Pacific Smiles Group Limited Annual Report 2023

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FY2023 Annual Report · Pacific Smiles Group Limited

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Annual Report 2023

Contents

Chairperson & Interim CEO Report

Business Review

20 Centre Locations

Environmental, Social and Governance

22 Consolidated Financial Report 2023

Director’s Report

Remuneration Report

49 Auditor’s Independence Declaration

50 Consolidated Financial Statements

54 Notes to the Consolidated Financial Statements

90 Directors’ Declaration

Independent Auditor’s Report

Shareholder Information

97 Corporate Directory

Our true purpose is to
improve the oral health
of ALL Australians to
world’s best.

1
1

2023 Performance Highlights

Patient Fees

Dental Centres

Underlying NPAT*

$270.5m

19.5%

130

2.4%

$4.5m

* excludes AASB 16 impacts

Same Centre Growth

Underlying EBITDA

Ordinary Dividends

14.9%

$24.1m

113.3%

2.62cps

2023 Operational Snapshot

New Dental Centres

Dentist Retention

Number of Dentists

85%

>900

New Dental Chairs

Net Promoter Score

Employee Retention

75%

Chairperson &
Interim CEO Report
Zita Peach & Paul Robertson

Dear Shareholder

FY 2023 has seen a welcome return to stable
operating conditions and improvement in
financial performance for Pacific Smiles,
underpinned by the return of patients to
their normal dentist visitation patterns
and organisational focus on efficiency and
sustainable growth.

Financial year 2023 has been a year of renewal
for Pacific Smiles following the interference
caused by the COVID-19 pandemic over
the previous three years, and we have
welcomed the return of many patients to
our dental centres. Furthermore, dentists
continue to choose Pacific Smiles in pleasing
numbers, reflecting the attractive and flexible
offering that our organisation affords. These
professionals continue to choose our services
and facilities as we offer them something quite
unique, and we continue to invest in our value
proposition to them.

FY 2023 Year in Review

All key operational metrics for Pacific Smiles
trended positively in FY 2023, culminating in a
strong improvement in financial performance.
Rising patient attendances, along with efforts to
maximise operational efficiency, saw earnings
recover markedly from a COVID-affected
FY 2022. This was reflected in very strong cash
generation, which has put Pacific Smiles back
in a net cash position.

We now have 130 Dental Centres and 8 HBF Dental
Centres, with 545 Dental Chairs in Pacific Smiles
centres and 37 chairs in HBF Dental centres. In
FY 2023 we opened 4 new Pacific Smiles dental
centres and installed 17 new chairs, with new
chairs driven by both the new centres and from
in-filling chairs in existing centres. The number of
new dental centres we opened was deliberately
moderated this year following the accelerated
rate of expansion of previous years. The ramp-up
and growth of our new centres is a key priority for
the management team.

We are also thrilled with the successful
continuation and expansion of our partnership
with HBF under a managed services agreement
to build and run dental centres for the health
fund in Western Australia. Two full financial
years into its existence, HBF Dental continues to
make pleasing progress and grow a meaningful
presence in the Western Australian dental
market. The HBF Dental Network finished FY
2023 with 8 centres, including two new centres
(Belmont and Floreat).

Returning the broader business to optimal levels
of operating efficiency, and support office size,
as patient and dentist attendance patterns
normalised, was a key focus for management
this year. Stabilisation of rostering drove a
material improvement in labour efficiency, while
we are always mindful of balancing operational
efficiency with appropriate levels of support for
dentists. We are particularly proud to report that
our patient Net Promoter Score remains at a very
high level, which is evidence of the great work
being performed across our centres.

Our improved financial performance generated
strong cashflows, which resulted in a return
to a net cash position of $9.6m at financial
year end and allowed the Board to resume
dividend payments. A final dividend of 2.27 cents
per share was declared, reflecting a payout
ratio for full year 2023 at the top end of the
Board-approved dividend policy range.

In August 2023 we bid farewell to our CEO of
five years, Phil McKenzie. The Board would like
to thank Phil for his significant contribution to
Pacific Smiles. He was an energetic leader who
led the business during a period of expansion,
with Pacific Smiles growing from around 80 to
130 centres during his tenure. He has helped
build a strong base and positioned the business
for continued success, and we wish him well.

Paul Robertson, our former Chief Commercial Officer,
has agreed to step into the role of interim CEO while
a search for a new CEO is undertaken. Paul has
been with Pacific Smiles for 15 years and has a deep
understanding of the business and its people.

Chairperson & Interim CEO Report

This year we have enabled key leadership
opportunities at the Executive Leadership
Team level. While more than 90% of our field
leadership positions are held by women, we
have also increased female representation at
the executive level. Ciara Rocks commenced
as Chief Operating Officer during the year,
having previously held the role of Chief
Marketing Officer, and Louise Hayes was
promoted to Executive General Manager –
People & Culture. These were both internal
promotions of high-calibre female executives.

Departures from the Pacific Smiles Board over
the year include Mr Andrew Knott following the
December 2022 EGM and the resignations of Mr
Hilton Brett in June 2023 and Mr Simon Rutherford,
effective at the conclusion of the 2023 AGM.

Andrew joined the board earlier in 2022 and
once again we thank him for his contribution
to the Board over that period. Hilton was a
Non-executive director for five years, and
we extend our gratitude for his service to our
company throughout this time. He was a guiding
force for the growth of Pacific Smiles, and we
wish him all the very best. Simon’s departure is
a sad moment for the Company. Simon was a
founding director of Pacific Smiles at the time
of its IPO in 2014 and he has made a significant
contribution to its growth and success. He has
been an unwavering advocate of the company
and an active contributor to protecting our
strong financial position. He has been a highly
dedicated and respected Board member.

We are very pleased to welcome new
Non-executive Director appointments to the
Pacific Smiles Board, including Ms Jodie Leonard
and Mr Steven Rubic in May 2023, and Ms Giselle
Collins in September 2023, pending approval by
shareholders at the 2023 AGM.

Jodie brings over 30 years’ experience in various
marketing roles at firms including as Chief
Marketing Officer of GE Capital, while Steven has
over 30 years’ experience in senior leadership
roles, most recently as CEO of private healthcare
provider Healthscope. Giselle has significant
experience in property, tourism and financial
services, as well as having worked in professional
services with KPMG in Sydney, London and
Switzerland. Board renewal has been a focus
for Pacific Smiles, and these additions further
build out expertise in key areas.

Outlook

Overall dental sector dynamics remain positive
for Pacific Smiles, with appointment volume
growth still strong and patient cancellation rates
moderating as we move past the pandemic.

(demand for dental services is highest amongst
the elderly), stable private health insurance
participation rates, our access to Preferred Provider
Agreements (PPAs) with health funds, and the rising
demand for cosmetic dentistry.

The dental services industry also remains highly
fragmented, which leaves significant scope for
Pacific Smiles to grow further. We will continue to
capitalise on market opportunities by adding new
dental centres in areas that maximise efficiencies
and economies of scale, at a rate that aligns with
sensible management of our balance sheet and
use of capital.

Finally, we believe that dentist service
organisations such as Pacific Smiles will grow
in popularity as a destination for dentists to
practice. Following the pandemic, it has become
evident that the risks and complexity required
for practitioners to run their own business have
grown, while the costs of establishing and
running them is increasing. Pacific Smiles offers
safe harbour for people who simply want to be
great dentists and focus on increasing their skills
and scope of practice. We offer great training,
upskilling, and mentoring to further add to these
dentists’ professional development.

Pacific Smiles is a growth business that will
continue to draw from three key pillars to increase
our scale and profitability. Firstly, through same
centre patient fee growth from our more mature
centres, underpinned by a combination of service
mix uplift, value added dentistry and productivity
improvements as practitioners develop and
upskill. Secondly, via the maturation of our newer
centres as they ramp up and grow with more
patients and more practitioners, providing the
opportunity to add chairs to fill capacity and meet
this demand. Thirdly, we will continue to build
more new centres in high quality locations at a
manageable rate, reflecting the capacity of the
organisation to grow sustainably and profitably.

Finally, we would like to thank our shareholders
for their continued support along with our
hardworking people, who remain focused on
delivering the best possible services and facilities
to the dedicated dentists who choose to practice
with us. Providing dentists with the best possible
experience in our centres allows them to deliver
outstanding oral care to their patients. We would
also like to thank the dentists who choose to
practice in Pacific Smiles facilities, for the excellent
quality of care they provide to their patients.

Looking ahead there are several demand factors
underpinning the favourable outlook for Pacific
Smiles, including the ageing population in Australia

Zita Peach
Chairperson

Paul Robertson
Interim CEO

PACIFIC SMILES GROUPANNUAL REPORT 2023Business Review

FY 2023 was a year of consolidation and focus on financial and operational improvement
for Pacific Smiles, as the Company entered a more normal operating environment post
the disruption of the pandemic and a period of significant investment in new centres in
the previous two financial years.

Company Strategic Pillars

Pacific Smiles has a clear focus on strategic drivers of the business. Core pillars of the strategy are
as follows:

The core proposition remains unchanged.
Pacific Smiles provides dentists with fully
serviced and equipped facilities providing
support staff, materials, marketing and
administrative services, that delivers them the
benefit of more flexibility and time to focus on
their patients and offer exceptional patient care.

Business and financial performance has
improved markedly, with a particularly strong
second half of the financial year that culminated
in full year results as follows:

• Underlying net profit after tax (“NPAT”) of

$4.2m increased from an underlying net loss
after tax of $2.5m, an increase of 265.4%.

• Underlying earnings before interest, tax,

depreciation and amortisation (“EBITDA”)
(excluding AASB 16) increased from $11.3m
to $24.1m an increase of 113.9%.

•

Patient fees up 19.5% year on year to $270.5m.

• Group revenue up 18.5% year on year to $165.3m.

•

4 new centres opened in Endeavour Hills
(VIC), Chermside (QLD), Maroochydore (QLD)
and Bankstown (NSW).

• HBFD opened its eighth centre and delivered
over 38,000 appointments, an increase of
111% over the prior year.

•

Reintroduction of dividends.

• Net debt decreased from $6.7m to a net

cash position of $9.6m.

The FY 2023 results reflect the Company’s
strategy to leverage investments in existing
centres and capitalise on new centre growth
in FY 2021 and FY 2022 to drive profitability.
Moderate new centre growth in FY 2023,
combined with improved operational and
financial performance, resulted in a material
deleveraging of the balance sheet.

The operational overview and insights
discussions will focus on the underlying results
for FY 2023 and the comparative period,
excluding the impacts of AASB 16. While AASB
16 provides a more accurate representation
of the Company’s financial obligations and
assets related to leases, removing the effects
of the accounting standard provides a clearer
picture of operational performance and helps
with comparing the current financial results
with historical data and similar companies.
AASB 16 includes interest and depreciation
expenses instead of lease expenses, thereby
improving the earnings before interest and
depreciation (EBITDA) result without a change to
the operational performance of the Company.
To exclude the impacts of AASB 16, the Company
has replaced the depreciation and interest
expenses associated with the lease assets
and liabilities with the lease cash payments.
This reduces the EBITDA result. Reporting
on underlying EBITDA that removes these
impacts focuses on the core performance of
the Company.

Strong and
Engaged Culture

Investment in dentist, their patients and employee
experience is a core pillar of the strategy and is
measured via Engagement and Net Promoter scores
(NPS) research.

Operational
Excellence

Operational efficiency, productivity and economies of
scale are driven by leveraging investments in systems,
core processes and infrastructure.

Network Growth

Measured investment in value-enhancing new centres
whilst balancing profit growth with prudent capital
management.

Same Centre
Growth

Leveraging growth in the existing portfolio of dental
centres whilst adding additional capacity from new
chairs and practitioners.

Innovation

Ongoing investment in enhanced tools, systems and
processes to deliver an improved experience to dentists
and their patients, as well as employees.

Total Shareholder
Returns

Maximising the return on equity for shareholders
by increasing profitability that drives greater total
shareholder returns.

ANNUAL REPORT 2023PACIFIC SMILES GROUPWhy Dentists
Choose
Pacific Smiles

Business
Support &
Full Patient
Books

Clinical
Autonomy

Consistency &
Standardisation

Clinical
Governance

Feedback

Dentists
Supporting
Dentists

Professional
Education

Diversity

Infection
Prevention &
Control

Transparency
& Equality

Dr Rizvi Mahamud
Long-term Practitioner with PSG

Pacific Smiles Dental North Lakes

For over 10 years, Dr Rizvi Mahamud has

been successfully growing his practice

from Pacific Smiles Dental North Lakes.

With a special interest in implants,

extractions, cosmetic and restorative

dentistry, Rizvi delivers a commitment to

comprehensive patient care. He has

previously been a member of the Dental

Advisory Committee and he is a mentor

and advocate for continuous learning.

Business Review

Statutory results

Statutory net profit after tax for the year was $2.4m. This result has increased 153.4% from the FY 2022
statutory net loss after tax of ($4.5m). The statutory results for the year were driven by increased
patient volumes and improved operational efficiency in the second half which delivered lower costs
and improved margins.

Underlying Results

The consolidated entity’s underlying EBITDA, excluding the impact of AASB 16, increased 113.9% to
$24.1m compared with the previous financial year. The reconciliation of statutory net profit/(loss)
before tax to underlying EBITDA pre-AASB 16 is shown in the table below.

Statutory net profit/(loss) before tax

Depreciation and amortisation expense

Net finance cost

Statutory EBITDA

Severance expenses removed

Executive Long-Term Incentive plan expense

Additional costs associated with the December Extraordinary General
Meeting

Flood damaged asset write-offs

Net flood insurance recoveries associated with FY 2022 loss

Workers compensation insurance premium adjustments for prior years

Impact of prior years’ payroll tax determination

Adjustment to pre-AASB 16 basis

Underlying EBITDA pre-AASB 16

2023

2022

$’000

3,923

(6,537)

30,192

26,324

4,343

3,821

38,458

23,607

242

704

536

232

2,271

–

355

(646)

238

1,174

–

(16,597)

(15,196)

24,109

11,270

Note 1 – All termination and redundancy severance expenses have been removed as non-underlying cost as these are one-time
expenses that do not reflect regular payroll expenses and including them distorts true changes in ongoing employee expenditure.

Note 2 – Similarly, the long-term incentive costs for the Executive team have been removed as these expenses are tied to
specific performance criteria and do not reflect regular salary and benefits. Further, the adjustment outlined reflects that no new
performance rights were issued under the Long-Term Incentive Plan during the financial year and that Tranche 5 did not vest in
FY 2023.

Note 3 – The additional costs associated with the December Extraordinary General Meeting refers to the legal and consulting
costs that were borne as a consequence of the Section 249D notice that resulted in an Extraordinary General Meeting being
called on 19 December 2022.

Note 4 – The PSG dental centre located in Lismore was damaged in a major flood event on 28 February 2022. This centre was
not able to be restored and the decision was made to close the centre. The net flood insurance recoveries reflects the additional
insurance monies received up to when the claim was finalised in January 2023.

Note 5 – During the year, PSG received premium adjustment notices regarding workers compensation premiums for prior
financial years. As these are considered a change in estimate, they have been paid and included in the statutory result, however,
they have been excluded from the underlying result as they relate to prior years’ expenditure.

Note 6 – The prior year payroll tax determination represents the total amount paid for payroll tax and interest relating to the
four financial years 2019 to 2022. It includes an estimate of the outstanding liability for payroll tax (including estimated interest)
as determined by the NSW State Revenue Office (SRO) as well as an estimate for other jurisdictions for the same financial year
periods. It also includes legal costs incurred during the NSW SRO audit.

Note 7 – Several adjustments to the profit and loss statement are made to reverse the impacts of the AASB 16 Leases standard
and return the EBITDA result to one that is comparable to prior periods. The cash payments for leases and sub leases are included
in underlying EBITDA.

PACIFIC SMILES GROUPANNUAL REPORT 2023Underlying NPAT increased 265.4% to $4.2m compared to ($2.5m) in the prior year.

Depreciation and amortisation costs (excluding the impact of AASB 16) totalled $16.4m, an increase
of $1.3m on the prior period.

Summary of key financial results and metrics are as follows:

Group Financial Performance

Underlying1

Change

$ millions

Revenue
Gross profit2

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

Underlying earnings per share (cents)

EBITDA margin

EBITDA to Patient Fees margin

EBIT margin

18.5%

113.3%

2.4%

14.3%

19.5%

2023

165.3

157.4

24.1

7.7

4.2

130

545

270.5

14.9%

2.6

14.6%

8.9%

4.7%

2022

139.5

132.8

11.3

(3.9)

(2.5)

127

534

226.4

(10.1%)

(1.6)

8.1%

5.0%

(2.8%)

Underlying result includes the adjustments outlined in the table above.

2. Gross profit is defined as revenue, plus other income less direct expenses as disclosed in the consolidated statement of

profit and loss.

Business Review

Revenue

Group revenue is $165.3m, an increase of 18.5%
over the previous financial year. Revenue
consists mainly of service fees charged to the
dentists who practice from our centres. The
increase in revenue is driven by an increase in
patient volume following a return to more stable
trading conditions, with the prior year impacted
by the COVID-19 pandemic.

Patient fees increased 19.5% over the previous
year to $270.5m, with same centre fees
increasing 14.9%. New centres that opened in
FY 2021 and FY 2022 that had been performing
below the pre Covid new centre run rate,
delivered year-on-year improvements and are
returning towards ordinary course expectations.

Total practitioner hours increased 13.3% in
FY 2023 to approximately 690,000 hours, and
the total number of appointments attended
increased 16.0% to 1.0 million.

Many Australians who avoided seeing a
dentist during the pandemic have steadily
returned to pre-pandemic visitation patterns.
Patients of Pacific Smiles dentists on average
attend the dentist 1.95 times each year.
During the pandemic, this fell to an average
of approximately 1.63 visits per annum. In
FY 2023, this returned to 1.96 visits per annum.
Furthermore, it has become evident that there
is an increasing prevalence of more complex
needs arising due to many patients missing
preventative appointments, and restorative
treatments as a percentage of the overall
treatment mix increasing in FY 2023 compared
to the previous year.

inventory combined with strong partnerships
with suppliers achieved a 0.6% reduction in
total consumable expenses as a proportion
of patient fees, decreasing the ratio from
5.4% to 4.9%.

• Occupancy costs including lease payments

increased 7.5% to $20.9m in FY 2023 versus
$19.5m in the prior period. Approximately
$0.9m of this increase is attributed to
annual lease increases, while a full year of
new centres opened in FY 2022 and new
centres opened during the financial year
contributed $1.0m and $0.3m to occupancy
costs respectively. Pleasingly, proactive
management decisions including relocating
the Bendigo and Chatswood centres as
well as downsizing the nib Melbourne
centre, yielded over $0.6m in cost savings
compared to the previous year.

Repairs and maintenance expenditure
on dental equipment in the network
increased from $1.6m to $2.1m in FY 2023.
This year-on-year rise was primarily driven
by unplanned maintenance, particularly
in older cohort centres. To address this,
asset management processes are being
enhanced and vendor partnerships
leveraged to proactively schedule routine
maintenance. This will enable pre-emptive
equipment replacement decisions, ensuring
optimal equipment performance and
reliability, while maintaining a focus on cost.

Pacific Smiles’ corporate overhead ratio fell to
6.9% in FY 2023 from 8.1% in the prior year. This
was driven by two key factors, i) managing
costs and headcount to align support office
costs with the level of new centre growth,
and ii) an increase in revenues.

•

Expenses

EBITDA margins, both at a centre level and
group level improved materially in FY 2023,
reflecting both revenue growth and focused
expense management. Managing the efficiency
of the dental centre workforce as the Company
emerged from a complicated and interrupted
operating environment during the pandemic
remained a priority. The staff to practitioner
ratio (measured as the number of staff hours
worked to dentist hours worked) spiked during
this period due to the complexity of managing
increased appointment cancellations and
withdrawal of services by practitioners. This
ratio reduced towards the end of the first
half of FY 2023 and, pleasingly, approached
pre-pandemic levels by year end.

In relation to other areas of expenditure, the
following is noted:

• Consumable supply expenses increased
7.3% to $13.2m from $12.3m in the prior
period. However, proactive efforts to manage

• Net interest costs increased to $4.3m from
$3.8m in the prior year. Increased interest
paid on the debt facility was driven by the
prevailing market increases in interest
rates, resulting in higher interest expenses.
However, Management proactively
addressed this challenge by renegotiating
cash account terms to capitalise on the
high interest rate environment, leading to
a significant increase in interest income
received. As a result, the net movement in
interest costs was minimised.

•

There was an increase in expenditure
classified as non-underlying in FY 2023 due
to their one-off nature which is reflected in
the reconciliation of statutory to underlying
EBITDA. Underlying expenses include legal,
proxy advisor and other costs associated
with the Extraordinary General Meeting
(“EGM”) held on 19 December 2022, as well
as provisions and advisory costs related
to payroll tax on dentists contracted under
Service and Facilities Agreements (“SFA”)
outlined below.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Business Review

Appointment volume is more than 15% higher
than the prior year, reflecting a steady return to
more normal attendance and visitation patterns.
Marketing activity focused on building comfort
and confidence to return to the practice and
worked diligently to stay in touch with patients
throughout.

