Annual Report
2017
About Us
Contents
Our Locations
The focus and
ethos of providing
the highest
quality diagnostic
imaging services,
trusted by
referers, and
preferred by
patients, is
unwavering.
Chairman’s Report
Managing Director and Chief Executive
Officer’s Report
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Operating and Financial Review
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
2
4
6
14
22
23
31
Consolidated Statement of Financial Position 32
Consolidated Statement of Changes in Equity
33
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
Corporate Directory
34
35
67
68
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75
Victoria
• Ballarat (4 sites)
• Geelong (7 sites)
Queensland
• Gold Coast (10 sites)
• Mackay (1 site)
• Melbourne metropolitan (1 site)
• Toowoomba (1 site)
• Outer western areas of
Melbourne (10 sites)
• Warrnambool (1 site)
Western Australia
• South west Western Australia (9 sites)
Integral Diagnostics Limited ABN 55 130 832 816
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Annual Report 2017Integral Diagnostics Chairman’s Report
Dear shareholders,
On behalf of the Board, I present the 2017 Annual Report
for Integral Diagnostics Limited.
The performance of the Company over the 12 months ended
30 June 2017 (FY17) was within market guidance provided
at the half year, but was below the Board and management’s
expectations. Whilst revenue grew 7.1%, cost growth was
higher, leading to a $1.5 million decline (9.3%) in underlying
NPAT performance compared to FY16.
Dr Ian Kadish, an experienced CEO, has been recruited
to lead the Company in its strategy execution and improve
financial returns given the strength and opportunities
of the Integral Diagnostics business.
Throughout the Company, the focus and ethos of providing
the highest quality diagnostic imaging services, trusted by
referrers and preferred by patients, is unwavering. This
was evident during the many site visits undertaken by
Board members across all three States we operate in.
FY17 results
Revenue was up 7.1% to $179.7 million, reflecting a full
year of South West MRI Pty Ltd/Western District Radiology,
which was successfully acquired on 1 July 2016 and
integrated into the Group, and organic growth across
all business units.
Underlying examination volume growth was 4.6%. This was
below our expectations and slightly below Medicare data
of 5.1% in the States in which we operated, with volatility
across the year reflecting wider industry and competitive
dynamics in our key regions. Ensuring Integral Diagnostics
maintains and grows its historical share of industry growth
is a key focus for FY18.
The Company incurred expenditure growth of $13.5 million,
resulting in an overall underlying NPAT performance of
$15.1 million, which was $1.5 million below FY16. The
Company has the capacity and infrastructure in place to
support an increased volume of diagnostic imaging services
and will focus on disciplined cost management
with its new leadership to improve earnings.
Integral Diagnostics has net debt of $48.7 million and
comfortable gearing at 1.4x net debt to EBITDA. The Company
has the capital structure in place to support its growth strategy
and pursue attractive value accretive acquisitions.
Reflecting the Company’s strong balance sheet, financial
performance and outlook, your Board was pleased to
announce a fully franked final FY17 dividend of 4.0 cents
per share, taking the full year FY17 dividend to 7.0 cents
per share fully franked, in line with a payout ratio of
65-75% of net profit after tax and amortisation.
Smooth transition to fresh leadership
After completing a thorough search process, the Board
appointed Dr Ian Kadish as CEO and Managing Director,
effective 22 May 2017. With substantial healthcare and
listed company experience in Australia and overseas,
Ian brings an important mix of medical training, broad
international exposure, and strong finance, IT and M&A
experience in high-growth organisations.
The CEO transition was smooth, with John Livingston
resigning as CEO for personal health reasons. John was
the co-founder of Lake Imaging in 2002, and the entire
Board, management and team at Integral Diagnostics wish
John all the best in his recovery and future endeavours.
Revenue was up 7.1% to $179.7 million, reflecting a full
year of South West MRI Pty Ltd/Western District Radiology,
which was successfully acquired on 1 July 2016 and integrated
into the Group, and organic growth across all business units.
Craig Bremner resigned as Chief Financial Officer effective
31 August 2017 after 12 years with the Company. The
transition to Anne Lockwood, the Company’s Financial
Controller and former partner of a major accounting
firm, appointed as Interim CFO is well underway.
Garry Hounsell resigned as a Non-Executive Director on
31 March 2017 given the time commitments required for
another significant listed Chair role. As a result, Rupert
Harrington, who was a member of the Audit and Risk
Committee, was appointed Chair of that Committee.
Positioned to capitalise on attractive long-term
industry fundamentals
The regulatory environment is now clearer following the
Federal Government’s decision in May 2017 not to remove
bulk billing incentives for diagnostic imaging. In addition,
the Federal Government has committed to reintroducing
MBS rebate indexation for a small number of diagnostic
imaging services from July 2020. The diagnostic imaging
sector has operated with an MBS rebate freeze for nearly
two decades. We support the campaign to improve
affordability of all diagnostic services by reintroducing
indexation for all items in line with the reintroduction
of GP indexation from 2018.
The long-term industry fundamentals remain, and underpin
attractive future growth opportunities for Integral Diagnostics,
which we are well positioned to capitalise on. Australia has
a growing and ageing population requiring greater healthcare
support. At the same time, community expectations for
higher quality healthcare and diagnosis continue to rise,
while new imaging technologies improve efficiency and aid
diagnosis and early recognition of disease.
The support of our shareholders and their involvement in
our Company is greatly valued by the Board and we thank you
and encourage your continued participation. Special thanks
to the exceptional radiologists, imaging and support staff of
Integral Diagnostics who contribute to patient diagnosis and
treatment, critical in patient healthcare.
Helen Kurincic
Chairman
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Managing Director and Chief Executive Officer’s Report
Dear shareholders,
I am honoured to be writing to you as the Company’s
recently appointed CEO and Managing Director. I am
excited to lead Integral Diagnostics as we execute on
our development and growth strategy. Integral Diagnostics
is uniquely positioned as a focused diagnostic imaging
company that is 30% owned by its radiologists, is passionate
about quality care and clinical leadership, and is a market
leader in the regions in which it operates.
While I have been a part of Integral Diagnostics for only
a few months, it quickly became clear to me that our
radiologist team is among the finest in the country. Our
radiologists have the reputation, the skills and the expertise
that have enabled us to build a loyal referral network in
three States, and a quality reputation in all States. We have
also invested in high-quality clinical staff and world-class
imaging assets. Going forward, this positions the Company
well to deliver on our promise of quality patient care and
service to our referrers, and thereby increase value to our
shareholders. Ultimately good medicine is good business.
Operational highlights
Integral Diagnostics has historically invested in leading-
edge technology and staff to position the business to meet
expected long-term growth in demand for diagnostic
health services. This has adversely impacted margins and
earnings. The Company has the capacity and infrastructure in
place to support an increased volume of diagnostic imaging
services. Going forward, our investments will be tailored to
current growth patterns, with disciplined execution focused
on generating the returns necessary.
Over the course of the last year, Integral Diagnostics
delivered the following operational achievements:
• successfully acquired and integrated Western District
Radiology and South West MRI;
• executed five, five-year contracts with the West Australian
Country Health Service relating to the provision of
reporting contracts in remote regions;
• expanded capacity in Toowoomba, Sunbury and Geelong;
• refurbished diagnostic imaging facilities at Pindara
Private Hospital;
• installed new MRI machines and facilities at Robina
and John Flynn Private Hospital;
• purchased a Mobile MRI; and
• upgraded IT platforms to support improved medical
imaging and digital reporting.
Outlook
We will continue to invest in the business but will
be focused on improving margins through disciplined
cost management,driving growth organically and
through value accretive acquisitions. Coupled with
a more stable regulatory environment, we are looking
forward to a better FY18.
Growth will be achieved organically by leveraging the
infrastructure and resources already in place, through
investment in key strategic relationships with private
hospital groups, and through developing specialised
diagnostic centres of excellence. We will execute on
Our radiologists have the reputation, the skills and the expertise
that have enabled us to build a loyal referral network in three
States, and a quality reputation in all States.
strategically aligned acquisitions, and will ensure that
we continue to provide quality care and service to our
patients and referrers. An ageing population and better-
informed patients will continue to drive demand for
better health insights, and Integral Diagnostics is well
placed to benefit from this growth.
I would like to take this opportunity to thank our referrers,
doctors and staff for their ongoing support and commitment.
On behalf of IDX, we look forward to delivering quality
healthcare to our patients, outstanding service and valuable
insights to our referrers, a preferred place to work for our
doctors and staff, and improving returns for our investors.
Dr Ian Kadish
(Appointed 22 May 2017)
Managing Director and Chief Executive Officer
MBBCh, MBA
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Directors’ Report
For year ended 30 June 2017
The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter
as the ‘Group’) consisting of Integral Diagnostics Limited (referred to hereafter as the ‘Company’ or ‘parent entity’) and the
entities it controlled for the year ended 30 June 2017.
The information referred to below forms part of, and is to be read in conjunction with, this Directors’ Report:
• the Operating and Financial Review (OFR) on pages 23 to 30; and
• the Remuneration Report on pages 14 to 21.
Directors
The following persons were Directors of Integral Diagnostics Limited during the whole of the financial year and up to the date
of this Report, unless otherwise stated:
Helen Kurincic (Independent Non-Executive Chairman)
Dr Ian Kadish (Managing Director and Chief Executive Officer)
John Livingston (Managing Director and Chief Executive Officer)
Dr Chien Ping Ho (Executive Director)
Dr Sally Sojan (Executive Director)
John Atkin (Independent Non-Executive Director)
Rupert Harrington (Independent Non-Executive Director)
Garry Hounsell (Independent Non-Executive Director)
Appointed 22 May 2017
Resigned 21 May 2017
Resigned 31 March 2017
Principal activities
During the financial year, the principal activity of the Group was the provision of diagnostic imaging services.
Business strategies, prospects and likely developments
The OFR on pages 23 to 30 of the Annual Report sets out information on the business strategies, prospects and likely
development for the future financial years.
Review and results of operations
A review of the operations of the Group during the financial year, the results of those operations and the financial position
of the Group is contained in the OFR on pages 23 to 30.
Dividends paid in the year ended 30 June 2017
Dividends paid/payable during the financial year were as follows:
Dividend paid to shareholders of the Company at $0.04 cents per share paid 4 October 2016
Dividend paid to shareholders of the Company at $0.03 cents per share paid on 30 March 2017
Consolidated
30 June
2017
$’000
5,803
4,351
30 June
2016
$’000
-
-
Significant changes in the state of affairs
On 1 July 2016, the Group acquired the Western District Radiology business and the remaining 50% interest in South West
MRI Pty Ltd for the total consideration of $4,954,000, being $3,679,000 cash payment and $1,275,000 of issued shares (908,056
shares issued at $1.4041 per share). This acquisition fits the Company’s strategic criteria and further strengthens the Group’s
position in the south-west region of Victoria. See Note 32 to the financial statements for full details of this transaction.
On 21 May 2017 John Livingston resigned as the Managing Director and Chief Executive Officer. On 22 May 2017 the new
Managing Director and Chief Executive Officer, Ian Kadish joined Integral Diagnostics Limited.
There were no other significant changes to the state of affairs of the Group during the financial year.
Matters subsequent to the end of the financial year
Subsequent to year-end, a fully franked dividend of 4 cents per share was declared on 23 August 2017 and will be paid on
4 October 2017.
The Directors are not aware of any other matters or circumstances that have arisen since the end of the financial year which
have significantly affected or may significantly affect the operations of the Group, the results of those operations or the state
of affairs of the Group in subsequent financial years.
Environmental regulations
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. During
the financial year the Group was not convicted of any breach of environmental regulations.
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Directors’ Report continued
For year ended 30 June 2017
Information on Directors
Helen Kurincic
Independent Non-Executive Chairman
MBA, FAICD, Grad Dip Wom
Stud, PBC Crit
Care, Cert Nsg
Other current directorships
Former directorships (in the last three years)
Special responsibilities
Interests in shares
Helen Kurincic is the Chairman of Integral Diagnostics and has deep
Executive and Board-level experience in the healthcare industry. Helen
is currently a Non-Executive Director of HBF Health Limited, Estia Health
Limited and a senior advisor in the healthcare sector. She was the Chief
Operating Officer and Director of Genesis Care from its earliest inception
creating and developing the first and largest radiation oncology and
cardiology network across Australia.
Prior to that Helen held various executive and Non-Executive healthcare
sector roles including Non-Executive Director of DCA Group Limited
(diagnostic imaging services in Australia and the United Kingdom),
Non-Executive Director of AMP Capital Investors Domain Principal Group,
CEO of Benetas, Non-Executive Director of Melbourne Health and Orygen
Research Centre.
Ms Kurincic has also been actively involved in healthcare government
policy reform including appointments by health ministers as Chair of the
Professional Programs and Services Committee for the Fourth Community
Pharmacy Agreement and Member of the Minister’s Implementation
Taskforce and Minister’s Reference Group for the Long Term Reform
of Aged Care.
Estia Health Ltd
None
Chair of the Nominations Committee and Member of the Audit, Risk and
Compliance Committee and People and Remuneration Committee
420,870 ordinary shares (indirectly)
Dr Ian Kadish
(Appointed 22 May 2017)
Managing Director and Chief Executive Officer
MBBCh, MBA
Dr Ian Kadish was appointed Managing Director and Chief Executive
Officer of IDX on 22 May 2017. Ian began his career as a medical doctor in
Johannesburg, South Africa.
He subsequently completed an MBA at the Wharton Business School at
the University of Pennsylvania and followed this with several roles overseas
including CSC Healthcare, McKinsey and Company, and Netcare, a major
hospital group in South Africa and the United Kingdom where Ian was
Executive Director from 1997 to 2006. Ian was instrumental in growing the
group from 5 hospitals with a revenue of $60 million, to 119 hospitals and
revenue of $3 billion.
Since migrating to Australia in 2006, Ian’s roles have included CEO and
MD of Healthcare Australia, CEO and MD of Pulse Health Group (ASX-listed
hospital group) and CEO of Laverty Pathology.
Other current directorships
Former directorships (in the last three years)
Special responsibilities
Interests in shares
None
None
None
None
John Livingston
(Resigned 21 May 2017)
Managing Director and Chief Executive Officer
BAppSci (Med Rad), GradDipHSc (Edu),
GradCertBus (Mgt), GAICD
Other current directorships
Former directorships (in the last three years)
Special responsibilities
Interests in shares
Dr Chien Ping Ho
Executive Director
MBBS, FRANZCR, GAICD
John Livingston is a founding partner of Integral Diagnostics.
John has more than 20 years’ experience in healthcare, working in both
public and private radiology settings. As one of the founding partners of
Lake Imaging, John has grown the business through the introduction of
new services, greenfield facilities and various mergers and acquisitions
which have resulted in Integral Diagnostics moving towards a national
platform; namely the arrangements with St John of God and South
Western MRI in Victoria; Global Diagnostics in Western Australia and
South Coast Radiology in Queensland.
John was awarded the AGFA International award for Development of
Digital Imaging Solutions in 2005. He has presented in Australia and
abroad on the digital radiology environment, as well as business strategies
and systems within the commercial sector. With a special interest in the
enhancement of radiology efficiency, John is considered an industry leader
in the use of innovation to enhance referrer and patient outcomes.
Before moving into the private radiology sector, John held senior radiology
positions in the public sector.
None
None
None
2,467,230 ordinary shares (indirectly)
Dr Chien Ping Ho is a fellow of the Royal Australian and New Zealand
College of Radiologists and an accredited MRI supervising radiologist.
Upon completion of his radiology training at The Royal Melbourne Hospital,
Dr Ho undertook advanced training at three London hospitals – Chelsea
and Westminster Hospital, The Royal National Orthopaedic Hospital and
University College Hospital.
During this time he completed an MRI/musculoskeletal fellowship and also
spent time as a staff specialist. Dr Ho commenced with Lake Imaging in
2004 and is currently a consultant radiologist for Integral Diagnostics in
Victoria. Dr Ho has considerable experience across all radiology modalities
with a special interest in musculoskeletal and body imaging.
