Announcement

FLLYR: ABA: ABA FY19 Results Announcement 08:59a.m. 
ABA  
30/07/2019 08:59  
FLLYR  
PRICE SENSITIVE  
REL: 0859 HRS Abano Healthcare Group Limited  
 
FLLYR: ABA: ABA FY19 Results Announcement  
 
ABANO FY19 RESULTS ANNOUNCEMENT  
For the year ended 31 May 2019  
 
o Abano's FY19 results reflect strong acquisition growth in the first half of  
FY19, and increased investment into growth initiatives and business  
infrastructure, as well as a higher cost base which has impacted on margins.  
 
o FY19 EBITDA was $32.7m and NPAT was $7.6m after a $2.6m non-cash goodwill  
impairment and including a $1.1m writeback of deferred acquisition  
consideration. Underlying NPAT was $10.9m.  
o A final partially imputed dividend of 8 cents per share (cps) has been  
declared, taking FY19 dividends to 24 cps share.  
o The company has moved to focus on organic growth and realising the  
potential of the existing networks. Targeted initiatives are underway and  
good progress is being made.  
o The Board has appointed advisors to provide additional resource and assist  
in the strategic review.  
 
See table in attached press release.  
 
Commentary  
 
Listed trans-Tasman dental provider, Abano Healthcare Group Limited  
(NZX:ABA), has reported a positive performance in New Zealand offset by  
weaker trading in Australia, as it moves its focus to organic growth and  
realising the potential of its existing networks.  
 
Abano is now solely focused on the trans-Tasman dental sector and, with 239  
dental practices, is the owner and operator of the largest dental group in  
the region. Its goal remains to build dental networks of scale in Australia  
and New Zealand, which lead the way in quality patient care and experience,  
provide a rewarding work environment and generate an appropriate return on  
investment. Significant investment has been made into IT, people and systems,  
to build a platform to support the scale of the group.  
 
Lumino The Dentists in New Zealand delivered same practice revenue growth of  
1.2%, while Maven Dental Group in Australia was -2.9% as it continued to be  
adversely affected by a weaker economy, trading conditions and workforce  
factors. Abano is focused on improving the return on investment for its  
shareholders and initiatives are being put into place to lift the performance  
of both networks, particularly in Australia, with early progress now being  
achieved.  
 
Expansion by acquisition continued, primarily in the first half of the year,  
with 16 practices acquired which are expected to deliver $27.5m in annualised  
gross revenue. The majority of acquisitions were in the Australian dental  
market and included two very large Australian dental practices. Acquisitions  
contributed $18.8m in gross revenue and $4.9m in EBITDA for the FY19 period,  
with the full benefits expected to be seen in FY20. In addition, the Lumino  
Central practice was relocated to a new flagship practice in Auckland's CBD  
which opened in July 2018.  
 
Financial Results  
 
For the FY19 year ended 31 May 2019, Abano reported an 8% increase in revenue  
and gross revenue, to $279.3m and $338.9m respectively. Earnings Before  
Interest, Tax, Depreciation and Amortisation (EBITDA) were $32.7m, with NPAT  
of $7.6m.  
 
The FY19 result includes non-cash goodwill impairments of $2.6m relating to  
four Australian dental practices in Abano's portfolio which have been  
unfavourably impacted by long term practice specific factors; and a write  
back of deferred acquisition consideration of $1.1m .  
 
Abano also reports on underlying earnings which are the basis of Abano's  
dividend policy. Underlying EBITDA was $33.7m, and Underlying NPAT was  
$10.9m.  
 
On a like for like basis, excluding the prior year contributions from the  
radiology business which was sold in February 2018, revenue and gross revenue  
were both up 12%, with EBITDA up 1% and Underlying NPAT down 18%.  
 
Operating cashflow remains strong for Lumino and Maven. Net bank debt  
increased to $134.6m, primarily due to acquisitions.  
 
The Board has declared a partially imputed dividend of 8 cents per share,  
resulting in total FY19 dividends of 24 cents per share. The Dividend  
Reinvestment Plan will again be provided to allow shareholders the  
opportunity to reinvest their dividend.  
 
