I D T A u s t r a l i a L m i i t e d a n n u a l r e p o r t 2 0 1 5 IDT Australia Limited annual report 2015 Company Information Contents Directors Graeme Kaufman BSc, MBA (Chairman) Geoffrey F Lord BEc (Hons), MBA (Distn), ASSA, AICD (Deputy Chairman) Dr Graeme L Blackman OAM BSc (Hons), PhD, FRACI, FTSE Alan Fisher BComm (Accg), Fellow ICAA, AICD, FINSIA Reo Shigeno BA, Dip Financial Services Dr Paul MacLeman MBA, BVSc, Grad Dip Tech, Grad Cert Eng, FAICD, MATTA (Managing Director) Secretaries Joanna Johnson BEc, Grad Dip Management, ICAA Dr David Sparling BVSc (Hons), LLB (Hons), GDi pAppCor Gov Share Register Link Market Services Limited Level 1, 333 Collins Street MELBOURNE, VICTORIA, 3000 Bankers National Australia Bank Limited NAB Health Level 2, 151 Rathdowne Street CARLTON, VICTORIA, 3053 Auditors Deloitte Touche Tohmatsu 550 Bourke Street MELBOURNE, VICTORIA, 3000 Stock Exchange Australian Stock Exchange Limited 530 Collins Street MELBOURNE, VICTORIA, 3000 (ASX Code : IDT) Chairman’s Report Managing Director’s Report Report of the Directors Auditors Independence Declaration Corporate Governance Statement Statement of Profit or Loss and Other Comprehensive Income Statement of Financial Position Statement of Changes in Equity Statement of Cash Flows Notes To and Forming Part of the Financial Statements Directors’ Declaration Independent Audit Report to the Members Shareholder Information Registered Office and Principal Place of Business 45 Wadhurst Drive BORONIA, VICTORIA, 3155 Telephone +61 3 9801 8888 Facsimile +61 3 9837 6445 CMAX Level 5, East Wing Royal Adelaide Hospital North Terrace ADELAIDE, SOUTH AUSTRALIA, 5000 Telephone +61 8222 3923 Facsimile +61 8223 3475 Website Address www.idtaus.com.au www.cmax.com.au 2 3 4-13 14 15-20 21 22 23 24 25-47 48 49-50 51-52 1 IDT Annual Report 2015 Chairman’s Report Last year I spoke of the need for IDT to seek new business opportunities as well as rebuild the base business. I am pleased to report that significant progress has been made on both objectives. Proprietary Product Acquisition 2014 saw a milestone event in the history of the Company, with the acquisition of 23 approved generic products from a large multi-national. The acquisition of these products, with an addressable market of US$538m (IMS Health June 2015), marks the entry of IDT into the ranks of pharma companies. As these products enter the market through the course of 2016, we will be able to increase Boronia plant utilisation and leverage our strong manufacturing and quality capabilities to build on our established revenue base. The ability to take these products to market in the US is supported by appointment of a strong US distribution partner, ANI Pharmaceuticals Inc. IDT is actively working to bring these products back to market and anticipates the first cohort of products will be approved for market through the course of 2016. Strong Organic Growth of Base Businesses This year has seen dramatic growth in IDT’s traditional drug and clinical service businesses, with efforts in recent years to boost business development activities bearing fruit. CMAX revenues grew by 10% during the current year, a continuation of the solid growth trajectory that our clinical business has demonstrated for the past two years. Growth at our Melbourne contract manufacturing business grew by 60% year on year, a spectacular result given that it was achieved with zero increase in operational expenses. This resulted in a modest second half profit after tax in the 6 months to June. Pleasingly this expansion in our manufacturing services business looks set to continue, with strong forward orders moving into this coming year. This improvement marks a turnaround in our base business that will provide a platform for the company’s growth as we expand our proprietary specialty generics business. New CMAX Facilities CMAX’s lease at our current location ceases in April 2016 with the closure of the old Royal Adelaide Hospital in South Australia. In preparation for this we have located a new site in close proximity to the new Royal Adelaide Hospital being built in the South Australian medical innovation precinct. This year has seen detailed design and planning work for the new facility in preparation for construction in the first half of this year and the move itself early next year. This new purpose designed and built clinical facility will be the newest, largest and most sophisticated clinical trials unit in Australia when it is completed in early 2016. The Future: Growing the Business and Executing Generics Strategy In summary therefore, 2015 financial year has been a successful one for IDT, growing the base business, acquiring valuable new assets and positioning the company for stepwise growth and a return to profitability in coming years. I would like to thank my fellow Directors and the IDT Management team, for their contribution to the transformation of the IDT business, setting it on a course for major successes in coming years. Graeme Kaufman Chairman 2 IDT Annual Report 2015 Managing Director’s Report Healthy Year a Platform for Growth As our Chairman has outlined, 2015 has been a very successful year for IDT shareholders, with growing Melbourne and Adelaide revenues, the initial deployment of our growth strategy and preparations for further acquisitions in the future under way. Management is confident that the growth in base business revenues is sustainable as evidenced by an increase in our manufacturing sales pipeline from prospects valued at approximately $7 million in 2013 to over $40 million today and orders supporting activity well into 2016 already received. These revenue increases have furthermore been achieved within a strong operating cost containment focus. Bedding in Our New Portfolio As announced in May this year, we have started to move our newly acquired products into our manufacturing facility in Melbourne. This has necessitated the recommissioning of infrastructure that has not been used for some years and well as a ramp-up in ancillary but vitally important activities such as manufacturing and analytical methods development. Doxazosin, the first product into the facility, performed well in trial batches and with that in hand we moved forward with analytics in preparation for full regulatory batches. US Product Distribution Partnership We have spent some months negotiating with a number of interested parties who expressed interest in partnering for the distribution of our new portfolio in the US. In all we received 13 term sheets; pleasingly, far more than was expected. On 12 August 2014 we were pleased to announce the appointment of ANI Pharmaceuticals Inc as our distributor. ANI is a successful, rapidly growing player in the US generic pharmaceutical market, and one that we believe will do a very good job of maximising IDT’s economic returns for our portfolio. Being very experienced but also nimble, they are a good cultural fit for us and we look forward to a strong working relationship with them. We are finalising the regulatory and launch planning with ANI but remain confident that our products will begin entering the US market through the course of 2016. Temozolomide FDA Progress IDT filed its first Abbreviated New Drug Application in December 2013. The ANDA, for the brain cancer therapy temozolomide, represents an addressable market for IDT of over US$300m. IDT received correspondence from FDA in Q2 2015, indicating that the filing is now under active review. On this basis, IDT remains confident that the marketing approval for the product will be received sometime in late 2016 or early 2017, adding to IDT’s base business and growing generic portfolio income streams. Future Acquisitions As we have said in other forums, IDT continues to assess further acquisition opportunities to grow our speciality generics portfolio. In the short term we are focused however on bedding in the current assets and would only look towards another asset once we have demonstrated our ability to professionally execute on the commercial deployment of our current portfolio. Three Pillars Strategy In summary, we continue to invest in the growth and development of all three parts of our business; contract drug development, CMAX clinical services and a growing speciality generics business which all remain important growth drivers. We therefore expect to continue to expand and build the business as we create Australia’s next pharmaceutical company. Dr Paul MacLeman Managing Director 3 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (including Remuneration Report) Your directors present their report on the financial report of the company for the year ended 30 June 2015. The following persons were directors of IDT Australia Limited during or since the end of the financial year: G Kaufman (Chairman) G L Blackman P MacLeman D Williams (resigned 19th May 2015) Principal Activities G F Lord (Deputy Chairman) A D Fisher (appointed 10 June 2015) R Shigeno The principal activities of the Company in the course of the year were the supply of products and provision of research and development and other technical services for the pharmaceutical and allied industries. Review of Operations During the year, the Company continued to provide consulting research and development services and manufacture products for clients in the pharmaceutical and allied industries. In December 2014, the Company acquired 23 abbreviated new drug applications (“ANDAs”) and from that date has worked towards commercialising these products. A detailed review is given on pages 2 and 3 of this annual report. Results The net result of operations after applicable income tax expense was a loss of $2.992m (2014: $6.626m). Dividends No dividends were paid during the course of the financial year. There are no dividends or distributions recommended or declared for payment to members, but not yet paid, during the year. Significant Changes in the State of Affairs In the opinion of the Directors, there have been no significant changes in the state of affairs of the Company during the financial year under review not otherwise disclosed in this report or the financial statements. During the reporting period, the Company continued to provide manufactured products and research and development services for clients in the pharmaceutical and allied industries and the operational results achieved are consistent with expectations in terms of value and timing. Despite improvements in the operational result for the current financial year, particularly in the second half, the Company shows a net loss for the year. Firmed customer commitments are in hand to support a further step up in activity in the next financial year that is expected to be matched with ongoing improvement in profitability, particularly at the Boronia manufacturing campus. In December 2014, the Company raised net proceeds of $16.4m from new and existing investors to acquire 23 previously marketed US generic drug products, strategically repositioning IDT as a manufacturer and supplier of its own specialty generic drugs. These products are expected to be progressively launched from the middle of 2016 and should materially increase future plant utilisation, expanding revenues, margins and profitability. Matters Subsequent to the End of the Financial Year On 12 August 2015 the Company executed a partnership agreement with ANI Pharmaceuticals Inc., appointing them as distributors for the US market for eighteen of the twenty three products acquired from Sandoz Inc. in December 2014. A signing milestone of US$1m has been received and further milestones become receivable as the marketing authorisations are reapproved by the FDA. On 8 July 2015, the commercial loan facility with National Australia Bank Limited was increased by $0.5m to $3.25m and the term extended through to 31 October 2016. The $1.0m overdraft facility remains unchanged. 4 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) Other than the above, there has not been any matter or circumstance occurring subsequent to the end of the financial year that has significantly affected, or may significantly affect, the operations of the Company, or the state of affairs of the company in future financial years. Likely Developments The Company expects to have three key areas of strategic focus for the coming financial year: • The Company is well positioned to again realise superior organic revenue growth through identifying, successfully tendering for and completing new manufacturing and service projects which in turn is expected to underpin improvements profitability and cash generating capability. • Continue process of preparing to launch products to the US market, including the ANDAs purchased in December 2014 and internally developed products, through regulatory and commercial partnering activities. First product launches are expected in 2016. • With the old Royal Adelaide Hospital to be decommissioned and relocated, a lease for new facilities for CMAX has been executed. The unit will relocate to purpose built premises early in 2016. Environmental Regulations The Company is subject to environmental regulations and other licenses particularly in relation to its manufacturing operations, which include obligations to comply with provisions of the Environment Protection Act and a Trade Waste Agreement with South East Water. The Company is subject to environmental audits by local and international clients. Systems are in place to ensure compliance with federal, state and local environmental regulations and as at the date of this report, the Directors are not aware of any breach. Indemnification of Officers During the financial year, the Company paid an insurance premium insuring all officers of the company, including the Directors. Liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the company. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Meetings of Directors The following table sets out the number of meetings of the Company’s Directors held during the year ended 30 June 2015, and the number of meetings attended by each Director. Director Board Audit & Risk Committee Remuneration & Nomination Committee G L Blackman A D Fisher (from 10th June 2015) G Kaufman G F Lord P MacLeman R Shigeno D Williams (to 19th May 2015) A 12 1 13 12 13 13 12 B 13 1 13 13 13 13 12 A – – 1 – – 2 2 B – – 2 – – 2 2 A 2 – 2 2 – – – A = Meetings attended while a director or committee member. B = Meetings held while a director or committee member. – = Not a member of relevant committee B 2 – 2 2 – – – 5 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) Information on Directors GRAEME KAUFMAN Qualifications: BSc, MBA Experience: Formerly Executive Vice-President of Mesoblast Limited and Chief Financial Officer of CSL Limited. Non executive Director since 1 June 2013 Other Current Directorships: Non executive Chairman of Bionomics Limited (since 2012), non executive Chairman of Paradigm BioPharmaceuticals Limited (since 2014) Former Directorships in Last 3 Years: Non executive director of Cellmid Limited (until June 2015) Responsibilities: Chairman, Member of Audit and Risk and Nomination and Remuneration Equity interests in company: 285,000 fully paid ordinary shares Committees GEOFFREY F LORD Qualifications: BEc (Hons), MBA (Distn), ASSA, AICD Experience: Formerly Chief Executive and Deputy Chairman of Elders Resources Limited. Non executive Director since 1998 Other Current Directorships: Chairman and Chief Executive of Belgravia Group Pty Ltd, Non executive Chairman of UXC Limited (since 2002), Director of Maxitrans Industries Limited (since 2000), Director Melbourne Business School (appointed 2015) Former Directorships in Last 3 Years: Former Chairman of LCM Litigation Fund Responsibilities: Deputy Chairman from 2008. Member of Nomination and Remuneration Committee Equity interests in company: 6,831,907 fully paid ordinary shares (indirect) DR GRAEME L BLACKMAN OAM Qualifications: BSc (Hons), PhD, FRACI, FAICD, FTSE, FIoD Experience: Formerly Professor of Pharmaceutical Chemistry, Victorian College of Pharmacy. Extensive experience in research and development and commercial scientific consulting. Chairman (1986-2013), Managing Director (1986-2007) Other Current Directorships: None Former Directorships in Last 3 Years: None Responsibilities: Member of Nomination and Remuneration Committee Equity interests in company: 7,029,710 fully paid ordinary shares ALAN D FISHER (appointed 10 June 2015) Qualifications: BComm (Accg), FICAA, AICD, FINSIA Experience: Managing Director Fisher Corporate Advisory Pty Ltd (since 1997), Managing Director DMC Corporate Pty Ltd, formerly CEO Pental Ltd, Managing Director HRL Ltd and Corporate Finance Partner Coopers & Lybrand Other Current Directorships: Chairman Australian Renewable Fuels Ltd Former Directorships in Last 3 Years: Non executive Director Bluestone Global Ltd (29 April 2014 to 4 August 2014) Responsibilities: Chairman Audit and Risk Committee Equity interests in company: nil 6 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) REO SHIGENO Qualifications: BA, Dip Financial Services Experience: Chief Financial Officer of Healthy Clinical Research, a subsidiary of I’ROM Group, Ltd. Non executive Director since 1 June 2013 Other Current Directorships: nil Former Directorships in Last 3 Years: nil Responsibilities: Member of Audit and Risk Committee Equity interests in company: 333,333 fully paid ordinary shares DAVID WILLIAMS (resigned 19 May 2015) Qualifications: B.Ec (Hons), M.Ec, FAICD Experience: Managing Director of Kidder Williams Ltd, with over 30 years’ experience in investment banking Other Current Directorships: Chairman of Medical Developments International Limited, Chairman of PolyNovo Former Directorships in Last 3 Years: nil Responsibilities: Chair of Audit and Risk Committee Equity interests in company: nil Ltd (formerly Calzada Ltd) PAUL MACLEMAN Qualifications: MBA, BVSc, Grad Dip Tech, Grad Cert Eng, FAICD, MATTA Experience: Managing Director, IDT Australia Limited. Director since 21 August 2013 Other Current Directorships: nil Former Directorships in Last 3 Years: G Tech International Limited (until November 2012) Responsibilities: Managing Director (MD) Equity interests in company: 471,000 fully paid ordinary shares, 500,000 options Information on Secretaries MS JOANNA JOHNSON Qualifications: BEc, Grad Dip Management, ICAA Experience: Chief Financial Officer, IDT Australia Ltd since 2014. Previous roles include Chief Financial Officer and Company Secretary of Generic Health Pty Ltd (a partially owned subsidiary of Lupin Ltd) and Finance Director, Asia Pacific for Hospira Inc DR DAVID SPARLING Qualifications: BVSc (Hons), LLB (Hons), GDi pAppCor Gov Experience: Vice President Legal and Corporate Development, IDT Australia Ltd since 2013. Previous roles include Chairman FYI Resources Limited and Vice President Corporate Development, Genetic Technologies Limited 7 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) Remuneration Report The Directors of the Company are pleased to present the following Remuneration Report which forms part of the Report of Directors and has been prepared in accordance with s300A of the Corporations Act 2001. The Remuneration report has been audited as required by s308 (3C) of the Corporations Act 2001 and sets out remuneration information for the Company’s key management personnel. The Remuneration and Nomination Committee advises the Board on remuneration policies and practices generally, making specific recommendations on the remuneration framework and other terms of employment for executive Directors, non-executive Directors and senior executives, including incentives and share ownership plans. The Corporate Governance Statement provides further information on the role of this committee and its membership. Directors’ Remuneration Fees and payments to non executive Directors reflect the demands made on, and the responsibilities of, the Directors. They are set at market rates for our industry and size of the Company in order to attract Directors with expertise in our industry and Australian capital markets. Non executive Directors’ fees are reviewed annually by the Remuneration and Nomination Committee. The Chairman’s and MD’s fees were determined independently to the fees of non executive Directors based on comparative roles in the external market. The Chairman and Managing Director were not present at any discussions relating to the determination of their remuneration. Directors’ Fees Non executive Directors’ annual base fee is $40,000 and the Chairman received $80,000, plus superannuation contributions, as required under the Australian superannuation guarantee legislation. Non executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, periodically referred for approval by shareholders. The current maximum aggregate Directors’ fee pool is $400,000 for non-executive Directors. Key Management Personnel Remuneration Remuneration packages are set at levels intended to attract, retain and motivate high quality executives to manage the Company’s operations and achieve strategic objectives. The Company is committed to adhering to corporate governance standards for remuneration of executives. Key Management Personnel remuneration and other terms of employment are reviewed annually by the Remuneration and Nomination Committee having regard to performance against goals set at the start of the year, relevant comparative information and independent expert advice where necessary. The executive pay and reward framework comprises: • Base salary, plus statutory superannuation • Short term performance incentives • Long term incentives via participation in the Company’s Employee Share Plan. 8 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Report of the Directors - 30 June 2015 (Continued) Remuneration Details 2015 Short-term benefits Post-employment benefits Long-term benefits Cash salary and fees $ Cash bonus $ Non monetary benefits $ Super- annuation Termination benefits $ $ Long Service Leave $ Share- based payments Options / Shares $ Non-executive Directors G Kaufman – Chairman 80,000 G L Blackman A D Fisher* G F Lord R Shigeno D Williams** Sub–total Non–executive Directors Executive Director 17,500 3,333 40,000 40,000 36,667 217,500 – – – – – – – – 7,600 26,300 317 633 3,800 – 38,650 – – – – – – – P MacLeman, MD 310,667 45,000 – 23,821 Other key management personnel J Johnson Chief Financial Officer D Sparling VP Legal & Corporate Development Sub–total – executive management Total key management personnel compensation 193,486 – 198,986 47,502 703,139 92,502 920,639 92,502 – – – – 24,303 18,803 66,927 105,577 – – – – – – – – – – – – – Total $ 87,600 43,800 3,650 40,633 43,800 36,667 256,150 – – – – – – – – – – – – – – – – 1,691 43,804 424,983 630 1,088 – – 218,419 266,379 3,409 43,804 909,781 3,409 43,804 1,165,931 * Mr Fisher appointed as a Director effective 10 June 2015 ** Mr Williams resigned as a Director effective 19 May 2015 On 24 October 2014 Dr MacLeman was granted 360,000 Ordinary Shares under the Employee Share Plan at market value at the date of issue, $0.205. This issue was funded by an interest free limited recourse loan from the Company, repayable on sale of the shares. In line with the Company’s short term incentive program, cash bonuses were paid to Dr MacLeman and Dr Sparling during 2015 in relation to achievement of KPIs. 9 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) Remuneration Details 2014 Short-term benefits Post-employment benefits Long-term benefits Cash salary and fees Cash bonus $ $ Non monetary benefits $ Super- annuation Termination benefits $ $ Long Service Leave $ Share- based payments Options / Shares $ Non-executive Directors G Kaufman – Chairman ** 70,000 R Aston resigned 20 November 2013 G F Lord R Shigeno D Williams 16,666 40,000 40,000 40,000 Sub-total Non-executive Directors 206,666 Executive Directors G L Blackman * 27,499 P MacLeman, MD 301,040 Other key management personnel J Johnson *** Chief Financial Officer R Najdecki **** Chief Financial Officer D Sparling VP Legal & Corporate Development Sub–total – executive management Total key management personnel compensation 57,000 164,890 196,040 746,469 953,135 – – – – – – – 6,475 1,541 – 3,670 – 11,686 14,972 27,125 – 27,750 – – – 5,272 49,187 18,037 14,972 127,371 14,972 139,057 – – – – – – – – – – – – – – – – – – – – – – – – – – – Total $ 76,475 18,207 40,000 43,670 40,000 218,352 69,596 336,290 – – – – – – – 7,500 – – – – – – – – – 1,425 36,996 100,693 5,035 – 219,112 4,875 36,996 255,948 18,835 73,992 981,639 18,835 73,992 1,199,991 * ** *** **** Dr Blackman resigned as Chairman effective 30 September 2013 Mr Kaufman elected Chairman effective 30 September 2013 Ms J Johnson was appointed as Chief Financial Officer and Joint Company Secretary effective 18 March 2014 Mr R Najdecki resigned as Chief Financial Officer and Company Secretary effective 20 March 2014 On 15 May 2014 Dr Sparling and Ms Johnson were each granted 222,222 Ordinary Shares under the Employee Share Plan at market value at the date of issue, $0.27. This issue was funded by an interest free limited recourse loan from the Company, repayable on sale of the shares. No performance related remuneration was paid to any Key Management Personnel in 2014. 10 I D T A n n u a l R e p o r t 2 0 1 3 Report of the Directors - 30 June 2015 (Continued) Share-based Compensation Employee Share Plan From time to time, executive management and Directors may be invited to participate in the Employee Share Plan (ESP) whereby fully paid ordinary shares of the Company are issued at the market value at the date of issue and funded by an interest free limited recourse loan from the Company. Grants within the framework of the ESP are determined by the MD together with the Remuneration and Nomination Committee and are subject to approval by the Board. Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using a Black-Scholes pricing model taking into account the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. Additionally, other staff may be invited to participate in the allocation of up to $1,000 of shares per year, granted for no consideration and escrowed for three years whilst participants remain employees of the Company. Executive Option Plan Executive management and Directors are eligible to participate in the plan, subject to invitation and within the terms and conditions of the Executive Option Plan. Options are granted for a four year period, and vest immediately when they are granted and are granted for no consideration. Options granted under the plan carry no dividend or voting rights, when exercisable, each option is convertible into one ordinary share. Amounts disclosed for emoluments relating to options are the assessed fair values at grant date of options, allocated equally over the period from grant date to vesting date. Fair values at grant date are independently determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. No options were granted or exercised under the Executive Share Option Plan during the year ended 30 June 2015 (2014: nil granted, nil exercised). Details of all unissued shares or interest under option at the date of this report are : Number Grant Date Expiry Date Exercise Price Granted 15 April, 2013 Granted 15 April, 2013 250,000 250,000 15/04/2013 15/04/2017 15/04/2013 15/04/2017 $0.298 $0.373 Other Transactions with Key Management Personnel No other transactions or loans were provided to key management personnel other than interest free limited recourse loans provided in association with the Employee Share Plan. I D T A n n u a l R e p o r t 2 0 1 3 11 Report of the Directors - 30 June 2015 (Continued) Key Management Personnel Holdings of Ordinary Shares The number of ordinary shares in the Company held during the financial year by Directors and each of the specified executives are set out below. 