Other current directorships
Former directorships (in the last three years)
None
None
Special responsibilities
Interests in shares
Chair of the National Clinical Leadership Committee
2,445,481 ordinary shares (indirectly)
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Directors’ Report continued
For year ended 30 June 2017
Information on Directors continued
Dr Sally Sojan
Executive Director
MBBS, FRANZCR, FAANMS, GAICD
Dr Sally Sojan graduated from the University of Queensland with a medical
degree. Dr Sojan completed her radiology fellowship at the Princess
Alexandra Hospital in Brisbane. Dr Sojan then completed her nuclear
medicine and PET qualifications at The Royal Brisbane Hospital and The
Royal Adelaide Hospital followed by an MRI fellowship at The Mater Private
Hospital in Brisbane.
Dr Sojan commenced working at South Coast Radiology where she
established the first PET service on the Gold Coast. Her specialty interests
include nuclear medicine and PET and musculoskeletal MRI. Dr Sojan was
previously the Chair of the South Coast Radiology Board Meetings and has
been a Board member of Integral Diagnostics for three years.
Rupert Harrington
Independent Non-Executive Director
BTech, MSc, CDipAF
Rupert Harrington is a major shareholder and Executive Chairman of
Advent,a leading Australian private equity manager. Rupert has been
involved in private equity since 1987 and is considered to be one of the
founders of the Australian industry. Prior to Advent, Rupert had eight
years’ general management experience at both corporate and operational
management levels. During Rupert’s time at Advent, he has been either
a Director or Chairman of 26 investee companies, including businesses
operating in the manufacturing, services and high-technology sectors
spanning many facets of the investment process at all stages of the growth
cycle. He was actively involved in all aspects of Advent’s recent healthcare
investment in Primary Health Care and Genesis Care.
Other current directorships
Former directorships (in the last three years)
None
None
Special responsibilities
Interests in shares
Member of the National Clinical Leadership Committee
1,026,491 ordinary shares (indirectly)
John Atkin
Independent Non-Executive Director
BA, LLB, FAICD
John Atkin is a Non-Executive Director of IPH Limited. John is currently
the Nomination and Remuneration Committee Chair of IPH Limited and
is a member of the Audit and Risk Committee. John was Chief Executive
Officer and Managing Director of The Trust Company Limited from 2009
to 2013 prior to its successful merger with Perpetual Limited. Prior to
joining the Trust Company, John was the managing partner and Chief
Executive Officer of leading Australasian law firm Blake Dawson (now
Ashurst). Before this, John was a senior mergers and acquisitions partner
of Mallesons Stephen Jacques (Now King & Wood Mallesons). John is
Chairman of the Australian Outward Bound Foundation and a member
of the Board of the State Library of New South Wales Foundation.
Other current directorships
IPH Limited
Former directorships (in the last three years)
Special responsibilities
Interests in shares
Aurizon Holdings Limited, GPT Metro Office
Chair of the People and Remuneration Committee and a member of the
Audit, Risk and Compliance Committee and Nominations Committee
132,945 ordinary shares (indirectly)
Other current directorships
Clover Corporation Limited, Bradken Limited
Former directorships (in the last three years)
Special responsibilities
Interests in shares
Garry Hounsell
(Resigned 31 March 2017)
Independent Non-Executive Director
BBus (Accounting), FCA, FAICD
None
Chair of the Audit, Risk and Compliance Committee, and a member of the
People and Remuneration Committee and Nominations Committee
177,176 ordinary shares (directly) and 78,534 ordinary shares (indirectly)
Garry was a senior partner of Ernst & Young and Chief Executive Officer
and Country Managing Partner of Arthur Andersen. Garry is currently the
Chair of Spotless Group Holdings Limited (since March 2017) and the Chair
of Helloworld Travel Limited (since 2016). He is a Director of Treasury Wine
Estates Limited (since 2012) Dulux Group Limited (since 2010). Garry is
currently the Audit Committee Chair for Spotless Group Holdings Limited,
Treasury Wine Estates Limited and Dulux Group Limited. Garry was
Chairman of PanAust Limited (2008 to 2015) and eMitch (2006 to 2008) and
a Director of Qantas Airways Limited (2005 to 2015), Orica Limited (2004 to
2012), Nufarm Limited (2004 to 2012) and Mitchell Communications Group
Limited (2008 to 2010).
Other current directorships
Former directorships (in the last three years)
Special responsibilities
Interests in shares
Treasury Wine Estates Limited Helloworld Travel Limited, Dulux Group
Limited, Spotless Group Holdings Limited
PanAust Limited, Qantas Airways Limited
Chair of the Audit, Risk and Compliance Committee and a member of the
People and Remuneration Committee and Nominations Committee
20,000 ordinary shares (directly)
Other current directorships quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
Former directorships (last three years) quoted above are directorships held in the last three years for listed entities only
and excludes directorship of all other types of entities, unless otherwise stated.
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Directors’ Report continued
For year ended 30 June 2017
Company Secretary
Sonia Joksimovic (BBus, AFIN, FGIA, GAICD) was the Company Secretary until her resignation which was effective on the
7 August 2017. Sonia is an experienced chartered secretary with over nine years’ experience across listed small market
capitalisation, unlisted and private companies, specialising in governance, compliance and other corporate matters.
Proceedings on behalf of the Company
No person has applied to the court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf
of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility
on behalf of the Company for all or part of those proceedings.
Kathryn Davies (BBus, GAICD, CPA) was appointed Company Secretary effective 8 August 2017. Kathryn, holding a Bachelor
of Business with a double major in Accounting and Business Law, is a Certified Practising Accountant and a Graduate of
the Australian Institute of Company Directors, acts for companies as both advisor or Executive. Ms Davies has significant
experience in capital markets, negotiating and delivering on large scale business transactions and international stakeholder
management. She also has extensive corporate and commercial experience and has worked across technology, healthcare
and natural resources sectors. Most recently, she has been the Company Secretary of Japara Healthcare Ltd, interim Chief
Financial Officer of Planet Innovation Pty Ltd and is a current Non-Executive Director of Golden Rim Resources Ltd.
Meetings of Directors
Board
Audit, Risk and
Compliance
Committee
People and
Remuneration
Committee
Nomination
Committee
Held
15
12
2
15
15
11
15
15
Attended
15
12
2
15
14
9
15
14
Held
8
-
-
-
-
6
8
8
Attended
8
-
-
-
-
6
7
8
Held
7
-
-
-
-
5
7
7
Attended
7
-
-
-
-
4
7
6
Held
4
-
-
-
-
2
4
2
Attended
4
-
-
-
-
2
4
1
Director
Helen Kurincic
John Livingston
Dr Ian Kadish
Dr Chien Ping Ho
Dr Sally Sojan
Garry Hounsell
John Atkin
Rupert Harrington
Held: represents the number of meetings held during the time the Director held office and was eligible to attend as a member.
Indemnity and insurance of officers
The Company’s Constitution requires the Company to indemnify any person who is, or has been, an officer of the Company,
including the Directors, Executives and the Company Secretary of the Company, on a full indemnity basis and to the full
extent permitted by law, against all losses or liabilities (including all reasonable legal costs) incurred by the officer as an
officer of the Company or of a related body corporate.
In accordance with the Company’s Constitution, the Company has entered into a deed of indemnity, insurance and access
with each of the Company’s Directors. Under the deeds of indemnity, insurance and access, the Company must maintain
a Directors’ and officers’ insurance policy insuring a Director (among others) against liability as a Director and officer of the
Company and its related bodies corporate until seven years after a Director ceases to hold office as a Director or a related
body corporate (or the date any relevant proceedings commenced during the seven-year period have been finally resolved).
No Director or officer of the Company has received benefits under an indemnity from the Company during or since the end
of the financial year.
During the financial year, the Company has paid a premium in respect of a contract insuring officers of the Company and
its subsidiaries against all liabilities that they may incur as an officer of the Company, including liability for costs and
expenses incurred by them in defending civil or criminal proceedings involving them as such officers, with some exceptions.
Due to confidentiality obligations and undertakings of the policy, no further details in respect of the premium or the policy
can be disclosed.
Indemnity and insurance of the auditor
The Company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the Company
or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company
or any related entity.
Non-audit services
Details of the amounts paid or payable to the auditor for the non-audit services provided during the financial year by the
auditor are outlined in Note 27 to the financial statements.
The non-audit services provided were largely for work performed pertaining to compliance tax services.
The Directors are satisfied that the provision of non-audit services provided during the financial year by the auditor (or by
another person or firm on the auditor’s behalf), is compatible with the general standard of independence for auditors imposed
by the Corporations Act 2001.
The Directors are of the opinion that the services as disclosed in Note 27 to the financial statements do not compromise
the external auditor’s independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
Officers of the Company who are former partners of PricewaterhouseCoopers
There are no officers of the Company who are former audit partners of PricewaterhouseCoopers.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out
on page 22.
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
Rounding of amounts
The Company is a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to ‘rounding off’. Amounts in this Report and in the financial statements have been rounded off,
except where otherwise stated, in accordance with that Class Order to the nearest thousand dollars, or in certain cases,
the nearest dollar.
This Report is made in accordance with a resolution of Directors.
On behalf of the Directors
Helen Kurincic
Chairman
23 August 2017
Melbourne
Ian Kadish
Managing Director and Chief Executive Officer
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Remuneration Report
For year ended 30 June 2017
The Remuneration Report, which has been audited, outlines the Director and Executive remuneration arrangements
for the Group, in accordance with the requirements of the Corporations Act 2001 and its Regulations.
The following Non-Executive Directors, all of whom are currently regarded as independent, were members of the PRC for the
entire financial year (unless otherwise noted):
Key management personnel (KMP) are those persons having authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly, including all Directors.
The Remuneration Report is set out under the following main headings:
A. Principles used to determine the nature and amount of remuneration
B. Details of remuneration
C. Other transactions with KMP and their related parties
D. Service agreements
E. Additional disclosures relating to KMP
A. Principles used to determine the nature and amount of remuneration
The objective of the Group’s Executive reward framework is to ensure reward for performance is competitive and appropriate
for the results delivered. The framework aligns Executive reward with the achievement of strategic objectives and the creation
of value for shareholders. The Board of Directors (‘the Board’) works to ensure that Executive reward satisfies the following
key criteria for good governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage/alignment of Executive compensation; and
• transparency.
People and Remuneration Committee
The People and Remuneration Committee (PRC) is governed by the PRC Charter and is responsible for determining and
reviewing compensation arrangements for the Directors, Executive Directors, Executives and Senior Management including:
(a) Review and recommend to the Board arrangements for remuneration including contract terms, annual remuneration
and participation in any short and long-term incentive plans.
(b) Review and recommend to the Board major changes and developments in the Company’s remuneration, superannuation,
recruitment, retention and termination policies and procedures.
(c) Review and recommend to the Board short-term incentive strategy, performance targets and bonus payments for the CEO
and the Executives that report to the Board.
(d) Review and recommend to the Board the remuneration arrangements for the Chairman and the Non-Executive Directors
of the Board, including fees, travel and other benefits.
(e) Be satisfied that the Committee, the Board and management have available to them sufficient information and external
advice to ensure informed decision-making regarding remuneration.
The PRC also reviews and makes recommendations to the Board in regards to ‘people’ by monitoring and reviewing the
Senior Management performance assessment process, reviewing major changes and developments in the personnel
practices and industrial relations strategies of the Group, senior leadership succession planning, and overseeing the
effectiveness of the Diversity Policy.
John Atkin – Chairman
Independent, Non-Executive Director
Helen Kurincic
Independent, Non-Executive Director
Rupert Harrington
Independent, Non-Executive Director
Garry Hounsell
Independent, Non-Executive Director (resigned 31 March 2017)
Executives do not participate in any remuneration matters under the PRC Charter. The PRC meets quarterly or as often as
necessary in order to fulfil its role.
Non-Executive Directors’ remuneration arrangements
Under the Constitution, the Board decides the remuneration to which each Director is entitled for his or her service as a
Director. However, the total aggregate amount provided to all Non-Executive Directors for their services as Directors must not
exceed in any financial year the amount fixed by the Company in general meeting. This amount has been fixed at $1,000,000.
The annual base Non-Executive Director fees currently agreed to be paid by the Company are $200,000 to the Chairman and
$100,000 to each of the other Non-Executive Directors. Effective 1 October 2017 Rupert Harrington was entitled to receive
Directors’ fees.
The following additional annual fees are payable to Committee members, except the Chairman:
• $20,000 will be paid to the Chair of the Audit, Risk and Compliance Committee and $10,000 will be paid to each member
of that Committee; and
• $12,000 will be paid to the Chair of the People and Remuneration Committee and $6,000 will be paid to each member
of that Committee.
No additional fees were paid to Nomination Committee Chair or members. All Directors’ fees include superannuation.
The PRC reviewed Directors’ fees and had determined no increase for the 2017 financial year. There will also be no Director
fee increase for the 2018 financial year.
Executive Directors’ remuneration arrangements – Dr Chien Ping Ho and Dr Sally Sojan
Dr Chien Ping Ho and Dr Sally Sojan are deemed to be Executive Directors as they are employed as radiologists by the
Company. The key terms of their employment contracts as radiologist shareholders are consistent with all radiologist
shareholders and include a fixed salary at market rate plus allowances where appropriate and in line with market.
Dr Chien Ping Ho and Dr Sally Sojan are entitled to receive Medical Director Fees for representative Clinical Leadership
roles up to $100,000 in aggregate. They do not receive remuneration in their capacity as Directors.
Executive remuneration arrangements
The Executive remuneration and reward framework for the 2017 financial year has three components:
• base pay and non-monetary benefits;
• short-term performance incentives; and
• other remuneration such as superannuation and leave entitlements.
The combination of these comprises the Executives’ total remuneration.
The Executive remuneration is reviewed annually by the PRC, based on individual and business performance, the overall
performance of the Group and comparable market data.
The short-term incentives (STI) program is designed to align the targets of the business with the Executives responsible for
meeting those targets. Financial and non-financial targets and KPIs are reviewed annually by the PRC and approved by the
Board to ensure STI payments are aligned with the short-term objectives of the business while consistent with the long-term
strategy of the Company.
14
15
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Remuneration Report continued
For year ended 30 June 2017
A. Principles used to determine the nature and amount of remuneration continued
STI payments for the year ended 30 June 2017 were based on the performance of the business against the following
Executive KPIs:
• 50% financial target based on achievement of year-on-year EBIT growth measures; and
• 50% strategic priority targets such as safety and quality, business development, technology and organisational
capability transformation.
The achievement of the 50% financial target of EBIT growth was a gateway hurdle to being assessed against the other KPIs
for STI payment. Given that EBIT growth targets were not met the achievement of the additional KPIs was not assessed for
the purpose of determining the payment of a STI. The maximum STI opportunity for 30 June 2017 was $352,000 of which nil
was deemed to be payable to the Executive by the Board.
There were no equity-based long-term incentives (LTIs) in place for the 2017 financial year. The new CEO, Dr Ian Kadish who
commenced 22 May 2017 has an LTI contained within his employment agreement effective from FY18 with plan rules and
terms subject to approval by shareholders at the Company’s 2017 AGM. See the section on ‘Service Agreements’ on page 19
for more detail.
Performance against key measures
The Company aims to align its Executive remuneration to its strategic and business objectives and the creation of shareholder
wealth. The table below shows measures of IDX’s financial performance over the last two years as required by the Corporations
Act 2001. These are not necessarily consistent with the measures used in determining variable amounts of remuneration
awarded to key management personal. However, for FY17 no STI’s were paid reflecting dissapointing financial performance
as indicated in the measures below:
Key measures of the Group
Underlying EBITDA as a % of revenue
Underlying NPAT as a % of revenue
EPS (cents per share)
Return on operating assets (based on normalised NPAT)
Declared dividend payout ratio on NPAT
Use of remuneration consultants
2017
18.6%
8.4%
10.7
11.6%
65.6%
2016
21%
9.9%
8.2
13.4%
-
The Board ensures that any recommendations made by consultants in relation to remuneration arrangements of KMP at
Integral Diagnostics must be made directly to the Board without any influence from management. The arrangements in place
ensure any advice is independent of management and includes management not being able to attend Board or Committee
meetings where recommendations relating to their remuneration are discussed.
