Abano Provides FY14 Market Guidance
Abano Healthcare Group Limited (NZX:ABA) has today provided guidance for the financial year ending 31 May 2014.
The Company expects reported revenue to be between $209.8 million to $211.8 million with Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) to be between $27.3 million to $28.3 million generating a Net Profit After Tax (NPAT) between $4.5 million to $5.0 million. The Company’s underlying EBITDA is expected to be between $28.5 million to $29.5 million, resulting in an underlying NPAT between $5.8 million to $6.3 million.
This improved forecast is despite the strong New Zealand dollar which continued its increase against the Australian dollar in the last few months. The adverse movement in the exchange rate since FY13 is approximately 17% (0.796 average in FY13 to 0.931 in March 2014). While this is a non cash impact, it has depressed the forecast results by $18 million at gross revenue and $2 million at underlying EBITDA, compared to the FY13 exchange rate.The expected result is up on last year and ahead of the forecast which was set out in Grant Samuel’s independent valuation report as released to the market on 26 November 2013 and that underpinned the Grant Samuel valuation of Abano shares.
This forecast also includes the one-off costs incurred by Abano in relation to the unsolicited, indicative, highly conditional proposal received from Archer Capital, along with interests associated with Peter Hutson and James Reeves, which reduced EBITDA and NPAT. Had this proposal proceeded with notice of a formal Code compliant takeover offer, a significant portion of these costs would have been recovered from the bidder.
The Directors believe that the underlying NPAT is the most relevant factor in determining dividends and notes that underlying NPAT per share exceeded the dividend per share in the last financial year, with less than 50% of the dividend being paid in cash due to the strong support of the Company’s dividend reinvestment scheme. Based on today’s guidance, both the NPAT and underlying NPAT per share will be higher than a 21 cent dividend.
Year end net debt is projected to be less than $80 million, with confirmed undrawn debt facilities of over $55 million. Following the successful capital raising in late 2013 and the continuation of the existing dividend reinvestment plan, the Company has a sound capital structure. Based on current projections, the Company will not need to raise additional capital or increase debt facilities in the foreseeable future to be able to fund the planned acquisition and growth strategy investments.
Following the 2013 Annual Meeting and release of the Grant Samuel valuation, shareholders Peter Hutson and James Reeves, who failed in their attempt to take control of the Company, have continued to express views critical of Abano’s financial performance, governance and management. Abano requested that Grant Samuel review its valuation and assumptions in the light of the guidance provided above, and in the light of the views expressed by Hutson and Reeves. Grant Samuel has considered all information available to it and reaffirmed that its independent valuation of Abano Healthcare Group Limited dated 26 November 2013, which provided a range of $8.30 to $10.05 per share for 100% of the company, remains appropriate.
Abano’s managing director, Alan Clarke, said: “The forecast increase in reported and underlying NPAT for the FY14 year is the result of an improving dental performance along with Bay Audio’s solid progress as it moves towards achieving a breakeven result, as outlined by Abano in our investor presentations over the last four years. While the audiology business is still incurring EBITDA losses, the Australian-based management team has significantly improved store performance to the point that we now expect to see the Australian audiology business generating positive EBITDA earnings in the new financial year, underpinning its considerable enterprise value.
“Our dental group continues to grow well, both organically and through acquisition. Its performance is, however, masked by the 17% adverse exchange rate impact with the Australian dollar. Pleasingly, we are seeing a slow but steady consumer confidence recovery on both sides of the Tasman with improving results coming through in both our dental groups. We were delighted to weather the Australian economic downturnand the removal of the Australian Government Chronic Disease Dental Scheme that saw a listed dental consolidator and competitor, 1300 Smiles, report revenue decreases of 29% in their first six months of FY14, while we saw an 8% decrease in Dental Partners over the same period.
“Despite there being little improvement in the overall economy, Dental Partners has experienced a pleasing lift in recent months, with same store revenue for the December 13/January 14 period up 4% on the same time last year. The acquisition pipeline is still strong, although acquisition settlements are expected to be slower during the final quarter due to vendor requirements. The opportunities to share our New Zealand branding experience and move to a branded offer in Australia are starting to take shape.
“Following a successful Expression of Interest process, Aotea Pathology has now been invited to proceed into a Request For Proposal process. Aotea has been working with the area DHBs and a regional pathology solution for both community and hospital work, with long term tenure in the Capital, Coast and Hutt Valley regions, is now a real possibility.
“Abano’s radiology business is steadily filling capacity at both start up clinics – the Millennium Centre which opened in FY13 and the PET-CT cancer scanning center at Ascot Central. We have seen a steady and growing demand with improving revenues and earnings which are expected to continue. Our remaining rehabilitation business, Orthotics Centre, is forecast to continue in a steady state.”
Alan Clarke concluded: “Abano has a proven strategy and track record of profitable growth that will continue. We have a skilled and experienced leadership and clinical team supported by over 2,000 professional staff and clinicians. With our strong balance sheet and secured funding lines, we are well positioned to continue to grow in the years ahead.”
1.Gross revenue includes revenue earned by the equity accounted audiology group and Australian dental revenues before the payment of dentist’s commissions.
2.Revenue and EBITDA exclude earnings generated by Bay International, in which Abano holds a 50% shareholding. The results for the Bay Group are equity accounted and are therefore not included in the consolidated EBITDA.
3.Excludes irregular gains or losses and IFRS adjustments. Further information on underlying EBITDA and underlying NPAT, which are non-GAAP financial measures and are not prepared in accordance with NZIFRS, is available on the Abano website