Abano beats FY profit forecasts, plans $35M capital raising to accelerate growth
By Tina Morrison
July 26 (BusinessDesk) - Abano Healthcare, Australasia's second-largest dental group, beat its forecast for annual profit and announced plans to raise $35 million to accelerate its growth.
The healthcare investor posted a profit of $10.9 million in the year ended May 31, ahead of its forecast profit of between $9.7 million and $10.5 million. The company's year earlier profit of $28.4 million was boosted by the sale of its half share in audiology business Bay International, and when adjusted to include only continuing businesses the year earlier profit was $7.4 million.
Abano is growing its corporate dental businesses in a fragmented market across Australia and New Zealand where it sees increasing demand, with the aim of capturing 10 percent of an estimated $11 billion of revenue. The company said today it will offer existing shareholders the right to buy new shares at a discounted price in order to raise $35 million to accelerate the growth of its trans-Tasman dental group, particularly in Australia.
"Corporate groups own less than 10 percent of total dental practices in the trans-Tasman region and there is growing acceptance and popularity of the corporate model amongst dentists," Abano chair Trevor Janes said in a statement, adding that the number and size of practices in the company's acquisition pipeline are exceeding previous expectations. "The opportunity for Abano to continue to grow via its acquisition strategy, particularly in Australia, is significant."
In the latest year, the company's annual revenue increased 9.3 percent to $233.5 million. Its gross revenue, measured prior to the payment of dentists' commissions, was $278.7 million, 94 percent of which came from its dental business and the rest from its radiology business.
During the year, Abano acquired 27 dental practices which are expected to generate $33.8 million in annualised gross revenue. It had 205 practices at the end of the financial year and said it was in negotiations with a number of larger practices in Australia which are expected to settle in upcoming months.
In New Zealand, its Lumino group has acquired smaller dental practices and merged them into existing practices, boosting margins. In Australia, its Maven dental business is focused on acquiring larger practices and expanding nationwide.
Abano also owns 71 percent of the Ascot Radiology chain in Auckland, which lifted annual gross revenue 9.2 percent to $16.4 million.
The company is offering eligible shareholders the right to subscribe for one new share for every five existing shares held as at 5pm on Aug. 3 at an issue price of $8.15 per share, which is a 13.3 percent discount to the dividend adjusted closing price of $9.40 at yesterday's closing price. Forsyth Barr is the lead manager of the capital raising, and has fully underwritten the offer.
Abano will pay a final dividend of 20 cents per share on Aug. 18, taking the annual dividend to 36 cents per share. That compares with the year earlier's final dividend of 20 cents per share, for an annual dividend of 30 cents. The company said it is suspending its dividend reinvestment plan due to its capital raising.
The shares last traded at $9.60 and have gained 26 percent over the past year.