1
ANNUAL REPORT 2024
ANNUAL REPORT
2024
1
ANNUAL REPORT 2024
Contents
2024 Snapshot
3
Message from our Chairman
6
Message from our CEO
8
Business Review
10
Centre Locations
22
Environmental, Social and Governance
23
Consolidated Financial Report 2024
25
Director’s Report
26
Remuneration Report
34
Auditor’s Independence Declaration
53
Consolidated Financial Statements
54
Notes to the Consolidated Financial Statements
58
Directors’ Declaration
94
Independent Auditor’s Report
95
Shareholder Information
99
Corporate Directory
IBC
3
2
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
2024 Snapshot
2024 Snapshot
$291.8m
128
*excludes one-off tax refund
of $5.8m in FY23
$15m
13.1%
Patient Fees
Dental Centres
Free Cash Flow
Dentist Turnover
7.9%
35%*
60 bps
$28.2m
543
$17.7m
>90
Net Cash
Net Promoter Score
Underlying EBITDA
Dental Chairs
8.1m
16.9%
$8.9m
826
5.35cps
28.5%
Underlying NPAT*
Number of Dentists
*excludes AASB16 impacts
Ordinary Dividends
Employee Turnover
2.73cps
350 bps
98.3%
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ANNUAL REPORT 2024
4
PACIFIC SMILES GROUP
FY24 Review
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ANNUAL REPORT 2024
6
PACIFIC SMILES GROUP
Message from
our Chairman
Dear Shareholders,
On behalf of your Board, I am pleased to present the Annual
Report for the year ended 30 June 2024.
Following a year of both significant disruption and growth,
in August 2024, I was appointed Chairman of Pacific
Smiles Group and have been charged with refocusing the
organisation as we embark on our next stage of growth.
Pacific Smiles has already made a significant investment
in our dental centres and in FY24 the team serviced more
than one million appointments. We remain committed to
driving growth and return on investment not just from our
dental centre network, but also from investments made in
developing digital infrastructure to better service the needs
of our patients and dentists. Utilising embedded capacity
and maturing centres to optimise utilisation will remain a
cornerstone of the business plan moving forward with a key
priority being increasing both the number of patient visits
and the mix of services provided to those patients.
Healthcare businesses are all about the people, and,
pleasingly, this year our team showed their belief and
dedication in optimising our business through continual
improvements and their focus on our practitioners and
patients. The resilience and improvement in the results this
year highlight how much the people who work for Pacific
Smiles support the dental practitioners each and every day
so that they can do what they do best for the patient at our
dental centres.
Our Management and Board have had to remain focused
on both driving the business and responding to the initial
Genesis takeover offer that began a process in December
2023 and culminated in the NDC Bidco Pty Ltd (NDC) change
of control proposal. Shareholders had the opportunity at the
Scheme meeting on 8th August 2024, to vote on a resolution
to approve the proposed Scheme of arrangement under
which NDC would have acquired 100% of the shares in
Pacific Smiles. While the vote was unsuccessful, we thank
you for your feedback and support during this process and
recognise how disappointed many shareholders were with
the outcome, particularly given the number of shareholders
who voted in favour of the Scheme and that in total, 94% of
shareholders voted, clearly demonstrating how engaged
our shareholders are in Pacific Smiles.
Based on the strong FY24 results, we will now strive to
optimise business performance and develop a strategy in
consultation with the shareholders. As you may be aware,
we have a very concentrated share register and I am
cognisant that many shareholders have very disparate
views on what Management and the Board should do. For
the Board to be effective, it is imperative that we have your
support and trust to lead the Company and provide the
opportunity for the new management team to focus without
distraction on optimising the potential of each of our dental
centres and by doing so, drive revenue through maximising
patient fees and innovating our services to both the dental
practitioners and our patients. It is a tremendous business of
which I am very proud to be a part.
On behalf of the Board and shareholders, I would like to thank
Zita Peach for leading the Company over the past four years
– it’s been a very active chairmanship and I am sure you join
me in thanking her for her efforts and her stewardardship of
the business during her time as Chairperson. Additionally,
we acknowledge the contributions of Mark Bloom, a long-
standing Non-Executive Director who resigned in August 2024.
Simon Rutherford also retired from the Pacific Smiles Board in
November 2023, and we extend our heartfelt thanks for his 20
years of service to the Company.
I would also like to thank the management team, and in
particular, Andrew Vidler and Matt Cordingley as CEO and
CFO, for staying strong and focused during what has been
an exhausting and uncertain time. The Board wishes them
every success in their future endeavours. The backbone
of the organisation is the employees, as well as the dental
practitioners. I look forward to getting to know you better
and in doing so, understand ways to support you in the
interests of the Pacific Smiles Group.
Giselle Collins
Chairman
13th September 2024
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Message from our CEO
Message from
our CEO
Dear Shareholders,
The year 2024 was significant for Pacific Smiles,
underscoring the intrinsic value of our enterprise and the
resilience of our business model. It was a year marked by
both challenges and notable achievements.
It’s been my pleasure to lead the Pacific Smiles team
through what has been both a challenging and an
exciting time for the company. While the outcome of the
Scheme Implementation Deed vote ultimately resulted in
the company remaining a listed entity, the core business
remained focused. The excellent results achieved are a
testament to the relentless efforts of our entire team and
the practitioners who continue to choose Pacific Smiles for
their patients.
I take this opportunity to welcome Giselle Collins as our
new Chairman. I also extend my thanks to Zita Peach,
Mark Bloom and Simon Rutherford for their guidance and
commitment to Pacific Smiles.
In FY24, we remained focused on driving our operational
efficiency, improving utilisation of our existing practice
network and delivering stronger profit outcomes.
Key highlights for the year include:
Top-Line Growth
Patient fees reached $291.8 million, reflecting a 7.9% year-
on-year increase, supported by a 3.5% rise in the number of
appointments. Growth was achieved across all centre cohorts.
Improved Operating KPIs
We observed a decline in cancellation rates due to
enhanced patient communications and increased
appointment confirmations. Labour efficiency also
improved significantly throughout the year.
Rising Utilisation
Utilisation rates continued to improve across all cohorts
(except one) with particularly strong performance in newer
cohorts.
Enhanced Profitability
Underlying EBITDA grew to $28.2 million, a nearly 17%
improvement over the previous year. This also resulted in
a margin expansion of 110 basis points and a significant
increase in underlying net profit after tax to $8.9 million,
nearly doubling the prior year’s result.
It is worth highlighting that average patient fees increased
across all cohorts during FY24, with notable gains in newer
cohorts. Growth was driven by our efforts to optimise
capacity through both the acquisition of new patients
and an increase in practitioner hours worked. Utilisation of
existing chairs improved, driven by extended dentist hours
leading to more patient appointments.
Strong Cash Flow and Debt-Free Status
We ended FY24 with a net cash position of $17.7 million,
providing substantial flexibility for future capital allocation.
This enabled the Board to declare a fully franked final
dividend of 3.25 cents per share.
The results for FY24 are particularly positive given the
broader economic context, including the inflationary
pressures and rising cost of living impacting Australians.
Despite also experiencing significant increases in wages
and occupancy costs, Pacific Smiles remained resilient. We
carefully invested resources and management focus to
foster growth and enhance utilisation, particularly in centres
with established capacity that are continuing to mature.
Growth was achieved through a combination of extending
practitioner hours, attracting new patients, and modest
increases in fees earned per appointment.
Average patient fees increased across all cohorts during
FY24, with notable gains in newer cohorts. This growth was
driven by our efforts to optimise capacity through both the
acquisition of new patients and an increase in practitioner
hours worked. Utilisation of existing chairs improved,
driven by extended dentist hours leading to more patient
appointments. Utilisation rates increased across all but one
cohort (our 2015 to 2017 cohort), with higher growth rates
observed in centres established from FY20 onward.
We are continually evaluating opportunities to expand
capacity and utilisation with minimal investment, including
the placement of additional chairs in available surgeries.
Our focus on operational efficiency enhancements aimed
at improving service levels and outcomes for both patients
and practitioners yielded positive results. We increased our
use of online booking systems, streamlined appointment
confirmation processes, and improved rebooking practices.
These initiatives contributed to notable improvements in
operational metrics throughout FY24.
The staff-to-practitioner ratio, which measures the total
staff hours worked relative to dentist hours, provides a
valuable gauge of our operational efficiency. This ratio is
now at a level that optimally balances financial efficiency
with operational effectiveness in supporting our dentists
and patients.
The proposed transaction restricted our ability to open new
centres and capital expenditure was moderated. However,
a number of consolidations were undertaken, including the
mergers of nib Newcastle with Pacific Smiles Newcastle
in New South Wales, and nib Woden with Pacific Smiles
Woden in the Australian Capital Territory. Additionally,
several centres underwent refurbishments and equipment
upgrades as we kept our focus on delivering best practice
patient experiences.
By the end of the year, Pacific Smiles operated 128 dental
centres, plus eight HBF dental centres, with 543 dental
chairs in Pacific Smiles centres, 38 chairs in HBF dental
centres, and over 800 active practitioners.
The continued success of our partnership with HBF, under
a managed services agreement to build and operate
dental centres in Western Australia, was evident throughout
the year. Our contract with HBF involves the construction
and operation of dental centres on its behalf. In FY24, the
HBF Dental Network maintained its eight existing centres.
Notably, we achieved a substantial 52% increase in
attended appointments at HBF centres. We are pleased
to announce the approval of an additional two HBF dental
centres for FY25.
We value our relationship with HBF and appreciate the
collaborative efforts of both teams. We extend our gratitude
to HBF for its continued trust and partnership.
We also finalised an amendment to our long-term contract
with nib Health Funds (nib). This amendment adjusts the
contractual arrangements for providing a gap-free offering
to nib members. Pacific Smiles currently operates 11 nib
Dental Care Centres, where nib members receive fully
funded gap-free preventative dental care. This contract,
valid until May 2027, has been amended to extend the
gap-free preventative dental care offering to 117 Pacific
Smiles dental centres exclusively within their operational
geographies.
This year’s accomplishments would not have been possible
without the efforts of our dedicated team. To all staff,
whether working in centres, support roles, or leadership,
I extend my heartfelt thanks. Your commitment and
resilience, especially amid corporate distractions, have
been exemplary.
Finally, I would like to express my gratitude to the
practitioners who continue to choose Pacific Smiles for their
patient care. Your trust and dedication are invaluable to us.
My own short journey with Pacific Smiles concludes this year
but looking ahead to 2025, you should remain optimistic.
The business is well-positioned for continued growth and
success.
Andrew Vidler
Chief Executive Officer & Managing Director
13th September 2024
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ANNUAL REPORT 2024
10
PACIFIC SMILES GROUP
Business Review
In FY 2024 Pacific Smiles continued to invest resources and
management focus to drive growth and utilisation of dental centres in
the network that have embedded capacity and are still maturing.
Company Strategic Pillars
Pacific Smiles has a clear focus on strategic drivers of the business. Core pillars of the strategy
are as follows:
Strong and
Engaged Culture
Investment in dentist, patient and employee
experience is a core pillar of the strategy and is
measured via Engagement research and Net
Promoter Scores (NPS).
Operational
Excellence
Operational efficiency, productivity and economies of
scale are driven by leveraging investments in systems,
core processes and infrastructure.
Same Centre
Growth
Leveraging growth in the existing portfolio of dental
centres whilst adding additional capacity where
available 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.
Network
Optimisation
Measured investment in value-enhancing centres,
existing and new, whilst balancing profit growth with
prudent capital management.
Total Shareholder
Returns
Maximising the return on equity for shareholders
by increasing profitability that drives greater total
shareholder returns.
Growth was driven through a combination of engaging
new practitioners to utilise the services provided by Pacific
Smiles and attracting new patients to meet capacity
in centres. Marketing initiatives to drive new patient
acquisitions were implemented, including above-the-line
campaigns aimed at stimulating increased awareness and
demand for Pacific Smiles dental services.
There was also continued focus on delivering operational
efficiency enhancements, aimed at improving service
levels and outcomes for both patients and practitioners.
These were primarily targeted at improving patient
experience, with increased use of online bookings, seamless
appointment confirmation processes and rebooking of
appointments. All these metrics improved during FY 2024.
The Company experienced an unusual level of disruption
in FY 2024. In December, a proposal was received from
Genesis Capital Manager I Pty Ltd (Genesis Capital), a
private equity firm, to acquire 100% of the shares in Pacific
Smiles, closely coinciding with the January appointment of
Pacific Smiles new Chief Executive Officer, Mr Andrew Vidler.
The proposal was initially rejected by the Board of Pacific
Smiles, who then conducted a broad and thorough process
to determine whether other parties had an interest in
acquiring the Company at a value that the Board believed
better reflected the value of the Company and was in the
best interests of Pacific Smiles shareholders as a whole. This
process culminated with the receipt of a binding proposal
from NDC BidCo Pty Ltd (NDC), a portfolio company
managed by Crescent Capital Partners, to acquire 100%
of the shares in Pacific Smiles for $1.90 per share, which
the Board supported and recommended to shareholders
to approve. NDC ultimately increased its offer to $2.05
per share, which was also recommended by the Board to
shareholders.
Pacific Smiles held a Scheme Meeting on 8 August 2024
(Scheme Meeting), at which Pacific Smiles shareholders
had the opportunity to vote on a resolution to approve the
proposed scheme of arrangement under which NDC would
acquire 100% of the shares in Pacific Smiles (Scheme). The
resolution to approve the Scheme was not approved by the
requisite majorities of Pacific Smiles shareholders at the
Scheme Meeting.
The impact of this process, which continued for a prolonged
period as the Board extracted additional value from bidders,
restricted the ambitions of the business to undertake further
strategic initiatives, including the building of new centres.
Notwithstanding this corporate activity, 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.
Operating and financial performance improved on the prior
year, culminating in full year results as follows:
•
underlying earnings before interest, tax, depreciation
and amortisation (EBITDA) (excluding AASB 16)
increased from $24.1m to $28.2m, an increase of 16.9%
•
patient fees up 7.9% year on year to $291.8m
•
group revenue up 8.7% year on year to $179.8m
•
HBF Dental (HBFD) continued to grow delivering over
59,000 appointments, an increase of 52.2% over the
prior year
•
dividends of $7.0m paid to shareholders during the year
•
total borrowings reduced to nil, with a net cash position
of $17.7m.
The FY 2024 results reflect the Company’s strategy of
capitalising on the significant investments in prior periods
to leverage operational efficiencies and growth in patient
appointment and practitioner hours to drive profitability.
There were no new centres built in FY 2024 and capital
expenditure was moderated. The business did however
undertake centre consolidations with the mergers of nib
Newcastle and Pacific Smiles Newcastle in New South Wales
(NSW), and nib Woden and Pacific Smiles Woden in the
Australian Capital Territory (ACT).
The operational overview and insights discussions will focus
on the underlying results for FY 2024 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 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
leased 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
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12
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Business Review
Statutory Results
Statutory net profit after tax for the year was $8.0m. This result increased 232.1% from the FY 2023 statutory net profit after
tax of $2.4m. The statutory results for the year were driven by increased patient volumes, a modest increase in pricing and
a well-managed cost base.
Underlying Results
The consolidated entity’s underlying EBITDA, excluding the impact of AASB 16, increased 16.9% to $28.2m compared with the
previous financial year. The reconciliation of statutory net profit before tax to underlying EBITDA pre-AASB 16 is shown in the
table below.
2024
$’000
2023
$’000
Statutory net profit before tax
10,725
3,923
Depreciation and amortisation expense
30,332
30,192
Net finance cost
3,668
4,343
Statutory EBITDA
44,725
38,458
Severance expenses removed
1
226
242
Executive Long-Term Incentive plan (credit) / expense
2
(1,815)
704
Additional costs associated with the December Extraordinary General
Meeting
3
-
536
Costs associated with the control transaction proposals and Scheme of
Arrangement
4
2,313
-
Net flood insurance recoveries associated with FY 2022 loss
5
-
(646)
Workers compensation insurance premium adjustments for prior years
6
208
238
Impact of prior years’ payroll tax determination
7
1,191
1,174
Change in accounting estimate for consumables
8
(1,415)
-
Adjustment to pre-AASB 16 basis
9
(17,252)
(16,597)
Underlying EBITDA pre-AASB 16
28,181
24,109
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. During the year, the Executive Long-Term Incentive plan expense was
in credit, as the new Performance and Cash Rights issued were offset by the credits associated with Tranche 6 failing to vest, and a large
number of Performance Rights forfeited due to resignations.
Note 3 – The additional costs associated with the December Extraordinary General Meeting refer 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 held on 19 December 2022.
Note 4 – The costs associated with the proposals from each of Genesis Capital Manager I Pty Ltd and NDC BidCo Pty Ltd (NDC) to acquire
100% of the shares in Pacific Smiles and the subsequent meeting of Pacific Smiles shareholders held on 8 August 2024 (Scheme Meeting) to
consider and vote on a resolution to approve the proposed scheme of arrangement under which NDC would acquire 100% of the shares in
Pacific Smiles (Scheme). They include external costs paid for consulting, financial and legal advice and other associated costs related to the
Scheme and the Scheme Meeting. It also includes additional exertion payments to directors and management.
Note 5 – The PSG dental centre located in Lismore was damaged in the 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 until the claim was finalised in January 2023.
Note 6 – 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 7 – The prior year payroll tax determination represents the total amount paid for payroll tax relating to the five financial years 2019 to
2023 in the Australian Capital Territory (ACT) and associated attendant legal costs incurred during the audits and PSG’s objections.
