Abano ups dividend as earnings jump 46%

The Auckland-based company posted a net loss after minority interests of $1.3 million in the 12 months ended May 31. Photo / Thinkstock

The specialist medical investor Abano Healthcare lifted underlying earnings 46 per cent and paid a fatter dividend, underpinned by its dental and audiology businesses.

The Auckland-based company posted a net loss after minority interests of $1.3 million in the 12 months ended May 31, compared with a profit of $4.5 million a year earlier, it said. That included a $9 million charge on the sales of its orthotics and pathology businesses, which reduced Abano's exposure to uneven government funding.

Underlying profit, on which the company bases its dividends, rose 46 per cent to $8.8 million, near the top of its forecast earnings, and revenue increased 5 per cent to $222.2 million.

The company's shares, which have gained in the past fortnight, closed unchanged yesterday at $7.50. The board declared a final dividend of 15c a share, payable on August 21. That takes the full-year return to 25c, an increase of 19 per cent on 2014.

"Their dividend really came in ahead of expectations as well - all in all it was a good result," said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. "There was certainly some buying ahead of the results."

Abano flagged the impairment charges and likely loss when updating the market in April, saying the district health boards' switch to tendering for pathology meant Abano's former Aotea Pathology unit relied on short-term contracts.

When it sold the orthotics business, it said the exposure to government contracts was not compatible with Abano's investment criteria to operate on a fee-for-service basis.

Departing chief executive Alan Clarke told analysts that government funding made up less than 3 per cent of revenue, compared with 70 per cent more than 10 years ago.

Abano said it expected to continue increasing earnings in 2016, without providing more specific guidance.

The company's dental business lifted earnings before interest, tax, depreciation and amortisation (ebitda) 14 per cent to $23.9 million on a 10 per cent gain in revenue to $173 million.

Abano said the segment would remain its primary focus as it builds scale on both sides of the Tasman. In the first two months of the 2016 financial year, Abano has bought three dental practices, adding about $9 million in gross revenue.

Incoming chief executive Richard Keys said Abano was looking to introduce branded dental practices in Australia, and would then look to extend some New Zealand pricing initiatives across the Tasman.

Australia accounts for about 60 per cent of Abano's revenue, and the country's economic slowdown has seen a decline in high-end dental work that the company specialises in, such as crown and bridge work.

"We're still very long in Australia - the underlying engine they're getting it right, confidence will return and spending will increase," Clarke said.

Abano's audiology business lifted revenue 27 per cent to $40.1 million, and posted ebitda of $2 million, compared with an ebitda loss of $2.8 million a year earlier.