Annual Report
2015
Contents
A Message from the Chairman
Operating and Financial Review
Corporate Governance Statement
Directors’ Report
Remuneration Report
Auditor’s Independence Declaration
Financial Report
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
5
6
12
13
17
25
26
27
28
29
30
53
54
56
58
4
4
5
A message from
THE CHAIRMAN
Robert Cameron AO
This year was a very significant one for Pacific Smiles
Group (Pacific Smiles) with our listing on the Australian
Securities Exchange (ASX) in November 2014. On behalf
of the Board, welcome to all of the new Shareholders,
and thank you to all Shareholders for supporting Pacific
Smiles to reach this important milestone.
Ordinary dividends declared in relation to the 2015
financial year totalled 5.0 cents per share fully franked,
representing 78% of pro forma Net Profit After Tax and
a 25% increase on the previous year. A pre-IPO special
dividend of 1.6 cents per share fully franked was also
paid.
It was also a successful year and I am pleased to report
that our results for the financial year ended 30 June 2015
exceeded the pro forma earnings forecast provided in
the Prospectus for our Initial Public Offering (IPO).
Revenue of $74.9 million was 26.8% higher than the
previous year and our pro forma Net Profit After Tax of
$9.7 million was 31.9% higher than the previous year. The
results reflect our ongoing focus on revenue growth with
improving efficiencies and cost management.
The key milestones and achievements were delivered
against a backdrop of an accelerated roll-out program
of new dental centres and the integration of three large
dental centres acquired from Medibank Private in June
2014. At the close of the year, the dental centre network
comprised 42 Pacific Smiles Dental Centres and 7 nib
Dental Care Centres, located throughout New South
Wales, Queensland, Victoria and the Australian Capital
Territory.
Pacific Smiles Dental is now the largest branded
dental network in Australia and is poised for continued
expansion in established and new geographic clusters.
Growth in revenue will be derived from the continued
rollout of new dental centres but also from same-centre
patient fees growth, which was 4.3% in FY 2015. As
covered later in this report, our management is focussed
on driving same-centre growth through the delivery of
outstanding patient care and customer service in all our
dental centres and innovative marketing initiatives.
The Board’s enduring commitment to strong corporate
governance throughout Pacific Smiles’ history has
smoothed the transition to the more formal rigours of
the ASX listed company environment. Following the
retirement of Lance Wheeldon from the Board noted in
last year’s Annual Report, after a considered selection
process the Board was delighted to welcome Grant
Bourke as a Director from October 2014. All Directors
are highly engaged with the business, are committed to
its success and embody the deep skills and experience
needed.
I would like to thank the dentists who choose to practice
from our fully-serviced facilities. Our business is all
about providing them with the resources and the patient
flow to enable their practice to thrive. Our success is
aligned to theirs.
I would also like to thank our leadership team and all
employees throughout the Group. A public listing places
new demands upon an organisation and in particular,
upon the leadership team. My fellow Directors and I
believe that they have risen to the challenge and will
continue to build and operate a successful Australian
healthcare entity.
4
5
OPERATING AND
FINANCIAL REVIEW
from John Gibbs
Overview
Pacific Smiles Group is leading the way in Australia with a
branded network approach to the dental services industry.
Commencing with three established dental centres in 2003,
Pacific Smiles now has 42 Pacific Smiles Dental Centres and
7 nib Dental Care Centres throughout the eastern states and
territories of mainland Australia.
We provide fully serviced surgeries to independent dentists
who choose to practice from one or more of our dental
centres. Those dentists are able to devote their working
days to clinical dentistry while employees of Pacific Smiles
take care of everything else including all administration and
management of the dental centres and the wider business.
Our focus is on outstanding patient care and customer
service. We were a Net Promoter Score pioneer in the dental
services industry, introducing the methodology many years
ago and achieving outstanding results, including a group-
wide average score of over 60 in FY 2015. We have a
proprietary internal training program called APPEx®, which
stands for A Perfect Patient Experience. It is a compulsory
learning module for all centre-based employees.
We prefer to expand via roll-out of new dental centres rather
than via a roll-up of acquired independent dental practices.
We grow our network by developing new dental centres in
convenient locations in retail and services hubs in urban
and regional settings.
Whilst ongoing acquisition of individual practices is not a
feature of our expansion plans, opportunities for strategic
acquisitions are considered on their merits.
On 21st November 2014, Pacific Smiles Group completed an
IPO and listed on the ASX.
At the close of the year, Pacific Smiles Group employed
approximately 700 staff and provided services to 270
dentists.
Operations Overview and Highlights
During 2015, we grew from 41 to 49 dental centres with eight
new Pacific Smiles Dental Centres opened at Jesmond,
Toronto, Blacktown and Narellan in NSW, Tuggeranong and
Manuka in ACT, and Deception Bay and Brisbane CBD in
QLD.
Our roll-out involves the development of geographic clusters
of dental centres, so as Pacific Smiles benefits from ongoing
operational and marketing efficiencies and advantages.
Three large dental centres at Haymarket, Parramatta and
Wagga Wagga acquired from Medibank Private in June
2014, were integrated during the year into the Pacific Smiles
Dental network. Integration of these dental centres was
viewed from the beginning as a multi-year initiative, and
solid progress was made during the first year on a number of
operational aspects. The facility at Parramatta will relocate
to new premises in September 2015 and this will further
assist with ongoing successful progress.
Group Financial Performance
Statutory Results
The Group achieved statutory Net Profit After Tax of $8.4
million, up by 7.8% from $7.8 million in 2014. This result also
exceeded the statutory Prospectus forecast for the year of
$7.5 million.
The statutory results are impacted by the $1.4 million after-tax
effect of one-off transaction costs associated with the IPO.
Further, the results include the additional costs to conduct
the business as an ASX-listed company from 21 November
2014 onwards. These significant events and changes during
the reporting period make comparisons to the previous year
more difficult. Therefore, further discussion of the results
in this Operating and Financial Review focusses on the pro
forma results for 2015 and the comparative period.
Pro Forma Results
On a pro forma basis, EBITDA increased by 25.3% to $18.2
million, exceeding the Prospectus pro forma forecast of
$17.4 million. Pro forma Net Profit After Tax of $9.7 million
was 31.9% higher than the previous year, and 8.8% higher
that the Prospectus pro forma forecast of $8.9 million.
The strong financial results for the year were the result of
strong revenue growth, coupled with steady profit margins.
The Prospectus forecast anticipated that the integration of
the three dental centres acquired in June 2014 would have
a dampening effect on the Group’s margins in 2015, so it
was pleasing to conclude the year with an EBITDA to Patient
Fees margin of 15.0%, compared to 15.1% in the previous
year.
Group revenue was $74.9 million, which was up by 26.8%
over the previous full year. This revenue consists mainly of
the service fees charged to the dentists who practice from
our dental centres.
6
7
Operating and Financial Review
Patient Fees generated by dentists at Pacific Smiles dental
centres was $121.4 million, up 26.6% over the previous full
year. This increase in patient fees comprised same centre
growth of 4.3%, plus a substantial contribution from the
three centres acquired from Medibank Private in June 2014
and a full year effect from new centres opened in 2014.
Newly developed centres contributed, although some of
them opened late in the financial year.
$ millions
Revenue
Gross profit
EBITDA
EBIT
Net profit after tax
Operating metrics
Number of Dental Centres
Commissioned Dental Chairs
Patient Fees ($m)
Same Centre Patient Fees growth
Financial metrics
Earnings per share (cents)
EBITDA margin
EBITDA to Patient Fees margin
EBIT margin
Pro Forma
Pro Forma
Prospectus
2015
74.9
71.0
18.2
13.9
9.7
49
226
121.4
4.3%
6.7
24.3%
15.0%
18.6%
Change
26.8%
28.3%
25.3%
29.7%
31.9%
19.5%
11.3%
26.6%
24.1%
2014
59.1
55.3
14.5
10.8
7.4
41
203
95.9
(3.0%)
5.4
24.6%
15.1%
18.2%
2015
76.1
72.4
17.4
12.9
8.9
47
222
123.2
5.1%
6.1
22.9%
14.1%
16.9%
Pro forma Adjustments to the Statutory Income Statement
Statutory revenue
Pro forma revenue
Statutory net profit after tax
IPO transaction costs
Income tax effect of IPO transaction costs
Underlying statutory net profit after tax
Other pro forma adjustments:
Listed public company costs
Net interest
Income tax effect of other pro forma adjustments
Pro forma net profit after tax
2015
$ million
74.9
74.9
2014
$ million
59.1
59.1
8.4
2.0
(0.6)
9.8
(0.2)
0.1
0.0
9.7
7.8
-
-
7.8
(0.6)
-
0.2
7.4
7
6
8.0c
7.0c
6.0c
5.0c
4.0c
3.0c
2.0c
1.0c
0.0c
$12M
$10M
$8M
$6M
$4M
$2M
$M
8.0c
7.0c
6.0c
5.0c
4.0c
3.0c
2.0c
1.0c
0.0c
$12M
$8M
$6M
$4M
$2M
$M
8.0c
7.0c
8.0c
6.0c
7.0c
5.0c
6.0c
4.0c
5.0c
3.0c
4.0c
2.0c
3.0c
1.0c
2.0c
0.0c
1.0c
$12M
$10M
$12M
$8M
$10M
$6M
$4M
$2M
$8M
$6M
$4M
$M
$20M
$18M
$16M
$14M
$12M
$10M
$8M
$6M
$4M
$2M
$M
2011
2012 2013
2014
2015
Interim Dividend
Final Dividend
Special Dividend
2011
2012
2013
2014
2015
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
Operating and Financial Review
2011
2012
2013
2014
Statutory
Pro forma
Pro forma adjustments have been presented on a consistent
basis with the Prospectus pro forma adjustments, and are
explained as follows:
Listed Public Company Costs – An estimate of the incremental
full year costs Pacific Smiles would have incurred if it had
operated as a listed company for the full period.
IPO Transaction Costs – IPO costs charged as expenses
have been excluded from pro forma results.
Net Interest – An adjustment for the full year impact on
interest income and interest expense as if the major IPO cash
flows had taken effect on opening balances as at 1 July 2014.
Income Tax Effect – The tax effects of the above pro forma
adjustments calculated at the corporate tax rate of 30%.
2015
Financial Position
Pacific Smiles ended the financial year in a strong financial
position, with a net cash balance of $15.2 million, improved
from net debt of $5.8 million at 30 June 2014. Proceeds from
the IPO bolstered cash reserves, and healthy operating cash
flows also assisted.
After paying for the costs of the IPO, net proceeds of $19.6
million flowed into the Company. These funds were partially
used to repay $9.0 million in bank debt and to fund a special
dividend to pre-IPO shareholders of $2.2 million.
The Group again invested in expanding its dental centre
network and in renewing and upgrading existing facilities,
equipment and systems. Total capital expenditure was $6.7
million, which included $5.2 million for new dental centres.
During 2015, a total of eight new centres were opened, one
existing centre at Gladesville NSW was relocated, and works
were in progress at the end of the year to relocate the large
Parramatta centre.
