Abano 2011 Full Year Market Guidance
Listed healthcare investor and operator, Abano Healthcare Group, has today provided year end guidance for 2011 as it continues its growth in New Zealand, Australia and Asia, with the signing of two multi-million dollar health contracts as well as ongoing acquisitions and organic growth.
Chairman of Abano, Alison Paterson commented: “Economic and trading conditions remain very challenging, compounded by the natural disasters in both New Zealand and Australia which have had an enormous financial impact on the economies, business and consumer confidence in both countries. The January 2011 floods in Queensland, Victoria and New South Wales and the February earthquake in Christchurch are forecast to depress Abano Group earnings by about $0.3 million to $0.4 million in this financial year.
“Although this will have a short term impact on the Group, there has been no material physical impact on any of our business premises. I am also pleased to report that there were no staff fatalities or serious injuries in either disaster; however, many staff have been affected with the loss of homes and through the death or injury of close friends and family. Abano has responded to both disasters by attending to the needs of our affected staff and supporting the relief appeals.
“There are a number of one-off planned and unplanned costs to be absorbed in the last quarter of the financial year. First, are the unplanned impacts of these two natural disasters and a softer than expected performance of our brain injury rehabilitation business which continues to face referral challenges. In addition, we have a number of dental acquisitions which are likely to settle later than planned in the next three months, with the consequence that we will expense all acquisition costs without seeing their full contribution benefit in this financial year. Finally, the previously announced relocation of the Bay Audiology head offices in Australia and Asia has impacted with one off relocation costs.”
Alison Paterson continued: “Taking the above into account, and as we have done each year following the summer and holiday period trading, we are advising that our guidance for the full year ended 31 May 2011, before the gain on sale of National Hearing Care, is as follows:
“Revenues are expected to be between $175.0 to $177.0 million, operating EBITDA between $17.0 to $18.0 million and an operating NPAT of between $2.1 to $2.6 million. In addition, there will be a one off gain of $12.3 million, resulting from the recent sale of our shareholding in National Hearing Care.
“Excluding IFRS changes and the gain on sale, underlying EBITDA is expected to be $18.0 to $19.0 million and underlying NPAT between $3.3 to $3.8 million.”
The Abano board also reconfirmed its intention to maintain the 2011 dividend at 21cents per share.
Managing director, Alan Clarke, commented: “While healthcare is relatively protected from economic downturns, many areas of our Group are still dependent on discretionary healthcare spending and both the Australian and New Zealand economies and consumer confidence remain very sluggish.
“Despite this unsettled business environment, strong growth continues from our two dental businesses complimented by pleasing new contracts secured in Orthotics and Pathology, which will generate medium term annuity income streams. In addition, an important investment has been made into new PET/CT technology in Radiology which lays the foundation for future growth in this area.”
Abano’s Dental sector plays an increasingly important role as a revenue and earnings generator for the Group, with accelerated growth plans on both sides of the Tasman. In New Zealand, Lumino The Dentists, has grown to 56 practices with six acquisitions year to date and a further three to four acquisitions expected to settle in the last three months of the financial year.
In Australia, 10 practices have been added to the Dental Partners network since the beginning of the financial year, with another three to four expected to settle by the end of the financial year. This business now has 36 practices in its network and has recently relocated to a new head office to accommodate the group’s growing support and back office team.
While some dental acquisitions have been slower to complete over the past three months, it is expected that the acquisition rate for dental for the full year will be within expectations. Under International Financial Reporting Standards, all acquisition costs are now expensed on settlement and therefore the dental group’s earnings for the current financial year will be impacted by the delayed acquisitions now expected to settle in the next three months. While these acquisition costs will be recognised in the 2011 year, the income benefits from these investments will be seen in the 2012 financial year.
Abano’s Radiology business has also expanded, with a new $5 million, PET/CT scanning centre at Ascot Radiology in Auckland, due to open in April 2011. PET/CT scanning is the leading diagnostic tool in the fight against cancer and Ascot is one of only a handful of radiology centres in New Zealand to offer this service. In addition to this, two new radiologists have been admitted as equity partners of Ascot Radiology in the past few months.
Abano’s joint venture audiology company, Bay International, continues to invest in Australia and Asia. Both of these markets are in an investment, loss making phase, with positive income streams expected in the medium to long term.
New audiology management teams have recently been appointed in Asia and Australia, with the Asia support office relocating to Hong Kong, and in Australia, the support office has relocated to Sydney. These initiatives have incurred one off recruitment and relocation costs which will be absorbed during the second half of the 2011 financial year, however, they provide a strong foundation for the businesses going forward.
Abano’s diagnostic business, Aotea Pathology, announced in late December that it had negotiated a three year, $75 million extension of the existing five year community pathology contract it holds with the Hutt Valley and Capital and Coast District Health Boards (DHB). The extension means this contract is now extended to October 2014.
In January 2011, Abano completed a compulsory 1:4 share buy back and cancellation in January, cancelling 5.2 million shares and returning $27.3 million to shareholders following the sale of National Hearing Care.
In March 2011, Abano subsidiary, the Orthotic Centre, was selected as the preferred supplier for the Southland DHB orthotics contract. This new three year contract, which will begin on 4 April 2011, is worth over $3 million and will see the Orthotic Centre provide acute and disability support services to clients referred by Dunedin Hospital and Kew Hospital in Invercargill.