IDT Australia Limited
Annual Report 2018
Company Information
Directors
Alan Fisher
BCom, FCA, MAICD
(Chairman)
Hugh Burrill
BSc, MScSt, MBA, GAICD
Graeme Kaufman
BSc, MBA
Mary Sontrop
BAppSci, Grad Dip Quality Management, Grad Dip Management
(Health), MBA, GAICD
Secretaries
Joanna Johnson
BEc, Grad Dip Management, ICAA
Dr David Sparling
BVSc (Hons), LLB (Hons), GDi pAppCor Gov
Share Register
Link Market Services Limited
Tower 4, 727 Collins Street
MELBOURNE, VICTORIA, 3008
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)
2 IDT Annual Report 2018
Registered Office and Principal Place of Business
45 Wadhurst Drive
BORONIA, VICTORIA, 3155
Telephone +61 3 9801 8888
Facsimile +61 3 9837 6445
Website Address
www.idtaus.com.au
Contents
Chairman’s Letter
Report of the Chief Executive Officer
Report of the Directors
Auditors Independence Declaration
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
4
5
6-16
17
18
19
20
21
22-44
45
46-49
50-51
IDT Annual Report 2018 3
Chairman's Letter
On behalf of the Board of Directors of IDT Australia Limited I am pleased to present the Annual Report for the 2018 financial year.
The year in review has been one of change and renewal at IDT and we have finished the year in a positive fashion. The Company has
reported an operating profit after tax for the second half of the year of $222,832 and has closed the year with a cash balance exceeding
$14 million. IDT’s cash balance puts the Company in a good position to consider how best to maximise shareholder value.
During the first part of the year the Company undertook a strategic and operational review of the business. Key components of the
review included a critical assessment of the sustainability of IDT’s strategy and business model, the organisational structure of the
business and the operational issues currently being faced by the Company. I would like to thank Mr Graeme Kaufman and Ms Mary
Sontrop who both undertook executive roles during the year and for their valuable contribution to the strategic and operational review.
I would also like to thank Graeme for his stewardship as Chairman of IDT from October 2013 through to November 2017.
Several key outcomes from the strategic and operational review were identified and implemented which included a change in executive
leadership with the appointment of a new Chief Executive Officer along with a change in structure and composition of the senior
leadership team. There was also a renewed focus on business operations and a re-setting of the Company’s strategy to move away
from non-specialised generic products.
I am pleased with the progress we have made throughout the year and I am looking forward to the year ahead.
Alan Fisher
Chairman
21 August 2018
4 IDT Annual Report 2018
Report of the Chief Executive Officer
This year has been a busy and challenging one for IDT Australia. Since stepping in as Chief Executive Officer in February 2018 the
Company’s focus has been on strengthening the foundations of IDT’s business. The first task we set out to achieve was to materially
improve the Company’s operational execution and schedule adherence. Another key area of immediate focus was on cost containment.
I am pleased to report an operating profit after tax for the second half of the 2018 financial year. Whilst modest, this profit highlights the
strength of IDT’s foundations and I am immensely proud of the team’s focus and effort to deliver this result.
IDT also closed the year with a strong cash balance of $14.03m. In late August 2017 the Company successfully closed the final tranche
of the divestment of its clinical trials business CMAX to I’Rom Group Co Limited, bringing the total deal value to $16.2m in cash. At the
same time Mr Graeme Kaufman and Ms Mary Sontrop both stepped into the business in an executive capacity and oversaw a thorough
review of IDT’s strategy and operations. Mary and Graeme’s hard work and experienced oversight formed a key plank in IDT’s renewed
selected generics strategy and operational focus; and I would like to take this opportunity to sincerely thank them for stepping into these
roles during this time.
In April 2018 IDT divested its non-specialised generic product portfolio to its U.S. distribution partner ANI Pharmaceuticals Inc.
This transaction signalled a move by IDT away from non-specialised generic products at a time when there is increasing levels of
competition and downward pricing pressure in the U.S. and other markets. The divestment to ANI generated an additional USD 2.73m
in cash, reflected in a small booked profit for IDT, along with a share of the profits to be generated by the sale of Prazosin for 60 months
following the launch of the product. Another noteworthy feature of this divestment was IDT’s ability to immediately reduce the operating
cost base and commercialisation costs associated with owning a portfolio of 19 U.S. generic product filings.
On a disappointing note the Company received a Warning Letter from the U.S. Food and Drug Administration (FDA) in late May 2018.
The Warning Letter followed the FDA’s general compliance audit of IDT’s facilities in December 2017 and identified the need by IDT to
improve several of its processes and systems, along with the FDA’s increased focus on data integrity. IDT commenced remediation
activities immediately following the FDA audit. These activities have included top-down changes to IDT’s quality and operational
personnel as well as changes to processes and systems. In July 2018 the Company met with the FDA in Washington to outline and
discuss IDT’s Remediation and Action Plan. The dialogue during the meeting was positive and constructive and importantly the FDA
confirmed that IDT remains free to continue to market its products into the United States. IDT’s focus is now robustly executing the
Remediation and Action Plan and then inviting the FDA to re-inspect the facilities and our operations with a view to having the Warning
Letter lifted.
Looking to the year ahead IDT will continue to drive and grow the business whilst also pursuing high value selected generics
opportunities as and when they arise. IDT’s recently announced move into the exciting medicinal cannabis space in partnership with
Cann Group Limited is a good example of how IDT can leverage off its decades of pharmaceutical manufacturing experience and
accredited facilities to expand its service offerings into new products and markets.
I thank shareholders for their continued support.
David Sparling
Chief Executive Officer
21 August 2018
IDT Annual Report 2018 5
Report of the Directors – 30 June 2018
(Including Remuneration Report)
The Directors present their report on the financial report of the company for the year ended 30 June 2018.
The following persons were Directors of IDT Australia Limited during or since the end of the financial year:
Alan Fisher
Hugh Burrill
Graeme Kaufman
Paul MacLeman
Reo Shigeno
Mary Sontrop
Chairman from 21 November 2017, Non-Executive Director
Non-Executive Director
Chairman until 21 November 2017, Non-Executive Director
Executive Director until 14 July 2017
Non-Executive Director until 31 March 2018
Non-Executive Director
For the period 14 July 2017 until 20 February 2018, Graeme Kaufman and Mary Sontrop formally assumed Executive roles.
Therefore, neither Director is considered to be Independent for 3 years from the time they relinquished these Executive roles.
Except as noted above, the Directors held office during the whole of the financial year and since the end of the financial year.
Principal Activities
The principal activities of the Company through the course of the year were the supply of products and provision of research and
development and other technical services within the pharmaceutical and allied industries.
Review of Operations
The past 12 months reflects a consolidation of operations for IDT, firstly from the divestment of the CMAX Clinical Trial Unit and secondly
from the divestment of the portfolio of non-specialised generic products, supported by operational and cash containment strategies.
The table below highlights the impact of these transformation transactions from the underlying profits of the Company:
Revenue from ordinary activities
Profit / (Loss) for the Period
Profit from discontinued operation
Impairment of intangible assets
Underlying Profit / (Loss)
2017
$000
9,543
(773)
13,730
7,622
(6,881)
2018
$000
13,300
(16,979)
-
14,144
(2,835)
6 months to
December 2017
$000
6 months to
June 2018
$000
4,989
(17,202)
-
14,144
(3,058)
8,311
223
-
-
223
IDT’s ordinary revenues are mainly derived from contract and fee for service research and development and the manufacture of active
pharmaceutical ingredients for customers. These revenues have grown strongly over the year ended 30 June 2018 increasing by $3.8
million to $13.3 million, with $8.3 million achieved in the second half. This revenue uplift, combined with cost containment strategies is
reflected in a material improvement in the underlying profitability of the Company with the underlying loss reducing by $4.0 million to $2.0
million for the year ended 30 June 2018, with a profit of $0.2 million achieved in the second half.
These operational results and capital transactions have enabled IDT to strengthen its cash position by $5.6 million to $14.0 million over the
12 months to June 2018.
A detailed review of operations is given in the Chairman’s Letter and CEO reports on page 4-5 of this annual report.
6 IDT Annual Report 2018
Summary of FY18 financial performance
Revenue (1)
Net profit / (loss) before tax – continuing operations
Net profit / (loss) before tax – discontinued operations
Net profit / (loss) after tax
Basic earnings per share
Diluted earnings per share
(1) excluding CMAX discontinued operations
Financial position
30 June 2018
$000
30 June 2017
$000
Movement
13,300
(18,575)
-
(16,979)
(6.9¢)
(6.9¢)
9,543
(14,846)
13,730
(773)
(0.3¢)
(0.3¢)
3,757
(3,730)
(13,730)
16,206
The Company has strong cash reserves of $14.0 million as at balance date which is further supported by an unutilised and renewed facility
of $2.5 million with the National Australia Bank Ltd.
These cash reserves and debt facility are available to support the Company to continue to invest in projects to extend production and
manufacturing capabilities and to develop and launch new specialty niche generic products.
Results
The net result of operations after applicable income tax was a loss of $16.979 million (2017: $0.773 million).
Dividends
No dividends were paid during 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 not
otherwise disclosed in this report or the financial statements.
Matters Subsequent to the End of the Financial Year
David Sparling was appointed Interim CEO on 16 February 2018 and following consideration of his performance he was formally
appointed to that role on 2 July 2018.
