Thank you for standing by, and welcome to Integral Diagnostics FY 2022 results call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question, you will need to press the star key followed by the number one on your telephone keypad. On the call, we have with us Dr. Ian Kadish, Chief Executive Officer and Managing Director, and Mr. Craig White, Chief Financial Officer, Integral Diagnostics. I would now like to hand the conference over to Dr. Ian Kadish. Please go ahead. Thank you, Nirav. My name is Ian Kadish. I'm the Chief Executive Officer and Managing Director of Integral Diagnostics. I'm joined here this morning by our Chief Financial Officer, Craig White. Our presentation today is divided into three sections. I will provide an overview of FY 2022. Craig will follow with some more detailed information on our financials. I will then come back with a regulatory update and our strategy for FY 2023, including our focus for the next year. We'll then have a question and answer session at the end. Integral Diagnostics is a values-driven company. We put our patients first always. We are led by the medical science. At Integral Diagnostics, everyone counts. We look to create value importantly for our shareholders, but also for other stakeholders, including the environment. We look to embrace change. During the year, a COVID-impacted year like we just had, the year called on us to embrace change more than any other year to date. In terms of delivering on our values, we served 800,000 patients last year with more than 2 million exams. We invested AUD 31 million in CapEx, and we opened three new clinics at Benowa, Gold Coast, at Burleigh Heads, also on the [inaudible] Gold Coast, and we also opened our first clinic in Perth. We have 245 reporting radiologists in the group, and we continued the development of our teleradiology platform, which started right at about the same time as COVID did. Teleradiology is where we provide radiology services remotely to referrers and patients within our group and also importantly now externally as well. There are 1,868 employees at IDX now. We've developed a diversity and inclusion strategy and an action plan on diversity and inclusion, and we invested heavily during the year on supporting our people during the COVID-mandated absences. We unfortunately saw our Operating diluted earnings per share decline by 46% to AUD 0.102 a share, and we have declared an FY 2022 fully franked dividend of AUD 0.07 a share. We acquired Peloton Radiology and Horizon Radiology over the course of the second half, and we also announced the acquisition of Exact Radiology as well. We managed our workflows, our personnel, and our systems to adapt to operating in a COVID-19 environment. Importantly, this year, in January of this year, we appointed Craig White, our Chief Financial Officer, on the 24th of January. Moving to our financial highlights. We saw a 2.8% growth in operating revenue despite the COVID-19 impact affecting our near-term performance. Our Statutory NPAT declined by 53% to AUD 14.6 million. Our EBITDA declined by 20% to AUD 74.8 million. We ended the year with a strong balance sheet and a net-to-EBITDA ratio of 1.6x. The operating performance was significantly and adversely affected by COVID-19 across the entire year and together with influenza in the second half. The diagnostic imaging industry as a whole saw its toughest year in a long time. In Australia, the Medicare Benefits for the states in which we operate declined by 0.3%, and that's compared to our small growth of 0.1% in the Medicare business. Overall, organic growth was about 1.6%. We do provide services in the higher growth states of the country because when you do look at the Medicare reimbursement Australia-wide, that's down about 2.8% over the financial year. We declared our fully franked final dividend of AUD 0.03 a share, bringing our total dividend up to AUD 0.07 a share compared to AUD 0.125 last year, which reflects the COVID-19 impact on our performance. COVID-19 impacted performance in two major ways. One is with the reduced patient activity due to restrictions on elective surgery and also patients' reluctance or their inability to obtain healthcare services. Through staff shortages caused by the high levels of sick leave and personal leave and requirements to isolate. An increase in sick leave and other increased employee costs over the period through a reduction in personal leave, a reduction in leave taken, and through border restrictions impacting our ability to move staff freely across the interstate borders. We saw our employee costs increase over the period. Consumable costs also increased due to the ongoing use of personal protective equipment, and we had supply chain disruptions over the course of the year, resulting in delays to organic growth and increased downtime of our equipment compared to prior years. We're fully committed to maintaining and supporting our excellent team of radiologists and related medical specialists and technical staff through COVID-19 and to continue the delivery of high-quality healthcare services to our clients as demand returns, as it were. Looking at the next slide, showing the DI industry COVID-19 impact graphically, we can see that since December of 2014, and even prior to that, the industry was very stable in terms of our growth and our long-term average growth rate exceeded 6% over the course of the last decade and even longer. During last year in particular, last calendar year, we saw Medicare statistics, Medicare reimbursements, and also the number of tests being done. The top line we're looking at here shows the Medicare outlays, the reimbursements to the industry. The bottom line we're looking at shows the number of tests that are done in the industry. You can see that both declined significantly during the prior calendar year. They both declined during COVID, improved during calendar year 2021, and then declined significantly during the first half of calendar year 2022. Our EBITDA earnings are shown graphically on the next slide, where you can see that our earnings increased fairly consistently until financial year 2021, and then we saw the 20% decline due to the COVID impact across our group in the last financial year. Similarly, we reduced our dividend payout from AUD 0.125 to AUD 0.07 a share over the course of the full year. It's a fully franked dividend, and the reduction is due to the impact of COVID-19 over the period. I'm now going to hand over to Craig White to take us through the financials. Thanks very much, Ian, and good morning, everybody. Just taking you to the slide headed Results for FY 2022. These results are basically in line with what we announced to the market on the 27th of July with the market update. As Ian's talked about, we have 2.8% growth in operating revenue. I'll take you through a little bit of detail in regards to that on the next slide. Significant drop in Operating EBITDA and a contraction in EBITDA operating margin, driven by