2015 Non executive Directors G L Blackman G Kaufman G F Lord R Shigeno ** Executive Director Balance at Start of Year Employee Share Issue Other Changes During the Year Balance at the end of the Year 6,996,376 185,000 6,831,907 – – – – – 33,334 7,029,710 100,000 285,000 – 6,831,907 333,333 333,333 P MacLeman * 111,000 360,000 – 471,000 Other key management personnel D Sparling J Johnson 259,859 222,222 – – 33,334 100,000 293,193 322,222 Total Holdings 14,606,364 360,000 600,001 15,566,365 * At the AGM held on 23 October 2014, 360,000 ordinary shares were approved for issue to Dr MacLeman as a long term incentive within the framework of the Employee Share Plan. ** Mr Shigeno acquired 333,333 ordinary shares on 18 December 2014 through participation in the Share Placement to sophisticated and professional investors. This purchase was approved by a resolution at the Extraordinary General Meeting of shareholders held on 11 December 2014. All other changes during the year relate to ordinary shares issued on 24 December 2014 from participation in the Share Purchase Plan which was open to all shareholders. 2014 Non executive Directors G Kaufman G F Lord Executive Directors G L Blackman P MacLeman Other key management personnel D Sparling J Johnson Balance at Start of Year Employee Share Issue Other Changes During the Year Balance at the end of the Year – 5,693,254 5,830,313 – – – – – – – 222,222 222,222 444,444 185,000 1,138,653 1,166,063 111,000 37,637 – 185,000 6,831,907 6,996,376 111,000 259,859 222,222 2,638,353 14,606,364 Total Holdings 11,523,567 12 IDT Annual Report 2015 Report of the Directors - 30 June 2015 (Continued) Company Performance The table below sets out summary information regarding the Company’s movements in shareholder wealth for the five years to 30 June 2015: Share price (ASX:IDT) Start of year End of year High for year Low for year # Shares on issue Market capitalisation as at 30 June Increase / (decrease) Dividend paid 30 June 2015 $0.20 $0.23 $0.30 $0.13 191,281,032 $43.99m $28.52m – 30 June 2014 $0.20 $0.20 $0.50 $0.19 77,374,248 $15.47m $4.83m – 30 June 2013 $0.24 $0.20 $0.32 $0.19 53,192,059 $10.64m $0.27m – 30 June 2012 $0.35 $0.24 $0.43 $0.22 43,192,059 $10.37m ($4.71m) – 30 June 2011 $0.62 $0.35 $0.77 $0.34 43,096,294 $15.08m ($11.64m) – Non-Audit Services Details of amounts paid or payable to the auditor for non-audit services provided during the year are outlined in note 22 to the financial statements. The Directors have considered the position and are satisfied the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 and are satisfied this did not compromise the auditor independence requirements for the following reasons: • all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor, • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risk and rewards. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under Section 307C of the Corporations Act 2001 is included after this report. Proceedings on Behalf of the Company The Corporations Act 2001, allows specified persons to bring, or intervene in, proceedings on behalf of the company. No proceedings have been brought or intervened in on behalf of the company with leave of the court under Section 237 of the Corporations Act 2001. Rounding of Amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission relating to the “rounding off” of amounts in the Report of Directors. Amounts in the Report of Directors have been rounded off in accordance with the Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. Directors Resolution This report is made in accordance with a resolution of the Directors made pursuant to s298(2) of the Corporations Act 2001. Mr Graeme Kaufman Chairman 18 August 2015, Melbourne 13 IDT Annual Report 2015 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 3 9671 7000 Fax: +61 9671 7001 www.deloitte.com.au 18 August 2015 The Board of Directors IDT Australia Limited 45 Wadhurst Drive BORONIA VIC 3155 Dear Members of the Board, Auditor’s Independence Declaration to IDT Australia Limited In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of IDT Australia Limited. As lead audit partner for the audit of the financial statements of IDT Australia Limited for the year ended 30 June 2015, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours sincerely, DELOITTE TOUCHE TOHMATSU Chris Biermann Partner Chartered Accountants Liability limited by a scheme approved under Professional Standards Legislation Member of Deloitte Touche Tohmatsu Limited 14 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Corporate Governance Statement IDT Australia Limited (the Company) and the Board are committed to achieving and demonstrating high standards of corporate governance. The Board continues to review the framework and practices to ensure they meet the interests of all stakeholders. The Company’s main corporate governance practices are set out below. Unless otherwise stated, these practices were in place at the date of signing and for the entire year, satisfying the Principles and Recommendations of corporate governance for Companies listed on the ASX. Principle 1: Lay Solid Foundations for Management and Oversight Directors are responsible to shareholders for the Company’s performance in both the short and longer terms and to balance competing objectives in the best interests of the Company as a whole. Their focus is to enhance the shareholders and other key stakeholders’ interests and to ensure the Company is properly managed. The functions of the Board include: • providing strategic guidance to the Company, including contributing to development and approval of corporate strategy; • reviewing and approving business plans, the annual budget and financial plans, including assessment of available resources and major capital initiatives; • overseeing and monitoring progress of major capital expenditures and significant corporate projects including acquisitions and divestments; • overseeing the integrity of corporate reporting systems and monitoring financial performance including approval of annual and half-yearly financial reports and liaison with the Company’s auditors; • appointment and performance assessment of the MD against annually set key performance indicators • approving the Company’s remuneration framework; • ensuring the Company has an appropriate risk management framework and material risks have been identified and appropriate and adequate control, monitoring and reporting mechanisms are in place; reporting to shareholders; • • ensuring appropriate resources are available to the executive team; • overseeing the process for making timely and balanced disclosure of material information concerning the Company which a reasonable person would expect to have material impact on the price of the Company’s securities; and • monitoring effectiveness of the Company’s Governance practices. Day to day management of the Company’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the Board to the MD and Executive team. The Company Secretary is accountable directly to the Board, through the Chair, on all matters associated with the proper functioning of the Board. Specific limits of authority delegated to the MD and the Executive team are outlined in a formal Delegation of Authority Policy and approved by the Board. Performance Assessment The Board undertakes annual self assessment of its performance in relation to its leadership, structure, functionality, systems, meetings and relationship with management. 15 IDT Annual Report 2015 For th e year ended 30 June 2015 Corporate Governance Statement (Continued) Diversity Policy Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company is committed to diversity, recognising the benefits arising from employee and Board diversity and the importance of benefiting from all available talent. The Company’s diversity policy is available on the Company’s website. The Company is committed to building a strong representation of female employees, across the entire Company. The proportion of women employees in various positions is as follows: Board of Directors MD and Executive Team Other Managers All Other Employees Total Organisation 2015 0% 33% 45% 62% 61% 2014 0% 29% 63% 58% 57% Principle 2: Structure the Board to Add Value The Board of Directors The Board operates in accordance with the following broad principles that: • it should comprise both executive and non executive Directors, ideally with a majority of non executive Directors. Non executive Directors bring fresh perspective to consideration of strategic, risk and performance matters; the Chair is elected by the Board and meets regularly with the MD; the Company benefits from having Directors with different backgrounds, with complementary skills and experience; • • • an annual Board performance review is undertaken; and • Directors should exercise independent judgment when making Board decisions. Processes are in place to enable Directors to seek independent professional advice where required, at the Company’s expense. The Board seeks to ensure: • its membership represents an appropriate balance between Directors with experience and knowledge of the Company and directors with an external position. The number of independent and non-independent directors are balanced in order to challenge and hold management to account, and to represent the best interests of security holders as a whole rather than specific individuals or groups; • principles of diversity, including gender diversity, are promoted; and • the size of the Board is conducive to effective discussions with efficient decision making. Responsibilities The Chairman is responsible for leading the Board, ensuring Directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions. The MD is responsible for implementing Company strategies and policies. Term of Office The Company’s Constitution specifies one-third of Directors (other than the MD) must retire from office at the Annual General Meeting. They may offer themselves for re-election at this time. Commitment The Board meets approximately monthly throughout the year. The number of meetings of the Board and of each Board committee held, and the number attended by each Director is disclosed on page 5. 16 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Corporate Governance Statement (Continued) Board Committees The Board has established two committees to assist execution of its duties and facilitate consideration of complex issues; the Nomination and Remuneration Committee and the Audit and Risk Committee. The composition and meeting attendance of both Committees is outlined in the Report of Directors. Each committee has a written charter setting out its responsibilities, powers, duties and the manner in which it is to operate. These charters are available on the Company’s website. All matters determined by committees are submitted to the full Board as recommendations for Board decision. Minutes of committee meetings are tabled at the subsequent Board meeting. Nomination and Remuneration Committee The main responsibilities of the Nomination and Remuneration Committee are to: • advise the Board on remuneration policies and practices generally, making specific recommendations on remuneration packages and other terms of employment for non executive Directors, executive Directors and senior executives; and • conduct an annual review of the membership of the Board with regard to the Company’s present and future needs and make recommendations on Board composition and appointments, including succession planning. When the need for a new Director is identified or an existing Director is required to stand for re-election, the committee reviews the range of skills, experience and expertise on the Board, identifies its needs and prepares a short-list of candidates with skills and experience which complement the mix of skills and diversity the Board seeks to achieve in its membership. Where necessary, advice may be sought from independent search consultants. The full Board will appoint the most suitable candidate, who must in turn stand for election at the next Annual General Meeting. Re-appointment of existing Directors is not automatic and is contingent on performance and contribution to the Company. The Committee’s objective is to ensure remuneration policies are fair and competitive. The Remuneration and Nomination Committee seeks independent advice as an when it deems necessary. The Nomination and Remuneration Committee’s Charter is published on the on the Corporate Governance page of the Company’s website. Principle 3: Promote Ethical and Responsible Decision Making Code of Conduct The IDT Staff Handbook is provided to all Directors, senior Executives and employees and outlines the Company’s expectations that personnel act with utmost integrity, objectivity and in compliance with relevant legislation at all times. The IDT Staff Handbook provides guidance in specific areas, including: • Mission Statement, including Values and Relationship Statement; • Quality Policy; • Workplace Behaviour, including Equal Opportunity and Whistleblower Policies; • Occupational Health and Safety; and • Security Trading Policy. These guidelines extend to providing a safe and non-discriminatory workplace, honest and fair dealings with suppliers and customers, acting responsibly to environment and working with business partners who demonstrate similar objectives. Trading in Company Securities All staff are reminded of their obligations under Insider Trading legislation and additionally key management personnel and senior executives are precluded from trading in specific windows. The Securities Trading Policy is available on the Corporate Governance page of the Company’s website. 