The 2013 year was one of continued growth with Abano delivering record revenues of $207.0 million and strengthening profitability.
Investment was primarily into Abano’s New Zealand and Australian dental networks and our radiology business in New Zealand. We also strengthened the platform for our audiology businesses in Australia and South East Asia, which remain in an early start-up phase. Our orthotics and pathology businesses continue to provide solid returns, however they operate in a restrictive public contract funding environment.
Dental is now the largest business within the Group and the primary revenue generator. In the past five years, we have grown our trans-Tasman dental network to 140 practices across Australia and New Zealand as at the end of July 2013 and our acquisition programme remains in place as we continue to build this profitable business. Economies of scale are only now starting to become apparent with the margins from our dental group showing pleasing improvements and increasing profitability.
As well as the acquisition of quality dental practices, in FY13 we significantly increased our investment in our Australian dental business, buying out our 30% minority partners for A$14 million and increasing our ownership of the trans- Tasman dental group to 100%. We have been the majority shareholder in Dental Partners since its inception in 2008 and were delighted at the opportunity to invest further into the dental industry and this very valuable company.
There has been increasing interest from investors in the corporate dental market and recent transactions indicate a significant uplift in the value of our dental business and validate our ongoing dental strategy.
Corporate dental consolidators hold less than 5% of the trans-Tasman dental market, providing the opportunity for continued growth for our dental group for many years yet.
Radiology is also an important strategic investment area for Abano and in the past five years, we have invested $17 million into the development of three new radiology clinics and latest generation equipment and technologies, such as PET CT scanning for cancer diagnosis and a wide bore MRI scanner. We are seeing demand for these modalities building as their benefits become apparent to both referrers and public funders.
Our strategy is to identify opportunities in targeted areas of the healthcare market which offer the potential for growth. We achieve a presence in these markets in two ways – by investing in existing businesses where we believe we can improve performance, enhance the business’ value and deliver greater shareholder returns, or by establishing and growing start up businesses, such as our audiology businesses and the new radiology clinics, where returns are generated following the initial seeding phase.
Our investments and growth initiatives are predominantly funded by debt and we expect investment into growth opportunities to continue at similar levels for the foreseeable future.
As we continue to expand and utilise debt to fund our growth, the Company’s debt to debt+equity ratio is increasing. The Board carefully monitors gearing levels as we invest.
Under recent IFRS changes, acquisitions of minority holdings are now accounted through equity rather than an increase in the assets owned. The result is that Abano’s $17.9 million acquisition of the 30% holding in Dental Partners resulted in a decrease in Abano’s equity, rather than an increase in assets to reflect the acquisition.
To offset this, the Board has resolved to raise $18.5 million of capital. The offer will consist of a placement and Share Purchase Plan to allow all shareholders to participate substantially on a pro-rata basis. This is expected to be completed within the second quarter of our current financial year.