Palla Pharma Limited
ACN 107 872 453
Annual report
for the year ended 31 December 2019
Palla Pharma Limited ACN 107 872 453
Annual report - 31 December 2019
Contents
Corporate directory
Directors' report
Auditor's Independence Declaration
Corporate governance statement
Financial statements
Directors' declaration
Independent auditor's report to the members
Shareholder information
Page
1
2
21
22
23
74
75
79
Directors
Secretary
Principal registered office in Australia
Share registry
Auditor
Australian company number
Mailing address
Stock exchange listing
Website
Palla Pharma Limited
Corporate directory
Mr. Simon Moore (Independent Non-Executive
Chairman)
Mr. Jarrod Ritchie (Managing Director and CEO)
Mr. Todd Barlow (Non-Executive Director)
Mr. Stuart Black (Independent Non-Executive Director)
Ms. Sue MacLeman (Independent Non-Executive
Director)
Mr. Jaime Pinto
c/- Link Market Services Limited
Tower 4
727 Collins Street
Docklands VIC 3008
Tel: +61 3 9301 0800
Fax: +61 3 9301 0899
Link Market Services Limited
Tower 4
727 Collins Street
Docklands VIC 3008
KPMG
Tower 2
727 Collins Street
Docklands VIC 3008
107 872 453
PO Box 2139
Melbourne VIC 3001
Australian Securities Exchange
(ASX Code: PAL)
www.pallapharma.com
1
Palla Pharma Limited
Directors' report
31 December 2019
Directors' report
The directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of
Palla Pharma Limited (“the Company”) and the entities it controlled at the end of, or during, the year ended 31
December 2019.
Change of company name
On 19 June 2019 the company name was changed from TPI Enterprises Limited to Palla Pharma Limited.
Directors
The following persons were directors of Palla Pharma Limited during the whole of the financial year and up to the
date of this report:
Mr. Simon Moore (Independent Non-Executive Chairman)
Mr. Jarrod Ritchie (Managing Director and CEO)
Mr. Todd Barlow (Non-Executive Director)
Mr. Stuart Black (Independent Non-Executive Director)
Ms. Sue MacLeman (Independent Non-Executive Director)
Principal activities
During the year the principal continuing activities of the Group were the production and distribution of Narcotic
Raw Material ("NRM"), Active Pharmaceutical Ingredients ("API") and Finished Dosage Formulations ("FDF") for
supply to international pharmaceutical markets, and the production and distribution of poppy seed for supply to
international culinary markets.
Review of operations
Financial Results Summary
Consolidated entity
31 December
2019
$
31 December
2018
$
Sales of Narcotic Raw Material (“NRM”), Active Pharmaceutical Ingredients
(“API”), Finished Dosage Formulations (“FDF”) and Poppy Seed
Statutory Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA)
Statutory Earnings Before Interest and Tax (EBIT)
Statutory (Loss) for the year after Interest and Tax
Net cash (outflow) from operating activities
Operating EBITDA
54,685,394
(2,174,672)
(4,688,558)
(7,639,443)
(9,469,268)
(311,751)
46,170,998
(2,567,893)
(5,119,188)
(5,788,409)
(14,645,705)
(2,431,650)
A near breakeven Operating EBITDA for 2019 supports the Group’s strategy to pivot from a pure NRM supplier to
a downstream API and FDF producer.
Operating EBITDA, a non-GAAP financial measure, is used internally within the Group to manage performance
and is determined by adding back significant non-recurring items (litigation settlement and acquisition expenses),
and deducting other income and gains on non-core asset disposals of $1.9 million (2018: $0.1 million). A $2.1
million improvement in the reported Operating EBITDA loss from $2.4 million for the 2018 full-year to an
Operating EBITDA loss of $0.3 million for the 2019 full-year reflects the increased operating leverage associated
with increased production volumes, improved sales mix and minimal change in Indirect overhead costs.
A 77% increase in margin accretive API sales, early termination of a non-opiate contract manufacturing supply
agreement and increasing opiate FDF sales were highlights of the year. Offsetting these positives, was a deferral
of UK and French sales in the 4th quarter, along with significant non-recurring legal and quality costs, which
negatively impacted resulting in both Revenue and Operating EBITDA below expectation.
2
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Review of operations (continued)
Despite these short-term setbacks, the business continues to strengthen its foundation for the future with an
increased focus on downstream, margin accretive FDF sales, through both contract manufacturing and marketing
authorisation based supply agreements.
To support the strategy of increasing downstream margin accretive sales, the Group acquired six opiate based
marketing authorisations subsequent to 31 December 2019 and expanded its API production capacity to 70
tonne per annum. The Group continues to focus on increased poppy straw supply diversification and alkaloid
yields for its NRM operations, via its Australian and northern hemisphere supply chains.
The Group reported a statutory loss after income tax for the year ended 31 December 2019 of $7.6 million (2018:
$5.8 million) and a statutory Earnings Before Interest, Tax, Depreciation and Amortisation (“EBITDA”) loss of $2.2
million (2018: $2.6 million).
Sales revenue increased to $54.7 million representing an 18.4% increase over the corresponding full year period.
The increase was primarily driven by the growth of API, opiate based FDF and Poppy Seed sales. Reported
Gross Profit for the Group increased to $17.3 million, a 15.3% increase from 2018, due to the continued benefit of
sales volume growth and greater plant utilisation. Indirect overhead costs of $17.6 million for the 2019 full-year
period (2018: $17.5 million) increased marginally, despite additional investment in new product development and
one-off costs associated with improvements in the Norway quality processes.
Net finance expenses increased for 2019 to $3.1 million (2018: $1.7 million) due to higher utilisation of the
working capital debt facilities, driven by increased net working capital employed in inventories as a result of the
high codeine patent litigation and inability to process harvested high codeine poppy straw until the dispute was
resolved in June 2019.
In November 2019 the Group completed an equity capital raise through a placement and entitlement offering to
raise net proceeds of $29.5 million. Capital raised was used to repay borrowings and meet the Group’s near term
NRM and API growth capital expenditure needs. By reducing its borrowing levels, the Group was able to consider
other debt financing options which enabled it to renegotiate its working capital debt facility offering with
Washington H. Soul Pattinson and Company Limited on more favourable terms, which included a reduced
interest rate and extension of maturity date to August 2021.
Raw Material Straw Supply and Poppy Seed
A positive 2018/19 growing season in Australia saw the Group harvest record poppy straw volumes at the lowest
growing cost achieved for a domestic harvest for the Group. Northern Hemisphere straw supply improved further
during 2019, with the securing of additional aggregator supply agreements and a continued focus on improving
local expertise with increased farmer and aggregator engagement through the Group’s on-the-ground agricultural
expertise in Europe. The diversity of poppy straw supply sources continues to be of benefit in negating any
impacts on domestic supply through climatic risks that adversely impacted mainland growers in Australia for the
2019/20 growing season.
Poppy seed sales prices held at record levels during the first half of 2019 at over €4 per kilogram for premium
grade product, and the Group took advantage of this strong pricing by realising most of its seed inventory during
this period.
NRM production in Australia
NRM production productivity continued to improve with a more reliable straw supply, seeing daily extraction rates
in 2019 increasing further compared to 2018.
The majority of the Group’s NRM production is transferred to Norway for conversion to both Codeine Phosphate
and Pholcodine API’s. However, as the capacity of NRM production for the Group is currently greater than that of
API production, external NRM sales will continue to be an important revenue contributor in the short to medium
term.
3
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Review of operations (continued)
The Group continues to invest in research and development of its core NRM production process to further
optimise the extraction process and increase production efficiencies. The unique water-based extraction process
used is delivering a competitive cost advantage for the Group and when combined with a more reliable straw
supply, has enabled increased sales volumes and long-term supply agreements to be secured throughout the
supply chain.
API production in Norway
During 2019 the Group experienced significant growth in API production and sales volumes and further volume
growth is expected throughout 2020, with a major enhancement in production capacity achieved in the latter part
of 2019. Further market share gains and customer diversification have continued to be realised in both Codeine
Phosphate and Pholcodine API markets, along with sales into new regions not previously supplied, including first
sales into developing markets in south-east Asia and North Africa.
While pricing across the industry is at cyclical lows, the Group continues to attract new API volumes and grow
market share at commercially attractive margins, demonstrating the Group’s competitive cost advantage in API
production. This was further underpinned by the securing of several multi-year supply agreements through 2019
for opiate based API and FDF products.
FDF production in Norway
FDF production provides contract manufacturing (“CMO”) services for third parties under long term manufacture
and supply agreements. These services include granulating, tableting, packaging and warehousing, all of which
requires high levels of labour, working capital and generates lower margins than the core businesses of the
Group; NRM production and downstream conversion of NRM into API.
During 2019 further improvement in both tableting and packaging production uptime was achieved. However,
non-opiate based production remained a challenge due to the bespoke nature of the legacy non-opiate based
contract and range of products needing to be produced. This requires short production runs resulting in
significant production downtime for product changeover and line cleaning. In late 2019 the Group successfully
negotiated an early exit from its legacy non-opiate based CMO contract from February 2020. This which will free
up significant tableting capacity to direct towards higher-margin opiate-based products, while reducing
operational costs and inventory holdings that were required to be contractually maintained as a safety buffer.
Reconciliation of Operating EBITDA to Statutory EBITDA and Loss After Tax
The consolidated financial statements comply with International Financial Reporting Standards (IFRS’s) adopted
by the International Accounting Standards Board (IASB). In the presentation of its financial results the Group
uses a non‐GAAP financial measure which is not prepared in accordance with IFRS being:
• Operating EBITDA: calculated by adding back (or deducting) finance expense / (income), income tax
expense/(benefit), depreciation, amortisation, litigation settlement expenses, acquisition related expenses,
transaction integration services, agricultural area trialling expenses, inventory impairments, losses from
discontinued operations, gains/losses on disposal of non-core plant and equipment, and deducting other
income and depreciation expense from discontinued operations, to net profit / (loss) after tax.
The Group uses this measure internally and believes that this non‐GAAP financial measure provides useful
information to readers to assist in the understanding of the Group’s financial performance, financial position and
returns, as it is the predominant measure of financial performance used by management. It represents the best
measure of performance as a result of initiatives and activities directly controlled by management. Non‐GAAP
financial measures should not be viewed in isolation, nor considered as a substitute for measures reported in
accordance with IFRS. Non‐GAAP financial measures may not be comparable to similarly titled amounts reported
by other companies.
4
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Review of operations (continued)
The table below reconciles the Operating EBITDA to Statutory EBITDA and Loss After Tax:
Statutory (Loss) after income tax
Less: Profit from discontinued operation
Add/(Less): Income tax expense/(benefit)
Add: Net finance expenses
Statutory Earnings Before Interest and Tax (EBIT)
Consolidated entity
31 December
2019
$
31 December
2018
$
(7,639,443)
-
(138,193)
3,089,078
(4,688,558)
(5,788,409)
(1,119,003)
134,893
1,653,331
(5,119,188)
Add: Depreciation and amortisation expense
Statutory Earnings Before Interest, Tax, Depreciation and Amortisation
(EBITDA)
2,513,886
2,551,295
(2,174,672)
(2,567,893)
Add:
Acquisition related expenses - legal and other expenses
(Gain)/loss on disposal of property, plant and equipment
Litigation settlement expenses
space
Deduct:
Other income
Operating EBITDA
Summary of key business risks
122,001
(14,400)
1,913,409
295,851
232,775
-
(158,089)
(392,383)
(311,751)
(2,431,650)
The business, assets and operations of the Group are subject to certain risk factors that have the potential to
influence the Group’s operating and financial performance in the future. The Directors aim to manage these risks
by carefully planning the Group’s activities and implementing mitigating risk control measures. Specific risks to
which the Group is exposed to include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
failure to obtain or renew all necessary licences and permits across all jurisdictions in which the Group
operates;
inability to source sufficient raw material, including as a result of climate-induced variations such as extreme
adverse weather events or plant diseases;
changes in international, national or state laws, regulations or conventions relating to the growing,
manufacture, export or sale of NRM;
loss of key staff and inability to replace them with appropriately qualified personnel;
claims arising from the consequences of inappropriate use or excessive exposure to NRM;
diversion or illicit use of NRM during manufacture, storage or freight;
introduction or growth of competing pain relief products, including non-narcotic opiate products;
increasing poppy prices, including due to the reduction or withdrawal of government subsidies;
failure to maintain its trade secrets, including in relation to its water based, solvent free extraction process;
changes to scheduling or availability of pain relief medication or restrictions on import quotas for NRM;
fluctuations in foreign exchange rates against the Group’s functional currency (Australian dollars);
changes in the supply of, and/or demand for, poppy seed and changes in pricing of poppy seed;
changes to the cost of purifying poppy seed;
customer and supplier performance risks;
failure to comply with applicable standards and the risk of product recalls; and
restrictions on sales in some countries of API’s which have not been manufactured in that country or region.
5
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Significant changes in the state of affairs
Contributed equity increased by $29,514,931 (from $181,482,260 to $210,997,191) as a result of a placement
and entitlement offer completed in November 2019. Details of the changes in contributed equity are disclosed in
note 23 of the financial statements. The net cash received from the increase in contributed equity was used to
repay borrowings and to meet the Group's near term NRM and API growth capital expenditure needs.
There have been no other significant changes in the state of affairs of the Group during the year.
Events since the end of the financial year
On 10 February 2020 the Group announced that it had entered into an option agreement to acquire the shares of
its largest customer in the United Kingdom, a manufacturer of codeine phosphate finished dosage products.
Simultaneously, the Group also acquired four Market Authorisations from the customer for supply of codeine
phosphate based products into the United Kingdom, and on 18 February 2020 the Group acquired a further two
codeine phosphate based Market Authorisations from the same customer.
No other matter or circumstance has arisen since 31 December 2019 that has significantly affected the Group's
operations, results or state of affairs, or may do so in future years.
Likely developments and expected results of operations
Information about likely developments in the operations of the Group and the expected results of those
operations in future financial years has not been included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the Group.
Dividends
No dividends have been paid during the financial year. The directors do not recommend that a dividend be paid
in respect of the financial year (2018: $nil).
Environmental regulation
The Group’s operations are not subject to any particular or significant environmental regulation under a law of the
Commonwealth of Australia or of a State or Territory.
Indemnification and insurance of officers and auditors
During the financial year, the Company paid a premium in respect of a contract insuring the Directors and
Company Secretary (as named above), and all executive officers of the Group against a liability incurred when
acting in their capacity as a Director, Company Secretary or executive officer to the extent permitted by the
Corporations Act 2001. Further disclosure required under section 300(9) of the Corporations Act 2001 is
prohibited under the terms of the insurance contract.
Other than to the extent permitted by law, the Company has not otherwise, during or since the end of the financial
year, indemnified or agreed to indemnify an officer or auditor of the Company or any other related body corporate
against a liability incurred as such by an officer or auditor.
6
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Meetings of directors
The numbers of meetings of the Company's board of directors and of each board committee held during the year
ended 31 December 2019, and the numbers of meetings attended by each director were:
Board of Directors
Held and
Eligible to
Attend
Attended
Human Capital
Committee
Audit & Risk
Committee
Held and
Eligible to
Attend
Held and
Eligible to
Attend
Attended
Attended
Mr. Simon Moore (Independent
Non-Executive Chairman)
Mr. Jarrod Ritchie (Managing
Director and CEO)
Mr. Todd Barlow (Non-Executive
Director)
Mr. Stuart Black (Independent
Non-Executive Director)
Ms. Sue MacLeman (Independent
Non-Executive Director)
20#
20#
19
20#
19
20
19
19
19
18
* Attended by invitation
# Includes special purpose board sub-committee meetings
Proceedings on behalf of the Company
2
-
2
2
2
2
-
2
2
2
3*
3*
3
3
3
3*
3*
2
3
3
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring
proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for
the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.
