@madamswer Thanks for showing the half-yearly Employee Costs...

@madamswer

Thanks for showing the half-yearly Employee Costs since 2014.

Regarding the big increase in JH15 of 26% and DH15 of 22%, is it possible that they are caused by the 2 acquisitions done in 2014, namely:

1. Brisbane CBD, completed on 23 May 2014
At the time of the acquisition, it was expected that Brisbane CBD was going to contribute about $1.2m EBITDA in FY2015. In 2015, ONT booked $12.1m EBITDA, hence it can be argued that approximately 10% increase in ONT's 2015 Employee Costs was coming from this one practice.

2. North Sydney, completed on 7 April 2014
ONT didn't disclose how much EBITDA North Sydney was expected to contribute. But, this additional practice can also be expected to contribute to the increase in Employee Costs in 2015.

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The rest of the increase in Employee Costs probably came from growth in their existing businesses.

If this is true, then the big drop in FY2016 is still baffling to me.

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).

What could have happened is, some of the experienced dentists that came with acquisitions done 5 or more years ago decided to leave after the stay period expired and replaced by cheaper graduates.

Please note that this is nothing more than my guess, I have zero proof that this is indeed what had happened.

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My dentist friends also remarked that their practices had been approached by plenty of graduates who are having trouble getting a job. When these graduates get a job at one of the corporates, they usually have no choice but to accept relatively low percentage of OTC revenue as their commission.