Integral Diagnostics Limited (IDX) Earnings Call Transcript & Summary

Welcome, ladies and gentlemen, to the Annual General Meeting of Integral Diagnostics Limited. My name is Helen Kurincic, Chair of the company. It is now the appointed time for holding the meeting. I'm advised that a quorum is present, so I declare this Annual General Meeting of the shareholders of Integral Diagnostics open. In doing so, I would like to acknowledge the traditional owners and custodians of the land I'm joining you from, the Boon Wurrung people, and pay our respects to their elders, past, present and emerging. Thank you for attending online. It's exciting to be able to use technology to safely deliver our AGM this year. COVID-19 has impacted our world in many ways, and the increased use of technology allowed by the government, both for this AGM and in the medical industry, is a welcome change. Today's meeting is being held online by the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxies have the ability to ask questions and submit votes. On the screen and attending the meeting online are my fellow directors, Dr. Ian Kadish, Managing Director and CEO; John Atkin, Non-Executive Director, Chair of the People and Remuneration Committee and member of the Audit, Risk and Compliance Committee and Nomination Committee; Raelene Murphy, Non-Executive Director and Chair of the Audit, Risk and Compliance Committee and a member of the People and Remuneration Committee; Rupert Harrington, Non-Executive Director, member of the Audit, Risk and Compliance Committee, Nomination Committee and the People and Remuneration Committee; Rupert also leads our Mergers and Acquisitions working group; Dr. Chien Ho, Executive Director, member of our Integral Clinical Leadership Committee and an accredited MRI supervising radiologist with Lake Imaging in Victoria; and Dr. Jacqueline Milne, Executive Director, member of our Integral Clinical Leadership Committee and an accredited radiologist with South Coast Radiology in Queensland; Kirsty Lally, Company Secretary; Anne Lockwood, Chief Financial and Commercial Officer; Paul McCrow, Chief Operating Officer; and members of Integral Diagnostics management team are attending the meeting along with Jason Perry, partner with the company's auditor, PricewaterhouseCoopers. Jason will be available to answer questions on the accounts at the appropriate time. The agenda for today's meeting is as follows: I'll shortly present my address. Following that, Dr. Ian Kadish, our Managing Director and CEO, will present his review of the company's activities, which will include an introduction to the company's new Chief Operating Officer, Paul McCrow. We'll then proceed with the formal business of the meeting. Before we start, I'd like to outline a few procedural matters. Questions can be submitted at any time. To ask a question, press on the speech bubble icon. This will open a new screen. At the bottom of that screen, there is a section for you to type your question. Once you had finished typing, please hit the arrow symbol to send. When asking your question, please include the resolution it relates to. Please note that you can submit questions from now on, and I'll address them at the relevant time in the meeting. Please also note that your questions may be moderated or if we receive multiple questions on 1 topic, amalgamated together. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. At that time, if you are eligible to vote at this meeting, a new voting polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The voting polling icon will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting. I would now like to commence my address with 2 key reflections. The first, a reflection on this being Integral Diagnostics' fifth AGM and anniversary from listing on the ASX on the 21st of October 2015 with 44 clinics, 770 staff and a market cap of $275 million. Expressing sincere thank you to the many, many staff and shareholders of IDX, who have been with us throughout our journey thus far, now being an ASX 300 company with a market cap around $800 million, operating 73 clinics with 1,400 staff in both Australia and New Zealand. What hasn't changed is the sheer commitment to patients and referrers. Together, our team deliver essential diagnostic imaging services that saves lives and improves health outcomes through early detection, diagnosis and further management of illness and injury, often eliminating unnecessary procedures and avoidable costs. Enduring also has been the strategy of IDX with long-term horizon thinking guided by a fairly strong cultural and clinical compass. The next reflection is on our COVID-19 punctuated year. Our strong results in the face of a global pandemic demonstrates the adage of cream rising to the top. And every stakeholder, our patient-facing staff, our radiologists, our support team, our suppliers, our management, our Board and governments, have played a part making contributions and/or sacrifices, big and small. Over the 12 months ended 30th of June 2020, your company achieved statutory and net profit after tax of $23 million, 9.5% higher than prior year, and a 21.9% increase in operating NPAT of $31.2 million. Operating diluted earnings per share grew 4.9% to $0.17 per share. Operating revenue grew 18.7% to $274.1 million, driven by new sites, investments in high-end modalities, and an 8-month contribution from Imaging Queensland who we warmly welcomed this year, offset by COVID-19 impacts from March. As at 30th of June 2020, our debt-to-equity ratio of 0.54:1 and net debt to last 12 months EBITDA ratio of 1.8x reflects strong capital management to support our continued growth ambitions. A total full year FY '20 dividend of $0.095 per share fully franked was paid to shareholders, which is a 5% decline on FY '19, reflecting our conservative approach to cash management, and the ongoing uncertainty due to COVID-19. We've also introduced a dividend reinvestment plan, which operated for the first time in FY '20, providing shareholders the option to reinvest their returns in the company without incurring any brokerage or transaction fees. Despite the pandemic, our strategy marched on with the announcement in June of the acquisition of Ascot Radiology in New Zealand completed on the 1st of September. Ascot is a strategic, clinical and cultural fit with IDX, and we warmly welcome the Ascot team. Ascot has a high-quality footprint of 9 diagnostic imaging clinics, including key sites at Ascot Private Hospital, 22 doctors and is highly complementary to our existing New Zealand business. We commenced this current financial year with Stage 4 restrictions operating in Melbourne and Stage 3 for regional Victoria and Auckland. Overall, Integral Diagnostics' operations has delivered organic revenue growth of 4.2% in the first quarter of this financial year compared with the prior corresponding period. The prior corresponding period does not include Imaging Queensland and Ascot Radiology. To date, integration and operating performance of both Imaging Queensland and Ascot Radiology has been in line with expectations. We look forward to being able to physically visit hopefully soon once borders are open. Going forward, the impact on the company of the COVID-19 pandemic and associated government responses remains uncertain and cannot be accurately predicted. However, to date, we have demonstrated strong and safe management and we have not seen any indications that COVID-19 will have material ongoing impacts for the diagnostic imaging sector. As a Board, we are committed to leading a high-performance culture with transparency and accountability, whilst continuing to improve what we do as we grow. This year, we produced our first stand-alone environment, social and governance report, which acknowledges areas of best practice as well as areas where we are committed to do more as part of contributing to a healthier world. This includes support for the United Nations Sustainable Goals that most strongly align with our business. Underway currently is an assessment of our Scope 1, 2 and 3 emissions to measure and reduce our carbon footprint. Integral also contributes its specialist skills to developing nations through Radiology Across Borders, contributing to creating a Film Bank, an educational program that presents interesting and important radiological findings to assist and train doctors. Our people during the pandemic in June gave us an employee Net Promoter Score of plus 25.5, recommending IDX as a good place to work, higher than the diagnostic imaging norm of plus 15.7. Our lost time injuries per million hours halved compared to prior year and staff turnover reduced. Diversity and inclusion at every level continues to be a focus with 75% of our workforce who were promoted were female, consistent with the gender profile of our workforce. We are proud to have the governance model for our Specialist Medical business that includes radiologist executive directors. During FY '20, we welcomed Dr. Jacqui Milne as an Executive Director, taking over from Dr. Sally Sojan in November last year. I would like to especially acknowledge Dr. Ian Kadish, the senior leadership team, radiologists, staff and my fellow directors for their commitment, diligence and work ethic to progress the potential of this important company. Thank you, our shareholders, for your continued support and interest in our company, which plays a pivotal role in affordable quality health care for patients and referrers. I now invite our MD and CEO, Dr. Ian Kadish, to discuss Integral Diagnostics' operational review.

