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Fulgent GeneticsAnnual ReportFOR THE FULL YEAR ENDED 30 JUNE 2022 ABN 55 130 832 816Acknowledgement of CountryIntegral Diagnostics (IDX) acknowledges Aboriginal and Torres Strait Islander peoples as the First Peoples of Australia. We proudly recognise Elders past, present and emerging as the Traditional Owners of the lands on which we work and live. We’re committed to supporting Indigenous self-determination and envision a future where all Australians embrace Aboriginal and Torres Strait Islander histories, cultures and rights as a central part of our Australian identity.IDX recognises the status of Māori as Tangata Whenua and embraces the guiding Principles of Te Tiriti o Waitangi. We seek to grow our understanding of Kaupapa Māori, Tikanga Māori and Te Ao Māori in order to uphold our Te Tiriti responsibilities. CONTENTS
Governance
04 Company Highlights
06 Group Locations
08 Chair’s Letter
10 Managing Director and Chief Executive Officer’s Letter
14 Directors’ Report
22 Operating and Financial Review
35 Remuneration Report
54 Auditor’s Independence Declaration
Financial Report
56 Consolidated Statement of Profit or Loss
57 Consolidated Statement of Comprehensive Income
58 Consolidated Statement of Financial Position
59 Consolidated Statement of Changes in Equity
60 Consolidated Statement of Cash Flows
61 Notes to the financial statements
107 Directors’ Declaration
108 Independent auditor’s report to the members of Integral
Diagnostics Limited
114 Shareholder Information
117 Corporate Directory
Integral Diagnostics Annual Report 2022
i
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. 02
Governance
04 Company Highlights
06 Group Locations
08 Chair’s Letter
10 Managing Director and Chief Executive Officer’s Letter
14 Directors’ Report
22 Operating and Financial Review
35 Remuneration Report
54 Auditor’s Independence Declaration
Integral Diagnostics Annual Report 2022
03
COMPANY HIGHLIGHTS
04
+82
Patient NPS
IDX patient NPS Score
From more than 7,500 patient responses
2
million
Examinations
800
thousand
Patients
37
thousand
Referrers
245
Reporting Radiologists
You are part of a company whose purpose is to deliver the best possible outcomes for our
patients by providing diagnostic imaging services, in order to diagnose and treat illness
and injury.
Integral Diagnostics Annual Report 2022
05
GROUP LOCATIONS
06
Company historyLake Imaging brand established (wholly owned subsidiary of IDX) in Ballarat, VICThe practice that would become South Coast Radiology is establishedSuccessfully listed on the ASXMerged with South Coast Radiology in QLDAcquired Western Medical ImagingDarling Downs and Mackay Radiology Sunshine Coast Radiology practices openedAcquired 60% of Global Diagnostics in WAAcquired Ballarat MRI1967201220022014200720152011 Integral Diagnostics Annual Report 2022
07
Acquired X-Ray Group, NSW & VICAcquired Horizon Radiology, NZMedx established – Joint venture with Medica (UK) and IDXAcquired Ascot Radiology, NZAnnounced acquisition of Geelong Medical ImagingIDXt established - Specialist overflow and after hours teleradiology providerIntegral Diagnostics has been included in the ASX Top 300Acquired Peloton Radiology group, QLDAnnounced acquisition of Specialist Radiology Group, Trinity MRI and Cavendish Radiology in Auckland, NZAcquired Exact Radiology, QLDAcquired Imaging Queensland2021201820192020FY2022-2023 CHAIR’S LETTER
The Company believes the underlying fundamentals of
the essential radiology industry remain strong and the
Company is confident that patient volumes and historical
growth patterns will over time return to pre-COVID-19
levels, and that continued investment in our medical
specialist and technical workforce and infrastructure will
position the Company well.
Dear fellow shareholders,
On behalf of the Board, I present to you the
2022 Annual Report for Integral Diagnostics
(IDX) Limited.
You are part of a company whose purpose is to deliver the
best possible outcomes for our patients by providing diagnostic
imaging services, in order to diagnose and treat illness and
injury. This year the IDX group performed over 2 million exams
on around 800,000 patients, in demanding operating conditions.
The 2022 financial year has been a challenging one for the
communities we operate in and for your specialist healthcare
company. COVID-19, together with influenza in the winter
months, has disrupted operations and adversely impacted
patient and referrer activity, staff availability, employee and
consumable costs and equipment delivery and repairs. Our
people have worked hard to minimise disruptions caused by
these challenges impacting the sector to deliver the best
possible outcomes for our patients, and will continue to do so
to improve the performance of your Company.
Financial Results
In the 12 months ended 30 June 2022 (FY22), operating NPAT
declined by 43.1% to $21.7m. Statutory NPAT also fell by 53.5%
to $14.6m. Operating diluted earnings per share fell by 46.2% to
10.2 cents per share (cps).
Operating revenue grew 2.8% to $358.7m driven by an additional
two months of Astra Radiology revenue when compared to the
prior year and an eight-month contribution from The X-Ray
Group, which became part of the IDX group this financial year.
Across the full year ended 30 June 2022, the diagnostic imaging
industry has as a whole seen decreases in activity. In Australia,
Medicare Benefits for the States in which IDX operates have
seen a (0.3%) decrease in weighted average benefits paid for
FY22 and in comparison, IDX showed an equivalent increase of
0.1% in its organic business.
Reflecting the higher growth areas in which IDX provides
services to patients, the Medicare industry weighted average
for the States in which IDX operates of (0.3%) revenue decline
compares favourably with the Australia-wide Medicare industry
decline of (2.8%), which itself has occurred against a backdrop
of strong, consistent industry growth for more than a decade of
more than 6% per annum.
As at 30 June 2022, our net debt to equity ratio was 29% and the
Net Debt/EBITDA ratio was 1.6x.
We declared a fully franked final dividend of 3.0cps, a total of
7.0cps for FY22, a decrease of 44.0% on the prior year reflecting
the performance of your Company.
Despite the weaker results, the Company believes the
underlying fundamentals of the essential radiology industry
remain strong and the Company is confident that patient
volumes and historical growth patterns will over time return
to pre-COVID-19 levels.
Targeted Expansion in Existing Geographies
Total capital expenditure was $31.3m, with $21.9m relating to
growth initiatives to expand our footprint and service to patients
through the development of three new sites, Benowa and
Burleigh Heads on the Gold Coast and O’Connor in Perth, which
opened in October 2021, April 2022 and June 2022 respectively.
In line with our strategy, IDX secured targeted acquisitions in
existing geographies to expand the scope and depth of service
locations to patients and broaden our referrer base.
In November 2021, we completed the acquisition of The X-Ray
Group which is located in Albury Wodonga on the Victorian/New
South Wales border. The X-Ray Group complements IDX’s
regional footprint and comprises 5 diagnostic imaging
clinics, including leading clinics in Albury and Wodonga and
3 radiologists.
Also in FY22 we announced the acquisitions of Peloton
Radiology, Exact Radiology and Horizon Radiology.
08
With the easing of pandemic restrictions, the Board has
been able to positively renew our face-to-face meetings and
engagement activities including meeting with our teams and
visiting sites. It was great to see so many of the IDX team at this
year’s annual IDX clinical conference, which was held in June,
and I look forward to connecting with you our shareholders, both
in person and on line, at our AGM on Friday, 4 November 2022.
On behalf of the Board, I would like to thank our whole team
of 1,868 employees led by our Managing Director & CEO Dr
Ian Kadish, for their commitment to the shared IDX ambition to
combine the best people and technology to provide diagnostic
imaging that saves lives. I would also like to extend a warm
welcome to those businesses and employees who have joined
the IDX team more recently and look forward to seeing the
impact of their contributions.
Thank you for your ongoing support of our Company.
Helen Kurincic
Chair
29 August 2022
4
Acquisitions Announced
The X-Ray Group, Peloton
Radiology, Exact Radiology and
Horizon Radiology.
Peloton Radiology enhances IDX’s presence in the high growth
corridor of South East Queensland where its 9 radiology clinics
are located. Peloton brings a modern, well-invested fleet of
imaging equipment over a range of imaging modalities to
the group and a further 12 radiologists. This acquisition was
completed on 1 July 2022 and will contribute a full year of
earnings in FY23.
Exact Radiology is also located in South East Queensland,
servicing Brisbane, Ipswich and the surrounding areas at
its 11 clinics with 6 radiologists. This acquisition fits with
IDX’s other aforementioned South East Queensland acquisition,
Peloton Radiology, and consolidates the group’s Queensland
presence from the NSW border in the South, to Mackay in
the North. The acquisition of Exact Radiology is expected to be
completed in the second quarter of FY23, subject to satisfaction
of conditions precedent.
The acquisition of Horizon Radiology in Auckland, New Zealand,
provides IDX with the opportunity to expand its presence and
service offering in the Auckland market. Horizon operates 8
clinics, which are located close to major GP referrers and
focus on obstetrics and musculoskeletal x-ray and ultrasound
services. Horizon Radiology became part of the IDX group on
1 July 2022 and will contribute a full year of earnings in FY23.
The Company is now focused on integrating these acquisitions
and is not contemplating any further acquisitions at this time.
Governance
IDX welcomed Mr Andrew Fay as an independent non-executive
Director in July to replace Mr Harrington, who resigned in
December 2021 after an immense contribution to the business
over the last 6 years. Mr Fay is a highly experienced
company director and has over 30 years’ experience in
the financial services industry, bringing extensive knowledge
of investment and funds management. Mr Fay’s significant
executive experience includes Chief Executive Officer and
Chief Investment Officer roles at Deutsche Asset Management
(Australia) Limited, and he has provided corporate strategic
advice across diverse industries.
The Board has continued the advancement of its environmental,
social and governance (ESG) responsibilities and commend you
to our dedicated ESG Report prepared in accordance with the
Global Reporting Initiative (GRI) Standards: Core Option.
Integral Diagnostics Annual Report 2022
09
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S LETTER
The dedication and commitment of our frontline teams
to practice good medicine and patient care has exceeded
all expectations. Their professionalism, selflessness, care
and dedication is to be admired and deserves our
gratitude and pride.
Dear fellow shareholders,
Over the past financial year, the radiology
industry in Australia and New Zealand
experienced its most severe downturn in
a generation.
Both countries had been spared from the worst impacts of
the pandemic in prior years and consequently our levels of
immunity from prior infection were low compared to most of
the developed world. The highly contagious Omicron variant of
COVID-19 therefore impacted our populations widely.
Your Company too, had a challenging year. For the first time
since the advent of the pandemic, IDX was affected by COVID-19
in every community we serve. Our patients, our referring
doctors, and our own doctors and staff were impacted by the
Omicron variant in every part of our business, and to a far
greater extent than any prior outbreak.
Prior to Omicron, the brunt of the pandemic’s impact on IDX was
limited to our clinics in Victoria, and was driven as much by the
ramifications of the world’s longest lockdown at the time, as it
was by the pandemic itself. The opening of the Queensland State
border on 13 December which coincided with the arrival of the
Omicron variant in Australia changed all of this. The Omicron
variant entered Queensland and spread widely, followed by
Auckland and Western Australia. The impact on our industry and
our business was significant.
Medicare radiology reimbursement declined Australia-wide by
2.8% in FY22. This decline occurred against a backdrop of
strong, consistent industry growth for more than a decade, at
a compound annual growth rate above 6%.
Radiology industry revenue was impacted by decreased
referrals and by decreased capacity:
• Decreased referrals were driven by decreases in elective
surgery over the period, and by the significant decrease in
GP clinic visitations.
• Decreased capacity was driven by the COVID-19 related sick
leave for doctors and staff, by logistical delays for new
equipment and spare parts, and by shortages of contrast
media and other medical consumables.
Australia and New Zealand had benefited for a long time from
our ability to import doctors from abroad, ie from being a
net recipient of International Medical Graduates. The COVID-19
immigration lockdowns have significantly curtailed this source
of doctors and have exacerbated the doctor shortage in both
countries. Our radiology industry is impacted as much by the GP
shortage (reducing referrals) as it is by the radiologist shortage
(reducing reporting capacity).
We see the widespread doctor shortages as a material
risk to quality healthcare in Australia and New Zealand.
IDX continues to work with the Australian Diagnostic
Imaging Association (ADIA), and with industry bodies in New
Zealand, to do everything we can to address these major
healthcare challenges.
IDX Revenue Growth in Australia, Revenue
Declines in New Zealand
In FY22, IDX served 800,000 patients and performed more than
2 million exams on behalf of 37,000 referrers in Australia and
New Zealand.
Excluding acquisitions, IDX increased its market share in the
Australian market by growing organic operating revenue at
1.6%, being above the Medicare industry average nationally
(decreased by 2.8%) and in the States where IDX operates
(decreased by 0.3%) . Completion of the X-Ray Group acquisition
in November 2021 increased our market share further.
In New Zealand, IDX organic revenue declined by ($3.4m) or
(7.4%) as the company was impacted both by COVID-19 and
by new referrer-owned radiology practices. For several months
in FY22, Auckland radiology services were restricted by harsh
Government lockdowns.
In FY22, 88% of IDX revenue was derived from our
Australian businesses.
10
Cost Pressures
IDX experienced significant cost pressure from increased sick
leave, inflation and wage pressures, border closures restricting
the movement of radiologists and staff, increased consumable
costs for PPE, and price increases and logistical delays for new
equipment and spare parts.
Omicron’s impact on the radiology industry was magnified
due to its disproportionate impact on the healthcare frontline,
particularly nurses and sonographers. Reductions in ultrasound
volumes drive reductions across all diagnostic modalities, as
ultrasound is usually an early investigation that drives further
higher value investigations as patients and referrers seek more
definitive diagnoses.
Across the IDX group, sick leave in the second half of the
financial year was incurred at about twice its pre-COVID-19 level.
Acute staff shortages driven by sick leave exacerbated the skills
shortages we have in radiology, particularly in the clinical areas.
In non-COVID-19 years, the industry skills shortage is alleviated
by the inward immigration of radiologists and other skilled
professionals. The pandemic halted this inflow for 2 years.
The high levels of sick leave, combined with wage pressures and
skills shortages in many clinical areas, culminated in materially
higher labour costs as our clinics hired locums and incurred
overtime in an attempt to maintain capacity and throughput.
Financial Performance
As a result of lower than expected revenue growth, and higher
labour and equipment costs, your Company experienced a
decline in its earnings per share for the first time since listing in
2015. Operating diluted earnings per share declined by 46.2% to
10.2c in FY22.
Living our Values
Our values are epitomised by our frontline clinic staff, and those
who support them, in the work we do every day.
Even prior to COVID-19, our frontline staff always demonstrated
their commitment to put patients first, a commitment to our
first calling as health professionals. However, over the past
two years the dedication and commitment of our frontline
teams to practice good medicine and patient care has exceeded
all expectations. Their professionalism, selflessness, care and
dedication is to be admired, and deserves our gratitude
and pride.
Integral Diagnostics Annual Report 2022
11
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S LETTER
Growth and Acquisitions
Our People
Our people, the 1,868 individuals employed by IDX, will always
be the heart of our business. These are the doctors and staff
who work every day to provide the best possible health outcome
to every patient, in order to realise our vision of building a
healthier world.
IDX employee engagement levels increased in FY22 despite
the industry challenges. Our June 2022 employee survey
demonstrated solid improvement over the 12 month period. This
was a gratifying result in a challenging time, and demonstrated
that the company’s commitment to our radiologists and staff
were appreciated and gratefully reciprocated.
An excellent example of the world getting back to ‘normal’
and being able to reconnect in person was the 5th Annual IDX
Conference held on the Sunshine Coast in June. The conference
was the largest Annual IDX Conference yet held, involving 320
radiologists and staff from all business units across the IDX
group. The conference had been rescheduled several times due
to lockdowns and COVID-19 restrictions, and it provided an ideal
opportunity to give back to our hard hit frontline staff, providing
in-person teaching, training and networking opportunities with
our colleagues.
FY23 Priorities
Over the next financial year, our major priorities are to:
• drive organic growth, including through selective price
increases, cost efficiencies and select brownfield and
greenfield investment opportunities;
(ESG) strategy;
AI technologies;
• accelerate the use of teleradiology, digital and
• drive our environmental, social and governance
• continue to nurture and develop culture and leadership
• focus on integrating recent acquisitions well, with no further
across our people; and
acquisitions contemplated at this time.
We developed 3 important Greenfield sites in FY22.
The 3 new sites, at Benowa (opened October 2021) and Burleigh
Heads (opened April 2022) on the Gold Coast, and our new
metro Perth site at O’Connor (opened June 2022), have shown
promising early results, despite delays due to pandemic-related
logistical and construction challenges.
Over the last several years, your Company has completed
several strategic acquisitions, in Australia and in New Zealand.
This year was no exception:
• On 30 September 2021, we announced the acquisition of the
X-Ray Group, a leading regional radiology business located
in Albury-Wodonga on the NSW-Victoria border. The group
employs 3 fulltime radiologists, operates 5 clinics, and has 2
MRI’s and one full MRI license. The second MRI will become
Medicare rebateable in November 2022. We completed the
acquisition on 1 November 2021.
• On 23 February 2022, we announced the acquisition of the
Peloton Radiology, and undertook a $90m capital raising.
Peloton Radiology comprises 12 radiologists, 9 clinics
and 3 partial MRI licenses. The group provides radiology
services from the Sunshine Coast to the Brisbane CBD.
We successfully completed the $90m capital raising to
institutional investors on 24 February and to retail investors
on 22 March 2022.
• On 11 May 2022, we announced the acquisition of the Exact
Radiology business. Exact Radiology employs 6 radiologists,
operates 11 clinics, and has 2 MRI’s including one partial
MRI license in Ipswich. Exact Radiology solidifies the IDX
presence in Queensland, from the NSW border in the South
to Mackay in the North.
• On 18 May 2022, we announced the acquisition of Horizon
Radiology in Auckland. Horizon Radiology operates 8
clinics in greater Auckland, providing Xray and ultrasound
obstetrics and MSK services, and is located close to major
GP referrers.
On 1 July, we completed the acquisition of Peloton Radiology
and of Horizon Radiology. Completion of the acquisition of the
Exact Radiology business is expected in the second quarter of
FY23, subject to satisfaction of conditions precedent.
12
My thanks also to our patients who put their trust in us, to our
loyal referrers who trust their patients to us, and to you, our
shareholders, who put your faith in us.
My sincere thanks to our Chair, Board and management team,
for their valuable counsel, insight, commitment and support.
I look forward to reconnecting with you all in person at our
Annual General Meeting in November this year.
Good medicine is good business.
Sincerely,
Dr Ian Kadish
Managing Director and Chief
Executive Officer
29 August 2022
Going Forward
The long term industry fundamentals are strong. Both Australia
and New Zealand have growing and ageing populations that
will require more diagnostic support into the future. New
imaging technologies provide for better, safer and earlier
care. Your Company is well positioned to benefit from these
important trends.
Currently, we are still impacted by lower referrals, skills
shortages, inflation and supply chain issues, but we’re
addressing the challenges. We are moving to a more variable
cost model where we can and we are selectively increasing
prices to partially offset inflation in our cost base. The two-year
reduction in medical service provision means there will be a
pent up demand when patients do come back. The reduction
in screening services, particulary for oncology and cardiac
disease, means that patients will unfortunately be presenting
later and with more advanced disease and will generally
require more extensive radiology services. The new diagnostic
and treatment modalities available, facilitated by increased
digitisation, teleradiogy, big data and AI, positions companies like
ours to do well while delivering optimal health outcomes at the
same time.
The radiology industry is at the confluence of healthcare and
technology, and benefits from strong growth drivers in both
industries. IDX has positioned itself at the high acuity end
of the radiology spectrum, providing more high value MRI,
CT, Nuclear Medicine and PET-CT services to specialists and
GP’s, from comprehensive clinics in the ANZ and through our
teleradiology division, IDXt. We have strong comprehensive
market positions and are the number one or number two
provider in most geographic markets we serve. Challenges like
the COVID-19 pandemic reduce earnings in the short-term, but
the long-term growth drivers remain. Specifically, patients will
continue to need more of the high end diagnostic modalities
as these services provide increasingly valuable information to
patients and their referrers. PET-CT services for early detection
of Alzheimers disease, and MRI and PET-CT services for breast
and prostate disease are exciting new developments with large
addressable markets. Valuable diagnostic services like these
provide us with the ability to continue to fulfill our vision and
purpose to build a healthier world by delivering the best health
outcome to every patient we serve.
In closing, I’d ask my fellow shareholders to join me in thanking,
once again, our frontline healthcare heroes at IDX who continue
to put our patients first every day. Our doctors and staff are truly
among the finest healthcare professionals in the world. Their
professionalism, dedication and commitment to our patients and
referrers is inspiring.
Integral Diagnostics Annual Report 2022
13
DIRECTORS’ REPORT
For the year ended 30 June 2022
The Directors present their Report, together with the financial statements, on the consolidated entity the (‘Group’) consisting of Integral
Diagnostics Limited (IDX or the ‘Company’) and the entities it controlled for the year ended 30 June 2022.
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) commencing on page 22; and
• the Remuneration Report commencing on page 35.
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 Chair)
Dr Ian Kadish (Managing Director and Chief Executive Officer)
John Atkin (Independent Non-Executive Director)
Raelene Murphy (Independent Non-Executive Director)
Dr Jacqueline Milne (Executive Director)
Dr Nazar Bokani (Executive Director)
Rupert Harrington (Independent Non-Executive Director) resigned 19 December 2021
Andrew Fay (Independent Non-Executive Director) commenced 18 July 2022
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, which commences on page 22 of the Annual Report, sets out information on the business strategies, prospects and likely
developments for 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
are contained in the OFR, which commences on page 22 of the Annual Report.
Dividends paid in the year ended 30 June 2022
Dividends paid/payable during the financial year were as follows:
Dividend paid 4 cents per share on 1 October 2020
Dividend paid 5.5 cents per share on 6 April 2021
Dividend paid 7 cents per share on 6 October 2021
Dividend paid 4 cents per share on 4 April 2022
Consolidated
30 June 2022
$’000
30 June 2021
$’000
-
-
13,825
8,025
21,850
7,734
10,824
-
-
18,558
14
Significant changes in the state of affairs
The Group continued to navigate the impacts of the COVID-19 pandemic. Details of the operating and financial impacts of COVID-19
are included in the OFR. As at the date of this Directors’ Report it is not expected that COVID-19 will significantly impact the long-term
underlying fundamentals of the diagnostic imaging industry.
Effective from 1 November 2021 the Group completed the acquisition of The X-Ray Group. Details of the acquisition are included in Note
34 to the financial statements.
There were no other significant changes to the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
On 1 July 2022, the Group completed its acquisition of Peloton Radiology, a scale provider of diagnostic imaging services with a
strategic presence from Brisbane to the Sunshine Coast, in the high growth corridor of South East Queensland. Also on 1 July 2022,
the Group completed its acquisition of Horizon Radiology, a significant provider of obstetrics and musculoskeletal x-ray and ultrasound
services, which provides the Group with the opportunity to expand its presence and offering in the Auckland market. Further details of
these acquisitions are included in Note 39 to the financial statements.
