Annual Report 2018
Contents
About us
We pride ourselves in the quality
care and service that we deliver, in
the trust that our referrers have in us,
and in being the preferred provider
to our patients. We always put our
patients first, and in so doing we
also put our shareholders first.
02 Chairman’s Report
04 Managing Director and Chief
Executive Officer’s Report
06 Directors’ Report
14 Remuneration Report
24 Auditor’s Independence Declaration
25 Operating and Financial Review
33 Consolidated Statement
of Profit or Loss and Other
Comprehensive Income
34 Consolidated Statement
of Financial Position
35 Consolidated Statement
of Changes in Equity
36 Consolidated Statement
of Cash Flows
37 Notes to the Financial Statements
71 Directors’ Declaration
72 Independent Audit Report
78 Shareholder Information
81 Corporate Directory
Integral Diagnostics Limited ABN 55 130 832 816
Our locations
Victoria
// Ballarat (5 sites)
// Geelong (10 sites)
// Melbourne metropolitan (1 site)
// Outer western areas of Melbourne (9 sites)
// Warrnambool (2 sites)
Queensland
// Gold Coast (11 sites)
// Mackay (1 site)
// Toowoomba (1 site)
Western Australia
// South west Western Australia (9 sites)
New Zealand
// Auckland (4 sites)
Integral Diagnostics Limited ABN 55 130 832 816
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01
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
Chairman’s report
The strong financial performance of 20.5%
organic operating NPAT growth, was driven by solid
underlying services growth and the realisation of
significant cost efficiencies delivering a 1.5% uplift
to an industry leading margin of 20.1%.
Dear Shareholders,
On behalf of the Board, I present
the 2018 Annual Report for Integral
Diagnostics Limited.
Integral Diagnostics (IDX) delivered
20.5% organic operating NPAT growth
in line with guidance, and basic
operational EPS growth of 20.7%.
The performance of the Company
over the 12 months ended 30
June 2018 (FY18) was a material
improvement in operating margin
and key financial metrics.
This result was achieved despite the
significant distraction of an unsolicited
and hostile takeover bid in FY18, clearly
proven not to be in the best interests
of IDX shareholders. I commend the
Board and management’s diligence
and unwavering focus on value for our
shareholders throughout this time.
FY18 results delivered through
strategy execution
FY18 has seen IDX’s new management
team in place, working collaboratively
with our market leading radiologists,
executing on our attractive prospects
and clearly defined growth strategy,
underpinned by a diversified,
medically led business model.
The strong financial performance of
20.5% organic operating NPAT growth,
was driven by solid underlying services
growth and the realisation of significant
cost efficiencies delivering a 1.5% uplift
to an industry leading margin of 20.1%.
Operating revenue was up 5.9% to
$188.1 million, with organic growth
being delivered across all business
units by leveraging off our highly
developed hub and spoke model.
Whilst a strong result, revenue growth
was impacted by impaired access in
Q1 and the Commonwealth Games
on the Gold Coast in April 2018.
Underlying examination volume growth
was 6.7%. This was above Medicare
data of 5.7% in the States in which we
operate, with significant volume growth
coming from reporting contracts and
non-Medicare related imaging showing
the strength of our materially more
diversified model than typical industry
participants. IDX also provides a greater
level of higher value modalities than
the industry in general.
Importantly through disciplined cost
management executed and continuing
to be underway, IDX only incurred
expenditure growth of $6.6 million,
resulting in an underlying NPAT
performance of $18.2 million, which
was $3.1 million above FY17. Free
cash flow was up 27.9% to $30.7m.
At 30 June 2018 IDX had net debt of
$44.9 million and comfortable gearing
at 1.2X Net Debt to EBITDA.
On the 2nd of July 2018, IDX completed
the acquisition of specialist radiology
businesses Specialist Radiology Group,
Trinity MRI and Cavendish Radiology in
Auckland, New Zealand as well as the
acquisition of Geelong Medical Imaging
(GMI) in Australia. These acquisitions
represent a strong strategic, clinical and
cultural fit with our doctor led model
and we look forward to their successful
integration.
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Integral Diagnostics Annual Report 2018
Reflecting the company’s strong
financial performance and outlook,
and despite the costs incurred in the
takeover response, your Board was
pleased to announce a fully franked
final FY18 dividend of 4.0 cents per
share, taking the full year FY18 dividend
to 8.0 cents per share fully franked, in
line with a payout ratio of 65-75% of net
profit after tax and amortisation.
Transformational change
under fresh leadership
The successful execution of IDX’s
strategy has been led by our new
leadership team in place. Dr Ian Kadish
commenced as CEO and Managing
Director from 22 May 2017 and Anne
Lockwood was appointed as Chief
Financial Officer (CFO) on 1 December
2017, after previously being IDX’s
Financial Controller and Interim
CFO from 1 September 2017.
In February 2018, our CEO restructured
the management team, strengthened
the role of our General Managers and
the position of Chief Operating Officer
was made redundant.
Raelene Murphy joined the Board as
a non-executive Director on the 1st
October 2017 and is also the Chair of
the Audit and Risk Committee. Raelene
has extensive experience as Chair of
Audit and Risk Committees for ASX
listed companies and has already been
a valuable addition to our skilled and
diverse board.
Future prospects for further
growth are positive
The regulatory environment is generally
positive across Australia and New
Zealand whilst technological advances
continue to expand the range of clinical
indications for diagnostic imaging
solutions. This has improved diagnosis
and treatment, and assisted in avoiding
unnecessary invasive procedures
and reduced unnecessary hospital
admissions.
The introduction of a MBS rebate
for MRI Prostate is an example of the
critical benefits of diagnostic imaging
to patients, referrers and total health
care costs in modern medicine.
Prostate cancer is the most common
cancer in males with 17,729 new cases
of prostate cancer diagnosed in
2018 in Australia.
Prostate MRI has been proven to
improve the accuracy of prostate
cancer diagnosis by enhancing
detection of significant cancer requiring
treatment whilst also reducing treatment
of insignificant cancer. The use of
MRI following an elevated PSA can
help clinicians decide if a biopsy is
necessary. A British study published
in the Lancet Medical Journal found
that using MRI could prevent one in
four men from having an unnecessary
biopsy. Biopsies are more costly than a
MRI and come with discomfort and risk
of complications.
our culture and high end clinical focus,
and are earnings accretive to deliver
sustainable value to shareholders.
Given our MRI licences and high end
clinical expertise, this change will be
highly beneficial to Integral Diagnostics.
The MBS benefits will be partially offset
by the new restriction on GP referred
knee MRIs.
A select number of MBS diagnostic
imaging items are proposed to have
indexation re-instated from 2020.
We continue to support the campaign
to improve patient affordability of all
diagnostic imaging services by re-
instating indexation from 2020 across
all MBS diagnostic imaging items.
Diagnostic imaging has now operated
for 20 years without MBS indexation.
Looking forward, Integral Diagnostics
has a solid growth platform to
capitalise on the favourable healthcare
industry dynamics particularly evident
in diagnostic imaging – improving
technology, a continuation in the trend
towards prevention and early diagnosis
and a shift to more complex modalities.
Integral Diagnostics will continue
to pursue appropriate acquisition
opportunities that are in strategic
alignment with our doctor led model, fit
IDX is shaping as a true leader in
comprehensive, specialised and
regional diagnostic imaging.
The support of our shareholders has
been greatly valued by the Board and
we thank you. Special thanks to the
exceptional radiologists, imaging and
support staff of Integral Diagnostics
who work together to contribute daily
to patient diagnosis critical to accurate
health care evaluation and treatment.
We are essentially a people and
technology company. It is our
exceptionally talented people partnered
with high end clinical technology that
ensures patients are at the heart of
everything we do and get the very
best of health care. This is what
differentiates us.
Yours sincerely,
Helen Kurincic
Chairman
Integral Diagnostics Annual Report 2018
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Integral Diagnostics Annual Report 2018
Managing Director and
Chief Executive Officer’s Report
Building on our history of successfully acquiring
and integrating strategically compelling, fast-growing
diagnostic imaging businesses, we will continue
to pursue attractive acquisitions that fit our criteria,
add scale and scope, build our quality, service
and reputation, and are earnings accretive.
Dear Fellow Shareholders,
I am proud to have led Integral
Diagnostics during this exciting phase
of the Company’s development, as we
expand our service offering to growing
patient populations in Australia and
New Zealand.
Over the past year, we have performed
over a million diagnostic imaging
tests, have served more than 500,000
patients, and have consulted and
reported for more than 20,000 doctors
and other health professionals. In the
process we have grown our volumes
by almost 7%, and have organically
grown our operating earnings by
more than 20%.
Over the period we have seen our
share price increase by around 90% as
investors have come to recognise the
value that we offer in the fast growing
healthcare imaging market. We have
executed material acquisitions that
increased our earnings base by a third,
and have expanded the scale and
scope of our service offering with the
completion of important greenfields and
brownfields in Victoria and Queensland.
On July 2nd, we acquired a
comprehensive diagnostic imaging
business in Victoria, and we expanded
into New Zealand with the acquisition
of leading clinics in fast growing
patient populations in Auckland
and its surrounding suburbs.
At Integral Diagnostics, we pride
ourselves in the quality care and service
that we deliver, in the trust that our
referrers have in us, and in being the
preferred provider to our patients. We
always put our patients first, and in so
doing we also put our shareholders first.
We passionately believe that good
medicine is good business.
Operational Focus
delivering results
Integral Diagnostics is ideally positioned
as a focussed, comprehensive
diagnostic imaging company that is
substantially owned by its radiologists,
is passionate about quality care and
clinical leadership, and is a market
leader in each geography that we
service. Our concentrated presence
and comprehensive service offering in
growing markets position us well for
profitable expansion and development.
FY18 was a busy year operationally. We
successfully executed several important
initiatives that underpin the continued
growth of our business and earnings,
while delivering “best-in-class” clinical
services and the industry’s highest
reported margins.
The executed initiatives ensure that we
continue to provide the highest quality
care, while also improving our market-
leading margins. The improvements
in productivity and resource utilisation
over the period position the group well
to support the increased volume of
diagnostic imaging services expected
as referrers, and increasingly patients
themselves, become more aware of the
quality, cost and life-saving benefits that
diagnostic imaging provides.
In FY18, we delivered the following
major milestones:
• Installed new call centres in
Queensland and Western Australia,
considerably improving patient triage,
service and access for patients and
referrers
04
Integral Diagnostics Annual Report 2018
• Upgraded clinical systems improving
medical imaging, efficiency and
referrer engagement
• Opened the Spine Centre of
Excellence on the Gold Coast
• Installed a new wide bore MRI
in Mackay
• Undertook a major refurbishment and
expanded services at the 300 bed
St John of God Private Hospital in
Geelong
• Installed and commissioned a new
PET facility in Geelong, the first private
PET service in the city, our second
PET service in Victoria, and the fourth
PET service in the Integral group.
• Acquired Geelong Medical Imaging
in Victoria, including two radiology
clinics specialising in musculoskeletal
services (completed on July 2nd,
2018)
• Expanded into New Zealand with the
acquisition of Specialist Radiology
Group, Trinity MRI and Cavendish
Radiology, that comprise leading
specialist radiology clinics in Auckland
(completed on July 2nd, 2018)
Well positioned to continue
our growth trajectory
Our priorities for the year ahead build
on our achievements in FY18 and
enhance our growth platform into
FY19 and beyond.
We remain focused on further margin
improvement through disciplined
cost management and technology
improvements, and driving further
growth organically and through
value accretive acquisitions.
Growth will be achieved organically
by leveraging the infrastructure and
resources already in place, through
investment in key strategic relationships
with private hospital groups and
referrers, and through developing
our specialised diagnostic centres
of excellence.
Our disciplined capital expenditure
programme will see us continue to
invest in, and implement, leading edge
technology solutions that will improve
the efficiency of our operations and
further enhance the quality care and
service provided to Integral Diagnostic’s
patients and referrers.
Building on our history of successfully
acquiring and integrating strategically
compelling, fast-growing diagnostic
imaging businesses, we will continue
to pursue attractive acquisitions that fit
our criteria, add scale and scope, build
our quality, service and reputation, and
are earnings accretive at appropriate
multiples.
Industry conditions in Australia and
New Zealand are more favourable
for medical imaging as major payers
increasingly recognize the benefits
that these critical diagnostic services
offer to patients, referrers, insurers,
employers and to society as a whole.
Quality medical imaging help referrers
to reach a diagnosis faster, allow
patients to avoid more invasive and
more expensive surgical procedures,
and enable patients to return to work
sooner. Medicare Australia recently
recognized some of these benefits in
adding Prostate MRI to the Medicare
Benefits Schedule.
Integral Diagnostics is privileged to
work with some of the world’s finest
radiologists, specialists, clinical and
support teams. Integral is committed to
working with our radiologists, and with
the Royal Australia and New Zealand
College of Radiology (RANZCR), to
ensure that ANZ continues to educate,
train, attract and retain some of the
finest radiologists in the world. To that
end, Integral Diagnostics is proud
to have sponsored the College’s
2017 Graduation Ceremony for new
RANZCR-trained radiologists, and has
committed to sponsor it again this year.
I would like to take this opportunity to
thank our referrers, doctors and staff for
their ongoing support and commitment.
Without them, we wouldn’t be a leading
diagnostic imaging provider in Australia
and now also in New Zealand.
We look forward to continuing our
growth trajectory – to delivering quality
care to our patients, outstanding service
and valuable insights to our referrers, a
preferred place to work for our doctors
and staff, and growing returns for our
shareholders.
Sincerely,
Ian
Dr Ian Kadish
Managing Director and
Chief Executive Officer
Integral Diagnostics Annual Report 2018
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Integral Diagnostics Annual Report 2018
Directors’ Report
Directors’ Report continued
For year ended 30 June 2018
For year ended 30 June 2018
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the ‘Group’) consisting of Integral Diagnostics Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities
it controlled for the year ended 30 June 2018.
The information referred to below forms part of, and is to be read in conjunction with, this Directors’ Report:
• the Operating and Financial Review (OFR) on pages 25 to 32; and
• the Remuneration Report on pages 14 to 23.
Directors
The following persons were Directors of Integral Diagnostics Limited during the whole of the financial year and up to the date
of this Report, unless otherwise stated:
Helen Kurincic (Independent Non-Executive Chairman)
Dr Ian Kadish (Managing Director and Chief Executive Officer)
Dr Chien Ping Ho (Executive Director)
Dr Sally Sojan (Executive Director)
John Atkin (Independent Non-Executive Director)
Rupert Harrington (Independent Non-Executive Director)
Raelene Murphy (Independent Non-Executive Director)
Appointed 1st October 2017
Principal activities
During the financial year, the principal activity of the Group was the provision of diagnostic imaging services.
Business strategies, prospects and likely developments
The OFR on pages 25 to 32 of the Annual Report sets out information on the business strategies, prospects and likely
development for the future financial years.
Review and results of operations
A review of the operations of the Group during the financial year, the results of those operations and the financial position
of the Group is contained in the OFR on pages 25 to 32.
Dividends paid in the year ended 30 June 2018
Dividends paid/payable during the financial year were as follows:
Final Dividend paid to shareholders of the company.
Interim Dividend paid to shareholders of the company.
Consolidated
30 June 2018
$’000
5,802
5,802
30 June 2017
$’000
5,802
4,351
Significant changes in the state of affairs
There were no significant changes to the state of affairs of the Group during the financial year.
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Integral Diagnostics Annual Report 2018
Matters subsequent to the end of the financial year
On 2nd July 2018, the Group acquired the assets and liabilities of the Specialist Radiology Group, Trinity MRI and Cavendish
Radiology in Auckland New Zealand (referred to as the New Zealand transaction).
The three businesses combined:
• Comprise the leading specialist radiology clinics in Auckland.
• Employ and contract several of the nation’s leading specialists in musculoskeletal radiology and neuroradiology.
• Have a projected EBITDA contribution of NZ$13 million to NZ$14 million (A$12 million to A$13 million1) for FY19.
• A high growth business with strong margins.
• Provides a premier platform for Integral Diagnostics to enter and grow in New Zealand.
The key terms of the acquisition included:
• A purchase consideration of NZ$105 million (A$99.03 million) on a cash and debt free basis, comprising NZ$80 million
(A$75.3 million) in cash and NZ$25 million (A$23.25 million) in IDX equity.
• 80% of the equity will be held in escrow for up to five years.
• A five year staged earn-out for vendor radiologists based on earnings outperformance.
This strategic acquisition includes four clinics, employing 14 radiologists working in both the public and private sectors.
The clinics are market leaders in providing complex modalities including MRI, CT and SPECT CT (nuclear medicine), which
are high margin services positioned to experience significant future growth. The clinics are fitted with state of the art equipment.
Also on 2nd July 2018, the Group acquired the assets and liabilities of Geelong Medical Imaging (GMI), which comprises
two radiology clinics in Geelong, Victoria. These clinics comprise a number of modalities, including X-Ray, ultrasound, CT,
MRI and nuclear medicine.
The key terms of the acquisition include:
• A purchase consideration of $3.15 million on a cash and debt free basis.
• $1.05 million in IDX equity (subject to voluntary escrow).
• $1.40 million of deferred cash.
See Note 38 to the financial statements for full detail of these transactions.
Subsequent to year-end, a fully franked dividend of 4 cents per share was declared and will be paid on 2 October 2018.
Other than as disclosed in the financial statements, the Directors are not aware of any other matters or circumstances that have
arisen since the end of the financial year which have significantly affected or may significantly affect the operations of the Group,
the results of those operations or the state of affairs of the Group in subsequent financial years.
Environmental regulations
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
During the financial year the Group was not convicted of any breach of environmental regulations.
Integral Diagnostics Annual Report 2018
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Integral Diagnostics Annual Report 2018
1. Based on forecast average weighted exchange rate of $NZ1 to $AUD0.93.
Directors’ Report continued
For year ended 30 June 2018
Information Directors
Ms Helen Kurincic was appointed as an independent Non-Executive
Director and Chairman of the Company in December 2014, preceding
listing on the ASX on 21 October 2015 and is the Chairman of the
Nomination Committee and a member of the People and Remuneration
Committee and the Audit, Risk and Compliance Committee.