No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under
section 237 of the Corporations Act 2001.
7
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Information on directors
The following information is current as at the date of this report.
Mr. Simon Moore, B.Com/LLB (Hons), Independent Non-Executive Chairman
Qualifications and Experience
Simon Moore is currently Deputy Chairman of ASX Listed AMA Group Limited.
Simon is a Senior Partner of Colinton Capital Partners, a mid-market Australasian private equity investment
manager. He was formerly a Managing Director and Partner of global alternative asset manager, The Carlyle
Group. Prior to joining Carlyle, Simon was a Managing Director and Investment Committee Member of Investcorp
International, Inc. based in New York. Prior to that he worked in private equity investments and investment
banking at J.P. Morgan & Co. in New York, Hong Kong and Melbourne. Simon’s personal investments include
significant pastoral holdings and investments in a number of agricultural enterprises.
Former listed company directorships within past three years:
• Non-Executive Director of Megaport Limited (appointed 2015, resigned 2019)
• Non-Executive Director of First Wave Cloud Technology Limited (appointed 2017, resigned 2019)
Director of Palla Pharma Limited since 1 June 2016 and Chairman since 1 May 2018. Simon is a member of the
Human Capital Committee.
Mr. Jarrod Ritchie, BSc (Hons), Managing Director and Chief Executive Officer
Qualifications and Experience
Jarrod Ritchie has over 20 years’ experience in the opiates industry. He has led Palla Pharma Limited from its
inception as a start-up to its current position as Australia’s third licensed poppy processor with a strong
international reputation.
Jarrod has led new research in the opiates industry including Palla Pharma Limited’s unique,
environmentally-sustainable, solvent-free manufacturing process. He has also led the successful trialling of a new
thebaine-rich variety of poppy; the introduction of commercial crops to Victoria and New South Wales; the trialling
of poppy crops in the Northern Territory; and the expansion of Palla Pharma Limited’s global operations.
Director of Palla Pharma Limited since 5 February 2004.
Mr. Todd Barlow, B.Bus/LLB (Hons), Non-Executive Director
Qualifications and Experience
Todd Barlow is the Managing Director and CEO of Washington H. Soul Pattinson and Company Limited and a
Non-Executive Director of New Hope Corporation Limited. Before joining Washington H. Soul Pattinson and
Company Limited, he was Managing Director of Pitt Capital Partners Limited, a Sydney based corporate advisory
firm. He continues to serve as a Non-Executive Director of Pitt Capital Partners Limited as well as a number of
unlisted entities.
Between 2005 and 2008 Todd was based in Hong Kong, and provided advice on cross-border transactions
between Asia and Australia. He previously practiced as a lawyer, specialising in corporate law and mergers and
acquisitions.
Former listed company directorships within past three years:
• Non-Executive Director of PM Capital Asian Opportunities Fund Limited (appointed 2014, resigned 2017)
Director of Palla Pharma Limited since 18 June 2015. Todd is a member of the Human Capital Committee and
the Audit & Risk Committee.
8
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Information on directors (continued)
Mr. Stuart Black AM, FCA, FAICD, BA (Accounting), Independent Non-Executive Director
Qualifications and Experience
Stuart Black is a Chartered Accountant with extensive experience in agribusiness. He retired in 2013 as
managing partner of a practice specialising in agribusiness. Stuart is a current Non-Executive Director of ASX
listed Australian Agricultural Company Limited, and a Past President of the Institute of Chartered Accountants of
Australia. He was the inaugural Chair and a past board member of the Accounting Professional and Ethical
Standards Board and served as the Australian representative on the International Federation of Accountants
SMP Committee. Stuart is Chair of the Chartered Accountants Benevolent Fund Limited and a former Director of
the Country Education Foundation of Australia Limited.
In 2012 Stuart was appointed a Member of the Order of Australia for services to the profession of accounting, to
ethical standards, as a contributor to professional organisations and to the community.
Former listed company directorships within past three years:
• Non-Executive Director of NetComm Wireless Limited (appointed 2013, resigned 2019)
Director of Palla Pharma Limited since 7 June 2016. Stuart is Chair of the Audit & Risk Committee, and a
member of the Human Capital Committee.
Ms. Sue MacLeman, BPharm, LLM, MMkt, FAICD, FATSE, FACPP, Independent Non-Executive Director
Qualifications and Experience
Sue MacLeman has more than 30 years' experience as a pharmaceutical, biotechnology and medical technology
executive having held senior roles in corporate, medical, commercial and business development. Sue has also
served as CEO and Board member of several ASX and NASDAQ listed companies in the pharmaceutical sector
and is currently Chair of Anatara Lifesciences Limited, Chair of Tali Digital Limited, Chair and Non-Executive
Director of MTPConnect, Non-Executive Director of Oventus Medical Limited and Non-Executive Director of
veski.
Former listed company directorships within past three years:
• Non-Executive Director of RHS Limited (appointed 2014, resigned 2018)
Director of Palla Pharma Limited since 27 November 2018. Sue is Chair of the Human Capital Committee and a
member of the Audit & Risk Committee.
Information on secretary
The following information is current as at the date of this report.
Mr. Jaime Pinto, BComm, CA, Company Secretary
Qualifications and Experience
Mr. Pinto is a Chartered Accountant with extensive experience in both professional practice and in senior
commercial roles across a broad range of industries. Jaime is currently Company Secretary of Quickstep
Holdings Limited, BKI Investment Company Limited, and is Company Secretary and CFO of a number of unlisted
investment and industrial companies.
Company Secretary of Palla Pharma Limited since 28 October 2016.
9
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited
The directors present the Palla Pharma Limited 2019 remuneration report, outlining key aspects of our
remuneration policy and framework, and remuneration awarded this year.
The report is structured as follows:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
Key management personnel (KMP) disclosed in this report
Remuneration governance
Principals used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Equity instruments granted
Movement in shares held
Loans given to key management personnel
Other transactions with key management personnel
(a) Key management personnel disclosed in this report
Non-executive and executive directors
(i) Non-Executive Chairman
Mr. Simon Moore
(ii) Managing Director and Chief Executive Officer
Mr. Jarrod Ritchie
(iii) Non-Executive Directors
Mr. Todd Barlow
Mr. Stuart Black
Ms. Sue MacLeman
Other key management personnel
(i) Chief Financial Officer
Mr. Brendan Middleton
(b) Remuneration governance
The Board is responsible for determining and reviewing compensation arrangements for the Non-Executive
Directors, the Non-Executive Chairman and the Executive Management team. The Board has established a
Human Capital Committee, which is currently comprised of three Non-Executive Directors and the Chair. This
Committee is primarily responsible for making recommendations to the board on:
•
•
•
•
the over-arching executive remuneration framework;
the operation of incentive plans, including key performance indicators and performance hurdles;
remuneration levels of executive directors and other key management personnel; and
non-executive director fees.
The objective of the Committee is to ensure that remuneration policies and structures are fair and competitive
and aligned with the long-term interests of the Company. The Corporate Governance Statement provides further
information on the role of this committee.
10
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(c) Principles used to determine the nature and amount of remuneration
The Company’s goal is to engage and promote excellence at Board level, in staff members and partner
organisations. The Company looks to engage the services of individuals and organisations with the experience
necessary to assist the Company in meeting its strategic objectives.
The Board seeks to ensure that executive reward complies with good reward governance practices:
• Competitiveness and reasonableness;
Acceptability to shareholders;
•
Performance linkage;
•
•
Transparency; and
• Capital management.
The Company has an executive remuneration framework that is market competitive and complementary to the
reward strategy of the organisation. The Company’s remuneration framework seeks alignment with shareholders’
interests and is aligned to the rapid commercialisation of the Company’s intellectual property and in achieving its
milestones in a highly ethical and professional manner. The executive remuneration framework provides a mix of
fixed and variable pay and performance incentive rewards, including a Short Term Incentive (STI) and Long Term
Incentive (LTI) scheme.
The STI scheme is designed to focus the organisation on key shorter-term objectives that drive long-term
shareholder value, and the Board sets annual key performance indicators (KPIs) for the CEO and executives
which also serve as the Company’s objectives.
The LTI scheme assists in the motivation, retention and reward of executives and employees and aligns the
interests of employees with the interests of shareholders. Full time or part time employees, and Executive
Directors of PAL or any of its subsidiaries will be eligible to participate in the LTI scheme. The Executive Directors
of PAL will require approval from PAL’s shareholders prior to being permitted to participate in the LTI scheme.
There is no intention of Non-Executive Directors participating at this time.
Non-Executive Directors’ fees
Non-Executive Directors’ fees are determined by reference to industry standards, and were last reviewed
effective 21 July 2015. Directors’ fees are paid in cash. A Non-Executive Directors’ Fee Pool of $700,000 has
been approved by shareholders.
Directors’ fees are currently set at $120,000 for the Non-Executive Chairman and $70,000 per Non-Executive
Director plus statutory superannuation, with an additional $10,000 plus statutory superannuation for the
Chairman of the Audit & Risk Committee. These fees reflect the demands which are made on and the
responsibilities of the Directors.
Executive pay
The executive pay and reward framework has three components:
•
•
•
Base pay and benefits;
Short term performance incentives; and
Long term incentives.
The combination of these comprises the executive’s total remuneration.
11
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(c) Principles used to determine the nature and amount of remuneration (continued)
(i) Base pay and benefits
A total employment cost package may include a combination of cash and prescribed non-financial benefits at the
executive’s discretion.
Executives are offered a competitive base pay that comprises the fixed component of pay and rewards. The base
pay for executives is reviewed annually to ensure the executive’s pay is competitive with the market. An
executive’s pay is also reviewed on promotion.
There are no ongoing guaranteed base pay increases included in any executive contracts.
(ii) Short term incentives (STI's)
STI's payable to executives are based upon the attainment of agreed corporate and individual milestones and are
reviewed and approved by the Board of Directors. STI's are payable in cash.
(iii) Long term incentives (LTI's)
At the discretion of the Board of Directors, executives are issued with Share Appreciation Rights under the
Company’s Share Appreciation Rights Plan as LTI's in a manner that aligns this element of remuneration with the
creation of shareholder wealth. Each Share Appreciation Right is an equity security that confers on the participant
a right to be issued a specified number of the Group’s shares, calculated by reference to the increase in market
price of the Company’s shares over a three-year period, but subject to satisfaction of the vesting condition that
the participant must be an employee of the Company on the third anniversary of the grant date. Share
Appreciation Rights are granted under the plan for no consideration and carry no dividend or voting rights. Share
Appreciation Rights grants are made to executives who are able to influence the generation of shareholder
wealth and thus have a direct impact on the creation of shareholder wealth.
(iv) Relationship between remuneration policy and company performance
LTI's and STI's may be issued to new and existing employees, subject to performance review and based on
performance of the individual and/or the Company in absolute terms. The STI component of remuneration
provides a short term monetary reward for past performance and the equity component of the LTI aligns
employees future remuneration potential to growth in shareholder value in the future.
The Company’s remuneration policy seeks to reward staff members for their contribution to achieving significant
operational, strategic, financial and regulatory milestones. Achievement of milestones selected will build
sustainable and long term shareholder value.
Statutory performance indicators
The Company aims to align executive remuneration to strategic and business objectives and the creation of
shareholder wealth. The table following shows measures of the Company’s financial performance over the last
five years as required by the Corporations Act 2001. However, these measures are not necessarily consistent
with the measures used in determining the variable amounts of remuneration to be awarded to executives and
consequently, there may not always be a direct correlation between the statutory key performance measures and
the variable remuneration awarded.
12
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(c) Principles used to determine the nature and amount of remuneration (continued)
Revenue
Net profit/(loss) after tax
Closing share price
Price increase/(decrease) $
Price increase/(decrease) %
Earnings per share (cents)
(d) Details of remuneration
2019
54,843,483
(7,639,443)
$1.06
($0.09)
(7.8%)
(8.66)
2018
46,563,381
(5,788,409)
$1.15
($1.05)
(47.7%)
(8.52)
2017
2016
22,263,174
(16,692,689)
$2.20
($0.71)
(24.4%)
(23.38)
10,556,449
(14,020,835)
$2.91
($0.99)
(25.4%)
(26.96)
2015
3,679,063
(25,899,838)
$3.90
N/A
N/A
(52.07)
The following table shows details of the remuneration expense recognised for the Group's executive key
management personnel for the current and previous financial year measured in accordance with the
requirements of the accounting standards.
2019
Name
Non-executive directors
Todd Barlow
Simon Moore
Stuart Black
Sue MacLeman
Sub-total non-executive
directors
Executive directors
Jarrod Ritchie
Sub-total executive
directors
Other key management
personnel
Brendan Middleton
Sub-total other key
management personnel
Total key management
personnel compensation
Short-term employee benefits
Post-
employment
benefits
Equity-based
payments
Cash
salary and
fees
$
Non-
monetary
benefits
$
Super-
annuation
$
Other long
term
benefits
$
Share
Appreciation
Rights
$
STI
$
70,000
120,000
80,000
70,000
340,000
-
-
-
-
-
-
-
-
-
-
6,650
11,400
7,600
6,650
32,300
-
-
-
-
-
-
-
-
-
-
Total
$
76,650
131,400
87,600
76,650
372,300
775,000
2,996
31,097
26,127
12,466
121,997
969,683
775,000
2,996
31,097
26,127
12,466
121,997
969,683
275,000
25,958
275,000
25,958
-
-
26,118
10,329
45,984
383,389
26,118
10,329
45,984
383,389
Proportion
of
remuneration
performance
related
%
-
-
-
-
-
0.3
0.3
6.9
6.9
1,390,000
28,954
31,097
84,545
22,795
167,981
1,725,372
1.7
13
Remuneration report - Audited (continued)
(d) Details of remuneration (continued)
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
2018
Name
Non-executive directors
Peter Robinson *
Todd Barlow
Simon Moore
Stuart Black
Sue MacLeman **
Sub-total non-executive
directors
Executive directors
Jarrod Ritchie
Sub-total executive
directors
Other key management
personnel
Brendan Middleton
Sub-total other key
management personnel
Cash
salary
and fees
$
43,231
70,000
101,410
80,000
4,846
299,487
775,417
775,417
275,000
275,000
Total key management
personnel compensation 1,349,904
Short-term employee benefits
Post-
employment
benefits
Equity-based
payments
Non-
monetary
benefits
$
Super-
annuation
$
Other long
term
benefits
$
Share
Appreciation
Rights
$
STI
$
4,107
6,650
9,634
7,600
460
28,451
-
-
-
-
-
-
-
-
-
-
-
-
Total
$
47,338
76,650
111,044
87,600
5,306
327,938
24,583
11,142
93,333
904,475
24,583
11,142
93,333
904,475
25,000
14,122
35,158
349,280
25,000
14,122
35,158
349,280
78,034
25,264
128,491
1,581,693
Proportion
of
remuneration
performance
related
%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Non-Executive Director until 1 May 2018
** Non-Executive Director from 27 November 2018
(e) Service agreements
Remuneration and other terms of employment for the Non-Executive Chairman, Managing Director and Chief
Executive Officer, Non-Executive Directors and other key management personnel are formalised in service
agreements. The agreements, other than for Non-Executive Directors, may provide for the provision of
performance related cash bonuses and the award of equity in the Company.