Thank you very much, Helen. It is good to be here, and it is great to report on another strong year of performance at Integral Diagnostics. IDX has now performed well for several years, delivering strong consistent growth in revenue and earnings. Next slide, please. We grew our revenue to $274 million last year, an increase of 18.7%. We also improved our operating EBITDA by almost 21% to $64 million. We increased our operating NPAT by almost 22% to $31 million and increased earnings per share by 4.9% to $0.17 a share. We increased EPS by 4.9% largely because we issued a significant number of new shares on the acquisition of Imaging Queensland in August of last year. Next slide, please. And your company delivered on its values in FY '20 despite significant COVID impacts in the first months of the pandemic. Our doctors and our staff all across the company stepped up brilliantly to the new challenges with strong leadership, clinical acumen, dedication and commitment. We all remain indebted to the health care teams on the front lines of this pandemic at IDX and elsewhere. We lived up to our values of patients first by serving more than 660,000 patients referred by 30,000 referrers across our business. We reduced our adverse clinical events significantly. We impacted -- we invested in $26 million of new capital investment, and we enhanced cybersecurity and privacy protections. We displayed medical leadership through our 217 reporting radiologists specialists. We were the first to market in Australia with FDA and TGA approved AI applications. And we've built in our relationship with Radiologists (sic) [ Radiology ] Across Borders, a radiologist sponsored charity, that delivers quality radiology care, teaching and training in developing countries. And we displayed our value of everyone counts, all the more than 1,440 employees across Integral Diagnostics. We achieved an employee Net Promoter Score of 25 versus an industry average of 16. We reduced lost time injuries by more than half, and we initiated our first formal ESG program. We also created value by increasing the NPAT by 22% and EPS by 4.9%, by paying a dividend of $0.095 a share. We acquired Imaging Queensland and Ascot Radiology last year. And we included -- we were included for the first time in the ASX 300, a notable milestone for us, with 4,093 IDX shareholders. And we embraced change in a year that has seen more change than almost any other. We implemented an e-referral pilot, including patient and doctor portals. We enhanced the IDX reporting platform to allow and facilitate specialist specific workflows, and we continue to develop our AI and our digital capabilities. Next slide, please. The IDX share price reflects this strong and consistent earnings growth. We have, on this chart, indexed ourselves to the ASX on listing in October 2015. And then we clearly demonstrate the value of your company relative to the ASX, particularly over the last 3 and a bit years. Next slide, please. IDX operates in selected high-growth geographic markets. We operate in the western regions of Victoria in the cities of Ballarat, Geelong and Warrnambool and the outer Western and North Melbourne. We also operate in the high-growth areas for our target population. In Queensland, on the Sunshine Coast and on the Gold Coast, in Toowoomba and Mackay in Central Queensland, including Rockhampton and Gladstone. And we have selected high-growth areas in Southwest, Western Australia, where we operate from in the cities of Mandurah, Banbury, Busselton and other growth areas in Regional Western Australia. And in New Zealand, we operate in the greater Auckland area, an area that accounts for almost half of the New Zealand population. We have 73 sites across IDX. 21 of them hospital sites. We have 28 MRI machines and 17 of the MRI machines have licenses, 13 have full licenses, 4 have partial licenses. Our 6 MRIs in New Zealand do not need Medicare license and we employ 131 radiologists across our business in FY '20 and a further 86 contractor radiologists. We have 1,399 employees on the front line in our clinics. And we also have 49 employees in our corporate office taking care of all those on the front line. Next slide, please. Our strategy remains consistent with our underlying tenet that good medicine is still good business. Our strategy comprises 2 key components to grow the existing business and margin and then to make strategic acquisitions. Our levers in terms of growing the margin is to drive our organic growth, business integration and further efficiency gains, to accelerate the use of digital and AI technology, to drive our ESG agenda, to nurture and develop culture and leadership across our people and with regard to strategic acquisitions, to execute those acquisitions that are clinically and culturally aligned and earnings accretive. In FY '20, we acquired Imaging Queensland, which we completed on the 1st of November 2019. And we acquired Ascot Radiology, which we completed on the 1st of September this year. We delivered an FY '20 EBITDA margin of 23.3%. It's the highest published margin in the industry. Next slide, please. The industry growth rates in Australia have been significantly impacted by COVID-19, particularly in the March and June quarters. The top line on this chart represents industry revenue growth and the bottom line represents the number of services or procedures that were performed. The delta between the 2 lines is driven by the increase in high-value tests like MRI, PET scans and CTs relative to the lower value entry-level tests of basic x-rays and ultrasound. IDX has positioned itself focused on this high-value end of the spectrum in terms of PET scans and CTs. This graph shows the significant impact in March and June of 2020 but no Medicare numbers are available yet for the first quarter of 2021. Next slide, please. In the first quarter of 2021, our business developed an organic revenue growth of 4.2% versus the prior comparable period. It's important to note that the organic revenue growth excludes our acquisitions of Imaging Queensland and Ascot Radiology. And it also does not include any contribution from JobKeeper. It was driven by solid revenue growth in all regions of the business, except Victoria. The impact of the second wave was significantly less severe than the initial pandemic impact in April and May, and the New Zealand practices have not been materially impacted despite Auckland's lockdowns in August and September during the second wave. Our FY '20 acquisitions, Imaging Queensland and Ascot Radiology, continue to integrate and to perform on expectations. Imaging Queensland has recovered strongly since June, and Ascot Radiology is performing as projected despite the second wave in Auckland. Next slide, please. IDX continues to play a leadership role in the industry, helping health care payers in Australia and New Zealand continue to recognize the preventative benefits of diagnostic imaging in providing quality patient care and reducing unnecessary health care costs. In Australia, Medicare DI indexation was introduced on the 1st of July 2020 and has been committed to for a further 2 years. Breast MRI and breast PET were added to the Medicare Benefits Schedule in November 2019. These are important additions for our patients and for the industry. Telemedicine has been encouraged throughout the pandemic. It was encouraged at the advent of the pandemic, including digitized patient workflows like electronic referrals, electronic billing and sign offs. And we see most of these benefits -- we believe that most of these benefits will continue to be implemented post the pandemic. They are good changes for the industry, and it makes sense for our patients that they do stay in place. In New Zealand, Jacinda Ardern's Labour Party won an outright majority, and they're likely to retain the MRI referrals to private providers, which reduced public hospital waiting lists in the country. And the regulatory environment in New Zealand is stable. Next slide, please. It is my pleasure today to announce the appointment of the Chief Operating Officer for IDX, Paul McCrow. IDX has appointed a COO to help manage the extensive growth in company operations. Paul is an internal appointment, which is testament to the high caliber of people we have at IDX, and it is the IDX way. Paul brings 20 years of industry experience with IDX, also with SKG, Sonic's Western Australian imaging business and with Qscan. Paul is currently the IDX General Manager for Western Australia. He has driven the growth of the Apex business for the past several years. Apex was formerly known as Global Diagnostics Australia. Paul also introduced the first FDA and GDA approved AI algorithms into the IDX Group, and he leads IDXt, the IDX teleradiology business. Under Paul's leadership, Apex Radiology has consistently outperformed. It produced the highest multiyear compound annual growth rate in the IDX Group for several years. It also has the highest radiologist and staff retention scores, 81% of Apex radiologists and employees rate the company as a truly great place to work. Paul will also be a member of the company's key management personnel, together with Anne and I. I'm going to ask Paul if he can talk to the next slide on IDX's AI initiatives. And if we can move to the next slide, please. Over to you, Paul.

