Tuesday 26th March 2019
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Abano Healthcare is forecasting annual net profit will fall 12.6 percent amid “challenging” conditions in Australia which have halted its purchases of new dental practices across the Tasman.
The company says it expects earnings before interest, tax, depreciation and amortisation for the year ending May will rise about 1.9 percent to $33 million but bottom-line profit will fall to about $9 million from $10.3 million the previous year.
The forecast doesn’t include the year-end review of goodwill but does include the impact of the falling Australian dollar against the New Zealand dollar.
“Abano is focused on improving the return on investment for its shareholders. Australia acquisition multiples have increased and remain higher than New Zealand and, combined with current Australian trading, Abano is pausing its acquisitions in Australia to focus on organic growth of its Australian network."
The stock fell 1.9 percent to $5.64.
The company had reported a 13 percent increase in first-half net profit late last year and, apart from a newsletter in January and the appointment of a new director in February, has not communicated with shareholders.
Abano shares have almost halved from a recent peak of $10.20 on Dec. 17, 2017. The decline accelerated after Fisher Funds revealed in October last year that it had sold its 8.8 percent stake in the company after previously having been a staunch supporter.
Fisher sold at prices between $7.78 and $9.43 per share between February and October last year but the bulk of the shares sold at the lower price.
A partial takeover offer priced at $9.84 per share by former dissident shareholders Peter Hutson, his wife Anya and James Reeves failed in March 2017 after gaining less than 2 percent of the shares they didn’t already own. In August of that year, those shareholders sold their 19 percent stake at $8.85 per share.
In late 2016, independent adviser Grant Samuel had valued Abano shares at $9.95-11.96 each.
Abano operates under the Lumino brand in New Zealand and Maven in Australia.
Today's statement doesn't say whether it had bought any practices since November but says it has “over 237 dental practices.”
It had 237 practices at Nov. 30 with 116 in Australia. It bought 11 practices in Australia in the first half and three in New Zealand for a total of $31.6 million – that was a 71 percent increase on purchases in the previous first half.
“Given this change in acquisition focus, Abano does not see a need to raise capital in the foreseeable future. Selective acquisition growth will continue in New Zealand as the national network is completed,” the company says.
The new policy will reduce direct and indirect acquisition costs by about $1.8 million a year.
Abano says it has identified a number of initiatives to lift the performance of the Australian dental group and improve usage of its existing capacity across both networks and has already started implementing them.
“The board has a prudent and careful approach to management of funds and believes the change in strategy will ensure we are focused on lifting the performance of the existing business and investing new capital when we are confident we can obtain a satisfactory return,” chair Pip Dunphy says.
“Given this change, we will review Abano’s KPIs, set in 2016 for the three years to 2020, and will update the market in due course.”
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