Other major provisions of the agreements relating to remuneration are set out below:
Simon Moore, Independent Non-Executive Chairman
• Term of Agreement - Commencing from 1 May 2018
• Director’s fee - $120,000 plus statutory superannuation per annum to be reviewed independently and annually
by the Board of Directors
• Termination - No terms have been agreed
• Bonus - Nil
• Equity - Nil
14
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(e) Service agreements (continued)
Jarrod Ritchie, Managing Director and Chief Executive Officer
• Term of Agreement - Commencing from 21 July 2015 and ongoing unless terminated in accordance with its
terms
• Base Remuneration - $800,000 inclusive of statutory superannuation per annum, subject to increases at the
discretion of the Board of Directors
• Termination - By twelve months’ notice from either side
• Bonus - At the discretion of the Board of Directors
• Equity - The Director shall be entitled to participate in the LTI scheme of the Company
Todd Barlow, Non-Executive Director
• Term of Agreement - Commencing from 18 June 2015
• Director’s Fees - $70,000 plus statutory superannuation per annum to be reviewed independently and annually
by the Board of Directors
• Termination - No terms have been agreed
• Bonus - Nil
• Equity - Nil
Stuart Black, Independent Non-Executive Director
• Term of Agreement - Commencing from 7 June 2016
• Director’s Fees - $80,000 plus statutory superannuation per annum to be reviewed independently and annually
by the Board of Directors
• Termination - No terms have been agreed
• Bonus - Nil
• Equity - Nil
Sue MacLeman, Independent Non-Executive Director
• Term of Agreement - Commencing from 27 November 2018
• Director’s Fees - $70,000 plus statutory superannuation per annum to be reviewed independently and annually
by the Board of Directors
• Termination - No terms have been agreed
• Bonus - Nil
• Equity - Nil
Brendan Middleton, Chief Financial Officer
• Term of Agreement - Commencing from 5 June 2017
• Base Remuneration - $300,000 inclusive of statutory superannuation per annum, subject to increases at the
discretion of the Board of Directors
• Termination - By three months’ notice from either side
• Bonus - At the discretion of the Board of Directors
• Equity - The Executive shall be entitled to participate in the LTI scheme of the Company
15
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(f) Equity instruments granted
Details of equity instruments granted as remuneration to each KMP is set out below.
Number of
equity
instruments
issued
Grant
Opening
Price
Fair value of
equity
instruments
per share
Total value of
equity
instruments
issued
Start of
performance
period
End of
performance
period
Included in
2019
remuneration
Jarrod Ritchie, Managing Director and Chief Executive Officer
2019 Share Appreciation Rights - Tranche 1
space
2019 Share Appreciation Rights - Tranche 2
space
2017 Share Appreciation Rights
Brendan Middleton, Chief Financial Officer
2019 Share Appreciation Rights - Tranche 1
space
2019 Share Appreciation Rights - Tranche 2
space
2018 Share Appreciation Rights
space
2017 Share Appreciation Rights
451,613
$1.05
$0.250
$112,903 28 March 2019 28 March 2022
28,664
668,387
$4.75
$0.001
$668 28 March 2019 28 March 2022
-
451,613
$2.62
$0.620
$280,000 27 March 2017 27 March 2020
93,333
120,968
$1.05
$0.250
$30,242 28 March 2019 28 March 2022
7,678
179,032
$4.75
$0.001
$179 28 March 2019 28 March 2022
-
120,968
$1.39
$0.330
$39,919 28 March 2018 28 March 2021
13,306
120,968
$2.62
$0.620
$75,000
5 June 2017 27 March 2020
25,000
Total share appreciation rights issued are disclosed in note 31.
16
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(g) Movement in shares held
The movement during the year in the number of ordinary shares of the Company, held directly, indirectly or
beneficially, by each KMP is as follows:
Purchased
Sold
Other changes
during the year
Held at 31
December
2019
Name
Non-executive directors
Todd Barlow
Simon Moore
Stuart Black
Sue MacLeman
space
Executive directors
Jarrod Ritchie
space
Other key management
personnel
Brendan Middleton
Held at 1
January
2019
-
2,154,067
15,000
-
-
871,884
8,772
-
1,533,805
603,981
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,025,951
23,772
-
2,137,786
-
(h) Loans given to key management personnel
Details of loans made to directors of Palla Pharma Limited and other key management personnel of the Group,
including their close family members and entities related to them, are set out below.
Consolidated
entity
Name
Balance at the
start of the year
Interest paid and
payable for the
year
Interest not
charged
Balance at the
end of the year
Highest
indebtedness
during the year
Jarrod Ritchie
$
-
$
2,490
$
-
$
$
425,277
425,277
Loans to key management personnel outstanding at the end of the current year include a secured loan to a
director of Palla Pharma Limited of $422,787 which was made for a period of 25 years and is repayable on a
quarterly amortising reducing balance basis, maturing on 31 December 2044. Interest is payable on this loan at a
rate of 5% per annum, payable quarterly. This loan enabled the director to fully participate in the pro-rata
Entitlement Offer completed by the Group in November 2019 and is secured against the new shares subscribed
to under the offer.
The amounts shown for interest not charged in the table above represents the difference between the amount
paid and payable for the year and the amount of interest that would have been charged on an arm's-length basis.
No write-downs or allowances for doubtful receivables have been recognised in relation to any loans made to key
management personnel.
17
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Remuneration report - Audited (continued)
(i) Other transactions with key management personnel
A number of key management personnel (KMP), or their related parties, hold positions in other entities that result
in them having control, or joint control, over the financial or operating policies of those entities.
During 2019 company secretarial services and financial reporting services amounting to $4,500 (2018: $9,096)
were provided by Corporate and Administrative Services Pty Ltd, a subsidiary of Washington H. Soul Pattinson
and Company Limited. Interest and finance expenses during the year attributable to Washington H. Soul
Pattinson and Company Limited amounted to $2,741,896 (2018: $917,174).
End of the Remuneration Report (Audited)
18
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Non-audit services
During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and
review of the financial statements.
The board has considered the non-audit services provided during the year by the auditor and in accordance with
written advice provided by resolution of the audit committee, is satisfied that the provision of those non-audit
services during the year by the auditor is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
•
all non-audit services were subject to the corporate governance procedures adopted by the Group and have
been reviewed by the audit committee to ensure they do not impact the integrity and objectivity of the auditor;
and
the non-audit services provided do not undermine the general principles relating to auditor independence as
set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or
auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as
an advocate for the Group or jointly sharing risks and rewards.
Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit
services provided during the year are set out below:
(i) Audit and review services
space
Audit and review of financial statements - Group
Audit and review of financial statements - controlled entities
Total remuneration for audit and review services
space
(ii) Assurance services
space
Due diligence services
Total remuneration for assurance services *
(iii) Other services
space
Taxation advice and tax compliance services
Technical assistance for subsidiary financial statements
Total remuneration for other services
space
Total remuneration of KPMG
* There were no regulatory assurance services provided during the year.
No officers were previously partners of the audit firm KPMG.
The comparatives include amounts billed in the current period relating to the prior year.
Consolidated entity
2019
$
2018
$
167,214
12,156
179,370
173,756
14,127
187,883
28,463
28,463
12,156
4,052
16,208
-
-
12,156
5,673
17,829
224,041
205,712
19
Palla Pharma Limited
Directors' report
31 December 2019
(continued)
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 21.
Auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors.
Mr. Simon Moore
Director
Melbourne
27 February 2020
20
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Palla Pharma Limited
I declare that, to the best of my knowledge and belief, in relation to the audit of Palla Pharma Limited for
the financial year ended 31 December 2019 there have been:
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
i.
ii.
KPMG
Tony Batsakis
Partner
Melbourne
27 February 2020
21
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Palla Pharma Limited
Corporate governance statement
31 December 2019
Corporate governance statement
The Board of Directors of Palla Pharma Limited (Board) is responsible for the corporate governance of the
Company. The Board guides and monitors the business and affairs of the Company on behalf of the
shareholders by whom they are elected and to whom they are accountable.
The Board supports the core corporate governance principles published by the ASX Corporate Governance
Council (Council). The Company’s corporate governance framework is designed to comply with the Council's
principles whilst being relevant, efficient and cost effective for the current stage of the Company’s development.
The Corporate Governance Statement contains certain specific information and discloses the extent to which the
Company has followed the Council’s principles during the 2019 financial year.
The Company's Corporate Governance Statement and Appendix 4G is structured with reference to the ASX
Corporate Governance Principles and Recommendations and can be found on the "Corporate Governance"
section of the Company's website at: http://pallapharma.com/investors.
The Board will continue its ongoing review process to ensure that the model is relevant, efficient and cost
effective to the Company and its shareholders.
22
Palla Pharma Limited ACN 107 872 453
Financial statements - 31 December 2019
Contents
Financial statements
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors' declaration
Independent auditor's report to the members
Page
24
26
27
28
29
74
75
These financial statements are the consolidated financial statements of the consolidated entity consisting of Palla
Pharma Limited and its subsidiaries. A list of subsidiaries is included in note 27. These financial statements are
presented in Australian dollars ($), which is the Group’s functional currency.
Palla Pharma Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
Palla Pharma Limited
c/- Link Market Services Limited
Tower 4
727 Collins Street
Docklands VIC 3008
A description of the nature of the consolidated entity's operations and its principal activities is included in the
directors' report on page 2, which is not part of these financial statements.
The financial statements were authorised for issue by the directors on 27 February 2020. The directors have the
power to amend and reissue the financial statements.
23
Palla Pharma Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2019
Revenue
Sales from contracts with customers
Other income
Expenses
Raw materials, consumables and other production expenses
Employee benefits (production) expenses
Employee benefits (non-production) expenses
Legal and listing compliance expenses
Market development expenses
Occupancy expenses
Contract research expenses
Acquisition related expenses - legal and other expenses
Profit/(loss) on disposal of property, plant and equipment
Litigation settlement expenses
Consulting expenses
Outsourced quality consulting expenses
Other expenses
Total expenses
Earnings Before Interest, Tax, Depreciation and Amortisation
(EBITDA)
Depreciation and amortisation expense
Earnings Before Interest and Tax (EBIT)
Finance income
Finance expenses
Net finance expenses
space
(Loss) before income tax
Income tax benefit/(expense)
(Loss) from continuing operations
Profit from discontinued operation, net of tax
(Loss) for the year
Other comprehensive income/(loss)
Item that may be reclassified to profit or loss
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
6
7
7
7
7
8
54,685,394
158,089
54,843,483
46,170,998
392,383
46,563,381
(29,169,271)
(8,214,073)
(11,076,501)
(874,225)
(1,033,829)
(1,585,590)
(129,555)
(122,001)
14,400
(1,913,409)
(487,120)
(461,740)
(1,965,241)
(57,018,155)
(24,213,450)
(6,909,702)
(11,610,865)
(703,312)
(1,018,036)
(1,520,126)
(268,863)
(295,851)
(232,775)
-
(287,271)
(62,136)
(2,008,887)
(49,131,274)
(2,174,672)
(2,567,893)
(2,513,886)
(4,688,558)
(2,551,295)
(5,119,188)
23,028
(3,112,106)
(3,089,078)
21,418
(1,674,749)
(1,653,331)
(7,777,636)
(6,772,519)
138,193
(7,639,443)
(134,893)
(6,907,412)
-
(7,639,443)
1,119,003
(5,788,409)
Exchange differences on translation of foreign operations
(111,877)
1,179,901
Blank
Total comprehensive (loss) for the year
(7,751,320)
(4,608,508)
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
24
Palla Pharma Limited
Consolidated statement of profit or loss and other comprehensive income
For the year ended 31 December 2019
(continued)
space
space
space
(Loss) is attributable to:
Owners of Palla Pharma Limited
space
Total comprehensive (loss) for the year is attributable to:
Owners of Palla Pharma Limited
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
(7,639,443)
(5,788,409)
(7,751,320)
(4,608,508)
Cents
Cents
Earnings per share for the (loss) from continuing operations
attributable to the ordinary equity holders of the Company:
Basic (loss) per share
Diluted (loss) per share
Earnings per share for the profit from discontinued operations
attributable to the ordinary equity holders of the Company:
Basic profit per share
Diluted profit per share
30
30
(8.66)
(8.66)
(8.52)
(8.52)
0.00
0.00
1.38
1.38
The above consolidated statement of profit or loss and other comprehensive income should be read in
conjunction with the accompanying notes.
25
Palla Pharma Limited
Consolidated statement of financial position
As at 31 December 2019
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
9
10
11
6
12
14
15
16
13
17
18
19
20
21
22
2,019,087
11,507,068
22,149,374
5,995,039
1,481,425
43,151,993
1,904,583
11,932,039
19,166,364
3,527,827
2,723,041
39,253,854
405,875
103,272
26,693,955
16,967,608
2,250,585
46,421,295
-
103,549
27,762,272
14,816,227
1,821,873
44,503,921
89,573,288
83,757,775
8,907,120
467,424
-
1,847,235
11,221,779
9,426,538
166,074
134,893
1,710,002
11,437,507
1,563,462
5,000,000
378,044
6,941,506
-
22,702,960
314,549
23,017,509
18,163,285
34,455,016
71,410,003
49,302,759
23
24
210,997,191
3,595,223
(143,182,411)
181,482,260
3,363,467
(135,542,968)
71,410,003
49,302,759
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Contract assets
Prepayments
Total current assets
Non-current assets
Other receivables
Investments
Property, plant and equipment
Intangible assets
Inventories
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Provisions
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
(Accumulated losses)
Total equity
The above consolidated statement of financial position should be read in conjunction with the accompanying
notes.
