Increase in Scheme Price to $5.20 per Share
Abano Announces Increased Scheme Price On Back Of Strong Trading And Updated Forecast
- Listed trans-Tasman dental company, Abano Healthcare Group Limited, announces that Adams NZ Bidco Limited has agreed to increase its headline Scheme price for Abano shares from $4.75 per Abano share to $5.20 per share. The increased Scheme price remains subject to the price adjustment regime described in the Scheme Booklet and, therefore, the Scheme price could be reduced if an Adjustment Event occurs prior to implementation of the Scheme.
- The Board has updated its FY21 guidance as a result of strong trading for October 2020.
- Based on the updated information provided by Abano, the Independent Adviser has revised its valuation range from $4.70 to $5.50 per share to $4.95 to $5.80 per share. The increased headline Scheme price falls within the Independent Adviser’s revised valuation range.
- The Board unanimously recommends that shareholders vote in favour of the Scheme in the absence of a superior proposal. Each Abano Director who holds or controls Abano shares intends to vote all of such shares in favour of the Scheme, subject to the same qualification.
- The Scheme Meeting date has been moved to 25 November 2020, to allow for shareholders to receive and consider updated information before voting. Updated information for shareholders, including an addendum to the Independent Adviser’s Report and details of the rescheduled Scheme Meeting, is attached to this announcement.
- The Board has advised that should the Scheme of Arrangement not be supported by Abano shareholders, then a capital raising is no longer necessary.
Update on Trading
Since releasing the Scheme Booklet, actual revenue and Underlying EBITDA for October and forward booking data for November and December, are ahead of the forecast used by the Independent Adviser in its Report dated 9 October 2020. These results have been the major factor in Abano increasing its near-term outlook and for the uplift in the FY21 forecast set out below.
For October, Group gross revenue was $1.9m ahead of management forecasts, with Underlying EBITDA ahead by $0.6m. These results exceed the management forecasts used by the Independent Adviser in determining its valuation range for Abano shares in its report dated 9 October 2020.
Lumino same practice gross revenue growth for October was 13% (previously forecast to be 4%). For the five months in the financial year to date, Lumino same practice gross revenue has grown by approximately 12%, inclusive of the Auckland COVID-19 shutdown in August.
Maven same practice gross revenue growth for October was flat (previously forecast to be -3%). For the five months in the financial year to date, Maven same practice gross revenue has grown by approximately 2%, inclusive of the COVID-19 restrictions in Victoria from August through October.
For the financial year to date, Group gross revenue is up 7% on the prior year to $155.8m. Underlying EBITDA (excluding wage subsidies and pre-IFRS 16) for the five months is $18.2m, up 26% on the prior year.
As a result of the improved operating performance and strong operating cashflows, net bank debt has reduced to $116.1m as at end-October 2020. This is down from $134.5m at FY20 year end on 31 May 2020 and $116.8m as at end-September 2020 which was used by the Independent Adviser in determining its valuation range for Abano shares.
Updated guidance for FY21
Forward bookings for the next two months are higher than at the same time last year. This has led to an increase in the forecast appointments for the next two-month period, with Lumino in particular continuing to out-perform management expectations.
The improved performance to date and the strong forward bookings for the next two months has provided the Board with confidence to lift the near-term projections for the business, resulting in an uplift in the FY21 forecast.
Pre-NZ IFRS 16, Underlying EBITDA for FY21 is now expected to be between $34m and $35m (previously $32.0m), plus Government wage subsidies of $10.6m, totalling $44.6m to $45.6m (previously $42.2m). In providing this FY21 forecast the Board has had due regard to the uncertainties inherent in the current business environment. The forecast assumes no further COVID-19 lockdowns and includes $0.6m in recurring and non-recurring cost savings.
A capital raising is no longer necessary if the Scheme does not proceed
Given the actual trading performance in the year to date, the near term outlook and reduced net debt levels, the Board has determined that there is sufficient capacity and covenant headroom under the current debt facilities to meet the foreseeable needs of the business.
The Scheme Booklet indicated that if the Scheme was not implemented, Abano would likely undertake a capital raising of between $30m and $60m, which may dilute the interests of current shareholders.
The Board now considers that the company’s capital structure does not need to be addressed in the near term. Abano’s banking partner is supportive of the company and there is no requirement or review event in Abano’s banking facilities requiring a capital raising.
Accordingly, Abano confirms that a capital raising is no longer necessary should the Scheme not be approved by Abano’s shareholders. The Board remains focused on prudent capital management and confirms that no dividends are expected to be declared in respect of the FY21 year.
Should the Scheme not proceed, the Board will continue to assess Abano’s capital structure and, at an appropriate time, the company may seek to raise share capital to strengthen the company’s balance sheet, to address unforeseen events or to provide flexibility to pursue future growth initiatives.
Revised Independent Adviser’s valuation range for Abano shares
The updated trading information, reforecast and supporting information was provided to Calibre Partners, the Independent Adviser for the Scheme proposed by Bidco, on Friday last week and over the weekend. On Monday 9 November 2020, the Independent Adviser indicated that it expected to update its valuation range for Abano shares, and therefore the headline Scheme price of $4.75 per share was now expected to be below the low point of that range.
Abano notified Adams NZ Bidco Limited (“Bidco”) of this on 9 November 2020, and following consultation, Bidco has increased the headline Scheme price from $4.75 to $5.20 per Abano share. The increased headline Scheme price is within Calibre’s revised valuation range for Abano shares of $4.95 to $5.80 per share. The increased Scheme price remains subject to the specified price reductions described in the Scheme Booklet, up to a maximum of 75 cents per share, if any one of a number of defined Adjustment Events occur.
Abano’s Directors unanimously recommend shareholders vote in favour of the Scheme, in the absence of a superior proposal. Each Abano Director who holds or controls Abano shares intends to vote all of such shares in favour of the Scheme, subject to the same qualification.
Change to Scheme Meeting date – now 25 November
The Scheme Meeting date has been moved to 25 November 2020, to allow for shareholders to receive and consider the updated information before voting. Updated information for shareholders, including an addendum to the Independent Adviser’s Report and details of the rescheduled Scheme Meeting, is attached to this announcement and will be sent to shareholders as soon as practicable.
Any existing proxy vote made by a shareholder remains valid. Shareholders who have already voted by proxy, are able to change their vote, if they so wish, by completing the revised Proxy/Voting Form that will be enclosed with the supplementary materials to be sent to them or by changing their proxy vote online. Where a Proxy/Voting form is received from a shareholder, it will automatically replace and supersede any previous Proxy/Voting form provided by that holder.
If shareholders, including those who have already submitted a proxy vote, have any questions about how to vote, or other actions to take, in respect of the Scheme, they are encouraged to seek financial, taxation or legal advice.
 More information on non-GAAP measures, being gross revenue, EBITDA and underlying earnings is available on the Abano website at https://www.abano.co.nz/investor-information/non-gaap-financial-information. Underlying earnings are reported for both Net Profit After Tax (“NPAT”, a GAAP compliant measure) and EBITDA and exclude gains/losses arising on sale of businesses, fair value adjustments and impairments, including their tax effect.
 AUD:NZD 0.9417 as at end-October 2020. Net bank debt as at end-September 2020 was $116.8m (AUD:NZD 0.9250)
 Abano’s Directors do not intend to change their recommendation and/or vote against the Scheme if, prior to the Scheme Meeting, an Adjustment Event results in a reduction such that the Scheme Price falls below the valuation range. However, they do reserve their right to do so if the Independent Adviser’s valuation range for the Abano Shares changes for any other reason and, after that change, the Scheme Price is below the valuation range.