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Integral DiagnosticsAnnual ReportFOR THE FULL YEAR ENDED 30 JUNE 2023 Acknowledgement 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.OURVALUESa healthier world OURVISIONdeliver the best health outcomes for our patientsOUR PURPOSEpatients firstPATIENTS ARE AT THE HEARTOF EVERYTHING WE DOmedical leadershipIMPROVING OUTCOMES WITH EVIDENCE BASED CAREeveryone countsWE WORK SAFELY, INCLUSIVELY AND RESPECT EACH OTHERcreate valueDELIVER SUSTAINABLE VALUE TO ALL STAKEHOLDERSembrace changeSTRIVE FOR EXCELLENCE, HAVE THE COURAGE TO INNOVATE CONTENTS
Overview
04 Our Brands
08 Group Locations and History
10 Chair’s Letter
12 Managing Director and Chief Executive Officer’s Letter
16 Directors’ Report
24 Operating and Financial Review
33 Remuneration Report
55 Auditor’s Independence Declaration
Financial Report
58 Consolidated Statement of Profit or Loss
59 Consolidated Statement of Comprehensive Income
60 Consolidated Statement of Financial Position
61 Consolidated Statement of Changes in Equity
62 Consolidated Statement of Cash Flows
63 Notes to the Consolidated Financial Statements
112 Directors’ Declaration
113 Independent Auditor’s Report to the Members of
Integral Diagnostics Limited
118 Non-IFRS Financial Information
124 Shareholder Information
128 Corporate Directory
HEAD OFFICE Wurundjeri CountrySuite 9.02 Level 9, 45 William Street Melbourne, Victoria 3000T +61 5339 0704ABN 55 130 832 816 Printed on 100% Recycled Paper 02
248RadiologistsReport on our Examinations2,010+EmployeesPut our Patients First1.04M+PatientsVisited our clinics54K+ReferrersTrusted us 2.5M+ExaminationsConducted by IDX Group Overview
04 Our Brands
08 Group Locations and History
10 Chair’s Letter
12 Managing Director and Chief Executive Officer’s Letter
16 Directors’ Report
24 Operating and Financial Review
33 Remuneration Report
55 Auditor’s Independence Declaration
Integral Diagnostics Annual Report 2023
03
OUR BRANDS
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.
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));
• 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.
Group Overview
Core Markets Australia and New Zealand
Sites
MRI machines
PET scanners
Employed Radiologists2,3
91
37
6
165
Comprehensive sites1
Full MRI licences
Partial MRI licences
35
16
7
Number of Employees4
1,843
04
Queensland
Imaging Queensland
Established in 2011 on the Sunshine Coast and has expanded across South East
Queensland. Imaging Queensland provides diagnostic imaging services at 16
branches. The Imaging Queensland network comprises:
• Sunshine Coast Radiology
• Central Queensland Radiology
• IQ Radiology
Core Markets Sunshine Coast, Rockhampton and Gladstone
Sites
16
Comprehensive sites1
MRI machines
PET scanners
Full MRI licences
Partial MRI licences
6
-
7
3
2
Employed Radiologists2
26
Number of Employees4
328
X-Ray & Imaging (Peloton Radiology)
A local diagnostic imaging provider based on the Sunshine Coast.
X-Ray & Imaging (Peloton Radiology) provides services at 9 sites and the
network includes:
• CitiScan Radiology
• Lime Radiology and
• Diagnostic Imaging for Women
Core Markets Brisbane and Sunshine Coast
Sites
MRI machines
PET scanners
Employed Radiologists2
9
3
-
6
Comprehensive sites1
Full MRI licences
Partial MRI licences
3
-
3
Number of Employees4
180
South Coast Radiology
Since 1967, South Coast Radiology (SCR) has provided radiology services on
the Gold Coast. It provides medical imaging services to the Tweed, Gold Coast,
Darling Downs and Mackay communities.
Core Markets Gold Coast, Toowoomba and Mackay
Sites
17
Comprehensive sites1
MRI machines
PET scanners
Full MRI licences
Partial MRI licences
9
2
8
5
2
Employed Radiologists2
38
Number of Employees4
430
Integral Diagnostics Annual Report 2023
05
OUR BRANDS
Western Australia
Victoria
06
Apex Radiology
Established in 1996, Apex Radiology provides patients in rural and regional
communities in Western Australia access to diagnostic imaging services. Apex
Radiology has recently opened in the Perth metro area. Apex also provides
Radiology and Teleradiology services to WACHS (Western Australia Country
Health Service).
Core Markets South West Western Australia
Sites
MRI machines
PET scanners
Comprehensive sites1
Full MRI licences
Partial MRI licences
4
2
-
6
3
1
Employed Radiologists2
13
Number of Employees4
199
Lake Imaging
Lake Imaging has been offering radiology services to patients throughout
Geelong, Central and Western Victoria for over 20 years. It currently operates 18
clinics in locations including Ballarat, Geelong, Warrnambool, North Melbourne
and outer western areas of Melbourne
Core Markets Ballarat, Geelong, Warrnambool and outer western areas
of Melbourne
Sites
18
Comprehensive sites1
MRI machines
PET scanners
Full MRI licences
Partial MRI licences
8
2
6
4
-
Employed Radiologists2
43
Number of Employees4
391
The X-ray Group
Since 2007, the X-ray Group have delivered diagnostic medical imaging
services to the local communities of Albury, Wodonga, Wangaratta, Yarrawonga
and Lavington.
Core Markets Albury, Wodonga, Wangaratta, Yarrawonga and Lavington
Sites
MRI machines
PET scanners
Employed Radiologists2
5
2
-
4
Comprehensive sites1
Full MRI licences
Partial MRI licences
Number of Employees4
2
2
-
71
New Zealand
Teleradiology
Astra, SRG and Horizon Radiology | Trinity MRI
IDX New Zealand brands located in Auckland provide patients with radiology
services, across all diagnostic imaging modalities; MRI, CT, PET CT ultrasound,
digital breast tomosynthesis and plain x-rays.
Trinity MRI is a diagnostics imaging facility dedicated to Brain, Spine and
Neurovascular imaging.
Core Markets Auckland
Sites
20
Comprehensive sites1
MRI machines
PET scanners
Full MRI licences
Partial MRI licences
6
1
5
NA
NA
Employed Radiologists3
35
Number of Employees4
244
IDXt
IDXt is an overflow and after hours teleradiology provider.
IDXt offers teleradiology services to hospitals and radiology clinics across
Australia and New Zealand.
Providing a service supported by RANZCR accredited Radiologists, IDXt offers
urgent, routine and overflow teleradiology services.
These tables reflect data current at 30 June 2023.
1. Comprehensive sites include a range of radiology equipment including MRI’s and CT’s and are located with or near major
specialist referrers.
2. Relates to employed radiologists only. In addition, IDX has had 83 contractor radiologists providing services.
3. 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 radiologists.
4.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 167
employees in the corporate office (including IDXt) totalling 2,010 employees.
Integral Diagnostics Annual Report 2023
07
GROUP LOCATIONS AND HISTORY
08
196720212018201920202022201220022014200720152011The practice that would become South Coast Radiology is establishedLake Imaging established in Ballarat, VICDarling Downs and Mackay Radiology Sunshine Coast Radiology practices openedLake Imaging acquired Western Medical ImagingLake Imaging acquired Ballarat MRILake Imaging merged with South Coast Radiology in QLD and Integral Diagnostics was formedAcquired 60% of Global Diagnostics in WAAcquired remainder of Global Diagnostics in WAIntegral Diagnostics successfully listed on the ASXAnnounced acquisition of Geelong Medical ImagingAnnounced acquisition of Specialist Radiology Group, Trinity MRI and Cavendish Radiology in Auckland, NZAcquired Imaging QueenslandAcquired Ascot Radiology, NZIDXt established - Specialist overflow and after hours teleradiology providerIntegral Diagnostics has been included in the ASX Top 300Acquired The X-Ray Group, NSW & VICAcquired Horizon Radiology, NZAcquired Peloton Radiology Group, QLD Integral Diagnostics Annual Report 2023
09
CHAIR’S LETTER
The Company believes the underlying fundamentals
of the essential radiology industry remain strong
and the Company is confident that, in the absence
of extraordinary circumstances, patient volumes will
continue to grow over time, as evidenced by the
continued recovery of patient volumes in FY23.
Dear fellow shareholders,
On behalf of the Board, I present to you the
2023 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 2.5 million exams
on over one million patients.
During the financial year ended 30 June 2023 the diagnostic
imaging industry saw a continued improvement in operating
conditions, especially during the second half of the financial year,
as our communities recovered from the challenges brought on
by COVID-19, albeit in a higher inflation and higher interest
rate environment.
Financial Results
In this environment the IDX group delivered a materially
stronger second half profit result. In Australia, IDX gained
further revenue market share in FY23, with organic revenue
growing at 7.0% vs 4.8% industry growth in the States where
IDX operates. Our people have worked hard to deliver the best
possible outcomes for our patients and will continue to do so to
improve the performance of your Company.
For the financial year ended 30 June 2023, operating NPAT
declined by 17.6% to $17.8m, albeit operating NPAT of $10.0m
in the second half grew strongly by 28.0% compared to $7.8m
in the first half. Statutory NPAT increased by 71.5% to $25.0m,
reflecting the favourable impact of non-operating transactions.
Operating diluted earnings per share decreased by 26.0% to 7.6
cents per share (cps).
Revenue grew 22.1% to $440.8m, with an additional four months
of X-Ray Group revenue when compared to the prior year and a
full year contribution from both Peloton Radiology and Horizon
Radiology, who became part of the IDX group on 1 July 2022.
The increase in operating revenue was also driven by solid
growth in our existing businesses, being organic growth of 7.0%
in Australia and 4.4% in New Zealand.
As at 30 June 2023, our net debt to equity ratio was 52.1% and
the Net Debt/EBITDA ratio was 2.9x, or 2.8x on an annualised
second half run-rate basis, down from 3.1x at 31 December 2022.
We declared a fully franked final dividend of 3.5cps, a total of
6.0cps for FY23, a decrease of 14.3% on the prior year reflecting
the performance of your Company.
The Company believes the underlying fundamentals of the
essential radiology industry remain strong and the Company is
confident that, in the absence of extraordinary circumstances,
patient volumes will continue to grow over time, as evidenced by
the continued recovery of patient volumes in FY23.
Total capital expenditure was $45.2m, with $19.1m relating
to growth initiatives to expand our footprint and services
to patients. This included investing in two new greenfield
sites, additional diagnostic equipment and the development
and implementation of technology to enhance the patient and
referrer experience.
In line with our priorities, we have focused on integrating our
recent acquisitions to position ourselves well to take advantage
of the expected future growth in patient volumes.
Governance
IDX announced a number of Board changes, which commenced
with the appointment of Mr Andrew Fay as an independent, non-
executive Director in July 2022. This appointment was ratified by
shareholders at the Annual General Meeting (AGM) in November
2022. Mr Fay took over from Mr John Atkin in June 2023 as the
Chair of the People, Culture and Remuneration Committee.
As part of its succession plan, the Company also announced the
appointment of Ms Ingrid Player as a non-executive director.
Ms Player will commence on the 29 August 2023, to take over
from Mr John Atkin who is stepping down from the Board
on 31 August 2023. Mr Atkin has been a valuable member of
the Board of IDX since its listing in October 2015 and I would
like to thank him for his significant contribution and dedication
10
to the business over his tenure. Ms Player’s knowledge of
the healthcare industry as well as legal and environmental
experience will be a valuable addition to the Board and I look
forward to her contribution in the future.
Dr Nazar Bokani stepped down as an Executive Radiologist
Director on 9 August 2023, given his relocation overseas. I
would like to thank Dr Bokani for his radiologist leadership and
contribution to the Board.
The Board has continued the advancement of its environmental,
social and governance (ESG) responsibilities which will be
outlined in IDX’s dedicated ESG Report which will be available
prior to our AGM.
On behalf of the Board, I would like to thank our whole team
of over 2,000 employees led by our Managing Director & CEO,
Dr Ian Kadish, for their commitment to the shared IDX ambition
to build a healthier world by combining the best people and
technology to provide diagnostic imaging services that deliver
the best possible outcomes for our patients.
I would also like to express my gratitude to my fellow directors
for their commitment and to our shareholders for their ongoing
support. I look forward to connecting with you, our shareholders,
both in person and online, at our Annual General Meeting
in November.
Helen Kurincic
Chair
28 August 2023
Integral Diagnostics Annual Report 2023
11
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,
I am pleased to report that the last financial year has seen
a steady and constant improvement in industry and company
performance, as conditions have been normalising following the
challenges driven by the Covid-19 pandemic. In particular, I am
pleased to report that your Company delivered a materially
stronger second half in FY23, consistent with the outlook we
provided when announcing our first half results. Calendar year
2022 was the most challenging year that the radiology industry
in Australia and New Zealand had experienced in a generation,
and it was gratifying to see the market steadily returning in the
second six months of the financial year ended 30 June 2023.
Across Australia, radiology receipts from Medicare were up
6.5% in FY23. Importantly, industry receipts were up 9.5% in
the second half of the financial year. In the states where IDX
operates, industry receipts were up 4.8% in FY23, and were up
9.0% in the second half. The industry recovery in the second half
of FY23 was strong.
In Australia, IDX's organic revenue growth exceeded industry
growth nationally and in the States where IDX operates, and
similarly was up strongly in the second half of FY23, growing
4.2% in the first half and 10.3% in the second half. IDX therefore
gained further revenue market share in the FY23 year, with
organic revenue growing at 7.0% vs 4.8% industry growth in the
states where IDX operates.
In New Zealand, IDX organic revenue growth was 4.4% in FY231,
increasing 4.1% in the first half and 4.7% in the second half.
First half growth was impacted by new referrer-owned radiology
practices, and the impact of these reduced over the course of the
year as the market adjusted to new referral pathways. In FY23,
New Zealand accounted for 12% of IDX Group revenue.
Your Company also increased operating margins materially in
the second half, improving the operating EBITDA margin from
18.5% in the first half to 20.2% in the second half, demonstrating
the strong operating leverage in IDX’s business. The resultant
improved cash flows have driven an improvement in our
1. New Zealand does not publish industry growth numbers.
12
leverage ratio. Our net debt:EBITDA ratio improved from 3.1x at
31 December 2022 to 2.9x at 30 June 2023, with the annualised
second half net debt:EBITDA ratio improving further to 2.8x.
Industry Trends
Our industry benefits from being at the confluence of
two major global trends – demographic and technological.
Demographically, the ageing of the population and the increased
prevalence of chronic disease will drive demand for diagnostic
services well into the future. Technologically, digitisation and the
growth of big data and AI will materially improve the quality and
efficiency of the care we deliver.
Radiology industry growth rates around the world are reverting
to their long-term trend, including the accelerating move
to high value studies like MRI, PET scans and high speed
CT. Importantly, general practitioners and other primary care
physicians have increasing access to high value modalities
that were previously limited to specialist referrers. In addition,
the enhanced role that radiology plays in early detection and
disease prevention is becoming increasingly recognised as AI
technology drives new industry initiatives like Whole Body
Screening MRI; AI-enhanced screening for early detection of
breast, cardiac and prostate disease; and faster detection and
management of disease as new AI algorithms move abnormal
findings to the top of the radiologist worklist. Your company is
well positioned to benefit from these international trends.
Similarly, Australian radiology growth rates are also reverting to
their long-term trend, as indicated by the strong industry growth
numbers in the second half of FY23. The inclusion of PET-CT
on the Medicare Benefit Schedule (MBS) for the diagnosis
and management of metastatic prostate disease has been a
material addition to the MBS that obviates a battery of other
pathology and radiology tests that were previously required,
improving quality and saving costs. PET-CT is now incorporated
into the diagnostic and management protocols of 40% of all
solid tumours. Neurologically, the use of PET-CT scanning for
early detection of Alzheimer's disease has also been a valuable
addition to the Medicare schedule. Similarly, the decision by
Medicare to rebate all regional MRI’s is an important change
that helps narrow the gap between medical service provision in
regional compared to urban areas. Healthcare is a local service
and the ability to access Medicare rebateable MRI scans in
more regional areas is an important enhancement to healthcare
quality and service outside our major cities.
Alleviating the Medical Skills Shortage
The skills shortage, of doctors and clinical staff, remains the
limiting constraint to our growth. The reopening of borders
for immigration into Australia and New Zealand is making
a meaningful difference in 2023 as we once again welcome
international medical graduates, clinical and technical staff
into our radiology clinics. Just as importantly, we have also
been able to welcome new referrers to IDX, as our borders
have opened up to internationally trained general practitioners
and specialists. International Medical Graduates are compelled
to work in regional areas for up to 10 years after entering
Australia. These doctors are essential to the continued provision
of quality healthcare services in the regional areas and their
presence substantially enhances the performance of regional
IDX clinics. The material increase in immigration to both
countries also increases the number of patients we are able
to serve.
We are also addressing the skills shortage internally by
investing in an internal training school for sonographers,
fellowship opportunities and sub-specialty training for
radiologists, and the development of close working relationships
with industry training programs. For the past five years we
have sponsored the graduating ceremony for new RANZCR
trained radiologists, and our practice leaders build and foster
their relationships with radiology registrars from early in their
training programs.
Importantly, our investment in new artificial intelligence (AI)
and digital technologies that improve quality and efficiency also
helps to address the skills shortage. The use of technologies
like digitised radiology information systems (RIS) and Picture
Archiving and Communication Systems (PACS) facilitated
tremendous improvements in radiologist efficiencies over the
past decade and longer. In more recent years, teleradiology
has contributed to additional productivity gains and facilitated
quality improvements through increased access to sub-specialty
reporting. Teleradiology also provided many radiologists with
the ability to work from home during the depths of the Covid-19
pandemic. IDX launched its teleradiology business unit, IDXt, in
August of 2020, and IDXt has been the fastest growing business
unit in the IDX Group since that time.
Going forward, AI will play an even more important role in
improving radiologist quality and efficiency. IDX has been an
early mover in the adoption of AI algorithms that improve
patient care, save lives and improve efficiency. We invested
in our first AI algorithms in Western Australia in 2019 and
have progressively widened the offering and introduced more
AI algorithms to more IDX practices across the Group. There is
little doubt that the increasing use of AI over the next decade
will transform both radiology and medical practice and will allow
us to see more patients, detect and treat more disease earlier,
and save more quality life years.
