1300 Smiles ltd is an Australian based owner & operator of multiple dental practices, debt-free with impressive historical returns. In a highly fragmented market, 1300 Smiles is on its way to consolidate parts of the industry in their core areas.
With a very thoughtful buy-and-build strategy – led by majority owner (60%) and founder Dr. Daryl Holmes – 1300 Smiles has set a strong basis to grow profitable for the years to come.
With low capital constraints, huge expansion potential and “the most shareholder friendly executive team in Australia” (Motley Fool), 1300 Smiles offers a truly attractive long-term investment opportunity!

The dental industry serves fundamental medical needs of humans. Demand for dental services – proactive or when oral health is already tarnished – is rarely subject to significant volatility. Due to our sugar-loaded diets (at least in the western hemisphere) most people have to make use of dental services on a regular basis.

The Australian dental services industry

Due to its geographical characteristics, with very low density in population across the whole continent – Australia´s dental service facilities tend to concentrate on the south-east and the bigger cities across the coastline. More rural and less populated areas tend to be medically underserved (Australia´s National Oral Health Plan – 2015-2024).

The state of oral health – DMFT score

Compared to international peers like Canada, the United States and Germany, which share a similar level of economic development and population density (Canada & USA), Australia lags behind significantly in its state of oral health.

Most important measure is the DMFT (Decayed, Missing and Filled Teeth) Score. This score is applied “to the permanent dentition and is expressed as the total number of teeth or surfaces that are decayed (D), missing (M), or filled (F) in an individual” (www.dentalcare.com). This score has been used since more than 70 years and is the key measure of dental health across populations.

DMFT is usually applied to certain age groups. Single most important factor for the dental state of a population is the DMFT score for the age group of 12-year olds. Caries experience in this age group is most significantly correlated with future dental health of individuals (OECD). Reason is that lifelong dental health issues tend to manifest in the oral hygiene of an individual´s early youth. Compared to direct peers, Australia experiences the worst DMFT score across its population.

Cost of dental services

Recent figures show “that the price for a routine dental check-up can vary by more than AUD 300, depending on where the dentist is located […]. Unlike doctors, whose prices are largely regulated by Medicare, there are no set fees and charges for dental treatment” (www.choice.com/au). Ultimately, doctors are free to price their services as they see fit.

Unsurprisingly, a study by the Australian Institute of Health and Welfare (2013) found out, that “nearly half of those between 25 and 44 avoided or delayed visiting a dentist because of cost”. This figure has been increasing steadily over the past two decades!
The Australian Dental Association found out, that up to 10.000 Australians “go overseas each year in search for cheaper dental treatment” (www.internationalliving.com/au).

Putting these issues in the light of low DMFT scores, we can conclude, that high cost burdens are the major reason for the nation´s bad state of oral health!

Nevertheless, dental health care expenditures (with majority in out-of-pocket payments) have been on a steady rise within the last 10 years. With a growth rate (10-year CAGR) of 6,5%, the market has reached a value of almost 9,0 Bn AUD by the end of 2014.

Supply in dental services

Current state of oral health and supportive business economics have led to a strong increase in supply. Within the last 5 years, Australia has seen an increase in dental practitioners by almost 20%.

Due to the very favourable economic policy set for dentists (free pricing power, no government oversight) the market for dentists has seen a tremendous inflow of service supply.Compared to its peers, Australia has almost the same density in dentists as Germany. The country has a surplus of almost 30 dentists per 100.000 inhabitants, compared to the US and Canada.

Overall supply is structured in a very fragmented way, with more than 10.000 dental service facilities, employing more than 22.000 dentists. Most of these facilities are stand-alone companies, operated and owned by one to three dentists. The largest network of dental care facilities is operated by BUPA Dental Corporation, providing services through more than 190 practices across Australia. Currently, two publicly traded competitors operate alongside 1300 Smiles – Pacific Smiles and New Zealand based Abano Healthcare Group.  The majority (> 96%) of the market remains highly fragmented.

Industry Fragmentation:

The future of Australia´s dentistry

Australia´s dentistry operates in a mixed state between “growth” and “saturated”. Every year, more and more dentists graduate from med-schools, trying to participate in still-lucrative economic conditions. Supported by underserved demand and high prices, the Australian dental services industry is still far from seeing a downturn.

