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Capitol Health Ltd share price up 2% on growth news

The Capitol Health Ltd (ASX: CAJ) share price has risen by 1.79% on news of its latest growth plans.

The business has completed the acquisition of I-Rad Radiology, which is expected to add $3.7 million in annual revenue and $0.8 million in earnings before interest, tax, depreciation and amortisation.

The company has also completed two of its three planned clinics for FY18. Those clinics are now open and operational. The two clinics are located at Vermont Private Hospital and Altona in Melbourne. These two clinics expands Capitol’s presence in high-demand areas and builds on its referrer base.

Capitol Health Managing Director, Andrew Harrison, said “I-Rad is an example of Capitol deploying our cash reserves to build our network and deliver value for our shareholders.”

“Our balance sheet is strong and this acquisition, as well as that of Radiology Tasmania, speak to our commitment to deliver on our existing growth strategy through our reserves as well as pursue our proposed takeover of Integral Diagnostics Ltd (ASX: IDX).”

“We believe in the merits of our growth strategy as well as the merits of our offer to Integral shareholders, and are hopeful we will see constructive engagement from Integral’s Board.”

The company confirmed that I-Rad was acquired for an upfront consideration of $3 million with up to an additional $0.5 million payable under earnout over two years.

It also announced that it intends to reinstate dividends for FY18, consistent with restrictions.

Foolish takeaway

Capitol Health could be one to watch as it grows organically and through acquisitions. The ageing population of Australia should be a good tailwind for the business.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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