COVID, the impact on volumes, on a higher fixed cost base. We've seen that negative operating leverage in FY 2022, which we expect to reverse over time, as we go forward and come out of a COVID-19 operating environment. You'll see that there is a difference between our Operating NPAT of AUD 21.7 and our Statutory NPAT of AUD 14.6. That's largely explained by two items, being transaction costs relating to acquisitions in FY 2022 of AUD 5.5 million and the amortization of customer contracts in regards to historic acquisitions of AUD 2.2. That explains the bulk of the difference with the remaining amount due to share-based payment expense. Free cash flow of AUD 49.1 represents 78.3% conversion before taking into account replacement CapEx. As Ian mentioned earlier, we ended the year with net debt to pro forma EBITDA on a pre-AASB 16 basis of 1.6x, which is consistent with the way that we measure it for bank covenants that we were in full compliance with at 30 June 2022. Turning to the next slide on revenue, I think the key call-out here is really the fact that despite the impact of COVID in the business, organic revenue growth in Australia was 1.6% positive, which compares favorably to the Medicare equivalent industry-wide average number of -0.3% for the states in which we operate. If you look at it more broadly across all of Australia, the Medicare industry decline was -2.8% against our organic revenue growth of the + 1.6%. In a tough environment, overall, a good result. If you look at where the revenue growth came from, we had an additional two months of revenue from Ascot Radiology. It was acquired in the prior year. That contributed to AUD 3.6 million. The X-Ray Group that was acquired and completed on the first of November 2021 contributed AUD 8.9 million for the eight months that it was part of the group. Offsetting that was the organic revenue decline in New Zealand of AUD 3.4 million. Again, reflecting the impact of COVID and also the impact, to some extent of the competition we have from some of our referrers who've moved into owning their own radiology practices. Pleasingly, we saw again average fees per exam increasing by 4.3% in FY 2022, which is reflective of an ongoing trend or move towards higher-end modalities of CT, MRI, and PET scans. To a much lesser extent, the 0.9% Medicare indexation that applied on CT, ultrasound, and X-ray from 1 July 2021. Turning to the next page on operating revenue. As I mentioned earlier, we saw significant operating leverage or negative operating leverage impact on the business in FY 2022, with operating costs increasing by 5.8% as a percentage of revenue, given the relatively high fixed cost nature of the business on those lower revenues that were COVID impacted. You can see that the bulk of that 5.8% was reflected in part in employee costs increasing by 4.4% of revenue or $21.6 million. Over time, we would expect that we would see a reversal of that operating leverage to more favorably impact the business, albeit with a more gradual recovery. Importantly, I just wanted to address depreciation of $20.6 million in FY 2022. That depreciation of $20.6 million needs to be considered together with the AASB 16 adjustment of $13.1 million in looking at our total depreciation amortization expense that forms part of Operating NPAT. We will no doubt talk about that later on in the call. Turning to the next slide on capital management. As Ian alluded to, we ended the year with a strong balance sheet. Net debt of AUD 101.5 million against AUD 138.6 million in prior year. Leverage at 1.6 times EBITDA on a pre-AASB 16 basis, compared to 1.7 times in the prior year. We have significant liquidity headroom available under our group debt facilities, AUD 173.6 million, and in addition to that, we have a further revolving facility of AUD 105 million. You'll note that our cash balance at 30 June of AUD 123.2 million was significantly higher than the prior year, but that represented cash that was held pending completion of the acquisition of Peloton Radiology and Horizon Radiology the following day on 1 July 2022 at the beginning of the new financial year. Turning to the next slide on cash flow and cash conversion. As mentioned before, if we look at our free cash flow of AUD 49.1 million, that represents 78.3% from a conversion perspective before considering replacement CapEx. Lower than the prior year at 89.1%. If you look at those same numbers on a pre-AASB 16 free cash flow basis, then conversion, again before replacement CapEx, would be much higher at 98.4% against FY 2021 of 104.3%, reflecting strong underlying free cash flow conversion of the business. Turning to capital expenditure. This was largely in line with our overall strategy. CapEx end of the year is slightly below budget, reflecting some of the challenges of deploying CapEx in a COVID-19 affected environment. However, we invested AUD 31.3 million across the year, split between AUD 21.9 million in growth and AUD 9.4 million in replacement CapEx. As Ian alluded to, the key investment from a growth perspective went into opening three new sites, being Benowa, which is a greenfield on Gold Coast, where we invested AUD 5.5 million. O'Connor, which is a greenfield in Western Australia, where we invested AUD 5.4 million. And Burleigh Heads, a greenfield on the Gold Coast at AUD 1.8 million. I'll turn now to our regulatory update and then hand you back to Ian to take you through the rest of the pack. Thanks, Ian. Thank you. Thank you very much, Craig. In terms of regulatory activity in Australia, the major change we saw over the past financial year was the announcement that MRI licenses in regional and rural areas would be deregulated from the first of November this year. So you would no longer need licenses in regional and rural areas to be able to bill Medicare for MRI services. Indexation of 1.6% was announced this year, higher than last year, but well below inflation. The bulk billing incentive on MRI is reduced this year to 95% of the Medicare benefit schedule from 100% on the first of July 2022. Importantly, this only impacts those services which we bulk bill. We don't bulk bill all of our Medicare MRI services. On the first of November last year, a new PET item was introduced for the diagnosis of Alzheimer's disease, a very large addressable market. Time restrictions for CT scans for colorectal studies were reduced, and it was also made easier for MRI of the prostate to be paid for by Medicare because of the expanded population where MRI prostate requires a positive prostate-specific antigen and a family history. There's very large addressable markets for both of those, particularly for MRI prostate, also for Alzheimer's disease, and less so, but importantly for colorectal disease too. These are useful changes for patients and for the industry that Medicare introduced. Importantly, from the first of July this year, Medicare introduced a more significant change, an even more significant change, which is the two new