ANNUAL
REPORT 2012
Annual Report 2012 I
“What pleases us most about the roll-out of new Centres is the clear
demonstration of the scalability of the business model. We and the rest
of the team are systematic in the way that we research, investigate,
scope, design, develop, launch and operate Dental Care Centres.”
II Pacific Smiles Group Limited
MESSAGE FROM
THE FOUNDERS
A year ago, in our Founders’ Message, we reflected on
As founders, what pleases us most about the roll-out of
a year of ‘loading the bases’ in preparation for the
new Centres is the clear demonstration of the scalability
delivery of significant projects during financial year 2012.
of the business model. We and the rest of the team are
And delivered we have.
The relocation and expansion of the flagship Sydney nib
Dental Care Centre and the integration of The Dental
systematic in the way that we research, investigate,
scope, design, develop, launch and operate Dental Care
Centres.
Specialists from York Street into that development,
This systematic and scalable approach extends to
was one of the largest projects ever undertaken by the
the consistent positioning of all our Dental Centres
Pacific Smiles management team. It is also one of
according to what we call the 6 A’s, which are Availability,
the largest and most sophisticated Dental Centres
Accessibility, Array of Services, Affordability, Attention
in Australia. The fact that it has been an outstanding
to Care and Service and Assurance of Quality. This
success from day one is a testament to the deep skills
positioning is completely focused on delivering the very
that have been developed internally.
best care, service and value to the patient. This positioning
Those skills were also apparent in other key projects
which were completed during the year and which
expanded
our
operating
frontier
considerably.
underpins the direction that we established right from
the start with Pacific Smiles Group and we are proud to
see it rolling out into an expanding geographic area.
Pacific Smiles Dental North Lakes was our first new
Our
focus on Dental Care Centre networks was
development in Queensland and it is well located within
enhanced this year with the completion of two other
a major retail precinct about 40 minutes north of
major initiatives, the sale of the Eye Care business and
Brisbane. Pacific Smiles Dental Woden was our first
the execution of a new fifteen year agreement with nib to
Dental Centre in the ACT where it has quickly achieved
develop and operate nib branded Dental Care Centres.
an excellent reputation and strong patient demand,
being open seven days a week.
Our successes accrue
from
the efforts and
the
commitment of all the dentists who practice from our
Closer to our home base in the Hunter, we were proud
fully serviced facilities and the staff and management
to open a new Pacific Smiles Dental Centre at Kotara,
who support them. We sincerely thank them all.
one of the major retail areas of Newcastle. And Western
Sydney was not ignored, with the opening of a Pacific
Smiles Dental Centre in Penrith.
Annual Report 2012 III
CHAIRMAN’S
REPORT
It is a pleasure this year to report a record Net Profit Before Tax (NPBT) of $6.8 million, representing growth over the
previous year of 98%. In the current economic climate, this was an outstanding result, achieved during a very busy year
of major initiatives and against a backdrop of substantial geographic expansion of our Dental Centre networks into the
three eastern mainland states of Australia and the ACT.
The Group now operates 34 Dental Centres, of which 6 are branded nib Dental Care Centres and 28 of which are Pacific
Smiles Dental Centres. The latter are mainly located in regional hubs between one and three hours of capital cities.
For our shareholders, the excellent financial result has allowed the Board to declare a final dividend of 2.0 cents per share
(fully franked). Added to the interim dividend of 1.2 cents per share paid in April 2012, the total annual dividend in relation
to the 2012 financial year of 3.2 cents per share was up by 88% on last year and represents a payout ratio of 28%.
As mentioned in the Message from the Founders and covered in more detail in the Managing Director’s report, there were
many significant initiatives completed during the year. I won’t elaborate on them here, other than to say that the Board is
very pleased that Pacific Smiles Group is now more sharply focused on its core business of Dental Centre development
and management and dental services support businesses such as Dental Assistant Training Solutions, our Registered
Training Organisation for the dental industry.
With a sharp business strategy and effective execution, Pacific Smiles Group remains committed to achieving sufficient
scale to undertake a liquidity event on behalf of all shareholders in the medium term, subject to conducive external
conditions.
“Pacific Smiles Group enjoys well located and popular
Dental Centres throughout the eastern mainland states
and the ACT. Our focus on patient care as the key driver
of all operational and financial outcomes continues to
serve us well, as evidenced in the 2012 results.”
IV Pacific Smiles Group Limited
In the meantime, the Board was pleased to provide the
Pacific Smiles Group is fortunate to have someone of
recent (post balance date) opportunity for all shareholders
his calibre on our Board.
to participate in the 2012 Authorised Sale. This occurred
in July 2012 and approximately 20% of issued shares
were sold to new investors introduced to Pacific Smiles
Group by TDM Asset Management. The price of $1.55
per share at which the transactions took place set a new
benchmark for the Company.
As Chairman, I welcome the new investors and thank
them for their confidence in our successful business
model. Whilst there are now a number of dental corporates
operating in the Australian market place, Pacific Smiles
Group stands out as a scalable and sustainable
organisation with stable, experienced management and
excellent clinical and corporate governance.
I also welcome Ben Gisz to the Board of Directors of
Pacific Smiles Group. Ben has extensive experience
in financial markets in Australia and overseas and is a
principal of TDM Asset Management. His contributions
as a Director are greatly appreciated and I believe that
The long term prospects for Pacific Smiles Group are very
promising, but there are current challenges accruing from
economy-wide negative consumer sentiment and the
Federal Government retreat from direct funding of private
dental services.
However, Pacific Smiles Group enjoys well located and
popular Dental Centres throughout the eastern mainland
states and the ACT. We have a pipeline of new Dental
Centre developments that, subject to suitable market
conditions, continue to roll out at a rate of approximately
3 to 6 per year. Our focus on patient care as the key driver
of all operational and financial outcomes continues to
serve us well, as evidenced in the 2012 results.
Thanks to all shareholders for their support and to all
internal stakeholders for their commitment and diligence
in producing such a pleasing result.
Annual Report 2012 V
The Year in Review
MANAGING
DIRECTOR’S
REPORT
Financial Year 2012 proved that a clear strategy, well
As noted by the Chairman and the Founders, there were
executed, will deliver record results, even in a challenging
a number of strategic initiatives completed in Financial
operating environment. With no clear signs of a lift in
Year 2012. The sale of the Eye Care business was a
consumer sentiment in Australia and government policy
major one, not so much by virtue of transaction size, but
changes that are quite adverse to the private dental
because it facilitated the transition of the organisation to
services sector in the short to medium term, Pacific Smiles
a pure-play dental facilities and dental services business.
Group is benefiting from its prior period investments in
people and systems and from a service culture that we
believe is second to none in our industry.
Soon after the sale of that business, Pacific Smiles Group
entered into a new fifteen year Relationship and Marketing
Agreement with nib Health Funds Limited. Under this
The Net Profit Before Tax (NPBT) of $6.8 million was
agreement, Pacific Smiles Group enjoys exclusive rights
achieved from record services to patients to the value
to the development and operation of Dental Centres
of $86 million. Obviously, some of this accrued from the
branded as nib Dental Care Centres. There are six such
new Dental Centres that were opened during the year,
Centres in New South Wales and Victoria now, with other
but organic growth from established Dental Centres
opportunities currently being explored.
was again strong this year, suggesting that our focus on
patient care and customer service resonates with the
communities that we serve.
One of the nib Dental Care Centres was relocated during
the year. The flagship Sydney nib Dental Care Centre
was relocated from George Street to Hunter Street and
Four brand new Pacific Smiles Dental Centres were
expanded to 18 surgeries. It is one of the most impressive
opened during the year at North Lakes in Queensland,
Dental Centres in Australia and patient volumes have
Kotara in Newcastle, Penrith in Western Sydney and
stepped up considerably since the move, validating the
Woden in Canberra. All four new Centres are located in
expansion.
close proximity to large Westfield Shopping Towns and
benefit from excellent exposure and easy access. All four
were designed and built to proprietary in-house templates
and finishes guides and they all exude the professional, yet
friendly Pacific Smiles appeal. So well documented and
standardised are our new Centre developments that they
can be rolled out without distraction to daily operational
management or to other major strategic initiatives.
Since the balance date, three more Pacific Smiles
Dental Centres have been opened at Bendigo in regional
Victoria, Belmont in the Lake Macquarie region of New
South Wales and Bateau Bay on the Central Coast of
New South Wales.
A decision was finally made to close The Dental Specialists
on York Street after some years of under performance
and significant asset impairment write-downs in previous
periods. Equipment and personnel were transferred to the
new flagship nib Centre on Hunter Street, which benefited
from having an even greater array of dental services to
offer patients.
From an operational perspective, great strides were
made during the year on our two key internal aims –
consistency and efficiency. Increasingly, many of the
recurring processes and communications in Centres
and in Group Head Office are being automated. There
VI Pacific Smiles Group Limited
is a way to go yet, but it was pleasing during the year
for the delivery of the nationally accredited Certificate III
to see the development of patient e-communications, an
and Certificate IV in Dental Assisting. During the year, this
automated staff rostering system, an on-line workplace
100% owned subsidiary, called Dental Assistant Training
safety system and a company intranet, which will shortly
Solutions delivered a record number of qualifications and
go live.