Thank you, Ian. Great to be here. Artificial intelligence is improving patient outcomes. IDX currently invests in 4 algorithms with 2 more in testing. We're currently limited to 4 algorithms of the head, neck and chest for CTs in selected IDX businesses. We continue to grow the artificial intelligence capabilities as new applications are proven for patient care, improved quality and efficiency. A recent example of artificial intelligence was a few weeks ago, a patient presented to an emergency department some 700 kilometers from Perth in rural Western Australia. The patient had a suspected pulmonary embolus and required an urgent CT of their chest to see if the clot, the embolus, was the cause of their issues. An embolus like this can be life-threatening. The CT pulmonary angiogram was performed in the early hours of the morning. Within 7 minutes, the Integral Diagnostics' teleradiologists was notified 4,000 kilometers away that the patient had a potential positive pulmonary embolus. This was 3 minutes before the check had even finished the exam. Treatment to this patient was expedited due to the advanced notification of artificial intelligence with our radiologists making the diagnosis and notifying the emergency department doctors quickly. The patient was treated and is doing well. This is just 1 example of how AI is truly having a positive effect on patient outcomes in Integral Diagnostics. Going forward, AI will significantly amplify the scope, reach and clinical impact of diagnostic imaging. It improves diagnostic quality and saves lives. The current Integral Diagnostics' algorithms have 99% sensitivity. This means they seldomly miss pathology. It increases radiologist productivity and efficiency and it widens the scope of diagnostic imaging, appropriately increasing the use of diagnostic imaging and decreasing total health care costs. I'll pass back to Ian Kadish.

