Abano expects gain in annual earnings on lift from NZ dental unit

See also: Queensland the weak spot in Abano's otherwise bright outlook

Abano Healthcare [NZX: ABA] expects an uplift in annual earnings as a strong performance from its New Zealand dental chain offsets a flat performance from its Australian dental business.

Underlying profit, which excludes one-time items, is expected to be between $8.2 million and $9 million in the year ending May 31, the Auckland-based company says.

That compares with a year-earlier profit of $5.6 million for its continuing businesses, or profit of $8.8 million including earnings from two businesses it has since sold.

Abano is investing to increase its chain of dental businesses in a fragmented market across Australia and New Zealand, where it aims to capture 10% of the $11 billion of revenue.

So far this financial year it has acquired 13 dental practices, which are expected to add about $22 million in additional annualised gross revenue, and it has also opened one greenfield practice in Christchurch.

As at March 31, the company had 186 practices generating annualised gross revenue of $250 million and says it has several more acquisitions planned before the end of the financial year.

Its Lumino The Dentists chain in New Zealand increased same-store sales 3% for the nine months ended February as it benefited from marketing, branding, improved margins and experienced management.

Its Australian Maven Dental Group had a 4% drop in same-store revenue for the period as a weakening economy in Queensland offset positive growth in its practices in New South Wales and Victoria.

"The improving operating results are primarily being driven by a strong New Zealand dental performance offsetting a flat Australian dental performance; ongoing improvements from the audiology joint venture; and a stable performance from radiology," the company says.

"We are moving towards a closer consolidation between our two dental businesses to share resources, knowledge and expertise."

Abano says its audiology joint venture in Australia is expected to "show a good uplift" from the year earlier with same-store sales growth of about 4% so far this financial year. Six new greenfield stores have been opened, adding incremental revenue and profit to the business with no additional support infrastructure cost.

It's Ascot Radiology unit in Auckland is expected to deliver a stable performance in line with the year earlier as the company focuses on building demand for new technologies such as digital tomosynthesis mammography, while also expanding with the opening of a new CT scanning room and a new maternity scanning service.

The company sold its orthotics business in at the end of 2014, reasoning the exposure to government contracts wasn't compatible with Abano's investment criteria to operate on a fee for service basis. It also divested its Aotea Pathology unit after quitting the lower North Island district health board tender process.

The company expects net profit of between $9.4 million and $10.2 million this financial year, compared with a year earlier $4.5 million for its continuing businesses, or a loss of $1.3 million including its divested businesses.

Abano expects gross revenue, including audiology revenues and Australian dental revenues before payment of dentists' commissions, of $301 million to $305 million, compared with a year earlier $265.8 million for its continuing businesses or $300.4 million including its divested businesses.

Abano's shares last traded at $7.05 and have slid 7% this year. The stock is rated an average 'hold' according to two analyst recommendations compiled by Reuters.

(BusinessDesk)