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Shares in Townsville-headquartered dental group 1300 SMILES (ASX: ONT) continued their bull run today to reach pre-pandemic levels, following a 22 per cent lift in EBITDA to $16.2 million for FY20.
Around $1.27 million of that EBITDA can however be explained by JobKeeper, which appears to have kept the group going during closures and prepared to rebound when patients started to return from mid-May onwards.
While revenue was down slightly to $57.1 million and net profit after tax (NPAT) decreased 8 per cent to $7.1 million, managing director Dr Daryl Holmes (pictured) claimed the true strength of the business model had shone through a severe test of its operations.
"We have emerged from a lengthy shutdown with a business that has rebounded to higher levels of revenue and profit than ever before," he said in a letter to shareholders today, also explaining the company does not have facilities in any of the current hotspots.
Dr Holmes noted revenue was greatly reduced during the period of maximum economic restrictions between 23 March and 11 May, with many practices closed while others had their activities sharply limited.
"Subsequent to 11 May our revenue rebounded sharply, with the month of June 2020 delivering our highest monthly revenue ever, by a big margin," the executive said.
"The results for the quarter, the second half, and the full year mask the fact that we've been through a terrible spell which extended over several weeks, followed by an extremely positive period which lasted right to the end of the financial year and has continued without pause through the end of July.
"On a quarterly basis, revenue in 2020 exceeded revenue in the previous year in each of the first three quarters. Over the first three quarters, revenue was up by more than 7 per cent over the previous year."
Following these encouraging results, the board decided to give shareholders a 3 per cent lift in dividends to 12.5 cents per share, which likely contributed to the six per cent lift in today's share price.
He explained the COVID-19 pandemic had led to many weaker players simply leaving the market, which has improved 1300 Smiles' competitive position considerably.
"First of all, our facilities inspire confidence in our patients. Our practices are bright and clean, obviously sanitised and disinfected to the highest standard," Dr Holmes said.
"Our scheduling systems mean that patients spend minimal time in our waiting areas. Our equipment is modern and professionally maintained.
"We were equipped to prevent disease transmission long before COVID-19 came along, and the presentation of our facilities is reassuring to patients."
He described an "unprecedented flow" of both returning and new patients since June.
"Why so many new ones? I speculate that the presentation of our facilities gives people comfort. I speculate that many people who have previously not prioritised their dental and overall health, have reconsidered their life priorities.
"I also speculate but cannot yet measure another effect of COVID-19: it appears that a number of older dentists have kept their practices closed while they consider whether to resume operations at all.
"Along with the flood of new patients, we have also enjoyed an unprecedented stream of applications from qualified dentists wishing to join our practices."
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