Abano Healthcare gains on greater earnings

  • 29/07/2015
Abano Healthcare gains on greater earnings

Abano Healthcare shares gained after the specialist medical investor lifted underlying earnings 46 percent, 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 to a profit of $4.5 million a year earlier, it said.

That included a $9M charge on the sales of its orthotics and pathology businesses, which reduced Abano's exposure to uneven government funding.

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

The shares rose 0.7 percent to $7.55, and have gained 7.8 percent over the past two weeks.

The board declared a final dividend of 15 cents per share taking the full-year return to 25 cents.

"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. "There was certainly some buying ahead of the results."

Departing chief executive Alan Clarke told analysts New Zealand Government funding made up less than 3 percent of revenue, compared to 70 percent more than 10 years ago.

Abano said it expects to continue growing earnings in 2016, without providing more specific guidance.

Incoming chief executive Richard Keys told analysts he's comfortable paying Ebitda multiples of about 3.5 times to acquire dental practices in New Zealand, and that will be a little higher in Australia, though that measure isn't a one-size-fits-all.

Abano is looking to introduce branded dental practices in Australia, and will then look to extend some New Zealand pricing initiatives across the Tasman, he said.

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