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Citadel Group Ltd announces e-health acquisition

This morning Citadel Group Ltd (ASX: CGL) has announced the acquisition of Anaesthetic Private Practice Pty Ltd, which will expand its e-health capabilities.

Citadel describes itself as a leader in the development and delivery of managed technology solutions. The majority of its revenue is derived from long-term managed services and software-as-a-service solutions.

The acquisition will cost around $2 million and will be an all-cash deal.

Anaesthetic Private Practice was founded in 2010 and was the first provider of cloud-based Software as a Service (SaaS) practice management and billing tools to the anaesthetist market in Australia.

According to the ASX release, Anaesthetic Private Practice services around 300 private practice anaesthetists, with most of those being located in Queensland. It has a 6% market share of the total Australian anaesthetist market with a very high retention rate. Around 89% of its revenue is generated from recurring revenue and it has roughly $500,000 in annual earnings before interest, tax, depreciation and amortisation (EBITDA).

Citadel thinks there are many compelling reasons why this is a good acquisition. It expands Citadel’s existing e-health capabilities, it broadens the SaaS offerings, it can be extended into other e-health specialisations, it is earnings per share accretive and Citadel can expand it into other states and categories such as vets.

The CEO of Citadel, Darren Stanley, said “Key tenets of Citadel’s growth strategy are building scalable intellectual property and expanding our cloud-based SaaS offerings. The acquisition of Anaesthetic Private Practice is therefore a logical extension for Citadel as it supports our immediate expansion across the anaesthetist and general eHealth sectors whilst also growing Citadel’s recurring revenue base.”

Foolish takeaway

This seems like a smart acquisition by Citadel and management seem confident that the Anaesthetic Private Practice software can be rolled out to other areas, meaning a small cost could lead to great rewards. Citadel seems like a solid growing company and could be one to watch.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Citadel Group Ltd. 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 Scott Phillips.

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