17 IDT Annual Report 2015 For th e year ended 30 June 2015 Corporate Governance Statement (Continued) Principle 4: Safeguard Integrity in Financial Reporting Audit and Risk Committee The main responsibilities of the Audit and Risk Committee includes: • review, assess and recommend Board approval of the annual report, the half-yearly financial report and all other financial information published by the Company or released to the market; • assist the Board review the effectiveness of the organisation’s internal control environment; • oversee the effective operation of the risk management framework; • recommend to the Board the appointment, removal and remuneration of the external auditors, review the terms of their engagement and the scope and quality of the audit; • consider the independence and competence of the external auditor on an ongoing basis, including rotation of the audit engagement partner if required; review and approve non audit services provided by the external auditors to ensure it does not adversely impact auditor independence; review and monitor related party transactions and assess their propriety; and report to the board on matters relevant to the Committee’s role and responsibilities. • • • In fulfilling its responsibilities, the Audit and Risk Committee: receives regular reports from management and the external auditors; • • meets external auditors at least twice a year – more frequently if necessary; • reviews processes the MD and CFO use to support their certifications to the Board that, in their opinion, the financial records of the entity have been properly maintained, the financial statements comply with the appropriate accounting standards, give a true and fair view of the financial position and performance of the company and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively; reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved; • • provides the external auditors with a clear line of direct communication at any time to either the Chair of the Audit Committee or the Chair of the Board; and • ensures the external auditor attends the AGM in order to answer any questions a security holder may have in relation to the audit. The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party. The Audit and Risk Committee’s Charter is published on the Corporate Governance page of the Company’s website. Principles 5 and 6: Make Timely and Balanced Disclosures, Respect the Rights of Shareholders Continuous Disclosure The Chairman is responsible for ASX communications. He is also responsible for ensuring compliance with the continuous disclosure requirements in the ASX listing rules and overseeing and coordinating information disclosed to the ASX, analysts, brokers, shareholders, the media and the public. Management are responsible for ensuring all information that have the potential to materially affect the price or value of the Company’s shares is brought to the Chairman’s attention immediately it becomes known so it may be assessed in liaison with the Board and management in regards to the requirements of ASX listing rule 3.1. All information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX and email alerts are available to shareholders via the Company website. 18 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Corporate Governance Statement (Continued) Shareholder Communication The Company recognises the value of providing current and relevant information to shareholders through effective communication and publishes its Shareholder Communication Policy on the Corporate Governance page of its website. All information disclosed to the ASX announcements platform is available to shareholders on the Company website including prior year announcements. The website also holds the latest Company presentation used in analyst’s briefings and share price details. Shareholders can subscribe to email alerts of ASX announcements. Shareholders may elect to receive the Notices of Meetings and the Company’s Annual Report in hard or soft copy. Current and prior years’ Annual Reports are also available on the Company’s website. Principle 7: Recognise and Manage Risk The Company’s Board of Directors has overall responsibility for establishment and oversight of the Company’s risk management framework. The Audit and Risk Committee is in place to develop and oversee the Company’s risk management framework. The Company does not have an internal audit function and does not consider the existence of such a function to be typical for a company of its size and scope. Risk Assessment and Management The Company’s focus on risk management recognises that risk management is, prima facie, an issue for line management. The current framework supports this focus, providing a structured context to profile current and future risks. Management ensures appropriate controls are in place to effectively manage identified risks. Importance is placed on maintaining a strong control environment within the framework of the Company Quality Policy and the organisation’s structure has clear lines of accountability with formally delegated authority. Adherence to the control environment is required at all times and the Board actively promotes a culture of quality and integrity. The Board is responsible for satisfying itself annually, or more frequently as required, that management has developed and implemented a sound system of risk management, compliance and internal control. Management formally presents the Company’s Risk Register to the Board on a quarterly basis and provides more frequent updates where items have been identified which materially impact the risk environment. The Environment, Occupational Health and Safety The Company recognises the importance of Environmental and Occupational Health and Safety (OH&S) issues and is committed to the highest levels of performance. To help meet this objective the Company has regular monitoring to facilitate the systematic identification of environmental issues and the OH&S committee meets monthly to review and discuss specific health and safety issues. This system allows the Company to: • monitor compliance with relevant legislation; • continually assess and improve the impact of its operations on the environment; • encourage employees to actively participate in the management of environmental and OH&S issues; and • use energy and other resources efficiently. Information on compliance with significant environmental regulations is set out in the Report of Directors. 19 IDT Annual Report 2015 For th e year ended 30 June 2015 Corporate Governance Statement (Continued) Corporate Reporting Integrity of the Company’s financial reporting depends on existence of sound risk oversight systems, management and internal control which are enhanced by certifications to the Board made by the MD and Chief Financial Officer: • • that the Company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the Company and are in accordance with relevant accounting standards and Corporations Act 2001 provisions. that the above statement is founded on a sound system of risk management and internal compliance and control and which implements the policies adopted by the Board and that the Company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects. Principle 8: Remunerate Fairly and Responsibly The Nomination and Remuneration Committee advises the Board on remuneration and incentives policies and practices generally, making specific recommendations on remuneration packages and other terms of employment for executives and Directors. Remuneration packages are set at levels intended to attract, retain and motivate high quality executives capable of managing the Company’s operations and achieving the Company’s strategic objectives and to align their interests with the creation of value for security holders. Executive remuneration and other terms of employment are reviewed annually by the committee with regard to performance, relevant comparative information and independent expert advice. As well as base salary, remuneration packages include superannuation, performance-related bonuses and fringe benefits. Eligible employees may also be invited to participate in the Employee Share Plan. The Remuneration and Nomination Committee is also responsible for reviewing any transactions between the organisation and Directors, or any interests associated with Directors, to ensure the structure and terms of the transaction comply with Corporations Law and are appropriately disclosed. Further information on Directors’ and executives’ remuneration is set out in the Report of Directors and note 25 to the financial statements. 20 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Statement of Profit or Loss and Other Comprehensive Income Revenue from ordinary activities Raw materials Employee benefits expense Depreciation and amortisation expense Impairment of development costs Borrowing costs expense Utilities Repairs and maintenance Subject and screenings Insurance Waste removal Consumables Travel Share registry Accounting and audit Consultants Rent Other expenses Loss before income tax Income tax expense/(benefit) Loss for the year Other comprehensive income/(loss) Items that will not be reclassified to profit or loss: Revaluation gain on land and buildings Income tax relating to components of other comprehensive income Total comprehensive income/(loss) Basic earnings per share Diluted earnings per share Note 2 3 4 28 28 2015 $’000 15,720 974 9,560 2,267 – 45 741 702 2014 $’000 13,374 981 8,947 2,321 621 31 778 684 2,510 3,102 317 54 148 200 52 100 315 274 670 (3,209) (217) (2,992) 207 (62) (2,847) (2.2¢) (2.2¢) 355 70 152 181 65 125 291 262 991 (6,583) 43 (6,626) - - (6,626) (9.5¢) (9.5¢) The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. 21 IDT Annual Report 2015 For th e year ended 30 June 2015 Statement of Financial Position ASSETS Current Assets Cash and cash equivalents Trade and other receivables Current tax asset Inventories Total Current Assets Non Current Assets Property, plant and equipment Deferred tax assets Intangible assets Total Non Current Assets Total Assets Liabilities Current Liabilities Trade and other payables Borrowings Provisions Total Current Liabilities Non Current Liabilities Borrowings Provisions Total Non Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total Equity Note 2015 $’000 2014 $’000 5 6 7 8 9 15 10 11 12 16 13 16 17 18 19 129 3,775 430 503 4,837 2,415 1,916 169 647 5,147 19,923 21,210 – 18,440 38,363 43,200 2,241 436 1,164 3,841 18 136 154 3,995 39,205 39,287 3,801 (3,883) 39,205 – 1,938 23,148 28,295 1,432 39 1,110 2,581 49 114 163 2,744 25,551 22,877 3,565 (891) 25,551 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 22 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Statement of Changes in Equity Contributed Capital Asset Revaluation Reserve Share based Payment Reserve $’000 1,552 $’000 1,711 Balance at 1 July 2013 Loss for the year Shares issued during the year Transaction costs Vesting of arrangements involving limited recourse loans Balance at 30 June 2014 Balance at 1 July 2014 Loss for the year Shares issued during the year Transaction costs Vesting of arrangements involving limited recourse loans Other comprehensive income for the year $’000 17,031 – 6,260 (414) – 22,877 22,877 – 17,016 (606) – – Balance at 30 June 2015 39,287 – – – – 1,552 1,552 – – – – 145 1,697 Retained Profits / (Accumlated Losses) $’000 5,735 (6,626) – – – (891) (891) Total Equity $’000 26,029 (6,626) 6,260 (414) 302 25,551 25,551 (2,992) (2,992) – – – – 17,016 (606) 91 145 – – – 302 2,013 2,013 – – – 91 – 2,104 (3,883) 39,205 The above Statement of Changes in Equity should be read in conjunction with the accompanying notes. 23 IDT Annual Report 2015 For th e year ended 30 June 2015 Statement of Cash Flows Cash Flows From Operating Activities Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest and other costs of finance paid Income taxes refund Interest received Note 2015 $’000 2014 $’000 13,868 (15,774) (1,906) (45) 153 12 14,989 (16,862) (1,873) (38) 271 64 Net Cash Outflow From Operating Activities 27 (1,786) (1,576) Cash Flows From Investing Activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payments for development costs Payments for purchased Intangible Assets Net Cash Outflow From Investing Activities Cash Flows From Financing Activities Proceeds from issue of equity Payments for issue of equity Repayment of bills payable Proceeds from borrowings Repayment of lease liabilities Net Cash Inflow From Financing Activities Net Increase / (Decrease) In Cash And Cash Equivalents Held Cash and cash equivalents at the beginning of the financial year Cash and Cash Equivalents at the End of the Financial Year 5 (682) 2 (892) (15,704) (17,276) 17,016 (606) - 397 (31) 16,776 (2,286) 2,415 129 (221) 22 (291) - (490) 6,260 (414) (1,850) - (93) 3,903 1,837 578 2,415 The above Statement of Cash Flow should be read in conjunction with the accompanying notes. 24 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements 1. Summary Of Significant Accounting Policies The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. 1.1 Statement of Compliance These financial statements are general purpose financial statements prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. Accounting Standards include Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes of the Company comply with International Financial Reporting Standards (IFRS). For the purposes of preparing the financial statements, the Company is a for-profit entity. 