Following approval of their participation, on the 4 August 2022, $1.3 million of Radiologist contributions were received in connection
with the Radiologist Loan Funded Share Plan and the New Zealand Matching Options Plan. These contributions are to be matched by
an IDX contribution of $2.7 million, resulting in $4.0 million of share capital/options to be issued on 5 September 2022. The number of
shares/options to be issued will be determined by the 30-day VWAP up to 30 August 2022.
Subsequent to year end a dividend of 3.0 cents per share was declared and will be paid on 5 October 2022.
Other than those detailed above, no other matters or circumstances have arisen since 30 June 2022 that have significantly affected,
or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs until future
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.
A copy of the Group's ESG Report can be found on the Company's Website at www.integraldiagnostics.com.au/reports
Integral Diagnostics Annual Report 2022
15
DIRECTORS’ REPORT
For the year ended 30 June 2022
Information on Directors
Ms Helen Kurincic was appointed as an independent Non-Executive Director and Chair of the
Company in December 2014, preceding listing on the ASX on 21 October 2015.
Helen has deep Executive and Board-level experience across the healthcare industry.
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.
She is currently the Independent Non-Executive Chair of McMillian Shakespeare Limited
(ASX:MMS), a Non-Executive Director of Estia Health Limited (ASX:EHE), HBF Health
Limited, and the Victorian Clinical Genetics Service. She is also a senior advisor in the
healthcare sector.
Former directorships (in
the last three years)
None
Special responsibilities Member of the Audit Risk and Compliance Committee
Member of the People and Remuneration Committee
Chair of the Nomination Committee
Interests in shares
555,579 ordinary shares (indirectly)
Dr Ian Kadish was appointed Managing Director and Chief Executive Officer of IDX 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 McKinsey
and Company, CSC Healthcare in New York City, and Netcare, a major hospital group in
South Africa and the United Kingdom, where Dr Kadish was an Executive Director from
1997 to 2006. Ian was instrumental in growing the group from five hospitals with a market
capitalisation of $60 million, to 119 hospitals and a market capitalisation of $3 billion. Since
migrating to Australia in 2006, Dr Kadish’s roles have included CEO and MD of Healthcare
Australia, CEO and MD of Pulse Health Group (previously ASX-listed hospital group) and CEO
of Laverty Pathology.
Ian is currently a Non-Executive Director of Teaminvest Private Group Limited (ASX:TIP).
He is also an Executive Committee Member of the Australian Diagnostic Imaging
Association (ADIA).
Former directorships (in
the last three years)
None
Special responsibilities Member of the Integral Clinical Leadership Committee
Interests in shares
539,441 ordinary shares and 777,559 rights (directly)
Helen Kurincic
Independent Non-Executive Chair
MBA, FAICD, FGIA, MBA, Grad Dip
Wom Stud, PBC Crit Care, Cert Nsg
Dr Ian Kadish
Managing Director and Chief
Executive Officer MBBCh, MBA
16
John Atkin was appointed as an independent Non-Executive Director of IDX on
1 October 2015.
John is an experienced company director, and in 2018 he was appointed Chair of the
Australian Institute of Company Directors. 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 Jaques (now
King & Wood Mallesons).
He is currently a Non-Executive Director of IPH Limited (ASX:IPH). John is also a director of
a number of unlisted entities including Qantas Superannuation Limited, trustee of the Qantas
Superannuation Fund and Outward Bound International Inc.
Former directorships (in
the last three years)
None
Special responsibilities
Chair of the People and Remuneration Committee
Member of the Audit, Risk and Compliance Committee
Member of Nomination Committee
Interests in shares
183,785 ordinary shares (indirectly)
Ms Raelene Murphy was appointed as an independent Non-Executive Director of IDX on
1 October 2017.
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 the 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), Bega
Limited (ASX:BGA), Elders Limited (ASX:ELD) and Tabcorp Holdings Limited (ASX:TAH).
Former directorships (in
the last three years)
Service Stream Limited (ASX: SSM) - Non-Executive Director -
(2016 to 2019)
Clean Seas Seafood Limited (ASX:CSS) – Non-Executive Director -
(2018 to 2020)
Special responsibilities
Chair of the Audit, Risk and Compliance Committee
Member of the People and Remuneration Committee
Member of Nomination Committee
Interests in shares
30,945 ordinary shares (indirectly)
John Atkin
Independent Non-Executive
Director BA, LLB, FAICD
Raelene Murphy
Independent Non-Executive
Director BBus, FCA, GAICD
Integral Diagnostics Annual Report 2022
17
DIRECTORS’ REPORT
For the year ended 30 June 2022
Andrew Fay was appointed as an independent Non-Executive Director of IDX on 18 July 2022.
Andrew brings to the Board over 30 years’ experience in funds and investment management,
including Chief Executive Officer and Chief Investment Officer roles at Deutsche Asset
Management (Australia) Limited. He also held a number of other senior investment roles
at Deutsche Asset Management and previously at AMP Capital. From 1998 to 2006, he was a
member of the Investment Board Committee of the Financial Services Council.
Andrew is an experienced company director across ASX listed, private and regulated
entities and accordingly brings to the Board skills in financial and risk management,
capital markets, executive remuneration frameworks, strategy, investment and corporate
governance. Specifically, he has sector experience and expertise in financial services,
including investment, funds, property and infrastructure management.
Andrew Fay
Independent Non-Executive
Director BAgEc (Hons), A Fin
He is currently a Non-Executive Director of National Cardiac Pty Ltd, Utilities of Australia Pty
Ltd (Trustee of Utilities Trust of Australia) and advises Microbiogen Pty Ltd in the area of
corporate development.
Former directorships (in
the last three years)
Pendal Group Limited (ASX:PDL) - Non-Executive Director – (2011
– 2021)
Spark Infrastructure RE Limited (ASX:SKI) - Non-Executive
Director – (2010 – 2021)
Cromwell Property Group (ASX:CWM) - Non-Executive Director
(and Deputy Chair 2020) - (2018 – 2020)
Special responsibilities Member of the Audit, Risk and Compliance Committee
Member of the People and Remuneration Committee
Chair of the Mergers and Acquisitions Working Group
Interests in shares
None
Dr Nazar Bokani was appointed as a Director of IDX on 26 April 2021. Dr Bokani is a full time
employed radiologist of the Company based in Western Australia and is therefore considered
by the Board to be a Non-Independent Executive Director. While Dr Bokani is not an
independent director by virtue of his employment, he is independent of senior management
and his responsibilities do not extend to the day-to-day management of the Company.
Dr Bokani graduated in Medicine (MBChB) in 1991 at Baghdad University, and obtained his
MD degree from the University of Leiden in The Netherlands. He completed his radiology
training at Maastricht University Hospital in The Netherlands and consulted as a radiologist
in the UK before coming to Australia. Dr Bokani is qualified as a radiologist in Australia, the
UK and the Netherlands, where he has practiced.
Besides general radiological and interventional work, Dr Bokani covers cross-sectional CT
& MRI work, Cardiac CT, Ultrasound and symptomatic breast sessions both diagnostic and
interventional. Dr Bokani is also an active member of the IDX Western Australian radiologist
group, being a member of the Western Australian Clinical Leadership Committee.
Dr Bokani is the Chair of the Company’s Artificial Intelligence (AI) Steering Committee and
has been instrumental in the implementation of AI across the Company. He has also played a
key role in the in the establishment of the Company’s teleradiology offering.
Former directorships (in
the last three years)
None
Special responsibilities Member of the Integral Clinical Leadership Committee
Interests in shares
277,716 ordinary shares
Dr Nazar Bokani
Executive Director MBChB,
FRANZCR, MD, GAICD
18
Dr Jacqueline Milne was appointed as a Director of IDX on 1 November 2019. Dr Milne is
a full-time permanently employed radiologist of the Company based in Queensland and is
therefore considered by the Board to be a Non-Independent Executive Director. While Dr
Milne is not an independent director by virtue of her employment, she is independent of
senior management and her responsibilities do not extend to the day-to-day management of
the Company.
Dr Milne graduated from the University of Queensland with a medical degree and completed
her radiology fellowship at the Gold Coast University Hospital. Dr Milne began her medical
career as a practicing radiographer at South Coast Radiology prior to commencing her
medical degree and radiology qualifications. The multidisciplinary experience Dr Milne brings
as both a radiographer and radiologist to the Board is invaluable.
Dr Jacqueline Milne
Executive Director BASc., MBBS,
FRANZCR, GAICD
Dr Milne’s speciality interests include women’s imaging, medical training and general
procedural work. Dr Milne is also an active member of the IDX Queensland radiologist group
being a member of the Queensland Clinical Leadership Committee.
Former directorships (in
the last three years)
None
Special responsibilities Member of the Integral Clinical Leadership Committee
Interests in shares
19,990
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 exclude
directorship of all other types of entities, unless otherwise stated.
Company Secretary
Kirsty Lally (BEcon, CA,) was appointed Company Secretary on 5 July 2019. Kirsty is an experienced executive with 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
John Atkin
Raelene Murphy1
Dr Jacqueline Milne
Dr Nazar Bokani
Rupert Harrington2
Audit, Risk and
Compliance
Committee
People and
Remuneration
Committee
Nomination
Committee
Board
Held
Attended
Held
Attended Held Attended Held Attended
17
17
17
17
17
17
7
17
17
17
17
17
15
7
9
–
9
9
–
–
5
9
–
9
9
–
–
5
6
–
6
6
–
–
4
6
–
6
6
–
–
4
3
–
3
2
–
–
1
3
–
3
2
–
–
1
1. Raelene Murphy was appointed to the Nomination Committee on 24 January 2022
2. Rupert Harrington resigned as a Director of the Company on 19 December 2021
Held: represents the number of meetings held during the time a Director held office and was eligible to attend.
The Board has also established a group-wide Clinical Leadership Committee, which is made up of Executive Directors Dr Ian Kadish,
Dr Nazar Bokani, and Dr Jacqueline Milne, together with radiologist leaders from across IDX. Its role is to promote and support a
collegiate culture across all practices and to provide advice on all clinical governance matters including patient care, clinical standards
and quality assurance.
Integral Diagnostics Annual Report 2022
19
DIRECTORS’ REPORT
For the year ended 30 June 2022
The Integral Clinical Leadership Committee (ICLC) met 5 times during the year and Executive Directors’ attendance is noted below:
Director
Dr Ian Kadish
Dr Jacqueline Milne
Dr Nazar Bokani
ICLC
Held
Attended
5
5
5
5
5
2
Held: represents the number of meetings held during the time a Director held office and was eligible to attend.
The Board has a Mergers and Acquisitions Working Group. The working group was chaired by Mr Harrington prior to his resignation
and its members include Dr Ian Kadish and Chief Financial Officer (CFO), Mr Craig White. The Chair also attends the meetings when
relevant. The Mergers and Acquisitions Working Group met 5 times during the year. Mr Fay, who was appointed as a Director on the
18 July 2022, was also appointed Chair of the Mergers and Acquisitions Working Group.
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 of 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 or of a related
body corporate and its related bodies corporate against all liabilities that they may incur as an officer of the Company or of a related
body corporate, 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 agreed to indemnify the auditors, PricewaterhouseCoopers, to the extent permitted by law, against any claim by a
third party arising from the Company's breach of their agreement. The indemnity stipulates that the Company will meet the full amount
of any such liabilities including a reasonable amount of legal costs. No liability has arisen or premium paid under this indemnity.
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.
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 (Cth) (Corporations Act) 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.
20
Non-audit services
Details of the amounts paid or payable to the auditor of the Company for audit and non-audit services during the year by the auditor
are disclosed in Note 29 to the financial statements.
In accordance with its Policy for Non-Audit Services Provided by the External Auditor, the Company may decide to employ the
auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company
and/or the Group are important. The non-audit services provided were largely for work performed pertaining to tax advisory and
compliance services.
The Board, in accordance with advice provided by the Audit Risk and Compliance Committee (ARCC), is satisfied that the provision
of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act.
The directors are satisfied that the provision of non-audit services by the auditor did not compromise the auditor independence
requirements of the Corporations Act for the following reasons:
a. all non-audit services have been reviewed by the ARCC to ensure they do not impact the impartiality and objectivity of the
auditor, and
b. none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for
Professional Accountants.
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 is set out on page 54.
Auditor
PricewaterhouseCoopers continues in office as the auditor of the Company in accordance with section 327 of the Corporations Act.
Rounding of amounts
The Company is a kind referred to in Australian Securities and Investments Commission Legislative Instrument 2016/191, relating to
‘rounding off’. Amounts in this Report and in the financial statements have been rounded off, stated, in accordance with that Instrument
to the nearest thousand dollars, or in certain cases, the nearest dollar.
This Directors’ Report is made in accordance with a resolution of Directors.
On behalf of the Directors
Helen Kurincic
Chair
29 August 2022
Melbourne
Dr Ian Kadish
Managing Director and Chief Executive Officer
Integral Diagnostics Annual Report 2022
21
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
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 55 to107 and
the ASX announcement and full year results presentation dated 29 August 2022.
Integral Diagnostics Limited (ASX: IDX) is an Australian and New Zealand healthcare services company whose main activity is providing
diagnostic imaging services to referrers (general practitioners, medical specialists, and allied health professionals) and their patients.
IDX has a diversified revenue mix and focuses on providing a full range of diagnostic imaging modalities. Post the acquisitions of both
Peloton Radiology and Horizon Radiology on 1 July 2022, IDX has 91 sites of which 31 are comprehensive sites that are located close
to specialist referrers who require higher complexity imaging and make greater use of CT, MRI, PET and interventional procedures
throughout our business. During the year under review IDX operated in four key markets.
Diagnostic imaging is the branch of medicine that utilises a range of non-invasive imaging technology to create images of bones,
tissues and organs within the human body in order to diagnose and treat illness and injury. Images can be produced using a variety of
modalities including;
• nuclear medicine (which includes positron emission tomography (PET));
• single positron emission tomography (SPECT);
• magnetic resonance imaging (MRI);
• computed tomography (CT);
• mammography;
• interventional radiology (IR);
• ultrasound (US); and
• radiography (X-ray) & EOS.
The images produced by diagnostic imaging are a critical tool for referrers in reaching a diagnosis and deciding on the most effective
and efficient form of treatment for patients. In this way, appropriate use of diagnostic imaging can significantly enhance medical
outcomes for patients while at the same time reducing the overall cost of healthcare.
22
CompanyGeographic MarketCore markets SitesComprehensive sites2MRI machinesMRI LicencesPET ScannersEmployed Radiologists3# of Employees5VictoriaVictoriaBallarat, Geelong, Warrnambool and outer western areas of Melbourne19684 full0 partial246368Victoria & NSWAlbury, Wodonga, Wangaratta, Yarrawonga and Lavington5221 full 0 partial-276QueenslandQueenslandSunshine Coast, Rockhampton and Gladstone17763 full 2 partial-21320Queensland & NSWGold Coast, Toowoomba and Mackay16784 full 2 partial235415Queensland1Brisbane, Sunshine Coast9230 full3 partial-7162WAWestern AustraliaSouth West Western Australia6232 full 0 partial114175New ZealandNew ZealandAuckland1156N/A1364 168New Zealand1Auckland8--N/A-1465Total IDX91313614 full7 partial61621,7491. Acquisitions completed 1 July 20222. Comprehensive sites include a range of radiology equipment including MRI’s and CT’s and are located with or near major specialist referrers3. Relates to employed radiologists only. In addition, IDX has had 83 contractor radiologists providing services4. Consistent with the NZ private radiology model, all doctors work across the public and private sector and meet the criteria to be classified as contractors but are on terms and conditions similar to IDX employed radiologists5. This number represents the number of employees on employment contracts on either part time or full-time arrangements. It does not represent the number of full-time equivalent employees or individual casual/contract arrangements. In addition, there are 119 employees in the corporate office (including IDXt) totalling 1,868 employees Year in Review
Financial performance
A summary income statement providing details of non-operating transactions and reconciling to the statutory income statement is
outlined in the following table:
Summary income statement1
Operating revenue
Other revenue
Total revenue
Operating EBITDA
Operating EBITA
Operating NPAT
Non-operating transactions net of tax
Transaction and integration costs
Share based payments
Amortisation of customer contracts
Statutory NPAT
Operating EBITDA as a % of operating revenue
Operating NPAT as a % of operating revenue
Operating diluted EPS (earnings per share)
Statutory diluted EPS (earnings per share)
Return on operating assets (based on operating NPAT)2
Declared dividend pay-out ratio on statutory NPATA
30 June 2022
Actual
$m
30 June 2021
Actual
$m
358.7
2.3
361.0
74.8
41.0
21.7
(5.5)
0.6
(2.2)
14.6
20.8%
6.0%
10.2
6.9
6.3%
84.9%
348.8
1.9
350.7
93.5
62.8
38.1
(1.4)
(2.1)
(3.3)
31.3
26.8%
10.9%
19.0
15.6
14.5%
71.5%
1. The operating and financial review includes references to pro-forma results to exclude the impact of the adjustments detailed above. The Directors believe the presentation of non-IFRS financial
measures are useful for the users of this financial report as they provide additional and relevant information that reflect the underlying financial performance of the business. Non-IFRS financial
measures contained within this report are not subject to audit or review
2. Return on operating assets has been calculated using the LTM organic operating NPAT (plus trailing acquisitions NPAT) of $23.3m (FY21$38.9m)
The operating performance of IDX in FY22 was significantly adversely impacted by COVID-19 across the entire year, together with
influenza in the second half of FY22. Across the full year ended 30 June 2022, the diagnostic imaging industry has as a whole seen
decreases in activity. In Australia, Medicare Benefits for the States in which IDX operates have seen a (0.3%) decrease in weighted
average benefits paid for FY22 and in comparison, IDX showed an equivalent increase of 0.1% in its organic business. Reflecting the
higher growth areas in which IDX provides services to patients, the Medicare industry weighted average for the States in which IDX
operates of (0.3%) revenue decline compares favourably with the Australia-wide Medicare industry decline of (2.8%), which itself has
occurred against a backdrop of strong, consistent industry growth for more than a decade of more than 6% per annum.
The impacts of COVID-19, and to a lesser extent influenza in the second half of FY22, included the following:
• Reduced patient activity due to:
– restrictions on elective surgery, together with backlogs even where these restrictions have eased;
– patients’ reluctance or inability to attend healthcare services; and
– staff shortages caused by high levels of sick leave and/or personal leave where a close contact and required to isolate,
requiring site closures or reduced operations.
restrictions and its residual effects impacting staffing.
• Increased employee costs due to an increased use of sick and/or personal leave, a reduction in annual leave taken and border
• Increased consumable costs due to ongoing use of personal protective equipment.
• Supply chain disruptions for equipment delivery and repairs resulting in delays in organic growth initiatives and increased
downtime of equipment.
Integral Diagnostics Annual Report 2022
23
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
The operating EBITDA margin of 20.8% is 6.0% lower than the prior year, which is largely driven by the impact of COVID-19
across all geographic areas in which we operate. Influenza during the winter months is also further disrupting operations and
adversely impacted performance. This is consistent with the experience across the broader industry, with Medicare benefits for
similar geographic areas showing a (5.5%) decrease in weighted average benefits paid for the period from January to June 2022. In
comparison IDX showed an equivalent decrease of (3.6%).
Operating NPAT decreased by $16.4m or 43.1% and operating diluted earnings per share decreased by 46.2% to 10.2 cents per share.
Statutory NPAT performance of $14.6m decreased by 53.5% with the additional decrease relative to Operating NPAT being due to
non-operating transactions. These include transaction and integration costs of external advisors for mergers and acquisitions activity.
A proportion of these transaction costs are not tax deductible as they are on the capital account, creating a greater impact on statutory
earnings after tax.
Financial overview
• Operating revenue of $358.7m increased by 2.8%.
• Organic operating revenue from all sources (including reporting contracts) in Australia grew $4.8m or 1.6% (on volume decline of
2.6%), above the Medicare industry weighted average for the States in which IDX operates being (0.3%) revenue decline (on volume
decline of 1.8%). Note further that IDX’s growth is off a higher base relative to the industry weighted average for the States in which
IDX operates, given the more regional nature of IDX’s operations, which were less impacted by COVID-19 in the prior corresponding
period, in particular in Victoria.
• Average fees per exam (including reporting contracts) in Australia increased by 4.3% in FY22, reflective of an ongoing move to the
higher end CT, MRI and PET scan modalities and to a lesser extent Medicare indexation of 0.9% applied on CT, Ultrasound and X-ray
from 1 July 2021. Reflective of IDX’s focus on higher end modalities that drive stronger bottom-line results, the modalities in which
IDX trailed Medicare most in revenues were Ultrasound (4.8%) lower and X-ray (3.4%) lower.
• New Zealand contributed revenue in FY22 of $42.5m (FY21 $45.9m) with an organic revenue decline of ($3.4m) or (7.4%) reflecting
the absence of any COVID-19 impact in FY21. New Zealand revenues have continued to be impacted by referrer-owned radiology
practices in Auckland. The company continues to work with industry and regulatory authorities to maintain professional, quality,
arms-length referral practices that protect patient interests.
• The Astra Radiology acquisition contributed incremental revenue of A$3.6m for the 2 months from 1 July to 31 August 2021, while
• Operating EBITDA margin of 20.8% has decreased 6.0% from 26.8% due to the significant adverse impact of COVID-19 on patient
the X-Ray Group acquisition contributed incremental revenue of $8.9m for the 8 months from 1 November 2021 to 30 June 2022.
revenues, employee and consumables costs:
– IDX continued to outperform comparative published industry results by 0.4% year on year growth in revenue terms in Australia;
› Employee, consumables, equipment, occupancy and other costs all increased as a % of revenue driven by the adverse impact
of COVID-19 on patient revenues, together with the following:
› employee costs increased by 4.4% ($21.6m) as a percentage of revenue driven by the relatively fixed nature of employee
costs, radiologist demand vs supply cost pressures present in the industry and increased use of paid sick leave and/or
personal leave in a COVID-19 environment;
consumables increased by 0.5% ($2.2m) of revenues, reflecting the higher cost of consumables for higher end modalities
and increased usage of PPE due to COVID-19;
›
› equipment increased by 0.2% ($1.0m) of revenue, despite better pricing achieved due to some equipment coming out of
warranty and increasing the level of service cover on equipment;
› occupancy costs increased by 0.1% ($0.5m) of revenues reflecting an increased number of operational sites; and
› other costs increased by 0.7% ($4.2m) of revenues, reflecting a challenging insurance market resulting in increased
premiums, investment in cyber security and the cost of staff travel that was curtailed due to COVID-19 in FY21.
• IDX declared a fully franked final dividend of 3.0 cents per share (cps), resulting in a total FY22 fully franked dividend of 7.0 cps
(FY21: 12.5 cps), representing a 84.9% payout ratio and reflecting the impact of COVID-19 on performance.
24
Operating performance overview
During FY22 we continued to manage the on-going impacts of COVID-19. Our focus, as always was to keep our patients and employees
safe. We continued to secure adequate supply of personal protective equipment for all our sites with strict screening, hygiene, and
infection control protocols in place, and have adapted to the new normal for healthcare practices for COVID-19.
Drove organic growth, business integration and further efficiency gains
• Completed and opened Benowa practice on the Gold Coast in October 2021.