On 25 July 2018, commercial loan and overdraft facilities with the National Australia Bank totalling $2.5 million were renewed through to
31 July 2019.
IDT announced on 7 August 2018 that it had entered into a contract with Cann Group Limited to provide manufacturing support in
relation to medicinal cannabis-based products intended for supply to patients in Australia and overseas.
Other than the above, there has not been any matter or circumstance arising since the end of the financial year that has significantly
affected or may significantly affect the operations, results of the operations or the of the Company.
Likely Developments
The company has successfully tendered for and won several new projects which will support and grow the level of revenue expected to
be generated from contract and fee for service research and development over the coming financial year, including a contract with Cann
Group for manufacturing support in relation to medicinal cannabis-based products. Supply contracts for the manufacture of Active
Pharmaceutical Ingredients have been retained and activities supporting this revenue stream are expected to continue at a level similar to
the year reported.
Following the divestment of the ANDA bundle to ANI Pharmaceuticals Inc in April 2018, the Company retains a single approved Finished
Dose Form Product, Temozolomide, but additionally has agreed to support ANI’s ongoing commercial requirements on a contract
manufacturing basis. The company will also continue its program of selectively identifying and developing new Finished Dose Form
proprietary products to expand its portfolio.
There will continue to be a strong focus on cost containment in order to realise profitability improvements.
IDT Annual Report 2018 7
Report of the Directors – 30 June 2018 continued
Environmental Regulations
IDT Australia Ltd is subject to environmental regulations and other licenses in respect of its manufacturing facilities located in Boronia,
Victoria. The Company monitors changes in its regulatory environment and ensures ongoing compliance with new requirements. It is
subject to regular inspections and audits by responsible State and Federal authorities and by local and international clients. The
Company considers it has complied with all necessary environmental regulations throughout the year ended 30 June 2018 and no
related issues have arisen since the end of the financial year to the date of this report.
Following an audit conducted in December 2017 by the U.S. Food and Drug Administration (FDA), the Company received a Warning
Letter dated 23 May 2018. This Warning Letter does not contain any enforcement conditions limiting the sale of IDT’s products in the
US. The company has committed to a remediation plan in order to prepare the facility for re-inspection by the FDA and having the
Warning Letter lifted as soon as reasonably possible.
Corporate Governance Statement
The Company complies with the Australian Stock Exchange Corporate Governance Principles and Recommendations, 3rd edition (ASX
Principles). The Company’s Corporate Governance Statements and Policies, including disclosures required by the ASX Principles, may
be viewed on the Company’s website, www.idtaus.com.au/investor-centre/corporate-governance.
Indemnification of Officers
During the financial year, the Company paid an insurance premium to insure Directors and Officers (D&O) of the Company. Under the
terms of this policy the premium paid by the Company is not permitted to be disclosed.
The liabilities insured are legal costs which may be incurred in defending civil or criminal proceedings which may be brought against D&O
in their capacity as D&O of the Company, and any other payments arising from liabilities incurred by D&O in connection with such
proceedings, except for where such liabilities arise out of conduct involving a wilful breach of duty by D&O or improper use by D&O of
their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or
agreed to indemnify a D&O of the company against a liability incurred.
Information on Directors
ALAN D FISHER (Appointed Chairman 21 November 2017)
Qualifications: BCom, FCA, MAICD
Experience: Has extensive and proven experience in restoring and enhancing shareholder value. He spent 24 years at global
accounting firm Coopers & Lybrand where he headed and grew the Melbourne Corporate Finance Division. Following this tenure, he
has spent the last 21 years acting independently as a corporate advisor and professional director specialising in M&A, strategic advice,
business restructurings and capital raisings.
Other Current Directorships: Non-Executive Chair Centrepoint Alliance Ltd, Non-Executive Director and Chair of Audit and Risk
Committees of Bionomics Ltd and Thorney Technologies Ltd.
Former Directorships in Last 3 Years: Nil
Responsibilities: Chairman, Non-Executive Director, member Audit and Risk Committee.
Equity interests in company: Nil
HUGH N BURRILL
Qualifications: BSc, MScSt, MBA, GAICD
Experience: Formerly Corporate Vice President, Global Pharma Research & Development, Hospira Inc where he was responsible for
overall pipeline portfolio management, and research and development of generic and specialty pharmaceuticals. Prior to this he held
other senior international roles within Hospira Inc and the original Mayne Pharma Ltd and currently provides consulting services in
pharmaceutical strategic management, product development, regulatory affairs and intellectual property.
Other Current Directorships: Non-Executive Director and Deputy Chair Nova Aerospace Pty Ltd (since 2007).
Former Directorships in Last 3 Years: Nil
Responsibilities: Non-Executive Director, Chair Audit and Risk Committee, Member Remuneration and Nomination Committee
Equity interests in company: Nil
8 IDT Annual Report 2018
GRAEME KAUFMAN (Chair until 21 November 2017, Executive Director for the period 14 July 2017 to 20 February 2018,
thereafter Non-Executive Director)
Qualifications: BSc, MBA
Experience: Has wide ranging experience in the biotechnology sector, across scientific, commercial and financial areas. At CSL
Limited, he was responsible for manufacturing facilities, operated a division in the high technology medical device market and as General
Manager Finance was responsible for finance, strategy development, human resources and information technology. He was Executive
Vice President Corporate Finance with Mesoblast Limited until 2013.
Other Current Directorships: Non-Executive Chair, Paradigm BioPharmaceuticals Limited (since 2014)
Former Directorships in Last 3 Years: Non-Executive Chair Bionomics Ltd (until August 2016)
Responsibilities: Non-Executive Director, Member of Audit and Risk and Nomination and Remuneration Committees
Equity interests in company: 405,000 fully paid ordinary shares
MARY SONTROP (Executive Director from 14 July 2017 until 20 February 2018, thereafter Non-Executive Director)
Qualifications: BAppSci, Grad Dip Quality Management, Grad Dip Management (Health), MBA, GAICD
Experience: Experience in the biopharmaceutical sector across manufacturing operations, quality and business integration. Mary has
held executive roles at CSL Limited where she participated in international acquisitions, turned around unprofitable manufacturing
operations and established a globally integrated manufacturing network over four countries. As head of CSL’s Australia and New
Zealand pharmaceutical business she and her team successfully delivered the human papilloma virus immunisation programs and
obtained FDA approval to manufacture and export seasonal and pandemic influenza vaccines.
Other Current Directorships: Nil
Former Directorships in Last 3 Years: Nil
Responsibilities: Non-Executive Director, Chair Remuneration and Nomination Committee
Equity interests in company: 275,000 fully paid ordinary shares (indirect)
Directors resigned during the financial year
PAUL MACLEMAN (Managing Director until 14 July 2017)
Qualifications: MBA, BVSc, Grad Dip Tech, Grad Cert Eng, GAICD
Other Current Directorships: AdAlta Ltd
Former Directorships in Last 3 Years: Nil
REO SHIGENO (Non-Executive Director until 31 March 2018)
Qualifications: BA, Dip Financial Services
Other Current Directorships: CMAX Clinical Research Pty Ltd
Former Directorships in Last 3 Years: Nil
Information on Secretaries
DR DAVID SPARLING (Chief Executive Officer)
Qualifications: BVSc (Hons), LLB (Hons), GDi pAppCor Gov
Experience: Joined IDT in May 2013 as Vice President Legal and Corporate Development, with responsibility for identifying and
executing major transactions in line with IDT’s strategy for growth and expansion, business development, customer management, legal
and compliance and was promoted to Interim CEO in February 2018. He is an experienced senior executive, having held roles at CEO
and Chair level in ASX listed companies, including Chair FYI Resources Limited and Vice President Corporate Development, Genetic
Technologies Limited.
JOANNA JOHNSON (Chief Financial Officer)
Qualifications: BEc, Grad Dip Management, CA
Experience: Is a Chartered Accountant with more than 20 years of senior finance roles, specialising in the pharmaceuticals industry.
Her first Pharma finance role was at FH Faulding & Co Ltd, progressing through to Commercial Manager for Mayne Pharma Ltd, ANZ and
ultimately to Regional Finance Director, Asia Pacific, with Hospira Inc. Before joining IDT in 2014 her most recent role was as CFO and
Company Secretary of Generic Health Pty Ltd, a subsidiary of Lupin Ltd.
IDT Annual Report 2018 9
Report of the Directors – 30 June 2018 continued
Meetings of Directors
The following table sets out the number of meetings of the Company's Directors held during the year ended 30 June 2018, and the
number of meetings attended by each Director.
Director
Board
Audit and Risk Committee
Remuneration and
Nomination Committee
Hugh Burrill
Alan Fisher
Graeme Kaufman
Paul MacLeman (until 14 July 2017)
Reo Shigeno (until 31 March 18)
Mary Sontrop
A
14
15
15
-
12
15
B
15
15
15
1
12
15
A
1
2
2
-
1
-
B
1
2
2
-
1
-
A
2
-
2
-
2
2
B
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.
REMUNERATION REPORT
The Directors of the Company are pleased to present the following Remuneration Report which forms part of the Report of Directors
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 who have authority and are responsible for planning, directing and controlling
the Company’s activities, directly or indirectly, including any Director (whether executive or otherwise) of the Company and the broader
remuneration policies and philosophy adopted by the Board.