MedX Joint Venture
During FY23 both IDX and the Medica Group in the UK, through
our 50:50 joint venture MedX, continued to explore opportunities
to build an international teleradiology business. After full
consideration, both parties have elected to focus our resources
on the material opportunities in our own home markets in
the short to medium term, and to effectively make the MedX
joint venture dormant, while leaving open the possibility of
reactivating it at some point in the future.
IDX serviced over a million patients in FY23
In FY23, IDX served over one million patients and performed
more than 2.5 million exams on behalf of 55 thousand general
practitioners, specialists and other medical referrers in Australia
and New Zealand.
Inflationary Pressures
Wage inflation significantly impacted IDX margins in FY23. The
company provided CPI-level increases to many of our
clinical and support staff on 1 July 2022. These increases
were minimally offset by the 1.6% increase in Medicare
reimbursement, the limited reimbursement increases received
in New Zealand, and out of pocket price increases. In addition,
in the first half of FY23, IDX experienced significant cost
pressures from increased sick leave, increased consumable
costs for PPE, and price increases and logistical delays for new
radiology equipment and spare parts. Most of these impacts
were ameliorated in the second half of FY23. Sick leave in
the second half, in particular, was well down vs the prior
comparable period.
Financial Performance
FY23 revenue is up 22.1%, operating EBITDA is up 13.9%
while operating NPAT is down 17.6% vs FY22, driven by
increased finance costs, both in interest paid on the Group’s
borrowings as well as the AASB16 impact related to our long-
term leases. Importantly, second half FY23 revenue is up 4.3%,
operating EBITDA is up 14.2% and operating NPAT is up 28.0% vs
the first half of FY23.
Our second half margin of 20.2% is materially up on the first half
margin of 18.5%. Importantly, our exit margin in FY23 is well
above the margin entering FY23.
Integral Diagnostics Annual Report 2023
13
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER’S LETTER
Living our Values
At IDX, our vision is to build a healthier world, and we do this
by delivering the best health outcome for every patient. We
are defined by our five values – put patients first, demonstrate
medical leadership, ensure that everyone counts, create value
for all stakeholders, and embrace change as the last few years
have taught us to do. We live these shared values at IDX, on the
patient care frontline and in all the support areas. We hire based
on our values, we promote and demote based on our values, and
sometimes we part ways based on our values.
Our values define us as healthcare professionals, caregivers
and support staff. These values differentiate our company, even
amongst our healthcare peers. Our values build our culture,
our commitment to practice good medicine, and our patient first
ethos. We know that by putting our patients first, we will also be
putting our shareholders first as our shareholders benefit from
the sustainable value created by our patient first ethos.
Growth and Acquisitions
We invested $19.1m in growth initiatives in FY23, investing in
two new greenfield sites, and in several brownfields where we
expanded the capacity and scope of services at some of our
busiest clinics.
The two new greenfield sites, at Pimpama on the northern
part of the Gold Coast in Queensland (opened June 2023); and
Waiata Shores in Greater Auckland (opened February 2023),
serve important growing markets contiguous to our existing
service areas.
The brownfield developments included three PET-CT upgrades,
at Greenlane in Auckland, at John Flynn Private Hospital on the
Gold Coast and at the St John of God Hospital in Ballarat. We
upgraded MRIs in Bunbury, Rockhampton and on the Gold Coast.
We also developed a new upgraded facility in Auckland.
We completed and integrated two strategically important
acquisitions on 1 July 2022:
• The acquisition of Peloton Radiology (announced
23 February 2022). Peloton Radiology comprises 12
radiologists, nine clinics and three partial MRI licenses. The
group provides radiology services from the Sunshine Coast
to the Brisbane CBD, and its acquisition links our large Gold
Coast and Sunshine Coast practices.
• The acquisition of Horizon Radiology in Auckland (announced
18 May 2022). Horizon Radiology operates eight radiology
clinics in greater Auckland, providing X-ray and ultrasound
obstetrics and MSK services, and is located close to
major general practitioner referrers. Horizon Radiology
provides IDX in New Zealand with access to a wider general
practitioner market, which complements our predominantly
specialist offerings in Auckland.
The acquisitions have both performed in line or better than our
other IDX practices in the same geographic areas.
14
Our People
Our people, the 2,010 individuals employed and contracted by
IDX, will always be the heart of our business. These are the
dedicated doctors and staff who work every day to provide the
best possible health outcome to every patient we serve.
IDX employee engagement levels continued to increase in FY23
and exceed hospital and radiology industry benchmarks. This is
a pleasing result in our quest to become the industry’s employer
of choice for radiologists and staff.
to put our patients first every day. Our doctors and staff include
some the finest healthcare professionals in the world. Their
professionalism, dedication and commitment to our patients and
referrers remains inspiring.
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.
FY24 Priorities
Good medicine is still good business.
Sincerely,
Over the next financial year, our major priorities are to:
• Drive organic earnings growth, including through cost
management, selective price increases and brownfield as
well as greenfield investments;
AI technologies;
• Accelerate the use of teleradiology, digital and
• Drive our environmental, social and governance
• Continue to nurture and develop culture and leadership
• Consider accretive acquisitions that represent a strong
across our people; and
(ESG) strategy;
clinical, cultural and strategic fit.
Dr Ian Kadish
Managing Director and Chief
Executive Officer
28 August 2023
Going Forward
I am optimistic about our ability to grow strongly going forward.
Industry fundamentals are strong and radiology plays both an
important preventative as well as a curative role in improving
health outcomes. Australia and New Zealand have growing and
ageing populations that require more diagnostic support, for
earlier detection and for ongoing management. New imaging
technologies continue to provide for better, safer and earlier
care. The long-term trend towards more valuable diagnostic
modalities will continue as MRI and PET-CT’s continue to grow
in diagnostic importance. Teleradiology and AI will continue
to transform and improve quality, service and efficiency levels.
Your Company is strategically well positioned to benefit from
these important trends.
The regulatory environment too, is now more favourable.
The gap between Medicare reimbursement and inflation has
narrowed. Medicare has increased radiology reimbursement
by 3.6% from 1 July 2023 and by a further 0.5% expected from
1 November 2023. International borders in both countries have
opened up for qualified medical and technical graduates, helping
to address the skills shortage within our practices, increasing
the number of doctors who refer to us, and increasing the
number of patients we can serve.
Strong industry fundamentals, a more favourable regulatory
environment, and improving company performance allow us to
focus on both organic and inorganic growth opportunities.
In closing, I’ll ask my fellow shareholders to join me in thanking,
once again, our frontline healthcare heroes at IDX who continue
Integral Diagnostics Annual Report 2023
15
DIRECTORS’ REPORT
For the year ended 30 June 2023
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 2023.
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 24; and
• the Remuneration Report commencing on page 33.
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)
Andrew Fay (Independent Non-Executive Director) commenced 18 July 2022
Dr Jacqueline Milne (Executive Director)
Dr Nazar Bokani (Executive Director) resigned 9 August 2023
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 24 of the Annual Report, sets out information on the business strategies, prospects and likely
developments for future financial years. The expected results from those operations in future financial years have not been included
because they depend on factors such as general economic conditions, the risks outlined and the success of IDX's strategies, some of
which are outside the control of the Group.
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 24 of the Annual Report.
Dividends paid in the year ended 30 June 2023
Dividends paid/payable during the financial year were as follows:
Dividend paid 7.0 cents per share on 6 October 2021
Dividend paid 4.0 cents per share on 4 April 2022
Dividend paid 3.0 cents per share on 5 October 2022
Dividend paid 2.5 cents per share on 4 April 2023
Consolidated
30 June 2023
$’000
30 June 2022
$’000
-
-
6,885
5,755
12,640
13,825
8,025
-
-
21,850
16
Significant changes in the state of affairs
Effective from 1 July 2022, the Group completed the acquisition of Peloton Radiology and Horizon Radiology. Details of these
acquisitions 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 10 August 2023, the Group announced the resignation of Dr Nazar Bokani and Mr John Atkin from the Board of Directors, effective
9 August 2023 and 31 August 2023 respectively. The Group also announced the appointment of Ms Ingrid Player to the Board of
Directors, effective 29 August 2023.
The Board approved participation in the Radiologist Loan Funded Share Plan and New Zealand Matching Options Plan and subject
to receipt of radiologist contributions by 30 August 2023 of $0.33m, these contributions will be matched by an IDX contribution of
$0.66m, resulting in $0.99m of equity securities to be issued on 6 September 2023. The number of equity securities to be issued will be
determined by the 30-day VWAP up to 1 September 2023.
The performance condition relating to the performance rights issued as part of the FY19 and FY20 Long Term Incentive (LTI) awards
was tested on the 28 August 2023 and the performance required for vesting was not met for either the FY19 and FY20 LTI awards and
as a result 877,621 performance rights lapsed.
Subsequent to year end a dividend of 3.5 cents per share was declared and will be paid on 4 October 2023.
Other than those detailed above, no other matters or circumstances have arisen since 30 June 2023 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.
Details of our Environment, Social and Governance (ESG) activities will be published in our FY23 ESG Report prior to our Annual
General Meeting and will be available on the Company's website at https://integraldiagnostics.com.au/reports/.
Integral Diagnostics Annual Report 2023
17
DIRECTORS’ REPORT
For the year ended 30 June 2023
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) and HBF Health
Limited. 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, Culture 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 a Director 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 583,578 rights (directly)
Helen Kurincic
Independent Non-Executive Chair
MBA, FAICD, FGIA, Grad Dip Wom
Stud, PBC Crit Care, Cert Nsg
Dr Ian Kadish
Managing Director and Chief
Executive Officer MBBCh, MBA
18
Mr 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 Member of the People, Culture and Remuneration Committee
Member of the Audit, Risk and Compliance Committee
Member of Nomination Committee
Interests in shares
187,526 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 Bega Limited (ASX:BGA), Elders
Limited (ASX:ELD) and Tabcorp Holdings Limited (ASX:TAH).
Former directorships (in
the last three years)
Special responsibilities
Clean Seas Seafood Limited (ASX:CSS) – Non-Executive Director -
(2018 to 2020)
Altium Limited (ASX:ALU) – Non-Executive Director - (2016
to 2022)
Chair of the Audit, Risk and Compliance Committee
Member of the People, Culture 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 2023
19
DIRECTORS’ REPORT
For the year ended 30 June 2023
Mr 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.
He is currently Chair of Growthpoint Properties Australia (ASX:GOZ), 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
Chair of the People, Culture and Remuneration Committee
Member of the Audit, Risk and Compliance Committee
Member of the Nomination Committee
Interests in shares
23,000 ordinary shares (directly) and 17,000 ordinary
shares (indirectly)
Dr Nazar Bokani was appointed as a Director of IDX on 26 April 2021 and resigned as a
Director of IDX on 9 August 2023. Dr Bokani was a radiologist of the Company and was
therefore considered by the Board to be a Non-Independent Executive Director. While Dr
Bokani was not an independent director by virtue of his radiologist role, he was independent
of senior management and his responsibilities did 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 was the Chair of the Company’s Artificial Intelligence (AI) Steering Committee
up until his resignation on 9 August 2023. He also contributed to 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 (directly)
Andrew Fay
Independent Non-Executive
Director BAgEc (Hons), A Fin
Dr Nazar Bokani
Executive Director MBChB,
FRANZCR, MD, GAICD
20
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 practising 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
25, 200 ordinary shares (directly)
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
The numbers of meetings of the IDX board of directors and of each board committee held during the year ended 30 June 2023, and the
numbers of meetings attended by each director were:
Director
Helen Kurincic
Dr Ian Kadish
John Atkin
Raelene Murphy
Dr Jacqueline Milne
Dr Nazar Bokani
Andrew Fay1
Audit, Risk and
Compliance
Committee
People and
Remuneration
Committee
Nomination
Committee
Board
Held
Attended
Held
Attended Held Attended Held Attended
15
15
15
15
15
15
15
15
15
15
14
15
14
15
7
–
7
7
–
–
7
7
–
7
7
–
–
7
5
–
5
5
–
–
5
5
–
5
4
–
–
5
3
–
3
3
–
–
1
1. Andrew Fay was appointed as a Director of the Company on 18 July 2022 and was appointed a member of the Nomination Committee on the 23 February 2023.
Held: represents the number of meetings held during the time a Director held office and was eligible to attend.
Integral Diagnostics Annual Report 2023
3
–
3
3
–
–
1
21
DIRECTORS’ REPORT
For the year ended 30 June 2023
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. Dr Bokani was a member of this Committee up until his resignation on 9 August 2023.
The Integral Clinical Leadership Committee (ICLC) met five 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
4
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 is chaired by Mr Fay and its members include Dr Ian
Kadish and Chief Financial Officer (CFO), Mr Craig White, with the Board Chair attending the meetings when relevant. The Mergers and
Acquisitions Working Group was not convened during the year due to the Group's focus on the integration of the recent acquisitions.
Options and performance rights
As at the date of this report, IDX had 1,377,523 performance rights outstanding (2022: 1,656,384). For further details on the
performance rights, refer to note 24 in the Notes to the Financial Statements.
As at the date of this report, IDX had 923,342 options outstanding (2022: 860,388). For further details on the options, refer to note 24 in
the Notes to the Financial Statements.
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.
22
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.
Audit and 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. In the current year, there were no non-audit services provided by the External Auditor.
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 55.
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 of 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
Ian Kadish
Chair
28 August 2023
Melbourne
Managing Director and Chief
Executive Officer
Integral Diagnostics Annual Report 2023
23
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2023
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 which commences on
page 57 and the ASX announcement and full year results presentation dated 28 August 2023.
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 35 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, being Queensland, Victoria,
Western Australia and New Zealand. Refer to Page 4 to view 'Our Brands'.
Year in Review
Financial performance overview
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 statement1,2
Revenue
Other revenue
Total revenue and other income
Operating EBITDA
Operating EBITA
Operating NPAT
Non-operating transactions net of tax
Remeasurement of contingent consideration liabilities
Transaction and integration benefits/(costs)
Share based expenses
Share of net profit of joint ventures
Amortisation of customer contracts
Statutory NPAT
Operating EBITDA as a % of revenue
Operating NPAT as a % of revenue
Operating diluted EPS (earnings per share)
Statutory diluted EPS (earnings per share)
Return on operating assets (based on Operating NPAT)
Declared dividend pay-out ratio on Operating NPAT
30 June 2023
Actual
$m
30 June 2022
Actual
$m
440.8
0.4
441.2
85.2
43.8
17.8
15.8
(4.9)
(1.9)
(0.3)
(1.5)
25.0
19.3%
4.0%
7.6
10.6
5.6%
77.9%
360.9
0.1
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%
68.6%
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. For further information on non-IFRS measures used in this report, including a reconciliation to statutory financial information,
refer to the 'Non-IFRS Financial Information' section on pages 118 to 122 of this report.
2. Return on operating assets has been calculated using the LTM organic operating NPAT (plus trailing acquisitions NPAT) of $17.8m (FY22: $23.3m).
24
IDX’s results for FY23 reflect the combination of a relatively weak first half (1H FY23) performance together with a materially stronger
second half (2H FY23) profit result, demonstrated by an improvement in Group EBITDA margins by 1.7% to 20.2% for 2H FY23 and
illustrating the operating leverage in the business. In addition, leverage reduced by 0.2x to 2.9x as at 30 June 2023 (being 2.8x on a 2H
FY23 annualised run-rate basis). The materially stronger second half result is consistent with the outlook provided at the time of the
1H FY23 results release on 17 February 2023.
The Group continued to experience challenging trading conditions in 1H FY23, with modest underlying growth in Australia, reflecting
a slow gradual recovery in patient volumes, limited price increases and favourable mix impact, offset by significant cost pressures,
especially higher labour costs, driven by inflation and labour market supply constraints, together with higher interest funding costs.
The improved results for 2H FY23 compared to 1H FY23 were driven by:
in 2H FY23 vs 5.2% in 1H FY23
• Stronger organic revenue growth in Australia of 10.3% in 2H FY23 vs 4.1% in 1H FY23, with average fees per exam growth of 6.1%
• Stronger organic revenue growth in New Zealand of 4.7% in 2H FY23 vs 4.1% in 1H FY23, with average fees per exam growth of
• Labour cost growth of 3.6% 2H vs 1H FY23, being below revenue growth of 4.3%
• Lower 2H vs 1H FY23 operating expenditure (excluding labour) of $1.4m reflecting management’s focus on reducing operating
expenditure, together with a reassessment of make good provisions for leased premises
0.4% in 2H FY23 vs (5.2%) in 1H FY23
In Australia, IDX recorded solid gains in revenue market share, evidenced by a 7.0% revenue increase in its organic business (1H
4.2%; 2H 10.3%) in comparison to Medicare benefits for the States in which IDX operates which have seen a 4.8% increase in weighted
average benefits paid for FY23 adjusted for working days.
Operating NPAT decreased by $3.9m or 17.6% and operating diluted earnings per share decreased by 26.0% to 7.6 cents per share.
Statutory NPAT performance of $25.0m increased by 71.5% with the increase relative to Operating NPAT being due to non-operating
transactions. These include adjustments for:
• Remeasurement of contingent consideration liabilities, consisting of adjustments to contingent consideration provisions for Imaging
Queensland, the X-Ray Group and Horizon Radiology resulting from the re-assessment of estimated future earnout payments
($15.8m benefit to the income statement).
• FY23 transaction and integration costs, consisting of $2.9m relating to acquisitions and integration activities, and $2.0m of one-off
systems implementation costs, on a post tax basis.
As some of these non-operating transactions are on the capital account, they are not tax deductible, creating a greater impact on
statutory earnings after tax.
Financial overview
• In FY23 the Group achieved revenue growth of $79.8m, including the X-Ray Group ($5.1m for four months from July to October
2022 following completion of the acquisition in November 2021), Peloton Radiology ($37.7m) and Horizon Radiology ($11.4m)
following completion of both these acquisitions on 1 July 2022.
• Organic operating revenue from all sources (including reporting contracts, some of which are fixed rate) in Australia grew 7.0%
(1H 4.2%; 2H 10.3%), being higher compared to the Medicare industry weighted average for the States in which IDX operates of a
4.8% benefits increase adjusted for working days. Note that IDX’s growth is also 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.
