Specialist
C-level executive at Riverdale Healthcare Ltd
Agenda
- Current service delivery levels and expectations for H2 2020
- Sale of IDH Group – valuation and potential suitors
- Service mix review, M&A and recruitment headwinds
Questions
1.
What demand patterns or consumer behaviours is the UK dental market experiencing? Are there signs of people initially returning to undergo more urgent work, but being quite happy to postpone less urgent work?
2.
Is it fair to say you are relatively optimistic about the UK dental market recovery? You mentioned the spike around June and July for a W-shaped recovery. There were initial concerns from some who expected a return to dentistry where consumers – having been in lockdown for four months – underwent a lot of urgent dental work, and then a behaviour shift would kick in and there may be a steep drop. To confirm, you haven’t noted anything from consumers that would indicate a sharp downturn again?
3.
How are clinicians or dentists approaching NHS work amid the decline in private dentistry and the NHS’s continued support? Do you think there has been a difference in approach or willingness to deliver on NHS work vs seeking to increase the private mix we noted pre-pandemic?
4.
Has there been any discussion around the sizing of UDA [Unit of Dental Activity] contracts for the foreseeable future? Do you expect this to take a back seat due to the ongoing larger issues for the NHS?
5.
Could you elaborate on the flexible commissioning aspect? You referenced the 10% reduction in UDA targets, but clinics have to demonstrate that they are increasing the oral health of the patient.
6.
How do you think investors can approach valuing IDH Group in light of its potential sale? In Q1 FY21 – 1 April to 30 June 2020 – its revenue fell 32% and it resulted in a loss at adjusted EBITDA level. That said, its full-year FY20 results to 31 March were a lot healthier. How should investors break this down?
7.
You indicated one assumption to take in a model is that Mydentist will find a way to hit 96% UDA delivery, despite some historic issues. Why do you think it’s so key that investors make this assumption?
8.
As you mentioned, many people are valuing the business on full-year FY20 results. Do you think we can use previous transactions such as Curaeos being purchased in 2017 or the Bupa-Oasis deal, all of which went for about 14-15 times EBITDA? Can we assume the Mydentist transaction will follow a similar pattern, or do you think the current market changes the outlook?
9.
What multiple do you think a business such as Mydentist could fetch in today’s market?
10.
What are the top reasons IDH Group could sell at a premium relative to some other players in the market, outside of the natural size of the business and the strong national coverage?
11.
How much of a value-add do you think IDH Group’s Dental Directory could be at sale? It’s an area where the business has had a few issues, but it seems it’s found a degree of momentum, at least in the last year. I think it reported it had found new opportunities in areas such as aesthetics and corporate dentistry, and it ultimately resulted in a top-line driver of about 20% in the last year. How should investors factor this in?
12.
The largest upside of the Dental Directory is seemingly the ability for IDH to sell into its own practices. Is that a competitive advantage vs other players? I guess it would be primarily from a P&L perspective.
13.
Who do you think would ultimately be interested in buying IDH Group? Do you think it has to be a secondary PE buyer, or is a trade sale possible?
14.
Can you summarise the top three remaining value-accretive growth options for IDH Group, the private opportunity being one? How far could it reasonably push the private opportunity in the next five years?
15.
Is there any way we could forecast the EBITDA level impact of the shift towards private, i.e. for a 5% shift of NHS over to private? As discussed, there is a big focus on how far it can push this private mix, and the sooner it can do so, the sooner it can start to have significant impacts at the EBITDA level.
16.
Like-for-like private growth was 16% vs 6.5% for 2019 – this has, of course, been a key focus area for Mydentist in recent years. Is there anything that could hinder its progress towards driving this higher as a percentage of total revenue post-coronavirus? You outlined geographic coverage as one potential headwind.
17.
Are there any particular treatment areas where you think the potential to push people from Myoptions into full-on, higher-end private work is a little bit easier? Is there a starting block?
18.
Do you think Mydentist needs a degree of investment to compete in the private market more seriously?
19.
What investments might Mydentist need to make in individual practices relating to driving private revenue? What differentiates the practices it currently owns from those you would expect it to need?
20.
Who do you think Myoptions is appealing to? It seems to have had a reasonable uptake – it’s available in 490 of its practices – and my understanding is that it’s been reasonably successful. Is this appealing to the average consumer who goes to the dentist once or twice a year, or to those who were considering private but were a little bit stuck on the price point?
21.
If we draw upon wider market trends, we are hearing a lot more on prescriptive medicine and people taking control of their health, which I suppose is one of the more positive tailwinds of coronavirus. Do you expect a similar effect in dentistry? Might the average person be more inclined to get regular check-ups?
22.
In a previous Mydentist Interview, it was suggested that coronavirus may help to boost the availability of dental surgeons. I believe Portman CEO and Founder Sam Cohen also said a couple of months ago that there were early signs of clinicians approaching some of the larger groups, coming from independents. Almost three months later, with practices having opened back in June, do you think coronavirus has created an availability of dentists or dental surgeons for some of the larger practices?
23.
What is your outlook for the UK dental market post-coronavirus? On consolidation, you said some people have figured that the only way to get out of the situation is through buying their own practices. I think one initial expectation amid coronavirus was for a decline in independents, and therefore an increase in consolidation, particularly from the larger groups. Based on what you said, that might not necessarily occur. Do you expect a rapid wave of consolidation and a decline in independents, or for things to remain stable?
24.
What three KPIs do you think investors should track particularly closely when evaluating Mydentist, IDH Group or the UK dental market over the next 6-12 months?