• Upgraded MRI at John Flynn Hospital.
• Opened Burleigh Heads practice on Gold Coast in April 2022, which included the installation of the world’s first Canon Serve CT as a
• Completed and opened O’Connor site in Perth in June 2022, the first metropolitan location in Western Australia. This is a
comprehensive location in the southern suburbs of Perth and represents the delivery of the long-term strategy to enter
this market.
beta test site.
• Opened Geelong Breast Centre of Excellence in June 2022.
Used digital and AI technology to improve the patient and referrer experience
under the guidance of the AI Steering Committee, led by Dr Nazar Bokani.
cases to deliver best in class comprehensive reports to referrers and patients.
• Continued to expand the roll-out of proven AI software to improve clinical workflows and patient outcomes across the business
• Commenced introduction of a single, enterprise-wide reporting platform to develop sub-specialty workflows for complex clinical
• Built upon our consolidated reporting platform to provide teleradiology services across both the internal business group and our
• Continued to test and enhance cyber-security applications to ensure robust protections in place that remain relevant.
• Introduced a state-of-the-art voice recognition application to build upon our standard templated reporting strategy, to enhance the
• Implemented E-referrals in parts of our business to enhance the referrer experience.
• Commenced roll-out of process automation tools to improve the efficiencies of our back of house processes.
referrer’s clinical experience and improve our report turnaround times.
external reporting contracts.
Continued to develop our environment, social and governance (ESG) agenda
develop a carbon neutral strategy.
• Completed our first Scope 3 emission assessment along with further assessment of Scope 1 and 2 emissions, with a view to
• Commenced the implementation of our ESG Strategy developed in FY21.
• Completed our first supplier screening risk rating review.
• Completed and submitted our second Modern Slavery Statement.
• Developed a 3 year Diversity and Inclusion strategy, prioritising four key focus areas - inclusive culture, careers, leadership
• Began an organisation wide review of all sites' waste management practices under our Operational Waste Management Plan.
and care.
Nurtured and developed culture and leadership across our people
• In addition to our leadership programs for our frontline teams, implemented a leadership program for our radiologists.
• In addition to our annual CEO Awards, implemented monthly peer to peer employee recognition programs to celebrate our people
living our values and their achievements across IDX.
Evaluated further strategic acquisitions that were a clinical fit, strategically aligned and earnings accretive
• Undertook thorough analyses and due diligence on a number of selected acquisitions in an increasingly competitive market. IDX
maintained strong discipline in regard to ensuring that offers made included an assessment of clinical fit, strategic alignment and
earning accretion to ensure sustainable value to our shareholders.
• The Company progressed its pipeline of targeted bolt-on acquisitions that expand the business and diversify services to patients in
existing geographies. These strategic acquisitions include:
– The X-Ray Group in Albury Wodonga which completed on 1 November 2021
– Peloton Radiology in South East Queensland which completed on 1 July 2022
– Horizon Radiology in Auckland, New Zealand which completed on 1 July 2022
– Exact Radiology in South East Queensland which is expected to complete in the second quarter of FY23, subject to satisfaction of
conditions precedent
• The Company is now focused on integrating these acquisitions well and is not contemplating any further acquisitions at this time.
Integral Diagnostics Annual Report 2022
25
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
Capital expenditure
Total expenditure on tangible assets was $31.3m (FY21: $23.1m) of which $9.4m related to equipment replacement and $21.9m related
to growth opportunities, including the development of three new sites, being Benowa and Burleigh Heads on the Gold Coast, and
O’Connor in Perth, which opened in October 2021, April 2022 and June 2022 respectively.
Acquisitions
The acquisition of The X-Ray Group in Albury Wodonga was completed on 1 November 2021.
The aforementioned acquisitions of Peloton Radiology, Horizon Radiology and Exact Radiology were all signed during FY22 however
either have completed or will complete, subject to all required conditions precedent being satisfied, in FY23 as mentioned above.
As disclosed in Note 20, the settlement payment for Earn Out A due to the vendors of Imaging Queensland is subject to the dispute
settlement process provided for in the Share and Asset Sale Agreement (SASA).
Taxation
The effective tax rate on operating earnings is 29.7% (FY21: 29.5%).
The effective tax rate on statutory earnings of 35.3% (FY21: 30.9%) is driven by the higher level of non-deductible transaction costs
incurred and treated as non-operating transactions.
Cash flows
Free cash flows of $49.1m (FY21: $66.5m) decreased 26.1%. Free cash flow conversion before replacement capex was 78.3% (FY21:
89.1%). The decline in free cash flows is due to the adverse impact of COVID-19 on earnings with minimal working capital movements.
Capital Management
Net debt decreased by $37.1m to $101.5m (FY21: $138.6m). This reflects a combination of the $90m capital raising completed in March
2022, debt drawn down to fund the X-Ray Group, Peloton Radiology and Horizon Radiology acquisitions, operational cashflows and the
dividend payment made at the half year.
Net debt to equity at 30 June 2022 was 29% (FY21: 54%) and Net Debt/EBITDA ratio was 1.6x at 30 June 2022 (FY21:1.7x).
At 30 June 2022 IDX had cash reserves of $123.2m and committed facilities of $407m of which $173.6m remained undrawn and with
access to a further $105m under an accordion facility. Current debt facilities have a 5-year term to February 2026 and IDX is in
compliance with all the covenants under the debt facility.
Earnings per share
On a statutory basis, basic earnings per share decreased by 55.9% to 7.0 cents per share (FY21: 15.8 cents per share). Diluted earnings
per share in FY22 considering the FY19, FY20, FY21 and FY22 performance rights issues as well as the New Zealand based Radiologist
Option Plan was 6.9 cents per share (FY21: 15.6 cents per share). The decreasing earnings per share at a statutory level is reflective of
the decrease in statutory NPAT of 53.5% to $14.6m.
On an Operating NPAT basis, adjusted1 Diluted Earnings per Share decreased 46.2% to 10.2 cents per share (FY21: 19.0 cents
per share).
Dividend
Fully franked dividends paid or declared of 7.0 cents per share (FY21: 12.5 cents per share) totalling $14.9m have been paid or
declared for FY22. The decrease in dividends of 44.0% reflects the adverse impact of COVID-19 on performance. A fully franked final
dividend of 3.0 cents per share will be paid on 5 October 2022 to shareholders on the register at 2 September 2022. This represents
84.9% of Statutory NPATA (FY21: 71.5%). The dividend reinvestment plan (DRP) will operate with no discount for the FY22 dividend.
1. Operating Diluted EPS calculation has been adjusted to reflect the return on the operating net profit after tax on a LTM basis. Calculating Operating Diluted EPS on this basis provides a normalised
measure on which to assess the contribution of the X-Ray Group acquisition in FY22 (FY21: Astra Radiology acquisition).
26
Regulatory outlook
In Australia, IDX continues to monitor, assess and help shape the regulatory landscape through its participation in the executive of
the Australian Diagnostic Imaging Association (ADIA) and radiologist’s membership in the Royal Australian and New Zealand College
of Radiologists (RANZCR). Our CMO Dr Lisa Sorger is on the RANZCR Faculty Council, the Diagnostic Economics Committee and the
Theranostics Working Group. In New Zealand Dr Quentin Reeves’ is the president of the Australasian Musculoskeletal Imaging Group
(AMSIG) and a New Zealand committee member of the New Zealand branch of RANZCR.
In New Zealand, IDX participates in an association of independent radiologists to closely monitor and assess the regulatory landscape.
This is a newly formed association, which plans to operate in a similar manner to ADIA across New Zealand.
In Australia:
CPI rate of 6.1%.
• On 29 March 2022 the Federal Government announced the de-regulation of Medicare funded MRI services in regional and rural
areas, defined as Modified Monash Model 2-7. As at the date of this report, no further licences or plans for deregulation of MRI
licences have been announced.
• Indexation of 1.6% announced and applied to 97% of Diagnostic Imaging Services, including MRI items, from 1 July 2022 against a
• Bulk billing incentive on MRI reduced to 95% of CMBS from 100% from 1 July 2022. This only affects services currently bulk billed
• From 1 November 2021, a new PET item was introduced for the diagnosis of Alzheimer’s Disease. Time restrictions on CT scans
for colorectal studies were removed. MRI for breast biopsy was changed to allow for co-claiming with ultrasound and biopsy items.
MRI for prostate cancer item description now includes an expanded population to allow high risk patients access to this service.
• From 1 July 2022, two new PET items were introduced for patients with prostate cancer. These items allow for the initial staging of
to Medicare.
intermediate to high-risk patients with prostate cancer.
In New Zealand in FY23 there is limited indexation of pricing, however, we continue to negotiate with a range of funders.
Emerging market practices continue to be challenging in New Zealand, where referrers are acquiring ownership interests in radiology
practices or equipment. This is changing the competitor dynamics. IDX is working with the New Zealand Institute of Independent
Radiologists, to encourage New Zealand payors and regulators to review these practices against their published guidelines on
non-arm’s length referrals and will undertake the necessary actions to manage referrer conflicts of interest. IDX supports the
upholding of the current published guidelines to ensure that quality is maintained, patient choice is retained, and payors are not
subject to over-servicing and unnecessary imaging.
Company outlook
COVID-19 continues to adversely impact healthcare and the Group, which cannot be accurately projected at this time.
The long-term industry fundamentals in Australia and New Zealand are strong and continue to underpin attractive ongoing growth
opportunities. Both Australia and New Zealand have growing and ageing populations requiring greater healthcare support. At the same
time, community expectations for higher quality diagnosis and care continue to increase, while new imaging technologies improve
efficiency and aid diagnosis and early detection of disease.
The Company’s focus in FY23 will be to:
investment opportunities;
• drive organic growth, including through selective price increases, cost efficiencies and select brownfield and greenfield
• accelerate the use of teleradiology, digital and AI technologies;
• drive our environmental, social and governance (ESG) strategy;
• continue to nurture and develop culture and leadership across our people; and
• focus on integrating recent acquisitions well, with no further acquisitions contemplated at this time.
Integral Diagnostics Annual Report 2022
27
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
Balance Sheet
A summary of the balance sheet as at 30 June 2022 and a 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
Right of use assets – AASB 16
Intangible assets
Deferred tax asset
Investments accounted for using the equity method
Total non-current assets
Total assets
Trade and other payables
Current tax liabilities
Borrowings
Lease obligations – AASB 16
Contingent consideration
Provisions
Total current liabilities
Contingent consideration
Borrowings
Provisions
Lease obligations – AASB 16
Deferred tax liability
Total non-current liabilities
Total liabilities
Net assets
30 June 2022
Actual
$m
30 June 2021
Actual
$m
123.2
19.4
7.8
150.4
124.3
106.8
380.5
17.3
0.2
629.1
779.5
22.9
(3.6)
5.5
11.7
16.4
23.5
76.4
8.2
217.6
9.5
106.2
14.4
355.9
62.2
14.3
5.8
82.3
111.1
100.4
344.7
16.3
0.1
572.6
654.9
20.3
4.5
6.5
10.4
15.9
20.3
77.9
7.2
192.2
9.8
99.2
13.8
322.2
432.3
400.1
347.2
254.8
• Working capital of ($19.2m) increased by $0.8m.
• Provisions (excluding tax) have increased $2.9m. This increase is partly due to increased employees annual leave provision, with
lower than expected levels of annual leave being taken during FY22 due to travel restrictions and higher levels of sick leave
being taken.
• Contingent consideration of $24.6m relates to Imaging Queensland $17.9m and the X-Ray Group $6.7m.
• Net debt decreased by $37.1m to $101.5m (FY21: $138.6m). This reflects a combination of the $90m capital raising completed in
March 2022, debt draw down to fund the X-Ray Group, Peloton Radiology and Horizon acquisitions, operational cashflows and the
dividend payment made at the half year.
28
Cash flow
A summary of the cash flows as at 30 June 2022 are presented below.
Summary of cash flow
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
Payments for acquisitions
Working capital acquired
Proceeds from the issue of equity
Deferred consideration paid
Dividends paid
Transaction costs relating to acquisitions
Capital raising costs
Net cash flows
30 June 2022
Actual
$m
30 June 2021
Actual
$m
49.1
(21.9)
27.2
(17.4)
(5.7)
24.3
(24.6)
(0.5)
91.8
(3.3)
(20.9)
(5.5)
(2.9)
62.5
66.5
(6.3)
60.2
(16.7)
(4.6)
18.4
(35.4)
-
1.8
(0.9)
(17.8)
-
-
5.0
on performance.
• Free cash flows of $49.1m are $17.4m or 26.1% lower than FY21, which is reflective of the adverse impact of COVID-19
• Growth capital expenditure was $21.9m.
• Dividends of $21.9m (10.5 cents per share fully franked) were paid in FY22.
• Transaction costs relating to acquisitions of $2.2m were included in Free cash flow in FY21.
Integral Diagnostics Annual Report 2022
29
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
Business risks
IDX has a Risk Management Framework that is used to identify the IDX risk profile, setting out the way key risks are assessed,
managed, monitored, measured and reported. 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 actual and potential risks that may impact IDX’s financial and operating
results in future periods.
Risk Area
COVID-19
Recurrence of declines in revenue and increase in
costs, due to:
• Intermittent community lockdowns or
restrictions impacting elective surgery, sport,
medical (including GP) and allied health
visits, and travel in the geographies in which
we operate.
• Significant COVID-19 breakouts among
employees requiring sites to shut down for
prolonged periods and/or resulting in higher
than normal sick leave and associated costs.
• The Company does not take adequate
precautions or fails to follow Government
directives to manage the risk of COVID-19
infection to staff and patients.
• Potential adverse impacts on our highly
skilled workforce through prolonged or
recurring restrictions.
Risk Management Strategy
IDX operates to stay up to date.
• Proactive monitoring of the COVID-19 situation in all jurisdictions in which
• Regular reporting to the Board and Senior Management.
• Ongoing maintenance of infection control and safety process for patients
and staff, designed to reduce the likelihood of staff contracting COVID-19
or the spread of COVID-19 between staff and patients in our locations, to
ensure continuity of service to patients and control over costs, including
overtime, allowances and sick leave.
• Ongoing maintenance of protocols that enable the Company to quickly
respond to a COVID-19 situation and ensure that any affected sites are able
to be cleaned and reopened as soon as possible, to ensure continuity of
service to patients and control over costs, including overtime, allowances
and sick leave.
• Where possible over time move to a more variable cost model, particularly
for labour, and appropriately and selectively increase prices to partially
offset inflation in the cost base.
the M&A Working Group.
• Program of oversight for M&A activity, due diligence and integration led by
• Detailed due diligence processes and procedures, including the
• Engagement of external advisors to ensure risks, challenges and
development of integration and resourcing plans.
opportunities of acquisitions have been identified.
• On-going analysis undertaken for prospective M&A opportunities to
• Engagement of external advisors to assist in monitoring and assessing
determine scope, fit and likelihood of success.
market activity and the impact on potential acquisitions.
Strategic Growth
Mergers and acquisitions. It is IDX’s strategy to
drive growth organically and through mergers
and acquisitions (M&A). 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.
Future acquisition pipeline. IDX has a mature
process that regularly reviews a number of
acquisition opportunities that may be at various
stages of evaluation. Risks exist regarding
whether identified acquisitions are able to be
completed on terms and conditions that deliver
appropriate returns to stakeholders in line with the
Company’s strategy.
30
Risk Area
Risk Management Strategy
Earn out management. IDX has a number of earn
out arrangements from acquisitions, which are
subject to interpretation of contract terms and a
level of judgemental measurement and agreement
with vendors.
Maintaining strong referrer relationships. The risk
of a material loss of, or lack of growth in, referrals
to IDX would impact financial and operational
performance of the Company, especially given
that a significant percentage of IDX’s costs are
fixed meaning that an adverse change in revenue
could have a disproportionate adverse impact on
operating profit.
Performance of greenfield and brownfield
initiatives to drive growth. IDX regularly invests
in greenfield and brownfield initiatives to support
growth within our existing business units. There
is a risk that these investments do not perform
as expected.
Equity and debt funding and refinance. The risk that
IDX is unable to access equity capital or refinance,
repay or renew its debt facilities or otherwise obtain
debt finance on favourable terms in order to meet
its growth objectives, which could adversely affect
IDX’s business and financial condition. IDX is also
exposed to increases in interest rates, which would
increase the cost of servicing IDX’s debt finance.
Regulation and Contracts
Funding change to revenue stream. Changes to
funding and government policies and regulations
may have a material adverse impact on the financial
and operational performance of the Company,
especially given that a significant percentage of
IDX’s costs are fixed, meaning that an adverse
change in revenue could have a disproportionate
adverse impact on operating profit.
Regulatory compliance. Not meeting industry or
regulatory compliance requirements may lead to
the loss of licenses and accreditation and the
inability to provide services or offer rebates which
will reduce the provision of services.
Contracts and service agreements. Contracts and
service agreements may be breached, terminated
or not renewed resulting in loss of revenue and
operating profit.
Property leases. IDX has 83 property leases across
the Group, including 78 operational and 5 corporate
sites. There is a risk that we may not always be
able to come to commercially acceptable terms with
landlords in order to renew property leases.
• Engagement of external advisors to ensure the structure of earn out
arrangements in sale agreements are appropriate and that earn out
calculations are in accordance with the contract terms.
calculate earn outs is complete and accurate.
• Use of finance capabilities within IDX to ensure the underlying data used to
• Maintenance of existing relationships across IDX’s referrer network
• Continuous investment in new technology to enhance access and service
• Clinical Leadership Committees are established in each business unit,
through a process of continuous engagement.
which are supported by the CMO and COO to drive clinical governance
to support referrer confidence.
for referrers and patients.
• Established processes for business case development, review and
• Regular reporting to Senior Management and the Board on performance
approval, including alignment of business cases to strategic objectives.
against business cases.
structure with long dated debt maturities.
• Ensuring that IDX maintains an appropriate equity and debt capital
• Monitoring and management of leverage to ensure compliance with
• Monitoring and management of interest rate risk.
borrowing covenants.
New Zealand.
Imaging Association.
industry developments.
• Regular monitoring of funding and regulatory changes and
• Membership of, and participation in, the Australian Diagnostic
• Participation in a discussion group with other private radiology providers in
• Membership of, and participation in, the Royal Australian New Zealand
• Use of internal and external audit functions to provide assurance that
• Regular monitoring of compliance by Senior Management across key areas,
compliance obligations in key areas are being met.
including regular reporting to the Company’s Audit, Risk and Compliance
Committee (ARCC) and to the Board.
College of Radiologists.
• Regular review of all IDX contracts to ensure completeness of information,
renewal dates, contract owners and performance against SLA’s.
• Continual management and renegotiation of leases throughout the normal
course of business. Where commercially acceptable terms are not
available, IDX will seek alternative leasing options.
Integral Diagnostics Annual Report 2022
31
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
Risk Area
Risk Management Strategy
• Establishment of the Company’s Integral Clinical Leadership Committee
(ICLC) to manage and advise on clinical governance matters, including
patient care, clinical standards and quality assurance.
• Consistent clinical risk and incident reporting process in place across the
Company and business units, with a focus on reviewing incident data
and resulting recommendations at all management levels, through to
the Board.
to medical malpractice.
• Appointment of CMO to further strengthen focus on clinical governance
• Maintenance of appropriate insurance arrangements, including in relation
• Establishment of a group wide Safety Management System in line with
• Provision of specific training programs for all staff to build knowledge
and capability on safety matters, including hazard identification, risk
management and incident reporting.
industry standards.
within IDX.
and safety matters.
• Investment in injury prevention programs.
• Regular incident reporting to Senior Management and the Board on health
• Consistent privacy policies and practices in place across the Company that
have been reviewed by external privacy experts to ensure compliance with
the required laws in Australia and New Zealand. Provision of training for
staff tailored to roles and responsibilities.
privacy provisions are in place.
• Appointment of an IDX Privacy Officer.
• Regular internal checks for privacy process compliance.
• Engagement with key partners and third parties to ensure appropriate
• Cyber security and IT infrastructure controls in place and
• Insurance cover is maintained by IDX consistent with industry practice,
continually reviewed.
including in regards to workers compensation, business interruption,
property damage, public liability, professional indemnity, cyber attacks and
medical malpractice.
continuous improvement in BCP and DR.
key areas such as Business Unit Plans, IT recovery, Covid-19 responses etc.
• Business Continuity (BCP) and Disaster Recovery (DR) plans in place for
• Establishment of a Business Continuity Steering Committee to drive
• Testing of BCP and DR scenarios.
• IDX publishes an Environment, Social and Governance Report with a focus
• Some of the areas of focus for IDX include greenhouse gas emissions,
on identifying and analysing the status of significant ESG areas for IDX.
waste management, radiation doses, employee relations, culture, health
and safety, diversity and inclusion, arrangements with suppliers and
community interaction and contributions.
Governance, Risk and Compliance
Clinical risk management. The risk of patient harm
due to human error or a lack of effective clinical
governance and processes.
Health and safety. The risk of harm to employees
due to a lack of effectiveness in workplace health
and safety systems.
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.
Insurance. The risk that insurance arrangements
do not cover all claims and/or that insurance will
not be available in the future on commercially
reasonable terms.
Business Continuity, disaster recovery and crisis
management. The risk of an ineffective response
to a business continuity or disaster recovery
event impacting on operations, patients, and other
stakeholders. This includes IDX’s ability to respond
and adapt to the spread of COVID-19.
Environmental, social and governance (ESG)
standards. The risk that evolving community
attitudes towards, and increasing regulation and
disclosure in relation to, ESG issues may adversely
impact the operation of IDX’s business.
32
Risk Management Strategy
industry standards.
simulations for staff.
protections are relevant to increasing threats.
business partners and vendors to keep abreast of market changes.
• CIO is a key member of the Senior Leadership Team (SLT).
• Proactive monitoring of technology developments and changes.
• Continued focus on nurturing existing relationships with technology
• Investment in leading edge/premium technology and equipment.
• Provision of cyber security training including phishing training and
• Performance by external party of ongoing penetration testing to ensure
• Regular meetings of Cyber Security Steering Committee.
• Alignment of the Company’s cyber security framework and controls to
• Inclusion of cyber security events in BCP and DR planning.
• Investment in employee engagement, professional development and
• Implementation of a Leadership Capability Framework and a Performance
• Provision of People and Culture support across the Company for all staff,
• Investment in employee engagement, professional development and
• Annual reviews and appropriate benchmarking of employee remuneration
• Constructive engagement with employee unions to ensure fair outcomes
to ensure appropriate and competitive with relevant market conditions.
including an Employee Assistance Program.
culture building activities across IDX.
culture building activities across IDX.
and Development Framework.
are achieved in regards to EBAs.
• Proactive monitoring of changes in the market including to stay abreast of
and responding to identified changes.
Risk Area
Technology and Security
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.
Cyber security. The risk of a material cyber security
event or attack on IDX, or the inability of IDX
to respond to the continually evolving threats
affecting its operations and involving significant
remediation resources.
Recruitment and Retention
Attraction and retention of talent. The risk of an
inability to attract and retain quality radiologists,
management and staff due to competition across
the market, geographical location of some sites or
other factors.
