Financial Information


The business

Abano owns 100 percent of Lumino Care Dental, which contributed approximately 22 percent of the Group’s revenue for the 2007 financial year.

Lumino Care Dental is New Zealand’s largest single ownership dental group and employs over 180 staff in 24 branches, including two mobile units, across both the North and South Islands.

The business is quickly gaining acceptance as an attractive alternative to the traditional private ownership model, and is cementing its place in the New Zealand dental fraternity with the continued acquisition of quality practices.

Lumino provides a full range of general dental work, including complex restorative and cosmetic dental services, with over 90 percent of income from private patients. Dental hygienists are employed throughout the group providing a cost-effective oral hygiene maintenance service for patients.

highlights and significant events

  • Termination of the Dencare contract (funded by the Ministry of Health), resulting in some practices experiencing an initial fall in revenue.
  • Acquisition of six clinics – Geoff Hunt and Cathrine Lloyd, and Tony Wong Dental, both in Wellington, Absolute Dental in Lower Hutt, The Smile Studio in Orewa and Merrilands Dental Centre and Smile Solutions in New Plymouth. Merrilands Dental and Smile Solutions were subsequently merged into one practice to become Lumino New Plymouth.
  • Closure of the underperforming Newmarket branch during the year due to the expiry of its lease, merging the patient list with nearby Lumino practices in Remuera.
  • Inaugural Lumino Conference on Waiheke Island in June 2006.
  • Appointment of Andy Tapper as general manager, with the support of Vikki Andrews as operations manager.
  • Attendance at the NZ Employment Expo in London, where several clinicians were successfully recruited.
  • Establishment of a Clinical Board consisting of six senior Lumino dentists, chaired by Allen Baker.
  • Appointment of an external strategic marketing advisor to develop Lumino’s marketing plan.
  • The commencement of a new series of workshops from Prime Practice management for the lower North Island and Dunedin practices.

Operational performance

Revenue has grown dramatically over the last three years, primarily driven by growth from acquisition, with some organic growth. We expect to see Core EBITDA continue to climb with the integration of new practices into the Group and the consolidation and growth of the EBITDA contribution from our existing practices.

The market

The dental market primarily comprises individual and small group dental practices, owned and managed by practising dentists. The cost of keeping up with modern technology is rising, competition is high, particularly in the main metropolitan centres and more time is required for administration rather than revenue-generating dental treatment. Many dentists are recognising that dentistry can be more efficient, rewarding and cost-effective if delivered within a well-managed group structure.

Recruitment and retention of key clinical staff continues to be an industry issue, due to a worldwide shortage of high-quality dental clinicians. Lumino has a number of initiatives in place to reward staff, and is focused on providing a work environment and career opportunities that are simply not possible in other smaller practices.

The outlook

The outlook for the dental sector is positive with a continuing growth strategy in place.

Lumino will continue to focus on private paying patients, offering up-to-date technology and professional, high-quality services and products which meet changing customer demand.

During 2008, an increased focus will be placed on the branding and marketing of Lumino to increase its profile with consumers and dentists.

We will also be developing existing practices to accommodate more dentists and create more space for additional services, such as cosmetic treatments.

The success of the business relies on continued growth by acquisition to increase the scale of the group to cover the relatively fixed cost of the central overhead infrastructure. We will aim to increase the rate of acquisitions in 2008, from the six practices per year we have averaged over the past two years, and are well on the way to achieving our target of 40 practices in our network by 2009. With acquisitions providing an EBITDA return on invested capital in excess of 25 percent, and increasing margin growth, we expect to see this sector’s return on invested capital migrate towards the target of between 15 and 25 percent.

Since year end, there have been two further practice acquisitions – Anzac Street Dental Centre in Auckland and Shearer Dental in Oamaru.

While the acquisitions are structured to retain the founder/dentists through long-term earn-outs, generally of four years including further restraints on dentists post the earn-out period, it is also important to ensure succession plans for all practices to protect their contribution going forward. Recruitment and retention will be a major investment area for management in 2008, with the introduction of a number of HR and career development initiatives. These include a package called Lumino Advantage which has a graduated commission base as well as profit-share bonuses. As dentists are remunerated on commission, this incentivises them to increase revenues and grow the business, and aligns their interests with those of our shareholders.