Helen has deep Executive and Board-level experience across the
healthcare industry. She is currently a Non-Executive Director of HBF
Health Limited, Estia Health Limited (ASX: EHE) and Sirtex Medical Limited
(ASX: SRX), and is a senior advisor in the healthcare sector. Previously,
Helen was the Chief Operating Officer and Director of Genesis Care from
its earliest inception, creating and developing the first and largest radiation
oncology and cardiology business across Australia. Prior to that Helen
held various executive and non-executive healthcare sector roles including
Non-Executive Director of DCA Group Ltd (diagnostic imaging services in
Australia and the United Kingdom), Non-Executive Director of AMP Capital
Investors Domain Principal Group, CEO of Benetas and Non-Executive
Director of Melbourne Health and Orygen Research Centre.
Helen has also been actively involved in healthcare government policy
reform including appointments by health ministers as Chair of the
Professional Programs and Services Committee for the Fourth Community
Pharmacy Agreement and Member of the Minister’s Implementation
Taskforce and Minister’s Reference Group for the Long Term Reform
of Aged Care.
Helen Kurincic
Independent Non-Executive Chairman
MBA, FAICD, Grad Dip Wom Stud,
PBC Crit Care, Cert Nsg
Former directorships (in the last three years)
None
Special responsibilities
Member of the Audit, Risk and Compliance Committee and People and
Remuneration Committee, Chair of the Nomination Committee
Interests in shares
420,870 ordinary shares (indirectly)
Dr Ian Kadish was appointed Managing Director and Chief Executive
Officer of Integral Diagnostics on 22 May 2017. Ian began his career
as a medical doctor in Johannesburg, South Africa.
He subsequently completed an MBA at the Wharton Business School at
the University of Pennsylvania (Dean’s List, May 1990) and followed this
with several roles overseas including CSC Healthcare, McKinsey and
Company, and Netcare, a major hospital group in South Aftrica and the
United Kingdom where Ian was an Executive Director from 1997 to 2006.
Ian was instrumental in growing the group from five hospitals with
a revenue of $60 million, to 119 hospitals and revenue of $3 billion.
Since migrating to Australia in 2006, Ian’s roles have included CEO
and MD of Healthcare Australia, CEO and MD of Pulse Health Group
(ASX-listed hospital group) and CEO of Laverty Pathology.
Dr Ian Kadish
Managing Director and Chief Executive Officer
MBBCh, MBA
Former directorships (in the last three years)
None
Special responsibilities
None
Interests in shares
66,202 ordinary shares, 362,585 rights
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Integral Diagnostics Annual Report 2018
Dr Chien Ping Ho is a fellow of the Royal Australian and New Zealand
College of Radiologists and an accredited MRI supervising radiologist.
Upon completion of his radiology training at The Royal Melbourne
Hospital, Dr Ho undertook advanced training at three London hospitals:
Chelsea and Westminster Hospital, The Royal National Orthopaedic
Hospital and University College Hospital.
During this time he completed an MRI/musculoskeletal fellowship and also
spent time as a staff specialist. Dr Ho commenced with Lake Imaging in
2004 and is currently a consultant radiologist for Integral Diagnostics in
Victoria Dr Ho has considerable experience across all radiology modalities
with a special interest in musculoskeletal imaging, body MRI (including
prostate) and Cardiac CT.
Dr Chien Ping Ho
Executive Director
MBBS, FRANZCR, GAICD
Former directorships (in the last three years)
None
Special responsibilities
Chair of the National Clinical Leadership Committee
Interests in shares
2,343,630 ordinary shares (indirectly)
Dr Sally Sojan graduated from the University of Queensland with
a medical degree.
Dr Sojan completed her radiology fellowship at the Princess Alexandra
Hospital in Brisbane. Dr Sojan then completed her nuclear medicine and
PET qualifications at The Royal Brisbane Hospital and The Royal Adelaide
Hospital followed by an MRI fellowship at The Mater Private Hospital
in Brisbane.
Dr Sojan commenced working at South Coast Radiology where she
established the first PET service on the Gold Coast. Her specialty interests
include nuclear medicine and PET and musculoskeletal MRI. Dr Sojan was
previously the Chair of the South Coast Radiology Board Meetings and
has been a board member of Integral Diagnostics for four years.
Dr Sally Sojan
Executive Director
MBBS, FRANZCR, FAANMS,GAICD
Former directorships (in the last three years)
None
Special responsibilities
Member of the National Clinical Leadership Committee
Interests in shares
1,046,491 ordinary shares (indirectly)
Integral Diagnostics Annual Report 2018
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Integral Diagnostics Annual Report 2018
Directors’ Report continued
For year ended 30 June 2018
John Atkin is a Non-Executive Director of IPH Limited (ASX: IPH). John
is currently the Nomination and Remuneration Committee Chair of IPH
Limited and is a member of its Audit and Risk Committees.
John is also an independent director of the Commonwealth Bank
Group Superfund. John was a non executive director of Aurizon Limited
(ASX: AZJ) from 2010 to 2016 and Chair of GPT Metro (ASX:GMF)
for 2014 to 2016.
John was Chief Executive Officer and Managing Director of The Trust
Company Limited from 2009 to 2013 prior to its successful merger
with Perpetual Limited. Prior to joining the Trust Company, John was the
managing partner and Chief Executive Officer of leading Australasian law
firm Blake Dawson (now Ashurst). Before this, John was a senior mergers
and acquisitions partner of Mallesons Stephen Jacques (Now King &
Wood Mallesons). John is Chairman of the Australian Outward Bound
Foundation, a Director of Outward Bound International Inc, Chair
of Hunters Hill Environment Action Group Inc and a member of
the board of the State Library of New South Wales Foundation.
John Atkin
Independent Non-Executive Director
BA, LLB, FAICD
Former directorships (in the last three years)
Aurizon Holdings Limited, GPT Metro Office
Special responsibilities
Chair of the People and Remuneration Committee and a member of the
Audit, Risk and Compliance Committee and the Nomination Committee
Interests in shares
132,945 ordinary shares (indirectly)
Rupert Harrington joined the Integral Board on 1 October 2015 as an
experienced director with a wealth of experience in business strategy
and M&A.
Mr Harrington’s early career was in operational management in
United Kingdom and Australia. His career from 1987 was in private equity
where he has an excellent track record of delivering results for investors
in sectors including health, technology, services, and manufacturing.
This included Advent’s healthcare investments in Primary Health Care
and Genesis Care.
Mr Harrington is currently Chairman of Clover Corporation (ASX: CLV) and
Non-Executive Director of Pro-Packaging (ASX: PPG). At the end of 2017
he resigned as Non-Executive Director of Bradken Limited following its
successful acquisition by Hitachi.
Rupert Harrington
Independent Non-Executive Director
BTech, MSc, CDipAF
Former directorships (in the last three years)
Bradken Limited
Special responsibilities
Member of the Audit, Risk and Compliance Committee, the People
and Remuneration Committee and the Nomination Committee
Interests in shares
177,356 ordinary shares (directly) and 128,534 ordinary shares (indirectly)
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Integral Diagnostics Annual Report 2018
Ms Raelene Murphy was appointed as an independent Non-Executive
Director of the Company on 1 October 2017, and is the Chairman
of the Audit, Risk & Compliance Committee.
Raelene has over 30 years’ experience in strategic, financial and
operational leadership in both industry and professional advisory after
beginning her career in audit. She was formerly a Partner in a national
accounting firm, Managing Director of Korda Mentha and CEO of Delta
Group. In her professional advisory career she specialised in operational
and financial restructuring with a particular emphasis on merger
and acquisition integration across a range of significant public
and private companies.
Raelene is a Fellow of Chartered Accountants Australia and New Zealand
and has extensive experience as Chair of Audit and Risk Committees
for ASX Listed companies.
She is currently a Non-Executive Director of ASX listed Altium Limited
(ASX: ALU), Service Stream Limited (ASX: SSM), Bega Limited (ASX: BGA)
and Clean Seas Seafood Limited (ASX: CSS).
Raelene Murphy
(Appointed 1 October 2017)
Independent Non-Executive Director
BBus, FCA, GAICD
Former directorships (in the last three years)
Tassal Group Limited and EVZ Limited
Special responsibilities
Chair of the Audit, Risk and Compliance Committee.
Interests in shares
12,835 ordinary shares (indirectly)
Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships
of all other types of entities, unless otherwise stated.
Former directorships (last three years)’ quoted above are directorships held in the last three years for listed entities
only and excludes directorship of all other types of entities, unless otherwise stated.
Integral Diagnostics Annual Report 2018
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Integral Diagnostics Annual Report 2018
Directors’ Report continued
For year ended 30 June 2018
Company Secretary
Kathryn Davies (BBus, CPA, GAICD) was appointed Company Secretary on 8 August 2017. Kathryn is an experienced executive
and company secretary with extensive commercial and corporate governance experience across international capital markets.
Her experience includes healthcare, mining, oil and gas, industrial and technology groups. She has significant experience
in negotiating and delivering on multi jurisdiction transactions and large scale, long term contracts as well as international
stakeholder management.
Sonia Joksimovic (BBus, AFIN, FGIA, GAICD) was Company Secretary until her resignation on 7 August 2017. Sonia is an
experienced chartered secretary with over nine years’ experience across listed small market capitalisation, unlisted and private
companies, specialising in governance, compliance and other corporate matters.
Meetings of Directors
Director
Helen Kurincic
Dr Ian Kadish
Dr Chien Ping Ho1
Dr Sally Sojan
John Atkin
Rupert Harrington
Raelene Murphy
Board
Held
26
26
25
25
26
26
22
Attended
26
26
23
25
26
26
21
Audit, Risk and
Compliance
Committee
People and
Remuneration
Committee
Nomination
Committee
Held
4
–
–
–
4
4
3
Attended
4
–
–
–
4
4
3
Held
6
–
–
–
6
6
–
Attended
6
–
–
–
6
6
–
Held
3
–
–
–
3
3
–
Attended
3
–
–
–
3
3
–
Held: represents the number of meetings held during the time the Director held office and was eligible to attend. A number
of additional Board meetings were convened during the period of the takeover bid resulting in a higher than usual number
of Board meetings held annually.
1. Dr Chien Ping Ho was on sabbatical and undertaking professional development overseas, he was unable to attend two meetings during this time.
Indemnity and insurance of officers
The Company’s Constitution requires the Company to indemnify any person who is, or has been, an officer of the Company,
including the Directors, Executives and the Company Secretary of the Company, on a full indemnity basis and to the full extent
permitted by law, against all losses or liabilities (including all reasonable legal costs) incurred by the officer as an officer
of the Company or of a related body corporate.
In accordance with the Company’s Constitution, the Company has entered into a deed of indemnity, insurance and access
with each of the Company’s Directors. Under the deeds of indemnity, insurance and access, the Company must maintain
a Directors’ and officers’ insurance policy insuring a Director (among others) against liability as a Director and officer of the
Company and its related bodies corporate until seven years after a Director ceases to hold office as a Director or a related
body corporate (or the date any relevant proceedings commenced during the seven-year period have been finally resolved).
No Director or officer of the Company has received benefits under an indemnity from the Company during or since the end
of the financial year.
During the financial year, the Company has paid a premium in respect of a contract insuring officers of the Company and
its subsidiaries against all liabilities that they may incur as an officer of the Company, including liability for costs and expenses
incurred by them in defending civil or criminal proceedings involving them as such officers, with some exceptions. Due to
confidentiality obligations and undertakings of the policy, no further details in respect of the premium or the policy can
be disclosed.
Indemnity and insurance of the auditor
The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
12
Integral Diagnostics Annual Report 2018
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of
the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on
behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for the non-audit services provided during the financial year by the auditor
are outlined in Note 28 to the financial statements.
The non-audit services provided were largely for work performed pertaining to compliance tax services, takeover response
and due diligence on transactions.
The Directors are satisfied that the provision of non-audit services provided during the financial year by the auditor (or by
another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 28 to the financial statements do not compromise
the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or
auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate
for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of PricewaterhouseCoopers
There are no officers of the Company who are former audit partners of PricewaterhouseCoopers.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 24.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
Rounding of amounts
The Company is a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding off’. Amounts in this Report and in the financial statements have been rounded off,
except where otherwise stated, in accordance with that Class Order to the nearest thousand dollars, or in certain cases,
the nearest dollar.
This Report is made in accordance with a resolution of Directors. On behalf of the Directors.
Integral Diagnostics Annual Report 2018
12
13
Integral Diagnostics Annual Report 2018
Helen Kurincic
Chairman
22 August 2018
Melbourne
Dr Ian Kadish
Managing Director and Chief Executive Officer
Remuneration Report
For year ended 30 June 2018
The Remuneration Report, which has been audited, outlines the Director and Executive remuneration arrangements for the
Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
Key Management Personnel (KMP) of the Group are those persons having authority and responsibility for planning, directing
and controlling the activities of the entity, directly or indirectly, including all Directors. The table below lists the KMP for the year
ended 30 June 2018 (FY18). All KMP held their position for the duration of FY18, unless otherwise noted.
Name
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Chien Ping Ho
Dr Sally Sojan
Executives
Anne Lockwood
Gregory Hughes
Craig Bremner
Position
Independent, Non-Executive Chairman
Independent, Non-Executive Director
Independent, Non-Executive Director
Independent, Non-Executive Director
Managing Director and Chief Executive Officer
Executive Director
Executive Director
Chief Financial Officer (commenced as interim CFO on 1 September 2017 and appointed
permanent CFO from 1 December 2017)
Chief Operating Officer (position made redundant and ceased to be KMP on 9 February 2018)
Chief Financial Officer (ceased on 31 August 2017)
For the remainder of the Report, the term ‘Executive’ refers to all Executive KMP except for Dr Chien Ping Ho and Dr Sally Sojan
who are both full time radiologists with the group.
The Remuneration Report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Other transactions with KMP and their related parties
D. Service agreements
E. Minimum Shareholding Policy
F. Additional disclosures relating to KMP
A. Principles used to determine the nature and amount of remuneration
The objectives of the Group’s Executive reward framework is to align Executive reward with the achievement of strategic
objectives, the creation of value for shareholders and ensures the reward for performance is competitive and appropriate
for the results delivered. The Board of Directors (‘the Board’) works to ensure that Executive reward satisfies the following
key criteria:
• competitiveness and reasonableness;
• acceptability and alignment to shareholders;
• performance linkage/alignment of Executive compensation; and
• transparency.
The Company’s remuneration policy for Non-Executive Directors aims to ensure that the Company can attract and retain
suitably qualified and experienced Non-Executive Directors.
14
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
15
People and Remuneration Committee
The People and Remuneration Committee (PRC) is governed by the PRC Charter and is responsible for reviewing and
recommending to the Board compensation arrangements for the Non-Executive Directors, Executive Directors, other KMP and
Senior Management including:
(a) contract terms, annual remuneration and participation in any short and long-term incentive plans.
(b) major changes and developments in the Company’s remuneration, superannuation, recruitment, retention and termination
policies and procedures.
(c) remuneration strategy, performance targets and bonus payments for the CEO and the Executives that report to the CEO.
(d) remuneration arrangements for the Chairman and the Non-Executive Directors of the Board, including fees, travel and other
benefits.
The PRC also reviews and makes recommendations to the Board in regards to ‘people’ by monitoring and reviewing the Senior
Management performance assessment process, reviewing major changes and developments in the personnel practices and
industrial relations strategies of the Group, senior leadership succession planning, and overseeing the effectiveness of the
Diversity Policy.
The following Non-Executive Directors, all of whom are regarded as independent, were members of the PRC for the entire
financial year:
John Atkin – Chairman
Independent, Non-Executive Director
Helen Kurincic
Independent, Non-Executive Director
Rupert Harrington
Independent, Non-Executive Director
Executives do not participate in any remuneration matters under the PRC Charter. The PRC meets quarterly or as often as
necessary in order to fulfil its role.
Use of remuneration consultants
The Board ensures that any recommendations made by consultants in relation to remuneration arrangements of KMP must
be made directly to the Board without any influence from management. The arrangements in place ensure any advice is
independent of management and includes management not being able to attend Board or Committee meetings where
recommendations relating to their remuneration are discussed.
During FY18, the Company did not receive any ‘remuneration recommendations’ as defined under the Corporations Act 2001
(Cth).
Comparative market benchmarking of Senior Executive remuneration was undertaken by the Chair of the PRC and discussed
with the Chair of the Board together with the Non-Executive Directors of the PRC.
Non-Executive Directors’ remuneration arrangements
Under the Constitution, the Board decides the remuneration to which each Director is entitled for his or her service as a Director.
However, the total aggregate amount provided to all Non-Executive Directors for their services as Directors must not exceed
in any financial year the amount fixed by the Company in general meeting. This amount has been fixed at $1,000,000.
The annual base Non-Executive Director fees currently agreed to be paid by the Company are $200,000 to the Chairman
and $100,000 to each of the other Non-Executive Directors.
The following additional annual fees are payable to Committee members for their service to their respective Committees, except
the Chairman of the Board:
• $20,000 will be paid to the Chair of the Audit, Risk and Compliance Committee and $10,000 will be paid to each member
of that Committee; and
• $12,000 will be paid to the Chair of the People and Remuneration Committee and $6,000 will be paid to each member
of that Committee.
Integral Diagnostics Annual Report 2018
14
15
Integral Diagnostics Annual Report 2018
Remuneration Report continued
For year ended 30 June 2018
All Non-Executive Directors’ fees include superannuation. No additional fees are paid to the Nomination Committee Chair
or members.
The PRC reviewed Directors’ fees during the year and determined that there would be no increase for the 2018 financial year.
There will also be no Director fee increase for the 2019 financial year.
Executive Directors’ remuneration arrangements
Dr Chien Ping Ho and Dr Sally Sojan are deemed to be Executive Directors as they are employed as radiologists by the Group.
The key terms of their employment contracts are consistent with all radiologist shareholders and include a fixed salary at market
rate plus allowances where appropriate and in line with market.
An Executive Director Board fee of up to $50,000 is paid to each of Dr Chien Ping Ho and Dr Sally Sojan.
Further details are provided on pages 21 and 22.