Nevertheless, increase in supply in a non-regulated industry will lead to price decreases and a fall in operating margins. Especially, dental chains with aggressive, debt-financed expansion strategies (more on this in the competitor´s analysis) will face dramatic challenges in the long-run.

I believe that the market is inevitably developing towards a more customer friendly state with lower prices. Nevertheless, I believe that such circumstances enable companies like 1300 Smiles to significantly expand their market share.  They will have the opportunity to reap off extraordinary benefits as soon as the industry recovers.

1300 Smiles ltd. – company overview

Over twenty years ago, dentist Dr. Daryl Holmes started his company with two dental practices in the rural towns of Queensland before building a country-wide recognized brand of dental services. Currently, the company operates 27 facilities across Queensland, Adelaide and Sydney. The company offers a wide range of dental services, from general and cosmetic dentistry, orthodontics and children´s dentistry.

The business model

Dentists in the 1300 Smiles system are self-employed. These dentists pay a fee to the company for the use of facilities and administration. The goal is to enable dentists to concentrate on providing medical services, while 1300 Smiles takes care of all infrastructure and overhead related issues.
The fee charged for dentists is based upon revenue on services charged to customers (so called over-the-counter (OTC) revenue). 1300 Smiles keeps currently around 70% of OTC revenues while 30% remain direct income to self-employed dentists.
General functions like marketing, human resources and administration are centralized by 1300 Smiles. Therefore individual facilities do not have any overheads and solely focus on operations.

Focus – affordable quality

1300 Smiles is not only there to reap off the benefits of consolidating a fragmented industry. Led by Dr. Daryl Holmes, the company is formed to build a business based on the satisfaction and loyalty of its customers.

Due to high, price-related rates of avoiding dentist visits, 1300 Smiles has set its mission to make dental health care as affordable as possible. The company has launched several initiatives to lower costs and increase price transparency. Most prominently, in 2014 the company started its “1 $ a day dentistry”, which covers full costs of preventative dental care for – as you might guess -only 1 $ (AUD) a day.

Basically, the plan has introduced a regular income stream for the company by lowering costs for customers and providing them with certainty about costs for preventive care (by far the major service demanded by patients).  In addition, patients under the scheme will receive another 10% for further treatments.

The goal is to maximize recurring revenues and impose switching costs to customers. By simplifying the customers process to book, pay and save money on its services, 1300 Smiles is able to build highly valuable customer relationships.

Expansion strategy – buy & build in excellenceSince the payment scheme´s inception in 2012, the number of subscribers/ members has soared to more than 6.000 in less than 2 years (June 2014; no actual numbers for members available).
This development is accompanied by a significant decrease in past due receivables. Regular collections combined with low costs and price transparency decreased average past due receivables by more than 70% in the course of 3 to 4 years.

Exceptionally high past due receivable ratios in 2012/2013 are due to low year-end inventory levels on the balance sheet.

In order to grow revenues, 1300 Smiles has to expand its number of dental practices. Revenue growth within a certain location is limited – dental services require time, staff and demand in reasonable geographical distance, leaving limited room for scalability per dental practice.
The company´s success is a direct result of Dr. Holmes´ thoughtful and patient buy-and-build strategy, best described in his most recent letter to shareholders (2017):

With every acquisition, Dr. Holmes and his management team emphasize on the possibility of revenue and profitability expansion within their facilities – cost efficient organic growth. The company´s goal is to operate 5 to 7 dental chairs, offering different services, within a single facility (Interview with “Dentistry Uncensored”) – maximizing revenue diversity and economies of scale:

Effective capital allocation is a key factor in 1300 Smiles´ expansion strategy, best described in Dr. Holmes´ letter to shareholders from the 2014 annual report:

1300 Smiles´ executive team has the patience and discipline to invest in organic growth and the willpower to resist the temptation of acquisitions focused on increasing the size of the company. As already stated in Lawrence Cunningham´s book “Quality Investing”, “excessively proud management teams indulging in undisciplined acquisition sprees rarely create value for shareholders.” It is important to notice, that 1300 Smiles solely acquirers established dental practices with significant potential for recurring revenues. Unlike its competitors, no greenfield strategy (establishing a new dental practice) is adopted. In contrast to its competitors, 1300 Smiles spends most of his resources on acquiring existing relations to patients rather than property, plant and equipment.
With Dr. Holmes´ repetitive statements in his shareholder letters, I do not believe this strategy to change for the foreseeable future.