As predicted, these systems are allowing Pacific Smiles
short courses to Trainees and other employees of Pacific
Smiles Group and to a growing external customer base.
Group to expand its networks of Dental Centres without
The proprietary in-house training program for patient care
commensurate increases in head office labour. The
and customer service, which is called APPEx (A Perfect
scalability dividend that the organisation is now enjoying
Patient Experience) is currently undergoing a revamp and
is derived not only from these various systems technology
shift from paper-based to an on-line self-administered
investments, but from investments in people, training and
series of education modules for all staff and dentists.
systems over the years.
Training continues to be a foundation block for Pacific
Smiles Group. It is the only dental corporate in Australia
that owns and operates a Registered Training Organisation
As with all other automation projects at Pacific Smiles
Group, the aim of this is to create a truly scalable asset to
underpin a consistent approach in terms of process and
culture.
OUTLOOK
Despite the outstanding results for Financial Year 2012
This step change in Federal Government funding, with
and a long term positive view, the intermediate outlook
a lengthy gap between the termination of one program
is shaded by economic uncertainty, subdued consumer
and the commencement of the next, could serve to
sentiment and Federal Government policy changes that
curtail demand for private dental services. Other recent
reduce support for the private dental services market in
government changes such as the means testing of
Australia.
At the time of writing this report, the Federal Government
had just announced the termination of the Chronic
the private health insurance rebate and of the Medical
Expenses Tax Offset Scheme, could also depress
demand for private dental services in the short term.
Diseases Dental Scheme from late calendar 2012 and
Pacific Smiles Group is less dependent upon Federal
the Teen Dental Scheme at the end of 2013. Combined,
Government revenue streams than many other dental
these schemes represent about $1 billion per year and
providers but is, nevertheless, likely to be impacted by
almost 15% of the total private dental services market in
these changes which coincide with a period of reduced
Australia. They are being terminated with no immediate
discretionary expenditure and an increase in the number
replacement.
of dentists practicing in Australia.
From January 2014, the Federal Government proposes a
Management will work diligently to minimise the impacts
Dental Health Reform Package to provide $2.7 billion over
of these multiple challenges in the short term and is
six years to children aged 2 to 17 in Family-Tax-Benefit-A
committed to the continued development and expansion
eligible households. If implemented, this will reach some
of profitable networks of Dental Centres where patient
3.4 million Australian children and would be a huge boost
care and customer service remain the central focus.
to the private dental services market.
Annual Report 2012 VII
PERFORMANCE
HIGHLIGHTS
• Consolidated Group Net Profit After Tax of $4.7 million reported
for 2012.
• Net Profit Before Tax was $6.8 million, up 98% on the
previous year.
• Total Revenue up 17% to $56.7 million, derived from services
provided by dentists to patients to the value of $86 million.
• Gross Profit up 19% on the previous year.
• At $10.6 million for 2012, EBITDA has increased by 48%
compared with 2011. Excluding the impairment adjustments
in 2011, the EBITDA from operations has increased by 28%.
• Balance sheet remains strong and gearing position is
conservative. Borrowings have been reduced over the course of
the year, with substantial investments in growing and enhancing
the business funded largely by cash flows from operations.
• Total dividends paid of $888K, an increase of 32% over the
previous year. Total dividends declared and paid in respect of the
2012 financial year, including a final dividend paid subsequent to
year end, totalled 3.20 cents per share, representing a payout
ratio of 28% of Net Profit After Tax.
VIII Pacific Smiles Group Limited
60,000,000
60,000,000
60,000,000
50,000,000
50,000,000
50,000,000
40,000,000
40,000,000
40,000,000
30,000,000
30,000,000
30,000,000
20,000,000
20,000,000
20,000,000
0
0
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
0
2008
Revenue
Revenue
Revenue
2009
2010
2011
2012
Total Revenue
25,000,000
25,000,000
25,000,000
20,000,000
20,000,000
20,000,000
15,000,000
15,000,000
15,000,000
10,000,000
10,000,000
10,000,000
5,000,000
5,000,000
5,000,000
0
0
0
2008
2008
Net Assets
2008
Net Assets
Net Assets
2009
2009
2010
2010
2011
2011
2012
2012
2009
2010
2011
2012
Net Assets
11,000,000
11,000,000
11,000,000
9,000,000
9,000,000
9,000,000
7,000,000
7,000,000
7,000,000
5,000,000
5,000,000
5,000,000
3,000,000
3,000,000
3,000,000
0
0
0
EBITDA
EBITDA
EBITDA
2008
2008
2009
2009
2010
2010
2011
2011
2012
2012
2008
2009
2010
2011
2012
EBITDA
BUSINESS
DEVELOPMENT
HIGHLIGHTS
North Lakes
Kotara
ACT
Pacific Smiles Dental
nib Dental Care Centre
• Entry into the ACT market with the launch of Pacific
• Relocation and expansion of the flagship nib Dental
Smiles Dental Woden
Care Centre in Sydney
• Strengthened presence in the Hunter region with
• Completed the relocation of Pacific Smiles Dental
the opening of Pacific Smiles Dental Kotara
Torquay into new and larger premises
• First new development in Queensland, with the
• Planning well advanced for commissioning new
opening of Pacific Smiles Dental North Lakes
Pacific Smiles Dental centres in Bendigo,
Bateau Bay and Belmont
• Established Pacific Smiles Dental Penrith to extend
reach into Western Sydney
Annual Report 2012 IX
FINANCIAL
REPORT
This financial report covers both Pacific Smiles Group Limited as an individual entity and
the consolidated entity consisting of Pacific Smiles Group Limited and its subsidiaries.
The financial report is presented in the Australian currency.
Pacific Smiles Group Limited is a company limited by shares, incorporated and domiciled
in Australia. Its registered office and its principal place of business are located at 6 Molly
Morgan Drive, Greenhills, NSW.
A description of the nature of the consolidated entity’s operations and its principal
activities is included in the Directors’ Report on pages 2 to 4, which is not part of this
financial report.
The financial report was authorised for issue by the Directors on 25 October 2012. The
Company has the power to amend and reissue the financial report.
X Pacific Smiles Group Limited
DIRECTORS’ REPORT
AUDITOR’S INDEPENDENCE DECLARATION
INDEPENDENT AUDIT REPORT
DIRECTORS’ DECLARATION
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF
CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
2
5
6
8
9
10
11
12
13
Annual Report 2012 XI
DIRECTORS’
REPORT
FOR YEAR ENDED 30 JUNE 2012
Your directors present their report on the consolidated
entity (referred to hereafter as the Group) consisting
of Pacific Smiles Group Limited and the entities it
controlled at the end of, or during the year ended
30 June 2012.
Directors
The following persons were directors of Pacific Smiles Group Limited during the whole of the financial year and
up to the date of this report:
R Cameron | A Abrahams | J Gibbs | S Rutherford | L Wheeldon | B Gisz appointed 18 July 2012
Robert Cameron AO
BE Min (Hons) MBA Grad. Dip. Geoscience, FAICD, FAIM, FAusIMM
Chairman, appointed in a non-executive capacity in 2003.
Bob Cameron is the Founder and Chairman (non-executive) of Centennial Coal Company Limited
and was its Managing Director and Chief Executive Officer until 30 June 2011. He is currently
Chairman of County Coal, Chairman of Hunter Valley Training Company, a director of Mining
Education Australia, a director of the University of NSW Foundation and a Trustee of the Museum
of Applied Arts and Sciences. Bob has been honoured with an Order of Australia, as part of the
Queen’s Birthday Honours List in 2012.
Alex Abrahams
BDS (Syd Uni), AIMM
Founder and Executive Director – Strategy and Business Development, appointed in 2003.
Alex has overseen the development of the Company from a group of partnerships to an
incorporated entity on 1 January 2003. Alex is a Dentist with a special interest in dental
implants. Alex is a member of the Australian Dental Association and a member of the Australian
Osseointegration Society (Implants). He is a Director of Group Homes Australia Pty Limited, a
Director of the Trustees of Canyon Property Trust and Key Health Unit Trust, and formerly a Board
Member of Hunter Valley Grammar School.
John Gibbs
B.Bus, M.Bus. (Int. Mkg.), AFAIM, GAICD
Managing Director and Chief Executive Officer, appointed in 2008.
John commenced employment as General manager in 2004. He has a background of experience
in the establishment and management of private health facilities and the development of private
medical markets. He has established new private hospitals for Australian and international
investors in the Asia-Pacific region and has participated in redevelopments in Australia. John has
undergraduate and postgraduate Business and Marketing Degrees.
Simon Rutherford
B. Comm., CA, FAICD
Non-Executive Director, appointed in 2003.
Simon is a Chartered Accountant and Partner with Lawler Partners. He is a director of Lawler
Corporate Finance Pty Limited, and specialises in strategy, structuring, business sales, mergers
and acquisitions. In this role Simon has assisted various companies with capital raising, listing
requirements and initial public offers. Simon is a Director of the Trustee of Canyon Property Trust
and is involved with various syndicated investments. He also sits on a number of other Boards
and boards of management.