2011
2012 2013
2014
2015
Interim Dividend
Final Dividend
Special Dividend
Patient Fees
$140M
$120M
$100M
$80M
8.0c
$60M
7.0c
$40M
6.0c
$20M
5.0c
$M
4.0c
3.0c
2011
2012
2013
2014
2015
EBITDA (1)
2.0c
1.0c
$20M
0.0c
$18M
$16M
2011
2012 2013
2014
2015
Interim Dividend
$14M
Final Dividend
Special Dividend
$12M
$10M
$8M
$6M
$4M
$2M
$M
2011
2012
2013
2014
2015
(1) Excludes IPO transaction costs expensed in 2015
and impairment of non-current assets in prior years
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
Dividends
8.0c
8.0c
Net Profit After Tax
8.0c
7.0c
7.0c
7.0c
6.0c
6.0c
6.0c
5.0c
5.0c
5.0c
4.0c
4.0c
4.0c
3.0c
3.0c
3.0c
2.0c
2.0c
2.0c
1.0c
1.0c
8.0c
8.0c
7.0c
7.0c
6.0c
6.0c
5.0c
5.0c
4.0c
4.0c
3.0c
3.0c
2.0c
2.0c
1.0c
0.0c
0.0c
1.0c
2011
0.0c
0.0c
Interim Dividend
2012 2013
2011
2011
2011
1.0c
2011
0.0c
Interim Dividend
2015
2012 2013
2012 2013
$20M
$12M
$18M
$10M
$16M
$14M
$8M
$12M
$10M
$6M
$8M
$6M
$4M
$4M
$2M
$2M
$M
$M
2014
2014
2015
2015
$20M
$18M
$16M
$14M
$12M
$10M
$8M
$6M
$4M
$2M
$20M
$20M
$20M
$18M
$18M
$18M
$16M
$16M
$16M
$14M
$14M
$12M
$14M
$12M
$10M
$12M
$10M
$8M
$10M
$8M
$6M
$8M
$6M
$4M
$6M
$4M
$2M
$2M
$4M
$M
$2M
$M
$20M
$20M
$18M
$18M
$16M
$16M
$14M
$14M
$12M
$12M
$10M
$10M
$8M
$8M
$6M
$6M
$4M
$4M
$2M
$2M
2011
2011
$M
2011
$M
2012
2012
$M
2012
2011
2012 2013
2014
$10M
Interim Dividend
0.0c
Final Dividend
2011
2012 2013
2014
Final Dividend
Final Dividend
2014
2012 2013
2012 2013
2015
2014
2014
Special Dividend
Special Dividend
2015
2015
Interim Dividend
2015
Special Dividend
Interim Dividend
Interim Dividend
Final Dividend
Final Dividend
Final Dividend
Special Dividend
Special Dividend
Special Dividend
$140M
2011
2011
$120M
2012
2013
2014
2015
2012
2013
2014
$M
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
2013
Pro forma
2011
Statutory
2014
2012
2015
2015
2011
2011
(1) Excludes IPO transaction costs expensed
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
and impairment of non-current assets
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
(1) Excludes IPO transaction costs expensed
Interim Dividend
Final Dividend
Special Dividend
8
2011
2012
2013
2014
2015
Statutory
Pro forma
$12M
$12M
$12M
$10M
$10M
$12M
$12M
$10M
$8M
$8M
$10M
$10M
$6M
$6M
$8M
$8M
$8M
$4M
$4M
$6M
$6M
$6M
$2M
$2M
$4M
$4M
$4M
$M
$M
$2M
$2M
$2M
2011
2011
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
$100M
$80M
$60M
$40M
$20M
$M
2011
2012
2013
2014
2015
$140M
$140M
$120M
$120M
$140M
$100M
$100M
$120M
$80M
$80M
$100M
$60M
$60M
$80M
$40M
$40M
$60M
$20M
$20M
$40M
$M
$M
$20M
$140M
$140M
$120M
$120M
$100M
$100M
$80M
$80M
$60M
$60M
$40M
$40M
$140M
$120M
$100M
$80M
$60M
$40M
$20M
$140M
$120M
$100M
$80M
$60M
$40M
$M
2011
$20M
$M
2012
2012
2013
2013
2014
2014
2015
2015
$2M
2011
2012
2013
2014
2015
$M
Statutory
Statutory
$M
$M
Pro forma
Pro forma
Statutory
Pro forma
$M
2011
2012
2013
2014
2015
Statutory
Statutory
Statutory
Pro forma
Pro forma
Pro forma
2011
2012
2011
2013
2011
2012
2012
2014
2013
2013
2015
2014
2014
2015
2015
2012
2013
2014
2015
$M
$M
$M
2011
2011
$20M
$20M
2012
2012
2013
2013
2014
2014
2015
2015
2011
2012
2011
2011
2013
2012
2012
2014
2013
2013
2015
2014
2014
2015
2015
Statutory
Pro forma
2011
2012
2013
2014
2015
2011
2012
2013
2014
2015
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
$20M
$18M
$16M
$14M
$12M
$10M
$8M
$6M
$4M
$2M
$M
$140M
$120M
$100M
$80M
$60M
$40M
$20M
$M
2013
2013
2014
2014
2015
2015
2013
2012
2012
2014
2013
2013
2015
2014
2014
2015
2015
(1) Excludes IPO transaction costs expensed
and impairment of non-current assets
and impairment of non-current assets
2011
2012
2013
2014
2015
9
Operating and Financial Review
The Market
The market for dental services in Australia is approximately
$8.7 billion and this market has grown steadily over the long
term.
Drivers of patient demand
include general economic
conditions and sentiment, income levels and job security,
private health insurance participation rates and dental health
and treatment awareness.
Demand for dental services is discretionary to the extent that
some treatments and services may be delayed or foregone
by the patient. This is more so for cosmetic and aesthetic
treatments and less so for treatments required as a functional
necessity. Some treatments, such as dental implants, deliver
both aesthetic and functional benefits to patients and this
particular treatment is generating higher levels of interest
and activity.
Government funding is fairly limited compared to other
sectors of healthcare. The Commonwealth funds the Child
Dental Benefit Scheme and some partnership arrangements
with the States and Territories, but this is a small proportion
of the total funding of the market.
An increase in the number of local dentistry graduates over
the last few years will be a sustained feature of the market.
The expected impact is increased local competition in some
areas but also a less constrained labour market and better
access to dentists.
Business Strategy
Pacific Smiles Group strives to continue to create and build
shareholder value through the ongoing rollout of quality
branded and fully serviced dental centres that exceed the
expectations of the dentists who practice there and the
patients who attend.
Our business growth will be underpinned by the following
strategic activities:
We will roll-out eight to ten new dental centres in FY
2016 and will continue to roll-out in the years ahead.
Via our roll-out we will create an expanding network
of accessible, modern, purpose-built dental centres
that offer a comfortable and enjoyable environment for
patients, dentists and employees.
We will focus on patient satisfaction levels and
continually enhance our service levels to positively
influence loyalty and retention.
We will work closely with each of the dentists who
practice from our dental centres to help to enhance their
professional satisfaction and practice development.
We will invest in and use information technology solutions
that enhance service delivery, communications, internal
efficiencies and management information.
We will launch new and innovative brand marketing
initiatives to build greater awareness in the communities
we serve and to attract new patients.
We will continue to collaborate with private health
insurers and other third parties to encourage their
members or customers to choose the dentists at our
centres as their preferred providers.
We will enhance our high performance culture
throughout all areas of the organisation through an
emphasis on employee training and development,
accountability and reward and recognition.
We will
governance and workplace safety for all.
foster a culture of exceptional clinical
Risk Management
Pacific Smiles is subject to various risk factors, with some of
these specific to its business activities and others of a more
general nature. Pacific Smiles has not identified any specific,
material exposure to its economic, social or environmental
sustainability over the long term.
Pacific Smiles has established policies and structures for
oversight and management of material business risks.
Further information regarding how Pacific Smiles recognises
and manages risks is detailed in our Corporate Governance
Statement and related governance policies on our website.
8
9
Operating and Financial Review
Outlook
In FY 2016, Pacific Smiles will continue its dual focus on
geographic expansion and organic growth. A total of eight
to ten new dental centres are anticipated to be rolled out in
existing and new geographic clusters during the coming year,
building upon our successful record in the establishment
of new centres. The pipeline looks healthy for future years
beyond FY 2016.
Patient fees and revenue growth are expected to accrue
from a number of new marketing initiatives to attract new
patients and service and quality enhancements to drive
loyalty amongst the large patient base across the network of
dental centres. The large centre at Parramatta, acquired from
Medibank Private in June 2014, will be relocated as planned,
to an excellent new site in the Parramatta commercial district.
Improved profitability will be underpinned by an ongoing
drive by management to realise the benefits from increasing
scale, streamlining operations and enhancing the patient
experience across our centres.
We will continue to benefit from our strong balance sheet,
with an expectation that future growth can be funded
while maintaining a net cash position and a dividend pay-
out ratio in the range of 70 to 100% of profit, as previously
communicated.
Risk Management (continued)
The following risk areas and mitigating factors have been
identified by Pacific Smiles:
General economic conditions – downturns in general
economic conditions could adversely impact demand for
dental services, given the discretionary nature of some of
those services. Dentists at Pacific Smiles dental centres
provide a range of treatments to patients in a number of
different geographic zones throughout the eastern states of
Australia.
Reduction in private health insurance coverage – a reduction
in private health insurance coverage could impact upon the
attendance frequency of patients. Patients at Pacific Smiles
dental centres are a mix of privately insured and non-insured
individuals and there are facilities available to assist patients
to pay for the treatments they require.
Competition induced fee pressure – an increase in the
number of practicing dentists could increase competition
for patients and the degree to which dentists compete on
the basis of fee levels. Pacific Smiles centres are usually
differentiated from other local providers and compete on
the basis of convenience, value, access and overall patient
experience.
Reputational damage – Actions by employees or dentists
could give rise to reputational damage of Pacific Smiles and
its brands. There is a close focus on internal procedures and
clinical governance by management and the board.
Termination of Service and Facility Agreements by dentists
- Under the Service and Facility Agreement between Pacific
Smiles and dentists, the dentists may terminate without cause,
on a few months’ notice. Pacific Smiles views the dentists as
a key customer group and focuses resources accordingly.
10
11
Our Dental Network
Pacific Smiles Group owns and operates
Pacific Smiles Dental Centres and nib
Dental Care Centres located throughout
Australian Capital Territory, New South
Wales, Victoria and Queensland.