Practitioners

The number of practitioners practicing with
Pacific Smiles at the end of FY 2023 grew to more
than 900 with an impressive retention rate of
approximately 85%.

The increase in practitioner numbers, plus
more hours worked by existing practitioners,
contributed to an increase of over 50,000
practitioner hours worked in FY 2023 compared
to the prior year.

Payroll Tax

Systems and Technology

Employees

During FY 2023, Pacific Smiles received a
Determination Letter (“Determination”) from
Revenue New South Wales (“Revenue NSW”)
pertaining to the treatment of its Services
and Facility Agreements (“SFAs”) with dentists
for payroll tax purposes. Specifically, the
Determination concluded that the SFAs are
“relevant contracts” under the contractor
provisions of the Payroll Tax Act (NSW)
2007 (“PTA”).

Subsequently, Pacific Smiles received an
Assessment for Payroll Tax from Revenue NSW in
respect of the four financial years 2019 to 2022.
The Assessment specifies that Pacific Smiles is
to remit a total of $0.97m in payroll tax shortfalls
and interest relating to the four financial years
2019 to 2022. No penalties were applied by
Revenue NSW in the Assessment on the basis
that the Company has taken reasonable care
in relation to payroll tax. This amount, paid in
FY 2023, is reflected as non-underlying
expenditure for the current year. The Company
has made a provision for payroll tax in all other
States and Territories for the same time period
where it is deemed that the Company may
receive an assessment in line with that of New
South Wales, totalling $0.67 million. This provision
is also reflected as non-underlying expenditure
for the current year. The Company has
self-assessed payroll tax on SFA contracts on
the same basis in FY 2023, resulting in a $0.34m
expense which is included in the underlying
result for FY 2023.

Pacific Smiles is continuing to undertake further
analysis with our advisors to determine any
potential payroll tax liability going forward.

Capital Expenditure

Capital expenditure for the year is lower at
$11.1m compared to FY 2022 at $23.7m, reflecting
the reduction in the rate of opening new
centres. However, Pacific Smiles continued to
invest in its network by opening 4 new centres,
adding 5 additional chairs in existing centres,
completing one centre expansion and two
relocations. Investment in equipment continued
with $1.6m spent on 3D scanners and $1.0m on
technology upgrades.

Over the last two years, PSG strengthened the
core technology foundations and expanded
the catalogue of digital assets, products
and services. During FY 2023, modern and
appropriate investments were made across
the core Information Technology domains of
cloud infrastructure, cyber security and data
governance, delivering enhanced efficiency,
security, and cost-effectiveness, while prioritising
improvements in practitioner and patient
experiences. Robust disaster recovery and
business continuity capability was a positive
outcome of the technology upgrades.

Investment in cyber security controls improved
the baseline position as well as incident recovery
capabilities. A strategic focus on the technology
roadmap ensured further consolidation and
simplification of technology, delivering greater
efficiency and performance across the network.

Cash and Borrowings

Pacific Smiles continues its strong focus on cash
management and fiscal discipline. Improved
trading conditions in FY 2023 enabled Pacific
Smiles to consolidate and strengthen its balance
sheet. During the year, $9.5m debt was repaid
leaving $9.0m of the $40.0m facility drawn,
ending the year in a net cash position of $9.6m.

Centres

In FY 2023, four new Pacific Smiles dental centres
opened in Endeavour Hills (Victoria), Chermside
(Queensland), Maroochydore (Queensland), and
Bankstown (New South Wales). Chatswood nib
centre was consolidated into the existing Pacific
Smiles dental centre in Westfield Chatswood
shopping centre following the cessation of the
lease in the existing nib Chatswood premises,
bringing the total dental network at 30 June 2023
to 130 centres.

The Company continually evaluates the strategy
to accelerate growth in light of the operating
environment to ensure efficient use of capital
and a balanced approach to growth.

Total employee expenses for FY 2023 of $80.7m
equates to 29.8% of patient fees, compared to
$74.1m or 32.7% of patient fees in the prior period.

Employee engagement remains a key priority
and was actively managed during the year.
In FY 2023, the first field leadership conference
was held in three years and was an important
milestone, bringing people together for the
first-time post COVID-19.

Patients of Pacific Smiles’ Dentists

In FY 2023, Pacific Smiles dentists delivered
1 million patient appointments with a patient net
promoter score of 90. This is a very strong result
and places Pacific Smiles in the top percentile.

Dr Ann Park
Recent Dental Graduate

Sydney CBD

Dr Ann Park joined Pacific Smiles Group in

2022 after graduating from the University of

Adelaide. Ann accepted a place in the Pacific

Smiles Group New Graduate program and

joined nib Dental Care in the Sydney CBD.

She was supported by a dedicated mentor,

with an experienced centre team and had

access to further professional development

opportunities as she made the successful

transition from university into private practice.

Ann is highly regarded by her colleagues at

Pacific Smiles Group and continues to build

a successful practice.

PACIFIC SMILES GROUPANNUAL REPORT 2023Business Strategies and Prospects for
Future Financial Years
Pacific Smiles is a highly experienced developer
and operator of dental centres. The model and
framework have been built and refined over a
long period of time, giving the Company unique
industry intellectual property.

Location and Community/Convenience
Proposition
•

Target regions under-serviced by dentists
that suit the model;

•

Localised regions and centre clusters create
scale and efficiency opportunities, with
ability to grow market share in communities
where convenience and proximity to the
dentist drive patient choice of dentist; and

Shopping centre model builds brand
awareness, and ease and frequency of visits
to shopping centre locations facilitates
repeat visits (especially within families).

Standardisation of Centre Layout, Brand,
Culture, People and Systems
• Common Patient Management System and
a “single patient record” across every Pacific
Smiles centre makes it easy for patients
to book appointments with their dentist at
any location;

• Common culture and values across all

centres, creating unified focus and enables
common key performance indicators to
be established;

•

Standard operating procedures across the
entire operating ecosystem are rolled out
consistently:

• making it easier for Dentists to practice

across multiple centres;

•

creating high quality patient care; and

reducing wastage and inefficiencies.

Ease of Mobility for Staff and Dentists
Sharing of resources between centres in a
“cluster” allows for increased efficiency, more
streamlined labour management and greater
practitioner and patient satisfaction.

Growth Focus
Multiple opportunities to drive growth by:

i. building new centres;

ii. adding capacity to existing centres (more

chairs); and

iii. uplifting utilisation through increased patient
attendance via retention of existing patients
and acquisition of new patients.

The outlook and future prospects for Pacific
Smiles is favourable and the Company is
optimistic of growing revenue and earnings in
FY24, noting:

• Growth will continue through a combination
of i) increasing utilisation of existing mature
centres, ii) ramping-up new centres,
and iii) building new centres in attractive
locations at a sustainable rate that meet the
investment criteria;

•

Key trends and demand factors in the
Australian dental sector support a positive
outlook, including:

• Ageing and population growth - dental
problems are highest for people aged 75
and older and is growing with Australia’s
ageing population.

•

Private health insurance (PHI)
participation rates remain high –
recent APRA data (Mar-23) revealed
continued PHI policy growth of 2%,
supporting continued dental growth and
ancillary claiming.

• Access to Preferred Provider

Agreements (PPAs) – the Company
has access to a broad spectrum of PPAs
from insurers, which underpins patient
demand as insurers promote dentist
locations within their PPA network.

• Child Dental Benefits Scheme (CDBS)
continues – Financial support funded
by the Commonwealth Government for
eligible children to receive access to
dental care.

• Cosmetic dentistry trend continues
– Increasing demand for orthodontic
procedures (aligners etc), teeth
whitening, veneers and crowns.

Business Review

The Dental Market

IBISWorld in its Industry Report (Q8531: “Dental
Services in Australia”, IBISWorld, May 2023) has
reported that the market for dental services in
Australia is approximately at $10.9b per annum
in 2023 and is forecast to continue to grow over
the next five years.

Non-emergency dental work (preventative
& diagnostic) was delayed throughout the
COVID-19 period due to lockdowns and patient
and dentist health concerns. This resulted in a
backlog of residual demand, including for more
expensive restorative procedures with delays
and deferral of in preventative care treatments.

Demand for dental services is further driven by
a combination of the ageing population with
dental issues highest for people aged 75 and
older, ongoing marginal growth in private health
insurance membership and a growing demand
for cosmetic dentistry. However, macroeconomic
conditions are presenting headwinds to the
market with restrictive monetary policy and
cyclically high inflation causing economic
growth to slow and household consumption and
discretionary spending to plateau. Suppressed
consumer sentiment may impact dental
service volumes as households again delay
preventative, restorative and cosmetic services.

The industry continues to be highly fragmented with
most providers operating from small scale single
locations, although corporate activity in the sector
is increasing. There are more branded networks,
including some owned and operated by private
health insurance organisations, who market to their
own members to encourage attendance.

The market continues to see growth in the
number of registered dentists. The increase
in recent years has been the combined
impact of overseas trained dentists and local
graduates. New dentists generally open their
own businesses, although some join existing
operators. A growing number of new dentists
have joined corporate dental groups over the
past five years, making corporate dentistry more
commonplace in the industry.

Environment considerations

Pacific Smiles is not subject to any particular
and significant environmental regulation under
the law of the Commonwealth or of a state
or territory.

PACIFIC SMILES GROUPANNUAL REPORT 2023Risk Management

Pacific Smiles is subject to various risk factors, both business specific and of a 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 can
be sourced from our Corporate Governance Statement and related governance policies on our
website.

The following risk areas and mitigating factors have been identified by Pacific Smiles:

Risk Area

Market

Mitigating Factors & Risk Management Approach

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 several different
geographic zones across the eastern states of
Australia. Pacific Smiles’ partially offset increased
costs via operating efficiencies from increased
scale.

A higher inflationary
environment may drive up
costs that are unable to be fully
passed on, creating pressure
on operating margins.

Significant investment in industry-leading systems
and infrastructure in the last 3 years has laid the
foundation to further capitalise on efficiencies that
contributes to offsetting external margin pressures.

Legal,
Regulatory and
Governance

Changes in government
regulations and legislation
that lead to increased costs.

Business Model Changes to the nature or

extent of private health
insurance coverage could
impact upon the attendance
frequency of patients and
the payments received from
health insurers.

Competition-induced fee
pressure could increase
competition for patients and
the degree to which dentists
compete based on fee levels.

Under the Service and
Facility Agreements between
Pacific Smiles and dentists,
the dentists may terminate
without cause, generally with
3 months’ notice.

Practitioners

Pacific Smiles has a risk management framework
that considers the risks due to changes in laws
and regulations. It is regularly reviewed by its
Audit and Risk Management Committee and
the Company takes advice from expert counsel
regarding its contractual arrangements and
regulatory compliance.

Payroll tax risk in relation to dentists’ Service and
Facilities Agreements is managed through expert
counsel advice and any developments are clearly
communicated to investors and the market in
compliance with continuing disclosure obligations.

Patients of Pacific Smiles’ dentists are a mix of
privately insured and non-insured individuals and
there are various payment plans and treatment
payment options available.

Pacific Smiles’ dental centres are usually
differentiated from other local providers and
compete based on convenience, value, access
and overall patient experience.

Pacific Smiles views the dentists as a key customer
group and focuses resources accordingly. Dentist
engagement remains a priority and is tracked
regularly. Dentists choose Pacific Smiles because
of the high level of business and clinical support
the model provides to their practice, including
continuing professional education.

Risk Area

Dentist operating outside
scope of practice is also a
risk for the business.

Occupational
Health and
Safety

Should the availability of
appropriately skilled and
aligned dentists become
restricted, then growth and
expansion of Pacific Smiles
could be slowed.

Transfer of infection to
individuals due to safety
or sterilisation breaches
in a dental centre may
lead to harm to individuals
and negative reputational
impacts on Pacific Smiles
as well negative economic
consequences.

Business Review

Mitigating Factors & Risk Management Approach

A compliance framework is in place to ensure
protocols are followed and dentists are well
credentialed. A new Dental Advisory Committee has
been established to oversee dentist credentials.
The Clinical Governance Committee is responsible
for continuous improvement of processes and
ensuring good clinical outcomes for patients.

A pipeline of dentists is built via ongoing training
and development of dentists, including a structured
mentoring program for new graduate dentists.

Pacific Smiles has a clinical governance framework
that governs infection control management
procedures, including a training program.
Clinical risks are coordinated and managed by a
dedicated clinical specialist team and monthly
audits are undertaken.

There is a close focus on internal procedures
and clinical governance by management and
the Board. This has been further enhanced by
internal and external appointments to the Dental
Advisory Committee.

OHS practices and outcomes are a priority for all
employees of the Company.

People &
Culture

Reputational damage –
Actions by employees or
dentists could give rise to
reputational damage to
Pacific Smiles and its brands.

Pacific Smiles focuses on attracting and retaining
a diverse workforce that reflects the communities
in which we operate, with clear training and
onboarding procedures to educate employees on
issues that could result in reputational damage.

Pay & Entitlements

Staff Turnover

Paying employees correctly and ensuring they
are paid correct entitlements is essential to
maintaining trust and the company’s reputation.
Pacific Smiles regularly reviews and enhances
baseline controls across the end-to-end pay
process. Where possible, automation procedures
are utilised to reduce the risk of manual errors.
Industrial instruments are proactively reviewed, and
management are responsible for staying abreast
of changes to industrial relations legislation and
ensuring all leaders understand and comply.

Employees are an essential component of the
services Pacific Smiles provides to dentists and
the dentist’s patients. Attracting, retaining and
engaging team members is crucial.

Engagement surveys provide invaluable
feedback on employee engagement with leaders
empowered to act on feedback specific to their
areas. Improving talent acquisition and onboarding
processes has been a key focus over the past
12 months to ensure a consistent experience
across the group and that employees have a
positive start with the Company.

PACIFIC SMILES GROUPANNUAL REPORT 2023Business Review

Dr Renu Lakra
Multi-location Practice

nib Brisbane, Newstead, Mt Gravatt

Dr Renu Lakra is an experienced dental professional

with a passion for implant, orthodontic, and aesthetic

dentistry. Since joining Pacific Smiles Group in 2019 she

has practices in several Pacific Smiles centres in

Brisbane leveraging her expertise to provide diverse

scope of work. She is also part of the Graduate program

mentoring graduates who choose to operate their

practice from a Pacific Smiles Group centre.

Risk Area

Cyber Security
and Data
Management

Actions whereby the
company’s IT systems are
accessed and result in the
failure of or interruption to
key IT systems or a material
patient privacy breach.

Technology

Business
Continuity

Effective business operations
and technology are
inextricably linked and
mutually dependent. Both our
Information Technology and
clinical Operational Technology
environment combine to
deliver required business
performance outcomes.

Any loss of critical Technology
systems or services would
result in business disruption.

Should an event result in the
closure, restriction or delay of
key consumables or personal
protective equipment (PPE)
meaning our ability to meet
the needs of dentists and their
patients could be impacted.

Mitigating Factors & Risk Management Approach

Pacific Smiles Group have sophisticated cyber
security controls in place to minimise technology
related business interruptions and to assure the
privacy of patient information. Cyber and data
roadmaps are in place to continually uplift maturity
in both areas to meet operational expectations.
A program of continuous external security
audits ensures compliance and performance is
maintained.

A planning for disruption mindset has driven uplift
in technology enabled business resilience.

Cloud first computing investments underpin the
design of the technology platform and enable
faster recovery and access to data if required.

IT Business Continuity plans continue to evolve, and
critical IT business system disruption is insulated
via advanced Disaster Recovery process and
capability.

Long term relationships with national suppliers and
alternate suppliers have been identified. Pacific
Smiles closely monitors inventory levels to ensure
adequate stock of appropriate personal protective
equipment (PPE) is available. A strategy for
emergency store of critical PPE is also in place.

Should a pandemic restrict
the dental services able to
be performed in specific
locations, states or nationally
due to the risk of infection
to staff, dentists and their
patients.

A process for closely monitoring and adhering to
government or professional body recommendations
is in place. Procedures for ensuring adequate stocks
of appropriate personal protective equipment
(PPE) are in place, along with a close focus on
internal procedures and clinical governance by
management and the Board.

Environmental
and
Sustainability
Risk

Climate change and
sustainability-related
risks pose risk to physical
infrastructure and could
impact our business
operations.

A comprehensive insurance program is in place
to financially protect the business from major
catastrophic events to the extent that they are
insurable.

Modern
Slavery Risk

Shareholder
Activism

Poor sustainability practices
and controls could negatively
affect stakeholder and
community expectations if
not managed appropriately.

Pacific Smiles has an executive committee which
monitors and has carriage of our efforts to source
environmentally responsible or renewable products
across our business.

Impacts upon brand and
reputation that results in
negative impact on the
share price and financial
performance of the
Company as it bears the
cost of addressing activist
campaigns.

Due diligence is undertaken for specific suppliers
relative to compliance with the Company’s Modern
Slavery Policy which is overseen by the Board.

Pacific Smiles regularly and transparently
communicates with all shareholders through its
Investor Relations program, providing a platform
for appropriate dialogue and investor feedback.

A practice of holding Investor days has
commenced that enables additional
communication and engagement with a broader
group of investors.

PACIFIC SMILES GROUPANNUAL REPORT 2023Centre
Locations

WA (HBFD)
Belmont*
Bull Creek
Cannington
Floreat*
Joondalup
Karrinyup
Mandurah
Morley

ACT
Belconnen
Gungahlin
Manuka
Tuggeranong
Woden
nib Woden

QLD
Aspley
Birtinya
Bribie Island
nib Brisbane
Browns Plains
Buddina
Burleigh Heads
Capalaba
Chermside*
Cleveland
Coomera**
Deception Bay
Helensvale
Loganholme**
Maroochydore*
Mitchelton
Morayfield
Mt Gravatt
Mt Ommaney
Newstead
North Lakes
Redbank Plains
Robina
Runaway Bay
Strathpine
Victoria Point

WA
8

VIC
Bairnsdale
Bendigo
Caroline Springs
Chirnside Park
Craigieburn**
Cranbourne Park
Doncaster East**
Drysdale
Endeavour Hills*
Epping
Frankston**
Glen Iris
Glen Waverley
Greensborough
Keysborough
Leopold
Melbourne
nib Melbourne
Melton
Mill Park
Mulgrave
Narre Warren
Oakleigh**
Ocean Grove
Point Cook
Preston
Ringwood
Sale
Taylors Lake
Torquay
Traralgon
Warragul
Waurn Ponds
Werribee

QLD
26

ACT
6

NSW
64

VIC
34

Marrickville
Merrylands**
Morisset
Mount Hutton
Narellan
Newcastle**
nib Newcastle
nib North Parramatta
Nowra
Parramatta
Penrith
Queanbeyan
Raymond Terrace
Richmond**
Rockdale**
Rutherford
Salamander Bay
Shellharbour
Singleton
Sylvania**
nib Sydney
Toronto
Town Hall
Tuggerah
Tweed Heads
Wagga Wagga
Wollongong
nib Wollongong

NSW
Ashfield
Balgowlah
Bateau Bay
Ballina
Bankstown*
Bass Hill
Baulkham Hills
Belmont
Belrose
Bondi Junction
Blacktown
Brookvale
Cameron Park**
Campbelltown
Charlestown
nib Chatswood‡
Chullora**
Corrimal**
Dapto**
Erina
nib Erina
Figtree
Forster
Gladesville
Glendale
nib Glendale
Goulburn**
Greenhills
Greenhills Ortho
Hornsby**
Hurstville
Jesmond
Kotara
Lake Haven
Lane Cove
Maroubra**

Environmental, Social
and Governance

Pacific Smiles makes a difference through strategic initiatives in the field, at our
Dental Centre Support office and in our new centre build schedules.

ENVIRONMENTAL

SOCIAL

GOVERNANCE

Commitment to
increase our usage of
environmentally friendly
consumables, sourced from
responsible organisations
that prioritise sustainable
and ethical practices

Printer cartridge return and
recycle program through
Close the Loop has saved
560 printer cartridges
(446kg) from Landfill

Changed over to
autoclavable mixing wells
and cheek retractors
reducing single use plastics

Continued use of AI
technology to reduce bias
from candidate screenings
in our recruitment process

Donated dental items to a
Central Coast and Hunter
based charity “We Care
Connect” which helps care
for local children living in
poverty

We build transparency
and trust through strong
governance, evidenced by
our Board subcommittees
and Dental Advisory
Committee, which govern
our operating and risk
environment

Our policies and procedures
guide our people on how
to make the right decisions
and demonstrate ethical
behaviours

Social

mental

n
viro

n
E

Notes:

* FY23 New Centres

** FY22 New Centres

‡ PSD Chatswood merged with nib Chatswood

ANNUAL REPORT 2023PACIFIC SMILES GROUP

Consolidated
Financial Report 2023

Director’s Report

Remuneration Report

49 Auditor’s Independence Declaration

50 Consolidated Statement of Profit or Loss and

Other Comprehensive Income

Consolidated Balance Sheet

52 Consolidated Statement of Changes in Equity

53 Consolidated Statement of Cash Flows

54 Notes to the Consolidated Financial Statements

90 Directors’ Declaration

Independent Auditor’s Report

Director’s Report

The Directors present their report, together with the financial statements, of the consolidated
entity (referred to hereafter as the ‘consolidated entity’) consisting of Pacific Smiles Group Limited
(referred to hereafter as the ‘Company’ or ‘parent entity’) and the entities it controlled at the end of,
or during the year ended 30 June 2023.