2 Pacific Smiles Group Limited
DIRECTORS’
REPORT
FOR YEAR ENDED 30 JUNE 2012
Lance Wheeldon
BAppSc
Non-Executive Director, appointed in 2003.
Lance is currently the CEO, Company Secretary and Executive Director of Hunter Valley Private
Hospital and has led the significant development and expansion of this facility for over 10 years.
He also has extensive prior experience in multisite networks as an Operations Manager in the
pathology sector. Lance has a Bachelor of Applied Science degree and broad management
experience in project management, mergers, information technology, organisational structures,
workplace safety and human resource management.
Ben Gisz
B.Comm., CA, FFin, CFA
Non-Executive Director, appointed in 2012.
Ben is a principal of TDM Asset Management, a Sydney based private investment firm. Ben has
extensive financial markets experience, including prior roles in private equity investing, investment
banking and equities research. Ben holds a Bachelor of Commerce degree from the University of
Sydney and is a Fellow of the Financial Services Institute of Australasia. Ben is also a Chartered
Accountant and a CFA Charter holder.
Company Secretary
The company secretary is Jane Coleman B.Comm, MBA, CA, GAICD. Jane was appointed to the position of
Company Secretary during 2006, and also holds the position of Chief Financial Officer within the Group. Jane is a
Chartered Accountant. Before joining the Company, Jane worked in senior roles within a global chartered accounting
firm, and within the health, finance and health insurance industries.
Principal Activities
Pacific Smiles Group continues to be an operator of Dental Care Centres at which independent and employed
practitioners practice and provide clinical treatments and services to patients.
Review of Operations
The Group’s net profit for the financial year after providing for income tax amounts to $4,747,958 (2011: $1,996,598).
Commentary on financial performance and other developments during the year are provided in the Group’s Annual
Report.
Dividends
Dividends paid to members during the financial year were $887,514 (2011: $674,138).
Likely Developments and Expected Results of Operations
The Group will continue to pursue opportunities to enhance the growth and prosperity of its business. Further
information on likely developments in the operations of the Group and the expected results of operations have not
been included in this annual financial report because the directors believe it would be likely to result in unreasonable
prejudice to the Group.
Shares Under Option
Details of shares under option are disclosed at Note 17 of the accompanying financial report.
Environmental Regulation
The Group’s operations are not regulated by any significant environmental regulation.
Annual Report 2012 3
DIRECTORS’
REPORT
FOR YEAR ENDED 30 JUNE 2012
Meetings of Directors
The numbers of meetings of the Company’s Board of Directors held during the year ended 30 June 2012, and the
attendances by each Director were:
MEETINGS HELD
WHILST A DIRECTOR
MEETINGS ATTENDED
Robert Cameron
Alex Abrahams
Simon Rutherford
Lance Wheeldon
John Gibbs
11
11
11
11
11
10
10
10
10
11
Matters Subsequent to the End of the Financial Year
Subsequent to the end of the financial year, the Directors declared a final dividend of 2.0 cents per share in relation to
the financial year ended 30 June 2012. The dividend was paid in October 2012.
An extraordinary general meeting of Pacific Smiles Group Limited was held on 16 July 2012, at which Shareholders
unanimously approved the 2012 Authorised Sale proposal and associated changes to the Company’s constitution.
These approvals enabled entities associated with TDM Asset Management Pty Ltd (TDM) to acquire a relevant interest
in 19.9% of the issued shares of the Company for $13,000,000. In connection with the transaction, Mr Ben Gisz, a
principal of TDM, was appointed as a Director of the Company.
No other matter or circumstance has arisen since 30 June 2012 that has significantly affected, or may significantly
affect:
(a) the Group’s operations in future financial years, or
(b) the results of those operations in future financial years, or
(c) the Group’s state of affairs in future financial years.
Insurance of Officers and Auditors
During the financial year, the Group paid a premium in respect of a contract insuring its directors and officers against
a liability incurred as such an officer. No such insurance contracts apply to insure auditors of the Group.
The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that
may be brought against the officers in their capacity as officers of the Group.
Auditors’ Independence Declaration
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set
out on page 5.
Auditor
Cutcher & Neale continues as auditor in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Board of Directors.
Alexander Abrahams
Director
Greenhills - 25 October 2012
4 Pacific Smiles Group Limited
AUDITOR’S
INDEPENDENCE
DECLARATION
FOR YEAR ENDED 30 JUNE 2012
PACIFIC SMILES GROUP LIMITED ABN: 42 103 087 449
AUDITORS INDEPENDENCE DECLARATION
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
TO THE DIRECTORS OF PACIFIC SMILES GROUP LIMITED
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2012 there have
been:
(i) no contraventions of the auditor independence requirements as set out in the Corporations Act
2001 in relation to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Cutcher & Neale
Chartered Accountants
Mark O'Connor
Partner
24 October 2012
NEWCASTLE
Annual Report 2012 5
INDEPENDENT
AUDIT
REPORT
FOR YEAR ENDED 30 JUNE 2012
PACIFIC SMILES GROUP LIMITED ABN: 42 103 087 449
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF PACIFIC SMILES GROUP LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Pacific Smiles Group Limited, which
comprises the statement of financial position as at 30 June 2012, the statement of
comprehensive income, statement of changes in equity and statement of cash flows for the
year then ended, notes comprising a summary of significant accounting policies and other
explanatory information, and the directors' declaration.
Directors' Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary
to enable the preparation of the financial report that is free from material misstatement,
whether due to fraud or error.
In Note 1, the directors also state, in accordance with Accounting Standard AASB 101
Presentation of Financial Statements, that the financial statements comply with International
Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We
conducted our audit in accordance with Australian Auditing Standards. Those standards
require that we comply with relevant ethical requirements relating to audit engagements and
plan and perform the audit to obtain reasonable assurance about whether the financial report
is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material misstatement of the financial
report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation of the financial report that gives
a true and fair view in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well
as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our audit opinion.
6 Pacific Smiles Group Limited
INDEPENDENT
AUDIT
REPORT
FOR YEAR ENDED 30 JUNE 2012
PACIFIC SMILES GROUP LIMITED ABN: 42 103 087 449
INDEPENDENT AUDIT REPORT
TO THE MEMBERS OF PACIFIC SMILES GROUP LIMITED
Independence
PACIFIC SMILES GROUP LIMITED ABN: 42 103 087 449
In conducting our audit, we have complied with the independence requirements of the
INDEPENDENT AUDIT REPORT
Corporations Act 2001. We confirm that the independence declaration required by the
TO THE MEMBERS OF PACIFIC SMILES GROUP LIMITED
Corporations Act 2001, which has been given to the directors of Pacific Smiles Group Limited
on 24 October 2012, would be in the same terms if given to the directors as at the time of this
auditor’s report.
Independence
Auditor's Opinion
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001. We confirm that the independence declaration required by the
In our opinion:
Corporations Act 2001, which has been given to the directors of Pacific Smiles Group Limited
on 24 October 2012, would be in the same terms if given to the directors as at the time of this
(a) the financial report of Pacific Smiles Group Limited is in accordance with the
auditor’s report.
Corporations Act 2001, including:
Auditor's Opinion
(i) giving a true and fair view of the company’s financial position as at 30 June 2012 and
In our opinion:
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
(a) the financial report of Pacific Smiles Group Limited is in accordance with the
2001;
Corporations Act 2001, including:
(b) the financial report also complies with International Financial Reporting Standards as
(i) giving a true and fair view of the company’s financial position as at 30 June 2012 and
disclosed in Note 1.
of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations
2001;
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in Note 1.
Cutcher & Neale
Chartered Accountants
Cutcher & Neale
Mark O'Connor
Chartered Accountants
Partner
NEWCASTLE
26 October 2012
Mark O'Connor
Partner
NEWCASTLE
26 October 2012
Annual Report 2012 7
DIRECTORS’
DECLARATION
30 JUNE 2012
In the directors’ opinion:
a.
the financial statements and notes set out on pages 9 to 38 are in accordance with the Corporations Act 2001,
including:
i. complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements; and
ii. giving a true and fair view of the consolidated entity’s financial position as at 30 June 2012 and of its
performance for the financial year ended on that date; and
b.
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
c.
the financial statements comply with all Australian equivalents to International Financial Reporting Standards
(AIFRS) in their entirety.
This declaration is made in accordance with a resolution of the Board of Directors.