QLD
Bribie Island / Brisbane CBD
Deception Bay / North Lakes
Hunter + North Coast
Belmont / Charlestown / Forster / Greenhills
nib Glendale / Jesmond / Kotara / Morisset
nib Newcastle / Rutherford / Salamander Bay
Singleton / Toronto
Central Coast Bateau Bay / Erina
Lake Haven / Tuggerah
Greater Sydney
Blacktown / nib Chatswood / Gladesville
Haymarket / Narellan / nib North Parramatta
Parramatta / Penrith / nib Sydney
Southern NSW
Nowra / Wagga Wagga
Warilla / nib Wollongong
Central +
Western VIC
Bendigo / Drysdale
Melbourne CBD
nib Melbourne / Melton
Torquay / Waurn Ponds
ACT
Belconnen / Manuka
Tuggeranong / Woden
Gippsland
Bairnsdale / Sale
Traralgon / Warragul
10
11
Corporate Governance
Statement
As at 30 June 2015
Pacific Smiles Group Limited and the Board of Directors are committed to achieving and demonstrating the highest standards
of corporate governance. Pacific Smiles Group Limited has reviewed its corporate governance practices against the Corporate
Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council.
The 2015 corporate governance statement is dated as at 30 June 2015 and reflects the corporate governance practices in place
with effect from listing on the ASX on 21st November 2014 through until the end of the 2015 financial year. The 2015 corporate
governance statement was approved by the Board on 20 August 2015. A description of the Group’s current corporate governance
practices is set out in the Group’s corporate governance statement which can be viewed at http://www.pacificsmilesgroup.com.
au/Investors/CorporateGovernance.
12
12
12
13
13
Your directors present their report on the consolidated entity (referred to hereafter as “the Group”) consisting of Pacific Smiles
Group Limited (“the Company”) and the entities it controlled at the end of, or during the year ended 30 June 2015.
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:
Mr Robert Cameron AO
Mr John Gibbs
Dr Alex Abrahams
Mr Ben Gisz
Mr Simon Rutherford
Mr Grant Bourke was appointed a director on 9 October 2014 and continues in office at the date of this report.
Mr Lance Wheeldon was a director from the beginning of the financial year until his retirement on 28 August 2014.
Principal Activities
Pacific Smiles Group principally operates dental centres at which independent dentists practice and provide clinical treatments
and services to patients. Revenues and profits are primarily derived from fees charged to dentists for the provision of these fully
serviced dental facilities.
Review of Operations
Information on the operations and financial position of the Group and its business strategies and prospects is set out in the
Operating and Financial Review accompanying this report.
Dividends
Dividends paid to members during the financial year were as follows:
2014 special dividend of 7.33 cents* per share
Final dividend for the year ended 30 June 2014 of 2.50 cents*
per share (2014 – 1.67 cents*)
Pre IPO special dividend of 1.60 cents per share (2014 – nil)
Interim dividend for the year ended 30 June 2015 of 1.67 cents
(2014 – 1.50 cents*) per share
2015
$’000
-
3,410
2,182
2,538
8,130
2014
$’000
10,002
2,273
-
2,046
14,321
* A subdivision of capital on 9 October 2014 resulted in the conversion of each one ordinary share into three ordinary shares.
Dividends per share paid during the year and prior comparative period have been restated and presented on a post share-split
basis.
Subsequent to the end of the financial year, the directors declared a final dividend of 3.33 cents per share in relation to the
financial year ended 30 June 2015. The dividend, which totals $5.061 million, will be paid on 1 October 2015.
12
12
13
13
Directors’ ReportFor the year ended 30 June 2015
Information on Directors
Robert Cameron AO
BE Min (Hons) MBA Grad. Dip. Geoscience, FAICD, FAIM, FAusIMM
Non-executive Chairman, appointed in 2003
Member of the Nomination and Remuneration Committee
Bob 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 Limited, Chairman of Hunter Valley Training Company, a Trustee of the University
of NSW Foundation and the Museum of Applied Arts and Sciences. In addition to his extensive
business career, he has served on many community, educational, industry and government bodies.
John Gibbs
B.Bus, M.Bus. (Int. Mkg.), AFAIM, GAICD
Managing Director and Chief Executive Officer, appointed in 2008
John commenced as General Manager in 2004. His background experience includes the
development and management of private health facilities, and the marketing and business
development of medical and surgical devices. He established new private hospitals for Mayne
Health and local joint-venture partners in the Asia-Pacific region, following his participation
in private hospital expansion and upgrade projects for Mayne Health in Australia. John has
undergraduate and postgraduate business and marketing degrees.
Dr Alex Abrahams
BDS (Syd Uni), AIMM
Founder and Executive Director, appointed in 2002
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.
Ben Gisz
B.Comm., CA, FFin, CFA
Non-executive Director, appointed in 2012
Chairman of the Nomination and Remuneration Committee
Member of the Audit and Risk Management Committee
Ben is a partner at TDM Asset Management, a Sydney based private investment firm. Ben has
extensive financial markets experience, including roles in investment banking and private equity/
principal investments with Investec Group in Sydney and London. Prior to this, Ben was an
equities analyst with Credit Suisse. 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.
14
15
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015 Information on Directors (continued)
Simon Rutherford
B. Comm., CA, FAICD
Non-executive Director, appointed in 2003
Chairman of the Audit and Risk Management Committee
Simon is a chartered accountant and partner with PKF working in business advisory services. He
is a director and responsible manager with PFK Corporate Finance Pty Limited and specialises
in strategy, governance, structuring, business sales, mergers and acquisitions. In this role Simon
has assisted various companies with capital raising, listing requirements and transactions. Simon
is a Director of the Trustee of Canyon Property Trust and is involved with other syndicated
investments. He has also served on a number of boards including National Brokers Group and
Vow Financial Group.
Grant Bourke
BSc (Hons), MBA, MAICD
Non-executive Director, appointed in 2014
Member of the Audit and Risk Management Committee
Member of the Nomination and Remuneration Committee
Grant is an entrepreneur and investor, with a background in retailing and the food service industry.
He is a Non-executive Director of Domino’s Pizza Enterprises Ltd and Domino’s Pizza Japan.
Grant was deeply involved in the listing of Domino’s on the ASX in 2005. Grant’s involvement
with Domino’s started as a successful franchisee. He sold his stores to Domino’s in exchange for
a substantial shareholding, and then moved into senior executive positions within the Domino’s
organisation. Prior to joining Domino’s, Grant worked in various technical, sales, and marketing
roles in Australia, New Zealand and Japan.
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 Group, Jane held senior accounting roles at nib Health Funds and Credit Suisse, following a chartered accounting
career as a manager at PricewaterhouseCoopers. Jane has also held external board positions within the finance and health
sectors.
14
15
Directors’ ReportFor the year ended 30 June 2015 Meetings of Directors
The number of meetings of the Company’s board of directors held during the year ended 30 June 2015, and the attendances
by each director were:
Full Meetings of Directors
Meetings of Committees
Held
Attended
Held
Attended
Held
Attended
Audit and Risk Management Nomination and Remuneration
Robert Cameron AO
John Gibbs
Alex Abrahams
Ben Gisz
Simon Rutherford
Grant Bourke
Lance Wheeldon
17
17
17
17
17
11
3
- Not a member of the relevant committee
16
17
17
17
17
11
3
-
-
-
4
4
2
2
-
-
-
4
4
2
2
3
-
-
3
1
2
-
2
-
-
3
1
2
-
Matters Subsequent to the End of the Financial Year
Other than the declaration of a final dividend subsequent to the end of the financial year, no other matter or circumstance has
arisen since 30 June 2015 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.
Likely Developments and Expected Results of Operations
The Group will continue to pursue opportunities to enhance the growth and prosperity of its business. Refer to the Operating and
Financial Review accompanying this report for some further detail. 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.
Environmental Regulation
The Group’s operations are not regulated by any significant environmental regulation.
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.
16
17
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015 Remuneration Report (Audited)
The Directors 2015 Remuneration Report sets out remuneration information for Pacific Smiles Group Limited’s non-executive
directors, executive directors and other key management personnel for the year ended 30 June 2015.
The remuneration report is set out under the following headings:
(a) Key management personnel disclosed in this report
(b) Remuneration governance
(c) Executive remuneration policy and framework
(d) Relationship between remuneration and Pacific Smiles Group’s performance
(e) Non-executive director remuneration policy
(f) Details of remuneration
(g) Employment contracts
(h) Details of share based compensation
(i) Equity instruments held by key management personnel
(j) Other transactions with key management personnel.
The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act
2001.
(a) Key management personnel disclosed in this report
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 directors and executives have been identified as having the greatest authority for the strategic direction and management
of the Group.
Non-executive Directors
Robert Cameron AO
Non-executive Chairman
Ben Gisz
Simon Rutherford
Grant Bourke
Lance Wheeldon
Executive Directors
Non-executive Director
Non-executive Director
Non-executive Director (appointed 9 October 2014)
Non-executive Director (retired 28 August 2014)
John Gibbs
Managing Director and Chief Executive Officer
Dr Alex Abrahams
Executive Director
Other Executives
Jane Coleman
Paul Robertson
Alison Hughes
Emma McKenny
Chief Financial Officer and Company Secretary
Chief Operating Officer
Head of Practitioner Services
Executive Manager – People and Culture (appointed 1 June 2015)
Where relevant, executive directors and other executives may hereafter be referred to collectively as executives within this
remuneration report.
16
17
Directors’ ReportFor the year ended 30 June 2015
(b) Remuneration governance
The Nomination and Remuneration Committee is a committee of the Board. It is primarily responsible for making recommendations
to the Board on:
•
the over-arching executive remuneration framework;
• operation of the incentive plans which apply to the senior management team, including key performance indicators
and performance hurdles;
•
•
remuneration packages for the chief executive officer, executive director and senior management; and
remuneration arrangements for non-executive directors.
The committee’s objective is to ensure that remuneration policies and structures are fair and competitive and aligned with the
long-term interests of the Group.
The Nomination and Remuneration Committee Charter, included on the Company’s website at http://www.pacificsmilesgroup.
com.au provides further information on the role of this committee.
(c) Executive remuneration policy and framework
In determining executive remuneration, the Board aims to ensure that remuneration practices are:
• competitive and reasonable, enabling the Group to attract and retain key talent;
• aligned to the Group’s strategic and business objectives and the creation of shareholder value;
•
transparent; and
• acceptable to shareholders.
The executive remuneration framework has three components:
• base salary and benefits, including superannuation;
• short-term performance incentives ('STI') plan; and
• a long-term equity incentive (‘LTI’) plan.
Base salary and benefits
Base salaries are reviewed annually or upon any substantial changes to positions. There are no guaranteed pay increases
included in any key management personnel contracts. Base salary includes any elected salary sacrifice arrangements as
individually nominated.
Base salary is inclusive of required superannuation contributions.
Short-term performance incentives
Executives have the opportunity to earn an annual short-term incentive (STI) linked to the achievement of performance hurdles.
The actual level of STI paid to each executive is determined at the end of the financial year based on the executives’ achievement
of specific KPIs and an annual performance review. Targets are reviewed annually.
The executive STI plan performance criteria are summarised below:
Achieve Group net profit before tax targets
Individual performance metrics (financial and non-financial)
Maximum STI for full achievement of targets
Exceptional performance bonus for over-achievement of net profit before tax target
Total Maximum STI
% of Base Salary
Up to 12.5%
Up to 7.5%
Up to 20.0%
Up to 15.0%
Up to 35.0%
18
19
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015 (c) Executive remuneration policy and framework (continued)
Ongoing participation by executives in the STI plan is at the discretion of the Board. With reference to recommendations from
the Nomination and Remuneration Committee, the Board will approve all executive STI payments, and may use its discretion to
adjust STI remuneration up or down, to prevent any inappropriate reward outcomes.