The remuneration consultants engaged by the Board, Godfrey Remuneration Group Pty Ltd (GRG), completed a report for the
Board on market benchmarking of Senior Executive remuneration during the 2017 financial year. The total consideration paid
to GRG for the advice provided was $18,000 excluding GST.
The scope of the report and all discussions with GRG were undertaken by the Chair of the PRC and the Chair of the Board
together with Non-Executive Directors of the PRC.
No discussions were held between GRG and the Executive KMP. Accordingly, the Board is satisfied that the recommendations
made by GRG are free from undue influence by any member of the KMP to whom the recommendations relate.
B. Details of remuneration
Amounts of remuneration
The KMP of the Group consisted of the Directors of Integral Diagnostics Limited and the following Executives:
• Craig Bremner – Chief Financial Officer; and
• Gregory Hughes – Chief Operating Officer.
Details of the remuneration received by the Group’s KMP for the current and prior financial years are set out in the
following tables.
2017
Non-Executive Directors
Helen Kurincic
Garry Hounsell 1
John Atkin
Rupert Harrington 2
Executive Directors
John Livingston 3
Dr Ian Kadish 4
Dr Chien Ping Ho 5
Dr Sally Sojan 5
Other key management
personnel
Craig Bremner 6
Gregory Hughes
Short-term benefits
Post-employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash incentive
$
Superannuation
$
Long service
leave
$
182,648
86,301
111,416
82,160
444,801
44,268
617,607
702,572
2,271,473
301,717
301,717
603,434
-
-
-
-
-
-
-
-
-
-
-
17,352
8,199
10,584
7,340
20,193
4,205
20,823
25,000
113,696
19,616
19,616
39,232
-
-
-
-
-
1,205
9,198
8,644
19,047
5,029
5,029
10,058
Total
$
200,000
94,500
122,000
89,500
464,994
49,678
647,328
736,216
2,404,216
326,362
326,362
652,724
1. Resigned effective 31 March 2017.
2. Eligible for Directors’ fees from 1 October 2016 and Chair of ARCC from April 2017.
3. Resigned as Executive Director effective 21 May 2017, employment cessation effective 31 July 2017.
4. Appointed effective 22 May 2017.
5. Remuneration includes Medical Director fees for the entire financial year.
6. Resigned to be effective 31 August 2017.
Given that no STIs were paid, the proportion of remuneration paid in the 2017 financial year and linked to performance for all
executives was nil.
16
17
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Remuneration Report continued
For year ended 30 June 2017
2016
Non-Executive Directors
Helen Kurincic
Garry Hounsell
John Atkin
Rupert Harrington
Mark Jago 2
Robert-Radcliff Smith 2
Executive Directors
John Livingston
Dr Chien Ping Ho 3
Dr Sally Sojan 3
Dr Alexius Meakin 4
Dr Donald Barrie 5
Other key management
personnel
Craig Bremner
Gregory Hughes
Short-term benefits
Post-employment
benefits
Long-term
benefits
Cash salary
and fees
$
Cash incentive1
$
Superannuation
$
Long service
leave
$
166,667
86,301
83,643
-
-
-
486,018
563,355
591,020
162,885
61,406
2,201,295
294,218
294,218
588,436
-
-
-
-
-
-
120,000
-
-
-
-
120,000
80,000
-
80,000
15,833
8,199
7,857
-
-
-
19,308
19,308
25,000
7,705
4,826
108,036
19,308
19,308
38,616
-
-
-
-
-
-
14,709
16,988
8,336
2,256
724
43,013
9,250
9,250
18,500
Total
$
182,500
94,500
91,500
-
-
-
640,035
599,651
624,356
172,846
66,956
2,472,344
402,776
322,776
725,552
1. Cash incentives made to Executives in the 2016 financial year relate solely to performance during the Company’s IPO preparation and process. No
STI payments were deemed by the Board to be payable to the Executive for performance for the year ended 30 June 2016. The above table does not
include payments made to John Livingston, Craig Bremner and Gregory Hughes of $117,189, $47,372 and $47,372 respectively, which relate to the
2015 financial year and were prior to the IPO.
2. Resigned as a Director 30 September 2015 – received no remuneration for 2016.
3. Remuneration includes Medical Director fees from October 2015.
4. Resigned as a Director 30 September 2015 – remuneration disclosed is from 1 July 30 September 2015 only.
5. Resigned as a Director 31 July 2015 – remuneration disclosed from 1 July 31 July 2015 only.
C. Other transactions with KMP and their related parties
Payment for goods and services
Cleaning fees paid to GJJ Hughes Pty Ltd of which Gregory Hughes is related to1
Payment for rental of buildings to Perhaps Holdings Pty Ltd of which Chien Ping Ho and John Livingston
are related 2
Payment for rental of buildings to Eleven Eleven How Pty Ltd of which Chien Ping Ho, John Livingston,
Gregory Hughes and Craig Bremner are related to
Payment for rental of buildings to Kiwi Blue Pty Ltd of which Chien Ping Ho and John Livingston are related to
Consolidated
30 June 2017
$
12,500
44,120
391,934
225,307
1. The cleaning arrangement with GJJ Hughes Pty Ltd was terminated in February 2017.
2. The property rented through Perhaps Holdings Pty Ltd was sold in February 2017 by Perhaps Holdings Pty Ltd to an independent third party.
All transactions with KMP are made on commercial arm’s-length terms and conditions and in the ordinary course of
business. The Board has an established Related Party Transaction Policy, that is overseen by the Audit, Risk and Compliance
Committee, to ensure that related party transactions are managed and disclosed in accordance with the Corporations Act,
ASX Listing Rule 10.1 and accounting requirements and in accordance with good governance obligations, to ensure that
financial benefit is not given to related parties without approval by the Board, and where required, shareholders.
The related party transactions set out above were historical arrangements in place when the business was privately held. It
is the Board’s policy that independent reviews will be undertaken on any renewals and these reviews will be overseen by the
Audit, Risk and Compliance Committee.
D. Service agreements
Remuneration and other terms of employment for Executive KMP are formalised in service agreements. Details of these
agreements are as follows:
Chief Executive Officer (CEO)
Dr Ian Kadish (Appointed CEO 22nd May 2017)
The CEO is employed under an ongoing contract until terminated as set out in the termination provisions below. There is no
minimum term.
Under the terms of the contract:
• the CEO receives fixed remuneration of $480,000 per annum, which represents the CEO’s total employment cost inclusive
of the Employee’s Salary, superannuation, fringe benefits tax, motor vehicle allowance and any other benefits as may be
agreed between the Employer and the Employee from time to time;
• relocation allowance of up to $20,000 in the first year of employment;
• an annual bonus for FY18 of up to $100,000 where the Board may at its discretion, decide that the Employee should receive
a bonus having regard to the overall performance of the Group and the progress made by the Employee in achieving the
performance goals set by the Board at the outset of the period;
• the CEO is entitled to a long-term incentive for FY18 having a maximum face value equal to $500,000 to be provided through
the grant of performance rights (zero priced options) issued at the volume weighted average trading price of ordinary
shares in Integral Diagnostics on the Australian Stock Exchange for the 30 trading days prior to the commencement of the
Employee’s appointment. Vesting is to be tested at the four-year point (that is, based on the Integral Diagnostics accounts
for the year ended June 2021 and will be determined by reference to the improvement in EPS
in FY21 over FY17). Vesting of 100% will occur if compound annual growth rate (CAGR) of earnings per share (EPS) equals
or exceeds 15%. There will be no vesting if EPS CAGR is less than 5%. There will be 20% vesting at EPS CAGR of 5%
and pro-rata vesting between 5% and 15%.
EPS growth rate is to be calculated by reference to an assumed conservative gearing in line with Board’s current policy.
The Board, at its discretion, may allow a re-test at five years if the EPS result for the fourth year is ‘knocked off track’
due to some extreme event or circumstance.
If there is a merger, takeover or change of control or other significant transaction (including buy-back or reduction of
capital) the Board has a discretion as to whether or not the formula and benchmarks for calculating for EPS growth are
adjusted to exclude some or all of the impact of that transaction so the Employee is not unfairly benefited or impacted
by the transaction (i.e. avoid any windfall gains or unfair penalties).
If Integral Diagnostics is subject to a takeover (or merger by way of scheme of arrangement) resulting in a change of
control, the LTI will immediately vest pro-rata relative to the time period that has elapsed between 22 May 2017 and the
change of control event and having regard to the CAGR of EPS achieved or reasonably estimated by the Board to have
been achieved in the period prior to the change in control.
The performance rights and any shares in Integral Diagnostics arising from the vesting and exercise of the performance
rights are subject to a holding lock and cannot be traded or dealt with by the Employee in any way for the maximum period
taxing on receipt of the performance rights can be deferred under the applicable tax legislation. The shares will be entitled
to dividends during this period. Once receipt of the shares is included in the Employee’s taxable income, they may sell so
much of the shares as is reasonably required to meet the tax payable in connection with their receipt, with the balance
held subject to escrow conditions that match those applicable to radiologist shareholders in Integral Diagnostics; and
• the CEO’s remuneration will be reviewed on an annual basis. Any increase in the Employee’s remuneration is at the sole
discretion of Integral Diagnostics Limited.
18
19
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Remuneration Report continued
For year ended 30 June 2017
John Livingston (Resigned as CEO 21 May 2017)
The CEO was employed under an ongoing contract with a minimum employment term of three years, expiring 31 July 2017.
Under the terms of the contract:
• the CEO received fixed remuneration of $505,680 per annum, which includes superannuation;
• the CEO’s STI opportunity was $192,000; and
• fixed remuneration had an annual indexation of 2% or CPI, whichever is higher subject to satisfactory individual and
business performance as determined by the Company acting reasonably.
Termination provisions for Executives
Termination provisions of KMP are formalised in their individual employment agreements. Details of these agreements are
as follows:
Name:
Title:
Dr Ian Kadish
Chief Executive Officer
Agreement commenced:
22 May 2017
Term of agreement:
No fixed end date
Details:
Name:
Title:
Either the Company or the Executive may terminate the agreement by giving six months’ notice
in writing. Upon termination the Company at its absolute discretion may elect to pay out the
notice period, or any remaining part of the notice period, based on the Executive’s salary
component only of the TEC including superannuation or place the Executive on garden leave.
Notwithstanding the above, the Company may terminate the Executive’s employment without
notice for serious misconduct. Upon termination of the Executive agreement, the Executive
will be subject to a restraint of trade period of 15 months. The Company may elect to reduce
this restraint period and the enforceability of the restraint deed is subject to all usual legal
requirements.
John Livingston
Chief Executive Officer (resigned as CEO 21 May 2017 employment, cessation effective 31 July 2017)
Agreement commenced:
1 August 2014
Term of agreement:
Minimum period of employment of three years expiring on 31 July 2017 with no fixed end date
Details:
During the Executive’s minimum period of employment the Company may terminate their
employment if there are changes outside its control that will materially harm the business
and its shareholders, or there is continued and unremedied poor performance, provided in
each case it has provided 12 months’ notice in writing. The Executives may not terminate their
employment during the minimum term. After expiry of the minimum term, the Executive’s
employment will continue until terminated by either party providing six months’ notice in writing
unless otherwise agreed and approved by the Board. The Executive may give the period of notice
of termination of six months during the minimm period of employment so that the date of
resignation is effective on or after the expiry of the minimum period. The Executive may be paid
in lieu of all or part of the notice period. Notwithstanding the above, the Company may terminate
the Executive’s employment without notice for serious misconduct. Upon termination of the
Executive agreement, the Executive will be subject to a restraint of trade period of six months.
The Company may elect to reduce this restraint period and the enforceability of the restraint
deed is subject to all usual legal requirements.
Name:
Title:
Craig Bremner
Chief Financial Officer (resigned to be effective 31 August 2017)
Agreement commenced:
1 August 2014
Term of agreement:
Minimum period of employment of three years expiring on 31 July 2017 with no fixed end date.
Details:
During the Executive’s minimum period of employment the Company may terminate their
employment if there are changes outside its control that will materially harm the business
and its shareholders, or there is continued and unremedied poor performance, provided in
each case it has provided 12 months’ notice in writing. The Executives may not terminate their
employment during the minimum term. After expiry of the minimum term, the Executive’s
employment will continue until terminated by either party providing six months’ notice in writing
unless otherwise agreed and approved by the Board. The Executive may give the period of notice
of termination of six months during the minimm period of employment so that the date of
resignation is effective on or after the expiry of the minimum period. The Executive may be paid
in lieu of all or part of the notice period. Notwithstanding the above, the Company may terminate
the Executive’s employment without notice for serious misconduct. Upon termination of the
Executive agreement, the Executive will be subject to a restraint of trade period of six months.
The Company may elect to reduce this restraint period and the enforceability of the restraint
deed is subject to all usual legal requirements.
Name:
Title:
Greg Hughes
Chief Operating Officer
Agreement commenced:
1 August 2014
Term of agreement:
Minimum period of employment of three years expiring on 31 July 2017 with no fixed end date.
Details:
During the Executive’s minimum period of employment the Company may terminate their
employment if there are changes outside its control that will materially harm the business
and its shareholders, or there is continued and unremedied poor performance, provided in
each case it has provided 12 months’ notice in writing. The Executives may not terminate their
employment during the minimum term. After expiry of the minimum term, the Executive’s
employment will continue until terminated by either party providing six months’ notice in writing
unless otherwise agreed and approved by the Board. The Executive may give the period of notice
of termination of six months during the minimm period of employment so that the date of
resignation is effective on or after the expiry of the minimum period. The Executive may be paid
in lieu of all or part of the notice period. Notwithstanding the above, the Company may terminate
the Executive’s employment without notice for serious misconduct. Upon termination of the
Executive agreement, the Executive will be subject to a restraint of trade period of six months.
The Company may elect to reduce this restraint period and the enforceability of the restraint
deed is subject to all usual legal requirements.
E. Additional disclosures relating to KMP
Shareholding
The number of shares in the Company held during the financial year by each Director and other members of the KMP of the
Group, including their personal related parties, is set out below:
Ordinary shares
Helen Kurincic
John Livingston
Dr Chien Ping Ho
Dr Sally Sojan
John Atkin
Garry Hounsell
Rupert Harrington
Craig Bremner
Gregory Hughes
Balance at
1 July 2016
420,870
2,467,230
2,467,230
1,095,000
91,623
50,000
130,710
2,467,230
2,467,230
11,657,123
Received as part of
remuneration
-
-
-
-
-
-
-
-
-
-
Additions
-
-
-
-
41,322
-
125,000
-
-
166,322
Disposals/other
-
-
21,749
68,509
-
30,000
-
-
-
120,258
Balance at the
end of the year
420,870
2,467,230
2,445,481
1,026,491
132,945
20,000
255,710
2,467,230
2,467,230
11,703,187
20
The Remuneration Report has been audited.
21
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics 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 ability of the Group 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 Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Auditor’s Independence Declaration
For year ended 30 June 2017
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
if,
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 21 of the directors’ report for the year
ended 30 June 2017.
Auditor’s Independence Declaration
As lead auditor for the audit of Integral Diagnostics Limited for the year ended 30 June 2017, I declare that
In our opinion, the remuneration report of Integral Diagnostics Limited, for the year ended 30 June
to the best of my knowledge and belief, there have been:
2017 complies with section 300A of the Corporations Act 2001.
(a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
Responsibilities
no contraventions of any applicable code of professional conduct in relation to the audit.
(b)
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
This declaration is in respect of Integral Diagnostics Limited and the entities it controlled during the
period.
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
Nadia Carlin
Nadia Carlin
Partner
Partner
PricewaterhouseCoopers
Melbourne
23 August 2017
Melbourne
23 August 2017
Operating and Financial Review
For the year ended 30 June 2017
The purpose of this Operating and Financial Review is to provide shareholders with additional information regarding the
Company’s operations, financial position, business strategies and prospects. The review complements the Financial Report
on pages 31 to 66 and the ASX announcement and full year results presentation dated 24 August 2017.