Alexander Abrahams
Director
Greenhills - 25 October 2012
8 Pacific Smiles Group Limited
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
FOR YEAR ENDED 30 JUNE 2012
REVENUE
Cost of goods sold
Other direct expenses
Gross profit
Other expenses from ordinary activities
Consumable supplies expenses
Employee expenses
Occupancy expenses
Marketing expenses
Administration and other expenses
Impairment of property, plant and equipment
Depreciation and amortisation expense
Finance costs
Profit before income tax
Income tax expense
NOTES
2
3
3
3
4
2012
$
56,709,687
(878,030)
(6,378,450)
49,453,207
(5,354,025)
(22,411,891)
(4,771,159)
(1,438,105)
(4,906,543)
2,719
(3,287,702)
(489,453)
6,797,048
2011
$
48,623,079
(2,292,324)
(4,723,321)
41,607,434
(4,133,082)
(18,837,195)
(4,307,161)
(1,615,014)
(4,460,921)
(1,107,149)
(3,202,449)
(506,654)
3,437,809
(2,049,090)
(1,441,211)
Profit / (loss) for the year
4,747,958
1,996,598
Other comprehensive income
-
-
Total comprehensive income for the year
4,747,958
1,996,598
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Annual Report 2012 9
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2012
ASSETS
Current Assets
Cash and cash equivalents
Receivables
Inventories
Other
Total Current Assets
Non-Current Assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Payables
Borrowings
Current tax liabilities
Provisions
Total Current Liabilities
Non-Current Liabilities
Borrowings
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Retained profits
Total Equity
NOTES
6
7
8
9
10
11
12
13
14
15
16
14
16
17
18
2012
$
4,654,737
565,478
1,522,999
297,903
7,041,117
18,816,194
8,978,570
1,282,124
29,076,888
2011
$
3,415,433
966,724
1,503,815
205,929
6,091,901
14,915,625
9,785,690
998,976
25,700,291
36,118,005
31,792,192
6,365,283
5,950,282
910,831
1,432,871
14,659,267
971,740
402,387
1,374,127
5,804,222
6,080,836
765,288
1,348,062
13,998,408
1,356,355
306,549
1,662,904
16,033,394
15,661,312
20,084,611
16,130,880
11,355,349
8,729,262
11,262,062
4,868,818
20,084,611
16,130,880
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
10 Pacific Smiles Group Limited
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
FOR YEAR ENDED 30 JUNE 2012
NOTES
CONTRIBUTED
EQUITY
$
RETAINED
PROFITS
$
TOTAL
EQUITY
$
Consolidated Balance at 30 June 2010
10,563,767
3,546,358
14,110,125
Total comprehensive income for the year
-
1,996,598
1,996,598
Transactions with equity holders in their capacity
as equity holders:
Movements in contributed equity
Dividends provided for or paid
Consolidated Balance at 30 June 2011
Total comprehensive income for the year
Transactions with equity holders in their capacity
as equity holders:
Movements in contributed equity
Dividends provided for or paid
17
5
17
5
698,295
-
698,295
-
(674,138)
(674,138)
698,295
(674,138)
24,157
11,262,062
4,868,818
16,130,880
-
4,747,958
4,747,958
93,287
-
93,287
-
(887,514)
(887,514)
93,287
(887,514)
(794,227)
Consolidated Balance at 30 June 2012
11,355,349
8,729,262
20,084,611
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Annual Report 2012 11
CONSOLIDATED
STATEMENT OF
CASH FLOWS
FOR YEAR ENDED 30 JUNE 2012
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest and finance costs paid
Income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payments for purchases of businesses
Proceeds from disposal of a business
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Loans advanced
Repayment of loans
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share buy back
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash
Cash at the beginning of the financial year
Cash at the end of the financial year
NOTES
29
25
27
6
6
2012
$
62,170,334
(50,752,687)
11,417,647
129,791
(452,607)
(2,234,056)
8,860,775
2011
$
52,638,932
(43,513,506)
9,125,426
142,367
(539,103)
(1,652,450)
7,076,240
-
(3,540,959)
713,488
(7,043,350)
17,788
(424,000)
424,000
(6,312,074)
153,323
(60,036)
1,121,870
(1,637,040)
(887,514)
(1,309,397)
1,239,304
3,415,433
4,654,737
-
(2,919,296)
55,378
-
-
(6,404,877)
698,295
-
497,027
(1,973,366)
(674,138)
(1,452,182)
(780,819)
4,196,252
3,415,433
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
12 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
1. Summary of Significant Accounting Policies
The principal accounting policies adopted in preparation of these consolidated financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated
entity consisting of Pacific Smiles Group Limited and its subsidiaries.
a. Basis of Preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, other authoritative
pronouncements of the Australian Accounting Standards Board, Australian Accounting Interpretations and the Corporations Act
2001. Pacific Smiles Group Limited is a for-profit entity for the purpose of preparing the financial statements.
Compliance with International Financial Reporting Standards (IFRS)
The financial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
Historical Cost Convention
These financial statements have been prepared on an accruals basis and are based on historical costs, modified where applicable, by
the measurement at fair value of selected non-current assets, financial assets and financial liabilities.
Critical Accounting Estimates and Judgements
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed, where applicable,
in the relevant notes to the financial statements.
New Accounting Standards and Accounting Interpretations
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards
Board that are relevant to its operations and effective for the reporting period. Details of the impact of the adoption of these new
accounting standards, where applicable, are set out in the individual accounting policy notes.
Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting
periods. None of these standards or interpretations have been adopted early in the preparation of these financial statements. On
assessment of these new standards and interpretations, there is no material identified impact for the Group.
b. Principles of Consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Pacific Smiles Group Limited (“Company”
or “parent entity”) as at 30 June 2012 and the results of all subsidiaries for the year then ended. Pacific Smiles Group Limited and its
subsidiaries together are referred to in this financial report as the Group or the consolidated entity.
Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally
accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are
currently exercisable or convertible are considered when assessing whether the Group controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. The acquisition method of accounting
is used to account for business combinations by the Group (refer to note 1(g)).
Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of
subsidiaries are consistent with the policies adopted by the Group.
Investments in subsidiaries are accounted for at cost in the individual financial statements of the parent entity.
c. Segment Reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
The chief operating decision maker is responsible for allocating resources and assessing performance of the operating segments.
Annual Report 2012 13
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
1. Summary of Significant Accounting Policies (continued)
d. Revenue Recognition
Revenue is recognised at the fair value of consideration received or receivable.
Revenue from the rendering of services is recognised once the services have been provided and is measured in accordance with
contractual calculation methods and rates.
Revenue from the sale of goods is net of returns, discounts and other allowances, and is recognised when the significant risks and
rewards of ownership of the goods have passed to the buyer. Risks and rewards of ownership are considered to pass to the buyer
at the time when control of the goods passes to the customer in the case of the supply of non-customised products, or at the time a
significant monetary deposit is taken in the case of customised products.
Income Tax
e.
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting
period in the jurisdictions where the Company and its subsidiaries operate and generate taxable income. Management periodically
evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretations. It
establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted
for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transactions affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates and laws that have
been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income
tax asset is realised or the deferred income tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable
amounts will be available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of
investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and
it is probable that the differences will not reverse in the foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when
the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a
legally enforceable right to offset and intends to either settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive
income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.
f. Leases
Leases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are
classified as finance leases. Finance leases are capitalised at the lease inception at the lower of the fair value of the lease asset and
the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in
borrowings. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate of the finance
balance outstanding. The interest element of the finance cost is charged to the profit or loss over the lease period so as to produce a
constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired
under finance leases are depreciated over the shorter of the asset’s useful life and the lease term.
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as
operating leases. Payments made under operating leases are charged to the profit or loss as incurred.
Lease income from operating leases where the Group is a lessor is recognised in income as it is earned.
14 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
1. Summary of Significant Accounting Policies (continued)
g. Business Combinations
The acquisition method of accounting is used to account for all business combinations. Cost is measured as the fair value of the
assets given, equity instruments issued or liabilities incurred or assumed. The consideration also includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net
assets acquired is recorded as goodwill (refer Note 1(m)).
Contingent consideration is classified as a financial liability and amounts are subsequently re-measured to fair value, with changes in
fair value recognised in profit and loss.
Impairment of Assets
h.
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment.
Other assets, including those that are subject to depreciation or amortisation are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to
sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately
identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash generating units).
Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each
reporting date. Cash inflows considered for the purposes of impairment testing are discounted to present value.
Significant judgement has been used in testing assets for impairment and in determining the amounts recognised as impairment
losses at reporting date. Further details of the material impairment losses recognised in the financial statements in the previous
financial year are provided below:
Impairment Loss – Property, Plant and Equipment
During the previous financial year, the Group recorded an impairment loss of $1,107,149 relating to the write down of the leasehold
improvements assets at two of its Dental Centres. The adjustment comprised $685,692 relating to the Group’s specialist Dental
Centre located in Sydney, and $421,457 relating to a Dental Centre located in Melbourne.
The impairment assessments were made on the basis of the assets’ expected value in use. Discounted cash flow forecasts were
reviewed for each business unit, and the carrying value of the business assets exceeded their recoverable amount.
During the financial year ended 30 June 2012, a decision was made to cease operation of a dedicated specialist Dental Centre in
Sydney, and instead facilitate the provision of a range of specialist dental services throughout the network of general Dental Centres
operated by the Group. Assets with remaining carrying values that were previously utilised at the specialist Dental Centre have been
redeployed to other productive uses within the Group.
i. Cash and Cash Equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid
investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
j. Receivables
Receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for impairment
if applicable.
The amount of the impairment loss is recognised in profit or loss with other expenses. When a receivable for which an impairment
allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account.
Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.
