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The companies
1300 Smiles Limited
Townsville-based 1300 SMILES, founded in 2000, runs a chain of more than two dozen dental practices in 10 cities and towns in Queensland, and has also expanded to South Australia and New South Wales. Its main role is the provision of dental surgeries and practice management services to self-employed dentists, allowing them to focus on dental services. It also manages its own small dental business. The founder and managing director, Dr Daryl Holmes, owns nearly 60 per cent of the company equity.
Revenues and profits rebounded strongly from the decline of the previous year, with a noteworthy contribution from BOH Dental, which was acquired in May 2014. The company reported that its subscription-based Dental Care Plan has become a core part of its business. During the year it also launched a new product, dental vouchers for patients requiring extensive treatment but wishing to spread payment over an extended period, and it reported strong initial demand for these. 1300 SMILES also reports what it calls over-the-counter revenues, which represent the amount actually received by its dentistry businesses before the deduction of patient fees by self-employed dentists. On this basis – which the company believes gives a fairer measure of the scale of its operations than its reported statutory sales figure – total company revenues rose to $53.2 million in June 2015, from $43.3 million in the previous year.
The dental business in Australia is fragmented, with a majority of dentists working in their own private practices. A gradual consolidation is taking place, with 1300 SMILES one of the leaders in this work. It buys dental practices, then retains the dentists, who pay a fee to 1300 SMILES for services received. The company continues to seek out new practices to buy, though it has strict benchmarks concerning the price it will pay. It is also looking to establish new practices in new regions. BOH Dental, located in the Brisbane CBD, and the company's largest-ever acquisition, has provided a substantial boost to business. Seven of the 10 BOH dentists are senior specialists, allowing 1300 SMILES to make referrals within the company. The company looks to its $1-a-day Dental Care Plan and its new dental vouchers – which offer extended payment terms and also give a discount on the cost of treatment – to generate solid growth in business. At June 2015 1300 SMILES had no debt and $6.3 million in cash holdings – up from $1.4 million a year earlier – that it can employ for future expansion.
Acrux Limited
Melbourne pharmaceuticals company Acrux, founded in 1998, is engaged in the development and marketing of healthcare drugs. Its initial product, Estradiol, is a spray for women to treat menopausal symptoms and is distributed internationally under the name Evamist. Its Axiron drug for the treatment of testosterone deficiency in men has been licensed to Eli Lilley and has been launched in the US, Canada, Australia, Germany, Brazil and South Korea. Recuvyra, a drug used for post-operative pain relief in dogs, is also marketed internationally. The company maintains an active research program, with a pipeline of other products at various stages of development.
Revenues and profits crashed as the company did not receive any bonus payment for Axiron drug sales. Axiron provides more than 95 per cent of the company's income, with the US – where the drug enjoys a market share of around 14 per cent – the major market. The June 2014 year saw a special bonus payment to Acrux of US$25 million for achieving net sales in the previous year of more than US$100 million, but no such payment was made in the June 2015 year. Royalty revenue for Axiron was $24.3 million, about the same as in the previous year, despite a fall in sales of the drug, from US$181.1 million in the June 2014 year to US$155.4 million. This partly resulted from a warning by the US Food and Drug Administration aimed at limiting the use of testosterone therapy products. With high fixed costs, the company's operating expenditure for the year posted a modest decline, from $10 million to $8.6 million, which had a big adverse impact on levels of profitability. The weaker dollar generated a $0.2 million foreign exchange profit, compared with a $1.2 million foreign exchange loss in the previous year.
In March 2015 the US Food and Drug Administration issued a warning against the use of testosterone therapy in men whose low levels of testosterone were due simply to ageing. In addition, it required testosterone manufacturers to include on their labelling a warning about a possible increased risk of heart attack and stroke. This has led to a slowdown in Axiron sales in the US. In the April to June 2015 quarter the company reported sales of US$32.4 million, down from US$47.1 million in the same period of 2014. Products in development for Acrux include drugs in the fields of hormone deficiency and animal health.
Adelaide Brighton Limited
Adelaide-based Adelaide Brighton, established in 1882, is one of Australia's leaders in the production and supply of construction materials, notably cement and lime. In addition, its Hy-Tec business and its Mawson Group joint venture are suppliers of pre-mixed concrete, and it has a business as a supplier of aggregates, through Mawson Group and Hurd Haulage. The Adbri Masonry operation is a leading producer of concrete masonry products. Adelaide Brighton's major customers include the residential, non-residential and engineering construction sectors, as well as the infrastructure, alumina, steel and mining industries.
Adelaide Brighton reported an excellent result, with profits rising significantly. Although part of this derived from land sales, there was also some impressive organic growth. Cement sales were up, thanks to strong residential construction demand in East Coast states, and Adelaide Brighton was able to raise its prices. The company was also able to augment its own production with cement imports at competitive prices for sale to its customers. Demand for lime also grew, with the resumption of sales to a major customer and growing business with the non-alumina sector, and the company was again able to raise prices. Concrete and aggregate sales were strong, thanks to the buoyant residential and commercial construction environment, and the company benefited from three acquisitions made in 2014. Adelaide Brighton's efforts during 2014 to lower its cost base also contributed to the rise in profits. The good result was boosted by $16.2 million of land sales during the period, generating an after-tax profit of $12 million.
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