PET items that were introduced for prostate cancer that will allow for initial staging of the disease and also allow for better management of prostate disease. In New Zealand, there is limited indexation of pricing this year in New Zealand, but we're continuing to negotiate on price with some of the funders. The emerging market practices in New Zealand continue to be challenging, where we're working with the New Zealand Institute of Independent Radiologists on trying to manage non-arm's length referrals in that country better, so that quality can be maintained, and that patient choice can be retained. That patients and payers aren't subject to unnecessary imaging. Our strategy is still good medicine, is still good business. We will be growing our existing business and margin, and importantly, we're gonna be focusing now on integrating our strategic acquisitions that we recently made. There are no further acquisitions that we're contemplating at this time. We fully committed to maintaining our specialist and technical workforce to support the delivery of high-quality services to our patients as demand returns. While the prior experience of operating in a post-COVID-19 environment saw a return to historical levels of operation and a pent-up demand coming back, the very disruptive nature of Omicron has meant that we're yet to experience this recovery, and we expect that it will be more gradual. The underlying fundamentals of the radiology industry are strong, though, and we're confident that patient volumes and historical growth patterns will, over time, return to those pre-COVID-19 levels. Our focus in FY 2023 is on organic growth, integrating the recent strategic acquisitions and some select brownfield and greenfield opportunities that I'll outline in a bit more detail on the next page. We expect to be spending in FY 2023 on replacements and growth CapEx between AUD 30 million and 40 million. As you'll see on the map of Australia and New Zealand on the next page, we're looking to drive organic growth, both through the selective price increases, through cost efficiencies, and through some selected brownfields and greenfields. The major brownfields are the Smith Street expansion, where we're going to be upgrading our PET/CT in Southport and moving that over to Smith Street and upgrading the PET/CT to a digital PET, the MRI, CT, and mammo in Smith Street into a world-class comprehensive diagnostic imaging center. Smith Street Center has excellent visibility. It's been an outstanding success story for us over time. We started there with a greenfield in financial year 2018. We added an MRI there over time, and we're now going to be expanding it to a world-class diagnostic imaging center. There are about 50,000 cars that pass by Smith Street, the entrance to the Gold Coast, every day. We will also be expanding our presence in Ballarat with an AUD 5 million upgrade to that PET/CT and a cardiac CT, an expansion in our oncologic imaging capabilities. In Auckland, we're introducing an additional PET in S outh Auckland that will bring two of our PET/CTs into that market. We'll be upgrading the current PET/CT to a digital PET. To account for and provide services for the increased market that we're seeing for nuclear medicine and particularly PET services. In Bunbury in Western Australia, there's a AUD 2 million upgrade to the MRI we have in Bunbury as we upgrade that to a 3T. There are three greenfields we're looking at over the course of this year. One in Torquay in Victoria, one in Pimpama on the Gold Coast, and we're also looking at a new greenfield at Waiata Shores in Auckland. Our focus in FY 2023 is to accelerate our use of teleradiology, digital and AR technologies, where we'll continue to identify, to assess, and to implement AR software that expedites diagnosis, improves efficiencies, and saves lives. Software like our stroke detection software that picks up a stroke before the radiologist has even seen the scan and puts that scan right at the top of the radiologist worklist so that it becomes the next scan that the radiologist looks at. For diagnoses like stroke, this is particularly important to be able to get in very quickly during that first golden hour or two to be able to intervene and to change the course of the patient's diagnosis and treatment. We'll be looking to leverage our teleradiology offering, our own IDXP and also through our JV with UK's Medica Group to provide radiology services in geographies where we do not currently have an on-site presence, and we did that for the first time in the second half of last financial year. We'll be offering subspecialty capabilities across the group as we roll out our enterprise-wide reporting platform. We'll also complete the rollout of our electronic referrals and our Radiology Patient App. In terms of driving our ESG strategy, we're developing a carbon neutral emissions target and a pathway to net zero. We're implementing a diversity and inclusion plan which includes paid parental leave. We're working with Radiology Across Borders to improve diagnostic capabilities in developing countries. We're going to nurture and develop our patient-centric culture and leadership programs by implementing an IDX employee well-being framework and by promoting our proud patient-centric culture and values to the 344 doctors and staff who have joined IDX over the past year. Finally, we are focused on integrating our recent acquisitions well, and we're not contemplating further acquisitions at this time. At this point, we're happy to go over to the question and answers. Operator, if you can let us know who the first person is. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star and two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question is from the line of David Stanton from Jefferies. Please go ahead. Thanks very much for taking my two questions. Look, I wonder if you could start by giving us some further color on the scale of cost inflation that you expect in FY 2023, in particular, you know, wages pressures, please. Thank you. Thanks, David. Cost inflation is impacting us across the board, so both labor and consumables, as we call that. We're facing the same pressures for labor that other industries are, for non-clinical labor, for front office staff, for receptionists, and others. We're seeing, you know, CPI type adjustments in those areas. In terms of the clinical areas, similarly, we're seeing inflation, cost inflation in the clinical areas. With respect to radiologists, though, what we do try to do with regards to our radiology workforce is to try to keep our radiologist costs constant as a percentage of revenue. As revenue increases and the workload increases, we do expect radiology costs to increase proportionately with that. The cost in other areas, in fact, across the board, labor and non-labor areas, we are seeing, and have seen for the past few months, cost inflation coming through. Understood. My second question, and I'll get back in the queue