Industrial relations and wage pressure. The risk
that disputes arise with employees who are covered
by enterprise bargaining agreements (EBAs), other
workplace agreements and employment contracts,
which periodically require negotiation and renewal.
This could lead to disruptions to IDX’s operations,
increased direct and indirect labour costs, which
could lead to reduced profitability, and/or cause
damage to IDX’s reputation.
Market Trends
Changing market trends. The risk that changing
trends in the radiology market, in both Australia and
New Zealand, eg the emergence of specialist groups
such as cardiology purchasing their own diagnostics
equipment, or new market entrants, will have a
negative impact on market share and revenue,
especially given that a significant percentage of
IDX’s costs are fixed meaning that an adverse
change in revenue could have a disproportionate
adverse impact on operating profit.
Integral Diagnostics Annual Report 2022
33
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2022
Risk management
The Company’s Risk Management Framework is overseen by the ARCC and is actively managed by the members of Senior
Management with input from the ICLC. The framework is consistent with ISO 31000:2018 Risk Management – Guidelines and is
subject to review at least annually.
The framework is used to enable a consistent and rigorous approach to identifying, analysing and evaluating risks.
Fundamental to the Company’s risk management framework is its risk appetite statement. The Board’s risk appetite is aligned to the
risk culture of the Company including:
• its vision and values;
• IDX’s strategic plan and goals;
• its service commitment;
• the underlying patient and referrer demographic; and
• the financial and budget environment in which the Company is operating.
During FY22 we continued to review, assess and strengthen our policies and procedures over our processes and controls in relation to
health and safety, privacy and confidentiality, and cyber security. Ongoing reviews consider how our approach meets best practices in
line with our industry profile, and how risks are being managed to ensure the best outcomes for all stakeholders. We will continue this
review in FY23 as well as implementing identified improvements.
A key component of the Company’s risk management is clinical governance, which is managed through the ICLC and Business Unit
Clinical Leadership Committees (BU CLCs) under the ICLC Charter. A copy of the ICLC Charter can be found on the Company’s website:
www.integraldiagnostics.com.au/corporate-governance
The ICLC Charter provides a framework for the ICLC and BU CLCs to work together to develop and implement policies and work
practices to enable clinical best practice. The responsibilities of the ICLC include reviewing any recommendations arising from any
adverse incidents from the BU CLCs and to share learnings to prevent recurrence.
The ICLC works within the Clinical Governance and Quality Framework, which is the overarching framework directing the delivery of
safe and high-quality diagnostic imaging services across the Group, while 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 Clinical
Governance and Quality Framework meet the requirements of ISO 9001:2015 Quality Management Systems – Requirements and ISO
31000:2018 Risk Management – Guidelines.
A copy of the Company’s Audit Risk and Compliance Committee Charter can be found on the Company’s website:
www.integraldiagnostics.com.au/corporate-governance
34
REMUNERATION REPORT
For year ended 30 June 2022
Introduction from the People and Remuneration Committee Chair
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration Report for the 2022 financial year. We will seek your approval of the
report at our Annual General Meeting to be held on 4 November 2022.
Our executive remuneration framework has always sought to achieve the key objectives of being:
• competitive, fair and equitable;
• linked to performance and consistent with the Group’s values and strategy;
• aligned with the interests of shareholders and other stakeholders; and
• applied with appropriate transparency, particularly in relation to KMP.
This year the disappointing financial outcomes for shareholders has been reflected in the STI and LTI outcomes. The Company did not
achieve the threshold achievement level for the financial component of the FY22 STI awards. The non-financial component of strategic
objectives and priorities were subject to a financial gateway condition, which was not achieved. Reflecting the disappointing outcome
for shareholders, the Board declined to exercise its discretion to make any STI awards for these non-financial strategic objectives and
priorities notwithstanding significant outcomes achieved by the executive.
In FY23 the non-financial award portion of the STI has been amended to include sustainability goals to support the Group's ongoing
achievements of its ESG strategy. We recognise that our patients, people, culture and risk management are integral to our ongoing
success and ability to differentiate in an increasingly competitive market. Sustainability goals include measures related to patient
satisfaction, employee engagement, safety and injury prevention, employee turnover and environmental impact. To further emphasise
the importance of sustainability, the Company has also introduced a risk, compliance and conduct gateway to the granting of any STI
award in FY23.
Due to the significant decline in underlying EPS, the Threshold vesting level of EPS for the FY19 LTI performance rights was not
satisfied. Having regard to the severe impact of COVID-19 on the business during FY22, which was seen as an extreme circumstance
outside managements’ control, the Board has exercised its discretion under the terms of those rights and decided to allow re-testing
of the FY19 LTI Performance Rights at the end of FY23. The Threshold and Stretch levels of achievement on that re-test will be
determined by applying the CAGRs (5% and 12% respectively) over the full 5 years.
Since our last report, the Board has also reviewed the executive remuneration framework for FY23, taking into account feedback and
comments from investors. The following key decisions from that review should be noted:
holding and employment retention requirement;
• the fixed remuneration of the executive KMP has not been increased;
• STI award will be subject to a risk, compliance and conduct gateway;
• the potential available under the STI awards has increased, with 50% of any award deferred into equity subject to a one year
• in addition to strategic goals, sustainability goals will be introduced into the STI non financial award goals;
• the testing period for the FY23 LTI Performance Rights has been reduced to 3 years and the provision allowing re-testing has been
• two new performance targets – relative TSR and average ROIC – have been introduced for the FY23 LTI Performance Rights
removed; and
alongside EPS growth.
The reasons for these decisions are discussed in more detail in our report.
We look forward to your support and welcome your feedback on our Remuneration Report.
John Atkin
People and Remuneration
Committee Chair
Integral Diagnostics Annual Report 2022
35
REMUNERATION REPORT
For year ended 30 June 2022
The Remuneration Report, which has been audited, outlines the Director and Executive KMP 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 2022 (FY22). All KMP held their position for the duration of FY22, unless otherwise noted.
Name
Position
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Jacqueline Milne
Dr Nazar Bokani
Executives
Anne Lockwood
Paul McCrow
Craig White
Independent, Non-Executive Chair
Independent, Non-Executive Director
Independent, Non-Executive Director (ceased KMP position 20 December 2021)
Independent, Non-Executive Director
Managing Director and Chief Executive Officer
Executive Director
Executive Director (commenced KMP position 26 April 2021)
Chief Financial and Commercial Officer (ceased KMP position 30 January 2022)
Chief Operating Officer (commenced KMP position 1 November 2020)
Chief Financial Officer (commenced KMP position 24 January 2022)
The Remuneration Report is set out under the following main headings:
a. Overview of Executive Remuneration Framework
b. Alignment of remuneration with Company performance
c. Remuneration outcomes for FY22
d. Adjustments in remuneration settings for FY23
e. Cumulative interest of Executives under the LTI program
f. Other transactions with KMP and their related parties
g. Executive service agreements
h. KMP shareholding and minimum shareholding policy for KMP
36
a. Overview of Executive Remuneration Framework
The Board of Directors (‘the Board’) work to ensure that Executive reward satisfies the following key criteria:
• competitive, fair and equitable;
• linked to performance and consistent with the Group’s values and strategy;
• aligned with the interests of shareholders and other stakeholders,
• appropriate transparency in application, particularly to KMP.
The Company’s remuneration policy for Non-Executive Directors (NEDs) aims to ensure that the Company can attract and retain
suitably qualified and experienced NEDs and recognises the specific governance of this medical specialist company and the higher
workload with four independent NEDs.
Remuneration Framework
The objective 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 ensure the reward for performance is competitive and appropriate for the results delivered.
Figure 1 outlines the components of Executive KMP remuneration and their purpose.
Figure 1:
Integral Diagnostics Annual Report 2022
37
FY22 KMP Remuneration FrameworkFixed Remuneration Cash, superannuation, non-monetary awardsSTICashLTIPerformance rights converted to shares after 4 yearsYear 1Year 2Year 3Year 4Remuneration ComponentsFixed Variable 'at risk' Fixed Remuneration Short Term Incentive Long Term IncentivePurpose and Alignment Market competitive to attract and retain talent.To drive achievement of short term financial, strategic and sustainability priorities as agreed by the Board. To reward and incentivise Executive KMP to drive sustained creation of shareholder value.Value to Individual • Fixed market remuneration is comparable to market. The market is defined around similar companies based on revenue, comparable industries and business size. • Fixed remuneration may deviate from the market depending on individual alignment to capabilities, experience and performance. • Operating NPAT gateway determines capacity to pay. • Awards are based on financial performance, individual performance of strategic KPIs and organisational performance of sustainability KPIs.• Board discretion to moderate award for factors such as alignment to values, behaviours and risk management. • Vesting is based on achievement of earnings per share (EPS) performance against targets. REMUNERATION REPORT
For year ended 30 June 2022
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, talent attraction, retention and termination
policies and procedures;
remuneration strategy, performance targets and bonus payments for the CEO and the Executives that report to the CEO; and
remuneration arrangements for the Chair, Non-Executive and Executive Directors of the Board.
c.
d.
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 full FY22 financial
year, unless otherwise stated:
John Atkin – Chair
Helen Kurincic
Rupert Harrington
Raelene Murphy
Independent, Non-Executive Director
Independent, Non-Executive Director
Independent, Non-Executive Director (ceased KMP position 20 December 2021)
Independent, Non-Executive Director
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.
The Board did not engage any remuneration consultants during the financial year.
Non-Executive Directors’ remuneration arrangements
Under the Constitution, the Board determines 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.
Fees to Non-Executive Directors reflect the demands and responsibilities of their role, the specialist nature of a diagnostic imaging
business and the deliberate structure of our Board with four independent Non-Executive Directors and two Executive Directors
employed as radiologists. Non-Executive Directors’ fees are reviewed periodically by the PRC. The PRC may, from time to time,
receive advice from independent remuneration consultants to ensure Non-Executive Directors’ fees are appropriate and in line with
the market.
The Chair’s fees are determined independently from the fees of other Non-Executive Directors based on comparative roles in the
external market and the specific nature of the expertise and role for this company. Non-Executive Directors do not receive share
options or other incentives and their remuneration must not include a commission on, or a percentage of, operating revenue.
38
Radiologist Executive Directors’ remuneration arrangements
Dr Jacqueline Milne and Dr Nazar Bokani are deemed to be Executive Directors as they are employed as radiologists by the Group.
However, it is important to note that they do not report to the Chief Executive or the other Executives. The key terms of their
employment contracts are consistent with employed radiologists and include a fixed salary at market rate plus allowances where
appropriate and in line with market.
In addition, they receive an Executive Director Board fee which is set by reference to the fees paid to the Non-Executive Directors.
Executive remuneration arrangements
The Executive remuneration and reward framework for the 2022 financial year had 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
The target remuneration mix is shown below. It reflects the STI opportunity that will be available if the performance conditions are
satisfied at target, and the face value of the LTI performance rights granted during the year, as determined at grant date. The target
remuneration mix has a deliberate weighting to the LTI consistent with the Company’s strategy of delivering increased earnings per
share over the longer term.
Executive
Dr Ian Kadish
Craig White
Paul McCrow
Anne Lockwood
Fixed remuneration
Delivery mechanism
Considerations
Strategic objective
Governance
Fixed
remuneration
(%)
45%
49%
58%
77%
STI
(%)
11%
11%
14%
23%
LTI
(%)
Total
remuneration
44%
40%
28%
-
100%
100%
100%
100%
benefits and employer superannuation contributions.
• 100% cash payment including base salary, allowances, other non monetary and fringe
• Role scope and complexity.
• The Executive’s skills and experience.
• Industry benchmarking.
• Fixed remuneration is reviewed annually by the PRC with regard to market rates and
• There are no guaranteed increases to fixed remuneration in employment contracts.
individual performance and is approved by the Board.
Integral Diagnostics Annual Report 2022
39
REMUNERATION REPORT
For year ended 30 June 2022
Short term incentive (STI)
Delivery mechanism
Performance period
Gateway, modifier and
performance measures
• 100% cash payment.
• The FY22 STI targets were set at the commencement of FY22 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.
Gateway
• A gateway is in place for all Executives, which means a minimum Operating NPAT target
must be achieved before any STI will be paid, unless Board discretion is applied.
Modifier
Financial performance target
• Behavioural adherence to core values of the Company is an explicit modifier.
• Additional FY22 modifier of employee engagement
• 50% of STI will be available based on achievement of year-on-year Operating
• Operating NPAT growth was selected because it is linked to the creation of
NPAT growth.
shareholder returns.
Strategic priority targets
• 50% of STI will be available on achievement of non-financial strategic objectives and
priorities identified by the Board. Measures to assess performance against those
objectives are also set at that time.
The PRC reviews each Executive’s performance against these metrics to ensure Executives
consider non-financial objectives when making strategic decisions. All are essential to
positive outcomes for the Company and its stakeholders.
STI opportunity
Maximum STI opportunities are outlined below:
Strategic objective
Governance
Executive
Dr Ian Kadish
Paul McCrow
Anne Lockwood1
Craig White2
Maximum opportunity
25% of fixed remuneration
25% of fixed remuneration
25% of fixed remuneration
25% of fixed remuneration
• The Financial Performance Target and Strategic Priority Targets were chosen because
they are aligned with the short-term objectives of the business, while being consistent
with the long-term strategy of the Company.
• 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.
1. Anne Lockwood ceased as KMP on 30 January 2022 - any FY22 STI opportunity was provided on a pro rata basis
2. Craig White commenced as KMP 24 January 2022 - any FY22 STI opportunity was provided on a pro rata basis
40
Long term incentive (LTI)
Strategic objective
LTI award
• The LTI Plan is designed to encourage Executives to focus on the key performance
drivers, which underpin sustainable growth in shareholder value within the boundaries
of the Company’s risk management framework. 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.
(Performance Rights).
• Each year the LTI award is delivered in the form of zero exercise priced options
• The number of Performance Rights granted to participants is determined by use of a face
value methodology. In the absence of special circumstances warranting another pricing
method, a participant's LTI award is divided by the 30-day VWAP for the period up to and
including 30 June in the prior financial year and rounded up to the nearest whole number
to determine the number of Performance Rights granted.
• 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
The FY22 LTI Performance Rights will be tested based on performance over a four year
period commencing on 1 July in the year they are granted.
Performance condition and measures
The FY22 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 Threshold and Stretch target levels of achievement are reviewed each year at the time
of grant. The vesting at Threshold is 20% and the Threshold target is set at a level which
the Board regards as readily attainable. The Stretch target is set at a level which the Board
regards as demonstrating clear outperformance. Full vesting occurs when performance
equals or exceeds Stretch. For FY22 and prior years the Board settled on a single measure
of performance for the LTI, after considering the Company's strategy and the risks of having
only one measure. In short the Board took the view that if management were successful
in achieving compound EPS growth at or towards stretch, shareholders could reasonably
expect to see an increase in dividends, and over the longer-term share price appreciation
in line with of ahead of market indices. The approach adopted for FY23 is explained later in
the report.
Integral Diagnostics Annual Report 2022
41
REMUNERATION REPORT
For year ended 30 June 2022
Long term incentive (LTI)
Testing of performance condition
Assessment of performance condition • EPS growth rate is to be calculated with reference to underlying earnings (operating1).
• Testing of the Performance Rights is expected to occur, shortly after the end of the
• Any Performance Rights that vest will be automatically exercised, and participants are
Performance Period.
not required to pay an exercise price. Any remaining Performance Rights that do not vest
will lapse.
• If some of the FY22 Performance Rights fail to 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. Any
Performance Rights that do not vest after the re-test will lapse immediately.
• In any re-test, the Threshold and Stretch levels of achievement will be determined by
applying the CAGRs as specified by the Board at the time the Rights were granted over
the full 5 years. In other words, to achieve Stretch, the EPS achieved would need to equal
or exceed the level representing 5 years of compound growth at the relevant rate.
does not unfairly advantage management or disadvantage shareholders.
• In exercising its discretion to re-test, the Board will be mindful of ensuring the re-test
• Participants in the LTI Plan may elect to place an additional dealing restriction, by way
• The minimum additional restriction periods that may be chosen range from 1 to 7 years
• Where a participant ceases employment for cause or due to resignation (other than
of a holding lock, foregoing the right to trade on any shares they may receive on vesting
and exercise of the Performance Rights.
due to death, permanent disability or serious illness) all unvested Performance Rights
will lapse.
after vesting.
• 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.
• Where there is a takeover bid or other transaction, event or state of affairs that in the
Board’s opinion is likely to result in a change of 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.
• 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.
Additional restrictions
Treatment of cessation2
Change of control3
Forfeiture and clawback
Governance
1. Operating NPAT is defined as NPAT before non-operating transactions and as included in the Operating and Financial Review.
2. For each of the FY19, FY20 and FY21 grants the Board has determined that if the CEO ceases employment and he is deemed by the Board to be a “Good Leaver”, his full FY19, FY20 and FY21
Performance Rights would stay on foot. The Board has made the same determination in relation to CFCO’s FY19 and FY20 Performance Rights and the COO’s FY20 and FY21 Performance Rights. The
Board has made the same determination in relation to the CFO's FY22 Performance Rights.
3. The Board has also determined that, absent of malus, if there is a change of control it would exercise discretion to fully accelerate vesting of FY19 , FY20 and FY21 Performance Rights held by the CEO.
The Board has made the same determination in relation to the FY19 and FY20 Performance Rights held by the CFCO and the COO’s FY20 and FY21 Performance Rights. The Board has made the same
determination in relation to the CFO's FY22 Performance Rights.
42
b. Alignment of remuneration with 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 four years. Consistent with Company strategy, the
table shows the Company performance over that period.
The link between the Company’s performance and STI and LTI outcomes is considered in the sections below.
Key measures of the Group
Operating EBITDA as a % of revenue2
Operating NPAT as a % of revenue3
Operating EPS4
Return on operating assets5
Closing share price6
Dividends paid or declared per share
Declared dividend payout ratio7
FY22
20.8%
6.0%
FY21
26.8%
10.9%
FY20
27.6%
11.4%
FY19
22.9%
11.1%
FY181
20.3%
9.7%
10.2cps
19.0cps
16.6cps
16.2cps
12.6cps
10.7%
3.03
7.0cps
84.9%
14.7%
5.20
12.2cps
68.8%
13.9%
3.90
9.5cps
80.0%
17.9%
3.16
10.0cps
74.7%
14.5%
3.02
8.0cps
79.6%
1. Key measures for the period are measured on a pre-AASB 16 basis.
2. Operating EBITDA defined as EBITDA before non-operating items.
3. Operating NPAT defined as NPAT before non-operating items.
4. Operating Diluted EPS calculation in FY20 has been adjusted to align with the settlement date of the Imaging Queensland acquisition being 1 November 2019 and provide a more accurate reflection of
the underlying EPS in that period by increasing the Diluted EPS by 0.3cps to 17.0cps. The FY22 Operating Diluted calculation reflects the impact of the capital raising completed in March 2022.
5. Return on operating assets for FY20 has been calculated using the LTM organic operating NPAT (plus trailing acquisitions NPAT) of $33.8m
6. The opening share price on 21 October 2015 was $1.91.
7. Dividend payout ratio is calculated on statutory NPAT adjusted for non-cash customer contract amortisation
c. Remuneration outcomes for FY22
Non-Executive Director and Executive Director Board fees for FY22
For FY22 the Board determined that Non-Executive Director fees would be altered from a bundled fee to a base fee, a committee fee, a
committee chair fee and a fee for convening the Merger and Acquisitions Working Group.
The following annual fees were paid to Executive Directors, Non-Executive Directors and the Chair for their services:
• for Executive Directors (excluding the MD/CEO), $68,750;
• for Non-Executive Director, a base fee of $100,000;
• for committee members, a fee of $12,500 per committee;
• for committee chairs, a fee of $25,000;
• for convening the Mergers & Acquisition Working Group, a fee of $12,500, and
• for the Chair, $285,000 (inclusive of all Committee Chair and Committee member roles).
• All Non-Executive Directors’ fees include superannuation where applicable.
The PRC has recently reviewed Director’s fees and determined that there will be no change in these fees for the 2023 financial year.
Executive Remuneration
As disclosed in last year’s report, the remuneration for the CEO, CFCO and COO for FY22 was reviewed having regard to growth in the
size and complexity of the business in FY21, the strong performance of the Executive KMP in role, outcomes achieved for shareholders
and other stakeholders, and market benchmarks.
The fixed remuneration for the CEO for FY22 was increased by 9.7% to $790,000, the CFCO by 8.6% to $543,000 and the COO by 5% to
$393,750. In the Board's view the increases were warranted by the factors mentioned above and still placed the Executive KMP fixed
remuneration appropriately by reference to comparable benchmarks. In assessing the reasonableness of the fixed remuneration of the
Executive KMP the Board also thought it important to bear in mind the overall remuneration structure, which had a relatively low level
of STI potential that remained at 25% of their fixed remuneration and a higher weighting to the longer term, with a four year LTI at
100% and 75% of their fixed remuneration respectively.
To align with the ongoing development of the Group's ESG strategy and to emphasise the importance of sustainability, the FY22 STI
award was subject to a sustainability modifier KPI related to employee engagement. This modifier KPI was in addition to the Board's
discretion to moderate any award for factors such as alignment to values, conduct and risk management.
Integral Diagnostics Annual Report 2022
43
REMUNERATION REPORT
For year ended 30 June 2022
The CFCO resigned effective 30 January 2022 and her fixed remuneration, including any statutory leave accrual owed, was paid
until her effective resignation date on a pro rata basis. Ms Lockwood received termination benefits calculated in accordance with
the Corporations Act 2001 of $405,993. These benefits comprised of the Board exercising its discretion to keep on foot, subject to
subsequent tesing in accordance with their terms of issue, the FY19, FY20 and FY21 performance rights that had been granted to Ms
Lockwood, together with some token gifts for her years of service.
Craig White was employed by the Group as CFO on 24 January 2022. The CFO’s fixed annual remuneration for FY22 was set at $620,000
per annum, paid pro rata for the period of his employment, after consultation with the recruiting firm engaged at the time and after
consideration of benchmarking information available to the Company.
For a short period after her resignation date, Ms Lockwood was retained by the Group as an independent contractor to assist with
acquisitions and received $89,042 in consulting fees set at commercial rates.
STI Outcomes and Payments
Consistent with our general principles, the CEO, CFCO and the COO were set a financial goal based on achievement of year-on-year
operating NPAT growth at threshold $40m, target $40.7m and stretch $41.7m. They were also each set strategic goals.
The CEO’s strategic goals focused on:
The CFCO’s strategic goals were focused on:
• business development;
• acquisition integration;
• organic growth and cost structure; and
• radiologist and referrer engagement (including clinical leadership and building industry leading culture).
• business development and pursuit of further acquisition targets;
• development of stronger controls around and enhancement of capital deployment;
• continued deployment of Environmental Social Governance strategy; and
• overseeing the implementation of new of finance and risk systems.
• improving operational performance;
• growth strategies and supporting local greenfield and brownfield strategies;
• Integration of Ascot and IQ acquisition; and
• formulating radiologist sub speciality groups and improving engagement.
The COO’s strategic goals were focused on:
Upon commencement the CFO was set a financial goal consistent with the CEO, CFCO and COO as well as strategic goals.