There were no significant changes to remuneration policies during the year.
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, share ownership plans and the relationship between remuneration policy and Company
performance.
At the last AGM held on 24 October 2017, the Company received a first strike on its 2017 Remuneration Report. At this meeting 51.2%
of shareholders supported acceptance of the report, but this was short of the required 75% approval. A company which sustains a vote
against the Remuneration Report of more than 25% in two successive annual general meetings is required to vote on a board spill,
which if passed by more than 50 percent of votes, would require all Directors to stand for re-election at a general meeting of
shareholders which must be held within 90 days.
In response to receiving this first strike, the Company has increased the level of detail in the disclosure of the remuneration setting
process in this report. Additionally, Key Management Personnel (KMP) disclosure has been expanded to include all members of the
Executive Leadership Team, all of whom now have a whole of business scope following the narrowing of organisational focus
consequential from the divestment of CMAX finalised earlier in this financial year.
Directors’ Remuneration
Fees and payments to Directors reflect the demands made on, and the responsibilities of, the Directors. Directors’ fees are reviewed
annually by the Remuneration and Nomination Committee, considering comparative remuneration data for the industry and size of the
Company to attract Directors with relevant expertise in our industry as well as Australian capital markets.
The Non-Executive Directors’ annual base fee is currently $70,000 and the Chair $120,000, inclusive of superannuation contributions,
as required under the Australian superannuation guarantee legislation. Total 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
for Non-Executive Directors is $400,000.
10 IDT Annual Report 2018
IDT has a small and focussed Board which works closely with Executive management. For seven months of this financial year, two of
these Directors, Graeme Kaufman and Mary Sontrop, assumed Executive responsibilities to support the Company whilst recruitment of a
new CEO was conducted. The Company is appreciative of their contributions which were made for no additional remuneration.
Having assumed these temporary Executive responsibilities neither Graeme Kaufman nor Mary Sontrop are considered to be
Independent Directors for a period of three years, from the time they relinquished these additional Executive responsibilities in
February 2018.
Executive Remuneration
Remuneration packages are set at levels intended to attract, retain and motivate high quality executives to manage the Company’s operations
and are linked to the Company’s financial and operational performance. The Company is committed to adhering to Corporate Governance
Standards for remuneration of executives.
The framework of executive remuneration and other terms of employment of the CEO are reviewed annually by the Remuneration and
Nomination Committee and other executive remuneration is reviewed by the CEO with the oversight of the Remuneration and Nomination
Committee having regard to performance against personal and company objectives established at the beginning of the year, relevant
comparative information and independent expert advice is taken where necessary.
Remuneration and other key terms of employment for KMP are formalised in service agreements. Major provisions of these service
agreements include the following fixed and performance-based elements:
•
•
•
•
•
•
base salary plus statutory employer contributions to the superannuation fund of the employee’s choice and statutory leave
entitlements
short term performance incentives payable as a cash bonus, based on achievement of company and individual performance
objectives established at the beginning of the year. The CEO may receive up to 50% of his base salary as a short-term incentive
whilst other KMP are eligible in the range of 15-20%
long term incentives are available via invitation to participate in the Company’s Loan Funded Employee Share Plan
a KMP may be terminated at the Company’s discretion by giving 3 months’ notice
for employment to be terminated at the discretion of the KMP, 3 months’ written notice is required
in the case of serious misconduct KMP forgo termination entitlements other than payment of applicable base salary to the date of
termination and statutory leave and superannuation entitlements.
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, repayable at any time or within 90 days of an employee’s termination.
Grants within the framework of the ESP are determined by the CEO together with the Remuneration and Nomination Committee and are
subject to approval by the Board. To the extent shares may be offered to Directors such issues would require approval by resolution at a
General Meeting of shareholders.
Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using a Black-Scholes
pricing model considering 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.
Other staff may be invited to participate in the allocation of up to $1,000 value of shares per year, granted for no consideration and
escrowed for three years whilst participants remain employees of the Company.
IDT Annual Report 2018 11
Report of the Directors – 30 June 2018 continued
Remuneration Details 2018
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Salary
and fees
$
Cash
bonus
$ (8)
Non
monetary
$
Super-
annuation
$
Long
Service
Leave
$
Shares
$
Total
$
Non-executive Directors
A D Fisher, Chairman (1)
G Kaufman (2)
H N Burrill
R Shigeno
M E Sontrop (3)
Sub-total
Non-executive
Directors
Executive Director
91,792
81,723
63,927
47,945
63,927
349,314
P MacLeman, MD (4)
177,253
-
-
-
-
-
-
-
Other key
management personnel
M Coffey,
VP Quality and
Regulatory (5)
J Johnson,
Chief Financial Officer
D Savaglio,
VP People and Change
J Sosic, VP Operations,
Supply and Infrastructure (6)
D Sparling, CEO (7)
Sub-total executive
management
Total key management
personnel
compensation
175,000
12,625
209,168
12,292
130,343
8,340
99,068
257,032
-
-
-
-
-
-
-
-
-
-
-
-
8,720
7,764
6,073
4,555
6,073
33,185
5,012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100,512
89,487
70,000
52,500
70,000
382,499
182,265
16,625
568
11,510
216,328
19,871
4,417
13,758
259,506
12,383
2,275
9,334
162,675
3,971
9,789
264
13,090
126,182
-
23,544
10,991
15,191
306,758
1,047,864
33,257
3,971
87,224
18,515
62,883
1,253,714
1,397,178
33,257
3,971
120,409
18,515
62,883
1,636,213
(1) Mr Fisher assumed the Chair on 21 November 2017.
(2) Mr Kaufman was Executive Chairman from 14 July 2017 through to 21 November 2017 and remained an Executive Director until 20 February 2018. He
now serves the Company as a Non-Executive Director.
(3) Ms Sontrop was an Executive Director for the period 14 July 2017 to 20 February 2018, thereafter she is a Non-Executive Director.
(4) Dr MacLeman was an Executive Director until his resignation on 14 July 2017. His remuneration for 2018 includes payments associated with settlement of
his employee entitlements and his notice period.
(5) Ms Coffey commenced on 28 March 2017 and is a KMP from 1 July 2017. In addition to her ordinary Short-Term Incentive Bonus, Ms Coffey received a
sum of $10,000 paid on 19 February 2018 as a sign on bonus following completion of her probationary period.
(6) Mr Sosic joined IDT on 11 December 2017. Within the terms of company policy, he has elected for part of his salary to be attributed to the provision of a
motor vehicle.
(7) Dr Sparling was appointed as Interim CEO on 16 February 2018 and formally appointed on 2 July 2018. Prior to this appointment he was Vice President
Corporate and Business Development.
(8) Short Term Incentive Bonuses were paid on 22 February 2018.
12 IDT Annual Report 2018
Summary of Short Term Incentive Bonuses paid in 2018 in relation to achievement of objectives established at the
beginning of the previous financial year
Potential of fixed remuneration
Achievement of objectives
as set at the start of the year
M Coffey
J Johnson
D Savaglio
Remuneration Details 2017
20%
20%
20%
30%
30%
30%
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Salary
and fees
$
Cash
bonus
$
Non
monetary
$
Super-
annuation
$
Long
Service
Leave
$
Shares
$
Total
$
Non-executive Directors
G Kaufman, Chairman
G L Blackman (1)
H N Burrill
A D Fisher
G F Lord (1)
R Shigeno
M E Sontrop (1)
Sub-total
Non-executive Directors
Executive Director
89,863
44,369
47,975
47,975
13,333
47,975
21,308
312,798
-
-
-
-
-
-
-
-
P MacLeman, MD (3)
370,459
52,500
Other key management
personnel
J Johnson, Chief Financial
Officer (2)
204,866
28,125
D Sparling, VP Corporate and
Business Development (2)
230,959
51,000
Sub-total executive
management
Total key management
personnel compensation
806,284
131,625
1,119,082
131,625
-
-
-
-
-
-
-
-
-
-
-
-
-
8,537
4,215
4,558
4,558
1,267
4,558
2,024
29,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
98,400
48,584
52,533
52,533
14,600
52,333
23,333
342,515
14,712
16,867
100,828
555,365
19,462
5,433
34,551
292,408
19,616
10,345
38,952
350,871
53,790
32,645
174,331
1,198,675
83,507
32,645
174,331
1,541,190
(1) Mr Lord resigned effective 18 October 2016, Dr Blackman resigned effective 13 June 2017, Ms Sontrop was appointed 1 March 2017.
(2) Ms Johnson and Dr Sparling were issued 241,598 and 272,369 shares respectively under the Employee Share Plan on 21 September 2016 with a
five-year term. At the time of issue these shares were valued in line with the Employee Share Plan and $73,503 recorded as a share-based payment
expense in the current year.
(3)
In the prior financial year, 5 tranches of Loan Shares totalling 3,600,000 shares were issued for the benefit of Dr MacLeman. At the time of issue
these shares were independently valued at $705,794 to be recorded as $100,828 per year over
the seven-year term of the offer from the date the shares were issued.
IDT Annual Report 2018 13
Report of the Directors – 30 June 2018 continued
Summary of Short Term Incentive Bonuses paid in 2017 in relation to achievement of objectives established at the
beginning of the previous financial year
Potential of fixed remuneration
Achievement of objectives
as set at the start of the year
P MacLeman
D Sparling
J Johnson
30%
30%
20%
50%
75%
70%
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 Loan Shares granted within the framework of the Employee Share Plan.