Principal activities

The Company 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.

Governance

To the extent the Directors regard as appropriate to the size and stage of development of
the Company, Pacific Smiles Group has adopted the recommendations of the ASX Corporate
Governance Council’s Corporate Governance Principles and Recommendations (4th edition)
throughout the reporting period (exceptions are set out below). Details are provided in the
Corporate Governance Statement.

Governance Principles to be considered for implementation in the future as the Company size and
cost warrants the additional oversight.

• Appointment of an internal audit function.

• Appointment of a separate Nomination Committee.

Further details of the key corporate governance policies and practices of the Company during the
year are set out in the Corporate Governance Statement. Full details of the Corporate Governance
Statement are available on the Company website.

Matters subsequent to the end of the financial year

Resignation of CEO and Managing Director
On 11 August 2023, the Company announced the resignation of Managing Director and Chief
Executive Officer (CEO), Mr Phil McKenzie, with effect from 31 August 2023. Mr Paul Robertson has
been appointed Interim Chief Executive Officer with effect from 1 September 2023. His appointment
facilities an orderly handover and minimises disruption to the Company.

Mr Robertson is an experienced Chief Executive Officer and senior executive. He joined Pacific Smiles
Group in 2008 as Chief Operating Officer where he spent 13 years building a deep understanding
of the Company’s operations. In July 2022, he was appointed Chief Commercial Officer, enabling
him to leverage his knowledge of the business and build on established relationships. As a
CEO, Mr Robertson has extensive experience leading private hospitals including Calvary John
James Hospital, Lingard, Christo Road, Lady Davidson, Warners Bay, Castlecrag and Mosman
Private Hospitals.

Mr Robertson’s appointment as Interim Chief Executive Officer will continue for the period of the
search for a permanent Chief Executive Officer, which is underway.

Either party may terminate the employment agreement by providing three months’ notice.

It is intended that Mr Robertson will return to the position of Chief Commercial Officer as soon as a
new Chief Executive Officer commences.

Final dividend declaration
Subsequent to the end of the financial year, the Directors have recommended the payment of a
final dividend of 2.27 cents (2022: nil) per ordinary share, fully franked. The aggregate amount of the
proposed dividend expected to be paid out of profit reserves in October 2023, but not recognised as
a liability as at the end of the financial year is $3,627,463 (2022: nil).

ANNUAL REPORT 2023PACIFIC SMILES GROUPNo other matter or circumstance has arisen since 30 June 2023 that has significantly affected,
or may significantly affect the consolidated entity’s operations, the results of those operations,
or the consolidated entity’s state of affairs in future financial years.

Directors

The Directors of the Company at any time during or since the end of the financial year are:

Director’s Report

Board Skills and Experience

Pacific Smiles Group Board comprises Directors with a diverse range of skills, experience, and
backgrounds to support the effective governance and robust decision-making of the Company,
with a particular focus on the key desired areas listed below. An assessment of the optimum mix
of these skills and experience takes place at least annually, noting not all Directors are expected to
hold advanced capability in every area.

In addition to skills and expertise, we also consider personal attributes of Directors in the renewal
process and the annual Board performance review process, to continuously enhance Director
engagement, interaction, and effectiveness. A summary of the key skills and experience of the
current Directors against those identified in the skills matrix is set out below:

Board Skill

Definition

Dentistry/
Dental Industry
Experience

An experienced Dentist with a commercial mindset, ideally with
a background running multiple practices and demonstrated
industry thought leadership.

Healthcare
Industry
Experience

Leadership &
Commercial
Acumen

Extensive experience in healthcare, health insurance or a related
category that manages the treatment of patients, ideally at
multi-site locations.

Experience as a C-suite level executive of a significant
organisation with proven ability to consistently deliver results, run
complex businesses/business units and lead complex projects.

Growth & Scale
Up Experience

Experience in high growth organisations with an understanding of
pacing capital allocation and investment within the organisations
financial and risk boundaries.

Strategy

Finance/
Accounting

Property

Governance

Digital and
Data

Marketing

Expertise and experience in identifying and critically assessing
strategic opportunities and threats, including constructively
questioning and challenging business plans and overseeing
successful transformation and growth in large, complex
organisations to create sustained, resilient business outcomes.

Proficiency and expertise in capital management, financial
accounting and corporate reporting, including understanding
the key financial drivers of the business, the ability to probe
the adequacies of internal financial controls and systems and
investor relations.

Experience in property management including asset utilization,
leasing, asset management, capital allocation and multi-
location roll out.

Demonstrated experience in, or commitment to best practice
corporate standards, as well as the oversite of corporate
governance frameworks, policies & processes, ideally in an ASX
environment.

Expertise and experience in innovation, adoption and
implementation of new technologies, digital disruption,
leveraging digital technologies, understanding the use of data
and data analytics.

Extensive experience leading both B2B and B2C Marketing
teams with functional leadership overseeing advertising, brand,
customer relationship management & customer experience.

Risk
Management

Experience in anticipating, recognising and managing risks,
including regulatory, financial, and non-financial risks.

People
Management

Experience leading teams, developing remuneration plans and
strategies, remuneration governance, strong understanding
of remuneration policies and implications, OHS practices and
governance and oversight and development of corporate.

Number of
Directors

Ms Zita Peach

Mr Mark Bloom

Mr Simon Rutherford

Non-Executive Chair, appointed
February 2020.
Non-Executive Director,
appointed August 2017.
Member of the Nomination and
Remuneration Committee.

Non-Executive Director,
appointed October 2019.
Member of the Audit and Risk
Management Committee.
Chair of the Property
Committee.

Non-Executive Director,
appointed September 2003.
Chair of the Audit & Risk
Management Committee.

B.Comm, CA, FAICD

Simon is a chartered
accountant and partner with
PKF business advisory services
where he has worked for over 35
years. He works with corporate
and family-owned groups as
an advisory Board member
and lead adviser on strategy,
governance, structuring,
business sales, mergers, and
acquisitions. He is also a
Director of PKF Wealth. In his
role Simon has assisted various
companies with capital raising
and listing requirements. Simon
was 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.

Other current directorships: Nil

Former directorships
(last 3 years): Nil

Interests in shares: 1,744,863

BSc, FAICD, FAMI

B.Comm, B.Acc, CA ANZ

Zita has more than 25 years of
commercial experience in the
pharmaceutical, biotechnology,
medical devices and health services
industries. She has extensive sales
and marketing experience across a
broad range of sectors in healthcare,
locally and internationally, as well
as leading international expansions
and conducting major business
transactions. At leading global
healthcare company Fresenius Kabi,
Zita was Executive Vice President for
South Asia Pacific, Managing Director
for Australia and New Zealand and
Chair of the Boards for Malaysia,
Australia and New Zealand. Zita
was Vice President of Business
Development at CSL Limited and has
an extensive track record in mergers
and acquisitions deals, licencing
and commercialising products and
technologies on a global scale.
Zita is a Non-Executive Director of
Monash IVF Group Limited and for
two privately held companies, Icon
Group Pty Ltd and Nucleus Network
Pty Ltd. Zita is also a member of the
Hudson Institute of Medical Research
Board.

Other current directorships:
Monash IVF Group Limited

Former directorships
(last 3 years): Starpharma
Holdings Limited

Interests in shares: 50,087

Up until April 2019, Mark held the
position of Chief Financial Officer
at ASX 20 listed Scentre Group
Limited (Owner and operator of
Westfield in Australia and NZ).
Mark’s executive career as a
Finance Executive has spanned
36 years as Chief Financial
Officer and an Executive Director
at 3 top 20 listed entities in Real
Estate (Westfield and Scentre
Group – 16 years) and Insurance
and diversified Financial Services
(Liberty Life, South Africa and
Manulife Financial, Toronto –
20 years). He has had extensive
experience in running global
and local Finance and IT teams
encompassing Treasury, Tax,
Operations Finance, Compliance,
Risk Management, Financial
Reporting, Legal and Information
Technology. Mark has extensive
experience in corporate
transactions and restructuring.
Mark is a Non-executive Director
at AGL Energy Limited and EBOS
Group Limited.

Other current directorships:
AGL Energy Limited, EBOS Group
Limited

Former directorships
(last 3 years): Abacus Property
Group Limited

Interests in shares: 277,952

PACIFIC SMILES GROUPANNUAL REPORT 2023Directors continued

The following persons were Directors of the Company at the beginning of the
financial year up to their resignation date.

Director’s Report

Dr Scott Kalniz

Ms Jodie Leonard

Mr Steven Rubic

Mr Phil McKenzie

Mr Hilton Brett

Mr Andrew Knott

Non-Executive Director,
appointed May 2023.
Member Nomination &
Remuneration and Property
Committees.

B.Health Admin, MBA, FAICD,
FACHSM

Steven has over 30 years of
healthcare Executive leadership
experience including CEO roles
at Healthscope, I-MED Radiology
Network and St Vincent’s &
Mater Health. Steven is currently
a Non-Executive Director of
Healthscope and the Mercy
Partners and was previously the
Chair of Monte Sant’ Angelo Mercy
College, and formerly a Board
Director of the Garvan Institute
of Medical Research, the Chris
O’Brien Lifehouse, the Macquarie
University Council and the NSW
Private Hospitals Association.
He has worked closely with
Boards and private equity firms
over the last 11 years, growing
a number of businesses with a
focus on commercial outcomes
and delivering strong returns to
shareholders.

Other current directorships: Mercy
Partners

Former directorships
(last 3 years): Nil

Interests in shares: 20,000

Non-Executive Director,
appointed January 2021.
Member of the Audit and Risk
Management Committee.

DDS and BS in Business
Administration, Economics
(The Ohio State University)

Dr. Kalniz has over 25 years of
dental industry experience in the
United States.

Scott’s current role is Chief
Dental Officer and VP of Network
Development at Beam Benefits,
an employee benefits company.
Scott is also a director on the
following private equity boards:
Signature Dental Partners,
Premier Dentist Partners and
Smiles America Partners. He
started his career as a practicing
dentist with a single location
practice and purchased a
number of other dental practices,
eventually selling his group to
North American Dental. At North
American Dental, he helped grow
the business to over 50 locations.
Dr. Kalniz then partnered with a
private equity firm, as CEO and
Chief Dental Officer, to create
a new Chicago headquartered
Dental Services Organisation
(DSO), Elite Dental Partners. In
under 5 years, the business
grew to over 110 locations in 12
states. Dr. Kalniz retired from the
Board of Elite Dental Partners
in September 2020.

Other current directorships:
Signature Dental Partners

Former directorships
(last 3 years): Elite Dental
Partners, Heartland Veterinary
Partners

Interests in shares: 20,000

Non-Executive Director,
appointed May 2023.
Member of the Nomination and
Remuneration Committee and
appointed Chair of Nomination
and Remuneration Committee
on 30 June 2023.

B Bus, Marketing, FAICD

Jodie is an experienced
Non-Executive Director and
Remuneration Committee Chair of
ASX listed and public companies.
Her portfolio focusses on scaling
companies for growth and
transforming business models
to drive profitability. She has a
deep understanding of ASX and
regulated entity governance and
has also chaired both Risk and Audit
committees. Jodie has Executive
expertise in strategic planning,
digital innovation, and marketing
across a diverse range of industries
including technology, banking &
financial services, consumer goods,
media, and travel & tourism. She
previously held Chief Marketing
Officer and corporate strategy roles
in blue chip companies including
General Electric, British Airways,
Telstra, Nine Network, Unilever and
Colgate, during which time she
worked in global oral care in New
York. She has also served on a range
of public Boards including the RACV,
Beyond Bank Australia, Great Ocean
Road Coast & Parks Authority, and
Kinetic Superannuation Ltd and is
currently also on the Board of the
Barwon Region Water Corporation.

Other current directorships:
XPON Technology Group Ltd

Former directorships
(last 3 years): X2M Connect Ltd,
Flexigroup Ltd (now HUMM Group
Ltd), BWX Ltd, Selfwealth Ltd

Interests in shares: Nil – awaiting
clearance of blackout period.

Managing Director and Chief
Executive Officer, appointed
October 2018. Resigned
31 August 2023.

B.Bus (Auckland University of
Technology)

Prior to joining Pacific Smiles,
Phil was Chief Executive Officer
for Audiology Management
Group (AMG), a leading
audiology services business
with a network of more than
200 clinic locations across
the USA. During his time at
AMG, Phil balanced and
transitioned the model from
acquisition driven to greenfield
expansion and delivered
strong financial performance
for the group. Prior to his
role as CEO of AGM, Phil was
CEO of Widex Australia, New
Zealand, Singapore, Hong
Kong and India retail where
he successfully turned around
and grew those operations.
Phil has also held leadership
positions at Apple Retail as
Australian Market Director
and was a driver of Apple’s
retail entry into the Australian
market from 2008 to 2011,
and Luxottica as National
Operations Manager from
2005 to 2007.

Other current directorships:
Nil

Former directorships
(last 3 years): Nil

Interests in shares: 10,600

Non-Executive Director,
appointed August 2018.
Resigned 30 June 2023.
Chair of the Nomination and
Remuneration Committee.

B.Comm, PGDA

Hilton is an Operating Partner
at TDM Growth Partners, a
private global investment firm
founded in 2004, with offices
in Sydney and New York. Hilton
is a Non-Executive Director
of Guzman Y Gomez Mexican
Taqueria, and Somnomed Ltd.
Prior to joining TDM, Hilton was
the Co-CEO of Accent Group
Limited (AX1), formerly RCG
Corporation Ltd, which is the
regional leader in the retail and
distribution of performance
and lifestyle footwear Australia
and New Zealand. Hilton joined
RCG in 2006 when the business
had a market capitalisation of
$8 million. Over the 12 years from
2006 to 2018, the team grew the
business to a $800 million market
capitalisation and delivered
total shareholder returns in
excess of 25% CAGR. Hilton
has over 25 years’ experience
as CEO of multiple consumer
businesses with proven skills
in growing the business and
delivering outstanding returns for
shareholders.

Other current directorships:
SomnoMed Ltd

Former directorships
(last 3 years): Nil

Interests in shares: 100,000

Non-Executive Director,
appointed February 2022. Stood
down December 2022 following
the EGM.
Member of the Nomination and
Remuneration Committee.

B Bus, Marketing and Finance

Andrew was the President –
Verizon at the Publicis Groupe of
advertising agencies. Leading over
850 staff delivering across media,
customer experience, data and
analytics, marketing optimisation
and creative for Verizon Consumer,
Business, and Media Groups,
Andrew was accountable
for accelerating change for
marketing, channel development,
sales effectiveness, customer
analytics and operations,
overseeing $1.5 billion in client
spend and delivering over $200
million in group revenue. Andrew
has held Chief Marketing roles at
JPMorgan Chase & Co, National
Australia Bank (NAB) and was Vice
President Digital Transformation
and Marketing at McDonald’s.
Andrew has extensive experience
as a senior executive in Australia,
Asia Pacific, and the United States.

Other current directorships: Nil

Former directorships
(last 3 years): Nil

Interests in shares: Nil

PACIFIC SMILES GROUPANNUAL REPORT 2023Executive Team

Meetings of Directors

The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board
committee held during the year ended 30 June 2023, and the number of meetings attended by each
Director were:

Director’s Report

Board Meetings

Audit & Risk
Committee

Scheduled

Attended

Unscheduled

Attended

Held

Attended

Nomination &
Remuneration
Committee
Held

Attended

Property
Committee

Held

Attended

Mr Paul Robertson
Interim Chief Executive Officer
B.Comm

Mr Matthew Cordingley
Chief Financial Officer
B.Bus

Ciara Rocks
Chief Operating Officer
BA (Social Science), MBA

Paul is an experienced Chief
Executive Officer and senior
executive. He joined Pacific Smiles
Group in 2008 as Chief Operating
Officer where he spent 13 years
building a deep understanding
of the Company’s operations. In
July 2022, he was appointed Chief
Commercial Officer, enabling him
to leverage his knowledge of the
business and build on established
relationships.

As a CEO Paul has extensive
experience having led a number
of private hospitals for major
operators including Affinity Health,
Healthe Care, and Little Company
of Mary Healthcare.

An experienced leader with
extensive finance and commercial
experience, Matthew’s career over
more than 20 years has spanned
chartered accounting, investment
banking and corporate roles.

Most recently Matthew was Head
of Mergers and Acquisitions at
Healius Limited, a leading ASX listed
healthcare company, where he
was responsible for the company’s
strategic business development,
growth and capital raising activities.
During his tenure at Healius, Matthew
was instrumental in redesigning
the model for investments and
was a member of the Finance
Transformation Committee.

Ciara is an experienced Executive
Leader with over 20 years’ experience
in sales, customer experience and
operations across various service
and retail industries. She is a proven
people leader with the ability to set
and implement business strategies;
meet budgeted revenue and
exceed customer service targets.
Galvanising small and large teams
to deliver performance, managing
change and driving innovation is
Ciara’s passion.

Ciara has previously held the position
of Chief Marketing Officer at Paciifc
Smiles Group and senior positions at
Hunter Water, the Commonwealth
Bank and the NRMA.

Ms Zita
Peach

Mr Phil
McKenzie

Mr Simon
Rutherford

Mr Mark
Bloom

Mr Hilton
Brett

Dr Scott
Kalniz1

Mr Andrew
Knott2

Ms Jodie
Leonard3

Mr Steven
Rubic3

Louise Hayes
Executive General Manager –
People & Culture
B.Bus

Louise is a senior leader with
more than 15 years of experience
focused on people, culture and
change management within
Australia and internationally. She
has a strong background working
across several sectors, including
healthcare, financial services,
government and mining. With
extensive knowledge of navigating
businesses during periods of
growth and change, Louise has
proven success in supporting
organisations to build capability
through people, fostering positive
and inclusive workplace culture,
and enhancing reputation as an
employer of choice.

Troy McGowan
Executive General Manager –
Clinical Excellence
B.Sc, BOH (Dent Sci), Grad Dip
(Dent), DClinDent (Perio)

Dr Troy McGowan is an Australian-
trained periodontist with more than
a decade of experience in clinical
dentistry and health leadership.

Troy spent 13 years in the RAAF where
he held the position of senior dental
officer and specialist career advisor.
As well as his time in the ADF Troy
has worked in the public sector both
as a dentist and periodontist and
has spent the last year and a half in
private specialist practice. He holds
honorary academic positions with
both the University of Queensland
and Central Queensland University
and has published several articles in
peer-reviewed dental journals.

1 Dr Scott Kalniz resides in the United States and was unable to attend a number of meetings called on short notice due to the
time difference.

2 Mr Knott stood down on 19 December 2022 following the EGM.

3 Ms Leonard and Mr Rubic were appointed 8 May 2023.

Scheduled and unscheduled meetings

The Board attended to a regular schedule of Board meetings in FY23. In addition, a number of
unscheduled meetings were held to address out of cycle meetings for issues the Board needed to
attend to during the year.

Company Secretary

Belinda Cleminson of the Automic Group is the Company Secretary.

Indemnity and insurance of officers

During or since the end of the financial year, the Company has paid or agreed to pay a premium in
respect of a contract of insurance insuring Directors, officers and employees of the Company and its
subsidiaries against certain liabilities incurred in that capacity. Disclosure of the total amount of the
premiums and the nature of the liabilities in respect of such insurance is prohibited by the contract
of insurance.

Indemnity and insurance of auditor

The Company has not, during or since the end of the financial year, indemnified or agreed to
indemnify the auditor of the company or any related entity against a liability incurred by the auditor.

PACIFIC SMILES GROUPANNUAL REPORT 2023Non-audit services

During the financial year the following fees were paid or payable for services provided to KPMG,
the auditor of the Company:

Audit services – audit or review of the financial statements

Other services – tax compliance and advisory services

2023
$

190,900

27,000

217,900

2022
$

180,000

26,900

206,900

Details of the amounts paid or payable to the Company’s auditor and related practices of the
auditor for non-audit services provided during the year are set out above. The Board has considered
the position and is satisfied that the provision of the non-audit services is compatible with the
general standard of independence of auditors imposed by the Corporations Act 2001. The Directors
are satisfied that the provision of non-audit services by the auditor did not compromise the auditor
independence requirements of the Corporations Act 2001 for the following reasons:

• All non-audit services have been reviewed by the Board to ensure they do not impact the

impartiality and objectivity of the auditor; and

• None of the services undermine the general principles relating to auditor independence as set

out in APES 110 Code of Ethics for Professional Accountants.

