Richard KeysAll sectors delivered improving margins and contributed positive operating profits, generating returns that exceeded our Weighted Average Cost of Capital (WACC).

The Return on Invested Capital at EBITDA continued to improve from less than 5 percent in 2000 to 17.5 percent in 2008. We are well on track to reach our target of Return on Invested Capital at EBITDA of 18 percent by the end of the 2009 financial year.

A detailed analysis of each sector can be found in the Segment Reporting note to the financial statements on page 51.

Balance Sheet

Management and the board constantly review debt levels to ensure an efficient level of debt and equity is maintained in the business. As advised last year, the debt levels were budgeted to increase to a more appropriate level. Net bank debt has therefore grown from $12.3 million in 2007 to $33.9 million as at 31 May 2008, generating a debt equity ratio of 20.7 percent compared with 9.9 percent in 2007.

This is in line with our policy to more efficiently use our balance sheet to fund acquisition and investment in good businesses which will provide appropriate returns. Abano currently has debt facilities in place to provide for the planned growth and acquisition initiatives, as well as the existing dividend policy.

Abano has a committed cashflow lend facility with ASB Bank Limited which includes additional funding capacity. A new Australian debt facility has also been established since year end with the Commonwealth Bank of Australia, specifically with regard to the rollout of the Dental Partners network in Australia.

Interest rate risk is mitigated through the use of interest rate SWAP agreements, while a hedging policy is in place to mitigate risk from currency fluctuations where possible. However, as most purchases are done in NZ dollars, Abano has a very small exposure to fluctuating exchange rates.

Total capital expenditure for 2008 was approximately $23 million, made up of acquisitions of approximately $11 million, greenfield set ups or new revenue generating capital expenditure of approximately $5 million, and approximately $7 million for normal operational and replacement capital expenditure which included the refurbishment of the Aotea Pathology laboratory.

Total planned capital expenditure in the next twelve months is estimated at approximately $42 million. This will be funded through cashflow and existing bank facilities.

Operational Focus

The operational focus for 2009 is to grow revenue through new contracts as well as introduce new services and organic growth of existing businesses. We will also focus on continuing to improve margins across all our businesses as we drive cost efficiencies and continue to target those areas which provide the most value and return.

We will also be closely monitoring our people costs which have shown a steady increase year on year, due in part to the introduction of Kiwisaver, and the move to four weeks of annual leave.

Recruitment and retention of staff is a key area and we will continue to invest in the development of our people and ensuring attractive and rewarding employment opportunities. This is a key objective and performance measure for our business managers with numerous initiatives developed and introduced across our businesses to aid recruitment, support people development and encourage retention. More information on People Development initiatives for each sector are detailed in the sector reports on pages 12 to 29.


For the 2008 financial year we have elected to send all shareholders a printed annual report.

As a regular reminder, all company announcements and news are available on our website and you can subscribe to receive notification of news by registering online at

Richar Keys Signature

Richard Keys
Chief Financial Officer

Group Ebitda Return Ebitda Progress


Capital Emplyed By Sector Ebidta Progress By Srctpr
Click to download the "Operation Performance" document as pdf ( 207 kb )