Annual Report 2012 15
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
1. Summary of Significant Accounting Policies (continued)
Inventories
k.
Inventories held for sale and stores of consumable supplies are stated at the lower of cost and net realisable value. Costs are assigned
to individual items of inventory on the basis of actual costs.
l. Property, Plant and Equipment
All property, plant and equipment is stated at historical cost less depreciation, amortisation and accumulated impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred.
Depreciation is calculated using the straight line method to allocate the cost of assets, net of their residual values, over their estimated
useful lives, as follows:
Leasehold improvements
Plant and equipment
10 to 20 years
3 to 10 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount (note 1(h)).
m. Intangible Assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the
acquired business at the date of acquisition. Goodwill on acquisitions of businesses is included in intangible assets.
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually, or more frequently
if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.
Goodwill is allocated to relevant cash-generating units for the purpose of impairment testing.
(ii) Rights and Licences
Contractual rights and licences have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.
Amortisation is calculated using the straight line method to allocate the cost of the rights and licences over their estimated useful lives,
being between three and ten years.
n. Payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid.
o. Borrowings
Borrowings are measured at amortised cost. Fees paid on the establishment of loan facilities, which are not incremental costs relating
to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of the
facility.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liabilities for at
least 12 months after the reporting period.
p. Employee Benefits
Provision is made for the Group’s liability for employee benefits arising from services rendered by employees up to balance date.
Employee benefits that may be settled within one year have been measured at the amounts expected to be paid when the liability
is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the
estimated future cash outflows to be made for those benefits.
16 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
1. Summary of Significant Accounting Policies (continued)
q. Dividends
Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at balance date.
r. Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable
from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of
an item of expense. Receivables and payables in the balance sheet are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
s. Parent Entity Financial Information
The financial information for the parent entity, Pacific Smiles Group Limited, disclosed in note 30 has been prepared on the same basis
as the consolidated financial statements, except as set out below.
(i) Investments in subsidiaries, associates and joint venture entities
Investments in subsidiaries are accounted for at cost in the financial statements of Pacific Smiles Group Limited.
(ii) Tax consolidation legislation
Pacific Smiles Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The head entity, Pacific Smiles Group Limited, and the controlled entities in the tax consolidated group account for their own current
and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand
alone taxpayer in its own right.
In addition to its own current and deferred tax amounts, Pacific Smiles Group Limited also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax
consolidated group.
The entities have also entered into a tax funding agreement under which the wholly–owned entities fully compensate Pacific Smiles
Group Limited for any current tax payable assumed and are compensated by Pacific Smiles Group Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Pacific Smiles Group
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the
wholly-owned entities’ financial statements.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as current amounts receivable
from or payable to other entities in the group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised
as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Annual Report 2012 17
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
2. Revenue
Services rendered
Sale of goods
Interest revenue
Rents
Government subsidies
Sundry income
3. Expenses
Profit/(loss) before income tax includes the following specific expenses:
Depreciation
Plant and equipment
Leasehold improvements
Total Depreciation
Amortisation
Rights and licences
Total Amortisation
Net loss on disposal of non-current assets
Impairment loss/(write-back) on write-down
of assets to recoverable amount
Receivables – other entities
Inventories
Property, plant and equipment
Interest and finance charges paid/payable
2012
$
53,828,157
1,812,768
129,791
604,082
287,683
47,206
2011
$
42,750,485
4,935,080
142,367
482,677
145,100
167,370
56,709,687
48,623,079
2,345,586
690,148
3,035,734
251,968
251,968
38,634
(3,898)
(26,806)
(2,719)
489,453
2,097,563
811,059
2,908,622
293,828
293,828
10,007
27,869
2,990
1,107,149
506,654
Rental expenses relating to operating leases
4,162,986
3,656,926
Defined contribution superannuation plans expense
1,762,891
1,549,128
18 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
4.
Income Tax Expense
a.
Income Tax Expense
Current tax
Deferred tax (note 12)
2012
$
2011
$
2,379,600
(330,510)
2,049,090
1,698,963
(257,752)
1,441,211
b. Numerical Reconciliation of Income Tax Expense to Prima Facie Tax Payable
Profit before income tax expense
6,797,048
3,437,809
Income tax calculated at 30% (2011: 30%)
Tax effect of amounts which are not deductible/(taxable)
in calculating taxable income:
Amortisation of intangibles
Impairment loss – fixed assets
Sundry items
Income tax expense
c. Tax consolidation legislation
2,039,114
1,031,343
72,090
(816)
(61,298)
2,049,090
84,648
332,145
(6,925)
1,441,211
Pacific Smiles Group Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.
The accounting policy in relation to this legislation is set out in note 1. On adoption of the tax consolidation legislation, the entities in the
tax consolidated group entered into a tax sharing agreement which, in the opinion of the directors, limits the joint and several liability
of the wholly-owned entities in the case of a default by the head entity, Pacific Smiles Group Limited.
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Pacific Smiles
Group Limited for any current tax payable assumed and are compensated by Pacific Smiles Group Limited for any current tax
receivable and deferred tax assets relating to unused tax losses or unused tax credits that are transferred to Pacific Smiles Group
Limited under the tax consolidation legislation. The funding amounts are determined by reference to the amounts recognised in the
wholly-owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entity,
which is issued as soon as practicable after the end of each financial year. The head entity may also require payment of interim funding
amounts to assist with its obligations to pay tax instalments. The funding amounts are recognised as current intercompany receivables
or payables.
Annual Report 2012 19
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
5. Dividends
(a) Interim and final dividends totalling 2.10 cents (2011: Interim
and final dividends totalling 1.60 cents) per share, fully franked
based on tax paid @ 30%
PARENT ENTITY 2012
PARENT ENTITY 2011
$
$
887,514
674,138
(b) Franking credits available for subsequent financial years based
on a tax rate of 30% (2011: 30%)
5,893,584
3,940,861
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for franking credits
that will arise from the payment of the amount of income tax payable or collection of income tax receivable.
The impact on the franking account of the dividend declared by the directors and paid since the end of the reporting period, but not
recognised as a liability at the reporting date, will be a reduction in the franking account of $362,067 (2011: $163,123).
2012
$
2011
$
4,654,737
3,415,433
-
86,106
(14,350)
71,756
493,722
565,478
88,442
421,423
(24,487)
485,378
481,346
966,724
6. Cash and Cash Equivalents
CURRENT
Cash at bank and in hand
7. Receivables
CURRENT
Trade debtors – related entity
Trade debtors – other entities
Provision for impairment – other entities
Sundry debtors
20 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
8. Inventories
CURRENT
Inventories – at cost
Inventories – at net realisable value
9. Other Assets
CURRENT
Prepayments
Other
10. Property, Plant and Equipment
NON-CURRENT
Leasehold improvements – at cost
Less accumulated depreciation and impairment
Plant and equipment – at cost
Less accumulated depreciation and impairment
2012
$
2011
$
1,522,999
-
1,522,999
170,381
127,522
297,903
15,166,137
(4,632,313)
10,533,824
17,309,691
(9,027,321)
8,282,370
1,289,210
214,605
1,503,815
139,608
66,321
205,929
12,047,714
(4,233,518)
7,814,196
14,726,751
(7,625,322)
7,101,429
Total property, plant and equipment
18,816,194
14,915,625
Annual Report 2012 21
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
10. Property, Plant and Equipment (continued)
Movements in Carrying Amounts
2012
LEASEHOLD
PLANT &
IMPROVEMENTS
EQUIPMENT
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation expense
Impairment reversal/(loss)
$
7,814,196
3,421,365
(14,308)
(690,148)
2,719
$
7,101,429
3,621,985
(95,458)
TOTAL
$
14,915,625
7,043,350
(109,766)
(2,345,586)
(3,035,734)
-
2,719
Carrying amount at the end of the year
10,533,824
8,282,370
18,816,194
2011
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation expense
Impairment loss
Carrying amount at the end of the year
LEASEHOLD
PLANT &
IMPROVEMENTS
EQUIPMENT
$
8,277,771
1,458,238
(3,605)
(811,059)
(1,107,149)
7,814,196
$
7,420,211
1,840,560
(61,779)
(2,097,563)
-
7,101,429
TOTAL
$
15,697,982
3,298,798
(65,384)
(2,908,622)
(1,107,149)
14,915,625
22 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
11. Intangible Assets
NON-CURRENT
Goodwill
Less accumulated amortisation and impairment
Rights and licences
Less accumulated amortisation and impairment
2012
$
2011
$
9,733,313
(1,052,088)
8,681,225
991,221
(693,876)
297,345
9,733,313
(1,052,088)
8,681,225
2,463,997
(1,359,532)
1,104,465
Total intangible assets
8,978,570
9,785,690
Movements in Carrying Amounts
2012
GOODWILL
$
RIGHTS &
LICENSES
$
TOTAL
$
Carrying amount at the beginning of the year
8,681,225
1,104,465
9,785,690
Additions
Disposals
Amortisation expense
Carrying amount at the end of the year
2011
Carrying amount at the beginning of the year
Additions
Amortisation expense
Carrying amount at the end of the year
-
-
-
8,681,225
GOODWILL
$
5,544,964
3,136,261
-
8,681,225
-
(555,152)
(251,968)
297,345
RIGHTS &
LICENSES
$
1,398,293
-
(293,828)
1,104,465
-
(555,152)
(251,968)
8,978,570
TOTAL
$
6,943,257
3,136,261
(293,828)
9,785,690
Annual Report 2012 23
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
12. Deferred Tax Assets
NON-CURRENT
The balance comprises temporary differences attributable to:
Provision for doubtful debts
Write-down of inventories to net realisable value
Depreciation of property, plant and equipment
Accrued expenses
Provisions
Net deferred tax assets
Movements:
Balance at the beginning of the year
Credited (charged) to the income statement
Assumption of deferred tax assets in business acquisitions
Reversal of deferred tax assets on disposal of business
Balance at the end of the year
13. Payables
CURRENT
Trade payables and accruals
2012
$
2011
$
4,305
-
565,834
161,407
550,578
1,282,124
998,976
330,510
-
(47,362)
1,282,124
7,346
8,366
375,642
111,238
496,384
998,976
724,659
257,752
16,565
-
998,976
6,365,283
5,804,222
24 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
14. Borrowings
CURRENT
Secured:
Bank bills
Bank loans
Other loans
Unsecured:
Other loans
Total
NON-CURRENT
Secured:
Bank loans
Unsecured:
Other loans
Total
Security
2012
$
2011
$
4,500,000
850,282
-
5,350,282
600,000
5,950,282
4,500,000
1,119,063
284,333
5,903,396
177,440
6,080,836
911,740
696,355
60,000
971,740
660,000
1,356,355
Bank bills, bank loans and asset finance provided by the bank are secured by registered equitable mortgage over the whole of the
assets and undertakings of the Group, including uncalled capital and inter-entity guarantees.