Rounding of amounts

The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been
rounded off in accordance with that Corporations Instrument to the nearest dollar.

Auditor’s independence declaration

The lead auditor’s independence declaration in accordance with section 307C of the Corporations
Act 2001, for the year ended 30 June 2023 has been received and can be found on page 51 of the
financial report.

Auditor

KPMG continues in office in accordance with section 327 of the Corporations Act 2001.

Other Information

The following information, contained in other sections of this Financial Report, forms part of this
Directors’ Report:

1. Operating and Financial Review details in pages 8–20 inclusive in the Financial Report.
2. Matters subsequent to end of the financial year as outlined in page 25.
3. The Remuneration Report on pages 34–50.
4. Auditor’s Independence Declaration on page 51.

Voting of shareholders at last year’s annual general meeting and general
meeting

AGM Voting Outcomes
The Board was disappointed with the outcomes of the 28 November 2022 AGM as they did not
receive shareholder support for several resolutions as follows:

Resolution

Award of Performance Rights to the MD & CEO

Approval of the FY 2022 Remuneration Report

Shareholder Votes
Against

54.1%

36.3%

Director’s Report

A ‘first-strike’ occurs where a Remuneration Report receives a ‘no’ vote of 25% or more at the AGM.
If this happens, the Company’s next subsequent Remuneration Report must explain whether and
the extent to which shareholders’ concerns have been considered. The FY 2022 Remuneration
Report received a no vote of 36.3% resulting in a first strike which was disappointing given the strong
support of the proxy advisers and institutional investors. All proxy advisors that reported on the
Company recommended in favour of the Remuneration Report. The Board sought feedback from
investors and were advised they would like to see a number of issues addressed including:

• Diversity of the Board.

• The LTI hurdles were too low.

• The quantum of the LTI awards were too high.

• Shareholders requested that Board governance be improved.

The Board has taken the feedback seriously and made considerable progress towards addressing
the issues and concerns raised by shareholders. More details on the proposed changes and status
of changes are outlined in the Remuneration Report.

Extraordinary General Meeting (EGM) held 19 December 2022
On 7th November 2022, shareholders were advised a general meeting of shareholders of the Pacific
Smiles Group was requisitioned by Dr. Alex Abrahams, who at the time was the beneficial owner of
approximately 12.07% of shares of Pacific Smiles Group.

Dr Abrahams requested shareholders consider a proposal to remove all seven Directors of the
Board at the time, including the MD & CEO, and replace them with four new Directors proposed by
Dr Abrahams, including himself. The Board recommended shareholders vote against the proposed
removal and replacement of the Board as they considered it was not in the best interests of
the Company.

On 13 December 2022, shareholders were advised Dr Abrahams had withdrawn his proposal to
remove Ms Zita Peach and Mr Mark Bloom as Directors of the Company, but he would proceed to a
vote to remove and replace all other Directors via a Extraordinary General Meeting (EGM) to be held
on 19 December 2022. Resolutions for the removal of six Directors on the Board of Pacific Smiles were
not successful and the resolution for the removal of Mr Andrew Knott was passed at the EGM.

The Board was disappointed an EGM had been called and is committed to working with all
shareholders to build a more productive relationship that aligns the interests of all shareholders and
enables the Board and management to work in the best interests of the Company.

This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the
Corporations Act 2001.

On behalf of the Directors

Zita Peach
Chairperson

23 August 2023

PACIFIC SMILES GROUPANNUAL REPORT 2023

Remuneration Report

Dear Shareholders

On behalf of the Board, I am pleased to share with
you the FY23 Remuneration Report. Throughout
FY23, management and the broader team
worked hard to deliver on the strategy, focusing
on driving operational excellence, maximizing
asset utilization, driving employee and dentist
engagement and delivering same centre growth.

The Company continued to show strong resilience
and agility as it continued to recover from the
interruption caused by the Covid pandemic, and
the challenging business environment.

Our customer focused culture delivered exceptional
growth in the second half of the year, achieving
record revenue days. The focus on driving
operational excellence and a desire to provide an
outstanding patient experience, is evidenced by
achieving a year end patient NPS score of 90, an
exceptional outcome that places Pacific Smiles at
the top of the upper quartile of NPS scores.

Strike against the FY 2022
Remuneration Report

The Board was disappointed by the outcomes
of the November 2022 AGM and has taken
the shareholder feedback seriously. Several
initiatives have been undertaken to address the
issues raised, including a refresh of the Board
of Directors, improving Board diversity, and a
review of incentive plans for FY24.

As part of the Board refresh, I was appointed
in May 2023 to the Board as a Non-Executive
Director, along with my fellow Director,
Steven Rubic. The refresh also resulted in the
resignation in June of Hilton Brett. As a result
of Hilton’s resignation, I was appointed Chair
of the Nomination & Remuneration Committee
and along with my committee colleagues,
immediately commenced a review of the
remuneration framework to ensure it is fit for the
Company’s purpose, improves the alignment
of Executives interest with shareholder interests,
and enhances employee engagement. The
Board would like to thank Hilton and Andrew
for their contribution during their time on the
Board. The final stage of the Board refresh will be
announced prior to the AGM.

Management Changes in FY 2023

The management team was restructured in
July 2022, resulting in a number of promotions
and appointments. Paul Robertson was
appointed Chief Commercial Officer, Ciara
Rocks was promoted to Chief Operating Officer,
Alice Telford was promoted to EGM Marketing
and Louise Hayes was promoted to EGM People
& Culture. It was pleasing to see the number of
women promoted to senior leadership positions
and is testament to the breadth of internal
talent. In November 2022, Dr Troy McGowan,
a specialist periodontist, was appointed EGM
Clinical Excellence. This is a critical role that
strives to improve the services Pacific Smiles
provides to dentists.

Board Refresh

As an outcome of the feedback from the AGM
and EGM, a significant refresh of the Board was
commenced with a clear focus on delivering
updated skill requirements including stronger
experience in governance, healthcare, marketing
& digital, remuneration and ASX listed company
experience. There was also a Board vacancy to
fill as a result of Andrew Knott stepping down
following the December 2022 EGM.

Incentive Outcomes

Although guidance was met, the EBITDA
target was delivered at the lower end of the
target range and therefore resulted in a lower
Short-Term Incentive (STI) payout. In addition,
only one of the three non-financial metrics was
delivered, resulting in 17% of the STI being earned
by KMP. The Board did not apply its discretion
to this outcome. Shareholders did not approve

the award of equity to the CEO at the November
2022 AGM and fed back a number of issues that
the Board has since considered. As a result of the
feedback, no award of equity was made under
the Long Term Incentive (“LTI”) plan.

FY24 Remuneration Plans

Since joining the Board, extensive work has
been undertaken to review the remuneration
framework and the measures used to reward
short and long-term performance. The key
focus has been to align the Executive team
with the Company’s FY24 strategic priorities.
This has resulted in benchmarking of Executive
remuneration by an independent remuneration
consultant and a range of improvements to the
remuneration framework that will include:

• A redesign of the STI plan to drive balanced

delivery of patient fee and EBITDA
outcomes, as well as non-financial metrics
related to employee, patient and dentist
engagement.

• A new LTI plan focused on delivering three

key metrics over a 3-year period and
addressing a number of issues raised by
investors.

interests and with more skin in the game.
While the FY24 LTI is being structured to focus
management on restoring shareholder value,
the STI will further support shareholder alignment
by awarding the STI as a combination of cash
and equity. Further details will be disclosed in the
FY24 Remuneration Report.

In Summary

Despite a challenging year with various
disruptions, the team have delivered guidance
communicated to the market whilst also driving
delivery of key strategic priorities.

The Board has made considerable progress in
delivering a Board refresh, adding more diversity
and experience to ensure valuable oversight of
the future growth of the company.

We remain focused on progressing the strategic
agenda in FY 2024 as we continue to profitably
scale and grow the Pacific Smiles Group.

Engagement of Executives in
FY 2024 and beyond

Jodie Leonard

Chair Nomination & Remunerations Commitee

As the Company has worked through the
turmoil and disruptions of the pandemic and
subsequently the volatility and distractions
of the shareholder resolutions at the EGM,
management has remained focused on
achieving revenue and profit growth. This has
not been easy, but it is pleasing to see positive
momentum building towards achieving near
and midterm goals.

The Board is conscious of shareholders’
feedback regarding their concern to see
management more closely aligned with their

PACIFIC SMILES GROUPANNUAL REPORT 2023Remuneration report (audited)

1.0 Remuneration at a Glance

The Board of Directors are pleased to present the Remuneration Report for the Pacific Smiles Group
for the financial year ended 30 June 2023.

Our remuneration framework is designed to support delivery of Pacific Smiles Group’s strategic
priorities:

The Remuneration Report is set out under the following headings below:

Remuneration Report

Strong and
Engaged
Culture

Operational
Excellence

Network
Growth

Same Centre
Growth

Innovation

Total
Shareholder
Returns

Remuneration Principles

Clear principles guide our remuneration strategies and form the basis of Pacific Smiles Group’s
Remuneration Policy. The key principles are:

Attract and
retain talent

Merit
based

Market
competitive

Align with
Strategy

Reward
fairly

Comply with
all legal &
regulatory
requirements

1.1 Remuneration Framework

The remuneration framework has been designed to align Executive reward to shareholders’ interests.

TOTAL FIXED REMUNERATION
(TFR)

SHORT TERM INCENTIVE
(STI)

LONG TERM INCENTIVE
(LTI)

TFR consists of base salary
and superannuation.

TFR is set in relation to
the external market and
considers:

• strategic value of the role

• size and complexity of

the role

•

individual responsibilities

• experience and skills.

TFR is targeted broadly in
line with the 50th percentile of
similar companies.

The STI is currently paid as
cash for achievement of a
mix of short-term corporate
and personal targets.

The short-term business
objectives reflect the early
stage of the company and
are primarily based on
achievement of the following
goals:

• EBITDA $

• NPS outcomes

The LTI aligns Executives with
the Company performance
and with the goals of
shareholders via the award
of Performance Rights.

No LTI award was awarded
in FY23. The LTI plan is being
restructured for FY24.

1.0

2.0

3.0

4.0

Remuneration framework
FY23 Executive KMP Remuneration Mix

Short term incentive (STI)
Long term incentive (LTI)
Service Agreements
FY24 Remuneration changes

Remuneration at a Glance
1.1
1.2
Executive KMP Remuneration
2.1
2.2
2.3
2.4
Governance
3.1
3.2
3.3
KMP and Non-Executive Director Remuneration
4.1
4.2
4.3
4.4

The Role of the Board
The Role of the Nomination and Remuneration Committee (NRC)
The Role of Independent Remuneration Advisors

Details of Remuneration
KMP Performance Rights
KMP and Non-Executive Director Shareholding
Additional disclosures relating to key management personnel.

This report details the Key Management Personnel (KMP) remuneration arrangements for the consolidated
entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations.

Persons covered in the Remuneration Report

Non-Executive Directors

Role

Ms Zita Peach

Mr Simon Rutherford

Mr Hilton Brett

Mr Mark Bloom

Dr Scott Kalniz

Mr Andrew Knott

Ms Jodie Leonard

Mr Steven Rubic

Executive KMP

Mr Phil McKenzie

Appointed 18 August 2017 and subsequently Chair on 19 February 2020.
Independent Non-Executive Director, Chair of the Board, member of
Nominations and Remuneration Committee.

Appointed 24 September 2003. Independent Non-Executive Director,
Chair of the Audit & Risk Management Committee, and member of the
Property Committee.

Appointed 24 August 2018. Independent Non-Executive Director, Chair
of Nomination & Remuneration Committee. Resigned 30 June 2023.

Appointed 18 August 2019. Independent Non-Executive Director,
Chair of Property Committee, member of Audit & Risk Management
Committee.

Appointed 28 January 2021. Independent Non-Executive Director
appointed to the Audit & Risk Management Committee 18 August 2023.

Appointed 7 February 2022. Independent Non-Executive Director,
member of the Nomination & Remuneration Committee. Stood down
on 19 December 2022 following the EGM.

Appointed 8 May 2023. Independent Non-Executive Director, member
of the Nomination & Remuneration Committee. Appointed Chair of
Nomination & Remuneration Committee 30 June 2023.

Appointed 8 May 2023. Independent Non-Executive Director, member
of the Nomination & Remuneration Committee and member of the
Property Committee.

Group CEO and Managing Director (CEO) appointed 29 October 2018,
resigned 31 August 2023.

Mr Matthew Cordingley

Chief Financial Officer (CFO) appointed 12 April 2021.

Mr Paul Robertson

Chief Commercial Officer (CCO) appointed 5 February 2016, appointed
as Interim Chief Executive Officer (CEO) 1 September 2023.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Remuneration Report

2.0 Executive KMP Remuneration

The Company aims to reward Executives based on their position and responsibility, with a level
and mix of remuneration which has both fixed and variable components. In determining Executive
remuneration, the Board aims to ensure that remuneration practices are:

• Competitive and reasonable, enabling the Company’s to attract and retain key talent;

• Aligned to the Company’s strategic and business objectives, and the creation of shareholder

value;

• Transparent;

• Acceptable to shareholders; and

• Reward for performance.

The Executive remuneration and reward framework has four components:

(i)

Fixed remuneration which primarily consists of base salary and superannuation;

(ii) Short term performance incentives (STI’s);

(iii) Long term incentives (LTI’s); and

(iv) Other remuneration such as statutory benefits including long service leave.

The combination of these comprises the Executive’s total remuneration.

In FY23, the Short-Term Incentive Plan is based on awarding cash remuneration for delivery
of financial and strategic outcomes as a result of delivering key budget targets for the period
1 July 2022 to 30 June 2023. STI outcomes are based on measurement of target outcomes and
release of the audited financial accounts. Executives are eligible to earn an STI payment as a
percentage of Total Fixed Remuneration (TFR – base salary + superannuation) as follows.

Executive KMP

CEO

Other Executive KMP

Eligible STI %

50%

35%

1.2 FY23 Executive KMP Remuneration Mix

The remuneration mix KMP are eligible to earn in FY23 follows:

Chief Executive Officer – Mr Phil McKenzie

Total Fixed
Remuneration 24 %

Maximum
STI 12 %

h
c
t
e
r
t

(50% of TFR) S

(100% of TFR)

1Stretch STI 4% (17% of TFR).

Chief Financial Officer – Mr Matthew Cordingley

Total Fixed Remuneration 35 %

(100% of TFR)

1Stretch STI 6% (18% of TFR).

Maximum
STI 12 %

(35% of TFR) S

Chief Commercial Officer – Mr Paul Robertson

Total Fixed Remuneration 35 %

(100% of TFR)

1Stretch STI 6% (18% of TFR).

Maximum
STI 12 %

(35% of TFR) S

h
c
t
e
r
t

Target LTI2 60 %

(251% of TFR)

Target LTI2 47 %

(135% of TFR)

Target LTI2 47 %

(135% of TFR)

2Value of LTI based on 60-day VWAP, noting LTI was not awarded in FY23 as it did not receive shareholder approval.

Consolidated entity performance and link to remuneration
The following table shows key performance indicators (KPI’s) for the consolidated entity over the last
five years.

STI Outcome

LTI Outcome – % vesting

Dividends per share – ordinary (cents)

2023

17.0%

Nil

0.35

2022

32.9%

Nil

0.00

2021

92.5%

Nil

2.40

2020

0.0%

Nil

2.40

2019

0.0%

Nil

5.80

Underlying EBITDA $ pre-AASB 161

$24.1m

$11.3m

$33.1m

$23.5m

$22.8m

Net Promoter Score (NPS) – patient

Share price ($) – 60 days VWAP up to 30
November of relevant year

$1.222

$1.47

$2.79

$1.85

$1.65

Total Shareholder Return (TSR) ($)

Basic Earnings Per Share (EPS) (cps)

(0.25)

1.5

(1.32)

(2.8)

0.96

8.3

0.23

4.2

0.29

5.6

1For details of underlying EBITDA pre-AASB 16 please see the reconciliation in the Operation Report.
22023 share price is calculated based on 60 day average VWAP to 30 June 2023.

PACIFIC SMILES GROUPANNUAL REPORT 2023

2.1 Short Term Incentive (STI)

The STI targets for FY23 are outlined below:

Must achieve “Meets Expectations” at year-end review

HURDLE

If financial KPI’s not achieved, Non-Financial KPI’s will not be paid.

MODIFIER

FINANCIAL KPI

70% WEIGHTING

ON-FINANCIAL KPI

30% WEIGHTING

EBITDA $ TARGET

PAYOUT

TARGET

STRETCH

$24m

$25m

$26m

$27m

$28m

14%

31%

48%

61%

75%

$28.9m

100%

NPS

Weighting Target

Payout

Target

Payout

Patients

Dentists

Employees

10%

25%

33.3%

STRETCH BONUS

If EBITDA ≥$30m is delivered, a pool of $500k is available for
additional bonus payment to Executive team

No STI is payable if the STI Target and hurdles are not met by the Executives. If the Stretch Bonus
target is achieved, the stretch bonus will be split between Executives at the discretion of the Board.

FY23 STI Outcomes
In FY23,17.0% of the STI was achieved based on delivery of the financial KPI, along with one of the three
non-financial KPI’s. Whilst it’s disappointing the engagement KPI for dentists and employees were
not achieved, the outcomes did improve for these cohorts, and they will continue to be a priority in
FY24. The engagement surveys undertaken during the year in relation to employees showed positive
responses in areas including level of management support and improved focus on key behaviours,
standard operating procedures, and consistent onboarding. Dentist engagement survey feedback
highlighted high levels of satisfaction relating to dentists’ scope of practice, continuing levels of
education and the opportunity for peer networking.

FINANCIAL KPI’s

70% WEIGHTING

NON - FINANCIAL KPI’s

30% WEIGHTING

EBITDA Target

Outcome

NPS Target

Outcome

$24m

Met

Dentists

Patients

Employees

Missed

Met

Missed

Remuneration Report

The following table shows the split of STI earned between financial and non-financial STI targets.

2023

2022

2023

2022

% of TFR paid as STI
to CEO

% of TFR paid as STI
to Exec KMP

% of TFR paid as STI
to CEO

% of TFR paid as STI
to Exec KMP

Financial targets

Non-financial
targets

4.7%

3.7%

Total STI Achieved

8.5%

3.4%

2.6%

6.0%

0.0%

10.0%

0.0%

7.3%

2.2 Long Term Incentive (LTI)

The LTI plan is designed to assist in the motivation, retention, and reward of Executives. The LTI plan
is designed to align the interests of Executives more closely with the interests of shareholders by
providing an opportunity for Executives to receive an equity interest in the Company through the
granting of Performance Rights based on the achievement of long-term financial targets.

Legacy LTI Plans
The following LTI grants remain on foot to be tested in the normal course.

Year

2020

2021

2022

2023

Tranche

Hurdle

Vesting occurs when TSR achieved between 10%-25% CAGR

N/A

No award granted

Outcome
On foot1

On foot

N/A

1Tranche 6 is due for measurement on 30 November 2023. Based on the prevailing share price, it is considered unlikely that
Tranche 6 Performance Rights will vest.

Key terms and conditions of all grants are as follows:

Plan Rules

Description

Vesting Period All tranches based on 4 year vesting period

Participant

Employees only eligible to participate

Dividends and
Voting Rights

Service
Condition

Performance Rights do not earn dividends and are not entitled to voting rights.

Must be employed at time of vesting to be eligible to covert Performance Rights
to shares. The Board has discretion to apply “Good Leaver” status to employees
who cease to be employed before the vesting period is reached due to genuine
redundancy or death of for other reasons other than as would be determined as a
“Bad Leaver”.

Performance
Conditions

Each tranche vests when total shareholder return, measured over the 4 year
vesting period, is between or above the range of 10-25%

Malus

In the event of fraud, dishonesty, breach of obligations, or in the opinion of the
Board vesting of the Performance Rights would result in an inappropriate benefit,
the Board may make a determination, including the forfeiture of unvested
Performance Rights, to ensure that no unfair benefit is obtained.

Board
Discretion

Board has absolute discretion to determine the extent to which unvested
Performance Rights may vest or lapse, or whether any resulting Shares which are
subject to a restriction period should become unrestricted.

PACIFIC SMILES GROUPANNUAL REPORT 2023
Plan Rules

Description

2.4 FY24 Remuneration Changes

Remuneration Report

Change in
Control

Under the Long-Term Incentive Plan rules, in the event of a Change of Control,
unvested Performance Rights and/or unvested Options will vest on a pro rata
basis based on the proportion of the Performance Period in respect of those
Unvested Performance Rights and/or Unvested Options which has elapsed at
the date of the Change of Control. The Board has discretion as to how to treat
remaining Unvested Performance Rights and Unvested Options including, but
not limited to, Vesting a portion of those Unvested Performance Rights and/or
Unvested Options, applying the specified Vesting Condition performance tests at
an earlier date and Vesting a portion appropriate to that level of achievement,
allowing those Unvested Performance Rights and/or Unvested Options to stay
‘on foot‘ and/or allowing those Unvested Performance Rights and/or Unvested
Options to be ‘swapped’ into the acquiring company’s Performance Rights and/or
Unvested Options.