1.2 Basis of Preparation These financial statements have been prepared under the basis of historical cost, except for certain financial instruments that are measured at fair value at the end of the reporting period, and explained in the notes below. Historical cost is generally based on fair values of the consideration given in exchange for goods and services. Fair value is the price that would be received to sell an asset or liability in an orderly transaction between market participants at the measurement date. Fair value for measurement and / or disclosure purposes in these financial statements is determined on such a basis, except for share based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117 and measurements that have some similarities to fair value but are not fair value, such as net realiseable value in AASB 102 ‘Inventories’ or value in use in AASB 136 ‘Impairment of Assets’. These financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and realisation of assets and settlement of liabilities in the ordinary course of business. Detailed forecasts and sensitivity analyses have been prepared for the next twelve months to support the view that the Company will continue to improve its underlying profitability and have sufficient funds available to continue to invest in the commercialisation of new products and fit out the new clinic for CMAX within its existing bank facility. Accordingly, the Directors consider it reasonably foreseeable that the Company will continue as a going concern and accordingly adopts the going concern basis in the preparation of the financial report. All amounts are presented in Australian dollars unless otherwise noted. 1.3 Going concern basis For the year ended 30 June 2015, the Company incurred a loss after tax of $2.992 million and experienced negative cash flows from operations of $1.786 million. The Company achieved a small profit after tax in the second half of the financial year under review as well as generating a net cash inflow from operations for the period. Sales growth and hence cash generating activity in the organic business is expected to continue to improve into the coming financial year. The Company is not only pursuing organic sales growth opportunities but has a core strategy of developing and acquiring new products in order to leverage existing manufacturing facilities and capabilities. The acquisition of 23 previously marketed US generic drugs in December 2014 and ongoing internal development of temozolomide are examples of successful execution of this strategy and will require the Company to continue to invest in the development of these products. These financial statements have been prepared on a going concern basis contemplating continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The Directors believe the going concern basis of preparation to be appropriate given its budget and forecasts, which include cash flow forecasts and customer confirmed forward sales orders, indicate the Company’s base operations are expected to continue to grow. As at 30 June 2015, the Company had available debt facilities of $3.75 million of which only $405,000 was drawn down and which has been subsequently renewed and expanded by $500,000. 25 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) Having carefully assessed the Company’s cash flow forecasts and available debt facilities, the Directors believe the Company will continue to operate as a going concern for at least the next 12 months and therefore it is appropriate to prepare the financial statements on a going concern basis. 1.4 Change in Accounting Policy The Company has adopted new and revised Australian Accounting Standards issued by the AASB which are mandatory to apply to the previous reporting period and are detailed in Note 1.24. Disclosures required by these Standards that are deemed material have been included in this financial report on the basis that they represent significant change in information from that previously made available. There have been no other significant changes in accounting policies during the reporting period. 1.5 Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when assets are recovered or liabilities settled, based on tax rates which are enacted or substantively enacted. The relevant tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company is incurs eligible expenditure to support a R&D Tax Incentive Claim. This receivable balance is accounted for as a current tax asset and income tax expense. 1.6 Foreign Currency Translation Foreign currency transactions are translated into functional currency (Australian Dollars) using exchange rates prevailing at the dates of the transactions. Transactions in currencies other than the Company’s functional currency are recognised at the rates of exchange prevailing at the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. Foreign exchange gains and losses resulting from settlement of such transactions and from translation at period end exchange rates of foreign currency monetary assets and liabilities are recognised in the Statement of Profit or Loss and Other Comprehensive Income, except for exchange differences on transactions entered into in order to hedge certain material foreign currency risks. The company has entered a number of forward foreign exchange hedge contracts to manage its exposure to foreign exchange risk. Such contracts are initially recognised at fair value at the date they were initiated and subsequently remeasured to their fair value at the end of the reporting period with the resulting unrealised gain or loss recognised in profit or loss. 1.7 Revenue Recognition Revenue is measured at fair value of the consideration received or receivable. A sale is recorded when the significant risks and rewards of ownership of manufactured goods have passed to the customer, including despatch to a customer pursuant to a sales order. 26 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) Revenue from a contract to provide services is recognised with reference to the stage of completion of the contract. The stage of completion is determined with reference to key project milestones achieved to date within the total contractual value. It must also be probable that the economic benefits of the transaction will flow to the Company and the amount of revenue can be measured reliably. 1.8 Trade and Other Receivables These amounts represent amounts receivable relating to the provision of goods and services to a customer pursuant to a valid order or contract. All receivables are recognised at the full amounts receivable, as they are due for settlement within 60 days of invoice date and therefore do not require re-measurement. Collectability of receivable balances is reviewed on an ongoing basis and a provision raised where collection in full is no longer considered probable. Debts which are known to be uncollectable are written off. 1.9 Inventories Inventories are valued at the lower of cost and net realisable value with the cost determined on a first-in-first-out basis. Net realisable value reflects the estimated selling price in the ordinary course of business less the estimated costs of completion and costs necessary to make the sale. 1.10 Leases Leases of property, plant and equipment where the Company has substantially all the risks and rewards of ownership are classified as finance leases (note 21). Finance leases are capitalised as Assets at fair value at the lease’s inception, or if lower, at the present value of the minimum lease payments. Property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s useful life and the lease term. Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases (note 21). Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease. 1.11 Property, Plant and Equipment Freehold land and buildings are shown at their revalued amounts being the fair value at date of revaluation less subsequent depreciation for buildings. Revaluations are performed with sufficient regularity such that carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. Any revaluation increase arising on the revaluation of such land and buildings is recognised in other comprehensive income and accumulated in the revaluation reserve within equity. Decreases that offset previous increases of the same asset are recognised against revaluation reserve directly in equity; all other decreases are recognised in profit or loss. Plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment. The cost of non-current assets constructed by the company includes the costs of all materials used in construction, direct labour on the project and an appropriate proportion of directly attributable variable and fixed overheads. Depreciation is recognised so as to write off the cost or valuation of assets (other than land) over their estimated useful lives, net of their residual values, using the straight line method, as follows: • Buildings • Machinery • Vehicles • Furniture, fittings and equipment 40 years 10-15 years 3-5 years 3-10 years Assets held under finance leases are depreciated over their expected useful lives over the same basis as owned assets. 27 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) The cost of improvements to leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvement, whichever is the shorter. Estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Plant is regularly overhauled through an ongoing cyclical maintenance program. Routine operating maintenance, repair costs and minor renewals are charged as expenses as incurred. An item of property, plant and equipment is derecognised upon disposal or where no future economic benefits are expected to arise from its continued use. Any gain or loss arising on disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit or loss. 1.12 Intangible Assets a) Intangible Assets acquired separately Intangible assets that are acquired separately are carried at cost less accumulated amortisation and any applicable impairment loss. Amortisation on the ANDAs acquired in December 2014 will commence once internal development activities are completed and the products launched. At this time the assets’ useful life will be assessed, with amortisation to be applied on a straight line basis and reviewed at the end of each reporting period. b) Internally generated Intangible Assets Research expenditure is recognised as an expense as incurred. An internally generated intangible asset arising from development is recognised where all of the following conditions can be demonstrated : technical feasibility of completing the project that it will be available for use or sale intention to complete the intangible asset and use it or sell it • • • ability to use the intangible asset • • availability of adequate technical, financial and other resources to complete the development • and the ability to measure reliably the expenditure attributable to the development of the asset. the intangible asset will generate probable future economic benefits The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date the asset first met the recognition criteria listed above. Development expenditures that do not meet these criteria are recognised in profit or loss in the period in which incurred. Developments costs previously recognised as an expense are not recognised as an asset in a subsequent period. Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation from the date the intangible asset first meets the recognition criteria, on the same basis as intangible assets which are acquired separately. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any change accounted for on a prospective basis. 1.13 Impairment of Tangible and Intangible Assets At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets to determine if there is any indication the assets have suffered an impairment loss. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. When it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. 28 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) Assets, including Intangible Assets not yet available for use, are tested for impairment at least annually, and whenever there is an indication the asset may be impaired. In testing for impairment, the recoverable amount is determined using a value-in-use approach based on discounted cash flows for each project, using a fair value less costs of disposal approach, based on either independent valuations or insured replacement cost. If the recoverable amount of an asset (or cash generating unit) is estimated to be less than its carrying amount, the carrying amount is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of profit or loss immediately after identification and the asset is derecognised if no future economic benefits are estimated from use or disposal. 1.14 Trade and Other Payables These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid at balance date. The amounts are unsecured and are usually paid within 30-60 days of recognition. 1.15 Provisions Provisions are recognised when the Company has a present obligation (legal and constructive) as a consequence of a past event, it is probable the Company will be required to settle the obligation and a reliable estimate of the value of the obligation can be made. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking account of the risks and uncertainties surrounding the obligation. When a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows, where the effect of the time value of money is material. 1.16 Short and Long Term Employee Benefits A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they can be reliably measured. Liabilities recognised in respect of short term benefits are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long term employee benefits are measured at the present value of the estimated future outflows to be made by the Company in respect of services provided by employees up to reporting date. Payments to defined contribution retirement benefit plans are recognised as an expense when employees have rendered service entitling them to the contributions. 