after that. As Craig pointed out, depreciation and amortization was call it AUD 37 million in 2021, of which AUD 20 million depreciation, AUD 21 million amortization, including right of use assets at AUD 16 million. You know, can you give us, Craig, perhaps some color on what should we be thinking of in terms of an increase in depreciation, given the acquisitions and investments you've made into 2023 and the amortization also number, what should we be thinking there for 2023, please? Yeah. Thanks, David. So look, perhaps just if I could ground FY 2022 first and then I'll talk to FY 2023. I think importantly, when you look at what we include in Operating NPAT versus Statutory NPAT, it's important to understand that the elements that are deducted as an expense in arriving Operating NPAT are depreciation, the AUD 20.6 million and 13.1 million of that amortization expense that you referred to. The remaining 3 million of the amortization expense we treat below the line. It relates to the amortization of customer contracts, which is all part of the acquisition accounting for acquisitions. Effectively, in arriving at Operating NPAT in FY 2022, we deducted a total of the 20.6, the 13.1, just 33.7 to arrive at Operating NPAT of 21.7. That's FY 2022. I think as we think towards FY 2023, obviously the picture is a bit more complicated than probably prior years, by virtue of the fact that we have, you know, a number of new business cases for select brownfield and greenfield investments, which is, you know, obviously consistent with what we've had in the past. We've also got the three acquisitions of Ascot Radiology, Horizon Radiology, both of which have completed, and also Exact Radiology, which, as you know, has been announced but not yet completed. It's all subject to some conditions precedent. It becomes a little difficult to give you a firm number. I would say that if in FY 2022, you know, depreciation amortization of 33.7%, I would be thinking towards a number of around 40% for FY 2023. You know, on the assumption that Exact Radiology completes, on the assumption that we execute business cases in FY 2023 and are not sort of frustrated in those efforts by, you know, impacts of COVID or sickness or supply chain constraints. Directionally, I would say around 40 is probably a good number for both depreciation and amortization in FY 2023. I should just say that that amortization number relates purely to the AASB 16 adjustment for the leases. It's the right of use assets. If you'd like further information on that, please just have a look at note six of the annual report, and there's full disclosure of those balances in that note. Understood. Thank you. I'll get back in the queue. Thanks. Thank you. Your next question is from Steve Wheen from Jarden. Please go ahead. Yeah, good morning, Ian and Craig. I just wanted to historically give a trading update for the months of sort of July and August. Just wonder if you can help us sort of understand what's happening so far in this half, and maybe specific commentary around Australia versus New Zealand in that context, given New Zealand was so dramatically impacted by those stage four lockdowns. Yeah, it's still too early to say, Steven, in terms of performance in July and August relative to where we were trading in the months leading up to July and August. So there's not really any additional information that we can give out there. Similarly, with regard to New Zealand, we've called out that there's only limited indexation in New Zealand for next year. There's additional competition in the New Zealand market from the referrer-owned practices. We do expect New Zealand, similar to Australia, to get back onto the long-term trend of diagnostic imaging growing as it did in the past. Although it is important to bear in mind in New Zealand now there is some additional competition that will probably work its way through the market. There's not much more color we can give on that. Is that just a comment that things haven't improved or deteriorated roughly the same? Or can you directionally say, are we getting better or worse from here? Right now, it's roughly the same. We're not, you know. It's still too early to say whether things have turned around. What we have seen in the past, if we look at you know, July of last year, we did see pent-up demand coming back in New Zealand particularly. We're not calling that out this year. It's just too early to say whether there's been any real significant change. Our patients are going to continue to need radiology services. Screening services have decreased for the past two and a half years. There will be that pent-up demand coming through at some point, and patients will be presenting later in their disease and probably sicker and in more need of diagnostic services. We've not seen any of that. We're not seeing any of that coming through as yet. We do expect it will come through. Yep. Okay, great. The next thing I just wanted to ask about is in terms of the gearing that you've quoted across the pro forma earnings. How does that look from a gearing perspective when you incorporate the pro forma earnings of all the acquisitions that you've flagged to date? Just trying to understand what it looks like now post-balance date. Yeah, Steve. I think you should be thinking of a number based in the high 2s. I think when we originally were looking at these acquisitions, the forecast performance for FY 2022 is a little stronger. We were probably around, I think at 2.6%-2.7%. We're around three mark, post-completion of those acquisitions. Okay, great. Thanks for that, Craig. Last one for me, and just on the earn out provisions, just if you can give any sort of color around the timing of whether that litigation will be resolved. The second part of this is I notice there's a remeasurement of your earn out. Has that remeasurement benefited the statutory impact, or did it go into the operating? Maybe I'll take the first part of the question, Steve, and then I'll hand over to Craig for the remeasurement part. We're not expecting any change in our earn-out provisions. The earn-out provisions that we have in there are the most realistic we believe estimates are the provisions that are there. We're not expecting there to be significant change on that. I'll ask Craig if he can comment on the restatement. Yeah. Steve, can you just perhaps clarify your question around the remeasurement? Yeah, sorry. I was just trying to understand where it appears in the P&L and whether you've classified it as. My interpretation is that it's a reversal of the liability back into the P&L. I was just curious, is that at an operating level or is it below the line? No, it is at the operating level. There was 1.8% versus 0.9% in the first half and 0.9% in the second half. Okay, got it. Thanks for that, Craig. No problem. Thank you. The next question is from John Deakin-Bell from Citi. Please go ahead. Thank you. My question was firstly just on New Zealand, where you've talked about