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Audiology

Abano has three businesses in Audiology – New Zealand’s leading audiology provider, Bay Audiology, Bay Audio in Australia and Bay Audiology in Asia. In 2009, these businesses provided approximately 33 percent of Abano’s group revenue. In each of these businesses, a minority shareholding is held by clinical partners including the Bay founders.

The focus for 2009 was to maximise the performance of Bay Audiology, leveraging off the established network of clinics and the business’s positioning as the leading audiology provider in New Zealand. There has been growth in competitor activity in the last twelve months and Bay has a marketing strategy in place to ensure continued high brand awareness, as evidenced by the recent successful marketing campaign in the second half of the financial year.

Bay Audio in Australia was launched in February 2007 and continues to grow, with the size of the network expanding through the development of Greenfield sites and the conversion of satellite clinics into full time clinics. Bay Audio’s retail focused strategy of establishing ‘walk in’ audiology stores in retail and shopping mall environments provides a point of difference from many other audiology providers which offer their services through healthcare centres and alignments with medical practitioners.

The development and rollout of the revolutionary self assessment Touchscreen technology also provides Bay Audio with a unique offer and supports its retail focused strategy. The Touchscreen technology was designed with the help of audiologist advisors and lets customers self check their hearing health by following the instructions of a ‘virtual audiologist’. This removes the pressure on customers to make an appointment and is ideally suited for retail and shopping mall environments.

The Australian audiology market is notably more fragmented than the New Zealand market, with the largest provider holding less than 10 percent share of the market and the majority of audiology providers consisting of small partnerships or sole providers. With a population more than five times bigger than that of New Zealand and a market size estimated at over AUD$900 million, Australia offers considerable opportunity for Bay Audio.

Bay Audiology in Asia was established through a small investment in several clinics in Hong Kong and Singapore in late 2008, with a further two clinics acquired in Malaysia since the end of the financial year. These clinics operate as Sountex in Singapore and Malaysia and Dynasound in Hong Kong. As with Abano’s other audiology businesses, Bay Audiology in Asia operates primarily through clinics in retail malls with high foot traffic.

The Asian market is characterised by high GDP growth with sophisticated consumer markets and behaviours and rapidly rising household incomes. Like New Zealand and Australia, one in nine people in Asia are affected by hearing difficulties. However, whereas 20 to 30 percent of these people are treated for hearing loss in New Zealand and Australia, in Asia the treatment rate is well below five percent. With limited existing providers and large prosperous populations, the Asian market provides a new opportunity for Abano with significant potential.

Although Greenfield development in New Zealand is expected to continue, the future high growth opportunities for Abano in audiology will be through the Bay Audio business in Australia and Bay Audiology in Asia. Both of these businesses are in their infancy in markets with large untapped potential.

This growth, for both Australia and Asia, will continue to be through the development of Greenfield sites in retail mall settings. This is partly because there are fewer desirable acquisitions or because the market is at its infancy. Greenfields also provide significantly lower upfront investment and capital costs compared to growth by acquisition. While Greenfield sites are generally cash negative during the early start up months, they have good return on investment over time as each store moves out of its start up phase.

As part of growing into Australia and Asia, the audiology businesses will continue to partner with local clinicians and management. This is to ensure that there is the appropriate management team in place in each region, who understand the local customs, cultures and traditions. Abano is also being assisted in its move into the Asian audiology market by a world-wide agreement with Siemen’s Group, which provides mutual benefits to both parties and provides a lower risk entry into Asia for Abano.

Operational Performance

Operational Performance Table

* After allocation of corporate overhead
1. Seventy percent of Bay Audiology acquired in October 2005
2. Entry into Australian market
3. Entry into the Asian market in December 2008

BAY AUDIOLOGY NEW ZEALAND

2009 Highlights and Achievements

  • Continued year on year business growth
  • Acquired Dunedin Hearing with six clinics across Dunedin and Central Otago
  • Strengthened management team with appointment of senior executive team
  • Intranet site introduced as part of broader communication improvement programme to improve cross-site employee communication

Focus for 2010

  • Introduction of new financial IT platform
  • Rollout of new clinic IT platform
  • Continuously improve all business processes and drive return on investment measurement into all results
  • Ensure robust business processes and business improvement
  • Year on year growth from existing sites, new site growth and transitioning visiting clinics into full time clinics
  • Improve on all productivity measures across the business

BAY AUDIO AUSTRALIA

2009 Highlights and Achievements

  • Continued development of strong business platform for future growth
  • Acquisition of King Hearing with four permanent sites and opening of seven permanent Greenfield retail locations
  • Strengthened senior management team with appointment of Human Resource Officer, Operations Manager and Marketing Manager
  • Introduction of Touchscreen self assessment hearing technology
  • Roll out of retail mall based clinics

Focus for 2010

  • Development of more retail oriented marketing initiatives
  • Continued and accelerated rollout of retail sites in large shopping centres
  • Recruit more retail and sales oriented staff
  • Engender a retail oriented focus across the network with ongoing training and advice
  • Develop operational systems and structure to support a large retail chain

BAY AUDIOLOGY ASIA

Highlights and achievements for 2009

  • Entered the Asian market with the acquisition of three Sountex clinics in Singapore and two Dynasound clinics in Hong Kong
  • Acquired the two remaining Sountex franchisees in Singapore
  • Opened two more stores in Hong Kong later in the financial year
  • Appointed regional manager to manage Singapore and retained the owner of Dynasound to oversee Hong Kong

Focus for 2010

  • Consolidate the new investments, including Malaysian acquisitions announced in July 2009, and integrate them into the Bay portfolio
  • Focus on growth and securing long term dominant position in the Asian market
  • Continue to identify opportunities in retail malls
  • Open new, high profile retail focussed clinics in Singapore and Hong Kong