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Paragon Care has emerged as a leading provider of equipment,
devices and consumables to the healthcare market.
Paragon Care is an ASX listed Company (PGC) which has
progressively acquired businesses in the healthcare sector.
Health.
Covered.
Paragon Care continues to build
it’s strong representation within
the following healthcare markets:
Hospital & Acute Care
Aged Care
Primary Care
Optometry/Ophthalmology
Medical Aesthetics
Materials Handling
Patient Stretchers
Mobile Surgical Units
Medical + Medication Carts
Screen Systems
IV Systems
Bedding Products
Mattresses
Furniture
Lifting Systems
Chair Systems
Ophthalmic Surgical Lasers + Devices
Kidney Stone Blasting
Specialty Diagnostic Equipment +
Recording Systems
IOL + Dry Eye Products
Magnification + Illumination Products
Consulting Room Equipment
Infection Control for Ultrasound Needle
Guides + Therapeutic Instruments
Stabilisers + Steppers for Transperineal
Biopsy, Brachytherapy + MRI Fusion Biopsy
Aesthetics Cooling Devices
Medical Cases + Bags
Nebulisers, Spares + Accessories
General Medical Products
Fashion Medical Scrubs
Blood Pressure, Sphygmomanometry
Stethoscopes
Resuscitation, Respiratory
CSSD Products
Surgical Instruments
Specialist Medical, Ophthalmology
Specialist Medical, Orthodontic
Aged Care Products
Acute Hospital Care Products
General Medicine
Veterinary Supplies
Women’s Healthcare
Shelving Systems
Service Carts
Refrigeration Systems
Mortuary Systems
Stainless Steel Equipment for the
Acute + Aged Care Markets
Hospital Trolleys, Case + List Carts
Chairs, Surgeon Stools, Examination
Couches + Screening Systems
Lithotomy, Mayo + Operating Theatre Tables
Operating Theatre Equipment
General Ward + Maternity Equipment
ICU Flow Chart Tables
Dermatologic + Cosmetic Medicine
Newborn Hearing Screening + Care
Targeted Temperature Management
Diagnostic + Intra-operative Ultrasound
Interpretive Reporting Platform
Contents
Corporate Directory
Chairman’s Report
Directors’ Report
Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001
Consolidated Statement of Profit or Loss and Other Comprehensive Income
2
3
4
13
15
16
Consolidated Statement of Financial Position
17
Consolidated Statement of Changes in Equity
18
Consolidated Statement of Cash Flows
19 Notes to the Financial Statements
46
Directors’ Declaration
47
Independent Audit Report
50
Shareholder Information
Paragon Care Limited
ABN 76 064 551 426
Registered Office
11 Dalmore Drive
Scoresby, VIC 3179
Telephone: 1300 369 559
Telephone: +61 3 8833 7800
Facsimile: +61 3 8833 7890
Principal Business Office
11 Dalmore Drive
Scoresby, VIC 3179
Telephone: 1300 369 559
Telephone: +61 3 8833 7800
Facsimile: +61 3 8833 7890
www.paragoncare.com.au
Corporate Directory
Directors
Shane Tanner [Non-Executive Chairman]
Mark Simari [Managing Director]
Michael Newton [Non-Executive Director]
Geoff Sam OAM [Non-Executive Director]
Brett Cheong [Executive Director]
Michael Rice [Alternate Director to Mr Simari]
Company Secretary
John Osborne
Stephen Munday
Share Registry
Link Market Services Limited
Level 1, 333 Collins St
Melbourne, VIC, 3000
Locked Bag A14
Sydney South, NSW, 1235
Telephone:1300 554 474
Facsimile: (02) 9287 303
Website: www.linkmarketservices.com.au
Stock Exchange Listing
Australian Stock Exchange
Trading Code:
PGC – Ordinary Shares
Auditor
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne, Victoria 3000
Website: www.rsmi.com.au
Bankers
National Australia Bank
Solicitors
SOHO Lawyers
Level 5, 124 Exhibition Street
Melbourne Vic 3000
2
Paragon Care Limited Financial Report 2015/16 Chairman’s Report
For the year ended 30 June 2016
Introduction
On behalf of the Board of Directors of Paragon Care Limited,
I am pleased to present to you our 2016 Annual Report.
The Period in Review
The financial year ended 30th June 2016 was a dramatic year of
change for Paragon Care Limited. The business grew substantially
on the back of three major acquisitions – Western Biomedical
in Western Australia, Designs for Vision, a national ophthalmic
equipment and consumables business, and Meditron, a leading
supplier of urological equipment and consumables.
The traditional capital equipment business continued to grow
well. In particular the devices portfolio that was acquired in 2014
continues to go from strength to strength. Paragon will continue
to grow both organically and also through strategic acquisitions
that make good economic sense. The pipeline of opportunities
continues to be strong.
I am pleased to report that the Paragon Care group of businesses
both old and new have been well bedded in and are operating as
one entity.
Highlights for the year ended 30 June 2016 included:
- Revenue up 190% to 93.4M.
- EBITDA of $12.1M, up 224% over the prior period and slightly ahead
of market guidance.
- Net Profit after tax of $7.5M up 257% over the prior year.
- Earnings per share of 5.6 cents, up 75%.
- The Company’s balance sheet remains sound with cash at year-end
of $19.1M
- Paragon’s share price increased 18% over the course of the
financial year as investors continued to embrace our story.
- Fully franked dividends for the year of 2.2 cents, up 57% from the
1.4 cents in the prior year.
- Paragon was admitted into the ASX All Ordinaries index, which
gives the company a wider access to capital as it grows.
The move to our new offices and the 6,400 square metres warehouse
in Scoresby in Victoria has gone very smoothly. It is a brilliant operation
and significant savings have been extracted. Great credit must go to
both our COO Mike Rice and Executive Director Brett Cheong for their
great work in leading this relocation project. The excellent integration
of the three new businesses is a testament to both the vendor
executives and the Paragon team. The company has blended into one
very quickly and cross synergies have commenced. I would also like to
welcome our new Non-Executive Director, Geoff Sam. Geoff has forged
a great career in the Australian Healthcare industry and his knowledge,
contacts and commercial approach will add great value to Paragon.
On behalf of the Board, I would like to thank the employees, customers,
suppliers and shareholders of Paragon Care for their continued
support. We have an outstanding management team led by Managing
Director Mark Simari, and I remain very confident in the company’s
ability to continue to generate value for all key stakeholder groups
moving forward.
Shane Tanner
Chairman
8 August 2016
Revenue
$93.4M
$32.2M
$19.4M
EBITDA
$12.1M
$3.7M
$1.8M
Net Profit
$7.5M
$2.1M
$1.1M
13/14
14/15
15/16
13/14
14/15
15/16
13/14
14/15
15/16
3
Paragon Care Limited Financial Report 2015/16 Your Directors present their report on the consolidated entity
(referred to hereafter as the Group) consisting of Paragon Care
Limited (“Company”) and the entities it controlled at the end of,
or during, the year ended 30 June 2016.