Thank you very much, Paul. The Chief Operating Officer appointment augments IDX's senior leadership team, if we can move to the next slide, please, consistent with the extensive growth of the IDX business. Our leadership team is noted on this page. Anne Lockwood, our Chief Financial and Commercial Officer, who is well-known to most of you, has been with IDX now for about 4.5 years. She was promoted to Chief Financial Officer in November of 2018. She was further promoted to Chief Financial and Commercial Officer in August of 2019 and Anne has been my partner over the past few years in growing the IDX business. Paul, as you have all just been introduced to, is an exciting new addition to the senior leadership team. And we look forward to working closely with Paul in his new capacity. Mica Duncalfe has also been with IDX for about 4.5 years and has recently been promoted to the Chief People Officer of the business. And Julian Gully, our Chief Information Officer, was promoted from Group IT Manager in August of last year to CIO. Julian comes from 20 years or so spent with a major competitor of ours in the business, and it's terrific to also have Julian as a member of the senior leadership team. We will be appointing -- over the course of the remainder of this financial year, we will be seeking and appointing a Chief Medical Officer, and we expect to be able to make this appointment in the first half of calendar year -- of next calendar year. Next slide, please. Our team's key priorities this next year are to continue to drive organic growth, business integration and further our efficiency gains, we're going to manage the ongoing impacts of COVID-19, we're going to integrate Ascot Radiology into the business, and we're going to continue to promote the benefits of MRI and PET technologies so that they're widely understood and recognized by patients, payers and our referrers. We will continue to accelerate the growth of AI and digital technologies to execute on the AI and broader technology strategy, to complete implementation of our patient app to improve access, knowledge and compliance and to leverage the consolidated reporting platform to develop sub-specialty workflows. We will continue to work on our ESG agenda and to drive the agenda with regard to ethical supply chains, responsible consumptions and reducing our carbon footprint. We'll continue to build on our community relationships, corporate governance and ESG scorecard. And we will nurture and develop culture and leadership throughout our group. We'll support company growth with investment that we have just announced in the Chief Operating Officer; in a Chief Medical Officer next year and in a Group Integration Manager. We will develop leadership capabilities of management, radiologists, clinical and administrative teams across the business. And we will continue to undertake analysis and due diligence on potential acquisitions that are a clinical fit, strategically aligned and earnings accretive. We're currently considering several growth strategies -- several growth opportunities in a very active health care sector. I'll hand back over to you now, Helen.

