Abano announces move into orthotics

Media Release

New Zealand’s leading listed healthcare investor and operator, Abano Healthcare Group, today announced the signing of an agreement to acquire 100 percent of leading orthotic specialists, Orthotic Centre (NZ) Limited, through two transactions over the next three years.

The agreement will see Abano establishing an equity partnership with the proven and successful specialist practice, extending Abano’s rehabilitation sector as signalled in recent weeks.

The Orthotic Centre is New Zealand’s foremost supplier of orthotic services and specialist products and has revenues of over $5 million per year. The business provides specialist clinical consultation and orthotic products, such as restorative orthotic supports and custom made footwear, with approximately 30,000 client services each year.

The acquisition follows a decision by the founder of the Orthotic Centre, Mr John Clark, to sell his interests over time as part of his retirement from the business. John will remain on the board, and involved in the business for the foreseeable future, along with current directors, Ross Nicholson and Denis Currie.

The settlement of the first transaction for 70 percent of the business is planned for October 2005, for an investment cost of $4.5 million, with the remaining 30 percent to be acquired through a second transaction by July 2008, on an earn out and floor price basis.

The Orthotic Centre was established in 1991 by John Clark, and has a staff of 40, including seven orthotists based in Auckland, and another five in Hamilton and Wellington. Staff in Auckland includes a team of 10 highly skilled manufacturing technicians. The company derives its income primarily from private sales, ACC and DHB contracts, with referrals from medical specialists, general practitioners and other health professionals.

Abano Healthcare currently has full or part ownership of a range of businesses in three key healthcare and medical service sectors – dental, diagnostics and rehabilitation – and has announced a move into the Audiology sector in October 2005 through the acquisition of 70 percent of Bay Audiology. The Orthotic Centre will become a part of Abano Rehabilitation, alongside the Group’s other rehabilitation practices.

Managing director of Abano, Mr Alan Clarke, said: “Following the sale of Abano’s aged care business, ElderCare, in July 2005, we have been identifying opportunities that are less capital intensive, and offer higher returns for our shareholders.

“The Orthotic Centre has a long and established profitable operating history, with a diversified income base from DHBs, ACC and growing private sales. The business will provide a return on invested capital at EBITDA that exceeds 20 percent, and a return at NPAT that exceeds Äbano’s weighted average cost of capital, thereby adding shareholder value.”

He continued: “The board and management of Abano are supportive of the Orthotic Centre’s already successful business performance and practices, and no changes are planned to either operations or staff. We are confident that Abano can provide the Orthotic Centre with a strong future, and are committed to continuing to offer the excellent, high quality services for which the Orthotic Centre is known. “

Founder of the Orthotic Centre, Mr John Clark, said: “Our decision to sell to Abano was made after careful review and consideration, and took into account Abano’s reputation as a long term holder and investor in successful healthcare businesses, and the experience and professionalism of the people on both the board and in Abano’s senior management team.”

For more information, please contact:

Alan Clarke
Managing director, Abano Healthcare Group
Tel: 09 361 0482 or mob: 021 368 818