26
Palla Pharma Limited
Consolidated statement of changes in equity
For the year ended 31 December 2019
Attributable to owners of
Palla Pharma Limited
Contributed
equity
$
Foreign
currency
translation
reserve
$
Other
reserves
$
(Accumulated
losses)
$
Total
equity
$
181,482,260
(264,593)
2,120,662 (129,754,559) 53,583,770
-
-
-
-
-
-
1,179,901
1,179,901
-
-
-
(5,788,409)
(5,788,409)
-
1,179,901
(5,788,409)
(4,608,508)
-
-
327,497
327,497
-
-
327,497
327,497
181,482,260
915,308
2,448,159 (135,542,968) 49,302,759
181,482,260
915,308
2,448,159 (135,542,968) 49,302,759
-
-
-
-
(111,877)
(111,877)
-
-
-
(7,639,443)
-
(7,639,443)
(111,877)
(7,639,443)
(7,751,320)
23
31
29,514,931
-
29,514,931
-
-
-
-
343,633
343,633
-
-
-
29,514,931
343,633
29,858,564
210,997,191
803,431
2,791,792 (143,182,411) 71,410,003
Consolidated entity
Notes
Balance at 1 January 2018
space
(Loss) for the year
Other comprehensive
income
Total comprehensive
income/(loss) for the year
Transactions with owners
in their capacity as
owners:
Share-based payments
Total transactions with
owners in their capacity
as owners
31
Balance at 31 December
2018
Balance at 1 January 2019
space
(Loss) for the year
Other comprehensive (loss)
Total comprehensive
income/(loss) for the year
Transactions with owners
in their capacity as
owners:
Contributions of equity, net
of transaction costs and tax
Share-based payments
Total transactions with
owners in their capacity
as owners
Balance at 31 December
2019
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
27
Palla Pharma Limited
Consolidated statement of cash flows
For the year ended 31 December 2019
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
Cash flows from operating activities
Receipts from customers (inclusive of VAT)
Payments to suppliers and employees (inclusive of GST and VAT)
Other cash receipts
Interest received
Interest and finance costs paid
Net cash (outflow) from operating activities
Cash flows from investing activities
Proceeds/(payments) for acquisition of subsidiary, net of cash acquired
Payments for property, plant and equipment
Payments for capitalised development costs and patents
Proceeds from sale of non-current assets
Proceeds from sale of held-for-sale assets
Net cash (outflow) inflow from investing activities
Cash flows from financing activities
Proceeds from issues of shares
Share issuance transaction costs
Proceeds from borrowings
Repayment of borrowings
Net cash inflow from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on the balance of assets held in foreign
currencies
Cash and cash equivalents at end of year
58,308,188
(64,688,378)
(6,380,190)
-
23,028
(3,112,106)
(9,469,268)
40,767,047
(54,016,366)
(13,249,319)
256,945
21,418
(1,674,749)
(14,645,705)
-
(1,879,368)
(611,339)
14,400
-
(2,476,307)
761,935
(2,781,687)
(454,541)
979,799
4,291,522
2,797,028
30,980,882
(1,888,738)
9,147,040
(26,548,650)
11,690,534
-
-
25,669,130
(16,026,934)
9,642,196
(255,041)
1,904,583
(2,206,481)
3,644,547
28
15
16
23
23
21
21
369,545
2,019,087
466,517
1,904,583
9
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
28
Contents of the notes to the consolidated financial statements
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Reporting entity
Summary of significant accounting policies
Financial risk management
Use of estimates and judgements
Segment information
Revenue
Expenses
Income tax expense
Current assets - Cash and cash equivalents
Current assets - Trade and other receivables
Current assets - Inventories
Non-current assets - Other receivables
Non-current assets - Inventories
Non-current assets - Investments
Non-current assets - Property, plant and equipment
Non-current assets - Intangible assets
Current liabilities - Trade and other payables
Current liabilities - Borrowings
Current liabilities - Provisions
Non-current liabilities - Trade and other payables
Non-current liabilities - Borrowings
Non-current liabilities - Provisions
Contributed equity
Reserves
Remuneration of auditors
Commitments
Related party transactions
Cash flow information
Events occurring after the reporting period
Earnings per share
Share-based payments
Parent entity financial information
29
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30
30
45
53
54
56
57
58
58
59
59
59
59
60
60
63
64
64
64
64
65
67
67
68
68
68
69
70
71
71
72
73
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
1 Reporting entity
Palla Pharma Limited (the ‘Company’) is domiciled in Australia. The Company’s registered office is at c/- Link
Market Services Limited, Tower 4, 727 Collins Street, Docklands VIC 3008. These consolidated financial
statements comprise the Company and the entities it controlled at the end of or during the financial year (together
referred to as the ‘Group’). These financial statements were approved on 27 February 2020.
The Group is a for-profit entity and is primarily involved in the production and distribution of Narcotic Raw
Material, Active Pharmaceutical Ingredients and Finished Dosage Formulations for supply to global
pharmaceutical markets, and the production and distribution of poppy seed for supply to global culinary markets.
2 Summary of significant accounting policies
This note provides a list of significant accounting policies adopted in the preparation of these consolidated
financial statements. These policies have been consistently applied to the years presented, unless otherwise
stated. The financial statements are for the Group consisting of Palla Pharma Limited and its subsidiaries.
(a) Basis of preparation
(i) Compliance with IFRS
The consolidated financial statements are general purpose financial statements which have been prepared in
accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards
Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International
Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
The consolidated financial statements have been prepared on the historical cost basis unless stated otherwise.
(iii) Changes in significant accounting policies
This is the first set of the Group's financial statements where AASB16 Leases has been applied. There has been
no material impact on the Group's financial statements on adoption of AASB16.
A number of other new standards are also effective from 1 January 2019 but they do not have a material effect
on the Group's financial statements.
(iv) New accounting standards for application in future periods
Certain new accounting standards and interpretations have been published that are not mandatory for 31
December 2019 reporting periods and have not been early adopted by the Group. These standards are not
expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
30
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(b) Principles of consolidation
Business combinations
The Group accounts for business combinations using the acquisition method when control is transferred to the
Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable
net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is
recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the
issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships.
Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured
and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair
value at each reporting date and subsequent changes in the fair value of the contingent consideration are
recognised in profit or loss.
If share-based payment awards (replacement awards) are required to be exchanged for awards held by the
acquiree’s employees (acquiree’s awards), then all or a portion of the amount of the acquirer’s replacement
awards is included in measuring the consideration transferred in the business combination. This determination is
based on the market-based measure of the replacement awards compared with the market-based measure of
the acquiree’s awards and the extent to which the replacement awards relate to pre-combination service.
Subsidiaries
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Palla Pharma
Limited as at 31 December 2019 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those companies over which the Group has the power to govern the financial and operating
policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and
effect of potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls another entity. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date control eases.
Intercompany transactions, balances and unrealised gains on transactions between Group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the Group.
(c) Segment reporting
Operating segments are presented using the 'management approach', where the information presented is on the
same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
31
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(d) Foreign currency translation
(i) Functional and presentation currency
These consolidated financial statements are presented in Australian dollars, which is the Group’s functional
currency.
(ii) Transactions and balances
Transactions in foreign currencies are translated to the functional currency of the Group at exchange rates at the
dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on
monetary items is the difference between amortised cost in the functional currency at the beginning of the period,
adjusted for effective interest and payments during the period, and the amortised cost in foreign currency
translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange rate at the date that the fair value was determined.
Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the
exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in the consolidated statement of profit or loss
and other comprehensive income as either finance income or finance expenses see note 2(p).
(iii) Foreign operations
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
acquisition, are translated into the functional currency at the exchange rates at the reporting date. The income
and expenses of foreign operations are translated into the functional currency at the exchange rates at the dates
of the transactions.
Foreign currency differences are recognised in the consolidated statement of profit or loss and other
comprehensive income and accumulated in the translation reserve, except to the extent that the translation
difference is allocated to non-controlling interests.
(e) Going concern
The consolidated financial statements have been prepared on a going concern basis, which assumes that the
Group will be able to continue trading, realise its assets and discharge its liabilities in the ordinary course of
business for a period of at least 12 months from the date that these financial statements are approved.
The Directors note the following events and conditions which have been considered in assessing the
appropriateness of the going concern assumption:
•
•
•
For the year ended 31 December 2019 the Group generated a loss after income tax of $7,639,443 (2018:
$5,788,409) and had cash outflows from operations of $10,010,864 (2018: $14,645,705).
As at 31 December 2019 the Group's current assets exceeded its current liabilities by $31,930,214 (31
December 2018: $27,816,347), with cash and cash equivalents of $2,019,087 (31 December 2018:
$1,904,583).
The Group has a standby debt facility in place with Washington H. Soul Pattinson and Company Limited to
meet the Group’s short-term working capital requirements. As at the date of this report the facility has a limit
of $16,000,000 and at 31 December 2019 the Group had drawn down $5,000,000 of the Facility. The
remaining facility available for utilisation of $11,000,000 combined with cash and cash equivalents of
$2,019,087 provides adequate funding to meet the Group’s immediate needs.
32
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(e) Going concern (continued)
•
•
•
•
The standby debt facility in place with Washington H. Soul Pattinson expires on 31 August 2021. The
Directors acknowledge that prima facie a refinancing risk exists at 31 August 2021 if the facility is not
renewed in line with past practice, repaid out of funds secured from an alternative source of debt or raised
from the issue of additional equity.
In November 2019 the Group raised $31.4m in new equity from a placement and entitlement offer. The
Directors have confidence that the recent equity capital raised and availability of debt facilities can meet the
Group’s immediate funding needs.
The Directors have confidence in the continuing support from existing shareholders and ability to attract new
investors and debt providers to fund the Group’s future financing requirements, if required, as demonstrated
by previous capital and debt raisings.
The Directors have confidence in the basis of preparation and achievability of the business plans, cash flow
and profit and loss forecasts prepared by management which project positive EBITDA and positive operating
cash flows.
After considering the above factors, the Directors have concluded that the use of the going concern basis of
preparation is appropriate.
(f) Financial instruments
Non-derivative financial assets
Financial instruments
The Group initially recognises trade receivables on the date that they are originated. All other financial assets
(including assets designated at fair value through profit or loss) are recognised initially on the trade date at which
the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in
transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial
position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a
net basis or to realise the asset and settle the liability simultaneously.
Classification and subsequent measurement
On initial recognition, a financial asset is classified as measured at: amortised cost; or FVTPL.
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business
model for managing financial assets, in which case all affected financial assets are reclassified on the first day of
the first reporting period following the change in the business model.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated
as FVTPL:
•
•
it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
its contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding.
33
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(f) Financial instruments (continued)
Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective interest method. The amortised
cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are
recognised in profit or loss (see note 2(j)). Any gain or loss on derecognition is recognised in profit or loss.
Financial assets at fair value through profit or loss
A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is
designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as
incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein,
including any interest or dividend income, are recognised in profit or loss.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or
less from the acquisition date that are subject to an insignificant risk of changes in their fair value, and are used
by the Group in the management of its short-term commitments.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are
originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are
recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or
expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the
modified liability are substantially different, in which case a new financial liability based on the modified terms is
recognised at fair value.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial
liabilities are recognised initially at fair value less any directly attributable transaction costs. Subsequent to initial
recognition, these financial liabilities are measured at amortised cost using the effective interest rate method.
Other financial liabilities comprise loans and borrowings and trade and other payables.
Share capital - Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares
and share options are recognised as a deduction from equity, net of any tax effects.
Impact on the financial statements
The Group has applied AASB 9 cumulatively, the comparative figures are therefore not restated. The effect of
initially applying the standard is the reclassification of trade receivables from the category of 'loans and
receivables' to 'Amortised cost'. The adoption of an Expected Credit Loss ('ECL') model did not result in any
material adjustments.
34
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(g) Revenue recognition
(i) Sale of goods
Under AASB 15, revenue is recognised when a customer obtains control of the goods or services. Determining
the timing of the transfer of control - at a point in time or over time - requires judgement.
Sale of goods - contract manufacturing revenue recognised over time
The Group has determined that for certain goods that are manufactured and supplied under contract
manufacturing and supply arrangements, the customer controls the goods once the goods are duly finished,
approved for distribution and packaged in accordance with the relevant agreement. This is because under those
agreements, goods are manufactured to a customer’s specification, packaged with the customer’s branding, and
if a firm order that is placed by the customer in accordance with the agreement is terminated, the Group is
entitled to reimbursement of the costs incurred in manufacturing the goods, including a reasonable margin.
Therefore, revenue from these agreements and the associated costs are recognised over time - i.e. before the
goods are delivered to the customer’s premises. Invoices are issued according to contractual terms and amounts
not yet invoiced are presented as contract assets in the consolidated statement of financial position.
Sale of goods - other revenue recognised at a point in time
Revenue from the sale of goods that are not subject to contract manufacturing arrangements is measured at the
fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates.
Revenue is recognised when a customer obtains control of the promised goods and the Group has satisfied its
performance obligation in relation to the promised goods. In determining when control of promised goods passes
to the customer, the Group considers the transfer of significant risks and rewards of ownership of the goods to
the customer to indicate that the customer has obtained the ability to direct the use of and obtain substantially all
of the remaining benefits from the goods. The timing of the transfer of risks and rewards to the customer for the
sale of goods occurs either:
• When the goods are despatched or delivered in line with the International Chamber of Commerce’s
International Commercial Terms (Incoterms®) as detailed in the relevant contract of sale or purchase order
for the goods;
• When they are made available to the customer and ownership transfers prior to despatch as detailed in the
relevant contract of sale or purchase order for the goods; or
• On notification that the product has been used when the goods are consignment products located at
customers’ premises.
Where cash consideration has been received but the revenue recognition criteria has not been met, such
amounts have been recorded on the consolidated statement of financial position as a contract liability.
(ii) Government grants
Government grants are recognised initially as deferred income at fair value and when there is reasonable
assurance that they will be received and that the Group will comply with the conditions associated with the grant,
they are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset.
Grants that compensate the Group for expenses incurred are recognised in profit or loss or other income on a
systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group
for expenditure capitalised are recognised as a reduction in the carrying value of the asset and grants that
compensate the Group for expenditure recognised in profit or loss is recognised as government grant income.
(h) Income tax
Tax expense comprises current and deferred tax. Current and deferred taxes are recognised in profit or loss
except to the extent that it relates to a business combination, or items recognised directly in equity or in other
comprehensive income.
35
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(h) Income tax (continued)
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous
years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognised for:
•
•
•
temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss,
temporary differences related to investments in subsidiaries and associates and jointly controlled entities to
the extent that it is probable that they will not reverse in the foreseeable future, and
taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, using tax rates enacted or substantively enacted at the reporting date.
In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax
positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax
liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of
tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of
judgements about future events. New information may become available that causes the Group to change its
judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense
in the period that such a determination is made.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the
extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred
tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the
related tax benefit will be realised.
Additional income tax expenses that arise from the distribution of cash dividends are recognised at the same time
that the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as
dividends to its shareholders.
(i) Leases
Policy applicable before 1 January 2019
For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or
contained a lease based on the assessment of whether:
•
•
fulfilment of the arrangement was dependent on the use of a specific asset or assets; and
the arrangement had conveyed a right to use the asset. An arrangement conveyed the right to use the
asset if one of the following was met:
•
•
•
the purchaser had the ability or right to operate the asset while obtaining or controlling more than
an insignificant amount of the output;
the purchaser had the ability or right to control physical access to the asset while obtaining or
controlling more than an insignificant amount of the output; or
facts and circumstances indicated that it was remote that other parties would take more than an
insignificant amount of the output, and the price per unit was neither fixed per unit of output nor
equal to the current market price per unit of output.
36
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(i) Leases (continued)
Leased assets
Leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance
leases. Assets acquired under finance leases are initially measured at an amount equal to the lower of their fair
value and the present value of the minimum lease payments. Subsequent to initial recognition, these leased
assets are accounted for in accordance with the accounting policy applicable to each asset.
Other leases are classified as operating leases, and the underlying assets are not recognised in the Group’s
consolidated statement of financial position.
Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of
the lease. Lease incentives received are recognised as an integral part of the total lease expense over the term
of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the
reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as
to produce a constant periodic rate of interest on the remaining balance of the liability.
Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. A specific
asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An
arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the
use of the underlying asset.
At inception and on reassessment of an arrangement that contains a lease, the Group separates payments and
other consideration required by the arrangement into those for the lease and those for other elements on the
basis of their relative fair values. If an arrangement contains a finance lease and the Group concludes that it is
impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal
to the fair value of the underlying asset. The liability is subsequently reduced as payments are made, and an
imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate.
Policy applicable from 1 January 2019
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or
contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified
asset, the Group uses the definition of a lease in IFRS 16.