Note 8 – During the year, PSG updated and improved processes and controls around dental centre consumables and the associated
estimated cost and quantity held at individual dental centres. Applying this change has resulted in a credit in the current year, which has
been excluded from the underlying results as it is a non-cash adjustment that is not anticipated to recur in future periods.
Note 9 – 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.
Underlying NPAT increased 103.8% to $8.5m compared to $4.2m in the prior year.
Depreciation and amortisation costs (excluding the impact of AASB 16) totalled $16.1m, a reduction of $0.3m on the prior
period.
Summary of key financial results and metrics is as follows.
Group Financial Performance
$ million
Underlying1
2024
Underlying1
2023
Change
Revenue
179.8
165.3
8.7%
Gross profit2
170.6
157.4
8.4%
EBITDA
28.2
24.1
16.9%
EBIT
12.1
7.7
56.6%
Net profit after tax
8.9
4.5
98.3%
Operating metrics
Number of dental centres
128
130
(1.5%)
Commissioned dental chairs
543
545
(0.4%)
Patient fees
291.8
270.5
7.9%
Same centre patient fees growth
7.3%
14.9%
753 bps
Financial metrics
Underlying earnings per share (cents)
5.6
2.8
98.3%
EBITDA to revenue margin
15.7%
14.6%
110 bps
EBITDA to patient fees margin
9.7%
8.9%
80 bps
EBIT to revenue margin
6.7%
4.7%
200 bps
1.
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.
15
14
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Business Review
Revenue
Group revenue is $179.8m, an increase of 8.7% over the
previous financial year. Revenue consists mainly of service
fees charged to the dentists who practise from centres.
The increase in revenue was driven by both increased
appointment volumes as the business continues to grow
and scale, as well as modestly higher prices driven by
small increases provided by health funds.
Patient fees increased 7.9% over the previous year to
$291.8m, with same centre fees increasing 7.3%. Utilisation
rates and appointment volumes increased in all but one
cohort (based on age), with higher growth rates achieved
in more immature centres, predominantly established in
FY20 or later.
Total practitioner hours increased 3.9% in FY 2024 to
approximately 717,000 hours, and the total number of
appointments attended increased 3.5% to
approximately 1,049,000.
Average patient visitation in FY 2024 remained consistent
at approximately 1.95 visits per annum, driven by strong
brand loyalty and high rebooking and appointment
confirmation rates.
Expenses
EBITDA margins at a centre level increased slightly
compared to FY 2023, despite the challenging cost
environment driven by the Fair Work Commission’s
determination of a 5.75% wage increase for FY 2024, which
affected the cost base for the majority of the Company’s
employees. Balancing the efficiency and productivity of
the dental centre workforce against the need to provide
practitioners and patients with high-quality support and
care remained a priority. The staff-to-practitioner ratio
(measured as the number of staff hours worked to dentist
hours worked) was in line with FY 2023.
Consumable supply expenses increased only 1.3% to $13.3m
from $13.2m in the prior period. These costs as a percentage
of turnover reduced in comparison to FY 2023, from 4.8% to
4.5% due to continued improvement in centre purchasing
processes and strong partnerships with suppliers.
Occupancy costs, including lease payments, increased
6.0% to $22.2m in FY 2024, versus $20.9m in the prior
period. Approximately $0.6m of this increase is attributed
to annual lease increases and $0.3m to utility prices
increasing outgoings. During the year, the Company
undertook two separate centre mergers, combining nib
Newcastle with PSD Newcastle and nib Woden with PSD
Woden. These consolidations resulted in efficiency gains
and cost savings.
Repairs and maintenance expenditure on dental equipment
in the network increased from $2.1m to $2.6m in FY 2024. The
year-on-year rise was primarily driven by increased ageing
of the dentist chair fleet and other equipment. To address
this, asset management processes continue to be examined
for potential improvements 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 6.4% in FY
2024 from 6.9% in the prior year. This was driven by two key
factors: managing costs and headcount to align support
office costs with the level of new centre growth, and an
increase in revenues.
Net interest costs decreased to $0.1m from $0.8m in the
prior year. Reduced interest paid on the debt facility was
driven by the progressive repayment of the term debt facility
combined with improved interest receipts associated with
higher rates. The Company is presently debt-free.
There was an increase in expenditure classified as non-
underlying in FY 2024 due to its one-off nature, which is
reflected in the reconciliation of statutory to underlying
EBITDA. The majority of non-underlying expenditure
included: costs associated with advice and the
comprehensive work related to responding to the control
transaction proposals and preparation for the attendant
Scheme Meeting, which took place on 8 August 2024,
and the non-cash adjustment for the estimate of cost
and quantities of consumables held at individual dental
centres. Other adjustments are outlined in the table on
page 12, reconciling Statutory net profit after tax to
Underlying EBITDA.
Payroll Tax
During the year, Pacific Smiles received two Payroll Tax
Notice of Reassessment Letters from the ACT Revenue
Office in respect of the financial years from 2019 to 2022
and for financial year 2023. These letters pertained to
the treatment of the Pacific Smiles’ Service and Facility
Agreements with dentists for payroll tax purposes and
specified that Pacific Smiles was to remit a total of
approximately $1.2m in payroll tax shortfalls covering the
five-year period. These amounts have been paid in full
to the ACT Revenue Office. This payment, and associated
legal and consulting costs, have been reflected as non-
underlying expenditures in the year.
Subsequent to the reassessment and payment, Pacific Smiles
lodged an objection with the ACT Revenue Office in January
2024, contesting the Reassessment for the four financial
years from 2019 to 2022 and, in February 2024, Pacific Smiles
lodged a second objection contesting the Reassessment for
the 2023 financial year. Both of these objections have been
acknowledged by the ACT Revenue Office and are expected
to be responded to in the first half of FY 2025.
Capital Expenditure
Capital expenditure for the year was lower at $3.8m,
compared to FY 2023 at $11.1m, primarily due to the
Company not opening any new centres during the year. The
Company had planned to open up to 5 new centres in the
second half of FY 2024, however restrictions imposed under
the Scheme Implementation Deed with NDC meant this
was not possible. With the reduction in expenditure for new
centres, Pacific Smiles spent $3.4m on equipment required
in the dental centres, including the purchase of 30 new
A-dec dental chairs to be used in both growth initiatives and
to replace ageing chairs in the fleet. Of the remaining capital
expenditure, $0.3m was spent on IT-related investment and
$0.2m on refurbishing dental centres.
Systems and Technology
Pacific Smiles’ systems and technology roadmap includes
advancements in digital dentistry, cybersecurity, cloud
computing, and digital service transformation, continuing
the commitment to driving technological excellence and
innovation. Enhancements to digital patient interfaces
provided an even more intuitive and engaging experience,
while integrating artificial intelligence and machine
learning algorithms into customer operations, reducing
service response times and increasing practitioner and
patient satisfaction. A new scalable CRM platform for
practitioners was invested in during the year, which is an
enabler for business expansion and a deeper relationship
and experience with dentists.
In response to the continued presence of cyber threats,
Pacific Smiles strengthened its cybersecurity monitoring
and infrastructure. This year, global cyber activity
intelligence was used to create advanced threat detection
and response systems, improving the privacy and security
of patient information.
The Company’s transition to cloud-based technology
solutions and the creation of a cloud-based Single Patient
Record has continued to yield positive results. Pacific
Smiles has also expanded its cloud infrastructure, offering
greater scalability and flexibility while reducing operational
costs and improving system reliability.
Cash and Borrowings
Pacific Smiles continues its strong focus on cash
management and fiscal discipline. During the year, $9.0m
debt was repaid, fully repaying the amount outstanding
under the Company’s term debt facility.
Centres
No new centres were opened in FY 2024. The Company
had planned to open up to 5 new centres in the second
half of FY 2024, however restrictions imposed under the
Scheme Implementation Deed with NDC meant this was
not possible.
Woden nib and Pacific Smiles Woden dental centres were
combined and co-located nearby as the landlord was
redeveloping the site. nib Newcastle was closed following
the cessation of the lease at these premises, with the
Pacific Smiles dental centre in Marketown shopping
complex rebranding as nib Newcastle, bringing the total
dental network at year end to 128 centres.
The Company continually evaluates the growth strategy in
light of the operating environment to ensure efficient use of
capital and a balanced approach to investment.
Employees
Total employee expenses for FY 2024 of $83.3m equates
to 28.5% of patient fees, compared to $80.7m or 29.8% of
patient fees in the prior period.
Employee engagement remains a key priority and was
actively managed during the year. Employee engagement
scores increased in FY 2024 relative to the prior year from
7.4 to 7.7, and investment was made in updating of the
employee value proposition to continue to improve overall
satisfaction and retention levels.
Patients of Pacific Smiles’ Dentists
In FY 2024, Pacific Smiles dentists delivered 1.05 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.
Appointment volume growth was lower than in FY 2024,
which primarily reflected the fact that there were no new
centres opened and that the growth in FY 2023 was inflated
due to the COVID-19 impacts on the business in FY 2022.
Practitioners
The number of active practitioners practising with Pacific
Smiles at the end of FY 2024 remained stable at 764 with a
planned and unplanned turnover rate of approximately 13.1%.
While the number of active practitioners remained stable,
existing practitioners worked 3.9% more hours, contributing
to an increase of over 27,000 practitioner hours worked in
FY 2024 compared to the prior year.
17
16
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Business Review
Business 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. It is
underpinned by:
•
locations with a strong community and convenience
proposition
•
standardisation of centre design, brand, people &
culture and systems
•
ease of mobility for staff and practitioners across the
network.
The outlook and future prospects for Pacific Smiles
is favourable and the Company is optimistic about
growing revenue and earnings in FY 2025, noting that the
Company’s growth is driven by three important levers,
including:
1. Embedded Capacity: Available capacity to fill addition-
al appointments within the existing network
•
filling existing spare appointments
•
higher utilisation of existing chairs
(via more dentist hours),
2. Cohort Maturation
•
further capacity from limited investment via new
chairs in available surgeries
•
higher utilisation of existing chairs
(via more dentist hours)
•
additional cohort maturation mix from improving
offering, efficiency and pricing
•
improving mix of higher value dentistry work could
drive further upside,
3. Network Optimisation
•
self-funded network centre growth remains a key
long-term opportunity
•
centre refurbishments and expansions
•
cash flow generation and a strong business model
supports continued scale.
Pacific Smiles also benefits from several valued strategic
partnerships, including with nib and HBF. nib is a key health
insurance partner of Pacific Smiles, cemented by a long-
term close working partnership of over 20 years. Pacific
Smiles owns and operates 11 nib-branded dental centres.
This relationship was recently enhanced via an agreement
to expand the current contractual arrangements for the
provision of a gap-free offering to nib members across the
whole Pacific Smiles network.
Pacific Smiles’ partnership with HBF began with the
Managed Services Agreement (MSA) whereby the
Company is the exclusive operator of HBF dental centres in
Western Australia. Since the inception of the MSA in FY 2021,
eight HBF dental centres have been developed, with agreed
plans to expand further in FY 2025.
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 are growing
with Australia’s ageing population.
•
People aged 35 to 74 have the greatest financial
means to pay for dental care – according to
Australian Bureau of Statistics (ABS) data, 84.3% of
people in this age cohort who needed to see a dentist
in 2022–23 did so.
•
Private health insurance (PHI) participation rates
remain high – recent Australian Prudential Regulation
Authority (APRA) data (December 2023) revealed
continued annual PHI policy growth of 2.3%, supporting
continued dental growth and ancillary claiming.
•
Access to Preferred Provider Agreements (PPA) – 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 be able to access
dental care.
•
Cosmetic dentistry trend continues – increasing
demand for orthodontic procedures (aligners, etc),
teeth whitening, veneers and crowns.
•
Ongoing growth in the corporate dental service
organisation (DSO) model.
The Dental Market
IBISWorld, in its Industry Report (Q8531: Dental Services
in Australia, IBISWorld, April 2024) has reported that the
market for dental services in Australia was approximately
worth $12.1b per annum in 2024 and is forecast to continue
to grow over the next five years.
Non-emergency dental work (preventative and 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 in and
deferral of 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, macro-
economic 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
resulted from 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.
Environmental Considerations
Pacific Smiles is not subject to any particular or
significant environmental regulation under the law of the
Commonwealth or of a state or territory.
Why Dentists Choose
Pacific Smiles
Clinical
Autonomy
Business
Support &
Full Patient
Books
Consistency &
Standardisation
Dentists
Supporting
Dentists
Clinical
Governance
Diversity
Transparency
& Equality
Infection
Prevention &
Control
Professional
Education
Feedback
19
18
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Business Review
Risk 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 the Corporate Governance
Statement and related governance policies on the Company website.
The following risk areas and mitigating factors have been identified by Pacific Smiles.
Risk Area
Mitigating Factors and Risk Management Approach
Market
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’ attempt to offset
increased costs via operating efficiencies from increased scale.
A high 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 three years has laid the foundation to
further capitalise on efficiencies that contribute to offsetting
external margin pressures.
Legal, Regulatory
and Governance
Changes to government
regulations and legislation that
lead to increased costs.
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
Payroll tax risk in relation to dentists’ Service and Facilities
Agreements is currently managed through expert legal advice and
any developments are clearly communicated to investors and the
market in compliance with continuing disclosure obligations.
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.
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.
Competition-induced fee
pressure could increase
competition for patients and
the degree to which dentists
compete based on fee levels.
Pacific Smiles dental centres are usually differentiated from other
local providers and compete based on convenience, value, access
and overall patient experience.
Risk Area
Mitigating Factors and Risk Management Approach
Practitioners
Under the Service and
Facility Agreements between
Pacific Smiles and dentists,
the dentists may terminate
without cause, generally with
three months notice.
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.
Dentists operating outside
scope of practice is also a risk
for the business.
A compliance framework is in place to ensure protocols are
followed and dentists are well- credentialled. A Dental Advisory
Committee oversees dentist credentials. In addition, the Clinical
Governance Committee is responsible for continuous improvement
of processes and ensuring good clinical outcomes for patients.
Should the availability of
appropriately skilled and
aligned dentists become
restricted, then growth and
expansion of Pacific Smiles
could be slowed.
A pipeline of dentists is built via ongoing training and development
of dentists, including a structured mentoring program for new
graduate dentists.
Occupational
Health and Safety
(OHS)
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 as negative economic
consequences.
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 is further
enhanced by internal and external appointments to the Dental
Advisory Committee.
OHS practices and outcomes are a priority for the Company.
People and
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 and Entitlements
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,
automated procedures are utilised to reduce the risk of manual
errors. Industrial instruments are proactively reviewed, and
management is responsible for staying abreast of changes to
industrial relations legislation and ensuring all leaders understand
and comply.
Staff Turnover
Employees are an essential component of the services Pacific
Smiles provides to dentists and the dentists’ 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.
21
20
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Business Review
Risk Area
Mitigating Factors and Risk Management Approach
Cybersecurity
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.
Pacific Smiles Group has cybersecurity controls in place to
minimise technology-related business interruptions and to
ensure 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.
Technology
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.
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.
Any loss of critical Technology
systems or services would
result in business disruption.
IT Business Continuity plans continue to evolve, and critical IT
business system disruption is insulated via advanced Disaster
Recovery process and capability.
Business
Continuity
Should an event result in the
closure, restriction or delay of
key consumables or personal
protective equipment (PPE),
our ability to meet the needs
of dentists and their patients
could be impacted.
Long-Term relationships with national suppliers and alternate
suppliers have been identified. Pacific Smiles closely monitors
inventory levels to ensure adequate stock of appropriate PPE is
available. A strategy for emergency storage of critical PPE is also in
place.
Should a pandemic restrict the
dental services that are 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 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 issues
pose a 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.
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.
Modern Slavery
Risk
Due diligence is undertaken for specific suppliers relative to
compliance with the Company’s Modern Slavery Policy, which is
overseen by the Board.
Risk Area
Mitigating Factors and Risk Management Approach
Shareholder
Activism
Impacts upon brand and
reputation that result in
a negative impact on the
share price and financial
performance of the
Company as it bears the
cost of addressing activist
campaigns.
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.
Shareholder
Concentration
Risk
The consequence of recent
activism and control
transaction proposals has
been a material concentration
of the Pacific Smiles
shareholder register. The top
six shareholders now own
approximately 74.4% of the
total shares outstanding.
The objectives and views of
the different shareholders with
material ownership of Pacific
Smiles may not be aligned.
This may inhibit the ability of
the Board and management
to successfully execute its
preferred strategy, negatively
impacting shareholder value.
Pacific Smiles regularly and transparently communicates with all
shareholders through its Investor Relations program, providing a
platform for appropriate dialogue and investor feedback.
23
22
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Environmental, Social and Governance
En
vi
ro
n
m
e
nt
al
So
ci
al
G
ov
er
n
a
n
c
e
Centre
Locations
WA
NSW
QLD
8
26
VIC
34
63
ACT
5
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**
Marrickville
Merrylands**
Morisset
Mount Hutton
Narellan
nib Newcastle‡
nib Nth 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
ACT
Belconnen
Gungahlin
Manuka
Tuggeranong
nib Woden‡
WA
(HBFD)
Belmont*
Bull Creek
Cannington
Floreat*
Joondalup
Karrinyup
Mandurah
Morley
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
Aspley
Birtinya
Bribie Island
Brisbane CBD
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
Notes:
* FY2023 New Centres ** FY2022 New Centres ‡ PSD Woden merged with nib Woden and PSD Newcastle was rebranded to nib Newcastle
Environmental, Social
and Governance
ENVIRONMENTAL
Transitioned to a single supplier
for uniforms & gowns, reducing
environmental impact of
separate supply chains
(freight etc).
