Abano Reports Half Year Profit Under NZIFRS

Abano Reports Half Year Profit Under NZIFRS

Abano Healthcare Group Limited today posted its interim results for the six month period to 30 November 2005, with a $14.2 million net profit after tax, following the realisation of gains from the sale of the ElderCare business.

The result, reported for the first time under NZ-IFRS (New Zealand International Financial Reporting Standards), included a $13.1 million gain on the sale of the ElderCare business to the Macquarie Group in July 2005 for $63.5 million. Excluding the gain from the sale the underlying core net profit after tax was $1.1 million, compared to $0.6 million in the corresponding six month period last year.

Revenue from continuing operations for the six month period was $28.2 million ($20.4 million in 2004), reflecting the sale of the ElderCare business in July 2005, and the subsequent acquisitions of Bay Audiology and the Orthotic Centre in October 2005.

During the half year, net bank debt was reduced from $33.0 million to $9.2 million and $10 million was returned to shareholders through a one-off, voluntary, off market 1:6 share buyback and cancellation at $2.20 per share.

Following the Annual Meeting, two new independent directors were appointed – Mr Trevor Janes and Mrs Susan Paterson – following the retirement of Mr Maurice Kidd and Dr Clint Teague. Mr Phil Newland was re-elected as an independent director.

Abano has elected to adopt NZ-IFRS for the financial year ended 31 May 2006. Therefore, the half year results to 30 November 2005 have been reported under the new standards, with comparative figures, where applicable, restated under the same standards.

Managing director of Abano, Mr Alan Clarke, said: “Abano has made steady progress in the six month period to 30 November 2005, with a number of positive changes to the company’s portfolio of businesses.

“We are continuing the integration of the Bay Audiology and the Orthotic Centre acquisitions into the Group, and both are performing well. The benefit of these businesses on the Group’s performance will be seen in full in the 2006/2007 financial year.

“We also carried on with the planned acquisition expansion of our dental sector, expanding the Fly Buys programme and our Prime marketing training initiative for dentists, and repositioning the company under the Lumino brand. The result is that the half year performance for this sector was down on expectations and the full year is now forecast to be below budget.

“Rehabilitation again reported a soft performance in the half, as previously indicated, and while there was an improvement in our ACC contracting conditions from December 2005 onwards, the second half will be affected by the Christmas summer and Easter holiday breaks. A soft full year performance from this sector is now expected

Radiology is performing well and above expectations, as are the Pathology laboratories, both of which are mid-way through responding to tenders for the regional community work in Wellington and Hutt Valley and for all the Pathology work in the Nelson Marlborough region. In addition, and following the recent Commerce Commission clearance, an agreement was reached with Sonic Healthcare last week, for Abano to hold 55% of a new company to be formed with Sonic Healthcare, to provide pathology laboratory operations in the Wellington and Hutt Valley region. This joint venture will only be formed if the joint tender is successful to the Capital and Coast District Health Board for the regions work.”

Abano’s chairman, Mr Jim Syme, commented on the Group’s future outlook: “Abano is making steady progress but there are a number of challenges ahead in the ACC contracting environment and through DHB tenders, which need to be addressed in the next few months.

“We are progressing well with our new portfolio, following the sale of the capital intensive aged care business sector. We are positioned for future profitable growth as we continue to explore expansion opportunities, while bedding in our existing healthcare business portfolio.

“The second six month operational profit performance is expected to be up on the first half, after a full period contribution from audiology and orthotics. However, as historically shown, we are expecting a soft second half performance from all our healthcare businesses, due to the Christmas, summer and Easter holiday breaks, where historically there is a reduction in referrals and a reduced demand for healthcare services.

“Under NZ-IFRS we account for 100% of the operating performance of the businesses in the group, where we have future put options in favour of our minority partners and we also take into account the projected future liability of these put options. This applies to our orthotics and audiology businesses and for the earn-out mechanisms we have in place for our dental acquisitions.

“The result is that until the put option is exercised, NZ-IFRS requires recognition of a notional interest charge on the future financial liability, which has the impact of increasing the Group’s “interest expense” in the income statement. No interest is actually paid and none of the adjustments required under NZ-IFRS will change the final exercise price of the put option. In addition goodwill is no longer amortised.

“We are therefore expecting a full year performance under NZ-IFRS, with Revenues in the range of $63 to $67 million, EBITDA of $5 to $6 million and net profit after tax of $1.2 to $1.7 million, before the extraordinary profit, as seen in the first half, from the sale of the Eldercare Group.”

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