Abano Healthcare Group expects annual net profit will probably fall, despite strong operating profit and sales growth, reflecting the company's continued transition after selling its New Zealand audiology operations.
BUSINESSDESK: Abano Healthcare Group expects annual net profit will probably fall, despite strong operating profit and sales growth, reflecting the company's continued transition after selling its New Zealand audiology operations.
Abano said revenue is likely to be between $205 million and $207 million for the year ending May 31, up from $174.8 million the previous year, reflecting growth between 17 percent and 18 percent.
“Growth in consumer demand following a successful television campaign for dentistry in New Zealand, accelerated dental acquisition growth in Australia and New Zealand, and growing referrals in radiology have underpinned the second-half forecast for Abano,” the company said.
The dental business is now Abano's major source of income.
Earnings before interest, tax, depreciation and amortisation (EBITDA) are expected to be between $24.7 million and $25.7 million, up from $19.7 million in the previous year, an increase between 25 percent and 31 percent.
However, net profit for the year should be between $1.3 million and $1.8 million compared with $2.3 million the previous year, excluding its one-off gain from selling its stake in National Hearing Care and the one-off de-recognition of tax losses from Bay International.
Underlying EBITDA should be between $26.2 million and $27.2 million, up from $20.5 million the previous year, and underlying net profit between $2.7 million and $3.2 million compared with $3.1 million the previous year.
Abano said these forecasts are in line with broker forecasts.
“The growth in revenues and earnings is very pleasing as we are in a regeneration phase,” managing director Alan Clarke said.
The company has bought 24 more dental practices so far this financial year which will provide an additional $36 million in annualised revenue.
“Pleasingly, we have also seen organic growth,” Clarke said.
Abano's joint venture greenfields audiology businesses in Australia and Asia have improved but are still showing development losses and will take another three to four years to break even, Clark said.
The New Zealand-based pathology, brain injury and orthotics businesses are all producing steady results, he said.
Chairman Trevor Janes said Abano's sales growth is despite the flat Australian and New Zealand economies, “underlining the relative resilience of healthcare spending in both markets.”
Abano's recent $4 million investment in a purpose-built radiology clinic on the AUT Millennium Campus on Auckland's North shore, while incurring set-up costs this year, will provide an additional source of income from the 2013 financial year.
Janes said Abano will continue to report underlying results, excluding acquisition and charges required by accounting rules, to provide shareholders with 'like-for-like' comparisons.
“We believe that this is a more appropriate representation of Abano's performance,” Janes said.
Recent changes to accounting rules mean costs relating to acquisitions which were previously capitalised must now be expensed against profit.
“As Abano has an acquisition growth strategy, the number of acquisitions made will continue to increase, which means the one-off costs and charges incurred” will drag down reported profits.
Nevertheless, Abano expects continued growth in revenue and EBITDA as well as its bottom line, he said.
Abano's board reconfirmed its expectation to maintain the 2012 dividend at 21 cents per share.
Abano shares fell 0.7 percent to $4.10, down from February's high at $4.50 but up from $3.60 in December, their lowest level since September 2007.