Pilot of paper cups replacing
plastic cups completed – rolled
out across HBFD centres in line
with WA plastics ban.
Reduction in non-recyclable
impression products with the
increased use of 3D scanners.
SOCIAL
Now in its third year, the career-
ready placement partnership
with the University of Newcastle
provides students with real-
world industry experience,
preparing them for future
workplace opportunities.
Continued use of AI
technology producing excellent
recruitment outcomes
by reducing bias from
candidate screenings in our
recruitment process.
GOVERNANCE
Improved the median gender pay
gap (WGEA) from 8.7% to 1.8%.
Gender, professional and
educational diversity embedded
in the new Clinical Governance
Committee and Dental Advisory
Committee.
High level of cultural and gender
diversity across our engaged
dentists (more than 60% female)
and workforce.
PSG makes a difference through strategic initiatives in the field, at our Dental
Centre Support office and in our new centre build schedules.
25
ANNUAL REPORT 2024
24
PACIFIC SMILES GROUP
Consolidated Financial
Report 2024
Consolidated Financial
Report 2024
27
26
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Director’s Report
Director’s Report
The Directors present their report, together with the financial statements, of the consolidated entity (referred to hereafter
as the ‘Group’) 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 2024.
Principal Activities
The Company principally operates dental centres at which independent dentists practise 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.
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’s
website. The Company is currently reviewing the need for the establishment of an Internal Audit Committee.
Matters Subsequent to The End of The Financial Year
Outcome of Scheme Meeting held on 8 August 2024
A Scheme Meeting was held on 8 August 2024 for shareholders to vote on a Scheme Resolution approving the Scheme
under which NDC would acquire 100% of the shares in Pacific Smiles for $2.05 per share. The Scheme Resolution, as set out
in the Notice of Scheme Meeting included in the Scheme Booklet released to the ASX on 26 June 2024, was not approved by
the requisite majorities of Pacific Smiles shareholders at the Scheme Meeting.
Retirement of Non-Executive Chairperson
On 19 August 2024, the Company announced the retirement of Non-Executive Chairperson, Ms Zita Peach, with effect from
the close of business on 28 August 2024. The Chair role will be succeeded by current Non-Executive Director Ms Giselle
Collins. Ms Collins has been on the Pacific Smiles Board since November 2023, is currently the Chair of the Audit & Risk
Management Committee and chaired the Board Takeover Response Committee.
Resignation of Non-Executive Director
On 9 August 2024, the Company announced the resignation of Non-Executive Director, Mr Mark Bloom, with immediate
effect.
Final dividend declaration
Subsequent to the end of the financial year, the Directors have recommended the payment of a final dividend of 3.25 cents
(2023: 2.27 cents) per ordinary share, fully franked. The aggregate amount of the proposed dividend expected to be paid
out of profit reserves, but not recognised as a liability as at the end of the financial year is $5,182,557 (2023: $3,622,510). The
record date for determining entitlements to the 2024 final dividend is 25 September 2024, with the payment date being 10
October 2024.
No other matter or circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect
the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years.
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 as at 30 June 2024 against those identified in the skills
matrix is set out below:
Board Skill
Definition
Number of
Directors
Dentistry/Dental
Industry Experience
An experienced dentist with a commercial mindset, ideally with a background
running multiple practices and demonstrated industry thought leadership.
1
Healthcare Industry
Experience
Extensive experience in healthcare, health insurance or a related category that
manages the treatment of patients, ideally at multi- site locations.
4
Leadership and
Commercial Acumen
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.
5
Strategy
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.
5
Finance/Accounting
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.
5
Property
Experience in property management, including asset utilisation, leasing, asset
management, capital allocation and multi-location roll out.
2
Governance
Demonstrated experience in, or commitment to, best practice corporate
standards, as well as the oversight of corporate governance frameworks, policies
and processes, ideally in an ASX environment.
3
Marketing, Digital
and Data
Extensive experience leading both B2B and B2C Marketing teams with functional
leadership overseeing advertising, brand, customer relationship management
and customer experience. In addition, expertise and experience in innovation,
adoption and implementation of new technologies, digital disruption, leveraging
digital technologies, understanding the use of data and data analytics.
2
Stakeholder
Engagement
Experience developing stakeholder engagement plans, including an
understanding of who the stakeholders are, the status of the relationship and
what responsibilities the Company has to them, as well as experience managing
multiple stakeholders in complex environments.
4
Risk Management
Experience in anticipating, recognising and managing risks, including regulatory,
financial, and non-financial risks.
3
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.
5
29
28
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Director’s Report
Directors
The Directors of the Company at any time during or since the end of the financial year are:
Ms Zita Peach
Ms Giselle Collins
Mr Andrew Vidler
Non-Executive Chairperson,
appointed February 2020, retired with
effect from the release of the results
on 28 August 2024.
Non-Executive Director, appointed
August 2017.
Member of the Nomination and
Remuneration Committee.
B.Sc., FAICD, FAMI
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, licensing
and commercialising products and
technologies on a global scale. Zita is
a Non-Executive Director of Monash
IVF Group Limited and incoming Chair
of the Olivia Newton John Cancer
Research Institute. Zita is also a Non-
Executive Director of three privately held
companies, Icon Group Pty Ltd, Nucleus
Network Pty Ltd and VetPartners Pty
Ltd. Zita is a Fellow of the Australian
Institute of Company Directors and the
Australian Marketing Institute.
Other current ASX directorships:
Monash IVF Group Limited
Former directorships (last three
years): Starpharma Holdings Limited
Interests in shares: 135,000
Non-Executive Director,
appointed November 2023.
Non-Executive Chair,
appointed 28 August 2024.
Chair of the Audit & Risk Management
Committee.
B.Ec., G.DipAppFin., CA, GAICD
Giselle is a chartered accountant and
Director with significant executive
experience in property, tourism and
financial services and has worked in
professional services with KPMG in
Sydney, London and Zug, Switzerland
and at National Roads and Motorists’
Association Limited (NRMA) as GM in
charge of Treasury, Property, Holiday
Parks and the investment in the
Travelodge Hotel Group.
Giselle’s past board experience
includes being the Chairman of Aon
Superannuation, Chairman of the
Travelodge Hotel Group and Chairman
of the Heart Research Institute, and
having served on the boards of BIG4
Holiday Parks, Vinomofo, ASX listed
Peak Rare Earths and the Royal
Australian Institute of Architects.
Giselle is currently Chairman of Hotel
Property Investments (ASX:HPI), a Non-
Executive Director for both Generation
Development Group (ASX:GDG) and
Cooper Energy (ASX:COE).
Other current ASX directorships:
Hotel Property Investments Limited
Generation Development Group
Limited
Cooper Energy Limited
Former directorships
(last three years): Peak Rare Earths
Limited
Interests in shares: 10,000
Managing Director and Chief
Executive Officer, appointed
January 2024.
B.A., B.Bus.
Andrew is an accomplished senior
executive with over 30 years of
experience in retail, consumer
products, and health industries. He
excels in driving growth and innovation
within large and complex businesses,
focusing on building high-performing
teams that are market-oriented and
customer-centric.
Andrew’s leadership style is anchored
in values and relationships, as
demonstrated during his successful
tenure leading Priceline and Priceline
Pharmacy, navigating through
the pandemic and overseeing the
transition to new ownership with
Wesfarmers. Prior to this, he spent
over two decades at EBOS Group Ltd,
establishing a comprehensive career
in consumer health and pharmacy
retailing.
Other current ASX directorships:
Wellnex Life Limited
Former directorships
(last three years): Nil
Interests in shares: 43,032
Dr Scott Kalniz
Ms Jodie Leonard
Mr Steven Rubic
Non-Executive Director, appointed
January 2021. Member of the Audit
and Risk Management Committee.
D.D.S. and B.S. in Business
Administration, Economics (The Ohio
State University)
Dr Kalniz has over 25 years of dental
industry experience in the United
States. Dr Kalniz’s current role is Chief
Dental Officer and VP of Network
Development at Beam Benefits,
an employee benefits company.
Dr Kalniz 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 practising 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 five
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 ASX directorships: Nil
Former directorships
(last three years): Nil
Interests in shares: 10,000
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
focuses 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 expertise in
strategic planning, digital innovation,
and marketing, with expertise across
a diverse range of industries including
technology, banking and financial
services, consumer goods, healthcare,
media, and travel and tourism. She
previously held Executive 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 boards, including RACV
Limited, Beyond Bank Australia Limited,
Kinetic Superannuation Limited,
Flexigroup Limited, BWX Limited and
the Great Ocean Road Coast and
Parks Authority, and is currently also on
the Board of Barwon Water.
Other current ASX directorships:
Regis Aged Care Limited
Former directorships
(last three years):
XPON Technology Group Ltd
X2M Connect Ltd
Selfwealth Ltd
Interests in shares: 38,500
Non-Executive Director,
appointed May 2023.
Member Nomination & Remuneration
and Property Committees.
B.Health Admin, M.B.A., 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
the Mercy Partners Mater Misericordiae
Limited, Invocare Ltd and Catholic
Healthcare Limited, 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,
Healthscope and the NSW Private
Hospitals Association. He has worked
closely with boards and private equity
firms over the last 12 years, growing a
number of businesses with a focus on
commercial outcomes and delivering
strong returns to shareholders.
Other current ASX directorships:
Invocare Limited
Former directorships
(last three years): Nil
Interests in shares: 120,000
31
30
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Director’s Report
The following persons were Directors of the Company at the beginning of the financial year up to their resignation or
retirement date.
Mr Mark Bloom
Mr Simon Rutherford
Mr Phil McKenzie
Non-Executive Director, appointed
October 2019, resigned 9 August 2024.
Member of the Audit and Risk
Management Committee.
Chair of the Property Committee.
B.Comm., B.Acc., CA ANZ
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
as Executive Director at three 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, EBOS
Group Limited, Metropolitan Memorial
Parks and Abacus Storage King.
Other current ASX directorships:AGL
Energy Limited, EBOS Group Limited and
Abacus Storage King Limited
Former directorships
(last three years): Abacus Property
Group Limited
Interests in shares: 277,952
Non-Executive Director,
appointed September 2003.
Chair of the Audit & Risk Management
Committee.
Retired 22 November 2023.
B.Comm., CA, FAICD
Simon is a chartered accountant and
partner with PKF business advisory
services where he has worked for over
36 years. He works with corporate and
family-owned groups as an advisory
Board member and lead advisor 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 ASX directorships: Nil
Former directorships
(last three years): Nil
Interests in shares: 1,744,863
Managing Director and Chief
Executive Officer,
appointed October 2018.
Resigned 31 August 2023.
B.Bus.
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 AMG, 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,
where he 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 ASX directorships: Nil
Former directorships
(last three years): Nil
Interests in shares: 10,600
Executive Team
Mr Andrew Vidler
Managing Director and Chief
Executive Officer
B.A., B.Bus.
Biography available in Directors section.
Mr Matthew Cordingley
Chief Financial Officer
B.Bus.
An experienced leader with extensive finance and commercial experience, Matthew’s
career spans more than 20 years in chartered accounting, investment banking and
corporate roles.
Matthew was previously 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.
Mr Paul Robertson
Chief Commercial Officer
B.Comm.
Paul’s career has focused on senior operational management roles in private
healthcare facilities.
He has managed several private hospitals of varying sizes, providing a wide range of
medical services. Paul has specialised in managing transition and operation of newly
acquired facilities. With a financial background, Paul has also overseen group-wide
corporate functions and significant involvement in multi-disciplinary project teams.
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 2024, and the number of meetings attended by each Director as follows.
Board Meetings
Audit & Risk
Committee
Nomination &
Remuneration
Committee
Property Committee
Held
Attended
Held
Attended
Held
Attended
Held
Attended
Ms Zita Peach7
38
37
-
-
9
9
-
-
Mr Andrew Vidler5
22
22
-
-
-
-
-
-
Mr Mark Bloom6
38
34
4
4
-
-
5
5
Dr Scott Kalniz1
38
32
4
4
-
-
-
-
Ms Jodie Leonard
38
37
-
-
9
9
-
-
Mr Steven Rubic
38
37
-
-
9
9
4
3
Ms Giselle Collins2
29
29
3
3
-
-
3
3
Mr Simon Rutherford3
8
5
1
-
-
-
2
2
Mr Phil McKenzie4
3
3
-
-
-
-
-
-
1 Dr 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 Ms Collins was appointed 22 November 2023.
3 Mr Rutherford retired 22 November 2023.
4 Mr McKenzie resigned 31 August 2023.
5 Mr Vidler was appointed 15 January 2024.
6 Mr Bloom resigned 9 August 2024.
7 Ms Peach retired with effect from the release of results on 28 August 2024.
33
32
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Director’s Report
Scheduled and unscheduled meetings
The Board attended to a regular schedule of Board meetings in FY 2024. In addition, a number of unscheduled meetings
were held to address out-of-cycle meetings for issues (mostly relating the control transaction proposals) 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.
Non-Audit Services
During the financial year the following fees were paid or payable for services provided to KPMG, the auditor of the
Company:
2024
$
2023
$
Audit services:
Audit and review of the financial statements
200,000
190,900
Other services:
Tax compliance and advisory services
55,330
27,000
Other advisory services
57,997
-
113,327
7,000
313,327
217,900
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 Audit and Risk Management Committee to ensure they do not
impact the impartiality and objectivity of the auditor.
•
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 thousand dollars.
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 2024 has been received and can be found on page 53 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 10 to 21 inclusive in the Financial Report.
2.
Matters subsequent to end of the financial year as outlined in page 26.
3.
The Remuneration Report on pages 34 to 52.
4.
Auditor’s Independence Declaration on page 53.
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
27 August 2024
35
34
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Remuneration Report
Remuneration Report
On behalf of the Board, I am pleased to share with you the
FY 2024 Remuneration Report.
It was another positive year in terms of organisational
performance, despite a challenging external environment
and the additional workload generated by entering into
a Scheme Implementation Deed with NDC Bidco Pty Ltd
(NDC) and the prolonged control transaction process.
Despite the challenges, Management and the broader
team remained focused on delivering best-in-class
services to our dentists and patients, as well as optimising
the network and driving robust financial outcomes for
shareholders.
Pleasingly, patient sentiment also remained in the upper
quartile with a 90 NPS score, which is a testament to the
organisational culture and the team’s commitment to
delivering an exceptional patient experience.
Board Refresh
The Board refresh that commenced in FY 2023 was finalised
in FY 2024. Giselle Collins was appointed as Non-Executive
Director and Chair of the Audit and Risk Management
Committee at the November AGM. Giselle was also
appointed as Chair of the Takeover Response Committee in
January 2024. We also farewelled Simon Rutherford at the FY
2023 AGM after serving 20 years as a Non-Executive Director.
Following the Scheme Meeting held on the 8 August 2024,
further changes were announced to the Board with the
resignation of Mark Bloom (effective on 8 August 2024)
and Zita Peach who announced her retirement with effect
from the release of results on 28 August 2024.The Board
would like to thank Simon, Mark and Zita for their significant
contribution to Pacific Smiles in their time spent serving on
the Board.
Management Changes in FY 2024
The resignation of Chief Executive Officer Phil McKenzie
in August 2023 led to changes within the management
team. The Board would like to thank Phil for his
commitment and navigating the path through the
pandemic. In the interim, we had the steady oversight
of Paul Robertson, Chief Commercial Officer, who was
appointed as Interim Chief Executive Officer whilst the
search for a new CEO was finalised.
In January 2024, the Board announced the appointment
of Andrew Vidler as CEO and Managing Director.
Andrew joined following the announcement of the initial
proposal by Genesis Capital and commencement of
the control transaction process. Andrew’s healthcare
and retail experience enabled him to quickly grasp the
fundamentals of the business and lead the team through
the transaction process.
In late June 2024, we also farewelled Ciara Rocks, Chief
Operating Officer, who very successfully reinvigorated field
operations and the marketing team. The Board would also
like to thank Ciara and wish her well in her new endeavours.
Executive Team Remuneration Changes
As indicated in last year’s Annual Report, the Board carefully
considered shareholder feedback regarding executive
remuneration and moved to implement new Short-Term
Incentive (STI) and Long-Term Incentive (LTI) structures that
more closely align with shareholder interests.
Redesign of the STI plan focussed on delivery of financial
metrics that balance patient fee and EBITDA outcomes, as
well as non-financial metrics related to employee, patient
and dentist engagement.
Redesign of the new LTI plan focussed on more closely
aligning the LTI plan with market norms including
introducing a 3-year performance period, aligning
the quantum of LTI grants with market norms and the
introduction of 3 weighted hurdles – Absolute EPS (40%),
Average Annual ROE (40%) and Absolute TSR (20%). Details
of the plans can be found on pages 39 to 45.
Incentive Outcomes
The upper range of the EBITDA guidance was delivered and
resulted in two of the STI hurdles being met. As a result,
Management was eligible to earn 26% of its eligible STI
payment and the Board did not apply their discretion to this
outcome. No LTI Performance Rights were vested in FY 2024.