Excellence in Leadership

In the light of a challenging development in the industry, excellent historic returns are – in my opinion – a direct result of the soft factors carefully cultivated by the company and its founder Dr. Daryl Holmes. In the case of 1300 Smiles, I see a combination of strong management and a well-positioned company.

Transparency – Keeping stakeholders informed!

From an investor´s perspective – trying to understand as much as possible about the business – Dr. Holmes´ letters to shareholders present an incredibly high degree of transparency. Since 2006, he uses up to 12 pages every year to explain changes in the industry, new business initiatives and acquisitions.
Unlike lots of shareholder letters – highlighting positive events and concealing mistakes or challenges – Dr. Holmes communicates openly about the development of the past year and implications for the future.
His effort is based on treating all shareholders as equal owners of the company.
I strongly recommend anybody interested in investing in 1300 Smiles to read carefully through every letter to shareholders since 2007.

Shareholder Friendly DNA – Earning profits for owners!

The Motley Fool has named 1300 Smiles´ management “the most shareholder friendly executive team in Australia” (https://www.fool.com.au). Dr. Holmes´ policy on delivering value to shareholders is best described in his most recent letter to shareholders (2017):

Despite owning almost 60% of shares outstanding, Dr. Holmes acts in the interest of all shareholders. With a very modest annual salary of AUD 90.000, Dr. Holmes earns most of his income through dividends. As stated above, his goal is to increase earnings/dividends per share over the long-term, supported by low capital constraints in expanding and maintaining the business.

At the same time, 1300 Smiles incorporates a strict no-options policy in favour of increasing earnings per share (EPS). Please take a look at Dr. Holmes´ statement on options from his 2014 shareholder letter:

Interesting side-note: In order to stay in touch with patients and his profession, Dr. Holmes still treats clients every Wednesday at the 1300 Smiles Belgian Gardens facility.

Working Environment – Keeping employees smart & happy!

Dr. Holmes set up a culture which emphasizes flexibility in work-life balance. In contrast to the overwhelming majority of corporations using this phrase, 1300 Smiles encourages truly individual work structures. Dentists are able to structure their work-load according to their personal demands – working just 3 days a week or taking every third week off – everything is possible. Since most dentists are self-employed under the 1300 Smiles brand, their income varies with less work-load, but flexibility is maximised. Paraphrasing Dr. Holmes in his interview with “The savvy dentist”, he does not tolerate a work environment, in which family, hobbies and other personal interests come off badly. In his interview with “The savvy dentist” he criticizes a lifestyle which promotes a 100% focus on work until retirement. In his experience, far too many people following such work ethic fall into depression after being retired. Staying flexible in work load counteracts such negative development in life.
His employment strategy is based on Henry Ford, who once said that success is the result of being surrounded by the very best people. 1300 Smiles is committed to hire the smartest people and “bring them play to their natural strengths” (The savvy dentist; Podcast #19).

Red Flag – Dependence on the company´s founder?!

A certain degree of uncertainty remains in the long-term with the company´s dependence on Dr. Daryl Holmes. As chief executive and major shareholder, he defines the course of the company. Currently 53 years old, the question arises if he will leave the company short- to mid-term to pursuit other professional/private interests.
It is my personal opinion that Dr. Holmes is willing to continue 1300 Smiles´ story of success for as long as possible. Most importantly, his letters to shareholders drastically show, that Dr. Holmes has a specific mission for 1300 Smiles and the Australian dentistry as a whole – bringing affordable and high-quality dental services to Australians. He still has a long way to go!

Financials – historic returns and capital structure

1300 Smiles has achieved a record of consistent above average returns and historic low leverage of the capital structure.

Profit & Loss

1300 Smiles´ prudent and consumer-centred business philosophy has resulted in above-average financial results over the last 10 years. Since 2006, 1300 Smiles´ has steadily achieved operational margins (EBIT) above 20%.

Net Income in the last 10 years has averaged 18,3% (20,1% in 2017). Annual increases (CAGR) in sales and net income amounted to 17,3% and 13,2% respectively.

As we can see in the chart P&L Performance, margins have been extraordinary while 1300 Smiles operated on a limited scope – with 10-13 locations. Margins have recovered since their low in 2008 mainly due to decreasing wages and salaries. On the other hand, 1300 Smiles has efficiently decreased its cost of consumables and laboratory supplies in the course of expansion and increased purchasing power. Stated in several annual reports, the company has introduced an active cost cutting management in order to further widen margins and proactively take measures for possible future industry downturns.