• Average fees per exam (including reporting contracts) in Australia increased by 5.7% in FY23, reflective of an on-going move to
• Organic operating revenue in New Zealand grew 4.4% (1H 4.1%; 2H 4.7%), on a constant currency basis adjusted for working days.
the higher end CT, MRI and PET scan modalities and to a lesser extent Medicare indexation of 1.6% applied to 97% of diagnostic
imaging services, including MRI, from 1 July 2022, and selective price increases.
New Zealand revenues continued to be impacted by referrer-owned radiology practices in Auckland. The company continues to
plan and implement management initiatives to respond.
• Operating EBITDA margin decrease of 140 bps compared to the prior corresponding period with both Peloton Radiology and
• Statutory NPAT of $25.0m after writeback of non-operating provisions, transaction and integration costs, amortisation of customer
Horizon Radiology acquisitions experiencing similar trends as IDX’s existing businesses in both QLD and NZ respectively.
contracts and other costs, net of tax, of $7.2m.
Integral Diagnostics Annual Report 2023
25
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2023
Operating performance overview
During FY23 we focused on the following:
Driving organic earnings growth through improved utilisation of existing assets, cost management, selective price increases and
brownfield as well as greenfield sites
• Grew organic patient volumes in both Australia and New Zealand utilising existing assets.
• Implemented selective price increases, while remaining competitive according to local market conditions.
• Focused on containing and reducing costs wherever possible.
• Improved access to services with new greenfield sites opened at Pimpama on the Gold Coast and Waiata Shores in Auckland.
• Improved services with brownfield investment in three PET-CT upgrades, at Greenlane in Auckland, at John Flynn Private Hospital
• We upgraded MRIs in Bunbury, Rockhampton and on the Gold Coast.
on the Gold Coast, and at the St John of God Hospital in Ballarat, as well as a new upgraded facility in Auckland.
Accelerated the use of teleradiology, digital and AI technologies
for growth across the Group.
under the guidance of the AI Steering Committee.
such as cross site patient bookings and technologists’ rosters.
for complex clinical cases and 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,
• Made significant progress in the implementation of a single, enterprise-wide reporting platform, to develop sub-specialty workflows
• Consolidated three disparate RIS applications (patient management software) in New Zealand to enhance operational efficiencies
• Implemented and integrated new businesses into a state of the art data centre to provide solid and secure infrastructure and allow
• Built upon our consolidated reporting platform to provide teleradiology services for both the internal business and our external
• Continued to enhance our cyber-security ecosystem to ensure robust protections in place that remain relevant and repeatable.
• Widened the footprint of our state-of-the-art voice recognition application to enhance the referrer’s clinical experience and improve
• Implemented E-referrals across the majority of our business to enhance the referrer experience.
• Introduced the ability for our patients to book their clinical appointments online through an integrated Avatar.
• Successfully implemented automation tools to improve the efficiencies of our back of house processes.
our report turnaround times.
reporting contracts.
Driving our environment, social and governance (ESG) strategy
• Continued to measure our carbon emissions across Scopes 1, 2 and 3.
• Further developed our ESG Strategy in line with stakeholder, industry and community expectations.
• Sought to develop partnerships with our suppliers and vendors to ensure our ESG strategies are enacted.
• Continued our commitment to Modern Slavery with the release of our third Modern Slavery Statement.
• Continued to assess and develop our waste management practices to reduce waste and our carbon footprint organisation wide.
Nurtured and developed our culture and leadership
frontline leaders, middle and senior leaders, and radiologists.
• Continued our investment in leadership capability with new intakes of our three distinct leadership programs - for emerging and
• Designed and implemented a suite of professional development sessions for our wider people manager cohort, focusing on the
core skills needed for day-to-day success as a people leader as part of our strategy to drive a supportive and inclusive high
performing culture.
teams, and continued to explore opportunities to contribute to and enhance our engagement with First Nations communities.
• Supported a safe and inclusive culture by cascading Mental Health First Aid and Inclusive Leadership training to local management
• Continued to grow engagement and uptake of our values-based employee recognition programs.
• Developed and implemented a wellbeing framework with a range of benefits designed to support our people across four key pillars
• Improved our employee value proposition by benchmarking remuneration to market and introducing new employee benefits.
of health – physical, emotional, social and financial wellbeing.
Integrated our recent acquisitions
• In FY23 the Company completed and integrated the following two strategic acquisitions (previously announced in FY22):
– Peloton Radiology in South East Queensland, which completed on 1 July 2022
26
– Horizon Radiology in Auckland, New Zealand, which also completed on 1 July 2022.
Capital expenditure
Total capital expenditure on tangible assets was $45.2m (FY22: $31.3m) of which $26.1m related to equipment replacement and $19.1m
related to growth opportunities, including the development of two new greenfield sites, being Waiata Shores in New Zealand and
Pimpama on the Gold Coast, which opened in February 2023 and June 2023 respectively.
FY24 replacement and growth capex is expected to be between $35.0m to $45.0m.
Acquisitions
The aforementioned acquisitions of Peloton Radiology and Horizon Radiology were all signed during FY22, however both completed on
1 July 2022.
The contingent consideration provision for the Earn Out A liability for the Imaging Queensland Group has been adjusted from $12.4m to
$2.2m based on the valuation provided by an Independent Expert, sought as part of the dispute resolution process provided for in the
Share Sale Contract, as disclosed in Note 20 of the Group's Consolidated Financial Statements for the year ended 30 June 2023. The
Group has made efforts to settle the $2.2m liability for Earn Out A, based on the valuation provided by the independent expert, however
the vendors have declined settlement, and the matter remains in dispute at the date of this report. The provision for Earn Out B liability
remains unchanged at $5.5m.
Taxation
The effective tax rate on operating earnings is 31.3% (FY22: 29.7%) due to the higher level of non-deductible costs relating to share
based payments and transaction advisory fees.
The effective tax rate on statutory earnings of 18.3% (FY22: 35.3%) is driven by statutory earnings containing adjustments to contingent
consideration provisions, which are on capital account.
Cash flows
Free cash flows of $53.1m (FY22: $49.1m) increased by 8.0%. Free cash flow conversion before replacement capex was 93.0% (FY22:
78.3%). The increase in free cash flows is due to the increase in Operating EBITDA, as well as changes in the working capital profile
driven by timing of payments.
Capital management
Net debt increased by $93.0m to $194.5m (FY22: $101.5m). 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 cash flows and
dividend payments made throughout the financial year.
Net debt to equity at 30 June 2023 was 52.1% (FY22: 29.2%) and the Net Debt/EBITDA ratio was 2.9x at 30 June 2023 (FY22:1.6x), with
the annualised second half net debt/EBITDA ratio improving further to 2.8x.
At 30 June 2023, IDX had cash reserves of $33.9m and committed facilities of $379.4m of which $152.4m remained undrawn and with
access to a further $105.0m under an Accordion facility. Current debt facilities have a five-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 increased by 54.4% to 10.8 cents per share (FY22: 7.0 cents per share). Diluted earnings
per share in FY23 considering the FY19, FY20, FY21, FY22 and FY23 performance rights and options issues was 10.6 cents per share
(FY22: 6.9 cents per share). The increased earnings per share at a statutory level is reflective of the increase in statutory NPAT of
71.5% to $25.0m.
On an Operating NPAT basis, adjusted1 Diluted Earnings per Share decreased 26.0% to 7.6 cents per share (FY22: 10.2 cents per share).
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 Peloton Radiology and Horizon Radiology Group acquisitions in FY23 (FY22: X-Ray Group acquisition).
Integral Diagnostics Annual Report 2023
27
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2023
Dividend
Fully franked dividends paid or declared of 6.0 cents per share (FY22: 7.0 cents per share) totalling $13.9m have been paid or declared
for FY23. The decrease in dividends of 14.3% reflects the decrease in Operating NPAT for the Group in FY23. A fully franked final
dividend of 3.5 cents per share will be paid on 4 October 2023 to shareholders on the register at 1 September 2023. This represents
77.9% of Operating NPAT (FY22: 68.6%). The dividend reinvestment plan (DRP) will operate with no discount for the FY23 dividend.
Regulatory outlook
Australia:
MRI Licences
On 1 November 2022 the Federal government de-regulated MRI services in regional and rural areas, defined as Modified Monash Model
2-7. As at the date of this presentation no further licences or plans for deregulation of MRI licences have been announced.
FY 2023 Medicare Changes
Indexation of 3.6% was announced and applied to all Diagnostic Imaging Services from 1 July 2023, including MRI items, however
excluding Nuclear Medicine items, with further indexation of 0.5% expected to be applied from 1 November 2023.
Bulk billing incentive on MRI reduced to 95% of CMBS from 100% from 1 July 2022. This only affects MRI services currently bulk billed
to Medicare.
From 1 July 2022, two new PET items were introduced for patients with prostate cancer. These items allow for the initial staging of
intermediate to high-risk patients with prostate cancer.
New Zealand:
There is limited indexation of pricing in New Zealand, however we continue to negotiate with a range of funders.
The regulatory authorities in New Zealand have determined that non-arms length referral practices by referrers who own interests
in radiology practices or equipment are acceptable. IDX is pursuing various strategic initiatives as a result of this situation, including
developing its referrer base in the New Zealand general practitioner market, a market segment that is less impacted by non-arms
length referrals.
Company outlook
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. Radiology plays both a preventative as well as curative non-invasive role in
improving the health of the Australia and New Zealand population.
The Company’s focus in FY24 will be to:
investment opportunities;
• drive organic earnings growth, including through cost management, selective price increases and brownfield as well as 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
• consider accretive acquisitions that represent a strong clinical, cultural and strategic fit.
28
Balance Sheet
A summary of the balance sheet as at 30 June 2023 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 assets
Investments accounted for using the equity method
Total non-current assets
Total assets
Trade and other payables
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 2023
Actual
$m
30 June 2022
Actual
$m
33.9
21.7
7.1
62.7
153.1
129.4
474.8
19.0
0.0
776.3
839.0
31.1
2.5
14.2
7.5
27.4
82.7
7.8
221.1
9.5
127.3
17.6
383.3
466.0
373.0
123.2
19.4
11.4
154.0
124.3
106.8
380.5
17.3
0.2
629.1
783.1
22.9
5.5
11.7
16.4
23.5
80.0
8.2
217.6
9.5
106.2
14.4
355.9
435.9
347.2
capital balances, as well as the timing of payments.
Peloton Radiology and Horizon Radiology totalling $2.8m at 30 June 2023.
• Working capital of ($2.3m) decreased by $10.2m, driven by the acquisition of Peloton Radiology and Horizon Radiology working
• Provisions (excluding tax) have increased $3.9m. This increase is primarily due to the acquisition of employees leave provision for
• Contingent consideration of $15.3m includes Imaging Queensland ($7.7m), the X-Ray Group ($0.6m), Peloton Radiology ($5.1m) and
• Net debt (including off balance sheet bank guarantees of $3.6m and excluding capitalised borrowing costs of $1.2m) increased
by $93.0m to $194.5m (FY22: $101.5m). This reflects a combination of the $90m capital raising completed in March 2022, debt
drawn down to fund the Peloton Radiology and Horizon Radiology acquisitions, operational cash flows, capital expenditure and the
dividend payment made at the half year.
Horizon Radiology ($1.4m).
Integral Diagnostics Annual Report 2023
29
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2023
Cash flow
A summary of the cash flows as at 30 June 2023 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
Integration costs
Capital raising costs
Other
Net cash flows
30 June 2023
Actual
$m
30 June 2022
Actual
$m
53.1
(19.1)
34.0
(2.0)
(13.2)
(2.2)
(85.9)
(0.3)
2.2
(0.2)
(12.6)
(4.0)
(2.8)
-
(2.4)
(89.4)
49.1
(21.9)
27.2
(17.4)
(5.7)
24.2
(24.3)
(0.5)
91.8
(3.3)
(20.9)
(5.5)
-
(2.9)
(0.2)
62.5
changes in working capital driven by timing of payments, offset by replacement capex.
• Free cash flows of $53.1m were $4.0m or 8.0% higher than FY22, which was driven by the increase in Operating EBITDA, as well as
• Growth capital expenditure was $19.1m.
• Dividends of $12.6m (5.5 cents per share fully franked) were paid in FY23.
Risk management
The Company’s Risk Management Framework is overseen by the Audit Risk and Compliance Committee (ARCC) and is actively
managed by the members of Senior Management and the Legal and Risk Team. The framework is consistent with ISO 31000:2018 Risk
Management – Guidelines and is subject to an annual review. A copy of the Company’s ARCC Charter can be found on the Company’s
website: www.integraldiagnostics.com.au/corporate-governance
The Framework, along with the Company's Risk Management Policy and Appetite Statement, is used to implement a consistent
approach to identifying, analysing and evaluating risks to support the Company's business activities and strategies. It also assists in
creating a culture of risk awareness and accountability throughout the business at all levels.
IDX continually reviews, assesses and strengthens its policies and procedures in all areas including clinical governance, regulatory,
occupational health and safety, IT, finance, business continuity and operations. This risk management process is aided by an
independent internal audit program to ensure the effectiveness and compliance of our practices.
Clinical governance is a key component of the Company's risk management and is managed through the Integral Clinical Leadership
Committee (ICLC) and Business Unit Clinical Leadership Committees under the ICLC Charter. A copy of the ICLC Charter can be found
on the Company’s website: www.integraldiagnostics.com.au/corporate-governance
30
Business risks
A list of IDX’s core risks are described below. These risks are continuously assessed by the business and reported on a regular basis
to the ARCC. Please note that 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
Regulatory changes
Changes to funding and government policies and
regulations may have a material adverse impact
on the financial and operational performance of the
Company including the deregulation of MRIs which
may remove significant barriers to entry into the
diagnostic imaging market.
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.
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.
Contracts and service agreements
Contracts and service agreements may be
breached, terminated or not renewed resulting in
loss of revenue and operating profit.
Clinical risk management
The risk of patient harm due to human error or a
lack of effective clinical governance and processes.
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.
Risk Management Strategy
industry developments.
• Regular monitoring of funding and regulatory changes and
• Membership of, and participation in, the Australian Diagnostic
• Membership of, and participation in, the Royal Australian New Zealand
Imaging Association.
College of Radiologists.
for referrers and patients.
through a process of continuous engagement.
• Maintenance of existing relationships across IDX’s referrer network
• Continuous investment in new technology to enhance access and service
• Clinical Leadership Committees in each business unit, supported by local
• Program of oversight for M&A activity, due diligence and integration.
• Detailed due diligence processes and procedures, including the
• Engagement of external advisors to assist in identifying risks, challenges
development of integration and resourcing plans.
management to drive clinical governance.
and opportunities of acquisitions.
• Regular review of all IDX contracts for completeness of information,
• Maintenance of a digital contract database which sends automatic
renewal dates, contract owners and performance against SLA’s.
reminders to contract owners about contract milestones including
expiry dates.
• ICLC manages and advises on clinical governance matters, including
• Consistent clinical risk and incident reporting processes in place across
patient care, clinical standards and quality assurance.
the Company and business units, to review incident data and resulting
recommendations at all management levels, through to the ARCC and
the Board.
governance within IDX.
to medical malpractice.
• Chief Medical Officer (CMO) further strengthens focus on clinical
• Maintenance of appropriate insurance arrangements, including in relation
• Radiologist peer review systems in place.
• Consistent privacy policies and practices in place across the Company that
have been reviewed by external privacy experts for compliance with the
required laws in Australia and New Zealand.
• Provision of training for staff.
• Cyber security and IT infrastructure controls in place and
continually reviewed.
Integral Diagnostics Annual Report 2023
31
OPERATING AND FINANCIAL REVIEW
For the year ended 30 June 2023
Risk Management Strategy
simulations for staff.
against increasing threats.
breach simulations held with senior leaders and the Board.
industry standards, including annual cyber maturity assessments.
• Provision of cyber security training including phishing training and
• Ongoing penetration testing by an external party to review protections
• Regular meetings of Cyber Security Steering Committee.
• Alignment of the Company’s cyber security framework and controls to
• Business continuity and disaster recovery plans in place including data
• Investment in employee engagement, professional development and
• Implementation of a Leadership Capability Framework and a Performance
• Targeted recruitment campaigns both locally and overseas.
• Provision of People and Culture support across the Company for all staff,
• Proactive monitoring of changes in the market including to stay abreast of
• Focus on maintaining and growing referrer relationships.
• Participation in industry group forums.
including an Employee Assistance Program.
and responding to identified changes.
culture building activities across IDX.
and Development Framework.
Risk Area
Cyber security
The risk of a material cyber security event, data
breach or attack on IDX, or the inability of IDX
to respond to the continually evolving threats
affecting its operations and involving significant
remediation resources.
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.
Competitive market dynamics
The risk of changing competitive trends in the
radiology market including the emergence of
medical specialist groups purchasing their own
diagnostic equipment, new market entrants or
increasing competition from radiologists setting up
independent practices.
32
REMUNERATION REPORT
For year ended 30 June 2023
Introduction from the People, Culture and Remuneration Committee Chair
Dear Shareholders,
On behalf of the Board, I am pleased to present the Remuneration Report for the 2023 financial year. We will seek your approval of the
report at our 2023 Annual General Meeting.
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.
As detailed in last year’s Remuneration Report, to further emphasise the importance of sustainability, the Company introduced a risk,
compliance and conduct gateway to the granting of any STI award in FY23. While the FY23 gateway was satisfied, the financial KPI
threshold representing 50% of the potential STI was not achieved and therefore no award was made for the financial component.
In FY23 the non-financial award portion of the STI included sustainability goals to support the Group's ongoing achievements of
its ESG strategy. This recognises 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. Significant quantifiable outcomes
were achieved in the non-financial KPIs by the Executive KMP in FY23.
Details of the Managing Director's achievements against the FY23 STI KPIs are provided on page 44. For all other executive KMP a
summary of key individual and common KPIs and the STIs awarded in FY23 are shown on page 45 In total the STI awards ranged from
33.5% to 43.5% of the STI opportunity in FY23.
Having regard to the severe impact of COVID-19 on the business during FY22, the Board previously disclosed it would exercise its
discretion under the terms of those rights to allow the re-testing of the FY19 LTI Performance Rights at the end of FY23. On re-testing,
the threshold vesting level of EPS for the FY19 LTI performance rights was not satisfied and those rights have therefore now lapsed.