The CFO's strategic goals focused on:
• business development;
• the pursuit of further acquisition and organic growth targets; and
• overseeing the implementation of new finance and risk systems.
For each strategic goal the Board established criteria by which achievement of that goal could be assessed. This was designed to
ensure that as far as possible the achievement was capable of objective determination.
44
The KMP achieved many aspects of their strategic goals which in the circumstances, particularly given the ongoing challenges
COVID-19 presented in FY22, was a commendable achievement. However, achievement of the financial goal was a gateway condition
for any award payment. The operating NPAT was $21.7m, falling well short of the required financial threshold hurdle requirement. In
these circumstances the Board declined to exercise its discretion and no STI payments were made to KMP for FY22.
The table below shows the STI outcomes for each KMP for the current and preceding financial years:
Executive
Dr Ian Kadish
Craig White
Paul McCrow
Anne Lockwood
FY22
FY21
STI foregone
(%)
STI paid
(%)
STI payment
$
STI foregone
(%)
STI paid
(%)
STI payment
$
100%
100%
100%
n/a
0%
0%
0%
n/a
-
-
-
n/a
16%
n/a
19%
14%
84%
n/a
81%
86%
151,200
n/a
67,318
107,500
LTI Performance Rights granted in FY22
For FY22, the Board maintained the metrics used to set vesting levels for the LTI consistent with those adopted for FY21.
The Board also determined the number of FY22 LTI Performance Rights awarded was by use of the 30 day VWAP prior to 30 June
consistent with the FY21 grant.
The table below shows the LTI details for each Executive for the financial year ended 30 June 2022:
Executive
Dr Ian Kadish
Craig White
Paul McCrow
Number of
performance
rights granted
Grant date
5-Nov-21
157,371
24-Jan-22
26-Aug-21
48,550
39,219
Fair value on
grant date
Aggregate fair
value
Vesting and
exercise date
Performance
rights expiry
date
4.53
3.71
4.90
712,891
180,121
192,173
30-Jun-25
30-Jun-26
30-Jun-25
30-Jun-26
30-Jun-25
30-Jun-26
LTI Performance Rights granted in FY21
The table below shows the LTI details for each Executive for the financial year ended 30 June 2021:
Executive
Dr Ian Kadish
Anne Lockwood
Paul McCrow
Number of
performance
rights granted
184,616
96,154
23,270
Grant date
31-Oct-20
17-Aug-20
17-Aug-20
Fair value on
grant date
Aggregate fair
value
Vesting and
exercise date
3.75
3.35
3.35
692,310
322,116
77,955
30-Jun-24
30-Jun-24
30-Jun-24
Performance
rights expiry
date
30-Jun-25
30-Jun-25
30-Jun-25
Integral Diagnostics Annual Report 2022
45
REMUNERATION REPORT
For year ended 30 June 2022
Summary of KMP remuneration for FY22
Details of the remuneration received by the Group’s KMP for FY22 and the prior financial year are set out in the following tables.
Short term benefits
Post employment
benefits
Long term
benefits
Cash
salary
and fees
$1
261,432
131,432
58,093
125,000
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
781,488
Dr Jacqueline Milne
908,319
Dr Nazar Bokani
924,609
Other Key Management Personnel
Craig White
Paul McCrow
Anne Lockwood
273,323
369,046
315,918
Proportion of
rem. tied to
performance
%
n/a
n/a
n/a
n/a
Cash
incentive
$
Superannuation
$
Long service
leave
$
Share based
payments
$2
Total
remuneration
$
n/a
n/a
n/a
n/a
-
n/a
n/a
-
-
-
23,568
6,068
5,676
12,500
23,568
23,568
23,568
11,784
23,568
20,108
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
285,000
137,500
63,769
137,500
11,006
(824,661)
(8,599)
Not meaningful
3,355
13,634
1,786
6,994
n/a
935,242
42,554
1,004,365
n/a
n/a
-
286,893
0.0%
(54,249)
345,359
Not meaningful
(35,282)
33,9183
334,662
Not meaningful
1. Includes Executive Director fees for the Company's radiologist directors.
2. Share based payment reversals reflect revised probability of FY19, FY20 and FY21 rights vesting as at 30 June 2022.
3. Based on the value of Ms Lockwood's LTI performance rights at the date she ceased service, and is included in the termination benefit disclosed on page 44.
Summary of KMP remuneration for FY21
Short term benefits
Post employment
benefits
Long term
benefits
Cash
salary
and fees
$1
Cash
incentive
$
228,311
114,155
114,155
121,385
736,429
781,895
381,695
171,048
n/a
n/a
n/a
n/a
151,200
n/a
n/a
n/a
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Jacqueline Milne
Dr Chien Ping Ho
Dr Nazar Bokani
Other Key Management Personnel
Anne Lockwood
Paul McCrow
496,766
247,477
107,500
67,318
1. Includes Executive Director fees for the Company's radiologist directors.
46
Superannuation
$
Long service
leave
$
Share based
payments
$
Total
remuneration
$
Proportion of
rem. tied to
performance
%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
250,000
125,000
125,000
125,000
626,424
1,547,222
50.2%
n/a
n/a
7,573
259,107
40,546
821,036
408,584
183,467
902,158
375,209
n/a
n/a
n/a
40.6%
28.7%
21,689
10,845
10,845
3,861
21,694
21,694
16,271
3,861
21,694
16,271
n/a
n/a
n/a
n/a
11,974
17,447
10,619
985
17,091
3,597
Realised KMP remuneration for FY22
The following table shows the actual remuneration paid to, and the equity which vested for, each KMP in the 2022 and 2021 Financial
Years. This includes fixed remuneration received; the STI amounts awarded; and value of LTI performance rights vested.
Fixed
remuneration
$
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Jacqueline Milne
Dr Nazar Bokani
Other Key Management Personnel
Craig White
Paul McCrow
Anne Lockwood
1. Valued on the 5 day VWAP of IDX ordinary shares up to vesting date.
Realised KMP remuneration for FY21
261,432
131,432
58,093
125,000
781,488
908,319
924,609
273,323
369,046
315,918
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Jacqueline Milne
Dr Chien Ping Ho
Dr Nazar Bokani
Other Key Management Personnel
Anne Lockwood
Paul McCrow
Fixed
remuneration
$
228,311
114,155
114,155
121,385
736,429
781,895
381,695
171,048
496,766
247,477
STI
$
n/a
n/a
n/a
n/a
-
n/a
n/a
-
-
-
STI
$
n/a
n/a
n/a
n/a
151,200
n/a
n/a
n/a
107,500
67,318
Vesting of prior
LTI grants
$1
Total
remuneration
$
Super
$
23,568
6,068
5,676
12,500
23,568
23,568
23,568
11,784
23,568
20,108
n/a
n/a
n/a
n/a
285,000
137,500
63,769
137,500
1,716,675
2,521,731
n/a
n/a
-
-
474,184
931,887
948,177
285,107
392,614
810,210
Vesting of prior
LTI grants
$
Total
remuneration
$
Super
$
21,689
10,845
10,845
3,861
21,694
21,694
16,271
3,861
21,694
16,271
n/a
n/a
n/a
n/a
-
n/a
n/a
n/a
-
-
250,000
125,000
125,000
125,000
-
909,323
803,589
397,966
174,909
-
625,960
331,066
Integral Diagnostics Annual Report 2022
47
REMUNERATION REPORT
For year ended 30 June 2022
d. Adjustments in remuneration settings for FY23
Review of Non-Executive Director and Executive Director Board fees for FY23
The Board has determined that for FY23 there will be no change in these Board fees.
Review of Executive Remuneration for FY23
The executive remuneration framework adopted in FY22 and prior years had not been substantially changed since 2017. During
FY22, the Board conducted a review of the framework. In conducting the review, the Board considered feedback it had received from
investors and management over the years, the increasing maturity of the business and the strategic priorities of the Company. The key
changes made to the framework for KMP for FY23 are:
• doubling the STI component but deferring 50% of the STI into equity for 12 months subject to retention and malus;
• shortening the test period for the LTI component to 3 years (from 4 years previously) but removing the re-test provision; and
• introducing two more measures of performance so LTI vesting is now tested on aggregate EPS (50%), relative TSR (25%) and
ROIC (25%).
Previously, the remuneration framework had a relatively low level of STI potential at 25% of fixed remuneration, and only one LTI
performance condition of earnings per share (EPS). Given the current uncertainty of trading conditions and, in light of the Board’s
decision to withhold all STI awards in FY22 because the financial gateway condition was not met, the Board has not imposed a financial
performance gateway for the award of the non-financial strategic objectives and priorities. However, the weighting on the financial
component dependent on achievement of Operating NPAT targets has been increased to 50%.
Summary of remuneration components
The table below summarises the remuneration components and timing of delivery.
48
FY23 Remuneration SummaryYear 1Year 2Year 3Fixed Remuneration100% CashCash, superannuation, non-monetary awardsSTI50% Cash50% delivered as cash50% Equity50% delivered as deferred equityLTIPerformance rightsPerformance rights converted to shares after 3 years
1. Fixed Remuneration
There has been no change in fixed remuneration for executive KMP in FY23.
2. Remuneration Mix
The target remuneration mix has been revised by increasing KMP maximum potential STI award resulting in the following
remuneration mix for FY23:
Executive
Dr Ian Kadish
Craig White
Paul McCrow
3. Overview of variable STI and LTI arrangements
STI
Fixed
remuneration
(%)
40%
44%
50%
STI
(%)
20%
23%
25%
LTI
(%)
Total
remuneration
40%
33%
25%
100%
100%
100%
For achievement of stretch performance the maximum potential for STI has been increased from 25% to 50% of fixed remuneration.
Market benchmarking has previously suggested that STI at 25% was at a relatively low level.
For FY23, the STI award will be divided into two equal components – the financial award and the non-financial strategic objectives
and priorities award. The financial award will be determined by the extent to which the financial goal of achievement of year-on-year
operating NPAT growth is met.
The non-financial award will in turn be made up of a mix of strategic goals and sustainability goals, which have been introduced
in FY23 to support the Group’s ongoing achievements of its ESG strategy, and to recognise that our patients, people, culture and
risk management are integral to our ongoing success and ability to differentiate in an increasingly competitive market. Sustainability
goals include measures related to patient satisfaction, employee engagement, safety and injury prevention, employee turnover and
environmental impact.
To further emphasise the importance of sustainability, the Company has also introduced a risk, compliance and conduct gateway as a
condition to the grant of any STI award.
Delivery of any FY23 STI award will be 50% as deferred equity subject to a twelve month holding lock and employment retention
requirement, with the remainder delivered in cash with no deferral.
LTI
The Board has responded to stakeholder feedback and introduced changes to the LTI for FY23.
Performance of the FY23 LTI will be measured over a three-year performance period instead of four years as in FY22. The re-test
provision will be removed and any award for which the performance conditions are not satisfied will lapse immediately after the
performance measurement is finalised.
Awards will vest under the LTI plan based on the extent to which the following performance conditions are achieved:
• aggregate Earnings Per Share (50% weighting);
• relative Total Shareholder Return (25% weighting); and
• Return on Invested Capital (25% weighting).
Details of the scheme will be presented to the AGM for shareholder approval.
Integral Diagnostics Annual Report 2022
49
REMUNERATION REPORT
For year ended 30 June 2022
e. Cumulative interest of Executives under the LTI program
The LTI program is the key element of the ‘at risk component’ of the Executives’ remuneration. The following table sets out the
movement 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.
As the LTI is tested over 4 years, the test for vesting of the FY19 grant will occur based on the results for FY22 as set out in this report.
Diluted Operating Earnings per Share have declined from 12.5 to 10.2 cents per share representing a compound annual growth rate
of (4.9%). This does not meet the threshold target of 5% set for the FY19 LTI Performance Rights. As noted previously, the terms of
the FY19 LTI Performance Rights allow for the Board to decide to re-test the performance condition at the end of a further one year
period, if the results in FY22, were adversely affected due to some extreme event or circumstance. Having regard to the severe impact
of COVID-19 on the business during FY22 which was seen as an extreme circumstance outside managements' control, the Board has
decided to allow re-testing of the FY19 LTI Performance Rights at the end of FY23. In exercising its discretion to re-test, the Board
was mindful of ensuring the re-test would not unfairly advantage management or disadvantage shareholders. In that regard, the Board
noted that at the re-test, the Threshold and Stretch levels of achievement will be determined by applying the CAGRs as specified by the
Board at the time the Rights were granted over the full five years. In other words, to achieve Stretch, the EPS achieved would need to
equal or exceed the level representing five years of compound growth at the relevant rate.
Movements in Performance Rights held by Executives
The following table sets out the movement of Performance Rights held by each Executive and their related parties. Executives
achieved full vesting of their FY18 Performance Rights during the year and this is reflected below. The FY19 Performance Rights did
not meet the performance condition for vesting.
Opening
balance
Granted
during
year
Vested
Forfeited
Balance at
end of year
(unvested)
Value yet
to be
expensed
Number
Number
Number
%
Number
%
Number
$
FY22
FY21
FY20
FY19
FY18
FY22
FY22
FY21
FY20
FY22
FY21
FY20
FY19
FY18
-
157,371
184,616
235,572
200,000
362,585
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
362,585
100.0%
-
-
48,550
39,219
23,270
59,779
-
96,154
124,633
84,386
100,154
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
100,154
100.0%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.0%
157,371
712,891
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
184,616
692,310
235,572
709,072
200,000
478,000
-
-
48,550
180,121
39,219
192,173
23,270
59,779
-
96,154
124,633
84,386
-
77,955
174,073
-
-
-
-
-
Dr Ian Kadish
Craig White
Paul McCrow
Anne Lockwood
50
LTI Plan EPS CAGR Target Summary
LTI Plan
Beginning of period
End of period
Diluted operating EPS of at beginning
of period
Threshold 5% CAGR
Stretch (12%) CAGR
Stretch (15%) CAGR
FY18
FY19
FY20
FY21
FY22
01-Jul-17
01-Jul-18
01-Jul-19
01-Jul-20
01-Jul-21
30-Jun-21
30-Jun-22
30-Jun-23
30-Jun-24
30-Jun-25
10.4
12.65
n/a
18.21
12.5
15.17
n/a
21.95
16.2
19.70
25.51
n/a
16.6
20.18
26.12
n/a
19.0
23.07
29.87
n/a
f. Other transactions with KMP and their related parties
Related party transactions
In FY22 there were no related party transactions, however as disclosed earlier in the report consulting fees of $89,042 were paid to
former KMP Ms Lockwood after her employment cessation to assist with acquisitions.
Financial Accommodation
Dr Nazar Bokani
Balance
30 June 2022
Balance
30 June 2021
Interest paid
and payable
454,658
470,747
-
The above loan relates to Dr Bokani’s participation in the Radiologist Loan Funded Share Plan (Loan Plan) in 2019, prior to his
appointment as a Director. The Loan was made on an interest free basis to enable the purchase of shares in the Company. Shares
issued attaching to the loan are subject to a continued employment condition of 4 years. The loan can be repaid after the employment
condition is satisfied and any time up to 1 March 2029. The Shares are subject to a holding lock until the loan is repaid. The dividend
streams relating to the loan funded shares are allocated, net of tax, to the repayment of the loan. These terms and conditions are
consistent with those offered to other radiologists under the rules governing the Loan Plan.
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.
g. Executive service agreements
Remuneration arrangements for Executive KMP are formalised in employment agreements. Key conditions for Executive KMP are
outlined below:
Name
Agreement Commenced Agreement Expiry Notice of Termination by Group
Employee Notice
Dr Ian Kadish
22 May 2017
No fixed date
Six Months, or 12 months if change of control event Six months
Craig White
24 January 2022
No fixed date
Six months
Paul McCrow
1 November 2020
No fixed date
Six months
Anne Lockwood 1 December 2017
No fixed date1
Six months
Six months
Six months
Six months
1. On 31 July 2021 Anne Lockwood gave the Company notice of her resignation. She served her notice period as detailed under the terms of her contract of employment and her employment ceased on
30 January 2022.
Integral Diagnostics Annual Report 2022
51
REMUNERATION REPORT
For year ended 30 June 2022
h. KMP shareholding and minimum shareholding policy for KMP
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:
Balance at
1 July 2021
Additions Disposals/other
Number of
shares held
upon ceasing to
be KMP
Balance at the
end of the year
Non-Executive Directors
Helen Kurincic
John Atkin
Rupert Harrington1
Raelene Murphy
Executive Directors
Dr Ian Kadish
Dr Jacqueline Milne
Dr Nazar Bokani
Other Key Management Personnel
Craig White
Paul McCrow
Anne Lockwood2
1 Resigned as a Director on 19 December 2021
2 Resigned as CFCO effective 30January 2022
492,084
158,891
357,648
30,945
89,379
-
277,716
-
-
-
63,495
24,894
5,307
-
450,062
19,990
-
-
-
100,154
-
-
-
-
-
-
-
-
-
-
-
-
362,955
-
-
-
-
-
-
100,154
555,579
183,785
-
30,945
539,441
19,990
277,716
-
-
52
Minimum Shareholding Policy
To ensure Board members and KMP are aligned with the interests of shareholders, from 1 July 2018 the Board 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 the KMP’s appointment. During the year this
Policy was reviewed and minor amendments were made.
KMP and Directors are required to meet a minimum shareholding equivalent as per the prescribed percentage of their total fixed
remuneration or fees as outlined below:
• Managing Director and CEO:
• CFO:
• Other Executive KMP:
• Non-Executive Directors:
• Executive Directors:
Minimum Shareholding
100%
75%
50%
100%
100%
Helen Kurinic
Dr Ian Kadish
John Atkin
Raelene Murphy
Jacqueline Milne
Nazar Bokani
l
e
n
n
o
s
r
e
P
t
n
e
m
e
g
a
n
a
M
y
e
K
Craig White
0%0%
Paul McCrow
0%0%
100%100%
100%100%
100%100%
88%88%
100%100%
68%68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
% Achieved
The Remuneration Report has been audited.
Integral Diagnostics Annual Report 2022
53
AUDITOR’S INDEPENDENCE DECLARATION
For year ended 30 June 2021
54
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. Auditor’s Independence Declaration As lead auditor for the audit of Integral Diagnostics Limited for the year ended 30 June 2022, 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 inrelation 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 Melbourne Partner PricewaterhouseCoopers 29 August 2022 Financial Report
56 Consolidated Statement of Profit or Loss
57 Consolidated Statement of Comprehensive Income
58 Consolidated Statement of Financial Position
59 Consolidated Statement of Changes in Equity
60 Consolidated Statement of Cash Flows
61 Notes to the financial statements
107 Directors’ Declaration
108 Independent auditor’s report to the members of Integral
Diagnostics Limited
114 Shareholder Information
117 Corporate Directory
Integral Diagnostics Annual Report 2022
55
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 30 June 2022
Revenue
Revenue
Interest and other income
Total revenue and other income
Expenses
Consumables
Employee benefits expense
Depreciation expense
Amortisation expense
Transaction and integration expenses
Share based payment reversal/(expense)
Equipment related expenses
Occupancy expenses
Other expenses
Finance costs
Share of net profits/(losses) of joint ventures accounted for using the
equity method
Total expenses
Profit before income tax expense
Income tax expense
Profit for the year from continuing operations
Profit is attributable to:
Owners of Integral Diagnostics Limited
Note
30 June 2022
$’000
30 June 2021
$’000
5
5
6
6
6
6
24
6
16
7
360,930
39
360,969
(19,221)
(219,612)
(20,644)
(16,055)
(5,460)
638
(13,142)
(8,028)
(26,243)
(10,483)
350,696
267
350,963
(17,017)
(197,992)
(18,747)
(16,167)
(2,219)
(2,080)
(12,152)
(7,492)
(22,984)
(8,909)
(158)
18
(338,408)
(305,741)
22,561
45,222
(7,958)
(13,954)
14,603
31,268
14,603
31,268
56
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2022
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations
Net (loss)/gain on cash flow hedges
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Total comprehensive income is attributable to:
Owners of Integral Diagnostics Limited
Note
30 June 2022
$’000
30 June 2021
$’000
14,603
31,268
(1,912)
-
(163)
-
12,691
31,105
12,691
31,105
12,691
31,105
Integral Diagnostics Annual Report 2022
57
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 30 June 2022
Note
30 June 2022
$’000
30 June 2021
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Other assets
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Deferred tax asset
Investments accounted for using the equity method
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Income tax payable
Contingent consideration
Provisions
Total current liabilities
Non-current liabilities
Contingent consideration
Borrowings
Lease liabilities
Deferred tax liability
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Retained profits
Total equity
58
8
9
10
11
12
13
14
15
16
17
18
13
20
19
20
21
13
15
22
23
24
25
123,193
19,409
3,594
6,524
1,264
153,984
124,252
106,881
380,487
17,252
159
629,031
783,015
22,897
5,470
11,740
-
16,376
23,521
80,004
8,236
217,582
106,199
14,226
9,524
355,767
435,771
62,203
14,260
-
4,874
914
82,251
111,094
100,391
344,729
16,335
99
572,648
654,899
20,271
6,543
10,427
4,509
15,863
20,286
77,899
7,246
192,185
99,199
13,826
9,805
322,261
400,160
347,244
254,739
322,543
(12,455)
37,156
347,244
219,219
(8,883)
44,403
254,739
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2022
Contributed
capital
$’000
Reserves
$’000
Retained profits
$’000
Total equity
$’000
Balance at 1 July 2020
Profit after income tax expense
Movement in translation of foreign operations
Total comprehensive income
Transactions with owners in their capacity as owners:
Net tax effect of transaction costs recognised in equity
Transaction costs recognised in equity (Note 23)
Issue of ordinary shares under Radiologist incentive scheme
(Note 23)
Issue of ordinary shares as consideration for a business
combination, net of transaction costs and tax (Note 23)
Share based payments (Note 24)
Dividends paid and reinvested in equity (Note 26)
Balance at 30 June 2021
Balance at 1 July 2021
Profit after income tax expense
Movement in translation of foreign operations
Total comprehensive income
Transactions with owners in their capacity as owners:
Net tax effect of transaction costs recognised in equity
Transaction costs recognised in equity (Note 23)
Issue of ordinary shares under Radiologist incentive scheme (Note 23)
Issue of ordinary shares as consideration for a business combination,
net of transaction costs and tax (Note 23)
Issue of ordinary shares pursuant to entitlement offers
Conversion of performance rights to ordinary shares
Share based payments (Note 24)
Dividends paid and reinvested in equity (Note 26)
207,437
(10,800)
-
-
-
(108)
(139)
1,500
9,857
-
671
219,219
-
(163)
(163)
-
-
-
-
2,080
-
(8,883)
Contributed
capital
$’000
Reserves
$’000
219,219
(8,883)
-
-
-
-
(1,912)
(1,912)
362
(2,875)
1,500
12,300
90,028
1,022
-
987
-
-
-
-
-
(1,022)
(638)
31,693
31,268
-
31,268
-
-
-
-
-
(18,558)
44,403
Retained
profits
$’000
44,403
14,603
-
14,603
-
-
-
-
-
-
-
228,330
31,268
(163)
31,105
(108)
(139)
1,500
9,857
2,080
(17,886)
254,739
Total equity
$’000
254,739
14,603
(1,912)
12,691
362
(2,875)
1,500
12,300
90,028
-
(638)
(20,863)
347,244
Balance at 30 June 2022
322,543
(12,455)
37,156
-
(21,850)
Integral Diagnostics Annual Report 2022
59
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2022
30 June 2022
$’000
30 June 2021
$’000
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Transaction and integration costs relating to acquisition of subsidiaries
Interest and other finance costs paid
Interest received
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for purchase of subsidiary, net of cash acquired
Payments in settlement of contingent consideration
Payments for property, plant and equipment
Payments for registration of brand names
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Transaction costs paid on issue of share capital
Proceeds from borrowings drawn
Repayment of borrowings
Repayment of the principal element of lease liabilities
Dividends paid to Company shareholders
Net cash from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
37
34
20
14
23
23
357,020
(286,726)
(5,460)
(10,328)
39
(17,445)
37,100
(24,614)
(3,309)
(27,770)
-
347,504
(248,752)
(2,219)
(10,315)
88
(16,734)
69,572
(35,459)
(931)
(20,259)
(14)
(55,693)
(56,663)
91,828
(2,875)
114,153
(89,829)
(11,280)
(20,863)
81,134
62,541
62,203
(1,551)
1,792
(139)
35,180
(16,786)
(9,995)
(17,886)
(7,834)
5,075
57,965
(837)
62,203
Cash and cash equivalents at the end of the financial year
8
123,193
60
NOTES TO THE FINANCIAL STATEMENTS
Note 1. General information
The Financial Report covers Integral Diagnostics Limited as a Group consisting of Integral Diagnostics Limited (‘Company’ or ‘parent
entity’) and the entities it controlled at the end of, or during, the year (collectively referred to as the ‘Group’). The financial statements
are presented in Australian dollars, which is Integral Diagnostics Limited’s functional and presentation currency and are rounded to
the nearest thousand dollars ($‘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:
Suite 9.02, Level 9, 45 William Street MELBOURNE VIC 3000
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 29th August 2022. 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.
