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Venture Life Group PlcAn nual Report
2013
Delivering emergency
meDical solutions
DeDicateD to improving
patient outcomes
CONTENTS
Chairman’s and CEO’s report
Summary of key achievements
Review of operations
Product portfolio
Pharmaceutical
Medical devices
Oxygen & other medical equipment
Veterinary
Board of directors
Full-year report & appendix 4E
Financials
Additonal stock exchange information
Corporate directory
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70
CHAIRMAN’S AND
CEO’S REPORT
DAVID WILLIAMS CHAIRMAN
JOHN SHARMAN CEO
CONTINUING GROWTH AND INVESTING IN THE FUTURE
Medical Developments International Limited. (‘MDI’) (ASX: MVP) delivered
a Net Profit after Tax of $2,309,309 for the year ended 30 June 2013.
MDI finished the year investing $4.9 million in clinical trials, R&D and product
development and paid two 3 cent fully-franked dividends (6 cents fully franked)
for the year ending 30 June 2013.
The Board has declared a further 2 cent fully franked dividend.
THE FINANCIAL RESULT REPRESENTS:
GROWTH IN SALES TO A RECORD $11.73 MILLION
GROWTH IN GROSS MARGIN TO A RECORD $8.33 MILLION
87% GROWTH IN RESPIRATORY MEDICAL DEVICES SALES IN AUSTRALIA
28% GROWTH IN WORLD-WIDE RESPIRATORY DEVICE SALES
20% GROWTH ACROSS ALL MEDICAL DEVICE SALES
53% GROWTH IN INTERNATIONAL PENTHROX® BUSINESS
76% GROWTH FOR PENTHROX® IN HOSPITAL IN AUSTRALIA
2
Medical Developments InternationalFINANCIALS SUMMARY OF
KEY ACHIEVEMENTS
KEY ACHIEVEMENTS 2012/2013
MDI paid fully-franked dividends totalling 6 cents per share.
PENTHROX®
Completed a 300 patient Pivotal Phase III Clinical Trial in Europe.
Completed a ‘Thorough QT/QTc’ Clinical Trial (study into Penthrox® impact on the heart).
Completed a 250 patient colonoscopy study at Royal Adelaide Hospital.
Publication of our Phase III Bone Marrow Biopsy Clinical Study conducted
at Peter MacCallum Cancer Centre.
Appointed advisors to locate suitable business partners for Penthrox® in Europe.
Progressed regulatory applications for sale of Penthrox® in other countries.
Penthrox® approved for reimbursement in New Zealand.
RESPIRATORY MEDICAL DEVICES
Won tender to exclusively supply GSK Australia with Asthma devices.
Achieved reimbursement approval for the cost of Space Chambers in the UK.
Won a tender to supply Canadian hospitals with our Space Chambers.
Launched additional products in our range of Asthma Space Chambers.
Lodged application with FDA to approve Space Chamber Plus range for sale in the USA.
Completed independent trials in North America on Space Chamber Plus range.
European subsidiary recorded first Respiratory Device sales in the UK.
OTHER
Signed agreement with CSIRO to develop an improved methoxyflurane production
process and successfully completed first phase of the project.
Significant success improving manufacturing costs and efficiency.
Increased investment in marketing, regulatory, product development and new business units.
3
2013 Annual Report FINANCIALS REVIEW OF
OPERATIONS
2013 was a year of significant investment in the future of our business.
The investment in our regulatory, sales, manufacturing, product
development and research teams was significant.
PHARMACEUTICALS
During the year, MDI completed a range of clinical studies
designed to improve the clinical and safety data for the use
of Penthrox®. MDI has invested more than $5.3 million since
the beginning of 2011 and completed and or finalised the
publication of the following clinical studies:
(i) Phase III Pivotal Study in the United Kingdom;
(ii) Phase III Bone Marrow Biopsy Clinical Study;
(iii) ‘Thorough QT/QTc’ Clinical Study in Australia;
(iv) A Clinical Study to evaluate the cardiovascular and
respiratory effects of inhaled methoxyflurane;
(v) Colonoscopy Study at Royal Adelaide Hospital; and
(vi) Other supportive Clinical Studies.
All endpoints and objectives of these studies were met on
time and on budget.
Completion of these Clinical Studies provides the
company with clinical trial data to include in its Regulatory
Dossier. This Dossier will form the basis of marketing
applications to sell Penthrox® in Europe and other markets
around the world.
MDI expects to finalise and submit the European Marketing
Approval (‘MA’) application sometime before the end of
September 2013.
Other clinical trials in Iran and Australia are progressing well
and we continue to assess further clinical trials that present
significant commercial opportunities and open up new areas
of use for Penthrox®.
USA
We have appointed regulatory experts to advise on getting
Penthrox® approved for sale in the USA.
JAPAN
Last year MDI signed a licencing agreement with Nippon
Zoki to sell Penthrox® in Japan. Nippon Zoki is currently in
negotiation with the Pharmaceuticals and Medical Devices
Agency (PMDA) in Japan in regard to the clinical trial data
required to register Penthrox® in Japan. The registration
process in Japan is expected to take several years but the
market opportunity is significant.
EUROPE
In June, MDI appointed advisors to find Marketing partners
for various European markets. Whilst in the very early
stages, this initiative is progressing well.
EASTERN EUROPE AND MIDDLE EAST
Internationally, our Penthrox® business grew by 53% and
our Eastern European Penthrox® business grew by 40%.
Our Middle East Penthrox® business grew 20% year on year.
NEW ZEALAND
Our New Zealand business grew 29%. In May 2013, the
use of Penthrox® was approved for reimbursement in New
Zealand hospitals. This means Penthrox® can be used in
all hospitals in New Zealand and is fully reimbursed by the
New Zealand government, which represents a significant
opportunity for growth.
AUSTRALIA
Domestically, several parts of the Penthrox® business
showed solid growth. Our hospital business grew 76%,
our Dental business grew 22% and our Cosmetics
business grew 11%. Our Ambulance business decreased
due to a change in usage from two customers.
MEDICAL DEVICES
RESPIRATORY
Our Respiratory Device business in Australia grew 87%
during the year. Globally our Respiratory Device business
grew 28%. Our Space Chamber Plus range of Respiratory
Devices continue to win market share and new markets.
USA
During the year we lodged a 510K application to have our
range of Space Chamber Plus devices approved for sale
into the USA. We expect to have approval to sell in the USA
before the end of December 2013. Our initial assessment of
the USA market is there are approximately 20 million devices
sold each year. Our products are amongst the world’s best
and our ambition is to win significant market share over the
next three years.
4
Medical Developments InternationalFINANCIALS EUROPE
In April 2013 our Space Chamber Plus range of devices
was listed for reimbursement by the MHRA in the UK and
we are now seeing our first sales in the UK through our
UK office. We expect to increase sales from our European
business over the coming years.
OTHER MEDICAL DEVICES
• New Face Masks;
• Emergency Equipment Bags;
• Tourniquet;
• Emergency Medical Consumables;
• Guedel Airways.
NEW ZEALAND
Our New Zealand business continues to perform strongly
where we have significant market share.
OTHER
We now have established distribution capabilities in the
UK, Canada, Germany, Belgium, Holland, Luxemburg,
Switzerland, Hong Kong, Singapore, New Zealand, UAE
and Asia. We are expecting to add to this network in the
near term.
VET
The overall contribution to profits from our Vet business
was equal to FY12. Sales in our Vet business fell 5% mainly
due to reduced sales in Europe. We expect our European
business to recover during FY14.
RESEARCH AND DEVELOPMENT
MDI announced in July 2012 we had launched a significant
research initiative with the CSIRO aimed at improving the
productivity and reducing the cost of our pharmaceutical
manufacturing business. This initiative is progressing well
and we have successfully completed the first phase of this
project. If successful this initiative will deliver significant
production cost benefits and valuable intellectual property to
MDI in the short to medium term.
PRODUCT DEVELOPMENT
Since the beginning of 2011, MDI has made a significant
investment building its internal product development
capabilities which will continue into FY2014. During the year,
MDI developed and/or launched:
ASTHMA MEDICAL DEVICES
• Space Chamber Plus autoclavable;
• Space Chamber Plus Compact antistatic;
• Space Chamber Plus Combo Pack.
FUTURE PRODUCTS
MDI has a number of products in development which
it hopes to launch during FY2014 which include:
• a new Penthrox® product;
• a new Vet anaesthetic machine;
• a new electronic Peak Flow Meter;
• a new range of oxygen and nebuliser masks;
• a new range of Space Chamber Plus devices; and
• a new range of Oxygen regulators.
OPERATIONS
OPERATING EXPENSES
During the year, the Company invested heavily in
our regulatory, product development, sales, marketing
and research and development teams.
The investment in clinical studies, research and
development and product development has been
capitalised to intangible assets where appropriate
and were in part funded by borrowings.
Overall the operating costs to sales ratio for the year
was 43.2% (37.6% : FY12). We expect improvement
in this ratio in FY14.
CASH FLOW
During the period the Company achieved a 4% increase
in cash receipts as a result of increased sales. The Company
invested its cash reserves as follows:
1. $2.5 million to further develop intangible assets;
2. $2.3 million paying dividends; and
3. $0.5 million to purchase fixed assets.
SUMMARY
MDI continues to improve all aspects of its business.
During this year, the MDI share price increased from $0.79
to $1.60 (as of 20 August 2013).
5
2013 Annual Report FINANCIALS REVIEW OF
OPERATIONS
KEY VALUE DRIVERS 2013
Continue to provide unique and innovative products to assist customers in the management
of acute and procedural pain.
Continue to provide unique and innovative products to assist customers in the delivery
of asthma medications.
Continue to provide unique and innovative products to assist customers in the resuscitation
and oxygen therapies for human and veterinary patients.
Continue to grow Penthrox® sales.
Develop a world class Regulatory Dossier to facilitate the registration of Penthrox® in as many
new countries as possible.
Work pro-actively to develop clinical trials which are likely to lead to a future commercial gain,
confirm the safety and efficacy of Penthrox® and raise market awareness in new channels.
Develop a wider product offering of medical equipment to capitalise on our market leading
position as the leading supplier to Ambulance Services.
Continue to identify and implement operational improvements.
VISION
Dominate the international markets for inhaled analgesics by providing a range of low cost,
high margin, fast acting, safe and category leading Penthrox® products.
Grow MVP into the leading international manufacturer and provider of Respiratory
Medical devices.
6
Medical Developments InternationalFINANCIALS
$
12,000,000
11,000,000
10,000,000
9,000,000
8,000,000
7,000,000
$
9,000,000
8,000,000
7,000,000
6,000,000
5,000,000
4,000,000
$
5,200,000
4,600,000
4,000,000
3,400,000
2,800,000
2,200,000
1,600,000
%
54.5
50.5
46.5
42.5
38.5
34.5
SALES
NET PROFIT AFTER TAX
$
2,750,000
2,250,000
1,750,000
1,250,000
750,000
250,000
FY09
FY10
FY11
FY12
FY13
FY09
FY10
FY11
FY12
FY13
GROSS MARGIN
EBIT
$
3,800,000
3,200,000
2,600,000
2,000,000
1,400,000
800,000
FY09
FY10
FY11
FY12
FY13
FY09
FY10
FY11
FY12
FY13
ASTHMA SALES
GP & HOSPITAL SALES
$
1,000,000
800,000
600,000
400,000
200,000
–
FY10
FY11
FY12
FY13
FY10
FY11
FY12
FY13
OPEX TO SALES
RECEIPTS FROM CUSTOMERS
$
11,750,000
11,000,000
10,250,000
9,500,000
8,750,000
8,000,000
FY09
FY10
FY11
FY12
FY13
FY09
FY10
FY11
FY12
FY13
7
2013 Annual Report FINANCIALS REVIEW OF
OPERATIONS
DIVIDEND
The Board of Directors is pleased to declare a Final Dividend
of 2 cents per share fully-franked.
MDI intends to make its Dividend Reinvestment Plan
available for shareholders to use the proceeds from the
Final Dividend to purchase MDI shares at a fixed price of
$1.27 per share, representing the 90 day Volume Weighted
Average Price up to and including 22 August 2013.
The timetable for the Final Dividend for the year ended
30 June 2013 is:
OUTLOOK
Our strategy to introduce Penthrox® to new markets
revolves around the development and delivery of a world
class Regulatory Dossier. We are well on the way to
achieving this strategy with our clinical trials in the UK,
Australia and elsewhere. We intend to submit our Marketing
Authorisation Application to have Penthrox® approved for
sale in selected European countries to the authorities in the
UK before the end of September and we have applications
for registrations currently being considered in a number of
other countries.
KEY DATES
EVENT
23 August 2013
6 September 2013
27 September 2013
Declaration of Final
Dividend
Record Date for eligible
shareholders to receive
dividend
Date for shareholders
to elect to participate in
Dividend Reinvestment Plan
11 October 2013
Payment Date
Our focus on improving efficiencies in all aspects of
our business whilst growing sales will continue and our
project with the CSIRO relating to the manufacturing of
methoxyflurane has the potential to transform the cost
base of our products over the next few years.
MDI is well placed to deliver future growth through its range
of respiratory equipment and devices. We are working
towards expanding our existing Australian and international
business and opening new markets in Europe and the USA.
MR JOHN SHARMAN
Chief Executive Officer
MR DAVID WILLIAMS
Chairman
8
Medical Developments InternationalFINANCIALS PRODUCT PORTFOLIO
PHARMACEUTICAL
ANALGESIA
Penthrox®
3ml and 1.5ml Dose Inhaler
MEDICAL
ASTHMA
OTHER
FACE MASKS
OXYGEN
REGULATORS
ABSORBERS
VETERINARY
ANAESTHESIA
Autoclavable Space Chamber®
Space Chamber® Combo Standard
Space Chamber® Combo Compact
Space Chamber® Combo
Space Chamber Plus®
Compact Space Chamber Plus®
Space Chamber® aerosol spacer
Antistatic Space Chamber®
Breath-Alert® peak flow meter
MyMDI™ Portable Nebuliser
MyMDI™ Pulse Oximeter
MyMDI™ Electronic Peak Flow Meter
Tournique
EZ-fit silicone and disposable face masks
Respiratory Silicone Masks
OXI-Port® oxygen therapy device
OXI-Sok oxygen therapy device
OXI-Pro oxygen resuscitation device
OXI-Life oxygen resuscitation device
OXI-Saver™ closed circuit oxygen resuscitation device
OXI-Dive closed circuit oxygen resuscitation device
OXI-Vac™ suction system
KDK™ regulator/flow meter with oxygen flush
KAB™ carbon dioxide absorber
MK5 closed circuit anaesthetic machine
LANA closed circuit anaesthetic machine
Mini-KOM™ anaesthetic machine
Breath-Alert® breathing monitor
9
2013 Annual Report FINANCIALS PHARMACEUTICAL
MVP is a world leader in the management of acute and procedural pain
BUILDING OUR BUSINESS
MVP manufactures its world leading inhaler analgesic from
its premises in Springvale, Victoria, Australia. MVP is the
sole manufacturer of the active molecule worldwide and
continues to develop new markets and applications for
the iconic brand Penthrox®.
PRODUCT SUITE
MVP is considering to add an alternative inhaled
analgesic to its product range and continues to build
on its reputation as the leading provider of pharmaceutical
and medical equipment used in the management of acute
and procedural pain.
Penthrox® continues to be used as a ‘first line’ product for
the treatment of pain in trauma by Ambulance Services in
all States and Territories of Australia. Moving forward, the
strategy to strengthen the association and collaboration with
all Ambulance Services will include offering a more complete
range of products required by the Ambulance Services,
enhanced training support and direct communication with
front line for specific applications.
THE MARKET
MVP continues to develop its market research and the
application of its products within Australia and internationally.
THE FUTURE
MVP is focused on building an international business for
Penthrox® and believes it has the attributes to dominate
the analgestic market nationally and internationally.
MVP continues to develop its
market research and the application
of its products within Australia
and internationally
10
Medical Developments InternationalFINANCIALS MEDICAL DEVICES
Building our product range
MVP’s focus in FY14 will be to add to our established
product range, to accelerate the sales growth that
has been established with our current partnerships in
Australia and overseas and at the same time develop
new collaborations for future growth. Core to the growth
is the development of new and improved models of:
• Asthma Space Chambers
• Combination Space Chamber and Masks product range
• Peak Flow Meters
• Pulse Oximeters
• Masks
• Tourniquets
• Emergency Medicine consumable equipment
RESPIRATORY DEVICES
MVP’s Respiratory devices business has been strong in
recent years and continues to provide solid sales and profit.