The testing of the FY20 LTI grant at the end of FY23 also failed to meet the threshold Operating EPS growth rates over the period
and as such those rights have lapsed. Despite the ongoing economy wide impacts of new COVID-19 variants through FY23, where over
10,000 cases a day were still being reported as late as December 2022, the Board has decided not to retest the FY20 LTI performance
rights in FY24 allowable under the terms of the rights. With the removal of most government restrictions in June 2022 and the gradual
recovery witnessed across the medical imaging industry, the Board determined the business environment didn't meet the extreme
circumstance test for re-testing. From FY23 the re-testing provision has been removed from LTI grants.
Following significant enhancements to the executive remuneration framework in FY23 the framework remains the same in FY24.
We look forward to your support and welcome your feedback on our Remuneration Report.
Andrew Fay
People, Culture
and Remuneration
Committee Chair
Integral Diagnostics Annual Report 2023
33
REMUNERATION REPORT
For year ended 30 June 2023
What's inside
The Remuneration Report is set out under the following main headings:
a.
b.
c.
d.
e.
f.
g.
h.
The role of the People, Culture and Remuneration Committee
Overview of FY23 Executive Remuneration Framework
Executive KMP Remuneration outcomes for FY23
Cumulative interest of Executives under the LTI program
Executive service agreements
Non-Executive Director and Radiologist Executive Director Remuneration
KMP minimum shareholding policy and shareholdings
Other transactions with KMP and their related parties
About the Remuneration Report
35
36
41
47
48
49
52
54
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 2023 (FY23). All KMP held their position for the duration of FY23, unless otherwise noted.
Name
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
Non-Executive Directors
Helen Kurincic
John Atkin
Raelene Murphy
Andrew Fay
Position
Managing Director and Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Independent, Non-Executive Chair
Independent, Non-Executive Director
Independent, Non-Executive Director
Independent, Non-Executive Director (commenced as Non-Executive Director on
18 July 2022)
Radiologist Executive Directors
Dr Jacqueline Milne
Dr Nazar Bokani
Radiologist Executive Director
Radiologist Executive Director (resigned as Radiologist Executive Director on 9 August 2023)
34
a. The role of the People, Culture and Remuneration Committee
The People, Culture and Remuneration Committee (PCRC) is governed by the PCRC Charter. It is responsible for reviewing and
recommending to the Board compensation arrangements for the Non-Executive Directors (NEDs), 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;
c. setting, monitoring and assessing the Company's culture;
d.
e.
remuneration strategy, performance targets and incentive payments for the CEO and the Executives that report to the CEO; and
remuneration arrangements for the Chair, NEDs and Executive Directors of the Board.
The PCRC 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 Inclusion and
Diversity Policy. In FY23 the Committee reviewed and changed its charter and name to include a focus on culture, noting the
importance of culture in achieving the Company's strategic objectives. Andrew Fay succeeded John Atkin as Chair of the PCRC on
1 June 2023. John Atkin was PCRC Chair since the Company's listing in 2015.
The following NEDs, all of whom are regarded as independent, were members of the PCRC for the full FY23 financial year, unless
otherwise stated:
Andrew Fay - Chair
Independent, Non-Executive Director (commenced KMP position and membership of the
Committee on 18 July 2022, commenced Chair of PCRC from 1 June 2023)
Independent, Non-Executive Director (retired as Chair of PCRC on 31 May 2023)
Independent, Non-Executive Director
Independent, Non-Executive Director
John Atkin
Helen Kurincic
Raelene Murphy
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. These arrangements 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.
Integral Diagnostics Annual Report 2023
35
REMUNERATION REPORT
For year ended 30 June 2023
b. Overview of FY23 Executive Remuneration Framework
The Board of Directors (Board) works to ensure that the Executive reward framework satisfies the following key criteria:
• 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,
• having appropriate transparency in application, particularly to KMP.
Remuneration Framework
The objective of the Group’s Executive reward framework is to align Executive reward with the achievement of strategic and
sustainability 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:
Fixed Remuneration
Cash, superannuation,
non-monetary awards
STI
50% delivered as cash
FY23 KMP Remuneration Framework
STI
50% delivered as deferred equity
LTI
Performance rights converted to shares after 3 years
Year 1
Fixed
Year 2
Year 3
Variable 'at risk'
Fixed Remuneration
Short Term Incentive
Long Term Incentive
Purpose 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.
• A risk, compliance and conduct
gateway must be met to qualify for
a STI.
• Awards are based on financial
performance, individual performance
of strategic KPIs and organisational
performance of sustainability KPIs.
• Performance measures are aligned to
long term shareholder returns and
value creation.
• Vesting is based on achievement of
aggregate earnings per share (EPS),
relative total shareholder returns (rTSR)
and target average return on invested
capital (ROIC).
36
Executive KMP remuneration arrangements
The Executive remuneration and reward framework for the FY23 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 PCRC, 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 financial and non financial objectives.
The Executive remuneration framework adopted in FY22 and prior years had not substantially changed since 2017. During FY22, the
Board conducted a review of the framework and introduced changes in FY23. In conducting the review, the Board considered feedback
it had received from stakeholders over the years, the increasing maturity of the business and the strategic priorities of the Company.
The key changes made to the remuneration framework for KMP for FY23 were:
• introduction of a risk, compliance and conduct gateway;
• 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 three years (from four years previously) but removing the re-test provision; and
• introducing two more measures of performance so LTI vesting is now tested on aggregate diluted Operating EPS (50%), relative
TSR (25%) and ROIC (25%).
Remuneration mix
The stretch remuneration mix is shown below. It reflects the STI opportunity that will be available if the performance conditions are
satisfied at stretch, and the face value of the LTI performance rights granted during the year, as determined at grant date. The stretch
remuneration mix has a deliberate weighting to the LTI consistent with the Company’s strategy of delivering increased shareholder
value over the longer term.
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
Fixed
remuneration
(%)
40%
44%
50%
STI
(%)
20%
22%
25%
LTI
(%)
Total
remuneration
40%
33%
25%
100%
100%
100%
With 60% of the CEO’s salary at risk, assuming the performance stretch is achieved in FY24, this will result in 50% of remuneration
comprising of deferred equity vesting over one to three years.
Integral Diagnostics Annual Report 2023
37
REMUNERATION REPORT
For year ended 30 June 2023
Fixed remuneration
Delivery mechanism
Considerations
Strategic objective
Governance
Short term incentive (STI)
Delivery mechanism
Performance period
Gateway and
performance measures
employer superannuation contributions.
• 100% cash payment including base salary, allowances, other non monetary and fringe benefits and
• Role scope and complexity.
• The Executive’s skills and experience.
• Attract and retain suitably qualified and experienced talent.
• Fixed remuneration is reviewed and benchmarked annually by the PCRC with regard to market
• There are no guaranteed increases to fixed remuneration in employment contracts.
rates and individual performance and is approved by the Board.
• 50% delivered as cash and 50% delivered as deferred equity.
• The STI targets were set at the commencement of FY23 and assessed by the PCRC at the end of the
financial year, based on the Company’s audited annual results and individual performance against
non-financial targets.
Gateway
• A risk, compliance and conduct gateway is in place for all Executives, which must be met before the
grant of any STI award can be made.
Financial performance target
• 50% of STI is available based on achievement of year-on-year Operating NPAT growth. Operating
NPAT growth was selected because it is linked to the creation of shareholder returns.
Should a decision be made during the year that significantly changes the number of shares on
issue (e.g. acquisition, buyback) the original NPAT hurdle will be adjusted to a diluted Operating
EPS measure.
Non-financial performance targets
• 50% of STI is available on achievement of non-financial objectives, which are made up of a mix of
strategic and sustainability goals and priorities identified by the Board, with measures to assess
performance against those objectives set at that time. Sustainability goals include measures related
to patient satisfaction, employee engagement, safety and injury prevention, employee turnover and
environmental impact.
STI opportunity
Maximum STI opportunities are outlined below:
Executive
Dr Ian Kadish
Craig White
Paul McCrow
Maximum opportunity
50% of fixed remuneration
50% of fixed remuneration
50% of fixed remuneration
Strategic objective
• The financial performance targets were chosen because they are aligned with the short-term
• The non-financial performance targets ensure Executives consider non-financial objectives when
objectives of the business, while being consistent with the long-term strategy of the Company.
making strategic decisions. All are essential to positive outcomes for the Company and its
stakeholders, and recognise that our patients, people, culture and risk management are integral
to the Company's sustainability, ongoing success and ability to differentiate in an increasingly
competitive market.
Governance
• Performance measures and objectives are clearly defined and measurable.
• Targets are recommended by the PCRC and approved by the Board.
• Any incentive payment is not an entitlement and provided at the discretion of the Board.
38
Long term incentive (LTI)
Delivery mechanism
Performance Period
Performance conditions
and measures
Assessment of
performance conditions
• The LTI award is delivered in the form of Performance Rights.
• 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 performance
conditions. 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.
The LTI Performance Rights are tested based on performance over a three-year period commencing on
1 July in the year they are granted.
The Performance Rights are subject to measurement against hurdles set for the following three KPIs:
• aggregate diluted Operating Earnings Per Share (EPS) (50% weighting);
• relative Total Shareholder Return (TSR) (25% weighting); and
• Return on Invested Capital (ROIC) (25% weighting).
The diluted Operating EPS performance condition will be measured by reference to the cumulative
Company EPS over a period of three financial years, commencing on 1 July in the year of the grant.
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
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 FY23 LTI EPS performance condition is detailed on page 46
The TSR performance condition measures the growth in the Company's share price, together with the
value of any cash dividends and any other shareholder benefits paid during the three-year performance
period (and assuming those dividends and other shareholder benefits were reinvested in additional
shares in the Company). Relative TSR provides a direct link between executive remuneration and
shareholder return relative to the Company's peers.
The FY23 TSR performance condition is detailed on page 46
The ROIC performance condition is based on internal targets related to return on invested capital. ROIC
has been chosen as a performance condition as the Board believes that a primary focus in coming
years should be an improvement in the return from the substantial investments the Company has made
into its business. The Board has set ROIC target ranges at the start of the performance period taking
into account the market conditions and company specific factors at the time.
At the end of the Performance Period, actual average ROIC will be calculated by taking the total of the
actual ROIC achieved for each year of the Performance Period, divided by three. Measurement of the
average actual ROIC would exclude any significant one-off events, and the initial impact of business
development initiatives, as approved by the Board.
In the ordinary course, if there is an asset impairment, the calculation for the Invested Capital will add
back the value of the impairment for testing the relevant LTI grants.
The FY23 ROIC performance condition is detailed on page 46
• Aggregate EPS is to be calculated with reference to underlying earnings (operating1).
• TSR will be measured against the Company's relevant peer group of S&P ASX300 Accumulation
• ROIC is to be calculated as earnings before interest and tax (EBIT) divided by invested capital.
Invested capital is defined as net debt, plus lease liabilities plus contributed share capital.
Index, excluding Banks2 and Resource companies.
Integral Diagnostics Annual Report 2023
39
REMUNERATION REPORT
For year ended 30 June 2023
Long term incentive (LTI)
Testing of
performance conditions
Additional restrictions
Treatment of cessation3
Change of control4
Forfeiture and clawback
Strategic objective
Governance
Performance Period.
• Testing of the performance conditions is expected to occur shortly after the end of the
• Any Performance Rights that vest will be automatically exercised, and participants are not required
• Participants in the LTI Plan may elect to place an additional dealing restriction, by way of a holding
to pay an exercise price. Any remaining Performance Rights that do not vest will lapse.
lock, foregoing the right to trade on any shares they may receive on vesting and exercise of the
Performance Rights.
after vesting.
• The minimum additional restriction periods that may be chosen range from one to eight years
• Where a participant ceases employment for cause or due to resignation (other than due to death,
• In all other circumstances, a pro-rata portion of Performance Rights (based on the portion of
permanent disability or serious illness) all unvested Performance Rights will lapse.
the Performance Period that has elapsed) will remain on foot and be subject to the original
performance conditions, 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 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.
• The performance conditions are clearly defined and measurable.
• Any grant is not an entitlement and provided at the discretion of the Board.
1. Operating NPAT is defined as NPAT before non-operating transactions as included in the Operating and Financial Review.
2. Banks are defined as entities included in the official S&P/ASX 300 Banks index including NAB, Virgin Money Ltd, Judo Capital Holdings Ltd, CBA, ANZ, Westpac, BOQ, Bendigo & Adelaide Bank Ltd and
Mystate Limited..
3. For the CEO's FY21 grant, the Board has determined that if the CEO ceases employment and he is deemed by the Board to be a “Good Leaver”, his full FY21 Performance Rights would stay on foot. The
Board has made the same determination in relation to the COO’s FY21 Performance Rights.
4. 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 FY21 Performance Rights held by the CEO. The Board has
made the same determination in relation to the COO’s FY21 Performance Rights. The Board has made the same determination in relation to the CFO's FY22 Performance Rights.
40
c. Executive KMP remuneration outcomes for FY23
Statutory remuneration outcomes for FY23
Details of the remuneration received by the Group’s Executive KMP for FY23 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
$
Cash incentive
$
Superannuation
$
Long service
leave
$
Share based
payments
$1
Total
remuneration
$
Proportion of
rem. tied to
performance
%
Dr Ian Kadish - Managing Director and Chief Executive Officer
FY23
FY22
782,058
781,488
Craig White - Chief Financial Officer2
FY23
FY22
589,632
273,323
Paul McCrow - Chief Operating Officer3
FY23
FY22
415,652
369,046
85,913
-
67,425
-
32,977
-
25,292
23,568
25,292
11,784
25,292
23,568
37,232
11,006
12,498
1,786
15,761
6,994
167,228
1,097,723
23.1%
(824,661)
(8,599) Not meaningful
106,860
-
801,707
286,893
21.7%
-
47,458
(54,249)
537,140
15.0%
345,359 Not meaningful
Anne Lockwood - Chief Financial and Commercial Officer4
FY23
FY22
-
315,918
-
-
-
-
-
-
20,108
(35,282)
33,918
334,662
-
10.1%
Total Statutory Remuneration for Executive KMP
FY23
FY22
1,787,342
186,315
1,739,775
-
75,876
79,028
65,491
321,546
2,436,570
20.8%
(15,496)
(844,992)
958,315 Not meaningful
1. Share based payment reversals reflect revised probability of FY19, FY20 and FY21 rights vesting as at 30 June 2022 and the FY23 STI deferred equity.
2. Craig White commenced KMP position 24 January 2022.
3. In FY23, Paul McCrow received a $50,000 payment in recognition for duties performed in addition to this role as Chief Operating Officer. This payment has been included in FY23 cash salary and fees.
4. Anne Lockwood ceased KMP position 30 January 2022.
Integral Diagnostics Annual Report 2023
41
REMUNERATION REPORT
For year ended 30 June 2023
Realised remuneration for FY23 (non-IFRS information)
The following table shows the actual remuneration paid to, and the equity which vested for, each Executive KMP in the FY23 and
FY22 financial years. Realised remuneration differs from statutory remuneration presented in the previous table that is prepared in
accordance with the Corporations Act 2001 (Cth) and Accounting Standards, and require share based payments to be reported as
remuneration from the time of grant, even though the actual value ultimately may not be realised from these share based payments.
Realised remuneration only reports remuneration and awards received by the participants in any given financial year. The Directors
believe this information provides clarity as to the relationship between the statutory remuneration reported in the table above to actual
remuneration realised.
Fixed
remuneration
$
Dr Ian Kadish - Managing Director and Chief Executive Officer
FY23
FY22
Craig White - Chief Financial Officer3
FY23
FY22
Paul McCrow - Chief Operating Officer
FY23
FY22
782,058
781,488
589,632
273,323
415,652
369,046
Anne Lockwood - Chief Financial and Commercial Officer4
FY23
FY22
-
315,918
STI
$1
85,913
-
67,425
-
32,977
-
-
-
Total Realised Remuneration for Executive KMP
FY23
FY22
1,787,342
1,739,775
186,315
-
Vesting of prior
LTI grants
$2
Total
remuneration
$
Super
$
25,292
23,568
25,292
11,784
25,292
23,568
-
20,108
75,876
79,028
-
1,716,675
893,263
2,521,731
-
-
-
-
-
682,349
285,107
473,921
392,614
-
474,184
810,210
-
2,049,534
2,190,859
4,009,662
1. Of the total STI realised for FY23, only 50% will be settled in cash. The remaining 50% of the STI award (totalling $186,314) will be settled in deferred equity provided the participant is employed by the
Group at 30 June 2024.
2. Valued on the 5 day VWAP of IDX ordinary shares up to vesting date.
3. Craig White commenced KMP position 24 January 2022.
4. Anne Lockwood ceased KMP position 30 January 2022.
42
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 past four years. Consistent with Company strategy, the
table shows the Company's 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 Group1,2
Operating EBITDA as a % of revenue
Operating NPAT as a % of revenue
Diluted Operating EPS
Return on operating assets
Closing share price
Dividends paid or declared per share
Declared operating dividend payout ratio
FY23
19.3%
4.0%
7.6cps
5.6%
3.28
6.0 cps
77.9%
FY22
20.8%
6.0%
10.2cps
10.7%
3.03
7.0 cps
68.6%
FY21
26.8%
10.9%
FY20
27.6%
11.4%
FY19
22.9%
11.1%
19.0cps
16.6cps
16.2cps
14.7%
5.20
12.2cps
48.2%
13.9%
3.90
9.5cps
50.2%
17.9%
3.16
10.0cps
46.9%
1. Key measures for the period are measured on a pre-AASB 16 basis.
2. The remuneration report includes references to non-IFRS financial information. The Directors believe the presentation of non-IFRS financial measures are useful for the users of this remuneration
report as they provide additional and relevant information that reflect the underlying financial performance of the business and measurement against performance criteria. For further information on
non-IFRS measures used in this report, including a reconciliation to statutory financial information, refer to the 'Non-IFRS Financial Information' section on pages 118 to 122 of this report.
Fixed Executive Remuneration
As disclosed in last year's report, changes to the remuneration framework were introduced in FY23. There was no change however, in
fixed remuneration for executive KMP in FY23.