Working Capital

Within the last 10 years, the company has witnessed quite a variance in receivables turnover. From peaks in 2009/2013 with receivables turnover of more than 60 times a year to a current low multiple of 17,5.

Turnover multiples correspond to receivables collection from 6 days (2009/2013) to 21 days (2017). The average receivable collection time in the last 5 years amounted to 14,5 days.
Despite its variance in turnover, 1300 Smiles has managed to keep its receivables at an average level of 5% of sales per annum. Additionally – as already described before – past due amounts as a share of trade receivables have decreased significantly since 2013.
Taking into account the process of invoicing, I assume 1300 Smiles´ current turnover level to be reasonable. As described before, the company has launched several initiatives to ease up capital constraints of customers, which could be a reason for a rise in collection time. Nevertheless, further increase in the years to come should be watched carefully.

The same conclusion can be drawn from 1300 Smiles´ trade payables analysis. Here, the trend is clear, with payment duration increasing from 42 days (2007) to more than 90 days (2017). Further information on trade payables and their development are not given by the company. With 27% of corresponding expenses comprised in trade payables (5-year avg.), payables still have reasonable levels. Nevertheless, payables should be watched carefully as well.

Capital Structure

1300 Smiles´ operations are well funded, debt-free with currently 12,6% cash on total assets.

Since 2006, equity has grown by almost 19% p.a., reaching a share of 79,1% (AUD 36,1 Mio.) of total assets.
Cash-on-hand decreases returns on capital, but enables 1300 Smiles to fulfill its promise to shareholders – to wait for acquisitions allowing for immediate growth in profits! Cash-on-hand, together with a comfortable equity cushion, allows 1300 Smiles to draw cheap debt with favorable covenants, when attractive acquisition targets require more resources than currently available.

Cash Flows

Comfortable cash-on-hand is a direct result of the company´s ability to generate substantial free cash flow from sales. On a 5-year average, every dollar in revenue returned 24 cents in operating cash flow and 19 cents in free cash flow available for shareholders.

This shows us the capital-light nature of 1300 Smiles´ operations. Purchased practices with established customers do only need small amounts of capital outlays. The average facility within 1300 Smiles, earning AUD 1,34 Mio. p.a. in revenues, needs about AUD 0,05 Mio. to keep operations fully functional – fully compliant with the company´s quality standards.

Returns on the capital structure

With high operating margins, asset-light balance sheet and despite no financial debt on its book, 1300 Smiles has returned exceptional returns throughout the capital structure since more than a decade.

Especially returns on equity have been exceptionally high until 2012. Decrease in ROE is partly attributed to existent debt on books and strongly increasing net income before 2012. Since then, the business has increased net income with 3,3% CAGR, whereas annual growth rates in profits before (2006-2012) amounted to more than 22%.

By taking current industry characteristics into account, I believe that returns have normalized and reached a sustainable basis. Nevertheless, with ongoing value-enhancing acquisitions and recovery of over-supply in dentists in the future, returns will most probably rise in the long term.

Competition – the key difference!

As already mentioned in the description of the Australian dental services industry, three major competitors exist for 1300 Smiles:

• BUPA Dental Corporation
• Pacific Smiles Group
• Abano Healthcare Group

BUPA Dental Corporation

BUPA Dental Corporation is a subsidy of BUPA Insurance company which is providing health and travel insurance internationally. Dental insurance takers from BUPA receive coverage in most cases only when they consult dentists from the BUPA Dental Corporation. Therefore, a lot of revenue is directed from the parent company and BUPA Dental Corporation acts more like a business unit then as an independent company. Although, no public information is available on BUPA Dental´s financial performance, I believe that they face a different cost structure compared to 1300 Smiles. One example would be almost non-existent marketing/ advertising expenses – who needs to advertise if almost all revenue is coming from its parent company?!
Due to non-existing public information, further analysis of BUPA´s competitive impact on 1300 Smiles is not fruitful. In the course of my analysis of competitors, I will therefore concentrate on both listed competitors – Pacific Smiles and New Zealand based Abano Healthcare Group.