Gender Pay Gap and Diversity
It was pleasing to see the outcomes achieved on gender
diversity. Management reported a median gender pay
gap of 2.7% in favour of men which was an improvement
on the 8.9% gap reported in FY 2023. We closed the year
with women accounting for 50% of independent Directors,
but unfortunately with Ciara’s resignation, women only
accounted for 20% of management positions which
we hope to address in FY 2025. Whilst this remains an
opportunity for improvement, it’s encouraging to see that
the effort and focus is translating into measurable and
tangible results and the Board congratulates the team on
the progress made this year.
Additional Remuneration Impacts
To ensure retention of key people and acknowledge the
additional duties as a result of entering into the Scheme
Implementation Deed with NDC, the Board made a
number of short-term remuneration changes and equity
awards. This included three people receiving extra duties
remuneration increases for the period of the additional
workload, and three additional people being awarded
Performance Rights which will lapse in December if a
transaction is not completed by calendar year end.
In addition to the management changes, the Board
was also required to perform substantially higher duties
throughout this period. This was reflected with the
additional duties’ payment paid to Non-Executive Directors
to recognise the significantly higher workload which
ceased on 8 August 2024.
In Summary
It has been another busy year for the Pacific Smiles team.
The Board would like to thank Andrew Vidler and Matthew
Cordingley for leading this process internally. Despite the
Scheme not being approved by the requisite majorities at
the Scheme Meeting, the value of the Pacific Smiles brand
and the services provided to our dentists and patients
remains undisputed and is thanks to the resilience and
dedication of the Pacific Smiles team.
On behalf of the Board, I would like to thank everyone for
their continued efforts.
Jodie Leonard
Chair Nomination & Remuneration Committee
Dear Shareholders,
37
36
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Remuneration Report
Remuneration report (audited)
The Board of Directors are pleased to present the Remuneration Report for the Pacific Smiles Group for the financial year
ended 30 June 2024.
The Remuneration Report is set out under the following headings below:
1.0 Remuneration at a Glance
1.1 Remuneration framework
1.2 FY 2024 Executive KMP Remuneration Mix
2.0 Executive KMP Remuneration
2.1 Short-term incentive (STI)
2.2 Long-term incentive (LTI)
2.3 Service Agreements
3.0 Governance
3.1 The Role of the Board
3.2 The Role of the Nomination and Remuneration Committee (NRC)
3.3 The Role of Independent Remuneration Advisors
4.0 KMP and Non-Executive Director Remuneration
4.1 Details of Remuneration
4.2 KMP Performance Rights
4.3 KMP and Non-Executive Director Shareholding
4.4 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
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. Retired with effect from the release of results on 28 August 2024.
Dr Scott Kalniz
Appointed 28 January 2021. Independent Non-Executive Director appointed to the Audit &
Risk Management Committee 18 August 2023.
Ms Jodie Leonard
Appointed 8 May 2023. Independent Non-Executive Director, Chair of the Nomination &
Remuneration Committee.
Mr Steven Rubic
Appointed 8 May 2023. Independent Non-Executive Director, member of the Nomination &
Remuneration Committee and member of the Property Committee.
Ms Giselle Collins
Appointed 22 November 2023. Independent Non-Executive Director, Chair of the Audit & Risk
Management Committee and member of the Property Committee. Appointed Chair of the
Takeover Response Committee in January 2024.
Mr Mark Bloom
Appointed 18 August 2019. Independent Non-Executive Director, Chair of Property Committee,
member of Audit & Risk Management Committee. Resigned 9 August 2024.
Mr Simon Rutherford
Appointed 24 September 2003. Independent Non-Executive Director, Chair of the Audit & Risk
Management Committee, and member of the Property Committee. Retired 22 November 2023.
Executive KMP
Mr Andrew Vidler
Mr Matthew Cordingley
Mr Paul Robertson
Mr Phil McKenzie
Group CEO and Managing Director (CEO) appointed 15 January 2024.
Chief Financial Officer (CFO) appointed 12 April 2021.
Chief Commercial Officer (CCO) appointed 5 February 2016, appointed Interim Chief
Executive Officer (CEO) for the period 1 September 2023 to 14 January 2024.
Group CEO and Managing Director (CEO) appointed 29 October 2018, resigned 31 August
2023.
1.0 Remuneration at a Glance
Our remuneration framework is designed to support delivery of Pacific Smiles Group’s strategic priorities:
Strong and
Engaged
Culture
Operational
Excellence
Network
Growth
Embedded
Capacity
Stakeholder
Relationships
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:
1.1 Remuneration Framework
The remuneration framework has been designed to align Executive reward to shareholders’ interests.
TOTAL FIXED REMUNERATION
(TFR)
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.
SHORT-TERM INCENTIVE
(STI)
The STI is currently paid as
two-thirds cash and one-third
Performance Rights (deferred for
one year) for achievement of a
mix of financial and non-financial
targets.
The short-term business objectives
are based on achievement of the
following goals:
• Financial Outcomes
−
EBITDA and Patient fees
• Non-Financial Outcomes
−
Patient NPS
−
Dentist Engagement
LONG-TERM INCENTIVE
(LTI)
The LTI aligns Executives with the
Company performance and with
the goals of shareholders via the
award of Performance Rights.
The LTI plan was restructured in FY
2024 and is based on achievement
of the following hurdles:
• Absolute EPS (40%)
• Average Annual ROE (40%)
• Absolute TSR (20%)
1.2 FY 2024 Executive KMP Remuneration Mix
The remuneration mix KMP are eligible to earn in FY 2024 is as follows.
Chief Executive Officer – Mr Andrew Vidler*
Total Fixed Remuneration 41 %
(100% of TFR)
Maximum STI 25 %
(60% of TFR)
Target LTI 34 %
(37.5% of TFR)
Chief Financial Officer – Mr Matthew Cordingley
Total Fixed Remuneration 53 %
(100% of TFR)
Maximum STI 21 %
(40% of TFR)
Target LTI 26 %
(50% of TFR)
Chief Commercial Officer – Mr Paul Robertson**
Total Fixed Remuneration 47 %
(100% of TFR)
Maximum STI 24 %
(50% of TFR)
Target LTI 29 %
(66% of TFR)
*Mr Vidler’s remuneration is pro-rated for the period following his appointment on 15 January 2024. The LTI reflects the value of Cash Rights,
** Mr Robertson’s FY 2024 remuneration represents a blend of Total Fixed Remuneration for the two roles he held throughout the reporting year.
Attract and
Retain Talent
Merit
Based
Market
Competitive
Align with
Strategy
Reward
Fairly
Comply with
all Legal &
Regulatory
Requirements
39
38
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Remuneration Report
Consolidated entity performance and link to remuneration
The following table shows key performance indicators (KPIs) for the consolidated entity over the last five years.
2024
2023
2022
2021
2020
STI Outcome
26%
17.0%
32.9%
92.5%
0.0%
LTI Outcome – % vesting
Nil
Nil
Nil
Nil
Nil
Dividends per share – ordinary (cents)
2.10
2.52
0.00
2.40
2.40
Underlying EBITDA pre-AASB 161
$28.2m
$24.1m
$11.3m
$33.1m
$23.5m
Net Promoter Score (NPS) – patient
90
90
90
87
87
Dentist Engagement2
7.3
7.3
-
-
-
Share price ($)
1.903
1.223
1.474
2.794
1.854
Total Shareholder Return (Absolute TSR) ($)
0.70
(0.25)
(1.32)
0.96
0.23
Basic Earnings Per Share (Absolute EPS) (cps)
5.0
1.5
(2.8)
8.3
4.2
Average Annual Statutory ROE5
13.2%
4.0%
(7.5%)
26.4%
16.4%
1For details of underlying EBITDA pre-AASB 16 please see the reconciliation in the Operation Report.
2Dentist engagement measure introduced in FY 2023.
3Share price is calculated on 60-day average VWAP to 30 June of the relevant year.
4Share price is calculated on 60-day average VWAP to 30 November of the relevant year.
5Return on Equity calculated as Statutory Net Profit After Tax divided by Average Total Equity (i.e. opening Total Equity plus Closing Total Equity
divided by two).
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 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
•
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 (STIs)
iii.
long-term incentives (LTIs)
iv.
other remuneration such as statutory benefits, including long service leave.
The combination of these comprises the Executive’s total remuneration.
In FY 2024, the Short-Term Incentive plan (STI) is based on awarding a mixture of cash remuneration and Performance
Rights for the achievement of key delivery of financial and experience outcomes. This structure incorporates shareholder
feedback and benchmarking management remuneration. Under the FY 2024 shortterm incentive offer, an eligible award
will be settled as 67% cash and 33% Pacific Smiles Performance Rights. 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
Eligible STI %
CEO
60%
CFO
40%
CCO
50%*
* In FY 2024, the short-term incentive for CCO is 50%, which reflects additional duties as Interim CEO.
2.1 Short Term Incentive (STI)
The STI targets for FY 2024 are outlined below:
HURDLES
1. Must achieve >90% of Board approved budget EBITDA target
2. No material safety, regulatory or governance breaches
3. Must achieve “Meets Expectations” at year-end performance review
FINANCIAL KPI – 80% Weighting
Payout based on Patient Fee and profitability outcomes
(Linear vesting between EBITDA hurdles applies)
PATIENT FEES $ TARGET
EBITDA $
(pre AASB 16)
≥$290m and
<$299m
$299m
>$299m
and ≤$315m
>$315m
≥$28.0m - <$28.8m
20%
25%
15%
10%
≥$28.8m - <$31.0m
95%
100-105%
85-110%
75-115%
≥$31.0m - <$33.0m
115%
120%
≥$33.0m+
125%
MODIFIER
An eligible incentive payment can be modified at the discretion of the Board as follows:
•
If the Employee Engagement Survey result is not achieved, the eligible incentive payout will be reduced by up to 20%
The key terms and conditions of the STI plan and the Deferred Equity are as follows.
Plan Rules
Description
Performance Period
1 July 2023 to 30 June 2024
Hurdles
Gateway Hurdles must be met to be eligible for an STI payment. An STI payment will not be
eligible for payment if any of the three of the hurdles are not met.
Performance Metrics
Financial – 80% weighting as outlined in table above.
Non-Financial – 20% weighting for achievement of Patient NPS and Dentist Engagement targets.
Modifiers
The Board has the right to reduce the proposed eligible STI outcome by 20% if the Employee
Engagement target is not achieved.
Payment Format
Two-thirds paid as cash and one-third paid as Performance Rights deferred for one year.
Number of Rights
Awarded
Eligible STI equity incentive $ value / 60-day share price Volume-Weighted Average Price
(VWAP) up to the day before grant awarded. Award of rights to a Director is dependent on
receiving shareholder approval prior to award.
Cash Payment and
Equity Grant Date
Executives will be paid eligible cash payments and awarded eligible Performance Rights within
60 days of the release of FY 2024 audited financial accounts.
Performance Rights
Grant Value
60-day VWAP
Equity Vesting Date
One year following Grant Date
Vesting Hurdle
Participants must be employed at the time of vesting or not have served notice of their
resignation prior to the equity vesting. Similarly, the Company must not have served a dismissal
notice on the participant.
Expiry Date
The Performance Rights expire on the fifth anniversary of the date of grant.
Participant
The offer is not transferable and can only be accepted by the participant.
NON-FINANCIAL KPIs - 20% Weighting
KPI
WEIGHTING
TARGET
Patient NPS
10%
≥90
Dentist
Engagement
10%
>7.3
(out of 10)
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Plan Rules
Description
Board Discretion
The Board has discretion to vary, amend, terminate or suspend the plan at any time, but any
such variation, amendment, termination or suspension will not adversely affect or prejudice the
participants holding the equity incentive. In particular, the Board also has the right to make such
variation or amendments in the event of a Change of Control and a major transaction, and/or
capital raising is undertaken.
Bad Leaver Provision
Bad leaver provisions apply if the participant ceases employment due to resignation (other
than due to terminal illness or total permanent incapacitation), dismissal for cause or poor
performance and any other circumstances (other than due to genuine redundancy) determined
by the Board to constitute a bad leaver (e.g. fraud, misconduct and/or misstatement).
Trading Restrictions
At all times, participants are required to comply with the Company’s Securities Trading policy.
Malus
Malus provisions apply in certain circumstances including in the event of fraud, dishonesty,
breach of obligations, or in the opinion of the Board vesting of 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 by the participant.
Hedging
Participants must not enter into any arrangement for the purpose of hedging, or otherwise
affecting their economic exposure to Performance Rights.
Change in Control
Notwithstanding the terms of the Long-Term Incentive Plan Rules, 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.
FY 2024 STI Outcomes
As disclosed on 18 July 2024 in connection with the Scheme, the Board had tested the FY 2024 STI outcomes on the basis
of the unaudited accounts and assessed that only one hurdle had been satisfied resulting in 10% of the FY 2024 STI being
payable. The Board has since reviewed the FY 2024 STI outcomes against the audited financials and determined that
26.0% of the STI was achieved based on delivery of the entry level financial KPI, along with one of the two non-financial
KPIs (patient NPS). This result was achieved in light of the material headwinds in the second half of FY 2024 relating to
challenging trading conditions. Notwithstanding patient fees falling below full-year guidance expectations, Management
actively managed operational efficiency and productivity to insulate earnings and achieve the EBITDA result. Dentist
engagement remained consistent year-on-year. Practitioner feedback continued to highlight high levels of satisfaction
relating to dentists’ autonomy with clinical practice, continuing levels of education and the opportunity for peer networking.
FINANCIAL KPI’s
80% WEIGHTING
NON - FINANCIAL KPI’s
20% WEIGHTING
Minimum Vesting
Hurdle – 20%
Outcome
NPS Target
Target
Outcome
EBITDA
≥ $28m
$28.2m
Dentist Engagement
>7.3
7.3
Patient Fees
≥$290m
$291.8m
Patient NPS
≥ 90%
90
The following table shows the split of STI earned between financial and non-financial STI targets.
2024
2023
2024
2023
% of TFR paid as STI
to CEO
% of TFR paid as STI to
CEO*
% of TFR paid as STI to
Exec KMP
% of TFR paid as STI to
Exec KMP
Financial targets
16%
-
16%
0.0%
Non-financial targets
10%
-
10%
10.0%
Total STI Achieved
26%
-
26%
10.0%
*CEO was appointed 15 January 2024.
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 against the hurdles outlined in the normal course.
Year
Awarded
Tranche
Hurdle
Outcome
2021
7
Vesting occurs when TSR achieved between 10%-25% CAGR
On foot
2022
8
Vesting occurs when TSR achieved between 10%-25% CAGR
On foot
2023
N/A
No award granted
N/A
Tranches 7 and 8
Key terms and conditions for grants for Tranches 7 – 8 are as follows.
Plan Rules
Description
Vesting Period
All tranches based on four-year vesting period.
Participant
Employees only eligible to participate.
Dividends and
Voting Rights
Performance Rights do not earn dividends and are not entitled to voting rights.
Service Condition
Must be employed at time of vesting to be eligible to convert 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 or 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 four-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.
Hedging
Participants must not enter into any arrangement for the purpose of hedging, or otherwise affecting their
economic exposure to Performance Rights.
Board Discretion
Board has 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.
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 have 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.
Tranche 9 – FY 2024 LTI Program
Following shareholder feedback, the LTI plan was updated in FY 2024 to more closely align with market norms and
shareholder expectations. Under the new plan, a number of key changes were introduced:
•
the performance period was reduced from four years to three years.
•
the size and value of the equity grants were reduced to align with more market norms.
•
the Change of Control condition was modified to provide the Board with full discretion as to how the tranche will be
treated in the event of a Change of Control.
•
two additional metrics, Return on Equity (ROE) and Earnings Per Share (EPS), were introduced to drive alignment with
delivering long-term shareholder value.
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Tranche 9 Long-Term Performance Hurdles – Vesting conditions
Absolute EPS
Average ROE
Absolute TSR
Weighting
40%
40%
20%
Hurdles
and vesting
schedule
Hurdle
Vesting
<0.08
Nil
$0.08
50%
>$0.08 and <$0.11
Straight line
$0.11
100%
Linear vesting between the
hurdles
Hurdle
Vesting
<18%
Nil
>18% and <20%
20%
20%
50%
>20% and <22%
Straight line
25%
100%
Linear vesting between the
hurdles
Hurdle
Vesting
<22%
Nil
22%
25%
>22% and <26%
Straight line
26%
50%
>26% and <30%
Straight line
30%
100%
Linear vesting between the
hurdles
Calculation
The Cash EPS vesting condition is
calculated by the Company for a
financial year as:
•
the reported underlying
net profit after tax for the
relevant financial year, after
adding back the amount
of intangibles amortisation
recorded in the annual
accounts and after adjusting
for any material one-off
income or expense items the
Board believes appropriate
to reflect underlying recurring
earnings;
•
divided by the weighted
average number of ordinary
shares on issue during the
relevant financial year.
This vesting condition is
measured by calculating the FY26
Cash EPS.
The Average Annual ROE vesting
condition for the Company for
the Performance Period will be
calculated as follows:
a) the reported underlying net
profit after tax for each of
the three relevant financial
years in the Performance
Period, after adding back
the amount of intangibles
amortisation recorded in
the annual accounts and
after adjusting for any
material one-off income or
expense items the Board
believes appropriate to
reflect underlying recurring
earnings;
b) divided by the weighted
average of shareholders’
equity for each of the three
relevant financial years in
the Performance Period with
the result expressed as a
percentage; and
c) the aggregate of the three
results determined by a) and
b) divided by three to give
the Average Annual ROE for
the Performance Period.