Financing Arrangements
Access was available at balance date to the following lines of credit:
Total bank borrowings facilities
Used at balance date
Unused at balance date
Covenants attaching to bank borrowings were complied with during the year.
13,500,000
(7,316,909)
6,183,091
13,500,000
(7,537,791)
5,962,209
15. Current Tax Liabilities
CURRENT
Income tax payable
910,831
765,288
Annual Report 2012 25
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
16. Provisions
CURRENT
Employee benefits
NON-CURRENT
Employee benefits
Movements:
Balance at the beginning of the year
Amounts recognised in connection with business combinations
Reverse amounts in connection with business disposed
Additional provisions made
Amounts used
Balance at the end of the year
17. Contributed Equity
(a) Share Capital – No. of Shares
Ordinary shares – fully paid
Ordinary shares – partly paid
Share Capital - $ of shares
Ordinary shares – fully paid
Ordinary shares – partly paid
2012
$
2011
$
1,432,871
1,348,062
402,387
306,549
1,654,611
-
(157,875)
1,712,610
(1,374,088)
1,835,258
2012
42,241,151
-
42,241,151
2012
$
11,355,349
-
11,355,349
1,268,575
55,218
-
1,505,060
(1,174,242)
1,654,611
2011
41,627,518
663,663
42,291,181
2011
$
10,784,905
477,157
11,262,062
26 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
17. Contributed Equity (continued)
(b) Movements
DATE
DETAILS
NUMBER OF
SHARES
ISSUE
PRICE
30 June 2010
Opening Balance
1 September 2010
Share issue on exercise of options
22 November 2010
Share issue on exercise of options
23 March 2011
Conversion of partly paid shares into fully paid
30 June 2011
30 June 2011
Regular calls on unpaid amounts of partly paid shares
Balance
41,633,652
200,000
600,000
(142,471)
42,291,181
$0.45
$0.60
30 November 2011
Share buy back
(50,030)
$1.20
30 June 2012
Regular calls on unpaid amounts of partly paid shares
30 June 2012
Balance
42,241,151
$
10,563,767
90,000
360,000
-
248,295
11,262,062
(60,036)
153,323
11,355,349
(c) Ordinary Shares
Fully paid ordinary shares – Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion
to the number of shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise
each shareholder has one vote on a show of hands.
Partly paid ordinary shares – The partly paid ordinary shares have been called on a scheduled basis throughout the year. All partly
paid shares were fully paid up by the end of the financial year.
(d) Share Options
Unissued ordinary shares of the Company under option at the date of this report are set out below.
DATE OPTIONS GRANTED
EXERCISE DATE
ISSUE PRICE
OF SHARES
NUMBER
UNDER OPTION
September 2008
October 2009
June 2010
September 2010
September 2013
October 2012
July 2013
October 2012
$1.00
$0.85
$1.00
$0.85
250,000
1,475,000
85,843
75,000
1,885,843
Annual Report 2012 27
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
18. Retained Profits
Balance at the beginning of the year
Net profit/(loss) for the year
Dividends
Balance at the end of the year
19. Remuneration of Auditors
Cutcher & Neale
2012
$
4,868,818
4,747,958
(887,514)
8,729,262
2011
$
3,546,358
1,996,598
(674,138)
4,868,818
Audit of the annual financial report under the Corporations Act 2001
33,500
32,000
20. Contingencies
Bank guarantees
The bank guarantees at the end of the financial year relate to security pro-
vided under operating leases for premises.
21. Commitments
(a) Capital Commitments
Capital expenditure contracted for at the reporting date but not recognised
as liabilities is as follows:
1,054,887
1,222,373
Property, plant and equipment
Payable within one year
268,818
449,294
(b) Operating Lease Commitments
Non-cancellable operating leases contracted for at the reporting date but
not recognised as liabilities are as follows:
Payable within one year
Payable later than one year but not later than five years
Payable later than five years
4,602,773
16,155,004
15,989,326
36,747,103
4032,899
15,936,893
16,781,968
36,751,760
Operating leases relate to rented premises and motor vehicles. Leases have various terms, including some options to extend the
terms.
28 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
22. Key Management Personnel Disclosures
(a) Directors
The names of persons who were directors of the Company at any time during the financial year were as follows:
Robert Cameron
John Gibbs
Alex Abrahams
Simon Rutherford
Lance Wheeldon
(b) Key management personnel compensation
Key management personnel compensation for the years ended 30 June 2012 and 2011 is set out below. The key management
personnel are all the directors of the Group and the executive managers within the Group who report directly to the Board or Chief
Executive Officer, and have prime responsibility for significant functional areas within the Group. These personnel are deemed to
have the greatest authority for the strategic direction and management of the Group.
Short-term employment benefits
2012
$
1,205,114
2011
$
1,266,659
(c) Other transactions with key management personnel or entities related to them
Information on transactions with key management personnel or entities related to them, other than compensation, is set out below.
All key management personnel or their related parties held shares in the Company during the financial year, and as such,
participated in dividends.
Bislab Pty Limited ATF the Canyon Property Trust, an entity related to Alex Abrahams and Simon Rutherford, provided premises
rental to the Company during 2012 and 2011 on normal commercial terms and conditions.
Exandal Investments, an entity related to Alex Abrahams and Alison Hughes, provided premises rental to the Company during 2012
and 2011 on normal commercial terms and conditions.
88 Park Avenue Pty Limited ATF the Key Health Unit trust, an entity related to Alex Abrahams, provided premises rental to the
Company during 2012 on normal commercial terms and conditions.
Susan Abrahams, an individual related to Alex Abrahams, provided premises rental to the Company during 2012 and 2011 on
normal commercial terms and conditions.
The Company received fees for the provision of services to Alex Abrahams and Alison Hughes under normal terms and conditions of
dental service and facility agreements.
The Company received fees for the provision of property management and administration services to Exandal Investments, Bislab
Pty Limited and 88 Park Avenue Pty Limited.
The Company paid fees for management and support services to Whitesail Pty Limited ATF AJ Abrahams Family Trust during
the 2012 year. The entity is related to Alex Abrahams. Fees were based on an agreement approved by the Board, which reflects
commercial terms and conditions.
The Company paid consultancy fees for specific advice and assistance to Lawler Partners during the 2012 and 2011 years. Lawler
Partners is an entity related to Simon Rutherford. Fees paid were based on normal commercial terms and conditions.
Annual Report 2012 29
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
22. Key Management Personnel Disclosures (continued)
(c) Other transactions with key management personnel or entities related to them (continued)
The aggregate amounts of each of the above types of transactions were:
Subscriptions for new ordinary shares
Dividends paid
Revenues from rendering of services
Administration fees received
Rental expense
Consultancy fees paid
Administration expenses
23. Subsidiaries
2012
$
-
631,894
464,593
2,038
1,164,502
3,514
32,676
2011
$
360,000
476,403
540,757
9,792
1,068,556
-
-
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with
the accounting policy described in Note 1(b):
NAME OF ENTITY
COUNTRY OF
INCORPORATION
CLASS OF
SHARES
Pacific Smiles Group Limited
Pacific Eyes Pty Limited *
Dentist Smiles Group Pty Limited
Dental Assistant Training Solutions Pty Limited
Pacific Medical Care Pty Limited **
Australia
Australia
Australia
Australia
Australia
-
Ordinary
Ordinary
Ordinary
Ordinary
EQUITY HOLDING
2012
%
2011
%
-
100
100
100
100
-
100
100
100
100
* Change of name from Pacific Optical Pty Limited to Pacific Eyes Pty Limited during the year, in connection with the disposal of
the Eye Care business.
