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Abano Enters Audiology Market

Media Release

6 July 2005

Abano Enters Audiology Market

Specialist healthcare investor and operator, Abano Healthcare Group today announced the signing of a conditional agreement to invest in Bay Audiology Limited, New Zealand’s largest audiology service provider.

Abano will invest $21 million in Bay Audiology for a 70 percent shareholding. The remaining 30 percent will continue to be held by Bay’s three founding clinical directors. After a five year period, Abano will have the ability to acquire their shareholdings based on a pre-determined price formula related to Bay Audiology’s future earnings subject to a minimum floor price.

The transaction is conditional upon the sale of Abano’s aged care business, ElderCare, being approved by shareholders at the SGM to be held today, 6 July 2005, as well as Abano shareholders’ approval of the Bay Audiology transaction at Abano’s annual meeting to be held in September 2005. Abano expects to complete the Bay Audiology transaction in early October 2005, following satisfaction of these conditions.

The investment in Bay Audiology provides Abano with entry into a new part of the healthcare sector, and it will operate alongside Abano’s other businesses in the dental, diagnostics and rehabilitation sectors.

Managing director of Abano Healthcare, Mr Alan Clarke, said: “This is an exciting and important transaction for Abano, and Bay Audiology will be a cornerstone business for our Group’s future development."

The Chairman of Bay Audiology, Peter Hutson commented, “We are delighted to have Abano join us to assist Bay Audiology in extending our current network. Audiology is a recognised area of need within New Zealand, with many hearing problems currently going undetected and untreated. With the emergence of new specialist testing techniques and ever improving hearing aid devices, the opportunity to identify and correct hearing deficiencies is improving all the time."

He continued: “Demand for audiology services is currently growing strongly. Hearing problems affect approximately 1 out of 9 of New Zealanders. Although hearing loss is more common amongst those aged over sixty, now comprising around one third of the population, hearing problems can affect all ages and demand is growing for new and improved hearing services and devices.

Established in 1993, Bay Audiology now represents the largest and only national audiology service provider. Bay’s national network of 12 fulltime clinics and 17 satellite clinics employs around 65 staff, more than 20 of whom are qualified audiologists.

For their current financial year, Bay has projected revenues exceeding $21 million, with an EBITDA contribution greater than 26 percent of revenue. Abano’s investment will yield a return on investment at EBITDA of over 20 percent and at NPAT of over 15 percent over the next two years as Bay is projected to expand its network and continue growing.

The business derives its revenues from the provision of professional clinical audiology services, particularly hearing tests, the supply and fitting of hearing aid devices, and follow up consultations, all of which are provided to both private patients as well as patients funded by ACC, War Pensions, and local DHBs.

Alan Clarke concluded: ”Our model of establishing partnerships with the clinical management teams we invest in, means that Bay Audiology will retain all the energy, passion and clinical expertise of its current principals and Abano will have committed long-term partners who will share in the future of the business with us."

ENDS

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