The success of this business over the last 2 years has been
due to these key factors:
• Developing a range of leading respiratory products
• The strength of our Respiratory devices business
with our partner in New Zealand
• The strength of our Respiratory devices business
in Australia
• The development of our international Respiratory
device business
• Consistent sales of our range of Asthma products
through established partners in various countries
around the world
PRODUCT DEVELOPMENT
MVP’s range of Respiratory medical devices is well
known and accepted as market leaders in domestic
and international markets.
MVP’s future growth will continue as it invests
and introduces new products and develops new
international markets.
MVP’s range of Respiratory medical
devices is well known and accepted
as market leaders in domestic and
international markets
11
2013 Annual Report FINANCIALS OXYGEN & OTHER
MEDICAL EQUIPMENT
Safe, precision engineering and custom design kits and accessories
MVP manufactures a range of oxygen therapy and
resuscitation equipment, providing healthcare professionals
and trained personnel with the ability to administer oxygen
to patients in an emergency situation. These devices range
from basic through to advanced systems of delivering
oxygen therapy or resuscitation.
PRODUCT SUITE
• OXI-Port® oxygen therapy device
• OXI-Sok oxygen therapy device
• OXI-Pro oxygen resuscitation device
• OXI-Life oxygen resuscitation device
• OXI-Saver™ closed circuit oxygen resuscitation device
• OXI-Dive closed circuit oxygen resuscitation device
• OXI-Vac™ suction system
These products are all custom assembled and tested at
MVP’s facilities in Melbourne, Australia.
THE MARKET
The MVP’s oxygen equipment is purchased and used by:
• Ambulance services
• Fire brigades
• Life saving clubs
• Military
These devices range from basic through
to advanced systems of delivering
oxygen therapy or resuscitation
12
Medical Developments InternationalFINANCIALS VETERINARY
MVP to re-invigorate its Vet product range
PRODUCTS
• Anaesthetic machines
• Vaporisers
• Breathing monitors
THE MARKET
MVP offers a range of open and closed circuit anaesthetic
machines to the veterinary market, which are popularly
known as Komesaroff anaesthetic machines. The Company
has developed a unique market position regarding the
design, manufacture and supply of closed circuit anaesthetic
machines to this particular niche market in Europe. Whilst
the majority of MDI’s veterinary products continue to be
sold in Europe, MVP continues to develop new products to
improve sales in local and international markets.
NEW PRODUCT DEVELOPMENT
MVP’s Breath-Alert® breathing monitor (Mark IV) continued
to sell well on new but simple selling features such as size
(smaller unit), ease of use and battery longevity.
The company has developed a unique
marker position regarding the design,
manufacture and supply of closed
circuit anaesthetic machines
13
2013 Annual Report FINANCIALS BOARD OF
DIRECTORS
MR DAVID WILLIAMS
Non-Executive Chairman
MR ALLAN MCCALLUM
Non-Executive Director
DR HARRY OXER ASM
Non-Executive Director
Managing Director of Kidder Williams
Chairman of Tassal Group Ltd and
Dr Oxer is a Medical Consultant to
Ltd, with over 29 years experience in the
Non-Executive Director of Incitec-Pivot
MDI and St John Ambulance in Western
investment banking sector. He is also a
Ltd. Mr McCallum has over 15 years public
Australia. Dr Oxer was a long-time
Director of IDT Australia Ltd. Mr Williams
companies experience including an ASX
member of the State Executive for St
is Chairman of the Remuneration and
50 company and has served on numerous
John Ambulance (WA) until his retirement
Nominations Committee.
committees including: Audit, Remuneration
in rotation in 2012, and was the previous
& Nomination, and as an Independent
Medical Director for twenty-six years.
Director on Related Parties (Governance)
Committees. Mr McCallum is a member
of the Remuneration and Nominations
Committee.
He has taught, lectured and published
extensively over the years, both nationally
and internationally. Dr Oxer is also a past
Chairman of the Australian Resuscitation
Council and has a major interest in
resuscitation, oxygen therapy, and
pain relief.
MR MAURICE VAN RYN
Non-Executive Director
MR MAX JOHNSTON
Non-Executive Director
Mr Van Ryn was a senior executive for
Mr Johnston is a non-executive director of
27 years of Bega Cheese Limited, 15
Enero Group Limited and Probiotec Limited.
years as CEO and recently International
Business Development Manager of that
company. Mr Van Ryn resigned from Bega
Cheese Limited in November 2012. He
is also Chairman of the pharmaceutical
manufacturer and marketer, Probiotec Ltd.
Mr Van Ryn has over 35 years experience in
the direct management of food companies
and has extensive experience in launching
and marketing products into international
markets. Mr Van Ryn is the Chairman of the
Audit & Risk Committee.
For 11 years he was President and Chief
Executive Officer of Johnson & Johnson
Pacific and an Executive Director of
Johnson & Johnson.
Max has also held several prominent
industry roles as a past President of
ACCORD Australasia Limited, a former
Vice Chairman of the Australian Food and
Grocery Council and a former member of
the board of ASMI. Max has had extensive
overseas experience during his career in
leading businesses in both Western and
Central-Eastern Europe, Africa as well as
Asia-Pacific. Mr Johnston is a member of
the Audit & Risk Committee.
14
Medical Developments InternationalFINANCIALS FULL-YEAR REPORT
& APPENDIX 4E
FINANCIAL YEAR ENDED 30 JUNE 2013
(PREVIOUS CORRESPONDING PERIOD: FINANCIAL YEAR ENDED 30 JUNE 2012)
RESULTS FOR ANNOUNCEMENT TO THE MARKET
The following information is provided in accordance with ASX Listing Rule 4.3C.2
PERCENTAGE
CHANGE
Revenue from ordinary activities
Up
3.7%
Profit after tax from operating activities
attributable to members
Net Profit after tax attributable to members
Down
Down
14.6%
14.6%
to
to
to
AMOUNT
$’000
11,733
2,309
2,309
EARNINGS PER SHARE
Basic earnings per share for the year ended 30 June 2013 was 4.1 cents (30 June 2012: 5.1 cents).
NET TANGIBLE ASSETS
Net tangible asset backing per ordinary share as at 30 June 2013 was 2.5 cents (30 June 2012: 8.0 cents).
BRIEF EXPLANATION OF THE FIGURES ABOVE
Refer to the preceding review of operations.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held as follows:
Place:
Date:
Time:
Deloitte
Level 10, 550 Bourke Street, Melbourne
29 October, 2013
10.30am
15
2013 Annual Report FINANCIALS
16
Medical Developments InternationalFINANCIALS FINANCIALS
CONTENTS
Corporate Governance Statement
Directors’ Report
Independence Declaration to the Directors of Medical Developments International Limited
Independent Auditor’s Report to the Members of Medical Developments International Limited
Directors’ Declaration
Consolidated Statement of Profit or Loss and Other Comprehensive Income for the
Financial Year Ended 30 June 2013
Consolidated Statement of Financial Position as at 30 June 2013
Consolidated Statement of Changes in Equity for the Financial Year Ended 30 June 2013
Consolidated Statement of Cash Flows for the Financial Year Ended 30 June 2013
Notes to the Financial Statements for the Financial Year Ended 30 June 2013
18
22
32
33
35
36
37
38
39
40
17
2013 Annual Report FINANCIALS CORPORATE GOVERNANCE
CORPORATE
GOVERNANCE
STATEMENT
STATEMENT
The Board of Directors is ultimately responsible for all matters relating to the
running of the company and is committed to implementing the highest standards
of corporate governance.
The Board’s role is to govern the organisation rather than
manage it. It is the purpose of senior management to
manage the organisation in accordance with the direction
of the Board. The Board is responsible for:
•
setting the goals of the company, including short-term,
medium-term and long-term objectives;
• providing the overall strategic direction of the company;
•
•
•
•
appointing and approving the terms and conditions of
the Chief Executive Officer and reviewing their ongoing
performance;
endorsing the terms and conditions of senior executives
through the Remuneration Committee;
establishing and determining the powers and functions
of the committees of the board, including the Audit &
Risk Committee and the Remuneration Committee;
reviewing the Board’s structure and performance from
time to time and making decisions on new appointments
to the Board;
• approving the annual budget and long-term budgets;
•
•
•
approving all mergers and acquisitions, and property
acquisitions and disposals;
the issue of any shares, options, equity instruments or
other securities in MDI or its subsidiaries;
determining the ethos of the company and ensuring that
the group adheres to appropriate standards and values
and applicable laws; and
•
representing the interests of shareholders.
To assist in the execution of these responsibilities, the Board
has two Board Committees being:
•
•
an Audit and Risk Committee (Mr M Johnston & Mr M
Van Ryn); and
a Remuneration and Nominations Committee (Mr D
Williams & Mr A McCallum).
All other functions of the Board will be dealt with by the
Board as a whole. However, from time to time, the
Board may determine to establish specific purpose
sub-committees to deal with specific issues.
SHARE TRADING
The Board has adopted a share trading policy for Directors
and officers of the company. The Policy regulates dealings
by Medical Developments International Limited (‘MDI’)
directors, officers and employees in MDI securities.
The standards and conduct adopted by the Board reflect,
where applicable, the standards for Corporate Governance
as provided in the ASX Corporate Governance Principles
established by the ASX Corporate Governance Council.
The following sections summarise MDI’s compliance
with these principles. Unless explicitly stated otherwise,
the Directors believe MDI complies with the Corporate
Governance Council’s recommendations.
PRINCIPLE 1: LAY SOLID FOUNDATIONS
FOR MANAGEMENT AND OVERSIGHT
Duties of the Board and of management are clearly
segregated and stated in the company’s corporate
governance manual. The Board’s role and responsibilities
are also summarised above. Senior executives are evaluated
by the remuneration committee annually, based on the
company’s performance and specific key performance
indicators set for the respective senior executive.
PRINCIPLE 2: STRUCTURE THE BOARD
TO ADD VALUE
The directors believe that the composition, size and
commitment of the Board will allow it to effectively discharge
its responsibilities and duties. To this end, currently four
of the five Board members are independent under the
definition of the Council. Furthermore, while the Chairman,
Mr Williams is not considered independent under the
Council definition and thus recommendation 2.2 is not
followed, the Board does not believe that Mr Williams being
a substantial shareholder has had or will have any adverse
impact on the conduct of MDI’s affairs or the representation
of the interests of other shareholders. Furthermore, the
roles of Chairman and CEO are not exercised by the same
individual.
To further ensure Directors can fulfil their obligations, the
Board has adopted a policy, contained in the company’s
18
Medical Developments InternationalFINANCIALS CORPORATE
GOVERNANCE
STATEMENT
corporate governance manual that allows directors to
take independent professional advice, at the expense
of the company.
The Board has established a Remuneration
and Nominations committee as suggested by
recommendation 2.4.
The company has no formal process for evaluating the
performance of its board, committees and individual
Directors. As such, recommendation 2.5 is not followed;
the Board has instead used regular informal assessments
to evaluate its performance.
The information required by recommendation 2.6 regarding
the skills, experience and expertise of the individual
Directors is included in the Director’s Report and is not
repeated here.
PRINCIPLE 3: PROMOTE ETHICAL AND
RESPONSIBLE DECISION-MAKING
The Board actively promotes ethical and responsible
decision-making.
RECOMMENDATION 3.1
Companies should establish a code of conduct and
disclose the code or a summary of the code as to
the practices necessary to maintain confidence in the
company’s integrity; the practices necessary to take
into account their legal obligations and the reasonable
expectations of their stakeholders; and the responsibility
and accountability of individuals for reporting and
investigating reports of unethical practices.
The Company has established and disclosed (in its
Induction Handbook) its Code of Conduct in accordance
with this recommendation. The Code of Conduct applies
to Directors, managers and employees of the Company.
The Code of Conduct is reviewed as necessary to ensure it
reflects the high ethical standards of conduct necessary to
maintain confidence in the Company’s integrity.
The Board has implemented and disclosed a share
trading policy covering Directors, senior executives and
employees. The directors are aware of their responsibility
to communicate any share trading to the company, and the
company notifies the ASX of any share transactions within
the allowed five business days.
The Board has adopted a policy for trading in Medical
Developments International securities by Directors
and employees. The purpose of this policy is to define
the circumstances in which Directors, employees and
any associates are permitted to deal in securities. This
policy was updated in 2010 and disclosed on the ASX
in December 2010 in accordance with the ASX Listing
Rules. The updated policy addresses each of the ASX
requirements including provisions relating to the prohibition
of trading by directors and senior management in the
Company’s securities during defined periods.
RECOMMENDATION 3.2
Companies should establish a policy concerning diversity
and disclose the policy or a summary of that policy. The
policy should include requirements for the board to establish
measurable objectives for achieving gender diversity and
for the board to assess annually both the objectives and
progress in achieving them.
The Company has established and disclosed (on its website)
its Diversity Policy is accordance with the recommendation.
RECOMMENDATION 3.3
Companies should disclose in each annual report the
measurable objectives for achieving gender diversity set
by the board in accordance with the diversity policy and
progress towards achieving them.
The Board believes in the value of diversity but does not
believe that given the size of the company and the resources
available to it, that formalising measurable objectives for
achieving gender diversity is appropriate. As the company
grows, the Board will continue to monitor the Diversity Policy
including formalising measureable objectives for achieving
gender diversity.
RECOMMENDATION 3.4
While there is currently no gender diversity on the Board,
the Board is made up of individuals from various
professions, cultures and backgrounds.
The Company’s workforce is comprised of three distinct
employee groups:
1. Employees engaged in senior management roles which
constitutes 24% of the workforce;
2. Employees engaged in middle management roles which
constitutes 10% of the workforce; and
3. Employees engaged in tier three level activities such as
production, sales, and administration type roles which
constitutes 66% of the workforce.
19
2013 Annual Report FINANCIALS CORPORATE
GOVERNANCE
STATEMENT
PRINCIPLE 4: SAFEGUARD INTEGRITY
IN FINANCIAL REPORTING
The Board has ensured there is a structure in place to
independently verify and safeguard the integrity of the
company’s financial reporting.
The Board has established an audit committee comprised
of two non-executive Directors. While this is less than the
three required by recommendation 4.2, the Board believes
a three member committee is impractical given the overall
size of the Board and that the current composition of the
committee allows it to discharge its mandate effectively.
The Committee’s Charter is contained within the company’s
Corporate Governance manual.
PRINCIPLE 5: MAKE TIMELY AND
BALANCED DISCLOSURES
The company has put in place mechanisms designed
to ensure compliance with the ASX Listing rules and
Corporations Act requirements regarding continuous
disclosure. The corporate governance manual details the
company policy and all management staff are made aware
of it. The company is committed to ensuring all market
participants have equal access to information and so
updates and presentations continue to be provided to the
ASX and posted on the company website. If a presentation
contains information that is not public and may have a
material effect on the share price, the material is sent to
the ASX prior to the presentation being made.
PRINCIPLE 6: RESPECT THE RIGHTS
OF SHAREHOLDERS
The Board of Directors has adopted a policy to ensure
that shareholders are informed of all major developments
affecting MDI in a timely manner. In accordance with this
policy, information is communicated in a variety of ways
including:
•
•
A half-yearly report containing summarised financial
information and a review of operations
An annual report with detailed financial information
and review of the operations of the company and
future outlook
•
Updates on operations and developments lodged
with the ASX
•
A comprehensive website carrying latest news and
containing an investor relations section which includes
corporate governance information and an archive of
periodic reports and ASX releases
The external auditor is required to attend the Annual General
Meeting and is available to answer questions. Furthermore,
the company encourages shareholders to attend the Annual
General Meeting and ask questions.
PRINCIPLE 7: RECOGNISE AND
MANAGE RISK
The management of risk is considered by the Audit and Risk
Committee. The Board determines whether management
has developed and implemented a sound system of risk
management and internal control.
The Chief Executive Officer and Finance Manager state to
the Board in writing that there is a sound system of risk
management and internal compliance and control within
the company and that this system operates effectively in
ensuring that financial reporting risks are managed such that
the declaration required by s.295A of the Corporations Act
can be provided.
PRINCIPLE 8: REMUNERATE FAIRLY
AND RESPONSIBLY
The Board has established a Remuneration committee
to ensure Directors and executives are remunerated
appropriately. The committee reviews remuneration
packages at least annually in the light of market conditions
and the performance of the company. The Remuneration
report contained within the Directors’ Report includes
considerable detail on the current remuneration of directors
and executives including how performance conditions for
performance related payments are chosen and assessed.