The TSR for the Company will be
determined by calculating the
amount by which the sum of:
a) the 90-day volume weighted
average price (VWAP)
for Pacific Smiles Group
Shares in the period up to
and including the 30 June
at the end of the relevant
Performance Period;
b) the dividends paid on a
Company Share during the
relevant Performance Period;
and
c) exceeds the 90-day VWAP for
the Company’s Shares in the
period up to and including 1
July at the beginning of the
relevant Performance Period,
expressed as a percentage.
Key terms and conditions for grants for Tranche 9 awarded in FY 2024 are as follows.
Plan Rules
Description
Performance Period
1 July 2023 to 30 June 2026
Testing Date for
Performance Rights
Following announcement of FY26 financial results
Grant Price
60 Day VWAP – $1.35
Vesting Date
15 September 2026
Exercise Period
On or after 15 September 2026 to 10th anniversary of grant date
Expiry Date
10th anniversary of grant date
Plan Rules
Description
Unvested Rights
Unvested Performance Rights Lapse as follows:
(a) the expiry of the Exercise Period applicable to that Performance Right;
(b) the Board determining that the Vesting Conditions in respect of the Performance Right are
not satisfied and not capable of being satisfied on the relevant testing date;
(c) 30 days after death or total and permanent disablement, if death or total and permanent
disablement occurs, unless the Board makes a determination that the Performance Right
has vested;
(d) On cessation of employment with the Pacific Smiles Group (including where your employer
ceases to be an entity in Pacific Smiles Group or its business has been transferred to
a non-Pacific Smiles Group entity) unless the Board makes a determination that the
Performance Right has vested or is to remain on foot to be tested in the normal course; or
(e) the Board determining there has been any act of dishonesty, fraud, wilful misconduct
or breach of duty, serious and wilful negligence or incompetence in the performance of
duties, or convicted of a criminal offence (other than minor/trivial offences) or are guilty
of wilful or recklessly indifferent conduct which may injure the reputation or business
of Pacific Smiles Group, or, in the opinion of the Board, the potential vesting of the
Performance Right would be an inappropriate benefit.
Service condition
Must be employed at relevant Vesting Date
Change of control
In the event of a change of control, the Board has the absolute discretion to determine the extent
to which some, none or all of the unvested Performance Rights may vest and will exercise that
discretion having regard for the prevailing circumstances of the change of control.
Dividends
Performance Rights do not earn dividends and are not entitled to voting rights prior to vesting
Once Performance Rights have vested and have been exercised and the Company has
transferred or issued the Shares that relate to those Performance Rights, participants will be
entitled to receive any dividends having a record date that occurs after those Shares have
been allocated.
The formula for Share entitlement on exercise of a Right is:
•
E is the entitlement conversion factor
•
div1 , div2 , … , divn are the dividends paid on a Pacific Smiles Share from the last trading day
in the period used to calculate VWAP from Vesting Date to the Exercise Date (with n being
the total number of dividends paid over that Period);
•
Pdiv1 , Pdiv2 , … , Pdivn are the close prices on the ex-dividend dates (i.e. immediate
reinvestment of dividends on the ex-dividend date).
Trading restrictions
At all times, participants are required to comply with the Company’s Securities Trading policy.
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.
Cash Rights
Given that the appointment of a new Managing Director and CEO coincided with the receipt by the Board of an unsolicited
non-binding indicative proposal from Genesis Capital to acquire 100% of the shares in Pacific Smiles, the Board determined
to grant the incoming CEO some certainty on their incentives during the period where a potential control transaction was
being considered as it was unclear if a transaction would occur before shareholder approval could be sought on the award
of equity to the Managing Director.
When the Chief Executive Officer and Managing Director was appointed on 15 January 2024, Pacific Smiles granted Cash
Rights to the Managing Director as a long-term incentive. The Cash Rights automatically lapse when Performance Rights
are issued in replacement. It is the Boards intention to seek shareholder approval of the award of Performance Rights at the
November 2024 Annual General Meeting at which time, if the award is approved by shareholders, the Cash Rights will lapse.
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PACIFIC SMILES GROUP
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Tranche 9 - Cash Rights Offer Terms
Plan Rules
Description
What is a Cash Right?
A contractual right granted to be paid cash by the Company on meeting the
vesting hurdles.
Grant date for Cash Rights
15 January 2024
Number of Cash Rights Granted
225,600
Value of each Cash Right
$1.00
Vesting Conditions
Absolute EPS (40%)
Average Annual ROE (40%)
Absolute TSR (20%)
Calculations, hurdles and vesting schedules as noted above (same as tranche 9)
Early Vesting
On a Change of Control, the Board may determine that the Vesting conditions
above are waived for all or any number of the Cash Rights, to the extent
they determine in their absolute discretion, and the relevant Cash Rights will
immediately vest, such date being the Vesting Date for those accelerated Cash
Rights.
Performance Period
1 July 2023 to 30 June 2026.
Lapse Date
The Cash Rights grant automatically lapse when Performance Rights are issued. It
is the Boards intention to seek shareholder approval of the award of Performance
Rights at the November 2024 Annual General Meeting at which time the Cash
Rights will lapse
Cash Rights lapse on the same date as the Performance Rights are awarded.
Service condition
Must be employed by the Pacific Smiles Group at relevant Vesting Date.
Testing Date for Cash Rights
Results announcement date for FY26.
Vesting Date
15 September 2026 or such earlier date as the Board determines.
Exercise Period
On or after 15 September 2026 to 5th anniversary of the grant date.
Expiry Date
The earlier of the issue of the Performance Rights and the 5th anniversary of the
grant date.
Restrictions on Disposal
The Cash Rights are not transferrable.
Lapse of unvested Cash Rights
Unvested Cash Rights will lapse in the following circumstances:
a.
upon the issue of the Performance Rights as outlined;
b.
the expiry of the Exercise Period applicable to the Cash Right;
c.
the Board determining that the Vesting Conditions in respect of the Cash
Rights are not satisfied or are not capable of being satisfied on the relevant
Testing Date;
d.
30 days after death or total and permanent disablement, if death or total and
permanent disablement occurs, unless the Board makes a determination that
the Cash Right has vested;
e.
On cessation of employment with the Pacific Smiles Group (including where
the employer ceases to be an entity in Pacific Smiles Group or its business
has been transferred to a non-Pacific Smiles Group entity) unless the Board
makes a determination that the Cash Right has vested or is to remain on foot
to be tested in the normal course; or
f.
the Board determining there has been any act of dishonesty, fraud, wilful
misconduct or breach of duty, serious and wilful negligence or incompetence
in the performance of duties, or convicted of a criminal offence (other than
minor/trivial offences) or are guilty of wilful or recklessly indifferent conduct
which may injure the reputation or business of Pacific Smiles Group, or, in
the opinion of the Board, the potential vesting of the Cash Right would be an
inappropriate benefit.
Performance Rights Terms If Offer Replaces Cash Rights
Vesting of the Pacific Smiles Cash Rights are dependent on achievement of the Long-Term incentive performance hurdles
outlined being met. The performance hurdles are the same hurdles as set for the tranche 9 Pacific Smiles Performance
Rights. The Pacific Smiles Cash Rights do not entitle the participant to receive any Pacific Smiles Shares or any other
securities in Pacific Smiles.
Pacific Smiles intends to seek approval for the issue of up to 186,446 Pacific Smiles Performance Rights at the 2024 Annual
General Meeting, which (if issued), will replace the Pacific Smiles Cash Rights and remain on the same terms as the tranche
9 Pacific Smiles Performance Rights noted in the earlier table.
Tranches 10 and 11 - Additional Performance Rights Awarded
In addition to the FY 2024 program outlined, the Board issued Performance Rights (Tranches 10 and 11) for remuneration and
retention of select personnel related to the proposed transaction.
The key terms and conditions associated with Tranches 10 and 11 are as follows:
Plan Rules
Description
Performance Rights
Tranche 10 - $1.75 (1 participant).
Grant price
Tranche 11- $1.90 (2 participants).
Vesting date and conditions
Performance Rights vest when and if a second court hearing officially approves a
Change of Control no later than 31 December 2024 or the Performance Rights will
expire.
Testing date
No later than 31 December 2024.
Service Condition
Must be employed at relevant Vesting Date.
Restrictions on Disposal
The Performance Rights are not transferrable without the prior written consent of
the Board.
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
Period of notice
from Company
Period of notice
from employee
Termination
payments
Mr Andrew Vidler
Chief Executive Officer
6 months
6 months
6 months
Mr Matthew Cordingley
Chief Financial Officer
6 months
6 months
6 months
Mr Paul Robertson
Chief Commercial Officer
3 months
3 months
3 months
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3.0 Governance
3.1 The Role of the Board
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 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 recognises 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 Remuneration 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 their 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 organisations 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.
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 Chair’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 20 November 2017, where the
shareholders approved a maximum annual aggregate remuneration of $800,000. For the financial year ended 30 June
2024, the fees payable to the current Non-Executive Directors (whether in cash or securities) did not exceed $800,000 in
aggregate.
Role
FY 2024 Fixed Remuneration inclusive of superannuation
Chair*
$150,000
Non-Executive Directors
$80,000
Committee Chair**
$12,000
Committee member***
$5,000
*Not entitled to earn addition fees for membership of an ongoing Board committee.
** Committee Chairs not entitled to earn additional fees for membership of other Board committees.
***Paid on a per committee basis to Non-Executive Directors who do not hold a Chair position.
The Company’s Remuneration Policy provides for Non-Executive Directors to be paid at the 50th percentile. As indicated in
previous years, base Non-Executive Director fees are well below market norms and benchmarking indicates Director fees
are at the lower quartile. As such, fees will continue to be adjusted in FY 2025 in order to be able to attract and retain Non-
Executive Directors and to better reflect the ongoing workload required.
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.
The constitution of Pacific Smiles permits Pacific Smiles Directors to be paid special remuneration where they are called on
to perform extra services or make any special exertions in connection with the affairs of Pacific Smiles.
In February 2024, the Pacific Smiles Board approved the payment of additional remuneration to each of the NonExecutive
Directors to recognise the significant additional time and services outside the scope of their ordinary duties provided
in connection with the Scheme and earlier potential control transaction proposals. The Board considered that the
performance of these additional services was necessary to facilitate the provision by Pacific Smiles of due diligence and
negotiations with third parties regarding a potential control transaction, and additional meetings and time and resources
required to be committed by the NonExecutive Directors as part of implementing the Scheme.
The special exertion fees paid from 1 January 2024 were as follows:
•
a fee to the Chairperson of Pacific Smiles’ Takeover Response Committee of $3,333 per month
•
a fee of $2,000 per month for all other Non-Executive Directors.
After undertaking external benchmarking and seeking input from external consultants, the Board considered the fees
to be consistent with market norms and fair and reasonable given the significant additional workload required of the
Non-Executive Directors. Additionally, given that the special exertion fees were not conditional on the Scheme becoming
effective, the Board did not consider that the receipt by Non-Executive Directors of such additional remuneration affected
the interests of Directors in the outcome of the Scheme.
The additional duties fees were paid until the Scheme Meeting was held on 8 August 2024, at which time payment was
ceased pending receipt of any further control proposals.
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 (Chair, retired with effect from the release of results on 28 August 2024)
•
Dr Scott Kalniz
•
Ms Jodie Leonard
•
Mr Steven Rubic
•
Ms Giselle Collins (appointed 22 November 2023)
•
Mr Mark Bloom (resigned 9 August 2024)
•
Mr Simon Rutherford (retired 22 November 2023)
And the following Executive KMP:
•
Mr Andrew Vidler (Managing Director and Chief Executive Officer – CEO, appointed 15 January 2024)
•
Mr Paul Robertson (Chief Commercial Officer – CCO and Interim CEO from 1 September 2023 to 14 January 2024)
•
Mr Matthew Cordingley (Chief Financial Officer – CFO)
•
Mr Phil McKenzie (Managing Director and Chief Executive Officer, resigned 31 August 2023)
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PACIFIC SMILES GROUP
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Remuneration Report
Details of the remuneration of Key Management Personnel of the Group are set out in the following tables.
Short-term
benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments8
2024
Cash
salary
and fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Long
service
leave
$
Cash
Rights
$
Rights
$
Total
$
Non-Executive Directors
Ms Zita Peach1
145,946
-
-
16,054
-
-
-
162,000
Dr Scott Kalniz2
97,000
-
-
-
-
-
-
97,000
Ms Jodie Leonard
94,453
-
-
9,547
-
-
-
104,000
Mr Steven Rubic
91,892
-
-
10,108
-
-
-
102,000
Ms Giselle Collins3
75,908
-
-
-
-
-
-
75,908
Mr Mark Bloom4
93,694
-
-
10,306
-
-
-
104,000
Mr Simon Rutherford5
38,333
-
-
-
-
-
-
38,333
Executive Directors:
Mr Andrew Vidler6
286,290
43,200
-
16,232
728
38,672
-
385,122
Mr Phil McKenzie7
92,694
-
-
4,487
(24,578)
-
(1,477,249)
(1,404,646)
Other Key Management
Personnel:
Mr Paul Robertson
346,099
51,350
-
27,587
15,179
-
24,0679
464,282
Mr Matthew Cordingley
444,923
45,257
-
28,134
2,828
-
214,209
735,351
1,807,232
139,807
-
122,455
(5,843)
38,672
(1,238,973)
863,350
1Retired with effect from the release of results on 28 August 2024
2Dr Kalniz is a non-resident of Australia and superannuation is therefore not applicable
3Appointed 22 November 2023
4Resigned 9 August 2024
5Retired 22 November 2023
6Appointed 15 January 2024
7Resigned 31 August 2023
8Reflects the movement in the carrying value of Performance Rights
9Value includes adjustment for lapsing of Tranche 6 Performance Rights
Short-term
benefits
Post-
employment
benefits
Long-term
benefits
Share-based
payments8
2023
Cash salary
and fees
$
Cash
bonus
$
Other
$
Super-
annuation
$
Long
service
leave
$
Rights
$
Total
$
Non-Executive Directors
Ms Zita Peach
121,894
-
-
12,799
-
-
134,693
Mr Mark Bloom
72,263
-
-
7,588
-
-
79,851
Dr Scott Kalniz1
80,000
-
-
-
-
-
80,000
Ms Jodie Leonard2
11,795
-
-
-
-
-
11,795
Mr Steven Rubic2
8,354
-
-
877
-
-
9,231
Mr Simon Rutherford3
80,000
-
-
-
-
-
80,000
Mr Hilton Brett4
72,263
-
-
7,588
-
-
79,851
Mr Andrew Knott5
36,332
-
-
3,815
-
-
40,147
Executive Directors:
Mr Phil McKenzie
572,799
49,806
-
27,500
7,301
190,142
847,548
Other Key Management
Personnel:
Mr Paul Robertson
285,174
18,441
-
27,500
8,096
145,221
484,432
Mr Matthew Cordingley
408,798
24,777
-
27,500
2,725
181,884
645,684
1,749,672
93,024
-
115,167
18,122
517,247
2,493,232
1 Dr Kalniz is a non-resident of Australia and superannuation is therefore not applicable
2Appointed 8 May 2023
3Retired 22 November 2023
4 Resigned 30 June 2023
5 Stood down following EGM on 19 December 2022
6Reflects the movement in the carrying value of Performance Rights.
51
50
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Remuneration Report
At Risk Remuneration Summary
The proportion of remuneration linked to performance and the fixed proportion are as follows.
Fixed remuneration
At risk – STI
At risk – LTI
Name
2024
2023
2024
2023
2024
2023
Non-Executive Directors
Ms Zita Peach1
100%
100%
-
-
-
-
Dr Scott Kalniz
100%
100%
-
-
-
-
Ms Jodie Leonard
100%
100%
-
-
-
-
Mr Steven Rubic
100%
100%
-
-
-
-
Ms Giselle Collins2
100%
100%
-
-
-
-
Mr Mark Bloom3
100%
100%
-
-
-
-
Mr Simon Rutherford4
100%
100%
-
-
-
-
Executive KMP
Mr Andrew Vidler5
41%
-
25%
-
34%
-
Mr Matthew Cordingley
53%
35%
21%
18%
26%
47%
Mr Paul Robertson
47%
35%
24%
18%
29%
47%
1Retired with effect from the release of results on 28 August 2024
2Appointed 22 November 2023
3Resigned 9 August 2024
4Retired 22 November 2023
5Appointed 15 January 2024
Cash STI Bonus Forfeited
The proportion of the cash bonus paid/payable or forfeited is as follows.
Cash bonus paid/payable
Cash bonus forfeited
Name
2024
2023
2024
2023
Executive KMP
Mr Andrew Vidler
26%
-
74%
-
Mr Matthew Cordingley
26%
6%
74%
94%
Mr Paul Robertson
26%
6%
74%
94%
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 2024.
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 2024.
Performance Rights
Under the LTI plan, Performance Rights have been granted to certain Executives. These Performance Rights will vest after
three years (the performance period) and are conditional on the achievement of relevant performance and service
conditions outlined.
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 FY 2024 or previous reporting years are as follows.
Grant date
Number
of Rights
granted
Vesting date
Fair value per
Right at grant
date
Number of
Rights forfeited
in FY 20241
Number of Rights that
remain on foot as of 30
June 2024
30/11/2019
3,500,000
30/11/2023
$0.61
(2,391,000)
-
30/11/2020
2,902,430
30/11/2024
$0.88
(1,175,672)
1,155,758
30/11/2021
2,500,000
30/11/2025
$1.32
(988,707)
992,775
07/12/2023
598,486
15/09/2026
$0.53
(88,889)
509,597
13/05/2024
57,143
01/08/2024
$1.75
-
57,143
08/05/2024
76,248
01/08/2024
$1.90
-
76,248
1Performance Rights associated with grant date 30 November 2019 did not achieve the relevant performance hurdles at the 30 November
2023 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.