Thanks, Ian. I'll now proceed to the formal business as set out in the Notice of Meeting. We'll deliver the formal part of this year's meeting in a similar fashion to what we've done in prior years. I'll introduce each of the resolutions, then display the proxy results of the corresponding resolution on screen and then shareholders will have the chance to ask questions on the resolution before we move on to the next resolution. If you've not already submitted a question, the steps for submitting a question are now displayed on the screen. To ask a question, press on the speech bubble icon. This will open a new screen. At the bottom of that screen, there's a section for you to type your question. Once you finish typing, please hit the arrow symbol to send. If you've not already voted, the voting process is now displayed on the screen. Selecting the voting icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You have the ability to change your vote up until the time I declare voting closed. The first item of business is to receive and consider the financial report of the company and its controlled entities and the reports of the directors and auditors for the year ended 30th of June 2020. The Corporations Act and the company's constitution require these statements and reports to be laid before shareholders but do not require a vote from shareholders to be taken on them. In accordance with the Corporations Act, this is your opportunity to ask questions about or make comment on the company's financial statements and reports. Jason Perry, partner with the company's auditor, PricewaterhouseCoopers, from PWC is online. You may ask the auditors questions relevant to the conduct of the audit, the preparation and content on the auditor's report, the accounting policies adopted by the company in relation to the preparation of the financial statements as a whole and the independence of the auditor in relation to the conduct of the audit. I remind you the directors and management are responsible for the preparation and presentation of the financial report. Accordingly, questions on specific aspects of the financial statements should be addressed by the directors. I now invite questions on this agenda item. Casey, is there any questions?

Thanks, Helen. We have 1 -- we have a question relating to virtual AGMs, and it was by [ Norman West ], who's an ASA representative, and there was also a similar question by [ Ms. sally Mellick ]. Has the company decided a policy related to the government inquiry proposal to make permanent the ability of companies to hold online-only virtual AGMs and send all communications by e-mail? Has the company made a submission to the inquiry? [ Norman ] also adds this proposal would extinguish a healthy human AGM where questions can be asked and answered face-to-face and shareholders, directors and management can meet and discuss the company.

Thank you for the question and the comment. Was that the end of the question, Casey? Just checking.

Yes, that's the end of the question.

Thanks for the question and comment. No, we have not made a submission to the inquiry and don't have a policy position as a company at this stage. This is our first virtual AGM as a result of the current COVID-19 pandemic. We will review this AGM in considering future AGMs and consider our feedback. I will say, on a personal level, I'm much more in favor of face-to-face meetings of any type compared to virtual ones, but also acknowledge that access and attendance actually can be improved when adding a virtual option. A hybrid may indeed be the best way in the future for AGMs, providing access options for all. Really good considerations for us to take into account for next year. Are there any further questions, Casey?

No further questions on this item.

As there are no further questions, that concludes our discussion on item 1, and I now move to the next agenda item. As this item relates to my reelection as Director, I'll hand over to John Atkin, Chair of the People and Remuneration Committee.

Thanks very much, Helen. The Board with Helen abstaining unanimously recommends the reelection of Helen as a Director of the company and recommends that you vote in favor of the resolution. I now invite questions on this agenda item. Casey, are there any questions?

No questions on this item.

