Abano forecasts FY profit growth of at least 60 percent , urges shareholders to support Janes

Wednesday 21st May 2014

Abano Healthcare, the medical investor embroiled in a dispute with its biggest shareholder, said full-year profit will rise at least 60 percent and urged shareholders to support chairman Trevor Janes at a special meeting that seeks to have him dumped.

In a letter to shareholders signed by the remaining five board members they describe a "misleading communications campaign" by dissident shareholders Peter Hutson and James Reeves after they failed in a takeover attempt with Australia's Archer Capital last year.

Since then, the campaign had become a personal attack on Janes, including the request for a special meeting to oust him, in a move "to exert control over the board for their own benefit." No date has been set for the special meeting.

In the defence of Janes, directors Susan Paterson, Ted Van Arkel, Pip Dunphy, Danny Chan and Alan Clarke said Abano had provided average gross returns of about 35 percent a year since 2006 and provided more than $74 million in dividends and capital returns since he became a director.

Hutson, who owns the other 50 percent of Abano's Bay International audiology business and would have gained full control for a nominal sum under last year's aborted takeover, was removed from the board last September. Last week the Employment Relations Authority upheld Abano's right to sack Peter Hutson and his wife Anya from their positions at Bay as chief executive and human resources director.

Abano managing director Alan Clarke said in a separate statement today that profit in the year through May 31 would rise 60 percent. Net profit in 2013 was $2.8 million.

"The forecast improvement reflects the growing returns from our trans-Tasman dental consolidation businesses, as well as an improving performance from our start up audiology businesses in Australia and South East Asia," Clarke said. "The audiology improvement is pleasing, given that, while not consolidated, the investment losses previously generated by this business have been a drag on Abano's cash flows and have depressed our reported NPAT by over $18 million during the past four years."

The audiology unit has been a perennial underperformer since the successful sale of the New Zealand business in 2009 for $158 million to National Hearing Centre. Abano retained the Australian and Asian businesses, letting Hutson lift his stake to an equal share from 40 percent, with an $11 million payment used to leave the unit debt-free.

At the time of the transaction, Bay had $17.3 million in assets and the same amount in liabilities, and was forecast to be loss-making for the following two years, according to a KordaMentha independent adviser's report on the transaction. The KordaMentha report said the transaction was fair to Abano shareholders not associated with Hutson.

Since then, the audiology unit's assets rose to $22.3 million as at Nov. 30, while its liabilities climbed to $47.1 million. It made a first-half Ebitda-loss of $3.3 million in the six months ended Nov. 30, down from a loss of $6.2 million a year earlier.

Abano shares were last at $6.93 and have gained 8.8 percent this year. The stock is rated an average 'buy' according to two analyst recommendations compiled by Reuters, with a median target price of $7.58.

BusinessDesk.co.nz

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