Performance Rights over
Ordinary Shares
Balance at the start of
the year
Granted
Vested
Expired/forfeited/
other2
Balance at the
end of the year
Mr Paul Robertson
1,032,371
166,667
-
(355,000)
844,038
Mr Matthew Cordingley
667,831
161,171
-
-
829,002
1,700,202
327,838
-
(355,000)
1,673,040
2The rights expired/ forfeited during the year relates to Tranche 7 Performance Rights granted on 30 November 2019.
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.
Balance
30/11/2020
30/11/2021
07/12/2023
30/06/2024
Mr Paul Robertson
355,000
322,371
166,667
844,038
Mr Matthew Cordingley
350,000
317,831
161,171
829,002
705,000
640,202
327,838
1,673,040
Details of vesting profiles of Performance Rights held by Key Management Personnel of the consolidated entity as at the
end of the financial year are detailed below.
Key Management
Personnel
Grant date
Number of
Performance
Rights
Vesting date
Minimum
value yet to
vest3
Maximum
value yet to
vest4
Mr Paul Robertson
30/11/2020
355,000
30/11/2024
Nil
32,759
30/11/2021
322,371
30/11/2025
Nil
151,004
07/12/2023
166,667
15/09/2026
Nil
130,907
Mr Matthew Cordingley
30/11/2020
350,000
30/11/2024
Nil
32,297
30/11/2021
317,831
30/11/2025
Nil
148,877
07/12/2023
161,171
15/09/2026
Nil
126,590
3The minimum value of Performance Rights yet to vest is nil since the rights will be forfeited if the vesting conditions are not met.
4The maximum value of Performance Rights yet to vest is calculated based on the amount of the grant date fair value that is yet to be
expensed in accordance with the requirements of AASB 2.
53
52
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Auditor’s Independence Declaration
KMP Cash Rights
Grant date
Number
of Rights
granted
Vesting date
Fair value per
Right at grant
date
Number of
Rights forfeited
in FY 20241
Number of
Rights that
remain on foot
as of 30 June
2024
15/01/2024
225,600
01/08/20242
$1.00
-
225,600
1The Cash Rights grant automatically lapses when Performance Rights are issued. It is the Board’s intention to seek shareholder approval of
the award of Performance Rights at the November 2024 Annual General Meeting at which time the Cash Rights will lapse.
2The Cash Rights did not vest on this date and remain on foot.
4.3 KMP and Non-Executive Director 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 Peach1
50,087
-
84,913
-
135,000
Dr Scott Kalniz
10,000
-
-
-
10,000
Ms Jodie Leonard
-
-
38,500
-
38,500
Mr Steven Rubic
20,000
-
100,000
-
120,000
Ms Giselle Collins
-
-
10,000
-
10,000
Mr Mark Bloom2
277,952
-
-
-
277,952
Mr Simon Rutherford3
1,741,017
-
-
1,741,017
-
Executive KMP
Mr Andew Vidler4
43,032
-
-
-
43,032
Mr Matthew Cordingley
-
-
-
-
-
Mr Paul Robertson
200,000
-
-
-
200,000
Mr Phil McKenzie5
10,600
-
-
10,600
-
2,352,688
-
233,413
1,751,617
834,484
1Retired with effect from the release of results on 28 August 2024
2Resigned 9 August 2024
3Retired 22 November 2023
4Appointed 15 January 2024
5Resigned 31 August 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.
This concludes the remuneration report, which has been audited.
Auditor’s Independence Declaration
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.
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 2024 there have been:
i.
no contraventions of the auditor independence requirements as set out in the Corporations
Act 2001 in relation to the audit; and
ii.
no contraventions of any applicable code of professional conduct in relation to the audit.
KPMG
Kevin Leighton
Partner
Newcastle
27 August 2024
55
ANNUAL REPORT 2024
54
PACIFIC SMILES GROUP
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2024
Note
2024
$’000
2023
$’000
Revenue
5
179,752
165,319
Other income
6
831
2,502
Expenses
Employee expenses - direct
7
(1,338)
(617)
Other direct expenses
7
(8,864)
(8,333)
Consumable supplies expenses
(11,925)
(13,172)
Employee expenses
(81,974)
(80,095)
Occupancy expenses
(4,746)
(3,940)
Marketing expenses
(5,071)
(3,553)
Administration and other expenses
(21,940)
(19,653)
Depreciation and amortisation expense
7
(30,332)
(30,192)
Net finance costs
7
(3,668)
(4,343)
Profit before income tax expense
10,725
3,923
Income tax expense
8
(2,686)
(1,502)
Profit after income tax expense for the year
8,039
2,421
Other comprehensive income for the year, net of tax
-
-
Total comprehensive income for the year
8,039
2,421
Cents
Cents
Basic earnings per share
36
5.0
1.5
Diluted earnings per share
36
5.0
1.5
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with
the accompanying notes
Consolidated balance sheet
For the year ended 30 June 2024
Note
2024
$’000
2023
$’000
Assets
Current assets
Cash and cash equivalents
9
17,656
18,573
Receivables
10
4,656
2,946
Inventories
11
7,715
6,200
Other
12
1,177
1,637
Total current assets
31,204
29,356
Non-current assets
Receivables
13
304
516
Property, plant and equipment
14
51,150
62,032
Right-of-use assets
15
62,427
71,455
Intangibles
16
12,914
14,579
Deferred tax
8
13,979
10,170
Total non-current assets
140,774
158,752
Total assets
171,978
188,108
Liabilities
Current liabilities
Payables
17
18,671
19,276
Lease liabilities
18
14,614
13,750
Income tax payable
8
4,359
1,442
Provisions
19
4,794
4,773
Total current liabilities
42,438
39,241
Non-current liabilities
Borrowings
20
-
9,000
Lease liabilities
21
60,720
70,246
Provisions
22
8,262
8,354
Total non-current liabilities
68,982
87,600
Total liabilities
111,420
126,841
Net assets
60,558
61,267
Equity
Contributed equity
23
52,104
52,104
Reserves
24
6,744
15,492
Retained profits/ (accumulated losses)
1,710
(6,329)
Total equity
60,558
61,267
The above consolidated balance sheet should be read in conjunction with the accompanying notes
Consolidated Financial Statements
57
ANNUAL REPORT 2024
56
PACIFIC SMILES GROUP
Consolidated statement of
changes in equity
For the year ended 30 June 2024
Contributed
equity
$’000
Reserves
$’000
Retained
profits/
(accumulated
losses)
$’000
Total
equity
$’000
Balance at 1 July 2022
51,917
15,346
(8,750)
58,513
Profit after income tax expense for the year
-
-
2,421
2,421
Other comprehensive income for the year, net of tax
-
-
-
-
Total comprehensive income for the year
-
-
2,421
2,421
Transactions with owners in their capacity as owners:
Share-based payments (note 37)
-
704
-
704
Contributions of equity, net of transaction costs
187
-
-
187
Dividends paid (note 25)
-
(558)
-
(558)
Balance at 30 June 2023
52,104
15,492
(6,329)
61,267
Contributed
equity
$’000
Reserves
$’000
Retained
profits/
(accumulated
losses)
$’000
Total
equity
$’000
Balance at 1 July 2023
52,104
15,492
(6,329)
61,267
Profit after income tax expense for the year
-
-
8,039
8,039
Other comprehensive income for the year, net of tax
-
-
-
-
Total comprehensive income for the year
-
-
8,039
8,039
Transactions with owners in their capacity as owners:
Share-based payments (note 37)
-
(1,775)
-
(1,775)
Dividends paid (note 25)
-
(6,973)
-
(6,973)
Balance at 30 June 2024
52,104
6,744
1,710
60,558
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
Consolidated statement of cash flows
For the year ended 30 June 2024
Note
2024
$’000
2023
$’000
Cash flows from operating activities
Receipts from customers
180,074
169,476
Payments to suppliers and employees
(140,365)
(129,010)
39,709
40,466
Interest received
487
218
Interest and finance costs paid
(3,811)
(4,561)
Income taxes refunded
-
5,768
Income taxes paid
(3,579)
(1,017)
Net cash from operating activities
35
32,806
40,874
Cash flows from investing activities
Payments for property, plant and equipment and intangibles
14,16
(3,839)
(11,071)
Proceeds from disposal of property, plant and equipment
56
15
Lease payments received from finance leases
422
509
Net cash used in investing activities
(3,361)
(10,547)
Cash flows from financing activities
Dividends paid
25
(6,973)
(558)
Repayment of borrowings
(9,000)
(9,500)
Payment of lease liabilities
(14,389)
(13,501)
Net cash used in financing activities
(30,362)
(23,559)
Net (decrease)/ increase in cash and cash equivalents
(917)
6,768
Cash and cash equivalents at the beginning of the financial year
18,573
11,805
Cash and cash equivalents at the end of the financial year
9
17,656
18,573
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
59
58
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Notes to the Consolidated Financial
Statements
For the year ended 30 June 2024
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 Group’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 27 August 2024. The
Directors have the power to amend and reissue the financial statements.
Note 2. Material accounting policy information
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.
The accounting policies that are material to the Group are set out below. The accounting policies adopted are consistent
with those of the previous financial year, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group 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.
The standards and amendments relevant to the consolidated entity for the current year are:
•
Disclosure of Accounting Policies and Definition of Accounting Estimates (Amendments to AASB 7, 101, 108 and AASB
Practice Statement 2).
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to AASB 112).
The Group applied Disclosure of Accounting Policies and Definition of Accounting Estimates (Amendments to AASB 7, 101,
108 and AASB Practice Statement 2) for the first time in 2024. The amendments require entities to disclose their ‘material’
accounting policies, rather than their ‘significant’ accounting policies.
The Group has also adopted Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments
to IAS 12) from 1 July 2023. The amendments narrow the scope of the initial recognition exemption to exclude transactions
that give rise to equal and offsetting temporary differences.
The Group previously accounted for deferred tax on leases and decommissioning liabilities by applying the ‘integrally
linked’ approach, resulting in a similar outcome as under the amendments, except that the deferred tax asset or liability
was recognised on a net basis. Following the amendments, the Group has recognised a separate deferred tax asset in
relation to its lease liabilities and a deferred tax liability in relation to its right-of-use assets. However, there was no impact
on the statement of financial position because the balances qualify for offset under paragraph 74 of IAS 12. There was also
no impact on the opening retained earnings as at 1 July 2022 as a result of the change.
For all other transactions, an entity applies the amendments to transactions that occur on or after the beginning of the
earliest period presented.
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 did not have any significant impact on the financial
performance or position of the Group.
Note 1. Corporate information
59
Note 2. Material accounting policy information
59
Note 3. Critical accounting judgements, estimates and assumptions
67
Note 4. Operating segments
68
Note 5. Revenue
69
Note 6. Other income
69
Note 7. Expenses
70
Note 8. Income tax
71
Note 9. Current assets - cash and cash equivalents
72
Note 10. Current assets - receivables
73
Note 11. Current assets - inventories
73
Note 12. Current assets - other
73
Note 13. Non-current assets - receivables
73
Note 14. Non-current assets - property, plant and equipment
74
Note 15. Non-current assets - right-of-use assets
75
Note 16. Non-current assets - intangibles
76
Note 17. Current liabilities - payables
78
Note 18. Current liabilities - lease liabilities
78
Note 19. Current liabilities - provisions
78
Note 20. Non-current liabilities - borrowings
79
Note 21. Non-current liabilities - lease liabilities
80
Note 22. Non-current liabilities - provisions
80
Note 23. Equity - contributed equity
81
Note 24. Equity - reserves
81
Note 25. Equity - dividends
82
Note 26. Financial instruments
83
Note 27. Key Management Personnel disclosures
84
Note 28. Remuneration of auditors
85
Note 29. Contingent liabilities
85
Note 30. Commitments
86
Note 31. Related party transactions
87
Note 32. Parent entity information
88
Note 33. Interests in subsidiaries
89
Note 34. Events after the reporting period
89
Note 35. Cash flow information
90
Note 36. Earnings per share
91
Note 37. Share-based payments
92
61
60
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 32.
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 2024 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 ‘Group’.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred
to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
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 Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-
controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group
recognises the fair value of the consideration received and the fair value of any investment retained together with any gain
or loss in profit or loss.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’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 Group 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 Group
owned dental centres. Services and facilities include the provision of fully equipped surgeries, staff, marketing and other
support infrastructure. The Group 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 Group 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 Group 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.
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 Group’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 Group’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.
63
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30
days.
The Group 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
Consumables and dental products are stated at the lower of cost and net realisable value. Cost comprises of purchase
and delivery costs, net of rebates and discounts received or receivable.
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
5-20 years
Plant and equipment
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
Group. 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 Group 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 Group 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 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 three to five 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 15 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 Group 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 Group has an unconditional right to defer settlement of the
liabilities for at least twelve months after the reporting period.
Lease liabilities
As a lessee:
The Group 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 Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the
discount rate.
The Group 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
•
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in
an optional renewal period if the Group is reasonably certain to exercise extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate early.
65
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
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 Group has applied the practical expedient to not assess rent concessions affecting payments due before 30 June 2022
that have occurred as a direct consequence of the COVID-19 pandemic as a lease modification.
The Group 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 Group enters into lease agreements as lessor in respect of some property leases. When the Group 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
Group 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 Group considers certain indicators such as whether the lease is for the major part of the
economic life of the asset.
When the Group 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 Group applies the exemption
described above, then it classifies the sub-lease as an operating lease.
The Group applies the derecognition and impairment requirements in AASB 9 to the net investment in the lease. The
Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the
lease. The Group recognises lease payments received under operating leases as income on a straight-line basis over the
lease term as part of ‘other revenue’.
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 Group has a present (legal or constructive) obligation as a result of a past event, it
is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value
of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Make good provision
The Group 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 Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. The benefit is discounted to determine its present value.
Re-measurements are recognised in profit or loss in the period in which they arise.
The obligations are presented as a current liability in the balance sheet if the Group does not have an unconditional right
to defer settlement for at least 12 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) and a
deferred component of the Short-Term Incentive plans for Key Management Personnel.
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 Group 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.
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 Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or
accounting policies and other pertinent conditions in existence at the acquisition date.
Where the business combination is achieved in stages, the Group 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.
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
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.
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 material 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 Group for the annual reporting period ended 30 June 2024. The Group has
not yet assessed the impact of these new or amended Accounting Standards and Interpretations.
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates
will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the
next financial year are discussed below.
Share-based payment transactions
The Group 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 37 for further details.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property,
plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical
innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less
than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be
written off or written down. Refer to note 14 and note 16 for further details.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 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 Group 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 Group and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves 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 Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. The Group recognises liabilities for anticipated tax audit issues based on the
Group’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 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 Group. The provision covers potential payroll tax liability in Queensland
and Victoria. 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 Group 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 17 for further
details.
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 4. Operating segments
The Group 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 Group’s Chief Executive Officer,
who is identified as the chief operating decision maker, in assessing performance and in determining the allocation of
resources. The Group’s operation inherently has one profile and performance assessment criteria. The financial results from
this segment are consistent with the financial statements for the Group as a whole.
The chief operating decision maker uses the Group’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 Group.
The reconciliation of statutory profit/ (loss) before tax to underlying EBITDA pre-AASB 16 is shown in the table below.
Ref
2024
$’000
2023
$’000
Statutory net profit/(loss) before tax
10,725
3,923
Depreciation and amortisation expense
30,332
30,192
Net finance cost
3,668
4,343
Statutory EBITDA
44,725
38,458
Severance expenses removed
1
226
242
Executive Long-Term Incentive plan expense
2
(1,815)
704
Additional costs associated with the December Extraordinary General Meeting
3
-
536
Costs associated with the control transaction proposals and Scheme of Arrangement
4
2,313
-
Net flood insurance recoveries associated with FY 2022 loss
5
-
(646)
Workers compensation insurance premium adjustments for prior years
6
208
238
Impact of prior years’ payroll tax determination (excluding interest)
7
1,191
1,174
Change in accounting estimate for consumables
8
(1,415)
-
Adjustment to pre-AASB 16 basis
9
(17,252)
(16,597)
Underlying EBITDA pre-AASB 16
28,181
24,109
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. During the year, the Executive Long-Term Incentive plan expense was
in credit, as the new Performance and Cash Rights issued were offset by the credits associated with Tranche 6 failing to vest, and a large
number of Performance Rights forfeited due to resignation.
Note 3 – The additional costs associated with the December Extraordinary General Meeting refer 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 held on 19 December 2022.
Note 4 – The costs associated with the proposals from each of Genesis Capital Manager I Pty Ltd and NDC BidCo Pty Ltd (NDC) to acquire
100% of the shares in Pacific Smiles and the subsequent meeting of Pacific Smiles shareholders held on 8 August 2024 (Scheme Meeting) to
consider and vote on a resolution to approve the proposed scheme of arrangement under which NDC would acquire 100% of the shares in
Pacific Smiles (Scheme). They include external costs paid for consulting, financial and legal advice and other associated costs related to the
Scheme and the Scheme Meeting. It also includes additional exertion payments to directors and management.
Note 5 – The PSG dental centre located in Lismore was damaged in the 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 until the claim was finalised in January 2023.