This policy is applied to contracts entered into, on or after 1 January 2019.
At commencement or on modification of a contract that contains a lease component, the Group allocates the
consideration in the contract to each lease component on the basis of its relative stand-alone prices. However,
for the leases of property the Group has elected not to separate non-lease components and account for the lease
and non-lease components as a single lease component.
37
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(i) Leases (continued)
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of
costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is
located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end
of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In
that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is
determined on the same basis as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
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 various external financing
sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
•
•
•
•
fixed payments, including in-substance fixed payments;
variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date;
amounts expected to be payable under a residual value guarantee; and
the exercise price under a purchase option that the Group is reasonably certain to exercise, lease
payments in an optional renewal period if the Group is reasonably certain to exercise an extension
option, and penalties for early termination of a lease unless the Group is reasonably certain not to
terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s
estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its
assessment of whether it will exercise a purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of
the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in ‘property, plant
and equipment’ and lease liabilities in ‘loans and borrowings’ in the consolidated statement of financial position.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and
short-term leases, including IT equipment. The Group recognises the lease payments associated with these
leases as an expense on a straight-line basis over the lease term.
38
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(j)
Impairment
Non-derivative financial assets
Financial instruments and contract assets
The Group recognises loss allowances for Expected Credit Losses on:
•
•
financial assets measured at amortised cost; and
contract assets.
Loss allowances for trade receivables and contract assets are always measured at an amount equal to lifetime
Expected Credit Losses.
When determining whether the credit risk of a financial asset has increased significantly since initial recognition
and when estimating Expected Credit Losses, the Group considers reasonable and supportable information that
is relevant and available without undue cost or effort. This includes both quantitative and qualitative information
and analysis, based on the Group’s historical experience and informed credit assessment and including
forward-looking information.
The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 30 days
past due.
The Group considers a financial asset to be in default when:
•
•
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to
actions such as realising security (if any is held); or
the financial asset is more than 90 days past due
Measurement of Expected Credit Losses
Expected Credit Losses are a probability-weighted estimate of credit losses. The Group uses an allowance matrix
to measure the expected credit losses of trade receivables from individual customers.
Loss rates are calculated using a 'roll rate' method based on the probability of a receivable progressing through
successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different
segments based on the following common credit risk characteristics - geographic region, age of customer
relationship and type of product purchased.
Expected Credit Losses are discounted at the effective interest rate of the financial asset.
Presentation of allowance for Expected Credit Loss in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of
the assets.
Write-off
The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of
recovering a financial asset in its entirety or a portion thereof. For individual customers, the Group has a policy of
writing off the gross carrying amount when the financial asset is 180 days past due based on historical
experience of recoveries of similar assets. For corporate customers, the Group individually makes an
assessment with respect to the timing and amount of write-off based on whether there is a reasonable
expectation of recovery. The Group expects no significant recovery from the amount written off. However,
financial assets that are written off could still be subject to enforcement activities in order to comply with the
Group’s procedures for recovery of amounts due.
39
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(j)
Impairment (continued)
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are
reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication
exists, then the asset’s recoverable amount is estimated. Indefinite life intangible assets are tested annually for
impairment. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating
unit (CGU) exceeds its recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less cost of
disposal. In assessing value in use, the estimated future cash flows are discounted to their present value using a
pre-tax or post-tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are
grouped together into the smallest group of assets that generates cash inflows from continuing use that are
largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test,
CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested
reflects the lowest level at which goodwill is monitored for internal reporting purposes.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs), and then
to reduce the carrying amounts of the other assets in the CGU (or group of CGUs) on a pro rata basis.
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been
recognised.
Goodwill
Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows
from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising
from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the
synergies of the combination.
(k)
Inventories
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the
first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion
costs, and other costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work in progress, cost includes an appropriate share of production overheads
based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
(l) Assets held for sale
Non-current assets, or disposal groups comprising assets and liabilities, are classified as held-for-sale if it is
highly probable that they will be recovered primarily through sale rather than through continuing use.
Such assets, or disposals group, are generally measured at lower of their carrying amount and fair value less
costs to sell. Any impairment loss on a disposal group is allocated first to goodwill and then the remaining assets
and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, employee
benefit assets or investment property, which continue to be measured in accordance with the Group’s other
accounting policies. Impairment losses on initial classification as held-for-sale or held-for- distribution and
subsequent gains and losses on re-measurement are recognised in profit or loss.
Once classified as held-for-sale, intangible assets and property, plant and equipment are no longer amortised or
depreciated, and any equity-accounted investee is no longer equity accounted.
40
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(m) Property, plant and equipment
Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated
impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed
assets includes the following:
the cost of materials and direct labour,
•
•
any other costs directly attributable to bringing the assets to a working condition for their intended use,
• when the Group has an obligation to remove the assets or restore the site, an estimate of the costs of
dismantling and removing the items and restoring the site on which they are located, and
capitalised borrowing costs.
•
Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment. Any gains and losses on disposal of an
item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and
the carrying amount of the item) is recognised in profit or loss.
Subsequent costs
Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with
the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.
Depreciation
Items of property, plant and equipment are depreciated on a straight-line basis in profit or loss over the estimated
useful lives of each component. Leased assets are depreciated over the shorter of the lease term and their useful
lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not
depreciated.
Items of property, plant and equipment are depreciated from the date that they are installed and are ready for
use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.
The estimated useful lives for the current and comparative years of significant items of property, plant and
equipment are as follows:
•
Buildings
Contract plant and equipment
•
• Manufacturing plant and equipment
• Motor vehicles
• Office equipment
40 years
5 - 20 years
3 - 25 years
8 years
2 - 7 years
Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.
(n) Investments
Details of shares in controlled entities are disclosed at note 27(a). Controlled entities are accounted for in the
consolidated accounts as set out in the note 2(b).
41
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(o) Intangible assets
(i) Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge
and understanding, is recognised in profit or loss as incurred.
Development activities involve a plan or design for the production of new or substantially improved products and
processes. Development expenditure is capitalised only if development costs can be measured reliably, the
product or process is technically and commercially feasible, future economic benefits are probable, and the
Group intends to and has sufficient resources to complete development and to use or sell the asset. The
expenditure capitalised includes the cost of materials, direct labour, overhead costs and external costs that are
directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other
development expenditure is recognised in profit or loss as incurred. Capitalised development expenditure is
measured at cost less accumulated amortisation and accumulated impairment losses.
(ii) Patents and trademarks
Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less
accumulated amortisation and accumulated impairment losses.
(iii) Goodwill
Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses.
(iv) Subsequent expenditure
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the
specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and
brands, is recognised in profit or loss as incurred.
(v) Amortisation
Identifiable intangible assets are amortised on a straight-line basis in profit or loss over their estimated useful
lives, from the date that they are available for use. Goodwill is not amortised.
The estimated useful lives for the current and comparative years are as follows:
•
•
Patents and trademarks
3 - 5 years
Capitalised development costs 2 - 5 years
Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if
appropriate.
(p) Finance income and finance expenses
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues in profit
or loss, using the effective interest method.
Finance expenses comprise interest expense on borrowings. Borrowing costs that are not directly attributable to
the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective
interest method.
Foreign currency gains and losses are reported on a net basis as either finance income or finance expense
depending on whether foreign currency movements are in a net gain or net loss position.
42
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(q) Provisions
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific to the liability. The unwinding of the
discount is recognised as a finance cost.
(r) Employee benefits
(i) Short-term obligations
Short-term employee benefit obligations including salaries and wages, annual leave and long service leave
expected to be settled within 12 months of the reporting date are measured on an undiscounted basis and are
expensed as the related service is provided. A liability is recognised for the amount expected to be paid under
short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
(ii) Other long-term employee benefit obligations
The Group’s obligation in respect of long service leave is the amount of future benefit that employees have
earned in return for their service in the current and prior periods. That liability is measured as the present value of
expected future payments to be made in respect of the services provided by employees up to the end of the
reporting period. Consideration is given to expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are discounted using market yields at the end of
the reporting period on corporate bonds with terms to maturity that match, as closely as possible, the estimated
future cash outflows.
The obligations are presented as a current liability in the consolidated statement of financial position if the Group
does not have an unconditional right to defer settlement for at least twelve months after the reporting date,
regardless of when the actual settlement is expected to occur.
(iii) Share-based payment arrangements
The grant-date fair value of equity-settled share-based payment arrangements granted to employees is generally
recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and
non-market performance conditions are expected to be met, such that the amount ultimately recognised is based
on the number of awards that meet the related service and non-market performance conditions at the vesting
date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based
payment is measured to reflect such conditions and there is no true-up for differences between expected and
actual outcomes.
(s) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing the profit/(loss) attributable to equity holders of the Company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the
year. Refer to note 30 for further details.
(ii) 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 additional ordinary shares that would have been outstanding
assuming the conversion of all dilutive potential ordinary shares. Refer to note 30 for further details.
43
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
2 Summary of significant accounting policies (continued)
(t) Goods and Services Tax (GST) and Value Added Tax (VAT)
Revenues, expenses and assets are recognised net of the amount of associated GST or VAT, unless the GST or
VAT incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of
acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST or VAT receivable or payable. The net
amount of GST or VAT recoverable from, or payable to, the taxation authority is included with other receivables
or payables in the consolidated statement of financial position.
Cash flows are presented on a gross basis. The GST or VAT components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(u) Parent entity financial information
The financial information for the parent entity, Palla Pharma Limited, disclosed in note 32, has been prepared on
the same basis as the consolidated financial statements, except for investments in subsidiaries. Investments in
subsidiaries are accounted for at cost in the financial statements of Palla Pharma Limited.
44
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management
Overview
The Group’s activities expose it to the following risks arising from their use of financial instruments:
• credit risk;
• liquidity risk; and
• market risk (including currency and interest rate risk).
This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives,
policies and processes for measuring and managing risk and the Group’s management of capital.
Risk management framework
The Directors have overall responsibility for the establishment and oversight of the risk management framework.
The Board of Directors seek to maintain a balance between the higher returns that might be possible with higher
levels of borrowings and the advantages and security afforded by a sound capital position. Capital requirements
have been principally funded by equity in the form of share capital from investors and debt in the form of
shareholder loans. It is anticipated any further expansion will be funded predominantly through debt in the form of
bank loans, and equity in the form of placements and rights issues.
(a) Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to
meet its contractual obligations, and arises principally from the Group’s receivables from customers.
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date for
recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets.
Exposure to credit risk
The Group limits its exposure to credit risk from trade receivables by establishing a maximum payment period
three months for corporate customers.
The carrying amount of the Group’s financial assets represents the maximum credit exposure. The maximum
exposure to credit risk at reporting date was:
Trade receivables
Other receivables and loans - current
Cash and cash equivalents
Contract assets
Other receivables and loans - non-current
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
10
10
9
12
11,269,118
237,950
2,019,087
5,995,039
405,875
19,927,069
10,171,554
1,760,485
1,904,583
3,527,827
-
17,364,449
45
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(a) Credit risk (continued)
The maximum exposure to credit risk for receivables at the reporting date by geographic region was:
Europe
Other regions
Consolidated entity
31 December
2019
$
31 December
2018
$
11,052,052
217,066
11,269,118
6,994,216
3,177,338
10,171,554
The maximum exposure to credit risk for trade receivables at the reporting date by type of counter party was:
End-user customers
Consolidated entity
31 December
2019
$
31 December
2018
$
11,269,118
10,171,554
The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In
monitoring customer credit risk, customers are grouped by their ageing profile. Monitoring of receivable balances
on an ongoing basis minimises the exposure of bad debts. A provision for impairment is recognised when there is
objective evidence that an individual trade receivable in impaired.
The aging of the Group’s trade receivables at the reporting date was:
Not past due
1 - 30 days
31 - 60 days
61 - 90 days
90 days and over
Consolidated entity
31 December
2019
$
31 December
2018
$
7,642,862
1,098,684
-
282,053
2,245,519
11,269,118
7,279,522
2,410,254
225,179
256,599
-
10,171,554
The trade receivable balances are reviewed monthly and an allowance is raised where an indication of
impairment exists such as customer insolvency or slow payment record without due cause. Where the Group
considers that recovery of the amount owing is not possible, the amounts considered irrecoverable are written off
against the financial asset directly. As at 31 December 2019, there was no provision for impairment in relation to
trade receivable balances (2018: nil).
The credit risk of contract assets amounting to $5,995,039 and other receivables and loans of $218,548 were
primarily in respect of the European geographic region, owing from end-user customers and aging that was not
past due at 31 December 2019 and $425,277 owing from key management personnel. Other receivables of
$1,760,485 in the 2018 financial period were predominately owing from statutory authorities.
46
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(a) Credit risk (continued)
Expected credit loss assessment for individual customers
The following table provides information about the exposure to credit risk and expected credit losses for trade
receivables and contract assets from individual customers as at 31 December 2019.
31 December 2019
Current (not past due)
1 - 30 days past due
31 - 60 days past due
61 - 90 days past due
90 days and over
Weighted-average
loss rate
%
0.00%
0.00%
0.00%
0.00%
0.00%
Gross carrying
amount
$
7,642,862
1,098,684
-
282,053
2,245,519
11,269,118
Loss
allowance
Credit
impaired
-
-
-
-
-
-
No
No
No
No
No
Loss rates are based on actual credit loss experience over a period of 48 months. These rates are multiplied by
scalar factors to reflect differences between economic conditions during the period over which the historical data
has been collected, current conditions and the Group's view of economic conditions over the expected lives of
the receivables.
As at 31 December 2019, the credit risk assessment of a customer ($3,672,860) has been assessed based on
the net-off value of certain assets acquired from that customer; refer to note 29. Whilst the debtor is not past due,
based on ongoing credit monitoring and assessment, it has been assessed that there is a higher risk associated
with its collectability.
Cash and cash equivalents
The Group held cash and cash equivalents, including other assets, of $2,019,087 at 31 December 2019 (2018:
$1,904,583), which represents its maximum credit exposure on these assets. The cash and cash equivalents are
held with bank and financial institution counterparts, which are rated AA-, based on S&P ratings.
47
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The
Group's approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses
or risking damage to the Group's reputation. The Group monitors the level of expected cash outflows on trade
and other payables. In addition, details of lines of credit maintained by the Group are set out in note 21.
The following are the contractual maturities of financial liabilities, including estimated interest payments and
excluding the impact of netting agreements:
Contractual
maturities of
financial liabilities
At 31 December
2019
Non-derivatives
Shareholder loan
facility
Trade and other
payables
Insurance premium
funding
Other
Total
non-derivatives
At 31 December 2018
space
Non-derivatives
Shareholder loan
facility
Trade and other
payables
Insurance premium
funding
Other
Total
non-derivatives
Less than
6 months
6 - 12
months
Between 1
and 2 years
Between 2
and 5
years
Over 5
years
Total
contractual
cash
flows
Carrying
amount of
liabilities
$
-
$
$
-
(5,962,500)
$
-
$
$
$
-
(5,962,500)
5,000,000
(8,349,055)
(558,065)
(194,035)
(12,168)
(281,646)
-
-
-
-
(1,563,462)
- (10,470,582) 10,470,582
-
-
-
-
(475,681)
(12,168)
455,256
12,168
(8,555,258)
(839,711)
(5,962,500) (1,563,462)
- (16,920,931) 15,938,006
-
- (26,659,402)
(9,426,538)
(184,148)
8,573
-
-
-
-
-
-
(9,602,113)
- (26,659,402)
-
-
-
-
-
- (26,659,402) 22,702,960
-
-
-
(9,426,538)
9,426,538
(184,148)
8,573
174,647
(8,573)
- (36,261,515) 32,295,572
48
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(c) Market risk
Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates, interest
rates and equity prices will affect the Group's income or the value of its holdings of financial instruments. The
objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
(i) Currency risk
The Group undertakes certain transactions denominated in foreign currencies, hence exposures to exchange
rate fluctuation arise. Exchange rate exposures are managed within approved policy parameters. The Group
manages the currency risk by monitoring the trend of the US dollar, Euro, Norwegian Krone, Swedish Krona,
Danish Krone, British Pound and Swiss Franc. The Group maintains US dollar, Euro and Norwegian Krone bank
accounts to cover a portion of its anticipated expenditures in the respective foreign currencies.