DIVERSITY
The Company has established a policy concerning diversity
which is available on its website. The policy outlines the
Company’s commitment to diversity, which is underpinned
by the following key principles:
•
•
Attracting, engaging and retaining a talented and
diverse workforce;
Recognising the need for workplace flexibility to
support the role employees at all levels have outside
of the workplace;
20
Medical Developments InternationalFINANCIALS •
•
•
•
Improving the quality of decision-making, creativity,
productivity and teamwork;
Enhancing service delivery through a workforce that
respects and reflects the diversity of our customers;
Building and maintaining a safe work environment by
taking action against inappropriate behaviour (including
discrimination, harassment, bullying, victimisation and
vilification); and
Facilitating equal employment opportunities by
considering a broad and diverse talent pool and
making decisions based on merit, ability,
performance and potential.
The Company’s Diversity Policy outlines the following key
areas of focus:
•
•
•
•
Conducting recruitment in a structured manner
consistent with Equal Employment Opportunity principles
and the objectives of this policy;
Undertaking structured talent management and
succession planning reviews;
Undertaking targeted diversity, culture and engagement
initiatives;
Establishing and reviewing appropriate and aligned
human resource policies and procedures; and
• Consistent messaging in internal communication.
ANNUAL REPORTING ON THE COMPANY’S
DIVERSITY POLICY AND PROPORTION OF WOMEN
There are two women currently in senior management roles.
Overall women represent 49% of the workforce of
the Company.
The Company has implemented a strategy designed
to increase the representation of women at the senior
management level. This has seen the representation of
women significantly increase over the past 12 months.
To aid in the attraction and retention of female employees,
the Company has carer’s leave in place as well as making
part-time work available. The Company always seeks
to accommodate individual circumstances to ensure all
employees can manage their work-life balance.
CORPORATE
GOVERNANCE
STATEMENT
21
2013 Annual Report FINANCIALS DIRECTORS’
CORPORATE
GOVERNANCE
REPORT
STATEMENT
The directors of Medical Developments International Limited (‘MDI’) herewith
submit the annual financial report of the company for the financial year ended
30 June 2013. In order to comply with the provisions of the Corporations Act 2001,
the directors report as follows:
INFORMATION ABOUT THE DIRECTORS
The names and particulars of the directors of the company
during or since the end of the financial year are:
MR D J WILLIAMS, B.EC (HONS), M.EC, FAICD
Non-Executive Chairman
Managing Director of Kidder Williams Ltd, with over 29 years
experience in the investment banking sector. He is also a
Director of IDT Australia Ltd. Mr Williams is Chairman of the
Remuneration and Nominations Committee.
MR A D MCCALLUM, DIP.AG SCIENCE, FAICD
Non-Executive Director
Chairman of Tassal Group Ltd and Non-Executive Director
of Incitec-Pivot Ltd. Mr McCallum has over 15 years public
companies experience including an ASX 50 company and
has served on numerous committees including: Audit,
Remuneration & Nomination, and as an Independent
Director on Related Parties (Governance) Committees.
Mr McCallum is a member of the Remuneration and
Nominations Committee.
DR H F OXER, AM, ASM, KSTJ MA (HONS),
MB.BCHIR (CANTAB), MRCS.LRCP, DA, FFARCS, FRCA,
FFARACS, FANZCA, FACAP, DIPDHM
Non-Executive Director
Dr Oxer is a Medical Consultant to MDI and St John
Ambulance in Western Australia. Dr Oxer was a long-time
member of the State Executive for St John Ambulance (WA)
until his retirement in rotation in 2012, and was the previous
Medical Director for twenty-six years.
He has taught, lectured and published extensively over the
years, both nationally and internationally. Dr Oxer is also a
past Chairman of the Australian Resuscitation Council and
has a major interest in resuscitation, oxygen therapy, and
pain relief.
MR M VAN RYN, B.BUS
Non-Executive Director
Mr Van Ryn was a senior executive for 27 years of Bega
Cheese Limited, 15 years as CEO and recently International
Business Development Manager of that company. Mr Van
Ryn resigned from Bega Cheese Limited in November 2012.
He is also Chairman of the pharmaceutical manufacturer
and marketer, Probiotec Ltd. Mr Van Ryn has over 35 years
experience in the direct management of food companies
and has extensive experience in launching and marketing
products into international markets. Mr Van Ryn is the
Chairman of the Audit & Risk Committee.
The above named directors held office during and since the
end of the financial year.
MR M JOHNSTON
Non-Executive Director (appointed 5 November 2012)
Mr Johnston is a non-executive director of Enero Group
Limited and Probiotec Limited.
For 11 years he was President and Chief Executive Officer
of Johnson & Johnson Pacific and an Executive Director of
Johnson & Johnson.
Max has also held several prominent industry roles as a
past President of ACCORD Australasia Limited, a former
Vice Chairman of the Australian Food and Grocery Council
and a former member of the board of ASMI. Max has had
extensive overseas experience during his career in leading
businesses in both Western and Central-Eastern Europe,
Africa as well as Asia-Pacific. Mr Johnston is a member of
the Audit & Risk Committee.
DR A COULEPIS, B.SC (HONS), PHD, MASM
Non-Executive Director (resigned 24 October 2012)
Dr Coulepis is currently the Executive Chairman of Ekera
Medical Ltd (formerly HealthCare Villages Ltd) and Ekera
Urgent Care Pty Ltd and is the strategic industry advisor to
Box Hill Institute. Dr. Coulepis also is a Director of Melbourne
Eastern Healthcare Village (MEHV) Pty Ltd, Ekera Logistics
Pty Ltd and Kelete Recruitment Pty Ltd as well as the CEO
and Managing Director of AGC Consulting Pty Ltd and 3
Point Solutions. Dr Coulepis has over 35 years of experience
in the pharmaceutical, healthcare, biotech, life sciences,
device and diagnostics industries, and was the founding
CEO and Executive Director of AusBiotech, Australia’s
Biotechnology Industry Organisation, Cellsense Pty Ltd
and also Australian Stem Cell HealthCare Pty Ltd.
22
Medical Developments InternationalFINANCIALS DIRECTORS’
REPORT
MR I M C KIRKWOOD, MA HONS (OXON)
FCPA, CA, MAICD
Non-Executive Director (resigned 26 February 2013)
Chartered Accountant, Chairman of Bluechiip Ltd (ASX:BCT)
and Avexa Ltd (ASX:AVX) and Non-Executive Director of
Vision Eye Institute Ltd (ASX:VEI). Mr Kirkwood has over 35
years financial and operational experience across a range of
industries. Mr Kirkwood was the Chairman of the Audit
& Risk Committee.
manufacturing, product development and research teams
was significant.
PHARMACEUTICALS
During the year, MDI completed a range of clinical studies
designed to improve the clinical and safety data for the use
of Penthrox®. MDI has invested more than $5.3 million since
the beginning of 2011 and completed and or finalised the
publication of the following clinical studies:
DIRECTORSHIPS OF OTHER LISTED
COMPANIES
Directorships of other listed companies held by the directors
in the 3 years immediately before the end of the financial
year are as follows:
NAME
COMPANY
PERIOD OF
DIRECTORSHIP
(i) Phase III Pivotal Study in the United Kingdom;
(ii) Phase III Bone Marrow Biopsy Clinical Study;
(iii) ‘Thorough QT/QTc’ Clinical Study in Australia;
(iv) A Clinical Study to evaluate the cardiovascular and
respiratory effects of inhaled methoxyflurane;
(v) Colonoscopy Study at Royal Adelaide Hospital; and
David Williams
IDT Australia Ltd
Since Dec 2010
(vi) Other supportive Clinical Studies.
Clever Communications
Australia Ltd (Chairman) 2007-2011
All endpoints and objectives of these studies were met on
time and on budget.
Iain Kirkwood
Vision Eye Institute Ltd
Since Nov 2004
Bluechiip Ltd (Chairman) Since Nov 2007
Avexa Ltd (Chairman)
Since Aug 2010
Metabolic
Pharmaceuticals Ltd
2008-2009
Allan McCallum Tassal Group Ltd
(Chairman)
Since Oct 2003
Incitec-Pivot Ltd
Since Dec 1997
Maurice Van
Ryn
Probiotec Ltd
(Chairman)
Since Jul 2006
Max Johnston
Probiotec Ltd
Since April 2010
Enero Group Limited
Since Mar 2011
COMPANY SECRETARY
Mrs W Gouveia, CA (SA)
Chartered Accountant (SA). Mrs Gouveia is also the Group
Financial Controller of the company.
PRINCIPAL ACTIVITIES
The company’s principal activities during the course of the
financial year were the manufacture and distribution of a
pharmaceutical drug and medical and veterinary equipment.
REVIEW OF OPERATIONS
2013 was a year of significant investment in the future
of our business. The investment in our regulatory, sales,
Completion of these Clinical Studies provides the company
with clinical trial data to include in its Regulatory Dossier.
This Dossier will form the basis of marketing applications
to sell Penthrox® in Europe and other markets around
the world.
MDI expects to finalise and submit the European Marketing
Approval (‘MA’) application sometime before the end of
September 2013.
Other clinical trials in Iran and Australia are progressing well
and we continue to assess further clinical trials that present
significant commercial opportunities and open up new areas
of use for Penthrox®.
USA
We have appointed regulatory experts to advise on getting
Penthrox® approved for sale in the USA.
JAPAN
Last year MDI signed a Licencing agreement with Nippon
Zoki to sell Penthrox® in Japan. Nippon Zoki is currently in
negotiation with the Pharmaceuticals and Medical Devices
Agency (PMDA) in Japan in regard to the clinical trial data
required to register Penthrox® in Japan. The registration
process in Japan is expected to take several years but the
market opportunity is significant.
23
2013 Annual Report FINANCIALS DIRECTORS’
REPORT
EUROPE
In June MDI appointed advisors to find Marketing partners
for various European markets. Whilst in the very early
stages, this initiative is progressing well.
EASTERN EUROPE AND MIDDLE EAST
Internationally, our Penthrox® business grew by 53%
and our Eastern European Penthrox® business grew
by 40%. Our Middle East Penthrox® business
grew 20% year on year.
NEW ZEALAND
Our New Zealand business grew 29%. In May 2013, the
use of Penthrox® was approved for reimbursement in New
Zealand hospitals. This means Penthrox® can be used in
all hospitals in New Zealand and is fully reimbursed by the
New Zealand government, which represents a significant
opportunity for growth.
AUSTRALIA
Domestically, several parts of the Penthrox® business
showed solid growth. Our hospital business grew 76%,
our Dental business grew 22% and our Cosmetics
business grew 11%. Our Ambulance business decreased
due to a change in usage from two customers.
MEDICAL DEVICES
RESPIRATORY
Our Respiratory Device business in Australia grew 87%
during the year. Globally our Respiratory Device business
grew 28%. Our Space Chamber Plus range of Respiratory
Devices continue to win market share and new markets.
USA
During the year we lodged a 510K application to have our
range of Space Chamber Plus devices approved for sale
into the USA. We expect to have approval to sell in the USA
before the end of December 2013. Our initial assessment of
the USA market is there are approximately 20 million devices
sold each year. Our products are amongst the world’s best
and our ambition is to win significant market share over the
next three years.
EUROPE
In April 2013 our Space Chamber Plus range of devices was
listed for reimbursement by the MHRA in the UK and we are
now seeing our first sales in the UK through our UK office.
We expect to increase sales from our European business
over the coming years.
NEW ZEALAND
Our New Zealand business continues to perform strongly
where we have significant market share.
OTHER
We now have established distribution capabilities in the
UK, Canada, Germany, Belgium, Holland, Luxemburg,
Switzerland, Hong Kong, Singapore, New Zealand, UAE
and Asia. We are expecting to add to this network in the
near term.
VET
The overall contribution to profits from our Vet business
was equal to FY12. Sales in our Vet business fell 5% mainly
due to reduced sales in Europe. We expect our European
business to recover during FY14.
RESEARCH AND DEVELOPMENT
MDI announced in July 2012 we had launched a significant
research initiative with the CSIRO aimed at improving the
productivity and reducing the cost of our pharmaceutical
manufacturing business. This initiative is progressing well
and we have successfully completed the first phase of this
project. If successful this initiative will deliver significant
production cost benefits and valuable intellectual property to
MDI in the short to medium term.
PRODUCT DEVELOPMENT
Since the beginning of 2011, MDI has made a significant
investment building its internal product development
capabilities which will continue into FY2014. During the year,
MDI developed and/or launched:
Asthma Medical Devices
• Space Chamber Plus autoclavable;
• Space Chamber Plus Compact antistatic; and
• Space Chamber Plus Combo Pack.
Other Medical Devices
• New Face Masks;
• Emergency Equipment Bags;
• Tourniquet;
• Emergency Medical Consumables; and
• Guedel Airways.
24
Medical Developments InternationalFINANCIALS DIRECTORS’
REPORT
FUTURE PRODUCTS
MDI has a number of products in development which it
hopes to launch during FY2014 which include:
• a new Penthrox® product;
• a new Vet anaesthetic machine;
• a new electronic Peak Flow Meter;
• a new range of oxygen and nebuliser masks;
• a new range of Space Chamber Plus devices; and
• a new range of Oxygen regulators.
OPERATIONS
OPERATING EXPENSES
During the year, the Company invested heavily in our
regulatory, product development, sales, marketing and
research and development teams.
The investment in clinical studies, research and development
and product development has been capitalised to intangible
assets where appropriate and were in part funded by
borrowings.
Overall the operating costs to sales ratio for the year was
43.2% (37.6% : FY12). We expect improvement in this ratio
in FY14.
FINANCIAL POSITION
During the year MDI continued to invest in clinical studies,
research and development and product development. This
have been capitalised to intangible assets and were in part
funded by borrowings as disclosed in note 17.
CASH FLOW
During the period the Company achieved a 4% increase in
cash receipts as a result of increased sales. The Company
invested its cash reserves as follows:
1. $2.5 million to further develop intangible assets;
2. $2.3 million paying dividends; and
3. $0.5 million to purchase fixed assets.
OUTLOOK/FUTURE DEVELOPMENTS
Our strategy to introduce Penthrox® to new markets
revolves around the development and delivery of a world
class Regulatory Dossier. We are well on the way to
achieving this strategy with our clinical trials in the UK,
Australia and elsewhere.
Our focus on improving efficiencies in all aspects of our
business whilst growing sales will continue and our project
relating to the manufacturing of methoxyflurane has the
potential to transform the cost base of our products over
the next few years.
MDI is well placed to deliver future growth through its range
of respiratory equipment and devices. We are working
towards expanding our existing Australian and international
business and opening new markets in Europe and the USA.
CHANGES IN STATE OF AFFAIRS
During the financial year there was no significant change
in the state of affairs of the company other than that referred
to in the financial statements or notes thereto.
SUBSEQUENT EVENTS
The company made an announcement on the Australian
Stock Exchange on 13 August, 2013 that Medical
Developments International Limited (MDI) has completed
the ‘Through QT/QTc’ Clinical Trial.
The success of MVP’s TQT Phase I study is a very significant
milestone. The study provides further clinical evidence as to
the safety of Penthrox® and is a critical component of the
regulatory strategy to introduce Penthrox® into new markets
internationally, and into Western Europe in particular.
The Board of Directors declared a Final Dividend of
2 cents per share fully franked in respect of the year
ended 30 June 2013.
Other than the above, there has not been any matter or
circumstance that has arisen that has significantly affected,
or may significantly affect the operations of the company,
the results of those operations, or the state of affairs of the
company in future years.
DIVIDENDS
The Board of Directors declared a Final Dividend of
3 cents per share fully franked in respect of the year
ended 30 June 2012 and paid on 10 October 2012.
The Board of Directors declared an Interim Dividend of
3 cents per share fully franked in respect of the half year
ended 31 December 2012 and paid on 11 April 2013.
The Board of Directors declared a Final Dividend of
2 cents per share fully franked in respect of the year
ended 30 June 2013.
SHARE OPTIONS
The Chief Executive Officer Long Term Incentive Plan
(CEO LTIP) was in place for the financial year ended
30 June 2013.
25
2013 Annual Report FINANCIALS DIRECTORS’
REPORT
Further details of the CEO LTIP are contained in the Audited
Remuneration Report and note 7 to the financial statements.
At 30 June 2013 all share options had been exercised and
no further share options were outstanding.
The company has not otherwise, during or since the end
of the financial year, indemnified or agreed to indemnify an
officer or auditor of the company against a liability incurred
as such an officer or auditor.
INDEMNIFICATION OF OFFICERS AND AUDITORS
During the financial year, the company paid a premium in
respect of a contract insuring the directors of the company
(as named above), and all executive officers of the company
against a liability incurred as such a director, secretary or
executive officer to the extent permitted by the Corporations
Act 2001. The contract of insurance prohibits disclosure of
the nature of the liability and the amount of the premium.