Network performance  
 
Lumino and Maven delivered $16.9m and A$19.5m in EBITDA respectively, with  
increasing Clinical Days but a decrease in Revenue Per Clinical Day.  
 
Lumino delivered same practice revenue growth of 1.2% for the year.  
Significant investment has been made over FY18/19 into IT, people and systems  
to support the scale of the group and growth initiatives. After seven years  
of continuous margin growth, Lumino's underlying EBITDA margin reduced to  
11.5% in FY19 and is expected to return to prior levels in the future.  
 
The challenging economic conditions noted in Australia since 2014 have  
continued and, along with workforce and other business factors, have impacted  
on Maven Dental Group. This resulted in same practice revenue being down 2.9%  
for the year, with a corresponding decline in same store EBITDA offset by  
positive contributions from acquisitions. Maven reported an underlying EBITDA  
margin of 10.9%, slightly down on the previous year (FY18:11.1%).  
 
Abano is adapting its growth strategy to suit market conditions and  
implementing initiatives to lift business performance. During FY19, Abano  
made significant investments into the use of data to drive productivity and  
better clinical practice. This included the establishment of Clinical  
Dashboards across both networks and Practice Essentials across Maven. In  
addition, the Lumino Dental Plan was launched into 50 practices across the  
New Zealand.  
 
Organic Growth strategy  
 
Abano is focused on improving the return on investment for its shareholders.  
As previously announced, following a strategic review undertaken in the  
second half of the financial year, Abano moved to focus on organic growth  
across both networks, expanding existing platform capacity and optimisation  
of the existing network structure, as well as selective acquisition growth  
for Lumino.  
 
This will see a reduction in the number of practices acquired by Abano with  
annualised savings of approximately $1.8m in direct and indirect acquisition  
costs in FY20. In line with the emphasis on organic growth, the support  
offices in both New Zealand and Australia have been resized.  
 
Abano's recent investment into IT has enabled better access to data and  
allowed for more detailed analysis across the networks. Along with the  
maturing of the Maven network, long term trends are now becoming visible. Key  
growth drivers are able to be monitored on a timely basis for both networks,  
specifically, Patient Visits, Clinical Days and Revenue per Clinical Day. A  
number of initiatives are being implemented in line with these, which are  
expected to deliver a lift in same practice performance and improve the  
profitability of the business.  
 
Early successes are now being seen due to targeted digital marketing  
campaigns, website optimisation and promotion of the Lumino Dental Plan; a  
focus on recruitment; training and development initiatives to upskill  
clinicians and practice management staff; and the successful piloting of the  
Practice Partnership Scheme to encourage retention of senior clinicians.  
 
FY20 outlook  
 
The Board and management are focussed on building on the strengths of the  
existing business, lifting performance and delivering shareholder value.  
Underpinning all activity is the continuing commitment to delivering high  
quality clinical care and an excellent patient experience.  
 
Earnings recovery is expected in FY20, driven by continued same store sales  
growth in New Zealand, the full year benefits of FY19 acquisitions, and  
contributions from further New Zealand acquisitions expected in the second  
half of the FY20 financial year.  
 
Update on expressions of interest  
 
As previously advised, Abano has received various expressions of interest,  
which may offer strategic opportunities and value to shareholders. Cameron  
Partners and Rothschild & Co have been appointed to provide additional  
resource and to assist the Board. There is no certainty that any expression  
of interest will lead to a proposal for shareholders to consider or to any  
transaction, either in respect of Abano itself or the company's businesses.  
 
Key Dates:  
o 31 May 2019 Financial Year End  
o 20 August 2019 FY19 final dividend record date  
o 28 August 2019 Confirmation of issue price for shares under the DRP, to be  
issued at a 3.0% discount to 5-day VWAP post-record date  
o 3 September 2019 FY19 final dividend payment and issue of shares under DRP  
o By end-August 2019 Release of FY19 Annual Report and Shareholder Review  
 
ENDS  
End CA:00338289 For:ABA Type:FLLYR Time:2019-07-30 08:59:24  

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