Financial Information


Chairman's Report

Year in review

It is with pleasure that the board of Abano present the annual report and financial statements of the Group for the year ended 31 May 2007.

Abano achieved a record operating Net Profit After Tax (NPAT) of $5.0 million for the financial year ended 31 May 2007. This result was up 213 percent on the 2006 operating NPAT result of $1.6 million (which excluded the one-off gain on the sale of ElderCare).

Operating revenue for the year was $89.5 million, with additional other income of $0.5 million, including the gain on sale of investments from the divestment of Nelson Diagnostic Limited and Biostandards. There was a 107 percent increase in operating Earnings Before Interest Tax Depreciation and Amortisation (EBITDA) from $6.7 million to $13.9 million.

The result also represents a margin improvement at EBITDA from 10.3 to 15.5 percent of revenue with Operating Earnings Per Share increasing by 213 percent to 21.9 cents per share. Over the last seven years, the Group has improved the return on invested capital at operational EBITDA from less than 5 percent in 2000 to 15.7 percent this year, up from 10.2 percent last year.

This improved performance was signalled in our last annual report and by the board at our annual meeting last year. However, the final consolidated result exceeded our initial guidance, and was driven by both solid acquisition growth and improving core business performances across the Abano portfolio.

The 2007 financial year included a full 12 months’ contribution from both Bay Audiology and the Orthotic Centre, in addition to the continued organic expansion and acquisition of businesses in Audiology, Dental and Radiology. Pleasingly, all sectors showed improved operating margins over the previous year.


As previously advised, we commenced an annual dividend programme with the payment of a maiden dividend in August 2007. In line with our announced dividend policy of 50 percent of Group NPAT, the directors confirmed a maiden dividend payment for the 2007 financial year of 11 cents per share, fully imputed, with the record date as at 13 August 2007. The dividend policy will be reviewed annually to ensure the dividend return and use of imputation credits is carefully balanced with the growth opportunities of the company.


Abano is a specialist investor operator in the private segment of the healthcare and medical services market.

As the demand for healthcare and medical services continues to outstrip the Government’s funding ability, and private payment from individuals or through private medical insurance becomes an increasing necessity, our Group investment strategy remains the same.

We believe that investing in businesses with strong private payment revenue streams is the most productive and rewarding strategic option for Abano.

We have key investment criteria against which any potential acquisition is tested.

Acquisitions must:

  • Derive the majority of their revenue from private income, and if there are contributing public revenues then these must be secure public contracts that yield commercial margins with a tenure of greater than three or more years;
  • Be number one or two in their market with a demonstrated history of profitable growth, and have the potential for future profitable growth;
  • Have high and defendable barriers to entry;
  • Be EVA positive, with a projected ROIC at NPAT greater than our WACC;
  • Be positioned in the mid to high end of their market employing leading-edge technologies and services, and attracting private paying customers;
  • Exhibit core future sustainability in demand for the services offered;
  • Have proven, successful and peer-respected clinical and management teams that will remain in the business and are aligned as ongoing owners in partnership with Abano shareholders;
  • Be compatible with Abano’s existing portfolio of healthcare and medical services.

While there are many definite opportunities for expanded growth and development across a range of healthcare and medical sectors, we will select our investments carefully and concentrate on our proven existing and successful investments, particularly within Audiology, Dental and Radiology.


Our investment philosophy is to identify successful businesses where we can enter into long-term equity partnerships with the clinical founders who will continue to work with us in growing their businesses and creating additional shareholder value.

At Abano’s group level, we recognise that our senior team are responsible for identifying, attracting, acquiring and then managing our investments in these partnerships. We also recognise that our senior team have constant access to inside information and therefore cannot acquire equity in Abano through the normal processes of the New Zealand Stock Exchange.

We believe it is important to recognise the growing shareholder value our managing director and chief financial officer create in the company; and their personal alignment as shareholding partners, with the clinical founders and Abano’s shareholders, is extremely important to ensure their long-term commitment to our business.

The board will be bringing a proposal to the annual meeting to strengthen the Executive Long Term Share Incentive Plan (LTI) for our key executives to ensure this ongoing alignment.


The board currently consists of five independent directors and one executive director (the managing director). Following the resignation of Mr Jim Syme from the board in October 2006, Graeme Edmond was appointed as a new independent director. Graeme has significant experience in the healthcare sector and is a welcome and valuable addition to the board. As Graeme was appointed by the board after our last annual meeting, he will be standing for election by shareholders at this year’s annual meeting.

To ensure directors’ fees are in line with market benchmarks, the board has requested an independent review and recommendations will be put forward to shareholders at the 2007 annual meeting. Directors’ fees were last approved at the 2005 shareholders’ meeting, when total directors’ remuneration was increased from $150,000 to $223, 000 per annum. This represented an increase in fees to $37,000 per non-executive director and $75,000 for the chairman. Since this time, an additional independent director has also been appointed to the board.


Abano has a sound portfolio of healthcare and medical services businesses that are now providing strong and improving bottom-line returns. We expect to see shareholder returns continue to improve as the performance of each of our businesses is enhanced through our partnership and co-investment model and as we continue to grow each business with our clinical equity partners. We will continue growing the Group through the acquisition of new businesses and the organic expansion of our existing networks.

I would like to thank the board for a year of valuable contribution, our managing director, Alan Clarke and his management team for their commitment and dedication to the businesses and organisations they manage and all our staff, whose expertise, enthusiasm, professionalism and care lead to an improvement in life for the thousands of people we diagnose, care for and treat each day.

I hope you enjoy reading about Abano and our businesses in this annual report, and thank you for your continued support. You, our shareholders, are an important part of our company and we welcome your feedback. I or any member of the board can be contacted through

I look forward to seeing you at the annual meeting in Auckland later this year.

Thank you

Alison Paterson