Full Year Results for the Year Ended 31 May 2013

Healthcare investor and operator, Abano Healthcare Group (NZX:ABA) continued to build on its successful growth strategy during the year to deliver record revenues of $207.0 million and a 75% increase in Net Profit After Tax to $2.8 million for the financial year ended 31 May 2013.


View latest financials

Healthcare investor and operator, Abano Healthcare Group (NZX:ABA) continued to build on its successful growth strategy during the year to deliver record revenues of $207.0 million and a 75% increase in Net Profit After Tax to $2.8 million for the financial year ended 31 May 2013.

The company reported Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of $27.7 million, up 8% on last year.

The revenue and EBITDA results reflect the divestment of the brain injury rehabilitation business in June 2012 at the start of the financial year, for a gain of $1.6 million, resulting in no further earnings contributions from this business. The Australian dental business, Dental Partners, also continued to roll out the change in the basis for contracting dentists, which in effect means revenue is now recognised after the payment of dentists’ commissions.

Gross revenues1 which include the audiology group and Australian dental revenues before payment of dentists’ commissions increased to $257.8 million, primarily driven by increasing dental group gross revenues which were up 18% on FY12.

Underlying earnings2 excluding non cash items required to be expensed under the International Financial Reporting Standards (IFRS), the one off gain from the sale of the company’s brain injury rehabilitation business and a review of Bay International’s goodwill and tax losses were $28.6 million at EBITDA giving an underlying NPAT of $4.5 million, up 50% on FY12.

Directors have confirmed a final dividend of 13.7cps, making an annual dividend of 21cps for the financial year ended 31 May 2013. This takes the total dividends and capital returns paid to shareholders over the past five years to $74.0 million.

In addition to the Dividend Reinvestment Plan, the Board has resolved to raise approximately $15 million of capital in the coming quarter. Forsyth Barr Limited has been appointed to arrange the offer and it is intended that the issue be underwritten. It is likely that the offer will consist of a small placement and Share Purchase Plan to provide for substantially pro-rata participation by all our shareholders.

Chairman and Management Commentary

It was a year of sustained growth for Abano, as we continued to build on our proven investments in the Australasian region. In particular, we continued to invest into the expansion of our dental networks on both sides of the Tasman and into our Auckland-based radiology group.

Dental generated gross revenues of $177.8 million (an 18% increase on FY12) and is the largest business within the Group, contributing 69% of Abano’s gross revenue.

In FY13, we acquired 24 dental practices across Australia and New Zealand, providing $23.1 million in additional annualised gross revenues, growing our trans-Tasman network to 138 practices at year end. We also invested in the buyout of our minority 30% partner in our Australian dental business, Dental Partners Pty Limited, increasing our ownership from 70% to 100% of its 62 practices as at year end. We have been the majority shareholder in Dental Partners since its inception in 2008 and were delighted at this opportunity to invest further into the dental industry and this very valuable company.

Organic growth also continued in dental with the successful Lumino TV-led advertising campaign in New Zealand moving into its second year. We are just now starting to see the benefits of scale across New Zealand and Australia, particularly with laboratory and materials purchasing. In the first two months since year end, we have acquired a further three practices providing $7.4 million in additional annualised gross revenues.

Recent transactions in the Australasian corporate dental market indicate a significant uplift in the value of our dental business and validate our ongoing dental strategy.

Radiology is also an important investment area for us, with the opening of a new clinic in the Millennium Institute on Auckland’s North Shore during FY13. We merged our two radiology businesses into one organisation in November 2012, to take advantage of synergies and economies of scale. Thanks to our ongoing investment into leading edge technologies and equipment, Insight+Ascot Radiology is now widely recognised as a leading specialist provider in the greater Auckland region.

Our audiology networks in Australia and South East Asia continued to develop and grow. These businesses are still in a development phase, with breakeven at EBITDA expected in FY16.

Following a review in South East Asia, we have decided to close three stores in Hong Kong due to the very high costs of suitable retail space. The closure has no impact on the development strategy for our audiology businesses in our other markets in South East Asia. The regional support office will move to Taiwan and the consolidation of resources will realise operational efficiencies and cost savings.

The majority of our audiology investment is in Australia, followed by Taiwan. Both these businesses operate in large markets and continue to show improving performance, with the more mature Australian business showing a year on year double digit revenue increase. We also continue to maintain our two smaller audiology businesses in Singapore and Malaysia.

Our pathology and orthotics businesses operate in the public contracting environment, mostly under fixed price short term contracts. Both performed well and provided solid cash flows for the Group. We continue to work closely with the District Health Boards to renew contracts as they expire, as well as investigating opportunities to de-risk the reliance on public funding.

The positive FY13 result was delivered despite the ongoing soft economic environment in New Zealand and a significant downturn in the Australian economy and consumer confidence, particularly in the past six months. While healthcare overall is relatively shielded from changing economic headwinds, some privately funded healthcare services, such as dental care and high end hearing devices, can be impacted as consumer spending decreases. Over the past three years, we have gained considerable experience operating in the soft New Zealand market and we are now applying these strategies in Australia.

During FY13, we reviewed our banking arrangements, refinancing our existing Australian and New Zealand debt facilities and gaining improved pricing and tenure. In addition, we negotiated a new facility of A$30 million to be used for future acquisitions. As at 31 May 2013, Abano had confirmed banking facilities of $151.6 million including undrawn facilities of $61.1 million.


Dental and radiology remain our primary growth opportunities. We continue to expand our dental footprint in New Zealand and Australia and are now starting to see the benefits of scale. Demand for the new radiology modalities and clinics we have invested into over the last five years is continuing to build.

While relatively small and still in a development phase, audiology continues to offer significant future potential in the markets in which we now operate, which all have large, wealthy and sophisticated populations. The audiology group remains on track to breakeven at EBITDA in the 2016 financial year.

While we expect the economy, particularly in Australia, to remain soft, we have gained experience and developed strategies in New Zealand to ensure our businesses are well positioned to navigate these challenging conditions. We therefore anticipate that the Australian downturn will have a limited impact on our business and our mid to long term view of the opportunities offered in Australia remains positive.

We will continue to invest into our company, building on our proven track record of successful growth and delivering increasing shareholder value.

Key Dates

  • 13 August 2013: Dividend record date
  • 20 August 2013: Confirmation of issue price for shares under the DRP (Shares will be issued at a 2.5% discount on the closing price)
  • 23 August 2013: Dividend payment and issue of shares under DRP

[1] Abano holds a 50% share in Bay International and therefore the results for the Bay group are equity accounted and not included in the reported revenue and EBITDA results.

[2] More information on gross revenue and underlying earnings which are non-GAAP financial measures and are not prepared in accordance with NZ IFRS, is available on the Abano website at