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 33.
New, revised or amending accounting standards and interpretations adopted
The Group has adopted all new, revised or amended accounting standards and interpretations issued by the Australian Accounting
Standards Board (AASB) that are mandatory for the current reporting period. There is no material impact from the adoption of these
new standards.
Any new, revised or amending accounting standards or interpretations that are not yet mandatory have not been early adopted.
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Integral Diagnostics Limited as at
30 June 2022 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 can 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.
Inter-Group 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.
Integral Diagnostics Annual Report 2022
61
NOTES TO THE FINANCIAL STATEMENTS
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.
Joint arrangements
The Group’s interests in joint ventures are accounted for using the equity method (see (iii) below), after initially being recognised at
cost in the consolidated balance sheet.
Equity method
Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the
Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other
comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint
ventures are recognised as a reduction in the carrying amount of the investment.
Where the group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other
unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on
behalf of the other entity.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset
transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the
policies adopted by the Group.
The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described later in
this note.
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.
Foreign currencies
The Group’s consolidated financial statements are presented in Australian dollars, which is also the parent Company’s functional
currency. For each entity, the Group determines the functional currency and items included in the financial statements of each entity
are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation,
the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot rates at the
date the transaction first qualifies for recognition.
Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at
the reporting date. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the
dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
rates at the date when the fair value is determined. The gain or loss arising on translation of non-monetary items measured at fair
value is treated in line with the recognition of the gain or loss on the change in fair value of the item (i.e., translation differences on
items whose fair value gain or loss is recognised in other comprehensive income (“OCI”) or profit or loss are also recognised in OCI or
profit or loss, respectively).
62
Group companies
On consolidation, the assets and liabilities of foreign operations are translated into Australian dollars at the rate of exchange prevailing
at the reporting date, and their statements of profit or loss are translated at average exchange rates for the period. The exchange
differences arising on translation for consolidation are recognised in OCI. On disposal of a foreign operation, the component of OCI
relating to that particular foreign operation is reclassified to profit or loss. Any goodwill arising on the acquisition of a foreign operation,
and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition, are treated as assets and
liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.
Impairment of non-financial assets
Goodwill and other intangible assets that have 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.
Share-based payments
Employees (including senior management and radiologists) of the Group receive remuneration and benefits in the form of share-based
payments. These employees render services as consideration for equity instruments (equity-settled transactions).
The cost of equity-settled transactions is determined by the fair value at the date when the grant is made using an appropriate
valuation model.
That cost is recognised in expense, together with a corresponding increase in equity (share based payment reserves), over the period
in which the service and, where applicable, the performance conditions are fulfilled (the vesting period). The cumulative expense
recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period
has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The expense or credit in the
statement of profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of
that period.
Service and non-market performance conditions are not taken into account when determining the grant date fair value of awards,
but the likelihood of the conditions being met is assessed as part of the Group’s best estimate of the number of equity instruments
that will ultimately vest. Market performance conditions are reflected within the grant date fair value. Any other conditions attached
to an award, but without an associated service requirement, are considered to be non-vesting conditions. Non-vesting conditions
are reflected in the fair value of an award and lead to an immediate expensing of an award unless there are also service and/or
performance conditions.
No expense is recognised for awards that do not ultimately vest because non-market performance and/or service conditions have not
been met. Where awards include a market or non-vesting condition, the transactions are treated as vested irrespective of whether the
market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.
When the terms of an equity-settled award are modified, the minimum expense recognised is the grant date fair value of the
unmodified award, provided the original vesting terms of the award are met. An additional expense, measured as at the date of
modification, is recognised for any modification that increases the total fair value of the share-based payment transaction, or is
otherwise beneficial to the employee. Where an award is cancelled by the entity or by the counterparty, any remaining element of the
fair value of the award is expensed immediately through profit or loss.
The dilutive effect of outstanding performance rights is reflected as additional share dilution in the computation of diluted earnings
per share.
The loan associated with loan funded shares is non-recourse in nature and it is held off balance sheet and no corresponding amounts
held in equity for the issued shares. The cost of the loan is recorded in the income statement over the service period, with the
corresponding amount charged to equity. This equity value is recorded as share capital when the holder of the loan funded shares
repays the loan in full, which is at their election in years 5 to 10 from grant date.
Integral Diagnostics Annual Report 2022
63
NOTES TO THE FINANCIAL STATEMENTS
Investments and other financial assets
Classification
The group classifies its financial assets in the following measurement categories:
• those to be measured subsequently at fair value (either through OCI, or through profit or loss), and
• those to be measured at amortised cost.
The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the
cash flows.
Financial assets at amortised cost
Loans and receivables are initially recognised at fair value and subsequently at amortised cost using the effective interest rate method
less any allowance under the expected credit loss (ECL) model.
All loans and receivables with maturities greater than 12 months after the balance date are classified as non-current assets.
The loss allowances for financial assets are based on assumptions about risk of default and expected loss rates. The Group uses
judgement when determining whether the credit risk of a financial asset has increased significantly since initial recognition and
when estimating ECL. The Group considers reasonable and supportable information that is relevant and available. This includes both
quantitative and qualitative information and analysis based on the Group’s historical experience and current market conditions as well
as forward looking estimates at the end of each reporting period.
Debts that are known to be uncollectable are written off when identified.
Revenue
Revenue from diagnostic imaging services is recognised on completion and reporting of imaging to the referring doctor. For diagnostic
imaging services provided under contract, revenue is recognised based on the actual service provided to the end of the reporting
period. This is determined based on the actual volume of exams reported.
Refer to note 5 for further details in relation to the point of revenue recognition for the Group’s specific revenue streams.
Government grants
Government grants are recognised only after eligibility conditions have been met and the Group has assessed these will be received.
Consistent with the income approach applicable under AASB 120, government grants are recognised in profit or loss as a deduction
against the employee benefits expenses for which they are intended to compensate.
Property leases
Property leases are recognised as a right-of-use asset and a corresponding liability at the date at which the property is available for
use by the Group. Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit or loss
over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The
corresponding right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Assets and liabilities arising from property leases are initially measured on a present value basis. Lease liabilities include the net
present value of the following lease payments:
• fixed payments, less any lease incentives receivable;
• variable lease payments that are based on an index or a rate; and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
The lease payments are discounted using the Group’s incremental borrowing rate, being the rate that would be paid to borrow the
funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
• the amount of the initial measurement of lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
• any initial direct costs, and
• restoration costs.
Payments associated with short-term leases are recognised on a straight-line basis as an expense in profit or loss. Short-term leases
are those with a lease term of 12 months or less.
64
Extension and termination options are included in most property leases across the group. These terms are used to maximise
operational flexibility in terms of managing contracts. Most extension and termination options held are exercisable only by the Group
and thus it has been assumed that these are to be exercised in the measurement of lease liabilities and right of use assets, as is
expected to be the case with future lease renewals.
Rounding of amounts
The Group 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 Instrument 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 2022. None of these new standards and interpretations
are expected to have a material impact on the Group’s financial statements.
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, that 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 14.
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. These
assumptions have taken into account uncertainty arising due to COVID-19 as outlined in Note 14.
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, including the continuation of the stable
regulatory environment and current competitive practices for healthcare services in both Australia and New Zealand.
Provision for make good
The Group records a provision for make good costs of lease properties. Make good costs are provided for at the present value of
expected costs to settle the obligation using estimated cash flows and are recognised as part of the cost of the relevant asset. The cash
flows are discounted at a current pre-tax rate that reflects the risks specific to the make good liability. The unwinding of the make good
is expensed as incurred and recognised in the statement of profit or loss. The estimated future costs of the make good are reviewed
annually and adjusted as appropriate. Changes in the estimated future costs, or in the discount rate applied, are added to or deducted
from the cost of the asset.
Integral Diagnostics Annual Report 2022
65
NOTES TO THE FINANCIAL STATEMENTS
Impacts of COVID-19
The Group has performed an assessment of the impacts of COVID-19 on the financial performance and position of the Group. It has
been determined that the net impact has been neither significant or prolonged and that the ongoing ability of the Group to generate
sufficient cash flows to support the carrying value of assets has not been impacted.
Should there be ongoing impacts from COVID-19 across the Group’s operations, and the impacts of this pandemic are significant or
prolonged, this may impact the Group in the longer term.
Business combination accounting
In applying business combination accounting to its acquisitions, the Group makes estimations of future cash flows and applies an
appropriate discount rate to measure identified assets, including brand names and customer contracts. The Group is also required to
estimate contingent considerations, involving the estimation of future earnings to be generated by the acquired business for a defined
period. These liabilities are further detailed in Note 20.
Note 4. Operating segments
Identification of reportable operating segments
The Group comprises the single reportable operating segment of the operation of diagnostic imaging facilities.
Major customers
During the year ended 30 June 2022, there was no external revenue greater than 10% to any one customer (2021: nil).
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.
Operating segment information
Revenue is attributable to the country where the service was transacted. The consolidated entity operates in two main geographical
areas, being Australia and New Zealand.
Total revenue and other income from continuing operations
Australia
New Zealand
Total non -current assets
Australia
New Zealand
Consolidated
30 June 2022
$’000
30 June 2021
$’000
318,407
42,562
360,969
475,640
153,391
629,031
304,562
46,401
350,963
410,740
161,908
572,648
66
Note 5. Revenue
Sales revenue
Services revenue
Other revenue
Other revenue
Revenue
Interest and other income
Interest income
Realised FX gain
Total revenue and other income
Timing of revenue recognition
At a point in time
Over time
Consolidated
30 June 2022
$’000
30 June 2021
$’000
358,739
348,808
2,191
360,930
1,888
350,696
39
-
39
88
179
267
360,969
350,963
342,905
18,025
360,930
334,722
15,974
350,696
Accounting policy for revenue recognition
Revenue is recognised when the Group has fulfilled its contractual performance obligations to its customers. Revenue is measured
at the fair value of the consideration received or receivable, and except for specific customer contracts where service revenues are
recognised over time, revenue recognised is at a point in time.
Rendering of services
Rendering of services revenue is recognised when the service is rendered for the provision of medical imaging services. For some
specific customer contracts, service revenues are recognised over time on a straight-line basis, which reflects the contract requirement
for services to be delivered evenly over the term. All other service revenues are recognised at the time the images are read and
reported on.
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).
Integral Diagnostics Annual Report 2022
67
NOTES TO THE FINANCIAL STATEMENTS
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Depreciation expense
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
Total depreciation
Amortisation expense
Customer contracts
Right-of-use assets
Total amortisation
Total depreciation and amortisation
Consolidated
30 June 2022
$’000
30 June 2021
$’000
2,921
14,351
36
3,336
20,644
2,952
13,103
16,055
36,699
2,705
13,373
32
2,637
18,747
4,474
11,692
16,167
34,914
Net (gain)/loss on disposal of property, plant and equipment
(175)
390
Transaction and integration costs relating to acquisition of subsidiaries
Professional fees and other costs
Total transaction costs
Finance costs
Interest and finance charges paid/payable
Unwinding of the effect of discounting provisions
Finance costs expensed
Employee benefits expense
Employee benefits
Government grants
Superannuation contributions
Labour supply
Total employee benefits expense
5,460
5,460
10,483
-
10,483
2,219
2,219
8,817
92
8,909
184,066
173,630
-
12,926
22,620
219,612
(6,695)
10,862
20,195
197,992
Costs of inventories recognised as expense were $19.2 million (2021: $17.0 million).
Accounting policy for finance costs
Borrowing costs are expensed in the period in which they are incurred. Amounts relating to the unwinding of discounting are classified
as finance costs.
Government grants
No amounts relating to government grants were recognised during the year (2021: $6.7 million).
68
In 2021, the Group elected to make a voluntary return of surplus JobKeeper funds to government of $2.9 million pre-tax, being
assessed the benefit received by the Group after making allowance for the impact of COVID-19, and the cost of retaining staff during
these disruptions. The amount of government grants disclosed in the above table is presented net of this return.
In 2021, JobKeeper payments, New Zealand Wage Subsidy and payroll tax refunds received as part of the government response to
the COVID-19 pandemic of $10.2 million were partially offset by $0.7 million of top up payments included in the employee benefits
line item. In 2021, the JobKeeper payments and New Zealand Wage Subsidy were taxable income, the net benefit to the Group after
top up payments, voluntary return of JobKeeper and related tax effects was $4.7 million. There were no unfulfilled conditions or
other contingencies attached to these grants. During the prior reporting period, the Group had also benefited from other government
assistance in the form of deferred payroll tax to the extent as outlined in Note 17.
In accordance with the legislative requirements, JobKeeper payment eligibility was assessed at the level of the group’s individual
subsidiary employment service entities. The eligibility of these entities for JobKeeper payments was assessed by applying the
basic turnover test to their expected management service fee turnover. The projected turnover declines in these entities were
commensurate with overall declines in revenue and operating returns experienced in the employment service entities' corresponding
trading subsidiary for the same period.
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Total income tax expense
Deferred tax included in income tax expense comprises:
(Increase) in deferred tax assets (Note 15)
Increase/(decrease) in deferred tax liabilities (Note 15)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the Australian statutory rate of 30% (2021: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment costs
Transaction costs
Share based payments
Share of profits of joint ventures
Lease adjustment
Adjustment recognised for prior periods
Impact of lower corporate tax rate in New Zealand
Income tax expense
Accounting policy for income tax
Consolidated
30 June 2022
$’000
30 June 2021
$’000
7,742
216
7,958
(55)
271
216
15,827
(1,873)
13,954
(2,728)
855
(1,873)
22,561
45,222
6,768
13,412
50
1,010
(184)
47
5
7,696
376
(114)
7,958
49
131
621
(5)
-
14,208
(99)
(155)
13,954
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.
Integral Diagnostics Annual Report 2022
69
NOTES TO THE FINANCIAL STATEMENTS
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
30 June 2022
$’000
30 June 2021
$’000
21
123,172
123,193
16
62,187
62,203
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.
Note 9. Current assets – trade and other receivables
Trade receivables
Less: loss allowance
Other receivables
Impairment of receivables
Movements in the loss allowance for trade receivables are as follows:
Opening balance
Recognised on business combination
Additional allowance recognised
Receivables written off during the year as uncollectable
Closing balance
The ageing of receivables past due is as follows:
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 91 days
70
Consolidated
30 June 2022
$’000
30 June 2021
$’000
19,712
(303)
19,409
-
19,409
14,788
(547)
14,242
18
14,260
Consolidated
30 June 2022
$’000
30 June 2021
$’000
547
-
(30)
(214)
303
235
313
86
(87)
547
Consolidated
30 June 2022
$’000
30 June 2021
$’000
2,255
649
1,928
4,832
785
335
1,034
2,154
Accounting policy for trade and other receivables
Trade receivables are amounts due from customers for services rendered. They are generally due for settlement within 30 to 60
days and are therefore all classified as current. Trade receivables are initially recognised at the amount of consideration that is
unconditional. None of the Group’s trade receivables have a significant financing component. The group holds these receivables to
collect the contractual cash flows and thus subsequently measures these at amortised cost less any loss allowance. Due to the
short-term nature of these receivables, their carrying amount is assumed to approximate fair value. Cash flows relating to short-term
receivables are not discounted if the effect of discounting is immaterial.
The group applies the simplified approach to measuring expected credit losses using a lifetime expected credit losses (ECL) allowance
for all trade receivables. The expected credit loss rates are based on the payment profile of sales in recent periods and historical
loss rates. The historical loss rates are adjusted to reflect current and forward looking information on factors affecting the ability of
customers to settle the receivable, including an increased risk associated with collection of outstanding amounts based on additional
factors such as probability of bankruptcy or financial reorganisation and consideration of the impact of COVID-19.
Other receivables are recognised at amortised cost, less any provision for impairment.
Note 10. Current assets – other
Accrued income
Prepayments
Security deposits
Other current assets
Note 11. Inventory
Contrast, drugs, needles & personal protective equipment
Accounting policy for inventory
Consolidated
30 June 2022
$’000
30 June 2021
$’000
1,322
4,821
381
-
6,524
1,557
2,623
401
293
4,874
Consolidated
30 June 2022
$’000
30 June 2021
$’000
1,264
914
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 contrast, drugs, needles and
personal protective equipment. Costs of inventories recognised as an expense was $19.2 million (2021: $17.0 million).
Integral Diagnostics Annual Report 2022
71
Consolidated
30 June 2022
$’000
30 June 2021
$’000
8,124
2,025
47,488
(14,462)
33,026
135,647
(65,057)
70,590
372
(208)
164
27,636
(15,288)
12,348
124,252
43,298
(11,540)
31,758
119,769
(52,35)
67,415
322
(172)
150
21,690
(11,943)
9,747
111,094
NOTES TO THE FINANCIAL STATEMENTS
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
72
Reconciliations
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:
Work in
progress
Leasehold
improvements
Plant and
equipment Motor Vehicles
Office furniture
and equipment
Consolidated
Balance at 30 June 2020
Business combination
Additions
Transfers
Disposals/write offs
Depreciation expense
Exchange differences
$’000
998
20,687
(19,660)
-
-
-
Balance at 30 June 2021
2,025
Business combination –
Note 34
Additions
Transfers
Disposals/write offs
Depreciation expense
Exchange differences
-
31,282
(25,183)
-
-
-
Balance at 30 June 2022
8,124
$’000
28,245
2,975
-
3,269
(108)
(2,705)
81
31,757
1,264
-
3,376
(433)
(2,921)
(17)
33,026
$’000
64,508
5,292
-
11,407
(514)
(13,373)
95
67,415
2,660
-
15,984
(821)
(14,351)
(297)
70,590
$’000
123
-
-
59
(32)
-
150
-
-
50
-
(36)
-
164
$’000
7,131
321
-
4,925
(9)
(2,637)
16
9,747
189
25
5,773
(2)
(3,336)
(48)
12,348
Total
$’000
101,005
8,588
20,687
-
(631)
(18,747)
192
111,094
4,113
31,307
-
(1,256)
(20,644)
(362)
124,252
Property, plant and equipment secured under asset financing facility
Refer to Note 21 for further information on property, plant and equipment secured under asset financing.
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
• Plant and equipment
• Motor vehicles
• Office furniture and equipment
5 – 20 years
4 – 15 years
5 – 8 years
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. Leasehold improvements include the expected future cost of making good leasehold premises at the conclusion of the
lease term.
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 the policy set out above.
Integral Diagnostics Annual Report 2022
73
NOTES TO THE FINANCIAL STATEMENTS
Note 13. Leases
The balance sheet shows the following amounts in respect of leases:
Right-of-use assets
Property leases
Lease liabilities
Current
Non-current
Additions to the right-of-use assets during the year were $14.2m (2021: $14.5m).
The statement of profit or loss shows the following amounts relating to leases:
Amortisation charge against right-of-use assets
Interest expense (included in finance cost)
Expense relating to short-term leases (included in occupancy expenses)
Credits received as rent concessions due to COVID-19 (included in occupancy expenses)
Reconciliation of movements in lease liabilities during the period
Lease liabilities recognised at 1 July
Lease liabilities assumed on acquisition
Remeasurement of liability
Early termination of leases
New leases entered into during the period
Repayment of lease liabilities, net of interest
Lease liabilities recognised at 30 June
74
Consolidated
30 June 2022
$’000
30 June 2021
$’000
106,881
100,391
11,740
106,199
117,939
10,427
99,199
109,626
Consolidated
30 June 2022
$’000
30 June 2021
$’000
13,103
4,030
311
11,692
3,728
768
-
Consolidated
30 June 2022
$’000
30 June 2021
$’000
109,626
9,038
(29)
(3,429)
14,013
(11,280)
117,939
96,107
12,527
1,823
(5,379)
14,542
(9,995)
109,626
Note 14. Non-current assets – intangibles
Goodwill – at cost
Brand names and trademarks – at cost
Customer contracts – at cost
Less: Accumulated amortisation
Consolidated
30 June 2022
$’000
30 June 2021
$’000
352,462
25,546
16,234
(13,755)
2,479
315,790
24,745
15,320
(11,126)
4,194
380,487
344,729
Reconciliations
Reconciliations of the written-down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balance at 30 June 2020
Assets recognised on business combination acquisitions
Additions
Amortisation expense
Foreign currency conversion
Balance at 30 June 2021
Assets recognised on business combination acquisition –
Note 34
Additions
Amortisation expense
Foreign currency conversion
Balance at 30 June 2022
Goodwill
$’000
280,017
35,388
-
-
385
315,790
Brand names &
trademarks
$'0001
24,768
-
14
-
(37)
24,745
39,976
1,100
-
-
(3,304)
352,462
-
-
(299)
25,546
Customer
contracts
$’000
2,486
6,044
-
(4,474)
138
4,194
430
818
(2,952)
(11)
2,479
1. Brand names of $24.77 million are distributed across the SCR ($7.0m), Lake Imaging ($0.17m), NZ ($9.7m) and Imaging Queensland ($7.9m) CGUs.
Reconciliations of the carrying values by cash generating unit are set out below:
Consolidated
Goodwill
Brand names and trademarks
Customer contracts
Balance at 30 June 2022
Impairment test for goodwill and intangibles
Australia
$’000
240,190
16,185
1,577
257,952
New Zealand
$’000
112,272
9,361
902
122,535
Total
$’000
307,271
41,432
14
(4,474)
486
344,729
41,506
818
(2,952)
(3,614)
380,487
Total
$’000
352,462
25,546
2,479
380,487
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 the identified cash generating units is
conducted annually.
