Abano Healthcare Group says first-half profit may fall because recent dental clinic acquisitions across the Tasman won't deliver immediate gains and the relocation of its biggest Lumino practice attracted some costs.
The Auckland-based dental and radiology investor expects net profit attributable to shareholders of between $5.4 million and $6.2m in the six months ending November 30, compared to $5.9m a year earlier.
That guidance includes Abano's decision to accelerate depreciation after relocating its biggest Lumino dental practice to a new location in Auckland early next year, a $160,000 loss of the sale of a small lab, and an increased provision for deferred acquisition payments with newly acquired practices beat expectations.
It also accounts for the cost of several acquisitions that aren't expected to make full-year earnings contributions until the 2019 financial year.
Abano has been on an acquisition spree as it looks to build a trans-Tasman network of dental practices as it chases a 10 per cent share of the $11 billion market to transform itself into a $1b revenue business.
"Abano's dental practice acquisition pipeline in Australia remains strong and the company is taking advantage of this to increase its acquisition rate above previous years," chief executive Richard Keys said in a statement.
"Several larger acquisitions, with a corresponding higher purchase price, have settled later in the first half than anticipated and several more are expected to settle in upcoming months."
Abano's optimism shows up in its forecast for underlying profit, its preferred measure stripping out accounting adjustments and asset sale gains and losses, which is expected to rise to between $6.3m and $7.1m in the half from $6.3m a year earlier.
Revenue is predicted to be between $130m and $135m, up from $116.8m a year earlier.
The company's dividend policy is based on underlying profit, and it expects to pay 16 cents per share, unchanged from a year earlier despite the larger share base from its recent one-for-five rights offer.
Keys said the dental practices generated same-store sales growth of 1.2 per cent in New Zealand, although Australia's same-store sales fell 2.2 per cent in "challenging and volatile economic conditions" and the firm is investing in marketing, technology and branding to lift the performance across the Tasman.
The radiology unit performed well, lifting revenue and earnings, he said.
Abano shares last traded at $9.77 and have gained 21 per cent so far this year, outpacing the 12 per cent gain on the S&P/NZX All Index over the same period.