Notwithstanding the terms of the Long-Term Incentive Plan, in the event of a
takeover, scheme or arrangement or other transaction that may result in a person
or entity becoming entitled to exercise control over the Company, the Board
has absolute discretion to determine the extent to which unvested Performance
Rights may vest or lapse, or whether any resulting Shares which are subject to a
restriction period should become unrestricted.

Given no LTI tranche to date has resulted in equity vesting, no current Executive KMP has been
awarded shares as part of their remuneration. The structure of the current LTI Plans makes attracting
new Executives, and keeping current Executives engaged and aligned with shareholders a challenge
that will be addressed in FY24.

2023 LTI Plan Offer
In FY23, it was the Company’s intention to adopt an Absolute TSR hurdle to further align Executives
with creating shareholder value.

The Notice of Meeting for the 28 November 2022 Annual General Meeting disclosed the details of the
proposed vesting conditions for the FY23 LTI. The proposed LTI equity grant based on those hurdles
did not receive majority shareholder approval. Some shareholders provided feedback to the Board
to the effect that the hurdles for vesting of the LTI were not considered to be sufficiently challenging,
and the quantum of the award to the CEO was too high.

As a result of the shareholder feedback, no LTI was granted to the CEO or Executive KMP in FY 2023.
The Board are addressing shareholder feedback and the Executive remuneration framework for FY24.

2.3 Service Agreements

Remuneration and other terms of employment for 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 plans are subject to the
Board’s discretion.

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.

Executive KMP

Role

Mr Phil McKenzie

Mr Matthew
Cordingley

Mr Paul Robertson

Chief Executive
Officer

Chief Financial
Officer

Chief Commercial
Officer

Period of notice
from Company

Period of notice
from employee

Termination
payments

6 months

3 months

Given the Company received a strike on the Remuneration Report at the November 2022 AGM
meeting, the Board has taken the feedback seriously and remuneration plans will be restructured for
FY 2024. Changes will include:

• Executive fixed remuneration will be reviewed following completion of external market

benchmarking versus a comparable set of companies.

• The STI plan will be redesigned to primarily reward Executives for balanced delivery of EBITDA $
and Patient Fee targets and key non-financial targets related to patient, dentist and employee
engagement.

• STI’s will be paid as a combination of cash and deferred equity to align Executives more

strongly with the interest of shareholders. This will also provide a vehicle for clawback should
the need arise.

• A new LTI plan focused on delivering three key metrics over a 3-year period.

3.0 Governance

3.1 The Role of the Board

Ultimately, the Board is responsible for the Company’s remuneration policies and practices. The role
of the Board is to ensure that appropriate and effective remuneration packages and policies are
in place to attract and retain high quality Executives and Non-Executive Directors, and to motivate
Executives to create value for our shareholders.

When reviewing performance and determining incentive outcomes, the Board ensures that
performance outcomes align with market-reported outcomes, management activity and
shareholder outcomes. To achieve this alignment, the Board retains discretion over final
performance and incentive outcomes and recognizes that there are limited cases where
adjustments should be sought.

The Board also monitors compliance with Board approved remuneration policies and practices and
stays abreast of remuneration trends and the general external environment.

3.2 The Role of the Nomination and Remuneration Committee (NRC)

The Nomination and Remunerations Committee’s role is to review and make recommendations
to the Board on remuneration packages and policies related to the Directors and Executives,
and to ensure the remuneration policies and practices are appropriate and aligned to company
performance and shareholder expectations.

Under its delegation of authority, the NRC is empowered by the Board to engage external consultants
and other professional advisors if necessary to carry out its duties. The NRC ensures the CEO is not
present at any discussions relating to the determination of his own remuneration.

3.3 The Role of Independent Remuneration Advisors

From time to time, the NRC may receive advice from independent remuneration consultants on
benchmarks for Non-Executive Director and Executive remuneration arrangements. Benchmarks
consider similar organizations in the Australian market where it competes for talent. If advisors
are engaged, they report directly to the Chair of the NRC. The agreement for the provision of
remuneration consulting services is executed by the Chair of the NRC under delegated authority on
behalf of the Board.

PACIFIC SMILES GROUPANNUAL REPORT 2023
4.0 KMP and Non-Executive Director Remuneration

Fees and payments to Non-Executive Directors should reflect the demands and responsibilities of
their role. Non-Executive Directors’ fees and payments are reviewed annually by the Nomination
and Remuneration Committee and may consider independent benchmark information to ensure
Non-Executive Directors’ fees and payments are appropriate and in line with the market. The
Chairman’s fees are determined independently of the fees of other Non-Executive Directors based
on comparative roles in the external market. The Chair is not present at any discussions about her
own remuneration determination.

ASX listing rules require the aggregate Non-Executive Directors’ remuneration be determined
periodically by a general meeting. The most recent determination was at the Annual General
Meeting held on 18 November 2020, where the shareholders approved a maximum annual
aggregate remuneration of $800,000. For the financial year ended 30 June 2023, the fees payable
to the current Non-Executive Directors (whether in cash or securities) did not exceed $800,000
in aggregate.

Role

Chair

Non-Executive Directors

FY23 Fixed Remuneration
including superannuation

$135,000

$80,000

Non-Executive Directors who devote special attention to the business of the Group or who perform
services which, in the opinion of the Nomination and Remuneration Committee, are outside the
scope of ordinary duties of a Director, may be remunerated for the services by the Company. There
are no retirement benefit schemes for Directors, other than statutory superannuation contributions.

Remuneration benchmarking continues to highlight that Non-Executive Director fees have not kept
pace with the market or growth of the Company since listing. External benchmarking has indicated
the Non-Executive Directors are paid well below the 50th percentile benchmark of comparable size
companies. To attract and retain high calibre Directors, Non-Executive Director fees will be increased
over future years to be more reflective of the Board’s significant workload.

This will be reviewed by the Board as Director fees more closely align with the market norms.

4.1 Details of remuneration

The key management personnel of the Company consisted of the following Non-Executive Directors
of Pacific Smiles Group Limited for the full year unless specified:

• Ms Zita Peach
• Mr Simon Rutherford
• Mr Hilton Brett (resigned 30 June 2023)
• Mr Mark Bloom
• Dr Scott Kalniz
• Mr Andrew Knott (stood down on 19 December 2022 following EGM)
• Ms Jodie Leonard (appointed 8 May 2023)
• Mr Steven Rubic (appointed 8 May 2023)

And the following Executive KMP:

• Mr Phil McKenzie (Managing Director and Chief Executive Officer – ”CEO”)
• Mr Paul Robertson (Chief Commercial Officer – ”CCO”)
• Mr Matthew Cordingley (Chief Financial Officer – ”CFO”)

Remuneration Report

Details of the remuneration of Key Management Personnel of the Group are set out in the following
tables:

Short-term benefits

Post-
employ-
ment
benefits

Long-
term
benefits

Share-
based
payments6

Cash

bonus Other

Super-
annuation

Long
service
leave

Rights

Total

Cash
salary
and fees

121,894

80,000

72,263

80,000

11,795

8,354

36,332

2023

Non-Executive
Directors:

Ms Zita Peach
Mr Simon Rutherford4

Mr Mark Bloom
Mr Hilton Brett3
Dr Scott Kalniz5
Ms Jodie Leonard1&4
Mr Steven Rubic1
Mr Andrew Knott2

Executive Directors:

–

Mr Phil McKenzie

572,799

49,806

Other Key
Management
Personnel:

Mr Paul Robertson

285,174

18,441

Mr Matthew Cordingley

408,798

24,777

1,749,672

93,024

1 Appointed 8 May 2023.

2 Stood down following EGM on 19 December 2022.

3 Resigned 30 June 2023.

4 Directors fees include an allowance for superannuation.

–

12,799

–

7,588

–

877

3,815

–

134,693

80,000

79,851

80,000

11,795

9,231

40,147

27,500

7,301

190,142

847,548

27,500

115,167

8,096

2,725

18,122

145,221

484,432

181,884

645,684

517,247 2,493,232

5 Dr Kalniz is a non-resident of Australia and superannuation is therefore not applicable.

6 Reflects the movement in the carrying value of Performance Rights awarded in previous years, noting that they did not vest
this year.

There were no termination benefits paid or payable to Key Management Personnel during 2023.

PACIFIC SMILES GROUPANNUAL REPORT 2023Short-term
benefits

Post-
employ-
ment
benefits

Long-
term
benefits

Share-
based
payments4

Cash
salary
and fees

Cash
bonus

Other

Super-
annuation

Long
service
leave

Rights

Total

2022

Non-Executive
Directors:

Ms Zita Peach

Mr Simon Rutherford

Mr Mark Bloom

Mr Hilton Brett
Dr Scott Kalniz1
Mr Andrew Knott2
Mr Ben Gisz3

Executive Directors:

114,155

75,000

68,493

76,977

24,388

30,375

–

Mr Phil McKenzie

590,268

56,567

Other Key
Management
Personnel:

Mr Paul Robertson

315,828

21,925

Mr Matthew Cordingley

398,475

29,471

1,762,452

107,963

–

11,416

–

6,849

–

2,439

–

125,571

75,000

75,342

76,977

26,827

30,375

27,500

17,278

376,211

1,067,824

27,500

110,053

70,448

240,933

676,634

2,710

163,344

621,500

90,436

780,488

2,851,392

1 Dr Kalniz is a non-resident of Australia and superannuation is therefore not applicable.

2 Appointed 7 February 2022.

3 Resigned 23 November 2021.

4 Reflects the movement in the carrying value of Performance Rights, noting that they did not vest this year.

Remuneration Report

At Risk Remuneration Summary

The proportion of remuneration linked to performance and the fixed proportion are as follows:

Name

2023

2022

2023

2022

2023

2022

Fixed remuneration

At risk – STI

At risk – LTI

Non-Executive Directors

Ms Zita Peach

Mr Simon Rutherford

Mr Mark Bloom

Mr Hilton Brett

Dr Scott Kalniz

Ms Jodie Leonard

Mr Steven Rubic

Mr Andrew Knott1

Mr Ben Gisz2

Executive KMP

Mr Phil McKenzie

Mr Matthew Cordingley

Mr Paul Robertson

100%

–

24%

35%

100%

25%

28%

23%

–

16%

18%

–

13%

10%

60%

47%

62%

69%

1 Appointed 7 February 2022 and stood down 19 December 2023 following the EGM.

2 Resigned 23 November 2021.

Cash STI Bonus Forfeited

The proportion of the cash bonus paid/payable or forfeited is as follows:

Name

Executive KMP

Mr Phil McKenzie

Mr Matthew Cordingley

Mr Paul Robertson

Cash bonus paid/payable

Cash bonus forfeited

2023

8.5%

6.0%

2022

10.0%

7.3%

2023

2022

91.5%

94.0%

90.0%

92.7%

Share-based compensation

Issue of shares
There were no Shares issued to Directors and other Key Management Personnel as part of compensation
during the year ended 30 June 2023.

Options
There were no Options over Ordinary Shares issued to Directors and other Key Management Personnel
as part of compensation that were outstanding as of 30 June 2023.

Performance Rights
There were no Performance Rights over Ordinary Shares issued to Directors and other Key Management
Personnel as part of compensation that were outstanding as of 30 June 2023.

PACIFIC SMILES GROUPANNUAL REPORT 2023

4.2 KMP Performance Rights

The terms and conditions of each grant of Performance Rights over ordinary shares affecting
remuneration of Directors, Key Management Personnel and other members of the Executive team in
FY23 or previous reporting years are as follows:

Grant date1

Number
of rights
granted

Vesting date

Fair
value
per right
at grant
date

Number
of Rights
Forfeited
in Total as
of 30 June
2022

30 November 2018

3,026,000

30 November 2022

$0.470

1,430,500

Number of
Rights that
remain on
foot as of
30 June
2023

–

Number
of Rights
Forfeited
in FY23
1,595,5003

30 November 2019

3,500,000

30 November 2023

$0.610

1,109,000

–

2,391,000

30 November 2020

2,902,430

30 November 2024

$0.880

271,000

300,000

2,331,430

30 November 2021

28 November 2022

2,500,000
nil2

30 November 2025

$1.320

246,092

272,426

1,981,482

nil

n/a

–

1 In November 2021, the Board changed the Performance Rights conditions for Tranches 5 to 8 (grant dates 30 November 2018,
30 November 2019, 30 November 2020 and 30 November 2021). In order to ensure an undue advantage was not provided to
Executives, a total of 1,336,000 Performance Rights were cancelled and disclosed to the market.
2 28 November 2022, at the Annual General Meeting, Resolution 5, being the “Approval of Issue of Incentive Securities to

Phil McKenzie, Managing Director”, was not approved by a majority of PSQ shareholders. Consequently, no performance rights
were issued.

3 Performance Rights associated with grant date 30 November 2018 did not achieve the relevant performance hurdles at the

30 November 2022 vesting date and as such all remaining performance rights were forfeited.

Performance Rights granted to date do not carry dividend or voting rights.

Performance Rights holding
The following table provides details of the number of performance rights over ordinary shares
movement during the year by key management personnel of the consolidated entity, including their
personally related parties, is set out below:

Performance Rights over
Ordinary Shares

Mr Phil McKenzie

Mr Paul Robertson

Mr Matthew Cordingley

Balance at
the start of
the year

3,550,000

1,254,371

667,831

5,472,202

Granted

Vested

–

Expired/
forfeited/
other4

(850,000)

(222,000)

Balance at the
end of the year

2,700,000

1,032,371

667,831

(1,072,000)

4,400,202

4The rights expired/forfeited during the year relates to Performance Rights granted on 30 November 2018.

The number of Performance Rights over Ordinary Shares in the company held during the financial
year by key management personnel of the consolidated entity, including their personally related
parties, is set out below:

Remuneration Report

30
November
2018

30
November
2019

–

1,500,000

355,000

–

Grant date

30
November
2020

700,000

355,000

350,000

Mr Phil McKenzie

Mr Paul Robertson

Mr Matthew
Cordingley

30
November
2021

30
November
2022

500,000

322,371

317,831

–

Balance at
the end of
the year

2,700,000

1,032,371

667,831

4,400,202

1,855,000

1,405,000

1,140,202

Details of vesting profiles of Performance Rights held by each Key Management Personnel of the
consolidated entity as at the end of financial year are detailed below:

Key Management
Personnel

Grant date

Number of
performance
rights

Vesting date

Minimum
value yet
to vest5

Maximum
value yet
to vest6

Mr Phil McKenzie

30 November 2019

1,500,000 30 November 2023

30 November 2020

700,000 30 November 2024

30 November 2021

500,000 30 November 2025

Mr Paul Robertson

30 November 2019

355,000 30 November 2023

30 November 2020

355,000 30 November 2024

30 November 2021

322,371 30 November 2025

Mr Matthew Cordingley 30 November 2020

350,000 30 November 2024

30 November 2021

317,831 30 November 2025

nil

$95,948

$218,594

$399,208

$22,078

$110,859

$257,386

$109,297

$253,762

5 The minimum value of Performance Rights yet to vest is nil since the rights will be forfeited if the vesting conditions are not met.

6 The maximum value of Performance Rights yet to vest is determined based on the amount of the grant date fair value that is yet
to be expensed.

PACIFIC SMILES GROUPANNUAL REPORT 20234.3 KMP and Non-Executive Directors Shareholding

The number of Shares in the Company held during the financial year by each Director and other
members of Key Management Personnel of the consolidated entity, including their personally related
parties, is set out below:

Balance at
the start of
the year

Received
as part of
remuneration

Additions

Disposals/
other

Balance at
the end of
the year

Ordinary Shares

Non-Executive Directors

Ms Zita Peach

Mr Simon Rutherford

Mr Mark Bloom

Dr Scott Kalniz
Mr Hilton Brett3
Ms Jodie Leonard2
Mr Steven Rubic2
Mr Andrew Knott1

Executive KMP

Mr Phil McKenzie

Mr Matthew Cordingley

Mr Paul Robertson

50,087

1,744,863

277,952

20,000

100,000

–

10,600

–

200,000

2,403,502

–

20,000

–

20,000

–

50,087

1,744,863

277,952

20,000

100,000

–

20,000

–

10,600

–

200,000

2,423,502

1 Stood down 19 December 2022 following the EGM

2 New Directors have complied with the Securities Trading Policy and have been unable to buy shares/additional since joining the
Board given the timing of their appointment and the Blackout period.

3 Resigned 30 June 2023

4.4 Additional disclosures relating to key management personnel

Loans to Key Management Personnel (KMP) and their related parties
There were no loans to KMP during the year.

Other transactions with KMP and their related parties
Transactions with KMP and/or related parties were conducted on terms no more favourable than
those reasonably expected under arm’s length dealings with unrelated parties.

There were no transactions with KMP and their related parties during the year.

Auditor’s Independence Declaration

Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001

To the Directors of Pacific Smiles Group Limited

I declare that, to the best of my knowledge and belief, in relation to the audit of Pacific Smiles Group
Limited for the financial year ended 30 June 2023 there have been:

ii.

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.

KPM_INI_01

PAR_SIG_01

PAR_NAM_01

PAR_POS_01

PAR_DAT_01

PAR_CIT_01

KPMG

Kevin Leighton

Partner

Newcastle

23 August 2023

This concludes the remuneration report, which has been audited.

KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG
International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used
under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under
Professional Standards Legislation.

ANNUAL REPORT 2023PACIFIC SMILES GROUP
Consolidated Financial Statements

Consolidated Statement of Profit or Loss and
Other Comprehensive Income
FOR THE YEAR ENDED 30 JUNE 2023

Consolidated Balance Sheet
FOR THE YEAR ENDED 30 JUNE 2023

Consolidated Financial Statements

Revenue

Other income

Expenses

Employee expenses – direct

Other direct expenses

Consumable supplies expenses

Employee expenses

Occupancy expenses

Marketing expenses

Administration and other expenses

Depreciation and amortisation expense

Net finance costs

Profit/(loss) before income tax (expense)/benefit

Income tax (expense)/benefit

2023

2022

$’000

165,319

$’000

139,467

2,502

1,293

(617)

(8,333)

(13,172)

(80,095)

(3,940)

(3,553)

(19,653)

(30,192)

(4,343)

(1,313)

(5,305)

(12,321)

(72,812)

(3,798)

(3,427)

(18,176)

(26,324)

(3,821)

3,923

(6,537)

(1,502)

2,006

Note

Profit/(loss) after income tax (expense)/benefit for the year

2,421

(4,531)

Other comprehensive income for the year, net of tax

–

Total comprehensive income for the year

2,421

(4,531)

Basic earnings per share

Diluted earnings per share

Cents

1.5

(2.8)

(2.7)

The above consolidated statement of profit or loss and other comprehensive income should be read
in conjunction with the accompanying notes

ASSETS
Current assets
Cash and cash equivalents

Receivables

Inventories

Income tax refund receivable

Other

Total current assets

Non-current assets
Receivables

Property, plant and equipment

Right-of-use assets

Intangibles

Deferred tax

Total non-current assets

Total assets

LIABILITIES

Current liabilities
Payables

Lease liabilities

Income tax payable

Provisions

Total current liabilities

Non-current liabilities
Borrowings

Lease liabilities

Provisions

Total non-current liabilities

Total liabilities

Net assets

EQUITY

Contributed equity

Reserves

Retained profits/(accumulated losses)

Total equity

1. Restated. Refer to note 24 for further details.

Note

2023

$’000

20221

$’000

18,573

2,946

6,200

–

1,637

29,356

516

62,032

71,455

14,579

10,170

158,752

188,108

19,276

13,750

1,442

4,773

39,241

9,000

70,246

8,354

87,600

126,841

11,805

3,478

5,795

2,378

928

24,384

477

68,866

71,021

13,463

12,416

166,243

190,627

17,521

12,865

–

5,061

35,447

18,500

74,510

3,657

96,667

132,114

61,267

58,513

52,104

15,492

51,917

15,346

(6,329)

(8,750)

61,267

58,513

The above consolidated balance sheet should be read in conjunction with the accompanying notes

PACIFIC SMILES GROUPANNUAL REPORT 2023
Consolidated Statement of Changes in Equity
FOR THE YEAR ENDED 30 JUNE 2023

Consolidated Statement of Cash Flows
FOR THE YEAR ENDED 30 JUNE 2023

Balance at 1 July 2021

Prior period restatement1

Contributed

equity Reserves

$’000

51,917

–

$’000

13,075

–

Retained
profits/
(accumulated
losses)

$’000

(3,810)

Total
Equity

$’000

61,182

(409)

Balance at 1 July 2021 – restated

51,917

13,075

(4,219)

60,773

Loss after income tax benefit for the year

Other comprehensive income for the year,
net of tax

Total comprehensive loss for the year

Share-based payments (note 38)

–

(4,531)

–

(4,531)

2,271

–

2,271

Balance at 30 June 2022

51,917

15,346

(8,750)