Fixed remuneration in FY23 for KMP remained at $790,000 for the CEO, $620,000 for the CFO and $393,750 for the COO. The COO also
received a $50,000 allowance in FY23 for taking on additional General Manager duties.
STI Outcomes and Payments
The Committee undertakes a quarterly and end of financial year performance review of the Executive KMP achievements against the
financial and non-financial criteria to recommend the STI award payable. Any award of a STI to Executive KMP requires Board approval.
Cash STI payments are made the following financial year in which they were earned.
The Board has ultimate discretion to apply judgement or make adjustments when approving the final performance outcomes. The
Board did not exercise any discretions or make any adjustments in determining the outcome of the Executive KMP's STI award
for FY23.
For each strategic and sustainability 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.
A summary of the CEO’s performance criteria, achievements and outcomes for the FY23 STI opportunity is provided below. A summary
table providing the aggregate STI results for Executive KMP is shown on page 45.
Integral Diagnostics Annual Report 2023
43
REMUNERATION REPORT
For year ended 30 June 2023
CEO's FY23 STI Scorecard
Criteria
Weighting
Strategic objectives
Result
Performance detail
Financial
50%
ONPAT targets set by the Board:
0%
Non
Financial
30%
Execution of projects critical for long term performance and growth of the business
• < $24.7m = 0%
• $24.7m (threshold) = 50%
• $27.4m (target) = 75%
• ≥ $ 30.1m(stretch) = 100%
• Successful integration and
achievement of FY23
financial forecasts for
recent acquisitions; Peloton
and Horizon
• Assessment of deliverables
relating to market growth
and key strategic and
commercial projects.
• Operating NPAT of $17.8m below threshold.
• Material improvement in second half results partially
helped by the reducing industry wide COVID-19 impacts.
10%
20%
• Integration plan agreed as part of the acquisition.
Integration teams and Steering Committee completed all
key deliverables in accordance with the plan.
existing IDX businesses in the relevant markets.
• The acquired businesses performed stronger than the
• IDX Australian revenue growth rate of 7.0% versus
• NZ second half results exceeded first half as
Medicare growth rate of 3.7%.
management broadened referrer base to specialities
less impacted by referrer owned practices.
• Introduced IDX preventative care products to
• Expanded and introduced gap pricing where appropriate
broaden market.
due to Medicare’s significantly lower than inflation
price increases.
20%
Sustainability, leadership and culture
• patient satisfaction
• employee engagement
• safety and injury prevention
• employee turnover
• environmental impact
13.5% • Patient satisfaction levels were consistently high
achieving an average NPS score of 84%.
compared to FY22 but below target.
• Improvement in FY23 employee engagement score of 2%
• Safety and injury prevention didn't meet
• Reduction in unplanned staff turnover by 3% compared
• IDX Carbon Emissions Reduction Strategy developed by
threshold requirement.
management and approved by Board
to FY22.
Total Non-
Financial
Total
Financial
50%
50%
Total of STI
opportunity
100%
43.5%
0%
43.5%
The Executive KMP achieved many aspects of their strategic and sustainability goals, which was a noticeable achievement in
the circumstances given the challenging trading conditions of FY23. However, the financial goal was not achieved as per the
CEO’s outcome.
44
The table below shows the STI awarded for each KMP for the current and preceding financial years:
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
FY23
FY22
STI foregone
(%)
STI awarded
(%)
STI awarded
$1
STI foregone
(%)
STI awarded
(%)
STI awarded
$
56%
56%
67%
44%
44%
34%
171,825
134,850
65,953
100%
100%
100%
0%
0%
0%
-
-
-
1. Includes both cash and equity settled STI awards.
The CFO and the COO were also set non-financial measurable targets comprising of strategic and sustainability objectives. These are
outlined below:
Strategic Objectives
CFO
COO
• business development
• acquisition integration
• organic growth and costs structure
• overseeing the implementation of new of finance and risk systems
• improving operational performance
• growth initiatives and supporting local greenfield and
• acquisition integration
• radiologist and referrer engagement
brownfield strategies
Sustainability Objectives
Applicable to both
• patient satisfaction
• employee engagement
• safety and injury prevention
• employee turnover
• environmental impact
LTI Outcomes and Payments
The FY19 LTI grant was tested over four years to the results for FY22. Diluted Operating Earnings per Share declined from 12.5
to 10.2 cents per share representing a compound annual growth rate of (4.9%). This did not meet the threshold target of 5% set
for the FY19 LTI Performance Rights. The terms of the FY19 LTI Performance Rights allowed 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. As the severe impact of COVID-19 on the business during FY22 was seen as an extreme circumstance outside
Management's control, the Board decided to allow re-testing of the FY19 LTI Performance Rights at the end of FY23.
The Board noted that at the re-test, the Threshold and stretch levels of achievement would be determined by applying the CAGRs as
specified by the Board at the time the Rights were granted over the full five years. This was tested at the end of FY23 and dilutive
Operating Earnings per Share declined from 12.5 to 7.6 cents per share representing a compound annual growth rate of (9.4%). This
did not meet the threshold target of 5% over the five year period (1July 2018 to 30 June 2023) set for FY19 LTI performance rights and
therefore all FY19 LTI Rights have lapsed.
The FY20 LTI is tested over four years to the results for the year ended 30 June 2023. Diluted Operating Earnings per Share declined
from 16.2 to 7.6 cents per share representing a compound annual growth rate of (17.2%). This did not meet the threshold target of 5%
set for the FY20 LTI Performance Rights and therefore all FY20 LTI Rights have lapsed.
Integral Diagnostics Annual Report 2023
45
REMUNERATION REPORT
For year ended 30 June 2023
LTI Performance Rights granted in FY23
For FY23, the LTI performance conditions have been determined as follows:
Performance conditions
and measures
The percentage of LTI Rights subject to the EPS performance condition that will be eligible for vesting
(if any) will be determined as follows:
Aggregate diluted Operating EPS (cents per
share) over the performance period
% of LTI Rights that Vest
Less than 35cps
Equal to 35cps
Between 35 and 45cps
Nil
20%
Straight line pro rata vesting between 20%
and 100%
Equal to, or above, 45cps
100%
The percentage of LTI Rights subject to the TSR performance condition that will be eligible for Vesting
(if any) will be determined as follows:
TSR ranking Achieved
Below the 51st percentile
51st percentile
% of LTI Rights that Vest
Nil
50%
Greater than 51st and less than 75th percentile
Straight line pro rata vesting between 50%
and 100%
75th percentile and above
100%
The percentage of LTI Rights subject to the ROIC performance condition that will be eligible for Vesting
(if any) will be determined as follows:
Average ROIC over 3 years
Less than 8.5% Average ROIC
Equal to 8.5% Average ROIC
% of LTI Rights that Vest
Nil
20%
Greater than 8.5% Average ROIC and less than 11%
Average ROIC
Straight line pro rata vesting between 20%
and 100%
11% of Average ROIC or greater
100%
The Threshold targets are set at a level that the Board regards as attainable. The stretch targets are
set at a level which the Board regards as demonstrating clear outperformance. Full vesting occurs
when performance equals or exceeds stretch.
The Board also determined the number of FY23 LTI Performance Rights awarded was by use of the 30-day VWAP prior to 30 June,
consistent with the FY22 grant.
The table below shows the LTI details for each Executive for the financial year ended 30 June 2023:
Number of
performance
rights granted
241,591
142,202
60,207
Grant date
4-Nov-22
3-Nov-22
3-Nov-22
Fair value on
grant date
Aggregate fair
value
Vesting and
exercise date
Performance
rights expiry
date
2.23
2.23
2.23
538,325
316,862
134,156
30-Jun-25
30-Jun-25
30-Jun-25
30-Jun-25
30-Jun-25
30-Jun-25
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
46
LTI Performance Rights granted in FY22
The table below shows the LTI details for each Executive for the financial year ended 30 June 2022:
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
Number of
performance
rights granted
157,371
48,550
39,219
Grant date
5-Nov-21
24-Jan-22
26-Aug-21
Fair value on
grant date
Aggregate fair
value
Vesting and
exercise date
4.53
3.71
4.90
712,891
180,121
192,173
30-Jun-25
30-Jun-25
30-Jun-25
Performance
rights expiry
date
30-Jun-26
30-Jun-26
30-Jun-26
d. Cumulative interest of Executives under the LTI program
The LTI program is the key element of the ‘at risk component’ of the Executives’ remuneration. None of the Performance Rights vested
or lapsed during the reporting period, however following testing after financial year end, the FY19 and FY20 performance rights lapsed.
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 for each
respective grant.
Grant
Year
Grant Date
Opening
balance
Granted
during
year
Vested
Forfeited
Balance at
end of year
(unvested)
Value yet
to be
expensed
Number
Number
Number
% Number
%
Number
$
Dr Ian Kadish
FY23
4-Nov-22
-
241,591
FY22
FY21
FY20
FY19
FY23
FY22
5-Nov-21
157,371
31-Oct-20
184,616
20-Nov-19
235,572
16-Nov-18
200,000
-
-
-
-
3-Nov-22
-
142,202
24-Jan-22
48,550
-
Craig White
Paul McCrow
FY23
3-Nov-22
-
60,207
FY22
FY21
FY20
26-Aug-21
39,219
17-Aug-20
23,270
26-Aug-19
59,779
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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%
0.0%
235,572
100.0%
200,000
100.0%
-
-
-
-
-
0.0%
0.0%
0.0%
0.0%
0.0%
59,779
100.0%
241,591
248,544
157,371
184,616
-
-
-
-
-
-
142,202
146,295
48,550
-
60,207
61,940
39,219
23,270
-
-
-
-
Integral Diagnostics Annual Report 2023
47
REMUNERATION REPORT
For year ended 30 June 2023
LTI Plan Target Summary
Diluted Operating earnings per share (diluted Operating EPS) tranche
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
20% vesting hurdle (cumulative 3 year)1
100% vesting hurdle (cumulative 3 year)2
FY23
FY22
FY21
FY20
FY19
01-Jul-22
01-Jul-21
01-Jul-20
01-Jul-19
01-Jul-18
30-Jun-25
30-Jun-25
30-Jun-24
30-Jun-23
30-Jun-22
n/a
n/a
n/a
n/a
35.00
45.00
19.0
23.07
29.87
n/a
n/a
n/a
16.6
20.18
26.12
n/a
n/a
n/a
16.2
19.70
25.51
n/a
n/a
n/a
12.5
15.17
n/a
21.95
n/a
n/a
1. Nil LTI rights will vest if this threshold is not achieved.
2. LTI rights will vest on a straight-line pro rata basis between the 20% and 100% vesting hurdles.
Relative total shareholder return (TSR) tranche
LTI Plan
Beginning of period
End of period
20% LTI rights vesting hurdle1
100% LTI rights vesting hurdle2
FY23
FY22
FY21
FY20
FY19
01-Jul-22
01-Jul-21
01-Jul-20
01-Jul-19
01-Jul-18
30-Jun-25
30-Jun-25
30-Jun-24
30-Jun-23
30-Jun-22
50.0%
100.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. Nil LTI rights will vest if this threshold is not achieved.
2. LTI rights will vest on a straight-line pro rata basis between the 20% and 100% vesting hurdles.
Return on invested capital (ROIC) tranche
LTI Plan
Beginning of period
End of period
20% LTI rights vesting hurdle1
100% LTI rights vesting hurdle2
FY23
FY22
FY21
FY20
FY19
01-Jul-22
01-Jul-21
01-Jul-20
01-Jul-19
01-Jul-18
30-Jun-25
30-Jun-25
30-Jun-24
30-Jun-23
30-Jun-22
8.5%
11.0%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. Nil LTI rights will vest if this threshold is not achieved.
2. LTI rights will vest on a straight-line pro rata basis between the 20% and 100% vesting hurdles.
e. 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
Six months
Six months
Other than those set out in this remuneration report, there are no further termination benefits offered to Executive KMP.
48
f. Non-Executive Director and Radiologist Executive Director Remuneration
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 NEDs for their services as Directors must not exceed in any financial year the
amount fixed by the Company in general meeting. This amount has been fixed at $1,000,000.
The Company’s remuneration policy for 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.
Fees to NEDs 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 NEDs and two Radiologist Executive Directors employed as radiologists.
NEDs’ fees are reviewed periodically by the PCRC. The PCRC may, from time to time, receive advice from independent remuneration
consultants to ensure NEDs’ fees are appropriate and in line with the market.
The Chair’s fees are determined independently from the fees of other NEDs, based on comparative roles in the external market
and the specific nature of the expertise and role for this company. NEDs do not receive share options or other incentives and their
remuneration must not include a commission on, or a percentage of, operating revenue.
Radiologist Executive Directors’ remuneration arrangements
Dr Jacqueline Milne and Dr Nazar Bokani are deemed to be Radiologist Executive Directors as they are engaged 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
contracts are consistent with other radiologists and include remuneration at market rates plus allowances where appropriate. During
the year Dr Bokani began providing some of his radiology services through a related party Tele-Rad Consultancy L.L.C-FZ on terms
consistent with other radiologists. Details of the related party transaction are detailed in Note 32 to the financial statements.
In addition, they receive a Radiologist Executive Director Board fee which is set by reference to the fees paid to the NEDs.
Non-Executive Director and Radiologist Executive Director Board fees for FY23
The following annual fees were paid to Radiologist Executive Directors, NEDs and the Chair for their services in FY23:
• for Radiologist Executive Directors (excluding the MD/CEO), $68,750;
• for NEDs, a base fee of $100,000;
• for committee members, a fee of $12,500 per committee, excluding the Nomination 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 NEDs’ fees include superannuation where applicable.
The Board has determined for FY24 there will be no change in Board fees.
Integral Diagnostics Annual Report 2023
49
REMUNERATION REPORT
For year ended 30 June 2023
FY23 Non-Executive and Radiologist Executive Director statutory remuneration
Details of the statutory remuneration received by the Group’s NEDs and Radiologist Executive Directors for FY23 and the prior financial
year are set out in the following table.
Short term
benefits
Cash salary
and fees
$1
Post
employment
benefits
Superannuation
$
Long term
benefits
Long service
leave
$
Share based
payments
$
Total
remuneration
$
Non-Executive Directors
Helen Kurincic
FY23
FY22
John Atkin
FY23
FY22
Raelene Murphy
FY23
FY22
Andrew Fay
FY23
FY22
Rupert Harrington
FY23
FY22
Radiologist Executive Directors2,3
Dr Jacqueline Milne
FY23
FY22
Dr Nazar Bokani
FY23
FY22
259,708
261,432
130,967
131,432
124,434
125,000
25,292
23,568
6,533
6,068
13,066
12,500
119,250
12,521
-
-
-
-
58,093
5,676
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
997,247
908,319
878,766
924,609
25,292
23,568
25,292
23,568
27,498
3,355
14,567
13,634
Total Director Fees and Remuneration for Non-Executive and Radiologist Executive Directors
FY23
FY22
2,510,372
2,408,885
107,996
94,948
42,065
16,989
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
28,929
42,554
28,929
42,554
285,000
285,000
137,500
137,500
137,500
137,500
131,771
-
-
63,769
1,050,037
935,242
947,554
1,004,365
2,689,362
2,563,376
1. Includes Executive Director fees and normal pay for the Company’s radiologist directors.
2. Dr Bokani and Dr Milne received $68,750 in director fees in FY23 (FY22: $68,750). With the exception of these director fees, all other remuneration received by Dr Bokani and Dr Milne is consideration
for their respective roles as radiologists and are on commercial terms commensurate with other radiologists within the Group.
3. Share based payments relate to reflect movements due to the Radiologist Loan Funded Share Plan for Executive Radiologist Directors.
50
The table below presents the total director fees for FY23:
FY23
FY22
1. Director fees inclusive of superannuation.
Director Fees
$1
829,271
761,269
FY23 Non-Executive Director and Radiologist Executive Director realised remuneration
Non-Executive Directors
Helen Kurincic
FY23
FY22
John Atkin
FY23
FY22
Raelene Murphy
FY23
FY22
Andrew Fay
FY23
FY22
Rupert Harrington
FY23
FY22
Radiologist Executive Directors
Dr Jacqueline Milne
FY23
FY22
Dr Nazar Bokani
FY23
FY22
Fixed
remuneration
$
Super
$
Total
remuneration
$
259,708
261,432
130,967
131,432
124,434
125,000
25,292
23,568
6,533
6,068
13,066
12,500
285,000
285,000
137,500
137,500
137,500
137,500
119,250
12,521
131,771
-
-
-
-
-
-
58,093
5,676
63,769
997,247
908,319
878,766
924,609
25,292
23,568
25,292
23,568
1,022,539
931,887
904,058
948,177
Total Director Fees and Remuneration for Non-Executive and Radiologist Executive Directors
FY23
FY22
2,510,372
2,408,885
107,997
2,618,368
94,948
2,503,833
Integral Diagnostics Annual Report 2023
51
REMUNERATION REPORT
For year ended 30 June 2023
g. KMP minimum shareholding policy and shareholdings
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. It requires NEDs, Radiologist 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 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 annual director fees as outlined below:
• Managing Director and CEO:
• CFO:
• Other Executive KMP:
• Non-Executive Directors:
• Radiologist Executive Directors:
100%
75%
50%
100%
100%
All KMP currently comply with the Minimum Shareholding Policy with the exception of Raelene Murphy. Ms Murphy is aiming to be
in compliance with this policy as soon as practicable, taking into account the provisions of related policies such as the Securities
Dealing Policy.
KMP shareholding
The number of shares in the Company held during the financial year by each Director and other members of the KMP, including their
personal related parties, is set out below:
Non-Executive Directors
Helen Kurincic
John Atkin
Raelene Murphy
Andrew Fay1
Radiologist Executive Directors
Dr Jacqueline Milne
Dr Nazar Bokani2
Executive KMP
Dr Ian Kadish
Craig White
Paul McCrow
Balance at
1 July 2022
Additions Disposals/other
Number of
shares held
upon ceasing to
be KMP
Balance at
30 June 2023
555,579
183,785
30,945
n/a
19,900
277,716
539,441
-
-
-
3,741
-
40,000
-
-
-
-
18,493
(13,193)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
555,579
187,526
30,945
40,000
25,200
277,716
539,441
-
-
1. Appointed a Director on 18 July 2022
2. Dr Nazar Bokani is a participant in the Radiologist Loan Share Scheme, under which 185,144 shares are subject to a limited recourse loan.
