Abano expects 50% lift in 2017 first-half profit on gains from dental acquisitions

Abano Healthcare says increased earnings are driven by dental acquisitions.

Abano Healthcare, the Australasian dental centre and radiology operator, told shareholders at today's annual meeting it expects to lift first-half profit by up to 50 percent in 2017 with increased earnings driven by dental acquisitions.

Auckland-based Abano, which owns the Lumino the Dentists chain in New Zealand and Maven Dental Group in Australia, is investing to grow its chain of dental businesses in a fragmented market across both countries, where it aims to capture 10 percent of the $11 billion of revenue. Chief executive Richard Keys told shareholders at today's AGM in Auckland the company expects revenue of between $113 million and $118 million in the six months ending Nov. 30, up from $108 million in the first half of 2016. Net profit is forecast to rise to between $4.5 million and $5.1 million from $3.4 million a year earlier.

"We see significant opportunity in the $11 billion trans-Tasman dental market and we are well placed to continue growing our market share through our fast growing dental networks," Keys said in speech notes published on the NZX. "We are currently generating approximately $265 million in annualised gross revenue, and are well on our way to our goal of $1 billion in revenue. Acquisition and organic growth are both a priority in our dental businesses and we are on track to achieve $30 million in additional annualised gross revenue from acquisitions this year."

Gross revenue reflects sales before dentists' commissions are paid.

In the first five months of its financial year, Keys said dental acquisitions had driven revenue growth, while its radiology business had contributed steadily. Lumino had its 11th consecutive quarter of same-store revenue growth, and margins improved to continue the five-year annual trend.

Abano bought 12 practices last year for its Lumino brand, and a further five practices this year, Keys said. Every dollar spent on Lumino TV and online advertising generates about $5 from patients, and new patients who are attracted by its new patient and interest-free offers spend significantly more than the average patient, driving increased per-patient spend, he said.

Maven is the second-largest network in Australia, and Abano added six practices last year and a further seven this year. Following on from 2016, the company has had a softer start to 2017 due to challenging economic conditions in Australia, Keys said. While the business delivered improved margins so far this year, they will be impacted in the short term by "investment into rebranding and other initiatives," he said.

Abano also has a radiology division, with a 71 percent holding in Ascot Radiology. In 2016, the segment delivered 5 percent of Abano's revenue, or $15 million, and underlying earnings before interest, taxation, depreciation and amortisation of $2.5 million. The company sold its pathology business in May 2015.

"Radiology is also a solid performer in a smaller market and our focus here is on organic growth and building demand for our high-end services," Keys said.

The shares increased 0.6 percent to $8.15, having gained 6.8 percent so far this year.

(BusinessDesk)