the increased level of competition and yet I see you're doing a greenfield expansion there, putting more capital in. Can you just give us an update? I know you've talked about this, you know, what you perceive to be a conflict and you're talking about that to the regulators there. Can you just give us an update as to exactly where that's at? You know, is there any reason why the level of competition won't continue to increase over the next two or three years? Thanks, David. The competition in New Zealand is most acute in the high technology area, in MRIs in particular. The competition has not changed significantly in the X-ray, ultrasound, and CT areas. We are focusing more on it becoming more attractive to GPs in that market. Historically, the IDX offering in New Zealand has been very specialist oriented, which is more directed towards those high technology areas. We're focusing now more on the GPs and both the greenfields and our recent acquisition of Horizon Radiology in New Zealand are very much focused on that GP market, so that our mix in New Zealand will come to reflect our mix in Australia a lot more where we have about. In Australia, we have about 50% GP referrals and 50% specialists. We don't expect to get quite there in New Zealand, but we do want to get closer to GP referrers in that market. Horizon Radiology has been an important stepping stone for us to get closer to those GPs. Right. As was the new greenfield that we're putting in at Waiata Shores. Would it be fair to say that the margin in that GP area is lower than that of the specialist MRI area? The margin is lower in the GP area, but access to the GPs and getting close to the GPs is important. GPs in New Zealand are increasingly able to refer to higher tech now, which they were not able to refer to in the past. For instance, GPs can now refer for knee MRIs in New Zealand, which GPs in Australia cannot refer patients over the age of 50 for knee MRIs, but in New Zealand, GPs can. It is important for us to get closer to the GPs, particularly as the market is changing and GPs can move more to those higher acuity services. Right. Thank you. Just on the CapEx, just to clarify, Craig, you said FY 2023 replacement and growth, AUD 30 million-AUD 40 million. I look at the next slide and I add up 17 for the growth, but it doesn't tell me how much the greenfields are. Can you just give us a split between what you think the growth and the replacement CapEx would be? David, we've provided a lot more detail than usual on the CapEx, on the growth CapEx in particular. We, you know, we're not keen to get more granular on that or more granular on those greenfield investments. It is correct that we are looking to spend over the course of the year between AUD 30 million- 40 million. You're absolutely right that a big chunk of that is accounted for by the brownfields that you see listed on the page. Okay. Thank you. Thank you. Your next question is from Craig Wong-Pan, from Royal Bank of Canada. Please go ahead. Good morning. Just with the higher costs and the staff shortages you experienced during FY 2022, I was wondering if you saw any improvement in staff absences or those kind of labor costs towards the end of FY 2022, and how that's kind of tracked into July and August. Thanks. Staff absences have continued throughout FY 2022, particularly in that second half. We're not pointing out any change for what we've seen in the beginning of FY 2023. There are a lot of staff are away because of both COVID and also because of the flu. To date, we're not calling out any change on that. We do hope that there will be some change in the regulatory side, for instance, that it will no longer be mandated to take seven days off work for COVID. We're expecting that to come down to five days. That'll help. Over time, we obviously are hoping for the impact of COVID and flu to abate, but we're not pointing out anything at this point. Okay, thanks. My next question is, on one of your initiatives on organic growth, you mentioned selective price increases. I was wondering if you can quantify what the potential impact there is into FY 2023. Craig, we're not, you know, gonna put a particular number to it. I think, you know, we called it selective. By that, I think we mean that, you know, we're looking at this probably through a lens of where we provide value to patients. Obviously, we're seeing the cost inflation. Just like any industry, you know, we need to be able to recoup our costs where we can. So we're, you know, in the respective business units and states where we operate, you know, where we might have bulk billed, in some cases, there'll be an out-of-pocket to recover some of these cost increases. It is selective. Just bearing in mind that every single market that we operate in has its own dynamics. Okay. Understood. We do charge. My last question. Yeah. Craig, we do charge more gaps than our competitors generally do. So we are able to change our pricing more flexibly than what the bulk bill operators who are committed to bulk billing, who are much more locked into the Medicare schedule than we are. Yeah. Great. Got that. Increase prices selectively. Okay, thanks. My last question, just on the delay to Exact Radiology. I think it was initially planned for early fiscal 2023, then first quarter, now it's second quarter. Just wanted to understand the kind of delays there. The conditions precedent needs to be fulfilled, and we're waiting for the performance of conditions precedent to be able to execute on Exact. We're, you know, we did announce Exact. We'd like the acquisition, but as with all our acquisitions, we do have important CPs that need to be met before we proceed. I might just add to that, Craig, you know, the acquisition of Exact was an acquisition of assets rather than shares. So, you know, there's a number of CPs there in terms of assignment of leases, assignment of some of the other important agreements and so on. We're working through that. Okay, great. Thanks. That's all my questions. Thank you. Your next question is from David Bailey from Macquarie. Please go ahead. Yeah, thanks. Morning, Ian and Craig. Just on MRI deregulation, just any initial thoughts you might have around outcomes for IDX, where you think it's an opportunity or some risk to come through that as well? Thanks, David. It is both. There are both pros and cons to MRI deregulation in the regional and rural areas. On the positive side, it does give us an ability in several of these areas to be able to introduce MRIs in these areas and be able to bill Medicare from those MRIs. We also have MRIs already in some of these areas that from November, we'll be able to start billing Medicare, and they were not able to do that in the past. On the positive side, it does give us an opportunity to bill Medicare for MRI services for, you know, existing and new MRIs that we may introduce into the market. On the negative side, though, it does also allow competitors to do something similar. We do lose