’s performance?
We included five ASX listed, regulated small and medium healthcare providers (Healius, Healthia, Monash IVF, Australian Clinical Labs and Capitol Health) who we believe to have the most similar business models to PSQ. The peer selection was consistent with analyst coverage for the company.
We chose not to include SILK Laser Australia as it is a franchise model that provides discretionary beauty services, which we know are not exposed to the same demand drivers as dental.
How many centres are you closing, I heard 20 is the number?
We have no pre-determined number.
There will be a centre review and closure is one of the options for underperforming centres or ones with poor prospects of long-term profitability. Any centres in this category will most likely be repositioned in favour of a more targeted patient need. However, we will be closing the Sydney Corporate office at Lavender Bay and utilising unused office and meeting space at nib Sydney Dental Centre in the CBD.
Aren’t you really trying to take control of the company without paying a premium?
No. Like many other shareholders, I’m seeking to replace a board that in my view has presided over a destruction in value. I am not seeking equity control and my shareholding does not change as a consequence of this action.
Rather this is about restoring profitability and creating a sustainable growth plan that is in the interests of all stakeholders. This is not a private equity style takeover and/or a move to take PSQ private. We intend to stay ASX listed to provide flexible ownership by shareholders.
PSQ Value Recovery General Meeting Shareholder Information
Shareholders are encouraged to read the Statement for Shareholders relating to the proposed new board and transformation plan to make an informed decision about the resolutions to be considered at the general meeting.
Click the tiles below to view the information.
Click the tiles below to view the information.