Integral Diagnostics Limited (ASX: IDX) is an Australian healthcare services company whose main activity is providing
diagnostic imaging services to general practitioners, medical specialists and allied health professionals (referrers) and their
patients. These services are provided through a network of 45 sites, including 12 hospital sites, in three regional geographic
markets under four brands – Lake Imaging (Victoria), South Coast Radiology (Queensland), Global Diagnostics (Western
Australia) and Western District Radiology (Victoria).
Diagnostic imaging involves a set of techniques that non-invasively produces images of the human body for clinical analysis
and medical intervention. Images can be produced using a variety of modalities, including:
• radiography (X-ray);
• ultrasound;
• computed tomography (CT);
• magnetic resonance imaging (MRI); and
• nuclear medicine (which includes positron emission tomography (PET)).
The images produced by diagnostic imaging are a critical tool for referrers in diagnosing and deciding on a form of treatment
for patients.
Year in review
Financial performance
A summary income statement providing details of one-off transactions and reconciling to the statutory income statement is
outlined in the following table:
Summary income statement ($million)
Total revenue
EBITDA prior to one-off transactions
EBIT prior to one-off transactions
NPAT prior to one-off transactions
One-off transactions net of tax
Transaction costs/IPO costs
Impairment of asset and restructuring provision
Fair value gain on acquisition of SWMRI joint venture
Statutory NPAT
Amortisation
NPATA
Underlying EBITDA as a % of revenue
Underlying NPAT as a % of revenue
EPS (cents per share)
Return on operating assets (underlying NPAT)
Declared dividend payout ratio on NPAT
Actual 2017
179.7
33.5
23.7
15.1
Actual 2016
167.8
34.9
26.2
16.6
-
(0.8)
1.2
15.5
0.4
15.9
18.6%
8.4%
10.7
11.6%
65.6%
(5.2)
-
-
11.4
0.4
11.8
21.0%
9.9%
8.2
13.4%
n/a
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331 MELBOURNE VIC 3001
T: +61 3 8603 1000, F: +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
The underlying performance of IDX during the year was within market guidance provided at the half year, but was below the
Board and management’s expectations. Whilst revenue grew 7.1%, cost growth was higher, leading to a $1.5 million decline
(9.3%) in underlying NPAT performance compared to the 2016 financial year.
The underlying performance decline of $1.5 million was primarily due to the growth in revenue being consumed by larger
growth in costs. This performance together with the unexpected impairment and restructuring cost of $0.8 million (net of tax)
were the key drivers of the FY17 result.
22
23
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Operating and Financial Review continued
For the year ended 30 June 2017
Year in review continued
Financial overview
• Achieved an overall examination volume increase of 4.6% (normalised for acquisitions), and revenue growth of $12.0 million
(7.1 %) to $179.7 million. The South West MRI Pty Ltd/Western District Radiology (SWMRI/WDR) acquisition contributed
$4.7 million in revenue, with the remainder representing organic growth across all business units.
• Patient examination volume growth for the Company across Medicare funded, patient funded and reporting contract
examinations was up 4.6% in FY17 (adjusted for working days and acquisitions). This level of volume growth was below the
Company’s expectations and slightly under the Medicare data growth rate of 5.1% in the States in which Integral Diagnostics
operates.
• Revenue growth was impacted by increased competition at selected sites in Victoria and Queensland.
• Incurred expenditure growth of $13.5 million, resulting in an overall underlying performance which was $1.5 million below
FY16. Expenditure growth was driven by:
− additional $10.1 million in employee benefits expense. With $2.2 million relating to the SWMRI/WDR acquisition and $7.9
million relating to the full year impact of historical investment in radiologists, imaging and administrative staff to service
expanded, yet underutilised capacity;
− additional $3.4 million in depreciation, occupancy, consumables and equipment costs driven by the investment in
leasehold properties and new equipment to deliver an expanded range of services at key sites including Toowoomba,
Sunbury, Ocean Grove and the SWMRI/WDR acquisition;
− additional other costs of $1.2 million due to ongoing investment in development of staff and systems;
− reduction in finance costs of $0.6 million driven by a lower cost of finance; and
− reduction in taxation costs of $0.6 million.
• Incurred an impairment charge of $0.8 million and a restructuring charge of $0.3 million before tax (total of $0.8 million net
of tax) as a result of the write-off of infrastructure installed to support the Mobile MRI at Port Hedland. The actual volume
achieved was well below the business plan. As a result of a full review it has been determined that it is not economic to
continue with the Mobile MRI in that region.
Operating performance overview
• Successfully completed the acquisition and integration of SWMRI/WDR.
• Benefited from the prior year investment in expanded capacity in Toowoomba, Sunbury and Geelong, which whilst
performing well are not yet at required capacity, with further growth expected to be derived from these sites in FY18.
• Signed five, five-year contracts with the West Australian Country Health Service relating to the provision of reporting
contracts in remote regions. Two of these contracts were new to the Group and increased services began in November
and December 2016.
• Contributed to the refurbishment of the Company’s facilities at Pindara Private Hospital and installed new state-
of-the-art MRI machines and facilities at Robina and John Flynn Private Hospital.
• Committed to a refurbishment project at the St John of God Hospital in Geelong, securing 10-year leases across
all three of the St John of God Hospital sites in Victoria. This further strengthens Integral Diagnostics’ strategic
relationship with St John of God Health Care.
• Purchased a Mobile MRI, which although has not been successful in its initial location of Port Hedland, will be
relocated to alternative locations where volumes are expected to deliver the utilisation levels and returns required.
• Invested in IT platforms to support the delivery of improved medical imaging and digital reporting to referrers.
• The Board has recruited an experienced CEO to lead the Company to capitalise on its geographic footprint and
scale, bring a disciplined approach to cost management and capital expenditure, and actively pursue value accretive
acquisition opportunities.
Capital expenditure
Total expenditure on tangible assets was $15.3 million (FY16: $17.5 million) of which $1.9 million related to the acquisition
of SWMRI/WDR, $11.1 million related to maintenance, and $2.3 million related to growth opportunities. The growth capital
expenditure included $0.75 million on the Mobile MRI machine, $0.81 million of infrastructure associated with the Mobile MRI
that has been subsequently impaired, $0.14 million invested in IT for improved medical imaging and reporting platforms, and
$0.58 million on new equipment across various sites.
Several growth opportunities, including the refurbishment of the St John of God Hospital in Geelong and the opening of key
strategic specialist sites planned for FY17 have been delayed and will occur in FY18.
Acquisitions
On 1 July 2016, the Group completed the acquisition of the Western District Radiology business and the remaining 50%
interest in South West MRI Pty Ltd (collectively known as the SWMRI/WDR acquisition) for $4.954 million. This acquisition
complemented the Group’s strengths and further strengthened its position in the south-west region of Victoria.
The operations of SWMRI/WDR have been successfully integrated into the Group.
Taxation
The effective tax rate on operating earnings is 27.35% (FY16: 30.77%) as a result of being able to claim transaction costs
relating to the IPO and acquisitions as deductible items.
Cash flows
Increase in free cash flows by 12.7% to $20.4 million (FY16: $18.1 million).
Debt facilities
The increase in net debt by 8.5% to $48.7 million (30 June 2016: $44.9 million) was largely due to a drawdown to fund
the acquisition of SWMRI/WDR.
The Company’s relationship with its current lenders is strong and the average cost of debt has declined over FY17. The
facilities under the current lending arrangement expire in September 2018. The Company is currently in the process of
reviewing the facilities arrangements and expects to have renewed terms and conditions prior to 31 December 2017.
Earnings per share
Basic earnings per share increased by 30.1% to 10.67 cents per share (FY16: 8.2 cents per share). On an underlying NPAT
performance, earnings per share declined 9% to 10.41 cents per share (FY16: 11.44 cents per share).
Dividend
Dividend payments of 7.00 cents per share ($10.2 million) fully franked have been paid during FY17. This represents 65.6%
of a NPAT payout ratio in line with expectations. A dividend of 4.00 cents per share fully franked will be paid on 4 October 2017
to shareholders on the register at 1 September 2017.
24
25
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Operating and Financial Review continued
For the year ended 30 June 2017
Company outlook
A key focus in FY18 is ensuring the Group retains its historical share of industry growth and contains costs.
Balance sheet
A summary of the balance sheet as at 30 June 2017 and in comparison to the prior year is outlined in the following table.
The long-term industry fundamentals remain strong and underpin attractive future growth opportunities. Australia has a
growing and ageing population requiring greater healthcare support. At the same time, community expectations for higher
quality healthcare and diagnosis continue to rise, while new imaging technologies improve efficiency and aid diagnosis and
early recognition of diseases.
The Company’s focus in FY18 will be to optimise the performance of existing capacity and infrastructure and driving growth
organically and through strategically aligned acquisitions. This includes:
• leveraging of the investments made by recognising the potential of the Company’s existing professional team and network
of sites to return volume growth to its historical growth trajectory;
• contain costs so revenue growth delivers improved returns;
• focused execution of future growth opportunities including the redevelopment at the St John of God Hospital in Geelong
and other key centres of excellence including the recently opened Spine Clinic on the Gold Coast; and
• building and capitalising on value accretive M&A opportunities in a consolidating market.
The ethos of providing the highest quality diagnostic imaging services, trusted by referrers and preferred by patients,
is unwavering.
Regulatory outlook
The regulatory environment is now clearer following the Federal Government’s decision in May 2017 not to remove bulk billing
incentives for diagnostic imaging. In addition, the Federal Government has committed to reintroducing MBS rebate indexation
for a limited number of diagnostic imaging services from July 2020.
Balance sheet
Cash and cash equivalents
Trade and other receivables
Other current assets
Total current assets
Property, plant and equipment
Intangible assets
Deferred tax asset
Total non-current assets
TOTAL ASSETS
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Other current liabilities
Total current liabilities
Borrowings
Provisions
Other non-current liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
30 June 2017
Actual
$’M
24.2
5.1
3.9
33.2
30 June 2016
Actual
$’M
23.6
5.5
2.9
32.0
50.5
104.0
2.7
157.2
190.4
8.3
(0.03)
11.5
10.6
0.06
30.5
61.4
8.1
-
69.5
100.0
90.4
46.6
99.8
2.7
149.1
181.1
10.4
1.1
6.7
9.5
–
27.7
61.8
7.2
0.4
69.4
97.1
84.0
• Working capital of $2.7 million is driven by strong cash holdings offset by an increase in current debt due to a number
of balloon payments due on finance leases.
• Property, plant and equipment increased by $3.9 million due to the acquisition of SWMRI/WDR ($1.9 million) and ongoing
investment in state-of-the-art equipment, offset by depreciation charges.
• Intangibles have increased by $4.2 million largely due to the goodwill recognised on the SWMRI/WDR acquisition and
the DTL recognised on brand names as required by Australian Accounting Standards.
• Provisions (excluding tax) have increased $2.0 million. This increase is primarily due to the provisions associated
with employee benefits and a $0.3 million provision for restructuring the operations in Port Hedland.
• Net debt increased by $3.8 million to $48.7 million, resulting in a gearing level of net debt/EBITDA of 1.4x.
• The Company continues to comply with the financial covenants of its facility agreement.
26
27
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Operating and Financial Review continued
For the year ended 30 June 2017
Cash flow
A summary of the cash flows as at 30 June 2017 are presented below.
Summary of cash flow ($ million)
Free cash flow
Growth capital expenditure
Net cash flow before financing and taxation
Tax paid
Interest and other costs paid on borrowings
Proceeds from issue of shares
Net change in borrowings
Net payment of bank facilities
Deferred consideration
Dividends paid
Offer transaction costs in equity
Net cash flows
2017 Actual
20.4
(2.3)
18.1
2016 Actual
18.1
(7.8)
10.3
(7.4)
(2.6)
-
2.7
-
(0.03)
(10.2)
-
0.6
(7.8)
(2.7)
33.2
6.0
(20.0)
(3.2)
-
(1.8)
14.0
• Free cash flows of $20.4 million are $2.3 million or 12.7% higher than FY16.
• Growth capital expenditure was $2.3 million for the year largely due to $0.75 million on Mobile MRI, $0.81million of
infrastructure associated with the Mobile MRI that has been subsequently impaired, $0.14 million investment on IT for
improved reporting platforms, and $0.58 million on new equipment across various sites. Growth Capex was lower than
expected as two significant projects were deferred until FY18 as outlined above.
• Dividends of $10.2 million (7 cents per share fully franked) were paid in FY17.
Business opportunities and risks
The following are key opportunities that may impact the Company’s financial and operating result in future periods:
• Ability to leverage off the growing demand for diagnostic imaging services through the Company’s current network.
• Utilisation of high-quality systems to deliver best-in-class patient and referrer outcomes.
• Ability to leverage off the Company’s strong market position, diversified service model and sources of funding to develop
growth opportunities.
• Identification of new business opportunities through development of the existing business, capacity expansion or further
acquisitions.
• Ability to leverage off and be first to market with new technology and innovation.
• Ability to leverage of the Company’s attractive specialist healthcare model to attract, retain and grow the radiologist group.
• Ability to attract and retain an experienced management team and Board to drive growth and sustainability through
the business.
The following are key risks that may impact the Company’s financial and operating result in future periods:
• Changes to or breaches of laws, accreditation, licensing, Government policies and regulations may impact the ability
of the Company to continue to operate at the same capacity.
• Inadequate Commonwealth Government rebates for diagnostic imaging services may reduce demand for services.
• Failure to realise anticipated benefits or appropriately integrate acquisitions.
• Failure to deliver upon key business cases or projects.
• Failure to adopt safe work practices for staff, patients and their carers.
• Inadequate processes or resources to manage a crisis or unexpected events that threaten to harm the organisation,
operations and staff.
• The Company may be unable to recruit and retain appropriately skilled radiologists, management and
technical professionals.
• The Company’s relationship with radiologists and technical professionals may deteriorate.
• Management and staff lack the competence and skills to undertake their duties appropriately
• Relationships with referrers may deteriorate resulting in a decrease in volume levels.
• The Company may suffer reputational damage resulting in a deterioration of its competitive position.
• Overall decline in competitive advantage.
• Labour costs may increase.
• Failure of technical infrastructure or medical equipment.
• Failure to adapt or respond to disruptive innovations and technologies.
28
29
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Operating and Financial Review continued
For the year ended 30 June 2017
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For year ended 30 June 2017
Risk management
The Company’s risk management framework is overseen by the Audit, Risk and Compliance Committee and is actively
managed by the Executive Committee. It is consistent with AS/NZ31000:2009 and is subject to regular review. This risk
management framework has helped to enable a consistent and rigorous approach to identifying, analysing and evaluating risks.
During the year, the Audit, Risk and Compliance Committee and the Board have reviewed and updated the Company’s
Enterprise Risk Management Framework. This review occurs annually or more regularly as required. The Audit, Risk and
Compliance Committee and the Board also reviewed risk appetite statements and measures for each of its risk categories
and reviewed the Company’s material business risk assessments during the period.
A key component of clinical risk management is managed through the National Clinical Leadership Committee (National
CLC) and State Clinical Leadership Committees (State CLCs), under the National and State Clinical Leadership Committees
Charter. The Charter provides a framework for the National CLC and State CLCs to work together to develop and implement
policies and work practices to enable clinical best practice.
The responsibilities of the National CLC include reviewing any recommendations arising from any adverse incidents from
the State CLCs and to share learnings to prevent recurrence.
The Company’s Audit, Risk and Compliance Committee Charter is also available in the Corporate Governance section
of its website.