52
Minimum shareholding
Helen Kurincic
Dr Ian Kadish
John Atkin
Andrew Fay
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%
95%95%
100%100%
100%100%
74%74%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90% 100%
% Achieved
Integral Diagnostics Annual Report 2023
53
REMUNERATION REPORT
For year ended 30 June 2023
h. Other transactions with KMP and their related parties
The following transactions occurred with related parties to KMP:
Consolidated
$
%
interest
KMP interest
$
30 June 2023
Payment for teleradiology services to Tele-Rad Consultancy L.L.C-FZ of which
Dr. Nazar Bokani is related
261,085
100%
261,085
30 June 2022
Nil
-
-
-
The above FY23 related party transactions relate to teleradiology services provided to the Group by Dr. Bokani and are on commercial
terms consistent with other teleradiology providers to the Group.
Financial Accommodation
Dr Nazar Bokani
Balance
30 June 2023
Balance
30 June 2022
Interest paid
and payable
446,614
454,658
-
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 four 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 Executive 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.
The Remuneration Report has been audited.
54
AUDITOR’S INDEPENDENCE DECLARATION
For year ended 30 June 2023
Integral Diagnostics Annual Report 2023
55
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 2023, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Integral Diagnostics Limited and the entities it controlled during the period. Niamh Hussey Melbourne Partner PricewaterhouseCoopers 28 August 2023 56
$53.1MFree Cash Flow ↑ 8.0% increase$19.1MCapex InvestedIn Growth Initiatives6.0 centsPer ShareFully Franked FY23 Dividend$85.2MOperating EBITDA ↑ 13.9% increase$17.8MOperating NPAT ↓ 17.6% decrease$440.8MRevenue ↑ 22.1% increase Financial Report
58 Consolidated Statement of Profit or Loss
59 Consolidated Statement of Comprehensive Income
60 Consolidated Statement of Financial Position
61 Consolidated Statement of Changes in Equity
62 Consolidated Statement of Cash Flows
63 Notes to the Consolidated Financial Statements
112 Directors’ Declaration
113 Independent Auditor’s Report to the Members of
Integral Diagnostics Limited
118 Non-IFRS Financial Information
124 Shareholder Information
128 Corporate Directory
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
For the year ended 30 June 2023
Revenue
Revenue
Interest and other income
Total revenue and other income
Expenses
Consumables
Employee benefits expense
Depreciation expense
Amortisation expense
Transaction and integration benefits/(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 2023
$’000
30 June 2022
$’000
5
5
6
6
6
6
24
6
16
7
440,762
360,930
448
39
441,210
360,969
(21,040)
(275,960)
(25,459)
(18,027)
9,077
(1,852)
(15,616)
(7,769)
(35,238)
(18,365)
(19,221)
(219,612)
(20,644)
(16,055)
(5,460)
638
(13,142)
(8,028)
(26,243)
(10,483)
(328)
(158)
(410,577)
(338,408)
30,633
22,561
(5,593)
(7,958)
25,040
14,603
25,040
14,603
58
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2023
Profit for the year
Other comprehensive income
Items that may be reclassified to profit or loss
Note
30 June 2023
$’000
30 June 2022
$’000
25,040
14,603
Exchange differences on translation of foreign operations
1,017
(1,912)
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
26,057
12,691
26,057
12,691
26,057
12,691
Integral Diagnostics Annual Report 2023
59
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the year ended 30 June 2023
Note
30 June 2023
$’000
30 June 2022
$’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
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
60
8
9
10
11
12
13
14
15
16
17
18
13
20
19
20
21
13
15
22
23
24
25
33,855
21,690
96
5,251
1,848
123,193
19,409
3,594
6,524
1,264
62,740
153,984
153,059
129,397
474,772
19,028
15
776,271
839,011
31,145
2,454
14,214
7,479
27,375
82,667
7,778
221,142
127,266
17,589
9,521
383,296
465,963
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
373,048
347,244
333,280
(9,788)
49,556
373,048
322,543
(12,455)
37,156
347,244
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Contributed
capital
$’000
Reserves
$’000
Retained
profits
$’000
Total equity
$’000
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)
219,219
(8,883)
-
-
-
-
(1,912)
(1,912)
44,403
14,603
-
14,603
362
(2,875)
1,500
12,300
90,028
1,022
-
987
-
-
-
-
-
(1,022)
(638)
-
Balance at 30 June 2022
322,543
(12,455)
Balance at 1 July 2022
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)
Contributed
capital
$’000
Reserves
$’000
322,543
(12,455)
-
-
-
-
-
1,322
9,023
-
-
-
-
1,017
1,017
-
-
-
-
-
-
1,650
254,739
14,603
(1,912)
12,691
362
(2,875)
1,500
12,300
90,028
-
(638)
(20,863)
347,244
Total equity
$’000
347,244
25,040
1,017
26,057
-
-
1,322
9,023
-
-
1,650
-
-
-
-
-
-
-
(21,850)
37,156
Retained
profits
$’000
37,156
25,040
-
25,040
-
-
-
-
-
-
-
Dividends paid and reinvested in equity (Note 24)
392
-
(12,640)
(12,248)
Balance at 30 June 2023
333,280
(9,788)
49,556
373,048
Integral Diagnostics Annual Report 2023
61
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2023
Note
30 June 2023
$’000
30 June 2022
$’000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Transaction and integration costs relating to acquisition of subsidiaries
Interest and other finance costs paid
Interest received
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for purchase of subsidiary, net of cash acquired
Payments in settlement of contingent consideration
Payments for property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of share capital
Transaction costs paid on issue of share capital
Proceeds from borrowings drawn
Repayment of borrowings
Repayment of the principal element of lease liabilities
Dividends paid to Company shareholders
Net cash from financing activities
37
34
20
23
23
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the financial year
8
440,367
(349,757)
(3,976)
(13,672)
448
(1,992)
71,418
(84,813)
(150)
(43,995)
(128,958)
2,203
-
43,049
(45,209)
(19,252)
(12,640)
(31,849)
(89,389)
123,193
51
33,855
357,020
(286,726)
(5,460)
(10,328)
39
(17,445)
37,100
(24,614)
(3,309)
(27,770)
(55,693)
91,828
(2,875)
114,153
(89,829)
(11,280)
(20,863)
81,134
62,541
62,203
(1,551)
123,193
62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. General information
The Financial Report covers Integral Diagnostics Limited as a Group consisting of Integral Diagnostics Limited (‘Company’ or ‘parent
entity’) and the entities it controlled at the end of, or during, the year (collectively referred to as the ‘Group’). The financial statements
are presented in Australian dollars, which is Integral Diagnostics Limited’s functional and presentation currency and are rounded to
the nearest thousand dollars ($‘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 28 August 2023. 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).
The financial report has been prepared on a going concern basis. While the Group is in a net current asset deficit position at 30 June
2023, the Group has sufficient operating cash flows and available debt facilities to pay its debts as and when they fall due for 12
months from the date of signing these financial statements.
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 2023 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.
Integral Diagnostics Annual Report 2023
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
30 June 2023 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.
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, 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
64
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).
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 2023
65
NOTES TO THE CONSOLIDATED 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.
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.
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.
66
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 2023. 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.
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.
Integral Diagnostics Annual Report 2023
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2023, there was no external revenue greater than 10% to any one customer (2022: 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 2023
$’000
30 June 2022
$’000
386,287
54,923
441,210
590,610
185,661
776,271
318,407
42,562
360,969
475,640
153,391
629,031
68
Note 5. Revenue
Sales revenue
Services revenue
Other revenue
Other revenue
Revenue
Interest and other income
Interest income
Other income
Total revenue and other income
Timing of revenue recognition
At a point in time
Over time
Consolidated
30 June 2023
$’000
30 June 2022
$’000
440,099
358,739
663
440,762
2,191
360,930
423
25
448
39
-
39
441,210
360,969
422,793
17,969
440,762
342,905
18,025
360,930
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 2023
69
NOTES TO THE CONSOLIDATED 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 2023
$’000
30 June 2022
$’000
3,701
16,899
70
4,789
25,459
2,153
15,874
18,027
43,486
2,921
14,351
36
3,336
20,644
2,952
13,103
16,055
36,699
Net loss on disposal of property, plant and equipment
17
(175)
Transaction and integration costs relating to acquisition of subsidiaries
Remeasurement of contingent consideration liabilities
Professional fees and other costs
Total transaction and integration costs
Finance costs
Interest and finance charges paid/payable
Unwinding of the effect of discounting provisions
Finance costs expensed
Employee benefits expense
Employee benefits
Superannuation contributions
Labour supply
Total employee benefits expense
(15,839)
6,762
(9,077)
18,295
70
18,365
228,258
15,362
32,340
275,960
-
5,460
5,460
10,483
-
10,483
184,066
12,926
22,620
219,612
Costs of inventories recognised as expense were $21.0 million (2022: $19.2 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 (2022: nil).
70
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% (2022: 30%)
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment costs
Transaction costs, including remeasurement of contingent consideration liabilities
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 2023
$’000
30 June 2022
$’000
5,464
129
5,593
(931)
1,060
129
7,742
216
7,958
(55)
271
216
30,633
22,561
9,190
6,768
37
(4,830)
664
122
-
5,183
457
(47)
5,593
50
1,010
(184)
47
5
7,696
376
(114)
7,958
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 2023
71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
30 June 2023
$’000
30 June 2022
$’000
22
33,833
33,855
21
123,172
123,193
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
Consolidated
30 June 2023
$’000
30 June 2022
$’000
21,998
(499)
21,499
191
21,690
19,712
(303)
19,409
-
19,409
Trade receivables
Less: loss allowance
Other receivables
72
Impairment of receivables
Movements in the loss allowance for trade receivables are as follows:
Opening balance
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
Consolidated
30 June 2023
$’000
30 June 2022
$’000
303
357
(161)
499
547
(30)
(214)
303
Consolidated
30 June 2023
$’000
30 June 2022
$’000
2,858
932
3,052
6,842
2,255
649
1,928
4,832
Ageing of trade receivables has deteriorated during the financial year, however the Group has assessed the likelihood of recovery and
determined that the provision for impairment is appropriate and no further provision is required.
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.
Other receivables are recognised at amortised cost, less any provision for impairment.
Note 10. Current assets – other
Accrued income
Prepayments
Security deposits
Integral Diagnostics Annual Report 2023
Consolidated
30 June 2023
$’000
30 June 2022
$’000
2,092
2,778
381
5,251
1,322
4,821
381
6,524
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 11. Inventory
Contrast, drugs, needles & personal protective equipment
Accounting policy for inventory
Consolidated
30 June 2023
$’000
30 June 2022
$’000
1,848
1,264
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 $21.0 million (2022: $19.2 million).
Note 12. Non-current assets – property, plant and equipment
Consolidated
30 June 2023
$’000
30 June 2022
$’000
3,004
8,124
57,283
(17,177)
40,106
163,651
(71,451)
92,200
537
(238)
299
31,391
(13,941)
17,450
153,059
47,488
(14,462)
33,026
135,647
(65,057)
70,590
372
(208)
164
27,636
(15,288)
12,348
124,252
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
74
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 2021
Business combination
Additions
Transfers
Disposals/write offs
Depreciation expense
Exchange differences
$’000
2,025
-
31,282
(25,183)
-
-
-
Balance at 30 June 2022
8,124
Business combination –
Note 34
Additions
Transfers
Disposals/write offs
Depreciation expense
Exchange differences
-
17,679
(22,809)
-
-
10
Balance at 30 June 2023
3,004
$’000
31,757
1,264
-
3,376
(433)
(2,921)
(17)
33,026
2,465
1,427
6,884
(31)
(3,701)
36
40,106
$’000
67,415
2,660
-
15,984
(821)
(14,351)
(297)
70,590
7,959
22,048
10,601
(2,171)
(16,899)
72
92,200
$’000
150
-
-
50
-
(36)
-
164
133
75
-
-
(70)
(3)
299
$’000
9,747
189
25
5,773
(2)
(3,336)
(48)
12,348
773
3,905
5,324
(96)
(4,789)
(15)
17,450
Total
$’000
111,094
4,113
31,307
-
(1,256)
(20,644)
(362)
124,252
11,330
45,134
-
(2,298)
(25,459)
100
153,059
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 that are necessarily incurred whilst commissioning a 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 2023
75
NOTES TO THE CONSOLIDATED 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
Consolidated
30 June 2023
$’000
30 June 2022
$’000
129,397
106,881
14,214
127,266
141,480
11,740
106,199
117,939
Additions to the right-of-use assets during the year were $31.9m (2022: $14.2m), of which $20.9m was acquired through business
combinations (refer Note 34 for further information on business combinations).
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)
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
Exchange Rate
Lease liabilities recognised at 30 June
Consolidated
30 June 2023
$’000
30 June 2022
$’000
15,874
5,311
240
13,103
4,030
311
Consolidated
30 June 2023
$’000
30 June 2022
$’000
117,939
20,909
5,258
(11,739)
23,696
(14,978)
395
109,626
9,038
(29)
(3,429)
14,013
(11,280)
-
141,480
117,939
76
Note 14. Non-current assets – intangibles
Goodwill – at cost
Brand names and trademarks – at cost
Customer contracts – at cost
Less: Accumulated amortisation
Customer contract - net
Total intangible assets
Reconciliations
Consolidated
30 June 2023
$’000
30 June 2022
$’000
444,477
28,763
17,625
(16,093)
1,532
352,462
25,546
16,234
(13,755)
2,479
474,772
380,487
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 2021
Assets recognised on business combination acquisitions
Additions
Amortisation expense
Foreign currency conversion
Balance at 30 June 2022
Assets recognised on business combination acquisition –
Note 34
Amortisation expense
Foreign currency conversion
Balance at 30 June 2023
Goodwill
$’000
315,790
39,976
-
-
(3,304)
352,462
89,305
-
2,710
444,477
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 2023
Brand names &
trademarks
$'000
Customer
contracts
$’000
24,745
1,100
-
-
(299)
25,546
3,042
-
175
28,763
4,194
430
818
(2,952)
(11)
2,479
1,175
(2,153)
31
1,532
Australia
$’000
New Zealand
$’000
301,084
19,225
813
321,122
143,393
9,537
720
153,650
Total
$’000
344,729
41,506
818
(2,952)
(3,614)
380,487
93,522
(2,153)
2,916
474,772
Total
$’000
444,477
28,762
1,533
474,772
Integral Diagnostics Annual Report 2023
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Impairment test for goodwill and intangibles
Goodwill and brand names are tested for impairment annually (as at 30 June) and when circumstances indicate the carrying value may
be impaired, and were last tested at 31 December 2022. 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.
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.
At 30 June 2023, the recoverable amount of the Australian and New Zealand CGU's are estimated to exceed their carrying values by
$313.1m and $34.2m respectively.
Key assumptions for value-in-use calculations
Five year compound annual revenue growth rate
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 are consistent with the long-term strategic
growth forecasts for the Group, and assume a continuation of the stable regulatory environment for healthcare services in both
Australia and New Zealand.
The value-in-use calculations have been assessed for the sensitivity of the five-year compound growth rate as a key input. A
reasonably possible decrease in the five-year compound annual growth rate to 3.6% would remove headroom in the New Zealand cash
generating unit.
Long term growth rate
The long term growth rate has been assessed to reflect macroeconomic and inflationary conditions in the Australian and New
Zealand markets.
Pre-tax discount rate
The pre-tax discount rate has been assessed with input from independent experts to reflect the current weighted average cost of
capital for the Group.
The value-in-use calculations have been assessed for the sensitivity of the pre-tax discount rate as a key input. A reasonably possible
increase in the pre-tax discount rate to 15.5% would remove headroom in the New Zealand cash generating unit.
The following table sets out the key assumptions for impairment testing for each geographic segment:
2023
%
7.0
2.5
11.8
6.3
2.5
13.5
2022
%
6.3
2.5
10.8
6.9
2.0
12.4
Break even
rate
%
5.8
(6.8)
17.2
3.6
(0.4)
15.5
Australia
Five-year compound annual revenue growth rate
Long-term growth rate
Pre-tax discount rate
New Zealand
Five-year compound annual revenue growth rate
Long-term growth rate
Pre-tax discount rate
78
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the
date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not
amortised and are subsequently measured at cost less an impairment. Finite life intangible assets are subsequently measured at cost
less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible
assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method 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.
Integral Diagnostics Annual Report 2023
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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)
Additions through business combinations (Note 34)
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
80
Consolidated
30 June 2023
$’000
30 June 2022
$’000
13,005
1,237
745
433
5
3,603
19,028
5,645
13,383
19,028
10,869
1,171
1,136
502
268
3,306
17,252
4,233
13,019
17,252
17,252
16,335
931
845
-
55
-
862
19,028
17,252
Consolidated
30 June 2023
$’000
30 June 2022
$’000
(8,705)
(8,884)
(17,589)
(871)
(16,718)
(17,589)
(6,024)
(8,202)
(14,226)
(602)
(13,624)
(14,226)
(14,226)
(13,826)
(1,060)
(2,303)
(271)
(129)
(17,589)
(14,226)
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 2023. 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.
Name of joint venture
MedX
Place of
incorporation
Australia
2023
%
50%
2022
%
Measurement
method
50% Equity method
2023
$'000
15
2022
$'000
159
Ownership interest
Carrying amount
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.
Aggregate carrying amount of individual immaterial joint ventures
Aggregate share of amounts of the group’s share of:
Profit/(loss) from continuing operations
Total comprehensive income
Integral Diagnostics Annual Report 2023
Consolidated
30 June 2023
$’000
30 June 2022
$’000
15
(328)
(328)
159
(158)
(158)
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 2023
$’000
30 June 2022
$’000
10,408
20,737
31,145
8,694
14,203
22,897
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 2023
$’000
30 June 2022
$’000
2,454
5,470
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 good
Consolidated
30 June 2023
$’000
30 June 2022
$’000
18,461
8,501
312
101
15,664
7,326
250
281
27,375
23,521
Accounting policy for 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.
