2016 Annual Report

A Word From The Chair

Abano Healthcare Group is in good shape and FY16 was another year of investment and growth.

Dental is our primary business, delivering 81% of our gross revenue in FY16, with our radiology and audiology investments making up the remainder.

In April 2016, we announced the sale of our audiology interests to our joint venture partners, resulting in a gain on sale of $20.2 million. We see this as a positive step forward for Abano as we increasingly focus our attention on the opportunity in the trans- Tasman dental market. The Board’s goal is to deliver improving results and shareholder value over the long term. We see real opportunities to generate attractive returns in the $11 billion revenue trans-Tasman dental market and our growing dental group is the second largest in Australasia with 188 practices at year end.

Radiology is a small but valued part of our portfolio. We are targeting the upper end of this high margin sector and provide a range of high end, leading edge imaging services and technologies.

Our strategy is to build scale, invest into infrastructure and add value to targeted businesses in the private, fee for service healthcare market.

In the past four years, we have sold four businesses including the recent sale of our Bay International shareholding, and ended our investments in audiology and the publicly funded rehabilitation and pathology sectors.

Proceeds from these sales have been used to pay down debt and then reinvested into our dental growth, which is primarily through the acquisition of high quality practices.

In November 2015, Richard Keys took up the role of CEO. Previously CFO/COO of Abano, Richard has an indepth knowledge of the company and has been working closely with the Board as we refine our long term strategic focus.

We are well positioned for continuing growth and our focus in FY17 will be concentrated on our dental networks in New Zealand and Australia. A consolidated dental leadership team is in place, and we expect to see growing benefits from closer collaboration and sharing of resources between our dental businesses. With a challenging Australian economy, a key focus for management this year will be to lift the performance of the Australian dental business and match the continuing success being demonstrated by Lumino The Dentists in New Zealand.

With the increase in underlying earnings from the continuing businesses and receipt of proceeds from the sale of Bay International, the Board was pleased to declare an increased final dividend of 20 cents per share.

This takes the full year dividend to 30 cents per share, equal to 72% of Underlying NPAT. Abano's Dividend Investment Plan also remains active, enabling shareholders to choose between receiving a dividend or reinvesting back into the company. Historically, approximately 50% of dividends have been reinvested under the DRP.

As our business continues to evolve, we undertake regular reviews of Board membership. This has seen new directors appointed on a regular basis as new skill sets are required to support the future growth of our company. An external review of the Board was undertaken in early 2016 with very positive results. We are now developing a succession plan for the next two to three years to ensure we have the appropriate capabilities, expertise, experience and knowledge in place to provide effective oversight of Abano’s strategy and growth.

The opportunities ahead of us are significant and we have a very clear and focused path to the future.

Trevor Janes, Chairman