Ann: Half Year Report and Accounts, page-10

By my numbers, if we look at EBITDA constructed purely from dental service fees, we have H1 FY16 EBITDA growth of about 6% versus pcp. However, to be fair, the figure for H1 FY15 was very bouyant, having grown at 49% compared to its pcp (H1 FY15 versus H1 FY14). So really, not a bad result, especially on what appear to be flat revenues (until I see the OCT revenue, I won't know exactly).

If we compare the running 6 monthly changes in EBITDA (as I've constructed it), then we have the following changes from one 6 month period compared to the prior 6 month period (so H1 FY16 versus H2 FY15 etc):

H2 FY14: +16%
H1 FY15: +29%
H2 FY15: -9% (drop)
H1 FY16: +17%

That looks pretty good to me.

I am showing this visually below, and also including the all important cash-flow figures.
image.pdf


Something else that should be kept in mind is that D&A has been running at 20% to 25% of EBITDA. Howevr capital expenditure (on PPE and intangibles such as software) has only been running at about 15%, or less (excluding sales of PPE). So cash generation is running ahead of profits.

With regards to increasing the dividend, I have mixed feelings. If this is a genuine indication, from management, about the companies prospects, then it's probably not a bad thing. On the other hand, if it's an attempt to appease shareholders, on the back of soft revenue numbers, well that's something else. I will give management the benefit of the doubt.

I will say this though. For most businesses on the ASX, I would applaud a sustainable increase in the payout ratio. This is the best way of stopping management from doing dumb things with shareholder capital. ONT, however, is premised (it's current share price certainly is) on expansion. Crucially, it has the track record of superior returns on its allocated capital, to match. Hence, for ONT, retaining more of is earnings will enrich shareholdesr more than increasing the dividend, assuming a continued superior return-on-incremental-capital.