DIRECTORS’ MEETINGS
The following table sets out the number of directors’
meetings (including meetings of committees of directors)
held during the financial year and the number of meetings
attended by each director (while they were a director or
committee member). During the financial year, 10 board
meetings, two audit and risk committee meetings and one
remuneration and nominations committee meeting
were held.
D.J. Williams
A. Coulepis
I.M.C. Kirkwood
A.D. McCallum
H.F. Oxer
M. Van Ryn
M. Johnston
BOARD OF DIRECTORS
AUDIT & RISK COMMITTEE
REMUNERATION &
NOMINATIONS
HELD
ATTENDED
HELD
ATTENDED
HELD
ATTENDED
10
4
7
10
10
10
6
10
4
7
10
10
9
6
–
–
2
–
–
2
–
–
–
2
–
–
2
–
1
–
–
1
–
–
–
1
–
–
1
–
–
–
DIRECTORS’ SHAREHOLDINGS
The following table sets out each director’s relevant interest
in shares or options in shares as at the date of this report.
D.J. Williams
A.D. McCallum
H.F. Oxer
M. Van Ryn
M. Johnston
FULLY PAID SHARES
30,211,588
470,095
203,804
1,321,029
20,000
AUDITED REMUNERATION REPORT
This remuneration report, which forms part of the
directors’ report, sets out information about the
remuneration of Medical Developments International
Limited’s key management personnel for the financial
year ended 30 June 2013. The term ‘key management
personnel’ refers to those persons having authority and
responsibility for planning, directing and controlling the
activities of the consolidated entity, directly or indirectly,
including any director (whether executive or otherwise)
of the consolidated entity. The prescribed details for
each person covered by this report are detailed below
under the following headings:
• key management personnel
•
•
remuneration policy
relationship between the remuneration policy and
company performance
•
remuneration of key management personnel
• key terms of employment contracts.
26
Medical Developments InternationalFINANCIALS KEY MANAGEMENT PERSONNEL DETAILS
The company’s key management personnel consist of the
following directors and executives:
The directors of the company during or since the end of the
financial year were:
• D.J. Williams (Chairman, Non-executive)
• A. Coulepis (Non-executive)
(resigned 24 October 2012)
• H. F. Oxer (Non-executive)
•
I.M.C. Kirkwood (Non-executive)
(resigned 26 February 2013)
• A.D. McCallum (Non-executive)
• M. Van Ryn (Non-executive)
•
M. Johnston (Non-executive)
(appointed 5 November 2012)
The company executives during or since the end of the
financial year were:
• J. Sharman (Chief Executive Officer)
•
•
U. Charan (Company Secretary)
(resigned 15 October 2012)
W. Gouveia (Company Secretary)
(appointed 15 October 2012)
Except as noted, the named persons held their current
position for the whole of the financial year and since the end
of the financial year.
REMUNERATION POLICY
The board continues to set remuneration at a level that will
attract directors and executives of high calibre. The two key
elements are:
•
•
base salary and fees, which are determined by reference
to the market rate based on payments at similar sized
companies in the industry; and
performance incentives, which have two components
– short term incentives based on achieving key
performance indicators during the year and payable
in cash, and long-term incentives payable in equity,
the value of which depends on the share price of
the company.
The remuneration and nominations committee, comprised
of D.J. Williams and A.D. McCallum, determines the salary
package of the CEO of the company and reviews the
compensation of the non-executive directors on an annual
basis. Changes are approved by the board as a whole.
DIRECTORS’
REPORT
RELATIONSHIP BETWEEN THE REMUNERATION
POLICY AND COMPANY PERFORMANCE
The board aims to ensure there is a strong link between
company performance and remuneration and believes that
the use of performance incentives ensures that company
performance is reflected in the quantum of payments
made to executives. Performance metrics are selected
to ensure that the interests of management are aligned
with those of shareholders. For short term incentives, key
metrics are NPAT (net profit after tax), used to directly link
company earnings and cash bonuses and other operational
measures, the achievement of which provides the basis for
future growth and profitability.
The table and graph below depict the company’s earnings
for the current financial year and the previous four financial
years, which demonstrate that the company has been
consistently profitable.
YEAR
2009
2010
2011
2012
2013
$'000
$'000
$'000
$'000
$'000
Revenue
8,727
8,296
10,206
11,313
11,733
NPBT
NPAT
3,000
2,500
2,000
0
0
0
$
`
1,500
1,000
500
0
1,175
1,273
2,495
3,789
3,192
810
879
1,743
2,704
2,309
NET PROFIT AFTER TAX 2009-2013
2009
2010
2011
2012
2013
The following table shows the company’s share prices for the
current financial year and the previous four financial years.
YEAR
2009
2010
2011
2012
2013
Share price - start ($)
0.34
0.18
0.22
0.40
Share price - end ($)
Interim Dividend (cps)*
Final Dividend (cps)*
Basic Earnings
per Share (cps)*
Diluted Earnings
per Share (cps)
0.18
–
–
0.22
–
–
0.40
–
3.00
0.79
3.00
3.00
0.79
1.27
3.00
2.00
1.50
1.70
3.40
5.10
4.10
1.50
1.70
3.40
5.10
4.10
*Franked to 100% at 30% corporate income tax rate.
27
2013 Annual Report FINANCIALS
DIRECTORS’
REPORT
DIVIDENDS
The directors declared a fully franked final dividend of
3 cents per share to the holders of fully paid ordinary
shares in respect of the financial year ended 30 June 2012.
The directors declared a fully franked interim dividend of
3 cents per share to the holders of fully paid ordinary
shares in respect the half year ended 31 December 2012.
The Board of Directors declared a Final Dividend of
2 cents per share fully franked in respect of the year
ended 30 June 2013.
As a result of the declared dividends, the company
issued 769,916 shares ($1,076,800) under its Dividends
Reinvestment Plan and paid $2,309,000 in dividends.
ELEMENTS OF DIRECTOR AND
EXECUTIVE REMUNERATION
Remuneration packages contain the following key elements:
1. Primary benefits – salary/fees and cash bonuses
2. Post-employment benefits – superannuation
3. Equity – rights to shares granted under the Chief
Executive Officer Long Term Incentive Plan (CEO LTIP).
The following table discloses the remuneration of the directors of the company in 2013:
2013
Directors
D.J. Williams
A. Coulepis (resigned 24 October 2012)
I.M.C. Kirkwood (resigned 26 February 2013)
A.D. McCallum
H.F. Oxer*
M. Van Ryn
M. Johnston (appointed 5 November 2012)
SHORT-TERM
EMPLOYEE BENEFITS
POST
EMPLOYMENT
SHARE-
BASED
PAYMENTS
TOTAL
SALARY
& FEES
$
BONUS
$
SUPER-
ANNUATION
$
OPTIONS
& RIGHTS
$
53,517
10,600
22,554
34,022
61,084
34,022
22,715
238,514
–
–
–
–
–
–
–
4,816
954
2,030
3,062
-
3,062
2,044
15,968
–
–
–
–
–
–
–
$
58,333
11,554
24,584
37,084
61,084
37,084
24,759
254,482
* Dr Oxer’s remuneration includes Directors Fees ($37,084) & Medical Consultant Fees ($24,000)
The following table discloses the remuneration of the key executives of the company in 2013:
2013
Executives
J. Sharman
(Chief Executive Officer)*
SHORT-TERM EMPLOYEE
BENEFITS
POST
EMPLOYMENT
SHARE-
BASED
PAYMENTS
TOTAL
SALARY
& FEES
$
BONUS
$
SUPER-
ANNUATION
$
OPTIONS
& RIGHTS
$
$
271,405
44,758
28,154
6,472
350,789
U. Charan
(Company Secretary, resigned 15 October 2012)*
W. Gouveia
(Company Secretary, appointed 15 October 2012)
46,083
3,500
3,847
81,713
-
7,354
-
-
53,430
89,067
399,201
48,258
39,355
6,472
493,286
* Included in Mrs Charan’s remuneration are termination benefits of $15,524 disclosed as part of Salaries & Fees.
28
Medical Developments InternationalFINANCIALS
DIRECTORS’
REPORT
The following table discloses the remuneration of the key executives of the company in 2012:
2012
Directors
D.J. Williams
A. Coulepis
I.M.C. Kirkwood
A.D. McCallum
H.F. Oxer*
M. Van Ryn
SHORT-TERM
EMPLOYEE BENEFITS
POST
EMPLOYMENT
SHARE-
BASED
PAYMENTS
TOTAL
SALARY
& FEES
$
BONUS
$
SUPER-
ANNUATION
$
OPTIONS
& RIGHTS
$
43,578
30,963
30,963
30,963
57,750
30,963
225,180
–
–
–
–
–
–
–
3,922
2,787
2,787
2,787
–
2,787
15,070
$
47,500
33,750
33,750
33,750
57,750
33,750
–
–
–
–
–
–
–
240,250
* Dr Oxer’s remuneration includes Directors Fees ($33,750) & Medical Consultant Fees ($24,000).
The following table discloses the remuneration of the key executives of the company in 2012:
2012
Executives
J. Sharman
(Chief Executive Officer)*
U. Charan
(Company Secretary)
SHORT-TERM EMPLOYEE
BENEFITS
POST
EMPLOYMENT
SHARE-
BASED
PAYMENTS
TOTAL
SALARY
& FEES
$
BONUS
$
SUPER-
ANNUATION
$
OPTIONS
& RIGHTS
$
$
246,207
40,000
25,086
103,381
414,674
101,300
10,000
10,017
–
121,317
347,507
50,000
35,103
103,381
535,991
* 25% of John Sharman’s remuneration relates to Share Based Payments.
No key management personnel appointed during
the period received a payment as part of his or her
consideration for agreeing to hold the position.
SHORT-TERM INCENTIVES
The determination and approval of any potential bonuses
is at the discretion of the Board.
ELEMENTS OF REMUNERATION RELATED
TO PERFORMANCE
Fees paid to non-executive directors are not directly tied
to performance. Salaries paid to the key executives are
also not directly tied to performance. The short term and
long-term incentive programmes are directly related to
performance, and the conditions and assessment
methods are explained below.
During the 2013 financial year, discretionary bonuses
totalling $48,258 (2012: $50,000) were determined and
approved by the Remuneration and Nominations Committee
in relation to key management personnel in respect of their
performance in the 2012 financial year. These bonuses are
reflected in the 2013 remuneration disclosures.
2012 Annual Report
29
29
2013 Annual Report FINANCIALS
DIRECTORS’
REPORT
LONG TERM INCENTIVES
On 5 September 2011, the Long-Term Incentive Plan (LTIP)
for the CEO (John Sharman) was formalised. Under the
agreement, the CEO is provided with 3 separate tranches
which if met (target share price and continued employment)
would entitle the CEO to a bonus / subscription of shares at
particular prices. No further service conditions are attached.
The LTIP allows the CEO to choose between receiving a
bonus (tranche 1: $120,000, tranche 2: $500,000 and
tranche 3: $1,200,000), to be applied net of taxation
through payroll and superannuation by the company to
acquire shares in the company or subscribe for 513,577
shares at 25 cents per share at each tranche. Where the
CEO receives the bonus amount, this will be applied by
the company to acquire shares at prices not exceeding the
relevant share purchase price (tranche 1: 50 cents, tranche
2: $1.00 and tranche 3: $1.50) where shares are purchased
on the ASX in the ordinary course of trading or issued by
the company at the relevant target price. Although the first
option involves a monetary bonus, this is used to acquire
shares to the value of the bonus. Therefore although the
number of shares is variable, the bonus is still settled
in shares for the CEO. Therefore neither option is a
cash-settled share-based payment.
The following table outlines for each of the tranches the
grant date, vesting conditions, fair valuation, and amount
expensed during the year.
TRANCHE
GRANT DATE
TARGET SHARE PRICE
FOR VESTING BASED ON A
CONTINUOUS WEIGHTED
AVERAGE FOR 3 MONTHS
(COMPANY SHARE PRICE)
1
2
3
Total
5 September 2011
5 September 2011
5 September 2011
$0.49
$0.97
$1.46
FAIR VALUE AT
GRANT DATE
EXPENSED DURING
THE YEAR
$96,501
$12,721
$631
$109,853
2013
–
$6,119
$353
$6,472
2012
$96,501
$6,602
$278
$103,381
If the CEO elects to subscribe for new shares, 60 per
cent of shares issued will be subject to escrow restrictions
for 12 months.
If the CEO’s employment is terminated for any reason
including resignation, all entitlements under the LTIP
will cease, except for shares held in escrow.
There were no share-based payments granted to key
management personnel during the current financial year.
During the year, John Sharman exercised options that were
granted to him as part of his compensation. Each option
converts to one ordinary share of Medical Developments
International Limited.
2013
LTIP
Tranche 2
Tranche 3
Total
GRANT DATE
NUMBER
EXCERCISED
EXERCISED DATE
SHARE PRICE AT
EXERCISE DATE
5 September 2011
5 September 2011
513,577
447,774
961,351
8 November 2012
25 January 2013
$
1.74
2.02
When exercising Tranche 2 the CEO opted to subscribe
for shares at 25 cents per share in accordance with
the LTIP. This resulted in an increase in ordinary share
capital of $128,394.
When exercising Tranche 3 the CEO opted to receive a
bonus of $1,200,000 was used to subscribe for shares
at the target price in accordance with the LTIP. After
withholding tax this resulted in a decrease in retained
earnings of $546,250 (withholding tax paid during the year).
3030
Medical Developments International
Medical Developments InternationalFINANCIALS DIRECTORS’
REPORT
2012
LTIP
Tranche 1
Total
GRANT DATE
NUMBER
EXCERCISED
EXERCISED DATE
SHARE PRICE AT
EXERCISE DATE
5 September 2011
513,577
513,577
3 January 2012
$
0.57
AUDITOR’S INDEPENDENCE DECLARATION
The auditor’s independence declaration is included on
page 32 of the annual report.
ROUNDING OFF OF AMOUNTS
The company is a company of the kind referred to in
ASIC Class Order 98/0100, dated 10 July 1998, and
in accordance with that Class Order amounts in the
directors’ report and the financial report are rounded off to
the nearest thousand dollars unless otherwise indicated.
Signed in accordance with a resolution of the directors
made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the directors.
David Williams
Chairman
Melbourne, 23 August 2013
When exercising Tranche 1 the CEO opted to subscribe
for shares at 25 cents per share in accordance with the
LTIP. This resulted in an increase in ordinary share capital
of $128,394.
No options lapsed during the year and at 30 June 2013
there were no further options exercisable.
CONTRACTS FOR SERVICES
Mr Sharman is employed under an open-ended contract
with a notice period of three months. The contract does
not provide for any termination payments beyond payment
for the notice period and any accrued annual leave.
Mrs Gouveia is employed under an open-ended contract
with a notice period of four weeks. The contract does not
provide for any termination payments beyond payment for
the notice period and any accrued annual leave.
NON-AUDIT SERVICES
The directors are satisfied that the provision of non-audit
services, during the 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 non-audit services
related to the provision of taxation services. The directors
do not believe that the provision of advice of this nature
compromises the general principles relating to auditor’s
independence, as set out by the Institute of Chartered
Accountants in Australia.
Details of amounts paid or payable to the auditor for
non-audit services provided during the year by the auditor
are outlined in note 8 to the financial statements.
2012 Annual Report
3131
2013 Annual Report FINANCIALS
32
Medical Developments InternationalFINANCIALS 33
2013 Annual Report FINANCIALS 34
Medical Developments InternationalFINANCIALS DIRECTORS’
DIRECTORS’
DECLARATION
REPORT
The directors declare that:
a) in the directors’ opinion, 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
b) in the directors’ opinion, the attached financial
statements and notes thereto are in accordance with
the Corporations Act 2001, including compliance
with accounting standards and giving a true and fair
view of the financial position and performance of the
consolidated entity; and
c) the attached financial statements are in compliance with
International Financial Reporting Standards, as stated in
note 1 of the financial statements; and
d) the directors have been given the declarations required
by s.295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors
made pursuant to s.295(5) of the Corporations Act 2001.