Executive remuneration arrangements
The Executive remuneration and reward framework for the 2018 financial year has three components:
• fixed remuneration (including base salary and superannuation) and non-monetary benefits;
• short-term performance incentives; and
• long-term performance incentives.
The combination of these comprises the Executives’ total remuneration.
An Executive’s remuneration arrangement is reviewed annually by the PRC, based on individual and business performance,
the overall performance of the Group and comparable market data. At risk remuneration consists of the short-term (STI) and
long-term (LTI) incentive programs which have been designed to align Executive remuneration with the creation of shareholder
value through achievement of strategic and financial objectives.
Remuneration mix
During the reporting period, the remuneration mix for each Executive is shown below:
Executives
Dr Ian Kadish
Anne Lockwood2
Gregory Hughes3
Craig Bremner4
Fixed Remuneration (%)
72%
80%
80%
80%
STI (%)
14%
17%
20%
20%
LTI (%)1
14%
3%
–
–
1. LTI calculated with reference to proportional allocation of annual expense of the maximum LTI opportunity from grant date.
2. Appointed KMP on 1 September 2017 as Interim CFO, formal CFO appointment approved 1 December 2017.
3. Position made redundant and ceased to be KMP on 9 February 2018.
4. Ceased to be KMP on 31 August 2017, ineligible to participate in the FY18 STI plan.
The percentage of remuneration that is ‘at risk’ LTI assumes all applicable performance conditions are achieved in full.
Details of Executive remuneration is set out below.
16
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
17
Fixed Remuneration
Delivery mechanism
Considerations
Strategic objective
Governance
• 100% cash payment including base salary and employer superannuation contributions
• Role scope and complexity
• The Executive’s skills and experience
• Industry benchmarking
• To attract and retain high quality Executives to deliver Company objectives
• Reward capability and experience
• Fixed remuneration is reviewed annually by the PRC with regard to market rates and
individual performance
• There are no guaranteed increases to fixed remuneration in employment contracts
Short Term Incentive (STI)
Delivery mechanism
• 100% cash payment
Performance period
• The FY18 STI targets were set at the commencement of FY18 and assessed by the PRC
after the end of the financial year, based on the Company’s audited annual results and
individual performance against non-financial targets.
Performance hurdles and
measures
NPAT Growth Hurdle
• A gateway is in place for all Executives which means a minimum NPAT target must be
achieved before any STI will be paid.
Financial Performance Target
• 50% of STI will be available based on achievement of year-on-year NPAT growth.
• NPAT growth was selected because it is better aligned to the creation of shareholder
returns.
Strategic Priority Targets
• 50% of STI will be available on achievement of non-financial strategic objectives and
priorities being safety and quality, business development, technology and organizational
capability transformation, which are all essential areas to positive outcomes for the
Company and its stakeholders. The PRC reviews each Executive’s performance against
these metrics to ensure Executives consider non-financial objectives when making
strategic decisions.
STI opportunity
Maximum STI opportunities are outlined below:
Executive
Dr Ian Kadish
Anne Lockwood
Craig Bremner
Gregory Hughes
Maximum opportunity
$100,000
$70,000
$83,000
$83,000
Strategic objective
• The Financial Performance Target and Strategic Priority Targets were chosen because they
are align with the short-term objectives of the business whilst consistent with the long term
strategy of the Company.
Governance
• Performance measures and objectives are clearly defined and measurable
• Targets are recommended by the PRC and approved by the Board
• Any incentive payment is not an entitlement and provided at the complete discretion
of the Board
FY18 outcome
• The operating NPAT result of $18.2m achieved the gateway hurdle requirement, therefore
triggering the STI payment. Refer to pages 21 and 22 for further details on the STI
payments.
Integral Diagnostics Annual Report 2018
16
17
Integral Diagnostics Annual Report 2018
Remuneration Report continued
For year ended 30 June 2018
Long Term Incentive (LTI)
Strategic objective
• The LTI Plan is designed to encourage Executives to focus on the key performance drivers
which underpin sustainable growth in shareholder value. It is also designed to align the
interests of Executives with the interests of shareholders by providing an opportunity
for Executives to receive an equity interest in the Company.
Participation by Executives
FY18 LTI award
• The CEO and CFO participated in the FY18 LTI Plan.
• The FY18 LTI award was delivered in the form of zero exercise priced options
(Performance Rights).
• The number of Performance Rights granted to participants was determined by use
of a face value methodology. A participant’s FY18 LTI award was divided by the volume
weighted average price of the Company’s shares traded on the ASX over the 30 trading
days up to 30 June 2017.
• Each Performance Right entitles the holder to one ordinary share in the Company
(or an equivalent cash payment in lieu of an allocation of shares) subject to the
satisfaction of an earnings per share performance condition.
• Performance Rights are granted by the Company at no cost to the participant and no
payment is required to be made on vesting and exercise of the Performance Rights.
• Performance Rights will automatically be exercised on vesting.
• Performance Rights do not carry any voting or dividend entitlements prior to vesting
and exercise.
Performance Period
Performance condition and
measures
The FY18 LTI Performance Rights will be tested based on performance over a 4 year period
commencing on 1 July 2017 and ending on 30 June 2021.
• The FY18 Performance Rights will vest subject to the satisfaction of an earnings per share
(EPS) performance condition.
• The EPS performance condition will be measured by reference to the compound annual
growth rate (CAGR) of the Company’s EPS over the Performance Period.
• EPS measures the earnings generated by the Company attributable to each share on
issue on a fully diluted basis.
• The EPS performance condition was selected because of its correlation with long-term
shareholder return and its lower susceptibility to short-term share price volatility.
• Calculation of EPS, the CAGR of the EPS and achievement against the performance
condition will be determined by the Board in its absolute discretion, having regard to any
matters that it considers relevant (including any adjustments for unusual or non-recurring
items that the Board consider appropriate).
The percentage of Performance Rights that will be eligible for vesting (if any) will be
determined as follows:
Company’s EPS CAGR over
the Performance Period
Less than 5% p.a.
Equal to 5% p.a.
Between 5% and 15% p.a.
Equal to, or above, 15% p.a.
% of FY18 Performance Rights that Vest
Nil
20%
Straight line pro rata Vesting between 20% and 100%
100%
Assessment of performance
condition
• EPS growth rate is to be calculated with reference to underlying earnings (operating1).
• The method of assessing the EPS performance condition has been chosen as the Board
believes it is the most appropriate way to assess the true financial performance of the
Company and determine remuneration outcomes.
18
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
19
Testing of performance
condition
• Testing of the Performance Rights is expected to occur in FY22, shortly after the
end of the Performance Period.
• Any Performance Rights that vest will be automatically exercised, and participants are not
required to pay an exercise price. Any remaining Performance Rights that do not vest
will lapse.
• If none of the FY18 Performance Rights vest following testing after the end of the
Performance Period due to some extreme event or circumstance, the Board may decide to
re-test the performance condition at the end of a further one year period ending on 1 July
30 June 2022. Any FY18 Performance Rights that do not vest after the re-test will lapse
immediately.
Additional restrictions
• Participants in the LTI Plan must elect to place an additional dealing restriction, by way
Treatment of cessation2
of a holding lock, on any shares they may receive on vesting and exercise of the
Performance Rights.
• The minimum additional restriction period applies until 1 July 2022 and the maximum
additional restrictions period applies until 1 July 2029 (or 1 July 2030 where the
Performance Rights vest following re-testing).
• Where a participant ceases employment for cause or due to resignation (other than due to
death, permanent disability or serious illness) all unvested Performance Rights will lapse,
unless the Board determines otherwise.
• In all other circumstances, a pro rata portion of Performance Rights (based on the portion
of the Performance Period that has elapsed) will remain on foot and be subject to the
original performance condition (including that the Performance Rights will be eligible
for re-testing), as though the participant had not ceased employment, unless the Board
determines otherwise.
Change of control
• Where there is takeover bid or other transaction, event or state of affairs that in the
Board’s opinion is likely to result in a change in control of the Company, the Board has
the discretion to accelerate vesting of some or all of the Performance Rights (but not less
than a pro rata portion (calculated based on the portion of the Performance Period that
has elapsed and tested based on performance against the performance condition to that
date)). Where only some of the Performance Rights are vested on a change of control, the
remainder of the Performance Rights will immediately lapse.
• If an actual change of control occurs before the Board exercises its discretion, a pro rata
portion of the Performance Rights (equal to the portion of the relevant Performance Period
that has elapsed up to the change of control) will be tested based on performance against
the performance condition to that date. The Board retains a discretion to determine
whether the remaining unvested Performance Rights will vest or lapse.
• The Board has broad “clawback” powers to determine that any Performance Rights
granted under the LTI Plan may lapse, shares allocated on vesting and exercise be
forfeited, or cash payments or dividends be repaid in certain circumstances (e.g. in the
case of fraud or gross misconduct). This protects the Company against the payment
of benefits where participants have acted inappropriately.
Forfeiture and clawback
Governance
• The performance condition and objectives are clearly defined and measurable
• Any grant is not an entitlement and provided at the complete discretion of the Board
1. Operating defined as NPAT before one-off costs.
2. For FY18, the Board has determined that in the event of the CEO or CFO ceasing employment as a good leaver their full FY18 Performance
Rights would stay on foot.
Company performance
The Company aims to align its Executive remuneration to its strategic and business objectives and the creation of shareholder
value. The table below shows measures of the Group’s financial performance over the last three years. The Company listed on
the ASX in October 2015. As a result, it is not possible to address the statutory requirement that the Company provides a five-
year discussion of the link between performance and reward in this Remuneration Report as the Company has not been listed
for a sufficient time.
Integral Diagnostics Annual Report 2018
18
19
Integral Diagnostics Annual Report 2018
Remuneration Report continued
For year ended 30 June 2018
The link between the Company’s performance and STI and LTI outcomes is considered in the sections below.
Key Measures of the Group
Operating EBITDA1 as a % of revenue
Operating NPAT2 as a % of Revenue
EPS (cents per share)
Return on Operating Assets (based on operating NPAT)
Closing share price3
Dividends paid per share
Declared dividend payout ratio on operating NPATA
1. Operating EBITDA defined as EBITDA before one-off costs.
2. Operating NPAT defined as NPAT before one off costs.
3. The opening share price on 21 October 2015 was $1.91.
FY2018
20.1%
9.6%
10.40cps
14.29%
3.02
8.0cps
65.0%
FY2017
18.8%
8.3%
10.67cps
11.6%
1.66
7.0cps
65.6%
FY2016
21%
9.9%
8.2cps
13.4%
1.45
4.0cps
–
Company performance and FY18 STI outcome
The operating NPAT result of $18.2m achieved the hurdle requirement, therefore satisfying the gateway condition for the STI
payments. In respect of FY18, 100% of current Executive STIs will be paid reflecting their contribution to the performance
of the Group and their contribution to the takeover response. STI payments will be made on 15 September 2018.
The table below shows the STI payment to each Executive for the current financial year:
Executives
Dr Ian Kadish1
Anne Lockwood2
Gregory Hughes3
Craig Bremner4
STI Foregone
%
–
–
58%
NA
FY2018
STI Paid
%
100%
100%
42%
NA
STI Payment
$5
100,000
70,000
35,285
NA
1. Appointed effective 22 May 2017.
2. Appointed KMP on 1 September 2017 as Interim CFO, formal CFO appointment approved 1 December 2017.
3. Position made redundant and ceased to be KMP on 9 February 2018.
4. Ceased to be a KMP on 31 August 2017, ineligible to participate in the FY18 STI plan.
5. The minimum STI value possible is zero.
B. Details of remuneration
LTI Performance Rights granted in FY18
The table below shows the LTI details for each Executive for the financial year ended 30 June 2018:
Executives
Dr Ian Kadish
Anne Lockwood
Grant date
22/11/2017
27/04/2018
# of
Performance
Rights granted1
362,585
100,154
Fair value on
grant date
$1.54
$1.94
Aggregate
fair vale1
$558,381
$194,299
Vesting and
exercise date2
30/06/2021
30/06/2021
Performance
Rights expiry
date
30/6/22
30/6/22
1. The FY18 performance rights granted were made with reference to the 30 day VWAP of the Company’s shares traded up to, and including 30 June
2017, calculated fair value was made on grant date.
2. The FY18 LTI Performance Rights are zero exercise price options and the Performance Rights are automatically exercised on vesting.
Movements in Performance Rights held by Executives
The following table sets out the movement during FY18 of Performance Rights held by each Executive and their related parties.
None of the Performance Rights vested or lapsed during the reporting period and none of the Performance Rights are presently
capable of being exercised.
20
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
21
Granted
Balance
Executives
Dr Ian Kadish
Anne Lockwood
1 July 2017 Number
362,585
nil
100,154
nil
Value
($)1
558,381
194,299
Vested
Number
& Value
–
–
Lapsed
Number
& Value
–
–
Balance
30 June 2018
362,585
100,154
Maximum value to
be recognised in
future years2
464,610
183,411
1. The value of FY18 LTI Performance Rights granted in the year is the fair value of the Performance Rights calculated at the grant date using the Black
Scholes Pricing Model.
2. No grants will vest if the performance conditions are not satisfied, hence, the minimum value of grants yet to vest is nil. The maximum value of
grants yet to vest has been estimated based on the fair value per grant at the maximum achievement of the vesting scale less amounts already
recognised as an expense.
Amounts of remuneration
Details of the remuneration received by the Group’s KMP for FY18 and the prior financial year are set out in the following tables.
Short Term Benefits
Post-
employment
Benefits
Long
term
benefits
Value
in Share
based
plans
Cash
salary
and fees
$
182,648
111,416
108,220
90,000
Cash
incentive
$
Superann-
uation
$
Long
service
leave
$
Performance
rights
granted
$
Total
remuneration
$
n/a
n/a
n/a
n/a
17,352
10,584
10,280
–
–
–
–
–
n/a
n/a
n/a
n/a
200,000
122,000
118,500
90,000
488,805
511,218
788,697
2,281,004
100,000
n/a
n/a
100,000
20,890
19,153
25,000
103,259
7,397
5,487
10,253
23,137
93,771
n/a
n/a
93,771
710,863
535,858
823,950
2,601,171
254,291
107,841
304,334
666,466
70,000
–
35,285
105,285
14,458
5,964
25,000
45,422
10,574
–
–
10,574
10,887
n/a
n/a
10,887
360,210
113,805
364,619
838,634
Proportion
of total
remuneration
related to
performance
%
0
0
0
0
27.26%
0
0
7.45%
22.46%
0
9.68%
13.85%
FY2018
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington1
Raelene Murphy2
Executive Directors
Dr Ian Kadish3
Dr Chien Ping Ho4
Dr Sally Sojan4
Other Key
Management
Personnel
Anne Lockwood5
Craig Bremner6
Gregory Hughes7
1. Chair of ARCC from April to September 2017.
2. Appointed 1 October 2017 and Chair of ARCC from October 2017.
3. Remuneration includes non-recurring relocation allowance of $20k.
4. Remuneration is as a radiologist of IDX and includes Executive Director fees.
5. Appointed 1 September 2017 as Interim CFO, permanent appointment from 1 December 2017.
6. Ceased on 31 August 2017.
7. Position made redundant and ceased to be KMP on 9 February 2018.
Integral Diagnostics Annual Report 2018
20
21
Integral Diagnostics Annual Report 2018
Remuneration Report continued
For year ended 30 June 2018
With reference to FY17 company performance, no STIs were paid.
Short Term Benefits
Post-
employment
Benefits
Long term
benefits
Cash salary
and fees
$
Cash
incentive
$
Superann-
uation
$
Long service
leave
$
Total
remuneration
$
Proportion
of total
remuneration
related to
performance
%
182,648
111,416
82,160
86,301
44,268
617,607
702,572
444,801
2,271,473
301,717
301,717
603,434
–
–
–
–
–
–
–
–
–
–
–
–
17,352
10,584
7,340
8,199
4,205
20,823
25,000
20,193
113,696
19,616
19,616
39,232
–
–
–
–
1,205
9,198
8,644
–
19,047
5,029
5,029
10,058
200,000
122,000
89,500
94,500
49,678
647,328
736,216
464,994
2,404,216
326,362
326,362
652,724
0
0
0
0
0
0
0
0
0
0
0
FY2017
Non-Executive
Directors
Helen Kurincic
John Atkin
Rupert Harrington1
Garry Hounsell2
Executive Directors
Dr Ian Kadish3
Dr Chien Ping Ho4
Dr Sally Sojan4
John Livingston5
Other Key
Management
Personnel
Craig Bremner6
Gregory Hughes
1. Eligible for Directors’ fees from 1 October 2016 and Chair of ARCC from April 2017.
2. Ceased on 31 March 2017.
3. Appointed effective 22 May 2017.
4. Remuneration is as a radiologist of IDX and includes Executive Director fees.
5. Ceased as an Executive Director on 21 May 2017, and ceased employment on 31 July 2017.
6. Ceased on 31 August 2017.
C. Other transactions with KMP and their related parties
Related party transactions
Payment for goods and services
Payment for rental of buildings to Eleven Eleven How Pty Ltd of which Dr Chien Ping Ho, Gregory Hughes
and Craig Bremner are related
Payment for rental of buildings to Kiwi Blue Pty Ltd of which Dr Chien Ping Ho is related
Consolidated
30 June 2018
$
368,506
210,820
All transactions with KMP are made on commercial arm’s-length terms and conditions and in the ordinary course of business.
The Board has an established Related Party Transaction Policy, that is overseen by the Audit, Risk and Compliance Committee,
to ensure that related party transactions are managed and disclosed in accordance with the Corporations Act, ASX Listing Rule
10.1 and accounting requirements and in accordance with good governance practices, to ensure that a financial benefit is not
given to related parties without approval by the Board, and where required, shareholders.
The related party transactions set out above were historical arrangements in place when the business was privately held. It is
the Board’s policy that independent reviews will be undertaken on any renewals and these reviews will be overseen by the Audit,
Risk and Compliance Committee.
22
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
23
Loans
No KMP has entered into a loan made, guaranteed or secured, directly or indirectly, with or by the Company or any of its
subsidiaries during the reporting period.