one of our moats in these areas in terms of the areas where we already have licenses and where those areas become open to competitors to bring MRIs into those areas. Importantly, though, in addition to the MRI license in those areas, we also have the staff, the radiologists, the radiographers, the technical staff to operate these machines, and they're already set up and geared up in these regional areas to provide the service. It's important to, you know, raise that there are both pros and cons to MRI deregulation in the regional areas. Got it. The net impact. Sorry. Yeah. We don't expect the net impact to be materially delayed. Understood. Just on the Gold Coast, fair bit of capital being deployed there. Just on the Smith Street site, is that to give you know, increased exposure to Gold Coast Uni Hospital? Could you also give us a bit of an update as to the performance of Benowa, how that site's going? The Benowa site is doing very well. We're very happy with how we're doing in Benowa. You know, to start, it was a greenfield, the first one that we introduced over the course of last financial year in October. We're happy with the progress of Benowa. With regard to the lease at Pindara and the other leases with Ramsay, they're still in negotiation. That's the Pindara lease and also three leases at Ramsay Hospitals in central Queensland and on the Sunshine Coast. All right. All tonight's champion. Thanks. Thank you. Next question is from Saul Hadassin from Barrenjoey. Please go ahead. Thanks. Good morning, Ian. Good morning, Craig. Just two questions from me. First one, just obviously we've got a budget coming up at a federal level in Australia. Just your thoughts on, any additional either positives or negatives that could emerge specifically for imaging. You've covered off the sort of the regulatory changes into fiscal 2023. Is there an expectation that effectively, you know, the funding envelope for imaging as a whole remains in place without any sort of significant changes? What's your thoughts on that? We don't expect any significant changes other than the ones that we have already called out. What we do hope to see is that the environment for our referring doctors, for GPs and others, is made more attractive so that over time, more medical graduates can become general practitioners as well as specialists, and that the borders are opened up more so that we can once again attract international medical graduates into the country. Thanks, Ian. I'll just. Yeah. We're not expecting any other changes in the new budget at this point. Thanks for that. Just one more. Again, we're seeing issues as it relates to the viability of general practice from a funding perspective and the notion that GPs will continue to shift away from bulk billing, and that in turn could lead to you know reduced attendances and the flow-on effect for referrals to various diagnostic services. Just your thoughts on, I guess, the relevance and the materiality of GP referrals to your business versus specialists. Again, if you think that's a realistic outcome that you will do see a degradation in attendances to GPs, which could flow-on effect through to diagnostic services. Yes. GPs and specialists and ourselves all receive the same 1.6% increase in Medicare indexation this year, which is way below inflation. GPs and specialists are seeing a lot of the same pressures as what we're seeing. Like ourselves, they're also reverting to pricing as one of the mechanisms that they have to address the inadequate Medicare increase. It is a challenge to the industry. It's a challenge to Australian healthcare overall that GPs are no longer able to bulk bill as much as they were in the past, given these additional pressures that the industry is facing. You know, you're absolutely right in that our referral market is impacted in much the same way as we are by, you know, indexation being a lot lower than what inflation is. Are you able to provide any color as to, from Integral's perspective, just what the proportion of all referrals or work you receive does indeed come from general practice versus specialists and in-hospital work? General practice for us, like for the whole industry, are our biggest referrers. GPs refer. We haven't called out the exact percentage, but they are our biggest referrers, and they refer, you know, about, I'm just unable to call out the exact percentage. As a group, GPs are our single largest referrer. Where we do differ though is unlike the rest of the industry, where GPs are also their biggest referrer, we have a more specialist orientation in our mix. If GPs account for, let's say, 50% of our market share and specialists 50%, we would see in the rest of the industry, GPs accounting for a lot more than 50% because our work is more weighted towards the higher acuity specialist end. Whereas specialists generally refer for a lot more of the high margin, high acuity MRIs and CTs, whereas GPs refer a lot more for the basic X-rays and ultrasounds. GPs are our most important referral source, and that's true in Australia and in New Zealand. We're weighting ourselves a lot more to GPs with the Horizon acquisition and also with the new greenfield. Great. Thank you for that. That's all I had. Thank you. The next question is from Chris Cooper from Goldman Sachs. Please go ahead. Morning. Thank you. Craig, you commented in February you'd be disappointed if employee expenses grew by as much as mid-single digits. That was a comment you were sort of referring to for the next couple of years. I think it's probably fair to say the degree of sort of staffing challenge would not have been well understood at that time. I just want to sort of circle back on that and confirm the extent to which that statement still held? Yeah, Chris, thanks for that. Look, I think a couple of things, as Ian's talked about, you know, we've been seeing the cost of inflation, you know, in line with CPI. I think the world in February is a very different world to the world that we see today and probably have for the last few months. How quickly things change. I would be thinking of, yeah, that, you know, CPI most recently is around that mid-single digit level, and that's what we're seeing. You said on this call, Craig, you expect there is a reversal of the sort of negative operating leverage dynamics you saw through fiscal 2022, i.e., you know, you expect revenue to grow ahead of costs. Can I confirm whether that was a sort of general long-term statement or whether that was specifically something you expect to see over the next year or two? Well, certainly, I think if you look at the experience of the industry, and obviously, IDX is just one part of that, you can see it in all the industry stats for Medicare. You know, when we came out of Delta, there was a sharp rebound in demand for services. I think what we're seeing with Omicron and probably a particularly heavy flu season, given the sort of the winter season that we're in now is that, you know, we just haven't seen