On behalf of the Directors
David Williams
Chairman
Melbourne, 23 August 2013
35
2013 Annual Report
STATEMENT OF
DIRECTORS’
COMPREHENSIVE INCOME
REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME FOR THE FINANCIAL YEAR ENDED 30 JUNE 2013
NOTE
4(a)
4(a)
4(b)
5(a)
Revenue from sale of goods
Cost of sales
Gross profit
Other income
Distribution expenses
Marketing expenses
Occupancy expenses
Administration expenses
Regulatory and registration expenses
Other expenses
Profit before income tax expense
Income tax expense
Profit for the year
Other Comprehensive Income for the year
Items that may be reclassified subsequently to
profit or loss, net of income tax
2013
$'000
11,733
(3,402)
8,331
95
(471)
(1,649)
(334)
(1,369)
(668)
(743)
3,192
(883)
2,309
2012
$'000
11,313
(3,467)
7,846
353
(449)
(1,175)
(267)
(1,418)
(639)
(462)
3,789
(1,085)
2,704
Exchange differences on translating foreign operations
22
Total comprehensive income for the year
(13)
2,296
–
2,704
Profit for the year attributable to:
Owners of the parent
Total comprehensive income for the year
attributable to:
Owners of the parent
Earnings per Share:
Basic (cents per share)
Diluted (cents per share)
2,309
2,704
2,296
2,704
24
24
4.1
4.1
5.1
5.1
Notes to the financial statements are included on pages 40-68
36
Medical Developments InternationalFINANCIALS STATEMENT OF
FINANCIAL POSITION
DIRECTORS’
REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2013
30 JUNE 2013
30 JUNE 2012
Current Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other
Total Current Assets
Non-Current Assets
Property, plant and equipment
Goodwill
Other intangible assets
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Borrowings
Provisions
Current tax liabilities
Total Current Liabilities
Non-Current Liabilities
Deferred tax liabilities
Borrowings
Provisions
Other
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings
Total Equity
NOTE
30(a)
9
10
5(d)
11
13
14
15
16
17
18
5(c)
5(e)
17
19
20
21
22
23
$'000
768
2,342
1,398
297
118
4,923
1,026
7,368
6,942
15,336
20,259
1,630
1,356
201
–
3,187
861
88
61
318
1,328
4,515
15,744
10,559
(13)
5,198
15,744
$'000
3,483
2,048
1,067
–
89
6,687
684
7,368
4,397
12,449
19,136
1,559
–
235
339
2,133
475
–
41
318
834
2,967
16,169
9,354
103
6,712
16,169
Notes to the financial statements are included on pages 40-68
37
2013 Annual Report FINANCIALS STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL YEAR
ENDED 30 JUNE 2013
FINANCIAL YEAR ENDED 30 JUNE 2013
ISSUED
CAPITAL
RETAINED
EARNINGS
$'000
9,354
–
–
–
–
128
1,077
–
–
10,559
$'000
6,712
2,309
–
2,309
–
(546)
(1,077)
(2,309)
109
5,198
EMPLOYEE
EQUITY
SETTLED
BENEFITS
RESERVE
$'000
103
–
–
–
6
–
–
–
(109)
–
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$'000
–
–
(13)
(13)
–
–
–
–
–
TOTAL
$'000
16,169
2,309
(13)
2,296
6
(418)
–
(2,309)
–
(13)
15,744
ISSUED
CAPITAL
RETAINED
EARNINGS
EMPLOYEE
EQUITY
SETTLED
BENEFITS
RESERVE
FOREIGN
CURRENCY
TRANSLATION
RESERVE
$'000
7,293
–
–
–
–
128
1,933
–
–
9,354
$'000
6,958
2,704
–
2,704
–
–
(1,933)
(1,221)
204
6,712
$'000
204
–
–
–
103
–
–
–
(204)
103
$’000
–
–
–
–
–
–
–
–
–
–
TOTAL
$'000
14,455
2,704
–
2,704
103
128
–
(1,221)
–
16,169
Opening balance
Profit for the year
Other comprehensive income for the year,
net of income tax
Total comprehensive income for the year
Share based payment
Shares subscribed for under CEO LTIP
Dividends reinvested in the form of shares
Dividends paid
Transfer to retained earnings
Closing balance
FINANCIAL YEAR ENDED 30 JUNE 2012
Opening balance
Profit for the year
Other comprehensive income for the year, net
of income tax
Total comprehensive income for the year
Share based payment
Shares subscribed for under CEO LTIP
Dividends reinvested in the form of shares
Dividends paid
Transfer to retained earnings
Closing balance
Notes to the financial statements are included on pages 40-68
38
Medical Developments InternationalFINANCIALS
STATEMENT OF
CASH FLOWS
DIRECTORS’
REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FINANCIAL YEAR
ENDED 30 JUNE 2013
NOTE
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Receipts from government grants
Other income
Interest paid
Income tax paid
Net cash generated by operating activities
30(b)
Cash flows from investing activities
Interest received
Payments for plant and equipment
Payments for other intangible assets
Net cash used in investing activities
Cash flows from financing activities
Cash received from share issue
Dividends paid
Proceeds from borrowings
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the
beginning of the financial year
Effects of exchange rate changes on the
balance of cash held in foreign currencies
23
17
Cash and cash equivalents at the end
of the financial year
30(a)
2013
$'000
11,427
(9,347)
–
42
(13)
(1,132)
977
78
(542)
(2,487)
(2,951)
128
(2,309)
1,444
(737)
(2,711)
3,483
(4)
768
2012
$'000
10,910
(7,290)
17
164
–
(763)
3,038
160
(121)
(2,053)
(2,014)
128
(1,221)
–
(1,093)
(69)
3,541
11
3,483
Notes to the financial statements are included on pages 40-68
39
2013 Annual Report FINANCIALS
NOTES TO THE
DIRECTORS’
FINANCIAL STATEMENT
REPORT
NOTES TO THE FINANCIAL
STATEMENTS FOR THE FINANCIAL
YEAR ENDED 30 JUNE 2013
1. SIGNIFICANT ACCOUNTING
POLICIES
STATEMENT OF COMPLIANCE
The financial report is a general purpose financial report
which has been prepared in accordance with the
Corporations Act 2001, Australian Accounting Standards
and Interpretations, and complies with other requirements
of the law.
The financial statements comprise the consolidated
financial statements of the Group.
For the purposes of preparing the consolidated
financial statements, the Company is a for-profit entity.
Accounting Standards include Australian Accounting
Standards. Compliance with Australian Accounting
Standards ensures that the financial statements and
notes of the company comply with International
Financial Reporting Standards (‘IFRS’).
The financial statements were authorised for issue by
the directors on 23 August 2013.
BASIS OF PREPARATION
The consolidated financial statements have been prepared
on the basis of historical cost, except for certain non-
current assets and financial instruments that are measured
at revalued amounts or fair values, as explained in the
accounting policies below. Historical cost is generally based
on the fair values of the consideration given in exchange
for assets. All amounts are presented in Australian dollars,
unless otherwise noted.
The company is a company of the kind referred to in
ASIC Class Order 98/0100, dated 10 July 1998, and in
accordance with that Class Order amounts in the financial
report are rounded off to the nearest thousand dollars,
unless otherwise noted.
BASIS OF CONSOLIDATION
The consolidated financial statements incorporate the
financial statements of the Company and entities (including
special purpose entities) controlled by the Company (its
subsidiaries). Control is achieved where the Company has
the power to govern the financial and operating policies of
an entity so as to obtain benefits from its activities.
Income and expense of subsidiaries acquired or disposed of
during the year are included in the consolidated statement
of profit or loss and other comprehensive income from the
effective date of acquisition and up to the effective date of
disposal, as appropriate. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring their accounting policies
into line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses
are eliminated in full on consolidation.
Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control are accounted
for as equity transactions. The carrying amounts of the
Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in
the subsidiaries. Any difference between the amount by
which the non-controlling interests are adjusted and the fair
value of the consideration paid or received is recognised
directly in equity and attributed to owners of the Company.
SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been
adopted in the preparation and presentation of the
financial report:
(a) Borrowings
Borrowings are recorded initially at fair value, net of
transaction costs.
Subsequent to initial recognition, borrowings are measured
at amortised cost with any difference between the initial
recognised amount and the redemption value being
recognised in profit and loss over the period of the
borrowing using the effective interest rate method.
(b) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand; cash
in banks and investments in money market instruments,
net of outstanding bank overdrafts.
(c) Employee benefits
A liability is recognised for benefits accruing to employees
in respect of wages and salaries, annual leave, long service
leave, and sick leave when it is probable that settlement will
be required and they are capable of being measured reliably.
40
Medical Developments InternationalFINANCIALS DIRECTORS’
REPORT
Liabilities recognised in respect of wages and salaries,
annual leave and sick leave expected to be settled within
12 months, are measured at their nominal values using
the remuneration rate expected to apply at the time
of settlement.
INTEREST AND DIVIDENDS
Interest and dividends are classified as expenses or as
distributions of profit consistent with the balance sheet
classification of the related debt or equity instruments or
component parts of compound instruments.
Liabilities recognised in respect of annual leave and long
service leave which are not expected to be settled within
12 months are measured using an estimate of the present
value of the future cash outflows to be made by the
company in respect of services provided by employees
up to reporting date.
(d) Financial assets
LOANS AND RECEIVABLES
Trade receivables, loans, and other receivables that have
fixed or determinable payments that are not quoted in an
active market are classified as ‘loans and receivables’.
Loans and receivables are measured at amortised cost
using the effective interest rate method less impairment.
Interest income is recognised by applying the effective
interest rate.
IMPAIRMENT OF FINANCIAL ASSETS
Financial Assets, other than those at fair value through
profit and loss, are assessed for indicators of impairment
at each balance sheet date. Financial assets are impaired
where there is objective evidence that as a result of one
or more events that occurred after the initial recognition of
the financial asset the estimated future cash flows of the
investment have been impacted.
(e) Financial instruments issued by the company
DEBT AND EQUITY INSTRUMENTS
Debt and equity instruments are classified as either liabilities
or as equity in accordance with the substance of the
contractual arrangement.
TRANSACTION COSTS ON THE ISSUE OF
EQUITY INSTRUMENTS
Transaction costs arising on the issue of equity instruments
are recognised directly in equity as a reduction of the
proceeds of the equity instruments to which they relate.
Transaction costs are the costs that are incurred directly in
connection with the issue of those equity instruments and
would not have been incurred had those instruments not
been issued.
(f) Foreign currency
The individual financial statements of each group entity
are presented in the currency of the primary economic
environment in which the entity operates (its functional
currency). For the purpose of the consolidated financial
statements, the results and financial position of each group
entity are expressed in Australian dollars (‘$’), which is the
functional currency of the Company and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of each individual
group entity, transactions in currencies other than the
entity’s functional currency (foreign currencies) are
recognised at the rates of exchange prevailing at the
dates of the transactions. At the end of each reporting
period, monetary items denominated in foreign currencies
are retranslated at the rates prevailing at that date. Non-
monetary items carried at fair value that are denominated in
foreign currencies are retranslated at the rates prevailing at
the date when the fair value was determined. Non-monetary
items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences on monetary items are recognised in
profit or loss in the period in which they arise except for:
•
•
•
exchange differences on foreign currency borrowings
relating to assets under construction for future productive
use, which are included in the cost of those assets when
they are regarded as an adjustment to interest costs on
those foreign currency borrowings;
exchange differences on transactions entered into in
order to hedge certain foreign currency risks below for
hedging accounting policies; and
exchange differences on monetary items receivable from
or payable to a foreign operation for which settlement is
neither planned nor likely to occur (therefore forming part
of the net investment in the foreign operation), which are
recognised initially in other comprehensive income and
reclassified from equity to profit or loss on repayment of
the monetary items.
41
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s foreign
operations are translated into Australian dollars using
exchange rates prevailing at the end of the reporting period.
Income and expense items are translated at the average
exchange rates for the period, unless exchange rates
fluctuated significantly during that period, in which case
the exchange rates at the dates of the transactions are
used. Exchange differences arising, if any, are recognised
in other comprehensive income and accumulated in equity
(attributed to non-controlling interests as appropriate).
(g) Goods and services tax
of the company other than the requirement to operate in
certain regions or industry sectors.
Government grants relating to income are recognised as
income over the periods necessary to match them with
the related costs. Government grants that are receivable
as compensation for expenses or losses already incurred
or for the purpose of giving immediate financial support to
the company with no future related costs are recognised as
income of the period in which it becomes receivable.
Government grants relating to assets are treated as deferred
income and recognised in profit and loss over the expected
useful lives of the assets concerned.
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
(j) Impairment of assets
•
where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of the
cost of acquisition of an asset or as part of an item of
expense; or
•
for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables.
Cash flows are included in the Consolidated Statement of
Cash Flows on a gross basis. The GST component of cash
flows arising from investing and financing activities which
is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
(h) Goodwill
Goodwill, representing the excess of the cost of acquisition
over the fair value of the identifiable net assets acquired, is
recognised as an asset and not amortised but tested for
impairment annually and whenever there is an indication
that the goodwill may be impaired. Any impairment is
recognised immediately in the Consolidated Statement of
Comprehensive Income and is not subsequently reversed.
Refer also to note 1(j).
(i) Government grants
Government grants are assistance by the government in the
form of transfers of resources to the company in return for
past or future compliance with certain conditions relating
to the operating activities of the company. Government
grants include government assistance where there are no
conditions specifically relating to the operating activities
At each reporting date, the company reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the company estimates
the recoverable amount of the cash generating unit to
which the asset belongs.
Goodwill, intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that
the asset may be impaired. An impairment of goodwill is not
subsequently reversed. Recoverable amount is the higher
of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted
to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of
money and the risks specific to the asset for which the
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (or cash-generating unit)
is reduced to its recoverable amount. An impairment
loss is recognised in the Consolidated Statement of
Comprehensive Income immediately, unless the relevant
asset is carried at fair value, in which case the impairment
loss is treated as a revaluation decrease.
Where an impairment loss (other than Goodwill)
subsequently reverses, the carrying amount of the asset
(or cash generating unit) is increased to the revised
estimate of its recoverable amount, but only to the extent
42
Medical Developments InternationalFINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
that the increased carrying amount does not exceed the
carrying amount that would have been determined had no
impairment loss been recognised for the asset (or cash-
generating unit) in prior years. A reversal of an impairment
loss is recognised in profit or loss immediately, unless the
relevant asset is carried at fair value, in which case the
reversal of the impairment loss is treated as a revaluation
increase.
(k) Income tax
CURRENT TAX
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the
taxable profit or loss for the period. It is calculated using tax
rates and tax laws that have been enacted or substantively
enacted by reporting date. Current tax for current and prior
periods is recognised as a liability (or asset) to the extent
that it is unpaid (or refundable).
Where the Group qualifies for the research and development
tax incentive refund (at 45%), this reduces the current tax
expense recognised in profit and loss for the period.
DEFERRED TAX
Deferred tax is accounted for using the comprehensive
balance sheet liability method in respect of temporary
differences arising from differences between the carrying
amount of assets and liabilities in the financial statements
and the corresponding tax base of those items.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient
taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax offsets
can be utilised. However, deferred tax assets and liabilities
are not recognised if the temporary differences giving rise
to them arise from the initial recognition of assets and
liabilities (other than as a result of a business combination)
which affects neither taxable income nor accounting profit.
Furthermore, a deferred tax liability is not recognised in
relation to taxable temporary differences arising from
goodwill.
the company expects, at the reporting date, to recover or
settle the carrying amount of its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and
the company intends to settle its current tax assets and
liabilities on a net basis.
CURRENT AND DEFERRED TAX FOR THE PERIOD
Current and deferred tax is recognised as an expense or
income in the Consolidated Statement of Comprehensive
Income, except when it relates to items credited or debited
directly to equity, in which case the deferred tax is also
recognised directly in equity, or where it arises from the
initial accounting for a business combination, in which
case it is taken into account in the determination of
goodwill or excess.
(l) Intangible assets
PATENTS, TRADEMARKS AND LICENSES
Patents, trademarks and licenses are recorded at cost
less accumulated amortisation and impairment. Amortisation
is charged on a straight line basis over their estimated
useful lives of 10 years. The estimated useful life and
amortisation method is reviewed at the end of each
annual reporting period.
RESEARCH AND DEVELOPMENT COSTS
Expenditure on research activities is recognised as an
expense in the period in which it is incurred. Where no
internally-generated intangible asset can be recognised,
development expenditure is recognised as an expense in
the period as incurred.
An intangible asset arising from development (or from the
development phase of an internal project) is recognised if,
and only if, all of the following are demonstrated:
•
•
the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
the intention to complete the intangible asset and use
or sell it;
•
the ability to use or sell the intangible asset;
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when the
asset and liability giving rise to them are realised or settled,
based on tax rates (and tax laws) that have been enacted or
substantively enacted by reporting date. The measurement
of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which
•
•
how the intangible asset will generate probable future
economic benefits;
the availability of adequate technical, financial and other
resources to complete the development and to use or
sell the intangible asset; and
43
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
•
the ability to measure reliably the expenditure attributable
to the intangible asset during its development.