Pacific Smiles Group

Pacific Smiles incorporates the same business model as 1300 Smiles.  Founded in 2003 by Dentist Dr. Alex Abrahams and listed in 2014 on the ASX, they have aggressively expanded into 70 facilities. Major differences to 1300 Smiles lie in their business philosophy and expansion strategy.

Operating margins in the light of different business strategies

Pacific Smiles has set its focus on growth in a very short time frame. They have quadrupled their chain of dental practices from 17 (2008) to 70 (2017) in less than 10 years. In the light of (still) favourable industry economics, results (EBIT & NI margins) have been very good, but growth has been achieved at the expense of large overheads and above-average wages (as compared to 1300 Smiles).

I believe that lower costs in wages & salaries are a direct outcome of 1300 Smiles´ focus on efficient use of human resources. Dr. Holmes has stated in his interview with “The savvy dentist” that his company has incorporated a system where dentists are used in different locations, effectively utilizing over-/ under-capacities. 1300 Smiles is therefore able to use more dentists in locations where demand is high while decreasing costs where demand is low.
Pacific Smiles – on the contrary – has a static employment system. In a traditional approach to human resources, wages and salaries are fixed costs in the short- to mid-term (depending on contract terms).

Major reason for the significant difference in administrative costs lie in 1300 Smiles focus to allocate capital (= to expand) only when clear guidance to profit maximization is realistically given. Since Pacific Smiles incorporates almost entirely a greenfield strategy (establishing new dental practices out of scratch), large overheads are necessary to plan and execute projects. Following extract from Pacific Smiles current annual report highlights the company´s approach to expansion and overheads:

Pacific Smiles strategy is to further expand their footprint in the Australian dental services market. Please take a look at their business outlook posted in their most recent annual report (2017):

Excessive Board Remuneration

Interesting side note: Board remuneration as part of administrative expenses is quite differently structured across both companies. While Dr. Holmes – as only executive director – earns about AUD 90.000 a year, Pacific Smiles board of directors employs two executives with yearly remuneration of more than AUD 600.000!

Returns on capital

Taking a look on returns throughout the capital structure, we get a more balanced comparison between both companies. Pacific Smiles´ greenfield approach requires increased spending on PPE charges. By taking a look at their balance sheet, we can see a heavy reliance on these fixed assets.
In comparison, 1300 Smiles mainly acquires customer lists with depreciated PPE already in place. Most of capital used for expansion is therefore allocated to goodwill. Despite higher operational margins, acquired goodwill diminishes 1300 Smiles´ returns on invested capital significantly. Directly compared to Pacific Smiles, both companies have almost equal returns on assets and invested capital.

Conclusion – 1300 Smiles vs. Pacific Smiles Group

Although both companies seem to follow the exact same business model, we see significant differences in their approach to growth and profitability. Whereas Pacific Smiles´ focus is clearly set on gaining size within the industry, 1300 Smiles patiently waits for profitable opportunities to grow within their franchise.
Although returns on capital are fairly the same, Pacific Smiles has less margin of safety in their operating margins. In an industry downturn – which will come eventually – low costs and efficient business processes will be a key differentiator. As a conservative and long-term investor, I believe that 1300 Smiles offers significant higher earnings power and ability to appreciate capital over time.

Abano Healthcare Group

Abano Healthcare Group was founded as ElderCare New Zealand ltd, developing retirement village properties across New Zealand. In late 2002, Abano expanded into dental services, with the acquisition of New Zealand based Geddes Dental Group. In 2008 they entered the Australian market with 19 practices acquired at year-end.
Abano Healthcare is a New Zealand based group focused on diagnostics and dental services. Throughout their local dental services subsidy, they operate currently 87 dental facilities in Australia. Like Pacific Smiles, Abano is a direct competitor with an increasing base of dental practices across the country.

Difference in business origin

Throughout the last decade, Abano has entered and exited different medical service businesses:

• Retirement villages (1999 – 2006)
• Brain injury rehabilitation services (2000 – 2012)
• Medical diagnostics laboratories (2002 – today)
• Dental services (2002 – today)
• Orthoses manufacturing (2006 – 2015)
• Audiology services (2006 – 2016)

Abano Healthcare Group enters and exits medical service markets through an opportunistic approach. More like a private equity player, they load up debt to acquire businesses with the intention – as seen throughout their history –  to exit with significant gains on sales (http://www.abano.co.nz).

