Announcement

HALFYR: ABA: Abano HY19 Results Announcement 08:46a.m. 
ABA  
20/12/2018 08:46  
HALFYR  
PRICE SENSITIVE  
REL: 0846 HRS Abano Healthcare Group Limited  
 
HALFYR: ABA: Abano HY19 Results Announcement  
 
ABANO FY19 HALF YEAR RESULTS  
Unaudited results for the six months ending 30 November 2018 (HY19)  
 
o Abano has reported a year on year uplift in results, driven by  
acquisition growth of its dental networks in New Zealand and Australia.  
o Investment has continued into business infrastructure to support the  
growing size of the dental networks and lift business capability, and  
initiatives to drive patient visits. Early benefits are now starting to be  
seen.  
o Highlights for the period include the start of the rollout of the  
Lumino Dental Plan in New Zealand, the establishment of the trans-Tasman  
leadership team, opening of the flagship Lumino practice in Auckland's CBD,  
the launch of a new TV advertising campaign, and the rollout of customised  
dashboards and other IT and technology initiatives.  
o The company has declared an interim dividend of 16 cents per share.  
 
(see table in attached HY19 results announcement)  
 
Listed trans-Tasman dental provider, Abano Healthcare Group Limited  
(NZX:ABA), has delivered a year on year uplift in results for the six months  
to 30 November 2018 (HY19), driven by dental practice acquisitions as  
investment continues into business infrastructure and growth initiatives.  
 
Abano reported gross revenue for the six months of $173.0m, EBITDA of $17.7m  
and Net Profit After Tax (NPAT) of $6.0m.  
 
Abano also reports on underlying earnings which provide the basis of Abano's  
dividend policy. The Company's Underlying EBITDA was $18.6m, with Underlying  
NPAT of $7.1m. On a like for like basis, excluding the prior year  
contributions from the radiology business which was sold in February 2018,  
Underlying NPAT was up 13%.  
 
The Board has declared a dividend of 16 cents per share, consistent with the  
prior year. The Dividend Reinvestment Plan will again be provided to allow  
shareholders the opportunity to reinvest their dividend.  
 
Abano is now solely focused on the trans-Tasman dental sector and, with 237  
dental practices, is the owner and operator of the largest dental group in  
the region. Its goal is to build dental networks of scale in Australia and  
New Zealand, which lead the way in quality clinical and patient care, provide  
a rewarding work environment and generate an appropriate return on  
investment.  
 
Abano's strategy is two-fold: To expand its networks through the acquisition  
of dental practices and to enhance the performance of existing practices,  
with a focus on increasing the return on invested capital.  
 
In HY19, Abano acquired 14 dental practices expected to provide $26.1m in  
annualised gross revenue and $6.2m in annualised EBITDA, excluding  
incremental support office costs associated with these acquisitions. The  
majority of these were larger practices in Australia and included two very  
large Australian dental practices. Acquisition consideration was $31.6m  
(HY18: $18.4m), including deferred acquisition consideration of $2.2m, based  
on a projection of outperformance. Fifty percent of acquisitions were settled  
in the last two months of the half year period and therefore only $1.5m of  
acquired EBITDA was recognised in HY19.  
 
Net bank debt rose to approximately $130m, primarily due to acquisitions,  
with bank facilities extended to approximately $193m in October 2018.  
 
As well as acquisition growth, Abano continued to invest into infrastructure,  
IT and people to lift business capability; and growth initiatives to drive  
patient visits and improve same practice performance. While the cost of these  
investments is being incurred now, early benefits are already being seen with  
the full benefits to be realised over the longer term.  
 