Note 6 - 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 7 – The prior year payroll tax determination represents the total amount paid for payroll tax relating to the five financial years 2019 to
2023 in the Australian Capital Territory (ACT) and associated attendant legal costs incurred during the audits and PSG’s objections.
Note 8 – During the year, PSG updated and improved processes and controls around dental centre consumables and the associated
estimates of cost and quantity held at individual dental centres. Applying this change has resulted in a credit in the current year, which has
been excluded from the underlying results as it is a non-cash adjustment that is not anticipated to recur in future periods.
Note 9 – 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 are included in EBITDA as are the cash payments
received from subleases.
Note 5. Revenue
2024
$’000
2023
$’000
Revenue from contracts with customers
Dental service fees
177,485
163,335
Dental product sales
429
536
177,914
163,871
Management fees
1,838
1,448
Revenue
179,752
165,319
Note 6. Other income
2024
$’000
2023
$’000
Rents
220
377
Sundry income
545
1,479
Net flood insurance recoveries associated with FY 2022 loss
66
646
Other income
831
2,502
71
70
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 7. Expenses
2024
$’000
2023
$’000
Profit before income tax includes the following specific expenses:
Depreciation
Leasehold improvements
7,120
7,553
Plant and equipment
7,096
7,239
Right-of-use assets
14,199
13,773
Total depreciation
28,415
28,565
Amortisation
Software
1,852
1,562
Rights and licences
65
65
Total amortisation
1,917
1,627
Total depreciation and amortisation
30,332
30,192
Finance costs
Interest and finance charges paid/payable on borrowings
566
1,012
Interest and finance charges paid/payable on lease liabilities
3,245
3,275
Unwinding of the discount on lease make good provision
344
-
Interest paid on payroll tax settlement
-
274
Interest received/receivable
(487)
(218)
Net finance costs
3,668
4,343
Superannuation expense
Defined contribution superannuation expense
7,308
6,631
Share-based payments expense
Share-based payments expense
(1,775)
704
Direct expenses
Other direct expenses
8,864
8,333
Employee expenses - direct
1,338
617
10,202
8,950
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).
Total employee expenses for the year are $83,344,485 (2023: $80,711,961). These include employee expenses and dental
practitioner employment costs presented as employee expenses - direct.
Note 8. Income tax
2024
$’000
2023
$’000
Income tax expense
Current tax
6,581
2,450
Deferred tax
(3,809)
(817)
Adjustment recognised for prior periods
(86)
(131)
Aggregate income tax expense
2,686
1,502
Deferred tax included in income tax expense comprises:
Increase in deferred tax assets
(3,809)
(817)
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
10,725
3,923
Tax at the statutory tax rate of 30%
3,218
1,177
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Entertainment expenses
44
45
Share-based payments
(533)
211
2,729
1,433
Adjustment recognised for prior periods
(86)
(131)
Prior year temporary differences not recognised now recognised
43
200
Income tax expense
2,686
1,502
2024
$’000
2023
$’000
Amounts credited directly to equity
Deferred tax assets
-
(187)
73
72
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
2024
$’000
2023
$’000
Deferred tax asset
Net deferred tax asset comprises temporary differences attributable to:
Allowance for expected credit losses
44
55
Property, plant and equipment
5,351
2,327
Employee benefits
1,728
1,700
Lease liabilities
22,600
25,199
Provision for lease make good
2,177
2,238
Accrued expenses
503
340
Intangibles
(98)
(117)
Lease receivables
(155)
(215)
Right-of-use assets
(18,728)
(21,437)
Prepayments and others
40
80
Business related costs (s40-880)
517
-
Deferred tax asset
13,979
10,170
Movements:
Opening balance
10,170
12,416
Credited to profit or loss
3,809
817
Credited to equity
-
187
Tax losses carry back claimed
-
(3,250)
Closing balance
13,979
10,170
2024
$’000
2023
$’000
Provision for income tax
4,359
1,442
Note 9. Current assets - cash and cash equivalents
2024
$’000
2023
$’000
Cash at bank and in hand
17,656
18,573
Note 10. Current assets - receivables
2024
$’000
2023
$’000
Trade receivables
4,115
2,630
Less: Allowance for expected credit losses
(147)
(184)
3,968
2,446
Finance lease receivables
212
202
Other receivables
476
298
4,656
2,946
Refer to note 13 for finance lease receivables maturity analysis.
Note 11. Current assets - inventories
2024
$’000
2023
$’000
Inventories - at cost
7,715
6,200
Inventories recognised as an expense during the 2024 financial year amounted to $11,735,049 (2023: $12,727,025). These
figures were included in consumables supplies expense in the statement of profit or loss.
Note 12. Current assets - other
2024
$’000
2023
$’000
Prepayments
1,113
1,558
Other
64
79
1,177
1,637
Note 13. Non-current assets - receivables
2024
$’000
2023
$’000
Finance lease receivables - rental subleases
304
516
The following table sets out a maturity analysis of finance leases receivable, showing the undiscounted lease payments to
be received after the reporting date:
2024
$’000
2023
$’000
Within one year
234
234
One to five years
322
556
Total undiscounted finance lease receivable
556
790
Less: Unearned finance income
(40)
(72)
Total finance lease receivables
516
718
75
74
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 14. Non-current assets - property, plant and equipment
2024
$’000
2023
$’000
Leasehold improvements - at cost
83,494
83,346
Less: Accumulated depreciation and impairment
(51,187)
(44,067)
32,307
39,279
Plant and equipment - at cost
71,089
69,316
Less: Accumulated depreciation and impairment
(52,246)
(46,563)
18,843
22,753
51,150
62,032
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below.
Leasehold
improvements
$’000
Plant and
equipment
$’000
Total
$’000
Balance at 1 July 2022
44,809
24,057
68,866
Additions
2,593
5,959
8,552
Disposals
(570)
(24)
(594)
Depreciation expense
(7,553)
(7,239)
(14,792)
Balance at 30 June 2023
39,279
22,753
62,032
Additions
166
3,229
3,395
Disposals
(18)
(43)
(61)
Depreciation expense
(7,120)
(7,096)
(14,216)
Balance at 30 June 2024
32,307
18,843
51,150
Impairment of assets
No impairment losses were recognised in the 2024 and 2023 financial years.
Note 15. Non-current assets - right-of-use assets
2024
$’000
2023
$’000
Leases - right-of-use
115,089
111,454
Less: Accumulated depreciation
(52,662)
(39,999)
62,427
71,455
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below.
$’000
Balance at 1 July 2022
71,021
Adjustment on carrying value from lease variations
(238)
Disposals
(2,025)
Additions
16,470
Depreciation expense
(13,773)
Balance at 30 June 2023
71,455
Adjustment on carrying value from lease variations
5,579
Adjustment on carrying value from changes in make good provision estimates
(409)
Depreciation expense
(14,198)
Balance at 30 June 2024
62,427
Some property leases contain extension options exercisable by the Group before the end of the non-cancellable contract
period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility.
The extension options held are exercisable only by the Group and not by the lessors. The Group 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 Group reassesses whether it is reasonably certain to exercise the options if there is a significant event or
significant changes in circumstances within its control.
77
76
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 16. Non-current assets - intangibles
2024
$’000
2023
$’000
Goodwill
12,517
12,517
Less: Impairment
(2,894)
(2,894)
9,623
9,623
Software - at cost
9,282
10,980
Less: Accumulated amortisation
(6,316)
(6,416)
2,966
4,564
Rights and licences
985
985
Less: Accumulated amortisation
(660)
(593)
325
392
12,914
14,579
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below.
Goodwill
$’000
Software
$’000
Rights and
licences
$’000
Total
$’000
Balance at 1 July 2022
9,623
3,383
457
13,463
Additions
-
2,743
-
2,743
Amortisation expense
-
(1,562)
(65)
(1,627)
Balance at 30 June 2023
9,623
4,564
392
14,579
Additions
-
252
-
252
Amortisation expense
-
(1,852)
(65)
(1,917)
Balance at 30 June 2024
9,623
2,964
327
12,914
Impairment testing for cash-generating-units (CGU)
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.
2024
$’000
2023
$’000
Northern New South Wales
2,453
2,453
Northern Queensland
2,446
2,446
Eastern Victoria
1,926
1,926
Western Sydney
1,317
1,317
Western Victoria
704
704
Sydney
449
449
Central New South Wales
328
328
Total goodwill
9,623
9,623
The key assumptions used in the estimation of the recoverable amount are set out below.
2024
%
2023
%
Discount rate
10.50
13.00
Terminal value EBITDA growth rate
2.50
2.50
Budgeted EBITDA growth rate (average of next five years)
9.72
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 growth projections for years 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 discount rate based on the Group’s weighted average cost of capital of 10.50% (2023: 13.00%). The pre-tax
discount rate is 11.00% (2023: 14.00%).
Management has performed sensitivity analyses to the key assumptions by increasing the discount rate up to 15.5%. The
analyses assume that all other variables remain constant. The analyses resulted in the estimated recoverable amount of
the CGUs still exceeding 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 Group’s acquisition of the three former AHM dental centres, the Group 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.
79
78
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 17. Current liabilities - payables
2024
$’000
2023
$’000
Trade and other payables
18,671
19,276
Payroll Tax provision of $506,394 (2023: $991,178) for the financial years 2019, 2020, 2021, and 2022 for independent dentists
operating under a Service and Facilities Agreement with the Group is included in the Payables balance. The provision
covers potential payroll tax liability in Queensland and Victoria. 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 Group in New South
Wales.
Note 18. Current liabilities - lease liabilities
2024
$’000
2023
$’000
Lease liability
14,614
13,750
Refer to note 30 for further information on lease maturity analysis.
Note 19. Current liabilities - provisions
2024
$’000
2023
$’000
Employee benefits
4,794
4,773
Note 20. Non-current liabilities - borrowings
2024
$’000
2023
$’000
Bank loans
-
9,000
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
2024
$’000
2023
$’000
Bank loans
-
9,000
Assets pledged as security
The bank loans are secured by a registered equitable mortgage over the whole of the assets and undertakings of the
Group, including uncalled capital and inter-entity guarantees.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit.
2024
$’000
2023
$’000
Total facilities
Bank overdraft
500
500
Bank loans
20,000
40,000
Bank guarantees
5,000
5,000
25,500
45,500
Used at the reporting date
Bank overdraft
-
-
Bank loans
-
9,000
Bank guarantees
3,745
3,841
3,745
12,841
Unused at the reporting date
Bank overdraft
500
500
Bank loans
20,000
31,000
Bank guarantees
1,255
1,159
21,755
32,659
Covenants attached to bank loans were complied with during the financial year. The facility is available to the Group until
30 September 2025. Further information relating to the loans’ weighted average interest rate and contractual cashflow is
included in note 26.
81
80
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 21. Non-current liabilities - lease liabilities
2024
$’000
2023
$’000
Lease liability
60,720
70,246
Refer to note 30 for further information on lease maturity analysis.
Note 22. Non-current liabilities - provisions
2024
$’000
2023
$’000
Employee benefits
1,006
894
Lease make good
7,256
7,460
8,262
8,354
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.
2024
Make good
provision
$’000
Carrying amount at the start of the year
7,460
Change in accounting estimates
(409)
Amounts used
(49)
Unwinding of discount
344
Unused amounts reversed
(90)
Carrying amount at the end of the year
7,256
During the current financial year, changes to the make-good provision estimates for certain leases was made due to
changes in the anticipated costs for future restoration of the leased premises. The assessment was based on the latest
available data and prevailing circumstances.
Note 23. Equity - contributed equity
2024
Shares
2023
Shares
2024
$’000
2023
$’000
Ordinary shares - fully paid
159,581,938
159,581,938
52,104
52,104
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 Group’s objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can
continue to provide returns for shareholders and benefits for other stakeholders, maintain sufficient financial flexibility to
pursue its growth objectives, and maintain an optimum capital structure to reduce the cost of capital. The Group monitors
its working capital continually and manages it within a Board-approved finance facility. Debt covenants have been
consistently achieved and are 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 - reserves
2024
$’000
2023
$’000
Profits reserve
4,855
11,829
Share-based payments reserve
1,889
3,663
6,744
15,492
Profits reserve
The profits reserve represents current year profits transferred to a reserve to preserve the characteristic as a profit so as to
quarantine it 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.
83
82
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 25. Equity - dividends
Dividends
Dividends paid during the financial year were as follows.
2024
$’000
2023
$’000
Final dividend for the year ended 30 June 2023 of 2.27 cents per ordinary share, fully
franked, paid on 9 October 2023
3,622
-
Interim dividend for the year ended 30 June 2024 of 2.10 cents (2023: 0.35 cents) per
ordinary share, fully franked, paid on 5 April 2024
3,351
558
6,973
558
Subsequent to the end of the financial year, the Directors have recommended the payment of a final dividend of 3.25 cents
(2023: 2.27 cents) per ordinary share, fully franked. The aggregate amount of the proposed dividend expected to be paid
out of profit reserves, but not recognised as a liability as at the end of the financial year is $5,182,557 (2023: $3,622,510). The
record date for determining entitlements to the 2024 final dividend is 25 September 2024, with the payment date being 10
October 2024.
Franking credits
2024
$’000
2023
$’000
Franking credits available for subsequent financial years based on a tax rate of 30%
16,423
19,446
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.
Note 26. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (interest rate risk), credit risk and liquidity risk.
The Board has overall responsibility for the establishment and oversight of the risk management framework and is
supported by the Board Audit and Risk Management Committee. Senior management develops and monitors risk
management policy and reports regularly to the Directors on issues and compliance matters. Risk management principles
and systems are reviewed regularly to reflect changes in market conditions and the consolidated entity’s activities.
The Group’s principal financial instruments during the 2024 and 2023 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 Group has various other financial instruments such as trade and other debtors and creditors, which arise
directly from its operations. The Group does not trade in financial instruments.
Market risk
Interest rate risk
The Group’s exposure to market risk for changes in interest rates at the end of the year was minimal, as the bank debt had
been fully repaid.
Credit risk
The Group 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 Group has had no bad debts (2023: nil) in the period and at 30 June 2024, no trade receivables are overdue by more
than 90 days that have not been fully provided for. The expected credit loss provision is $146,623 (2023: $184,246).
Liquidity risk
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 12 months, regardless
of how likely settlement under contractual arrangements is judged to be. The Group’s current assets, available financing
facilities, and ongoing positive operating cash flows continue to be sufficient to satisfy all payment obligations within the
timeframes required.
The following tables detail the Group’s remaining contractual maturity for its financial instrument liabilities. The tables
have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the balance sheet. The carrying
amount of these financial liabilities are disclosed in each respective note.
85
84
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 26. Financial instruments (continued)
2024
Less than 6
months
$’000
Between 6 and
12 months
$’000
Between 1
and 5 years
$’000
Remaining
contractual maturities
$’000
Non-derivatives
Non-interest bearing
Trade payables (note 17)
18,671
-
-
18,671
Total non-derivatives
18,671
-
-
18,671
2023
Less than 6
months
$’000
Between 6 and
12 months
$’000
Between 1
and 5 years
$’000
Remaining
contractual maturities
$’000
Non-derivatives
Trade payables (note 17)
19,276
-
-
19,276
Interest-bearing - variable
Bank loans (note 20)
280
288
9,762
10,330
Total non-derivatives
19,556
288
9,762
29,606
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.
Note 27. Key Management Personnel disclosures
Compensation
The aggregate compensation paid to Directors and other members of Key Management Personnel of the Group is set out
below.
2024
$’000
2023
$’000
Short-term employee benefits
1,947,039
1,842,696
Post-employment benefits
122,455
115,167
Long-term benefits
32,829
18,122
Share-based payments
(1,238,973)
517,247
863,350
2,493,232
Note 28. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the
Company.
2024
$’000
2023
$’000
Audit services
Audit or review of the financial statements
200,000
190,900
Other services
Tax compliance and advisory services
55,330
27,000
Other advisory services
57,997
-
113,327
27,000
313,327
217,900
Note 29. Contingent liabilities
2024
$’000
2023
$’000
Bank guarantees
3,745
3,841
The consolidated entity has given bank guarantees as at 30 June 2024 of $3,744,588 (2023: 3,841,030) to various landlords
as security for leased premises.
87
86
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 30. Commitments
2024
$’000
2023
$’000
Capital commitments
Committed at the reporting date but not recognised as liabilities:
Property, plant and equipment
123
460
Printers
506
710
Committed at the reporting date but not recognised as liabilities:
Within one year
311
664
One to five years
318
506
629
1,170
Lease commitments
Committed at the reporting date and recognised as liabilities, payable:
Within one year
17,404
16,805
One to five years
50,138
54,170
More than five years
17,280
24,576
Total commitment
84,822
95,551
Less: Future finance charges
(9,478)
(11,554)
Net commitment recognised as liabilities
75,344
83,997
Note 31. Related party transactions
Parent entity
Pacific Smiles Group Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 33.
Key Management Personnel
Disclosures relating to Key Management Personnel are set out in note 27 and the remuneration report included in the
Directors’ report.
Transactions with related parties
Key Management Personnel or their related parties held shares in the Group during 2024 and 2023, and as such,
participated in dividends.
Other than that, there were no other transactions with related parties in the current period.
