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Abano's bottom line fell sharply but results at top end of forecasts

Monday 30th July 2012

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Abano Healthcare Group's annual bottom line fell sharply but its results were near the top end of its forecasts.

Net sank to $1.6 million in the year ended May 31 from $11.5 million a year earlier, when it included a $12.3 million gain from selling its National Hearing Care stake, the health services company said in a statement. Earnings before interest, tax depreciation and amortisation (EBITDA) rose 30 percent to $25.7 million while revenue climbed 18 percent to a record $206.4 million.

In March, Abano predicted a bottom line between $1.3 million and $1.8 million, EBITDA between $24.7 million and $25.7 million and sales between $205 million and $207 million.

"Abano grew strongly over the last year, producing a solid result that was in line with our market guidance," managing director Alan Clarke said.

A number of strategic investment decisions made during the year, including an accelerated dental acquisition program in New Zealand and Australia, "will yield significant benefits for the long-term profitability of Abano."

Other investments included the start up of the PET CT radiology centre in Auckland, commissioned in late financial 2011, and the development of the new millennium radiology clinic due to open late this year on Auckland's North Shore.

"While these investments all provide strong growth platforms for the company and will generate long-term profitable cash flows, the associated costs had an immediate and negative impact" on net profit.

Clarke said Abano is now well down the track to rebuilding its bottom line earnings towards the levels achieved before it sold its New Zealand-based audiology business in late 2009. In the year ended May 2009, Abano reported a record bottom line profit of $9.7 million.

Decisions such as divesting its brain injury rehabilitation business, settled last month for an as yet undisclosed sum, and the A$14 million purchase of the 30 percent of Australia-based Dental Partners it didn't already own, which was completed last week, "will ensure that our company continues to advance and perform successfully into the future," Clarke said.

"This portfolio rationalisation has seen the release of funds from a business that was highly dependent on public funding in a limited scale market and increased investment into a fast growing private income business which is in a very large, scalable market," he said.

The dental businesses will be Abano's primary revenue and income generator and radiology is expected to deliver increasing returns. The greenfields audiology businesses in Asia and Australia are expected to reach break even in two to three years.

The pathology and orthotics businesses, both of which rely on District Health Board contracts, are expected to contribute "another solid and stable year of performance."

Clarke said more than 45 percent of Abano's revenue is now generated from outside New Zealand and he expects offshore growth will be faster than domestic growth and, by 2015, more than 70 percent of income will be derived overseas.

Abano will pay a fully imputed final dividend of 13.7 cents per share, taking the annual payout to 21 cents, even though per-share earnings were only 10.07 cents. The payout has been steady for the last four years and the company said it demonstrates "the board's confidence in the underlying growth of net profit."

Abano shares rose 1.4 percent to $4.48, well above last December's $3.60 low. The stock is rated an average 'outperform' based on two analysts' recommendations compiled by Reuters with a median target price of $4.46.

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