Revenue
Revenue
Fair value gain on acquisition of SWMRI joint venture
Interest income
Total revenue and other income
Expenses
Consumables
Employee benefits expense
Depreciation and amortisation expense
Transaction costs
Equipment-related expenses
Occupancy expenses
Other expenses
Impairment of asset and restructuring provision
Finance costs
Total expenses
Operating profit
Share of profits of associates accounted for using the equity method
Profit before income tax expense
Note
30 June 2017
$’000
30 June 2016
$’000
5
6
6
6
6
6
6
179,732
1,200
370
181,302
(8,850)
(105,577)
(9,831)
–
(6,993)
(12,615)
(12,178)
(1,108)
(2,841)
(159,993)
167,770
–
263
168,033
(8,365)
(95,406)
(8,720)
(6,990)
(6,056)
(11,724)
(10,991)
–
(3,333)
(151,585)
21,309
–
16,448
2
21,309
16,450
Income tax expense
7
(5,829)
(5,062)
Profit for the year from continuing operations
15,480
11,388
Other comprehensive income, net of tax
Total comprehensive income
Profit is attributable to:
Owners of Integral Diagnostics Limited
Total comprehensive income is attributable to:
Owners of Integral Diagnostics Limited
Earnings per share attributable to the owners of Integral Diagnostics Limited
Basic earnings per share
Diluted earnings per share
37
37
–
15,480
15,480
15,480
15,480
15,480
Cents
10.67
10.67
–
11,388
11,388
11,388
11,388
11,388
Cents
8.2
8.2
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the
accompanying notes.
30
31
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Consolidated Statement of Financial Position
For year ended 30 June 2017
Consolidated Statement of Changes in Equity
For year ended 30 June 2017
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Other assets
Inventory
Total current assets
Non-current assets
Property, plant and equipment
Intangibles
Deferred tax asset
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Income tax payable
Provisions
Derivative financial instrument
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed capital
Reserves
Retained profits
Total equity
Note
30 June 2017
$’000
30 June 2016
$’000
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24,210
5,149
3,514
393
33,266
50,523
103,921
2,675
157,119
23,620
5,544
2,450
333
31,947
46,629
99,872
2,657
149,158
190,385
181,105
8,340
11,495
(34)
10,650
59
30,510
61,397
–
8,126
69,523
10,397
6,762
1,107
9,519
–
27,785
61,781
365
7,254
69,400
100,033
97,185
90,352
83,920
83,866
(11,862)
18,348
82,760
(11,862)
13,022
90,352
83,920
Balance at 1 July 2015
Profit/(loss) after income tax expense
Other comprehensive income, net of tax
Total comprehensive income
Transactions with owners
in their capacity as owners:
Contributions of equity,
net of transaction costs (Note 21)
Transaction with non-controlling
interest reserve
Share-based payments
Balance at 30 June 2016
Balance at 1 July 2016
Profit/(loss) after income tax expense
Other comprehensive income, net of tax
Total comprehensive income
Transactions with owners
in their capacity as owners:
Contributions of equity, net of
transaction costs (Notes 21, 32)
Unwinding of DTA in equity
Dividends paid
Balance at 30 June 2017
Contributed
capital
$’000
50,743
–
–
–
32,017
–
–
82,760
Contributed
capital
$’000
82,760
–
–
82,760
Reserves
$’000
(10,537)
–
–
–
(194)
(1,197)
66
(11,862)
Reserves
$’000
(11,862)
–
–
(11,862)
Retained
profits
$’000
1,634
11,388
-
13,022
Total
equity
$’000
41,840
11,388
-
53,228
–
31,823
–
–
13,022
Retained
profits
$’000
13,022
15,480
–
28,502
(1,197)
66
83,920
Total
equity
$’000
83,920
15,480
–
99,400
1,275
(169)
–
83,866
–
–
–
(11,862)
–
–
(10,154)
18,348
1,275
(169)
(10,154)
90,352
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.
32
33
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Consolidated Statement of Cash Flows
For year ended 30 June 2017
Notes to the Financial Statements
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Transaction costs relating to acquisition of subsidiaries
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payments for purchase of subsidiary, net of cash acquired
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
IPO transaction costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid to Company shareholders
Settlement of deferred consideration
Transactions with non-controlling interests
Net cash (used in)/from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Note
30 June 2017
$’000
30 June 2016
$’000
179,604
(146,314)
(180)
(2,960)
(7,420)
22,730
(3,529)
(11,650)
100
370
(14,709)
–
–
10,887
(8,134)
(10,154)
(30)
–
(7,431)
590
23,620
24,210
166,804
(131,706)
(189)
(3,067)
(7,787)
24,055
–
(17,222)
300
263
(16,659)
33,170
(8,104)
17,043
(31,134)
-
(3,150)
(1,197)
6,628
14,024
9,596
23,620
36
32
21
22
8
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
Note 1. General information
The Financial Report covers Integral Diagnostics Limited as a Group consisting of Integral Diagnostics Limited (‘Company’
or ‘parent entity’) and the entities it controlled at the end of, or during, the year (collectively referred to as the ‘Group’). The
financial statements are presented in Australian dollars, which is Integral Diagnostics Limited’s functional and presentation
currency and are rounded to the nearest thousand dollars ($‘000) unless otherwise stated.
Integral Diagnostics Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
1111 Howitt Street
Wendouree VIC 3355
A description of the nature of the consolidated entity’s operations and its principal activities are included in the Directors’
Report, which is not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of Directors, on 23 August 2017. The Directors
have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective
notes or below. These policies have been consistently applied to all the years presented, except as follows:
Recognition of deferred tax liabilities on indefinite life intangible assets
The IFRS Interpretations Committee (IFRIC) has recently clarified that an intangible asset with an indefinite useful life
is not a non-depreciable asset and that non-amortisation of an intangible asset does not necessarily mean that recovery
of the carrying amount of the intangible asset will be only through sale and not through use.
The Group has recognised brand names on acquisition which are indefinite life intangibles, previously it has been assumed
that recovery of the carrying value of the brand names would be through sale. Given the clarification provided by IFRIC
the Group has elected to change the method of accounting and has determined that the value of the brand names will be
recovered through use on the basis that management expects to hold and consume the brand names until the end of their
lives (even though this point of time is not known).
Given that the brand names were acquired in a business combination, a deferred tax liability is required to be recognised on
these brand names. A deferred tax liability to the value of $2,146,500 has been recognised on brand names; this change has
been adopted retrospectively and adjusted through goodwill recognised on acquisition. There has been no impact on the profit
and loss or the net assets of the Group as a result of this change in accounting policy.
New, revised or amending accounting standards and interpretations adopted
The Group has adopted all of the new, revised or amending accounting standards and interpretations issued by the Australian
Accounting Standards Board (AASB) that are mandatory for the current reporting period.
Any new, revised or amending accounting standards or interpretations that are not yet mandatory have not been early adopted.
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001, as appropriate for
for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards (IFRSs)
as issued by the International Accounting Standards Board (IASB).
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative financial instruments
which have been measured at fair value.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary
information about the parent entity is disclosed in Note 31.
34
35
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 2. Significant accounting policies continued
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Integral Diagnostics Limited
as at 30 June 2017 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to
the Group. They are deconsolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by
the Group.
Where the Group loses control over a subsidiary, it derecognises the assets (including goodwill), liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the
fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss.
Current and non-current classification
Assets and liabilities are presented in the Consolidated Statement of Financial Position based on current and non-current
classification.
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in a normal
operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting
period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is expected to be settled in a normal operating cycle; it is held primarily for the purpose
of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the
settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets
and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which effectively transfer from the lessor to the lessee substantially all the risks
and benefits incidental to the ownership of leased assets, and operating leases, under which the lessor effectively retains
substantially all such risks and benefits.
Finance leases are capitalised. A lease asset and liability are established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are depreciated over the asset’s useful life or over the shorter of the asset’s
useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.
Operating lease payments, net of any incentives received from the lessor, are charged to profit or loss on a straight-line basis
over the term of the lease.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful lives are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use (VIU). The VIU is the present
value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-
generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form
a cash-generating unit.
Rounding of amounts
The Company is of a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’. Amounts in this Report have been rounded off in accordance with that Class Order
to the nearest thousand dollars, or in certain cases, the nearest dollar.
New accounting standards and interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory,
have not been early adopted by the Group for the annual reporting period ended 30 June 2017. The Group’s assessment of
the impact of these new or amended accounting standards and interpretations, most relevant to the Group is set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. For lessee accounting,
the standard eliminates the ‘operating lease’ and ‘finance lease’ classification required by AASB 117 ‘Leases’. Subject to
exceptions, a ‘right-of-use’ asset will be capitalised in the Consolidated Statement of Financial Position, measured as the
present value of the unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term
leases of 12 months or less and leases of low-value assets (such as personal computers and office furniture) where an
accounting policy choice exists whereby either a ‘right-of-use’ asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease prepayments,
lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or dismantling costs.
Straight-line operating lease expense recognition will be replaced with a depreciation charge for the leased asset (included
in operating costs) and an interest expense on the recognised lease liability (included in the finance costs). For classification
within the Consolidated Statement of Cash Flows, the lease payments will be separated into both a principal (financing
activities) and interest (either operating or financing activities) components. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases. The Group will adopt this standard from 1 July 2019. On adoption the
asset and liabilities will be grossed up by the value of leased assets, which the Group is unable to quantify until adoption as
it is dependent on the number of leased properties held at that date, from adoption operating lease costs will be allocated
to amortisation and interest charges which will be below the EBITDA line.
AASB 15 Revenue from contracts with customers
This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single
standard for revenue recognition. The core principle of the standard is that an entity will recognise 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. The standard will require: contracts (either written, verbal or implied)
to be identified, together with the separate performance obligations within the contract; determine the transaction price,
adjusted for the time value of money excluding credit risk; allocation of the transaction price to the separate performance
obligations on a basis of relative stand-alone selling price of each distinct good or service, or estimation approach if no
distinct observable prices exist; and recognition of revenue when each performance obligation is satisfied. Credit risk will be
presented separately as an expense rather than adjusted to revenue. For goods,the performance obligation would be satisfied
when the customer obtains control of the goods. For services, the performance obligation is satisfied when the service has
been provided, typically for promises to transfer services to customers. For performance obligations satisfied over time,
an entity would select an appropriate measure of progress to determine how much revenue should be recognised as the
performance obligation is satisfied. Contracts with customers will be presented in an entity’s statement of financial position
as a contract liability, a contract asset, or a receivable, depending on the relationship between the entity’s performance and the
customer’s payment. Sufficient quantitative and qualitative disclosure is required to enable users to understand the contracts
with customers; the significant judgements made in applying the guidance to those contracts; and any assets recognised from
the costs to obtain or fulfil a contract with a customer. The Group will adopt this standard from 1 July 2018. The changes
in revenue recognition requirements in AASB 15 are not expected to have a significant impact on the timing and amount
of revenue recorded in the financial statements, or result in significant additional disclosures.
36
37
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates
in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events, management
believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations
or some other event.
The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives,
or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated
in Note 13.
The recoverable amounts of cash-generating units have been determined based on VIU calculations. These calculations
require the use of assumptions, including anticipated sales growth, long-term growth rate and the post-tax discount rate.
Sales revenue
Services revenue
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assessed impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves VIU calculations,
in conjunction with the goodwill impairment testing which incorporates a number of key estimates and assumptions.
Other revenue
Other revenue
Fair value gain on aquiition of SWMRI joint venture
Total revenue
Note 4. Operating segments
Identification of reportable operating segments
The Group comprised the single business segment of the operation of diagnostics imaging facilities.
Major customers
During the year ended 30 June 2017, there was no external revenue greater than 10% to any one customer (2016: nil).
Operating segment information
As the Group operates in a single business and geographic segment, these financial statements represent the required
financial information of that segment.
Accounting policy for operating segments
Operating segments are presented using the ‘management approach’, where the information presented is on the same basis
as the internal reports provided to the Chief Operating Decision Makers (CODM) which includes the KMP of the Company. The
CODM is responsible for the allocation of resources to operating segments and assessing their performance.
Note 5. Revenue
Consolidated
30 June 2017
$’000
30 June 2016
$’000
177,710
165,435
2,022
1,200
180,932
2,335
–
167,770
Accounting policy for revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration received or receivable.
Rendering of services
Rendering of services revenue is recognised when the service is rendered for the provision of medical imaging services.
The point of sale is deemed to be at the time the image is taken.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established. Other revenue largely
includes compensation payments received under equipment and leasehold contracts as well as labour cost charges to
hospitals and Government (trainees and paid parental leave).
38
39
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 6. Expenses
Profit before income tax includes the following specific expenses:
Consolidated
30 June 2017
$’000
30 June 2016
$’000
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Office furniture and equipment
Total depreciation
Amortisation
Customer contracts
Total depreciation and amortisation
Transaction costs
Professional fees and other costs on acquisition of South Coast Radiology business and
investment in Lake Imaging Holdings
IPO transaction costs
Fees relating to other transactions
Total transaction costs
Finance costs
Interest and finance charges paid/payable
Funding/establishment costs
Finance costs expensed
1,087
6,242
107
1,751
9,187
644
9,831
–
–
–
–
2,653
188
2,841
751
6,633
104
587
8,075
645
8,720
115
6,321
554
6,990
3,151
182
3,333
Net loss/(gain) on disposal
Net loss/(gain) on disposal of property, plant and equipment
477
177
Employee benefits expense
Employee benefits
Superannuation contributions
Labour supply
Total employee benefits expense
Impairment of asset and restructuring provision
Impairment of asset
Restructuring provision (see Note 17)
Total impairment of asset and restructuring provision expense
88,211
6,032
11,334
105,577
810
298
1,108
79,448
5,477
10,481
95,406
–
–
–
The impaired asset relates to building works conducted on leased land at Port Hedland. As at 30 June 2017 there were
indicators of impairment in regards to the building works based on the level of volumes and revenue the MRI operations
were able to achieve. Impairment testing was undertaken in accordance with the requirements of AASB 136 ‘Impairment
of assets’ and it was determined that the carrying value of the asset could not be supported through a VIU or fair value less
costs to sell methodology in accordance with Australian Accounting Standards and as such the Group has determined that the
infrastructure asset supporting the Mobile MRI is impaired as at 30 June 2017. The Mobile MRI is not considered impaired as
it can be easily re-located to another site and its carrying value can be supported through both a VIU and fair value less costs
to sell valuation methodology.
Minimum lease payments recognised as operating lease expense were $8,683,000 (2016: $8,316,000). Costs of inventories
recognised as expense were $8,850,000 (2016: $8,365,000).
Accounting policy for finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed
in the period in which they are incurred.
Note 7. Income tax expense
Income tax expense
Current tax
Deferred tax – origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense
Deferred tax included in income tax expense comprises:
Decrease/(increase) in deferred tax assets (Note 14)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
Tax at the statutory rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment costs
Fair value gain
Fixed asset variance
Transactions costs deducted in equity
Adjustment recognised for prior periods
Income tax expense
Consolidated
30 June 2017
$’000
30 June 2016
$’000
6,170
(208)
(133)
5,829
6,517
(1,545)
90
5,062
(208)
(1,545)
21,309
16,450
6,393
4,935
21
(360)
76
(168)
5,962
(133)
5,829
19
–
–
18
4,972
90
5,062
Accounting policy for income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable
income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary
differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Note 8. Current assets – cash and cash equivalents
Cash on hand
Cash at bank
Consolidated
30 June 2017
$’000
14
24,196
24,210
30 June 2016
$’000
15
23,605
23,620
Accounting policy for cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes in value.
40
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 9. Current assets – trade and other receivables
Note 10. Current assets – other
Trade receivables
Less: Provision for impairment of receivables
Other receivables
Impairment of receivables
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provisions recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
30 June 2017
$’000
4,975
(137)
4,838
30 June 2016
$’000
5,199
(63)
5,136
311
5 ,149
408
5,544
Consolidated
30 June 2017
$’000
63
127
(53)
137
30 June 2016
$’000
88
66
(91)
63
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $986,000 as at 30 June 2017
($1,812,000 as at 30 June 2016).
The Group did not consider there was a credit risk on the aggregate balances after reviewing the credit terms of customers
based on recent collection practices.
The ageing of the past due but not impaired receivables are as follows:
Past due 31 to 60 days
Past due 61 to 90 days
Past due more than 91 days
Consolidated
30 June 2017
$’000
367
210
409
986
30 June 2016
$’000
1,278
164
370
1,812
Accounting policy for trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days.
Due to the short-term nature of these receivables, their carrying amount is assumed to approximate fair value.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when there is objective
evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant
financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or
delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable may be impaired.