Integral Diagnostics Annual Report 2022
75
NOTES TO THE FINANCIAL STATEMENTS
Management have concluded that the current centralised structure of operations in Australia, and the ongoing synergies and
opportunities this delivers to the Group’s Australian operations warrants the continued allocation of goodwill to form one cash-
generating unit in Australia, and a second cash generating unit in New Zealand for impairment testing purposes. Brand names and
trademarks are allocated to brand level cash-generating units.
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 the Board. Cash flows beyond the five-year period
are extrapolated using the estimated growth rates stated below. These growth rates do not exceed the historical average growth rates
for the industry in which the Group operates and assume a continuation of the stable regulatory environment for healthcare services in
both Australia and New Zealand.
A reasonable possible change in the 5 year compound annual revenue growth rate could cause an impairment in both the Australian
and New Zealand cash generating units. At 30 June 2022, the recoverable amount of the Australian and New Zealand CGU's are
estimated to exceed their carrying values by $232 million and $50 million respectively.
The following table sets out the key assumptions for impairment testing for each geographic segment:
Australia
5 year compound annual revenue growth rate
Long-term growth rate
Pre-tax discount rate
New Zealand
5 year compound annual revenue growth rate
Long-term growth rate
Pre-tax discount rate
Accounting policy for intangible assets
2022
%
6.3
2.5
10.8
6.9
2.0
12.4
2021
%
5.3
1.9
10.6
8.5
1.5
12.1
Break even
rate
%
5.2
(4.3)
15.1
4.6
(4.3)
16.1
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 of
amortisation 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 and trademarks
Significant costs associated with brand names and trademarks 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 the remaining term of the contract as at the date of acquisition. The balance remaining consists of the contracts held with the
Central Queensland Hospital and Health Service, and the Southern Cross Health Insurance, Accident Compensation Corporation and
healthAlliance in New Zealand.
76
Note 15. Deferred tax
Deferred tax assets
Deferred tax asset comprises temporary differences attributable to:
Employee benefits and other provisions
Provisions for lease make good
Transaction costs in equity
Transaction costs
Tax losses available
Leases
Total deferred tax asset
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Movements:
Opening balance
Credited to profit or loss (Note 7)
Credited to equity
Closing balance
Deferred tax liabilities
Deferred tax liability comprises temporary differences attributable to:
Amounts recognised in profit or loss
Property, plant and equipment
Brand names and customer contracts
Total deferred tax liabilities
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)
Additions through business combinations (Note 34)
Closing balance
Integral Diagnostics Annual Report 2022
Consolidated
30 June 2022
$’000
30 June 2021
$’000
10,869
1,171
1,136
502
268
3,306
17,252
4,233
13,019
17,252
16,335
55
862
17,252
10,770
1,035
665
834
268
2,763
16,335
4,116
12,219
16,335
13,607
2,728
-
16,335
Consolidated
30 June 2022
$’000
30 June 2021
$’000
(6,024)
(8,202)
(14,226)
(602)
(13,624)
(14,226)
(13,826)
(271)
(129)
(14,226)
(5,384)
(8,442)
(13,826)
(538)
(13,288)
(13,826)
(11,515)
(855)
(1,456)
(13,826)
77
NOTES TO THE FINANCIAL STATEMENTS
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
• when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of
that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or
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.
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 16. Interests in other entities
Interests in joint ventures
Set out below are the joint ventures of the Group as at 30 June 2022. The entities listed below have share capital consisting solely
of ordinary shares, which are held directly by the Group. The country of incorporation or registration is also their principal place of
business, and the proportion of ownership interest is the same as the proportion of voting rights held.
Ownership interest
Carriying amount
Name of joint venture
MedX
Place of
incorporation
Australia
Ascot at Maranui1
New Zealand
2022
%
50%
100%
2021
%
Measurement
method
50% Equity method
50% Equity method
2022
$'000
159
-
2021
$'000
-
99
1. The remaining share capital in this entity was acquired during the year and is now consolidated.
Summarised financial information for joint ventures
The table summarises the financial information for those joint ventures of the group accounted for using the equity method.
78
Aggregate carrying amount of individual immaterial joint ventures
Aggregate share of amounts of the group’s share of:
Profit/(loss) from continuing operations
Other comprehensive income
Total comprehensive income
Note 17. Current liabilities – trade and other payables
Trade payables
Other payables and accruals
Refer to Note 27 for further information on financial instruments.
Accounting policy for trade and other payables
Consolidated
30 June 2022
$’000
30 June 2021
$’000
159
(158)
-
(158)
99
18
-
18
Consolidated
30 June 2022
$’000
30 June 2021
$’000
8,694
14,203
22,897
4,753
15,518
20,271
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 18. Current liabilities – borrowings
Asset financing facility
Consolidated
30 June 2022
$’000
30 June 2021
$’000
5,470
6,543
Refer to Note 21 for accounting policy on borrowings and further information on assets pledged as security and
financing arrangements.
Refer to Note 27 for further information on financial instruments.
Note 19. Current liabilities – provisions
Annual leave
Long service leave
Employee benefits
Lease make good1
1. Refer to note 22 for the accounting policy for lease make good and long service leave provisions.
Consolidated
30 June 2022
$’000
30 June 2021
$’000
15,664
7,326
250
281
13,891
5,935
282
178
23,521
20,286
Integral Diagnostics Annual Report 2022
79
NOTES TO THE FINANCIAL STATEMENTS
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.
Note 20. Contingent consideration
Current portion
Non-current portion
The movements in each element of contingent consideration during the financial are set out below:
Consolidated
Carrying amount at the start of the year
Recognised on business combination – Note 34
Remeasurements charged through profit or loss
Amounts paid during the year
Balance at 30 June 2022
Contingent consideration
Consolidated
30 June 2022
$’000
30 June 2021
$’000
16,376
8,236
24,612
15,863
7,246
23,109
Total
$’000
23,109
6,500
(1,688)
(3,309)
24,612
Contingent consideration arises from contractual commitments entered into on the acquisition of businesses. Where contingent
consideration payments are significantly linked to requirements for ongoing employment the cost of the deferred payment is charged
to profit or loss as earnt. Where contingent consideration is linked to the enterprise value of the entity acquired and each vendor is
entitled to the payment of the earn of regardless of their employment status, the amounts are recognised in goodwill as part of the
business combination accounting and based on expectation of payment. Any increment or decrement arising from remeasurement of
these liabilities is charged to profit or loss.
An amount of $12.4m has been provided for in regards to Earn Out A of the Imaging Queensland acquisition. The settlement payment
for Earn Out A due to the vendors of Imaging Queensland is subject to the dispute settlement process provided for in the Share and
Asset Sale Agreement (SASA).
80
Note 21. Non-current liabilities – borrowings
Club debt facility
Asset financing facility
Consolidated
30 June 2022
$’000
30 June 2021
$’000
213,057
4,525
217,582
187,969
4,216
192,185
The fair values of these borrowings are not materially different from their carrying amounts, as the interest payable on those
borrowings reflect either current market rates or the borrowings are of a short-term nature.
Refer to Note 27 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Club debt facility
Asset financing facility
Assets pledged as security
Consolidated
30 June 2022
$’000
30 June 2021
$’000
213,057
9,995
223,052
187,969
10,759
198,728
The asset finance liabilities are effectively secured as the financiers have rights to the assets under finance in the event of default.
Under the club debt facility the financiers have security over the cash flows of the business.
Integral Diagnostics Annual Report 2022
81
NOTES TO THE FINANCIAL STATEMENTS
Financial arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Asset finance facility
Cash advance facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Used at the reporting date
Asset finance facility
Cash advance facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Unused at the reporting date
Asset finance facility
Cash advance facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Accounting policy for borrowings
Consolidated
30 June 2022
$’000
30 June 2021
$’000
80,000
314,564
7,000
591
-
80,000
312,429
7,000
340
3,075
402,155
402,844
9,994
215,129
2,869
52
-
10,728
190,002
2,273
14
-
228,044
203,017
70,006
99,435
4,131
539
-
69,272
122,427
4,727
326
3,075
174,111
199,827
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs incurred. They
are subsequently measured at amortised cost using the effective interest method. During the year, the terms of the Group’s facilities
were renegotiated with the lenders. There were no substantial changes to the terms of the agreement. Under the current lending
arrangement the cash advance facilities expire in February 2026.
82
Note 22. Non-current liabilities – provisions
Long service leave
Lease make good
Lease make good
Consolidated
30 June 2022
$’000
30 June 2021
$’000
3,982
5,542
9,524
4,703
5,102
9,805
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 and probability of lease renewals 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 – 2022
Carrying amount at the start of the year
Provision recognised on business combination
Additional provisions
Amounts used
Carrying amount at the end of the year
Accounting policy for provisions
Lease
make good
$’000
5,280
330
257
(44)
5,823
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
Integral Diagnostics Annual Report 2022
83
NOTES TO THE FINANCIAL STATEMENTS
23. Equity – contributed capital
Ordinary shares – fully paid
229,070,797
198,628,698
322,543
219,219
Consolidated
Consolidated
30 June 2022
Shares
30 June 2021
Shares
30 June 2022
$’000
30 June 2021
$’000
Date
Number of
Shares
194,684,039
Issue Price
Total $’000
207,437
Movement in ordinary share capital
Balances at 1 July 2020
Shares issued for cash consideration as part of Ascot
Radiology acquisition
Shares issued for cash consideration as part of Ascot
Radiology acquisition
Shares issued under Radiologist Loan & Option Share
Scheme1 – Self-Funded
Shares issued under Radiologist Loan Share Scheme1 -
Loan Shares
Shares issued under dividend reinvestment plan (DRP)
Shares issued under dividend reinvestment plan (DRP)
Capital raising costs
Transaction costs on acquisitions in equity
Balance at 30 June 2021
1 September
85,790
1 September
2,809,625
2 September
383,804
2 September
1 October
6 April
509,180
72,675
83,585
-
-
198,628,698
Conversion of performance rights to ordinary shares
30 August
601,807
Shares issued under Radiologist Loan & Option Share
Scheme1 – Self-funded2
Shares issued under Radiologist Loan Share Scheme1 –
Loan Shares
Shares issued under dividend reinvestment plan (DRP)
Shares issued as consideration as part of X-Ray Group
acquisition (Note 34)
Institutional Accelerated Pro Rata Non Renounceable
Entitlement Offer
Institutional Accelerated Pro Rata Non Renounceable
Entitlement Offer
6 September
302,367
6 September
6 October
507,976
126,859
1 November
2,628,205
7 March
12,515,348
22 March
13,655,451
Shares issued under dividend reinvestment plan (DRP)
4 April
104,086
Capital raising costs
Net income tax effect of transaction costs in equity
Balance at 30 June 2022
Ordinary shares
229,070,797
3.40
3.40
3.91
-
4.08
4.47
-
-
1.70
4.96
-
4.72
4.68
3.44
3.44
3.73
292
9,565
1,500
-
298
374
(139)
(108)
219,219
1,022
1,500
598
12,300
43,053
46,975
389
(2,875)
362
322,543
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 on a poll one vote for each fully
paid ordinary share held.
84
Capital risk management
The Group’s objective 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 has also initiated a dividend reinvestment plan
(DRP) during the prior year to provide its shareholders with the ability to reinvest their dividends into additional share capital.
The Group looks to raise capital when an opportunity to invest in a business or company is seen as value adding relative to the current
company’s share price at the time of the investment.
The Group is subject to certain financing arrangement covenants and meeting these is given priority in all capital risk management
decisions. Under the terms of the major borrowing facilities, the Group is required to comply with the following financial covenants;
• net debt to pre-AASB 16 EBITDA not greater than 3.5; and
• fixed charge cover greater than 1.75
The Group has complied with the covenants throughout the reporting period. The calculation basis provided for in the terms to the
Group’s borrowing facilities allows for the exclusion of the impacts of AASB 16 Leases and the adoption of AASB 16 Leases has not
impacted compliance with these financial covenants, nor have the financial impacts of COVID-19.
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.
Note 24. Equity – reserves
Share-based payments reserve
Capital reorganisation reserve
Transactions with non-controlling interest
Foreign currency translation reserve
Share-based payments reserve
Consolidated
30 June 2022
$’000
30 June 2021
$’000
2,440
(3,849)
(8,013)
(3,033)
(12,455)
4,100
(3,849)
(8,013)
(1,121)
(8,883)
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 Lake Imaging Pty Ltd 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.
Foreign currency translation reserve
Exchange differences arising on translation of the foreign controlled entities are taken to the foreign currency translation reserve, as
described in Note 2. The reserve is recognised in profit and loss when the net investment is disposed of.
Integral Diagnostics Annual Report 2022
85
NOTES TO THE FINANCIAL STATEMENTS
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2020
Recognition of share-based payments
Movement in translation of foreign operations
Balance at 30 June 2021
Recognition of share-based payments
Conversion of performance rights to
ordinary shares
Movement in translation of foreign operations
Balance at 30 June 2022
Share-based
payment
reserve
$'000
Capital re-
organisation
reserve
$'000
Transaction
with non-
controlling
interest
$'000
Foreign
currency
translation
reserve
$'000
2,020
2,080
-
4,100
(638)
(1,022)
-
2,440
(3,849)
(8,013)
-
-
-
-
(3,849)
(8,013)
-
-
-
-
-
-
(3,849)
(8,013)
(958)
-
(163)
(1,121)
-
-
(1,912)
(3,033)
Total
$'000
(10,800)
2,080
(163)
(8,883)
(638)
(1,022)
(1,912)
(12,455)
The expense recognised for share based payments during the year was based on valuations using the Black Scholes model.
Share-based payment expense – Long Term Incentive (LTI) Scheme
Share-based payment expense – Radiologist Loan Funded Share Plan (LFSP)
Total expense arising from equity-settled share-based payment transactions
There were no cancellations or modifications to the awards in 2022 or 2021.
Long-term incentive (LTI) scheme
30 June 2022
$’000
30 June 2021
$’000
(1,672)
1,034
(638)
1,265
815
2,080
The following table illustrates the number of, and movements in performance rights issued under long term incentive scheme (LTI) to
executives and members of the senior management team during the year. The exercise price of these rights is $Nil.
Under the plan, performance rights only vest with an equity settlement if an EPS growth hurdle and a four year service condition are
met. Participation in the plan is at the board’s discretion and no individual has a contractual right to participate in the plan or to receive
any guaranteed benefits.
Outstanding at 1 July
Granted during the year
Forfeited during the year
Converted to ordinary shares during the year
Expired during the year
Outstanding at 30 June
Exercisable at 30 June
2022
Number
2021
Number
1,934,938
1,538,873
323,253
396,065
-
(601,807)
-
-
-
-
1,656,384
1,934,938
-
-
The following table lists the inputs to the valuation model used for the LTI plan. In FY2022 the LTI plan was granted to members
of the Senior Management Team and the Senior Leadership Team on 26 August 2021, CEO on 5 November 2021 and incoming CFO
on 20 December 2021. The varying dates resulted in different valuation metrics applicable to each LTI grant, which are set out
respectively below:
86
Weighted average fair values at the measurement date ($)
4.90/4.53
3.35/3.75
2.75/3.01
3.08/3.53
2022
LTI Plan
2021
LTI Plan
2020
LTI (1) Plan
2020
LTI (2) Plan
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share (years)
Weighted average share price ($)
Model used
2.5
N/A
3
N/A
3.5
N/A
3.5
N/A
0.59/1.37
0.27/0.13
0.72/0.77
0.71/0.72
4
5.39/4.96
4
3.91
4
2.71
4
2.71
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Radiologist Loan Funded Share & Option Plan (LFSP)
The following tables the number of, and movements in shares and options issued under the Radiologist Loan Funded Share Plan
(LFSP). For the year ended 30 June 2022, shares and options were issued to participating radiologists on 1 September 2021.
The value of the shares issued under the plan was $4.96 and a loan equivalent to the issued shares is due and payable at the
Radiologist's option. This option can be exercised between 4-10 years from the issue date, once the loan is fully paid the loan shares
are released from Escrow and will no longer be subject to Escrow restrictions.
Options were issued in lieu of loan shares to the Group’s New Zealand resident radiologists. These options were issued with a strike
price of $4.96 and an expiry date of 1September 2031.
Outstanding at 1 July 2020
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 June 2021
Granted during the year
Forfeited during the year
Exercised during the year
Expired during the year
Outstanding at 30 June 2022
Exercisable at 30 June
1. Weighted average exercise price (WAEP)
WAEP1
Shares
WAEP1
Options
505,202
258,428
-
-
-
763,630
96,758
-
-
-
2.71
3.91
-
-
-
3.12
4.96
-
-
-
1,695,256
509,180
-
-
-
2,204,436
507,976
-
-
-
860,388
3.32
2,712,412
-
-
-
2.70
3.91
-
-
-
2.98
4.96
-
-
-
3.35
-
The following table lists the inputs to the models used for the LFSP.
Weighted average fair values at the measurement date ($)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of instrument (years)
Weighted average share price ($)
Model used
2022
LFSP Options
2022
LSFP Shares
2021
LFSP Options
2021
LSFP Shares
1.25
N/A
35
0.65
4.5
4.96
1.33
N/A
35
0.65
5
4.96
1.59
N/A
40
0.43
4.5
3.91
1.66
N/A
40
0.43
5
3.91
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Integral Diagnostics Annual Report 2022
87
NOTES TO THE FINANCIAL STATEMENTS
Note 25. Equity – retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense for the year
Dividend paid (Note 26)
Retained profits at the end of the financial year
Note 26. Equity – dividends
Dividends
Full franked Dividends paid during the financial year were as follows:
Dividend paid 4 cents per share on 1 October 2020
Dividend paid 5.5 cents per share on 6 April 2021
Dividend paid 7 cents per share on 6 October 2021
Dividend paid 4 cents per share on 4 April 2022
Franking credits
Consolidated
30 June 2022
$’000
30 June 2021
$’000
44,403
14,603
(21,850)
37,156
31,693
31,268
(18,558)
44,403
Consolidated
30 June 2022
$’000
30 June 2021
$’000
-
-
13,825
8,025
21,850
7,734
10,824
-
-
18,558
Consolidated
30 June 2022
$’000
30 June 2021
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
31,335
25,934
The amount recorded above as the franking credit amount is based on the amount of Australian income tax paid in respect of the
liability for income tax at the balance 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.
88
Note 27. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate and foreign exchange 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 foreign currency risks
and ageing analysis for credit risk.
Risk management is carried out by management 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.
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.
As at the reporting date, the Group had the following interest-bearing financial assets and liabilities:
Consolidated
Cash at bank and on deposit
Club debt facility
Asset finance facility
Net exposure to cash flow interest rate risk
2022
2022
Weighted
average
interest rate
%
0.07%
2.48%
1.99%
Weighted
average
interest rate
%
0.13
1.88
3.43
Balance
$'000
123,193
(213,057)
(9,995)
(99,859)
Balance
$'000
62,203
(187,969)
(10,759)
(136,525)
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 (2021: 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 decrease effect on
Basis points
change
Profit before
tax
$’000
Effect on equity
post tax
$’000
Basis points
change
Profit before
tax
$’000
Effect on equity
post tax
$’000
100
100
2,010
2,031
1,407
1,422
(100)
(100)
(2,010)
(2,031)
(1,407)
(1,422)
2022
2021
Integral Diagnostics Annual Report 2022
89
NOTES TO THE FINANCIAL STATEMENTS
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows on an exposure will fluctuate because of changes in foreign
exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating
activities (when revenue or expense is denominated in a foreign currency) and the Group’s net investments in foreign subsidiaries.
The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the New Zealand dollar
(NZD). The Group manages its exposure to fluctuations on the translation into Australian dollars of its foreign operations by holding net
borrowings in foreign currencies, creating a natural hedging relationship. The Group assessed the remaining risk exposure and given
the exchange rate is not expected to fluctuate significantly, has not entered into other hedging relationships. The Group will monitor
this risk on an ongoing basis.
Foreign Currency Sensitivity
2022
2021
Change in NZD
Rate
Effect on profit
post tax
$'000
Effect on equity
$'000
+2.5c
-2.5c
+2.5c
-2.5c
(80)
80
(166)
166
(1,580)
1,580
(1,770)
1,770
The following table demonstrates the sensitivity to a reasonably possible change in NZD exchange rates, with all other variables held
constant. The impact on the Group’s profit before tax is due to changes in translation rates. The impact on the Group’s equity is due to
changes in the fair value of the net investment.
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.
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 3 years, 8 months (2021: 4 years, 8 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.
90
Weighted
average
interest
rate
%
1 year or less
$’000
Between
1 and
2 years
$’000
Between
2 and
5 years
$’000
Over 5 years
$’000
Total contracted
cashflows
$’000
-
-
-
2.48%
1.99%
3.50%
8,419
14,202
16,376
10,936
5,638
13,914
69,485
Weighted
average
interest
rate
%
1 year or less
$’000
-
-
-
1.88
3.43
3.50
4,753
15,518
15,863
4,949
6,916
14,273
62,272
-
-
-
-
2,500
5,736
10,936
2,444
12,696
28,576
Between
1 and
2 years
$’000
-
-
526
4,949
3,642
13,873
22,990
333,253
2,209
23,292
364,490
Between
2 and
5 years
$’000
-
-
6,720
204,852
512
26,305
238,389
-
-
-
-
-
75,710
75,710
8,419
14,202
24,612
-
-
355,125
10,291
125,612
538,261
Over 5 years
$’000
Total
contracted
cashflows
$’000
-
-
-
-
-
84,654
84,654
4,753
15,518
23,109
214,750
11,070
139,105
408,305
As at 30 June 2022
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing – variable
Club debt facility
Asset financing facility
Property lease liabilities
Total non-derivatives
As at 30 June 2021
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing – variable
Club debt facility
Asset financing facility
Property lease liabilities
Total non-derivatives
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Integral Diagnostics Annual Report 2022
91
NOTES TO THE FINANCIAL STATEMENTS
28. 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
Post-employment benefits
Long-term employee benefits
Share-based payments
Consolidated
30 June 2022
$’000
30 June 2021
$’000
4,148,660
3,719,334
173,976
1,494
(1,208,431)
148,479
61,713
933,650
3,115,699
4,863,176
Note 29. 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 Australia
Audit and review of the financial statements
Consolidated group
Controlled entities
Other services
PricewaterhouseCoopers Australia
Due diligence and tax advisory services
Tax compliance services
Other services
Network firms of PricewaterhouseCoopers
Tax compliance and company secretarial services
Due diligence and tax advisory services
Total other services
Total remuneration
Consolidated
30 June 2022
$
30 June 2021
$
422,000
-
422,000
-
42,713
2,945
45,658
-
-
-
45,658
467,658
337,000
30,000
367,000
133,266
150,148
-
283,414
78,828
2,525
81,353
364,767
731,767
The Company has considered and approved the nature of the non-audit fees and, in line with the Company’s Non-Audit Services Policy,
are satisfied with the independence of PricewaterhouseCoopers as auditor and are comfortable that the $45,658 of non-audit fees
are appropriate.
