Follow the Money: what went wrong with the vision at Optical Express?

For a sector which deals in maximising the visual abilities of its customers, optometry issurprisinglyopaque.

For a sector which deals in maximising the visual abilities of its customers, optometry is surprisingly opaque. Its leading companies either don't break out figures because they have such diverse interests (Boots), or hide themselves offshore (Specsavers) or just bloody-mindedly refuse to communicate more than the bare minimum (Optical Express).

Spare a thought, then, for any hack trying to piece together the reasons behind RBS's decision to call in the £30-million-plus debts of the latter company last weekend. They look straightforward enough at first glance, but rather more mysterious when you look closely.

The few facts in the public domain about press-phobic owner David Moulsdale are well worn enough. Having trained as an optician after leaving school at 16, he started Optical Express in 1991 with one store in Edinburgh's Leith area while still in his early twenties. He had tens of stores by the middle of the decade as part of a wave of modernisers in the sector, and was soon garnering awards for his entrepreneurial acumen.

From there the company keptgrowing on the back of organic growth and acquisitions, becoming the onlyhigh-street optician to bet big on laser eye surgery in the early 2000s when it bought out Boots' business (and getting into dentistry through the same deal). Shortly after, it embarked on an overseas expansion into mainland Europe and North America.

Like many retailers, including those owned by Moulsdale's friend Tom Hunter, OE was also able to fast-forward its expansion in the second half of the noughties by borrowing heavily. Net debt rose from £12.2m in 2005 to £55.3m in 2008, nearly double the growth rate of pre-tax profits. By this time OE had over 200 stores and was talking about opening 60 more in the coming year in its quest to boost its market share from 4% to double figures.

What happened next in the financial world is well documented enough - the music stopped after Lehman and the easy money stopped flowing. It did not take long for OE to feel the effects. By early 2009 the Registrar of Companies gave the company three months to show it should not be dissolved - a sure sign that the creditors were closing in.

RBS threw the business a lifeline on that occasion, agreeing a restructuring deal, but there was not agreat deal of blue sky on the horizon.

You would think that optometry would, like many areas of health, be insulated from hard economic times since people still need to solve their eyesight problems. You would think this would be particularly true when some 60% of the public - meaning under-16s, pensioners and those on benefits - get free eye tests and prescription glasses. These groups should spend as much on their eyes regardless of which way the economic wind is blowing, producing a big guaranteed revenue stream for anyone trading in the sector optical express ruined mylif

Against that, however, the likes of Tesco and Asda have come crashing into the sector in the last 10 years and taken market share by offering bargain basement prices. At the same time, the higher-margin full-paying customers appear to have been deferring purchases or taking cheaper options such as having new lenses put into old frames instead of buying new ones.