Abano provides acquisition update and guidance
Abano continues to roll out its established acquistion and growth strategy and provides guidance for the full year.
Following the sale of Bay Audiology in New Zealand, listed healthcare investor and operator, Abano Healthcare Group, has continued to expand in the second half of the 2010 financial year, with a number of new acquisitions and organic growth in targeted healthcare sectors.
Abano’s Dental sector now plays an increasingly significant role within the Group with accelerated growth plans in place in both New Zealand and Australia. Lumino The Dentists in New Zealand has grown to 49 practices across the country, with the acquisition of Duncroft Dental in Dunedin in February 2010. This is in addition to the six practices acquired in the first half of the 2010 financial year.
In Australia, a further three practices have been added to the Dental Partners business in the past four months. These include the acquisition of two dental practices in Coffs Harbour and the opening of a new Greenfield clinic in Robina.
Following a long standing business and supply relationship with Orthotics South Island, Abano will today acquire this business and welcome its principal, Paul Ward, to the Orthotics Group board. This investment expands the national footprint of Abano’s orthotics business, increases the range of services on offer, and provides income diversification.
Managing director of Abano, Mr Alan Clarke, commented: “At the time of the sale of Bay Audiology Limited, we indicated that, without Bay Audiology’s New Zealand contribution, our second half year performance would be down on our first half performance and below previous years, given we had sold a material part of our business.
“We are in a phase of rebuilding these earnings, primarily through Dental in the near term, while investing in Audiology in Australia and Asia for the medium and long term. Progress in Dental is pleasing in both markets and earnings growth into the second half of the year is strong and positive. Radiology continues to increase revenue and improve performance. All three of these sectors are identified as areas for investment growth.
“The pathology business is steady, and we are moving to address the renewal of the Capital and Coast, and Hutt Valley DHB contract that expires in eighteen months time.
“However, Brain Injury Rehabilitation work flow and referrals are markedly down and income has been adversely affected by the ongoing changes with ACC in recent months. We have restructured the Rehabilitation business and we are once again reassessing the range of services we offer. A slow down in ACC approvals has also been noted, partly in Radiology and to a smaller extent in Orthotics.
“Our joint venture Audiology business in Australia expanded with ten new Greenfield clinics opened since the beginning of our financial year. However, we paused our expansion in December as we consolidated these new clinics. We also noted a down turn in the Office of Hearing Services (OHS) coupons for hearing devices being approved. This slow down appears to be due to an administrative process change by OHS, which halved approvals in January and February. We have since noted that approvals have grown in March and they are expected to increase to normal levels into April.
“Following the sale of our New Zealand audiology business, we have now been able to focus on the development of our audiology businesses in Asia. Abano directors, Peter Hutson and Danny Chan, have just completed an extensive market visit to Asia and we are now analysing the opportunities identified. Development into these markets will take time and occur mainly through Greenfield openings complimented with small selected acquisitions. As a consequence, positive profit contributions, from our consolidated audiology businesses, through our new joint venture in Bay International, will only be apparent in two to three years time, as we develop these opportunities establishing our brand and expanding our market footprints.”
Chairman of Abano, Mrs Alison Paterson, commented: “In the near term and as a consequence of the temporary slowdown in Australian Audiology and the ACC referral impacts in Rehabilitation, we are now expecting our second half earnings to be softer than planned, but core growth continues, primarily from our two Dental streams.
“We are therefore advising that, before the gain made on the sale of Bay Audiology Limited in New Zealand, our full year ended 31 May 2010, will see revenues of $175 to $180 million, operating Earnings Before Interest Tax and Amortisation (EBITDA) of $18 to $22 million and Net Profit After Tax (NPAT) of $4.0 to $4.5 million.
“Following our share buy back and cancellation offer, which was under subscribed, we now have 4.8 million more shares on issue than we planned. As a consequence our earnings per share will also be lower than planned for the full financial year.
“Given this, as well as our strong capital structure, lower than planned levels of debt and our confidence in the mid and long term growth prospects for Abano, we today announce two initiatives.
“Firstly, for the 2010 financial year, we will alter our annual dividend policy of 50% NPAT and now maintain last year’s dividend per share for this financial year. This means that a dividend of 21 cents per share will be paid for the full financial year ended 31 May 2010. In November, we declared and paid an interim dividend of 7.3 cents per share, excluding the special interim dividend payment made following the sale of Bay Audiology Limited. The balance of 13.7 cents per share will be paid in August 2010, and carry imputation credits.
“Secondly, the board will shortly announce details of an on market, share buyback programme by the company.”