92
Note 30. Contingent liabilities
The Group has given bank guarantees as at 30 June 2022 of $2.9million (2021: $2.5 million) to various landlords.
As disclosed in Note 20, the settlement payment for Earn Out A due to the vendors of Imaging Queensland is subject to the dispute
settlement process provided for in the Share and Asset Sale Agreement (SASA).
Note 31. Commitments
As at 30 June 2022, there were capital commitments for plant and equipment and leasehold improvements of $24.9 million (2021:
$8.9 million).
Note 32. Related party transactions
Parent entity
Integral Diagnostics Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 35.
Joint ventures
Interests in joint ventures are set out in Note 16.
Key management personnel
Disclosures relating to Key Management Personnel are set out in Note 28 and the Remuneration Report on pages 22 - 37.
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, which is overseen by the Audit, Risk and Compliance Committee (ARCC),
to ensure that related party transactions are managed and disclosed in accordance with the Corporations Act, ASX Listing Rule 10.1,
accounting requirements and in accordance with good governance practices, to ensure that a financial benefit is not provided to related
parties without approval by the Board, and where required, shareholders. It is the Board’s policy that independent reviews will be
undertaken on any renewals and these reviews will be overseen by the ARCC.
The following transactions occurred with related parties:
Consolidated
$1
%
interest
KMP interest
$
30 June 2022
Nil
30 June 2021
Payment for rental of buildings to Eleven Eleven How Pty Ltd of which Dr Chien
Ping Ho is related
Payment for rental of buildings to Kiwi Blue Pty Ltd of which Dr Chien Ping Ho
is related
250,077
6.25%
15,630
148,388
9.09%
13,488
1. Amounts represent the rental payments for the period of the year in which Dr. Ho was a member of KMP (1 July 2020 through 1 April 2021 inclusive).
The above FY21 related party transactions are historic in nature and relate to leases assumed from previous vendors when the
business was privately held. In FY21, Dr Chien Ho had a 6% interest in Eleven Eleven How Pty Ltd and a 9% interest in Kiwi Blue Pty
Ltd. The leases cover four properties located in Ballarat, Ocean Grove and Melton.
Integral Diagnostics Annual Report 2022
93
NOTES TO THE FINANCIAL STATEMENTS
Loans to related party
Loan to key management personnel
Balance at the beginning of the year
Balance on appointment as KMP
Repayments
Loans balance held on appointment as KMP
Consolidated
30 June 2022
$’000
30 June 2021
$’000
470,747
-
-
470,747
(16,089)
454,658
-
470,747
Dr. Bokani is a full-time radiologist employed by the Group. The loan above arose on Dr Bokani’s participation in the radiologist loan
share scheme in 2019, prior to his appointment as a director. The non-recourse loan was made on an interest-free basis, is subject to a
4-year continuous service condition, has a 10-year term, and is repayable in full on 1 March 2029 and is thus accounted for as a share
option. These terms are consistent with those offered to other radiologists under rules governing the loan share scheme.
Note 33. Parent entity information
Summary financial information
The individual financial statements for the parent entity, Integral Diagnostics Limited, show the following aggregate amounts.
Statement of Profit or Loss and Other Comprehensive Income
Parent
30 June 2022
$’000
30 June 2021
$’000
7,025
7,025
25,328
25,328
Parent
30 June 2022
$’000
30 June 2021
$’000
67,013
443,429
7,473
101,652
322,543
2,440
20,992
345,975
12,558
365,662
9,636
116,071
219,219
4,100
26,272
249,591
Profit after income tax
Total comprehensive income
Statement of Financial Position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed capital
Share-based payments reserve
Retained profits
Total equity
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 36.
94
Contingent liabilities
Except as disclosed in Note 30, there are no other contingent liabilities of the parent entity as at 30 June 2022 and 30 June 2021.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021.
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 34. Business combinations
Effective 1 November 2021, the Group acquired the shares of the X-Ray Group which:
and Lavington;
COVID-19 impacts;
radiologist, who has worked in the Albury-Wodonga and Northeast region for 25 years;
• comprises leading radiology clinics in Albury and Wodonga, as well as three smaller community clinics in Wangaratta, Yarrawonga
• employs three radiologists under long term employment arrangements including Dr James Mullins, a highly experienced
• has a projected FY22 EBITDA contribution, of between $5.0m and $5.5m, on a pro-forma full year basis and before any
• has one full MRI licence;
• is EPS accretive in year one before any COVID-19 impacts; and
• has strong growth opportunities and potential operational synergies.
• upfront purchase consideration of $36.8m on a cash and debt free basis, comprising $24.8m in cash and $12.0m in new ordinary
• FY22 earn-out of up to $4.0m and FY23 earn-out of up to $2.5m, subject to EBITDA performance hurdles; and
• deferred consideration of up to $1.0m payable on the third anniversary of completion of the transaction.
The key terms of the acquisition included:
IDX shares;
The purchase price accounting has now been finalised, with the final values identified being:
Integral Diagnostics Annual Report 2022
95
NOTES TO THE FINANCIAL STATEMENTS
Plant and equipment
Right-of-use assets
Customer contracts
Brand names
Deferred tax
Lease liabilities
Employee benefits
Provisions
Cash assets
Working capital assets
Working capital liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Integral Diagnostics Limited shares issued to vendor
Contingent consideration
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Acquisition-related costs
Provisional
acquisition
fair value
$’000
Adjustments to
fair value
$’000
Final
acquisition
fair value
$’000
4,298
8,999
430
1,100
(129)
(8,999)
(764)
(1,406)
834
1,823
(2,193)
3,993
39,366
43,359
24,859
12,000
6,500
43,359
(834)
24,859
24,025
89
-
-
-
-
-
-
-
-
(110)
-
(21)
610
589
589
-
-
589
-
589
589
4,387
8,999
430
1,100
(129)
(8,999)
(764)
(1,406)
834
1,713
(2,193)
3,972
39,976
43,948
25,448
12,000
6,500
43,948
-
(834)
25,448
24,614
Acquisition-related costs of $268,599 have been expensed in transaction and integration costs for the period.
Contingent consideration
The contingent consideration arrangement requires the Group to pay the vendors of the X-Ray Group Pty Ltd further consideration,
up to a maximum undiscounted amount of $6,500,000 subject to meeting EBITDA hurdles in financial years 2022 and 2023. There is no
minimum amount payable.
Acquired receivables
The fair value of acquired trade receivables was $1,013,275. The gross contractual amount for trade receivables due is $1,013,275, with
a nil loss allowance recognised on acquisition.
Revenue and profit contribution
The X-Ray Group has contributed revenues of $8,967,318 to the Group for the period from 1 November 2021 to 30 June 2022. The net
profit contribution cannot be reliably measured due to this requiring the use of estimates and judgements around extracted synergies
and allocation of shared costs for which objective information is limited. Similarly, it is impracticable to provide pro-forma revenue and
net profit as if the acquisition of X-Ray Group had occurred on 1 July 2021, as this would require assessment of the impact of COVID-19
in the pro-forma period, which would be judgemental and hypothetical.
96
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. 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.
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. Refer to Note 20 for further
details on the Group’s accounting policy for contingent consideration.
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.
Business combinations are initially accounted for on a provisional basis. The provisional opening balance amounts are only adjusted
retrospectively during the measurement period, and 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) 12 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.
35. 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:
Integral Diagnostics Annual Report 2022
97
NOTES TO THE FINANCIAL STATEMENTS
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
Integral Diagnostics No. 1 Pty Ltd
Imaging Queensland Pty Ltd
Queensland Nuclear Medicine Pty Ltd
Advanced Women’s Imaging Pty Ltd
Imaging Queensland IP Pty Ltd
Radiology 24/7 Pty Ltd
Sunshine Coast Radiology Pty Ltd
SC Radiology Pty Ltd
Central Queensland Radiology Pty Ltd
CQ Radiology Pty Ltd
IQ Radiology Pty Ltd
IQ Radiology Services Pty Ltd
Integrated Pain Management Pty Ltd
Bodyscreen Pty Ltd
X-Ray Group Pty Ltd
Martlesham Pty Ltd
Warby X-Ray Services Pty Ltd
Wang X-Ray Unit Trust
Tern Hill Pty Ltd
Yarrawonga X-Ray Services Pty Ltd
Yarra X-Ray Unit Trust
Specialist Radiology Group Limited
Trinity MRI Limited
Cavendish Radiology Limited1
Integral Diagnostics New Zealand Limited
Astra Radiology Limited
Ascot at Maranui Limited
Insight Radiology Limited
1. Amalgamated with Specialist Radiology Group Limited (IDX Group entity) during FY22.
98
Principal place
of business/
country of
incorporation
Ownership interest
2022
%
2021
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
New Zealand
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
100
100
100
100
100
50
100
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Note 36. Deed of cross guarantee
• 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
• Integral Diagnostics No. 1 Pty Ltd
• Imaging Queensland Pty Ltd
• Queensland Nuclear Medicine Pty Ltd
• Advanced Women’s Imaging Pty Ltd
• Imaging Queensland IP Pty Ltd
• Radiology 24/7 Pty Ltd
• Sunshine Coast Radiology Pty Ltd
• SC Radiology Pty Ltd
• Central Queensland Radiology Pty Ltd
• CQ Radiology Pty Ltd
• IQ Radiology Pty Ltd
• IQ Radiology Services Pty Ltd
• Integrated Pain Management Pty Ltd
• Bodyscreen Pty Ltd
• Martlesham Pty Ltd
• The X-Ray Group Pty Ltd
• Warby X-Ray Services Pty Ltd
• Tern Hill Pty Ltd
• Yarrawonga X-Ray Services 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 consolidated statement of profit or loss, consolidated statement of comprehensive income, summary of movements in
consolidated retained earnings and consolidated statement of financial position of the entities that are members of the Closed Group
are as follows:
Integral Diagnostics Annual Report 2022
99
NOTES TO THE FINANCIAL STATEMENTS
Consolidated Statement of Profit or loss and Comprehensive income
Revenue
Revenue
Interest, management fees and dividends eliminated on consolidation
Interest and other income
Total revenue and other income
Expenses
Consumables
Employee benefits expense
Depreciation expense
Amortisation expense
Transaction and integration expenses
Share based payment expense
Equipment related expenses
Occupancy expenses
Other expenses
Finance costs
Share of net profits of joint ventures accounted using the equity method
Total expenses
Profit before income tax expense
Income tax expense
Profit for the year from continuing operations
Profit is attributable to:
Owners of Integral Diagnostics Limited
Comprehensive income
Items that may be reclassified to profit & loss:
Net (loss)/gain on cash flow hedges
Total comprehensive income
Note
30 June 2022
$’000
30 June 2021
$’000
319,333
304,482
2,548
39
2,309
80
321,920
306,871
(16,877)
(202,009)
(14,892)
(178,519)
(18,067)
(12,266)
(5,353)
637
(11,430)
(6,689)
(25,285)
(7,030)
(141)
(16,771)
(11,166)
(2,219)
(2,080)
(10,587)
(6,262)
(20,904)
(6,539)
-
(304,510)
(269,939)
17,410
(5,677)
11,733
36,932
(11,845)
25,087
11,733
25,087
-
11,733
-
25,087
100
Consolidated Statement of Financial Position
Note
30 June 2022
$’000
30 June 2021
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventory
Total current assets
Non-current assets
Investment
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Income tax payable
Provisions
Deferred consideration
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred consideration
Deferred tax liability
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Retained profits
Total equity
Integral Diagnostics Annual Report 2022
88,313
17,912
6,239
1,177
113,641
46,348
110,354
90,452
257,952
16,723
521,829
635,470
20,222
5,470
10,510
(3,361)
22,780
16,376
71,997
51,174
12,357
13,814
849
78,194
39,681
95,782
82,523
217,159
15,276
450,421
528,615
17,795
6,543
9,206
3,707
19,548
13,020
69,819
109,150
107,504
90,445
8,236
10,840
8,882
227,553
299,550
335,920
322,543
(9,422)
22,799
335,920
82,142
5,514
10,113
9,142
214,415
284,234
244,381
219,219
(7,764)
32,926
244,381
101
NOTES TO THE FINANCIAL STATEMENTS
Note 37. 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/write-off
Share-based payments
(Profit)/loss on the sale of assets
Remeasurement of make good provisions
(Reversal)/recognition of contingent consideration
Bad debts
Unrealised FX loss (gain)
Share of profits/(losses) of joint venture
Capitalised refinance costs
Change in operating assets and liabilities, net of the effects of business combinations:
Increase in trade and other receivables
Increase in deferred taxes
Increase in other operating assets and inventory
Increase/(decrease) in trade and other payables
Increase/(decrease) in contingent consideration
Increase/(decrease) in provision for income tax
Increase /(decrease) in other provisions
Net inflow cash from operating activities
Consolidated
30 June 2022
$’000
30 June 2021
$’000
14,603
31,268
36,699
408
(637)
(175)
(60)
(1,688)
(214)
155
158
-
(3,436)
(646)
1,846
433
(3,309)
(9,203)
2,165
37,100
34,914
429
2,080
419
(41)
735
87
(179)
(18)
(1,835)
(2,918)
(1,873)
2,300
736
(735)
(799)
5,002
69,572
102
Reconciliation of liabilities arising from financing activities
Consolidated
Balance as at 1 July 2020
Business combination
New leases net of terminations
Impact of liability maturity for period
Cash flows
FX
Balance as at 1 July 2021
Business combination
New leases net of terminations
Impact of liability maturity for period
Cash flows
FX
Balance as at 30 June 2022
Net debt reconciliation
Cash and cash equivalents
Borrowings – repayable within one year
Borrowings – repayable after one year1
Net Debt
Cash and liquid investments
Gross debt – variable interest rates
Net Debt
Property leases
due within 1
year
$’000
Property leases
due after 1 year
$’000
Borrowings
due within 1
year
$’000
Borrowings
due after 1 year
$’000
9,608
739
-
9,850
(9,995)
225
10,427
578
12,768
(11,498)
(535)
11,740
86,499
11,788
10,762
(9,850)
-
-
99,199
8,460
11,308
(12,768)
-
-
13,177
168,564
-
-
9,724
(16,786)
427
6,542
-
-
88,756
(89,828)
-
-
-
(9,724)
33,345
-
192,185
-
-
(88,756)
114,153
-
Total
$’000
277,848
12,527
10,762
-
6,564
652
308,353
9,038
11,308
-
12,827
(535)
106,199
5,470
217,582
340,991
30 June 2022
$’000
30 June 2021
$’000
123,193
(5,470)
(217,582)
(99,859)
123,193
(223,052)
(99,859)
62,203
(6,543)
(194,221)
(138,561)
62,203
(200,764)
(138,561)
1. Non-current borrowings per Note 20 includes $2.04m (2020: $0.63m) of capitalised funding establishment costs.
Integral Diagnostics Annual Report 2022
103
NOTES TO THE FINANCIAL STATEMENTS
Note 38. Earnings per share
Profit after income tax Non-controlling interest
Non-controlling interest
Profit after income tax attributable to the owners of Integral Diagnostics Limited
30 June 2022
$’000
30 June 2021
$’000
14,603
-
14,603
31,268
-
31,268
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
209,370,731
197,919,010
Adjustments for calculation of diluted earnings per share:
Weighted average number of performance rights over ordinary shares
Weighted average number of options over ordinary shares
2,160,053
1,799,299
337,955
718,317
Weighted average number of ordinary shares used in calculating diluted earnings per share
211,868,739
200,436,626
Basic earnings per share attributable to the owners of Integral Diagnostics Limited
Diluted earnings per share attributable to the owners of Integral Diagnostics Limited
Cents
7.0
6.9
Cents
15.8
15.6
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.
104
Note 39. Events after the reporting period
Acquisition of Peloton Radiology
On 1 July 2022, the Group completed its acquisition of Peloton Radiology, a scale provider of diagnostic imaging services with a
strategic presence from Brisbane to the Sunshine Coast in the high growth corridor of South East Queensland.
The purchase price accounting has not been finalised at the date of this report, the initial values identified in relation to the acquisition
are as follows:
Plant and equipment
Right of use assets
Deferred tax
Lease liabilities
Employee benefits
Cash assets
Working capital assets
Working capital liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Integral Diagnostics Limited shares issued to vendor
Contingent consideration
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Acquisition of Horizon Radiology
Provisional
acquisition
fair value
$’000
11,342
9,033
216
(9,385)
(2,159)
459
1,433
(1,588)
9,351
61,142
70,493
58,332
7,213
4,948
70,493
(459)
58,332
57,873
Also on 1 July 2022, the Group completed its acquisition of Horizon Radiology, a significant provider of obstetrics and musculoskeletal
x-ray and ultrasound services that provides the Group with the opportunity to expand its presence and offering in the Auckland market.
The purchase price accounting has not been finalised at the date of this report, the initial values identified in relation to the acquisition
are as follows:
Integral Diagnostics Annual Report 2022
105
NOTES TO THE FINANCIAL STATEMENTS
Plant and equipment
Deferred tax
Borrowings
Employee benefits
Cash assets
Working capital assets
Working capital liabilities
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid to vendor
Integral Diagnostics Limited shares issued to vendor
Contingent consideration
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Provisional
acquisition
fair value
$’000
8,741
(2,003)
(200)
(353)
593
959
(462)
7,275
23,759
31,034
26,512
1,810
2,712
31,034
(593)
26,512
25,919
Radiologist Loan Funded Share Plan and Matching Options Plan operations
Following approval of their participation, on 4 August 2022, $1.3 million of Radiologist contributions were received in connection with
the Radiologist Loan Funded Share Plan and the New Zealand Matching Options plan. These contributions are to be matched by an
IDX contribution of $2.7 million, resulting in $4.0 million of share capital/options to be issued on 5 September 2022. The number of
shares/options to be issued will be determined by the 30-day VWAP up to 30 August 2022.
Dividend declaration
Subsequent to year end a dividend of 2.0 cents per share was declared and will be paid on 5 October 2022.
Other matters or circumstances
No other matter or circumstances has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state of affairs until future financial years.
106
DIRECTORS’ DECLARATION
In the Directors’ opinion:
Regulations 2001 and other mandatory professional reporting requirements;
Accounting Standards Board as described in Note 2 to the financial statements;
• the attached financial statements and notes comply with the Corporations Act 2001, the accounting standards, the Corporations
• the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International
• the attached financial statements and notes give a true and fair view of the Group’s financial position as at 30 June 2022 and of its
• there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due 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 36 to the financial statements.
performance for the financial year ended on that date;
payable; and
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
Ian Kadish
Chair
29 August 2022
Managing Director and Chief
Executive Officer
Integral Diagnostics Annual Report 2022
107
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
108
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 Liability limited by a scheme approved under Professional Standards Legislation. 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 2022 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 2022 ● the consolidated statement of profit or loss for the year then ended ● the consolidated statement of 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 significant accounting policies and other explanatory information ● 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (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. Integral Diagnostics Annual Report 2022
109
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 ● For the purpose of our audit we used overall Group materiality of $1.4 million, which represents approximately 5% of the Group’s profit before tax excluding transaction and integration expenses of $5.5 million. ● 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 profit before tax excluding transaction and integration costs because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. 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 Australia and New Zealand. All audit procedures are performed by the Group audit team. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
110
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 Carrying value of goodwill and indefinite life brand names Refer to note 14 - $378m At 30 June 2022, the Group has a goodwill balance of $352.5m and indefinite life brand names and trademarks of $25.5m, which represents approximately 48% of the total assets of the Group. At least annually, an impairment test is performed by the Group over the goodwill and indefinite life brand names and trademarks in each of the Group’s cash generating units (“CGU’s”) based on value in use discounted cash flow models (the models). The Group’s goodwill and indefinite life brand names and trademarks are recognised in two CGUs – Australia and New Zealand. Significant judgement is required by the Group to estimate the key assumptions in the models to determine the recoverable amount of goodwill and indefinite life brands and trademarks, and the amount of any resulting impairment (if applicable). The key assumptions applied by the Group include: ● Discount rates which reflect economic and financial market conditions ● Five-year cash flow projections (Cash flow forecasts) ● Earnings growth rates applied beyond the initial five-year period (Long term growth rates) We considered the carrying value of goodwill and indefinite life brand names and trademarks to be a Key Audit Matter because they are significant to the consolidated statement of financial position and there is significant judgement involved in estimating discounted future cash flows. We performed the following procedures, amongst others: ● Evaluated the Group’s assessment of the determination of cash generating units ● Assessed the appropriateness of selected assumptions used to estimate the future cash flows ● Engaged internal experts to assess the appropriateness of the discount rates and long term growth rates used in the models ● Considered the historical accuracy of the Group’s cash flow forecasts by comparing the forecasts used in the prior year value-in-use calculations to the actual performance of the Group in the year to 30 June 2022 ● Re-performed a selection of calculations in the value-in-use models to assess the mathematical accuracy of the models ● Assessed the sensitivity to change of key assumptions used in the models that would result in an impairment of assets We evaluated the disclosures made in Note 14, including those regarding key assumptions in light of the requirements of Australian Accounting Standards. Integral Diagnostics Annual Report 2022
111
Key audit matter How our audit addressed the key audit matter Accounting for business combinations Refer to note 34 During the year, the Group acquired X-Ray Radiology Group (X-Ray) for consideration of $43.9m in a combination of cash, shares and contingent consideration. The Group has recognised the fair value of assets and liabilities, which included goodwill of $40.0m. We considered this a Key Audit Matter given the financial significance of the acquisition and the complex judgements required by the Group in accounting for the acquisition, including: ● Identifying all assets and liabilities of the newly acquired business and estimating the fair value of each asset and liability for initial recognition by the Group. This requires management to make assumptions around discount rate, asset useful life and forecast results. The Group was assisted by an external valuation expert in this process. ● Identifying whether consideration paid relates to the vendor's role as a shareholder of the vendor company or employee and the associated accounting treatment of the consideration. ● Estimating the purchase price consideration, particularly in respect of the contingent earnout consideration payable on the achievement of certain performance targets. With assistance from PwC valuation experts we performed the following procedures, amongst others: ● Evaluated the Group’s accounting by considering the requirements of Australian Accounting Standards, key transaction agreements, and our understanding of the business acquired ● Assessed the fair values of the acquired assets and liabilities recognised Evaluated the disclosures made in Note 34, in light of the requirements of Australian Accounting Standards. In relation to the estimation of contingent consideration, our procedures included, amongst others: ● Assessing if the calculation of the contingent consideration was in accordance with the contractual arrangements and the requirements of Australian Accounting Standards ● Assessing the Group’s evaluation of whether the conditions required for the contingent consideration to be paid were likely to be met in the future based upon actual performance since acquisition and current Group forecasts. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
112
Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. 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 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 on the other information that we obtained prior to the date of this auditor’s report, 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: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. Integral Diagnostics Annual Report 2022
113
Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 35 to 53 of the directors’ report for the year ended 30 June 2022. In our opinion, the remuneration report of Integral Diagnostics Limited for the year ended 30 June 2022 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 Melbourne Partner 29 August 2022 SHAREHOLDER INFORMATION
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report follows. This information is
current as at 3 August 2022.
a. Top 20 shareholders – ordinary shares
Rank
Name
Number of fully paid
ordinary shares
% of issued
capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
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