Abano Rehabilitation, New ZealandOrthotic Centre, New Zealand
In FY12, our rehabilitation sector was made up of two businesses offering orthotics and brain injury rehabilitation services. Both of these are leaders in their field. However, due to their reliance on publicly funded and ACC contracts, they had hold and maintain strategies in place.
The sector saw a modest growth in revenues and a pleasing improvement in the bottom line performance at EBITDA . This was mostly driven by the expansion into Dunedin and Invercargill for the orthotics business, and a pleasing improvement in performance from the brain injury rehabilitation business, following diversification into MOH rehabilitation contracts.
BRAIN INJURY REHABILITATION
During FY12, the business again concentrated on reducing costs, and opened new contract areas in MOH rehabilitation contracts. This improvement assisted in the sale process to Bupa Care Services, which we announced at the end of FY12. Settlement was on 29 June 2012 and the proceeds were applied to the reduction of debt, and to support Abano’s ongoing investment into its growth sectors.
Abano Rehabilitation operated in a fixed price environment, with a strong focus on delivering services purchased under specific contracts.
Revenue was 75% from ACC and 25% from DHB and MOH contracts, and there were limited growth opportunities or potential for Abano to add value. The offer from Bupa was an attractive one, and the business was sold for a consideration above book value. Bupa is recognised as a world leader in providing healthcare services. We were pleased to sell to an organisation such as Bupa, which is familiar and comfortable in the Government funded contracting environment, and will continue to value and nurture this business.
Our orthotics business provides sustainable cashflow and income for the Group. A large proportion of income is generated from DHB contracts (78%), and several of these were renewed or awarded to the Orthotic Centre in FY12. Due to the limited growth opportunities in this market, Abano has a hold and maintain strategy in place for this business.
Orthotics revenues grew by 13% over FY12, largely as a result of the contract extension into Dunedin and Invercargill.
Once again, we would like to mention the exceptional performance of the Christchurch based team under Paul Ward’s leadership. Christchurch suffered numerous earthquakes over the last twelve months; the damage to the city and the impact on people’s lives is immeasurable, and our staff are no exception. We are demonstrating our commitment to them by working to ensure the continuity of DHB contracts, and therefore their employment. On a more personal level, we have retained a four bedroom house in Hamner Springs, just north of Christchurch, for the exclusive use of our employees and their families and friends to offer them some respite from the ceaseless flow of earthquakes in the city.
The Orthotic Centre is a sound business, providing solid, sustainable cashflows. Its services are valued by DHBs and private clients alike, in all the markets it serves across New Zealand. As is normal, there are a number of contracts up for renewal in the next 12 to 18 months and we will be working closely with funders to renew these contracts.