Directors
The following persons were Directors of Paragon Care Limited during
the whole of the financial year and up to the date of this report unless
otherwise stated.
Mr Shane Tanner
Mr Mark Simari
Mr Michael Newton
Mr Brett Cheong
Mr Geoff Sam (Appointed 3 June 2016)
Mr Michael Rice (Alternate Director for Mr Mark Simari)
Principal Activities
The principal continuing activity of the Group is supply of durable
medical equipment, medical devices and consumable medical
product to the health and aged care markets throughout Australia
and New Zealand.
There were no significant changes in the nature of the activities of
the Group that occurred during the year:
Operating Results and Review of Operations for the Year
Key financial highlights include:
Revenue
EBITDA
Net Profit
Net Debt
2015/16
$93.4 M
$12.1 M
$7.5 M
$19.0 M
2014/15
$32.2 M
$3.74 M
$2.10M
$12.25 M
The Group’s performance has significantly increased again in the
2015–16 financial year compared with 2014–15. Revenue increased
by 190% to $93.3 million whilst net profit grew from profit of $2.1
million in 2014–15 to $7.5 million for 2015–16.
The almost tripling in revenue was due primarily to the addition of our
Urology and Ophthalmics product portfolios and expansion of our
operations and presence into Western Australia through the
acquisitions of Meditron, Designs For Vision and Western Biomedical
in October 2015. These acquisitions added to organic growth in many
parts of the existing product ranges from a sales perspective on the
back of increased penetration into the sector and new product
development.
Directors’ Report
For the year ended 30 June 2016
The Group’s performance
has significantly increased
again in the 2015–16
financial year compared
with 2014–15.
Revenue increased
by 190% to $93.4 million
whilst net profit grew from
profit of $2.1 million in
2014–15 to $7.5 million
for 2015–16.
4
Paragon Care Limited Financial Report 2015/16
Directors’ Report Continued
For the year ended 30 June 2016
Highlights for the year included:
- Revenues in excess of $93.4m and an EBITDA of $12.1m, a substantial
increase from previous years and validation that the strategy of
creating a healthcare platform for a vast range of products and
servicing is successfully being implemented into the health care
sector.
- Successful integration of the Meditron and Designs for Vision
acquisitions. Through these acquisitions, Paragon Care’s equipment
devices and consumables platform range has been expanded into
Urology and Ophthalmics.
- The expansion of Paragon Care’s operations and presence into
Western Australia through the Western Biomedical acquisition has
facilitated the expansion into the region for the entire Paragon Care
suite of products.
- The organic growth of many parts of the existing product ranges has
continued this year from a sales perspective on the back of increased
penetration into the sector and new product development.
During the year Paragon Care has continued to grow and achieve its
vision of offering its customers a broad platform of products and
services designed to assist health professionals easily access high
quality medical products, devices and consumables to deliver better
and more affordable medical outcomes to their patients.
accept part of the earn-out consideration in an issue of new fully paid
ordinary shares to the value of $500,000 and the balance is cash. The
issue price of the new shares was $0.70 being the five day VWAP up to
and including 15 July 2016 and the new shares were issued on 18 July
2016.
No other matter or circumstance has arisen since 30 June 2016
that has significantly affected, or may significantly affect:
(a) The group’s operations in future financial years, or
(b) The results of those operations in future financial years, or
(c) The group’s state of affairs in future financial years.
Likely developments and expected results of operations
The Company’s focus for the coming year will be to continue to
implement its strategy to become one of Australia’s leading providers
of medical equipment and consumable products to the health and
aged care sector throughout Australia and New Zealand.
Leveraging the diverse product portfolio, Paragon Care will continue
to penetrate high growth markets driven by the ageing of the
population and continuously rising consumer expectations and
increasing government spending.
The Company will continue to seek and attempt to secure suitable
investments or businesses that are complimentary to its existing
operations and further enhance its product and service offering to
the health and aged care markets.
The continued expansion of hospital, aged care and allied health and
medical facilities in Australia and the underlying strength of the health
care sector provide strong growth markets in which Paragon Care’s
products and services are sold.
Further information on likely developments in the operations of the
Group and the expected results of operations have not been included
in this Annual Financial Report because the Directors believe it would
be likely to result in unreasonable prejudice to the Group.
Significant changes in the state of affairs
Contributed equity increased by $47,024,934 (from $23,611,121 to
$70,636,055) as the result of shares issued pursuant to the company’s
dividend re-investment plan; shares issued in consideration for the
acquisition of Meditron and Designs For Vision; and shares issued in
the September 2015 fund raising as part of the acquisition of Western
Biomedical, Meditron and Designs For Vision. Details of the changes in
contributed equity are disclosed in note 17 to the financial statements.
The net cash received from the increase in contributed equity was
used principally towards the acquisitions and to fund working capital.
Matters subsequent to the end of the financial year
On 8 July 2016 the company announced the acquisition of MIDAS
Software Solutions Pty Ltd (owner of the MIDAS intellectual property)
and the business and the assets of Spintech Oceania Pty Ltd (owner of
the distribution rights to MIDAS). The acquisition consideration will be
as follows:
- $2 million (less minimum working capital adjustments) via the
issuing of fully paid ordinary shares in PCG, with appropriate escrow
arrangements. The issue price for the calculation of the fully paid
shares will be $0.703, which is the 5-day volume weighted average of
the PCG share price to the 6 July 2016.
- An earn-out of 4 times MIDAS profit before tax (including R&D
expenses) will apply for the incremental growth from FY16 to FY18.
- 2.5% MIDAS revenue royalty for each founder following the initial
2-year period, as long as they remain contracted with PGC.
Environmental Regulations
The Group’s operations are not regulated by any significant
environmental regulation under a law of the Commonwealth or of
a State or Territory.
Dividends Paid
In keeping with Directors confidence of Paragon Care, the directors
have recommended the payment of a fully franked final dividend of
$2,286,911 (1.40 cents per fully paid ordinary share) to be paid on 6th
of October 2016 in respect of the financial year ended 30 June 2016.
The dividend will be paid to all shareholders on the register of
members as at the Record Date of 16th of September 2016. This
dividend has not been included as a liability in these financial
statements.
In April 2016, an interim dividend of 0.80 cents per share valuing
$1,277,737 fully franked was paid. The record date was 10th March
2016 with the payment date of 1st April 2016.
Combined with the interim dividend of 0.80 cents per fully paid
ordinary share paid in April 2016 in respect of the half year ended 31
December 2015, the full year dividend for 2016 will be 2.20 cents per
fully paid ordinary share, a 57% increase on the full year dividend of
1.40 cents per fully paid ordinary share for the 2015 financial year and
represents a 47.3% payout of NPAT which is at the higher end of the
40% to 50% company dividend payment policy.
Paragon Care paid a fully franked dividend of 1.4 cents per share with
the value of $978,786 for the year ended 30 June 2015 on 31 March
2015 (0.60 cents per share) and 18th of September 2016 (0.80 cents
per share).