Internally-generated intangible assets in respect of
development costs are stated at cost less accumulated
amortisation and impairment, and are amortised on a
straight-line basis over their estimated useful life of 5 years
commencing from the date that revenue results.
DEFERRED REGISTRATION COSTS
Items of expenditure on registrations are deferred to the
extent that such costs can be measured reliably, future
economic benefits are attributable to the expenditure,
and it is probable that such future economic benefits
will eventuate.
Any deferred registration costs are amortised over a period
of 5 - 20 years in which the corresponding benefits are
expected to arise, commencing from commercial sales
to any of the countries for which the registration costs
contributed to a successful registration.
The unamortised balance of registration costs deferred in
previous periods is reviewed regularly at each reporting date,
to ensure the criteria for deferral continue to be met. Where
such costs are no longer recoverable, they are written off as
an expense in the Statement of Comprehensive Income.
(m) Inventories
Inventories are valued at the lower of cost and net realisable
value. Costs, including an appropriate portion of fixed and
variable overhead expenses, are assigned to inventory on
hand by the method most appropriate to each particular
class of inventory, with the majority being valued on a first in
first out basis. Net realisable value represents the estimated
selling price less all estimated costs of completion and costs
to be incurred in marketing, selling and distribution.
(n) Leases
Leases are classified as finance leases whenever the terms
of the lease transfer substantially all the risks and rewards of
ownership to the lessee. The company currently does not
have any finance leases. All other leases are classified as
operating leases.
Operating lease payments are recognised as an expense
on a straight-line basis over the lease term, except where
another systematic basis is more representative of the time
pattern in which economic benefits from the leased asset
are consumed.
(o) Financial Liabilities
Trade payables and other accounts payable are classified
as financial liabilities and are recognised when the company
becomes obliged to make future payments resulting from
the purchase of goods and services. Financial liabilities are
initially measured at fair value, net of transaction costs.
Financial liabilities are subsequently measured at amortised
cost using the effective interest rate method, with interest
expense recognised on an effective yield basis.
(p) Plant and equipment
Plant and equipment and leasehold improvements
are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly
attributable to the acquisition of the item. In the event that
settlement of all or part of the purchase consideration is
deferred, cost is determined by discounting the amounts
payable in the future to their present value as at the date of
the acquisition.
DEPRECIATION
Depreciation is provided on plant and equipment and is
calculated on a straight line basis so as to write off the cost
of each asset over its expected useful life to its estimated
residual value. Leasehold improvements are depreciated
over the period of the lease or estimated useful life,
whichever is the shorter, using the straight line method.
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each annual reporting
period.
The following estimated useful lives are used in the
calculation of depreciation:
Leasehold improvements
5 years
Plant and equipment
4 -10 years
(q) Provisions
Provisions are recognised when the Group has a present
obligation, the future sacrifice of economic benefits is
probable, and the amount of the provision can be
measured reliably.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation
at reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision
is measured using the cashflows estimated to settle the
present obligation, its carrying amount is the present value
of those cashflows.
44
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is probable that
recovery will be received and the amount of the receivable
can be measured reliably.
DIVIDENDS
A liability is recognised for dividends when they have been
declared, determined or publicly recommended by the
directors on or before the reporting date.
(r) Revenue recognition
SALE OF GOODS
Revenue from the sale of goods is recognised when the
company has transferred to the buyer the significant risks
and rewards of ownership of the goods.
INTEREST INCOME
Interest income is recognised on a time proportionate
basis that takes into account the effective yield on the
financial asset.
(s) Share based payments
Equity-settled share-based payments granted are
measured at fair value at the date of grant. Fair value is
measured by use of a Monte Carlo valuation model.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a
straight-line basis over the vesting period, based on the
company’s estimate of options that will eventually vest.
(t) Application of new and revised
Accounting Standards
STANDARDS AND INTERPRETATIONS AFFECTING
AMOUNTS REPORTED IN THE CURRENT PERIOD
(AND/OR PRIOR PERIODS)
The following new and revised Standards and Interpretations
have been adopted in the current year and have affected the
amounts reported in these financial statements.
STANDARDS AFFECTING PRESENTATION AND DISCLOSURE
Amendments to AASB 101
The amendment (part of AASB 2011-9 ‘Amendments to Australian Accounting Standards
‘Presentation of Financial Statements’
- Presentation of Items of Other Comprehensive Income’) introduces new terminology for
the Statement of ComprehensiveIncome and Income Statement. Under the amendments
to AASB 101, the Statement of Comprehensive Income is renamed as a Statement of
Profit or Loss and Other Comprehensive Income and the IncomeSstatement is renamed
as a Statement of Profit or Loss. The amendments to AASB 101 retain the option to
present profit or loss and other comprehensive income in either a single statement or
in two separate but consecutive statements. However, the amendments to AASB 101
require items of other comprehensive income to be grouped into two categories in the
other comprehensive income section: (a) items that will not be reclassified subsequently
to profit or loss and (b) items that may be reclassified subsequently to profit or loss when
specific conditions are met. Income tax on items of other comprehensive income is
required to be allocated on the same basis – the amendments do not change the
option to present items of other comprehensive income either before tax or net of tax.
The amendments have been applied retrospectively, and hence the presentation of items
of other comprehensive income has been modified to reflect the changes. Other than the
above mentioned presentation changes, the application of the amendments to AASB
101 does not result in any impact on profit or loss, other comprehensive income and
total comprehensive income.
45
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
1. STANDARDS AND INTERPRETATIONS AFFECTING THE REPORTED RESULTS
OR FINANCIAL POSITION
There are no new and revised Standards and Interpretations adopted in these financial statements affecting the reporting
results or financial position.
STANDARDS AND INTERPRETATIONS IN ISSUE NOT YET ADOPTED
At the date of authorisation of the financial statements, the Standards and Interpretations listed below were in issue but not
yet effective. The Company does not expect that upon adoption that there will be any significant impact on the financial
statements.
STANDARDS/INTERPRETATIONS
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
EXPECTED TO BE INITIALLY
APPLIED IN THE FINANCIAL
YEAR ENDING
AASB 9 ‘Financial Instruments’, and the relevant
1 January 2015
30 June 2016
amending standards
AASB 10 ‘Consolidated Financial Statements’ and
1 January 2013
30 June 2014
AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint
Arrangements standards’
AASB 11 ‘Joint Arrangements’ and AASB 2011-7
1 January 2013
30 June 2014
‘Amendments to Australian Accounting Standards arising
from the consolidation and Joint Arrangements standards’
AASB 12 ‘Disclosure of Interests in Other Entities’ and
1 January 2013
30 June 2014
AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint
Arrangements standards’
AASB 127 ‘Separate Financial Statements’ (2011) and
1 January 2013
30 June 2014
AASB 2011-7 ‘Amendments to Australian Accounting
Standards arising from the consolidation and Joint
Arrangements standards’
AASB 128 ‘Investments in Associates and Joint Ventures’
1 January 2013
30 June 2014
(2011) and AASB 2011-7 ‘Amendments to Australian
Accounting Standards arising from the consolidation and
Joint Arrangements standards’
AASB 13 ‘Fair Value Measurement’ and AASB 2011-8
1 January 2013
30 June 2014
‘Amendments to Australian Accounting Standards
arising from AASB 13’
AASB 119 ‘Employee Benefits’ (2011) and AASB 2011-10
1 January 2013
30 June 2014
‘Amendments to Australian Accounting Standards arising
from AASB 119 (2011)’
AASB 2011-4 ‘Amendments to Australian Accounting
1 July 2013
30 June 2014
Standards to Remove Individual Key Management Personnel
Disclosure Requirements’
46
Medical Developments InternationalFINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
STANDARDS/INTERPRETATIONS
EFFECTIVE FOR ANNUAL
REPORTING PERIODS
BEGINNING ON OR AFTER
EXPECTED TO BE INITIALLY
APPLIED IN THE FINANCIAL
YEAR ENDING
AASB 2012-2 ‘Amendments to Australian Accounting
1 January 2013
30 June 2014
Standards – Disclosures – Offsetting Financial Assets
and Financial Liabilities’
AASB 2012-3 ‘Amendments to Australian Accounting
1 January 2014
30 June 2015
Standards – Offsetting Financial Assets and Financial
Liabilities’
AASB 2012-5 ‘Amendments to Australian Accounting
1 January 2013
30 June 2014
Standards arising from Annual Improvements
2009–2011 Cycle’
AASB 2012-10 ‘Amendments to Australian Accounting
1 January 2013
30 June 2014
Standards – Transition Guidance and Other Amendments’
2. CRITICAL ACCOUNTING
JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty at
the balance sheet date, that have significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
IMPAIRMENT OF GOODWILL
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash generating unit and a
suitable discount rate in order to calculate the present value.
The carrying amount of goodwill at the balance sheet date
was $7,368K (2012: $7,368K). Details of the impairment
calculation are provided in note 14.
AMORTISATION OF DEFERRED
REGISTRATION COSTS
During the year, management reviewed the unamortised
balance of registration costs deferred in previous period.
Consideration was given to the cost for each classification
of deferred costs to determine whether the corresponding
benefits are likely to arise. Developments continue on the
unamortised categories of registration costs deferred in prior
periods, and once revenue has been generated in these
categories, the balances will be amortised.
At the reporting date there was no indication that any of the
internally generated intangible assets, relating to registration
costs, were impaired. This situation will be closely
monitored, and amortisation will be recognised in future
periods as corresponding economic benefits flow. Details of
the deferred registration costs are provided in note 15.
3. SEGMENT INFORMATION
PRODUCTS AND SERVICES WITHIN EACH
BUSINESS SEGMENT
For management purposes, the company is organised into
three business units – Pharmaceuticals, Medical Devices
and Veterinary products. These units are the basis on which
the company reports its primary segment information. The
principal products and services of each of these divisions
are as follows:
•
•
Pharmaceuticals – the sale of Penthrox® primarily within
Australia and New Zealand, but with some sales in
Eastern Europe, the Middle East, and South America.
Medical Devices – the sale of medical devices,
particularly the Space Chamber and Breath-Alert
Peak-Flow meters, primarily within Australia and
New Zealand, but with some sales in Asia, Europe,
the Middle East and North America.
•
Veterinary Products – the sale of veterinary products
within Australia, Europe, and the United States.
47
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
SEGMENT REVENUES AND RESULTS
PHARMACEUTICALS
MEDICAL
EQUIPMENT
VETERINARY
EQUIPMENT
UNALLOCATED
TOTAL
2013
$’000
2012
$’000
2013
$’000
2012
$’000
2013
$’000
2012
$’000
2013
$’000
2012
$’000
2013
$’000
2012
$’000
6,290
6,646
5,105
4,310
338
357
–
–
–
–
–
–
–
41
–
11,733
11,313
181
41
181
11,774
11,494
Revenues:
External sales
Other income
Total revenue
Results:
Segment results
2,616
2,896
1,445
1,306
105
108
–
–
4,166
4,310
Unallocated
–
–
–
–
–
–
(781)
(446)
(781)
(446)
Profit before
interest, income
tax depreciation &
amortisation
Depreciation &
Amortisation
Profit before interest
and tax
Net Interest
Profit before income
tax expense
Income tax expense
Net profit for the
period from continuing
operations
Assets and Liabilities:
Assets
Liabilities
Other Segment
Information:
Acquisition of
segment assets
2,616
2,896
1,445
1,306
105
108
(781)
(446)
3,385
3,864
(149)
(164)
(8)
(19)
(3)
(8)
(74)
(56)
(234)
(247)
2,467
2,732
1,437
1,287
102
100
(855)
(502)
3,151
3,617
41
172
41
172
(814)
(330)
3,192
3,789
(883)
(1,085)
(883)
(1,085)
(1,697)
(1,415)
2,309
2,704
13,145
10,219
4,792
4,287
807
789
1,515
3,841
20,259
19,136
–
–
–
–
–
–
4,515
2,967
4,515
2,967
2,802
2,109
77
17
33
7
209
41
3,121
2,174
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 1.
This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment
of segment performance.
Liabilities are not disclosed per segment as it is not possible to track these on a segment basis.
48
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
REVENUE FROM MAJOR PRODUCTS AND SERVICES
Revenue from major products and services has not been presented as it is not considered practicable to do so.
GEOGRAPHICAL INFORMATION
The Group operates in three principal geographical areas: Australia (country of domicile); New Zealand; and ‘International’
comprising Eastern Europe, Germany, Canada, Middle East and South America.
The Group’s revenue from continuing operations from external customers and information about its non-current assets by
location of assets are detailed below:
GEOGRAPHICAL
INFORMATION
Australia
New Zealand
International
REVENUE
FROM
EXTERNAL
CUSTOMERS
2013
$’000
8,678
1,575
1,480
%
74.0
13.4
12.6
REVENUE
FROM
EXTERNAL
CUSTOMERS
2012
$’000
8,068
1,664
1,581
%
74.0
17.9
8.1
11,733
100.0
11,313
100.0
The Group’s non-current assets by location are detailed below:
NON-CURRENT SEGMENT ASSETS
AUSTRALIA
$’000
OVERSEAS
$’000
TOTAL
$’000
Leasehold improvements at cost
Plant and equipment at cost
Goodwill at gross carrying amount
Other intangible assets at cost
515
2,438
7,368
7,333
–
161
–
–
515
2,599
7,368
7,333
17,654
161
17,815
INFORMATION ABOUT MAJOR CUSTOMERS
The Group’s three largest customers who contributed 10% or more to the Group’s revenue from external sales for both 2013
and 2012 are below:
TOP CUSTOMERS WITH
> 10% SALES
Customer A
Customer B
Customer C
2013
$’000
1,724
1,293
1,086
4,103
% TOTAL
SALES
2012
$’000
% TOTAL
SALES
SEGMENT
14.7
11.0
9.3
1,412
12.0
Pharmaceutical/Medical Equipment
1,399
11.9
Medical Equipment
501
4.3
Pharmaceutical/Medical Equipment
3,312
49
2013 Annual Report FINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
4. PROFIT FOR THE YEAR
(a) Revenue and other income
Revenue from sale of goods
Other operating lease rental income
Interest revenue - bank deposits
Other Income
Government grant income
(b) Expense items included in profit and loss
Profit before income tax has been arrived at after charging the following expenses:
Depreciation of non-current assets
Amortisation of non-current assets
Research & development costs immediately expensed
Operating lease rental expenses - minimum lease payments
Interest expense
Employee benefit expense:
Short-term employee benefits
Superannuation contributions
Equity settled share based payments
2013
$'000
2012
$'000
11,733
11,313
8
54
33
–
7
172
157
17
11,828
11,666
(200)
(34)
(41)
(145)
(13)
(2,304)
(288)
(6)
(2,598)
(157)
(90)
(75)
(124)
–
(1,934)
(265)
(103)
(2,302)
50
Medical Developments InternationalFINANCIALS 5. INCOME TAXES
(a) Income tax recognised in profit or loss
Tax expense comprises:
Current tax expense
Adjustments recognised in the current year in relation to the
current tax of prior year
Deferred tax expense in relation to the deferred tax of prior year
Deferred tax expense relating to the origination and reversal
of temporary differences
Total tax expense
NOTES TO THE
FINANCIAL
STATEMENT
2013
$'000
456
41
(43)
429
883
2012
$'000
745
(73)
–
413
1,085
The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements as follows:
Profit from operations
Income tax calculated at 30%
Share based payment expense
Research & development expense
Effect of expenses that are not deductible in determining taxable profit
Adjustments recognised in the current year in relation to the current tax of prior year
Effect of profit or loss items eliminated on consolidation
Effect of different tax rates of subsidiaries operating in other jurisdictions
Deferred tax expense in relation to the deferred tax of prior year
Income tax expense recognised in the Statement of Comprehensive Income
3,192
958
2
(110)
1
41
19
15
(43)
883
3,789
1,137
31
(73)
2
(73)
–
–
61
1,085
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits
under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.