The STI amounts are paid in cash, and are those earned during the financial year and provided for in the annual financial
statements. STI cash bonuses are generally payable in September following the end of the financial year, and once the financial
results of the year have been subject to independent external audit.
Long-term equity incentives
During the year, the Company established a LTI plan to assist in the motivation, retention and reward of executives. The LTI
plan is designed to align the interests of senior management more closely with the interests of shareholders by providing an
opportunity for senior management to receive an equity interest in the Company through the granting of performance rights.
Vesting of the performance rights granted during the year will be subject to:
•
•
satisfaction of earnings per share (EPS) performance hurdles (measured using the 2014 year as the base year) for the
performance period. The number of performance rights vesting will be determined on a sliding scale from nil vesting
for an EPS compound annual growth rate (CAGR) of 15.0% per annum or less and 100% vesting for an EPS CAGR of
25.0% per annum; and
the participant remaining employed by Pacific Smiles (or its subsidiaries) on the vesting date, subject to certain “good
leaver” exemptions.
Performance rights that do not vest on the relevant vesting date will lapse. Performance rights will also lapse if total shareholder
return (TSR) does not reach a minimum of 10.0% per annum over the performance period.
In the event of serious misconduct or a material misstatement in the Group’s financial statements, the Board may determine
that certain performance-based remuneration (including STIs and/or LTIs) should not have been paid and may claw back
performance-based remuneration paid in the preceding three financial years.
18
19
Directors’ ReportFor the year ended 30 June 2015 (d) Relationship between remuneration and Pacific Smiles Group's performance
The following table shows key performance indicators for the Group over the last five years.
Revenue
EBITDA (statutory)
Net profit after tax (statutory)
Dividends per share – ordinary (cps)
Dividends per share – special (cps)
Earnings per share (cents)
2015
$’000
74,898
16,409
8,360
5.0
1.6
5.7
2014
$’000
59,081
15,069
7,752
4.0
7.3
5.7
2013
$’000
60,074
12,921
6,137
2.5
-
n/a
2012
$’000
55,641
10,201
4,577
1.1
-
n/a
2011
$’000
47,686
6,868
1,902
0.6
-
n/a
(e) Non-executive director remuneration policy
Non-executive directors receive fees reflective of board roles and market levels. These fees are inclusive of their relevant
responsibilities as part of the main Board and on the various Board committees. Fees are inclusive of any applicable
superannuation.
These fees exclude any additional fees for special services which may be determined from time to time. No additional retirement
benefits are payable. Non-executive directors do not receive performance-based compensation.
The non-executive director fees are reviewed annually to ensure that the fees reflect market rates. There are no guaranteed
annual increases in any directors’ fees.
Non-executive directors are entitled to be reimbursed for their reasonable expenses incurred in connection with the affairs of
the Company.
The constitution of the Company provides that non-executive directors are entitled to receive compensation for their services
as determined by approval at a general meeting. The current directors’ fees pool is an aggregate sum of $500,000. Any change
to this aggregate annual amount is required to be approved by shareholders. The Board may approve additional remuneration
for special exertions and additional services performed by a director outside of the aggregated pool. Remuneration paid to
directors in their capacity as employees also falls outside of the aggregated pool.
The following fees (inclusive of applicable superannuation) were applicable on an annualised basis:
Chairman
Other non-executive directors
21 November 2014 to
30 June 2015
1 July 2014 to
20 November 2014
1 July 2013 to
30 June 2014
$
120,000
70,000
$
41,344
33,075
$
39,375
31,500
20
21
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015
(f) Details of remuneration
Details of the remuneration of the directors and other key management personnel of the Group are set out in the following tables.
In line with Regulation 2M.3.03 of the Corporations Regulations 2001, the Company has elected not to disclose comparative
amounts, as it was not listed on the ASX during the previous financial year.
2015
Non-executive Directors
Robert Cameron
Simon Rutherford
Ben Gisz
Grant Bourke
(appointed 9 October 2014)
Lance Wheeldon
(retired 28 August 2014)
Executive Directors
John Gibbs
Alex Abrahams
Other Key Management
Personnel
Jane Coleman
Paul Robertson
Alison Hughes
Emma McKenny (from 1 June 2015)
Short-term employee benefits
Long term
benefits
Share
based
payments
Salary &
fees
Bonus
Super-
annuation
Long
service
leave
Rights
Total
$
81,554
55,588
55,588
46,648
9,963
$
-
-
-
-
-
$
7,748
-
-
-
946
374,461
165,806
54,494
24,651
18,828
15,752
262,221
212,219
185,930
14,561
40,474
31,795
26,550
-
23,532
18,137
17,326
1,277
$
-
-
-
-
-
6,667
3,000
5,000
3,743
3,327
242
$
-
-
-
-
-
$
89,302
55,588
55,588
46,648
10,909
21,079
10,540
475,529
219,749
15,810
12,296
7,026
-
347,037
278,190
240,159
16,080
There were no termination benefits paid or payable during the current financial year.
STI awarded
For each STI bonus included in the 2015 table above, the percentage of the available bonus that was earned in the financial
year and the percentage that was forfeited because the person did not meet the target performance criteria are set out below.
Name
John Gibbs
Alex Abrahams
Jane Coleman
Paul Robertson
Alison Hughes
Emma McKenny1
% of Maximum STI Awarded
Forfeited
40%
40%
42%
40%
38%
-
60%
60%
58%
60%
62%
-
1 Emma McKenny commenced as key management personnel with effect from 1 June 2015. Ms McKenny was not eligible for an STI in her
capacity as key management personnel during 2015.
20
21
Directors’ ReportFor the year ended 30 June 2015
(g) Employment contracts
Remuneration and other terms of employment for the executives are formalised in employment contracts. The employment
contracts specify the remuneration arrangements, benefits, notice periods and other terms and conditions. Participation in the
STI and LTI arrangements are subject to the Board’s discretion.
New employment contracts were implemented with each executive with effect from the Group’s listing on the ASX on 21
November 2014, with the exception of Emma McKenny, who was formally appointed to an executive position with effect from 1
June 2015. The current executive contracts do not have fixed terms. Contracts may be terminated by the executive with notice,
or by the Company with notice or by payment in lieu of notice, or with immediate effect in circumstances involving serious or
wilful misconduct.
Executive
John Gibbs
Alex Abrahams
Jane Coleman
Paul Robertson
Alison Hughes
Emma McKenny
Annual Base
Salary including
Superannuation1
Termination Notice
by Executive
Termination Notice
or Payment in Lieu of
Notice by Company
$400,000
$180,000
$300,000
$224,583
$199,623
$174,000
9 months
3 months
6 months
3 months
3 months
3 months
12 months
6 months
9 months
3 months
6 months
3 months
1Base salaries quoted are those in effect as at 30 June 2015.
(h) Details of share based compensation
Performance Rights
Under the LTI plan, performance rights of 2,137,500 were granted to the executive directors and certain executives at the time
of the Company’s IPO and listing on the ASX, being 21 November 2014. Those performance rights will vest after four years (the
performance period), conditional on the achievement of relevant performance and service conditions measured from the listing
date of 21 November 2014 to 30 June 2018.
The fair value of each performance right at grant date was $0.51.
No other share based compensation arrangements were in effect during the financial year.
22
23
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015
(i) Equity instruments held by key management personnel
The tables below show the number of shares and performance rights in the Company that were held during the financial year
by key management personnel, including their close family members and entities related to them. No amounts remain unpaid in
respect of ordinary shares at the end of the financial year.
There were no shares granted during the reporting period as compensation, or on exercise of an option or right.
Ordinary Shares
2015
Balance at start of year1
Net change
Balance at end of year
Robert Cameron AO
Ben Gisz
Simon Rutherford
Grant Bourke
(appointed 9 October 2014)
Lance Wheeldon
(retired 28 August 2014)
John Gibbs
Alex Abrahams
Jane Coleman
Paul Robertson
Alison Hughes
3,540,000
25,671,291
1,811,325
n/a
2,682,540
8,113,860
45,009,501
1,650,000
675,000
17,622,435
(156,742)
(1,263,309)
(70,308)
1,538,462
n/a
(1,613,860)
(5,366,140)
(250,000)
(337,500)
(1,762,245)
3,383,258
24,407,982
1,741,017
1,538,462
n/a
6,500,000
39,643,361
1,400,000
337,500
15,860,190
1A subdivision of capital on 9 October 2014 resulted in the conversion of each one ordinary share into three ordinary shares. The balance at
the start of the year has been restated and presented on a post share-split basis to assist with comparability.
The shareholdings disclosed in the table above exclude shares in which the key management personnel listed have only a
nominal interest
Performance Rights
2015
John Gibbs
Alex Abrahams
Jane Coleman
Paul Robertson
Alison Hughes
Value of rights granted
during the year1
Number of rights granted
as compensation
Number of rights held at
end of year (all unvested)
$137,700
$68,850
$103,275
$80,325
$45,900
675,000
337,500
506,250
393,750
225,000
675,000
337,500
506,250
393,750
225,000
1 The value of rights granted in the year is the value of the rights calculated at grant date in accordance with AASB 2 Share-based Payment. This
amount is allocated to remuneration over the vesting period (being four years).
This concludes the remuneration report, which has been audited.
22
23
Directors’ ReportFor the year ended 30 June 2015
Non-audit Services
Details of the amounts paid or payable to the auditor for non-audit services providing during the financial year by the auditor are
outlined in Note 23 to the financial report.
Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 25.
Rounding of Amounts
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the ‘rounding off’ of amounts in the directors’ report and financial report. Amounts in the directors’ report and
financial report have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar.
This report is made in accordance with a resolution of the Board of Directors.
Robert Cameron AO
Chairman
Greenhills
20 August 2015
24
24
25
25
Pacific Smiles Group | ANNUAL REPORT 2015Directors’ ReportFor the year ended 30 June 2015
Auditor’s Independence
Declaration
ABCD
ABCD
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
Act 2001
To: the directors of Pacific Smiles Group Limited
Lead Auditor’s Independence Declaration under Section 307C of the Corporations
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2015 there have been:
Act 2001
(i)
To: the directors of Pacific Smiles Group Limited
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
(ii)
I declare that, to the best of my knowledge and belief, in relation to the audit for the financial
year ended 30 June 2015 there have been:
no contraventions of any applicable code of professional conduct in relation to the
audit.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the
audit.
