Investors have big reasons for Smiles

KEEPING the issue of new shares under control has been key to delivering good returns to investors, according to one of Australia’s most successful health care companies.

Townsville- based 1300 Smiles Ltd held its 14th annual meeting in the city this week with founder and managing director Daryl Holmes reporting on a record year.

He also outlined some of the strategies which have supported a 700 per cent increase in its share price to about $ 6.30 since listing in 2005 and growing annual dividends in all but two of those years.

1300 Smiles is an aggregator, providing the back end support to both employed and self- employed dentists in dental facilities it owns across three states.

Dr Holmes said protecting and increasing dividends had always been one of their key commitments to shareholders.

Achieving this depended on increasing earnings per share, he said.

“The objective of increasing earnings per share – to enable an increased dividend per share – has two parts,” he said. “First, we have to increase our company’s total profit. Second, and just as important, we have to keep the total number of issued shares under control.

“It’s easy to grow by endless acquisition if you’re not careful about the quality of the businesses you buy, how much you pay, or how many additional shares you issue.

“We have avoided this ap- proach, instead imposing a strict rule: acquisitions must contribute to increased earnings per share, either instantly or very soon.

“We’re always ready to make earnings- accretive acquisitions.”

Also, its facilities were operating at 76 per cent capacity, leaving room for cost- effective growth by “in- filling”.

Dr Holmes said revenues were up almost 10 per cent to an all- time high of $ 55.8 million in 2018, while net profit after tax was at a record $ 7.6 million.

Net profit after tax delivered earnings per share of 32.2c, delivering its largest ever fullyear dividend of 24c per share, fully franked, to shareholders, about a third of whom are Townsville people.

After the meeting, Dr Holmes said while the Townsville economy was not as strong as other centres in which the company operated, he said there were “green shoots” here.

“I think there’re green shoots here. But it’s like the rain, infrequent and not enough,” he said.