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.
All shares issued to employees were made within the provisions of the Employee Share Plan funded by an interest free limited recourse
loan from the Company.
2018
Non-executive Directors
G Kaufman
R Shigeno
M E Sontrop
Executive Director
P MacLeman
Other key management personnel
M Coffey
J Johnson
D Savaglio (2)
J Sosic
D Sparling
Total Holdings
Balance at
start of year
Shares issued
to employees
Other changes
during the year
Balance at the
end of the year
405,000
333,333
275,000
4,071,000
-
787,886
298,638
-
818,200
-
-
-
-
234,940
280,812
190,527
255,078
310,066
6,989,057
1,271,423
-
-
-
-
-
-
-
-
-
-
405,000
(1)
275,000
(1)
234,940
1,068,678
489,165
255,078
1,128,266
3,856,147
(1) Mr Shigeno and Dr MacLeman resigned from office of Director during the current financial year and accordingly their shareholdings as at 30 June 2018
are not disclosed. 3,960,000 loan funded shares issued to Dr MacLeman were cancelled 90 days following cessation of his employment in
accordance with the terms of their issue.
(2) Ms Savaglio became KMP on 1 July 2017 and accordingly previous ESP share issues made to her are reflected in the opening balance.
14 IDT Annual Report 2018
2017
Non-executive Directors
G L Blackman
G Kaufman
G F Lord
R Shigeno
M E Sontrop
Executive Director
P MacLeman
Other key management personnel
D Sparling
J Johnson
Total Holdings
Balance at
start of year
Shares issued
to employees
Other changes
during the year
Balance at the
end of the year
7,029,710
285,000
6,831,907
333,333
-
4,071,000
545,831
546,288
19,643,069
-
-
-
-
-
-
272,369
241,598
513,967
-
(2)
120,000 (1)
405,000
-
-
275,000 (1)
-
-
-
(2)
333,333
275,000
4,071,000
818,200
787,886
395,000
6,690,419
(1) Mr Kaufman and Ms Sontrop made on market share purchases within the provisions of the Company’s Security Trading Policy.
(2) Dr Blackman and Mr Lord resigned from office of Director during the current financial year and accordingly their shareholdings as at 30 June 2017 are
not disclosed.
Company performance
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for the five years to
30 June 2018.
Revenue (1)
Net profit / (loss) before tax (2)
Net profit / (loss) after tax
Share price at start of year
Share price at end of year
Final dividend
Basic earnings per share
Diluted earnings per share
30 June
2018
$000
13,300
(18,575)
(16,979)
$0.105
$0.096
-
(6.9¢)
(6.9¢)
30 June
2017
$000
9,543
(1,116)
(773)
$0.23
$0.105
-
(0.3¢)
(0.3¢)
30 June
2016
$000
16,914
(5,704)
(4,006)
$0.23
$0.23
-
(1.9¢)
(1.9¢)
30 June
2015
$000
15,720
(3,209)
(2,992)
$0.20
$0.23
-
(2.2¢)
(2.2¢)
30 June
2014
$000
13,374
(6,583)
(6,626)
$0.20
$0.20
-
(9.5¢)
(9.5¢)
# Shares on issue, 30 June
244,466,732
248,161,716
219,355,298
191,281,032
77,374,248
Market capitalisation, 30 June
$23.47m
$26.06m
$50.45m
$43.99m
$15.47m
(1) CMAX Revenues have been excluded from the year ended 30 June 2017 and retained in the prior year comparatives
(2) Net profit / (loss) before tax includes intangible asset impairment adjustments of $14.144 million and $7.622 million for the years ended 30 June 2018
and 2017 respectively. Furthermore, the period ended 30 June 2017 includes $13.718 million profit from the divestment of CMAX.
IDT Annual Report 2018 15
Report of the Directors – 30 June 2018 continued
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 Company may decide to engage the external auditor on assignments additional to their statutory audit duties where the external
auditor’s expertise and experience with the Company is important.
Directors have considered the position and is satisfied that any provision of non-audit services is compatible with the general standard of
independence for external auditors imposed by the Corporations Act 2001.
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 ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 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.
Alan Fisher
Chairman
21 August 2018
Melbourne
16 IDT Annual Report 2018
Auditors Independence Declaration
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 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
21 August 2018
The Board of Directors
IDT Australia Limited
45 Wadhurst Drive
BORONIA VIC 3155
Dear Board Members
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 financial
year ended 30 June 2018, 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
Anneke Du Toit
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation
Member of Deloitte Touche Tohmatsu Limited
IDT Annual Report 2018 17
Statement of Profit or Loss and Other Comprehensive Income
For the Year Ended 30 June 2018
Revenue from ordinary activities
Raw materials
Employee benefits expense
Depreciation and amortisation expense
Finance costs
Impairment of intangible assets
Profit on divestment of intangible assets
Other operating expenses
Loss before income tax
Income tax benefit
Loss for the year from continuing operations
Profit from discontinued operation
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 loss
Basic earnings per share
Diluted earnings per share
Note
2
2018
$000
13,300
(2,428)
(8,291)
(2,625)
(32)
10
(14,144)
55
(4,410)
2017
$000
9,543
(1,953)
(9,747)
(2,163)
(15)
(7,622)
-
(2,889)
4
19
28
28
(18,575)
(14,846)
1,596
(16,979)
-
(16,979)
343
(14,503)
13,730
(773)
506
(152)
-
-
(16,625)
(773)
(6.9¢)
(6.9¢)
(0.3¢)
(0.3¢)
The above Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes.
18 IDT Annual Report 2018
Statement of Financial Position
As at 30 June 2018
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Current tax asset
Inventories
Assets classified as held for sale
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets
Deferred tax assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Borrowings
Unearned revenue
Provisions
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Borrowings
Unearned revenue
Provisions
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Accumulated losses
TOTAL EQUITY
Note
2018
$000
2017
$000
5
6
7
8
19
9
10
11
12
13
14
15
13
14
15
16
17
18
14,027
3,474
396
1,055
18,952
-
18,952
18,709
1,251
-
19,960
38,912
8,417
2,288
2,208
333
13,246
6,159
19,405
19,525
19,185
-
38,710
58,115
3,738
4,219
129
244
714
122
705
840
4,825
5,886
413
982
236
1,631
6,456
32,456
52,833
5,264
(25,641)
32,456
542
2,622
147
3,311
9,197
48,918
52,833
4,747
(8,662)
48,918
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
IDT Annual Report 2018 19
Statement of Changes in Equity
For the Year Ended 30 June 2018
Contributed
Capital
$000
Asset
Revaluation
Reserve
$000
Share-based
Payment
Reserve
$000
Accumulated
Losses
$000
Total Equity
$000
1,809
2,495
Balance at 1 July 2016
Profit/(Loss) for the year
Shares issued during the year
Share based payments expense
Other comprehensive income
for the year
46,961
-
5,872
-
-
-
-
-
-
Balance at 30 June 2017
52,833
1,809
Balance at 1 July 2017
52,833
1,809
2,938
Profit/(Loss) for the year
Shares issued during the year
Share based payments expense
Other comprehensive income
for the year
-
-
-
Balance at 30 June 2018
52,833
-
-
-
354
2,163
-
-
443
-
2,938
-
-
163
-
(7,889)
(773)
-
-
-
43,376
(773)
5,872
443
-
(8,662)
48,918
(8,662)
(16,979)
48,918
(16,979)
-
-
-
-
163
354
3,101
(25,641)
32,456
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
20 IDT Annual Report 2018
Statement of Cash Flows
For the Year Ended 30 June 2018
Note
2018
$000
2017
$000
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 tax refund received
Interest received
NET CASH INFLOW / (OUTFLOW) FROM OPERATING ACTIVITIES
27
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Payments for development costs
Proceeds divestment - ANDA’s
Proceeds divestment - CMAX
NET CASH INFLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of equity
Payments for issue of equity
Repayment of borrowings
(Repayment of) / Proceeds from Finance Leases
NET CASH INFLOW / (OUTFLOW) FROM FINANCING ACTIVITIES
NET INCREASE / 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
11,421
(16,442)
(5,021)
(33)
3,256
171
(1,627)
(918)
(1,440)
3,558
6,159
7,359
-
-
-
(122)
(122)
5,610
8,417
14,027
19,690
(17,742)
1,948
(14)
-
86
2,019
(1,766)
(5,801)
-
10,000
2,433
6,315
(443)
(2,554)
626
3,944
8,396
21
8,417
The above Statement of Cash Flow should be read in conjunction with the accompanying notes.
IDT Annual Report 2018 21
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 outlined in this section and 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, Australian Accounting Standards and Interpretations, and comply with International Financial Reporting Standards
and other requirements of the law.
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,
intangible assets and land and buildings that are measured at fair value.
Historical cost is generally based on fair values of the consideration given in exchange for goods and services, being the
price that would be received in an orderly transaction between market participants at the measurement date, regardless
of whether that price is directly observable or estimated using another technique.
A fair value measurement of a non-financial asset considers the Company’s ability to generate economic benefits
through use of the asset in its highest or best use or by selling it through an orderly transaction.