that. Again, you can see that across the industry, we're performing much better than the industry. You know, I called out those numbers earlier. The Medicare industry data for FY 2022 was down 2.8%. We're up 1.6% on organic revenue. That's a strong result given the environment we're in. You know, while we've seen the sharp recovery historically, we haven't seen it to date. The industry hasn't seen it to date, and that's why we've said we expect the recovery to be more gradual. Therefore, that reversal of the negative operating leverage that we've seen towards positive operating leverage, I think is gonna be more gradual. That's just the reality of the world that we face as we sit here today. Okay. Understood. Just one last one on M&A. I heard your comments at the end of the prepared remarks there, Ian, just on M&A sort of being less likely in the year ahead. Can I ask the opposite question for New Zealand? I mean, there's some structural challenges in that market you've referred to a lot through the last 12 months. It doesn't sound like a quick fix. Is there any scenario where you'd consider strategic options for that business? Not at this point. We're very happy with our business in New Zealand, despite the pressures that the business is facing there. We think we have a much improved case mix in New Zealand now, where we can access the full spectrum of referrers the same way as we can in Australia. It's a much more balanced business than what it's been historically. We're very happy both with the quality of the service we offer, the quality and reputation of our providers in New Zealand. We also have a strong presence in the Greater Auckland area, in Auckland itself and in South Auckland. Strategically, it's still a very good fit within the group, and we're not looking at changing that at all. I might just add one comment there. You know, that's in regards to the acquisition of Horizon Radiology. You know, we've only owned the business a month, but that business is basically trading in line with expectations and diversifies the New Zealand business quite nicely. To address some of those other sort of competitive challenges we're seeing some from some of the referrer providers. Okay. That's all I have. Thanks. Thank you. Your next question is from Lyanne Harrison from Bank of America. Please go ahead. Yes, good morning, Ian. Good morning, Craig. You mentioned that you had some supply chain challenges in 2022 that impacted your growth initiatives. Can you know, add some color as to what extent those challenges still remain for 2023, given your organic growth focus for the year? Hi, Lyanne. Those challenges are still in the market now, so it's taking a much longer time than normal to order both new MRIs and CTs, as well as spare parts for MRIs and CTs. These delays do impact our brownfields and greenfield growth opportunities because they do take longer as they did last year. We have built in more realistic expectations this year, but you know, the supply chain challenges there still do remain. What impacted us last year as well, particularly, was the ability to source spare parts from overseas, which took a lot longer to get in here because of logistics challenges and also intra-border challenges that we had last year that are not there this year. It costs us dearly when we have machines, expensive machines like MRIs and CTs that are not operational because they're waiting on spare parts. Historically, we've, you know, been able to minimize that to no longer than a day or two at a time. Last year we were impacted for a few days at a time, several times. We expect to see a lot less of that going forward. In other words, we're seeing the supply chain get addressed in things like spare parts quicker than what we're seeing the supply chain get addressed in terms of, you know, full new equipment orders. The new equipment orders are still taking a long time, but we're not down for as long as we were last year, waiting on things like spare parts for MRIs and CTs. Another question on greenfield sites, obviously three in the pipeline. Can you just give us some color on, I guess, the size and planned modality mix of those new sites compared to Integral's average, for example, and also, you know, when do you expect them to contribute revenue? Lyanne, we're not calling out any more detail on those sites other than what we have here. But just from publicly available information, you can see that, you know, one of those sites is in an MM2 area, so it could make sense to, you know, put an MRI into a site like that because it has the ability to bill Medicare, whereas the other site is in an MM1 area where, you know, an MRI would not make sense. That generally is the difference in a lot of our greenfield sites, is whether the site is, you know, X-ray, ultrasound, CT with or without MRI. We're just not calling out any more detail than that at this point. Okay. Thank you very much. Thank you. Once again, if you wish to ask a question, please press star one on your telephone and we'd be able to re-announce. Your next question is from Rod Sleath from Rimor Equity Research. Please go ahead. Hi, Ian. Hi, Craig. Thank you very much for your time this morning. I've just got a few questions. I guess most of them are just trying to get a little bit more detail on some comments that you've already made. Perhaps to start with, if I could just come back to the Ramsay Hospital leases, which are up for renewal. I don't know how much information you can give us given that you are currently in discussions and negotiations. I guess I was interested in trying to get some sort of quantification of what the worst case would be if those leases are not renewed. Perhaps in terms of, you know, some sort of proportion of what Ramsay is of revenues, if possible, and how the level of profitability in those hospital businesses perhaps compares to other business. I guess also if a non-renewal has an effect on your sort of hub and spoke models in those areas. Alongside that, as part of that question, I suppose, obviously note that, you know, Benowa Ashmore Road facility is, you know, only a block away from Pindara Hospital facility. Should we look at that opening as something that would have happened anyway, i.e., that capacity expansion was required, or should we look at that as more of a defensive greenfield opening that is taking business from the Pindara facility? That's the first question on the Ramsay Hospitals. Yeah. Rod, the Benowa site in Ashmore Road was open for both of those reasons. It provides us with better access to community, and we've seen that since it's opened. It's a very visible site. It provides good parking. It's easy to access. That on its own made sense for the site to be located where it was. In addition to that, it does give us the ability, if we were not to go forward with Pindara, to continue to provide services to our referrers from the start. We are currently in constructive negotiations with Ramsay, and we do hope