The company expects the cash flow impact and the earnings impact
from this acquisition will not be material in FY17.
On 18 July 2016 the company announced the Meditron business
acquired in October 2015 performed well in the year to 30 June 2016.
As a result, the vendor is entitled to receive the full earn-out amount of
$800,000 as advised in the Acquisition & Capital Raising Presentation
of 26 August 2015. The vendor of the Meditron business has decided to
Dividend Reinvestment Plan
Paragon Care operates a dividend reinvestment plan (DRP) that
enables shareholders to elect to reinvest all, or up to a portion of,
their dividends into additional shares in Paragon. The DRP has been
available since the interim dividend payable on 31 March 2014.
Shares will be issued at a discount of 2.5% to the volume weighted
average market price of shares sold on the ASX over the 5 trading days
immediately preceding the record date.
5
Paragon Care Limited Financial Report 2015/16
Directors’ Report Continued
For the year ended 30 June 2016
Information on Directors
The names of Directors in office at any time during or since
the end of the financial year are:
Directors’ Qualifications,
Experience, and Responsibilities
Mr Shane Tanner
Mr Mark Simari
Mr Brett Cheong
Mr Michael Newton
Mr Geoffrey Sam (Appointed 3 June 2016)
Mr Michael Rice (Alternate Director to Mr Simari)
Directors have been in office since the start of the financial year to the
date of this report (unless otherwise stated).
Mr Shane F Tanner
Non-Executive Chairman, Age 63
Mr Mark A Simari
Managing Director, Age 47
Qualifications
FCPA, AGIA
Qualifications
B.Acc, Dip FS
Experience
Chairman of Funtastic Limited and Chairman of
BGD Limited and Non-Executive Director of Jayex
Healthcare Limited. Formerly Chairman of Vision
Eye Institute Limited
Appointed as a Director on 21 December 2005
Experience
Former Director of DKN Financial Group Limited.
Former Director of Sage Capital Group Pty Ltd.
Director of Garmak Enterprises Pty Ltd.
Appointed as a Director on 13 February 2007
and Managing Director on 15 April 2007
Responsibilities
Chairman of the Board
Responsibilities Managing Director
Chairman of the Nominations
& Remuneration Committee
Member of the Audit &
Risk Management Committee
Mr Geoffrey J Sam OAM
Non-Executive Director, Age 62
Mr Michael C Newton
Non-Executive Director, Age 62
Qualifications
B.App Sci., Grad Dip Bus Adm.
Experience
Managing Director of Symex Limited from 1999 to 2007
and Chairman of The Power House Youth Leadership
Foundation.
Appointed as a Director on 22 June 2007
Responsibilities
Chairman of the Audit & Risk Management Committee
Member of the Nominations & Remuneration Committee
Qualifications
B. Commerce, M. Hospital Administration and
M. Economics & Social Studies. FAICD
Experience
Over 35 years experience in the Australian health sector.
Co-founder and former Executive Chairman,
Healthecare Pty Ltd.
Non-Executive Director, CML Group Limited.
Former Non-executive Chairman, Money3 Corporation
Limited (retired December 2013)
Former Managing Director, Nova Health Limited.
Board Member, Country Health SA Local Health
Network Advisory Board.
Member of Council, Australian Private Hospitals
Association (former National President)
Appointed as a Director on 3 June 2016
Responsibilities Member of the Audit & Risk Management Committee
Member of the Nominations & Remuneration
Committee
6
Paragon Care Limited Financial Report 2015/16
Directors’ Report Continued
For the year ended 30 June 2016
Mr Brett A Cheong
Executive Director, Age 57
Mr Michael G Rice
Alternate Director, Age 40
Experience
Founder and Managing Director of Axishealth
May 2002–June 2009 and with over 30 years
experience in the durable medical equipment industry.
Experience
Appointed as a Director on 2 July 2009
Responsibilities Marketing Manager
Founder and Managing Director of GM Medical—
April 2002–June 2011, Over 20 years experience
in the healthcare sector.
Appointed as an Alternate Director to Mr Simari
on 11 June 2015
Responsibilities
Chief Operating Officer
Mr John Osborne
Company Secretary, Age 67
Mr Stephen J Munday
Company Secretary, Age 52
Qualifications
BSc, FRMIT (Management), Grad Dip Corp Gov.,AGIA
Qualifications
MBA, B Bus, FCIS, CA
Experience
Over 30 years of senior financial, administrative,
commercial and company secretarial experience with
ASX listed companies.
Experience
Appointed as Company Secretary on
13 March 2015
Over thirty years business experience in Australia and
North America including CFO and company secretarial
positions in listed companies over that time.
He has also been responsible for various management
functions including marketing, business development,
supply management, commercial management,
financial management and change management.
Appointed as Company Secretary on
17 December 2015
Meetings of Directors
The number of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2016,
and the number of meetings attended by each Director were:
Directors’ Meetings
Audit & Risk
Management Committee
Nominations &
Remuneration Committee
Number eligible
to attend
Number
attended
Number eligible
to attend
Number
attended
Number eligible
to attend
Number
attended
Mr S F Tanner
Mr M A Simari
Mr B A Cheong
Mr M C Newton
Mr G J Sam
Mr M G Rice (Alternate Director)
14
14
14
14
0
14
14
14
14
14
0
14
1
-
-
1
0
-
1
-
-
1
0
-
2
-
-
2
0
-
2
-
-
2
0
-
7
Paragon Care Limited Financial Report 2015/16 Directors’ Report Continued
For the year ended 30 June 2016
Director Shareholdings
Total
30 June 2015
Total
30 June 2016
502,867
205,148
N/A¹
1,674,204
2,633,208
134,058
610,000
307,699
582,526
1,707,611
2,642,640
134,058
Directors
S F Tanner
M C Newton
G J Sam
M A Simari
B A Cheong
M G Rice (Alternate to Mr Simari)
¹ Mr Sam appointed 3 June 2016
Remuneration Report
This remuneration report sets out remuneration information for
Paragon Care’s Non-Executive Directors, Executive Directors, and
other key management personnel.
Directors and key management personnel disclosed in this report
Non-Executive and Executive Directors (see page 6)
S F Tanner
M C Newton
G J Sam OAM
M A Simari
B A Cheong
M G Rice
to the performance of the Company. However, to align Directors’
interests with shareholder interests, the Directors are encouraged
to hold shares in the Company.
Non-Executive Directors’ remuneration reflects the additional
responsibilities each Director may take on from time to time.
There are no termination benefits for Non-Executive Directors.