In estimating the fair value of an asset or liability, the Company considers the characteristics into account if market
participants would take those characteristics into account when pricing the asset or liability at measurement date. Fair
value has been used in these financial statements except for share based payment transactions within the scope of
AASB 2, leasing transactions 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 fair value less cost to dispose in AASB
136 ‘Impairment of Assets’.
In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the
degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair
value measurement in its entirety, which are described as follows:
•
•
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can
access at the measurement date;
Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or
liability, either directly or indirectly; and
•
Level 3 inputs are unobservable inputs for the asset or liability.
All amounts are presented in Australian dollars unless otherwise noted.
1.3
Going Concern Basis
For the year ended 30 June 2018, the Company incurred a loss after tax of $16.979 million, including $14.144 million
recognised for impairment of intangible assets, and generated an increase in cash and cash equivalents of
$5.610 million.
As at 30 June 2018, the Company held cash reserves in excess of $14 million which will enable the Company to fund
planned capital projects as well as ongoing development of the Company’s proprietary product portfolio.
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 in the light of its budget and forward
forecasts, which include cash flow forecasts and forward sales orders received from customers.
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 and therefore it is appropriate to prepare the financial statements
on a going concern basis.
22 IDT Annual Report 2018
1.4
Impairment of Tangible and Intangible Assets
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. If such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss.
In testing for impairment, the recoverable amount of the Company’s Property Plant and Equipment is determined using a
fair value less cost to dispose approach (excess earnings methodology) based on discounted cash flows, either 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 is estimated to be less than its carrying amount, the carrying amount is reduced to
its recoverable amount. An impairment loss is recognised 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.
1.5
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 1.9. Disclosures required by these Standards that are
applicable 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.
1.6
Foreign Currency Translation
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 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.
From time to time the company enters into 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
Critical Accounting Estimates and Judgements
The preparation of these financial statements requires the Company to make estimates and judgements that may affect
the reported values of assets, liabilities, revenues and expenses. Management continually evaluates estimates and
judgements based on historical experience and other factors it believes to be reasonable under the circumstances,
including expectations of future events that may have a financial impact on the entity.
The following critical judgements have been made in application of the Company's accounting policies and have the
most significant effect on amounts recognised in the Company’s financial statements.
Valuation of non-current assets
The Company applies AASB 136 Impairment of Assets to test the carrying value of non-current assets. Judgement is
applied to make estimates of future cashflows to support the assessment of the appropriateness of the carrying value.
Criteria considered include anticipated future sales prices, market size and expected share, future exchange rates and
the discount rate.
In making these judgements, 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, the cost to complete the project, existence of an attractive commercial market,
potential launch dates and sales expectations to conclude on the value of expected future economic benefits which
would be expected to flow to the entity in order to calculate discounted cashflows.
Balanced and conservative estimates of these criteria have been made but key sensitivities could include changes to
launch dates or more competitive market conditions which could result in higher than expected discounting required to
achieve targeted market share.
IDT Annual Report 2018 23
Notes to and Forming Part of the Financial Statements continued
At any time should the estimated value of future economic benefits relative to the asset’s carrying value be considered
insufficient relative to net book value, the Company would recognise impairment in accordance with AASB 136
Impairment of Assets.
1.8
Rounding of Amounts
The company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191 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.
1.9
Application of New and revised Accounting Standards
In the current year, the Company has adopted all the new and revised Standards and Interpretations issued by the
Australian Accounting Standards Board (AASB) that are relevant to its operations and are effective for the current
reporting period. The adoption of these new and revised standards has resulted in no significant changes to the
Company’s accounting policies.
The following relevant standards were available for early adoption, but not applied by the Company:
•
•
AASB 9 Financial Instruments – applies for annual periods beginning on or after 1 January 2018 and brings together
the classification and measurement, impairment and hedge accounting to replace AASB 139 Financial Instruments:
Recognition and Measurement.
The Company does not expect there to be any material impact from the application of these new and revised
accounting standards.
AASB 15 Revenue from Contracts with Customers, applies for annual periods beginning on or after 1 January 2018
for entities to use in accounting for revenue arising from contracts with customers. The core principle is that an
entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that
reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
Sales revenue is currently recognised with reference to stage of completion of fee for service projects and is
deferred with reference to the completion of key milestones. The Company does not expect the adoption of
AASB 15 to have a material impact on how sales revenue is recognised.
•
AASB 16 Leases, the new Standard applies for annual periods commencing from 1 January 2019 and provides a
comprehensive model for the identification of lease arrangements and their treatment in the financial statements of
both lessees and lessors.
The new Standard introduces three main changes:
•
•
Enhanced guidance on identifying whether a contract contains a lease;
A new leases accounting model for lessees that require lessees to recognise all leases on balance sheet,
except for short-term leases and leases of low value assets; and
•
Enhanced disclosures.
Management are in the process of determining the potential impact of this new standard.
24 IDT Annual Report 2018
2
REVENUE
Sales revenue
Other revenue
- Management Fee received from Related Party
- Dividend
- Interest
Total revenue
Key Accounting Policies
2018
$000
12,892
75
162
171
2017
$000
9,295
162
-
86
13,300
9,543
Revenue is measured at the 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. Revenue from a contract to provide services is recognised in accordance with the stage of completion of the
contract which is determined with reference to completion of key project milestones within the total contract 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.
The Company is contractually entitled to receive profit share revenues from distribution partners in relation to its generic products.
Profit shares are calculated by the distribution partner and remitted to the Company after the close of each quarter. Revenue
has been recognised where our distribution partner has calculated and advised this value for the reporting period.
3
EXPENSES
Loss from ordinary activities before income tax expense includes the following expenses:
Cost of goods sold
Depreciation of property, plant and equipment
Amortisation
– Finance leases capitalised
– Development costs
Repairs and maintenance
Impairment of intangible assets
Net foreign currency loss
3,826
2,086
153
386
859
14,144
99
1,953
1,991
41
131
1,024
7,622
79
IDT Annual Report 2018 25
Notes to and Forming Part of the Financial Statements continued
4
INCOME TAX
(a) Income Tax Benefit
Current tax
Deferred tax
(Under) / over recognised current tax asset in prior period
(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 expenses
Research and development tax concessions
Employee share issue
Impairment losses
(Under) / over recognised Current tax asset in prior period
Deferred tax losses (not) brought to account
Utilisation of prior year losses not brought to account
Income tax expense/(benefit) attributable to operating loss
Key Accounting Policies
2018
$000
(396)
370
(1,048)
(1,074)
(18,575)
(5,573)
112
396
49
4,243
(772)
(1,048)
224
-
(1,596)
2017
$000
(2,208)
362
(36)
(1,862)
(1,116)
(335)
182
405
132
2,287
2,671
(36)
(746)
(2,232)
(343)
The income tax expense or benefit for the period is the tax payable/receivable on the current period’s taxable income/(loss) 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.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
The Company incurs eligible expenditure which supports a R&D Tax Incentive Claim, refundable by the Australian Government at
43.5% for entities with a tax loss and revenues less than $20 million. There are no unfulfilled conditions or other contingencies in
relation to this incentive. This receivable balance is accounted for as a current tax asset and income tax expense / (benefit).
26 IDT Annual Report 2018
5
CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Key Accounting Policies
2018
$000
14,027
2017
$000
8,417
For purposes of the statement of cashflows, cash and cash equivalents include bank deposits which are readily convertible to
cash on hand and which are used in the cash management function on a day-to-day basis.
6
CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for doubtful debts
Accrued revenue
Other receivables
Prepayments
2,490
-
2,490
-
44
940
1,115
-
1,115
529
-
644
3,474
2,288
The average collection period for invoices is 30-60 days from invoice date and interest is not charged on overdue balances.
Age of receivables which are past due, but not impaired
30-60 days
60-90 days
90+ days
Key Accounting Policies
-
-
21
21
484
-
30
514
Trade receivables represent amounts receivable relating to the provision of goods and services pursuant to a valid purchase
order or contract for product or services. Receivables are recognised at the full value receivable and do not require re-
measurement because they are due for settlement within 60 days of invoice date.
Accrued revenue reflects progress completion and work performed but not yet invoiced on client projects.
After initial measurement, the 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. The Company
does not have a history of collection delays, defaulted balances or client dispute and accordingly does not consider a provision
for doubtful debts is necessary currently.
IDT Annual Report 2018 27
Notes to and Forming Part of the Financial Statements continued
7
CURRENT ASSET - CURRENT TAX ASSET
Income tax receivable
Key Accounting Policies
2018
$000
396
2017
$000
2,208
The Company incurs eligible expenditure to support a R&D Tax Incentive Claim. The estimated amount of claim is recognised as
a current tax asset and income tax expense / (benefit) in the year that the R&D was incurred.
8
CURRENT ASSETS – INVENTORIES
Raw materials - at cost
Less: Provision for stock obsolescence
Work in Progress
Key Accounting Policies
958
(150)
247
1,055
301
(50)
82
333
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.
Subsequent to initial measurement, balances held in inventory are reviewed at least annually and a provision raised where future
use is no longer considered probable, principally due to reasons of obsolescence or product dating.
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
28 IDT Annual Report 2018
4,380
5,255
(43)
9,592
40,817
(32,533)
313
8,597
762
(241)
521
4,380
4,942
(125)
9,197
38,956
(30,809)
1,507
9,654
766
(92)
674
9,118
10,328
18,709
19,525
Reconciliation 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.