As there are no further questions on this resolution, I now table valid proxies received for item 2 by the company. Someone putting those questions up -- the proxies up. Could we have the slide with the proxies? Thank you.

John, I'm happy to say a few words in regard...

I think to say -- do you want to speak, it'll have an impact if anyone -- I'm not sure whether any shareholders can speak on this under our facility but you got...

[Audio Gap] questions. So I'm happy to speak to my reelection and also take any questions that shareholders may have. So firstly, thank you, shareholders for considering my reelection. I have been the Independent Chair of the company since December 2014, preceding listing on the ASX on the 21st of October 2015. The total return for shareholders since IPO to-date 5 years later is 160% to 21% annualized return. I've also served as Chair of the company's Nomination Committee and a member of the People and Remuneration Committee and the Audit, Risk and Compliance Committee. A very deep executive and Board level experience across the health care industry, I'm currently a Non-Executive Director of Estia Health Limited, HBF Health Limited and the Victorian Clinical Genetics Service, Chair of McMillian Shakespeare Limited and a senior adviser in the health care sector. I'm passionate about transforming health care, strong corporate governance, sustainable strategy setting and leading high-performance cultures in business. Subject to reelection, I look forward to working with the Board and management team to continue to achieve growth and improvement in our business to achieve better outcomes for patients and referrers and in turn, deliver for our shareholders.

Thanks, Helen. Are there any questions or comments from shareholders? There being no questions...

No other questions, John.

Sorry?

No questions, John.

Thanks, Casey. There being no questions or comments, I'd like to then move that Ms. Helen Kurincic, who retires by rotation and being eligible, be reelected as a Director of the company. Helen has explained the process for voting, and that now concludes item 2, and I will pass back to Helen.

Thanks, John, and thank you, shareholders. The next item of business relates to the reelection of Raelene Murphy as a Director of the company, who is retiring by rotation, is offering herself for reelection in accordance with Rule 8 of the company's constitution. Details of her reelection are set out in the Notice of Meeting. I would invite Raelene to say a few words regarding her reelection.

Thank you, Helen, and thank you for the recommendation. I'm very pleased to be here today to offer myself for reelection to the IDX Board. I have been an Independent Non-Executive Director of the IDX Board since 2017. It has been incredibly satisfying to be a member of the Board, which leads a team of exceptional executives that have delivered significant company growth and increase in shareholder value in that time. The Board works diligently on delivering value to shareholders and ensuring the highest level of corporate governance and under the chairmanship of Helen Kurincic performs at a very high level. My background is both finance where I started my career with PWC and has been a partner and Managing Director of large national accounting firms. In addition, I've also been a CEO of a significant successful Australian construction company. I've had over 30 years experience in strategic, financial and operational leadership and I'm specialized in merger and acquisition and integration across a range of public and private companies. I bring that experience to the Board, and in particular, to my role as Chair of the Audit, Risk and Compliance Committee, which I've shared since becoming a Director in 2017. This committee has achieved much in that time as IDX has grown. I currently serve on 2 other ASX listed companies, which ensure my perspectives and insights are contemporary. I'm firmly committed to the IDX strategy, and will continue to devote my energy, commitment and passion to our company. It's a great honor to have the support of my fellow directors, whose counsel and skill I value highly, and in turn, shareholder support for my reelection. IDX has a great future, and I welcome the opportunity to be part of that future. Thank you very much.

Thanks, Raelene. The Board with Ms. Murphy abstaining unanimously recommends a reelection of Ms. Murphy as a Director of the company and recommends that you vote in favor of the resolution. I now invite questions on this agenda item. Casey, do we have any questions?

No questions on this item.

As there are no questions on this resolution, I'll now table valid proxies received for item 3 by the company. I move that Ms. Raelene Murphy, who retires by rotation and being eligible, be reelected as a Director of the company. That concludes item 3, and I move to item 4, adoption of the remuneration report. The remuneration report is contained in the annual report. It describes the policies and sets out the remuneration arrangements in place for directors and senior executives. The company has a remuneration framework, which aims to ensure that reward for performance is competitive and aligned to shareholders' interests. The vote on this item is advisory only and does not bind the directors or the company. Nevertheless, the people and the Remuneration Committee will take into account the discussion of this item and the outcome of the vote when considering the future remuneration policies and practices of the company. The Corporations Act provides that the results of the vote on the remuneration report may trigger the first leg of the two-strikes rule. I now invite questions on this agenda item. Casey, are there any questions?

