NON-GAAP FINANCIAL MEASURES
Gross Revenue represents the fees paid by all dental patients regardless of whether the services are provided by dentists contracted directly by the Group or by dentists to whom we provide facilities and services under Facilities and Services Agreements. Prior to its sale in FY16, gross revenue also included audiology revenues as this was a joint venture and was therefore equity accounted. Gross revenue is reported within the segment note in the Financial Statements.
Earnings Before Interest Tax Depreciation and Amortisation (“EBITDA”) •is reported within the segment note in the Financial Statements and is Net Profit After Tax (“NPAT”) excluding GAAP compliant net finance expenses, fair value adjustments, realised foreign exchange gains/losses, asset impairments, gains/losses arising on sale of businesses, practice partnering scheme – profit share, equity accounted investments (the Bay International joint venture prior to its sale in FY16), non-controlling interests, tax, depreciation and amortisation costs.
Underlying Financial Measures: In addition to reporting results under IFRS, the Abano Board also reports on Underlying NPAT and Underlying EBITDA. These are the measures used within the Company to evaluate performance, establish strategic goals and to allocate resources. Underlying NPAT is also the basis for the Company’s dividend policy. The Abano Board believes that these measures provide a more appropriate representation of Abano’s performance and Abano has been reporting these metrics on a consistent basis over a number of years.
Underlying EBITDA is EBITDA excluding business acquisition and transaction costs.
Underlying NPAT is NPAT excluding business acquisition costs, fair value adjustments, asset impairments, gains/losses arising on sale of businesses, and equity accounted investments (the Bay International joint venture prior to its sale in FY16) including their tax effect if any.
Gross revenue, EBITDA, Underlying EBITDA and Underlying NPAT are non-GAAP financial measures and are not prepared in accordance with NZ IFRS.
Accounting for Acquisitions
1. Time Value Interest Component of Acquisition Earn Out: A component of the deferred purchase price payment, which reflects the time value of the deferred payment, is expensed. This does not increase the purchase price, is a non-cash expense and is non-deductible for tax purposes.
2. Change in Estimate of Deferred Payments on Acquisitions: Any movement in the estimated deferred payment or liability is expensed and is a non-deductible expense for tax purposes. If acquisitions perform well, the resulting deferred purchase price payment over the earn out period increases due to the increased performance, and although positive, this also leads to an increased expense in Abano’s Profit and Loss account, providing a negative impact on the Net Profit After Tax.
3. Acquisition costs to be expensed: Costs associated with an acquisition, such as legal or due diligence costs, are expensed. This is a non-deductible expense for tax purposes. The level of acquisition related expenses in Abano’s Profit and Loss increases relative to the number and size of acquisitions made. That is, the more acquisitions made, the higher the expense, conversely providing a negative impact on the Net Profit After Tax.
OTHER FINANCIAL TERMS
Discontinued Businesses: Rehabilitation businesses divested in FY15; Pathology business divested FY15; Audiology shareholding divested FY16; Radiology shareholding divested FY18
Revenue excludes any audiology revenues (prior to its sale in FY16) and only includes Australian dental revenues after the payment of dentists’ commissions.
Same Practice Gross Revenue Growth is all practices owned for 12 months normalised for trading days.
Dental Margin is calculated as dental Underlying EBITDA as a percentage of Gross Revenue.