1.17 Share-based payments Share-based compensation benefits are provided to employees via the IDT Australia Limited Executive Option Plan (EOP) and the Employee Share Plan (ESP). (i) Executive Option Plan The fair value of options granted under the EOP is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options and is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non- tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital. 29 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) (ii) Employee Share Plan The ESP provides an annual value of up to $1,000 of shares may be issued to employees for no consideration. The market value of shares issued to employees under the ESP is recognised as an employee benefits expense with a corresponding increase in equity at the date such shares were issued to employees. Also within the ESP, Executive Managers can be offered shares in the Company to be issued at the current market value at the date of issue and funded by an interest free limited recourse loan from the Company. Grants within the framework of the ESP are determined by the MD together with the Remuneration and Nomination Committee, and subject to approval by the Board. Amounts disclosed for emoluments relating to such shares are the assessed fair values at issue date determined using a Black- Scholes pricing model taking into account the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. 1.18 Cash and Cash Equivalents For purposes of the statement of cashflows, cash and cash equivalents includes deposits which are readily convertible to cash on hand and in banks and which are used in the cash management function on a day-to-day basis, net of outstanding bank overdrafts. 1.19 Earnings per Share (i) Basic Earnings per Share Basic earnings per share is determined by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. (ii) Diluted Earnings per Share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 1.20 Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST except where the amount of GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset, or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from or payable to the taxation authority is included as part of receivables or payables on the Balance Sheet. Cashflows are included in the statement of cashflow on a gross basis. The GST component of cashflows arising from investing and financing activities, which is recoverable from, or payable to the taxation authority are classified as operating cashflows. 1.21 Dividends Provision is made for the amount of any dividend declared, determined or publicly recommended by the Directors on or before the end of the financial year but not distributed at balance date. 1.22 Financial Instruments The Company holds financial instruments to hedge foreign currency exposures which are initially recognised at fair value. Subsequent to initial recognition, instruments are measured at fair value with changes recognised in profit and loss. 30 I D T A n n u a l R e p o r t 2 0 1 5 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 1.23 Rounding of Amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 1.24 Application of new and revised Accounting Standards In the current year, the Company has applied a number of amendments to AASBs and a new Interpretation issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2014, and therefore relevant for the current year end. AASB 2012-3 ‘Amendments to Australian Accounting Standards – Offsetting Financial Assets and Financial Liabilities’ The amendments to AASB 132 clarify the requirements relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right of set-off’ and ‘simultaneous realisation and settlement’. As the Company does not have any financial assets and financial liabilities that qualify for offset, application of the amendments does not have material impact on the disclosures or on the amounts recognised in the Company’s financial statements AASB 2013-3 ‘Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets’ The amendments to AASB 136 remove the requirement to disclose the recoverable amount of a cash-generating unit (CGU) to which goodwill or other intangible assets with indefinite useful lives had been allocated when there has been no impairment or reversal of impairment of the related CGU. The amendments introduce additional disclosure requirements applicable to when the recoverable amount of an asset or a CGU is measured at fair value less costs of disposal. These new disclosures include the fair value hierarchy, key assumptions and valuation techniques used which are in line with the disclosure required by AASB 13 ‘Fair Value Measurements’. The Company does not recognise Goodwill or Intangible Assets with indefinite useful lives and accordingly application of these amendments does not have material impact on the disclosures in the Company’s financial statements. AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part A: Annual Improvements 2010–2012 and 2011–2013 Cycles) The Annual Improvements 2010-2012 has made number of amendments to various AASBs, summarised below. • The amendments to AASB 2 (i) change the definitions of ‘vesting condition’ and ‘market condition’; and (ii) add definitions for ‘performance condition’ and ‘service condition’ which were previously included within the definition of ‘vesting condition’. The amendments to AASB 2 are effective for share based payment transactions for which the grant date is on or after 1 July 2014. • The amendments to AASB 3 clarify contingent consideration classified as an asset or a liability should be measured at fair value at each reporting date, irrespective of whether the contingent consideration is a financial instrument within the scope of AASB 9 or AASB 139 or a non-financial asset or liability. Changes in fair value (other than measurement period adjustments) should be recognised in profit and loss. • The amendments to AASB 8 (i) require an entity to disclose judgements made by management in applying the aggregation criteria to operating segments, including a description of the operating segments aggregated and the economic indicators assessed in determining whether the operating segments have ‘similar economic characteristics’; and (ii) clarify that a reconciliation of the total of the reportable segments’ assets to the entity’s assets should only be provided if the segment assets are regularly provided to the chief operating decision-maker. • The amendments to the basis for conclusions of AASB 13 clarify that the issue of AASB 13 and consequential amendments to AASB 139 and AASB 9 did not remove the ability to measure short-term receivables and payables with no stated interest rate at their invoice amounts without discounting, if the effect of discounting is immaterial. I D T A n n u a l R e p o r t 2 0 1 5 31 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) • The amendments to AASB 116 and AASB 138 remove perceived inconsistencies in the accounting for accumulated depreciation / amortisation when an item of property, plant and equipment or an intangible asset is revalued. The amended standards clarify that the gross carrying amount is adjusted in a manner consistent with the revaluation of the carrying amount of the asset and that accumulated depreciation / amortisation is the difference between the gross carrying amount and the carrying amount after taking into account accumulated impairment losses. • The amendments to AASB 124 clarify that a management entity providing key management personnel services to a reporting entity is a related party of the reporting entity. Consequently, the reporting entity should disclose as related party transactions the amounts incurred for the service paid or payable to the management entity for the provision of key management personnel services. However, disclosure of the components of such compensation is not required The Annual Improvements 2011-2013 has made number of amendments to various AASBs, summarised below. • The amendments to AASB 3 clarify that the standard does not apply to the accounting for the formation of all types of joint arrangements in the financial statements of the joint arrangement itself. • The amendments to AASB 13 clarify that the scope of the portfolio exception for measuring the fair value of a group of financial assets and financial liabilities on a net basis includes all contracts that are within the scope of, and accounted for in accordance with, AASB 139 or AASB 9, even if those contracts do not meet the definitions of financial assets or financial liabilities within AASB 132. • The amendments to AASB 140 clarify that AASB 140 and AASB 3 are not mutually exclusive and application of both standards may be required. Consequently, an entity acquiring investment property must determine whether: the property meets the definition of investment property in terms of AASB 140; and the transaction meets the definition of a business combination under AASB 3. Application of these amendments does not have material impact on the disclosures or on the amounts recognised in the Company’s financial statements. Interpretation 21 ‘Levies’ Interpretation 21 addresses the issue as to when to recognise a liability to pay a levy imposed by a government. The Interpretation defines a levy, and specifies that the obligating event that gives rise to the liability is the activity that triggers the payment of the levy, as identified by legislation. The Interpretation provides guidance on how different levy arrangements should be accounted for, in particular, it clarifies that neither economic compulsion nor the going concern basis of financial statements preparation implies that an entity has a present obligation to pay a levy that will be triggered by operating in a future period. Interpretation 21 has been applied retrospectively. The application of this Interpretation does not have any material impact on the disclosures or on the amounts recognised in the Company’s financial statements. AASB 1031 ‘Materiality’, AASB 2013-9 ‘Amendments to Australian Accounting Standards’ – Conceptual Framework, Materiality and Financial Instruments’ (Part B: Materiality), AASB 2014-1 ‘Amendments to Australian Accounting Standards’ (Part C: Materiality) The revised AASB 1031 is an interim standard that cross-references to other Standards and the ‘Framework for the Preparation and Presentation of Financial Statements’ (issued December 2013) that contain guidance on materiality. The AASB is progressively removing references to AASB 1031 in all Standards and Interpretations. Once all of these references have been removed, AASB 1031 will be withdrawn. The adoption of AASB 1031, AASB 2013-9 (Part B) and AASB 2014-1 (Part C) does not have any material impact on the disclosures or the amounts recognised in the Company’s financial statements. AASB108.28(f)(ii) The impact of the application of the new and revised Standards on basic and diluted earnings per share is disclosed in note 28. 32 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 1.25 Standards and Interpretations in issue not yet adopted At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not yet effective. Standard/Interpretation Effective for annual reporting periods beginning on or after Expected to be initially applied in the financial year ending AASB 9 ‘Financial Instruments’, and the relevant amending standards (*) 1 January 2018 30 June 2019 AASB 15 ‘Revenue from Contracts with Customers’ and AASB 2014-5 ‘Amendments to Australian Accounting Standards arising from AASB 15’ 1 January 2017 30 June 2018 AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’ 1 January 2016 30 June 2017 AASB 2015-1 ‘Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle’ AASB 2015-2 ‘Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101’ 1 January 2016 30 June 2017 1 January 2016 30 June 2017 AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality’ 1 July 2015 30 June 2016 (*) The AASB has issued the following versions of AASB 9: • AASB 9 ‘Financial Instruments’ (December 2009) and the relevant amending standard; • AASB 9 ‘Financial Instruments’ (December 2010) and the relevant amending standards; • AASB 2013-9 ‘Amendment to Australian Accounting Standards – Conceptual Framework, Materiality and Financial Instruments’, Part C – Financial Instruments • AASB 9 ‘Financial Instruments’ (December 2014) and the relevant amending standards All the standards have an effective date of annual reporting periods beginning on or after 1 January 2018. Either AASB 9 (December 2009) or AASB 9 (December 2010) can be early adopted if the initial application date is before 1 February 2015. After this date only AASB 9 (December 2014) can be early adopted. At the date of publication, there have been no IASB Standards or IFRIC Interpretations that are issued but not yet effective. 33 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 2. Revenue Sales revenue Other revenue – Government grants – Interest – Royalties Total revenue 3. Expenses Loss from ordinary activities before income tax expense includes the following expenses: Cost of goods sold Finance charges relating to finance leases Depreciation of property, plant and equipment Amortisation – Finance leases capitalised – Development costs Repairs and maintenance Impairment of development costs Net foreign currency loss 4. Income Tax (a) Income Tax Expense Current tax Deferred tax Under/(over) provided in prior years (b) Numerical reconciliation of income tax expense to prima facie tax payable Loss from ordinary activities before income tax expense Prima facie tax benefit at 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income Non deductible entertainment expenses Research and development tax concessions Motor vehicle depreciation Employee share issue Under/(over) provision in previous year Deferred tax losses not brought to account Income tax expense/(benefit) attributable to operating profit 34 2015 $000 15,703 5 12 – 17 15,720 4,638 5 2,146 27 94 702 – 101 (430) 182 31 (217) (3,209) (963) 2 70 – 27 (864) – 647 (217) 2014 $000 13,171 67 64 72 203 13,374 4,943 6 2,202 28 91 684 621 7 (63) – 106 43 (6,583) (1,975) 2 33 (6) 104 (1,842) 106 1,779 43 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 5. Current Assets – Cash and Cash Equivalents Cash at bank and on hand 6. Current Assets – Trade and Other Receivables Trade receivables Less: Provision for doubtful debts Other receivables Prepayments 2015 $000 129 3,334 – 3,334 9 432 3,775 2014 $000 2,415 1,493 – 1,493 79 344 1,916 The average collection period for sales invoices is 30-60 days from invoice date and interest is not charged on past due balances. The Company does not have a history of collection delays or defaulted balances and accordingly does not consider a provision for doubtful debts is necessary. Age of receivables which are past due, but not impaired 30-60 days 60-90 days 7. Current Asset - Current Tax Asset 301 245 546 267 9- 276 Income tax receivable 430 169 8. Current Assets - Inventories Raw materials - at cost Work in progress - at cost The valuation policy adopted in respect of inventories is set out in Note 1.9. 