Directors’ Fees
The current Director’s fees were last reviewed with effect from
1 July 2015. The following fees have applied:
Base Fees
Chairman
Other Non-Executive Directors
From
1 Jan 2016
$120,000
$50,000
From
1 July 2015 to
31 Dec 2015
$88,965
$40,645
Executive Pay
The objective of the Group’s Executive reward framework is to ensure
reward for performance is competitive and appropriate for the results
delivered. The framework aligns Executive reward with achievement
of strategic objectives and the creation of value for shareholders, and
conforms to market practice for delivery of reward. The Board ensures
that Executive reward satisfies the following key criteria for good
reward governance practices:
- Competitiveness and reasonableness
- Acceptability to shareholders
- Performance linkage / alignment of Executive compensation
- Transparency
- Capital management
Other key management personnel
M R Parker
Chief Financial Officer (until 13 March 2015)
S J Munday
Chief Financial Officer (1 June 2015 onwards)
Remuneration governance
The remuneration committee is a committee of the Board. It is
primarily responsible for making recommendations to the Board on:
- The over-arching Executive remuneration framework
- Remuneration levels of Executive Directors and other key management
personnel, and
- Non-Executive Directors fees
Their objective is to ensure that remuneration policies and structures
are fair, competitive and aligned with the long term interests of the
Company.
The Group has structured an Executive remuneration framework that
is market competitive and complementary to the reward strategy of
the organisation.
The remuneration committee is responsible for determining and
reviewing compensation arrangements. The remuneration committee
assess the appropriateness of the nature and amount of emoluments
of company Executives on a periodic basis by reference to relevant
employment market conditions and capacity to pay with the overall
objective of ensuring maximum stakeholder benefit from the retention
of a high quality Board and Executive team. Remuneration packages
are set at levels that attract and retain Executives capable of
managing the Company’s operations. Remuneration and other terms
of employment for the Managing Director and Executives have been
formalised in service agreements.
Agreements are structured as a total employment cost package which
may be delivered as a combination of cash and prescribed non-
financial benefits at the Executives’ discretion.
The Corporate Governance Statement provides further information on
the role of this committee.
The Company did not receive any specific feedback at the AGM or
throughout the year on its remuneration practices.
Principles used to determine the nature and amount of remuneration
Details of remuneration and service agreements
Non-Executive Directors
Service Agreements
The Board’s policy is to remunerate Non-Executive Directors at
market rates for comparable companies for time, commitment and
responsibilities. Detail of the remuneration of each Non-Executive
Director is shown below. The Chairman in consultation with
independent advisors determines payments to the Non-Executive
Directors and reviews their remuneration annually, based on market
practice, duties and accountability. The maximum aggregate amount
of fees that can be paid to Non-Executive Directors is subject to
approval by shareholders in a General Meeting, and is currently
$250,000 per annum. Fees for Non-Executive Directors are not linked
On appointment to the Board, all Non-Executive Directors enter
into a service agreement with the company in the form of a letter of
appointment. The letter summarises the Board policies and terms,
including compensation, relevant to the office of Director.
Remuneration and other terms of employment for Executive Directors
and other senior executives and key management are also formalised
in service agreements.
8
Paragon Care Limited Financial Report 2015/16 Directors’ Report Continued
For the year ended 30 June 2016
Company share performance shareholder wealth and
Director Executive remuneration
In considering Non-Executive Director and executive remuneration the
Directors take into consideration the Company’s share performance and
shareholder wealth creation. During the financial year the Company’s
share price traded between a low of 54.0¢ and a high of 72.9¢. As at 30
June 2016 the, Company’s share price (ASX: PGC) was 70.0¢ per share.
PGC Share Performance
Year Ended
Price High ¢
Price Low ¢
Price 30 June ¢
Earnings ¢ per share
Dividends ¢
Dividends ¢ (Interim)
Net Asset $ million
30 June 2011
30 June 2012
30 June 2013
30 June 2014
30 June 2015
30 June 2016
5.0
2.5
4.0
0.3
Nil
Nil
5.05
43.5
19.5
19.5
(0.2)
Nil
Nil
6.45
43.5
17.0
30.5
1.7
Nil
Nil
48.5
22.5
26.0
2.0
1.0
0.5
59.0
25.0
59.0
3.2
1.35
0.6
72.9
54.0
70.0
5.1
2.2
0.8
10.37
18.20
20.58
72.26
Major provisions of the agreements as at 30 June 2016 relating to
remuneration are set out below:
Name
Term of Agreement
Base Salary Including
Superannuation
Termination Benefit
Non-Executive Directors
Mr S F Tanner,
Non-Executive Chairman
Mr M C Newton,
Non-Executive Director
Mr G J Sam
Non-Executive Director
Executive Directors
Mr M A Simari,
Executive Director / CEO
Mr B A Cheong,
Executive Director / Marketing Manager
Mr Michael Rice,
Alternate Director / Chief Operating Officer
Other Key Management Personnel
Mr Stephen Munday,
Chief Financial Officer (Appointed June 2015)
No fixed term
$120,000
No termination benefit
No fixed term
No fixed term
$50,000
No termination benefit
$50,000
No termination benefit
No fixed term
$438,000
No termination benefit
No fixed term
$160,000
(consultancy package)
No termination benefit
No fixed term
$240,000
No termination benefit
No fixed term
$290,000
No termination benefit
9
Paragon Care Limited Financial Report 2015/16
Directors’ Report Continued
For the year ended 30 June 2016
Emoluments of Directors, Executive officers and other Executives of the Company:
2016
Name
Non-Executive Directors
Mr S F Tanner
Mr M C Newton
Mr G J Sam
Executive Directors
Mr M A Simari
Mr B A Cheong
Mr M G Rice
Other Key Management Personnel
Mr S J Munday
Total
Short-Term Employee Benefits
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Cash Salary
and Fees
Cash Bonus
Non-Monetary
Benefits
Super-
annuation
Long Service
Leave
Options
$
104,348
7,752
3,623
338,824
150,000
220,000
230,000
1,054,547
$
-
-
-
-
-
-
-
-
$
-
-
-
$
34,333
344
19,437
15,000
-
-
27,447
20,900
-
35,000
46,885
105,557
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
2015
Name
Short-Term Employee Benefits
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Cash Salary
and Fees
Cash Bonus
Non-Monetary
Benefits
Super-
annuation
Long Service
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Non-Executive Directors
Mr S F Tanner
Mr M C Newton
Executive Directors
Mr M A Simari
Mr B A Cheong
Mr M G Rice
Other Key Management Personnel
Mr S J Munday
Mr M Parker
Total
$
77,124
2,690
230,767
124,000
200,000
-
130,545
765,126
$
-
-
-
-
-
-
-
-
$
-
-
16,256
-
-
-
-
16,256
$
-
29,644
-
-
19,000
20,000
11,722
80,366
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
Total
$
104,348
42,084
3,967
373,262
150,000
268,347
265,000
1,207,008
Total
$
77,124
32,334
247,023
124,000
219,000
20,000
142,267
861,748
The elements of emoluments have been determined on the basis of the cost to the Company.
Except as detailed in the Remuneration Report or below, no Director has received or become entitled to receive, during or since the financial
period, a benefit because of a contract made by the Company or a related body corporate with a Director, a firm of which a Director is a member
or an entity in which a Director has a substantial financial interest. This statement excludes a benefit included in the aggregate amount of
emoluments received or due and receivable by Directors and shown in the Remuneration Report, prepared in accordance with the Corporations
regulations, or the fixed salary of a full time employee of the Company.