2018
Freehold
Land
$000
Buildings
$000
Plant &
Equipment
$000
Leased Plant
& Equipment
$000
Total
$000
Carrying amount at start of year
4,380
4,817
9,654
674
19,525
Revaluation
Additions
Disposals
Depreciation expense
-
-
-
-
Carrying amount at end of year
4,380
2017
506
15
-
(126)
5,212
-
903
-
(1,960)
8,597
-
-
-
(153)
521
Freehold
Land
$000
Buildings
$000
Plant &
Equipment
$000
Leased Plant
& Equipment
$000
Carrying amount at start of year
4,380
4,936
12,827
Revaluation
Additions
Disposals (*)
Depreciation expense
-
-
-
-
Carrying amount at end of year
4,380
*CMAX disposal
Key Accounting Policies
-
22
(16)
(125)
4,817
-
1,088
(2,263)
(1,998)
9,654
61
-
656
-
(43)
674
506
918
-
(2,239)
18,709
Total
$000
22,204
-
1,766
(2,279)
(2,166)
19,525
Freehold land and buildings are shown at revalued amounts being the fair value (level 3) at date of revaluation less subsequent
depreciation for buildings. The most recent fair value measurement by independent valuers was 19 February 2018. The valuation
conforms to Australian Valuation Standards and was calculated based on the fair value of the land and depreciated replacement cost of
the buildings. As revaluations are performed regularly, carrying amounts do not differ materially from those that would be determined
using fair values at the end of each reporting period.
The revaluation increase arising on the revaluation of land and buildings is 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 to be recognised in profit or loss.
Plant and equipment are measured at cost less accumulated depreciation and any impairment adjustments which may have been
identified. The cost of non-current assets constructed or developed 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
•
•
Plant & Equipment
Leased Plant & Equipment
40 years
3-15 years
3-15 years
IDT Annual Report 2018 29
Notes to and Forming Part of the Financial Statements continued
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets.
Estimated useful lives, residual values and depreciation methods 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.
Impairment of property plant and equipment
Carrying amounts are reviewed at least annually or whenever there is an indicator the asset’s fair value may be impaired. In assessing
the asset’s fair value, future cashflows are estimated and discounted to their present value using a post-tax discount rate reflecting
current market estimates of the time value of money and risks specific to the asset tested. If this calculated recoverable amount is less
than the carrying amount, an impairment loss would be recognised immediately.
The Company has prepared fair value less cost to dispose models (level 3) for the purpose of impairment testing as at 30 June 2018,
using a discounted cash flow model based on the five-year forecast. Future cash flows were discounted at an after-tax rate of 15%.
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
Divested 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
Key Accounting Policies
a)
Intangible Assets acquired separately
2018
$000
-
1,701
(450)
1,251
2017
$000
12,324
7,986
(1,125)
19,185
19,185
21,137
-
(4,844)
1,440
(386)
(14,144)
1,251
-
-
5,801
(131)
(7,622)
19,185
Intangible assets that are acquired separately are carried at cost less accumulated amortisation and any applicable impairment
loss.
Amortisation of separately acquired assets will commence once development activities are completed and 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.
All acquired Intangible Assets were divested on 3 April 2018.
30 IDT Annual Report 2018
b)
Internally generated Intangible Assets
Research expenditure is recognised as an expense as incurred.
An internally generated intangible asset arising from development is recognised as a non- current asset 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
the intangible asset will generate probable future economic benefits for the Company
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 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 all of these criteria
are recognised in profit or loss in the period in which incurred.
Development costs previously recognised as an expense may not be 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. 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.
c)
Impairment of intangible assets
Carrying amounts are reviewed at least annually or whenever there is an indicator the asset’s fair value may be impaired. In
assessing the asset’s fair value, future cashflows are estimated and discounted to their present value using a post-tax discount
rate reflecting current market estimates of the time value of money and risks specific to the asset tested. If this calculated
recoverable amount is less than the carrying amount, an impairment loss would be recognised immediately.
Further to the impairment recognised as at 30 June 2017, market conditions and expectations were further considered as at
31 December 2017 where it was identified the rate of increase of generic price discounting in the U.S. had exceeded previous
expectations.
Furthermore, as reported as at 31 December 2017:
•
•
Prazosin – launch date was delayed and third-party manufacturing costs were higher than expected
Pindolol – our distributor’s market share and pricing expectations had been impacted by recent tender results
• Mexilitine and Flecainide no longer had reasonably certain commercialisation paths and therefore their carrying value
could no longer be supported.
Consequently, carrying values were formally reconsidered as at 31 December 2017 and an impairment of $14.144 million
reported (2017: $7.622 million). In performing this review, a range of scenarios were contemplated including likely and more
aggressive pricing and cost of manufacture assumptions and a valuation at the more conservative end of the range selected.
d) Divestment
On 3 April 2018, the acquired intangible assets, subject to impairment adjustments as at 30 June 2017 and again on 31
December 2017 were divested to ANI Pharmaceuticals Inc for consideration of USD 2.7 million, returning a profit on disposal
of $0.05 million.
The Company retains Temozolomide and has other selected niche generic products currently under development.
IDT Annual Report 2018 31
Notes to and Forming Part of the Financial Statements continued
11
NON-CURRENT ASSETS - DEFERRED TAX ASSET / (LIABILITY)
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 expense
Current year increase/(decrease not recognised
Closing balance at 30 June
Deferred tax assets
The balance comprises temporary differences attributable to:
Employee entitlements, accruals and other
Tax losses
Movements
Opening balance at 1 July
Increase/(reduction) current tax expense
Charged/(credited) to equity
Closing balance at 30 June
Net deferred 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
32 IDT Annual Report 2018
2018
$000
2,173
2017
$000
2,889
1,635
2,493
152
11
375
2,173
2,889
1,596
(2,312)
2,173
2,173
309
1,864
2,173
2,889
(564)
(152)
2,173
-
2,173
2,173
2,173
2,173
-
-
396
2,889
2,982
343
(436)
2,889
2,889
414
2,475
2,889
2,982
(93)
-
2,889
-
2,889
2,889
-
2,889
2,889
Key Accounting Policies
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets
are recovered or liabilities settled. 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 will only be recognised for deductible temporary differences and unused tax losses if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses. In addition to the above deferred tax
assets recognised, the Company has further unrecognised tax losses relating to prior period tax losses.
As at 30 June 2018 the Company has gross carried forward tax losses amounting to $14.4m (2017: $14.2m) and a further
$12.3m (2017: nil) capital losses which have not been recognised as assets in these financial statements.
12
CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Trade payables
Other payables
Total trade and other payables
13
BORROWINGS
Current
Lease liabilities (note 21)
Total current borrowings
Non Current
Lease liabilities (note 21)
Total non current borrowings
2018
$000
576
3,162
3,738
129
129
413
413
2017
$000
683
3,536
4,219
122
122
542
542
IDT Annual Report 2018 33
Notes to and Forming Part of the Financial Statements continued
14
UNEARNED REVENUE
Current
Client prepayments
Contractual milestones received
Total current unearned revenue
Non Current
Contractual milestones received
Key Accounting Policies
2018
$000
2017
$000
106
138
244
550
155
705
982
2,622
Revenue from a client contract to provide services is recognised with reference to stage of completion of the contract. In some
cases the client may pay for such services before the work is conducted and this revenue is deferred until earned.
Contractual milestones have been received in accordance with the Company’s long-term distribution agreements. As such
milestones relate to the performance of the contract, revenue is recognised over the term of the distribution contract.
15
PROVISIONS
Current
Employee entitlements
Non Current
Employee entitlements
Key Accounting Policies
714
840
236
147
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.
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 employee benefits are classified as current liabilities and 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 classified as non-current liabilities and 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.
34 IDT Annual Report 2018
16
CONTRIBUTED EQUITY
2018
Shares
2017
Shares
2018
$000
2017
$000
Paid up capital - Ordinary shares, fully paid
244,446,732
248,161,716
52,833
52,833
Movements in ordinary share capital of the company during the past two years were as follows:
Date
1 July 2016
6 July 2016
Details
Opening balance
Sophisticated Placement
3 August 2016
Employee share plan issue
21 September 2016
Employee share plan issue
21 September 2016
Forfeited employee shares
20 October 2016
Employee share plan issue
23 February 2016
Forfeited employee shares
13 June 2016
Forfeited employee shares
No. of Shares
219,355,298
27,727,300
208,300
1,350,254
(443,108)
235,859
(198,113)
(74,074)
$000
46,961
5,872
-
-
-
-
-
-
30 June 2017
248,161,716
52,833
1 November 2017
Employee share plan issue
21 November 2017
Employee share plan issue
17 January 2018
Employee share plan issue
17 January 2018
Forfeited employee shares
5 March 2018
Employee share plan issue
25 June 2018
Forfeited employee shares
1,275,044
618,750
255,078
(5,430,092)
276,942
(690,706)
-
-
-
-
-
-
30 June 2018
244,466,732
52,833
During the year 2,425,814 (2017: 1,794,413) ordinary shares were issued within the rules of the IDT Australia Limited Employee
Share Plan. 2,520,798 (2017: 715,295) shares were forfeited due to former employees electing not to repay the interest free
limited recourse loan within 90 days of cessation of employment. A further 3,600,000 shares issued to the former Managing
Director were forfeited during the period.