The Group’s foreign currency risk denominated financial assets and financial liabilities at the reporting date are
as follows:
Consolidated
entity
Financial assets
Cash and cash
equivalents
Trade and other
receivables
space
Financial
liabilities
Trade and other
payables
Net exposure
Consolidated
entity
Financial assets
Cash and cash
equivalents
Trade and other
receivables
space
Financial
liabilities
Trade and other
payables
Net exposure
USD
31 December 2019
EUR
NOK
SEK
DKK
GBP
CHF
291,271
439,180
2,707,954
1,180,804
1,588,833 19,611,341
-
-
(2,951,297)
(1,479,222)
(200,080) (11,147,183)
1,827,933 11,172,112
(1,525,534)
(1,525,534)
-
-
-
-
-
1,917,500
-
-
(5,377)
1,912,123
(1,963)
(1,963)
USD
31 December 2018
EUR
NOK
SEK
DKK
GBP
CHF
11,955
243,408
7,676,105
4,387,777
893,640 11,247,740
-
-
-
-
(108,970)
4,290,762
(254,565) (10,198,010)
8,725,835
882,483
(3,399,938)
(3,399,938)
(19,430)
(19,430)
-
-
-
-
-
-
-
-
49
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(c) Market risk (continued)
Sensitivity
The following sensitivity analysis is based on the foreign currency risk exposures in existence at the statement of
financial position date. A 10 percent increase or decrease in the foreign exchange rate is used and represents
management’s assessment of the possible change in foreign exchange rates and historically is within a range of
rate movements. A positive number indicates an increase in profit and equity. A negative number indicates a
decrease in profit and equity. At 31 December 2019, if foreign exchange rates had moved, as illustrated in the
table below, with all other variables held constant, pre-tax profit and equity would have been affected as follows:
31 December 2019
Consolidated entity
Financial assets
Cash and cash equivalents
Trade and other receivables
space
Financial liabilities
Trade and other payables
31 December 2018
Consolidated entity
Financial assets
Cash and cash equivalents
Trade and other receivables
space
Financial liabilities
Trade and other payables
-10%
in AUD
+10%
in AUD
Profit
$
Equity
$
Profit
$
Equity
$
172,956
1,221,479
172,956
1,221,479
(141,510)
(999,392)
(141,510)
(999,392)
(814,856)
579,579
(814,856)
579,579
666,701
(474,201)
666,701
(474,201)
-10%
in AUD
+10%
in AUD
Profit
$
Equity
$
Profit
$
Equity
$
184,521
1,056,448
184,521
1,056,448
(152,839)
(864,367)
(152,839)
(864,367)
(546,063)
694,906
(546,063)
694,906
446,780
(570,426)
446,780
(570,426)
Interest rate risk
(ii)
The Group is exposed to interest rate risk arising from changes in market interest rate on its variable rate
investments. The Group's policy is to manage its finance costs using a mix of fixed and variable rate debt.
Management periodically reviews its interest rate exposure and consideration is given to potential renewals of
existing positions, alternative financing and the mix of fixed and variable interest rates.
50
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(c) Market risk (continued)
Profile
At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was as follows:
Fixed rate instruments
Financial assets
Financial liabilities
space
Variable rate instruments
Financial assets
Financial liabilities
Carrying amounts
31 December
2019
$
31 December
2018
$
425,277
5,455,256
-
22,877,607
457,573
-
221,892
-
Fair value sensitivity analysis for fixed rate instruments
The Group does not account for any fixed rate financial assets and liabilities at fair value through profit and loss.
Therefore a change in interest rate at the reporting date would not affect the profit and loss or equity.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates would have increased or decreased the Group’s equity by $4,576
(2018: $2,219). This analysis assumes that all other variables, in particular foreign currency rates remain
constant.
(d) Capital management
The Board's policy is to maintain a strong capital base to ensure the Group continues as a going concern, and to
sustain future development of the business while maximising returns to stakeholders.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of
borrowings and the advantages and security afforded by a sound capital position. With the Group still in its early
stages, capital requirements have been principally funded by equity in the form of share capital from investors,
shareholder loans and surplus operating cash flows. As the Group consolidates its operating position, it is
anticipated that further expansion will be funded predominantly through debt in the form of bank loans and equity
in the form of placements and right issues.
(e) Fair values
None of the Group’s financial assets or financial liabilities are readily traded on an organised market in
standardised form, and all are classified as Level 3 in the fair value hierarchy. As such, the Group uses valuation
techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The chosen valuation technique for each asset or liability is listed below, and where relevant incorporate all of the
factors that market participants would take into account in pricing a transaction.
Financial instrument
Unlisted investments
All other financial assets and liabilities
Valuation technique
Group’s share in the net asset value of the investee at balance date
Fair value approximates their carrying value
51
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
3 Financial risk management (continued)
(e) Fair values (continued)
Accounting classifications and fair values
The following table shows the carrying amounts and fair values of financial assets and financial liabilities. It does
not include fair value information for financial assets and financial liabilities not measured at fair value if the
carrying amount is a reasonable approximation of fair value.
31 December 2019
Financial assets measured at fair value
Unlisted investments
Financial assets not measured at fair value
Cash and cash equivalents
Trade, other receivables and loans
Financial liabilities not measured at fair value
Shareholder loan facility
Insurance premium funding
Other borrowings
Trade and other payables
31 December 2018
Financial assets measured at fair value
Unlisted investments
Financial assets not measured at fair value
Cash and cash equivalents
Trade, other receivables and loans
Financial liabilities not measured at fair value
Shareholder loan facility
Insurance premium funding
Other borrowings
Trade and other payables
Carrying amounts
Fair value
through profit
and loss
$
Financial
assets at
amortised
cost
$
Other
financial
liabilities
$
Total
$
103,272
-
-
103,272
-
2,019,087
11,912,943
13,932,030
-
-
-
-
103,272
2,019,087
11,912,943
14,035,302
-
-
-
-
-
$
103,549
-
-
103,549
-
-
-
-
-
-
-
-
-
-
$
-
1,904,583
11,932,039
13,836,622
5,000,000
455,256
12,168
10,470,582
15,938,006
5,000,000
455,256
12,168
10,470,582
15,938,006
$
-
-
-
-
$
103,549
1,904,583
11,932,039
13,940,171
-
-
-
-
-
22,702,960
174,647
(8,573)
9,426,538
32,295,572
22,702,960
174,647
(8,573)
9,426,538
32,295,572
Unlisted investments represents the Group’s interest in the Macquarie River Pipeline Partnership and its fair
value categorised as level 3 in the fair value hierarchy based on inputs that are not based on observable market
data.
52
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
4 Use of estimates and judgements
The preparation of consolidated financial statements in conformity with AASBs requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material
adjustment in the year ending 31 December 2019 is included in the following notes:
Notes 15 and 16 - impairment test: key assumptions underlying recoverable amounts of property, plant and
equipment and intangible assets.
Measurement of fair values
A number of the Group's accounting policies and disclosures require the measurement of fair values for both
financial and non-financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Group uses observable market data as far as
possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows.
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: inputs other than quoted prices in Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices).
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value
hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period
during which the change has occurred.
53
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
5 Segment information
Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief
Operating Decision Maker ('CODM') of the Group. The CODM is responsible for the allocation of resources to operating segments and assessing their performance. The
CODM has been identified as the CEO. Segment information is presented to the CEO comprising two segments: Australia and Norway.
Australia
Segment activities: Narcotic Raw Material and Poppy Seed production and distribution.
Norway
Segment activities: Active Pharmaceutical Ingredient and Finished Dosage Formulation production and distribution.
Consolidated entity
External revenue
Inter-segment revenue
Total segment revenue
Reportable segment profit/(loss) after tax
space
Unallocated amounts
Net financing costs
Profit from discontinued operation
(Loss) for the year
Australia
Norway
Eliminations
Consolidated
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
8,043,325
21,226,183
29,269,508
8,792,653
10,500,690
19,293,343
46,642,069
-
46,642,069
37,378,345
-
37,378,345
-
(21,226,183)
(21,226,183)
-
(10,500,690)
(10,500,690)
54,685,394
-
54,685,394
46,170,998
-
46,170,998
(2,304,283)
(6,218,549)
(2,089,880)
678,511
(156,202)
285,957
(4,550,365)
(5,254,081)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,089,078)
-
(7,639,443)
(1,653,331)
1,119,003
(5,788,409)
54
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
5 Segment information (continued)
Consolidated entity
Timing of External revenue recognition:
At a point in time
Over time
Australia
Norway
Eliminations
Consolidated
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
31 December
2019
$
31 December
2018
$
8,043,325
-
8,043,325
8,792,653
-
8,792,653
18,860,079
27,781,990
46,642,069
10,684,300
26,694,045
37,378,345
-
-
-
-
-
-
26,903,404
27,781,990
54,685,394
19,476,953
26,694,045
46,170,998
55
5 Segment information (continued)
Non-current assets
Australia
Europe
6 Revenue
(a) Revenue streams
From continuing operations
Sale of goods
Sales from contracts with customers
space
Other income
Rental income
Macquarie Pipeline Partnership
Other items
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
29,706,630
16,714,665
46,421,295
27,366,538
17,137,383
44,503,921
Consolidated entity
31 December
2019
$
31 December
2018
$
54,685,394
46,170,998
158,366
(277)
-
158,089
101,446
1,783
289,154
392,383
54,843,483
46,563,381
(b) Contract balances
The following table provides information about receivables and contract assets from contracts with customers.
Receivables, which are included in 'trade and other receivables'
Contract assets - refer to note 2(g)(i)
Consolidated entity
31 December
2019
$
31 December
2018
$
11,269,118
5,995,039
17,264,157
10,171,554
3,527,827
13,699,381
56
7 Expenses
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
Notes
(Loss) before income tax includes the following specific
expenses:
Employee benefits expenses
Salaries and wages
Other associated personnel expenses
Defined contribution superannuation expenses
Increase/(decrease) in liability for long service leave
Increase in liability for annual leave
Share-based payments
Total employee benefits expenses
16,613,290
1,565,539
567,384
63,495
137,233
343,633
19,290,574
15,581,094
1,660,743
460,366
(17)
490,884
327,497
18,520,567
31
Depreciation
Buildings
Contract equipment
Manufacturing plant and equipment
Office equipment
Motor vehicles
Total depreciation
Amortisation
Patents
Total depreciation and amortisation
Finance income
Interest income
Finance costs
Interest and finance expenses on financial liabilities measured at amortised
cost
Net exchange losses on foreign currency
429,713
171,866
1,624,393
226,230
18,277
2,470,479
419,564
185,654
1,722,681
162,204
28,961
2,519,064
43,407
2,513,886
32,231
2,551,295
(23,028)
(23,028)
(21,418)
(21,418)
2,801,015
311,091
3,112,106
1,657,773
16,976
1,674,749
Net finance expenses recognised in profit or loss
3,089,078
1,653,331
57
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
8 Income tax expense
(a) Numerical reconciliation of income tax expense to prima facie tax payable
(Loss) from continuing operations before income tax expense
space
Tax at the Australian tax rate of 30.0% (2018 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Effect of different tax rates of subsidiaries operating in other jurisdictions
Deferred tax assets not brought into account
Income tax (benefit)/expense
(b) Unrecognised deferred tax assets
The following deferred tax assets have not been brought to account as assets:
Deductible temporary differences
Tax losses – revenue
Consolidated entity
31 December
2019
$
31 December
2018
$
(7,777,636)
(6,772,519)
(2,333,291)
(2,031,756)
99,534
2,095,564
(138,193)
(41,054)
2,207,703
134,893
7,915,829
6,637,626
Consolidated entity
31 December
2019
$
31 December
2018
$
3,319,155
35,130,520
38,449,675
3,284,749
33,069,362
36,354,111
These deductible temporary differences and tax losses can be carried forward indefinitely, and the tax losses are
subject to the company loss recoupment rules under current tax legislation in Australia. Deferred tax assets have
not been recognised in respect of these items because, given the stage of business, the Group cannot currently
satisfy the necessary standard of probability that future taxable profits will be available against which the Group
can utilise the benefits therefrom.
9 Current assets - Cash and cash equivalents
Cash at bank
Consolidated entity
31 December
2019
$
31 December
2018
$
2,019,087
1,904,583
58
10 Current assets - Trade and other receivables
Trade receivables
Other receivables
Loan to key management personnel
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
11,269,118
218,548
19,402
11,507,068
10,171,554
1,760,485
-
11,932,039
The balance of trade and other receivables of $11,507,068 (2018: $11,932,038) are not considered impaired.
Refer to note 3 for details of the credit risk exposure analysis.
11 Current assets - Inventories
Consolidated entity
31 December
2019
$
31 December
2018
$
6,607,925
15,194,810
346,639
22,149,374
5,830,836
12,751,135
584,393
19,166,364
Consolidated entity
31 December
2019
$
31 December
2018
$
405,875
-
Consolidated entity
31 December
2019
$
31 December
2018
$
1,977,493
250,901
22,191
2,250,585
1,200,529
599,095
22,249
1,821,873
Raw materials and consumables
Work in progress
Finished goods
12 Non-current assets - Other receivables
Loan to key management personnel
13 Non-current assets - Inventories
Raw materials and consumables
Work in progress
Finished goods
59
14 Non-current assets - Investments
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
Macquarie River Pipeline Partnership - at fair value
103,272
103,549
The unlisted interest in the Macquarie River Pipeline Partnership has been designated at fair value through profit
or loss because it is managed on a fair value basis (refer note 4). The Group recognised its share of profits
generated by the Partnership during the year.
