@travelightor, Thanks for that feedback. I guess when you ask...

@travelightor,

Thanks for that feedback.

I guess when you ask any industry operator a question like "How easy it is for profits in their line of business to increase by 16% when revenues are flat?", the answer is almost sure to take on a skeptical tone (one should be mightily surprised if it wasn't!). Especially when it is acknowledged that the respondents are less-than-favourably disposed to the company and this business model in the first place.


Besides, he question you posed to them encapsulates only part of the problem here.

The issue - when it comes to the movements in employee costs in JH2016 - is as much a problem with the starting point (viz. Employee Expenses in pcp of $8.18m in JH2015), as it it with the end point (Employee Expenses of $6.40m in JH2016).

For that JH2015 figure of $8.18m was, in turn, somewhat out of kilter with the norm, being 26% higher than JH2014.

For clarity, here follow half-year Employee Expenses (in $m, with change on pcp in parenthesis):

JH13: 6.9
DH13: 5.5
JH14: 6.5 (-6%)
DH14: 5.7 (4%)
JH15: 8.2 (26%)
DH15: 6.9 (22%)
JH16: 6.4 (-22%)

Evidently, what your cohort of surveyed dentists failed to account for was the base effect, whereby the JH2016 Employee Expenses were cycling a rather huge base in the pcp.

So, to really understand what is going on here, one needs to know what informs the JH2015 figure, which looks a bit anomalous to me. (Note the seasonality between JH's and DHs, and that JH2016's number is broadly in line with previous JH levels.)

So that debunks the highly unlikely [*] theory that ONT ditched a whole lot of expensive and experienced dentists and replaced them with a whole lot of cheap rookies.

Because it fails to explain why the Employee Expenses gapped up by 26% in JH2015. (The company certainly wasn't at the time sacking a whole lot of cheap, inexperienced dentists and replacing them with expensive, experienced ones, I assume).


[*] I contend that it is highly unlikely because whatever Dr Holmes is, he isn't dumb. And he would know that such a strategy - even if it were to able to be somehow undertaken from a practical point of view - might provide a short-term fillip to earnings but before long the piper would need to be paid. Dr Holmes might be many things, but one thing he most certainly isn't is an operator of the business for the short-term. (In fact sometimes, I feel he operates - if anything - with too long-term a strategic time horizon)