D. Service agreements
Remuneration arrangements for Executive KMP are formalised in employment agreements. Key conditions for Executive KMP
are outlined below:
Name
Dr Ian Kadish
Agreement commenced Agreement expire Notice of termination by group Employee notice
22 May 2017
No fixed end date
Six months
Dr Chien Ping Ho
Dr Sally Sojan
1 August 2014
1 August 2014
No fixed end date
No fixed end date
Six months, or 12 months if
change of control event.
Six months
Six months
Six months
Six months
post minimum
employment
period of five years
Six months
Anne Lockwood
1 December 2017
No fixed end date
Six months
E. Minimum Shareholding Policy
From 1 July 2018, the Board has introduced a Minimum Shareholding Policy that requires Non-Executive Directors, Executive
Directors and other KMP to build and maintain a minimum shareholding by the later of the fifth anniversary of the policy or the
fifth anniversary of their appointment in that role.
KMP are required to meet a minimum shareholding equivalent as per the prescribed percentage of their total base remuneration
as outlined below:
Managing Director and CEO:
CFO:
100%
50%
Non-Executive Directors and Executive Directors are required to establish and maintain a minimum shareholding of shares
equal to 100% of their annual director fees.
F. Additional disclosures relating to KMP
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of the KMP of the
Group, including their personal related parties, is set out below:
Ordinary shares
Helen Kurincic
Dr Chien Ping Ho
Dr Sally Sojan
Dr Ian Kadish
John Atkin
Rupert Harrington
Raelene Murphy
Anne Lockwood1
Craig Bremner2
Gregory Hughes3
Balance at
1 July 2017
420,870
2,445,481
1,026,491
–
132,945
255,890
–
–
–
–
4,281,677
Additions
–
–
20,000
66,202
–
50,000
23,946
–
–
–
166,322
Disposals/other
–
101,851
–
–
–
–
11,111
–
–
–
112,962
Number of
shares held
upon ceasing
to be KMP
–
–
–
–
–
–
–
–
2,467,230
2,467,230
4,934,460
Balance at the
end of the year
420,870
2,343,630
1,046,491
66,202
132,945
305,890
12,835
–
2,467,230
2,467,230
9,263,323
1. Commenced as interim CFO on 1 September 2017 and appointed permanent CFO from 1 December 2017.
2. Ceased on 31 August 2017.
3. Position made redundant and ceased to be KMP on 9 February 2018.
The Remuneration Report has been audited.
23
Integral Diagnostics Annual Report 2018
Integral Diagnostics Annual Report 2018
22
Auditor’s Independence Declaration
For year ended 30 June 2018
Auditor’s Independence Declaration
As lead auditor for the audit of Integral Diagnostics Limited for the year ended 30 June 2018, I declare
that to the best of my knowledge and belief, there have been:
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Integral Diagnostics Limited and the entities it controlled during the
period.
Jason Perry
Partner
PricewaterhouseCoopers
Melbourne
22 August 2018
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
24
Integral Diagnostics Annual Report 2018
Operating and Financial Review
For year ended 30 June 2018
The purpose of this Operating and Financial Review is to provide shareholders with additional information regarding the
Company’s operations, financial position, business strategies and prospects. The review complements the Financial Report
on pages 33 to 70 and the ASX announcement and full year results presentation dated 23 August 2018.
Integral Diagnostics Limited (ASX: IDX) is an Australian healthcare services company whose main activity is providing diagnostic
imaging services to general practitioners, medical specialists and allied health professionals (referrers) and their patients.
IDX has a diversified revenue mix and focuses on providing a full range of diagnostic imaging modalities. Our footprint in
full service hospitals leads to higher complexity and greater use of MRI and PET machines and interventional procedures
throughout our business which leads to less reliance on bulk billed services. Post the acquisitions on the 2nd July 2018
in New Zealand and Victoria, IDX operates in four key markets.
Geographic Market
Operating Brands
Core markets
Sites (including
hospital sites)
Hospital sites
MRI machines
MRI licences
Employed
Radiologists1
Employees
Victoria
Lake Imaging
Geelong Medical
Imaging
South West MRI
Western District
Radiology
Ballarat, Geelong,
Warrnambool
and outer
western areas of
Melbourne
27
7
7
4 full
0 partial
27
351
Total IDX
Queensland
South Coast
Radiology
Darling Downs
Radiology
Mackay Radiology
Western Australia
Global
Diagnostics
New Zealand
Specialist
Radiology Group
Trinity MRI
Gold Coast,
Toowoomba and
Mackay
South West
Western Australia
Auckland
13
2
7
3 full
3 partial
31
348
9
4
2
2 full
0 partial
8
155
4
–
3
na
14
74
53
13
19
9 full
3 partial
80
928
Diagnostic imaging involves a set of techniques that non-invasively produces images of the human body for clinical analysis
and medical intervention. Images can be produced using a variety of modalities, including:
• radiography (X-ray);
• ultrasound;
• computed tomography (CT);
• magnetic resonance imaging (MRI); and
• nuclear medicine (which includes positron emission tomography (PET)).
The images produced by diagnostic imaging are a critical tool for referrers in diagnosing and deciding on the most effective and
efficient form of treatment for patients. In this way, appropriate use of diagnostics imaging can significantly enhance medical
outcomes for patients while at the same time reduce the overall cost of health care.
1. Relates to employed radiologists only. In addition IDX has a number of contractor radiologists (~39 currently).
25
Integral Diagnostics Annual Report 2018
Operating and Financial Review continued
For year ended 30 June 2018
Year in Review
Financial performance
A summary income statement providing details of one off transactions and reconciling to the statutory income statement is
outlined in the following table:
Summary income statement ($million)
Operating revenue
Other revenue
Total revenue
EBITDA prior to one off transactions
EBIT prior to one off transactions
NPAT prior to one off transactions
One off transactions net of tax
Transaction costs
Impairment of asset and restructuring provision
Fair Value gain on acquisition of SWMRI Joint venture
Statutory NPAT prior to takeover response costs
Takeover response costs
Statutory NPAT
Amortisation NPATA
Operating EBITDA as a % of Revenue
Operating NPAT as a % of Revenue
Operating Basic EPS (earnings per share)
Statutory Basic EPS (earnings per share)
Return on operating assets (Operating NPAT)
Declared dividend payout ratio on operating NPATA
Actual
2018
188.1
1.3
189.4
38.1
28.5
18.2
(1.4)
–
–
16.8
(1.7)
15.1
15.4
20.1%
9.7%
12.55
10.40
14.29%
65.0%
Actual
2017
177.7
2.0
179.7
33.5
23.7
15.1
–
(0.8)
1.2
15.5
–
15.5
15.9
18.6%
8.4%
10.41
10.67
11.6%
65.6%
The Operating performance of IDX was a material improvement on FY17. The strong financial performance was driven by
solid organic revenue growth and the realisation of significant cost efficiencies resulting in IDX delivering an industry leading
operating margin of 20.1%.
The lower statutory performance was due to the $3.1million in takeover response ($1.7m) and transaction costs ($1.4m). Before
takeover response costs Statutory NPAT improved by 8.4%. IDX has only allocated costs directly related to external advisors
and transaction related travel costs. The one off costs do not include any internal costs that would have otherwise been incurred
in operations or business improvement.
Financial overview
• Achieved an overall examination volume increase of 6.7%, and operating revenue growth of $10.4 million (5.9 %) to
$188.1million. The solid Operating growth was driven by new management executing on initiatives improving patient access
from Q2 and leveraging off IDX’s strong hub and spoke model to drive organic growth.
• Patient examination volume growth for the Company across Medicare funded, patient funded, and reporting contract
examinations was up 6.7% in FY18 (with one less working day). This level of volume growth is above the Medicare data growth
rate of 5.7% in the States in which IDX operates. IDX had particularly strong growth in volumes from reporting contracts and
non-Medicare related imaging.
• Despite the strong revenue growth the Company was impacted by the impaired access in Q1 and the Commonwealth Games
on the Gold Coast in April 2018.
• Significant cost efficiencies were realised during FY18 delivering an industry leading operating margin of 20.1%
– Labour costs declined as a percentage of revenue reflecting management’s approach to flexing labour to demand. Labour
costs in FY18 also includes approximately $1.3million of incentives not included in FY17.
– Consumable costs declined 2% or $0.2m from prior year despite volumes being up by 6.7%.
26
Integral Diagnostics Annual Report 2018
– Except for equipment, all other operating cost centres declined as a percentage of revenue – reduced costs were driven by
the vendor audit and cost efficiency reviews and did not impact service levels in any way. Equipment costs are a focus in
FY19 and management is currently undertaking a review of all service costs and adopting a national procurement approach
for equipment.
– Depreciation costs were minimised due to managements and radiologists focus on ‘smart spending’ which reduced capital
outlay and resulting depreciation.
– Finance costs were reduced by a successful refinancing of debt facilities and disciplined use of surplus cash to fund asset
purchases instead of higher cost asset financing.
– Effective tax rate increased due to impact of non-deductible transaction costs.
Operating performance overview
• Successful defence of unsolicited, hostile takeover bid, clearly proven not to be in the best interests of IDX shareholders;
• Completion of high margin/high growth New Zealand acquisitions with high end clinical specialties and completion of a bolt
on acquisition in Victoria (July 2nd, 2018);
• Installation of new call centres in QLD and WA, considerably improving access for patients and referrers from Q2;
• Upgraded clinical systems for improved medical imaging, efficiency and referrer engagement;
• Replaced MRI in Mackay with higher end wide bore MRI to better service the community;
• Opened the Spine Centre of Excellence on the Gold Coast;
• Commenced review of radiologist recruitment, retention, incentives and escrow arrangements; and
• Major refurbishment and addition of the first and only private PET facility in Geelong at St John of God Private Hospital.
Capital expenditure
Total expenditure on tangible assets was $14.0 million (FY17: $13.4 million) of which $8.8 million related to replacement, and
$5.2 million related to growth opportunities. The growth capital expenditure included the Spine Centre of Excellence on the Gold
Coast, the major refurbishment and new PET facility at the St John of God Hospital in Geelong, new site development at Miami
Beach (opening in FY19) and investment in IT infrastructure and software to align the group’s network, deliver synergies and
improve the patient and referrer experience.
The development of the specialist Prostate site in partnership with the Australian Prostate Cancer Research Centre has been
delayed and will occur in FY19.
Acquisitions
On 2 July 2018, the Group completed the acquisition of Specialist Radiology Group, Trinity MRI and Cavendish Radiology in
Auckland, New Zealand.
The three businesses combined:
• Comprise the leading specialist radiology clinics in Auckland;
• Employ and contract several of the nation’s leading specialists in musculoskeletal radiology and neuroradiology;
• Have a projected EBITDA contribution of NZ$13m to NZ$14m (A$12m to A$13m1) for FY19;
• A high growth business with strong margins; and
• Provides a premier platform for Integral Diagnostics to enter and grow in New Zealand.
This strategic acquisition includes four clinics, employing 14 radiologists who work in both the public and private sector. The
clinics are market leaders in providing complex modalities including MRI, CT and SPECT (nuclear medicine), which are high
margin services positioned to experience significant future growth. The clinics are fitted with a state of the art and modern
modality fleet.
1. Based on average exchange rate of NZD$1 AUD$0.93.
27
Integral Diagnostics Annual Report 2018
Operating and Financial Review continued
For year ended 30 June 2018
IDX also completed the acquisition of Geelong Medical Imaging (GMI) on 2 July 2018, which comprises two radiology clinics
in Geelong, Victoria. The clinics provide a number of modalities, including X-Ray, ultrasound, CT, MRI and nuclear medicine.
The vendor radiologist is dual-trained in radiology and nuclear medicine. The FY19 EBITDA contribution of the GMI business
is projected to be $1m.
Taxation
The effective tax rate on operating earnings is 31.79% (FY17: 27.35%) as a result of non-deductible transaction costs.
Cash flows
Increase in free cash flows by 27.9% to $30.7 million (FY17: $24.0 million).
Capital Management
The decline in net debt by 7.8% to $44.9 million (30 June 2017: $48.7 million) was largely due to strong cash flows.
Net Debt/EBITDA ratio of 1.2X at 30 June allowing IDX to comfortably execute acquisitions on 2nd July 2018. Post acquisition
the Net Debt/EBITDA ratio is approximately 2.2X.
The Company renewed and extended debt facilities for a further three years in December 2017 and has maintained the average
cost of debt at less than 3.8%.
The Company is currently undertaking a review of required financing and the optimal capital structure to fund an ongoing
acquisition strategy.
Earnings per share
On a statutory basis, Basic Earnings per Share declined by 2.5% to 10.40 cents per share (FY17: 10.67 cents per share).
Pre takeover defence costs Statutory Basic Earnings per Share for FY18 was up at 11.57 cents per share. Diluted Earnings per
Share in FY18 taking into account the FY18 performance rights issue was 10.38 cents per share (FY17: 10.67 cents per share).
On an Operating NPAT performance, Basic Earnings per Share increased 20.7% to 12.55 cents per share (FY17 10.41 cents
per share).
Dividend
Dividend payments of 8.00 cents per share ($11.6 million) fully franked will be paid for FY18. This represents 65.0% of Operating
NPATA. The dividend is in line with the IDX dividend policy. A dividend of 4.00 cents per share fully franked will be paid on
4 October 2018 to shareholders on the register at 3 September 2018.
28
Integral Diagnostics Annual Report 2018
Company outlook
The long-term industry fundamentals in Australia and New Zealand are strong and continue to underpin attractive on-going
growth opportunities. Australia and New Zealand have growing and ageing populations requiring greater healthcare support.
At the same time, community expectations for higher quality healthcare and diagnosis continue to rise, while new imaging
technologies improve efficiency and aid diagnosis and early recognition of diseases.
Increasing the use of diagnostic imaging as an early detector of disease leads to better preventative care via less invasive
treatments which will ultimately lower overall healthcare costs.
The Company’s focus in FY19 will be to:
• Leverage off our diversified revenue streams and developed hub and spoke model to drive organic growth and further
efficiency gains;
• Focus on selection and implementation of leading edge technology solutions to improve the patient and referrer experience
whilst protecting privacy that are best in class in the industry;
• Develop a prostate imaging centre of excellence in partnership with the Australian Prostate Cancer Research Centre in North
Melbourne. The centre will also include state of the art cardiac imaging;
• Conclude review of radiologist recruitment, retention, incentives and escrow arrangements;
• Successfully integrate the New Zealand and Geelong Medical Imaging acquisitions which will be EPS accretive; and
• Execute on further value accretive, strategic acquisitions that are a good cultural and clinical fit and are strategically aligned.
IDX remains committed to getting on with the business of executing on our attractive prospects and growth strategy supported
by a medically led and diversified business model.
Regulatory outlook
The regulatory environment is generally positive across Australia and New Zealand.
In Australia IDX expects to benefit from the introduction of an MBS rebate on MRI of the prostate from the 1st of July 2018.
This will be partially offset by the restriction of GP’s referring knee MRI’s for patients > 50 years old from the 1st November
2018. New Breast Tomosynthesis items will also be made available from 1 November 2018 for a temporary period while a
permanent listing is considered. IDX’s high end clinical focus on specialising in prostate and breast imaging in Australia will
benefit from these new item codes.
Importantly the Federal Government has committed to reintroducing MBS rebate indexation for a limited number of diagnostic
imaging services from July 2020.
The regulatory outlook in New Zealand is stable with new pricing on contracts with the Accident Compensation Corporation (ACC)
and Southern Cross Health Care (SCH) being recently finalised and confirmed.
29
Integral Diagnostics Annual Report 2018
Operating and Financial Review continued
For year ended 30 June 2018
Balance Sheet
A summary of the balance sheet as at 30 June 2018 and in comparison to the prior year is outlined in the following table.
Balance sheet
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Total non-current assets
Total assets
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Other current liabilities
Total current liabilities
Borrowings
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
30 June 2018
Actual $’M
20.8
5.6
3.9
30.3
30 June 2017
Actual $’M
24.2
5.1
3.9
33.2
54.1
103.6
2.8
160.5
190.8
12.1
0.3
12.8
10.6
–
35.9
52.5
8.9
0.1
61.5
97.4
93.4
50.5
104.0
2.7
157.2
190.4
8.3
(0.03)
11.5
10.6
0.06
30.5
61.4
8.1
–
69.5
100.0
90.4
• Working capital of ($5.6) million is driven by an increase in current debt due to a number of balloon payments due on finance
leases, increase in trade payables due to timing and decline in cash holdings from settlement of takeover response and
transaction costs.
• Property, plant and equipment increased by $3.6 million due to $14m of purchases offset by depreciation charges.
• Provisions (excluding tax) have increased $0.8 million. This increase is due to increased employees (employee provisions)
and sites (straight line lease accounting and make good provisions)
• Net debt declined by $3.8 million to $44.9 million, resulting in a leverage level of net debt / EBITDA of 1.2x.
• The Company renewed its debt facilities in December 2017 for three years and continues to comply with the financial
covenants of its facility agreement.
• An additional $75million of debt was utilised to fund settlement of the acquisitions on the 2nd of July – leverage is approx. 2.2x
post acquisitions.
30
Integral Diagnostics Annual Report 2018
Cash flow
A summary of the cash flows as at 30 June 2018 are presented below.
Summary of cash flow ($ million)
Free cash flow
Growth capital expenditure
Net cash flow before financing and taxation
Tax paid
Interest and other costs paid on borrowings
Net change in borrowings
Deferred consideration
Dividends paid
Offer transaction costs in equity
NET CASH FLOWS
Actual
2018
30.7
(5.2)
25.5
(7.0)
(2.5)
(7.5)
(0.01)
(11.6)
(0.3)
(3.4)
Actual
2017
20.4
(2.3)
18.1
(7.4)
(2.6)
2.7
0.03
(10.2)
–
0.6
• Free cash flows of $30.7million are $6.7 million or 27.9% higher than FY17.
• Growth capital expenditure was $5.2 million for the year largely for the Spine Centre of Excellence in Southport and the major
redevelopment and new PET facility at the St John of God Hospital in Geelong. Growth Capex was lower than expected due to
the development of the Prostate Centre of Excellence being delayed until FY19.
• Dividends of $11.6 million (8 cents per share fully franked) were paid in FY18.