The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of
estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables
are not discounted if the effect of discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
Accrued revenue
Prepayments
Security deposits
Other current assets
Note 11. Inventory
Film, contrast, drugs and needles
Consolidated
30 June 2017
$’000
1,248
2,200
56
10
3,514
30 June 2016
$’000
745
1,584
43
78
2,450
Consolidated
30 June 2017
$’000
393
393
30 June 2016
$’000
333
333
Accounting policy for inventory
Inventory is valued at the lower of cost and net realisable value. Inventory has been recognised based on categories
of high-value items used in the production of medical images that the Company holds in large volumes including film,
contrast, drugs and needles. Costs of inventories recognised as an expense was $8,850,000 (2016: $8,365,000).
Note 12. Non-current assets – property, plant and equipment
Leasehold improvements – at cost
Less: Accumulated depreciation
Plant and equipment – at cost
Less: Accumulated depreciation
Motor vehicles – at cost
Less: Accumulated depreciation
Office furniture and equipment – at cost
Less: Accumulated depreciation
Consolidated
30 June 2017
$’000
15,752
(4,793)
10,959
30 June 2016
$’000
14,055
(3,811)
10,244
57,612
(22,945)
34,667
466
(372)
94
9,310
(4,507)
4,803
52,660
(20,439)
32,221
418
(280)
138
7,854
(3,828)
4,026
50,523
46,629
42
43
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 12. Non-current assets – property, plant and equipment continued
Note 13. Non-current assets – intangibles
Reconciliations
(a) Reconciliations of the written down values of property, plant and equipment at the beginning and end of the current and
previous financial year are set out below:
Consolidated
Balance at 1 July 2015
Additions
Disposals
Depreciation expense
Balance at 30 June 2016
Additions
Disposals/write-offs
Depreciation expense
Balance at 30 June 2017
Leasehold
improvements
$’000
6,616
4,419
(40)
(751)
10,244
2,612
(810)
(1,087)
10,959
Plant and
equipment
$’000
27,542
11,858
(546)
(6,633)
32,221
9,188
(500)
(6,242)
34,667
Motor
vehicles
$’000
242
–
–
(104)
138
Office furniture
and equipment
$’000
3,559
1,245
(191)
(587)
4,026
63
–
(107)
94
2,618
(90)
(1,751)
4,803
Total
$’000
37,959
17,522
(777)
(8,075)
46,629
14,481
(1,400)
(9,187)
50,523
(b) Property, plant and equipment includes the following amounts where the Group is a lessee under a finance lease at the
beginning and end of the current and previous financial year are set out below:
Consolidated
Net book value at 30 June 2016
Leasehold
improvements
$’000
4,065
Plant and
equipment
$’000
26,318
Motor
vehicles
$’000
116
Office furniture
and equipment
$’000
355
Total
$’000
30,854
Net book value at 30 June 2017
4,562
29,941
102
568
35,173
Property, plant and equipment secured under finance leases
Refer to Note 19 for further information on property, plant and equipment secured under finance leases.
Accounting policy for property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Motor vehicles
5 – 20 years
4 – 15 years
5 – 8 years
Office furniture and equipment
3 – 15 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.
Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets,
whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Goodwill – at cost
Brand names – at cost
Customer contracts – at cost
Less: Accumulated amortisation
Consolidated
30 June 2017
$’000
96,387
30 June 2016
$’000
91,851
7,155
7,000
2,456
(2,077)
379
2,456
(1,435)
1,021
103,921
99,872
Reconciliations
Reconciliations of the written-down values at the beginning and end of the current and previous financial year are set out below:
Consolidated
Balances at 1 July 2015
Adjustment for change in accounting policy *
Amortisation expense
Balance at 30 June 2016
Additions through business combinations (Note 32)
Amortisation expense
Goodwill
$’000
89,704
2,147
–
91,851
4,536
–
Brand
names
$’000
7,000
–
–
7,000
155
–
Customer
contracts
$’000
1,668
–
(647)
1,021
-
(642)
Total
$’000
98,372
2,147
(647)
99,872
4,691
(642)
Balance at 30 June 2017
96,387
7,155
379
103,921
* Restated for change in accounting policy $2,147,000 DTL recognised on brand names retrospectively.
Impairment test for goodwill and intangibles
Goodwill and brand names are tested for impairment annually (as at 30 June) and when circumstances indicate the carrying
value may be impaired. The Group’s impairment test for goodwill and intangible assets with indefinite lives is based on VIU
calculations.
For the year ended 30 June 2016 the Group identified three cash-generating units to which goodwill was applied. Management
have undertaken a review of the judgements used to determine the allocation of goodwill to individual cash-generating units
and have concluded that given the change in the structure and operations of the Group since initial acquisition of the individual
businesses and, given the synergies now being delivered and the opportunities available to the Group from the amalgamation of
the businesses as a whole, from 1 July 2016 goodwill forms one cash-generating unit for impairment testing purposes, which
is in line with the operating segment identified in Note 3.
44
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 13. Non-current assets – intangibles continued
Goodwill allocation
CGU:
South Coast Radiology
Lake Imaging
Global Diagnostics (Australia)
Consolidated CGU
Consolidated
30 June 2017
$’000
30 June 2016
$’000
–
–
–
96,387
78,420
6,330
4,954
89,704
Brand names of $7,000,000 are included within the SCR CGU and $155,000 included within the Lake Imaging CGU.
Key assumptions for VIU calculations
The recoverable amount of each CGU is determined based on VIU calculations which require the use of assumptions. The
calculations use cash flow projections based on financial budgets approved by management. Cash flows beyond the five-year
period are extrapolated using the estimated growth rates stated below. These growth rates do not exceed the average growth
rates for the industry in which the Group operates.
The following table sets out the key assumptions for impairment testing:
2017 – Long-term growth rate
2017 – Pre-tax discount rate
2016 – Long-term growth rate
2016 – Pre-tax discount rate
%
3.0
15.4
3.0
14.8
Within the VIU calculation for the five-year forecast period revenues have been forecast to grow between 3.0%–6.5% (2016:
4.2%–4.7%) and 3% (2016: 3%) into perpetuity. The forecast cash flows also include ongoing investment in property, plant and
equipment to maintain the existing base and in 2018 to invest in further technology and expansion.
The pre-tax discount rate would need to increase by more than 8.1% or the growth rate decline by more than 1.0% in the
five-year forecast period and into perpetuity for there to be any impairment of the goodwill balances.
Should managements judgement in regards in the allocation of goodwill to cash-generating units for the purpose of
impairment testing not have changed and goodwill and intangible assets with indefinite lives were tested for impairment as
allocated to the separate cash-generating units as outlined in the 2016 Annual Report and in accordance with the updated
assumptions as outlined above, no impairment for goodwill and intangibles with indefinite lives would have been identified.
Accounting policy for intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less an impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying
amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in
the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment,
or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed.
Brand names
Significant costs associated with brand names are not amortised but are tested for impairment annually on the same basis
and within the same VIU calculation as outlined above and are carried at cost.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite useful lives of between one and four years. The contracts consist of Global Diagnostics
(Australia), a 100% owned subsidiary of the Company, providing radiology reporting services to the Western Australia Country
Health Service in the Pilbara, Wheatbelt and Goldfield regions.
Note 14. Non-current assets – deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Employee benefits and other provisions
Provisions for lease make good
Provision for restructuring
Operating lease borrowings
Transaction costs
Impaired asset
Property, plant and equipment
Brand names (change in accounting policy)
Tax losses available
Intangible assets
Operating lease
Consolidated
30 June 2017
$’000
30 June 2016*
$’000
4,325
621
89
36
1,813
243
(2,355)
(2,147)
54
(114)
110
3,557
519
–
119
2,486
–
(1,784)
(2,147)
-
(306)
213
Net deferred tax asset
2,675
2,657
Amount expected to be recovered within 12 months
Amount expected to be recovered after more than 12 months
Amount expected to be settled within 12 months
Amount expected to be settled after more than 12 months
Movements:
Opening balance
Credited to profit or loss (Note 7)
Credited to equity
Fixed asset variance
Additions through business combinations (Note 32)
Closing balance
*Restated for change in accounting policy $2,147 DTL recognised on brand names retrospectively.
2,457
4,834
(355)
(4,261)
2,675
2,657
208
(168)
(76)
54
2,675
3,416
3,479
(280)
(3,958)
2,657
3,259
1,545
–
–
(2,147)
2,657
46
47
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 14. Non-current assets – deferred tax continued
Note 16. Current liabilities – borrowings
Accounting policy for deferred tax
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the
assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
• when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing
of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future
taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax
assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the
carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable
that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against
current tax liabilities and deferred assets against deferred tax liabilities; and they relate to the same taxable authority on
either the same taxable entity or different taxable entities which intend to settle simultaneously.
Integral Diagnostics Limited (the ‘head entity’) and its wholly owned Australian subsidiaries have formed an income tax-
consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax-consolidated group
continue to account for their own current and deferred tax amounts. The tax-consolidated group has applied the ‘separate
taxpayer within group’ approach in determining the appropriate amount of taxes to allocate to members of the tax-consolidated
group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary
in the tax-consolidated group.
Assets or liabilities arising under tax funding agreements with the tax-consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax-consolidated group. The tax-consolidated group has a tax sharing
agreement in place to limit the liability of subsidiaries in the tax-consolidated group, arising under the joint and several
liability provisions of the tax consolidation system, in the event of default by the head entity to meet its payment obligations.
Note 15. Current liabilities – trade and other payables
Trade payables
Other payables and accruals
Consolidated
30 June 2017
$’000
3,316
5,024
8,340
30 June 2016
$’000
4,132
6,265
10,397
Refer to Note 25 for further information on financial instruments.
Accounting policy for trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. They are recognised at their fair value. The amounts are unsecured and are usually paid within 30 days
of recognition. Due to the short-term nature of these payables, their carrying amount is assumed to approximate fair value.
Borrowings
Lease liability
Consolidated
30 June 2017
$’000
18
11,477
11,495
30 June 2016
$’000
17
6,745
6,762
Refer to Note 19 for further information on assets pledged as security and financing arrangements.
Refer to Note 25 for further information on financial instruments.
Note 17. Current liabilities – provisions
Annual leave
Long service leave
Employee benefits
Restructuring provision
Consolidated
30 June 2017
$’000
5,494
4,645
213
298
10,650
30 June 2016
$’000
5,051
4,225
243
–
9,519
Accounting policy for employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled
within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.
The leave obligations cover the Group’s liability for long service leave, annual leave and rostered days off. The current
portion of this liability includes all accrued annual leave, the unconditional entitlements to long service leave where
employees have completed the required period of service and also those where employes are entitled to pro-rata payments
in certain circumstances.
Accounting policy for restructuring provisions
Restructuring provisions are recognised only when a detailed formal plan identifies the business or part of the business
concerned, the location and number of employees effected, a detailed estimate of associated costs, and an appropriate
timeline, and the business has been notified of the plan’s main features.
The restructuring provision of $298,000 relates to the recommission costs of the Port Hedland site where the Mobile
MRI was located. Given the poor performance of the Mobile MRI in Port Hedland it has been determined that the Mobile MRI
will be re-located to an alternative location where volumes are expected to deliver the utilisation levels and returns required.
Costs included within the restructuring provision include lease and electricity contract break costs and repatriation of the site
on which the impaired infrastructure asset is located.
48
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 18. Current liabilities – Derivative financial instrument
Derivative financial instrument
Note 19. Non-current liabilities – borrowings
Borrowings
Lease liability
Refer to Note 25 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Borrowings
Lease liability
Consolidated
30 June 2017
$’000
59
30 June 2016
$’000
–
Consolidated
30 June 2017
$’000
43,750
17,647
61,397
30 June 2016
$’000
40,373
21,408
61,781
Consolidated
30 June 2017
$’000
43,768
29,124
72,892
30 June 2016
$’000
40,390
28,153
68,543
Assets pledged as security
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the Consolidated Statement
of Financial Position, revert to the lessor in the event of default.
Financial arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Equipment finance facility
Cash advance facility
Cash advance facility
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Used at the reporting date
Equipment finance facility
Cash advance facility
Cash advance facility
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Unused at the reporting date
Equipment finance facility
Cash advance facility
Cash advance facility
Multi-option facility
Standby letter of credit or guarantee facility
Commercial cards facility
Electronic payaway facility
Consolidated
30 June 2017
$’000
30 June 2016
$’000
15,900
10,500
50,250
15,000
2,000
600
3,075
97,325
15,900
10,500
33,250
10,167
1,406
30
3,075
74,328
–
–
17,000
4,833
594
570
–
22,997
15,900
10,500
50,250
15,000
2,000
300
3,075
97,025
14,407
10,500
30,250
10,310
1,567
30
3,075
70,139
1,493
–
20,000
4,690
433
270
–
26,886
Accounting policy for borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are
subsequently measured at amortised cost using the effective interest method. Under the current lending arrangement the
facilities expire in September 2018, and the Company are currently in the process of reviewing the facilities arrangements
with the Company current lender and expect to have renewed terms and conditions prior to 31 December 2017 to ensure
the Company meet the requirements of Australian Accounting Standards and can continue to classify the debt as non-
current for the Company half-year accounts.
50
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 20. Non-current liabilities – provisions
Note 21. Equity – contributed capital
Long service leave
Deferred rent liability
Lease make good
Consolidated
30 June 2017
$’000
1,704
2,172
4,250
8,126
30 June 2016
$’000
1,592
1,717
3,945
7,254
Ordinary shares – fully paid
Movements in ordinary share capital
Consolidated
Consolidated
30 June 2017
shares
145,044,157
30 June 2016
shares
144,136,101
30 June 2017
$’000
83,866
30 June 2016
$’000
82,760
Deferred rent liability
Deferred rent liabilities relate to property leases where rent increases prescribed in leases are based on fixed percentage
increases, and/or where leases include a rent-free period or other lease incentives. The liability represents the difference
between actual rental costs incurred per terms of leases, and calculated expense if the total estimated rental expense
over the period of the lease was expensed evenly over the expected term of the lease. The liability reflects that as of the
date of this Report, the calculated expense (if the total estimated rental expense was expensed evenly over the expected
term of the lease) is greater than actual costs incurred to date. The total liability is expected to fluctuate over time reflecting
the cumulative calculations of individual leases. For individual leases, any liability will unwind over the period of the lease.
Lease make good
The provision represents the present value of the estimated costs to make good the premises leased by the Group at the end
of the respective lease terms. Property lease agreements include various obligations at the end of the respective lease terms,
such as removal of tenant installations and making good any damage caused by installation or removal, removing signage,
and other general maintenance obligations (e.g. painting, cleaning). These costs have been estimated for each location, based
on specific terms of individual leases, size of the individual sites, and historical experience of costs incurred when vacating a site.
Movements in provisions
Movements in each class of provision during the financial year, other than employee benefits, are set out below:
Consolidated – 2017
Carrying amount at the start of the year
Additional provisions
Amounts used
Carrying amount at the end of the year
Deferred rent
liability
$’000
Lease
make good
$’000
1,717
631
(176)
2,172
3,945
310
(5)
4,250
Accounting policy for provisions
Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable
the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at
the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is
material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting
from the passage of time is recognised as a finance cost.
Accounting policy for other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured as the present value of expected future payments to be made in respect of services provided by employees up to
the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields at
the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated
future cash outflows.
Details
Balance
Issue of shares on exercise of options
Share split prior to Initial Public Offering
Issue of shares in Initial Public Offering
Issue of shares to employees in Initial Public Offering
Discount on employee share offer
Less: Share issue transaction costs net of tax
Balance
Shares issued as part of acquisition (Note 32)
Reversal of DTA on transaction costs in equity
Date
30 June 2015
30 September 2015
30 September 2015
21 October 2015
21 October 2015
21 October 2015
30 June 2016
1 July 2016
Number of shares
4,219,468
5,380
122,520,592
17,143,244
247,417
–
–
144,136,101
908,056
–
Issue price
$36.06
$0.00
$1.91
$1.72
$0.00
Balance
30 June 2017
145,044,157
$’000
50,743
194
–
32,744
426
47
(1,394)
82,760
1,275
(169)
83,866
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion
to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company
does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share
shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The Group’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide
returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost
of capital.
