Abano confirms first-half profit gain

Abano Healthcare, fending off a hostile takeover from its biggest shareholder, cut three cents from the independent valuation it commissioned to allow for executive incentive shares while confirming a 73% gain in first-half profit

Net profit after minorities rose to $5.9 million, or 27.48c a share, in the six months ended November 30, from $3.4 million, or 16.14 cents, a year earlier, the Auckland-based company said in a statement. Revenue was confirmed at $116.8 million, an 8% gain.

Abano released a summary of its results earlier this month, on growth in its dental network, to underline the value of the business in the face of a partial takeover bid from Healthcare Partners, an entity owned by cornerstone shareholders Anya and Peter Hutson and James Reeves.

Healthcare Partners yesterday criticised Abano's independent adviser report as using some unrealistic assumptions which plumped up Abano's value. The target company today revised its valuation range to between $9.92 and $11.93, from $9.95 to $11.96, to reflect 45,860 restricted shares issued to management last year as part of a long-term incentive scheme. Independent valuer Grant Samuel advised that this doesn't affect its assessment of the merits of the offer, and Abano's board still recommends shareholders reject the offer.

"While the Healthcare Partners partial takeover offer has been disruptive, management continues to focus on delivering strong results and an ongoing improving performance," chief executive Richard Keys said.

Abano's board confirmed an interim dividend of 16c a share, paid on January 23 to shareholders on the register on January 11. Healthcare Partners' $10-a-share offer for 50.01% of the company doesn't include the dividend, meaning its effective bid is $9.84, and Abano again complained about Healthcare's refusal to allow the dividend reinvestment plan to operate.

The Hutsons and Reeves poured about 4.1 million shares, or 19% of Abano, into the Healthcare Partners entity, and if the bid is successful, they would seek changes to improve the company's performance by halting acquisitions in the medium term in order to reduce debt, while improving the dental practices' operations. They would also install three new directors.

Abano's shares last traded at $8.21, having gained 8.3% so far this year, outpacing the 3.8% on the S&P/NZX All Index over the same period. The stock is rated an average 'buy' based on two analyst recommendations compiled by Reuters, with a median price target of $10.

Today's results show the healthcare investor bought 13 dental practices in the period, taking its tally to 197 in New Zealand and Australia as at Nov. 30, and it's bought a further three this month.

"The company's acquisition strategy will continue to provide additional operational, scale, and synergy benefits for the dental group as it continues to expand," Abano said. "The board expects this positive result and growth trajectory to continue into the second half of the year."

The dental division, which accounts for the bulk of Abano's earnings, lifted revenue 7.8% to $108.4 million in the half, with operating profit up 27% to $11.9 million. The radiology diagnostics unit posted a 13% increase in revenue to $8.4 million, generating earnings of $807,000 compared to just $61,000 a year earlier.

(BusinessDesk)