Canberra-based software and services company Citadel Group has spent AU$198 million (£103 million) on acquiring UK-based Wellbeing Software Group.
Wellbeing Software Group focuses on radiology and maternity software solutions that manage patient workflow and data.
The acquisition is part of Citadel’s strategy to expand into “high quality software based recurring revenue streams” while shifting the company’s profile towards healthcare software, slotting within its health division, where it currently services pathology and oncology software products.
The acquisition will be made up of $9 million in Citadel shares and $189 million in cash.
Citadel CEO, Mark McConnell said the acquisition will transform Citadel into a global healthcare software company and created substantial cross-sell opportunities within both organisations.
“Citadel has been focused on growing in the healthcare software sector in the UK over the past two years,” McConnell said.
“Like Citadel, Wellbeing is well regarded, as is evident from its over 150 clients in the UK, average annual retention rate of 99.9 per cent over the past three years, and average relationship length of over 12 years across its top 10 customers.
“With around 70 per cent of revenues recurring and an EBITDA [earnings before tax] margin approaching 40 per cent, Wellbeing has a highly attractive financial profile."
Furthermore, Citadel pointed out that Wellbeing had a strong sales pipeline with more than 80 per cent visibility on calendar year 2020 revenue.
In the meantime, Citadel released its half-year FY20 results showing revenue growth from its software business increasing 18.9 per cent to $18.9 million, contributing towards total revenue increase of 24.4 per cent to $61.1 million.
EBITDA fell 5.3 per cent to $12.5 million due to $800,000 of abnormal restructure and other one off expenses.
McConnell emphasised the company’s strategic focus on shifting the business mix to increase the proportion of revenue and earnings from its software segment to provide long-term recurring revenue streams.
“Our first half result reflects our dedicated to growing our software segment, as well as the successful integration of Noventus, which is performing above our expectations,” he said.
“Citadel has invested in its software and platform capabilities to generate recurring revenue, which has underpinned a return to growth.
“We are focused on developing secure cloud-based software solutions that have large addressable markets, and a high degree of contracted, recurring revenue models."
During the first half year, Citadel launched two key products, AVAssist and goTrim Pro, and plans to launch Citadel Share in the second half of FY20.
“We continue to see substantial opportunities to leverage our strong IP and leading products in international markets, both directly and via exclusive channel partnerships, which is a long term strategic focus for the Group,” he said.