Business risks
The risk management framework in place at IDX identifies the risk profile and sets out for each key risk how management
assess, manage, monitor, measure and report the risk. IDX’s core risks are described below and these risks are continuously
assessed and reported on monthly. This is not a comprehensive list of all of the risks involved that may impact IDX’s financial
and operating result in future periods:
Strategic
• Mergers and acquisitions. It is the Company’s strategy to drive growth organically and through mergers and acquisitions. This
strategy may place significant demands on management, resources, internal controls and systems resulting in the failure to
realise anticipated benefits or effectively integrate acquisitions.
• Contemporary technology and innovation. The failure to adapt or respond to contemporary disruptive innovations and
technologies will see an increase in competition and a decline in referrals.
Financial
• Regulatory change to revenue stream. Changes to government policies and regulations may have a material adverse impact
on the financial and operational performance of the Company.
• Financial – Contracts and service agreements. Contracts and service agreements may be breached, terminated or not
renewed resulting in loss of capacity and revenue.
Compliance
• Regulatory compliance. Not meeting industry or regulatory compliance requirements will lead to the loss of licenses and
accreditation and the inability to provide services or offer rebates which will reduce the demand for services.
• Privacy and confidentiality. The Company relies on secure processing, transmission and storage of confidential, proprietary
and other information in its IT infrastructure. The loss or misuse of personal information, or inadequate and insecure data
protection and privacy protocols may result in a breach of a patient or referrer privacy and confidentiality.
Operations and ICT
• Cyber security and data loss. Data integrity and IT infrastructure security and monitoring is paramount to mitigate data loss,
cyber-attacks, exposure and breaches.
• Disaster recovery and crisis management. Inadequate processes and resources to manage crisis or unexpected events that
threaten to harm the Company and its stakeholders.
31
Integral Diagnostics Annual Report 2018
Operating and Financial Review continued
For year ended 30 June 2018
Quality and Safety
• Clinical risk management. Inadequate and substandard professional clinical service provision places patients at risk of harm.
• Unsafe work practices. The inability to maintain safe work practices and systems for staff, patients and their carers.
Professional Staff
• Recruitment and retention of professional staff. The inability to attract, recruit, and retain quality skilled; Radiologists, technical
professionals, management and staff will impact the ability to provide quality services to patients and referrers.
Risk management
The Company’s risk management framework is overseen by the Audit Risk and Compliance Committee and is actively managed
by the Senior Management Group. The framework is consistent with ISO 31000:2018 Risk Management – Guidelines and is
subject to regular review. The framework is used to enable a consistent and rigorous approach to identifying, analysing and
evaluating risks.
Fundamental to the Company’s robust risk management framework has been the development and understanding of risk
appetite across the business. Risk appetite is defined as the amount of risk on a broad level that the Board has been prepared
to take to meet its Company goals. The Board’s risk appetite is aligned to the risk culture of the company; vision and values;
strategic plan and goals; service commitment and patient and referrer demographic; and the financial and budget environment
in which the Company is operating.
A key component of the Company’s risk management is clinical governance which is managed through Integral Diagnostic’s
National Clinical Leadership Committee (NCLC) and State Clinical Leadership Committees (State CLCs), under the National
and State Clinical Leadership Committees Charter.
The Charter provides a framework for the National CLC and State CLCs to work together to develop and implement policies and
work practices to enable clinical best practice. The responsibilities of the NCLC include reviewing any recommendations arising
from any adverse incidents from the State CLCs and to share learnings to prevent recurrence.
The NCLC and Board have also endorsed the Company’s new Clinical Governance and Quality Framework which is the
overarching framework directing the delivery of safe and high quality diagnostic imaging services across the Group whilst
maximising outcomes for patients and referrers through quality of care, continuous improvement, risk mitigation and fostering
an environment of excellence in care.
The Clinical Governance and Quality Framework is supported through the elements of: governance and leadership; systems
and structures; roles and responsibilities; culture and transparency; and performance review and reporting. The principles of the
framework meet the requirements of ISO 9001:2015 Quality Management Systems – Requirements and ISO 31000:2018 Risk
Management – Guidelines.
Post the acquisition of the New Zealand entities the NCLC was re-named Integral Clinical Leadership Committee (ICLC)
and will incorporate a New Zealand based Clinical Leadership Committee.
The Company’s Audit Risk and Compliance Committee Charter is also available in the Corporate Governance section
of its website.
32
Integral Diagnostics Annual Report 2018
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For year ended 30 June 2018
Note
30 June 2018
$’000
30 June 2017
$’000
Revenue
Revenue
Fair value gain on acquisition of SWMRI joint venture
Interest income
Total revenue and other income
Expenses
Consumables
Employee benefits expense
Depreciation and amortisation expense
Transaction and takeover defence costs
Equipment related expenses
Occupancy expenses
Other expenses
Impairment of asset and restructuring provision
Finance costs
Total expenses
Operating profit
Profit before income tax expense
Income tax expense
Profit for the year from continuing operations
Profit is attributable to:
Owners of Integral Diagnostics Limited
5
5
6
6
6
6
6
7
Earnings per share attributable to the owners of Integral Diagnostics Limited
Basic earnings per share
Diluted earnings per share
37
37
Consolidated Statement of other comprehensive income
Items that may be reclassified to profit & loss:
Net (loss)/gain on cash flow hedges
Total comprehensive income
Total comprehensive income is attributable to:
Owners of Integral Diagnostics Limited
189,399
–
330
189,729
(8,649)
(109,513)
(9,610)
(3,902)
(7,691)
(13,120)
(12,354)
–
(2,783)
(167,622)
179,732
1,200
370
181,302
(8,850)
(105,577)
(9,831)
–
(6,993)
(12,615)
(12,178)
(1,108)
(2,841)
(159,993)
22,107
21,309
22,107
21,309
(7,028)
15,079
(5,829)
15,480
15,079
15,079
Cents
10.40
10.38
15,480
15,480
Cents
10.67
10.67
(85)
14,994
–
15,480
14,994
15,480
The above Consolidated Statement of Profit or Loss and Consolidated Statement of Other Comprehensive Income should be
read in conjunction with the accompanying notes.
33
Integral Diagnostics Annual Report 2018
Consolidated Statement of Financial Position
As at 30 June 2018
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Income tax payable
Provisions
Derivative financial instruments
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Retained profits
Total equity
Note
30 June 2018
$’000
30 June 2017
$’000
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
20,844
5,622
3,516
346
30,328
54,084
103,542
2,838
160,464
24,210
5,149
3,514
393
33,266
50,523
103,921
2,675
157,119
190,792
190,385
12,112
12,820
318
10,644
–
35,894
52,503
122
8,851
61,476
8,340
11,495
(34)
10,650
59
30,510
61,397
–
8,126
69,523
97,370
100,033
93,422
90,352
83,425
(11,827)
21,824
83,866
(11,862)
18,348
93,422
90,352
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
34
Integral Diagnostics Annual Report 2018
Consolidated Statement of Changes in Equity
For the year ended 30 June 2018
Balance at 1 July 2016
Profit/(loss) after income tax expense
Other comprehensive income, net of tax
Total comprehensive income
Transactions with owners
in their capacity as owners:
Contributions of equity,
net of transaction costs (Note 22, 33)
Unwinding of DTA in equity
Dividend paid (Note 25)
Balance at 30 June 2017
Balance at 1 July 2017
Profit after income tax expense
Movement in FV of derivative financial instrument
Total comprehensive income
Transactions with owners
in their capacity as owners:
Unwinding of DTA in equity
Transaction costs recognised in equity (Note 22)
Performance rights issue
Dividends paid (Note 25)
Balance at 30 June 2018
Contributed
capital
$’000
82,760
–
–
82,760
Reserves
$’000
(11,862)
–
–
(11,862)
1,275
(169)
–
83,866
–
–
–
(11,862)
Contributed
capital
$’000
83,866
–
–
83,866
(162)
(279)
–
–
83,425
Reserves
$’000
(11,862)
–
(85)
(11,947)
–
–
120
–
(11,827)
Retained
profits
$’000
13,022
15,480
–
28,502
–
–
(10,154)
18,348
Retained
profits
$’000
18,348
15,079
–
33,427
–
–
–
(11,603)
21,824
Total equity
$’000
83,920
15,480
–
99,400
1,275
(169)
(10,154)
90,352
Total equity
$’000
90,352
15,079
(85)
105,346
(162)
(279)
120
(11,603)
93,422
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
35
Integral Diagnostics Annual Report 2018
Consolidated Statement of Cash Flows
For the year ended 30 June 2018
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Transaction and takeover response costs
Interest and other finance costs paid
Interest received
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for purchase of subsidiary, net of cash acquired
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Dividends paid to Company shareholders
Transaction and takeover response costs
Settlement of deferred consideration
Net cash (used in)/from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Note
30 June 2018
$’000
30 June 2017
$’000
189,703
(149,807)
(3,902)
(2,842)
330
(6,965)
26,517
–
(11,578)
1,144
–
(10,434)
4,641
(12,209)
(11,603)
(278)
–
(19,449)
(3,366)
24,210
20,844
179,604
(146,314)
(180)
(2,960)
–
(7,420)
22,730
(3,529)
(11,650)
100
370
(14,709)
10,887
(8,134)
(10,154)
–
(30)
(7,431)
590
23,620
24,210
36
33
36
36
22
8
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
36
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements
Note 1. General information
The Financial Report covers Integral Diagnostics Limited as a Group consisting of Integral Diagnostics Limited (‘Company’ or
‘parent entity’) and the entities it controlled at the end of, or during, the year (collectively referred to as the ‘Group’). The financial
statements are presented in Australian dollars, which is Integral Diagnostics Limited’s functional and presentation currency and
are rounded to the nearest thousand dollars ($‘000) unless otherwise stated.
Integral Diagnostics Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Level 8/14-20 Blackwood Street
North Melbourne VIC 3051
A description of the nature of the consolidated entity’s operations and its principal activities are included in the Directors’ Report,
which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 22nd August 2018. The Directors
have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes
or below.
New, revised or amending accounting standards and interpretations adopted
The Group has adopted all of the new, revised or amending accounting standards and interpretations issued by the Australian
Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new, revised or amending accounting standards or interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001, as appropriate
for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards (IFRSs)
as issued by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative financial instruments
which have been measured at fair value.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in Note 32.
37
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Integral Diagnostics Limited
as at 30 June 2018 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group.
They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Where the Group loses control over a subsidiary, it derecognises the assets (including goodwill), liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair
value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
Current and non-current classification
Assets and liabilities are presented in the Consolidated Statement of Financial Position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in a normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is expected to be settled in a normal operating cycle; it is held primarily for the purpose of
trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement
of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks
and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains
substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower, the
present value of minimum lease payments. Lease payments are allocated between the principal component of the lease liability
and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of the asset’s
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
38
Integral Diagnostics Annual Report 2018
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful lives are not subject to amortisation and are tested annually
for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-
financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-
generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a
cash-generating unit.
Rounding of amounts
The Company is of a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’. Amounts in this Report have been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, the nearest dollar.
New accounting standards and interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have
not been early adopted by the Group for the annual reporting period ended 30 June 2018. The Group’s assessment of the impact
of these new or amended accounting standards and interpretations, most relevant to the Group is set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. For lessee accounting, the standard
eliminates the ‘operating lease’ and ‘finance lease’ classification required by AASB 117 ‘Leases’. Subject to exceptions, a
‘right-of-use’ asset will be capitalised in the Consolidated Statement of Financial Position, measured as the present value of
the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12 months
or less and leases of low- value assets (such as personal computers and office furniture) where an accounting policy choice
exists whereby either a ‘right-of-use’ asset is recognised or lease payments are expensed to profit or loss as incurred. A liability
corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial
direct costs incurred and an estimate of any future restoration, removal or dismantling costs. Straight-line operating lease
expense recognition will be replaced with a depreciation charge for the leased asset (included in operating costs) and an
interest expense on the recognised lease liability (included in the finance costs). For classification within the Consolidated
Statement of Cash Flows, the lease payments will be separated into both a principal (financing activities) and interest (either
operating or financing activities) components. For lessor accounting, the standard does not substantially change how a lessor
accounts for leases. The Group will adopt this standard from 1 July 2019. On adoption the asset and liabilities will be grossed
up by the value of leased assets, which we are unable to quantify until adoption as it is dependent on the number of leased
properties held at that date, from adoption operating lease costs will be allocated to amortisation and interest charges which
will be below the EBITDA line.
The group continues to analyse the impact of the new standard by assessing the terms of leases in light of the requirements
of AASB16. Further lease reviews as required and the computation of the likely lease liability and right of use asset to be
recognised on transition will be completed throughout FY2019. This will be followed by consideration of the broader business
impacts. The group is still in the process of assessing the appropriate adoption date of AASB16. At this time, the cumulative
catch up transition method will be adopted.
39
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
AASB 15 Revenue from contracts with customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer
of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled
in exchange for those goods or services. The standard will require: contracts (either written, verbal or implied) to be identified,
together with the separate performance obligations within the contract; determine the transaction price, adjusted for the time
value of money excluding credit risk; allocation of the transaction price to the separate performance obligations on a basis
of relative stand-alone selling price of each distinct good or service, or estimation approach if no distinct observable prices
exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be presented separately as
an expense rather than adjusted to revenue. For goods, the performance obligation would be satisfied when the customer
obtains control of the goods. For services, the performance obligation is satisfied when the service has been provided, typically
for promises to transfer services to customers. For performance obligations satisfied over time, an entity would select an
appropriate measure of progress to determine how much revenue should be recognised as the performance obligation
is satisfied. Contracts with customers will be presented in an entity’s statement of financial position as a contract liability,
a contract asset, or a receivable, depending on the relationship between the entity’s performance and the customer’s payment.
Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts with customers; the
significant judgements made in applying the guidance to those contracts; and any assets recognised from the costs to obtain
or fulfil a contract with a customer. The Group will adopt this standard from 1 July 2018.
Management have undertaken a review of all revenue streams across the business and applied the requirements of the five step
model across each revenue stream to identify the impact of the new revenue standard from application date. Management has
assessed the effects of applying the new standard on the Group’s financial statements and has identified that it will not have a
material impact on the Group.
AASB 9 Financial Instruments
AASB9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial
liabilities, introduces new rules for hedge accounting and a new impairment model for financial assets. The standard does not
need to be applied until 1 July 2018 but is available for early adoption. The Group does not expect the new guidance to have
a significant impact on the classification and measurement of its financial assets.
There will be no impact on the Group’s accounting for financial liabilities, as the new requirements only affect the accounting
for financial liabilities that are designated at fair value through profit or loss and the Group does not have any such liabilities.
The derecognition rules have been transferred from AASB 193 Financial Instruments: Recognition and Measurement and have
not been changed.
The new hedge accounting rules will align the accounting for hedging instruments more closely with the Group’s risk management
practices. As a general rule, more hedge relationships might be eligible for hedge accounting. Based on the Group’s assessment
the current hedge relationships would qualify as continuing hedges upon the adoption of AASB 9. Accordingly, the Group does
not expect a significant impact on the accounting for its hedging relationships.
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only
incurred credit losses as is the case under IAS 39. It applies to financial assets classified at amortised cost, debt instruments
measured at fair value through other comprehensive income, contract assets under AASB 15 Revenue from Contracts with
Customers, lease receivables, loan commitments and certain financial guarantee contracts. Management has assessed the
effects of applying the new standard on the Group’s financial statements and has identified that it is unlikely to have a material
impact on the Group.
The new standard also introduces expanded disclosure requirements and changes in presentation. These are expected to
change the nature and extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption
of the new standard.
40
Integral Diagnostics Annual Report 2018
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect
the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to
assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events, management believes to be
reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual
results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event.
The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives,
or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and
other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in Note 13.
The recoverable amounts of cash-generating units have been determined based on value-in-use (VIU) calculations. These
calculations require the use of assumptions, including anticipated sales growth, long-term growth rate and the post-tax
discount rate.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assessed impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves value-in-use (VIU) calculations,
in conjunction with the goodwill impairment testing which incorporates a number of key estimates and assumptions.
Note 4. Operating segments
Identification of reportable operating segments
The Group comprised the single business segment of the operation of diagnostics imaging facilities.
Major customers
During the year ended 30 June 2018, there was no external revenue greater than 10% to any one customer (2017: nil).
Operating segment information
As the Group operates in a single business and geographic segment, these financial statements represent the required financial
information of that segment.
Accounting policy for operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers (CODM) which includes the KMP of the Company.
The CODM are responsible for the allocation of resources to operating segments and assessing their performance.
41
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 5. Revenue
Sales revenue
Services revenue
Other revenue
Other revenue
Fair value gain on acquisition of SWMRI joint venture
Revenue
Consolidated
30 June 2018
$’000
30 June 2017
$’000
188,002
177,710
1,397
–
189,399
2,022
1,200
180,932
Accounting policy for revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Rendering of services
Rendering of services revenue is recognised when the service is rendered for the provision of medical imaging services.
The point of sale is deemed to be at the time the image is taken.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established. Other revenue largely includes
compensation payments received under equipment and leasehold contracts as well as labour cost charges to hospitals and
Government (trainees and paid parental leave).
42
Integral Diagnostics Annual Report 2018
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Consolidated
30 June 2018
$’000
30 June 2017
$’000
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
Total depreciation
Amortisation
Customer contracts
Total depreciation and amortisation
Transaction costs and takeover response costs
Professional fees and other costs
Takeover defence costs
Total transaction costs
Finance costs
Interest and finance charges paid/payable
Funding/establishment costs
Finance costs expensed
Net loss/(gain) on disposal
Net loss/(gain) on disposal of property, plant and equipment
Employee benefits expense
Employee benefits
Superannuation contributions
Labour supply
Total employee benefits expense
Impairment of asset and restructuring provision
Impairment of asset
Restructuring provision (see note 17)
Total impairment of asset and restructuring provision expense
1,096
6,292
28
1,815
9,231
379
9,610
1,468
2,434
3,902
2,627
156
2,783
1,087
6,242
107
1,751
9,187
644
9,831
–
–
–
2,653
188
2,841
(424)
477
89,552
6,160
13,801
109,513
–
–
–
88,211
6,032
11,334
105,577
810
298
1,108
The impaired asset relates to building works conducted on leased land at Pt Headland in relation to the Mobile MRI. As at
30 June 2017 there were indicators of impairment in regards to the building works based on the level of volumes and revenue
the MRI operations were able to achieve. Impairment testing was undertaken in accordance with the requirements of AASB 136
“Impairment of assets” and it was determined that the carrying value of the asset could not be supported through a value-in-use
or fair value less costs to sell methodology in accordance with Australian Accounting Standards and as such the Group has
determined that the infrastructure asset supporting the Mobile MRI was impaired as at 30 June 2017.