15 Non-current assets - Property, plant and equipment
Consolidated
entity
At 1 January
2018
Cost
Accumulated
depreciation
Net book amount
Year ended 31
December 2018
Opening net book
amount
Exchange
differences
Additions
Disposals
Transfers
Depreciation
charge
Closing net book
amount
At 31 December
2018
Cost
Accumulated
depreciation
Net book amount
Land and
buildings
$
Manufacturing
plant and
equipment
$
Office
equipment
$
Motor
vehicles
$
Contract
plant and
equipment
$
Total
$
17,383,499
26,036,796
1,148,017
660,324
2,345,907
47,574,543
(7,389,126)
9,994,373
(11,093,642)
14,943,154
(439,316)
708,701
(526,130)
134,194
(739,289)
1,606,618
(20,187,503)
27,387,040
9,994,373
14,943,154
708,701
134,194
1,606,618
27,387,040
23,802
585,300
-
-
68,523
1,507,030
-
-
1,735
655,478
(415)
130,834
290
21,818
(41,550)
-
-
12,061
(70,610)
-
94,350
2,781,687
(112,575)
130,834
(419,564)
(1,722,681)
(162,204)
(28,961)
(185,654)
(2,519,064)
10,183,911
14,796,026
1,334,129
85,791
1,362,415
27,762,272
17,994,157
27,616,556
1,931,659
252,975
2,233,071
50,028,418
(7,810,246)
10,183,911
(12,820,530)
14,796,026
(597,530)
1,334,129
(167,184)
85,791
(870,656)
1,362,415
(22,266,146)
27,762,272
60
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
15 Non-current assets - Property, plant and equipment (continued)
Land and
buildings
$
Manufacturing
plant and
equipment
$
Office
equipment
$
Motor
vehicles
$
Contract
plant and
equipment
$
Total
$
10,183,911
14,796,026
1,334,129
85,791
1,362,415
27,762,272
(4,983)
65,410
(391,278)
1,545,431
(80,923)
267,906
(22)
-
-
621
(477,206)
1,879,368
(429,713)
(1,624,393)
(226,230)
(18,277)
(171,866)
(2,470,479)
9,814,625
14,325,786
1,294,882
67,492
1,191,170
26,693,955
18,192,282
29,124,070
2,149,354
258,748
2,233,692
51,958,146
(8,377,657)
9,814,625
(14,798,284)
14,325,786
(854,472)
1,294,882
(191,256)
67,492
(1,042,522)
1,191,170
(25,264,191)
26,693,955
Consolidated
entity
Year ended 31
December 2019
Opening net book
amount
Exchange
differences
Additions
Depreciation
charge
Closing net book
amount
At 31 December
2019
Cost
Accumulated
depreciation
Net book amount
Impairment testing
During the year ended 31 December 2019, the Group continued to record operating losses and accordingly has
performed impairment testing to assess whether the recoverable amount of its property, plant and equipment and
intangible assets is in excess of carrying value.
For the purpose of impairment testing the Group has defined two Cash Generating Units (CGU) the Australia
CGU and the Norway CGU.
The recoverable amount for the CGU's was determined based on value-in-use calculations which require the use
of assumptions.
Value in use as at 31 December 2019 was determined for the CGU's, based on the following key assumptions:
• Cash flows were forecast based on the Group’s five-year business plan with the terminal value based on the
fifth-year cash flow and a long-term growth rate of 2.5%, which is consistent with the long-term inflation and
growth targets of between 2% and 3%.
•
•
•
•
Forecast sales volumes are based on past performance and management’s expectations of market
development.
Forecast foreign currency rates are set based on a range of external market commentator forecasts.
Sales prices are based on current industry trends for each sales territory and contracted pricing where
applicable.
Forecast gross margins are based on past performance and management’s expectations for the future.
• Other operating costs of the CGU, which do not vary significantly with sales volumes or prices, have been
forecast by management based on the current structure of the business, but not reflecting any future
restructurings or cost saving measures.
61
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
15 Non-current assets - Property, plant and equipment (continued)
•
•
•
Poppy straw harvesting yields were considered based on historical yield performance, climate-induced
variations such as severe weather events, past plant losses and new growing areas coming into production.
Annual capital expenditure is based on the historical experience of management. No incremental cost
savings are assumed in the value-in-use model as a result of this expenditure.
An after-tax discount rate of 8.5% and 10% for the Australia and Norway CGU’s respectively was applied in
determining the recoverable amount of the CGU’s based on an industry average weighted-average cost of
capital and applying a premium to the industry average due to the Group’s size and stage of lifecycle.
The recoverable amount of the Australia CGU which was most sensitive to changes in key assumptions was
determined to be higher than its carrying amount, indicating that no impairment is evident. In addition, reasonably
possible changes in key assumptions were considered, such as changes in the forecast sales volumes, foreign
exchange rates and the discount rate; sufficient headroom exists and no impairment was noted.
In percent
Discount rate
Change required for carrying
amount to equal recoverable
amount
2019
3.1
2018
0.5
In addition, a reasonably possible change in the USD/AUD foreign exchange rate would increase/(decrease) the
headroom between the recoverable amount based on the value in use calculations and the carrying amount of
the Australian CGU as follows:
In cents
USD/AUD exchange rate – 1 cent movement
Increase by 1 cent
Decrease by 1 cent
Change to headroom
(increase/(decrease))
2018
2019
$7.8m
($7.6m)
$6.1m
($5.9m)
62
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
16 Non-current assets - Intangible assets
Consolidated entity
At 1 January 2018
Cost
Accumulated amortisation and
impairment
Net book amount
Patents,
trademarks
and other
rights
$
Capitalised
development
costs
$
Goodwill
$
Irrigation
rights
$
Total
$
13,795,140
607,450
1,070,646
1,100,000
16,573,236
-
13,795,140
(360,729)
246,721
(760,891)
309,755
-
1,100,000
(1,121,620)
15,451,616
Year ended 31 December 2018
Opening net book amount
Exchange differences
Additions
Disposals
Transfers between assets classes
Amortisation charge
Closing net book amount
13,795,140
160,363
-
-
-
-
13,955,503
246,721
12,772
-
-
(130,834)
(32,231)
96,428
309,755
-
454,541
-
-
-
764,296
1,100,000
-
-
(1,100,000)
-
-
-
15,451,616
173,135
454,541
(1,100,000)
(130,834)
(32,231)
14,816,227
At 31 December 2018
Cost
Accumulated amortisation and
impairment
Net book amount
Consolidated entity
Year ended 31 December 2019
Opening net book amount
Exchange differences
Additions
Amortisation charge
Closing net book amount
At 31 December 2019
Cost
Accumulated amortisation and
impairment
Net book amount
Impairment testing
13,955,503
128,571
764,296
-
13,955,503
(32,143)
96,428
-
764,296
13,955,503
-
-
-
13,955,503
96,428
(917)
2,160,520
(43,407)
2,212,624
764,296
-
35,185
-
799,481
13,955,503
2,287,492
799,481
-
13,955,503
(74,868)
2,212,624
-
799,481
-
-
-
-
-
-
-
-
-
-
-
14,848,370
(32,143)
14,816,227
14,816,227
(917)
2,195,705
(43,407)
16,967,608
17,042,476
(74,868)
16,967,608
The Group reviewed the carrying value of development costs at 31 December 2019 and determined that no
impairments were required in respect of these assets.
The goodwill, intangible assets, development costs were tested as part of the CGU testing performed.
Refer to note 15 for further details of the Group's impairment testing for the year ended 31 December 2019.
63
17 Current liabilities - Trade and other payables
Trade payables
GST and VAT
Other payables
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
7,039,444
976,780
890,896
8,907,120
8,053,892
455,896
916,750
9,426,538
18 Current liabilities - Borrowings
This note provides information about the Group’s current interest-bearing loans and borrowings, which are
measured at amortised cost.
Other loans
Total current borrowings
Consolidated entity
31 December
2019
$
31 December
2018
$
467,424
467,424
166,074
166,074
Refer to note 21 for movements during the year, and the contractual terms of the Group’s current borrowings.
Refer to note 21 for reconciliation of movements of liabilities to cash flows arising from financing activities.
19 Current liabilities - Provisions
Employee benefits - annual leave
20 Non-current liabilities - Trade and other payables
Trade payables
Consolidated entity
31 December
2019
$
31 December
2018
$
1,847,235
1,710,002
Consolidated entity
31 December
2019
$
31 December
2018
$
1,563,462
-
64
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
21 Non-current liabilities - Borrowings
This note provides information about the Group’s non-current interest-bearing loans and borrowings, which are
measured at amortised cost.
Shareholder loan facility
Total non-current borrowings
Consolidated entity
31 December
2019
$
31 December
2018
$
5,000,000
5,000,000
22,702,960
22,702,960
Washington H. Soul Pattinson and Company Limited, a substantial shareholder has provided the Group with a
standby debt facility with a limit of up to $16,000,000 (2018: $25,000,000) to meet the Group's short term working
capital needs. At 31 December 2019 the Group had drawn down $5,000,000 of the facility (2018: $22,702,960).
The maturity date of this facility is August 2021. This facility is secured by a mortgage over the property located in
Australia, which has a book value of $8,313,469 at 31 December 2019.
(a) Movements during the year
Currency
Nominal
interest rate
Year of
maturity
Movement
Carrying
amount ($)
22,869,034
At 1 January 2019
(Repayments)/drawings
Shareholder loan facility - Tranche A
Shareholder loan facility - Tranche B
Shareholder loan facility - Tranche C
Insurance premium funding
Insurance premium funding
Other
Carrying amount at 31 December 2019
AUD
AUD
AUD
AUD
AUD
AUD
(b) Terms and debt repayment schedule
Terms and conditions of outstanding loans were as follows:
11.00%
9.00%
8.25%
5.57%
3.75%
2020
2020
2021
2020
2020
2019
(16,400,000)
(6,302,960)
5,000,000
95,151
185,458
20,741
(17,401,610)
-
-
5,000,000
183,797
271,459
12,168
5,467,424
Shareholder loan facility -
Tranche A
Shareholder loan facility -
Tranche B
Shareholder loan facility -
Tranche C
Insurance premium funding
Insurance premium funding
Other
Total interest bearing
liabilities
AUD
AUD
AUD
AUD
AUD
Nominal
interest
rate
Currency
Year of
maturity
Face value
($)
Carrying
amount ($)
Face value
($)
Carrying
amount ($)
31 December 2019
31 December 2018
AUD
11.00%
2020
9.00%
2020
-
-
- 16,400,000 16,400,000
-
6,302,960
6,302,960
8.25%
5.57%
3.75%
2021
2020
2020
2019
5,000,000
183,797
271,459
12,168
5,000,000
183,797
271,459
12,168
-
88,646
86,001
(8,573)
-
88,646
86,001
(8,573)
5,467,424
5,467,424 22,869,034 22,869,034
65
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
21 Non-current liabilities - Borrowings (continued)
(c) Reconciliation of movements of liabilities to cash flows arising from financing activities
Liabilities
Equity
Finance lease
liabilities
$
Loans
$
Share capital
$
Total
$
Balance 1 January 2019
space
Changes from financing cash flows
Proceeds from issue of share capital
Proceeds from loans and borrowings
Repayment of borrowings
Total changes from financing cash flows
22,869,034
-
9,147,040
(26,548,650)
(17,401,610)
Balance at 31 December 2019
5,467,424
Liability - related
Interest expense
Interest paid
Total liability-related other changes
(2,801,015)
2,801,015
-
-
-
-
-
-
-
-
-
-
181,482,260
204,351,294
29,514,931
-
-
29,514,931
29,514,931
9,147,040
(26,548,650)
12,113,321
210,997,191
216,464,615
-
-
-
(2,801,015)
2,801,015
-
Consolidated entity
Balance 1 January 2018
space
Changes from financing cash flows
Proceeds from loans and borrowings
Repayment of borrowings
Payment of finance lease liabilities
Total changes from financing cash flows
Liabilities
Equity
Finance lease
liabilities
$
Loans
$
Share capital
$
Total
$
5,076,838
8,150,000
181,482,260
194,709,098
25,669,130
(7,876,934)
-
17,792,196
-
-
(8,150,000)
(8,150,000)
-
-
-
-
25,669,130
(7,876,934)
(8,150,000)
9,642,196
Balance at 31 December 2018
22,869,034
-
181,482,260
204,351,294
Liability - related
Interest expense
Interest paid
Total liability-related other changes
(935,575)
935,575
-
(722,198)
722,198
-
-
-
-
(1,657,773)
1,657,773
-
66
22 Non-current liabilities - Provisions
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
Employee benefits - long service leave
378,044
314,549
23 Contributed equity
(a) Share capital
Ordinary shares
Fully paid
(b) Movements in ordinary shares:
Details
Opening balance 1 January 2018
Balance 31 December 2018
Opening balance 1 January 2019
Shares issued for cash
Shares issued for secured directors loan
Less: Transaction costs arising on share issues
Balance 31 December 2019
(c) Ordinary shares
31 December
2019
Shares
31 December
2018
Shares
31 December
2019
$
31 December
2018
$
125,947,977
81,085,594
210,997,191
181,482,260
Number of shares
Total
$
81,085,594
81,085,594
181,482,260
181,482,260
81,085,594
44,258,402
603,981
-
125,947,977
181,482,260
30,980,882
422,787
(1,888,738)
210,997,191
The Company does not have authorised capital or par values in respect of its issued shares. All issued shares
are fully paid. All shares rank equally.
Ordinary shares participate in dividends and the proceeds on winding up of the Company in equal proportion to
the number of shares held. At shareholder 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. In respect of the Company's shares that
are held by the Company, all rights are suspended until those shares are reissued.
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to
one vote per share at meetings of the Company.
67
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
24 Reserves
Foreign currency translation reserve
Exchange differences relating to translation from functional currencies of the Group’s foreign controlled entities
into Australian Dollars are brought to account by entries made directly to the foreign currency translation reserve.
Other reserves
Other reserves comprise a share-based payment reserve.
25 Remuneration of auditors
During the year the following fees were paid or payable for services provided by the auditor of the parent entity,
its related practices and non-related audit firms:
KPMG
(i) Audit and review services
Audit and review of financial statements - Group
Audit and review of financial statements - controlled entities
Total remuneration for audit and review services
(ii) Assurance services
Due diligence services
Total remuneration for assurance services *
(iii) Other services
Taxation advice and tax compliance services
Technical assistance for subsidiary financial statements
Total remuneration for other services
Consolidated entity
2019
$
2018
$
167,214
12,156
179,370
173,756
14,127
187,883
28,463
28,463
-
-
12,156
4,052
16,208
12,156
5,673
17,829
Total remuneration of KPMG
224,041
205,712
* There were no regulatory assurance services provided during the year.
The comparatives include amounts billed in the current period relating to the prior year.
26 Commitments
Capital commitments
As at 31 December 2019 the Group had capital commitments for equipment of $nil (2018: $nil).
68
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
27 Related party transactions
(a) Controlled subsidiary entities
Name of entity
Country of
incorporation
Class of
shares
Equity holding
2019
%
2018
%
Parent Entity:
Palla Pharma Limited
space
Controlled Entities:
Purplebay Pty Limited
TPI Norway Holding AS
TPI Norway AS
Australia
Australia
Norway
Norway
Ordinary
Ordinary
Ordinary
-
100
100
100
-
100
100
100
The consolidated financial statements incorporate the assets, liabilities and results of these subsidiaries in
accordance with the accounting policy described in note 2(b).
(b) Key management personnel compensation
The aggregate compensation made to Directors and other members of key management personnel of the
Company is set out below:
Short-term employee benefits
Post-employment benefits
Other long term benefits
Share-based payments
Consolidated entity
31 December
2019
$
31 December
2018
$
1,450,051
84,545
22,795
167,981
1,725,372
1,349,904
78,034
25,264
128,491
1,581,693
Further disclosures regarding key management personnel compensation are contained within the Remuneration
Report.
(c) Amounts owing to related parties
Refer to note 21 for details of loans from shareholders.
(d) Other related party transactions
During 2019 company secretarial and financial reporting services amounting to $4,500 (2018: $9,096) were
provided by Corporate and Administrative Services Pty Ltd, a subsidiary of Washington H. Soul Pattinson and
Company Limited. Interest and finance expenses during the year attributable to Washington H. Soul Pattinson
and Company Limited amounted to $2,741,896 (2018: $917,174).