Growth initiatives include:  
o In New Zealand, the launch of a new TV advertising campaign in  
September 2018, which led to a significant increase in new and existing  
patient visits in October and November and the highest-ever recorded levels  
of utilisation across the Lumino group;  
o The start of the rollout of the Lumino Dental Plan (a proprietary,  
subscription-based annual dental treatment package) across the Lumino network  
following a successful pilot; and  
o The relocation of the flagship Lumino Central practice in Auckland's  
CBD resulting in a year on year 20% increase in revenue and utilisation for  
that practice.  
o In Australia, the increasing number of branded practices is allowing  
for more effective branded marketing campaigns, including "No Gap" and  
interest free offers.  
 
Lumino The Dentists delivered same practice gross revenue growth of 1.6% for  
the half year period. Lumino's EBITDA was affected by a number of one-off and  
other costs, particularly higher laboratory costs due to the rise of  
Invisalign orthodontic services; production costs of the TV campaign; costs  
associated with the replacement of several retiring members of the Lumino  
senior management team; and the relocation of the Lumino CBD practice. After  
seven years of continuous improvement from 8.2% in FY11 to 13.9% in FY18,  
Lumino's underlying EBITDA margin reduced to 12.4% in HY19 but is expected  
to return to previous levels over time.  
 
In Australia, Maven has been impacted by challenging economic conditions,  
with declining consumer sentiment and slowing economic growth. Monthly same  
practice gross revenue for Maven remains variable and was -1.2% for the six  
months to the end of November. However, the increasing scale of the network  
and careful cost management has seen margin improve from 11.1% at the end of  
FY18 to 11.8% for HY19.  
 
Total dental underlying EBITDA margin of 12.1% was in line with the previous  
first half year.  
 
The investment into projects over the last two years, including a significant  
investment in IT (the move of the support offices into the cloud and the data  
warehouse), the Dental Plan, the Rangiora greenfield practice opened in  
September 2017 and the Lumino CBD relocation, has led to an increase in  
depreciation expense.  
 
Abano CEO, Richard Keys, said: "We have invested significantly into business  
infrastructure and growth initiatives in the past two years to lift  
capability, support the growing size of our trans-Tasman group and drive  
practice performance. Pleasingly, early benefits are already starting to be  
seen.  
 
"In particular, we are now starting to realise opportunities resulting from  
our investment into IT in the past few years. The data warehouse is enabling  
advanced analytics, and customised online dashboards, with real time updates,  
allowing us to benchmark and measure individual dentist and practice  
performance. This is resulting in better clinical and operational management  
and is helping to identify opportunities to lift same store performance."  
 
Outlook  
 
Abano's strategy remains to grow through acquisition as well as improving  
utilisation of existing practices. The focus is on increasing profitability  
and lifting the return on invested capital.  
 
In Australia, the focus is on lifting business performance by driving new and  
existing patient visits and increasing utilisation, as well as ensuring the  
right people and infrastructure are in place, such as the recent appointment  
of Dennis Surlan as Group COO and Anne Brown as Group GM Marketing, both  
based in Australia. Going forward, acquisitions in Australia will take into  
account the more challenging environment, given the increased risks  
associated with potential changes in the private health insurance market and  
the slowing economy.  
 
In New Zealand, the focus is on realising the benefits of recent investments  
and initiatives, as well as improving efficiencies at practice level.  
 
Chair of Abano, Pip Dunphy, said: "We continue to see significant potential  
in the trans-Tasman dental market. Abano is one of the largest providers in  
the sector, with a focus on operational and clinical excellence, a great  
patient experience and helping our people realise their potential. We are  
focused on lifting the underlying performance of our businesses and  
delivering improved returns for our shareholders."  
 
Key Dates:  
o End of half year: 30 November 2018  
o Interim Dividend Record Date: 11 February 2019  
o Confirmation of issue price for shares under the DRP, to be issued at  
a 3.0% discount to 5-day VWAP post-record date: 18 February 2019  
o Interim Dividend Payment Date and issue of shares under the DRP: 22  
February 2019  
o Release of HY19 Interim Report: By end-February 2019  
o End of financial year: 31 May 2019  
 
ENDS  
End CA:00328699 For:ABA Type:HALFYR Time:2018-12-20 08:46:42