2012 Annual Report

Abano Healthcare Group has provided a solid result in a year underscored by a continuing downturn in the global economy.

Reported revenues were at their highest level ever at $206.4 million, up 18% on the previous year (FY11: $174.8 million). As expected, we have seen strong growth at EBITDA , with an increase of 30% to $25.7 million (FY11: $19.8 million1).

We have used the opportunity provided by the slowing economies to invest in our businesses. This included an accelerated dental acquisition programme in New Zealand and Australia, funded by an increase in debt facilities, as well as investment into dental IT platforms. There was also the start up of the PET CT radiology expansion in Auckland, which was commissioned in late FY11, and the decision to develop the new Millennium radiology centre, which will open in late 2012 on Auckland’s North Shore.

Following year end, we announced the divestment of our brain injury rehabilitation business, which settled in June 2012, and finalised the acquisition of the outstanding 30% shareholding in our Australian dental business, Dental Partners, in July 2012.

While these investments all provide strong growth platforms for the company and will generate long term profitable cashflows, the associated investment costs had an immediate impact on the Profit and Loss account in the 2012 financial year. As a result, while FY12 NPAT, at $1.6 million, was in line with forecast, it was down on the previous year’s NPAT of $11.5 million, which also included the one off $12.3 million gain on sale of National Hearing Care.

We also report our underlying earnings, which exclude a number of items required to be expensed under IFRS.

We believe underlying earnings provides a more accurate portrayal of the Company’s true performance, and on a like for like basis with previous years.

Underlying EBITDA in FY12 was $27.3 million, up 33% on 2011 (FY11: $20.6m1), with an Underlying NPAT of $3.0 million (FY11:$3.1m).

The revenue and EBITDA results exclude the returns from our audiology business. This is because it is a 50:50 joint venture, and therefore we equity account our 50% share of the NPAT result in the financial period.

It is also important to note that the FY11 result included a one off gain on sale of $12.3 million, from the sale of Abano’s shareholding in National Hearing Care, and the de-recognition of tax losses in Bay International of $3.1 million.

More information on the Company’s financial performance, underlying earnings and reconciliation back to reported profit is available here.

1 EBITDA excludes profit/losses generated by Bay International, in which Abano holds a 50% shareholding. The results for the Bay Group are now equity accounted and therefore no longer included in the consolidated EBITDA. FY11 EBITDA has been restated to provide a like for like comparison.

OUTLOOK

Our vision is to be the leading healthcare investor and operator in the $60 billion New Zealand, Australia and South East Asian health market. An ageing population, improvement in life expectancy, the reduced ability of Governments to fund healthcare, and rising patient expectations are all driving escalating demand for quality, private healthcare options.

Abano has continued to engage with policy makers in the healthcare sector and during FY12 we held briefing sessions for Government Ministers and Members of Parliament on both sides of the House. In addition, we have met with DHB management and Board members in order to gain a better understanding of their needs and to encourage a debate about the future funding and delivery of health services in New Zealand.

Regional Growth

Forty-five percent of Abano’s revenue is now generated from outside of New Zealand, with a faster growth rate than domestic revenues. While New Zealand will remain our biggest geographical base in FY13, our presence in Australia and South East Asia will continue to grow and will soon contribute over 50% of our revenues.

These markets are significantly larger, and offer considerable potential for expansion.

Abano initially entered the Australian market in February 2007 with a greenfield audiology development in Brisbane. In June 2008, we branched out into the Australian dental market with a seed investment of nine practices in Queensland and Melbourne. In December 2008, we entered Asia with small audiology acquisitions in Hong Kong and Singapore, followed closely by small investments into audiology in Malaysia and subsequently Taiwan in December 2010.

At 31 May 2012, we had Australian and Asian revenues of NZ$105 million, a 20 fold increase in four years.

In New Zealand over the same period, revenues increased from $119 million in 2008 to $125 million in FY12. It should be noted that this includes the material divestment of the New Zealand audiology business at the end of 2009.

Domestic growth opportunities, while still available, are eclipsed by the sheer size of the Australian and Asian healthcare markets. This means our offshore growth will be faster than domestic growth, and by 2015, it is estimated that over 70% of Group income will be derived overseas.

It is therefore likely that, in the next few years, Abano will establish a corporate presence in the Australian market to oversee our ongoing development there and in Asia. However, we expect that Abano will remain a New Zealand registered and domiciled company for the foreseeable future .



Revenue Generation

Dental will remain our primary revenue generator, as our accelerated acquisition programmes continue in both Australia and New Zealand.

Organic growth will also be increasingly important and we have committed to a second year for our successful Lumino The Dentists marketing campaign in New Zealand. Both our dental businesses now have real depth and are supported by experienced management teams on both sides of the Tasman. 

Audiology is expected to make good progress in FY13 with growing traction in Australia and steady development in Asia.

Finally, we expect another solid and stable year of performance from our orthotics business and Aotea Pathology, both of which will continue to work within their DHB contracts to provide the best possible, quality service for their clients and the communities they serve.

Alan Clarke, Managing Director

TOP FIVE - FOCUS FOR 2013 FINANCIAL YEAR

  1. Accelerated acquisition and investment into trans-Tasman dental sector
  2. Develop revenue streams following investment into radiology sector
  3. Ongoing development of emerging audiology networks in Australia and Asia
  4. Focus on organic growth and investment opportunities for all businesses
  5. Increasing percentage of both private revenues and revenues driven from offshore markets