17
RESERVES
Share-based payments reserve
Asset revaluation reserve
2018
$000
3,101
2,163
5,264
2017
$000
2,938
1,809
4,747
The asset revaluation reserve is used to recognise fair value movements in respect of land and buildings owned by the
Company valued by an independent third party valuer.
IDT Annual Report 2018 35
Notes to and Forming Part of the Financial Statements continued
18
ACCUMULATED LOSSES
Accumulated losses at the beginning of the financial year
Net loss attributable to members of IDT Australia Limited
Accumulated losses at the end of the financial year
19
DIVESTMENT OF CMAX
2018
$000
(8,662)
(16,979)
(25,641)
2017
$000
(7,889)
(773)
(8,662)
On 28 October 2016, the Company announced that I’rom Group Co., Ltd. would acquire the CMAX Clinical Research Pty Ltd
(CCR). I’rom acquired the first 61% on 15 December 2016 for $10,000,000 cash consideration. The transaction was
concluded on 23 August 2017 with consideration of $6,159,892 received for the final 39% of shares. A dividend of $162,054
has been received by IDT in FY18 relating to the share of profits for the period of partial ownership.
The reported profit from the CMAX discontinued operation is as follows:
Revenue
Expenses
Profit before tax
Gain on disposal including selling cost
Profit for the year from discontinued operation
Asset classified as held for sale
Dividend income received
Period to
15 December
2016
$000
5,974
5,961
12
13,718
13,730
2017
$000
6,159
-
2018
$000
-
162
36 IDT Annual Report 2018
20
FINANCING ARRANGEMENTS
Bank overdraft
Commercial loan
Lease liabilities (refer note 21)
Total secured liabilities (current and non current)
2018
$000
-
-
542
542
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
- Bank Guarantee to CMAX Clinical Research Pty Ltd (1)
- Credit Card Facility
Used at balance date
- Bank Overdraft
- Lease Facility
- Flexible Rate Commercial Loan
-Bank Guarantee to CMAX Clinical Research Pty Ltd Ltd (1)
- Credit Card Facility
(1) Bank Guarantee cancelled on completion of the CMAX divestment
Available at balance date
- Bank Overdraft
- Lease Facility
- Flexible Rate Commercial Loan
- Credit Card Facility
1,000
800
1,500
-
100
-
542
-
-
32
1,000
272
1,500
68
2017
$000
-
-
664
664
1,000
800
1,500
585
100
-
664
-
585
36
1,000
136
1,500
64
IDT Annual Report 2018 37
Notes to and Forming Part of the Financial Statements continued
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
21
COMMITMENTS 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
2018
$000
9,592
521
10,113
155
447
602
60
542
-
-
-
-
2017
$000
9,197
674
9,861
155
602
757
93
664
-
-
-
-
(c) Capital Commitments
The Company has nil commitments for future capital expenditure outstanding as at 30 June 2018 (2017: nil).
Key Accounting Policies
Leases of property, plant and equipment where the Company has substantially all the risks and rewards of ownership are
classified as finance leases. 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. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of
the lease.
38 IDT Annual Report 2018
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 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
liquidity risk
c)
a) Market risk
2018
$000
2017
$000
111,500
116,900
-
-
111,500
116,900
In order to minimise the impact of currency fluctuation it is Company policy to transact in Australian dollars wherever
possible. From time to time the Company also transacts in foreign currencies, particularly Euro and US dollars, which can
give rise to foreign exchange risk as exchange rates fluctuate.
Where material foreign currency denominated transactions have been identified, the Company manages exchange rate
exposure through the use of forward exchange contracts designated as cash flow hedges. The Company does not enter
into or trade financial instruments for speculative purposes. No hedges were in place at reporting date.
At balance date the Company has $14.027 million Cash Reserves held in its operating bank account and short term bank
deposits. Forward cashflow forecasts do not project use of the bank debt facilities. Therefore other than finance leases
already in place the company does not forsee any increased borrowings or consequentially a material sensitivity from
interest rates.
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.
Customer credit worthiness is reviewed on an ongoing basis and exposure to any one customer is monitored. Collectability
of debts is regularly reviewed and assessed and a Provision would be raised if there was any evidence the Company could
not collect the Debt.
The Company does not have a history of defaulted balances nor does it carry a material level of overdue debtor balances.
c) Liquidity risk
Liquidity risk arises from the financial liabilities of the Company and is the risk that the company is not able to pay its financial
liabilities as when they fall due. 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 and scenario analysis. The Company manages liquidity risk by
maintaining cash reserves and reserve borrowing facilities.
Rolling 18 month cashflow forecasts are prepared each month. Strategic planning also includes liquidity considerations
and based on current strategies, no funding shortfalls have been identified.
In addition to funds on deposit, the Company currently has available banking facilities of $2.5 million.
IDT Annual Report 2018 39
Notes to and Forming Part of the Financial Statements continued
The Company holds the following financial instruments:
Liquid Financial Assets
Cash and cash equivalents
Trade receivables and other
Total financial assets
Financial Liabilities
Trade and other payables
Borrowings, current and non current
Total financial liabilities
Net financial position
2018
$000
2017
$000
14,027
3,474
17,501
3,738
542
4,280
8,417
8,447
16,864
4,219
664
4,883
13,221
11,981
24
SHARE BASED PAYMENTS
The Employee Share Plan (ESP) was approved at the Annual General Meeting held on 18 November 2016.
During the year ended 30 June 2018, the Company issued 2,425,814 ordinary shares under the rules of the IDT Australia
Limited ESP (2017: 1,794,413).
Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit
expenses were as follows:
Value of shares issued under employee share plan
Movement in number of shares issued under employee share plan:
Opening balance
Employee share plan granted during the year
Forfeited during the year
Closing balance
2018
$000
163
2017
$000
277
2018
Shares
2017
Shares
4,886,422
3,807,304
2,425,814
1,794,413
(2,520,798)
(715,295)
4,791,438
4,886,422
40 IDT Annual Report 2018
Key Accounting Policies
Executive managers and Directors may be offered shares in the Company at the current market value at the date of issue,
funded by an interest free limited recourse loan from the Company. Grants within the framework of the ESP are determined by
the CEO together with the Remuneration and Nomination Committee and are subject to approval by the Board. To the extent
shares are offered to Directors such issues must also be approved as a resolution at a General Meeting of shareholders.
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.
The ESP provides an annual value of up to $1,000 of shares may be issued to eligible employees for no consideration. The
value of shares issued is recognised in the income statement as employee benefit costs at the time the shares are granted.
Such shares may not be sold until the earlier of three years after issue or cessation of employment with the Company.
In all other respects ESP shares rank equally with other fully-paid ordinary shares on issue.
25
KEY MANAGEMENT PERSONNEL DISCLOSURES
The following persons were Directors of IDT Australia Limited during the financial year:
Executive Director
Paul MacLeman, Managing Director until 14 July 2017
Non Executive Directors
Alan Fisher, Chair
Hugh Burrill
Graeme Kaufman
Mary Sontrop
Reo Shigeno, until 31 March 2018
Mr Kaufman and Ms Sontrop assumed Executive roles for the period 14 July 2017 through to 20 February 2018 and
consequently they are not considered to be Independent Directors for a period of 3 years after ceasing these temporary
Executive roles.
Mr Fisher and Mr Burrill are Independent Directors.
Key Management Personnel
The following persons have authority and responsibility for planning, directing and controlling the activities of the Company,
directly or indirectly, during the financial year:
Michelle Coffey
Joanna Johnson
Danielle Savaglio
Jim Sosic
David Sparling
Vice President Quality and Regulatory
Chief Financial Officer, Joint Company Secretary
Vice President People and Change
Vice President Operations, Supply and Infrastructure
Chief Executive Officer, Joint Company Secretary
Directors and Key Management Personnel Compensation
Short term employee benefits
Post-employment benefits
Long term benefits
Share based payments
2018
$000
2017
$000
1,434,406
1,250,707
120,409
18,515
62,883
83,507
32,645
174,331
1,636,213
1,541,190
IDT Annual Report 2018 41
Notes to and Forming Part of the Financial Statements continued
26
RELATED PARTY TRANSACTIONS
Transactions of Directors and Key Management Personnel Concerning Shares
Aggregate numbers of shares acquired and disposed of by Directors or Key Management Personnel were as follows:
Ordinary shares issued to KMP
Ordinary shares forfeited by KMPs
Ordinary shares acquired
2018
Shares
2017
Shares
1,271,423
513,967
3,960,000
-
-
395,000
Other than shares issued as described in Note 24, the terms and conditions of other 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 KMP holding office at
balance date were as follows:
Ordinary shares
2018
2017
3,856,147
6,690,419
There were no other transactions between the Company and Directors and Key Management Personnel in 2018 (2017: nil).
Transactions associated with CMAX Clinical Research Pty Ltd
For the period to 23 August 2017 the Company retained a 39% ownership interest in CMAX Clinical Research Pty Ltd (CCR).
$6,159,892 was received for divestment of the remaining shares.
During the reporting period the Company continued to provide ongoing operational support for which it earned a Management Fee of
$75,000 (2017: $162,500) and received a dividend of $162,054 (2017: nil).
To support CCR’s initial working capital and overdraft the Company provided a bank guarantee of $585,000 which was withdrawn when
the remaining 39% shares were divested.
