2014 Annual Report

OUR NET PROFIT AFTER TAX WAS $4.9 MILLION FOR THE YEAR, A 75% INCREASE ON THE PREVIOUS YEAR AND AT THE TOP OF OUR GUIDANCE.

CEO/MD, Alan Clarke (right) and COO/CFO, Richard Keys (left)

During the 2014 financial year, we made solid progress in growing our business and delivering on our shareholders’expectations.

Our Net Profit After Tax was $4.9 million for the year, a 75% increase on the previous year and at the top of our guidance.

Revenues were a record $211.1 million, with Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA1) of$27.8 million.

Underlying earnings2 were $29.1 million at EBITDA giving an underlying NPAT of $6.1 million.

We also report gross revenues3, which include revenues from the joint venture audiology group and Australian dental revenues before payment of dentists’ commissions. Gross revenues increased to $274.0 million, primarily driven by growing dental revenues but also reflecting the continued growth in the Australian audiology business as it reduces its losses and moves towards achieving a breakeven EBITDA result.

Including the equity accounted audiology businesses, over 50% of Abano’s revenues are now generated offshore, with 96% of that amount generated in Australia. We expect to see the percentage of offshore revenue increase as we continue to grow our dental and audiology businesses in the Australian market, which offers much greater scale and size than in New Zealand.

A strong New Zealand dollar continued to impact on our results, with a year on year negative exchange rate movement of approximately 13% in the New Zealand dollar when compared to the Australian dollar.

If the exchange rate had remained at the same levels as FY13, revenue would have been $17.7 million higher and underlying EBITDA would be $1.8 million higher. Gross revenues would have been $291.7 million, a 13% year on year increase.

Revenue earned offshore is currently retained and reinvested in the country of origin. Therefore, any foreign exchange translation to New Zealand dollars for reporting purposes is non-cash. In addition, all consumables and other purchases are generally paid for in local currencies.

One exception is a small orthotics purchasing contract worth approximately $1 million, where forward foreign exchange contracts are put in place for each new financial year.

Any debt required for the Dental Partners acquisition programme in Australia is provided through local currency facilities and therefore the loan is in the same currency as the acquired assets.

For the second year in a row, gross revenues generated from private revenue streams remained constant at approximately 80%. We now have only two businesses with a high reliance on public funding – our New Zealand pathology and orthotics businesses.

The results also included one-off costs of $0.7 million incurred by Abano in relation to the unsolicited proposal received from Archer Capital along with interests associated with Peter Hutson and James Reeves, and responding to the subsequent actions of Messrs Hutson and Reeves interests.

The impact of the exchange rate and the one off costs relating to the Archer/Hutson/Reeves activity negatively impacted year on year performance and underlying EBITDA by $2.5 million.