Canberra's Citadel Group acquires UK-based Wellbeing Software

Canberra-based IT service management company Citadel Group has acquired UK-based healthcare software vendor Wellbeing Software Group for £103 million (A$199.5 million).

The company provides radiology and maternity software solutions that manage patient workflow and data. Wellbeing will fit into Citadel’s health division, adding to its current offerings in pathology and oncology software.

In an ASX announcement (pdf), Citadel said the acquisition is in line with its strategy to further expand into “high quality software based recurring revenue streams” and to shift the company’s overall earnings profile towards healthcare software.

“Citadel’s acquisition of Wellbeing transforms Citadel into a global healthcare software company with multiple growth opportunities. Citadel has been focused on growing in the healthcare software sector in the UK over the past two years,” Citadel chief executive Mark McConnell said.

“I am excited to welcome Wellbeing’s management team into Citadel and am looking forward to executing on the many growth opportunities we see for the combined businesses.”

Citadel expects the acquisition will be finalised in April this year.

Software pivot pays off with strong growth

Alongside the Wellbeing acquisition, Citadel also reported its first half FY2020 results as well as a number of contract wins during the period.

The company reported total revenue of $61.1 million in the six months ended 31 December 2019, up 24.4 percent from $49.1 million the previous year. The growth came from both services and software, delivering 25 percent and 18.9 percent year-on-year growth respectively.

The growth in the software business came following investments to develop and enhance software and platform capabilities as part of an overall strategy to increase the proportion of revenue and earnings of software relative to its services division.

“Citadel has invested in its software and platform capabilities to generate recurring revenue, which has underpinned a return to growth,” McConnell said in a separate ASX announcement (pdf).

“We are focused on developing secure cloud-based software solutions that have large addressable markets and a high degree of contracted, recurring revenue models.”

Enterprise software revenue grew to $9.3 million, up 55 percent from $6 million the previous year. Health software revenue declined to $9.6 million, down 3 percent from $9.9 million due to a lower number of non-recurring licence fees.

McConnell said recent contract wins have positioned Citadel to post future growth in the healthcare software segment.