10
Paragon Care Limited Financial Report 2015/16 Directors’ Report Continued
For the year ended 30 June 2016
Directors’ Interest in Contracts with the Company
Directors and Officers Indemnity
There are no material contracts involving Directors’ interests at the end
of the financial year nor have any been entered into since the end of
the previous financial year not otherwise disclosed in this report.
The Paragon Healthcare business leased premises from Mr Brett
Cheong and Mrs Lynn Cheong, Mr Cheong being a Director of the
Company. The lease ran for 3 years from 1 January 2013. The rent paid
was on commercial terms and the directors consider Mr Cheong’s
association with the arrangement is on arm’s-length terms and
conditions. The total rent paid to Mr and Mrs Cheong by the Company
for the year ended 30 June 2016 was $78,300.
The Company has entered into an Indemnity Deed with each of the
Directors which will indemnify them against liability incurred to a
third party (not being the Company or any related company) where the
liability does not arise out of the conduct involving a lack of good faith.
The Indemnity Deed will continue to apply for a period of 10 years after
a Director ceases to hold office. There is also a Directors’ Access and
Insurance Deed with each of the Directors pursuant to which a Director
can request access to copies of documents provided to the Director
whilst serving the Company for a period of 10 years after the Director
ceases to hold office. There will be certain restrictions on the Directors’
entitlement to access under the deed.
Proceedings on Behalf of Company
No person has applied for leave of the Court under section 237 of the
Corporations Act 2001 for leave to bring proceedings on behalf of the
Company or 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 any part of those proceedings.
No proceedings have been brought or intervened in on behalf of
the Company with leave of the court. The Company was not a party
to any such proceedings during the year under section 237 of the
Corporations Act 2001.
Corporate Governance Statement
In accordance with ASX Listing Rule 4.10.3, the Company’s 2016
Corporate Governance Statement can be found on its website at
www.paragoncare.com.au/statement-of-corporate-governance
Directors’ Interests
As at the date of this report the interests of the Directors held either
directly or through entities they control, in the securities of the
Company are as follows:
Fully paid ordinary shares (PGC)
Mr S F Tanner
Mr M A Simari
Mr M C Newton
Mr G J Sam
Mr B A Cheong
Mr M G Rice
610,000
1,707,611
307,699
582,526
2,642,640
134,058
The Directors of the Company are encouraged to hold shares in the
Company and are permitted to trade in the Company’s securities
consistent with the Company’s securities trading policy (refer
Corporate Governance Report). All Directors sign an agreement with
the Company in which they undertake to advise the Company whenever
they or a related party trades in the Company’s securities.
It is the Company’s policy that Directors and Executives of the
Company are required to seek the prior written approval of the Board
before entering into hedging arrangements in respect to their holdings
of company equity instruments.
The Executive or Director must provide full details of any such hedging
arrangements for consideration by the Board. The Board will consider
each approach for approval on its merits, taking into account the size
of the holding, the level of exposure, the repayment requirements and
the impact any adverse market conditions may have on the capital
structure of the Company.
Indemnification and Insurance of Directors and Officers
During the financial year the Company has paid premiums to insure
all the Directors and Officers against liabilities for costs and expenses
incurred by them in defending any claims arising out of their conduct
while acting in the capacity of Director of the Company to the extent
permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of the liability and the amount of
the premium.
11
Paragon Care Limited Financial Report 2015/16 Directors’ Report Continued
For the year ended 30 June 2016
Auditor
RSM Australia Partners was appointed Company auditor on 27
November 2009 and will continue in office in accordance with section
327 of the Corporations Act 2001.
Non-Audit Services
The Company may decide to engage the auditor on assignments
additional to their statutory audit duties where the auditor’s expertise
and experience with the Group are important.
The Board of Directors has considered the position and is satisfied
that the provision of the non-audit services listed below is compatible
with the general standard of independence for auditors imposed by the
Corporations Act 2001.
During the year the following fees were paid or payable for services
provided by RSM Australia Partners, the auditor of the parent entity, its
related practices and non-related audit firms:
Audit Services
Audit and review of financial reports
and other audit work under the
Corporations Act 2001
Non Audit Services
Taxation Services
Other Services
2016
$
2015
$
79,010
69,000
24,108
18,000
-
-
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 13.
Signed in accordance with a resolution of the Directors:
S F Tanner
Chairman
8 August 2016
12
Paragon Care Limited Financial Report 2015/16 Auditor’s Independence Declaration
For the year ended 30 June 2016
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Paragon Care Limited for the year ended 30 June 2016, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
R B MIANO
Partner
Melbourne, Victoria
Dated: 8 August 2016
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
13
Paragon Care Limited Financial Report 2015/16
FINANCIAL
STATEMENTS
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For the year ended 30 June 2016
Revenue from continuing operations
Revenue
Cost of sales
Gross profit
Other income
Operating costs
Corporate costs
Finance costs
Selling and distribution
Employee and consultants costs (incl. Directors fees and remuneration)
Profit/(loss) before tax
Income tax expense
Profit/(loss) from continuing operations
Other comprehensive income
Items that may be reclassified to Profit or Loss
Gain (Loss) on cash flow hedges and currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit for the period attributable to:
Owners of the parent
Total comprehensive income for the year attributable to:
Owners of the parent
Earnings per share
Basic (cents per share)
Diluted (cents per share)
Note
3
4
2016
$
2015
$
93,383,052
32,223,351
(56,924,483)
(16,712,124)
36,458,569
15,511,227
36,872
6,140
(6,414,255)
(2,950,084)
(444,538)
(1,504,972)
(1,094,469)
(273,382)
(696,224)
(182,829)
(17,168,084)
(8,718,271)
9,869,123
2,696,577
7
(2,338,600)
(593,421)
7,530,523
2,103,156
(550,603)
(550,603)
377,994
377,994
6,979,920
2,481,150
7,530,523
2,103,156
6,979,920
2,481,150
22
22
5.6
5.6
3.2
3.2
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes
which form an integral part of these financial statements
15
Paragon Care Limited Financial Report 2015/16 Consolidated Statement of Financial Position
For the year ended 30 June 2016
Assets
Current assets
Cash and cash equivalents
Inventories
Trade and other receivables
Other financial assets
Total current assets
Non-Current Assets
Plant and equipment
Deferred tax assets
Other receivables
Intangibles
Total non-current assets
Total Assets
Liabilities
Current liabilities
Trade and other payables
Interest bearing liability
Other financial liabilities
Provision for Income Tax
Provisions
Total current liabilities
Non-current liabilities
Other Payables
Interest bearing liability
Provisions
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
Retained earnings (Accumulated losses)
Total Equity
Note
2016
$
2015
$
8
9
10
11
12
7
13
14
15
11
16
14
15
16
17
18
19,116,930
22,615,886
19,400,652
-
3,755,847
8,413,501
7,139,034
264,056
61,133,468
19,572,438
2,982,624
2,331,507
302,979