Thanks, Helen. Yes, we have a question from [ Norman West ], ASA representative. The remuneration report has more information but is not clearer due to the use of terms such as underlying, diluted, operating, operating organic, operating diluted and adjusted diluted. They all seem to be similar and provide a more positive result. Can this be clarified?

Thanks for the question and feedback, [ Norman ]. We have tried to ensure terminology is defined in our various reports. But clearly, we do need to see what we can do to improve this. I think in FY '20, it's been made more complex with acquisitions and the capital raised in FY '20. For example, in our remuneration report, we note the operating diluted EPS calculation for that year has been adjusted in order for the weighted average calculation of shares on the capital raise to align with the 1st of November settlement date of the IQ acquisition, from 4th of September for the institutional placement and then the 30th of September for the retail entitlement offer. We align the date because it provides a more accurate reflection of the underlying EPS for shareholders. Due to acquisitions in the year, we also try to be transparent with shareholders in communicating like-for-like or organic results given organic growth in the businesses are of primary importance and the result would otherwise be skewed by the acquisition impact. I do receive positive feedback from shareholders, particularly noting the clear reconciliation of operating to statutory impact outlined in our investor presentation. In any case, definitely, we'll take on board your feedback and look to see how we can improve definition and communication to show the discipline that we apply in our reporting. Are there any further questions, Casey?

Yes. We have another question from [ Norman West ], ASA representative. The LTI performance rights being based on statutory earnings per share would be 1 sound condition, but it is based on underlying earnings, which is less transparent. What risks were assessed in adopting this measure?

Thanks, [ Norman ]. The Board ensures this risk is minimized by clearly considering and transparently disclosing underlying earnings. Our operating result which is defined as NPAT before one-off costs is reported in our operating and financial review in the annual report. And we also have the full reconciliation transparently outlined in our investor presentation. This approach has actually been applied consistently year-on-year. In regards the actual LTI, the first test really comes at the end of this financial year, given we've had a full year LTI. So the first time it will occur is actually at the end of FY '21. And the Board is certainly committed to transparency in its approach. And this time next year, shareholders will be able to assess exactly how we've gone about it and look forward to your feedback at that time. Are there any further questions, Casey?

One last question on this item, Helen. Again, from [ Norman West ], ASA representative. Performance is assessed with reference to underlying earnings. Diluted earnings per share grew by 4.9% to $0.17 per share. The dividend payout ratio is on statutory NPAT. On a statutory basis, earnings per share declined by 7% to $0.1243 per share.

Thanks, [ Norman ]. The 7% decline in earnings per share to the $0.1243 per share at a statutory level is actually reflective of the high level of nonrecurring transaction costs, which we incurred in FY '20 in delivering and integrating both the Imaging Queensland acquisition and also the Ascot Radiology New Zealand acquisition and which we already and will continue to contribute to improved shareholder returns. IDX still delivered statutory NPAT of $23 million after application of AASB 16, the customer contract amortization transaction and other costs of about $8.2 million in the year, which on a statutory NPAT level is still a 9.5% increase on prior year despite the COVID impacts in FY '20. Are there any further questions on this resolution, Casey?

No further questions on this resolution, Helen.

As there are no questions, I move that the remuneration report for the year ended 30th of June 2020 be adopted. Sorry, I should also table the proxies. Let me just do that first. I'll table the ballot proxies received for item 4 by the company. So they are now visible on screen. And I move that the remuneration report for the year ended 30th of June 2020 be adopted. I draw shareholders' attention to the voting restrictions applicable to this resolution as contained within the Notice of Annual General Meeting. That concludes item 4, and I move to item 5. The approval of long-term incentive grant of FY '21 rights to the Managing Director, CEO. The Board with Dr. Kadish abstaining unanimously recommends that shareholders approve the grant of FY '20 rights to Dr. Kadish and recommends that you vote in favor of the resolution. Details of the terms and conditions of the proposed rights are set out in the Notice of Meeting. I now invite questions on this agenda item. Casey, is there any questions on this item?

There are no questions on this item.

As there are no questions on this resolution, I now table valid proxies received for item 5 by the company. I move that approval be given for all purposes, including ASX Listing Rule 10.14 for the grant of rights to Dr. Ian Kadish as his annual long-term incentive grant for the year ended 30th of June 2021 on the terms described in the Explanatory Memorandum accompanying this Notice of Meeting. I draw shareholders' attention to the voting restrictions applicable to this resolution as contained within the Notice of Annual General Meeting. That concludes item 5. The next item is item 6, the ratification of share issue, Radiologist Share Loan Scheme. Details of the share issue are set out in the Notice of Meeting. The Board unanimously recommends that shareholders ratify the share issue. I now invite questions on this agenda item. Casey, are there any questions?

