Letter to Shareholders 5 March 08
Your board today confirmed our current year forecast at a record $7.9m Net Profit After Tax, and its intention to declare and pay an interim dividend of 13 cents a share as soon as the Crescent bid expires.
The current year forecast remains the same as the guidance provided in the Independent Appraisal Report which was sent to shareholders in January 2008. We reconfirm the full year result will be approximately $125m, EBITDA of $23.9m and a Net Profit After Tax of $7.9 million. This excludes any costs associated with any takeover bids, which are expected to be fully recoverable from a bidding party.
In addition to this, subsequently we have asked management to review the 2009 projected EBITDA contained in the Independent Appraisal Report released in early January 2008.
The 2009 forecast in the Independent Appraisal Report indicates an EBITDA of $28.9m and management has 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.
We also believe it is important to correct misleading statements and graphs that were recently released by Crescent Capital in a press release and through a letter sent to you.
Crescent suggests that the Abano share price increase since September 2007 has all been due to takeover and “speculation” activity.
While there can be no doubt that the takeover activity…which commenced with the Masthead purchase of 19.9% nearly 18 months ago … has drawn considerable attention to Abano, the reality is that this activity has, albeit belatedly, highlighted the excellent performance and growth of the company.
During this period, we have released a record 2007 year end result, a record 2008 half year result, have made profit upgrades due to the continuing improvement of the business, increased our acquisition rate and released our detailed projections through the two Independent Appraisal reports. This drives your share price more than any “speculation”.
The independent broker reports from ABN Amro and Forsyth Barr do not factor in “speculation”, and they have valued Abano shares at up to $6.18.
The fact is that our company is very conservatively priced compared to other Australasian healthcare groups.
Abano’s earnings have grown from $1.6m in 2006 to $5.0m in 2007 and a guidance of $7.9m for 2008. This strong growth is expected to continue, with management projections of a 33% increase in Net Profit After Tax next year. We believed that this is why Crescent Capital wants to buy your shares, not because they believe your share price is inflated by “speculation”.
We again remind shareholders that Abano now has a long track record of meeting or exceeding all market guidance that your board has made and we remain confident of meeting the full year forecast for 2008 and achieving the projection for 2009 above.
In addition, your directors have confirmed our intention to declare an interim dividend of 13 cents a share if the Crescent bid fails to succeed by the closing date of the 14th of March 2008.
We draw to your attention the sections in the attached media release that outlines the changes in the international economic conditions as well as some shareholding changes. This has reduced interest from other parties.
However, all things being equal, the board believes in the current business plan, the ability of management to meet the forecasts and the excellent prospects for this company. We therefore believe that any weakness in the share price should the Crescent bid fail, is likely to be recovered through the growth of the company.
On this basis, we reconfirm our advice to reject the Crescent bid. Management similarly has advised that they will not be selling into the bid.
We remind you that the Independent Advisor’s valuation range was $5.15 to $5.90 and that independent broker reports have provided valuations of up to $6.18.
We have maintained close communication with our shareholders and will continue to do so as events unfold.
My thanks for your ongoing support.