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Abano provides updated earnings guidance

Abano Healthcare Group has today reconfirmed its guidance for a record 2008 financial year with revenues expected of approximately $125m, EBITDA of $23.9m and a Net Profit After Tax of $7.9 million, and has also released projections for the 2009 financial year.

The business continues to produce strong earnings growth from both new acquisitions and existing business growth and improving margins. In addition to this, there are a number of additional dental and audiology acquisitions nearing completion which are planned to be announced in the next few weeks.

Chairman of Abano, Alison Paterson, commented: “Since the release of the Target Company Statement in January 2008, there has been a change in international economic circumstances as well as some shareholding changes in Abano, now with two shareholders owning just under 20% shareholding each. While this has reduced interest from other parties, the healthcare market is generally steady since healthcare is not a discretionary purchasing activity, and therefore external factors have not changed the fundamentals and growth prospects of Abano.”

The forecast remains the same as the guidance provided in the Independent Report to shareholders in January 2008, as part of the Target Company Statement in response to the Crescent Capital Partners takeover offer. All figures exclude costs associated with any takeover bids, which are expected to be fully recoverable from a bidding party.

Alison Paterson continued: “Abano now has a long record of meeting or exceeding its market forecasts and guidance and the board believes it will continue to deliver strong value and growth for our shareholders. In light of the recent changes, we have subsequently reviewed the 2009 projected EBITDA contained in the Independent Appraisal Report released in early January 2008.

“While the board would not normally release such guidance in advance of the next financial year at this stage, the circumstances of two takeover offers in less than six months, means the board believes shareholders need clear information and guidance at this time.

“The 2009 management forecast in the Independent Appraisal Report indicates an EBITDA of $28.9m and the company has today reconfirmed the expectation that this will be met or exceeded. These projections provide for a Net Profit After Tax in 2009 of at least $10.5m.”

The board notes that based on this projection and the current Crescent offer of $5.20, this provides a forward PE multiple of approximately 11.4, well below the current healthcare multiples being paid in New Zealand and Australia. Therefore, the board is not surprised that Crescent is attempting to gain control and acquire Abano on a relatively cheap multiple. The board does note however, that to date, Crescent has only received acceptances in respect of less than 1.9% of shares on issue.

Alison Paterson continued: “The board has also considered its position on the current interim dividend. As Crescent did not allow the interim dividend to be declared and paid on the due date, unfortunately imputation credits of approximately $3 million were lost due to Crescent and Mastheads recent share transactions.”

The board has previously stated that it is mindful of protecting imputation credits and is continuing to work towards paying the interim dividend.

To avoid any future loss of imputation credits, the board has advised, that given the 3rd quarter of the 2008 financial year has just been completed, on expiry of the Crescent bid on the 14th of March 2008, it is the board’s intention to declare an interim dividend of 13 cents a share. This compares with the earlier advised interim dividend rate of 8.5 cents for the six months period and is therefore consistent on an annualised basis as a dividend for a nine month period.

This maintains the current dividend policy of distributing 50% of the Group’s Net Profit After Tax, and the interim payment is based on three quarters of the forecasted full year dividend. At the Crescent bid price, the expected dividend of 18 cents per share, fully imputed for the full year, will represent a pre-tax yield of 5.1%pa on a growth stock.

The board understands that Crescent is currently canvassing individual shareholders and would remind shareholders that despite recent international and local market uncertainties, Abano’s investment fundamentals, and the market’s awareness of them, continue to strengthen the longer term growth of the company.

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