Minimum lease payments recognised as operating lease expense were $9.671 million (2017: $8.683 million). Costs of inventories
recognised as expense were $8.649 million (2017: $8.850 million).
43
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Accounting policy for finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the
period in which they are incurred.
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(Increase) in deferred tax assets (Note 14)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment costs
Transaction and takeover defence costs
Fair Value gain/loss
Fixed Asset Variance
Transactions costs deducted in equity
Adjustment recognised for prior periods
Income tax expense
Consolidated
30 June 2018
$’000
30 June 2017
$’000
7,078
(164)
114
7,028
6,170
(208)
(133)
5,829
(164)
(208)
22,107
21,309
6,632
6,393
23
241
37
114
(133)
6,914
114
7,028
21
–
(360)
76
(168)
5,962
(133)
5,829
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
30 June 2018
$’000
15
20,829
20,844
30 June 2017
$’000
14
24,196
24,210
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
44
Integral Diagnostics Annual Report 2018
Note 9. Current assets – trade and other receivables
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Impairment of receivables
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
30 June 2018
$’000
5,570
(90)
5,480
30 June 2017
$’000
4,975
(137)
4,838
142
5,622
311
5,149
Consolidated
30 June 2018
$’000
137
7
(54)
90
30 June 2017
$’000
63
127
(53)
137
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $913,000 as at 30 June 2018
($986,000 as at 30 June 2017).
The Group did not consider there was a credit risk on the aggregate balances after reviewing the credit terms of customers
based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 91 days
Consolidated
30 June 2018
$’000
328
135
450
913
30 June 2017
$’000
367
210
409
986
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less any provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days. Due to the
short-term nature of these receivables, their carrying amount is assumed to approximate fair value.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off by
reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective evidence
that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial
difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency
in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired. The amount of
the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the
effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
45
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 10. Current assets – other
Accrued revenue
Prepayments
Security deposits
Other current assets
Note 11. Inventory
Film, contrast, drugs and needles
Consolidated
30 June 2018
$’000
1,296
2,154
55
11
3,516
30 June 2017
$’000
1,248
2,200
56
10
3,514
Consolidated
30 June 2018
$’000
346
346
30 June 2017
$’000
393
393
Accounting policy for inventory
Inventory is valued at the lower of cost and net realisable value. Inventory has been recognised based on categories of high-value
items used in the production of medical images that the Company holds in large volumes including film, contrast, drugs and
needles. Costs of inventories recognised as an expense was $8,649,000 (2017: $8,850,000).
Note 12. Non-current assets – property, plant and equipment
Work in progress – at cost
Leasehold improvements – at cost
Less: Accumulated depreciation
Plant and equipment – at cost
Less: Accumulated depreciation
Motor vehicles – at cost
Less: Accumulated depreciation
Office furniture and equipment – at cost
Less: Accumulated depreciation
Consolidated
30 June 2018
$’000
5,266
5,266
30 June 2017
$’000
449
449
16,190
(5,877)
10,313
62,014
(28,281)
33,733
466
(400)
66
11,028
(6,322)
4,706
15,303
(4,793)
10,510
57,612
(22,945)
34,667
466
(372)
94
9,310
(4,507)
4,803
54,084
50,523
46
Integral Diagnostics Annual Report 2018
Reconciliations
(a) Reconciliations of the written down values of property, plant and equipment at the beginning and end of the current
and previous financial year are set out below:
Consolidated
Balance at 1 July 2016
Additions
Disposals
Depreciation expense
Balance at 30 June 2017
Additions
Transfers
Disposals/write offs
Depreciation expense
Balance at 30 June 2018
Work in
progress
$’000
–
449
–
–
449
Leasehold
improvements
$’000
10,244
2,163
(810)
(1,087)
10,510
13,512
(8,695)
–
–
5,266
–
899
–
(1,096)
10,313
Plant and
equipment
$’000
32,221
9,188
(500)
(6,242)
34,667
–
6,078
(720)
(6,292)
33,733
Motor
Vehicles
$’000
138
63
–
(107)
94
Office
furniture and
equipment
$’000
4,026
2,618
(90)
(1,751)
4,803
–
–
–
(28)
66
–
1,718
–
(1,815)
4,706
Total
$’000
46,629
14,481
(1,400)
(9,187)
50,523
13,512
–
(720)
(9,231)
54,084
(b) Property, plant and equipment includes the following amounts where the Group is a lessee under a finance lease at the
beginning and end of the current and previous financial year are set out below:
Net book value at 30 June 2017
Net book value at 30 June 2018
Leasehold
improvements
$’000
4,562
3,823
Plant and
equipment
$’000
29,941
20,814
Motor
vehicles
$’000
102
5
Office
furniture and
equipment
$’000
568
721
Total
$’000
35,173
25,363
Property, plant and equipment secured under finance leases
Refer to Note 19 for further information on property, plant and equipment secured under finance leases.
Accounting policy for property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Leasehold improvements
5 – 20 years
Plant and equipment
Motor vehicles
4 – 15 years
5 – 8 years
Office furniture and equipment 3 – 15 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Costs which are necessarily incurred whilst commissioning new asset, in the period before they are capable of operating in the
manner intended by management, are capitalised as Work in Progress. Upon completion of the asset and all associated costs
being recognised, the Work in Progress is transferred to the correct property, plant and equipment classification at which point
it is accounted for in accordance with AASB 116.
47
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 13. Non-current assets – intangibles
Goodwill – at cost
Brand names – at cost
Customer contracts – at cost
Less: Accumulated amortisation
Consolidated
30 June 2018
$’000
96,387
30 June 2017
$’000
96,387
7,155
7,155
2,456
(2,456)
–
2,456
(2,077)
379
103,542
103,921
Reconciliations
Reconciliations of the written-down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balances at 1 July 2016
Additions through business combinations (Note 33)
Amortisation expense
Balance at 30 June 2017
Amortisation expense
Balance at 30 June 2018
Goodwill
$’000
91,851
4,536
–
96,387
–
96,387
Brand
names1
$’000
7,000
155
–
7,155
–
7,155
Customer
contracts
$’000
1,021
–
(642)
379
(379)
–
Total
$’000
99,872
4,691
(642)
103,921
(379)
103,542
1. Brand names of $7.0 million are included within the SCR CGU and $0.155 million included within the Lake Imaging CGU.
Impairment test for goodwill and intangibles
Goodwill and brand names are tested for impairment annually (as at 30 June) and when circumstances indicate the carrying
value may be impaired. The Group’s impairment test for goodwill and intangible assets with indefinite lives is based on value
in use calculations.
An assessment of identifiable cash-generating units and a review of allocations of goodwill to identified cash-generating units
is conducted annually. Management have concluded that given the current structure and operations of the Group and given
the synergies being delivered and the opportunities available to the Group since initial acquisition, goodwill continues to form
one cash-generating unit for impairment testing purposes, which is in line with the operating segment identified in Note 4.
48
Integral Diagnostics Annual Report 2018
Key assumptions for value-in-use calculations
The recoverable amount is determined based on value-in-use calculations which require the use of assumptions.
The calculations use cash flow projections based on financial budgets approved by management. Cash flows beyond the
five-year period are extrapolated using the estimated growth rates stated below. These growth rates do not exceed the average
growth rates for the industry in which the Group operates.
The following table sets out the key assumptions for impairment testing:
2018 – Long-term growth rate
2018 – Pre-tax discount rate
2017 – Long-term growth rate
2017 – Pre-tax discount rate
%
3.0
15.4
3.0
15.4
Within the value-in-use calculation for the five-year forecast period revenues have been forecast to grow between 4.2% – 8.3%
(2017: 3.0% – 6.5%) and 3% (2017: 3%) into perpetuity. The forecast cash flows also includes ongoing investment in property,
plant and equipment to maintain the existing base and in 2019 to invest in further technology and expansion.
The pre-tax discount rate would need to increase by more than 15.6% or the growth rate decline by more than 1.8% in the five
year forecast period and into perpetuity for there to be any impairment of the goodwill balances.
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at
the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets
are not amortised and are subsequently measured at cost less an impairment. Finite life intangible assets are subsequently
measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the
derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of
the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected
pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated
impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Brand names
Significant costs associated with brand names are not amortised but are tested for impairment annually on the same basis
and within the same VIU calculation as outlined above and are carried at cost.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected
benefit, being their finite useful lives of between one and four years. The contracts consist of Global Diagnostics (Australia), a
100% owned subsidiary of the Company, providing radiology reporting services to the Western Australia Country Health Service
in the Pilbara, Wheatbelt and Goldfield regions.
49
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 14. Non-current assets – deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits and other provisions
Provisions for lease make good
Transaction costs in equity
Provision for restructuring
Operating lease borrowings
Transaction costs
Impaired asset
Property, plant and equipment
Brand names (change in accounting policy)
Tax losses available
Intangible assets
Operating lease
Consolidated
30 June 2018
$’000
30 June 2017
$’000
5,108
721
284
–
–
1,406
–
(2,594)
(2,147)
54
–
6
4,325
621
–
89
36
1,813
243
(2,355)
(2,147)
54
(114)
110
Net deferred tax asset
2,838
2,675
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Movements:
Opening balance
Credited to profit or loss (Note 7)
Credited to equity
Fixed Asset Variance
Adjustments recognised for prior periods
Additions through business combinations (Note 33)
Closing balance
2,446
5,265
(393)
(4,480)
2,838
2,675
164
(133)
114
18
–
2,838
2,457
4,834
(355)
(4,261)
2,675
2,657
208
(168)
(76)
–
54
2,675
Accounting policy for deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
• when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
50
Integral Diagnostics Annual Report 2018
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred assets against deferred tax liabilities; and they relate to the same taxable authority on either
the same taxable entity or different taxable entities which intend to settle simultaneously.
Integral Diagnostics Limited (the ‘head entity’) and its wholly owned Australian subsidiaries have formed an income tax-consolidated
group under the tax consolidation regime. The head entity and each subsidiary in the tax-consolidated group continue to account
for their own current and deferred tax amounts. The tax-consolidated group has applied the ‘separate taxpayer within group’
approach in determining the appropriate amount of taxes to allocate to members of the tax-consolidated group. In addition to
its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred
tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax-consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the tax-consolidated group. The tax-consolidated group has a tax sharing agreement in place
to limit the liability of subsidiaries in the tax-consolidated group, arising under the joint and several liability provisions of the tax
consolidation system, in the event of default by the head entity to meet its payment obligations.
Note 15. Current liabilities – trade and other payables
Trade payables
Other payables and accruals
Refer to Note 26 for further information on financial instruments.
Consolidated
30 June 2018
$’000
4,417
7,695
12,112
30 June 2017
$’000
3,316
5,024
8,340
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. They are recognised at their fair value. The amounts are unsecured and are usually paid within 30 days
of recognition. Due to the short-term nature of these payables, their carrying amount is assumed to approximate fair value.
Note 16. Current liabilities – borrowings
Borrowings
Lease liability
Consolidated
30 June 2018
$’000
–
12,820
12,820
30 June 2017
$’000
18
11,477
11,495
Refer to Note 19 for further information on assets pledged as security and financing arrangements.
Refer to Note 26 for further information on financial instruments.
Note 17. Current liabilities – provisions
Annual leave
Long service leave
Employee benefits
Restructuring Provision
Consolidated
30 June 2018
$’000
5,757
4,702
185
–
10,644
30 June 2017
$’000
5,494
4,645
213
298
10,650
51
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Accounting policy for employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
The leave obligations cover the Group’s liability for long service leave, annual leave and rostered days off. The current provision
of this liability includes all accrued annual leave, the unconditional entitlements to long service leave where employees have
completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances.
Accounting policy for restructuring provisions
Restructuring provisions are recognised only when a detailed formal plan identifies the business or part of the business
concerned, the location and number of employees effected, a detailed estimate of associated costs, and an appropriate
timeline, and the business has been notified of the plans main features.
The restructuring provision of $0.298 million relates to the recommission costs of the Pt Headland site where the Mobile MRI
was located. Given the poor performance of the Mobile MRI in Pt Headland it has been determined that the Mobile MRI will
be re-located to a site where it will be fully utilised. Costs included within the restructuring provision include lease and electricity
contract break costs and repatriation of the site on which the impaired infrastructure asset is located.
Note 18. Current liabilities – Derivative financial instrument
Derivative financial instrument
Refer to Note 2 for further information on derivative financial instruments.
Note 19. Non-current liabilities – borrowings
Borrowings
Lease liability
Refer to Note 26 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Borrowings
Lease liability
Consolidated
30 June 2018
$’000
–
30 June 2017
$’000
59
Consolidated
30 June 2018
$’000
43,750
8,753
52,503
30 June 2017
$’000
43,750
17,647
61,397
Consolidated
30 June 2018
$’000
43,750
21,573
65,323
30 June 2017
$’000
43,768
29,124
72,892
52
Integral Diagnostics Annual Report 2018
Refinancing of existing bank debt facilities
On 7 December 2017 the Group agreed terms to refinance its existing bank debt facility with a new three year $100 million cash
advance facility, plus a $31 million asset finance facility.
Current cash reserves, ongoing operating cash flows and the extended facility provides the Group with certainty in relation
to its funding for the next three years to allow the Group to
• maintain cash reserves for working capital and debt servicing;
• fund forecast maintenance and growth capital expenditure;
• fund bolt on acquisitions as well as 1-2 mid-size acquisitions; and
• meet the obligations under the dividend policy of 65%-75% of net profit after tax.
Key terms of the new debt facility are as follows:
• cash advance facility limit of up to $80 million, plus an accordion of $20 million. This increases the facility from the previous
$65 million;
• asset finance facility of $31 million was reduced by $8 million in June 2018 as asset finance facilities by alternative lenders
were entered into;
• margin pricing on the cash advance facility has increased by only 10 basis points reflecting the risk of the larger facility,
average cost of debt will remain at less than 3.8% (based on one month BBSW of 1.98% 6 July 2018);
• financial indebtedness under lease finance facilities extended to $30 million (prior year $15 million) allowing substantial
asset finance facilities to be taken out with alternative lenders;
• the facility will be subject to the following financial covenants:
– Net Debt to EBITDA Ratio not greater than 3.50:1;
– Fixed Charge Cover Ratio not less than 2.00:1; and
– interest rate risk hedging on a minimum 25% of the amount drawn under the cash advance facility.
In accordance with Australian Accounting Standards, Loan Establishment fees have been capitalised and will be amortised over
the life of the debt facilities.
Assets pledged as security
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the Consolidated Statement of Financial
Position, revert to the lessor in the event of default.
53
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Financial arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Equipment finance facility
Cash advance facility (1)
Cash advance facility (2)
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Used at the reporting date
Equipment finance facility
Cash advance facility (1)
Cash advance facility (2)
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Unused at the reporting date
Equipment finance facility
Cash advance facility (1)
Cash advance facility (2)
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Consolidated
30 June 2018
$’000
30 June 2017
$’000
38,096
10,500
69,500
–
2,000
300
3,075
123,471
21,574
10,500
33,250
–
1,469
79
–
66,872
16,522
–
36,250
–
531
221
3,075
56,599
15,900
10,500
50,250
15,000
2,000
600
3,075
97,325
15,900
10,500
33,250
10,167
1,406
30
3,075
74,328
–
–
17,000
4,833
594
570
–
22,997
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method. Under the current lending arrangement the cash
advance facilities expire in December 2020.
Note 20. Non-current liabilities – Derivative financial instrument
Derivative financial instrument
Refer to Note 2 for further information on derivative financial instruments.
Consolidated
30 June 2018
$’000
122
30 June 2017
$’000
–
54
Integral Diagnostics Annual Report 2018
Note 21. Non-current liabilities – provisions
Long service leave
Deferred rent liability
Lease make good
Consolidated
30 June 2018
$’000
2,114
2,387
4,350
8,851
30 June 2017
$’000
1,704
2,172
4,250
8,126
Deferred rent liability
Deferred rent liabilities relate to property leases where rent increases prescribed in leases are based on fixed percentage
increases, and/or where leases include a rent-free period or other lease incentives. The liability represents the difference
between actual rental costs incurred per terms of leases, and calculated expense if the total estimated rental expense over
the period of the lease was expensed evenly over the expected term of the lease. The liability reflects that as of the date of
this Report, the calculated expense (if the total estimated rental expense was expensed evenly over the expected term of the
lease) is greater than actual costs incurred to date. The total liability is expected to fluctuate over time reflecting the cumulative
calculations of individual leases. For individual leases, any liability will unwind over the period of the lease.
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end
of the respective lease terms. Property lease agreements include various obligations at the end of the respective lease terms,
such as removal of tenant installations and making good any damage caused by installation or removal, removing signage, and
other general maintenance obligations (e.g. painting, cleaning). These costs have been estimated for each location, based on
specific terms of individual leases, size of the individual sites, and historical experience of costs incurred when vacating a site.
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated – 2018
Carrying amount at the start of the year
Additional provisions
Amounts used
Carrying amount at the end of the year
Deferred rent
liability
$’000
Lease make
good
$’000
2,172
430
(215)
2,387
4,250
130
(30)
4,350
Accounting policy for provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is
probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the
reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material,
provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the
passage of time is recognised as a finance cost.
Accounting policy for other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured as the present value of expected future payments to be made in respect of services provided by employees up
to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at the
reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future
cash outflows.