Abano´s Dental Services division – Business model and financial performance

Attention: Throughout annual reports, Abano Healthcare publishes only consolidated information on their dental services business (New Zealand and Australia combined). Therefore, I will assume consolidated margins and returns on Abano´s Australian dental service business.

Abano´s total dental services business has grown rapidly since 2003. In Australia, the company has grown its dental facilities with a CAGR of more than 18% from 19 (2008) to 87 practices (2017). First, let´s take a look at Abano´s consolidated performance on its dental services:

Compared to 1300 Smiles, Abano lags behind significantly in operating results. Although limited information is given on their dental services balance sheet, total assets are published. Therefore, we can at least compare EBIT margins and ROA between both Abano and 1300 Smiles:

Conclusion – 1300 Smiles vs. Abano Healthcare Group

The significant difference in profitability supports my suggestion, that Abano Healthcare Group operates more like an investment fund with clear guidance on sale of assets after certain milestones in size have been reached. Emphasis lies overwhelmingly on establishing new facilities (corresponding to the extremely high levels of debt of the parent entity) with less focus on profitability.
Additionally, this view is supported by the company´s low sales per location. With 5-year average revenues of AUD 0,96 Mio., Abano makes less than 70% of 1300 Smiles´ sales per location. As we have seen, 1300 Smiles is focused on increasing internal growth per location by installing multiple dental chairs with various service offerings.
It appears, that Abano is focused on opening/acquiring new facilities rather than driving internal growth.

In direct comparison, Abano Healthcare Group shows major disadvantages compared to 1300 Smiles.

Experience & Commitment – First, Abano is not a pure dental player. Although they are currently generating more than 90% from dental services, they have been a conglomerate of medical services, buying and selling businesses on an opportunistic basis. They do not show the same commitment and expertise as Dr. Holmes with 1300 Smiles.

Operating margins – Abano has shown significantly lower profitability on dental services. Therefore, the company is much more sensitive towards increases in prices, lab fees or wages.

Capital structure – Abano Healthcare Group is loaded with debt. Debt-to-Assets currently amounts to 40%. With more than 90% of business generated by dental services, I believe that most of debt is assigned to dental operations. Increased acquisition and development of dental facilities was financed by debt. In contrast, 1300 Smiles is debt-free with a strong cash balance. Debt will have to be paid back with interest, diminishing future value to shareholders substantially (especially in the light of low operating margins).

Expansion vs. profitability –  Most importantly, Abano´s business model is focused on growth first and profitability later. As a shareholder, I believe that capital should be used in the first place to accumulate with a high return. Therefore, margin expansion and profits are more important than growth for itself – which is 1300 Smiles business philosophy!

In total, 1300 Smiles is definitely not growing as fast as Abano, but stewardship of shareholders capital is in better hands with Dr. Daryl Holmes! With coming saturation in the industry, operational excellence and profits will matter most in the future. In my opinion, Abano´s financial leverage will be crucial obstacle in competing with 1300 Smiles and Pacific Smiles in the long-run.

Investment rationale

Australia´s dental services market is characterized by emerging oversupply in services due to high price burdens on customers (free price setting through dentists). Eventually, this development in a non-regulated market will lead to price drops, forcing a lot of new (and debt-loaded) entrants out of the market.
With high operating margins, excellent capital allocation and significant net cash on hand, 1300 Smiles is set to benefit most by industry downturns, being able to gain market share while others are suffering. Compared to direct peers, 1300 Smiles´ returns and capital structure provides strong competitive advantages

Key investment reason is 1300 Smiles´ ability to patiently wait for value enhancing acquisitions and their excellence in post-merger integration. Founder and majority shareholder (60%) Dr. Daryl Holmes has set a clear vision and mission for 1300 Smiles to improve Australia´s dental health in the very long-term. Currently being 53 years old, Dr. Holmes is still practicing dentistry once a week in one of his facilities. With his age, the company and shareholders can count on his services as managing director for many years to come.

Therefore, I strongly believe that the company will stay on their track of acquiring dental practices with reasonable prices and significant growth opportunities. In the long-term, this strategy and focused execution will lead eventually lead to strong growth in net income and cash flow available for shareholders.

I hope that my analysis brought to you valuable thoughts and insights about 1300 Smiles ltd. and its competitive advantage in the Australian dental industry. If you have any questions or remarks, please do not hesitate to contact me.

Yours sincerely,