ABA
22/12/2014 08:31
HALFYR
PRICE SENSITIVE
REL: 0831 HRS Abano Healthcare Group Limited
HALFYR: ABA: ABA Delivers Improved HY Profit and Increases Dividend
Abano Healthcare Group (NZX:ABA) has delivered a 51% increase in half year
profit and confirmed an increased interim dividend payment of 10 cents per
share, up 37% on the previous year.
For the six months ended 30 November 2014, Abano reported revenues of $114.9
million, EBITDA of $14.9 million and a Net Profit After Tax (NPAT) of $3.5
million, an increase of 51% on HY14. The results are based on unaudited
management accounts.
Gross revenues were $153.2 million, while Underlying EBITDA was $15.4
million and Underlying NPAT was $4.0 million.
The stronger results were mainly driven by growing revenues and improvements
in same store EBITDA across Abano's dental group and an increase in revenues
and reduction in losses from Abano's joint venture audiology business.
Based on the steady and continuing growth of the Company and taking into
account relevant factors including working capital and investment growth, the
Directors have confirmed an increased interim dividend payment of 10 cents
per share. This equates to 52% of Underlying Net Profit After Tax.
As announced at the recent Abano Annual Meeting, a conditional agreement has
been signed to sell the Orthotics Centre with settlement expected on 30
January 2015. The business is being sold within the range of the recent Grant
Samuel valuation, and after normal settlement adjustments and sale costs, is
expected to incur a loss of approximately $0.4 million. In accordance with
GAAP, the loss on sale has been included in the half year results.
Also included in the half year result were additional costs of over $350,000
associated with the special shareholders' meeting and High Court action in
June 2014.
The results were affected by timing delays in the settlement of dental
acquisitions, with New Zealand acquisitions ahead of plan, but behind plan in
Australia in the period up to end-November 2014. In addition, the softer
economic conditions in Australia and the continuing weakness of the
Australian dollar against the New Zealand dollar had a negative influence on
the results.
MANAGEMENT COMMENTARY
Abano's Dental sector remains the Company's primary revenue generator and
Abano Dental continues to be one of Australasia's fastest growing dental
corporates, with the network expanding to 164 practices as at 30 November
2014.
Eleven dental practices providing an additional $13.9 million in annualised
gross revenues were acquired in the first six months of this financial year,
being approximately 50% of the additional gross revenue acquired in the
previous financial year.
In the last three weeks, since the end of the first half, a further two
practices have been acquired, including a large Australian dental practice.
These take total additional annualised gross revenues from acquisitions in
the financial year to date to $17.9 million.
Based on our estimates and analysis, same store dental revenues in New
Zealand and Australia have continued to outperform the market . In New
Zealand, Lumino's same stores sales growth of 4.8% is a pleasing improvement
on last year, in a market that we believe is still negative. Meanwhile,
Dental Partners same store sales growth in Australia is steady on last year,
in contrast to the Australian dental market which we believe has also been
experiencing negative growth trends.
The potential value of our growing dental group can be seen in the
comparative values and transactions that have taken place in the market
recently. Of particular note, is the recent listing by Pacific Smiles Group
on the ASX in Australia.
At FY14 year-end, Pacific Smiles had 41 practices, generating gross revenue
of A$95.9 million and an EBITDA of approximately A$15 million. It listed in
November 2014 with an Enterprise Value of A$186.3 million and after a share
price increase of over 35%, it is currently trading with an Enterprise Value
of approximately A$260 million.
Our Abano dental group currently has 166 practices, generating annualised
gross revenues of over NZ$220 million with an annualised EBITDA of over NZ$25
million.
Abano's joint venture audiology business also delivered an improving result
as revenues increased. The majority of the business is located in Australia
and good progress is being made, with the Australian business now delivering
a positive monthly EBITDA result, with year to date same store revenue growth
of 30%. Due to this improving performance, we have opened three new
greenfield stores during the first half and they are already showing pleasing
results.
The Diagnostics sector has provided a steady result, with radiology revenues
continuing to grow with an increased demand from referrers, while pathology
revenues at Aotea Pathology are fixed under a single, fixed price DHB
contract. This contract expires in October 2015.
Aotea Pathology has provided community pathology services in Wellington for
over 80 years and is currently involved in an RFP process to deliver a long
term solution for the community and hospital testing in the wider Wellington,
Hutt Valley and Wairapara regions.
As in the past with this process, being the successful tenderer will ensure
the continuation of Aotea Pathology and may also lead to a longer tenure with
a wider scope of services in partnership with the DHBs. While we are
confident we have submitted a strong proposal, we note that if we lose the
contract, we will need to write off the book value of this business, which is
currently $11 million. An outcome is expected to be announced by the DHBs in
early 2015.
Following the sale of the Orthotics Centre, Abano's portfolio will revert to
three sectors. The Orthotic Centre falls outside of our investment strategy
and as we have shown before, where a business no longer falls within our
investment strategy, we will divest to the right owners at the right time.
The proceeds will be reinvested into our growth businesses, in particular
dental.
OUTLOOK
Abano is a Company of over 2,200 people providing care and diagnosis to
thousands of people every day, in New Zealand, Australia and South East Asia.
We have identified key opportunities in the private healthcare market,
particularly in the trans-Tasman dental sector, which we believe provide
attractive above average, long term sustainable returns for our shareholders.
We are committed to continuing to invest into these growth opportunities with
the majority of capital currently being deployed towards expansion of our
dental businesses.
HY15 KEY EVENTS
- Special shareholders meeting requisitioned by interests associated with Mr
Hutson and Mr Reeves and the subsequent High Court action bought by Mr Reeves
to delay or cancel the special meeting. Abano was forced to defend this
action and the Court ruled in Abano's favour and awarded Abano costs.
- Shareholders voted in record numbers at the special meeting ( 82.5% of
shares voted), with Mr Hutson and Mr Reeves receiving less than one percent
support from Abano's other shareholders for their resolution, with an
overwhelming majority voting against their resolution.
- Acquisition of 11 dental practices providing additional annualised gross
revenues of $13.9 million. We believe dental same store performance continues
to outperform the market, with 4.8% same store revenue growth in New Zealand.
- Opening of three greenfield audiology stores in Australia. The Australian
audiology business is now delivering positive monthly EBITDA results.
- Conditional agreement to sell the Orthotics Centre to private investors,
with settlement expected at the end of January 2015.
- CEO and managing director, Alan Clarke, announced he will retire from his
role, following the 2015 Abano Annual Meeting.
KEY DATES
Record date for interim dividend 12 January 2015
Confirmation of issue price of shares under DRP. Shares will be issued at a
2.5% discount on closing price 19 January 2015
Payment date of interim dividend/Issue of shares under DRP 23 January 2015
Release of interim report February 2015
ENDS
- Gross revenues include the audiology group and Australian dental revenues
before payment of dentists' commissions
- Underlying EBITDA excluding non-cash items required to be expensed under
the International Financial Reporting Standards (IFRS)
- 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 www.abano.co.nz/underlyingearnings.
- Dental market estimates based on management analysis and estimates of
market performance in Australia and New Zealand. More detail is available in
Abano's 2014 Annual Meeting presentations and speeches.
End CA:00259221 For:ABA Type:HALFYR Time:2014-12-22 08:31:18