55
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 22. Equity – contributed capital
Ordinary shares – fully paid
Movement in ordinary share capital
Details
Balance
Shares issued as part of Acquisition (Note 33)
Reversal of DTA on transaction costs of equity
Balance
Reversal of DTA on transaction costs of equity
Transaction costs on acquisitions in equity
Balance
Consolidated
Consolidated
30 June 2018
Shares
145,044,157
30 June 2017
Shares
145,044,157
30 June 2018
$’000
83,425
30 June 2017
$’000
83,866
Date
1 July 2016
1 July 2016
Number of shares
144,136,101
908,056
Issue Price
$1.40
30 June 2017
145,044,157
30 June 2018
145,044,157
$’000
82,760
1,275
(169)
83,866
(162)
(279)
83,425
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does
not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the Consolidated Statement of Financial Position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, adjustments may be made to the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative
to the current company’s share price at the time of the investment. The Group is currently undergoing a review of its capital
structure and future requirements to continue to grow the business and execute on acquisition opportunities whilst maintaining
an optimal mix of debt and equity against forecast EBITDA.
The Group is subject to certain financing arrangement covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
Accounting policy for contributed capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
56
Integral Diagnostics Annual Report 2018
Note 23. Equity – reserves
Share-based payments reserve
Capital reorganisation reserve
Transactions with non-controlling interest
Cash flow hedge reserve
Consolidated
30 June 2018
$’000
120
(3,849)
(8,013)
(85)
(11,827)
30 June 2017
$’000
–
(3,849)
(8,013)
–
(11,862)
Share-based payments reserve
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration,
and as part of their compensation for services.
Capital reorganisation reserve
The reserve is used to account for historical capital reorganisation of the Lake Group whereby the assets and liabilities of
the acquired party are recorded at their previous book values and no goodwill is recognised. Any difference between the
cost of the transaction and the carrying amount of the assets and liabilities are recorded directly in this reserve.
Transactions with non-controlling interest
Transactions with non-controlling interest reserve is used to record the differences arising as a result of transactions with
non-controlling interests that do not result in a loss of control.
Cash flow hedge reserve
The reserve is used to recognise the effective portion of changes in the fair value of derivatives that are designated and qualify
as cash flow hedges. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss, within other
income (expenses).
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 30 June 2017
Recognition of share-based payments
Net movement in FV of derivative
financial instrument
Balance at 30 June 2018
Cash flow
hedge
reserve
$’000
–
–
Share-based
payment
reserve
$’000
–
120
Capital
reorganisation
reserve
$’000
(3,849)
–
Transaction
with non-
controlling
interest
$’000
(8,013)
–
(85)
(85)
–
120
–
(3,849)
–
(8,013)
Total
$’000
(11,862)
120
(85)
(11,827)
57
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 24. Equity – retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense for the year
Dividend paid (Note 25)
Retained profits at the end of the financial year
Note 25. Equity – dividends
Dividends
Full franked Dividends paid during the financial year were as follows:
Dividend paid 4 cents per share on 4 October 2016
Dividend paid 3 cents per share on 30 March 2017
Dividend paid 4 cents per share on 4 October 2017
Dividend paid 4 cents per share on 5 March 2018
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
30 June 2018
$’000
18,348
15,079
(11,603)
21,824
30 June 2017
$’000
13,022
15,480
(10,154)
18,348
Consolidated
30 June 2018
$’000
–
–
5,801
5,802
11,603
30 June 2017
$’000
5,803
4,351
–
–
10,154
Consolidated
30 June 2018
$’000
19,972
30 June 2017
$’000
17,838
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date;
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
Accounting policy for dividends
Dividends are recognised when declared during the financial year and payment is no longer at the discretion of the Company.
Note 26. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and ageing analysis
for credit risk .
Risk management is carried out by senior financial executives (‘finance’) under policies approved by the Board of Directors
(‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures,
controls and risk limits. Finance reports to the Board on a monthly basis.
58
Integral Diagnostics Annual Report 2018
Market risk
Interest rate risk
The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to
interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The policy is to maintain
approximately 25% of borrowings at fixed rates using interest rate swaps to achieve this when necessary.
As at the reporting date, the Group had the following interest bearing financial assets and liabilities:
Consolidated
Cash at bank and on deposit
Borrowings
Finance leases
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2018
2017
Weighted
average
interest rate
%
1.5
3.4
5
2.46
Weighted
average
interest rate
%
1.5
3.8
4.0
3.1
Balance
$’000
20,844
(43,750)
(21,573)
(122)
(44,601)
Balance
$’000
24,210
(43,750)
(29,124)
(59)
(48,723)
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
If interest rates were to increase/decrease by 100 (2017: 100) basis points from rates used to determine fair values as at the
reporting date, assuming all other variables that might impact on fair value remain constant, then the impact on profit for the
year and equity is as follows:
Basis points increase effect on
Basis
points
change
Profit
before tax
Effect
on equity
post tax
Basis points decrease effect on
Basis
points
change
Profit
before tax
Effect
on equity
post tax
Consolidated – 2018
Impact
Consolidated – 2017
Impact
100
100
449
485
314
339
100
100
(449)
(485)
(314)
(339)
Credit risk
Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the
Group. Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks. Credit risk for trade
receivables is managed by completing credit checks for new customers. Outstanding receivables are regularly monitored for
payments in accordance with credit terms. The maximum exposure to credit risk at the reporting date to recognised financial
assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the Consolidated Statement
of Financial Position and notes to the financial statements. The Group does not hold any collateral.
The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments
entered into by the Group.
The credit risk for derivative financial instruments arises from the potential failure of the counter-party to meet its obligations.
The credit risk exposure of forward contracts is the net fair value of these contracts.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents)
and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
59
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Fair value risk
The only item held at fair value in the financial statements is an interest rate derivative which is considered immaterial and as
such no further disclosure in relation to fair value has been made.
Subject to the continuance of satisfactory credit ratings and compliance with banking covenants, the bank loan facilities may be
drawn at any time and have a maturity of two years and five months (2017: two years and three months). The bank loan facilities
are interest-only repayments.
Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have been
drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities
are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities
and therefore these totals may differ from their carrying amount in the statement of financial position.
Weighted
average
interest rate
%
–
–
3.4
5
2.46
Weighted
average
interest rate
%
–
–
3.8
4.0
3.1
Consolidated – 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – variable
Borrowings
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
Consolidated – 2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – variable
Borrowings
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
1 year
or less
$’000
4,417
7,695
1,492
13,235
26,839
(122)
(122)
1 year
or less
$’000
3,316
5,024
1,667
12,017
22,024
59
59
Between
1 and
2 years
$’000
Between
2 and
5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
1,492
6,871
8,363
–
–
–
–
44,400
2,379
46,779
–
–
–
–
–
–
–
–
–
4,417
7,695
47,384
22,485
81,981
(122)
(122)
Between
1 and
2 years
$’000
Between
2 and
5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
44,185
12,099
56,284
–
–
–
–
–
6,479
6,479
–
–
–
–
–
–
–
–
3,316
5,024
45,852
30,595
84,787
59
59
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
60
Integral Diagnostics Annual Report 2018
Note 27. Key management personnel disclosures
Compensation
The aggregate compensation paid to Directors and other members of the key management personnel of the Group
is set out below:
Short-term employee benefits
Long-term employee benefits
Consolidated
30 June 2018
$
3,335,147
104,658
3,439,805
30 June 2017
$
3,056,941
–
3,056,941
Note 28. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor
of the Company:
Audit services – PricewaterhouseCoopers
Audit and review of the financial statements
Other services – PricewaterhouseCoopers
Tax services – acquisitions and takeover defence
Agreed procedures in relation to takeover defence
Advice re employee shares
Tax compliance services
Other services – Network firms of PwC Australia
Due diligence and transaction costs
Consolidated
30 June 2018
$
30 June 2017
$
206,925
214,925
52,000
27,800
5,000
26,000
317,725
–
–
–
31,562
246,487
185,804
–
Note 29. Contingent liabilities
The Group has given bank guarantees as at 30 June 2018 of $1.5 million (2017: $1.4 million) to various landlords.
61
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 30. Commitments
Lease commitments – operating
Within one year
One to five years
More than five years
Lease commitments – finance
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Consolidated
30 June 2018
$’000
30 June 2017
$’000
7,856
11,247
2,443
21,546
13,235
9,249
22,484
(911)
7,874
14,896
2,811
25,581
12,017
18,578
30,595
(1,471)
Net commitment recognised as liabilities
21,573
29,124
Representing:
Lease liability – current (Note 16)
Lease liability – non-current (Note 19)
12,820
8,753
11,477
17,647
21,573
29,124
Under the terms of the leases, the Group has the option to acquire the leased assets for predetermined residual values on the
expiry of the leases.
As at 30 June 2018, there were outstanding capital commitments for plant and equipment of $1.2 million (2017: $3.6 million).
Note 31. Related party transactions
Parent entity
Integral Diagnostics Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 34.
Key management personnel
Disclosures relating to key management personnel are set out in Note 27 and the Remuneration Report on pages 14 to 23.
62
Integral Diagnostics Annual Report 2018
Transactions with related parties
The following transactions occurred with related parties:
Payment for goods and services:
Cleaning fees paid to GJJ Hughes of which Gregory Hughes is related to
(this arrangement was terminated effective January 2017).
Other Transactions:
Payment for rental of buildings to Eleven Eleven How Pty Ltd of which Chien Ping Ho
and Gregory Hughes and Craig Bremner are related to.
Payment for rental of buildings to Perhaps Holdings Pty Ltd of which Chien Ping Ho
is related to (this arrangement was terminated effective January 2017).
Payment for rental of buildings to Kiwi Blue Pty Ltd of which Chien Ping Ho
and Gregory Hughes are related to.
Consolidated
30 June 2018
$
30 June 2017
$
–
12,500
368,506
391,934
–
44,120
210,820
225,307
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Trade receivables from related parties
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Profit after income tax
Total comprehensive income
Consolidated
30 June 2018
$’000
30 June 2017
$’000
–
54
Parent
30 June 2018
$’000
6,575
30 June 2017
$’000
6,700
6,575
6,700
63
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Statement of Financial Position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed capital
Cash flow hedging reserve
Share-based payments reserve
Retained profits
Total equity
Parent
30 June 2018
$’000
30,256
30 June 2017
$’000
23,759
143,893
142,779
1,567
222
45,043
43,844
83,462
(122)
120
15,390
83,866
–
–
15,069
98,850
98,935
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity is party to the deed of cross guarantee, as disclosed in Note 35.
Contingent liabilities
Except as disclosed in Note 30, there are no other contingent liabilities of the parent entity as at 30 June 2018 and 30 June 2017.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2018 and 30 June 2017.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 2, except for the following:
• investments in subsidiaries are accounted for at cost, less an impairment, in the parent entity;
• investments in associates are accounted for at cost, less any impairment, in the parent entity; and
• dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
Note 33. Business combinations
Disclosure required under Australian Accounting Standards, in relation to the post balance date business combination,
has been detailed in Note 38 on page 69.
On 1st July 2016, the Group acquired the assets and liabilities of the Western District Radiology business and the remaining 50%
interest in South West MRI Pty Ltd (collectively known as the WDR/SWMRI acquisition) for the total consideration transferred
of $4.954 million inclusive of GST. This acquisition complements the Group’s strengths and further strengthens the Group’s
position in the South West region of Victoria and will be integrated into the Group so as the maximum synergies can be obtained.
The business of South West MRI Pty Ltd was valued at $2.400 million immediately prior to acquisition, the value of the 50%
interest held previously immediately prior to acquisition was $0.002 million resulting in the recognition of a $1.200 million gain
as a result of re-measuring to fair value the equity interest held in South West MRI Pty Ltd. This amount was recognised in other
income in the statement of profit and loss as at 1 July 2016 and in goodwill. The share of plant and equipment $0.453 million
and debt assumed $0.389 million will result in net assets of $0.065m being booked which will reduce goodwill by $0.065 million.
64
Integral Diagnostics Annual Report 2018
Details of the acquisition are as follows:
Plant and equipment
Brand name
Other assets
Employee benefits
Lease make good provision
Debt assumed
GST on acquisition
Net assets acquired
Fair value gain on acquisition of SWMRI Pty Ltd joint venture
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor(including GST)
Contingent consideration
Integral Diagnostics Limited shares issued to vendor
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: 908,056 shares issued by Company (at fair value of $1.4041 per share) as part of consideration
Less: Contingent consideration
Net cash used
Recognised
on acquisition
fair value
$’000
1,968
155
106
(229)
(100)
(767)
485
1,618
(1,200)
4,536
4,954
3,529
150
1,275
4,954
4,954
(1,275)
(150)
3,529
Total goodwill to be booked on the transaction $3.401 million relating to the acquisition, $1.200 million relating to the fair value
uplift on existing interest less $0.065m on recognition of 50% of net assets in SWMRI, totaling goodwill of $4.536 million. The
goodwill recognized is primarily attributed to the expected synergies and other benefits from combining the assets and activities
of SWMRI/WDR with those of the Group. The goodwill is not deductible for income tax purposes.
Contingent consideration payable is a maximum amount of $0.150 million and is dependent on a range of performance hurdles
over a two year period, with payments required six monthly. On acquisition it was considered that all performance hurdles would
be met and the contingent consideration would be payable. As at 30 June 2017 $0.050 million of the deferred consideration
has been paid, $0.030 million in cash and $0.020 million offset against the amount owing by the vendor on settlement of the
completion statement. On the 3rd August 2017 a further $0.025 million was paid.
From the date of acquisition, which was the beginning of the period, SWMRI/WDR has contributed $4.755 million of revenue and
$2.405 million (prior to any corporate overhead allocations) to the net profit before tax from the continuing operations of the Group.
Transaction costs of $180,000 were expensed in the statement of profit and loss for the year ended 30 June 2016 and were part
of the operating cash flows in the statement of cash flows for the half year ended 31 December 2016.
65
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or
liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree.
For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate
share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or
accounting policies and other pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the Group measures its previously held equity interest in the acquiree
at the acquisition date fair value and the difference between and fair value and the previous carrying amount is recognised in
profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. Subsequent changes
in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling interest in
the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is
recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable
net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss
by the acquirer on the acquisition date but only after a reassessment of the identification and measurement of the net assets
acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held
equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets and liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends
on either the earlier of (i) twelve months from the date of the acquisition or (ii) when the acquirer received all the information
possible to determine fair value.
Business combinations under common control use the principals of corporate reorganisation. The difference between the
acquisition-date historical book value of assets acquired, liabilities assumed and any non-controlling interest in the acquired and
the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as a
capital reorganisation in reserves, and not as goodwill.
66
Integral Diagnostics Annual Report 2018
Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 2:
Name of entity
Lake Imaging Pty Ltd
Radploy Pty Ltd
Radploy 2 Pty Ltd
Radploy 3 Pty Ltd
Radploy 4 Pty Ltd
Global Diagnostics (Australia) Pty Ltd
SCR Corporate Pty Ltd
RAD Corporate Pty Ltd
Principal place of business/
country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2018
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
2017
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Note 35. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
• Integral Diagnostics Limited (formerly known as Lake Imaging Holdings Pty Ltd)
• Lake Imaging Pty Ltd
• Radploy Pty Ltd
• Radploy 2 Pty Ltd
• Radploy 3 Pty Ltd
• Radploy 4 Pty Ltd
• Global Diagnostics (Australia) Pty Ltd
• SCR Corporate Pty Ltd
• RAD Corporate Pty Ltd
By entering into the deed, the wholly owned entities have been relieved from the requirement to prepare financial statements
and a Directors’ Report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments
Commission (ASIC).
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the
deed of cross guarantee that are controlled by Integral Diagnostics Limited, they also represent the ‘extended closed group’.
The Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position are the same as the Group
and therefore have not been separately disclose.
67
Integral Diagnostics Annual Report 2018
Notes to the Financial Statements continued
Note 36. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax expense for the year
Adjustments for:
Depreciation and amortisation
Loan establishment costs amortisation
Net (gain)/loss on disposal of property, plant and equipment
Impairment of asset
Share-based payments
Tax included in equity
FV gain on acquisition of SWMRI Pty Ltd
Financial liability fair value movement through profit and loss
Interest income
Bad debts
Property, plant, and equipment in payables
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in deferred tax assets
Increase in other operating assets and inventory
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase /(decrease) in other provisions
Consolidated
30 June 2018
$’000
15,079
30 June 2017
$’000
15,480
9,610
149
(423)
–
120
(126)
–
(59)
(330)
65
(1,821)
(473)
(163)
47
3,771
352
719
9,830
188
477
810
–
–
(1,200)
(306)
(370)
–
–
(108)
(208)
(622)
(1,302)
1,448
(1,387)
Net cash from operating activities
26,517
22,730
Reconciliation of Liabilities arising from Financing Activities
Finance
Leases due
within 1 year
$’000
11,477
1,343
12,820
Finance
Leases due
after 1 year
$’000
17,647
(8,894)
8,753
Borrowings
due within
1 year
$’000
18
(18)
–
Borrowings
due after
1 year
$’000
43,750
–
43,750
Total
$’000
72,892
(7,568)
65,324
Consolidated – 2018
Balance as at 30/06/2017
Net cash flows
Balance as at 30/06/2018
Note 37. Earnings per share
Profit after income tax Non-controlling interest
Profit after income tax attributable to the owners of Integral Diagnostics Limited
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Weighted average number of performance rights over ordinary shares
Weighted average number of ordinary shares used in calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
30 June 2018
$’000
15,079
–
15,079
30 June 2017
$’000
15,480
–
15,480
Number
145,044,157
Number
145,044,157
262,139
145,306,296
–
145,044,157
Cents
10.40
10.38
Cents
10.67
10.67
68
Integral Diagnostics Annual Report 2018
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Integral Diagnostics Limited, excluding
any costs of servicing equity other than ordinary shares, by weighted average number of ordinary shares outstanding during the
financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.
Note 38. Events after the reporting period
(a) On 2nd July 2018, the Group acquired the assets and liabilities of the Specialist Radiology Group, Trinity MRI and Cavendish
Radiology in Auckland New Zealand (referred to as the New Zealand transaction).
The three businesses combined:
• comprise the leading specialist radiology clinics in Auckland;
• employ and contract several of the nation’s leading specialists in musculoskeletal radiology and neuroradiology;
• have a projected EBITDA contribution of NZ$13 million to NZ$14 million (A$12 million to A$13 million1) for FY19;
• a high growth business with strong margins; and
• provides a premier platform for Integral Diagnostics to enter and grow in New Zealand.