347 156 503 462 185 647 35 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 9. Non Current Assets – Property, Plant and Equipment Land and Buildings Freehold land (at fair value) Buildings (at fair value) Less: Accumulated depreciation Total Land and Buildings Plant and Equipment Plant and equipment – at cost Less: Accumulated depreciation Capital Work in Progress Plant and Equipment under Finance Lease Capitalised cost Less: Accumulated amortisation Total Plant & Equipment Total Property, Plant and Equipment 2015 $000 4,380 4,920 (36) 9,264 39,134 (28,920) 383 10,597 106 (44) 62 10,659 19,923 2014 $000 4,380 4,920 (124) 9,176 38,912 (26,973) - 11,939 130 (35) 95 12,034 21,210 The Company’s freehold land and buildings are stated at revalued amounts, being fair value at the date of revaluation, less subsequent accumulated depreciation. The fair value measurement was performed by independent valuers effective 15 April 2015. The valuations, conform to Australian Valuation Standards and were calculated based on the fair value of the land and depreciated replacement cost of the buildings. Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. 2015 Freehold Land $000 Buildings $000 Plant & Equipment $000 Leased Plant & Equipment $000 Carrying amount at start of year 4,380 Revaluation Additions Transfer between categories Disposals Depreciation expense – – – – – Carrying amount at end of year 4,380 4,796 207 6 – – (125) 4,884 11,939 – 676 7 (2) (2,023) 10,597 95 – – (7) – (26) 62 2014 Freehold Land $000 Buildings $000 Plant & Equipment $000 Leased Plant & Equipment $000 Carrying amount at start of year 4,380 4,920 13,778 Revaluation Additions Disposals Depreciation expense - - - - Carrying amount at end of year 4,380 - - - (124) 4,796 - 241 (2) (2,078) 11,939 81 - 85 (43) (28) 95 Total $000 21,210 207 682 – (2) (2,174) 19,923 Total $000 23,159 - 326 (45) (2,230) 21,210 36 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 10. Non Current Assets – Intangible Assets Intangible assets separately acquired Development expenditure capitalised Less: Accumulated amortisation development costs Reconciliation of Intangible Assets Carrying amount at start of year Purchase of intangible assets Development expenditure capitalised during the year Amortisation of development costs during the year Development costs impaired during the year Carrying amount at end of year 2015 $000 15,704 3,636 (900) 18,440 1,938 15,704 892 (94) – 2014 $000 – 2,744 (806) 1,938 2,359 – 291 (91) (621) 18,440 1,938 In December 2014, the Company acquired 23 ANDA’s, being the FDA’s approval to manufacture and market these products in the US. Additional development expenditure has been incurred to register IDT as the owner of these products, to transfer the manufacture to our Boronia facility and on the development of other pipeline products. 11. Current Liabilities – Trade and Other Payables Trade payables Other payables Total current liabilities 12. Current Liabilities – Borrowings Lease liabilities (note 21) Commercial loan Total current borrowings 13. Non Current Liabilities - Borrowings Lease liabilities (note 21) Total non current borrowings 847 1,394 2,241 31 405 436 18 18 574 858 1,432 39 – 39 49 49 37 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 14. Financing Arrangements Commercial loan Lease liabilities Total secured liabilities (current and non current) 2015 $000 405 49 454 Unrestricted access was available at balance date to the following credit facilities with the National Australia Bank Ltd: Total facilities – Bank Overdraft – Lease Facility – Flexible Rate Commercial Loan – Credit Card Facility Used at balance date – Bank Overdraft – Lease Facility – Finance Leases – Lease Facility – Operating Leases – Flexible Rate Commercial Loan – Credit Card Facility Available at balance date – Bank Overdraft – Lease Facility – Flexible Rate Commercial Loan – Credit Card Facility 1,000 450 2,750 100 – 49 68 405 74 1,000 333 2,345 26 2014 $000 – 88 88 1,000 450 2,750 100 – 88 – – 38 1,000 362 2,750 62 Security for Borrowings The bank overdraft, lease and business loan facilities are secured by the following: – A Registered Mortgage over property situated at 39 Wadhurst Drive, Boronia – A Registered Mortgage over property situated at 41 Wadhurst Drive, Boronia – A Registered Mortgage over property situated at 43-49 Wadhurst Drive, Boronia – A Registered Mortgage over property situated at 51-57 Wadhurst Drive, Boronia – A Registered Mortgage over property situated at 68 Wadhurst Drive, Boronia Carrying value of assets pledged as Security – Freehold land and buildings – Plant and equipment under finance lease Total assets pledged as security 9,264 62 9,326 9,176 95 9,271 Subsequent to balance date the Flexible Rate Commercial Loan facility has been extended until 31 October 2016 and increased by $500,000 to $3,250,000. The Bank Overdraft facility is unchanged. 38 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 15. Non Current - Deferred Tax Asset / (Liabilities) Deferred Liability The balance comprises temporary differences attributable to: Depreciation Asset revaluation Prepayments Development costs Movements Opening balance at 1 July Increase/(reduction) current tax asset Current year increase/(decrease) not recognised Closing balance at 30 June Deferred tax assets The balance comprises temporary differences attributable to: Employee entitlements Tax losses Opening balance at 1 July Increase/(reduction) current tax asset Charged/(credited) to equity Closing balance at 30 June Net deferred tax assets/(liability) Deferred tax liability expected to settle within 12 months Deferred tax liability expected to settle more than 12 months Deferred tax asset expected to be recovered within 12 months Deferred tax asset expected to be recovered after more than 12 months 16. Provisions Current Employee entitlements Non Current Employee entitlements 2015 $000 2,895 2,359 (62) 12 586 2,895 2,772 261 (138) 2,895 2,895 390 2,505 2,895 2,772 261 (138) 2,895 - - 2,895 2,895 - 2,895 2,895 2014 $000 2,772 1,658 532 - 582 2,772 2,924 (275) 123 2,772 2,772 367 2,405 2,772 2,924 (275) 123 2,772 - - 2,772 2,772 - 2,772 2,772 1,164 1,110 136 114 The provision for employee entitlements represents annual leave, vested long service leave and an estimate of long service leave payable to employees which has not yet vested. 39 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 17. Contributed Equity 2015 Shares 2014 Shares (a) Paid up capital - Ordinary shares, fully paid 191,281,032 77,374,248 2015 $000 39,287 (b) Movements in ordinary share capital of the company during the past two years were as follows: Date Details 1 July 2013 Opening balance Notes No. of Shares 53,192,059 16 August 2013 Employee share plan issue (a) 206,235 26 September 2013 1:5 non-renounceable rights issue Costs associated with rights issue 22 October 2013 Sophisticated placement Costs associated with sophisticated placement 10,679,659 – 11,481,482 – 15 May 2014 Employee share plan issue (a) 1,814,813 Deferred tax impact on share issues – 2014 $000 22,877 $000 17,030 46 2,884 (249) 3,100 (164) – 230 30 June 2014 77,374,248 22,877 24 October 2014 Employee share plan issue (a) 360,000 – 18 December 2014 Share placement to sophisticated investors 100,000,000 15,000 30 December 2014 Share purchase plan Costs associated with share issues 23 February 2015 Forfeited employee shares 27 April 2015 Employee share plan issue 30 June 2015 (a) IDT Employee Share Plan 13,440,096 – (74,074) 180,762 (a) (a) 2,016 (606) – – 191,281,032 39,287 During the year the Company issued 540,762 (2014: 2,021,048) ordinary shares under the rules of the IDT Australia Limited Employee Share Plan. Additionally, 74,074 shares were forfeited during 2015 with a former employee electing not to repay the interest free limited recourse loan following cessation of employment thereby forfeiting ownership within the terms of the Plan. Ordinary Shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. 40 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 18. Reserves Share-based payments reserve Asset revaluation reserve Movements in share-based payment reserve Balance 1 July Vesting of arrangements involving limited recourse loans 2015 $000 2,104 1,697 3,801 2,013 91 2,104 2014 $000 2,013 1,552 3,565 1,711 302 2,013 The share-based payments reserve is used to recognise the fair value of options issued but not exercised and the fair value of shares issued under the IDT Australia Limited Employee Share Plan. Refer note 24. Movements in share-based payment reserve Balance 1 July Vesting of arrangements involving limited recourse loans 1,552 145 1,697 1,552 – 1,552 The asset revaluation reserve is used to recognise the value of land and buildings owned by IDT Australia Limited and valued by an independent third party valuer. 19. Retained Profits Retained profits/(accumulated losses) at the beginning of the financial year Net loss attributable to members of IDT Australia Limited Dividends provided for or paid Accumulated losses at the end of the financial year 20. Financial Reporting By Segments (891) (2,992) – (3,883) 5,735 (6,626) – (891) The Company operates in the pharmaceutical industry and the principal activities are the provision of products, research, development and other technical services. The company operates predominantly in one geographic area, being Australia. Sales Revenue consists of: – Fee for Service – Manufacturing – Clinical Trials Total Sales Revenue 3,013 3,309 9,381 15,703 3,347 1,483 8,341 13,171 Included in the above revenues are revenues of $5.13 million arising from sales to the Company’s three largest customers. Each of which individually contributed 10% or more to the Company’s revenue. 41 IDT Annual Report 2015 2015 $000 2014 $000 34 18 52 (3) 49 546 2,289 – 2,835 45 52 97 (9) 88 323 348 – 671 2014 $ 80,850 6,100 86,950 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 21. Committments for Expenditure (a) Finance lease commitments – Within one year – Later than one year but not later than 5 years Minimum lease payments Less: future finance charges Total finance lease liability (b) Non cancellable operating lease commitments – Within one year – Later than one year but not later than 5 years – Later than 5 years (c) Capital Commitments The Company has no commitments for future capital expenditure outstanding as at 30 June 2015 (2014 : nil). 2015 $ 81,500 – 81,500 22. Auditor’s Remuneration Total amounts receivable by Deloitte Touche Tohmatsu for: (a) Audit and review of the company’s financial statements (b) Other services Total Audit Services 23. Financial Risk Management Financial risks impacting the Company’s activities fall into three categories: a ) market risk – foreign exchange and interest rate b) credit risk c) liquidity risk a) Market risk Whilst it is Company policy to contract in Australian dollars where possible, the Company also undertakes transactions in foreign currencies, particularly Euro and US dollars, which give rise to foreign exchange risk as exchange rates fluctuate. The Company has identified future material foreign exchange transactions associated with product development pipeline and existing accounts receivable balances, and managed exchange rate exposure through the use of forward exchange contracts on such material transactions. Such contracts are designated as cash flow hedges. The Company does not enter into or trade financial instruments for speculative purposes. 