The following balances were outstanding at the end of the reporting period in relation to these transactions:
Consolidated entity
31 December
2019
$
31 December
2018
$
Corporate and Administrative Services Pty Ltd
825
-
69
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
Consolidated entity
31 December
2019
$
31 December
2018
$
-
422,787
2,490
425,277
-
-
-
-
27 Related party transactions (continued)
(e) Loans to related parties
Loans to key management personnel
Beginning of the year
Loans advanced
Interest charged
End of year
(f) Terms and conditions
Other related party transactions were made on normal commerical terms and conditions and at market rates.
Loans to key management personnel outstanding at the end of the current year include a secured loan to a
director of Palla Pharma Limited of $422,787 which was made for a period of 25 years and is repayable on a
quarterly amortising reducing balance basis, maturing on 31 December 2044. Interest is payable on this loan at a
rate of 5% per annum, payable quarterly. This loan enabled the director to fully participate in the pro-rata
Entitlement Offer completed by the Group in November 2019 and is secured against the new shares subscribed
to under the offer.
Outstanding balances other than loans to key management personnel are unsecured and are repayable in cash.
28 Cash flow information
(a) Reconciliation of (loss) after income tax to net cash (outflow) from operating activities
Consolidated entity
31 December
2019
$
31 December
2018
$
(7,639,443)
(5,788,409)
2,470,479
43,407
277
(14,400)
1,161,365
-
(138,193)
343,633
2,519,064
32,231
-
232,775
(1,783)
(1,119,003)
134,893
327,497
(2,025,329)
(3,411,722)
1,241,615
(1,701,685)
200,728
(9,469,268)
(5,537,606)
(4,488,767)
(1,520,753)
73,289
490,867
(14,645,705)
(Loss) for the period
Adjustment for
Depreciation expense
Amortisation expense
Partnership distribution
Net (gain)/loss on sale of non-current assets
Litigation settlement expense
Gain on sale of discontinued operation, net of income tax
Income tax (benefit)/expense
Equity-settled share-based payment transactions
Change in operating assets and liabilities:
(Increase) in trade, other receivables and contract assets
(Increase) in inventories
Decrease/(increase) in prepayments
(Decrease)/increase in trade and other payables
Increase in other provisions
Net cash (outflow) from operating activities
70
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
28 Cash flow information (continued)
(b) Non-cash investing activities
During the year, the Group acquired license intangibles of a $1,918,067 with the corresponding entry recorded as
a non current payable of $1,563,462 (note 20) and the residual being paid by 31 December 2019.
29 Events occurring after the reporting period
On 10 February 2020 the Group announced that it had entered into an option agreement to acquire the shares of
its largest customer in the United Kingdom, a manufacturer of codeine phosphate finished dosage products.
Simultaneously, the Group also acquired four Market Authorisations from the customer for supply of codeine
phosphate based products into the United Kingdom, and on 18 February 2020 the Group acquired a further two
codeine phosphate based Market Authorisations from the same customer.
No other matters or circumstances have occurred subsequent to year end that has significantly affected, or may
significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group
or economic entity in subsequent financial years.
30 Earnings per share
(a) Reconciliation of earnings used in calculating earnings per share
Net loss used in calculating basic earnings per share:
Net loss used in calculating diluted earnings per share:
(b) Weighted average number of shares used as the denominator
Consolidated entity
31 December
2019
$
31 December
2018
$
7,639,443
7,639,443
6,907,412
6,907,412
Consolidated entity
2019
Number
2018
Number
Weighted average number of ordinary shares used in calculating basic earnings
per share
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
88,214,983
81,085,594
88,214,983
81,085,594
(c)
Information concerning the classification of securities
Fully paid ordinary shares carry the right to participate in dividends and the proceeds on winding up of the
Company in equal proportion to the number of shares held. At shareholder 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. Fully
paid ordinary shares are included as ordinary shares in the determination of basic earnings per share.
No other securities are currently on issue.
71
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
31 Share-based payments
At 31 December 2019, the Group had the following share-based payment arrangement:
Share appreciation rights (equity settled)
The establishment of the Group’s Share Appreciation Rights Plan was approved by shareholders at the 2017
annual general meeting.
Each Share Appreciation Right ("SAR") is an equity security that confers on the participant a right to be issued a
specified number of the Company's shares, calculated by reference to the increase in market price of the
Company's shares over a three year period, but subject to satisfaction of the vesting condition that the participant
must be an employee of the Group on the third anniversary of the grant date at the Boards discretion. Share
Appreciation Rights are granted under the plan for no consideration and carry no dividend or voting rights.
Tranche 1 Share Appreciation Rights are based on employment and Tranche 2 Share Appreciation Rights are
based on market prices or the Company's shares.
The fair value of the Share Appreciation Rights at grant date is determined using the Black-Scholes model.
Measurement of grant date fair values
The following inputs were used in the measurement of the fair values at grant date of the Share Appreciation
Rights granted:
SAR's Granted
2019
2019
2018
2017
Tranche 2
Tranche 1
Tranche 1
Tranche 1
Number of SAR's granted
1,890,697
1,160,136
800,000
1,259,597
Fair value at grant date
$0.001
$0.250
$0.330
$0.620
Grant date
28 March 2019
28 March 2019
28 March 2018
27 March 2017
Expiry and vesting date
28 March 2022
28 March 2022
28 March 2021
27 March 2020
Share price at grant date
Expected volatility
Risk-free interest rate
Expected dividends
$1.05
30%
2.5%
nil
$1.05
30%
2.5%
nil
$1.39
30%
2.5%
nil
$2.62
30%
2.5%
nil
None of the Share Appreciation Rights had vested at 31 December 2019. Total expenses arising from
share-based payment transactions recognised during the period as part of employee benefit expenses was
$343,633 (2018: $327,497).
Total number of Share Appreciation Rights granted as at 31 December 2019 are 5,110,430.
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price,
particularly over the historical period commensurate with the expected term. The expected term of the
instruments has been based on historical experience and general option holder behaviour.
72
Palla Pharma Limited
Notes to the consolidated financial statements
31 December 2019
(continued)
32 Parent entity financial information
(a) Summary financial information
The individual financial statements for the parent entity show the following aggregate amounts:
Balance sheet
Current assets
Total assets
Current liabilities
Total liabilities
Shareholders' equity
Issued capital
Reserves
(Accumulated losses)
Total shareholders' equity
(Loss) for the year of the parent entity
31 December
2019
$
31 December
2018
$
54,608,209
87,185,292
11,727,407
12,105,451
(117,960,643)
46,649,205
77,751,744
27,936,760
28,251,309
(68,212,880)
210,997,191
3,711,447
(139,628,797)
181,482,260
3,771,092
(135,752,917)
75,079,841
49,500,435
(3,875,880)
(6,189,898)
Total comprehensive (loss) of the parent entity
(3,875,880)
(6,189,898)
(b) Guarantees entered into by the parent entity
The parent entity did not enter any guarantees in relation to the debts of its subsidiaries as at 31 December 2019
or 31 December 2018.
(c) Contractual commitments for the acquisition of property, plant or equipment
Refer to note 26.
73
Palla Pharma Limited
Directors' declaration
31 December 2019
In the directors' opinion:
(a)
the consolidated financial statements and notes set out on pages 23 to 73 are in accordance with the
Corporations Act 2001, including:
(i)
(ii)
complying with Australian Accounting Standards, the Corporations Regulations 2001 and other
mandatory professional reporting requirements, and
giving a true and fair view of the consolidated entity's financial position as at 31 December 2019
and of its performance for the financial year ended on that date, and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
Note 2(a) confirms that the financial statements also comply with International Financial Reporting Standards as
issued by the International Accounting Standards Board.
The directors have been given the declarations by the chief executive officer and chief financial officer required
by section 295A of the Corporations Act 2001 for the financial year ended 31 December 2019.
This declaration is made in accordance with a resolution of directors.
Mr. Simon Moore
Director
Melbourne
27 February 2020
74
Independent Auditor’s Report
To the shareholders of Palla Pharma Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of
Palla Pharma Limited (the Company).
In our opinion, the accompanying
Financial Report of the Company is in
accordance with the Corporations Act
2001, including:
•
•
giving a true and fair view of the
Group's financial position as at 31
December 2019 and of its financial
performance for the year ended on
that date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
Basis for opinion
The Financial Report comprises:
• Consolidated statement of financial position as at 31
December 2019
• 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
• Notes including a summary of significant accounting
policies
• Directors' Declaration.
The Group consists of Palla Pharma Limited (the Company)
and the entities it controlled at the year end or from time to
time during the financial year.
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 (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
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.
75
Liability limited by a scheme approved under
Professional Standards Legislation.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Recoverable amount of plant and equipment and intangibles
Refer to property, plant and equipment ($26,693,955 Note 15) and intangible assets ($16,967,608 Note
16) to the Financial Report
The key audit matter
How the matter was addressed in our audit
A key audit matter for us was the Group’s
testing of intangible assets and property,
plant and equipment for impairment. The
Group has incurred a loss during the year
and has a history of operating losses, which
increased the judgement applied by us
when evaluating the evidence available. The
value of these assets is significant at
balance date (being 49% of total assets).
Given the operating losses, this has
increased the possibility of intangible assets
and property, plant and equipment being
impaired, plus the risk of inaccurate
forecasts or a wider range of possible
outcomes for us to consider.
Our audit attention focused on assessing
the significant judgements the Group
applied in their value in use model for the
Australian CGU. This model uses forward
looking estimations, which can be
inherently difficult to determine with
precision, and to audit. Key judgements and
estimates included the:
•
•
•
•
discount rate applied to the forecast
cash flows;
forecast cash outflows, in particular,
cost of purchases which is influenced
by supplier volumes, poppy straw
harvesting yields, and other climate-
induced volumes;
forecast cash inflows which is
influenced by forecast customer
demand, expected production volumes,
sales prices and foreign exchange rates;
and,
forecast growth rates applied in the
Group’s value in use model.
We involved valuation specialists to
supplement our senior audit team members
in assessing this key audit matter.
Our procedures included:
• We considered the appropriateness of the value in
use method applied by the Group to perform the
test of intangible assets and property, plant and
equipment for impairment against the requirements
of the accounting standards.
• We assessed the integrity of the value in use
models used, including the accuracy of the
underlying calculation formulas.
• We considered the sensitivity of the Group’s model
by varying key assumptions, such as the foreign
exchange rates and the discount rate, within a
reasonably possible range. We did this to identify
those CGUs at higher risk of impairment and to
focus our further procedures.
• We compared the forecast cash flows contained in
the value in use model to Board approved forecasts.
• We assessed the accuracy of previous Group
forecasts to inform our evaluation of forecasts
incorporated in the model.
• We checked the key judgements and estimates for
evidence of detailed review and approval by the
Directors.
• We challenged the significant forecast cash flows
and growth assumptions given the operating losses.
We compared key events to the Board approved
plan and strategy. We compared forecast growth
rates to published studies of industry trends and
expectations, and considered differences for the
Group’s operations. We used our knowledge of the
Group, their past performance, business and
customers, and our industry experience. In addition:
- We compared the forecast cash inflows, which
is influenced by expected production volumes to
the Group’s production plans and forecast
customer demand. We compared the sales
76
prices to historically achieved prices as per
underlying accounting records.
- Working with our valuation specialists we
compared the forecast foreign exchange rates
to published views of market commentators on
future trends.
- We compared the forecast cash outflows to the
previous year’s achieved poppy straw harvesting
yields, supplier and other climate-induced
volumes.
• Working with our valuation specialists, we
independently developed an acceptable range of
discount rates based on market data for comparable
entities, adjusted by risk factors specific to the
Group.
• We assessed the disclosures in the financial report
using our understanding obtained from our testing
and against the requirements of the accounting
standards.
Other Information
Other Information is financial and non-financial information in Palla Pharma Limited’s annual reporting
which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are
responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the
Remuneration Report and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or
our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other Information,
and based on the work we have performed on the Other Information that we obtained prior to the date of
this 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 that gives a true and fair view in accordance with Australian Accounting
Standards and the Corporations Act 2001
•
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
• assessing the Group and 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
77
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 Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf.
This description forms part of our Auditor’s Report.
Report on the Remuneration Report
Opinion
Directors’ responsibilities
In our opinion, the Remuneration
Report of Palla Pharma Limited for the
year ended 31 December 2019,
complies with Section 300A of the
Corporations Act 2001.
The Directors of the Company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with Section 300A of the Corporations Act 2001.
Our responsibilities
We have audited the Remuneration Report included in pages
10 to 18 of the Directors’ report for the year ended 31
December 2019.
Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
KPMG
Tony Batsakis
Partner
Melbourne
27 February 2020
78
Palla Pharma Limited
Shareholder information
31 December 2019
Class of
equity
security
Ordinary
shares
334
537
241
489
91
1,692
The shareholder information set out below was applicable as at 14 February 2020.
A. Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
There were 166 holders of less than a marketable parcel of ordinary shares.
B. Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Name
Washington H. Soul Pattinson and Company Limited
UBS Nominees Pty Ltd
Sandhurst Trustees Ltd
National Nominees Limited
JP Morgan Nominees Australia Limited
Colinton Investments Pty Ltd
Skylights Pty Ltd
Sico Holdings Pty Ltd
Sky Lights Pty Ltd
HSBC Custody Nominees (Australia) Limited
Gaspard Boot
Jarrod Ritchie & Catrina Ritchie
Bond Street Custodians Limited
Gowing Bros Limited
Ian Lindeman Pty Ltd
Langburgh Pty Ltd
Mr Jarrod David Ritchie
Radiata Investments Pty Ltd
Citicorp Nominees Pty Limited
Australian Philanthropic Services Foundation Pty Ltd
79
Ordinary shares
Number held
Percentage of
issued shares
25,040,465
23,489,809
10,664,711
10,005,876
3,969,361
2,963,895
2,906,714
2,740,741
2,173,024
1,908,772
1,498,000
1,381,177
1,298,729
1,064,914
850,001
723,173
703,587
701,060
582,525
500,000
95,166,534
19.9
18.7
8.5
7.9
3.2
2.4
2.3
2.2
1.7
1.5
1.2
1.1
1.0
0.8
0.7
0.6
0.6
0.6
0.5
0.4
75.8
Palla Pharma Limited
Shareholder information
31 December 2019
(continued)
C. Substantial shareholders
The Company’s Holders of Relevant Interests as notified by ASX Substantial Shareholders and the number of
shares in which they have an interest as disclosed by notices received under Part 6.7 of the Corporations Act
2001 as at 14 February 2020 are listed below:
Name
Washington H. Soul Pattinson and Company Limited & Brickworks Limited
Thorney Opportunities Limited & TIGA Trading Pty Limited
Wentworth Williamson Management Pty Ltd
Sico Holdings Pty Ltd ATF Oranje Trust and associates
National Nominees Ltd ACF Australian Ethical Investment Limited
D. Voting rights
Ordinary
Shares
Percentage
25,040,465
23,489,809
10,664,711
8,361,889
7,987,076
19.9%
18.7%
8.5%
6.6%
6.3%
The voting rights attaching to each class of equity securities are set out below:
(a)
Ordinary shares: on a show of hands every member present at a meeting in person or by proxy shall
have one vote and upon a poll each share shall have one vote.
80