58,513

Contributed

equity Reserves

$’000

51,917

$’000

15,346

Retained
profits/
(accumulated
losses)

$’000

(8,750)

Total
Equity

$’000

58,513

–

2,421

–

2,421

–

187

–

52,104

704

–

(558)

15,492

–

(6,329)

704

187

(558)

61,267

Balance at 1 July 2022

Profit after income tax expense for the year

Other comprehensive income for the year,
net of tax

Total comprehensive income for the year

Transactions with owners in their capacity
as owners:
Share-based payments (note 38)

Contributions of equity, net of transaction costs

Dividends paid (note 26)

Balance at 30 June 2023

1. Restated. Refer to note 24 for further details.

The above consolidated statement of changes in equity should be read in conjunction with the
accompanying notes

Note

2023

$’000

2023

$’000

Cash flows from operating activities

Receipts from customers

Payments to suppliers and employees

Interest received

Interest and finance costs paid

Income taxes refunded

Income taxes paid

Net cash from operating activities

169,476

138,372

(129,010)

(112,643)

40,466

25,729

218

(4,561)

(3,850)

5,768

(1,017)

40,874

–

(4,011)

17,897

Cash flows from investing activities

Payments for property, plant and equipment and intangibles

14,16

(11,071)

(23,380)

Proceeds from disposal of property, plant and equipment

Lease payments received from finance leases

Net cash used in investing activities

509

623

625

(10,547)

(22,132)

Cash flows from financing activities

Dividends paid

(Repayment)/proceeds of borrowings

Repayment of lease liabilities

Net cash (used in)/from financing activities

Net increase in cash and cash equivalents

Cash and cash equivalents at the beginning of the financial year

(558)

–

(9,500)

17,500

(13,501)

(12,407)

(23,559)

6,768

11,805

5,093

858

10,947

Cash and cash equivalents at the end of the financial year

18,573

11,805

The above consolidated statement of cash flows should be read in conjunction with the
accompanying notes

ANNUAL REPORT 2023PACIFIC SMILES GROUPNotes to the Consolidated Financial
Statements
Notes to the Consolidated Financial
Statements
FOR THE YEAR ENDED 30 JUNE 2023

Note 1. Corporate information

Note 2. Significant accounting policies

Note 3. Critical accounting judgements, estimates and assumptions

Note 4. Operating segments

Note 5. Revenue

Note 6. Other income

Note 7. Expenses

Note 8. Income tax

Note 9. Current assets – cash and cash equivalents

Note 10. Current assets – receivables

Note 11. Current assets – inventories

Note 12. Current assets – other

Note 13. Non-current assets – receivables

Note 14. Non-current assets – property, plant and equipment

Note 15. Non-current assets – right-of-use assets

Note 16. Non-current assets – intangibles

Note 17. Current liabilities – payables

Note 18. Current liabilities – lease liabilities

Note 19. Current liabilities – provisions

Note 20. Non-current liabilities – borrowings

Note 21. Non-current liabilities – lease liabilities

Note 22. Non-current liabilities – provisions

Note 23. Equity – contributed equity

Note 24. Equity – Prior period restatement – indirect tax liabilities

Note 25. Equity – reserves

Note 26. Equity – dividends

Note 27. Financial instruments

Note 28. Key Management Personnel disclosures

Note 29. Remuneration of auditors

Note 30. Contingent liabilities

Note 31. Commitments

Note 32. Related party transactions

Note 33. Parent entity information

Note 34. Interests in subsidiaries

Note 35. Events after the reporting period

Note 36. Cash flow information

Note 37. Earnings per share

Note 38. Share-based payments

Notes to the Consolidated Financial Statements

Note 1. Corporate information
The consolidated financial statements cover Pacific Smiles Group Limited as a consolidated entity
consisting of Pacific Smiles Group Limited (the “Company”) and the entities it controlled at the end
of, or during, the year. The financial statements are presented in Australian dollars, which is Pacific
Smiles Group Limited’s functional and presentation currency.

Pacific Smiles Group Limited is a listed public company limited by shares, incorporated and
domiciled in Australia. On 21 November 2014 Pacific Smiles Group Limited was listed on the ASX. Its
registered office and principal place of business is:

6 Molly Morgan Drive, Greenhills, New South Wales

A description of the nature of the consolidated entity’s operations and its principal activities are
included in the Directors’ report, which is not part of the financial statements.

The financial statements were authorised for issue, in accordance with a resolution of Directors,
on 23 August 2023. The Directors have the power to amend and reissue the financial statements.

Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the consolidated financial
statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated.

Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian
Accounting Standards and Interpretations issued by the Australian Accounting Standards Board
(‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These
financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board (‘IASB’).

Historical cost convention
The 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, and assets and liabilities held for sale.

New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory
for the current reporting period, including AASB 2020-3 Amendments to Australian Accounting
Standards – Annual Improvements 2018–2020 and Other Amendments (AASB 1, AASB 3, AASB 9,
AASB 116, AASB 137 & AASB 141).

These amendments did not have any impact on the amounts recognised in prior periods and are
not expected to significantly affect the current or future periods.

Any new or amended Accounting Standards or Interpretations that are not yet mandatory
have not been early adopted. The adoption of these Accounting Standards and Interpretations
is not expected to have any significant impact on the financial performance or position of the
consolidated entity.

Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the
consolidated entity only. Supplementary information about the parent entity is disclosed in note 33.

Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of
Pacific Smiles Group Limited (‘company’ or ‘parent entity’) as at 30 June 2023 and the results of all
subsidiaries for the year then ended. Pacific Smiles Group Limited and its subsidiaries together are
referred to in these financial statements as the ‘consolidated entity’.

PACIFIC SMILES GROUPANNUAL REPORT 2023
Subsidiaries are all those entities over which the consolidated entity has control. The consolidated
entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power to
direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the consolidated entity. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction
provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries
have been changed where necessary to ensure consistency with the policies adopted by the
consolidated entity.

The acquisition of subsidiaries is accounted for using the acquisition method of accounting.
A change in ownership interest, without the loss of control, is accounted for as an equity transaction,
where the difference between the consideration transferred and the book value of the share of the
non-controlling interest acquired is recognised directly in equity attributable to the parent.

Where the consolidated entity loses control over a subsidiary, it derecognises the assets including
goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation
differences recognised in equity. The consolidated entity recognises the fair value of the consideration
received and the fair value of any investment retained together with any gain or loss in profit or loss.

Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to
the consolidated entity’s Chief Executive Officer (the chief operating decision maker). The chief
operating decision maker is responsible for allocating resources and assessing performance of the
operating segments.

Revenue recognition
The consolidated entity recognises revenue as follows:

Dental service fees
Dental service fees consist of the revenue generated from service and facility fees and professional
dental fees.

Service and facility fees are generated from the services and facilities provided to dentists practising
out of consolidated entity owned dental centres. Services and facilities include the provision of
fully equipped surgeries, staff, marketing and other support infrastructure. The consolidated entity
invoices the dentists on a monthly basis based on a percentage of patient receipts net of direct
costs, which are costs directly incurred by the dentists. The percentage charged is applied to
monthly patient receipts based on a Services and Facilities Agreement with the dentist. Revenue
is recognised when the performance obligation, being support at the time the dentist provides a
service, occurs. The Services and Facilities Agreement with the dentists allows the dentists the right
to cancel the arrangement with one to three months of notice without penalty.

Professional dental fees are generated from a range of dental services to patients provided by the
employed and contracted dentists. Revenue is recognised at a point in time when the performance
obligation is satisfied on performance of the service for the amount charged to the patient, based on
standard list price.

Dental product sales
The consolidated entity sells a range of dental products. Revenue is recognised when the product is
provided to and paid for by the customer as this is when the performance obligation is satisfied.

Management fees
The consolidated entity provides comprehensive operational support to HBF Dental (HBFD) clinics
across Western Australia. Revenue is recognised when the performance obligation, being the
provision of the managed services to HBFD, is performed.

Income tax
The income tax expense or benefit for the period is the tax payable on that period’s taxable income
based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred
tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment
recognised for prior periods, where applicable.

Notes to the Consolidated Financial Statements

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected
to be applied when the assets are recovered or liabilities are settled, based on those tax rates that
are enacted or substantively enacted, except for:

• When the deferred income tax asset or liability arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a business combination and that, at the time of
the transaction, affects neither the accounting nor taxable profits; or

• When the taxable temporary difference is associated with interests in subsidiaries, associates
or joint ventures, and the timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only
if it is probable that future taxable amounts will be available to utilise those temporary differences
and losses.

The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each
reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable
that future taxable profits will be available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the extent that it is probable that there are
future taxable profits available to recover the asset.

Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset
current tax assets against current tax liabilities and deferred tax assets against deferred tax
liabilities; and they relate to the same taxable authority on either the same taxable entity or different
taxable entities which intend to settle simultaneously.

Pacific Smiles Group Limited (the ‘head entity’) and its wholly-owned Australian subsidiaries have
formed an income tax consolidated group under the tax consolidation regime. The head entity
and each subsidiary in the tax consolidated group continue to account for their own current and
deferred tax amounts. The tax consolidated group has applied the ‘separate taxpayer within group’
approach in determining the appropriate amount of taxes to allocate to members of the tax
consolidated group.

In addition to its own current and deferred tax amounts, the head entity also recognises the current
tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax
credits assumed from each subsidiary in the tax consolidated group.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities in the tax consolidated group.
The tax funding arrangement ensures that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting in neither a contribution by the head
entity to the subsidiaries nor a distribution by the subsidiaries to the head entity.

Current and non-current classification
Assets and liabilities are presented in the balance sheet based on current and non-current
classification.

An asset is classified as current when it is either expected to be realised or intended to be sold or
consumed in the consolidated entity’s normal operating cycle; it is held primarily for the purpose of
trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash
or cash equivalent unless restricted from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when it is either expected to be settled in the consolidated entity’s
normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within
12 months after the reporting period; or there is no unconditional right to defer the settlement of the
liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

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.

PACIFIC SMILES GROUPANNUAL REPORT 2023Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any allowance for expected credit losses. Trade
receivables are generally due for settlement within 30 days.

The consolidated entity has applied the simplified approach to measuring expected credit losses,
which uses a lifetime expected loss allowance. To measure the expected credit losses, trade
receivables have been grouped based on days overdue.

Other receivables are recognised at amortised cost, less any allowance for expected credit losses.

Inventories
Finished goods are stated at the lower of cost and net realisable value on a ‘first in first out’ basis.
Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable.

Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the sale.

Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment.
Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Depreciation is calculated on a straight-line basis to write off the net cost of each item of property,
plant and equipment (excluding land) over their expected useful lives as follows:

Leasehold improvements

Plant and equipment

5-20 years

3-10 years

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate,
at each reporting date.

Leasehold improvements are depreciated over the unexpired period of the lease or the estimated
useful life of the assets, whichever is shorter.

An item of property, plant and equipment is derecognised upon disposal or when there is no future
economic benefit to the consolidated entity. Gains and losses between the carrying amount and the
disposal proceeds are taken to profit or loss.

Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset
is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before the commencement date net of any lease
incentives received, any initial direct costs incurred, and an estimate of costs expected to be
incurred for dismantling and removing the underlying asset, and restoring the site or asset.

Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease
or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity
expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is
over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any
remeasurement of lease liabilities.

The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease
liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease
payments on these assets are expensed to profit or loss as incurred.

Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially
measured at their fair value at the date of the acquisition. Intangible assets acquired separately are
initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently
measured at cost less any impairment. Finite life intangible assets are subsequently measured at
cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising
from the derecognition of intangible assets are measured as the difference between net disposal

Notes to the Consolidated Financial Statements

proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life
intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful
life are accounted for prospectively by changing the amortisation method or period.

Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested
annually for impairment, or more frequently if events or changes in circumstances indicate that it
might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on
goodwill are taken to profit or loss and are not subsequently reversed.

Goodwill is allocated to relevant cash-generating units (CGU) for the purpose of impairment testing.

Software
Costs associated with software development and implementation, as well as perpetual licences
costs, are deferred and amortised on a straight-line basis over the period of their expected benefit,
being their finite life of 3 to 5 years.

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.

Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment, or more frequently if events or changes in
circumstances indicate that they might be impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use.
The value-in-use is the present value of the estimated future cash flows relating to the asset using a
pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets
that do not have independent cash flows are grouped together to form a cash-generating unit.

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely independent of the cash inflows 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 the key judgements
and estimates along with any impairment loss recognised in the financial statements are provided
in the notes dealing with the relevant asset category.

Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior
to the end of the financial year and which are unpaid.

Borrowings
Borrowings are measured at amortised cost. Borrowing costs are expensed as incurred.

Borrowings are classified as current liabilities unless the consolidated entity has an unconditional
right to defer settlement of the liabilities for at least twelve months after the reporting period.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Lease liabilities
As a lessee:

The consolidated entity leases properties under rental contracts which are typically made for
fixed periods of between 5 to 10 years but may have extension options. The lease liability is initially
measured at the present value of the lease payments that are not paid at the commencement date,
discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined,
the consolidated entity’s incremental borrowing rate. Generally, the consolidated entity uses its
incremental borrowing rate as the discount rate.

The consolidated entity determines its incremental borrowing rate by obtaining interest rates from
external financing source and makes certain adjustments to reflect the terms of the lease and type
of the asset leased.

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments;

• variable lease payments that depend on an index or a rate, initially measured using the index

or rate as at the commencement date;

• amounts expected to be payable under a residual value guarantee; and

• the exercise price under a purchase option that the consolidated entity is reasonably certain to
exercise, lease payments in an optional renewal period if the consolidated entity is reasonably
certain to exercise extension option, and penalties for early termination of a lease unless the
consolidated entity is reasonably certain not to terminate early.

Lease liabilities are measured at amortised cost using the effective interest method. The carrying
amounts are remeasured if there is a change in the following: future lease payments arising from
a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option
and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset
is fully written down.

Rent concessions:

The consolidated entity has applied the practical expedient to not assess rent concessions affecting
payments due before the 30 June 2022 that have occurred as a direct consequence of the COVID-19
pandemic as a lease modification.

The consolidated entity has recognised the amount as “other income” in profit or loss for the
reporting period to reflect changes in lease payments that arise from rent concessions to which the
lessee has applied the practical expedient.

As a lessor:

The consolidated entity enters into lease agreements as lessor in respect of some property leases.
When the consolidated entity acts as a lessor, it determines at lease inception whether each lease
is a finance lease or an operating lease. To classify each lease, the consolidated entity makes an
overall assessment of whether the lease transfers substantially all of the risks and rewards incidental
to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it
is an operating lease. As part of this assessment, the consolidated entity considers certain indicators
such as whether the lease is for the major part of the economic life of the asset.

When the consolidated entity is an intermediate lessor, it accounts for its interests in the head lease
and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to
the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a
head lease is a short-term lease to which the consolidated entity applies the exemption described
above, then it classifies the sub-lease as an operating lease.

The consolidated entity applies the derecognition and impairment requirements in AASB 9 to the net
investment in the lease. The consolidated entity further regularly reviews estimated unguaranteed
residual values used in calculating the gross investment in the lease. The consolidated entity
recognises lease payments received under operating leases as income on a straight-line basis over
the lease term as part of ‘other revenue’.

Notes to the Consolidated Financial Statements

Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance
costs are expensed in the period in which they are incurred.

Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive)
obligation as a result of a past event, it is probable the consolidated entity will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation. The amount
recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation. If the time value of money is material, provisions are discounted using a current pre-tax
rate specific to the liability. The increase in the provision resulting from the passage of time is
recognised as a finance cost.

Make good provision
The consolidated entity is required to restore most leased premises to their original condition at the
end of their 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.

Employee benefits
Short-term employee benefits
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.

Other long-term employee benefits
The consolidated entity’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.

Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they
are incurred.

Share-based payments
Share-based compensation benefits are provided to selected employees via a long term incentive
plan (LTI plan).

The fair value of performance rights granted under the LTI plan is recognised as an employee
benefits expense with a corresponding increase in the share-based payment reserve. 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
consolidated entity 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.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or
disclosure purposes, the fair value is based on the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement
date; and assumes that the transaction will take place either: in the principal market; or in the
absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair
value measurement is based on its highest and best use. Valuation techniques that are appropriate
in the circumstances and for which sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

Issued capital
Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.

Dividends
Provision is made for the amount of any dividend declared, being appropriately authorised and no
longer at the discretion of the company, on or before the end of the financial year but not distributed
at the reporting date.

Business combinations
The acquisition method of accounting is used to account for business combinations regardless of
whether equity instruments or other assets are acquired.

The consideration transferred is the sum of the acquisition-date fair values of the assets transferred,
equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree
and the amount of any non-controlling interest in the acquiree. For each business combination,
the non-controlling interest in the acquiree is measured at either fair value or at the proportionate
share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit
or loss.

On the acquisition of a business, the consolidated entity assesses the financial assets acquired and
liabilities assumed for appropriate classification and designation in accordance with the contractual
terms, economic conditions, the consolidated entity’s operating or accounting policies and other
pertinent conditions in existence at the acquisition-date.

Where the business combination is achieved in stages, the consolidated entity remeasures its
previously held equity interest in the acquiree at the acquisition-date fair value and the difference
between the fair value and the previous carrying amount is recognised in profit or loss.

Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair
value. Subsequent changes in the fair value of the contingent consideration classified as an asset or
liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured
and its subsequent settlement is accounted for within equity.

The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any
non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair
value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair value of the identifiable net assets
acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in
profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification
and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the
consideration transferred and the acquirer’s previously held equity interest in the acquirer.

Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively
adjusts the provisional amounts recognised and also recognises additional assets or liabilities
during the measurement period, based on new information obtained about the facts and
circumstances that existed at the acquisition-date. The measurement period ends on either the
earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.

Notes to the Consolidated Financial Statements

Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Pacific
Smiles Group Limited, 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 financial year.

Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share
to take into account the after income tax effect of interest and other financing costs associated with
dilutive potential ordinary shares and the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive potential ordinary shares.

Goods and Services Tax (‘GST’) and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST
incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of
the acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net
amount of GST recoverable from, or payable to, the tax authority is included in other receivables or
other payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing
or financing activities which are recoverable from, or payable to the tax authority, are presented as
operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or
payable to, the tax authority.

Government grants
Government grants shall be recognised in profit or loss as other income on a systematic basis over
the periods in which the entity recognises as expenses the related costs for which the grants are
intended to compensate.

Changes to significant accounting policy
There were no changes to the financial reporting requirements this year that affected the disclosures
in the financial statements.

Rounding of amounts
The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian
Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been
rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.

New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended
but are not yet mandatory, have not been early adopted by the consolidated entity for the annual
reporting period ended 30 June 2023. The consolidated entity has not yet assessed the impact of
these new or amended Accounting Standards and Interpretations.

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 3. Critical accounting judgements, estimates and
assumptions
The preparation of the financial statements requires management to make judgements, estimates
and assumptions that affect the reported amounts in the financial statements. Management
continually evaluates its judgements and estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions
on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates
and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities (refer to the respective notes) within the next financial year are
discussed below.

Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by
reference to the fair value of the equity instruments at the date at which they are granted. The
fair value is determined by using either the Binomial or Monte Carlo model taking into account
the terms and conditions upon which the instruments were granted. The accounting estimates
and assumptions relating to equity-settled share-based payments would have no impact on the
carrying amounts of assets and liabilities within the next annual reporting period but may impact
profit or loss and equity dependent on the achievement of relevant performance and service
conditions. Refer to note 38 for further details.

Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and
amortisation charges for its property, plant and equipment and finite life intangible assets. The
useful lives could change significantly as a result of technical innovations or some other event. The
depreciation and amortisation charge will increase where the useful lives are less than previously
estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold
will be written off or written down. Refer to note 14 and note 16 for further details.

Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances
indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any
impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of
cash-generating units have been determined based on fair value less cost of disposal, estimated
using discounted cashflows. These calculations require the use of assumptions, including estimated
discount rates based on the current cost of capital and growth rates of the estimated future cash
flows. Refer to note 16 for further details.

Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and
other indefinite life intangible assets at each reporting date by evaluating conditions specific to
the consolidated entity and to the particular asset that may lead to impairment. If an impairment
trigger exists, the recoverable amount of the asset is determined. This involves fair value less
costs of disposal or value-in-use calculations, which incorporate a number of key estimates and
assumptions. Refer to note 14 and note 16 for the information on non-financial assets other than
goodwill and other indefinite life intangible assets.

Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant
judgement is required in determining the provision for income tax. The consolidated entity
recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current
understanding of the tax law. Where the final tax outcome of these matters is different from the
carrying amounts, such differences will impact the current and deferred tax provisions in the period
in which such determination is made. Refer to note 8 for further details.