The key terms of the acquisition include:
• a purchase consideration of NZ$105 million (A$99.03 million) on a cash and debt free basis, comprising NZ$80 million
(A$75.3 million) in cash and Z$25 million (A$23.73 million) in IDX equity;
• 80% of the equity will be held in escrow for up to five years; and
• a five year staged earn-out for vendor radiologists based on earnings outperformance.
This strategic acquisition includes four clinics, employing 14 radiologists working in both the public and private sectors.
The clinics are market leaders in providing complex modalities including MRI, CT and SPECT CT (nuclear medicine), which
are high margin services positioned to experience significant future growth. The clinics are fitted with state of the art equipment.
The purchase price accounting has not yet been finalised as at the date of this report, the initial values identified in relation
to the acquisition are as follows.
Plant and equipment
Intellectual Property (brand names)
Customer contracts
Deferred tax assets
Working capital assets
Working capital liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
1. Based on forecast average weighted exchange rate of $NZ1 to $AUD0.93.
69
Integral Diagnostics Annual Report 2018
Recognise on
Acquisition
$’000
6,623
10,788
3,906
56
1,255
(909)
21,719
77,317
99,036
Notes to the Financial Statements continued
Representing:
Cash paid or payable to vendor
Integral Diagnostics Limited shares issued to vendor
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Recognise on
Acquisition
$’000
75,303
23,733
1,000
(75,303)
(74,303)
(b) Also on 2nd July 2018, the Group acquired the assets and liabilities of Geelong Medical Imaging (GMI), which comprises
two radiology clinics in Geelong, Victoria. These clinics comprise a number of modalities, including X-Ray, ultrasound, CT,
MRI and nuclear medicine.
The key terms of the acquisition include:
• a purchase consideration of $3.15 million on a cash and debt free basis;
• $1.05 million in IDX equity (subject to voluntary escrow); and
• $1.40 million of deferred cash.
The acquisition complements the Group’s strengths and further strengthens the Group’s position in South West Victoria
and will be integrated into Lake Imaging.
The purchase price accounting has not yet been finalised as at the date of this report, the initial values identified in relation
to the acquisition are as follows.
Plant and equipment
Brand name
Employee benefits
Inventory
Deferred tax asset
Prepayments
Net assets acquired
Goodwill
Acquisition-date fair value of total consideration transferred
Representing:
Cash paid or payable to vendor
Deferred consideration
Contingent consideration
Integral Diagnostics Limited shares issued to vendor
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Recognise on
Acquisition
$’000
626
170
(77)
16
23
39
797
4,803
5,600
3,150
500
900
1,050
–
(3,150)
(3,150)
Subsequent to year end a dividend of 4.0 cents per share was declared and will be paid on 2 October 2018.
No other matter or circumstance has arisen since 30 June 2018 that has significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state of affairs in future financial years.
70
Integral Diagnostics Annual Report 2018
Directors’ Declaration
In the Directors’ opinion:
• the attached financial statements and notes comply with the Corporations Act 2001, the accounting standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in Note 2 to the financial statements;
• the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2018
and of its performance for the financial year ended on that date;
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
• at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed group will be
able to meet any obligations or liabilities to which they are, or may become, subject to virtue of the deed of cross guarantee
described in Note 35 to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
Helen Kurincic
Chairman
Dr Ian Kadish
Managing Director and Chief Executive Officer
22 August 2018
Melbourne
71
Integral Diagnostics Annual Report 2018
Independent Audit Report
Independent auditor’s report
To the members of Integral Diagnostics Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Integral Diagnostics Limited (the Company) and its controlled
entities (together the Group) is in accordance with the Corporations Act 2001, including:
(a)
giving a true and fair view of the Group's financial position as at 30 June 2018 and of its
financial performance for the year then ended
(b)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The Group financial report comprises:
the consolidated statement of financial position as at 30 June 2018
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows for the year then ended
the notes to the consolidated financial statements, which include a summary of significant
accounting policies
the directors’ declaration.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s responsibilities for the audit of the financial
report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant
to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities
in accordance with the Code.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001
T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
72
Integral Diagnostics Annual Report 2018
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial report as a whole, taking into account the geographic and management
structure of the Group, its accounting processes and controls and the industry in which it operates.
Materiality
Audit scope
Our audit focused on where the Group made
subjective judgements; for example, significant
accounting estimates involving assumptions and
inherently uncertain future events.
The Group operates in 3 geographical locations
within Australia- Victoria, Queensland and
Western Australia.
We, as the Group engagement team, performed
our audit procedures at the Group’s shared service
office in Geelong, Victoria.
For the purpose of our audit we used overall Group
materiality of $1,288,000, which represents
approximately 5% of the Group’s adjusted profit
before tax.
We applied this threshold, together with
qualitative considerations, to determine the scope
of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of
misstatements on the financial report as a whole.
We chose Group adjusted profit before tax
because, in our view, it is the benchmark against
which the performance of the Group is most
commonly measured. We adjusted group profit
before tax for transaction costs as they are an
unusual or infrequently occurring item impacting
profit and loss.
We utilised a 5% threshold based on our
professional judgement, noting it is within the
range of commonly acceptable thresholds.
73
Integral Diagnostics Annual Report 2018
Independent Audit Report continued
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report for the current period. The key audit matters were addressed in the
context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit and Risk Committee.
Key audit matter
How our audit addressed the key audit matter
Valuation of Goodwill
Refer to note 13 $96.4m
The Group’s goodwill is recognised in one Cash
Generating Unit ("CGU"). A CGU is the smallest
identifiable group of assets that generate cash inflows
that are largely independent of the cash inflows from
other assets or groups of assets.
The Group has a goodwill balance of $96.4 million at
30 June 2018 which represents approximately 50% of
the total assets of the Group.
For the year ended 30 June 2018, the Group performed
an impairment assessment over the Group’s goodwill.
The impairment assessment relied on the calculation of
value-in-use for the Group. This calculation was based
on estimated future cash flows discounted to net
present value using the Company’s weighted average
cost of capital (WACC).
We considered the carrying value of goodwill to be a
key audit matter as the balance is significant to the
statement of financial position and there is significant
judgement involved in estimating future cash flows,
particularly with respect to determining appropriate:
Discount rates
Five-year cash flow projections (Cash flow
forecasts)
Earnings growth rates applied beyond the initial
five-year period (Terminal growth rates)
We assessed whether the division of the Group into
CGU's was consistent with our knowledge of the
Group’s operations and internal Group reporting.
To evaluate the Groups cash flow forecasts and the
process by which they were developed, we performed
the following procedures, amongst others:
Assessed the discount rate and long term growth
rates applied in the model by comparing these
rates to historical results, market expectations of
investment return and projected economic growth
and interest rates.
Considered the historical accuracy of the Group’s
cash flow forecasts by comparing the forecasts
used in the prior year cash flow forecast valuation
model (“the model”) to the actual performance of
the Group in the current year.
Compared the 12 month cash flow forecast used in
the model with the Board approved budget, and
considered whether the key assumptions used in
the model (in particular the discount rate and
growth rates) were subject to oversight from the
directors.
Reperformed the underlying calculations used in
the model.
Performed a sensitivity analysis by varying the
growth rates, discount rate and sales growth rates
within a reasonably possible range. We found that
changes to these key assumptions did not cause
the carrying value of the CGU to exceed its
recoverable amount.
74
Integral Diagnostics Annual Report 2018
Key audit matter
How our audit addressed the key audit matter
Borrowings
Refer to note 16 & 19 $65.3m
At 30 June 2018, The Group had a borrowing liability
(current and non-current) of $65.3 million
representing 67% of total liabilities.
The Group refinanced the banking facilities during the
year, replacing the old facility with a new facility with
the same lender. The terms and conditions of the
borrowings are detailed in note 19 of the financial
report. The borrowing agreements contain financial
covenants that the Group must comply with.
We considered this a key audit matter given the
significance of the refinancing arrangement, the
financial size of the borrowings balance and the
importance of the funding mechanism/capital structure
for the continued growth of the Group.
Transaction costs relating to the Unsolicited
takeover bid
Refer to note 6 $2.4m
During the year the Group was subject to an unsolicited
takeover bid by Capitol Health Limited. The Group
incurred significant costs relating to this takeover bid.
We considered the accounting treatment of the
transaction costs related to this bid to be a key audit
matter because these costs are significant and are a key
contributor to the Group’s financial performance.
We obtained confirmations directly from the
Group’s banks for all borrowings to test the
amounts recorded in the financial statements.
We read the most up-to-date agreements between
the Group and its financiers to develop an
understanding of the terms associated with the
facilities and the amount of facility available for
drawdown.
Where debt is regarded as non-current, we tested
the Group’s assessment that they had the
unconditional right to defer payment such that
there were no repayments required within 12
months from the balance date.
We assessed the accounting treatment of the
capitalised borrowing costs arising from new
arrangements and borrowing costs related to
terminated facilities.
As part of our procedures relating to the takeover bid
transaction costs, we:
Agreed a sample of transaction costs recorded by
the Group to the relevant underlying invoices.
Traced a sample of payments made by the Group
in respect of transaction costs to the relevant
invoice to assess whether they were recorded as
liabilities in the correct financial period.
Inspected a sample of underlying contracts
related to transaction costs to consider weather
expenses recognised were consistent with costs
agreed.
Considered the adequacy of the Group’s
accounting policies and disclosures in respect of
the transaction costs in light of the requirements
of Australian Accounting Standards.
Other information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 June 2018, including the
Chairman’s report, Managing Director and Chief Executive Officer’s report, Operating and Financial
Review, the Directors Report, Shareholder Information, our locations, About us and the Corporate
Directory, but does not include the financial report and our auditor’s report thereon.
75
Integral Diagnostics Annual Report 2018
Independent Audit Report continued
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent
with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor's report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 23 of the directors’ report for the
year ended 30 June 2018.
76
Integral Diagnostics Annual Report 2018
In our opinion, the remuneration report of Integral Diagnostics Limited for the year ended 30 June
2018 complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility
is to express an opinion on the remuneration report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Jason Perry
Partner
Melbourne
22 August 2018
77
Integral Diagnostics Annual Report 2018
Shareholder Information
Integral Diagnostics Limited
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report follows. This
information is current as at 10 August 2018.
(a) Top 20 shareholders – ordinary shares
Rank Name
1
2
3
4
5
6
7
8
9
10
10
10
10
14
15
16
17
18
19
20
20
Totals: Top 20 holders of ordinary fully paid shares (total)
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
Peter J Ansley + St Leger M Reeves + Stephen Eichsteadt + Thomas Q St Leger Reeves
Visionary Imaging Pty Ltd
Mittal Holdings Pty Ltd
Anacacia Pty Ltd + Wattle Fund A/C
G J Hughes Pty Ltd
Lethean Holdings Pty Ltd
Lockwood Ridge Pty Ltd
Wyndham Salter Pty Ltd
Mr Vincent Michael O’Sullivan
CS Fourth Nominees Pty Limited
NW3 Pty Ltd
New Imaging Pty Ltd
Jasmat Pty Ltd
UBS Nominees Pty Ltd
Meakin Professional Investments Pty Ltd
Willowbay Rise Pty Ltd
(b) Register of substantial shareholdings
Number of
fully paid
ordinary
shares
26,070,397
25,077,560
11,376,941
9,011,805
6,588,014
4,638,357
2,889,180
2,778,410
2,553,379
2,467,230
2,467,230
2,467,230
2,467,230
2,448,000
2,407,730
2,343,630
2,330,150
2,193,090
1,799,766
1,754,472
1,754,472
117,884,273
Shareholder
Integral Diagnostics Limited1
Investors Mutual Ltd
IOOF Holdings Limited
Adam Smith Asset Management
Viburnum Funds Pty Ltd
Number
of fully paid
ordinary shares
39,628,923
13,620,000
12,049,838
9,949,431
7,266,066
% of
issued
capital
16.78
16.14
7.32
5.80
4.24
2.98
1.86
1.79
1.64
1.59
1.59
1.59
1.59
1.58
1.55
1.51
1.50
1.41
1.16
1.13
1.13
75.86
% of
issued
capital
25.5%
9.32%
8.308%
6.86%
5.01%
1. Restriction on disposal of shares under voluntary escrow arrangements disclosed in Integral Diagnostics Limited’s replacement Prospectus dated 9
October 2015, the announcements to ASX on 27 October 2015, 1 July 2016, 16 February 2018 and 2 July 2018 (and as set out in the IPO Restriction
Deed, WDR Restriction Deed, NZ1 Restriction Deed, NZ Boyer Restriction Deed, NZ Gee Restriction Deed and GMI Restriction Deed) gives Integral
Diagnostics a relevant interest in its own shares under section 608(1)(c) of the Corporations Act. Integral Diagnostics has no right to acquire these
shares or to control the voting rights attached to these shares.
78
Integral Diagnostics Annual Report 2018
(c) Distribution of shareholders – ordinary shares
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 to 500,000
Rounding
Total
Total
holders
221
345
133
168
82
Shares
88,171
954,102
1,007,261
4,686,359
148,656,874
949
155,392,767
% Issued
capital
.06
.61
.65
3.02
95.67
-0.01
100.00
(d) Less than marketable parcels of ordinary shares
There are 80 shareholders holding less than a marketable parcel of ordinary shares (i.e. less than $500 per parcel of shares).
(e) Distribution of unquoted securities – performance rights
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over1
Total
Performance rights
of ordinary shares
–
–
–
139,068
462,739
601,807
%
–
–
–
23.11
76.89
100.00
Number of holders of
performance rights
–
–
–
3
2
5
%
–
–
–
60.00
40.00
100.00
1. Dr Ian Kadish holds greater than 20% of the performance rights; 362,585.
(f) Voting rights
In accordance with the Company’s Constitution, each member present at a meeting, whether in person, by proxy, by power
of attorney or by a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands
and one vote for each fully paid ordinary share on a poll.
Holders of performance rights do not have voting rights.
(g) On-market buy-backs
There is no current on-market buy-back in relation to the Company’s securities.
79
Integral Diagnostics Annual Report 2018
Shareholder Information continued
For the year ended 30 June 2018
(h) Securities subject to voluntary escrow
Number of securities
Date of expected release
from escrow1
23-Aug-18
30-Aug-18
04-Dec-18
22-Dec-18
01-Jan-19
11-Jan-19
28-Jan-19
23-Feb-19
30-Apr-19
02-Jul-19
08-Jul-19
31-Jul-19
Aug-194
31-Aug-19
22-Dec-19
06-Jan-20
23-Feb-20
29-Mar-20
22-Jun-20
02-Jul-20
31-Jul-20
30-Aug-20
07-Apr-21
18-Apr-21
02-Jul-21
03-Jul-21
08-Jul-21
25-Aug-21
10-Sep-21
02-Mar-22
12-Mar-22
02-Jul-22
03-Jul-22
18-Feb-23
30-Mar-23
02-Jul-23
03-Jul-23
03-Nov-23
18-Nov-23
05-Jan-24
05-Feb-24
02-Jul-24
21-Sep-24
01-Oct-24
Aug-254
Undated
Subject to
service conditions
being met2
–
–
244,470
–
122,232
244,470
–
–
244,470
18,834
822,408
–
–
–
–
822,408
–
–
244,470
–
–
–
822,408
288,918
–
–
244,470
822,408
288,912
288,918
144,456
–
–
288,918
822,408
–
–
288,918
288,918
84,174
213,588
–
577,836
822,408
873,918
–
9,925,338
Subject
to non-
compete
–
731,030
–
776,720
–
–
53,810
776,720
–
–
–
776,720
–
731,030
776,720
–
776,720
–
–
–
776,720
731,030
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,907,220
Total shares on issue subject to voluntary escrow
Unconditional
3,477,545
50,448
–
–
–
–
–
–
18,834
–
–
–
–
207,176
2,659,182
–
–
–
–
–
43,946
2,659,178
–
–
43,946
2,659,183
–
–
–
–
43,946
–
–
–
–
11,863,384
Subject to a long
term non-compete
minimum value3
–
–
236,321
–
118,156
236,321
–
–
236,321
–
794,994
–
–
–
–
794,994
–
–
236,321
–
–
–
794,994
279,287
–
–
236,321
794,994
279,280
269,657
139,640
–
–
275,759
794,994
–
–
277,071
279,287
70,145
206,468
–
481,530
767,582
1,282,947
–
9,883,384
Subject to
permanent
retirement
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
106,830
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
942,767
1,049,597
39,628,923
1. Shares are released from escrow on or around this date.
2. Conditions include a minimum of seven years service. If this condition is not met, shares are to be released in conjunction with the release
of FY25 annual results.
3. Minimum values are $1,000,000 or $500,000 and are calculated in accordance with the relevant Restriction Deed.
4. Actual date dependent on ASX annual results release.
80
Integral Diagnostics Annual Report 2018
Corporate Directory
Directors
Helen Kurincic – Independent Non-Executive Chairman
Dr Ian Kadish – Managing Director and Chief Executive Officer
Dr Chien Ping Ho – Executive Director
Dr Sally Sojan – Executive Director
John Atkin – Independent Non-Executive Director
Rupert Harrington – Independent Non-Executive Director
Raelene Murphy – Independent Non-Executive Director
Company secretary
Ms Kathryn Davies
Registered office
Level 8/14 -20 Blackwood Street
North Melbourne VIC 3051
T + 61 3 5339 0704
Share register
Computershare Investor Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
T 1300 787 272
Auditor
PricewaterhouseCoopers
Level 19, 2 Riverside Quay
Melbourne Victoria 3006
Solicitors
Herbert Smith Freehills
Level 42, 101 Collins Street
Melbourne Victoria 3000
Bankers
Australia and New Zealand Banking Group Limited
927 Sturt Street
Ballarat Victoria 3350
Stock exchange listing
Integral Diagnostics Limited shares are listed on
the Australian Securities Exchange (ASX code: IDX)
Website
integraldiagnostics.com.au
Corporate Governance Statement
The Corporate Governance Statement was approved by the
Board of Directors on 22 August 2018 and can be found at:
www.integraldiagnostics.com.au/page/for-investors/
corporate-governance
81
Integral Diagnostics Annual Report 2018