NPATEquityROEChange in NPAT from 2009Change in Equity from...

		NPAT	Equity	ROE	Change in NPAT from 2009	Change in Equity from 2009	Return on Incremental Equity from 2009	Note
1	2009	$3,810,000	$9,208,000	41.38%
2	2010	$4,327,000	$13,013,000	33.25%	$517,000	$3,805,000	13.59%
3	2011	$5,144,000	$15,690,000	32.79%	$1,334,000	$6,482,000	20.58%
4	2012	$6,175,000	$26,013,000	23.74%	$2,365,000	$16,805,000	14.07%
5	2013	$6,367,000	$27,952,000	22.78%	$2,557,000	$18,744,000	13.64%
6	2014	$4,987,000	$29,219,000	17.07%	$1,177,000	$20,011,000	5.88%
7	2015	$6,580,000	$31,800,000	20.69%	$2,770,000	$22,592,000	12.26%
8	2016	$7,441,000	$34,221,000	21.74%	$3,631,000	$25,013,000	14.52%
9	2017	$7,270,000	$36,105,000	20.14%	$3,460,000	$26,897,000	12.86%
10	2018	$7,633,000	$38,114,000	20.03%	$3,823,000	$28,906,000	13.23%
11	2019	$7,772,000	$40,085,000	19.39%	$3,962,000	$30,877,000	12.83%	Statutory figures
12	2019	$6,953,000	$40,085,000	17.35%	$3,143,000	$30,877,000	10.18%	Adjusted for Other Income (Fair value gain - investment property)

As @madamswer pointed out earlier, the 2019 figure included a non-operating one-off boost from "Fair Value Gain from Investment Property" of $1.17m pre tax (or $819K after tax)

If we subtract this figure $819K from the NPAT figure, we can see that operating NPAT had dropped by 9% from $7.6m in 2018 to $6.9m in 2019.

We can also do some analysis to work out the approximate Return on Incremental Equity. I do this by working out the change in NPAT (from 2009) and change in Equity (also from 2009) and divide the two numbers.

As the table shows, over the past 10 years, the incremental equity that has been reinvested in the business has on average produced a return of somewhere in the low teens.

And there is also no signs of this trend changing for the better, especially if we consider that the market for the acquisition of private practices has become a lot more competitive than 10 years ago, with competitors that are larger than ONT and who are not necessarily hesitant to pay top dollars for practices.

Therefore, we can expect to see ONT's ROE to continue to decline from the current level of 17% to the low teens, which is where the long term Return on Incremental Equity lies.

I have to give credit where credit is due. Apart from the capital raising done back in FY2010 and FY2012, ONT has been quite conservative in issuing shares, its number of shares hasn't changed for more than 7 years.

Over the past 10 years, ONT has been able to pay dividends that are increasing year in year out quite consistently.

I am afraid that this trend is about to end very soon.

Its dividend payout ratio has gone up from 60% in 2009 to 85% in 2019. The annual report states that the 2019 payout ratio is 76%. I believe this 76% figure is very misleading because it included the "Fair Value Gain - Investment Property" in the NPAT figure.

If the performance of the core or existing practices continue to deteriorate, ONT will experience a combination of negative factors happening at the same time, something that it has never experienced in its entire public life, namely:
1. Rate of decline in existing practices' profitability not able to be masked by profit contribution made by newly purchased practices
2. Pressure to make larger acquisitions at higher price to make up for the decline in the profitability of existing business.
3. Market derating its PE valuation from 20 to low teens, making the equity raising option a lot more expensive
4. Pressure to keep up the dividend level forces the board to pay dividends that it can't really afford
5. The current low interest rate environment is making a lot of companies too complacent. One day, if interest rate starts to increase again, it can make this debt a lot more expensive to service than it looks today. For the record, the new debt facility with CBA has an interest rate of 2.81%.

In conclusion, ONT's 2019 result is actually worse than what the fluffy report suggests.