Australia-based Integral Diagnostics buys Ascot Radiology for up to $52.8 million

Ascot has contracts with 22 of Auckland's diagnostic imaging specialists in oncology, gynaecology, obstetrics, paediatrics, breast, chest and musculoskeletal imaging. Photo / 123RF

Integral Diagnostics has bought Auckland-based Ascot Radiology for up to $52.8 million paid in a mix of $40m of cash, $10m of shares and an earnout of up to $2.8m to 17 vendor doctors.

"We are pleased to have extended our footprint in New Zealand with premier radiology partners who strongly complement our existing New Zealand business," said IDX managing director Ian Kadish.

Melbourne-based IDX already owns Trinity MRI, which is based in Auckland and specialises in brain, spine and neurovascular imaging, and an SRG Radiology-branded clinic in Manukau.

"The group's radiologists, specialists and staff represent a strong strategic and cultural fit with IDX's doctor-led operating model," Kadish said.

"The clinics have a demonstrated track record of achieving strong earnings growth and will add significant value to the IDX group."

Diagnostic specialists

Ascot, which has contracts with 22 of Auckland's diagnostic imaging specialists in oncology, gynaecology, obstetrics, paediatrics, breast, chest and musculoskeletal imaging, has projected earnings before interest, tax, depreciation and amortisation between $5.6m and $6.4m in 2021.

The ebitda forecast is before implementing the new accounting standard for leases and IDX said the purchase would be per-share earnings accretive in its first year of ownership.

ASX-listed IDX said Ascot has high growth opportunities and strong margins and will generate cost and revenue synergy benefits.

IDX has cash reserves of about A$55m ($58.7m) and undrawn committed cash advance facilities of A$75m, some of which will be used to fund the purchase. IDX said its debt facilities don't mature until December 2021 and that it is in compliance with all its debt covenants.

Ascot chair Emma Parry said the sale will build on her company's 20-year success and enable its long-term growth.

"The resulting Integral Diagnostics New Zealand Radiology group will have an enviable depth and range of imaging expertise and clinical services," Parry said.

The shares issued to settle the sale will be subject to escrow arrangements stretching out to five years.

Abano's exit

Ascot used to be part of the Abano Healthcare group of health-related business, with Abano first buying into it in 2005. In 2018, Abano sold its 71 per cent stake back to the clinicians for $17m. By then most of Abano's business was owning dental practices and Ascot was no longer a good fit.

Earlier today, IDX updated ASX on the cost-saving measures the group has taken to cope with the impact of the coronavirus crisis, which included negotiating cuts to the cost of leasing equipment and to rents across 72 leased properties

The group has also received about A$1.8m through Australia's JobKeeper programme and about $100,000 from the New Zealand government's wage subsidy programme.

IDX shares traded as high as A$4.30 after the two announcements, from A$3.70 yesterday. They were recently quoted at A$4.06, up 9.7 per cent on the day, and up 9.1 per cent year to date.