In addition to this operational and financial support, David Sparling remained a Director of CCR until 15 May 2018 and received Directors
Fees, including statutory superannuation of $11,563 (2017: $7,119).
42 IDT Annual Report 2018
27
RECONCILIATION OF NET CASH INFLOW FROM OPERATING
ACTIVITIES TO OPERATING LOSS AFTER INCOME TAX
Net cash inflow /(outflow) from operating activities
Depreciation and amortisation
Profit on divestment - CMAX
Profit on Divestment – ANDA’s
Non-cash share based payment
Impairment of intangible assets
Change in operating assets and liabilities:
Increase/(decrease) in receivables
Increase/(decrease) in inventories
Increase/(decrease) in current tax asset
(Increase)/Decrease in payables
Increase in other provisions
Increase/(decrease) in unearned revenue
Operating loss after income tax
28
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
2018
$000
(1,627)
(2,625)
-
55
(163)
(14,144)
888
722
(1,812)
874
36
818
(16,979)
2018
(6.9¢)
(6.9¢)
2017
$000
2,019
(2,163)
13,718
-
(443)
(7,622)
(4,298)
(863)
441
(1,280)
394
(677)
(773)
2017
(0.3¢)
(0.3¢)
Weighted average number of ordinary shares on issue during the year used to
calculate basic earnings per share
247,829,659
247,607,128
Weighted average number of ordinary shares on issue during the year used to
calculate diluted earnings per share
247,829,659
247,607,128
$000
$000
Basic Earnings per share
Loss attributable to ordinary equity holders used in calculating basic earnings per share
(16,979)
(773)
Diluted earnings per share
Loss attributable to ordinary equity holders used in calculating diluted earnings per share
(16,979)
(773)
Key Accounting Policies
(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.
IDT Annual Report 2018 43
Notes to and Forming Part of the Financial Statements continued
29
EVENTS AFTER THE REPORTING PERIOD
David Sparling was appointed Interim CEO on 16 February 2018 and following consideration of his performance he was formally
appointed to that role on 2 July 2018.
On 25 July 2018, commercial loan and overdraft facilities with the National Australia Bank totalling $2.5 million were renewed
through to 31 July 2019.
On 7 August 2018 it was announced that IDT has entered into a contract with Cann Group Limited to provide manufacturing
support in relation to medicinal cannabis-based products intended for supply to patients in Australia and overseas.
Other than the above, no matters or circumstances have arisen since the end of the financial year which significantly affect, or
may significantly affect the results of the operations of the Company.
30
CONTINGENT ASSETS AND CONTINGENT LIABILITIES
The Company has no contingent assets or liabilities to disclose at the date of this report.
44 IDT Annual Report 2018
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 18 to 44 are in accordance with the Corporations Act 2001, including:
complying with Accounting Standards, the Corporations Act 2001 and other mandatory professional reporting
(i)
requirements; and
giving a true and fair view of the Company’s financial position as at 30 June 2018 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
(ii)
(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
Alan Fisher
Chairman
Melbourne
21 August 2018
IDT Annual Report 2018 45
Independent Audit Report to the Members
Deloitte Touche Tohmatsu
ABN 74 490 121 060
550 Bourke Street
Melbourne VIC 3000
GPO Box 78
Melbourne VIC 3001 Australia
Tel: +61 (0) 3 9671 7000
Fax: +61 (0) 3 9671 7001
www.deloitte.com.au
Independent Auditor’s Report to the
members of IDT Australia Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of IDT Australia Limited (the “Company”), which comprises the statement
of financial position as at 30 June 2018, the statement of profit or loss and other comprehensive income, the
statement of changes in equity and the statement of cash flows for the year then ended, and notes to the
financial statements, including a summary of significant accounting policies, and the directors’ declaration.
In our opinion the accompanying financial report of the Company, 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 2018 and of its financial
performance for the year
then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Company in accordance with the auditor independence requirements of
the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards
Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit
of the financial report of the current period. These matters were addressed in the context of our audit of the
financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Liability limited by a scheme approved under Professional Standards Legislation 35.
Member of Deloitte Touche Tohmatsu Limited
46 IDT Annual Report 2018
Key Audit Matter
HOW THE SCOPE OF OUR AUDIT RESPONDED
TO THE KEY AUDIT MATTER
Carrying Value of non-current assets
Refer Note 9 Property, plant and equipment, 10 Intangible assets and 1.7 Critical accounting estimates
and judgements
As disclosed in Note 10, the Company held
property, plant and equipment of $18,709
thousand and intangible assets of $1,251 thousand
at 30 June 2018 and has recognised an impairment
expense of $14,144 thousand during the financial
year.
The assessment of the recoverable amount of non
current assets requires management to exercise
significant judgement in identifying indicators of
impairment and, where an impairment model is
required, setting assumptions such as future sales
prices, future exchange rates, and estimating the
timing of future regulatory approvals for
proprietary drugs and discount rate.
Our procedures included, but were not limited to:
• Assessing the existence of indicators of
impairment,
• Obtaining an understanding of the
process undertaken by management to
prepare fair value less costs to dispose
models,
•
• Agreeing as appropriate the inputs in the
model to board approved forecasts,
In conjunction with our valuation
specialists:
o assessing the appropriateness of the
model used by management to
calculate the recoverable amounts of
the assets,
o assessing and challenging the key
assumptions in the model as follows:
-
future sales prices by comparing to
distribution agreements and
related correspondence, historical
results and industry data,
future exchange rates by
comparing to market expectations,
and
-
- discount rate by comparing with an
independently developed rate.
• Assessing the historical accuracy of the
Company’s forecasts,
• Performing sensitivity analysis on the
impairment model using varied discount
rates and growth projections to simulate
alternative market conditions and
outcomes; and
• Assessing the appropriateness of the
disclosures to the financial statements.
IDT Annual Report 2018 47
Independent Audit Report to the Members continued
Other Information
The directors are responsible for the other information. The other information comprises the information
included in the Company’s annual report for the year ended 30 June 2018, but does not include the financial
report and our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial report or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information;
we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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.
In preparing the financial report, the directors are responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the Company or to cease operations, or have
no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify
our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Company’s to cease to continue as a
going concern.
48 IDT Annual Report 2018
• Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in
a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify
during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the financial report of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10-15 of the Directors’ Report for the year ended
30 June 2018.
In our opinion, the Remuneration Report of IDT Australia Limited, for the year ended 30 June 2018, complies
with section 300A of the Corporations Act 2001.
Responsibilities
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.
DELOITTE TOUCHE TOHMATSU
Anneke Du Toit
Partner
Chartered Accountants
IDT Annual Report 2018 49
Shareholder Information
The shareholder information set out below was applicable as at 8 August 2018
A
DISTRIBUTION OF EQUITY SECURITIES
Analysis of numbers of equity security holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001+
B
TWENTY LARGEST INDIVIDUAL SHAREHOLDERS
The names of the twenty largest individual holders of ordinary shares are listed below:
1
2
3
4
UBS NOMINEES PTY LTD
I'ROM GROUP CO LTD
CVC LIMITED
BRISPOT NOMINEES PTY LTD
5 ONE MANAGED INVT FUNDS LTD
6
CITICORP NOMINEES PTY LIMITED
7 MUTUAL TRUST PTY LTD
8
NATIONAL NOMINEES LIMITED
9 GRAEME LESLIE BLACKMAN
10 CS FOURTH NOMINEES PTY LIMITED
11 BELGRAVIA STRATEGIC EQUITIES PTY LTD
12 PAULENE BLACKMAN
13 RACT SUPER PTY LTD
14 MR ORLANDO BERARDINO DI IULIO & MS CATHARINA MARIA KOOPMAN
15 MR ANTHONY HUNTLEY
16 J P MORGAN NOMINEES AUSTRALIA LIMITED
17 CS THIRD NOMINEES PTY LIMITED
18 KEYGROWTH PTY LTD
19 MR ANTHONY JOHN HUNTLEY
20 MR ALISTAIR DAVID STRONG
50 IDT Annual Report 2018
Holders
2018
Holders
2017
458
513
210
562
212
466
561
240
709
283
1,955
2,259
Number Held
Percentage of
Issued Shares
32,364,372
15,793,001
15,327,909
11,671,173
10,920,606
10,813,196
8,014,226
7,274,409
7,029,710
6,370,615
4,499,791
4,457,737
3,750,000
3,100,000
2,721,401
2,611,923
2,520,000
2,332,116
2,250,000
2,000,000
13.24
6.46
6.27
4.77
4.47
4.42
3.28
2.98
2.88
2.61
1.84
1.82
1.53
1.27
1.11
1.07
1.03
0.95
0.92
0.82
157,822,185
64.58%
C
SUBSTANTIAL HOLDERS
The following parties have declared a relevant interest in the number of ordinary shares at the date of giving the notice under
Part 6C.1 of the Corporations Act.
Regal Funds Management Pty Ltd
Sandon Capital Pty Ltd
I'ROM GROUP CO LIMITED
CVC Limited
D
VOTING RIGHTS
Number Held
24,749,237
16,102,505
15,793,001
15,320,012
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.
IDT Annual Report 2018 51
IDT Australia Limited
45 Wadhurst Drive, Boronia Victoria 3155 Australia
www.idtaus.com.au
ABN 66 006 522 970