(i)
(ii)
KPMG
KPMG
Chris Allenby
Partner
Sydney
20 August 2015
Chris Allenby
Partner
Sydney
20 August 2015
24
24
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
25
25
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2015
Revenue
Direct expenses
Gross profit
Other income
Expenses
Consumable supplies expenses
Employee expenses
Occupancy expenses
Marketing expenses
Administration and other expenses
IPO transaction costs expensed
Depreciation and amortisation expense
Net finance costs
Profit before income tax
Income tax expense
Profit for the year
Other comprehensive income
NOTES
2
3
4
4
5
2015
$’000
74,898
(3,910)
70,988
2014
$’000
59,081
(3,740)
55,341
1,569
1,516
(6,346)
(31,608)
(7,947)
(1,185)
(7,090)
(1,972)
(4,249)
(110)
12,050
(5,328)
(23,774)
(5,967)
(829)
(5,890)
-
(3,770)
(51)
11,248
(3,690)
(3,496)
8,360
7,752
-
-
Total comprehensive income for the year
8,360
7,752
Earnings per share
Basic earnings per share
Diluted earnings per share
Cents
Cents
21
21
5.7
5.7
5.7
5.7
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction
with the accompanying notes.
26
27
Pacific Smiles Group | ANNUAL REPORT 2015
Consolidated
Balance Sheet
As at 30 June 2015
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
Deferred tax liabilities
Provisions
Total Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Retained profits
Total Equity
NOTES
7
8
9
10
11
12
13
14
15
16
17
15
18
17
19
20
2015
$’000
15,560
1,122
2,212
125
19,019
24,606
11,541
4,033
40,180
59,199
9,707
244
943
2,859
13,753
150
275
4,012
4,437
18,190
41,009
35,053
67
5,889
41,009
2014
$’000
3,767
3,610
1,990
118
9,485
22,010
11,610
3,178
36,798
46,283
9,452
228
1,604
2,761
14,045
9,393
438
3,564
13,395
27,440
18,843
13,184
-
5,659
18,843
26
27
The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes.
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2015
NOTES
Contributed
equity
Reserves
Retained
profits
Total equity
$’000
$’000
$’000
$’000
Consolidated Balance at 30 June 2013
Total comprehensive income for the year
Transactions with owners of the Company,
recognised directly in equity:
Contributions of equity, net of transaction
costs
Dividends provided for or paid
Consolidated Balance at 30 June 2014
Total comprehensive income for the year
Transactions with owners of the Company,
recognised directly in equity:
Contributions of equity, net of transaction
costs
Dividends provided for or paid
Share based payments charge –
performance rights
Consolidated Balance at 30 June 2015
19
6(a)
19
6(a)
20
12,610
-
574
-
574
13,184
-
21,869
-
-
21,869
35,053
-
-
-
-
-
-
-
-
-
67
67
67
12,228
24,838
7,752
7,752
-
(14,321)
(14,321)
574
(14,321)
(13,747)
5,659
18,843
8,360
8,360
-
(8,130)
21,869
(8,130)
-
67
(8,130)
13,806
5,889
41,009
The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.
28
29
Pacific Smiles Group | ANNUAL REPORT 2015
Consolidated Statement
of Cash Flows
For the year ended 30 June 2015
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
Proceeds from disposal of a business
Receipts/(payments) for purchase of a business
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Loans advanced
Loan repayments received
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares, net of transaction costs
Proceeds from borrowings
Repayment of borrowings
Dividends paid
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
Non-cash investing and financing activities
NOTES
31(a)
29(d)
29(b)
19
6(a)
7
7
31(b)
2015
$’000
84,786
(65,097)
19,689
195
(336)
(5,112)
14,436
-
1,500
(6,673)
6
-
242
(4,925)
19,640
-
(9,228)
(8,130)
2,282
11,793
3,767
15,560
2014
$’000
64,901
(47,792)
17,109
194
(206)
(3,743)
13,354
342
(6,037)
(5,329)
8
(242)
-
(11,258)
574
9,000
(3,351)
(14,321)
(8,098)
(6,002)
9,769
3,767
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.
28
29
1. Summary of Significant Accounting Policies
(a) Corporate Information
The financial statements are for the consolidated entity
consisting of Pacific Smiles Group Limited (“the Company”)
and its subsidiaries (“the Group”).
Pacific Smiles Group Limited is a public company limited
by shares, incorporated and domiciled in Australia. On 21
November 2014 the Company was listed on the ASX. 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 12 to 23, which is not part of this
financial report.
The financial report is presented in Australian Dollars, which
is the Company’s functional currency.
The financial report was authorised for issue by the directors
on 20 August 2015. The Company has the power to amend
and reissue the financial report.
(b) Basis of Preparation
Statement of Compliance
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.
These general purpose financial statements have been
prepared
in accordance with Australian Accounting
Standards (AASBs) adopted by the Australian Accounting
Standards Board (AASB) and the Corporations Act 2001.
Pacific Smiles Group Limited is a for-profit entity for the
purpose of preparing the financial statements.
The financial statements also comply with International
Financial Reporting Standards (IFRS) adopted 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 include asset impairment testing.
New Accounting Standards and Accounting Interpretations
The Group has adopted all of the new and revised standards
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 by the Australian Accounting Standards
Board that are not mandatory for 30 June 2015 reporting
periods and have not been adopted early by the Group. The
Group’s assessment of the impact of these new standards
and interpretations is set out below.
AASB 115 Revenue from Contracts with Customers is effective
from 1 January 2017. The Group is not required to adopt this
new standard until the annual reporting period ending 30
June 2017 and currently has no intention of adopting this
standard earlier. The potential impact of the standard has
been assessed at this stage as minimal.
There are no other such standards that are not yet effective
and that are expected to have a material impact on the Group
in the current or future reporting periods and on foreseeable
future transactions.
(c) Basis 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 2015
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 entities controlled by the Group. The Group
controls an entity when it is exposed to, or has rights to,
variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the
entity. The financial statements of subsidiaries are included in
the consolidated financial statements from the date on which
control commences until the date on which control ceases.
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(h)).
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.
30
31
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 1. Summary of Significant Accounting Policies (continued)
(d) 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.
(e) 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.
Government subsidies are recognised at their fair value
where there is reasonable assurance that the subsidy will
be received and the Group will comply with all attached
conditions.
Interest income is recognised as it accrues in profit and loss.
(f) Income Tax
The income tax expense 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.
(g) 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 and 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, net of incentives received from the lessor,
are charged to profit and loss on a straight-line basis over the
period of the lease.
Lease income from operating leases where the Group is a
lessor is recognised in income on a straight-line basis over
the lease term.
30
31
30 June 2015Notes to the ConsolidatedFinancial Statements 1. Summary of Significant Accounting Policies (continued)
(h) 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 to note 1(n)).
Where contingent consideration is classified as a financial
liability and amounts are subsequently re-measured to fair
value, changes in fair value are recognised in profit and loss.
(i) Impairment of Assets
Goodwill and intangible assets that have an indefinite useful
life are not subject to amortisation and are tested at least
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 judgment has been used in testing assets for
impairment and in determining the amounts recognised
as impairment losses at reporting date. Further details of
any material impairment losses recognised in the financial
statements are provided in the notes dealing with the relevant
asset category.
(j) 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.
(k) 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
and 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 and loss.
(l) Inventories
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. Net realisable value is the estimated selling
price less estimated costs associated with the sale.
(m) 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 and 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 (refer to note 1(i)).
(n) Intangible Assets
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
32
33
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements
1. Summary of Significant Accounting Policies (continued)
(n) Intangible Assets (continued)
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 (CGU)
for the purpose of impairment testing.
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 fifteen years.
(o) Payables
These amounts represent liabilities for goods and services
provided to the Group prior to the end of the financial year
which are unpaid.
(p) Borrowings
Borrowings are measured at amortised cost. Borrowing
costs are expensed as incurred.
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.
(q) Employee Benefits
The employee benefits provisions cover the Group’s
liability for employees’ annual leave and long service leave
entitlements.
Short-term Obligations
Short-term employee benefit obligations are measured on
an undiscounted basis and are expensed as the related
service is provided. The liabilities are measured at the
amounts expected to be paid when the liabilities are settled.
The liability for annual leave is recognised in the provision
for employee benefits. All other short-term employee benefit
obligations are presented as payables.
Long-term Obligations
The Group's net obligation in respect of long-term employee
benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior
periods. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service. The benefit is discounted to determine its
present value. Re-measurements are recognised in profit or
loss in the period in which they arise.
The obligations are presented as a current liability in the
balance sheet if the Group does not have an unconditional
right to defer settlement for at least twelve months after the
reporting date, regardless of when the actual settlement is
expected to occur.
Share Based Payments
Share-based compensation benefits are provided to selected
employees via an LTI plan which was established during
the period, with effect from the Company’s listing on the
Australian Securities Exchange (ASX). Further information on
the LTI plan is set out in note 22.
The fair value of performance rights granted under the LTI
plan is recognised as an employee benefits expense with
a corresponding increase in equity. The total amount to be
expensed is determined by reference to the fair value of
the performance rights granted, which includes any market
performance conditions and the impact of any non-vesting
conditions but excludes the impact of any service and non-
market performance vesting conditions.
Non-market vesting conditions are included in assumptions
about the number of performance rights that are expected
to vest. The total expense is recognised over the vesting
period, which is the period over which all of the specified
vesting conditions are satisfied. At the end of each period,
the Company revises its estimates of the number of
performance rights that are expected to vest based on the
non-market vesting conditions. It recognises the impact of
the revision to original estimates, if any, in profit or loss, with
a corresponding adjustment to equity.
(r) Provisions
A provision is recognised if, as a result of a past event, the
Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific
to the liability.
Make Good Provision
The Group is required to restore most leased premises to
their original condition at the end of the respective lease
terms. A provision has been recognised for the present
value of the estimated expenditure required to remove any
leasehold improvements and repair any associated damage.
These costs have been capitalised as part of the cost of
leasehold improvements and are amortised over the shorter
of the term of the lease or the useful life of the assets.
Onerous Contracts
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group from a contract
are lower than the unavoidable cost of meeting its obligations
under the contract. The provision is measured at the present
value of the lower of the expected cost of terminating the
contract and the expected net cost of continuing with the
contract. Before a provision is established, the Group
recognises any impairment loss on the assets associated
with that contract.
32
33
30 June 2015Notes to the ConsolidatedFinancial Statements 1. Summary of Significant Accounting Policies (continued)
(s) 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.
(t) Earnings Per Share
Basic earnings per share
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the Company,
excluding any costs of servicing equity other than
ordinary shares
• by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account:
•
•
the after income tax effect of interest and other financial
costs associated with dilutive potential ordinary shares,
and
the weighted average number of additional ordinary
shares that would have been outstanding assuming the
conversion of all dilutive potential ordinary shares.
(u) 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.
(v) Rounding of Amounts
The Company is of a kind referred to in Class Order
98/100, issued by the Australian Securities and Investments
Commission, relating to the ‘rounding off’ of amounts in
the directors’ report and financial report. Amounts in the
directors’ report and financial report have been rounded off
to the nearest thousand dollars, or in certain cases, to the
nearest dollar.
(w) Parent Entity Financial Information
The financial information for the parent entity, Pacific Smiles
Group Limited, disclosed in note 32 has been prepared on
the same basis as the consolidated financial statements,
except as set out below.
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.
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.
