Abano posts loss on exit impairments; underlying earnings at top of guidance

See also: Abano aims for $1 billion in dental revenue within 10 years

Abano Healthcare [NZX: ABA], the listed healthcare investor, reported an annual loss after recognising impairment charges on the sale of its pathology and orthotics units, though underlying earnings were at the top end of guidance from its dental and audiology businesses.

The Auckland-based company posted a net loss after minority interests of $1.3 million, or 6.11c per share, in the 12 months ended May 31, compared to a profit of $4.5 million, or 21.55c, a year earlier, it said in a statement. That included a $9 million charge on the sales of its orthotics and pathology businesses, which reduced Abano's exposure to sometimes volatile government funding.

Underlying net profit, on which the company bases its dividends, rose 46% to $8.8 million, near the top of its forecast earnings, and revenue increased 5% to $222.2 million.

"Abano's investment strategy remains to invest into scalable growth businesses in the private, fee for service, healthcare market," the company said. "We delivered a pleasing improvement in our underlying performance in the 2015 financial year as we restructured and re-focused our investment efforts into three sectors – dental in New Zealand and Australia, audiology in Australia and Southeast Asia, and radiology in New Zealand."

The company flagged the impairment charges and likely loss when updating the market in April, saying the district health boards' switch to tendering for pathology meant Abano's former Aotea Pathology unit relied on short-term contracts. When it sold the orthotics business, it said the exposure to government contracts wasn't compatible with Abano's investment criteria to operate on a fee for service basis.

The board declared a final dividend of 15c per share, payable on August 21 with an August 12 record date. That takes the full-year return to 21c, an increase of 19% on the 2014 financial year.

The shares last traded at $7.50 and have decreased 3.2% this year.

Abano expects to continue growing earnings in 2016, without providing more specific guidance.

The company's dental business lifted earnings before interest, tax, depreciation and amortisation 14% to $23.9 million on a 10% gain in revenue to $173 million, and Abano said the segment will remain its primary focus as it builds scale on both sides of the Tasman. In the first two months of the 2016 financial year, Abano has bought three dental practices, adding about $9 million in gross revenue, which includes dentists' commissions.

The audiology business lifted revenue 27% to $40.1 million, and posted ebitda of $2 million, compared to an ebitda loss of $2.8 million a year earlier.

The company's diagnostics unit, which includes revenue from the pathology business it's now sold, posted a 2.8% decline in revenue to $41.5 million and a 2.6% fall in ebitda to $7.6 million. The unit now consists of Abano's radiology business.

Abano's rehabilitation segment, the former orthotics business, posted a 32% drop in sales to $7.7 million and a 39% slide in ebitda to $1.4 million.

Both the diagnostics and rehabilitation units' revenues reflect that the pathology and orthotics businesses were sold during the year, so did not record a full 12 months' activity.

(BusinessDesk)