Capital is regarded as total equity, as recognised in the Consolidated Statement of Financial Position, plus net debt. Net debt
is calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, adjustments may be made to the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
52
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 21. Equity – contributed capital continued
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current company’s share price at the time of the investment. The Group is not actively pursuing additional
investments in the short term, as it continues to integrate and grow its existing businesses in order to maximise synergies.
The Group is subject to certain financing arrangement covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
Accounting policy for contributed capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Note 22. Equity – reserves
Share-based payments reserve
Capital reorganisation reserve
Transactions with non-controlling interest
Share-based payments reserve
Consolidated
30 June 2017
$’000
–
(3,849)
(8,013)
(11,862)
30 June 2016
$’000
–
(3,849)
(8,013)
(11,862)
The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their
remuneration, and as part of their compensation for services.
Capital reorganisation reserve
The reserve is used to account for historical capital reorganisation of the Lake Group whereby the assets and liabilities
of the acquired party are recorded at their previous book values and no goodwill is recognised. Any difference between
the cost of the transaction and the carrying amount of the assets and liabilities are recorded directly in this reserve.
Transactions with non-controlling interest
Transactions with non-controlling interest reserve is used to record the differences arising as a result of transactions
with non-controlling interests that do not result in a loss of control.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Consolidated
Balance at 30 June 2015
Recognition of share-based payments
Issue of shares to employees
Net movement on transactions with non-controlling interest
(Note 32)
Balance at 30 June 2016
Balance at 30 June 2017
Share-based
payments
reserve
$’000
128
66
(194)
Capital
reorganisation
reserve
$’000
(3,849)
–
–
Transactions
with non-
controlling
interest
$’000
(6,816)
–
–
–
–
–
–
(3,849)
(3,849)
(1,197)
(8,013)
(8,013)
Total
$’000
(10,537)
66
(194)
(1,197)
(11,862)
(11,862)
Note 23. Equity – retained profits
Retained profits at the beginning of the financial year
Profit after income tax expense for the year
Dividend paid (Note 24)
Retained profits at the end of the financial year
Note 24. Equity – dividends
Dividends
Dividends paid during the financial year were as follows:
Dividend paid 4 cents per share on 4 October 2016
Dividend paid 3 cents per share on 30 March 2017
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
Consolidated
30 June 2017
$’000
13,022
15,480
(10,154)
18,348
30 June 2016
$’000
1,634
11,388
–
13,022
Consolidated
30 June 2017
$’000
5,803
4,351
10,154
30 June 2016
$’000
–
–
–
Consolidated
30 June 2017
$’000
17,838
30 June 2016
$’000
14,714
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
• franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date;
• franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
• franking credits that will arise from the receipt of dividends recognised as receivables at the reporting.
Accounting policy for dividends
Dividends are recognised when declared during the financial year and payment is no longer at the discretion of the Company.
54
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 25. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different
types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, ageing analysis
for credit risk and beta analysis in respect of investment portfolios to determine market risk.
Risk management is carried out by senior financial Executives (‘finance’) under policies approved by the Board of Directors
(‘the Board’). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures,
controls and risk limits. Finance reports to the Board on a monthly basis.
Market risk
Interest rate risk
The Group’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Group to interest
rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The policy has been to maintain
approximately 25% of borrowings at fixed rates using interest rate swaps to achieve this when necessary.
As at the reporting date, the Group had the following interest-bearing financial assets and liabilities:
Consolidated
Cash at bank and on deposit
Borrowings
Finance leases
Interest rate swaps (notional principal amount)
Net exposure to cash flow interest rate risk
2017
2016
Weighted
average
interest rate
%
1.5
3.8
4.0
3.1
Weighted
average
interest rate
%
1.6
4.5
4.9
3.1
Balance
$’000
24,210
(43,750)
(29,124)
(59)
(48,723)
Balance
$’000
23,620
(40,250)
(28,153)
(365)
(45,148)
An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below.
If interest rates were to increase/decrease by 100 (2016: 100) basis points from rates used to determine fair values as at
the reporting date, assuming all other variables that might impact on fair value remain constant, then the impact on profit
for the year and equity would be as follows:
Basis points increase
effect on
Profit before
tax
Effect on equity
post tax
Basis points
change
Basis points decrease
effect on
Profit before
tax
Effect on equity
post tax
Basis points
change
Consolidated –2017
Impact
Consolidated – 2016
Impact
100
100
485
536
339
375
100
100
(485)
(536)
(339)
(375)
56
Credit risk
Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to
the Group. Credit risk for cash deposits is managed by holding all cash deposits with major Australian banks. Credit risk
for trade receivables is managed by completing credit checks for new customers. Outstanding receivables are regularly
monitored for payments in accordance with credit terms. The maximum exposure to credit risk at the reporting date to
recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed
in the Consolidated Statement of Financial Position and notes to the financial statements. The Group does not hold
any collateral.
The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial
instruments entered into by the Group.
The credit risk for derivative financial instruments arises from the potential failure of the counter-party to meet its
obligations. The credit risk exposure of forward contracts is the net fair value of these contracts.
Liquidity risk
Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents)
and available borrowing facilities to be able to pay debts as and when they become due and payable.
The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities.
Fair value risk
The only item held at fair value in the financial statements is an interest rate derivative which is considered immaterial
and as such no further disclosure in relation to fair value has been made.
Subject to the continuance of satisfactory credit ratings and compliance with banking covenants, the bank loan facilities may
be drawn at any time and have a maturity of one year and three months (2016: two years and three months). The bank loan
facilities are interest-only repayments.
Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial
liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the Statement of Financial Position.
Consolidated – 2017
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing – variable
Borrowings
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
Weighted
average
interest
rate
%
1 year or
less
$’000
Between
1 and
2 years
$’000
Between
2 and
5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
44,185
12,099
56,284
–
–
–
–
-
6,479
6,479
–
–
–
–
–
–
–
–
–
3,316
5,024
45,852
30,595
84,787
59
59
–
–
3.8
4.0
3.1
3,316
5,024
1,667
12,017
22,024
59
59
57
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 25. Financial instruments continued
Consolidated – 2016
Non-derivatives
Non-interest
Bearing trade
Other payables
Contingent consideration
Interest-bearing – variable
Borrowings
Lease liability
Total non-derivatives
Derivatives
Interest rate swaps net settled
Total derivatives
Weighted
average
interest
rate
%
1 year or
less
$’000
Between
1 and
2 years
$’000
Between
2 and
5 years
$’000
Over
5 years
$’000
Remaining
contractual
maturities
$’000
–
–
–
4.5
4.9
3.1
4,132
6,265
–
1,997
7,930
20,324
324
324
–
–
–
1,997
10,550
12,547
41
41
–
–
–
41,433
11,717
53,150
–
–
–
–
–
–
–
–
–
–
4,132
6,265
–
45,427
30,197
86,021
365
365
Note 28. Contingent liabilities
The Group has given bank guarantees as at 30 June 2017 of $1,400,000 (2016: $1,300,000) to various landlords.
Note 29. Commitments
Lease commitments – operating
Within one year
One to five years
More than five years
Lease commitments – finance
Committed at the reporting date and recognised as liabilities, payable:
Within one year
One to five years
Total commitment
Less: Future finance charges
Consolidated
30 June 2017
$’000
30 June 2016
$’000
7,874
14,896
2,811
25,581
12,017
18,578
30,595
(1,471)
7,574
20,956
3,465
31,995
7,930
22,267
30,197
(2,044)
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Net commitment recognised as liabilities
29,124
28,153
Note 26. Key management personnel disclosures
Compensation
The aggregate compensation paid to Directors and other members of the key management personnel of the Group is set
out below:
Representing:
Lease liability – current (Note 16)
Lease liability – non-current (Note 19)
11,477
17,647
6,745
21,408
29,124
28,153
Short-term employee benefits
Consolidated
30 June 2017
$
3,056,941
3,056,941
30 June 2016
$
3,197,896
3,197,896
Note 27. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by PricewaterhouseCoopers, the auditor
of the Company:
Audit services – PricewaterhouseCoopers
Audit and review of the financial statements
Other services – PricewaterhouseCoopers
Due diligence
Tax compliance services
Tax advice relating to corporate structuring
Consolidated
30 June 2017
$
30 June 2016
$
214,925
204,545
–
31,562
–
246,487
427,273
42,727
126,364
800,909
Under the terms of the leases, the Group has the option to acquire the leased assets for predetermined residual values on the
expiry of the leases.
As at 30 June 2017, there were outstanding capital commitments for plant and equipment of $3,600,000 (2016: $300,000).
Note 30. Related party transactions
Parent entity
Integral Diagnostics Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in Note 33.
Key management personnel
Disclosures relating to key management personnel are set out in Note 26 and the Remuneration Report on pages 14 to 21.
58
59
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 30. Related party transactions continued
The following transactions occurred with related parties:
Other income:
Management fee received from South West MRI Pty Ltd, a joint venture entity
Payment for goods and services:
Consulting fees paid to Helen Kurincic, a Director of the Group
Consulting fees paid to Garry Hounsell, a Director of the Group
Consulting fees paid to John Atkin, a Director of the Group
Radiology services provided to South West MRI Pty Ltd a joint venture entity
Cleaning fees paid to GJJ Hughes of which Gregory Hughes is related to
Other transactions:
Payment for rental of buildings to Eleven Eleven How Pty Ltd of which Chien Ping Ho,
John Livingston, Gregory Hughes and Craig Bremner are related to
Payment for rental of buildings to Perhaps Holdings Pty Ltd of which Chien Ping Ho
and John Livingston are related to
Payment for rental of buildings to Kiwi Blue Pty Ltd of which Chien Ping Ho
and John Livingston are related to
Subscription for new ordinary shares by John Atkin, a Director of the Group
Subscription for new ordinary shares by Rupert Harrington, a Director of the Group
Consolidated
30 June 2017
$
30 June 2016
$
–
142,383
–
–
–
–
12,500
60,000
25,000
25,000
291,887
17,800
391,934
592,166
44,120
65,391
225,307
–
–
193,182
175,000
249,656
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables:
Trade receivables from related parties
Consolidated
30 June 2017
$’000
30 June 2016
$’000
54
155
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Note 31. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of Profit or Loss and Other Comprehensive Income
Profit after income tax
Total comprehensive income
The parent has paid $10,154,000 in dividends during the year.
Statement of Financial Position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed capital
Share-based payments reserve
Retained profits
Total equity
Parent
30 June 2017
$’000
16,700
30 June 2016
$’000
8,446
16,700
8,446
Parent
30 June 2017
$’000
23,759
30 June 2016
$’000
11,114
142,779
132,839
222
807
43,844
41,557
83,866
–
15,069
82,760
–
8,522
98,935
91,282
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity is party to the deed of cross guarantee, as disclosed in Note 34.
Contingent liabilities
Except as disclosed in Note 28, there are no other contingent liabilities of the parent entity as at 30 June 2017 and 30 June 2016.
Capital commitments – property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2017 and 30 June 2016.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in Note 2, except for the following:
• investments in subsidiaries are accounted for at cost, less an impairment, in the parent entity;
• investments in associates are accounted for at cost, less any impairment, in the parent entity; and
• dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator
of an impairment of the investment.
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61
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Note 32. Business combinations
On 1 July 2016, the Group acquired the assets and liabilities of the Western District Radiology business and the remaining 50%
interest in South West MRI Pty Ltd (collectively known as the WDR/SWMRI acquisition) for the total consideration transferred
of $4,954,000 inclusive of GST. This acquisition complements the Group’s strengths and further strengthens the Group’s position
in the south-west region of Victoria and will be integrated into the Group so as the maximum synergies can be obtained.
The business of South West MRI Pty Ltd was valued at $2,400,000 immediately prior to acquisition, the value of the 50% interest
held previously immediately prior to acquisition was $2,000 resulting in the recognition of a $1,200,000 gain as a result
of re-measuring to fair value the equity interest held in South West MRI Pty Ltd. This amount was recognised in other income
in the Statement of Profit and Loss as at 1 July 2016 and in goodwill. The share of plant and equipment $453,000 and debt
assumed $389,000 will result in net assets of $65,000 being booked, which will reduce goodwill by $65,000.
Details of the acquisition are as follows:
1 July 2016
Plant and equipment
Brand name
Other assets
Employee benefits
Lease make good provision
Debt assumed
GST on acquisition
Net assets acquired
Fair value gain on acquisition of SWMRI Pty Ltd joint venture
Goodwill
Acquisition date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor (including GST)
Contingent consideration
Integral Diagnostics Limited shares issued to vendor
Cash used to acquire business, net of cash acquired:
Acquisition date fair value of the total consideration transferred
Less: 908,056 shares issued by Company (at fair value of $1.4041 per share) as part of consideration
Less: Contingent consideration
Net cash used
Recognised on
acquisition
fair value
$’000
1,968
155
106
(229)
(100)
(767)
485
1,618
(1,200)
4,536
4,954
3,529
150
1,275
4,954
4,954
(1,275)
(150)
3,529
Total goodwill to be booked on the transaction $3,401,000 relating to the acquisition, $1,200,000 relating to the fair value uplift
on existing interest less $65,000 on recognition of 50% of net assets in SWMRI, totalling goodwill of $4,536,000. The goodwill
recognised is primarily attributed to the expected synergies and other benefits from combining the assets and activities
of SWMRI/WDR with those of the Group. The goodwill is not deductible for income tax purposes.
Contingent consideration payable is a maximum amount of $150,000 and is dependent on a range of performance hurdles
over a two-year period, with payments required six-monthly. On acquisition it was considered that all performance hurdles
would be met and the contingent consideration would be payable. As at 30 June 2017, $50,000 of the deferred consideration
has been paid, $30,000 in cash and $20,000 offset against the amount owing by the vendor on settlement of the completion
statement. On 3 August 2017 a further $25,000 was paid.
From the date of acquisition, which was the beginning of the period, SWMRI/WDR has contributed $4,755,000 of revenue
and $2,405,000 (prior to any corporate overhead allocations) to the net profit before tax from the continuing operations
of the Group.
Transaction costs of $180,000 were expensed in the Statement of Profit and Loss for the year ended 30 June 2016 and were
part of the operating cash flows in the statement of cash flows.
Accounting policy for business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or
accounting policies and other pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the Group measures its previously held equity interest in the acquiree
at the acquisition date fair value and the difference between and fair value and the previous carrying amount is recognised
in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity.
The difference between the acquisition date fair value of assets acquired, liabilities assumed and any non-controlling interest
in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the
acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value
of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly
in profit or loss by the acquirer on the acquisition date but only after a reassessment of the identification and measurement
of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s
previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional
amounts recognised and also recognises additional assets and liabilities during the measurement period, based on new
information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends
on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer received all the information
possible to determine fair value.
Business combinations under common control use the principals of corporate reorganisation. The difference between the
acquisition-date historical book value of assets acquired, liabilities assumed and any non-controlling interest in the acquired
and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised
as a capital reorganisation in reserves, and not as goodwill.
62
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics Notes to the Financial Statements continued
Note 33. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in Note 2:
Note 35. Interests in joint ventures
Interest in joint ventures are accounted for using the equity method of accounting. Information relating to joint ventures are
set out below:
Lake Imaging Pty Ltd
Radploy Pty Ltd
Radploy 2 Pty Ltd
Radploy 3 Pty Ltd
Radploy 4 Pty Ltd
Global Diagnostics (Australia) Pty Ltd
SCR Corporate Pty Ltd
RAD Corporate Pty Ltd
Principal place of business/
country of incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2017
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
2016
%
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
Note 34. Deed of cross guarantee
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
• Integral Diagnostics Limited (formerly known as Lake Imaging Holdings Pty Ltd)
• Lake Imaging Pty Ltd
• Radploy Pty Ltd
• Radploy 2 Pty ltd
• Radploy 3 Pty Ltd
• Radploy 4 Pty Ltd
• Global Diagnostics (Australia) Pty Ltd
• SCR Corporate Pty Ltd
• RAD Corporate Pty Ltd
By entering into the deed, the wholly owned entities have been relieved from the requirement to prepare financial statements
and a Directors’ Report under the ASIC Corporations Instrument issued by the Australian Securities and Investments
Commission (ASIC).