89
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 32. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
2024
$’000
2023
$’000
Profit after income tax
8,036
2,429
Total comprehensive income
8,036
2,429
Balance sheet
2024
$’000
2023
$’000
Total current assets
31,241
29,544
Total assets
171,906
188,248
Total current liabilities
41,709
38,716
Total liabilities
110,685
126,314
Equity
Contributed equity
52,104
52,104
Profits reserve
4,855
11,829
Share-based payments reserve
1,889
3,663
Retained profits/(accumulated losses)
2,373
(5,662)
Total equity
61,221
61,934
Contingent liabilities
The parent entity had no contingent liabilities, other than bank guarantees as at 30 June 2024 totalling $3,744,588 (30 June
2022: $3,841,030).
Note 33. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Ownership interest
Name
Principal place of business /
Country of incorporation
2024
%
2023
%
Dentist Smiles Group Pty Limited
Australia
100.00%
100.00%
Dental Assistant Training Solutions Pty Limited
Australia
100.00%
100.00%
Pacific Eyes Pty Limited
Australia
100.00%
100.00%
Everything Dentures Pty Limited
Australia
100.00%
100.00%
Dental Assistant Training Solutions Pty Limited, Pacific Eyes Pty Limited and Everything Dentures Pty Limited are dormant
entities.
Note 34. Events after the reporting period
Outcome of Scheme Meeting held on 8 August 2024
A Scheme Meeting was held on 8 August 2024 for shareholders to vote on a Scheme Resolution approving the Scheme
under which NDC would acquire 100% of the shares in Pacific Smiles for $2.05 per share. The Scheme Resolution, as set out
in the Notice of Scheme Meeting included in the Scheme Booklet released to the ASX on 26 June 2024, was not approved by
the requisite majorities of Pacific Smiles Shareholders at the Scheme Meeting.
Retirement of Non-Executive Chairperson
On 19 August 2024, the Company announced the retirement of Non-Executive Chairperson, Ms Zita Peach, with effect from
the release of the results on 28 August 2024. The Chair role will be succeeded by current Non-Executive Director Ms Giselle
Collins. Ms Collins has been on the Pacific Smiles Board since November 2023, is currently the Chair of the Audit & Risk
Management Committee and chaired the Board Takeover Response Committee.
Resignation of Non-Executive Director
On 9 August 2024, the Company announced the resignation of Non-Executive Director, Mr Mark Bloom, with immediate
effect.
Apart from the matter disclosed above and final dividend declared as disclosed in note 25, no other matter or
circumstance has arisen since 30 June 2024 that has significantly affected, or may significantly affect the Group’s
operations, the results of those operations, or the Group’s state of affairs in future financial years.
91
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 35. Cash flow information
Reconciliation of profit after income tax to net cash from operating activities
2024
$’000
2023
$’000
Profit after income tax expense for the year
8,039
2,421
Adjustments for:
Depreciation and amortisation
30,332
30,192
Net loss on disposal of property, plant and equipment
5
591
Share-based payments
(1,775)
704
Change in operating assets and liabilities:
Decrease/(increase) in receivables
(1,498)
493
Increase in inventories
(1,515)
(405)
Decrease/(increase) in deferred tax assets
(3,809)
2,433
Decrease/(increase) in other operating assets
460
(709)
Increase/(decrease) in payables
(605)
1,755
Increase/(decrease) in other provisions
255
(421)
Increase /(decrease) in income tax
2,917
3,820
Net cash from operating activities
32,806
40,874
Changes in liabilities arising from financing activities
Dividend
$’000
Borrowings
$’000
Leases
$’000
Total
$’000
Balance at 1 July 2022
-
18,500
87,375
105,875
Net cash used in financing activities
(558)
(9,500)
(13,501)
(23,559)
Dividend declared (note 25)
558
-
-
558
New leases
-
-
8,175
8,175
Changes in lease liabilities carrying value from lease variation
-
-
4,196
4,196
Changes from discontinued leases
-
-
(2,249)
(2,249)
Interest expenses
-
1,012
3,275
4,287
Interest paid (presented as operating cashflow)
-
(1,012)
(3,275)
(4,287)
Balance at 30 June 2023
-
9,000
83,996
92,996
Net cash used in financing activities
(6,973)
(9,000)
(14,389)
(30,362)
Dividend declared (note 25)
6,973
-
-
6,973
Changes in lease liabilities carrying value from lease variations
-
-
5,727
5,727
Interest expenses
-
-
3,245
3,245
Interest paid (presented as operating cashflow)
-
-
(3,245)
(3,245)
Balance at 30 June 2024
-
-
75,334
75,334
Note 36. Earnings per share
2024
$’000
2023
$’000
Profit after income tax
8,039
2,421
Cents
Cents
Basic earnings per share
5.0
1.5
Diluted earnings per share
5.0
1.5
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
159,581,938
159,581,938
Weighted average number of ordinary shares used in calculating diluted earnings per share
159,581,938
159,581,938
Performance rights
Performance rights granted to employees under the consolidated entity’s LTI 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 2024.
These performance rights could potentially dilute basic earnings per share in the future.
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PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Notes to the Consolidated Financial Statements
Note 37. Share-based payments
Long-Term Incentive plan overview
The consolidated entity has established a 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 selected senior managers, at the absolute discretion of the Board, pursuant to the
LTI plan in financial years 2022 and 2021.
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.
There was no new issuance of the Long-Term Incentive Plan in FY 2023.
In FY 2024, a new LTI plan was issued on 7 December 2023. This tranche’s LTI plan was updated to more closely align with
market norms and shareholder expectation. Under the new plan, a number of key changes were introduced:
•
The performance period was reduced from four years to three years in line with market norms.
•
The size and value of the equity grants were reduced to align with more market norms.
•
The Change of Control condition was changed to provide the Board with full discretion as to how the tranche will be
treated in the event of a Change of Control.
•
Two additional metrics were introduced to drive alignment with delivering long-tern shareholder value.
The vesting conditions are categorised based on three metrics: Absolute EPS, Average ROE, and Absolute TSR, with
respective weightings of 40%, 40%, and 20%.
The details of the vesting conditions and calculations are as follows:
•
For the Absolute EPS metric, no shares vest if the EPS is below $0.08. If the EPS reaches $0.08, 50% of the shares vest,
and between $0.08 and $0.11, the vesting occurs on a straight-line basis. When the EPS hits $0.11 or more, 100% of the
shares vest. The Cash EPS vesting condition is calculated by adjusting the reported underlying net profit after tax for
intangibles amortisation and one-off items, then dividing by the weighted average number of ordinary shares on
issue during the financial year, specifically measured by the Cash EPS of FY26.
•
For the Average ROE metric, no shares vest if the ROE is below 18%. If the ROE is between 18% and 20%, 20% of the shares
vest. When the ROE reaches 20%, 50% of the shares vest, and vesting occurs on a straight-line basis between 20%
and 22%. At 25% ROE, 100% of the shares vest. The Average Annual ROE vesting condition is determined by calculating
the average of the reported underlying net profit after tax, adjusted for intangibles amortisation and one-off items,
divided by the weighted average of shareholders’ equity over three years.
•
For the Absolute TSR metric, no shares vest if the TSR is below 22%. At 22%, 25% of the shares vest, and between 22% and
26%, vesting occurs on a straight-line basis. When TSR reaches 26%, 50% of the shares vest, and between 26% and 30%,
vesting again occurs on a straight-line basis. At 30% or more, 100% of the shares vest. The TSR is calculated by taking
the 90-day volume-weighted average price (VWAP) of the Company’s shares at the end of the performance period
and adding the dividends paid during this period, then subtracting the 90-day VWAP at the beginning of the period,
with the result expressed as a percentage.
In addition to the program above, the Board has issued Performance Rights on 8 May 2024 and 13 May 2024 to select key
personnel for remuneration and retention related to the proposed transaction. These Performance Rights vest upon the
official approval of a Change of Control by a second court hearing, which must occur no later than 31 December 2024. If
this approval is not obtained by this date, the Performance Rights will expire. Performance Rights will only vest if there is a
successful Change of Control event. Upon the occurrence of such an event, all unvested Performance Rights will fully vest.
Note 37. Share-based payments (continued)
Set out below are summaries of performance rights granted under the plan.
Grant date
Vesting date
Balance at the
start of the
year
Granted
Expired/
forfeited/ other
the end of the
year
30/11/2019
30/11/2023
2,391,000
-
(2,391,000)
-
30/11/2020
30/11/2024
2,331,430
-
(1,175,672)
1,155,758
30/11/2021
30/11/2025
1,981,482
-
(988,707)
992,775
07/12/2023
15/09/2026
-
598,486
(88,889)
509,597
19/04/2024
01/08/2024
-
57,143
-
57,143
23/05/2024
01/08/2024
-
76,248
-
76,248
6,703,912
731,877
(4,644,268)
2,791,521
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was
1.09 years (2023: 1.36 years).
For the performance rights granted on 7 December 2023, the fair value has been measured using a Monte Carlo simulation.
Non-market performance conditions attached to the arrangements was not taken into account in measuring fair value.
The valuation model inputs used to determine the fair value at the grant date, are as follows.
Grant date
Expiry date
Share price
at grant
date
Exercise
price
Expected
volatility
Dividend
yield
Risk-free
interest rate
Fair value at
grant date
07/12/2023
15/09/2026
$1.10
$0.00
45.00%
3.89%
4.14%
$0.530
For the performance rights granted on 8 and 13 May 2024, the fair value at the grant date has incorporated the occurrence
of a successful Change of Control event by applying a discount to the valuation. This discount was determined by
estimating the likelihood of a successful Change of Control event, based on the number of shareholders expected to
accept the scheme.
95
94
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Independent Auditor’s Report
The table below includes consolidated entity information required by section 295 of the Corporations Act 2001 (Cth):
Entity name
Entity type
Place formed /
Country of incorporation
Ownership
interest%
Tax residency
Pacific Smiles Group Limited
(the company)
Body corporate
Australia
Australia
Dentist Smiles Group Pty
Limited
Body corporate
Australia
100.00%
Australia
Dental Assistant Training
Solutions Pty Limited
Body corporate
Australia
100.00%
Australia
Pacific Eyes Pty Limited
Body corporate
Australia
100.00%
Australia
Everything Dentures Pty
Limited
Body corporate
Australia
100.00%
Australia
In determining tax residency, the consolidated entity has applied current legislation and judicial precedent, including
having regard to the Commissioner of Taxation’s public guidance in Tax Ruling TR 2018/5.
Director’s Declaration
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 Group’s financial position as at 30 June
2024 and of its performance for the financial year ended on that date;
•
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable; and
•
the information disclosed in the attached consolidated entity disclosure statement is true and correct.
The Directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the Directors
Zita Peach
Chairperson
27 August 2024
Independent Auditor’s Report
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.
Independent Auditor’s Report
To the shareholders of Pacific Smiles Group Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report
of Pacific Smiles Group Limited (the
Company).
In our opinion, the accompanying
Financial Report of the Company gives a
true and fair view, including of the
Group’s financial position as at 30 June
2024 and of its financial performance for
the year then ended, in accordance with
the Corporations Act 2001, in
compliance with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report comprises:
Consolidated
as at 30 June 2024
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
Consolidated entity disclosure statement and accompanying
basis of preparation as at 30 June 2024
Notes, including material accounting policies
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 Auditor’s 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 Board’s 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.
97
ANNUAL REPORT 2024
96
PACIFIC SMILES GROUP
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 ($179,752,000)
Refer to Note 5 to the Financial Report
The key audit matter
How the matter was addressed in our audit
Most of the Group’s 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 Group s
calculation of dentist payments and
therefore
service
fee
revenue,
presenting risks of transactions being
recorded incorrectly.
In assessing this key audit matter, we
involved senior audit team members who
understand
the
Group’s
business,
industry, and the economic environment
it operates in.
Our procedures included:
•
Evaluating the appropriateness of the Group s revenue
recognition policies for revenue streams against the
requirements of AASB 15 Revenue from Contracts with
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:
Checking total patient billings and dentist payments
throughout the year to the Group s bank statements. We
compared total patient billings less dentist payments to
the amount recorded as revenue by the Group;
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 to our calculation that multiplied the
average
dentist
fee
percentages
derived
from
percentages within dentist contracts by the total patient
billings per the Group s bank statements for the month.
We checked a sample of fee percentages for individual
dentists to the underlying contracts;
Comparing the settlement amounts owed to dentists
recognised by the Group at the end of the year to the
batch payment per the post year-end bank statement.
•
Evaluating the adequacy of the disclosures made in the
financial report against the requirements of the accounting
standards.
Other Information
Other Information is financial and non-financial information in Pacific Smiles Group Limited’s annual report
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for
the Other Information.
The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Report including
the Remuneration Report, the Operational Overview and Insights, ESG Report, Shareholder Information and
the Corporate Directory. The Chairperson’s Report is expected to be made available to us after the date of the
Auditor's Report.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will
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
Auditor’s Report we have nothing to report.
Responsibilities of the Directors for the Financial Report
The Directors are responsible for:
preparing the Financial Report in accordance with the Corporations Act 2001, including giving a true and
fair view of the financial position and performance of the Group, and in compliance with Australian
Accounting Standards and the Corporations Regulations 2001
implementing necessary internal control to enable the preparation of a Financial Report in accordance
with the Corporations Act 2001, including giving a true and fair view of the financial position and
performance of the Group, and that is free from material misstatement, whether due to fraud or error
assessing the Group and Company’s 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.
Auditor’s 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 Auditor’s Report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with 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
99
ANNUAL REPORT 2024
98
PACIFIC SMILES GROUP
Shareholder Information
The shareholder information set out below was applicable as at 16 August 2024.
Distribution of equity securities
Analysis of number of equity security holders by size of holding:
Ordinary shares
Number of
holders
% Issued
share capital
1 to 1,000
370
0.08
1,001 to 5,000
269
0.48
5,001 to 10,000
127
0.56
10,001 to 100,000
172
3.18
100,001 and over
56
95.70
994
100.00
Holding less than a marketable parcel
177
0.01
Equity security holders
Twenty largest quoted equity security holders
The names of the 20 largest security holders of quoted equity securities are listed below.
Ordinary shares
Number held
% of total
shares issued
HSBC Custody Nominees (Australia) Limited
52,962,823
33.19
Beam Investments Co Pty Ltd
31,750,000
19.90
Alison Jane Hughes
15,797,850
9.90
Citicorp Nominees Pty Limited
11,463,938
7.18
Dr Alexander John Abrahams
11,450,000
7.17
BNP Paribas Nominees Pty Ltd (DRP)
4,468,068
2.80
J P Morgan Nominees Australia Pty Limited
4,348,311
2.72
Channings Holdings Pty Ltd (The Khan Holdings A/C)
2,090,150
1.31
Karen Wright
2,022,000
1.27
Mrs Susan Louise Abrahams
2,000,000
1.25
Just Paddling Pty Ltd (Rosebrook Super Fund A/C)
1,954,646
1.22
Mr Trevor Collins & Mrs Dianne Elizabeth Collins (The Trevor Collins Fam A/C)
1,128,480
0.71
Dr David Roessler
766,200
0.48
Mr Christopher Fergusson (Fergusson Holding A/C>)
583,986
0.37
BNP Paribas Nominees Pty Ltd (AGENCY LENDING DRP A/C)
526,707
0.33
Peter David Wade (WADE FAMILY A/C)
523,862
0.33
Inglenook Super Pty Ltd (Cameron Family S/F A/C>)
500,000
0.31
Lanlex No 93 Pty Ltd
464,626
0.29
Dr Allan Chow
450,000
0.28
Palm Beach Nominees Pty Limited
428,429
0.27
145,680,076
91.28
Assurance Standards Board website at:
https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s
Report.
Report on the Remuneration Report
Opinion
In our opinion, the Remuneration Report
of Pacific Smiles Group Limited for the
year ended 30 June 2024 complies with
Section 300A of the Corporations Act
2001.
Directors’ responsibilities
The Directors of the Company are responsible for the preparation
and presentation of the Remuneration Report in accordance with
Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages 24 to
43 of the Directors’ report for the year ended 30 June 2024.
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
27 August 2024
34
52
101
100
PACIFIC SMILES GROUP
ANNUAL REPORT 2024
Corporate Directory
Substantial holders
Substantial holders based on information provided in the last substantial shareholders’ notice in the Company are set out
below.
Ordinary shares
Number held
% of total
shares issued
Genesis Capital
31,750,000
19.90
MA Asset Mgt
21,427,932
13.43
Spheria Asset Mgt
18,352,761
11.50
HBF Health
16,000,000
10.03
Ms Alison J Hughes
15,797,850
9.90
Mr Alexander J Abrahams
15,404,646
9.65
On-market buy-back
There is no current on-market buy-back.
Voting rights
Each ordinary share carries the right to one vote. No voting rights are attached to performance rights.
There are no other classes of equity securities.
Corporate Directory
Directors
Ms Zita Peach (retired with effect from the release of the results on 28 August 2024)
Non-Executive Chairperson and Non-Executive Director
Mr Andrew Vidler
Managing Director and Chief Executive Officer
Ms Giselle Collins
Non-Executive Director
Ms Jodie Leonard
Non-Executive Director
Dr Scott Kalniz
Non-Executive Director
Mr Steven Rubic
Non-Executive Director
Mr Mark Bloom (resigned 9 August 2024)
Non-Executive Director
Company secretary
Ms Belinda Cleminson
Registered office
Level 1, 6 Molly Morgan Drive
Greenhills NSW 2323
T: 02 4930 2000
F: 02 4930 2099
W: www.pacificsmiles.com.au
Share register
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 2024 and reflects the corporate
governance practices in place for the 2024 financial year. The corporate governance
statement was approved by the Board on 27 August 2024 and a copy can be found on the
Pacific Smiles website.
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PACIFIC SMILES GROUP