1,193,537
834,280
-
81,038,905
18,985,712
86,656,015
21,013,529
147,789,483
40,585,967
23,464,613
7,562,765
322,063
568,431
1,823,933
6,278,612
5,522,627
-
568,217
786,317
33,741,805
13,155,773
10,269,251
67,605
30,591,710
6,730,236
416,483
48,771
41,277,444
6,846,612
75,019,249
20,002,385
72,770,234
20,583,582
70,636,055
23,611,121
(286,547)
264,056
2,420,726
(3,291,595)
72,770,234
20,583,582
The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes which form an integral part of
these financial statements
16
Paragon Care Limited Financial Report 2015/16 Consolidated Statement of Changes in Equity
For the year ended 30 June 2016
Balance at 1 July 2014
Profit / (loss) for the year
Gain / (loss) on cash flow hedge
Total comprehensive income for the year
Issue of share capital
Dividend issued in the year
Balance at 30 June 2015
Balance at 1 July 2015
Profit / (loss) for the year
Gain / (loss) on cash flow hedge
Gain / (loss) on currency translation
Total comprehensive income for the year
Share Capital
$
22,808,822
-
-
-
802,299
-
23,611,121
23,611,121
-
-
-
-
Issue of share capital net of transaction costs
47,024,934
Dividend issued in the year
Balance at 30 June 2016
-
Currency
Translation
Reserve
Currency
Hedge Reserve
Retained Earnings
(Accumulated
Losses)
Total Equity
$
-
-
-
-
-
-
-
-
-
-
38,871
38,871
-
-
$
$
$
(113,938)
(4,486,621)
18,208,263
-
2,103,156
377,994
377,994
-
-
-
2,103,156
-
(908,132)
2,103,156
377,994
2,481,150
802,299
(908,132)
264,056
(3,291,595)
20,583,582
264,056
(3,291,595)
20,583,582
-
7,530,523
(589,473)
-
-
-
(589,473)
7,530,523
-
-
-
(1,818,200)
7,530,523
(589,473)
38,871
6,979,920
47,024,934
(1,818,200)
72,770,234
70,636,055
38,871
(325,417)
2,240,726
The above Consolidated Statement of Changes of Equity should be read in conjunction with the accompanying notes which form an integral part
of these financial statements
17
Paragon Care Limited Financial Report 2015/16 Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest and other items of similar nature paid
Interest received
Income taxes paid
Note
2016
$
2015
$
87,307,784
30,999,218
(74,724,846)
(29,269,701)
(1,504,972)
(696,224)
85,126
30,891
(3,403,871)
(254,310)
Net cash provided by / (used in) operating activities
8(b)
7,759,221
809,874
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Proceeds from sale of plant and equipment
Payment for plant and equipment
Payment for development of website and software
Net cash provided by / (used in) investing activities
Cash flows from financing activities
Proceeds from borrowings
Proceeds from issues of securities
Dividends paid
Other—share issue costs
Net cash provided by / (used in) financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial period
8(a)
(55,213,428)
(5,878,306)
195,720
(1,548,447)
(675,594)
82,588
(886,319)
(389,103)
(57,241,749)
(7,071,140)
27,113,505
7,947,845
42,136,144
(1,606,088)
(2,799,949)
157,021
(908,132)
-
64,843,612
7,196,734
15,361,083
3,755,847
19,116,930
935,468
2,820,379
3,755,847
The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes which form an integral part of these
financial statements
18
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements
For the year ended 30 June 2016
Note 1 Summary of Significant Accounting Policies
(d) Foreign Currency Translation
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below. These
policies have been consistently applied to all years presented, unless
otherwise stated. The financial statements are for the consolidated
entity consisting of Paragon Care Limited and its subsidiaries.
(a) Basis of Preparation
These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards and interpretations
issued by the Australian Accounting Standards Board and the
Corporations Act 2001. Paragon Care Limited is a for-profit entity
for the purpose of preparing the financial statements.
Australian Accounting Standards set out accounting policies that
the AASB has concluded would result in a financial report containing
relevant and reliable information about transactions, events and
conditions to which they apply. Compliance with Australian Accounting
Standards ensures that the financial statements and notes also
comply with International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board (IASB).
Material accounting policies adopted in the preparation of these
financial statements are presented below. They have been consistently
applied unless otherwise stated.
These financial statements have been prepared under the historical
costs convention modified, where applicable, by the measurement
at fair value of selected non-current assets, financial assets and
financial liabilities.
(b) Principles of Consolidation
The consolidated financial statements incorporate the assets,
liabilities and results of entities controlled by the Company at the
end of the reporting period. A controlled entity is any entity over
which Company has the power to govern the financial and operating
policies so as to obtain benefits from the entity’s activities. Control will
generally exist when the parent owns, directly or indirectly through
subsidiaries, more than half of the voting power of an entity.
In assessing the power to govern, the existence and effect of holdings
of actual and potential voting rights are also considered.
Where controlled entities have entered or left the Group during the
year, the financial performance of those entities are included only for
the period of the year that they were controlled. A list of controlled
entities is contained in Note 20 to the financial statements.
In preparing the consolidated financial statements, all inter-group
balances and transactions between entities in the consolidated
group have been eliminated on consolidation. Accounting policies
of subsidiaries have been changed where necessary to ensure
consistency with those adopted by the parent entity.
Non-controlling interests, being the equity in a subsidiary not
attributable, directly or indirectly, to a parent, are shown separately
within the Equity section of the consolidated Statement of Financial
Position and Statement of Profit or Loss and Other Comprehensive
Income. The non-controlling interests in the net assets comprise their
interests at the date of the original business combination and their
share of changes in equity since that date.
(c) Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for allocating
resources, and assessing performance of the operating segments has,
been identified as the Board of Directors.
The consolidated financial statements are presented in Australian
dollars, which is the Company’s functional and presentation currency.
Foreign currency transactions are translated into functional currency
using the exchange rates prevailing at the date of the transaction.
Foreign currency monetary items are translated at the year-end
exchange rate.
Non-monetary items measured at historical cost continue to be carried
at the exchange rate at the date of the transaction. Non-monetary
items measured at fair value are reported at the exchange rate at the
date when fair values were determined.
Exchange differences arising on the translation of monetary items are
recognised in the Statement of Profit or Loss and Other Comprehensive
Income, except where deferred in equity as a qualifying cash flow or
net investment hedge.
(e) Revenue Recognition
Sale of goods
The group manufactures and sells a range of goods to the wholesale
and end user market. Sales of goods are recognised when a group
entity has delivered product and there is no unfulfilled obligation that
could affect the customer’s acceptance of the product. Delivery does
not occur until the products have been shipped to the customer, the
risks of obsolescence and loss have been transferred, the customer
has accepted the products in accordance with the sales contract,
the acceptance provisions have lapsed, or the group has objective
evidence that all criteria for acceptance have been satisfied.