Lease make good provision
A provision has been made for the present value of anticipated costs for future restoration of leased
premises. The provision includes future cost estimates associated with closure of the premises. The
calculation of this provision requires assumptions such as application of closure dates and cost
estimates. The provision recognised for each site is periodically reviewed and updated based on the
facts and circumstances available at the time. Changes to the estimated future costs for sites are

Notes to the Consolidated Financial Statements

recognised in the balance sheet by adjusting the asset and the provision. Reductions in the provision
that exceed the carrying amount of the asset will be recognised in profit or loss. Refer to note 22 for
further details.

Payroll tax provision for prior period Independent Dentist Contracts
A payroll tax provision has been made for the financial years 2019, 2020, 2021, and 2022 for
independent dentists operating under a Service and Facilities Agreement with the consolidated
entity. The provision covers potential payroll tax liability in Queensland, Victoria, and the Australian
Capital Territory. The provision was estimated based on the methodology used by the NSW State
Revenue Office in calculating the additional Payroll Tax liability imposed on the consolidated entity in
New South Wales. The liability will be settled when the voluntary disclosures are completed and the
payments are made to the respective regulatory authorities. Refer to note 7 for further details.

Note 4. Operating segments
The consolidated entity is organised into one operating segment, being activities within the dental
sector throughout Eastern Australia. This operating segment is based on the internal reports that are
reviewed and used by the consolidated entity’s Chief Executive Officer, who is identified as the chief
operating decision maker, in assessing performance and in determining the allocation of resources.
The consolidated entity’s operation inherently has one profile and performance assessment
criteria. The financial results from this segment are consistent with the financial statements for the
consolidated entity as a whole.

The chief operating decision maker uses the consolidated entity’s underlying earnings before
interest, tax, depreciation and amortisation (EBITDA), excluding the impact of AASB 16, as the main
measure of performance. This measure is defined as the statutory EBITDA result, adjusted for the
effects of the AASB 16 Leases standard and excluding the impact of expenses not related to ongoing
employee expenses and non-recurring or extraordinary events that would distort insights into the
operational efficiency and profitability of the consolidated entity.

The reconciliation of statutory profit/(loss) before tax to underlying EBITDA pre-AASB 16 is shown on
the table below.

Statutory net profit/(loss) before tax

Depreciation and amortisation expense

Net finance cost

Statutory EBITDA

Severance expenses removed

Executive Long Term Incentive plan expense

Additional costs associated with the December Extraordinary General
Meeting

Flood damaged asset write-offs

Net flood insurance recoveries associated with FY 2022 loss

Workers compensation insurance premium adjustments for prior years

Impact of prior years’ payroll tax determination (excluding interest)

Adjustment to pre-AASB 16 basis

Underlying EBITDA pre-AASB 16

2023

2022

Ref

$’000

3,923

(6,537)

30,192

26,324

4,343

3,821

38,458

23,608

242

704

536

232

2,271

–

355

(646)

238

1,174

–

(16,597)

(15,196)

24,109

11,270

PACIFIC SMILES GROUPANNUAL REPORT 2023
Performance Rights were issued under the Long-Term Incentive Plan during the year and that Tranche 5 did not vest during the
financial year.

Note 3 – The additional costs associated with the December Extraordinary General Meeting refers to the legal and consulting
costs that were born as a consequence of the Section 249D notice that resulted in an Extraordinary General Meeting being called
on 19 December 2022.

Note 4 – The PSG dental centre located in Lismore was damaged in a major flood event on 28 February 2022. This centre was
not able to be repaired and restored and the decision was made to close the centre. The net flood insurance recoveries amount
reflects the additional insurance monies received up to when the claim was finalised in January 2023.

Note 6 – The prior year payroll tax determination represents the total amount paid for payroll tax relating to the four financial
years 2019 to 2022. It includes an estimate of the outstanding liability for payroll tax as determined by the NSW State Revenue
Office (SRO) as well as an estimate for other jurisdictions for the same financial year periods, as well as the legal costs incurred
during the NSW SRO audit.

are the cash payments received from subleases.

Note 5. Revenue

Revenue from contracts with customers

Dental service fees

Dental product sales

Management fees

Revenue

Note 6. Other income

Rents

Sundry income

Net flood insurance recoveries associated with FY 2022 loss

Other income

2023

$’000

2022

$’000

163,335

138,056

536

163,871

1,448

165,319

498

138,554

913

139,467

2023

$’000

377

1,479

646

2,502

2022

$’000

481

312

500

1,293

Notes to the Consolidated Financial Statements

Note 7. Expenses

Profit/(loss) before income tax includes the following specific expenses:

Depreciation

Leasehold improvements

Plant and equipment

Right-of-use assets

Total depreciation

Amortisation

Software

Rights and licences

Total amortisation

Total depreciation and amortisation

Finance costs

Interest and finance charges paid/payable on borrowings

Interest and finance charges paid/payable on lease liabilities

Interest paid on payroll tax settlement

Interest received/receivable

Net finance costs

Superannuation expense

2023

$’000

2022

$’000

7,553

7,239

13,773

6,693

6,989

11,401

28,565

25,083

1,562

1,627

1,176

1,241

30,192

26,324

1,012

3,275

274

(218)

4,343

708

3,141

–

(28)

3,821

Defined contribution superannuation expense

6,631

5,628

Share-based payments expense

Direct expenses

Other direct expenses

Employee expenses – direct

704

2,270

8,333

617

8,950

5,305

1,313

6,618

Employee expenses – direct relate to the dental practitioner employment costs. Other direct
expenses relate to the cost of the sale of dental products and payroll tax expenses for independent
dentists operating under Service and Facility Contracts (SFA) in the financial years 2019, 2020, 2021
and 2022.

Total employee expenses for the year are $80,711,961 (2022: $74,125,324). These include employee
expenses and dental practitioner employment costs presented as employee expenses – direct.

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 8. Income tax

Income tax expense/(benefit)

Current tax

Deferred tax

Adjustment recognised for prior periods

Aggregate income tax expense/(benefit)

2023

$’000

2022

$’000

2,450

(817)

(131)

–

(1,164)

(842)

1,502

(2,006)

Deferred tax included in income tax expense/(benefit) comprises:

Increase in deferred tax assets

(817)

(1,164)

Numerical reconciliation of income tax expense/(benefit) and tax at the
statutory rate

Profit/(loss) before income tax (expense)/benefit

Tax at the statutory tax rate of 30%

Tax effect amounts which are not deductible/(taxable) in calculating taxable
income:

Entertainment expenses

Share-based payments

Adjustment recognised for prior periods

Prior year temporary differences not recognised now recognised

Income tax expense/(benefit)

Amounts credited directly to equity

Deferred tax assets

3,923

(6,537)

1,177

(1,961)

211

116

681

1,433

(1,164)

(131)

200

(842)

–

1,502

(2,006)

2023

$’000

2022

$’000

(187)

–

Deferred tax asset

Net deferred tax asset comprises temporary differences attributable to:

Allowance for expected credit losses

Property, plant and equipment

Employee benefits

Lease liabilities

Provision for lease make good

Accrued expenses

Intangibles

Lease receivables

Right of use assets

Prepayments and others

Tax losses

Deferred tax asset

Movements:

Opening balance

Credited to profit or loss

Credited to equity

Tax losses carry back claimed

Closing balance

1. Restated. Refer to note 24 for further details.

Income tax refund receivable

Provision for income tax

Note 9. Current assets – cash and cash equivalents

Cash at bank and in hand

Notes to the Consolidated Financial Statements

2023

$’000

20221

$’000

2,327

1,700

25,199

2,238

340

(117)

(215)

1,509

1,826

26,212

789

500

(137)

(255)

(21,437)

(21,306)

10,170

–

10,170

12,416

817

187

(3,250)

(32)

9,166

3,250

12,416

11,252

1,164

10,170

12,416

2023

$’000

–

2023

$’000

1,442

2022

$’000

2,378

2022

$’000

–

2023

$’000

18,573

2022

$’000

11,805

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 10. Current assets – receivables

Note 14. Non-current assets – property, plant and equipment

Notes to the Consolidated Financial Statements

Leasehold improvements – at cost

Less: Accumulated depreciation and impairment

Plant and equipment – at cost

Less: Accumulated depreciation and impairment

2023

$’000

83,346

2022

$’000

82,243

(44,067)

(37,434)

39,279

44,809

69,316

63,930

(46,563)

(39,873)

22,753

62,032

24,057

68,866

Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:

Balance at 1 July 2021

Additions

Disposals

Transfer out to intangibles

Depreciation expense

Balance at 30 June 2022

Additions

Disposals

Depreciation expense

Leasehold
improvements

Plant and
equipment

$’000

37,378

15,155

(1,031)

–

$’000

27,710

4,592

(284)

(972)

Total

$’000

65,088

19,747

(1,315)

(972)

(6,693)

(6,989)

(13,682)

44,809

2,593

(570)

(7,553)

24,057

5,959

(24)

(7,239)

68,866

8,552

(594)

(14,792)

Balance at 30 June 2023

39,279

22,753

62,032

Impairment of assets
No impairment losses were recognised in the 2023 and 2022 financial years.

Trade receivables

Less: Allowance for expected credit losses

Finance lease receivables

Other receivables

Refer to note 13 for finance lease receivables maturity analysis.

Note 11. Current assets – inventories

Inventories – at cost

2023

$’000

2,630

(184)

2,446

202

298

2,946

2022

$’000

2,987

(200)

2,787

375

316

3,478

2023

$’000

6,200

2022

$’000

5,795

Inventories recognised as an expense during the 2023 financial year amounted to $12,727,025 (2022:
$11,433,071). These figures were included in consumables supplies expense in the statement of profit or loss.

Note 12. Current assets – other

Prepayments

Other

Note 13. Non-current assets – receivables

Finance lease receivables – rental subleases

2023

$’000

1,558

1,637

2022

$’000

781

147

928

2023

$’000

516

2022

$’000

477

The following table sets out a maturity analysis of finance leases receivable, showing the
undiscounted lease payments to be received after the reporting date:

Within one year

One to five years

Total undiscounted finance lease receivable

Less: Unearned finance income

Total finance lease receivables

2023

$’000

234

556

790

(72)

718

2022

$’000

394

520

914

(62)

852

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 15. Non-current assets – right-of-use assets

Note 16. Non-current assets – intangibles

Leases – right-of-use

Less: Accumulated depreciation

2023

$’000

111,454

2022

$’000

99,197

(39,999)

(28,176)

71,455

71,021

Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:

Balance at 1 July 2021

Adjustment on carrying value from lease variations

Disposals

Additions

Depreciation expense

Balance at 30 June 2022

Adjustment on carrying value from lease variations

Disposals

Additions

Depreciation expense

Balance at 30 June 2023

$’000

55,607

(655)

(1,528)

28,998

(11,401)

71,021

(238)

(2,025)

16,470

(13,773)

71,455

Some property leases contain extension options exercisable by the consolidated entity before
the end of the non-cancellable contract period. Where practicable, the consolidated entity seeks
to include extension options in new leases to provide operational flexibility. The extension options
held are exercisable only by the consolidated entity and not by the lessors. The consolidated
entity assesses at the lease commencement date whether it is reasonably certain to exercise the
extension options and this is included in the initial recognition. The consolidated entity reassesses
whether it is reasonably certain to exercise the options if there is a significant event or significant
changes in circumstances within its control.

Notes to the Consolidated Financial Statements

2023

$’000

12,517

2022

$’000

12,517

(2,894)

9,623

10,980

(6,416)

4,564

985

(593)

392

14,579

9,623

8,280

(4,897)

3,383

985

(528)

457

13,463

Goodwill

Less: Impairment

Software – at cost

Less: Accumulated amortisation

Rights and licences

Less: Accumulated amortisation

Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous
financial year are set out below:

Balance at 1 July 2021

Additions

Disposals

Transfers in from property, plant and equipment

Amortisation expense

Balance at 30 June 2022

Additions

Amortisation expense

Balance at 30 June 2023

Goodwill

Software

Rights and
licences

Total

$’000

9,623

–

9,623

–

9,623

$’000

–

3,634

(47)

972

(1,176)

3,383

2,743

(1,562)

4,564

522

–

10,145

3,634

(47)

972

(65)

(1,241)

457

13,463

–

2,743

(65)

392

(1,627)

14,579

Impairment testing for cash generating units (CGUs)
The impairment assessments for each CGU are made on the basis of fair value less cost of disposal,
estimated using discounted cashflow. The fair value measurement was categorised as a Level 3
fair value.

Based on the inputs in the valuation technique used, recoverable amounts of the CGUs exceeded
their carrying values, therefore no impairment losses were recorded in the financial year.

For the purpose of impairment testing, the carrying amount of goodwill has been allocated to
each CGU. The CGU is defined on a regional basis which includes multiple centres in geographical
proximity. The carrying amount of goodwill allocated to each CGU is set out below:

PACIFIC SMILES GROUPANNUAL REPORT 2023

Notes to the Consolidated Financial Statements

2023

$’000

19,276

20221

$’000

17,521

2023

$’000

13,750

2022

$’000

12,865

2023

$’000

4,773

2022

$’000

5,061

Northern New South Wales

Northern Queensland

Eastern Victoria

Western Sydney

Western Victoria

Sydney

Central New South Wales

Total goodwill

2023

$’000

2,453

2,446

1,926

1,317

704

449

328

2022

$’000

2,453

2,446

1,926

1,317

704

449

328

Note 17. Current liabilities – payables

Trade and other payables

1. Restated. Refer to note 24 for further details.

9,623

Note 18. Current liabilities – lease liabilities

The key assumptions used in the estimation of the recoverable amount are set out below.

Lease liability

Refer to note 31 for further information on lease maturity analysis.

Note 19. Current liabilities – provisions

Employee benefits

Discount rate

Terminal value EBITDA growth rate

Budgeted EBITDA growth rate (average of next five years)

2023

13.00%

2.50%

10.00%

2022

12.50%

2.50%

10.00%

The calculations use discounted cash flow projections covering a five-year period that are based
on detailed management projections, which consider historical financial results and trends, the
Board-approved financial budget for the next financial year. The cash flow projections for year two
to five differ depending on the relative maturity of each centre.

The cash flow projection from years two to five for centres that have been operating for less than five
years are based on an initial growth profile which reflects the ramp associated with starting from
a zero base. The trajectory of these centres allows for the annual growth rates to exceed the above
outlined Budgeted EBITDA growth rate due to the compounding effect wherein the growth of each of
the initial years is based on the increased base of the previous period.

In comparison, the more mature centres have already experienced the initial phases of growth and
consequently the cash flow projection from years two to five for these centres are based on the key
assumption of budgeted EBITDA growth rate as outlined above.

A long-term growth rate is used beyond year five in determining the terminal values, which is
considered reasonable in the context of the long-term growth rates for the markets in which
each CGU operates. Future cash flows are discounted using a post-tax measure based on the
consolidated entity’s weighted average cost of capital of 13.00% (2022: 12.50%). The pre-tax measure
of the consolidated entity’s weighted average cost of capital is 14.00% (2022: 13.00%).

Management has performed sensitivity analyses to the key assumptions, by increasing the discount
rate up to 18% and decreasing the EBITDA growth rate down to 5%. The analyses assume that all
other variables remain constant. The analyses resulted the estimated recoverable amount of the
CGUs still exceeded their carrying amount. On this basis the Group considers that a reasonably
possible change in the two key assumptions, being discount rate and growth rate, will not lead to the
carrying amount of the CGUs exceeding their recoverable amount.

Rights and licences
As part of the consolidated entity’s acquisition of the three former AHM dental centres, the
consolidated entity received preferential provider support from AHM. These rights and licenses relate
to AHM marketing rights at each Pacific Smiles dental centre with a further six years of amortisation
remaining.

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 20. Non-current liabilities – borrowings

Note 21. Non-current liabilities – lease liabilities

Notes to the Consolidated Financial Statements

Bank loans

Total secured liabilities
The total secured liabilities (current and non-current) are as follows:

Bank loans

2023

$’000

9,000

2022

$’000

18,500

2023

$’000

9,000

2022

$’000

18,500

Assets pledged as security
The bank loans are secured by a registered equitable mortgage over the whole of the assets and
undertakings of the consolidated entity, including uncalled capital and inter-entity guarantees.

Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:

Total facilities

Bank overdraft

Bank loans

Bank guarantees

Used at the reporting date

Bank overdraft

Bank loans

Bank guarantees

Unused at the reporting date

Bank overdraft

Bank loans

Bank guarantees

2023

$’000

500

40,000

5,000

45,500

–

9,000

3,841

12,841

500

31,000

1,159

32,659

2022

$’000

500

40,000

5,000

45,500

–

18,500

3,823

22,323

500

21,500

1,177

23,177

Covenants attached to bank loans were complied with during the financial year. The facility is
available to the consolidated entity until 30 September 2025. Further information relating to the loans
weighted average interest rate and contractual cashflow are included in note 27.

Lease liability

Refer to note 31 for further information on lease maturity analysis.

Note 22. Non-current liabilities – provisions

Employee benefits

Lease make good

2023

$’000

70,246

2022

$’000

74,510

2023

$’000

894

7,460

8,354

2022

$’000

1,027

2,630

3,657

Movements in provisions
Movements in each class of provision (current and non-current) during the current financial year,
other than employee benefits, are set out below:

2023

Carrying amount at the start of the year

Change in accounting estimates

Additional provisions recognised

Unused amounts reversed

Carrying amount at the end of the year

Make good
provision

$’000

2,630

4,631

350

(151)

7,460

During the current financial year, change to the make-good provision estimates was made due
to changes in the anticipated costs for future restoration of leased premises. The assessment was
based on the latest available data and prevailing circumstances.

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 23. Equity – contributed equity

Note 25. Equity – reserves

Ordinary Shares – fully paid

159,581,938

2023

2022

2023

$’000

52,104

2022

$’000

51,917

Ordinary Shares
Ordinary Shares entitle the holder to participate in dividends and the proceeds on the winding up of
the company in proportion to the number of 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.

Capital risk management
The consolidated entity’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
optimum capital structure to reduce the cost of capital. The consolidated entity monitors its working
capital continually and manages it within a Board approved finance facility. Debt covenants have
been consistently achieved and monitored monthly.

Capital is regarded as total equity, as recognised in the balance sheet, plus net debt. Net debt is
calculated as total borrowings less cash and cash equivalents.

Note 24. Equity – Prior period restatement – indirect tax
liabilities
During the period, management identified errors related to the calculation of prior year indirect
tax liabilities. The reassessment results in an overall increase in tax liabilities for the 2020 and 2021
financial years. The impact on previously reported balance as at 30 June 2022 and 30 June 2021 is
disclosed below:

2022

Restatement

Previously
reported

As
restated

Previously
reported

2021
Restatement1

Deferred tax assets

Total assets

Payables

Total liabilities

Retained earnings

Total equity

$’000

12,241

190,452

16,937

131,530

(8,341)

58,922

$’000

175

584

(409)

$’000

12,416

190,627

17,521

132,114

(8,750)

58,513

$’000

11,077

161,270

18,699

100,088

(3,810)

61,182

$’000

175

584

(409)

As
restated

$’000

11,250

161,445

19,283

100,672

(4,219)

60,773

1. The impact of the restatement on the consolidated statement of profit or loss and other comprehensive income in 30 June 2021

is not considered material.

Notes to the Consolidated Financial Statements

2023

$’000

11,829

3,663

15,492

2022

$’000

12,387

2,959

15,346

Profits reserve

Share-based payments reserve

Profits reserve
The profits reserve represents current year profits transferred to a reserve to preserve the
characteristic as a profit so as to quarantine from being appropriated against accumulated losses
arising from the adoption of AASB 16. Such profits are available to enable payment of franked
dividends in the future should the Directors declare so by resolution.

Note 26. Equity – dividends
Dividends
Dividends paid during the financial year were as follows:

Interim dividend for the year ended 30 June 2023 of 0.35 cents
(2022: nil) per ordinary share, fully franked paid on 6 April 2023

2023

$’000

558

2022

$’000

–

Subsequent to the end of the financial year, the Directors have recommended the payment of a
final dividend of 2.27 cents (2022: nil) per ordinary share, fully franked. The aggregate amount of the
proposed dividend expected to be paid out of profit reserves in October 2023, but not recognised as
a liability as at the end of the financial half-year is $3,627,463 (2022: nil).

Franking credits

Franking credits available for subsequent financial years based on a
tax rate of 30%

2023

$’000

19,446

2022

$’000

13,429

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.

PACIFIC SMILES GROUPANNUAL REPORT 2023
Note 27. Financial instruments

Financial risk management objectives
The consolidated entity’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 consolidated entity’s activities.

The consolidated entity’s principal financial instruments during the 2023 and 2022 financial years
comprised bank and other loans, and cash. The main purpose of these instruments has been to raise
finance for the consolidated entity’s operations and investments. The consolidated entity has various
other financial instruments such as trade and other debtors and creditors, which arise directly from
its operations. The consolidated entity does not trade in financial instruments.

Market risk
Interest rate risk
The consolidated entity’s exposure to market risk for changes in interest rates at the end of the year
was minimal, with bank debt partially offset by cash balances at 30 June 2023.

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 1.06% (2022: 0.10%).

