Ann: Capitol Acquires Radiology Network in Melbourne, page-25

A radiology practice usually preforms poorly if (not necessarily in order of importance)
1. The location is bad
2. They price themselves out of the market
3. The equipment is bad
4. The management is bad
5. The service staff (reception, radiographers, etc) are bad
6. The radiologist is bad
7. All of the above

These four sites only generate enough work for two radiologists, from the revenue figures provided (6.3 million). Which means they are probably manned part time.

Uniradiology does not have a good reputation imo. Given they bulk bill, and three of these four sites are near Capital sites, I will let you decide which of the factors above are likely to apply to these new acquisitions.

Paying a premium (close to 8x EBITDA) to acquire an elite competitor makes some sense. The last acquisitions were at a much better price (4.5-5.5x EBITDA from memory). Paying a premium to acquire these sites, when the Capital model relies on bulk billing and hence it is likely bulk billing will continue in these areas does not make a lot of sense on the information available to us, imo.

So overall, this to me is a negative, and looks like growth for the sake of it. It sounds like the BOD is angling for being taken over. Which (if it ever happens of course) I doubt will be at the price that could be achieved with hard work and financially responsible management.

CAJ has thrown money at everything in the last twelve months or so (share buy back, multiple practice purchases, failed IDX bid). If they are that keen to offload their cash, the least they could do is to pay the shareholders a special dividend and be done with it?

Alternatively the BOD is simply keen to rapidly boost the total revenue figure (empire building).

I hope there is an advantage to this I don't see, but I still think we paid way too much.