42 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 21. Committments for Expenditure (Continued) The Company’s exposure to foreign currency risk at 30 June 2015 is detailed below. Cash at Bank (USD) Receivables – Current (EUR) Receivables – Current (USD) Payables – Current (USD) Foreign Currency Value 2015 FC ‘000 USD 6 EUR 493 – – AUD Equivalent 2015 AUS ‘000 Foreign Currency Value 2014 FC ‘000 AUD Equivalent 2014 AUS ‘000 8 717 – – USD39 EUR255 USD1 USD25 42 369 1 27 The Company has limited exposure to interest rate risk as it holds no significant interest bearing assets or borrowings. The Company currently has limited exposure to interest rate risk because at balance date the Company has total borrowings of $405,000 (2014: nil), on which interest is payable on a variable rate. As current forecasts support increasing reliance on this facility during the coming financial year to support product development, commercialisation of the new ANDAs and the fit out of CMAX’s new clinical facility, the Company’s sensitivity to interest rates has increased. If the existing Variable Rate Commercial Loan was fully drawn and interest rates increased by 50 basis points the annualised interest rate sensitivity would be $16,250. b) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the Company. Credit risk is closely managed and the Company has procedures to deal with credit worthy counterparties, review customer credit worthiness on an ongoing basis and to monitor exposure to any one customer. The Company does not have a history of defaulted balances. c) Liquidity risk Liquidity risk is the risk that the company is not able to pay its debts as and when they fall due and the ultimate responsibility for liquidity risk management rests with the Board of Directors which has established a framework for management of the Company’s requirements over time through continuous monitoring of historical and anticipated cash flows, scenario analysis and maintaining adequate reserves. The Company currently has significant undrawn banking facilities The Company holds the following financial instruments: Financial Assets Cash and cash equivalents Trade and other receivables Total Financial Assets Financial Liabilities Trade and other payables Borrowings, current and non current Total Financial Liabilities Net Financial Position 2015 $000 129 3,775 3,904 2,241 454 2,695 1,209 2014 $000 2,415 1,916 4,331 1,432 88 1,520 2,811 43 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 24. Share Based Payments The Employee Share Plan (ESP) was approved at the Annual General Meeting held on 20 November 2013. During the year ended 30 June 2015, the Company issued 540,762 ordinary shares under the rules of the IDT Australia Limited ESP (2014: 2,021,048). Under the scheme, eligible employees may be offered up to $1,000 worth of fully-paid ordinary shares in IDT Australia Limited annually for no cash consideration. The value of shares issued under the scheme, measured as the market price on the day of issue of the shares, is recognised in the income statement as part of employee benefit costs in the period the shares are granted. Additionally within the ESP, from time to time executive managers and Directors may be offered shares in the Company issued at the current market value at the date of issue and funded by an interest free limited recourse loan from the Company. Grants within the framework of the ESP were determined by the MD together with the Remuneration and Nomination Committee, and subject to approval by the Board, and to the extent offered to the MD, approved as a resolution at a General Meeting of shareholders. Shares issued within the terms of ESP may not be sold until the earlier of three years after issue or cessation of employment with the company. In all other respects the shares rank equally with other fully-paid ordinary shares on issue. Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using a Black-Scholes pricing model taking into account the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. Expenses arising from Share-based Payment Transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expenses were as follows: 2015 $000 – 91 91 2014 $000 – 302 302 Options issued under executive option plan Shares issued under employee share plan 25. Key Management Personnel Disclosures The following persons were Directors of IDT Australia Limited during the financial year: Executive Director P MacLeman, Managing Director Non Executive Directors G Kaufman. Chair G Lord, Deputy Chair GL Blackman AD Fisher (appointed 10 June 2015) R Shigeno D Williams (resigned 19 May 2015) Key Management Personnel The following persons also have authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, during the financial year: Position Chief Financial Officer, Joint Company Secretary Vice President, Legal & Corporate Development, Joint Company Secretary Name J Johnson D Sparling 44 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 25. Key Management Personnel Disclosures (Continued) Directors and Key Management Personnel Compensation Short term employee benefits Post employment benefits Long term benefits Share based payments 26. Related Party Transactions 2015 $ 2014 $ 1,013,141 105,577 3,409 43,804 968,107 139,057 18,835 73,992 1,165,931 1,199,991 Transactions of Directors and Key Management Personnel Concerning Shares or Share Options Directors The names of persons who were Directors of the company at any time during the financial year are G Blackman, A Fisher, G Kaufman, G Lord, P MacLeman, R Shigeno and D Williams. Key Management Personnel The following persons also have authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, during the financial year Name Position J Johnson D Sparling Chief Financial Officer, Joint Company Secretary Vice President, Legal & Corporate Development, Joint Company Aggregate numbers of shares acquired and disposed of by Directors or Key Management Personnel were as follows: Ordinary shares acquired Ordinary shares disposed 2015 Shares 2014 Shares 600,001 2,638,353 – – The terms and conditions of transactions relating to shares were on the same basis as similar transactions with other shareholders. Aggregate numbers of shares of IDT Australia Limited held directly, indirectly or beneficially by Directors or Key Management Personnel at balance date were as follows: Ordinary shares Options 15,566,365 14,606,364 500,000 500,000 There were no other transactions between the Company and Directors and Key Management Personnel in 2015 (nil : 2014). 45 IDT Annual Report 2015 For th e year ended 30 June 2015 Notes To And Forming Part Of The Financial Statements (Continued) 27. Reconciliation Of Net Cash Inflow From Operating Activities To Operating Loss After Income Tax Net cash outflow from operating activities Depreciation and amortisation Fair value adjustment Impairment of development costs Non-cash share based payment Change in operating assets and liabilities: Increase/(decrease) in receivables Decrease in inventories Increase/(decrease) in current tax asset (Increase)/Decrease in payables Decrease in provision for deferred income tax Increase in other provisions Operating loss after income tax 28. Earnings Per Share Basic earnings per share Diluted earnings per share 2015 $000 (1,786) (2,267) 62 – (91) 2014 $000 (1,576) (2,321) – (621) (302) 1,858 (1,748) (144) 261 (809) – (76) (28) (102) 230 – (158) (2,992) (6,626) 2015 (2.2¢) (2.2¢) 2014 (9.5¢) (9.5¢) Weighted average number of ordinary shares on issue during the year used in calculation of basic earnings per share 137,699,014 69,600,776 Weighted average number of ordinary shares on issue during the year used in the calculation of diluted earnings per share 137,699,014 69,600,776 Basic Earnings per share Loss attributable to ordinary equity holders used in calculating basic earnings per share 2015 ’000 2014 ’000 (2,992) (6,626) Diluted earnings per share Loss attributable to ordinary equity holders used in calculating diluted earnings per share (2,992) (6,626) Options granted under the IDT Australia Limited Executive Share Option Plan could be considered dilutive to ordinary shares if the exercise price was less than the share price as at 30 June 2015. Accordingly no options have been included in the determination of basic earnings per share. 46 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Notes To And Forming Part Of The Financial Statements (Continued) 29. Critical Accounting Estimates And Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The following critical judgements have been made in application of the entity’s accounting policies. Future economic benefit of capitalised development costs. The Company applies AASB 136 Impairment of Intangible Assets to test the carrying value of the acquired intangibles and capitalised development costs. Judgement is applied to periodically assess the appropriateness of the carrying value. In making this judgement, the Company makes reasonable and supportable assumptions to represent management’s estimate of the conditions that will exist over the useful life of the asset. Amongst other factors the Company evaluates technical feasibility to complete the project, existence of a commercial market and sales expectations to conclude on the probability that expected future economic benefits will flow to the entity. Where the value of future economic benefits relative to the asset’s carrying value is considered insufficient, the Company recognises impairment in accordance with AASB 136 Impairment of Assets. 30. Events After The Reporting Period On 12 August 2015 the Company executed a partnership agreement with ANI Pharmaceuticals Inc, appointing them as our distributors for the US market for eighteen of the twenty three products acquired from Sandoz in December 2014. A signing milestone of US$1m has been received and further milestones become receivable as the products are reapproved by the FDA. On 8 July 2015, the commercial loan facility with National Australia Bank Limited was increased by $0.5m to $3.25m and the term extended through to 31 October 2016. The $1.0m overdraft facility remains unchanged. 31. Contingent Assets And Contingent Liabilities The Company has a contractual obligation to pay Sandoz the following milestones in association with the purchase of ANDAs effective December 2014: • On receipt of FDA marketing re-approval for the first product, payable USD1,500,000; • Achievement of cumulative in market product revenues exceeding USD20,000,000, payable USD1,000,000; • Achievement of cumulative in market product revenues exceeding USD40,000,000, payable USD1,000,000; and • Achievement of cumulative in market product revenues exceeding USD60,000,000, payable USD1,000,000. Marketing approval and accordingly first sales are expected in 2016 with the first sales milestone expected to be achieved in 2017. Other than above the Company has no contingent assets or liabilities to disclose at the date of this report. 47 IDT Annual Report 2015 For th e year ended 30 June 2015 Directors’ Declaration In the Directors’ opinion: (a) the financial statements and notes set out on pages 21 to 47 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Act 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the Company’s financial position as at 30 June 2015 and of its performance, as represented by the result of its operations, changes in equity and cash flows, for the financial year ended on that date; and (b) (c) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and the financial statements and notes thereto also comply with International Financial Reporting Standards as disclosed in Note 1. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Directors made pursuant to s295(5) of the Corporations Act 2001. On behalf of the directors Graeme Kaufman Chairman Dr Paul MacLeman Director Melbourne 18 August 2015 48 IDT Annual Report 2015 Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia DX: 111 Tel: +61 3 9671 7000 Fax: +61 3 9671 7001 www.deloitte.com.au Independent Auditor’s Report to the Members of IDT Australia Limited Report on the Financial Report We have audited the accompanying financial report of IDT Australia Limited, which comprises the statement of financial position as at 30 June 2015, the statement of profit or loss and other comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration as set out on pages 21 to 48. Directors’ Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the company’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited 49 IDT Annual Report 2015 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Auditor’s Independence Declaration In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of IDT Australia Limited, would be in the same terms if given to the directors as at the time of this auditor’s report. Opinion In our opinion: (a) the financial report of IDT Australia Limited is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the company’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the Remuneration Report included in pages 8 to 12 of the directors’ report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Opinion In our opinion the Remuneration Report of IDT Australia Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. DELOITTE TOUCHE TOHMATSU Chris Biermann Partner Chartered Accountants Melbourne, 19 August 2014 50 IDT Annual Report 2015 F or the yea r ended 30 June 201 5 Shareholder Information The shareholder information set out below was applicable as at 5 August 2014. A. Distribution of Equity Securities Analysis of numbers of equity security holders by size of holding: No. of Fully Paid Ordinary Shares Held 1 – 1000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – over B. Twenty Largest Shareholders The names of the twenty largest holders of ordinary shares are listed below: 1 2 3 4 5 6 National Nominees Limited I’ROM Group., Limited Citicorp Nominees Pty Limited UBS Nominees Pty Ltd Brispot Nominees Pty Ltd (House Head Nominee No 1 A/C) Graeme Leslie Blackman 7 Mutual Trust Pty Ltd 8 9 J P Morgan Nominees Australia Limited Paulene Blackman 10 RACT Super Pty Ltd (Rand Super Fund A/C) 11 CS Fourth Nominees Pty Ltd 12 Belgravia Strategic Equities Pty Ltd 13 HSBC Custody Nominees (Australia) Limited - A/C 3 14 Keygrowth Pty Ltd 15 HSBC Custody Nominees (Australia) Limited-Gsco Eca 16 Fifty Second Celebration Pty Ltd (Mcbain Family A/C) 17 Mr David Terrence Hamilton Clarke & Mrs Judith Margaret Clarke 18 Mr Anthony Huntley 19 Mr Anthony John Huntley 20 Poltick Pty Ltd Holders 2015 Holders 2014 439 627 237 604 190 460 658 251 433 83 2,097 1,885 Number Held Percentage of Issued Shares 20,961,419 10.96% 15,793,001 14,125,000 8,757,036 8,292,574 7,029,710 6,825,000 6,284,103 4,457,737 3,250,000 2,810,000 2,796,419 2,500,000 2,332,116 2,079,556 2,064,551 1,951,510 1,880,512 1,501,582 1,350,000 8.26% 7.38% 4.58% 4.34% 3.68% 3.57% 3.29% 2.33% 1.70% 1.47% 1.46% 1.31% 1.22% 1.09% 1.08% 1.02% 0.98% 0.79% 0.71% 117,041,826 61.19% 51 IDT Annual Report 2015 For th e year ended 30 June 2015 Shareholder Information (Continued) C. Substantial Holders Substantial holders in the company are set out below: National Nominees Ltd as custodian for Australian Ethical Smaller Companies Trust 22,766,419 11.90% I’ROM Group., Limited UBS Group AG and its related bodies corporate Bank of America Corporation and its related bodies corporate 15,793,001 11,799,262 11,125,000 8.26% 6.17% 5.82% Number Held Percentage of Issued Shares D. VOTING RIGHTS A registered holder of shares in the company may attend general meetings of the company in person or by proxy and on a poll may exercise one vote for each share held. Option holders have no voting rights. 52 IDT Annual Report 2015 IDT Australia Limited 45 Wadhurst Drive, Boronia Victoria 3155 Australia www.idtaus.com.au ABN 66 006 522 970