There are no questions on this agenda item.

As there are no questions on this resolution, I now table valid proxies received for item 6 by the company. I move that for the purpose of listing Rule 7.4 and for all other purposes, the issue of ordinary shares pursuant to the company's Radiologist Loan Share Scheme as described in the Explanatory Memorandum be ratified. I draw shareholders' attention to the voting restrictions applicable to this resolution as contained within the Notice of Annual General Meeting. That concludes this item. Item 7, the ratification of share issue, acquisition of Ascot Radiology. Details of share issue are set out in the Notice of Meeting. The Board unanimously recommends that shareholders ratify the share issue. I now invite questions on this agenda item. Are there any questions?

Helen, we have a question on this item from [ Norman West ], ASA representative. What is the attraction and potential of the New Zealand market compared to more expansion in Australia?

Thanks for the question, [ Norman ]. We consider each potential acquisition on its merits when it arises in both Australia and New Zealand. We proceed only with those investments that meet our investment criteria, which includes cultural, clinical and strategic fit. We'll continue to assess opportunities in various markets. Casey, is there any other questions on this resolution?

No more questions on this resolution, Helen.

As there are no further questions on this resolution, I now table valid proxies received for item 7 by the company. I move that for the purpose of listing Rule 7.4 and for all other purposes, the issue of ordinary shares for the acquisition of Ascot Radiology in New Zealand as described in the Explanatory Memorandum be ratified. I draw shareholders' attention to the voting restrictions applicable to this resolution as contained within the Notice of Annual General Meeting. The next item of business, item 8, relates to the approval of issue of securities under the company's Equity Incentive Plan. Details of the Equity Incentive Plan is set out in the Notice of Meeting. The Board unanimously recommends that shareholders approve the issue of securities under the company's Equity Incentive Plan. I now invite questions on this item. Casey, are there any questions?

No questions on this item, Helen.

As there are no questions on this resolution, I now table valid proxies received for item 8 by the company. I move that the company's Equity Incentive Plan, the terms and conditions of which are summarized in the Explanatory Memorandum accompanying this Notice of Meeting be approved and the issue of securities under the company's Equity Incentive Plan as described in the Explanatory Memorandum be approved for all purposes, including ASX Listing Rule 7.2, Exception 13. I draw shareholders' attention to the voting restrictions applicable to this resolution as contained within the Notice of Annual General Meeting. The last item of business, item 9, relates to the renewal of the proportional takeover approval provisions in the company's constitution. Details of the resolution are set out in the Notice of Meeting. I now invite questions on this agenda item. Casey, are there any questions?

Helen, there's no questions on this agenda item. But once we have concluded the agenda, I have a general question.

Okay. As there are no questions on this resolution, I'll table valid proxies received for item 9 by the company. I move that the proportional takeover provisions in the company's constitution Rule 6 be renewed for a further period of 3 years. That concludes our discussion on the items of business at the meeting, but happy to take another question, Casey, that you flagged you had.

Yes. So the question I have is from [ Ms. Sally Mellick ]. She asks, given the continued media reporting of cyber attacks and IT security, how does the Board keep on top of this function?

Great question, [ Sally ], and certainly very current and top of mind, I think, to Boards of all businesses. As a Board, we have oversight from the Audit, Risk and compliance Committee, who takes carriage of cyber risk but also given the cyber risk importance to our company, monthly reporting to the Board. In terms of some of the steps and things that we have in place, at a management level, there is also a Cybersecurity Steering Committee that is in place. We have external testing, both annual penetration testing and vulnerability assessments in place. We apply the latest applications, including the Board discussing the virtual umbrella that's actually across our network in the event of malware making its way across our network, that it can be blocked by an external shell, cyber education of our staff and also, cyber is actually an important part of our due diligence for acquisitions and a priority part of integration of those acquisitions. So hopefully, that provides some color to your question in regards to how we, as a Board, keep on top of that function. Thank you, Casey. Are there any other general questions?

No other general questions, Helen.

Thanks, Casey. In a couple of minutes, I'll close the voting system. Please ensure that you've cast your vote on all resolutions. I'll now pause to allow you time to finalize those votes. [Voting]

Voting is now closed. The results of these votes will be released on the stock exchange later today. Ladies and gentlemen, as there's no further business, that now concludes the Integral Diagnostics 2020 Annual General Meeting. I would like to thank you for your attendance today and for your continued support of Integral Diagnostics Limited. Be well, stay safe and happy Friday. Thanks all.