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Abano’s Dental Business Surpasses 150 Practice Milestone

3 March 2014

Abano’s Dental Business Surpasses 150 Practice Milestone and Continues to Grow

With its sixteenth dental acquisition in the first nine months of its financial year, Abano Healthcare Group (NZX:ABA) has achieved and surpassed a major milestone, with its dental group now totalling 151 practices across New Zealand and Australia. This firmly establishes Abano as the second largest and fastest growing dental corporate consolidator in Australasia.

The listed healthcare company has been investing in the dental sector since 2002 through its Lumino the Dentists business in New Zealand and through Dental Partners in Australia. The trans-Tasman acquisitions made to date in this financial year will provide additional annualised gross revenues of over AU$20million to Dental Partners and over NZ$4 million to Lumino.

Abano’s managing director, Alan Clarke, said: “Our dental business has been growing through acquisition and organic expansion for close to fifteen years. One hundred and fifty-one practices is a fantastic milestone to reach. We have some of the most experienced dental management teams and clinical expertise in the region and our people are a key ingredient in our success.

“Our highly successful marketing programme for Lumino the Dentists in New Zealand has helped us drive same store growth over the past three years, in a market where the wider profession has seen an annual decline in revenue. Because of this success, we will soon be rolling out similar branded marketing initiatives in Australia. Our strengthened Dental Partners management team, with a new CFO, GM Human Resources and soon to be added GM Marketing, will allow us to translate our New Zealand experience to Australia and maximise the potential of this remarkably large market as we continue to expand our Australian network.”

Alan Clarke continued: “Pleasingly, we have also achieved an overall lift in same store sales in our dental group for December 2013/January 2014, when compared to the previous year.

“In New Zealand, this was over 3% same store growth for these two months, in what has been a declining market. This is a reflection of Lumino’s successful branding and marketing activity. Combined with innovative offers such as interest free funding and a growing online campaign, we have seen the business achieve large increases in areas such as new patient bookings and online appointment bookings, which translates into increased treatments and revenue.

“The Australian dental market has been impacted in recent months due to the deterioration of the Australian economy and a downturn in consumer confidence. This was exacerbated by the removal of a Government funded Chronic Disease Dental Scheme in November 2012. Due to these conditions, several dental consolidators are now reporting negative year on year growth. It is interesting to note that 1300 Smiles, an ASX-listed dental group which had previously indicated a large exposure to the Scheme, has just reported a 30% drop in revenues and a 36% drop in reported profits.

“Due to Abano’s strategy to concentrate on private revenue sources, Dental Partners’ exposure to the Scheme was limited, at around 5% of total revenues, with Dental Partners reporting a year on year decline in HY14 same store sales of just 8%.

“Despite there being little improvement in the overall economy, Dental Partners has experienced a pleasing lift in recent months, with same store revenue for the December 13/January 14 period up 4% on the same time last year. This follows management action with respect to client recall and local advertising.

“As we introduce our new branding and marketing strategy into Australia, we expect to see this growth continue. The increasing scale and size of our Trans-Tasman dental group is also now starting to deliver a number of real commercial benefits, including increased negotiating power with suppliers and buying efficiencies.”

Abano first invested into the dental sector in late 2002, with the acquisition of a small group of dental practices, primarily located in Auckland. Since that time, the business has been rebranded as Lumino the Dentists and grown its New Zealand footprint to 78 practices, with more than 644 staff, delivering over NZ$77 million in annualised gross revenues.

Abano entered the Australian dental market in June 2008, in partnership with a local management team to form Dental Partners and take advantage of the growing acceptance of corporate consolidation in the dental sector. Abano acquired 100% of this business in 2012 and from an initial nine practices, Dental Partners now has 73 practices, with over 800 staff, delivering more than AU$105 million in annualised gross revenues.

Alan Clarke said: “The NZ$9.6 billion Australasian dental market is expected to continue to grow over the mid to long term. The consolidation model is becoming more widely accepted by clinicians, and while dental consolidators currently own less than 5% of practices, we expect to see this change significantly going forward in line with the experience of more mature markets such as the USA.

“Abano Dental has an established and excellent reputation within the dental profession and we are now the first choice for many vendor dentists who are considering joining a corporate consolidator. We have an experienced and supportive management team, a strong clinical team and funding for innovative growth.

“We are well positioned to continue the expansion of our networks in New Zealand and Australia, building a great organisation and delivering sustainable shareholder value for Abano in the years ahead.”

Abano Healthcare Group is New Zealand’s leading listed specialist healthcare investor and operator, with businesses in four sectors – audiology, rehabilitation, diagnostics and dental – and operations across New Zealand, Australia and Asia.

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