Amounts disclosed as revenue are net of returns, trade allowances,
duties and tax paid.
No element of financing is deemed present as the sales are made
with a credit term of between 30 and 60 days which is consistent with
market practice.
Service
Revenue from service is recognised in the accounting period in which
the services are rendered. For fixed-price contracts, revenue is
recognised under the percentage of completion method, based on
the actual service provided as a percentage of the total services to be
provided.
Interest revenue is recognised on an accrual basis taking into account
the interest rates applicable to the financial assets.
Dividend revenue from investments is recognised when the Group’s
right to receive payment has been established.
(f) Income Tax
The income tax expense (revenue) for the year comprises current
income tax expense (income) and deferred tax expense (income).
Current income tax expense charged to the profit or loss is the tax
payable on taxable income calculated using applicable income tax
rates enacted, or substantively enacted, as at the end of the reporting
period. Current tax liabilities (assets) are therefore measured at the
amounts expected to be paid to (recovered from) the relevant taxation
authority.
Deferred income tax expense reflects movements in deferred tax asset
and deferred tax liability balances during the year as well as unused
tax losses.
Current and deferred income tax expense (income) is charged or
credited directly to equity instead of the profit or loss when the tax
relates to items that are credited or charged directly to equity.
19
Paragon Care Limited Financial Report 2015/16
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
(f) Income Tax (continued)
Deferred tax assets and liabilities are ascertained based on temporary
differences arising between the tax bases of assets and liabilities and
their carrying amounts in the financial statements. Deferred tax assets
also result where amounts have been fully expensed but future tax
deductions are available. No deferred income tax will be recognised
from the initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable profit
or loss.
Deferred tax assets and liabilities are calculated at the tax rates that
are expected to apply to the period when the asset is realised or the
liability is settled, based on tax rates enacted or substantively enacted
at the end of the reporting period. Their measurement also reflects the
manner in which management expects to recover or settle the carrying
amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused
tax losses are recognised only to the extent that it is probable that
future taxable profit will be available against which the benefits of the
deferred tax asset can be utilised. Where temporary differences exist
in relation to investments in subsidiaries, branches, associates, and
joint ventures, deferred tax assets and liabilities are not recognised
where the timing of the reversal of the temporary difference can be
controlled and it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where a legally enforceable
right of set-off exists and it is intended that net settlement or
simultaneous realisation and settlement of the respective asset and
liability will occur. Deferred tax assets and liabilities are offset where
a legally enforceable right of set-off exists, the deferred tax assets
and liabilities relate to income taxes levied by the same taxation
authority on either the same taxable entity or different taxable entities
where it is intended that net settlement or simultaneous realisation
and settlement of the respective asset and liability will occur in
future periods in which significant amounts of deferred tax assets or
liabilities are expected to be recovered or settled.
Tax consolidation
Paragon Care Limited and its wholly-owned Australian subsidiaries
have formed an income tax consolidated group under tax consolidation
legislation. Each entity in the Group recognises its own current and
deferred tax assets and liabilities. Such taxes are measured using the
‘stand-alone taxpayer’ approach to allocation. Current tax liabilities
(assets) and deferred tax assets arising from unused tax losses and
tax credits in the subsidiaries are immediately transferred to the head
entity. The Group notified the Australian Taxation Office that it had
formed an income tax consolidated group to apply from 1 July 2008.
The tax consolidated group has entered a tax funding arrangement
whereby each company in the Group contributes to the income tax
payable by the Group in proportion to their contribution to the Group’s
taxable income. Differences between the amounts of net tax assets
and liabilities derecognised and the net amounts recognised pursuant
to the funding arrangement are recognised as either a contribution by,
or distribution to the head entity.
(g) Leases
Leases of plant and equipment where the Group as lessee has
substantially all the risks and benefits of ownership are classified as
finance leases.
Finance leases are capitalised by recording an asset and a liability at
the lower of the amounts equal to the fair value of the leased property
or the present value of the minimum lease payments, including any
guaranteed residual values. Lease payments are allocated between
the reduction of the lease liability and the lease interest expense for
the period.
20
Assets acquired under finance leases are depreciated on a straight-
line basis over the shorter of their estimated useful lives or the lease
term.
Lease payments for operating leases, where substantially all the risks
and benefits remain with the lessor, are charged as expenses in the
periods in which they are incurred.
(h) Business Combinations
Business combinations occur where an acquirer obtains control over
one or more businesses and results in the consolidation of its assets
and liabilities.
A business combination is accounted for by applying the acquisition
method, unless it is a combination involving entities or businesses
under common control. The acquisition method requires that for each
business combination one of the combining entities must be identified
as the acquirer (i.e. parent entity). The business combination will be
accounted for as at the acquisition date, which is the date that control
over the acquiree is obtained by the parent entity. At this date, the
parent shall recognise, in the consolidated accounts, and subject to
certain limited exceptions, the fair value of the identifiable assets
acquired and liabilities assumed. In addition, contingent liabilities of
the acquiree will be recognised where a present obligation has been
incurred and its fair value can be reliably measured.
The acquisition may result in the recognition of goodwill or a gain
from a bargain purchase. The method adopted for the measurement
of goodwill will impact on the measurement of any non-controlling
interest to be recognised in the acquiree where less than 100%
ownership interest is held in the acquiree.
The acquisition date fair value of the consideration transferred for
a business combination plus the acquisition date fair value of any
previously held equity interest shall form the cost of the investment in
the separate financial statements. Consideration may comprise the
sum of the assets transferred by the acquirer, liabilities incurred by the
acquirer to the former owners of the acquiree and the equity interests
issued by the acquirer.
Fair value uplifts in the value of pre-existing equity holdings are taken
to the Statement of Profit or Loss and Other Comprehensive Income.
Where changes in the value of such equity holdings had previously
been recognised in other comprehensive income, such amounts are
recycled to profit or loss.
Included in the measurement of consideration transferred is any asset
or liability resulting from a contingent consideration arrangement. Any
obligation incurred relating to contingent consideration is classified
as either a financial liability or equity instrument, depending upon
the nature of the arrangement. Rights to refunds of consideration
previously paid are recognised as a receivable.
Subsequent to initial recognition, contingent consideration classified
as equity is not remeasured and its subsequent settlement is
accounted for within equity. Contingent consideration classified as
an asset or a liability is remeasured each reporting period to fair value
through the Statement of Profit or Loss and Other Comprehensive
Income unless the change in value can be identified as existing at
acquisition date.
All transaction costs incurred in relation to the business combination
are expensed to the Statement of Profit or Loss and Other
Comprehensive Income.