The above companies represent a ‘closed group’ for the purposes of the Class Order, and as there are no other parties to the
deed of cross guarantee that are controlled by Integral Diagnostics Limited, they also represent the ‘extended closed group’.
The Statement of Profit or Loss and Other Comprehensive Income and Statement of Financial Position are the same as the
Group’s and therefore have not been separately disclosed.
South West MRI Pty Ltd
Principal place of business/
country of incorporation
Australia
Ownership interest
2017
%
–
2016
%
50.00
As a result of the acquisition, South West MRI Pty Ltd has been dissolved effective 12 July 2017 and no longer exists. Lake
Imaging Holdings Pty Ltd owned 50% (100 ordinary shares) of South West MRI Pty Ltd, a company set up to provide magnetic
resonance imaging (MRI) and associated services. Rafferty Rogan and Houghton Pty Ltd, in its capacity as Trustee for the
Ultrasound Service Unit Trust (‘Western District Radiology’) owns the other 50% (100 ordinary shares).
Accounting policy for joint ventures
A joint venture is a form of joint arrangement whereby the parties that have joint control of the arrangement have rights to
the net assets of the arrangement. Investments in joint ventures are accounted using the equity method. Under the equity
method, the share of the profits or losses of the joint venture is recognised in profit or loss and the movements in equity is
recognised in other comprehensive income. Investments in joint ventures are carried in the Statement of Financial Position
at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. Goodwill relating to the joint
venture is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment.
Income earned from joint venture entities reduce the carrying amount of the investment.
Note 36. Reconciliation of profit after income tax to net cash from operating activities
Profit after income tax
Adjustments for:
Depreciation and amortisation
Loan establishment costs amortisation
Net loss on disposal of property, plant and equipment
Impairment of asset
Share of profit – associates
Share-based payments
Tax included in equity
Fair value gain on acquisition of SWMRI Pty Ltd
Financial liability fair value movement through profit and loss
Interest income
IPO transaction costs included in financing activities
Change in operating assets and liabilities:
Increase in trade and other receivables
Increase in deferred tax assets
Increase in other operating assets and inventory
Increase/(decrease) in trade and other payables
Increase/(decrease) in provision for income tax
Increase /(decrease) in other provisions
Consolidated
30 June 2017
$’000
15,480
30 June 2016
$’000
11,388
9,830
188
477
810
-
-
-
(1,200)
(306)
(370)
-
(108)
(208)
(622)
(1,302)
1,448
(1,387)
8,720
180
176
-
(2)
113
440
-
(86)
(263)
6,272
(754)
(1,545)
(718)
1,575
(1,619)
178
Net cash from operating activities
22,730
24,055
64
65
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Notes to the Financial Statements continued
Directors’ Declaration
Note 37. Earnings per share
In the Directors’ opinion:
Profit after income tax
Non-controlling interest
Profit after income tax attributable to the owners of Integral Diagnostics Limited
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Weighted average number of options over ordinary shares
Weighted average number of ordinary shares used in calculating diluted earnings per share
Basic earnings per share
Diluted earnings per share
Consolidated
30 June 2017
$’000
15,480
–
15,480
30 June 2016
$’000
11,388
–
11,388
Number
145,044,157
Number
138,726,283
-
145,044,157
–
138,726,283
Cents
10.67
10.67
Cents
8.2
8.2
The weighted average number of ordinary shares for the comparative period has been adjusted for the 29 for one share split
that occurred on 30 September 2015.
Accounting policy for earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Integral Diagnostics Limited,
excluding any costs of servicing equity other than ordinary shares, by weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
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.
Note 38. Events after the reporting period
Subsequent to year-end, a fully franked dividend of 4 cents per share was declared on 23 August 2017 and will be paid
on 4 October 2017.
There are no other matters or circumstances that have arisen since the end of the financial year which have significantly
affected or may significantly affect the operations of the Group, the results of those operations or the state of affairs
of the Group in subsequent financial years.
• the attached financial statements and notes comply with the Corporations Act 2001, the accounting standards,
the Corporations Regulations 2001 and other mandatory professional reporting requirements;
• the attached financial statements and notes comply with International Financial Reporting Standards as issued
by the International Accounting Standards Board as described in Note 2 to the financial statements;
• the attached financial statements and notes give a true and fair view of the Group’s financial position as at
30 June 2017 and of its performance for the financial year ended on that date;
• 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
• at the date of this declaration, there are reasonable grounds to believe that the members of the extended closed
group will be able to meet any obligations or liabilities to which they are, or may become, subject to virtue of the
deed of cross guarantee described in Note 34 to the financial statements.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors.
Helen Kurincic
Chairman
Ian Kadish
Managing Director and
Chief Executive Officer
23 August 2017
Melbourne
66
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Independent Audit Report
Independent auditor’s report
To the shareholders of Integral Diagnostics Limited
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial report of Integral Diagnostics Limited (the Company) and its controlled entities
(together the Group) is in accordance with the Corporations Act 2001 , including:
a)
giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its financial
performance for the year then ended
b)
complying with Australian Accounting Standards and the Corporations Regulations 2001 .
What we have audited
The Group financial report comprises:
•
•
•
•
•
•
the consolidated statement of financial position as at 30 June 2017
the consolidated statement of profit or loss and other comprehensive income for the year then
ended
the consolidated statement of changes in equity for the year then ended
the consolidated statement of cash flows
for the year then ended
the notes to the financial statements, which include a summary of significant accounting policies
the director’s declaration.
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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Independence
We are independent of the Group 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.
PricewaterhouseCoopers, ABN 52 780 433 757
2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331 MELBOURNE VIC 3001
T: +61 3 8603 1000, F: +61 3 8603 1999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from
material misstatement. Misstatements may arise due to fraud or error. They are considered material if
individually or in aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial report as a whole, taking into account the geographic and management structure of the
Group, its accounting processes and controls and the industry in which it operates.
•
•
Key audit matters
Amongst other relevant topics,
we communicated the following
key audit matters to the Audit
–
and Risk Committee:
–
Valuation of Goodwill
Asset valuation- Property,
plant and equipment
They are further described in the
Key audit matters section of our
report.
•
•
•
Audit scope
Our audit focused on where the
Group made subjective
judgements; for example,
significant accounting estimates
involving assumptions and
inherently uncertain future
events.
The group operates in 3
geographical locations within
Australia- Victoria, Queensland
and Western Australia.
We, as the Group engagement
team, performed our audit
procedures at the Group’s
corporate head office in Geelong,
Victoria.
Materiality
For the purpose of our audit we
used overall Group materiality of
$1,065,000 which represents
approximately 5% of Group
profit before tax.
We applied this threshold,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial report as a whole.
We chose Group profit before tax
because, in our view, it is the
metric against which the
performance of the Group is most
commonly measured.
We selected 5% based on our
professional judgement noting
that it is also within the range of
commonly acceptable profit
related thresholds.
•
•
•
•
.
68
69
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Independent Audit Report continued
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 for the current period. The key audit 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. Further, any commentary on the outcomes of a particular audit
procedure is made in that context.
Key audit matter
Valuation of Goodwill
Refer to note 13 $96.4m
The Group’s goodwill is recognised in one Cash
Generating Unit (CGU). A Cash-generating unit is the
smallest identifiable group of assets that generate
cash inflows that are largely independent of the cash
inflows from other assets or groups of assets.
For the year ended 30 June 2017, the Group
performed an impairment assessment over the
goodwill balance of the IDX Group.
The impairment assessment relied on the calculation
of value-in-use for the Group. This calculation was
based on estimated future cash flows discounted to
net present value using the Company’s weighted
average cost of capital (WACC). We considered the
•
valuation of goodwill to be a key audit matter due to:
•
The size of the goodwill balance ($96.4 million
at 30 June 2017)
The significant judgement involved in
estimating future cash flows and the level to
which they are discounted, in particular:
discount rate
growth rates
•
In FY17 the performance of the Group was
below expectation.
How our audit addressed the key audit matter
We assessed whether the division of the Group into CGUs
was consistent with our knowledge of the Group’s
operations and internal Group reporting.
To evaluate the Groups cash flow forecasts and the
process by which they were developed, we performed the
•
following procedures, amongst others:
•
•
•
•
Considered the historical accuracy of the Group’s
cash flow forecasts by comparing the forecasts used
in the prior year cash flow forecast valuation model
(“the model”) to the actual performance of the
Group in the current year.
Compared the 12 month cash flow forecast used in
the model with the Board approved budget, and
considered whether the key assumptions used in
the model (in particular the discount rate and
growth rates) were subject to oversite from the
directors.
Together with PwC valuation experts, we assessed
the discount rate and long term growth rates
applied in the model by comparing these rates to
historical results, market expectations of
investment return and projected economic growth
and interest rates.
Reperformed the underlying calculations used in the
model noting no exceptions.
Performed a sensitivity analysis by varying the
growth rates, discount rate and sales growth rates
within a reasonably possible range. We found that
changes to these key assumptions did not cause the
carrying value of the CGU to exceed its recoverable
amount.
Asset valuation – property, plant and equipment
Refer to note 12 $50.5m
To assess the valuation of property, plant and equipment,
we performed the following procedures, amongst others:
•
For the year ended 30 June 2017, the Group
performed an impairment assessment over the
property, plant and equipment cash generating units
(CGUs) by reviewing the performance of each CGU for
the period. The Group identified one CGU which was
no longer expected to generate future profits,
resulting in an impairment charge of $810,000 to an
investment in infrastructure supporting the Group’s
mobile MRI facility in regional Western Australia. The
Group’s assessment did not identify any indicators of
impairment for other CGU’s.
We considered the valuation of property, plant and
•
equipment to be a key audit matter due to:
•
The size of the property, plant & equipment
balance ($50.5 million at 30 June 2017)
The judgements and assumptions required by
the Group in determining whether there were
any impairment indicators or impairment
charges.
•
•
•
Assessed whether the division of the Group into
CGUs was consistent with our knowledge of the
Group’s operations and internal Group reporting
Considered the Group’s assessment of whether
there were any indicators of asset impairment at
30 June 2017 for its CGUs.
Considered whether the discount rate and
growth rates applied in the Group’s value in use
model (“the model”) for the impaired CGU were
consistent with our knowledge of current
business conditions, externally derived data
(where possible) and our understanding of the
business.
Tested the mathematical accuracy of underlying
calculations used in the model.
Other information
The directors are responsible for the other information. The other information comprises the Chairman’s
report, Managing Director and Chief Executive Officer’s report, Operating and Financial Review report, the
Directors Report, Shareholder Information and the Corporate Directory included in the Group’s annual
report for the year ended 30 June 2017 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 accordingly 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
identified above 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.
70
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
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 ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
operations, or has no realistic alternative but to do so.
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
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
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
audit conducted in accordance with the Australian Auditing Standards will always detect a material
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
audit conducted in accordance with the Australian Auditing Standards will always detect a material
if,
individually or in the aggregate, they could reasonably be expected to influence the economic
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if,
decisions of users taken on the basis of the financial report.
individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at:
A further description of our responsibilities for the audit of the financial report is located at the
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
Auditing and Assurance Standards Board website at:
auditor’s report.
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our
auditor’s report.
Report on the remuneration report
Report on the remuneration report
Our opinion on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 21 of the directors’ report for the year
ended 30 June 2017.
We have audited the remuneration report included in pages 14 to 21 of the directors’ report for the year
ended 30 June 2017.
In our opinion, the remuneration report of Integral Diagnostics Limited, for the year ended 30 June
2017 complies with section 300A of the Corporations Act 2001.
In our opinion, the remuneration report of Integral Diagnostics Limited, for the year ended 30 June
2017 complies with section 300A of the Corporations Act 2001.
Responsibilities
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
The directors of the Company are responsible for the preparation and presentation of the
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is
Australian Auditing Standards.
to express an opinion on the Remuneration Report, based on our audit conducted in accordance with
Australian Auditing Standards.
PricewaterhouseCoopers
PricewaterhouseCoopers
PricewaterhouseCoopers
Nadia Carlin
Nadia Carlin
Partner
Partner
Nadia Carlin
Partner
Melbourne
23 August 2017
Melbourne
23 August 2017
Melbourne
23 August 2017
Independent Audit Report continued
In preparing the financial report, the directors are responsible for assessing the ability of the Group 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 Group or to cease operations,
or has 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 the financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing
and Assurance Standards Board website at:
http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor’s
report.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 14 to 21 of the directors’ report for the year
ended 30 June 2017.
In our opinion, the remuneration report of Integral Diagnostics Limited, for the year ended 30 June 2017
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.
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Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics
Shareholder Information
Corporate Directory
Integral Diagnostics Limited
Ordinary fully paid shares (total) as of 22 August 2017.
Top 20 shareholders
Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
RBC Investor Services Australia Nominees Pty Ltd
Citicorp Nominees Pty Limited
UBS Nominees Pty Ltd
National Nominees Limited
Visionary Imaging Pty Ltd
Mittal Holdings Pty Ltd
New Imaging Pty Ltd
G J Hughes Pty Ltd
Lethean Holdings Pty Ltd
Lockwood Ridge Pty Ltd
Muzray Pty Ltd
Willowbay Rise Pty Ltd
Wyndham Salter Pty Ltd
NW3 Pty Ltd
Mr Vincent Michael O'sullivan
Clight Pty Ltd
Jasmat Pty Ltd
John Livingston Pty Ltd
Meakin Professional Investments Pty Ltd
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Totals: Top 21 holders of ordinary fully paid shares (total)
Total remaining holders balance
Register of substantial shareholdings
Investors Mutual
SG Hiscock
Adam Smith Asset Management
Regal Funds Management
IOOF Holdings Limited
Range of units snapshot
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 over
Rounding
Total
Directors
Helen Kurincic – Independent Non-Executive Chairman
Ian Kadish – Managing Director and Chief Executive Officer
Dr Chien Ping Ho – Executive Director
Dr Sally Sojan – Executive Director
John Atkin – Independent Non-Executive Director
Rupert Harrington – Independent Non-Executive Director
Auditor
PricewaterhouseCoopers
2 Riverside Quay
Southbank VIC 3006
Solicitors
Herbert Smith Freehills
Level 42, 101 Collins Street
Melbourne Victoria 3000
Company secretary
Ms Kathryn Davies
Registered office
1111 Howitt Street
Wendouree Victoria 3355
T + 61 3 5339 0704
Share register
Computershare Investor Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford Victoria 3067
T 1300 787 272
Bankers
Australia and New Zealand Banking Group Limited
927 Sturt Street
Ballarat Victoria 3350
Stock exchange listing
Integral Diagnostics Limited shares are listed on
the Australian Securities Exchange (ASX code: IDX)
Website
integraldiagnostics.com.au
Corporate Governance Statement
The Corporate Governance Statement was approved by the
Board of Directors on 23 August 2017 and can be found at:
integraldiagnostics.com.au/page/for-investors/
Units
29,626,840
20,457,732
6,321,095
5,932,694
4,074,932
3,449,893
2,889,180
2,878,410
2,604,280
2,467,230
2,467,230
2,467,230
2,467,230
2,467,230
2,467,230
2,445,481
2,334,000
2,330,160
2,330,160
2,330,160
2,330,160
107,138,557
37,905,600
Shares
13,520,000
8,999,909
8,460,682
8,020,747
7,329,787
% of units
20.43
14.10
4.36
4.09
2.81
2.38
1.99
1.98
1.80
1.70
1.70
1.70
1.70
1.70
1.70
1.69
1.61
1.61
1.61
1.61
1.61
73.87
26.13
%
8.12
6.2
5.83
5.53
5.05
Total holders
159
366
200
267
70
Units
88,453
980,337
1,547,809
6,743,619
135,683,939
1,062
145,044,157
% issued capital
.06
.68
1.07
4.65
93.55
-0.01
100.00
74
75
Annual Report 2017Integral DiagnosticsAnnual Report 2017Integral Diagnostics