** Subsidiary has not traded since incorporation.
30 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
24. Related Party Transactions
(a) Parent Entity
The parent entity within the Group is Pacific Smiles Group Limited.
(b) Subsidiaries
Interests in subsidiaries are set out in Note 23.
(c) Key Management Personnel
Disclosures of transactions involving key management personnel are set out in Note 22.
(d) Transactions With Related Parties
In addition to the disclosures in relation to key management personnel, the following transactions occurred with related parties.
All transactions below involved entities within the wholly-owned group.
Provision of serviced dental facilities and related supplies
Sub-leasing of premises
Provision of management, administration and associated services and
supplies
Provision of training services
2012
$
7,766,060
75,581
212,197
54,572
2011
$
4,766,390
227,057
380,640
34,053
Transactions between members of the wholly-owned group are undertaken on terms equivalent to those which apply to arms-length
third parties where similar arrangements exist. Where services provided within the Group are not similarly provided to arms-length
parties, charging methodologies are applied to reflect likely normal commercial terms intended to recover costs and return a
reasonable margin.
Annual Report 2012 31
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
25. Business Combinations
(a) Summary of Acquisitions
There were no business acquisitions during the financial year. Details of business acquisitions during the previous financial year are
summarised below.
On 1 April 2011, the Group acquired a dental centre at Bribie Island, Queensland.
On 29 April 2011, the Group acquired a dental centre at Warilla, New South Wales.
Details of the aggregate fair value of the assets and liabilities acquired and goodwill were as follows:
Purchase consideration (refer to (b) below):
Cash paid/payable
Fair value of net identifiable assets acquired (refer to (c) below)
Goodwill (note 11)
2012
$
-
-
-
2011
$
3,540,959
404,698
3,136,261
In some instances, purchase consideration has been determined provisionally, as future installments of the price are payable upon
satisfaction of certain conditions. The full potential consideration, and hence goodwill, has been recognised as it was probable at
balance date that these conditions will be fulfilled.
During 2011, $91,603 of additional consideration was paid in relation to a previous business acquisition, upon satisfaction of
contractual conditions. This amount was recognised in Other Expenses in the Income Statement.
(b) Purchase Consideration
Outflow of cash to acquire businesses, net of cash acquired
Total consideration
Vendor finance/deferred consideration applied
Cash paid
Total outflow
2012
$
-
-
-
-
2011
$
3,540,959
480,000
3,060,959
3,540,959
No cash or bank overdrafts were acquired as part of the business acquisitions.
During 2011, acquisition-related transaction costs of $164,264 was included in Other Expenses in the Income Statement and in
Operating Cash Flows in the Statement of Cash Flows.
(c) Assets and Liabilities Acquired
The assets and liabilities arising from the acquisitions were as follows:
Inventories
Plant and equipment
Deferred tax assets
Provision for employee benefits
Net identifiable assets acquired
32 Pacific Smiles Group Limited
2012
$
-
-
-
-
-
2011
$
63,848
379,503
16,565
(55,218)
404,698
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
26. Financial Risk Management
The Group’s principal financial instruments comprise bank bills, bank and other loans, equipment finance instruments and cash.
The main purpose of these instruments is to raise finance for the Group’s operations and investments. The Group has various other
financial instruments such as trade and other debtors and creditors, which arise directly from its operations. The Group does not
trade in financial instruments.
The Board has overall responsibility for the establishment and oversight of the risk management framework. Senior management
develops and monitors risk management policy, and reports regularly to the directors on issues and compliance matters. Risk
management principles and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The
main risks arising from the Company and Group’s financial instruments are identified below.
Market Risk
The Group’s exposure to market risk for changes in interest rates relates primarily to its bank debt obligations. A significant portion
(90%) of the Group’s borrowings at balance date attracted fixed interest rates, with fixed rates applying to the bank-provided
equipment loans and bank bills. These loans are primarily used to partly finance the purchase of durable tangible assets and
intangible assets such as goodwill acquired in business acquisitions. Of these fixed interest liabilities, $1,500,000 (or 22% of total
borrowings) comprise bank bills, which have short durations and hence are repriced frequently. The remaining $3,000,000 of bank
bills form part of a loan facility which is subject to annual review by the bank, but which has an interest rate fixed for more than
twelve months. The remaining 10% of other loans were non-interest bearing.
Cash balances in cheque and other on-call accounts earned interest at rates ranging between 0.1% and 3.5% (2011: 1.25% and
4.75%) for the Group, depending upon account balances.
The weighted average interest rate on borrowings at the end of the year was 4.58% (2011: 5.22%) for the Group.
Interest Rate Sensitivity Analysis
Effect on profit before tax and equity:
1% increase in interest rates
1% decrease in interest rates
Credit Risk
2012
$
7,961
(7,961)
2011
$
24,794
(24,794)
The Group has no significant concentrations of credit risk. The Group does not have significant credit exposure to any one financial
institution or customer. The credit risk on financial assets of the consolidated entity which have been recognised in the balance
sheet is generally the carrying amount, net of any provision for doubtful debts.
Annual Report 2012 33
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
26. Financial Risk Management (continued)
Liquidity Risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of working capital and
bank borrowings. The Group aims to achieve this flexibility by keeping committed credit lines available. Opportunities to raise
additional capital from shareholders are also considered where appropriate. Bank financing facilities are identified at Note 14.
The Group manages liquidity risk by continuously monitoring forecast and actual cash flows to ensure sufficient liquidity is always
available to meet liability obligations as they fall due. The Group’s Balance Sheet shows an excess of current liabilities over current
assets at balance date of $7,618,150. Liabilities have been classified as current where it is probable that they will be settled within
twelve months or if there is a contractual obligation that may require settlement within twelve months, regardless of how likely
settlement under contractual arrangements is judged to be. The Group’s current assets, available financing facilities, and ongoing
positive operating cash flows continue to be sufficient to satisfy all payment obligations within the timeframes required.
Maturities of Financial Liabilities
The following tables show the maturity groupings of gross (undiscounted) payment obligations under contracts for financial liabilities.
Consolidated – 2012
Bank bills (*)
Bank loans
Other loans
Payables and accruals
Consolidated – 2011
Bank bills (*)
Bank loans
Other loans
Payables and accruals
LESS THAN 6
MONTHS
$
4,500,000
507,088
60,000
6,365,284
11,432,372
4,500,000
640,339
401,773
5,804,222
11,346,334
6 TO 12 MONTHS
1 TO 5 YEARS
TOTAL
CONTRACTUAL
AMOUNTS
$
4,500,000
1,762,022
660,000
6,365,284
13,287,306
4,500,000
1,815,418
1,121,773
5,804,222
$
-
911,740
60,000
-
971,740
-
696,356
660,000
-
1,356,356
13,241,413
$
-
343,194
540,000
-
883,194
-
478,723
60,000
-
538,723
* Bank bills totaling $4,500,000 form part of a bank facility which is reviewed annually with the Bank. The overall facility does not
have a fixed expiry date. It is an ongoing line of credit, subject to the Bank’s annual review. The particular financial instruments
drawn under the facility, such as bank bills, have specified maturity or roll-over dates, but the line of credit is un-termed. The
Company anticipates the facility will be reviewed with the Bank during the next twelve months and will remain in place thereafter
in the normal course of business. Balances outstanding under the facility have been classified as contractually due within twelve
months for the purposes of this disclosure.
Fair Value
The fair value of financial assets and liabilities held by the Group approximate the individual carrying values of those assets and
liabilities.
34 Pacific Smiles Group Limited
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
27. Segment Information
(a) Description of Segments
For part of the financial year, the consolidated entity was organised into two primary divisions by service type. These were Dental
and Eye Care, and represented the operating segments of the business. On 14 November 2011, the Eye Care business was sold,
and thereafter, the Group’s activities are primarily Dental in nature.
The Group’s activities are located throughout Eastern Australia.
(b) Segment Information
DENTAL
EYE CARE
CONSOLIDATED
$
$
$
2012
Segment revenue
Sales and services to external customers
Other revenue
Consolidated revenue
Segment result
53,843,088
1,051,119
54,894,207
1,797,837
17,643
1,815,480
Profit/(loss) before income tax
6,866,450
(69,402)
Income tax expense
Profit after income tax
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
36,121,037
2,026
16,036,427
1,525,414
Other segment information
Acquisitions of property, plant and equipment,
intangibles and other non-current assets
Depreciation and amortisation expense
Impairment losses/(reversals)
7,039,906
3,227,338
-
3,444
60,364
(2,719)
55,640,925
1,068,762
56,709,687
6,797,048
(2,049,090)
4,747,958
36,123,063
(5,058)
36,118,005
17,561,841
(1,528,447)
16,033,394
7,043,350
3,287,702
(2,719)
Annual Report 2012 35
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
27. Segment Information (continued)
2011
Segment revenue
Sales and services to external customers
Other revenue
Consolidated revenue
Segment result
Profit/(loss) before income tax
Income tax expense
Profit after income tax
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Other segment information
DENTAL
EYE CARE CONSOLIDATED
$
$
$
42,293,046
882,885
43,175,931
5,392,519
54,629
5,447,148
3,498,476
(60,667)
31,119,796
1,216,677
14,988,817
2,814,613
47,685,565
937,514
48,623,079
3,437,809
(1,441,211)
1,996,598
32,336,473
(544,281)
31,792,192
17,803,430
(2,142,118)
15,661,312
Acquisitions of property, plant and equipment, intangibles and
other non-current assets
Depreciation and amortisation expense
Impairment losses
(c) Disposal of Eye Care Business
6,439,808
3,029,945
1,124,271
11,817
172,504
13,737
6,451,625
3,202,449
1,138,008
On 14 November 2011, the Group, via subsidiary company Pacific Optical Pty Limited, completed the sale of its Eye Care business.