34
35
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 2. Revenue
Services rendered
Sale of goods
3. Other Income
Rents
Consideration receivable on surrender of lease
Sundry income
4. Expenses
Profit before income tax includes the following specific expenses:
2015
$’000
74,467
431
74,898
1,447
-
122
1,569
2014
$’000
58,722
359
59,081
923
475
118
1,516
Employee benefits – share based payments expense
67
-
Depreciation and amortisation
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
Net finance costs
Interest and finance charges paid/payable
Interest received/receivable
Total net finance costs
2,688
1,492
4,180
69
69
24
11
345
(235)
110
2,323
1,447
3,770
-
-
279
71
235
(184)
51
Defined contribution superannuation plans expense
2,613
1,853
34
35
30 June 2015Notes to the ConsolidatedFinancial Statements 5. Income Tax Expense
Current tax
Deferred tax (note 13, 18)
Profit before income tax expense
Income tax calculated at 30% (2014: 30%)
Tax effect of amounts which are not deductible/(taxable) in calculating taxable
income:
Amortisation of intangibles
Share based payments
Sundry items
Income tax expense
6. Dividends
(a) Dividends paid during the year:
2014 Special dividend of 7.33 cents* per share, fully franked
Final dividend for the year ended 30 June 2014 of 2.50 cents*
(2014 – 1.67 cents*) per share, fully franked
Pre IPO special dividend of 1.60 cents (2014 – nil), per share fully franked
Interim dividend for the year ended 30 June 2015 of 1.67 cents
(2014 – 1.50 cents*) per share, fully franked
(b) Dividends declared but not recognised at the end of the year:
The Directors have recommended the payment of a final dividend of 3.33 cents
(2014 – 2.50 cents*) per share, fully franked.
It is expected to be paid on 1 October 2015 out of retained earnings
at 30 June 2015, but not recognised as a liability at year end
*A subdivision of capital on 9 October 2014 resulted in the conversion of each
one ordinary share into three ordinary shares. Dividends per share paid during
the year and prior comparative period have been restated and presented on a
post share-split basis.
2015
$’000
4,709
(1,019)
3,690
2014
$’000
3,643
(147)
3,496
12,050
11,248
3,615
3,375
-
20
55
3,690
-
-
121
3,496
-
10,002
3,410
2,182
2,538
8,130
2,273
-
2,046
14,321
5,061
3,410
(c) Franking credits available for subsequent financial years based
on tax rate of 30% (2014: 30%)
6,375
5,074
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 consolidated amount includes franking credits that would be available to the parent entity if distributed profits of
subsidiaries were paid as dividends.
36
37
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements
7. Cash and Cash Equivalents
CURRENT
Cash at bank and in hand
8. Receivables
CURRENT
Trade debtors
Provision for doubtful debts
Deferred amount receivable in connection with consideration for business acquisition
Consideration receivable on surrender of lease – related entity
Sundry debtors
9. Inventories
CURRENT
Inventories – at cost
10. Other Assets
CURRENT
Prepayments
Other
11. 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
2015
$’000
2014
$’000
15,560
3,767
138
(80)
58
-
-
1,064
1,122
196
(94)
102
1,500
475
1,533
3,610
2,212
1,990
67
58
125
23,829
(8,414)
15,415
23,694
(14,503)
9,191
21
97
118
20,360
(6,921)
13,439
21,231
(12,660)
8,571
Total property, plant and equipment
24,606
22,010
36
37
30 June 2015Notes to the ConsolidatedFinancial Statements 11. Property, Plant and Equipment (continued)
Movements in Carrying Amounts
2015
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
2014
Carrying amount at the beginning of the year
Additions
Disposals
Depreciation expense
Carrying amount at the end of the year
12. Intangible Assets
NON-CURRENT
Goodwill
Less accumulated amortisation and impairment
Rights and licences
Less accumulated amortisation and impairment
Leasehold
improvements
Plant and
equipment
$’000
13,439
3,468
-
(1,492)
15,415
$’000
8,571
3,339
(31)
(2,688)
9,191
Leasehold
improvements
Plant and
equipment
$’000
11,282
3,827
(223)
(1,447)
13,439
$’000
7,304
3,800
(210)
(2,323)
8,571
2015
$’000
12,517
(1,892)
10,625
985
(69)
916
Total
$’000
22,010
6,807
(31)
(4,180)
24,606
Total
$’000
18,586
7,627
(433)
(3,770)
22,010
2014
$’000
12,517
(1,892)
10,625
1,665
(680)
985
Total intangible assets
11,541
11,610
Movements in Carrying Amounts
2015
Carrying amount at the beginning of the year
Disposals
Carrying amount at the end of the year
Goodwill
Rights and
licences
$’000
10,625
-
10,625
$’000
985
(69)
916
Total
$’000
11,610
(69)
11,541
38
39
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 12. Intangible Assets (continued)
2014
Carrying amount at the beginning of the year
Additions
Disposals
Carrying amount at the end of the year
Goodwill
$’000
7,841
2,884
(100)
10,625
Rights and
licences
$’000
-
985
-
985
Total
$’000
7,841
3,869
(100)
11,610
Impairment testing for cash generating units (CGUs)
The impairment assessments were made on the basis of the assets’ expected value in use and require the use of key assumptions.
The calculations use discounted cash flow projections covering a five year period and are based on financial budgets approved
by management and extrapolations using estimated growth rates. The table below sets out the key assumptions.
Discount rate
Long term growth rate
2015
10.0%
5.0%
For the purposes of impairment testing, goodwill has been allocated to the Group’s CGUs as follows:
Northern Brisbane
Multiple units without significant goodwill
2015
$’000
2,446
8,179
10,625
2014
8.7%
5.0%
2014
$’000
2,446
8,179
10,625
Discounted cash flow forecasts were reviewed for each CGU, and the carrying value of the assets exceeded their recoverable
amount. No impairment losses were recorded in the current year.
13. Deferred Tax Assets
NON-CURRENT
The balance comprises temporary differences attributable to:
Provision for doubtful debts
Depreciation of property, plant and equipment
Accrued expenses
Prepayments
Provisions
Other
Deferred tax assets
Movements:
Balance at the beginning of the year
Credited/(charged) to the income statement
Additions on business acquisition
Reversal of deferred tax assets on disposal of business
Balance at the end of the year
2015
$’000
24
1,316
214
679
1,794
6
4,033
3,178
855
-
-
4,033
2014
$’000
28
1,228
267
-
1,646
9
3,178
2,038
585
585
(30)
3,178
39
38
30 June 2015Notes to the ConsolidatedFinancial Statements
14. Payables
CURRENT
Trade payables and accruals – related entities
Trade payables and accruals – other entities
15. Borrowings
CURRENT
Secured:
Bank loans
Total
NON-CURRENT
Secured:
Bank bills
Bank loans
Total
Security
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.
Further details on financing facilities are included in note 28.
16. Current Tax Liabilities
CURRENT
Income tax payable
2015
$’000
32
9,675
9,707
244
244
-
150
150
2014
$’000
45
9,407
9,452
228
228
9,000
393
9,393
13,193
(2,339)
10,854
13,421
(11,178)
2,243
943
1,604
40
41
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 17. Provisions
CURRENT
Employee benefits
Straight-line operating lease adjustment
Onerous contracts
NON-CURRENT
Employee benefits
Straight-line operating lease adjustment
Onerous contracts
Make good provision
2015
$’000
2,630
189
40
2,859
880
1,577
138
1,417
4,012
Movements:
Balance at the beginning of the year
Additional provisions charged/(written back)
Amounts used
Balance at the end of the year
Employee
Benefits
Straight-
line Lease
Adjustment
Make Good
Provision
Onerous
Contracts
$’000
$’000
$’000
$’000
3,445
2,127
(2,062)
3,510
1,395
546
(175)
1,766
1,282
135
-
1,417
203
39
(64)
178
18. Deferred Tax Liabilities
NON-CURRENT
The balance comprises temporary differences attributable to:
Intangible assets
Receivables
Deferred tax liabilities
Movements:
Balance at the beginning of the year
Charged/(credited) to the income statement
Balance at the end of the year
2015
$’000
275
-
275
438
(163)
275
2014
$’000
2,580
95
86
2,761
865
1,300
117
1,282
3,564
Total
$’000
6,325
2,847
(2,301)
6,871
2014
$’000
295
143
438
-
438
438
40
41
30 June 2015Notes to the ConsolidatedFinancial Statements 19. 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
(b) Movements in Ordinary Share Capital
Details
Balance 30 June 2013
Amounts paid up on partly paid shares balance 30 June 2014
Balance 30 June 2014
Subdivision of capital, converting each ordinary share into three ordinary
shares
Reversal of shares
Conversion to three ordinary shares
Amounts paid up on partly paid shares
Share issue at IPO - $1.30 per share
Less: Transaction costs arising on share issue
Deferred tax credit recognised directly in equity
Balance 30 June 2015
2015
2014
151,993,395
-
43,641,151
1,823,314
151,993,395
45,464,465
2015
$’000
35,053
-
35,053
Number of
Shares
45,464,465
-
45,464,465
(45,464,465)
136,393,395
-
15,600,000
151,993,395
151,993,395
2014
$’000
12,546
638
13,184
$’000
12,610
574
13,184
-
-
2,188
20,280
35,652
(856)
257
35,053
(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 are called on in accordance with their underlying agreements
and as required by the Company. In any case, on winding up of the Company, the balance of partly paid shares, if any, may be
called up. The proceeds on winding up are proportional to the amounts paid on partly paid shares. Partly paid shares carry
equal dividend participation and voting rights as fully paid shares, although any dividends must first be applied to the unpaid
balance on the shares.
(d) Capital Management
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern so that it can
continue to provide returns for shareholders and benefits for other stakeholders, maintain sufficient financial flexibility to
pursue its growth objectives, and maintain an optimal capital structure to reduce the cost of capital.
During 2015, pursuit of the Group’s capital management strategy resulted in an initial public offering of the shares of Pacific
Smiles Group Limited, including new share capital issued by the Company and the admission of the Company to the official
list of the ASX.
42
43
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 20. Reserves
Share based payments reserve
21. Earning Per Share
Profit attributable to the ordinary equity holders of the Company
used in calculating basic and diluted earnings per share
Weighted average number of ordinary shares used as the denominator in
calculating basic and diluted earnings per share
Basic earnings per share
Diluted earnings per share
2015
$’000
67
2014
$’000
-
8,360
7,752
Shares
Shares
145,881,614
136,393,395
Cents
Cents
5.7
5.7
5.7
5.7
Information Concerning the Classification of Shares
(i) Partly Paid Shares
Partly paid shares were fully paid up by the date of the IPO and listing of the Company on the ASX on 21 November 2014. Until
that time, partly paid shares carried equal dividend participation and voting rights as fully paid shares, although dividends
were required to be first applied to the unpaid balance of the shares. Partly paid shares have been included as ordinary share
equivalents in the determination of basic and diluted earnings per share.