(b) Income tax recognised directly in equity
No current and deferred tax amounts have been charged directly to equity during the period (2012: $nil)
(c) Current tax liabilities
Income tax payable
(d) Current tax assets
Income tax receivable
(e) Deferred tax liabilities
Temporary differences
–
(339)
297
–
(861)
(475)
51
2013 Annual Report FINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
5. INCOME TAXES (CONTINUED)
Taxable/Deductible temporary differences arise from the following:
2013
Deferred tax assets/(liabilities):
Accrued expenses
Deferred grant revenue
Other Assets
Other Intangibles
Property, Plant & Equipment
Provisions
Tax losses
Unrealised foreign exchange losses
2012
Deferred tax assets/(liabilities):
Accrued expenses
Deferred grant revenue
Other Intangibles
Property, Plant & Equipment
Provisions
Unrealised foreign exchange losses
OPENING
BALANCE
$'000
CHARGED
TO INCOME
$'000
CLOSING
BALANCE
$'000
18
95
–
3
–
(3)
21
95
(3)
(648)
(525)
(1,173)
23
83
–
(46)
(475)
0
11
61
67
23
94
61
21
(386)
(861)
OPENING
BALANCE
$'000
CHARGED
TO INCOME
$'000
CLOSING
BALANCE
$'000
128
95
(376)
–
72
19
(62)
(110)
–
(272)
23
11
(65)
(413)
18
95
(648)
23
83
(46)
(475)
52
Medical Developments InternationalFINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
6. KEY MANAGEMENT PERSONNEL COMPENSATION
The aggregate compensation of the key management personnel of the company and the Group is set out below:
Short-term employee benefits
Post employment benefits
Share based payments
Termination benefits
2013
$’000
670
55
6
16
747
2012
$’000
623
50
103
–
776
7. SHARE-BASED PAYMENTS
(A) EMPLOYEE SHARE OPTION PLAN
On 5 September 2011 the Long-Term Incentive Plan (LTIP) for the CEO (John Sharman) was formalised. Under the
agreement, the CEO is provided with 3 separate tranches which if met (target share price and continued employment)
would entitle the CEO to a bonus / subscription of shares at particular prices. No further service conditions are attached.
The LTIP allows the CEO to choose between receiving a bonus (tranche 1: $120,000, tranche 2: $500,000 and tranche
3: $1,200,000), to be applied net of taxation through payroll and superannuation by the company to acquire shares in
the company or subscribe for 513,577 shares at 25 cents per share at each tranche. Where the CEO receives the bonus
amount, this will be applied by the company to acquire shares at prices not exceeding the relevant share purchase price
(tranche 1: 50 cents, tranche 2: $1.00 and tranche 3: $1,50) where shares are purchased on the ASX in the ordinary course
of trading or issued by the company at the relevant target price. Although the first option involves a monetary bonus, this
is used to acquire shares to the value of the bonus. Therefore although the number of shares is variable, the bonus is still
settled in shares for the CEO. Therefore neither option is a cash-settled share-based payment.
The following table outlines for each of the tranches the grant date, vesting conditions, fair valuation, and amount
expensed during the year.
TRANCHE
GRANT DATE
TARGET SHARE PRICE
FOR VESTING BASED ON A
CONTINUOUS WEIGHTED
AVERAGE FOR 3 MONTHS
(COMPANY SHARE PRICE)
1
2
3
Total
5 September 2011
5 September 2011
5 September 2011
$0.49
$0.97
$1.46
FAIR VALUE AT
GRANT DATE
EXPENSED DURING
THE YEAR
$96,501
2013
–
2012
$96,501
$12,721
$6,119
$6,602
$631
$353
$278
$109,853
$6,472
$103,381
53
2013 Annual Report FINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
(B) FAIR VALUE OF SHARE OPTIONS GRANTED IN THE YEAR
There were no options granted in the year ended 30 June 2013.
The three tranches granted under the LTIP were granted in the year ended 30 June 2012. The fair value of the three
tranches was based on the Monte Carlo method. The valuations were based on key assumptions one of which being
the length the CEO is likely to stay within the company from the period of the grant date. Entitlements under the LTIP
only cease on termination of the CEO’s employment.
The inputs to the model were as follows:
Target Price
Strike Price
Grant Date
Volatility (Daily)
Dividend Yield
Risk Free Rate
TRANCHE 1
TRANCHE 2
TRANCHE 3
$0.49
$0.25
$0.97
$0.25
$1.46
$0.25
5 September 2011
5 September 2011
5 September 2011
1.52%
8.57%
4.32%
1.52%
8.57%
4.32%
1.52%
8.57%
4.32%
(C) MOVEMENTS IN SHARE OPTIONS DURING THE YEAR
In the year ended 30 June 2013, Tranches 2 and 3 were vested and exercised under the LTIP (2012: Tranche 1 was vested
and exercised).
(D) SHARE OPTIONS EXERCISED DURING THE YEAR
The following options exercised during the year:
2013
LTIP
Tranche 2
Tranche 3
GRANT
DATE
NUMBER
EXCERCISED
EXERCISED
DATE
5 September 2011
5 September 2011
513,577
447,774
961,351
8 November 2012
25 January 2013
SHARE PRICE
AT EXERCISE DATE
$
1.74
2.02
When exercising Tranche 2 the CEO opted to subscribe for shares at 25 cents per share in accordance with the LTIP.
This resulted in an increase in ordinary share capital of $128,394.
When exercising Tranche 3 the CEO opted to receive a bonus of $1,200,000 was used to subscribe for shares at
the target price in accordance with the LTIP. After withholding tax this resulted in a decrease in retained earnings of
$546,250 (withholding tax paid during the year).
2012
LTIP
GRANT
DATE
NUMBER
EXCERCISED
EXERCISED
DATE
SHARE PRICE
AT EXERCISE DATE
$
Tranche 1
5 September 2011
513,577
513,577
3 January 2012
0.57
54
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
8. REMUNERATION OF AUDITORS
AGEING OF PAST DUE BUT NOT IMPAIRED
In determining the recoverability of trade receivables,
the Group considers any change in the credit quality of
the trade receivable from the date the credit was initially
granted up to the reporting date. The concentration of
credit risk is limited due to the fact that the customer
base is large and unrelated.
The directors believe that there is no further credit provision
required in excess of the allowance for doubtful debts.
10. CURRENT INVENTORIES
2013
$'000
31
243
274
2012
$'000
25
70
95
2013
$'000
2012
$'000
603
612
318
226
477
229
1,398
1,067
2013
$
2012
$
Auditor of the parent entity
Audit or review of the
financial report
Other services
71,955
14,000
85,955
60 - 90 days
90 - 120 days
69,500
Total
15,813
85,313
The auditor of the entity is Deloitte Touche Tohmatsu.
The other services relate to taxation services.
9. CURRENT RECEIVABLES
Trade receivables
Allowance for doubtful debts
Other debtors
GST recoverable
2013
$'000
2,230
–
6
106
2,342
2012
$'000
1,940
–
43
65
The average credit period on sales of goods to domestic
customers is 30 days; international customers 60 days.
No interest is charged on trade receivables.
The Group has a credit policy in place to reduce its credit
risks to significant debtors. Of the trade receivables balance
at the end of the year, $1,013,000 (2012: $633,000) is due
from the Group’s three largest customers (Refer to note 3).
Included in the trade receivable balance are debtors with
a carrying amount of $274,000 (2012: $95,000) which are
past due at the reporting date for which the Group has not
provided as there has not been a significant change in credit
quality and the amounts are still considered recoverable. The
Group does not hold any collateral over these balances.
Raw materials:
2,048
At cost
Work in progress:
At cost
Finished goods:
At cost
11. OTHER CURRENT ASSETS
Prepayments
2013
$'000
118
2012
$'000
89
55
2013 Annual Report FINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
12. SUBSIDIARIES
Details of the Group’s subsidiaries at the end of the reporting period are as follows.
NAME OF
SUBSIDIARY
PRINCIPLE
ACTIVITY
PLACE OF
INCORPORATION
AND OPERATION
PROPORTION OF OWNERSHIP
INTEREST AND VOTING POWER
HELD BY THE GROUP
Medical Developments
UK Limited
Distribution of pharmaceutical
drug and medical and
veterinary equipment
United Kingdom
13. PROPERTY, PLANT & EQUIPMENT
2013
100%
2012
100%
LEASEHOLD
IMPROVEMENTS
AT COST
PLANT AND
EQUIPMENT
AT COST
TOTAL
$'000
$'000
$'000
Gross carrying amount
Balance at 1 July 2011
Additions
Balance at 1 July 2012
Additions
Write off of PP&E
Balance at 30 June 2013
Accumulated depreciation
Balance at 1 July 2011
Depreciation expense
Balance at 1 July 2012
Depreciation expense
Write off of PP&E
Balance at 30 June 2013
Net book value
As at 30 June 2012
As at 30 June 2013
258
27
285
230
–
515
(126)
(33)
(159)
(59)
–
(218)
126
297
Aggregate depreciation allocated, whether recognised as an expense or capitalised
as part of the carrying value of other assets during the year:
Property, Plant & Equipment
56
2,195
94
2,289
312
(1)
2,600
(1,607)
(124)
(1,731)
(141)
1
(1,871)
558
729
2013
$'000
(200)
2,453
121
2,574
542
(1)
3,115
(1,733)
(157)
(1,890)
(200)
1
(2,089)
684
1,026
2012
$'000
(157)
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
14. GOODWILL
Gross carrying amount
Balance at beginning of financial year
Balance at end of financial year
Net book value
Balance at beginning of financial year
Balance at end of financial year
2013
$'000
7,368
7,368
7,368
7,368
2012
$'000
7,368
7,368
7,368
7,368
During the year, the company assessed the recoverable amount of goodwill and determined that there
was no impairment (2012: $nil).
ALLOCATION OF GOODWILL TO CASH-GENERATING UNITS
Goodwill has been allocated for impairment testing purposes to three individual cash-generating units:
pharmaceutical business, medical devices business and veterinary equipment business. The carrying
amount of goodwill allocated to cash-generating units that are significant individually is as follows:
Pharmaceuticals
Medical devices
Veterinary equipment
2013
$'000
3,808
2,979
581
7,368
2012
$'000
3,808
2,979
581
7,368
The recoverable amount of all three cash-generating units is based on a value in use calculation for each
unit which uses cash flow projections based on a five-year projection period and terminal value. The Board
of Directors approved financial budget for the following year is used to determine the cash flows for year 1.
This assumes growth rates of 7.5%, 18.8% and 3.7% respectively with growth rates for years 2-5 of:
Pharmaceuticals:
7.6% based on expansion into new markets
Medical Devices:
18.8% based on expansion into new markets
Veterinary equipment:
0%
A terminal value after 5 years based on a long term growth rate of 2.5%, and a pre-tax discount rate of 13.62%
per annum (2012: 10.85% per annum) have been used to calculate the carrying value of the intangible assets.
The key assumptions used in the value in use calculations for all units are:
• Sales growth – described above
•
Gross margin – it is assumed that gross margin of the Pharmaceutical & Medical Devices segments
will continue to improve following investment and activities aimed at improvement in the manufacturing
process and procedures.
Management believes that any reasonably possible change in the key assumptions on which the recoverable
amount for each of the three units is based would not cause the carrying amounts to exceed their
recoverable amounts.
57
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
15. OTHER INTANGIBLE ASSETS
2013
Gross carrying amount
Balance at 1 July 2011
Additions
Write off of Intangibles
Balance at 1 July 2012
Additions
Balance at 30 June 2013
Accumulated amortisation
Balance at 1 July 2011
Write back amortisation
Amortisation expense
Balance at 1 July 2012
Amortisation expense
Balance at 30 June 2013
Net book value
As at 30 June 2012
As at 30 June 2013
DEVELOPMENT
PATENTS &
TRADEMARKS
DEFERRED
REGISTRATION
COSTS
$'000
$'000
$'000
–
483
–
483
415
898
–
–
–
–
–
–
483
898
259
49
(17)
291
74
365
(57)
17
(33)
(73)
(31)
(104)
218
261
2,500
1,521
(41)
3,980
2,090
6,070
(268)
41
(57)
(284)
(3)
(287)
3,696
5,783
The amortisation charge for the year of $34,000 (2012: $90,000) has been included in administration expenses.
For an explanation of amortisation periods refer note 1(l).
16. CURRENT TRADE AND
OTHER PAYABLES
17. BORROWINGS
Trade payables (i)
Accrued expenses
Employee benefits payable
PAYG witholding tax payable
2013
$'000
1,238
336
1
55
2012
$'000
999
496
18
46
1,630
1,559
(i) The average credit period on purchase of goods is
30 days. No interest is charged on trade payables.
The company has financial risk management policies
in place to ensure that all payables are paid within the
credit timeframe.
Secured - at amortised cost
Bank loan (i)
Bank Bill (ii)
Other (iii)
Current
Non-current
2013
$'000
69
1,200
175
1,444
1,356
88
1,444
TOTAL
$'000
2,759
2,053
(58)
4,754
2,579
7,333
(325)
58
(90)
(357)
(34)
(391)
4,397
6,942
2012
$'000
–
–
–
–
–
–
–
58
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
18. CURRENT PROVISIONS
Employee benefits
2013
$'000
201
19. NON-CURRENT PROVISIONS
Employee benefits
2013
$'000
61
2012
$'000
235
2012
$'000
41
20. OTHER NON-CURRENT LIABILITIES
Unearned government
grant income
2013
$'000
318
2012
$'000
318
Unearned government grant income represents funds
received through the Commercial Ready Programme from
Federal Government.
SUMMARY OF BORROWING ARRANGEMENTS
(i) On 1 March 2013 the Group entered into a commercial
loan agreement to fund the purchase of a new bottling
station. As at 30 June 2013, $69,000 has been drawn
upon and $103,000 remains unused. When the final
draw down is made, the commercial loan agreement
will be converted into a Hire Purchase Agreement. The
current weighted-average effective interest rate on the
loan is 7.5% p.a. The commercial loan agreement is
secured by a registered charge over the equipment
financed.
(ii) The Bank Bill Facility with a variable interest rate and
90 day roll over period was taken out during the year.
As at 30 June 2013, $1,200,000 has been drawn upon
and $1,350,000 remains unused. The current weighted
average effective interest rate on the bills is 5.9% p.a.
The Bank Bill is secured by a registered charge over
the Group’s assets.
(iii) On 29 June 2012, the group entered into an
agreement with the Commonwealth Scientific and
Industrial Research Organisation (‘CSIRO’) to fund
the development of a new production process for the
pain relieving ingredient used in Penthrox®. Funding is
receivable at the commencement of each of three stages
of development and is payable over a three year term
upon the completion of the relevant stage. As at 30
June 2013, the stage 1a is complete and stage 1b has
commenced. Should MDI default on the loan, CSIRO
has the option to convert the debt into shares in MDI
at fair market value. This funding is interest- free until
the first anniversary of the completion of stages 1a and
2 and is then calculated at the Westpac Bank Lending
Rate at the date the relevant note was issued, plus 2%.
The funding for stage 2 is interest free.
(iv) The Group has an overdraft facility of $200,000. As at
30 June 2013, this remains unused.
59
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
21. ISSUED CAPITAL
2013
No.
2013
$'000
2012
No.
Fully paid ordinary shares
Balance at beginning of financial year
55,689,436
9,354
51,357,651
Shares Issued - CEO LTIP
Shares Issued - Dividends Reinvestment Plan
961,351
769,916
128
1,077
513,577
3,818,208
Balance at end of financial year
57,420,703
10,559
55,689,436
2012
$'000
7,293
128
1,933
9,354
2012
$'000
–
–
–
(b) Foreign currency translation reserve
Balance at beginning of year
Exchange differences arising on
translating the foreign operations
Balance at end of year
2013
$'000
–
(13)
(13)
Exchange differences relating to the translation of the
results and net assets of the Group’s foreign operations
from their functional currencies to the Group’s presentation
currency (i.e. Australian dollars) are recognised directly
in other comprehensive income and accumulated in the
foreign currency translation reserve. Gains and losses
on hedging instruments that are designated as hedging
instruments for hedges of net investments in foreign
operations are included in the foreign currency translation
reserve. Exchange differences previously accumulated
in the foreign currency translation reserve (in respect of
translating both the net assets of foreign operations and
hedges of foreign operations) are reclassified to profit or
loss on the disposal of the foreign operation.
Changes to the then Corporations Law abolished the
authorised capital and par value concept in relation to
share capital from 1 July 1998. Therefore, the company
does not have a limited amount of authorised capital
and issued shares do not have a par value.
Fully paid ordinary shares carry one vote per share and
carry the right to dividends.
SHARE OPTIONS
The Chief Executive Officer Long Term Incentive Plan
(CEO LTIP) was in place for the financial year ending
30 June 2013.
Further details of the CEO LTIP are contained in
note 7 to the financial statements.
22. RESERVES
2013
$'000
(a) Employee equity-settled benefits reserve
Balance at beginning of year
Transfer to retained earnings
Share-based payment
recognised
Balance at end of year
103
(109)
6
–
2012
$'000
204
(204)
103
103
The above equity-settled employee benefits reserve
relates to share options granted by the Company to the
CEO, John Sharman under its employee share option plan.
Items included in equity-settled employees benefit reserve
will not be reclassified subsequently to profit or loss.
Further information about these share-based payments
are set out in note 7.
