Pacific Smiles share price jumps 10% on FY20 results

The Pacific Smiles Group Ltd (ASX: PSQ) share price has surged 10% higher following the release of its FY20 results today.

The group operates dental centres in Queensland, Australian Capital Territory, New South Wales and Victoria. The market for dental services in Australia is approximately $10 billion to $11 billion per annum.

How did the company fare?

Pacific Smiles achieved strong growth before the impact of the coronavirus pandemic. However, in the second half of FY20, the dental service took a significant hit on its overall results for the year. 

In the first half of FY20, underlying earnings before interest, taxation and depreciation (EBITDA) was up 15% to $12.9 million. Ultimately, underlying EBITDA was $23.5 million, up just 2.9% on the prior corresponding period (pcp). 

Similarly, patient fees in the first half of FY20 soared 14.5% to $105.4 million but ended the year down 0.6% to $186.3 million compared to FY19. 

During FY20, Pacific Smiles opened 5 new dental centres, bringing its total to 94 dental centres.

The Jobkeeper scheme provided $8.4 million in gross benefits with a net impact of $5.7 million to EBITDA.

Depreciation and amortisation expenses increased $1.6 million due to the acceleration of new centre developments in prior years. 

Pacific Smiles did not declare a final dividend.

Outlook for Pacific Smiles share price

The long-term strategy is to grow dental centres from 94 centres to more than 250, dental chairs from 383 to more than 800 and boost market share from 2% to more than 5%. Pacific Smiles has committed to adding a further 9 sites in FY21 to its number of centres.

Patient fee growth in June of 12.4% and 13.5% in July compared to the pcp followed the lifting of government restrictions in May. Same centre patient fee growth tracking at approximately 10.6% year-to-date (YTD) at 31 August. This has been impacted by Victorian restrictions and would be 19.6% YTD with Victoria excluded.

In addition, Pacific Smiles expects a patient fees growth of 15% and underlying EBITDA of approximately 15% growth year-on-year assuming a number of factors. These include Jobkeeper benefits for Q1 FY21 offsetting coronavirus underperformance, continued level 3 restrictions in Melbourne in 1H FY21, H2 FY21 trading without significant interruption from the coronavirus pandemic and the opening of approximately 10 new dental centres.

Melbourne metro dental centres are operational under level 3 government-mandated restrictions but at reduced opening hours and only for emergency procedures. 

In response to the FY20 results, Pacific Smiles share price has surged almost 10% higher to $1.60. It has a market capitalisation of $247 million.

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Motley Fool contributor Matthew Donald has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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