(ii) Performance Rights
Performance rights granted to employees under the Company’s long term incentive plan are considered to be potential
ordinary shares and are only included in the determination of diluted earnings per share to the extent to which they are
dilutive. The total 2,137,500 performance rights granted during the year (2014 – nil) are not included in the calculation
of diluted earnings per share because they are contingently issuable ordinary shares and conditions were not
satisfied at 30 June 2015. These performance rights could potentially dilute basic earnings per share in the future.
22. Share Based Payments
(a) Long Term Incentive Plan Overview
During the year, the Company established a LTI plan to assist in the motivation, retention and reward of senior management. The
LTI plan is designed to align the interests of senior management more closely with the interests of shareholders by providing
an opportunity for senior management to receive an equity interest in the Company through the granting of performance rights.
Under the LTI plan, 2,137,500 performance rights were granted to the executive directors and certain executives at the time of
the Company’s IPO and listing on the ASX. Those performance rights will vest after four years (the performance period), condi-
tional on the achievement of relevant performance and service conditions measured from the listing date of 21 November 2014
to 30 June 2018. Vesting of the performance rights will be subject to:
• satisfaction of earnings per share (EPS) performance hurdles (measured using the FY2014 year as the base year) for
the performance period. The number of performance rights (PR) vesting will be determined on a sliding scale from nil
vesting for an EPS CAGR of 15.0% per annum or less and 100% vesting for an EPS CAGR of 25.0% per annum; and
•
the participant remaining employed by Pacific Smiles (or its subsidiaries) on the vesting date, subject to certain “good
leaver” exemptions.
Performance rights that do not vest on the relevant vesting date will lapse. Performance rights will also lapse if total shareholder
return (TSR) does not reach a minimum of 10.0% per annum over the performance period.
42
43
30 June 2015Notes to the ConsolidatedFinancial Statements 22. Share Based Payments (continued)
(b) Performance Rights
Date Granted
21 November 2014
Balance at
1 July 2014
Granted in period
Forfeited or
lapsed in period
-
2,137,500
-
Balance at
30 June 2015
2,137,500
(c) Fair Value of Performance Rights Granted
The assessed fair value at grant date of performance rights granted during the year ended 30 June 2015 was $0.51 per
performance right. The fair value at grant date has been determined via a pricing model which uses a Monte Carlo simulation,
and takes into account the term of the right (4 years), the share price at grant date (IPO offer price of $1.30 per share), exercise
price (nil), expected price volatility of the underlying share (30.00%), the expected dividend yield (4.00%) and the risk free
interest rate (3.64%) for the term of the right.
23. Remuneration of Auditors
Audit and review of financial statements
Non-audit services:
Tax compliance and advisory services
Advisory services – IPO and ASX listing
24. Contingencies
Bank guarantees
The bank guarantees at the end of the financial year relate to security provided
under operating leases for premises
2015
$’000
110
28
349
487
2014
$’000
53
19
-
72
1,946
1,557
44
45
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements
25. Commitments
(a) Capital Commitments
Capital expenditure contracted for at the reporting date but not recognised as
liabilities is as follows:
Property, plant and equipment
Payable within one year
(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
2015
2014
1,735
376
6,907
21,701
17,092
45,700
6,168
19,084
16,854
42,106
Operating leases relate to rented premises and motor vehicles. Leases have various terms, including some options to extend
the terms.
26. Subsidiaries
The parent entity within the Group is Pacific Smiles Group Limited.
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance
with the accounting policy described in note 1(c):
Name of Entity
Country of
incorporation
Class of shares
Dentist Smiles Group Pty Limited
Dental Assistant Training Solutions Pty Limited
Pacific Eyes Pty Limited *
Pacific Medical Care Pty Limited **
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Equity holding
2015
%
100
100
100
100
2014
%
100
100
100
100
* No longer trading
** Subsidiary has not traded since incorporation.
44
45
30 June 2015Notes to the ConsolidatedFinancial Statements 27. Related Party Disclosures
(a) Key Management Personnel Compensation
Short-term employment benefits
Long-term benefits
Share-based payments
2015
$
2014
$
1,746,049
21,979
66,751
1,510,785
15,580
-
1,834,779
1,526,365
Detailed remuneration disclosures are provided in the Remuneration Report within the Directors’ Report.
(b) Related Party Transactions
Other than remuneration for their positions as directors and executives of the Company, key management personnel or entities
related to them entered into a number of transactions with the Company. Information on these transactions is set out below.
Bourke Family Investments Pty Limited, an entity related to Grant Bourke, subscribed for shares in the Company’s IPO during
2015.
Key management personnel or their related parties held shares in the Company during 2015 and 2014, and as such,
participated in dividends. Amounts were paid up in accordance with the terms associated with partly paid shares. All partly
paid shares were fully paid up prior to the Company’s IPO during 2015.
Bislab Pty Limited ATF the Canyon Property Trust, an entity related to Alex Abrahams and Simon Rutherford, provided premises
rental to the Company during 2015 and 2014 on normal commercial terms and conditions.
Exandal Investments, an entity related to Alex Abrahams and Alison Hughes, leased business premises to the Company during
2015 and 2014 on normal commercial terms and conditions.
88 Park Avenue Pty Limited ATF the Key Health Unit Trust, an entity related to Alex Abrahams, leased business premises to the
Company during 2015 and 2014 on normal commercial terms and conditions.
Susan Abrahams, an individual related to Alex Abrahams, leased business premises to the Company during 2015 and 2014
on normal commercial terms and conditions. The lease over these premises was surrendered in July 2014, resulting in a
surrender fee being paid by Susan Abrahams to the Company.
The Company received fees for the provision of services to Alex Abrahams during 2015 and 2014 under normal terms and
conditions of dental service and facility agreements.
The Company paid fees for management and support services to Whitesail Pty Limited ATF The Whitesail Trust during 2014.
The agreement ended as at 30 June 2014. The entity is related to Alex Abrahams. Fees were based on an agreement approved
by the board, which reflected commercial terms and conditions. The majority of the fees were for the personal services of Alex
Abrahams in his capacity as a director and executive of the Group, and the relevant portion of the fees has been included
within the disclosures of key management personnel compensation for 2014. In 2015, Alex Abrahams was engaged as a direct
employee of the Company for these roles.
The Company procured marketing services during 2015 from Direct Impact Media, a business which is part of Domino’s
Pizza Enterprises Limited, an entity related to Grant Bourke. Fees were negotiated at arms-length and were based on normal
commercial terms and conditions.
46
47
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements
27. Related Party Disclosures (continued)
The Company paid consultancy fees for specific professional advice and assistance to TDM Asset Management Pty Ltd. TDM
Asset Management Pty Ltd is an entity related to Ben Gisz. During 2015 the consultancy fees were in connection with the
Company’s IPO, and in 2014 they were in connection with the Company’s acquisition of the Dental and Eye Care Practice
business from Australian Health Management Group Pty Ltd. Fees paid were based on normal commercial terms and conditions.
The aggregate amounts of each of the above types of transactions were:
Subscriptions for new ordinary shares – fully paid
Dividends paid
Revenues from rendering services
Fees receivable in relation to lease surrender
Rental expenses
Marketing expenses
Consultancy fees paid
Employee expenses
Administration and support services expenses
28. Financial Risk Management
2015
$
2,000,001
4,408,196
323,286
-
2014
$
-
8,555,364
291,370
475,500
1,220,942
1,289,979
120,428
210,367
12,212
5,288
-
71,060
-
78,422
Financial Risk Management Objectives
The Group’s activities expose it to a variety of financial risks: market risk (interest rate risk), credit risk and liquidity risk.
The board has overall responsibility for the establishment and oversight of the risk management framework, and is supported
by the Board Audit and Risk Management Committee. 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 Group’s principal financial instruments during the 2015 and 2014 financial years comprised bank bills, bank and other
loans, and cash. The main purpose of these instruments has been 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.
Market Risk
The Group’s exposure to market risk for changes in interest rates at the end of the year related primarily to cash balances.
The new share capital raised via the Company’s initial public offering during the 2015 financial year was used to repay a bank
bill liability of $9,000,000 outstanding at that time, and resulting in only minimal other bank borrowings outstanding at the end
of the financial year.
Cash balances are held in a combination of short term fixed interest deposit accounts and other cheque and on-call accounts
which attract variable interest rates. The weighted average interest rate on cash balances at the end of the year was 2.23%
(2014: 1.88%) for the Group.
The weighted average interest rate on borrowings at the end of the year was 6.8% (2014: 4.87%) for the Group.
46
47
30 June 2015Notes to the ConsolidatedFinancial Statements 28. Financial Risk Management (continued)
Interest Rate Sensitivity Analysis
Effect on profit before tax and equity:
1% increase in interest rates
1% decrease in interest rates
2015
$’000
55
(55)
2014
$’000
41
(41)
Credit Risk
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.
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 15.
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. 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 time frames required.
Maturities of Financial Liabilities
The following tables show the maturity groupings of gross (undiscounted) payment obligations under contracts for financial
liabilities.
Consolidated – 2015
Bank bills
Bank loans
Payables and accruals
Consolidated – 2014
Bank bills
Bank loans
Payables and accruals
Less than 6
months
6 to 12 months
1 to 5 Years
Total
Contractual
Amounts
$’000
-
120
9,707
9,827
-
112
9,452
9,564
$’000
$’000
$’000
-
124
-
124
-
116
-
116
-
150
-
150
9,000
393
-
9,393
-
394
9,707
10,101
9,000
621
9,452
19,073
Fair Value
The fair value of financial assets and liabilities held by the Group approximate the individual carrying values of those assets
and liabilities.
48
49
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements
29. Business Combinations
(a) Summary of Acquisitions
On 13 June 2014, the Group acquired Dental and Eye Care Centres located at Haymarket and Parramatta, and a Dental Centre
at Wagga Wagga, New South Wales. The two Eye Care businesses were sold immediately following the purchase.
Details of the aggregate fair value of the assets and liabilities acquired and goodwill are as follows:
Purchase consideration (refer to (b) below):
Cash paid/payable
Fair value of net identifiable assets acquired (refer to (c) below)
Goodwill (note 12)
(b) Purchase Consideration
Outflow of cash to acquire businesses, net of cash acquired
Total cash consideration
Cash acquired
Post completion adjustments receivable
Payments/(receipts) per statement of cash flows
Deferred consideration receivable
Total outflow
Acquisition-related transaction costs of $382,000 were included in other expenses
in the Statement of Comprehensive Income and in operating cash flows in the
Statement of Cash Flows during 2014.
(c) Assets and Liabilities Acquired
The assets and liabilities arising from the acquisitions were as follows:
Cash
Trade receivables
Inventories
Plant and equipment
Deferred tax asset
Intangible assets
Provisions
Net identifiable assets acquired
2015
$’000
-
-
-
(1,500)
-
-
(1,500)
1,500
-
-
-
-
-
-
-
-
-
2014
$’000
4,540
(1,656)
2,884
6,164
(3)
(124)
6,037
(1,500)
4,537
3
5
443
1,116
585
985
(1,481)
1,656
48
49
30 June 2015Notes to the ConsolidatedFinancial Statements
29. Business Combinations (continued)
(d) Disposal of Eye Care Business
On 13 June 2014, immediately subsequent to the purchase of the Dental and Eye Care businesses at Haymarket and
Parramatta, the Group, completed the sale of the Eye Care businesses. These businesses did not trade under the ownership
of Pacific Smiles Group Limited.