Variable rate bank loans drawn of $9,000,000 (2022: $18,500,000) form part of an ongoing loan
facility which was updated during the 2022 financial year. The overall facility term expires on 30
September 2025. The loans are subject to interest charged at the prevailing variable rate payable on
each reset date. The weighted average interest rate on borrowings at the end of the year was 6.14%
(2022: 4.75%).

2023

Basis points increase

Basis points decrease

Basis
points
change

Effect on
profit before
tax

Effect
on
equity

Basis points
change

Effect
on profit
before tax

Effect
on
equity

Variable rate bank loans

100

(29)

(100)

2022

Basis points increase

Basis points decrease

Basis
points
change

Effect on
profit before
tax

Effect
on
equity

Basis points
change

Effect
on profit
before tax

Effect
on
equity

Variable rate bank loans

100

(75)

(100)

Credit risk
The consolidated entity has no significant concentrations of credit risk. The consolidated entity does
not have significant credit exposure to any one financial institution or customer. The consolidated
entity only transacts with reputable Australian banks and its credit risk on trade receivables is not
considered significant.

The consolidated entity has had no bad debts (2022: nil) in the period and at 30 June 2023, no
trade receivables are overdue by more than 90 days that have not been fully provided for. The ECL
provision is $184,246 (2022: $200,246).

Notes to the Consolidated Financial Statements

Liquidity risk
The consolidated entity’s objective is to maintain a balance between continuity of funding and
flexibility through the use of working capital and bank borrowings. The consolidated entity aims to
achieve this flexibility by keeping committed credit lines available. Opportunities to raise additional
capital from shareholders are also considered where appropriate.

The Group manages liquidity risk by continuously monitoring forecast and actual cash flows to
ensure sufficient liquidity is always available to meet liability obligations as they fall due. The Group’s
balance sheet shows an excess of current liabilities over current assets at balance date. 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.

The following tables detail the consolidated entity’s remaining contractual maturity for its financial
instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of
financial liabilities based on the earliest date on which the financial liabilities are required to be
paid. The tables include both interest and principal cash flows disclosed as remaining contractual
maturities and therefore these totals may differ from their carrying amount in the balance sheet. The
carrying amount of these financial liabilities are disclosed in each respective note.

2023

Non-derivatives

Non-interest bearing

Trade payables (note 17)

Interest-bearing – variable

Bank loans (note 20)

Total non-derivatives

2022

Non-derivatives

Non-interest bearing

Trade payables1 (note 17)

Interest-bearing – variable

Bank loans (note 20)

Total non-derivatives

Less than 6
months

Between
6 and 12
months

Between 1
and 5 years

Remaining
contractual
maturities

$’000

19,276

–

19,276

280

19,556

288

9,762

10,330

29,606

Less than 6
months

Between
6 and 12
months

Between 1
and 5 years

Remaining
contractual
maturities

$’000

17,521

–

17,521

444

17,965

454

20,683

21,581

39,102

1. Restated. Refer to note 24 for further details.

The cash flows in the maturity analysis above are not expected to occur significantly earlier than
contractually disclosed above.

Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Note 28. Key Management Personnel disclosures
Compensation
The aggregate compensation paid to Directors and other members of Key Management Personnel
of the consolidated entity is set out below:

Note 30. Contingent liabilities

Bank guarantees

Notes to the Consolidated Financial Statements

2023

$’000

3,841

2022

$’000

3,823

Short-term employee benefits

Post-employment benefits

Long-term benefits

Share-based payments

2023

2022*

1,842,696

1,870,415

115,167

18,122

110,053

90,436

517,247

780,488

2,493,232

2,851,392

Note 29. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the
auditor of the company:

Audit services

Audit or review of the financial statements

190,900

180,000

Other services

Tax compliance and advisory services

27,000

217,900

26,900

206,900

2023

2022

The consolidated entity has given bank guarantees as at 30 June 2023 of $3,841,030 (2022: 3,823,493)
to various landlords as security for leased premises.

Note 31. Commitments

Capital commitments

Committed at the reporting date but not recognised as liabilities:

Property, plant and equipment

Printers

Committed at the reporting date but not recognised as liabilities:

Within one year

One to five years

Lease commitments

Committed at the reporting date and recognised as liabilities, payable:

Within one year

One to five years

More than five years

Total commitment

Less: Future finance charges

Net commitment recognised as liabilities

2023

$’000

2022

$’000

460

710

664

506

1,170

2,959

315

3,144

130

3,274

16,805

54,170

24,576

15,923

57,765

40,180

95,551

113,868

(11,554)

(26,493)

83,997

87,375

PACIFIC SMILES GROUPANNUAL REPORT 2023Note 32. Related party transactions
Parent entity
Pacific Smiles Group Limited is the parent entity.

Subsidiaries
Interests in subsidiaries are set out in note 34.

Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 28 and the remuneration
report included in the Directors’ report.

Transactions with related parties
Other than remuneration for their positions as Directors and Executives of the consolidated entity,
key management personnel or entities related to them entered into a number of transactions with
the consolidated entity. Information on these transactions is set out below.

Key Management Personnel or their related parties held shares in the consolidated entity during
2023 and 2022, and as such, participated in dividends.

Exandal Investments, an entity related to Alison Hughes, leased business premises to the
consolidated entity during 2022 on normal commercial terms and conditions. Alison Hughes was
part of Key Management Personnel for part of the 2022 financial year.

The following transactions occurred with related parties:

Rental expenses

2023

–

2022

345,115

Notes to the Consolidated Financial Statements

Note 33. Parent entity information
Set out below is the supplementary information about the parent entity.

Statement of profit or loss and other comprehensive income

Profit/(loss) after income tax

Total comprehensive income/(loss)

Balance sheet

Total current assets

Total assets

Total current liabilities

Total liabilities

Equity

Contributed equity

Profits reserve

Share-based payments reserve

Accumulated losses

Total equity

2023

$’000

2,429

2023

$’000

29,544

188,248

38,716

126,314

52,104

11,829

3,663

(5,662)

61,934

2022

$’000

(4,354)

20221

$’000

24,179

190,374

33,936

130,594

51,917

12,953

2,959

(8,049)

59,780

1. Restated. Refer to note 24 for further details. The restated figures of the parent entity’s current liabilities, total liabilities and

accumulated losses excludes $37,944 relating to Dental Smiles Group Pty Limited.

Contingent liabilities
The parent entity had no contingent liabilities, other than bank guarantees as at 30 June 2023
totalling $3,841,030 (30 June 2022: $3,823,493).

PACIFIC SMILES GROUPANNUAL REPORT 2023

Note 34. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following
subsidiaries in accordance with the accounting policy described in note 2:

Name

Principal place of business/
Country of incorporation

2023
%

2022
%

Ownership interest

Dentist Smiles Group Pty Limited

Australia

Dental Assistant Training Solutions Pty Limited Australia

Pacific Eyes Pty Limited

Everything Dentures Pty Limited

Australia

100.00%

Dental Assistant Training Solutions Pty Limited, Pacific Eyes Pty Limited and Everything Dentures Pty
Limited are dormant entities.

Note 35. Events after the reporting period
Resignation of CEO and Managing Director
On 11 August 2023, the Company announced the resignation of Managing Director and Chief
Executive Officer (CEO), Mr Phil McKenzie, with effect from 31 August 2023. Mr Paul Robertson
is appointed Interim Chief Executive Officer from 1 September 2023 in order to facilitate an
orderly handover.

Final dividend declaration
Subsequent to the end of the financial year, the Directors have recommended the payment of a
final dividend as disclosed in note 26.

No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or
may significantly affect the consolidated entity’s operations, the results of those operations, or the
consolidated entity’s state of affairs in future financial years.

Note 36. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from operating activities

Notes to the Consolidated Financial Statements

2023

$’000

2,421

2022

$’000

(4,531)

30,192

26,326

591

704

767

2,271

493

(405)

2,433

(709)

1,755

(421)

3,820

40,874

(2,123)

(39)

1,758

(100)

(1,762)

630

(5,300)

17,897

Total

$’000

70,379

5,093

32,091

(1,688)

3,805

Profit/(loss) after income tax (expense)/benefit for the year

Adjustments for:

Depreciation and amortisation

Net loss on disposal of property, plant and equipment

Share-based payments

Change in operating assets and liabilities:

Decrease/(increase) in receivables

Increase in inventories

Decrease in deferred tax assets

Increase in other operating assets

Increase/(decrease) in payables

Increase/(decrease) in other provisions

Increase/(decrease) in income tax

Net cash from operating activities

Changes in liabilities arising from financing activities

Dividend

Borrowings

Leases

Balance at 1 July 2021

Net cash (used in)/from financing activities

New leases

Changes from discontinued leases

Interest expenses

Interest paid (presented as operating cashflow)

Balance at 30 June 2022

Net cash used in financing activities

Dividend declared (note 26)

New leases

Changes from discontinued leases

Interest expenses

Interest paid (presented as operating cashflow)

Balance at 30 June 2023

$’000

–

(558)

558

–

$’000

1,000

$’000

69,379

17,500

(12,407)

–

663

32,091

(1,688)

3,142

(663)

(3,142)

(3,805)

18,500

87,375

105,875

(9,500)

(13,501)

(23,559)

–

12,371

558

12,371

(2,249)

1,012

3,275

4,287

(1,012)

(3,275)

(4,287)

9,000

83,996

92,996

PACIFIC SMILES GROUPANNUAL REPORT 2023

Note 37. Earnings per share

Profit/(loss) after income tax

Basic earnings per share

Diluted earnings per share

Weighted average number of ordinary shares used in calculating
basic earnings per share

Adjustments for calculation of diluted earnings per share:

Performance rights

Weighted average number of ordinary shares used in calculating
diluted earnings per share

2023

$’000

2,421

Cents

1.5

2022

$’000

(4,531)

Cents

(2.8)

(2.7)

Number

159,581,938

–

8,871,838

159,581,938

168,453,776

Performance rights
Performance rights granted to employees under the consolidated entity’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. There were no performance rights
on issue included in the calculation of diluted earnings per share because they are contingently
issuable ordinary shares and the conditions for these rights to be satisfied were not met as at 30
June 2023. These performance rights could potentially dilute basic earnings per share in the future.

Notes to the Consolidated Financial Statements

Note 38. Share-based payments
Long term incentive plan overview
The consolidated entity has established a long term incentive plan (LTI) 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 consolidated entity through the granting of
performance rights.

Performance rights have been issued to the Chief Executive Officer and selected senior managers, at
the absolute discretion of the Board, pursuant to the LTI plan in financial years 2022, 2021 and 2020.

The performance rights will vest after a set term (the performance period), and are conditional on
the achievement of relevant performance and service conditions.

The details of the vesting conditions are as follows:

• Satisfaction of total shareholder return (TSR) growth performance hurdles for a four-year

performance period. The number of performance rights vesting will be determined on a sliding
scale from nil vesting for a TSR compound annual growth rate (CAGR) of 10% per annum or less
and 100% vesting for a TSR CAGR of 25% per annum or more.

• The participant remaining employed by the consolidated entity over a four year or more period

through to 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 does not reach a minimum threshold over the relevant
performance period.

Set out below are summaries of Performance Rights granted under the plan:

Grant date

Vesting date

30/11/2018

30/11/2019

30/11/2020

30/11/2021

30/11/2022

30/11/2023

30/11/2024

30/11/2025

Balance at
the start of
the year

1,595,500

2,391,000

2,631,430

2,253,908

8,871,838

Expired/
forfeited/
other

(1,595,500)

Balance at
the end of
the year

–

2,391,000

(300,000)

2,331,430

(272,426)

1,981,482

(2,167,926)

6,703,912

Granted

–

The weighted average remaining contractual life of Performance Rights outstanding at the end of
the financial year was 1.36 years (2022: 2.05 years).

There was no new issuance of the Long-Term Incentive Plan during the year.

PACIFIC SMILES GROUPANNUAL REPORT 2023

Directors’ Declaration

Independent Auditor’s Report

In the Directors’ opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, the

Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements;

• the attached financial statements and notes comply with International Financial Reporting

Standards as issued by the International Accounting Standards Board as described in note 2 to
the financial statements;

• the attached financial statements and notes give a true and fair view of the consolidated

entity’s financial position as at 30 June 2023 and of its performance for the financial year ended
on that date; and

• there are reasonable grounds to believe that the company will be able to pay its debts as and

when they become due and payable.

Independent Auditor’s Report

To the shareholders of Pacific Smiles Group Limited

Report on the audit of the Financial Report

The Directors have been given the declarations required by section 295A of the Corporations Act 2001.

Opinion

Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.

On behalf of the Directors

Zita Peach
Chairperson

23 August 2023

We have audited the Financial Report of
Pacific Smiles Group Limited (the Company).

In our opinion, the accompanying Financial
Report of the Company is in accordance with
the Corporations Act 2001, including:

giving a true and fair view of the Groups
financial position as at 30 June 2023 and
of its financial performance for the year
ended on that date; and

complying with Australian Accounting
Standards
Corporations
and
Regulations 2001.

the

The Financial Report comprises:

Consolidated balance sheet as at 30 June 2023;

Consolidated statement of profit or loss and other
comprehensive income, consolidated statement
of changes in equity, and consolidated statement
of cash flows for the year then ended;

including a summary of significant

Notes
accounting policies; and

Directors Declaration.

The Group consists of the Company and the entities
it controlled at the year-end or from time to time
during the financial year.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Auditors responsibilities for the
audit of the Financial Report section of our report.

We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Boards APES 110 Code of Ethics
for Professional Accountants (including Independence Standards) (the Code) that are relevant to our
audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in
accordance with these requirements.

74
KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated
with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and
logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by

a scheme approved under Professional Standards Legislation.

ANNUAL REPORT 2023PACIFIC SMILES GROUP

Independent Auditor’s Report

Key Audit Matters

Key Audit Matters are those matters that, in our professional judgement, were of most significance
in our audit of the Financial Report of the current period.

This matter was addressed in the context of our audit of the Financial Report as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on this matter.

Revenue ($165,319,000)

Refer to Note 5 to the Financial Report

The key audit matter

How the matter was addressed in our audit

statements for the month. We
fee
checked
percentages for individual dentists
to the underlying contracts;

sample

the

owed

settlement
Comparing
amounts
dentists
recognised by the Group at the end
of the year to the batch payment
per
the post year-end bank
statement.

the

adequacy of

the
Evaluating
disclosures made in the financial report
against
the
the
accounting standards.

requirements of

Most of the Groups revenue relates to the rendering
of services, the majority being dental service fees.

Revenue of dental service fees was a key audit
matter due to the significant audit effort to test the:

High volume of transactions recorded as
revenue and significant amount of revenue
recognised;

Largely manual nature of
the Groups
calculation of dentist payments and therefore
service
revenue, presenting risks of
transactions being recorded incorrectly.

fee

In assessing this key audit matter, we involved senior
audit team members who understand the Groups
business, industry, and the economic environment it
operates in.

Our procedures included:

Evaluating the appropriateness of
the Groups revenue recognition
policies for revenue streams against
requirements of AASB 15
the
from Contracts with
Revenue
Customers;

Testing key internal controls in the
service revenue recognition process,
including the review of revenue inputs
and calculations, and review and dual
authorisation of dentist payments.

Substantive procedures including:

the Groups

Checking total patient billings and
dentist payments throughout the
year
bank
statements. We compared total
patient
dentist
payments to the amount recorded
as revenue by the Group;

billings

less

Checking the calculation of the
amounts paid to dentists to the
terms of the underlying contracts
with the dentists, for a sample of
service fees recognised throughout
the year;

Comparing service fees recognised
in the last month of the financial
year
that
to our calculation
multiplied the average dentist fee
percentages
from
dentist
percentages
total patient
contracts by
the Groups bank
billings per

derived
within

the

Other Information

Other Information is financial and non-financial information in Pacific Smiles Group Limiteds annual
reporting which is provided in addition to the Financial Report and the Auditors Report. The Directors
are responsible for the Other Information.

Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.

In connection with our audit of the Financial Report, our responsibility is to read the Other Information.
In doing so, we consider whether the Other Information is materially inconsistent with the Financial
Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date
of this Auditors Report we have nothing to report.

Responsibilities of the Directors for the Financial Report

The Directors are responsible for:

preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001

implementing necessary internal control to enable the preparation of a Financial Report that
gives a true and fair view and is free from material misstatement, whether due to fraud or error

assessing the Group and Companys ability to continue as a going concern and whether the use
of the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless they
either intend to liquidate the Group and Company or to cease operations, or have no realistic
alternative but to do so.

ANNUAL REPORT 2023PACIFIC SMILES GROUPAuditors responsibilities for the audit of the Financial Report

Our objective is:

to obtain reasonable assurance about whether the Financial Report as a whole is free from
material misstatement, whether due to fraud or error; and

to issue an Auditors Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Australian Auditing Standards will always detect a material misstatement when it
exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Financial Report.

A further description of our responsibilities for the audit of the Financial Report is located at the Auditing
and Assurance Standards Board website at:

https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our
Auditors Report.

Report on the Remuneration Report

Opinion

Directors responsibilities

In our opinion, the Remuneration Report of
Pacific Smiles Group Limited for the year
ended 30 June 2023, complies with Section
300A of the Corporations Act 2001.

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 responsibilities

We have audited the Remuneration Report included
in pages 23 to 35 of the Directors report for the year
ended 30 June 2023.

Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.

KPMG

Kevin Leighton

Partner

Newcastle

23 August 2023

Shareholder Information

The shareholder information set out below was applicable as at 30 June 2023.

Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:

1 to 1,000

1,001 to 5,000

5,001 to 10,000

10,001 to 100,000

100,001 and over

Holding less than a marketable parcel

Ordinary shares

Number of
holders

% Issued share
capital

389

328

179

229

1,192

225

0.09

0.59

0.82

4.08

94.42

100.00

0.02

Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:

HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Pty Limited
Alison J Hughes
Dr Alexander J Abrahams
National Nominees Limited
UBS Nominees Pty Limited
Citicorp Nominees Pty Limited
Just Paddling Pty Limited
Susan L Abrahams
Robert G Cameron & Paula S Cameron
Channings Holdings Pty Limited
Karen Wright
Sudemo Pty Limited
Lodka Pty Limited
Trevor Collins & Dianne E Collins
Sterling Surgical Pty Limited
Dianne A Wheeldon
Warbont Nominees Pty Limited
Dr David Roessler
Levigrad Pty Ltd

Ordinary Shares

Number
held
41,683,931
19,929,337
15,797,850
13,296,547
10,292,867
8,293,207
6,412,247
3,454,646
3,134,314
2,108,480
2,090,150
2,022,000
1,744,863
1,322,194
1,128,480
900,000
789,132
781,079
766,200
746,936
136,694,460

% of total
shares issued
26.12
12.49
9.90
8.33
6.45
5.20
4.02
2.16
1.96
1.32
1.31
1.27
1.09
0.83
0.71
0.56
0.49
0.49
0.48
0.47
85.65

ANNUAL REPORT 2023PACIFIC SMILES GROUP

Unquoted equity securities

Number on
issue

Number of
holders

Corporate Directory

Performance Rights issued under the consolidated entity’s LTI plan

6,703,912

Substantial holders
Substantial holders in the company are set out below:

Directors

Ms Zita Peach
Non-Executive Chairperson and Non-executive Director

Mr Alexander J Abrahams

HBF Health

Ms Alison J Hughes

MA Asset Mgt

QVG Capital

Regal Funds Mgt

Richmond Hill Capital

Ordinary Shares

Number
held

20,076,660

16,000,000

15,797,850

12,949,983

11,310,241

9,720,801

8,146,493

% of total
shares
issued

12.58

10.03

9.90

8.11

7.09

6.09

5.10

Mr Mark Bloom
Non-Executive Director

Mr Simon Rutherford
Non-Executive Director

Dr Scott Kalniz
Non-Executive Director

Mr Steven Rubic
Non-Executive Director

Ms Jodie Leonard
Non-Executive Director

Voting rights
Each Ordinary Share carries the right to one vote. No voting rights are attached to Performance Rights.

Interim CEO

Mr Paul Robertson

There are no other classes of equity securities.

Company Secretary

Ms Belinda Cleminson

Registered office

Share register

Level 1, 6 Molly Morgan Drive
Greenhills NSW 2323

T: 02 4930 2000
F: 02 4930 2099
W: www.pacificsmiles.com.au

Automic
Level 5, 126 Philip Street
Sydney NSW 2000

GPO Box 5193, Sydney NSW 2001

T: 1300 288 664 (within Australia) or +61 2 9698 54514 (outside Australia)

E: hello@automicgroup.com.au

Auditor

KPMG
Level 6, 18 Honeysuckle Drive
Newcastle NSW 2300

Stock exchange
listing

Pacific Smiles Group Limited shares are listed on the Australian Securities
Exchange (ASX code: PSQ)

Corporate
Governance
Statement

The corporate governance statement is dated 30 June 2023 and reflects
the corporate governance practices in place for the 2023 financial year.
The corporate governance statement was approved by the Board on 23
August 2023, a copy can be found on the Pacific Smiles website.

PACIFIC SMILES GROUP