82
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
Foreign exchange differences
Amounts paid during the year
Balance at 30 June 2023
Contingent consideration
Consolidated
30 June 2023
$’000
30 June 2022
$’000
7,479
7,778
15,257
16,376
8,236
24,612
Total
$’000
24,612
6,711
(15,962)
46
(150)
15,257
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.
The contingent consideration provision for the Earn Out A liability for the Imaging Queensland Group has been adjusted from $12.4m to
$2.2m based on the valuation provided by an independent expert, sought as part of the dispute resolution process provided for in the
Share Sale Contract, as disclosed in Note 20 of the Group's Consolidated Financial Statements for the year ended 30 June 2022. The
Group has made efforts to settle the $2.2m liability for Earn out A, based on the valuation provided by the independent expert, however
the vendors have declined settlement, and the matter remains in dispute at the date of this report. The provision for Earn Out B liability
remains unchanged at $5.5m.
The contingent consideration provision relating to the earn out liability for the X-Ray Group has been adjusted from $6.5m to nil and
the contingent consideration provision for Horizon Radiology has been adjusted from $2.8m to $1.4m based on the Group's estimation
of the amount likely to be paid out.
Integral Diagnostics Annual Report 2023
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 21. Non-current liabilities – borrowings
Debt facility
Asset financing facility
Consolidated
30 June 2023
$’000
30 June 2022
$’000
218,952
2,190
221,142
213,057
4,525
217,582
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:
Debt facility
Asset financing facility
Assets pledged as security
Consolidated
30 June 2023
$’000
30 June 2022
$’000
218,952
4,644
223,596
213,057
9,995
223,052
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.
84
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
Used at the reporting date
Asset finance facility
Cash advance facility
Standby letter of credit or guarantee facility
Commercial cards facility
Unused at the reporting date
Asset finance facility
Cash advance facility
Standby letter of credit or guarantee facility
Commercial cards facility
Accounting policy for borrowings
Consolidated
30 June 2023
$’000
30 June 2022
$’000
55,500
316,017
7,000
881
80,000
314,564
7,000
591
379,398
402,155
4,643
218,952
3,296
148
9,994
215,129
2,869
52
227,039
228,044
50,857
97,065
3,704
733
70,006
99,435
4,131
539
152,359
174,111
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.
Integral Diagnostics Annual Report 2023
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 22. Non-current liabilities – provisions
Long service leave
Lease make good
Lease make good
Consolidated
30 June 2023
$’000
30 June 2022
$’000
4,681
4,840
9,521
3,982
5,542
9,524
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 (current and non-current), are set
out below:
Consolidated – 2023
Carrying amount at the start of the year
Provision recognised on business combination
Remeasurements offset against make-good asset
Remeasurements charged through profit or loss
Amounts used
Carrying amount at the end of the year
Accounting policy for provisions
Lease
make good
$’000
5,823
878
(911)
(849)
-
4,941
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
86
23. Equity – contributed capital
Ordinary shares – fully paid
233,029,358
229,070,797
333,280
322,543
Consolidated
Consolidated
30 June 2023
#
30 June 2022
#
30 June 2023
$’000
30 June 2022
$’000
Movement in ordinary share capital
Balances at 1 July 2021
Date
Number of
Shares
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
Shares issued as consideration as part of Horizon
Radiology acquisition
Shares issued as consideration as part of Peloton
Radiology acquisition
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 under dividend reinvestment plan (DRP)
Balance at 30 June 2023
Ordinary shares
229,070,797
1 July
463,635
1 July
2,096,657
5 September
439,010
5 September
815,066
5 October
4 April
73,386
70,807
233,029,358
Issue Price
Total $’000
1.70
4.96
-
4.72
4.68
3.44
3.44
3.73
3.90
3.44
3.02
-
2.68
2.77
219,219
1,022
1,500
-
598
12,300
43,053
46,975
389
(2,875)
362
322,543
1,810
7,213
1,322
-
196
196
333,280
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.
Integral Diagnostics Annual Report 2023
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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.
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.
88
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 2023
$’000
30 June 2022
$’000
4,090
(3,849)
(8,013)
(2,016)
(9,788)
2,440
(3,849)
(8,013)
(3,033)
(12,455)
The reserve is used to recognise the value of equity benefits provided to employees 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. Refer to Note 16 for further detail on investments in joint ventures.
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 2023
89
NOTES TO THE CONSOLIDATED 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 2021
Recognition of share-based payments
Conversion of performance rights to
ordinary shares
Movement in translation of foreign operations
Balance at 30 June 2022
Issuance of shares held in escrow
Recognition of share-based payments
Movement in translation of foreign operations
Balance at 30 June 2023
Share-based
payment
reserve
$'000
Capital re-
organisation
reserve
$'000
Transaction
with non-
controlling
interest
$'000
Foreign
currency
translation
reserve
$'000
4,100
(638)
(1,022)
-
2,440
(563)
2,213
-
4,090
(3,849)
(8,013)
(1,121)
-
-
-
-
-
-
(3,849)
(8,013)
-
-
-
-
-
-
(3,849)
(8,013)
-
-
(1,912)
(3,033)
-
-
1,017
(2,016)
Total
$'000
(8,883)
(638)
(1,022)
(1,912)
(12,455)
(563)
2,213
1,017
(9,788)
The expense recognised for share based payments during the year was based on valuations using the Black-Scholes model.
Amount recognised in share based payment expense:
Share based payment expense - Management LTI scheme
Share based payment expense - Radiologist Loan Funded Share Plan (LFSP)
Amount recognised in employee benefits expense:
Share-based payment expense – Management STI scheme
Share-based payment expense – Management LTI scheme
Total share based payment expense
There were no cancellations or modifications to the awards in 2023 or 2022.
30 June 2023
$’000
30 June 2022
$’000
408
1,444
1,852
327
361
2,540
(1,672)
1,034
(638)
-
-
(638)
90
Valuation of equity-settled awards
The fair values of equity settled awards such as performance rights under the Management Long-term incentive (LTI) scheme, and
shares and options granted under the Radiologist Loan Funded Share & Option Plan (LFSP) were estimated using a Monte Carlo
simulation methodology and Black-Scholes option pricing technique and consider the following:
• exercise price
• expected life of the award
• current market price of the underlying shares
• expected volatility using an analysis of historic volatility over different rolling periods
• expected dividends
• the risk-free interest rate, which is an applicable government bond rate
• market-based performance hurdles (relative TSR).
Long-term incentive (LTI) scheme
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 $nil.
Under the plan, performance rights granted prior to FY23 only vest with an equity settlement if an EPS growth hurdle and a four-year
service condition are met. Performance rights granted in FY23 or later only vest if an cumulative EPS hurdle (50% of rights granted),
relative TSR hurdle (25% of rights granted) or return on invested capital (ROIC) hurdle (25% of rights granted) are met respectively. All
performance rights granted in FY23 or later are also subject to a three year service condition.
Participation in the plan is at the Board’s discretion and no individual has a contractual right to participate in the plan or to receive any
guaranteed benefits.
Outstanding at 1 July
Granted during the year
Forfeited during the year
Converted to ordinary shares during the year
Expired during the year
Outstanding at 30 June
Exercisable at 30 June
2023
Number
2022
Number
1,656,384
1,934,938
732,581
323,253
(1,011,442)
-
-
-
(601,807)
-
1,377,523
1,656,384
-
-
The following table lists the inputs to the valuation model used for the LTI plan. In FY23 the LTI plan was granted to members of the
Senior Management Team and the Senior Leadership Team on 3 November 2022 and the CEO on 4 November 2022. The valuation
metrics applicable to each LTI grant are set out below:
Weighted average fair values at the measurement date ($)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of share (years)
Weighted average share price ($)
Model used
2023
LTI Plan
2022
LTI Plan
2021
LTI Plan
2020
LTI (1) Plan
2.23
3.42
40%
3.25
2.7
2.75
4.90/4.53
3.35/3.75
2.75/3.01
2.5
N/A
3
N/A
3.5
N/A
0.59/1.37
0.27/0.13
0.72/0.77
4
5.39/4.96
4
3.91
4
2.71
Black Scholes
Black Scholes
Black Scholes
Black Scholes
The fair value at grant date of equity-settled share awards is recognised in the income statement over the period for which the benefits
of employee services are expected to be derived .Where awards are forfeited because non-market-based vesting conditions are not
met, the expense previously recognised is proportionately reversed.
Integral Diagnostics Annual Report 2023
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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). The allocated value of the shares issued to participating radiologists under the plan on 5 September 2022 was $3.02 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 $3.36 and an expiry date of 5 September 2032.
Outstanding at 1 July 2021
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 30 June 2022
Granted during the year
Forfeited during the year
Exercised during the year
Outstanding at 30 June 2023
Exercisable at 30 June
1. Weighted average exercise price (WAEP)
The following table lists the inputs to the models used for the LFSP.
WAEP1
Shares
WAEP1
Options
763,630
96,758
-
-
860,388
62,954
-
-
3.12
4.96
-
-
3.32
3.02
-
-
2,204,436
507,976
-
-
2,712,412
815,066
(55,418)
-
923,342
3.30
3,472,060
-
-
-
2.98
4.96
-
-
3.35
3.02
-
-
3.33
-
2023
LFSP Options
2023
LSFP Shares
2022
LFSP Options
2022
LSFP Shares
27 June 2022
27 June 2022
06 September
2021
06 September
2021
1.00
n/a
40.0%
3.40%
4.2
3.02
1.47
n/a
40.0%
3.67%
7.2
3.02
1.25
n/a
35.0%
0.65%
4.5
4.96
1.33
n/a
35.0%
0.65%
5.0
4.96
Black Scholes
Black Scholes
Black Scholes
Black Scholes
Consolidated
30 June 2023
$’000
30 June 2022
$’000
37,156
25,040
(12,640)
49,556
44,403
14,603
(21,850)
37,156
Grant Date
Weighted average fair values at the measurement date ($)
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of instrument (years)
Weighted average share price ($)
Model used
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
92
Note 26. Equity – dividends
Dividends
Full franked Dividends paid during the financial year were as follows:
Dividend paid 7.0 cents per share on 6 October 2021
Dividend paid 4.0 cents per share on 4 April 2022
Dividend paid 3.0 cents per share on 5 October 2022
Dividend paid 2.5 cents per share on 4 April 2023
Franking credits
Consolidated
30 June 2023
$’000
30 June 2022
$’000
-
-
6,885
5,755
12,640
13,825
8,025
-
-
21,850
Consolidated
30 June 2023
$’000
30 June 2022
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
34,793
31,335
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.
Integral Diagnostics Annual Report 2023
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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
2023
2022
Weighted
average
interest rate
%
1.12%
5.45%
2.50%
Weighted
average
interest rate
%
0.07%
2.48%
1.99%
Balance
$'000
33,833
(218,952)
(4,643)
(189,762)
Balance
$'000
123,193
(213,057)
(9,995)
(99,859)
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 (2022: 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
100
100
(2,211)
(2,010)
(1,548)
(1,407)
Basis points
change
(100)
(100)
Profit before
tax
$’000
Effect on equity
post tax
$’000
2,211
2,010
1,548
1,407
2023
2022
94
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
2023
2022
Change in NZD
Rate
Effect on profit
post tax
$'000
Effect on equity
$'000
+2.5c
-2.5c
+2.5c
-2.5c
(167)
167
(80)
80
(2,001)
2,001
(1,580)
1,580
The above 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 two years, eight months (2022: three years, eight months). The bank loan facilities are
interest-only repayments.
Integral Diagnostics Annual Report 2023
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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, therefore
these totals may differ from their carrying amount in the statement of financial position.
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
-
-
-
5.45%
2.50%
4.10%
10,408
20,737
7,479
-
2,455
18,922
60,001
Weighted
average
interest
rate
%
1 year or less
$’000
-
-
-
2.48%
1.99%
3.50%
8,419
14,202
16,376
10,936
5,638
13,914
69,485
-
-
7,778
-
-
-
-
220,120
2,189
18,182
28,149
Between
1 and
2 years
$’000
-
42,057
262,177
Between
2 and
5 years
$’000
-
-
-
-
2,500
5,736
10,936
2,444
12,696
28,576
333,253
2,209
23,292
364,490
-
-
-
-
-
90,695
90,695
10,408
20,737
15,257
220,120
4,644
169,856
441,022
Over 5 years
$’000
Total
contracted
cashflows
$’000
-
-
-
-
-
75,710
75,710
8,419
14,202
24,612
355,125
10,291
125,612
538,261
As at 30 June 2023
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing – variable
Debt facility
Asset financing facility
Property lease liabilities
Total non-derivatives
As at 30 June 2022
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Deferred consideration
Interest-bearing – variable
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.
96
Note 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 2023
$
30 June 2022
$
4,484,029
4,148,660
183,872
107,556
350,475
173,976
1,494
(1,208,431)
5,125,932
3,115,699
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 2023
$
30 June 2022
$
723,000
590,000
-
-
723,000
590,000
-
-
-
-
-
-
-
-
723,000
-
42,713
2,945
45,658
-
-
-
45,658
635,658
Integral Diagnostics Annual Report 2023
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 30. Contingent liabilities
The Group has given bank guarantees as at 30 June 2023 of $3.3 million (2022: $2.9 million) to various landlords.
Refer to Note 20 for details on contingent consideration liabilities held by the Group.
Note 31. Commitments
As at 30 June 2023, there were capital commitments for plant and equipment and leasehold improvements of $10.3 million (2022:
$24.9 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 33 - 54.
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 Rules,
accounting requirements and in accordance with good governance practices. This is to ensure that a financial benefit is not provided to
related parties without approval by the Board, and where required, shareholders.
The following transactions occurred with related parties:
Consolidated
$
%
interest
KMP interest
$
30 June 2023
Payment for teleradiology services to Tele-Rad Consultancy L.L.C-FZ of which
Dr. Nazar Bokani is related
261,085
100%
261,085
30 June 2022
Nil
-
-
-
The above FY23 related party transactions relate to teleradiology services provided to the Group by Dr Bokani and are on commercial
terms consistent with other teleradiology providers to the Group.
Loans to related party
Loan to key management personnel
Balance at the beginning of the year
Repayments
Balance at the end of the year
98
Consolidated
30 June 2023
$
30 June 2022
$
454,658
(8,044)
446,614
470,747
(16,089)
454,658
Dr Bokani is a 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
four-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
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
Parent
30 June 2023
$’000
30 June 2022
$’000
1,793
1,793
7,025
7,025
Parent
30 June 2023
$’000
30 June 2022
$’000
3,540
671,872
(4,392)
323,795
333,280
4,652
10,145
348,077
67,013
443,429
7,473
101,652
322,543
2,440
20,992
345,975
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.
Contingent liabilities
Except as disclosed in Note 30, there are no other contingent liabilities of the parent entity as at 30 June 2023.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023.
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.
Integral Diagnostics Annual Report 2023
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 34. Business combinations
Acquisition of Peloton Radiology
Effective 1 July 2022, the Group acquired the shares of the 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.
Peloton Radiology:
• Enhances IDX’s presence in the high growth corridor of South East Queensland;
• Provides radiology services at nine clinics;
• Is a comprehensive provider of diagnostic imaging services, with a highly diversified modality mix; and
• Employs six radiologists and has three partial MRI licences.
• Upfront purchase consideration of $66.0m on a cash and debt free basis, comprising $58.8m in cash and $7.2m in new ordinary IDX
• An initial earn-out payment up to $3.0m and a final earn-out payment of up to $1.0m, subject to the fulfilment of several
The key terms of the acquisition included:
shares; and
non-financial criteria.
The purchase price accounting has now been finalised with the final values on the following table:
Plant and equipment
Right of use assets
Brand names
Customer contracts
Intangible assets
Deferred tax
Borrowings
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
100
Fair value
recognised on
acquisition
$'000
Adjustments to
fair value
$’000
Final
acquisition
fair value
$’000
12,037
15,397
3,042
-
-
(1,678)
-
(15,397)
(2,159)
(695)
459
1,443
(1,588)
10,861
59,803
70,664
58,776
7,213
4,675
70,664
(459)
58,776
58,317
(2,670)
690
-
-
-
429
-
(690)
(85)
-
-
-
-
(2,326)
1,089
(1,237)
-
(562)
(675)
(1,237)
-
-
-
9,367
16,087
3,042
-
-
(1,249)
-
(16,087)
(2,244)
(695)
459
1,443
(1,588)
8,535
60,892
69,427
58,776
6,651
4,000
69,427
(459)
58,776
58,317
Acquisition-related costs
Acquisition-related costs of $40,564 relating to Peloton Radiology have been expensed in the Income Statement under 'transaction and
integration costs' in the financial period.
Contingent consideration
The contingent consideration arrangement requires the Group to pay the vendors of Peloton Radiology two fixed cash payments, up to
a maximum undiscounted amount of $4,000,000 upon certain criteria being met. There is no minimum amount payable.
The fair value of the contingent consideration arrangement at the acquisition date was estimated at $4,000,000 calculating the present
value of the future expected cash flows.
Acquired receivables
The fair value of acquired trade receivables was $524,784. The gross contractual amount for trade receivables due is $524,784 with a
nil loss allowance recognised on acquisition.
Revenue and profit contribution
Peloton Radiology has contributed revenues of $37,706,310 to the Group for the period from 1 July 2022 to 30 June 2023. 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.
Acquisition of Horizon Radiology
Effective 1 July 2022, the Group acquired the shares of the Horizon Radiology Limited, a provider of general practitioner referred
obstetrics and musculoskeletal x-ray and ultrasound services in Auckland, New Zealand.
Horizon Radiology:
• Expands IDX’s presence in Auckland, New Zealand’s largest market;
• Is a significant provider of obstetrics and musculoskeletal x-ray and ultrasound services; and
• Operates eight clinics that are located close to major general practitioner referrers.
• Upfront consideration of NZD$32.0m on a cash and debt free basis, comprising of NZD$30.0m in cash and NZD$2.0m in new
• Earn out payments of NZD$3.0m payable in two equal instalments over two years, subject to EBITDA performance hurdles.