Details of the aggregate fair value of the assets and liabilities disposed are as follows:
Total disposal consideration
Fair value of net assets disposed
Net loss on disposal
Inflow of cash from disposal of business, net of cash disposed
Deferred consideration
Cash received
Total inflow
2012 $
713,488
741,421
27,933
424,000
289,488
713,488
No cash or bank overdrafts were disposed of as part of the business disposal. Deferred consideration was received prior to the end
of the financial year. The assets and liabilities disposed were as follows:
Inventories
Plant and equipment
Intangible assets
Deferred tax assets
Provision for employee benefits
Net identifiable assets disposed
36 Pacific Smiles Group Limited
215,504
81,278
555,152
47,362
(157,875)
741,421
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
28. Events Occurring After the Balance Sheet Date
Subsequent to the end of the financial year, the Directors declared a final dividend of 2.0 cents per share in relation to the financial
year ended 30 June 2012. The dividend was paid in October 2012.
An extraordinary general meeting of Pacific Smiles Group Limited was held on 16 July 2012, at which Shareholders unanimously
approved the 2012 Authorised Sale proposal and associated changes to the Company’s constitution. These approvals enabled
entities associated with TDM Asset Management Pty Ltd (TDM) to acquire a relevant interest in 19.9% of the issued shares of the
Company for $13,000,000. In connection with the transaction, Mr Ben Gisz, a principal of TDM, was appointed as a Director of the
Company.
29. Note to the Statement of Cash Flows
Reconciliation of profit/(loss) after income tax to net cash inflow
from operating activities
Profit/(loss) for the year
Depreciation and amortisation
Impairment losses
Net loss on disposal of non-current assets
Change in operating assets and liabilities
(Increase) decrease in receivables
(Increase) decrease in inventories
(Increase) decrease in other operating assets
(Increase) decrease in deferred tax assets
Increase (decrease) in trade payables
Increase (decrease) in provisions
Increase (decrease) in income tax
Net cash inflow from operating activities
30. Parent Entity Financial Information
(a) Summary Financial Information
2012
$
4,747,958
3,287,702
(2,719)
38,633
401,246
(234,688)
(91,974)
(330,510)
561,062
338,522
145,543
8,860,775
The individual financial statements for the parent entity show the following aggregate amounts:
Balance Sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders’ equity
Issued capital
Retained earnings
Profit or (loss) for the year
Total comprehensive income
2012
$
7,546,203
36,455,100
14,490,712
15,864,839
11,355,349
9,234,912
20,590,261
4,904,599
4,904,599
2011
$
1,996,598
3,202,450
1,107,149
10,007
(244,945)
90,563
(114,002)
(257,752)
908,841
330,818
46,513
7,076,240
2011
$
6,287,388
31,225,201
13,095,188
14,745,311
11,262,062
5,217,828
16,479,890
2,166,255
2,166,255
Annual Report 2012 37
NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
FOR YEAR ENDED 30 JUNE 2012
30. Parent Entity Financial Information (continued)
(b) Contingent liabilities of the parent entity
2012
$
2011
$
Bank guarantees
1,054,887
1,222,373
The parent entity did not have any contingent liabilities or financial guarantees as at 30 June 2012 or 30 June 2011, other than bank
guarantees.
(c) Contractual commitments for the acquisition of property, plant or equipment
As at 30 June 2012, the parent entity had contractual commitments for the acquisition of property, plant or equipment totaling
$268,818 (30 June 2011 - $449,294). These commitments are not recognised as liabilities as the relevant assets have not yet
been received.
38 Pacific Smiles Group Limited
FIVE YEAR HISTORICAL TRENDS
GENERAL INFORMATION
Dental
Number of Centres
Number of Surgeries
Eye Care
Number of Centres
PROFIT AND LOSS
Total Revenue
Gross Profit
EBITDA
EBIT
Profit Before Income Tax
Profit/(Loss) After Income Tax
BALANCE SHEET
Total Assets
Total Liabilities
Total Borrowings
Net Assets
Contributed Equity
Retained Profits
CASH FLOWS
Cash Flows From Operations
Dividends - Fully Franked
RATIOS
EBITDA / Revenue
Profit After Income Tax / Revenue
Interest Coverage: EBITA / Net
Interest
Gearing: Debt / (Debt and Equity)
Return on Equity: Profit After
Income Tax / Total Equity
2012
2011
2010
2009
2008
31
150
-
$’000
56,710
49,453
10,574
7,287
6,797
4,748
$’000
36,118
16,033
6,922
20,085
11,355
8,729
$’000
8,861
888
28
130
4
$’000
48,623
41,607
7,147
3,944
3,438
1,997
$’000
31,792
15,661
7,437
16,131
11,262
4,869
$’000
7,076
674
25
118
6
$’000
43,485
35,881
6,996
4,222
3,676
2,512
$’000
29,906
15,796
8,914
14,110
10,564
3,546
$’000
5,869
465
19
104
7
$’000
39,527
30,666
3,450
938
310
-420
$’000
26,687
15,204
9,013
11,483
9,984
1,499
$’000
5,211
385
17
105
5
$’000
33,657
25,864
4,541
2,690
2,015
1,389
$’000
26,512
14,413
9,515
12,099
9,542
2,556
$’000
2,617
312
18.6%
8.4%
14.7%
4.1%
21.0 times
11.6 times
25.6%
23.6%
31.6%
12.4%
16.1%
5.8%
9.7 times
38.7%
8.7%
-1.1%
2.2 times
44.0%
13.5%
4.1%
4.4 times
44.0%
17.8%
-3.7%
11.5%
Dividends Per Share
2.10 cents
1.60 cents
1.15 cents
1.0 cents
0.90 cents
Annual Report 2012 39
NOTES
THIS PAGE INTENTIONALLY LEFT BLANK
40 Pacific Smiles Group Limited
PACIFIC SMILES GROUP
HEAD OFFICE
Level 1, 6 Molly Morgan Drive
GREENHILLS NSW 2323
pacificsmilesgroup.com.au
DENTAL ASSISTANT TRAINING SOLUTIONS
Level 1, 366 Hunter Street
NEWCASTLE NSW 2300
dentalassistanttraining.com.au
nib DENTAL CARE CENTRES
NEW SOUTH WALES
Glendale - 595 Main Road
Newcastle - 366 Hunter Street
Parramatta - 28 Grose Street
Sydney - 27-31 Hunter Street
Wollongong - 106 Crown Street
VICTORIA
Melbourne - 356 Collins Street
nib.com.au/dentallocations
PACIFIC SMILES DENTAL CENTRES
NEW SOUTH WALES
Bateau Bay - Bateau Bay Sqaure
Belmont - 12 Thomas Street
QUEENSLAND
Bribie Island - Bribie Island Shopping Centre
North Lakes - Westfield North Lakes
Charlestown - Cnr Smart & Pearson Streets
VICTORIA
Erina - Erina Fair
Forster - 22 South Street
Gladesville - 3 Meriton Street
Greenhills - 8 Molly Morgan Drive
Kotara - 88 Park Avenue
Lake Haven - Lake Haven Shopping Centre
Morisset - 49 Yambo Street
Nowra - 64 Junction Street
Penrith - 59 Station Street
Rutherford - West Mall, Rutherford Shopping Centre
Salamander Bay - 167 Salamander Way
Tuggerah - Westfield Shopping Centre
Warilla - 102 Shellharbour Road
pacificsmilesdental.com.au
Bendigo - Leading Healthcare Building, 84 Mollison Street
Bairnsdale -287 Main Street
Drysdale - 41 High Street
Melbourne - 360 Bourke Street
Sale - 56 Cunninghame Street
Torquay - 110 Geelong Road
Traralgon - 20 Hotham Street
Warragul - 130 Albert Street
Waurn Ponds - Medical One Building, 160 Colac Road
AUSTRALIAN CAPITALTERRITORY
Woden - 28 Brewer Street
Annual Report 2012 41
Pacific Smiles Group Limited
ABN 42 103 087 449
PO Box 2246
GREENHILLS NSW 2323
P: + 61 2 4930 2000
F: + 61 2 4930 2099
E: admin@pacificsmiles.com.au
pacificsmilesgroup.com.au