Integral Diagnostics to expand NZ footprint with acquisition of Ascot Radiology

Australian medical imaging services company Integral Diagnostics (ASX: IDX) plans to extend its New Zealand footprint by year end with the $47.7 million acquisition of specialist imaging technology firm Ascot Radiology.

The purchase consideration will comprise $38.2 million in cash and $9.5 million in new ordinary Integral shares to be issued at $3.48 per share to 17 specialist vendor doctors on completion of the transaction.

It will be partly funded by Integral’s cash reserves of $55 million and committed cash advance facilities, of which $75 million remains undrawn.

Chief executive officer Dr Ian Kadish said the Ascot purchase would complement Integral’s existing New Zealand business.

“Ascot’s radiologists, specialists and staff represent a strong strategic and cultural fit with [our] doctor-led operating model,” he said.

“The clinics have a demonstrated track record of achieving strong earnings growth and will add significant value to our group.”

Clinic network

Ascot Radiology comprises nine diagnostic imaging clinics, including key sites at Ascot Private Hospital in Auckland, and contracts with 22 private and public sector doctors specialising specialists in oncology, gynaecology, obstetrics, paediatrics, breast, chest and musculoskeletal imaging.

The clinics provide complex technologies including magnetic resonance imaging (MRI), computerised tomography (CT) scanning, positron emission tomography (PET) scanning and nuclear medicine, which Integral said are positioned to experience significant growth.

The acquisition will create a new entity known as Integral Diagnostics New Zealand Radiology group housing a considerable depth of imaging expertise and clinical services.

COVID-19 impact

Integral today confirmed it could expect to experience a continued and undefined impact from the COVID-19 pandemic and associated government response.

Government-imposed restrictions – specifically, the cancellation of elective surgery and sporting activities, a slowdown in regular hospital activity, and patient reluctance to visit doctor offices – had resulted in significant declines in diagnostic imaging volumes.

During the peak of the restriction period in April, Integral’s patient revenue had declined against pre-COVID-19 expectations by between 24% and 50% across all business units.

The figures began to improve in May, in line with an easing of restrictions, with declines against expectations of between 5% and 16%.

Dr Kadish said the start of June had been positive with patient revenue continuing to gradually improve at most sites.

“We closed eight of our smaller community sites [during the restriction period] and three of these sites have since been re-opened with the other five under consideration for re-opening,” he said.

“Our new Hope Island site on the Gold Coast commenced operations this month – two months later than originally planned – and patient activity has been positive to date.”

At mid-morning, shares in Integral were trading 12.16% higher at $4.15.