The key terms of the acquisition included:
ordinary IDX shares; and
The purchase price accounting has now been finalised with the final values being:
Integral Diagnostics Annual Report 2023
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Plant and equipment
Right of use assets
Brand names
Customer contracts
Intangible assets
Deferred tax
Borrowings
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
Fair value
recognised on
acquisition
$'000
Adjustments to
fair value
$’000
Final
acquisition
fair value
$’000
1,770
5,104
-
1,175
-
(206)
(195)
(5,109)
(352)
(183)
593
958
(463)
3,092
28,518
31,610
27,089
1,810
2,711
31,610
(593)
27,089
26,496
193
(287)
-
-
-
-
-
287
(88)
-
-
-
-
105
(105)
-
-
-
-
-
-
-
-
1,963
4,817
-
1,175
-
(206)
(195)
(4,822)
(440)
(183)
593
958
(463)
3,197
28,413
31,610
27,089
1,810
2,711
31,610
(593)
27,089
26,496
Acquisition-related costs of $277,463 relating to Horizon Radiology have been expensed in the Income Statement under 'transaction
and integration costs' in the financial period.
Contingent consideration
The contingent consideration arrangement requires the Group to pay the vendors of Horizon Radiology two fixed cash payments of
NZD$1,500,000 each, up to a maximum undiscounted amount of NZD$3,000,000 upon EBITDA performance hurdles being met. There is
no minimum amount payable.
The fair value of the contingent consideration arrangement at the acquisition date was estimated at NZD$3,000,000 calculating the
present value of the future expected cash flows.
Acquired receivables
The fair value of acquired trade receivables was $594,945. The gross contractual amount for trade receivables due is $594,945, with a
nil loss allowance recognised on acquisition.
102
Revenue and profit contribution
Horizon Radiology has contributed revenues of $11,369,413 to the Group for the period from 1 July 2022 to 30 June 2023. 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.
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 2023
103
NOTES TO THE CONSOLIDATED 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
Citiscan Radiology Pty Ltd
Peloton Radiology Pty Ltd
The Women's Imaging Group Pty Ltd
X-Ray & Imaging Holdings Pty Ltd
X-Ray & Imaging Pty Ltd
Specialist Radiology Group Limited
Trinity MRI Limited
Integral Diagnostics New Zealand Limited
Astra Radiology Limited
Ascot at Maranui Limited
Insight Radiology Limited
Horizon Radiology Limited
104
Principal place of business/
country of incorporation
2023
%
2022
%
Ownership interest
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
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
100
100
100
100
100
100
100
100
-
-
-
-
-
100
100
100
100
100
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
• Citiscan Radiology Pty Ltd
• Peloton Radiology Pty Ltd
• The Womens Imaging Group Pty Ltd
• X-Ray & Imaging Holdings Pty Ltd
• X-Ray & Imaging 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 2023
105
NOTES TO THE CONSOLIDATED 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 2023
$’000
30 June 2022
$’000
385,627
319,333
3,899
447
2,548
39
389,973
321,920
(18,550)
(250,120)
(16,877)
(202,009)
(22,221)
(14,632)
8,016
(1,852)
(13,307)
(6,055)
(30,149)
(12,489)
(328)
(18,067)
(12,266)
(5,353)
637
(11,430)
(6,689)
(25,285)
(7,030)
(141)
(361,687)
(304,510)
28,286
(5,294)
22,992
17,410
(5,677)
11,733
22,992
11,733
-
22,992
-
11,733
106
Consolidated Statement of Financial Position
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Income tax payable
Other assets
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax asset
Investment
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
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
Integral Diagnostics Annual Report 2023
Note
30 June 2023
$’000
30 June 2022
$’000
27,034
58,346
173
4,851
1,632
88,313
17,912
3,361
6,239
1,177
92,036
117,002
129,753
106,657
321,122
17,843
46,198
621,573
713,609
24,895
2,356
12,600
6,101
26,012
71,964
7,778
147,206
105,133
14,035
8,784
282,936
354,900
358,709
333,280
(7,723)
33,152
358,709
110,354
90,452
257,952
16,723
46,348
521,829
638,831
20,222
5,470
10,510
16,376
22,780
75,358
8,236
109,150
90,445
10,840
8,882
227,553
302,911
335,920
322,543
(9,422)
22,799
335,920
107
NOTES TO THE CONSOLIDATED 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
Remeasurement of lease Liability
Remeasurement of contingent consideration liabilities
Bad debts
Unrealised FX loss (gain)
Share of (profits)/losses of joint venture
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 2023
$’000
30 June 2022
$’000
25,040
14,603
43,486
36,699
391
2,212
17
(849)
4,331
(15,839)
356
(3)
328
(352)
(1,764)
693
3,159
(82)
5,355
4,938
71,417
408
(637)
(175)
(60)
-
(1,688)
(214)
155
158
(3,436)
(646)
1,846
433
(3,309)
(9,203)
2,165
37,100
108
Reconciliation of liabilities arising from financing activities
Consolidated
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
Business combination
New leases net of terminations
Impact of liability maturity for period
Cash flows
FX
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
10,427
578
12,768
(11,498)
(535)
11,740
1,765
978
18,890
(19,252)
93
99,199
8,460
11,308
(12,768)
-
-
106,199
19,144
12,213
(10,596)
-
306
6,542
192,185
-
-
88,756
(89,828)
-
5,470
195
-
41,905
(45,209)
93
2,454
-
-
(88,756)
114,153
-
217,582
-
-
(41,600)
43,049
2,111
221,142
Total
$’000
308,353
9,038
11,308
-
12,827
(535)
340,991
21,104
13,191
8,599
(21,411)
2,602
365,076
Balance as at 30 June 2023
14,214
127,266
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
1. Non-current borrowings per Note 20 includes $1.17m (2022: $2.04m) of capitalised funding establishment costs.
30 June 2023
$’000
30 June 2022
$’000
33,855
(2,454)
(221,142)
(189,741)
33,855
(223,596)
(189,741)
123,193
(5,470)
(217,582)
(99,859)
123,193
(223,052)
(99,859)
Integral Diagnostics Annual Report 2023
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 38. Earnings per share
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Integral Diagnostics Limited
30 June 2023
$’000
30 June 2022
$’000
25,040
-
25,040
14,603
-
14,603
30 June 2023
#
30 June 2022
#
Weighted average number of ordinary shares used in calculating basic earnings per share
232,718,711
209,370,731
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
2,928,429
2,160,053
148,156
337,955
Weighted average number of ordinary shares used in calculating diluted earnings per share
235,795,296
211,868,739
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
10.8
10.6
Cents
7.0
6.9
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.
110
Note 39. Events after the reporting period
Resignation of Directors
On 10 August 2023, the Group announced the resignation of Dr Nazar Bokani and John Atkin from the Board of Directors, effective
9 August 2023 and 31 August 2023 respectively. The Group also announced the appointment of Ingrid Player to the Board of Directors,
effective 29 August 2023.
Radiologist Loan Funded Share Plan and Matching Options Plan operations
The Board approved participation in the Radiologist Loan Funded Share Plan and New Zealand Matching Options Plan and subject
to receipt of radiologist contributions by 30 August 2023 of $0.33m, these contributions will be matched by an IDX contribution of
$0.66m, resulting in $0.99m of equity securities to be issued on 6 September 2023. The number of equity securities to be issued will be
determined by the 30-day VWAP up to 1 September 2023.
Results of the performance conditions for the Long Term Incentive (LTI) awards
The performance condition relating to the performance rights issued as part of the FY19 and FY20 Long Term Incentive (LTI) awards
was tested on the 28 August 2023. The performance required for vesting was not met for either the FY19 and FY20 LTI awards, and as
a result 877,621 performance rights lapsed.
Dividend declaration
Subsequent to year end, a dividend of 3.5 cents per share was declared and will be paid on 4 October 2023.
Other matters or circumstances
No other matter or circumstances has arisen since 30 June 2023 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.
Integral Diagnostics Annual Report 2023
111
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 2023 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
28 August 2023
Managing Director and Chief
Executive Officer
112
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
Integral Diagnostics Annual Report 2023
113
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 2023 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 2023 ● 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. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
114
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 $1.5 million, which represents approximately 5% of the Group’s profit before tax. ● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. ● We chose Group profit before tax 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. Integral Diagnostics Annual Report 2023
115
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 brand names and trademarks (Refer to note 14) At 30 June 2023, the Group has a goodwill balance of $444.7 million and indefinite life brand names and trademarks of $28.8 million. The Group’s goodwill and brand names are tested for impairment across two cash generating unit Groups (“CGU’s”) – Australia and New Zealand. Under Australian Accounting Standards, the Group is required to assess the goodwill and brand names for impairment at least annually. The Group has performed impairment tests over the CGU’s based on value in use discounted cash flow models (the models). This requires the Group to make significant judgements and assumptions, including estimation of forecast cash flows, terminal value growth rates and discount 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: ● Tested the mathematical accuracy of key underlying calculations in the impairment models. ● Compared the forecast future cash flows used in the model with the forecasts formally approved by the board. ● Compared growth assumptions in the forecast cash flows to historical results and external data sources such as economic and industry forecasts. ● With assistance of our internal valuation experts, we assessed the discount rates and long-term growth rates used in the models by comparing them to external market data and comparable companies. We evaluated the disclosures made in Note 14, including those regarding key assumptions in light of the requirements of Australian Accounting Standards. INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF INTEGRAL
DIAGNOSTICS LIMITED
116
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 Peloton Radiology and Horizon Radiology. The Group undertook a purchase price allocation exercise for both acquisitions in order to calculate the fair value of assets and liabilities acquired, including identifiable intangible assets. The accounting for these acquisitions is a Key Audit Matter given judgements made by the Group in identifying all assets and liabilities of the newly acquired businesses and estimating the fair value of each asset and liability for initial recognition by the Group. With assistance our internal 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 businesses acquired ● Assessed the fair values of the acquired assets and liabilities recognised by considering the valuation methodology adopted by management in light of the requirements of Australian Accounting Standards. We evaluated the disclosures made in Note 34, in light of the requirements of Australian Accounting Standards. Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the year ended 30 June 2023, 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 through our opinion on the financial report. We have issued a separate opinion on the remuneration report 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. Integral Diagnostics Annual Report 2023
117
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. Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 34 to 54 of the directors’ report for the year ended 30 June 2023. In our opinion, the remuneration report of Integral Diagnostics Limited for the year ended 30 June 2023 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 Niamh Hussey MelbournePartner 28 August 2023 NON-IFRS FINANCIAL INFORMATION
Certain parts of this report contain financial measures that have not been prepared in accordance with the Australian equivalents of
international financial reporting standards (IFRS) and are not recognised measures of financial performance or liquidity under IFRS. In
addition to the financial information presented in accordance with IFRS, certain ‘non-GAAP financial measures’ have been included in
this report. These measures include Capital expenditure, Free cash flow, Operating EBIT, Operating EBITDA , Operating NPAT, Reported
EBITDA, Net debt, Net Debt to Equity, Net Tangible Assets, and Net tangible asset per ordinary security, Return on Invested Capital
(ROIC) and Return on Operating Assets.
These non-IFRS financial measures are defined below. This section provides a reconciliation of these measures to the Group's
Financial Statements.
The Group believes that the non-IFRS financial measures it presents provide a useful means through which to examine the underlying
performance of its business. These measures however, should not be considered to be an indication of, or alternative to, corresponding
measures of gross profit, net profit, cash flows from operating activities, or other figures determined in accordance with IFRS. In
addition, such measures may not be comparable to similar measures presented by other companies.
Undue reliance should not be placed on the non-IFRS financial measures contained in this report, and the non-IFRS financial measures
should not be considered in isolation or as a substitute for financial measures computed in accordance with IRFS.
Although certain of these data have been extracted or derived from the Group's Financial Statements, these data have not been audited
or reviewed by the Group's independent auditors.
Definition and calculation of Non-IFRS financial information
Definitions and calculation methodology for non-IFRS financial information used in this report are as follows:
Non-IFRS
Financial Information
Capital expenditure
Free cash flow
Net debt
Net debt to EBITDA
(leverage ratio)
Net tangible assets
Management use
Calculation methodology
Used to assess the Group's deployment of capital.
Management use this measure to aid the decision
making of capital allocation and productivity.
Used to assess the cash available for investing
and financing activities, including shareholder
distributions, debt servicing after running the
Group's operations.
Used to measure the structure of the balance
sheet, and the financing of the Group, and aids
management in tracking the relative debt level of
the Group.
Used to measure the profitability of the Group
relative to the debt required to be serviced, and
aids management in determining debt servicing
requirements of the Group.
Used to measure the Group's net asset
position (after excluding intangible assets) to aid
management in assessing the liquidity and solvency
positions of the Group.
Includes capital additions for monies spent on
fixed assets such as office furniture equipment,
plant and equipment, motor vehicles, software and
leasehold improvements.
Cash flow from operating subtracting replacement
capital expenditure.
Calculated as interest bearing liabilities less cash
and cash equivalents.
Calculated as net debt divided by Reported EBITDA,
adjusted for items of income and expense as set out
per the Group's lending covenant requirements.
Calculated as net assets after subtracting intangible
assets, including right-of-use assets.
Net tangible assets per
ordinary security
Used to measure the Group's capital allocation
decisions relative to the performance of its share
price (equity valuation).
Calculated as net tangible assets, divided by
ordinary shares on issue.
118
Non-IFRS
Financial Information
Operating EBITA
Operating EBITDA
Operating NPAT
Reported EBITA
Reported EBITDA
Return on
invested capital
Return on
operating assets
Management use
Calculation methodology
Used to assess the Group's operational profitability,
excluding amortisation of non-operating intangibles,
net finance costs and income tax expense in order
to help management track the performance of the
Group from its operations only, after excluding the
impacts of exceptional and abnormal items.
Used to assess the Group's operational profitability,
excluding depreciation, amortisation, net finance
costs and income tax expense, in order to help
management track the performance of the Group
from its operations only after excluding the impact
of exceptional and abnormal items. This assists
management in determining optimal resource
allocation decisions.
Used to assess the Group's operational profitability
after excluding the impacts of exceptional and
abnormal items.
Used to assess the Group's operational profitability,
excluding amortisation of non-operating intangibles,
net finance costs and income tax expense in order
to help management track the performance of the
Group from its operations only.
Used to assess the Group's operational profitability,
excluding depreciation, amortisation, net finance
costs and income tax expense in order to help
management track the performance of the Group
from its operations.
Calculated as profit before income tax expense and
net finance costs, excluding non-operating items.
Calculated as profit before income tax expense,
net finance costs, depreciation and amortisation,
excluding non-operating items.
Calculated as statutory net profit after tax, after
excluding tax effective non-operating items.
Calculated as profit before income tax expense and
net finance costs.
Calculated as profit before income tax expense, net
finance costs, depreciation and amortisation.
Used to assess the Group's efficiency in allocating
capital to investments, and aids management in
making investment decisions.
Calculated as Operating EBIT divided by the sum
of net debt and share capital (averaged over
24 months).
Used to assess the Group's efficiency in utilising
operating assets to generate earnings, and aids
management in making investment decisions.
Calculated as LTM organic Operating NPAT (plus
trailing acquisitions NPAT) divided by the sum of
current assets and property plant and equipment
(at cost).
Integral Diagnostics Annual Report 2023
119
NON-IFRS FINANCIAL INFORMATION
Reconciliation of statutory earnings to non-IFRS financial information
Derived from the Statutory Consolidated Statement of Profit of Loss
Operating NPAT
Statutory NPAT
Adjusted for:
Remeasurement of contingent consideration liabilities (tax-effected)
Transaction and integration costs (tax-effected)
Share based payments (tax-effected)
Share of net profit of joint ventures (tax-effected)
Amortisation of customer contracts (tax-effected)
Operating NPAT
Reported EBITA/EBITDA
Statutory NPAT
Adjusted for:
Income tax expense
Interest income
Finance costs
Amortisation of customer contracts
Reported EBITA
Adjusted for:
Depreciation Expense
Amortisation Expense
Reported EBITDA
30 June 2023
$’000
30 June 2022
$’000
25,040
14,603
(15,774)
4,879
1,852
328
1,537
17,862
-
5,491
(637)
158
2,111
21,726
25,040
14,603
5,593
(423)
18,365
2,153
50,728
25,459
15,874
92,061
7,958
(39)
10,484
3,021
36,027
20,651
13,103
69,781
120
Operating EBITA
Reported EBITA
Adjusted for:
Remeasurement of contingent consideration liabilities
Transaction and integration costs
Share based payments
Share of net profit of joint ventures
Operating EBITA
Operating EBITDA
Reported EBITDA
Adjusted for:
Remeasurement of contingent consideration liabilities
Transaction and integration costs
Share based payments
Share of net profit of joint ventures
Asset Impairment
Operating EBITDA
30 June 2023
$’000
30 June 2022
$’000
50,728
36,027
(15,839)
6,762
1,852
328
43,831
-
5,460
(637)
158
41,008
92,061
69,781
(15,839)
6,762
1,852
328
26
-
5,460
(637)
158
-
85,190
74,762
Integral Diagnostics Annual Report 2023
121
NON-IFRS FINANCIAL INFORMATION
Derived from the Consolidated Statement of Profit or Loss and Consolidated Statement of FInancial Position
Diluted Operating EPS
Operating NPAT
Divided by:
Weighted average no. of shares (WaNoS)
WaNoS
WaN diluting instruments
Total dilutive WaNoS
30 June 2023
$’000
30 June 2022
$’000
17,862
21,726
30 June 2023
#000s
30 June 2022
#000s
232,719
3,076
235,795
209,371
2,498
211,869
Diluted Operating EPS (cents per share)
7.6
10.3
30 June 2023
$’000
30 June 2022
$’000
17,862
21,726
-
17,862
1,699
23,425
62,740
256,017
318,757
154,000
219,316
373,316
5.6%
6.3%
30 June 2023
$’000
30 June 2022
$’000
5,755
8,154
13,909
8,025
6,885
14,910
17,862
21,726
77.9%
68.6%
Return on operating assets
Operating NPAT
Adjusted for:
Trailing NPAT adjustment for business combinations
Operating NPAT including trailing NPAT from business combinations
Divided by:
Operating assets
Current assets
Property, plant and equipment (at cost)
Total operating assets
Return on operating assets
Declared dividend payout ratio
Interim dividend of 2.5 cents per share paid on 4 April 2023
Final dividend of 3.5 cents declared on 28 August 2023
Total dividend paid or declared
Divided by:
Operating NPAT
Declared dividend payout ratio
122
Integral Diagnostics Annual Report 2023
123
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 1 August 2023.
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
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
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