to be extending our leases at the Pindara hospital and also at the other three smaller hospitals, as well. The hospitals are more expensive. The hospital sites, and these in particular, are more expensive to run. Leasing costs are more expensive than. There are also additional logistical challenges in a hospital environment that something like the Ashmore Road site does not have. Things like parking, ease of access, visibility to the community allows a site like Benowa to operate at a much you know at an improved margin to the margin at the hospital sites. Are you able to give any feel for what the total revenue of those combined branches are for the renewal amount to? We don't call that out for a number of reasons, most importantly of which are competitive reasons. Sure. Okay. That's fine. Okay. Moving on, I just wanted to come back to a comment you made earlier, Ian, which was that you try and keep radiologist costs constant as a proportion of revenue. I just wanted to come back to that for a couple of reasons. One, I was wondering, have you in the past or are you able to call out, you know, roughly approximately what proportion of your employee costs are radiologist costs so we can put that into context? Secondly, I presume you mean on a medium-term basis, because I presume, obviously, in a situation you've got at the moment where your volumes are not doing what you would expect they would, that it's not possible to keep the radiologist costs equivalent as a proportion of revenue, given that that is not really a variable cost unless there's been some change in your contractual relationship with your radiologists, I would imagine. Yes. Either that or their link to revenue? It's true. In a year like the year we've just had, the radiologist cost as a proportion of revenue would be higher because of the impact that we had on revenue and also because of the fact that historically at IDX, we have had a much higher fixed radiologist cost base than variable cost base. Over time, though, we are looking over time to move to a more variable cost base for radiologist costs going forward. We have seen through some of the acquisitions that we made, that acquisitions where the radiologists are paid on a variable cost basis have much more protection on the downside than what we do during periods where revenue is down. We do get that operational leverage on the upside, though, when revenue comes back. Our radiologist costs, historically, have been much more fixed. We do get that positive operating leverage on the upside when revenue comes up. Because, you know, because revenue's been down in the last year, it has brought to our attention that it would be useful to be able to variabilize our cost base more. We're not looking at changing the structure of radiologist costs for those radiologists who are contracted, but we are looking going forward to move more, and have been for the past several months, moving more to a more variable cost base going forward. In terms of the percentage of revenue for radiologist costs, we've never really called that out, but it would be, you know, in the low 20%. That would be in a normal year. Normal. Yeah. I mean, if we weren't operating in a COVID environment, flu-affected and so on, you'd expect it to be low 20s%, but clearly we're higher than that at the moment. Okay. Can I just clarify that? That was low 20s% of revenues for radiologist costs. In a normal environment. In a normal environment. Yep. And- Okay, cool. Clearly we're not in a normal environment right now. Yes. Understood. I just wanted to quickly come back to New Zealand with regard to, I guess, the increase in referrer-owned competition that's taking place there. My understanding is that that's mainly happening with orthopedic specialists. I guess the question is that something that is stabilizing? I.e., new facilities have been opened that orthopedic surgeons have a share and ownership of, and they're increasing their referrals to those facilities. And that's done. Or are you seeing lots of specialists going, "Wow, this is a great new method of raising our proportion of the total share." And you're seeing more interest from specialists in following this trend. That's the first part of the question. The second part, given there's been so much going on in New Zealand, as a result of COVID as well, do you have some feel for what you think the materiality of the effect of this trend has been to date, and are you able to share that? Well, to answer your first question first, the orthopedic referrals are the ones that are most impacted. The reason for that is that orthopedic imaging services in New Zealand are well reimbursed, and it makes it worthwhile for the orthopedic surgeons to move into what is still a very gray area in terms of the non-arm's length referrals. We've not seen that in the other specialty areas yet, but the attraction for them is not as lucrative as it would be with regard to orthopedic surgeons. It is because New Zealand, the ACC is the major payer, the Accident Compensation Corporation, and they are very oriented towards orthopedic surgery, and they are, you know, a good payer in that market. It's for that reason that we see orthopedic surgeons moving more towards self-referrals in the imaging space. The other part of your question related to I think you were looking for a sort of quantum as to the impact. We don't, we haven't provided that. I think when you think about the New Zealand result, you should think mostly about COVID impact in FY 2022, and some impact from the referrer issue we've just discussed. Okay. Great. Sure. So, I guess the other thing I'd ask you is, do you feel that the level of competition in terms of the number of referrer-owned facilities has sort of happened and stabilized, or do you think that's a trend that's still in progress, i.e., there's more orthopedic surgeons who are thinking about or could be going this direction in your Auckland market? The orthopedic surgeons that I've spoken to have said that they're not looking at going into, you know, those that are still referring to us have indicated that they're not looking to go into that kind of practice because they're not comfortable with it. What we have seen, though, is in other places in Auckland, we've seen orthopedic surgeons do something similar. In other words, set up their own radiology clinics in partnership with radiologists in other cities in New Zealand. Oh, okay. Sorry, in other cities outside of Auckland? Correct. Great. Thank you very much. Thank you. There are no further questions at this time. I'll now hand it back to Dr. Kadish for closing comments. Thank you very much. We appreciate the level of engagement and interest from everyone on the call, and look forward to engaging with you further over the next two weeks of roadshow that Craig and I are going to be on. Thank you all for your interest and, thanks for your time this morning. Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect. Thank you.