60
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
23. RETAINED EARNINGS
24. EARNINGS PER SHARE
Balance at beginning
of financial year
Transfer from Reserves
Dividends paid
Dividends Reinvested
Shares subscribed for
under CEO LTIP
Net profit attributable
to members
2013
$'000
6,712
109
(2,309)
(1,077)
(546)
2,309
2012
$'000
6,958
2013
2012
CENTS PER
SHARE
CENTS PER
SHARE
Basic earnings per share
204
Diluted earnings per share
4.1
4.1
5.1
5.1
(1,221)
(1,933)
–
2,704
BASIC EARNINGS PER SHARE
The earnings and weighted average number of ordinary
shares used in the calculation of basic earnings per share
are as follows:
Balance at end of financial year
5,198
6,712
Earnings
2013
$'000
2,309
2013
No.
2012
$'000
2,704
2012
No.
Weighted average number
of ordinary shares
56,636,759
53,427,381
The shares issued to the CEO under the CEO LTIP have
been included in the weighted average number of ordinary
shares for the purposes of calculating basic EPS.
DILUTED EARNINGS PER SHARE
There is no difference from basic EPS in the calculation
of diluted EPS.
61
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
25. DIVIDENDS
The directors declared a fully franked final dividend of
3 cents per share to the holders of fully paid ordinary
shares in respect of the financial year ended 30 June 2012.
The directors declared a fully franked interim dividend of
3 cents per share to the holders of fully paid ordinary shares
in respect of the half year ended 31 December 2012.
The Board of Directors declared a Final Dividend of
2 cents per share fully franked in respect of the year
ended 30 June 2013.
All dividends are accrued for when declared.
Recognised amounts
Fully paid ordinary shares
Final dividend franked to 30%
Interim dividend franked to 30%
Unrecognised amounts
Fully paid ordinary shares
Final dividend franked to 30%
2013
2012
CENTS PER
SHARE
$'000
CENTS PER
SHARE
$'000
3.0
3.0
6.0
2.0
1,671
1,715
3,386
1,148
1,148
3.0
3.0
6.0
3.0
1,541
1,615
3,156
1,671
1,671
Adjusted franking account
balance
2013
$'000
1,496
2012
$'000
1,649
26. OPERATING LEASES
27. COMMITMENTS FOR EXPENDITURE
Operating leases relate to factory leases with remaining
lease terms of up to 30 months. The company does not
have the option to purchase the leased asset at the expiry
of the lease period.
(A) CAPITAL EXPENDITURE COMMITMENTS
Capital expenditure commitments relate to the purchase of a
new bottling station ($103,000) and the ongoing project with
CSIRO ($362,000). Further details are disclosed in note 17
to the financial statements.
Non cancellable operating lease payments:
2013
$'000
2012
$'000
28. RELATED PARTY DISCLOSURES
Not longer than 1 year
Longer than 1 year and not
longer than 5 years
181
262
443
66
146
212
(A) KEY MANAGEMENT PERSONNEL
COMPENSATION
Details of key management personnel compensation are
disclosed in note 6 to the financial statements.
62
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
(B) KEY MANAGEMENT PERSONNEL EQUITY HOLDINGS – FULLY PAID ORDINARY SHARES
2013
D.J. Williams
A. Coulepis
I.M.C. Kirkwood
A.D. McCallum
H.F. Oxer
M. Van Ryn
M. Johnston
J. Sharman*
BALANCE AT
30 JUNE 2012
ISSUED DURING
THE YEAR
NET OTHER
CHANGE
BALANCE AT
30 JUNE 2013
No.
No.
No.
No.
29,798,964
474,424
112,270
470,095
195,463
1,318,282
–
513,577
32,883,075
–
–
–
–
–
–
–
961,351
961,351
412,624
30,211,588
(474,424)
(112,270)
–
8,341
2,747
20,000
(705,698)
(848,680)
–
–
470,095
203,804
1,321,029
20,000
769,230
32,995,746
* The 961,351 shares issued during the year were as a result of the CEO exercising his rights under a Long Term Incentive Plan.
For further details refer to note 7.
2012
D.J. Williams
A. Coulepis
I.M.C. Kirkwood
A.D. McCallum
H.F. Oxer
M. Van Ryn
J. Sharman*
BALANCE AT
30 JUNE 2011
ISSUED DURING
THE YEAR
NET OTHER
CHANGE
BALANCE AT
30 JUNE 2012
No.
No.
No.
No.
25,513,321
385,000
100,000
470,095
140,000
1,203,898
–
27,812,314
–
–
–
–
–
–
4,285,643
29,798,964
89,424
12,270
–
55,463
114,384
474,424
112,270
470,095
195,463
1,318,282
513,577
513,577
–
513,577
4,557,184
32,883,075
* The 513,577 shares issued during the year were as a result of the CEO exercising his rights under a Long Term Incentive Plan.
For further details refer to note 7.
(C) KEY MANAGEMENT PERSONNEL EQUITY
HOLDINGS – OPTIONS
Details of the CEO LTIP are contained in note 7 to the
financial statements.
29. SUBSEQUENT EVENTS
The company made an announcement to the Australian
Stock Exchange on 13 August 2013 that the company
had completed the ‘Through QT/QTc’ Clinical Trial.
The success of MDI’s TQT Phase I study is a very significant
milestone. The study provides further clinical evidence as to
the safety of Penthrox® and is a critical component of the
regulatory strategy to introduce Penthrox® into new markets
internationally, and into Western Europe in particular.
The Board of Directors declared a Final Dividend of
2 cents per share fully franked in respect of the year
ended 30 June 2013.
Other than the above, there has not been any matter or
circumstance that has arisen that has significantly affected,
or may significantly affect the operations of the company,
the results of those operations, or the state of affairs of
the company in future years.
63
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
30. NOTES TO THE STATEMENT OF CASH FLOWS
(a) Reconciliation of cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash includes cash on hand
and in banks. Cash at the end of the financial year as shown in the Consolidated Statement
of Cash Flows is reconciled to the related item in the balance sheet as follows:
Cash and cash equivalents
(b) Reconciliation of profit for the period to net cash flows from operating activities
Profit for the period
Interest received
Depreciation and amortisation of non-current assets
Net foreign exchange loss/(gain)
Equity settled share based payment expense
Taxes paid in equity settled share based payment
Decrease in current tax liabilities
Increase in deferred tax liability
Movements in working capital
Increase in assets:
Current receivables
Current inventories
Other current assets
Increase/(decrease) in liabilities:
Current payables
Current provisions
Non-current provisions
Net cash from operating activities
(c) Financing facilities
Unsecured bank overdraft facility, reviewed annually and payable at call:
Amount unused
Bank bill facility with a 90 day roll over period:
Amount used
Amount unused
Details of further financing facilities are disclosed in Note 17.
(d) Non-cash transactions
During the current year, the Group continued to operate the Dividend Reinvestment Plan.
The total amount of dividend re-invested was $1,077,000 (2012: $1,933,000).
64
2013
$’000
2012
$’000
768
768
2,309
(78)
234
(8)
6
(546)
(636)
386
(294)
(331)
(29)
(22)
(34)
20
977
200
200
1,200
1,350
2,550
3,483
3,483
2,704
(160)
247
(12)
103
–
(90)
413
(415)
(127)
(11)
350
26
10
3,038
150
150
–
750
750
Medical Developments InternationalFINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
31. FINANCIAL INSTRUMENTS
(b) Significant accounting policies
(a) Capital risk management
The Group manages its capital to ensure that it will be
able to continue as a going concern while maximising the
return to stakeholders. The Group does not enter into
or trade financial instruments, including derivatives, for
speculative purposes.
The capital structure of the Group consists of net debt
(borrowings as detailed in note 17) and equity of the Group
(comprising issues capital, reserves, retained earnings, and
cash and cash equivalents as detailed in notes 21, 22, 23,
and 30(a), respectively).
The Group’s Audit and Risk Committee reviews the capital
structure of the Group on a semi-annual basis. As part of
this review, the committee considers the cost of capital and
the risks associated with each class of capital. The gearing
ratio at 30 June 2013 is 4% (see below).
Debt (i)
Cash and bank balances
Net debt / (cash)
Equity (ii)
Net debt to equity ratio
2013
$'000
1,444
(768)
676
15,744
4%
2012
$'000
0
(3,483)
(3,483)
16,169
-22%
(i) Debt is defined as long-term and short-term borrowings
as described in note 17.
(ii) Equity includes all capital and reserves of the group that
are managed as capital.
The bank bill facility includes financial covenants whereby
the debt cover ratio must be no less than 2 times and the
operating leverage ratio must be no higher than 1.50 times.
Monitoring of said covenants is performed monthly by
management and signed off quarterly by the board. At 30
June 2013 there were no instances of non-compliance.
Details of significant accounting policies and methods
adopted, including the criteria for recognition, the basis
of measurement and the basis on which revenues and
expenses are recognised, in respect of each class of
financial asset, financial liability and equity instrument
are disclosed in note 1 to the financial statements.
These policies were consistent throughout the current
year and the prior year.
(c) Financial risk management objectives
The Group’s finance function provides services to the
business, co-ordinates access to domestic and international
financial markets, monitors and manages financial risks
relating to the operations of the Group. These risks include
market risk (including currency risk, fair value interest rate
risk and price risk), credit risk, liquidity risk and cash flow
interest rate risk.
(d) Credit risk management
Credit risk refers to the risk that a counter party will default
on its contractual obligations resulting in financial loss
to the Group. The Group has adopted a policy of only
dealing with creditworthy counterparties. The Group’s
exposure is continually monitored and the aggregate value
of transactions concluded is spread amongst approved
counterparties.
Trade receivables consist of a large number of customers.
Ongoing credit evaluation is performed on the financial
condition of these accounts receivable and advance
payments are requested where deemed appropriate.
The carrying amount of financial assets recorded in the
financial statements, net of any allowance for losses,
represents the Group’s maximum exposure to credit risk
without taking account of the value of any collateral or
other security obtained.
Apart from the three largest customers of the Group (refer to
Notes 3 and 9), the Group does not have significant credit
risk exposure to any single counterparty or any group of
counterparties having similar characteristics. The Group
defines counterparties as having similar characteristics if
they are related entities. Concentration of credit risk to any
other counterparty did not exceed 5% of gross monetary
assets at any time during the year.
65
2013 Annual Report FINANCIALS NOTES TO THE
FINANCIAL
STATEMENT
(e) Foreign currency risk management
The Group undertakes certain transactions denominated
in foreign currencies, hence exposures to exchange rate
fluctuations arise.
The carrying amount of the Group’s foreign currency
denominated monetary assets and monetary liabilities at the
reporting date is as follows:
includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the period
end for a 10% change in foreign currency rates. A positive
number indicates an increase in profit or loss where
the Australian Dollar strengthens against the respective
currency. For a weakening of the Australian Dollar against
the respective currency there would be an equal and
opposite impact on the profit.
LIABILITIES
ASSETS
USD IMPACT
2013
$’000
522
8
–
2
18
550
2012
$’000
164
34
–
17
–
215
2013
$’000
446
–
4
–
–
2012
$’000
269
Profit or Loss
2013
$'000
8
2012
$'000
(11)
–
17
–
–
This is attributable to the exposure outstanding on USD
receivables and payables at year end in the Group. The
exposure to movement in NZD, EUR and GBP is not
deemed to be significant.
450
286
USD
GBP
NZD
EUR
CND
Amounts of exposure are not currently significant and as
such forward contracts and currency swap agreements are
not used.
FOREIGN CURRENCY SENSITIVITY ANALYSIS
The Group predominantly trades in Australian dollars (AUD),
but has limited exposure to the US dollar (USD) based on a
portion of its overseas sales and purchases.
The following table details the Group’s sensitivity to a 10%
increase and decrease in the Australian Dollar against the
USD. 10% is the sensitivity rate used when assessing
foreign currency risk internally by key management and
represents management’s assessment of the possible
change in foreign currency rates. The sensitivity analysis
(f) Fair value of financial instruments
The Directors consider that the carrying amount of financial
assets and liabilities recorded at amortised cost in the
financial statements approximates their respective net fair
values, determined in accordance with the accounting
policies disclosed in note 1 to the financial statements.
The Group does not recognise any financial instruments that
are measured subsequent to initial recognition at fair value.
(g) Interest rate risk management
The Group is exposed to interest rate risk as it holds cash at
floating interest rates. The following table details the Group’s
exposure to interest rate risk as at 30 June 2013 and 30
June 2012.
VARIABLE INTEREST RATE MATURITY
AVERAGE
INTEREST
RATE
%
LESS THAN
1 YEAR
1 TO 5 YEARS
MORE THAN
5 YEARS
$’000
$’000
$’000
NON-
INTEREST
BEARING
$’000
2.20
–
–
5.64
768
–
768
–
1,356
1,356
–
–
–
–
88
88
–
–
–
–
–
–
–
2,342
2,342
1,630
–
1,630
TOTAL
$’000
768
2,342
3,110
1,630
1,444
3,074
2013
Financial assets
Cash
Receivables
Financial liabilities
Payables
Borrowings
66
Medical Developments InternationalFINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
2012
Financial assets
Cash
Receivables
AVERAGE
INTEREST
RATE
%
4.28
–
Financial liabilities
Payables
–
VARIABLE INTEREST RATE MATURITY
LESS THAN
1 YEAR
1 TO 5 YEARS
MORE THAN
5 YEARS
$’000
$’000
$’000
NON-
INTEREST
BEARING
$’000
3,483
–
3,483
–
–
–
–
–
–
–
–
–
–
–
–
–
2,048
2,048
1,559
1,559
TOTAL
$’000
3,483
2,048
5,531
1,559
1,559
The following table details the Group’s sensitivity to a 50 basis point increase or decrease in interest rates.
Profit or Loss
2013
$'000
(3)
2012
$'000
18
(h) Liquidity risk management
The Group manages liquidity risk by maintaining adequate cash reserves, banking facilities and reserve borrowing facilities
by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
LIQUIDITY RISK TABLE
The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes the principal cash flows.
2013
Payables
Borrowings
2012
Payables
WEIGHTED
AVERAGE EFFECTIVE
INTEREST RATE %
LESS THAN
1 YEAR
$’000
1 TO 5 YEARS
$’000
MORE THAN
5 YEARS
$’000
–
5.64
–
1,630
1,356
2,986
1,559
1,559
–
88
88
–
–
–
–
–
–
–
TOTAL
$’000
1,630
1,444
3,074
1,559
1,559
67
2013 Annual Report FINANCIALS
NOTES TO THE
FINANCIAL
STATEMENT
32. PARENT ENTITY INFORMATION
The accounting policies of the parent entity, which have been applied in determining the financial information shown below,
are the same as those applied in the consolidated financial statements.
Refer to note 1 for a summary of the significant accounting policies relating to the Group.
FINANCIAL POSITION
Assets
Current Assets
Non-Current Assets
Total Assets
Liabilities
Current Liabilities
Non-Current Liabilities
Total Liabilities
Equity
Issued capital
Reserves
Retained earnings
Total Equity
Financial Performance
Profit for the year
Other comprehensive income
Total comprehesive income
30 JUNE
2013
$’000
30 JUNE
2012
$’000
5,194
15,335
20,529
3,137
1,389
4,526
10,560
-
5,443
16,003
2013
$’000
2,554
-
2,554
6,687
12,449
19,136
2,133
834
2,967
9,354
103
6,712
16,169
2012
$’000
2,704
-
2,704
33. ADDITIONAL COMPANY INFORMATION
Medical Developments International Limited is a listed public company, incorporated and operating in Australia.
Company Secretary
Mrs Wendy Gouveia
Registered office and principal place of business
7/56 Smith Road, Springvale, VIC 3171
Tel: (03) 9547 1888
Share registry
Computershare Investor Services Pty Ltd
Yarra Falls
452 Johnston Street, Abbotsford, VIC 3067
Tel: 1300 850 505
68
Medical Developments InternationalFINANCIALS ADDITIONAL STOCK
EXCHANGE INFORMATION
ADDITIONAL STOCK EXCHANGE INFORMATION AS AT 31 AUGUST 2013
NUMBER OF HOLDERS OF EQUITY SECURITIES
Fully paid ordinary shares
Ordinary share capital
57,420,703 fully paid ordinary shares held by
992 individual shareholders. All issued ordinary
shares carry one vote per share.
Distribution of holders of equity securities
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
SUBSTANTIAL SHAREHOLDERS
Mr David John Williams
Holding less than a marketable parcel
NUMBER
129
302
185
322
54
992
37
%
TWENTY LARGEST HOLDERS OF EQUITY SECURITIES
MR DAVID JOHN WILLIAMS
DR RUSSELL KAY HANCOCK
NAVIGATOR AUSTRALIA LTD
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