Abano forecasts full year loss of $1.3m-$1.9m on sale of Aotea stake, Orthotics

Abano Healthcare [NZX: ABA] expects to report a small full-year loss after the specialist medical investment firm agreed to sell its stake in Aotea Pathology and following the sale of its orthotics unit in January, which resulted in impairments on both businesses.

The net loss is expected to be $1.3 million to $1.9 million in the year ending May 31, the Auckland-based company said in a statement. Excluding impairments and loss on sale, annual profit is forecast at $7.2 million to $7.8 million, up from $4.9 million a year earlier, on sales of between $221 million and $225 million, up from $211 million in 2014.

Abano agreed to sell its 55 percent stake in Aotea to ASX-listed Healthscope. The remaining 45 percent is owned by Sonic Healthcare, also listed on the ASX. The sale is conditional on Healthscope's Wellington SCL Ltd subsidiary winning the regional pathology contract for Capital & Coast, Hutt Valley and Wairarapa district health boards, with settlement aimed for May 1. The Aotea deal follows Abano's decision in February to quit the tender for lower North Island pathology services, with Healthscope subsequently named preferred provider for the work.

"Aotea has been a solid contributor to the Abano Group for over 13 years," chief operating officer Richard Keys said. "However, since the fee for service model was removed and replaced by tendering, Aotea has been reliant on short term, fixed price District Health Board contracts, which means we have operated a hold and maintain strategy."

The sale of Aotea to Healthscope would reduce the estimated impairment charge against the business to $8.2 million from the previously flagged $11 million, Abano said.

Selling the orthotics and pathology businesses will transform Abano into more of an offshore business, with 61 percent of gross revenue to be generated outside New Zealand, especially from Australia. The company said it expects "strong growth" as it builds scale in dental and audiology services and reduces its exposure to New Zealand government funding through DHBs and the Accident Compensation Corp.

The forecast lift in annual earnings, excluding one-time charges, comes despite the kiwi dollar's advance against its Australian counterpart, Abano said.

The company has added 19 dental practices to its trans-Tasman business in the year to date, adding $26 million to annualised gross revenue, it said. It now has a total of 172 dental practices, including 90 in its Lumino the Dentists chain in New Zealand and 82 in its Dental Partners chain in Australia, where it expects to roll out its brand nationally next financial year.

Its Bay Audiology joint venture "continues to generate improving returns" across Australia, Singapore, Malaysia and Taiwan, with annualised revenue in excess of $40 million. Abano's radiology business,with five clinics in Auckland, is expected to lift both revenue and earnings before interest, tax, depreciation and amortisation this year, the company said.

Abano shares last traded at $7.75 and have gained 19 percent in the past 12 months, while the NZX 50 Index has risen 12 percent.

(BusinessDesk)