Details of the aggregate fair value of the assets and liabilities disposed were as follows:
Total disposal consideration
Fair value of net assets disposed
Net profit on disposal
Inflow of cash from disposal of business, net of cash disposed
Deferred consideration
Cash received
Post completion adjustments payable
Total inflow
No cash or bank overdrafts were disposed of as part of the business disposal.
Deferred consideration was receivable in equal installments after the end of the
financial year and all amounts due were collected by 30 June 2015.
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
30. Segment Information
2015
$’000
-
-
-
-
-
-
-
-
-
-
-
-
-
2014
$’000
342
(325)
17
250
100
(8)
342
166
130
100
30
(101)
325
The Group’s activities are within the dental sector. The Group’s activities are located throughout Eastern Australia.
The financial results from this segment are consistent with the financial statements for the Group as a whole.
50
51
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements 31. Notes to the Statement of Cash Flows
(a) Reconciliation of Profit after Income Tax to Net Cash Inflow
from Operating Activities
Profit for the year
Depreciation and amortisation
Net loss on disposal of non-current assets
IPO transaction costs classified as investing cash flows
Share based payments expense
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
Increase/(decrease) in deferred tax liabilities
Net cash inflow from operating activities
2015
$’000
8,360
4,249
24
1,972
67
750
(222)
(7)
(599)
256
410
(661)
(163)
14,436
2014
$’000
7,752
3,770
279
-
-
(1,395)
(110)
(23)
(585)
3,131
197
(100)
438
13,354
(b) Non-cash Investing and Financial Activities
Capitalisation of estimated future make-good obligations in relation to leasehold
premises
135
1,182
50
51
30 June 2015Notes to the ConsolidatedFinancial Statements 32. Parent Entity Financial Information
(a) Summary Financial Information
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
Reserves
Retained earnings
Profit or loss for the year
Total comprehensive income
(b) Contingent Liabilities of the Parent Entity
Bank guarantees
2015
$’000
2014
$’000
20,008
60,073
13,774
18,197
35,053
67
6,756
41,876
8,527
8,527
10,349
47,006
14,068
27,462
13,184
-
6,360
19,544
7,856
7,856
1,946
1,557
The parent entity did not have any contingent liabilities or financial guarantees as at 30 June 2015 or 30 June 2014, other than
bank guarantees.
52
53
Pacific Smiles Group | ANNUAL REPORT 201530 June 2015Notes to the ConsolidatedFinancial Statements Directors’ Declaration
For the year ended 30 June 2015
In the directors’ opinion:
(a)
the financial statements and notes set out on pages 26 to 52 are in accordance with the Corporations Act 2001,
including:
(i)
(ii)
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its
performance for the financial year ended on that date;
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements; 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.
Note 1 confirms that the financial statements comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Board of Directors.
Robert Cameron AO
Chairman
Greenhills
20 August 2015
52
53
30 June 2015Notes to the ConsolidatedFinancial Statements
Independent Auditor’s
Report
ABCD
Independent auditor’s report to the members of Pacific Smiles Group Limited
Report on the financial report
ABCD
We have audited the accompanying financial report of Pacific Smiles Group Limited (the
“Company”), which comprises the consolidated balance sheet as at 30 June 2015, and
consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year ended on that date, notes 1 to 32
Independent auditor’s report to the members of Pacific Smiles Group Limited
comprising a summary of significant accounting policies and other explanatory information and
the directors’ declaration of the Group comprising the Company and the entities it controlled at
the year’s end or from time to time during the financial year.
Report on the financial report
Directors’ responsibility for the financial report
We have audited the accompanying financial report of Pacific Smiles Group Limited (the
“Company”), which comprises the consolidated balance sheet as at 30 June 2015, and
consolidated statement of comprehensive income, consolidated statement of changes in equity
and consolidated statement of cash flows for the year ended on that date, notes 1 to 32
The directors of the Company are responsible for the preparation of the financial report that
comprising a summary of significant accounting policies and other explanatory information and
gives a true and fair view in accordance with Australian Accounting Standards and the
the directors’ declaration of the Group comprising the Company and the entities it controlled at
Corporations Act 2001 and for such internal control as the directors determine is necessary to
the year’s end or from time to time during the financial year.
enable the preparation of the financial report that is free from material misstatement whether due
to fraud or error. In note 1(b), the directors also state, in accordance with Australian Accounting
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Group comply with International Financial Reporting Standards.
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
Our responsibility is to express an opinion on the financial report based on our audit. We
to fraud or error. In note 1(b), the directors also state, in accordance with Australian Accounting
conducted our audit in accordance with Australian Auditing Standards. These Auditing
Standard AASB 101 Presentation of Financial Statements, that the financial statements of the
Standards require that we comply with relevant ethical requirements relating to audit
Group comply with International Financial Reporting Standards.
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
report is free from material misstatement.
Auditor’s responsibility
Auditor’s responsibility
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,
Our responsibility is to express an opinion on the financial report based on our audit. We
including the assessment of the risks of material misstatement of the financial report, whether
conducted our audit in accordance with Australian Auditing Standards. These Auditing
due to fraud or error. In making those risk assessments, the auditor considers internal control
Standards require that we comply with relevant ethical requirements relating to audit
relevant to the entity’s preparation of the financial report that gives a true and fair view in order
engagements and plan and perform the audit to obtain reasonable assurance whether the financial
to design audit procedures that are appropriate in the circumstances, but not for the purpose of
report is free from material misstatement.
expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes
An audit involves performing procedures to obtain audit evidence about the amounts and
evaluating the appropriateness of accounting policies used and the reasonableness of accounting
disclosures in the financial report. The procedures selected depend on the auditor’s judgement,
estimates made by the directors, as well as evaluating the overall presentation of the financial
including the assessment of the risks of material misstatement of the financial report, whether
report.
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 performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
We performed the procedures to assess whether in all material respects the financial report
presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting
Standards, a true and fair view which is consistent with our understanding of the Group’s
financial position and of its performance.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme
approved under Professional
Standards Legislation.
54
54
KPMG, an Australian partnership and a member firm
of the KPMG network of independent member firms
affiliated with KPMG International Cooperative
(“KPMG International”), a Swiss entity.
Liability limited by a scheme
approved under Professional
Standards Legislation.
54
55
Pacific Smiles Group | ANNUAL REPORT 2015 Independent Auditor’s
Report
ABCD
Independent auditor’s report to the members of Pacific Smiles Group Limited
(continued)
Independence
In conducting our audit, we have complied with the independence requirements of the
Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the financial report of the Pacific Smiles Group Limited is in accordance with the
Corporations Act 2001, including:
(i)
giving a true and fair view of the Group’s financial position as
at 30 June 2015 and of its performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards and the Corporations Regulations
2001.
(b) the financial report also complies with International Financial Reporting Standards as
disclosed in note 1(b).
Report on the remuneration report
We have audited the Remuneration Report included in pages 17 to 23 of the directors’ report
for the year ended 30 June 2015. The directors of the Company are responsible for the
preparation and presentation of the remuneration report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report,
based on our audit conducted in accordance with auditing standards.
Auditor’s opinion
In our opinion, the remuneration report of Pacific Smiles Group Limited for the year ended 30
June 2015, complies with Section 300A of the Corporations Act 2001.
KPMG
Chris Allenby
Partner
Sydney
20 August 2015
54
55
55
Shareholder Information
As at 31 July 2015
Distribution of Equity Security Holders
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
There were 24 holders of less than a marketable parcel of ordinary shares.
Number of equity
security holders
124
253
146
139
87
749
Twenty Largest Shareholders
Name
Alexander John Abrahams
Alison Jane Hughes
UBS Wealth Management Australia Nominees Pty Ltd
National Nominees Limited
Just Paddling Pty Ltd
BNP Paribas Noms Pty Ltd
RBC Investor Services Australia Nominees Pty Ltd
JP Morgan Nominees Australia Pty Ltd
Robert G Cameron and Paula S Cameron
John Gibbs
Susan Louise Abrahams
Channing Holdings Pty Ltd
Karen Wright
Contemplator Pty Ltd
Joseph Nominees Pty Ltd
Sandini Pty Ltd
Sudemo Pty Ltd
Citicorp Nominees Pty Ltd
William McIllwraith Pty Ltd
Amanda Taylor
Total
Other holders
Total quoted equity securities
Number of ordinary
shares held
Percentage of
issued shares %
29,936,010
15,860,190
13,893,665
9,463,464
6,089,082
4,576,004
4,230,763
3,492,119
3,383,258
3,337,265
3,268,269
3,090,150
2,022,000
1,920,270
1,819,770
1,819,769
1,741,017
1,722,047
1,695,000
1,647,735
115,007,847
36,985,548
151,993,395
19.70
10.43
9.14
6.23
4.01
3.01
2.78
2.30
2.23
2.20
2.15
2.03
1.33
1.26
1.20
1.20
1.15
1.13
1.12
1.08
75.68
24.32
100.00
56
57
Pacific Smiles Group | ANNUAL REPORT 2015
Shareholder Information
As at 31 July 2015
Unquoted Equity Securities
Performance rights issued under the Company’s LTI plan
2,137,500
5
Number on issue
Number of holders
Substantial Shareholders
Name
Alexander John Abrahams and his associates
TDM Asset Management Pty Ltd and its associates
Alison Jane Hughes
Escrowed Equity Securities
Number of ordinary
shares held
Percentage of
issued shares %
39,643,361
24,407,982
15,860,190
26.08
16.06
10.43
Number of ordinary
shares held
Ordinary shares subject to voluntary escrow arrangements until three business days after the date
on which the Company’s financial results for the year ended 30 June 2015 are released to the ASX
96,315,232
Voting Rights
Each ordinary share carries the right to one vote. No voting rights attached to performance rights.
56
57
Corporate Directory
Principal Registered Office
Level 1, 6 Molly Morgan Drive, Greenhills NSW 2323
T 02 4930 2000 / F 02 4930 2099
W www.pacificsmilesgroup.com.au
Directors
Robert Cameron AO
Non-executive Chairman
John Gibbs
Managing Director
& Chief Executive Officer
Dr Alex Abrahams
Executive Director
Company Secretary
Jane Coleman
Grant Bourke
Non-executive Director
Ben Gisz
Non-executive Director
Simon Rutherford
Non-executive Director
Auditor
KPMG
10 Shelley Street, Sydney NSW 2000
Share Registry
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000
Locked Bag A14, Sydney South NSW 1235
T 1300 554 474 / F 02 9287 0303
E registrars@linkmarketservices.com.au
Stock Exchange Listing
Pacific Smiles Group Limited shares are listed on the Australian Security Exchange under the code “PSQ”.
58
Pacific Smiles Group Limited
Level 1, 6 Molly Morgan Drive
PO Box 2246, Greenhills NSW 2323
pacificsmilesgroup.com.au
ABN 42 103 087 449