(i) Impairment of Assets
At the end of each reporting period, the Group assesses whether there
is any indication that an asset may be impaired. The assessment
will include the consideration of external and internal sources of
information including dividends received from subsidiaries, associates
or jointly controlled entities deemed to be out of pre-acquisition
profits. If such an indication exists, an impairment test is carried out on
the asset by comparing the recoverable amount of the asset, being the
higher of the asset’s fair value less costs to sell and value in use,
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
(i) Impairment of Assets (Continued)
Classification and subsequent measurement
to the asset’s carrying value. Any excess of the asset’s carrying value
over its recoverable amount is expensed to the Statement of Profit or
Loss and Other Comprehensive Income.
Where it is not possible to estimate the recoverable amount of an
individual asset, the Group estimates the recoverable amount of the
cash-generating unit to which the asset belongs.
Impairment testing is performed annually for goodwill and intangible
assets with indefinite lives.
(j) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits held at
call with banks, other short term highly liquid investments with
original maturities of three months or less, and bank overdrafts.
Bank overdrafts are shown within short term borrowings in current
liabilities on the balance sheet.
(k) Trade Receivables
Trade receivables are recognised when the risks and rewards of
ownership or provision of services of the underlying sales transactions
have passed to customers. This event usually occurs on delivery
of product or provision of services to customers. Trade receivables
are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for
impairment. Trade receivables are generally due for settlement 30
days after the end of the month in which the invoice was raised.
The collection of trade receivables is reviewed on an ongoing basis.
Debts which are known to be uncollectable are written off.
An allowance for doubtful debts is raised when the Directors consider
it is probable that the debt is impaired and that it will not be collected.
(l) Inventories
Inventories are measured at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and
condition are comprised of direct material and direct labour and an
appropriate proportion of variable and fixed overhead expenditure,
the latter being allocated on the basis of normal operating capacity.
Costs are assigned to individual items of inventory on the basis of
weighted average costs. Net realisable value is the estimated selling
price in the ordinary course of business less the estimated costs
necessary to make the sale.
(m) Financial Instruments
Recognition and initial measurement
Financial instruments, incorporating financial assets and financial
liabilities, are recognised when the group becomes a party to the
contractual provisions of the instruments.
Financial instruments are initially measured at fair value plus
transactions costs where the instrument is not classified as at fair
value through profit or loss. Transaction costs related to instruments
classified as at fair value through profit or loss are expensed to profit
or loss immediately. Those financial instruments entered into by the
group are classified and measured as set out below.
Derecognition
Financial assets are derecognised where the contractual rights to
receipt of cash flows expires or the asset is transferred to another
party whereby the entity no longer has any significant continuing
involvement in the risks and benefits associated with the asset.
Financial liabilities are derecognised where the related obligations are
discharged, cancelled or expired. The difference between the carrying
value of the financial liability extinguished or transferred to another
party and the fair value of consideration paid, including the transfer of
non-cash assets or liabilities assumed is recognised in profit or loss.
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market and are subsequently measured at amortised cost using
the effective interest rate method.
Trade receivables, being generally on 30 day terms, are recognised
and carried at original invoice amount less provision for any
uncollectible debts. An estimate for impaired debtors is made
when collection of the full amount is no longer probable. Bad debts
are written off as incurred.
(ii)
Financial liabilities
Non-derivative financial liabilities (excluding financial guarantees)
are subsequently measured at amortised cost using the effective
interest rate method.
Due to their short term nature trade and other payables are not
discounted. They represent liabilities for goods and services
provided to the Group prior to the end of the financial year that
are unpaid and arise when the Group becomes obliged to make
future payments in respect of the purchase of these goods and
services. The amounts are unsecured and are usually paid within
30 days of recognition.
Hedge accounting
The group designates certain derivatives as either:
(i) Hedges of the fair value of recognised assets or liabilities or a firm
commitment (fair value hedge); or
(ii) Hedges of highly probable forecast transactions (cash flow hedges).
At the inception of the transaction the relationship between
hedging instruments and hedged items, as well as the Group’s risk
management objective and strategy for undertaking various hedge
transactions is documented. Assessments, both at hedge inception
and on an ongoing basis, of whether the derivatives that are used in
hedging transactions have been and will continue to be highly effective
in offsetting changes in fair values or cash flows of hedged items, are
also documented.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and
qualified as fair value hedges are recorded in the Statement of
Profit or Loss and Other Comprehensive Income, together with any
changes in the fair value of hedged assets or liabilities that are
attributable to the hedged risk.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges is deferred to a
hedge reserve in equity. The gain or loss relating to the ineffective
portion is recognised immediately in the Statement of Profit or
Loss and Other Comprehensive Income. Amounts accumulated
in the hedge reserve in equity are transferred to the Statement
of Profit or Loss and Other Comprehensive Income in the periods
when the hedged item will affect profit or loss.
Fair value estimation
The fair value of financial assets and financial liabilities must
be estimated for recognition and measurement or for disclosure
purposes. Unless otherwise disclosed in the notes to the financial
statements, the carrying amount of the Group’s financial instruments
approximates their fair value.
21
Paragon Care Limited Financial Report 2015/16
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
(n) Property, Plant and Equipment
Each class of property, plant and equipment is stated at cost or
fair value as indicated less, where applicable, any accumulated
depreciation and impairment losses.
Plant and equipment
Plant and equipment are measured on the historical cost basis.
The carrying amount of plant and equipment is reviewed annually
by Directors to ensure it is not in excess of the recoverable amount
from these assets. The recoverable amount is assessed on the basis
of the expected net cash flows that will be received from the asset’s
employment and subsequent disposal. The expected net cash
flows have been discounted to their present values in determining
recoverable amounts.
The cost of fixed assets constructed within the consolidated group
includes the cost of materials, direct labour, borrowing costs and an
appropriate proportion of fixed and variable overheads.
Subsequent costs are included in the asset’s carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will
flow to the Group and the cost of the item can be measured reliably.
All other repairs and maintenance are charged to profit or loss during
the financial period in which they are incurred.
Depreciation
The depreciable amount of all fixed assets including buildings and
capitalised leased assets, but excluding freehold land, is depreciated
on either a straight-line or diminishing value basis over the asset’s
useful life to the Group commencing from the time the asset is held
ready for use. Leasehold improvements are depreciated over the
shorter of either the unexpired period of the lease or the estimated
useful lives of the improvements.
The depreciation rates used for each class of depreciable assets are:
Class of Fixed Asset
Depreciation Rate
Furniture, Fittings Equipment
Motor Vehicles
10–33%
14–25%
The assets’ residual values and useful lives are reviewed, and adjusted
if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than its
estimated recoverable amount.
Gains and losses on disposals are determined by comparing proceeds
with the carrying amount. These gains and losses are included in the
Statement of Profit or Loss and Other Comprehensive Income. When
revalued assets are sold, amounts included in the revaluation surplus
relating to that asset are transferred to retained earnings.
(o) Investments in Associates
Associate companies are companies in which the Group has significant
influence through holding, directly or indirectly, between 20% and
50% of the voting power of the Company. Investments in associates
are accounted for in the financial statements by applying the equity
method of accounting whereby the investment is initially recognised
at cost and adjusted thereafter for the post-acquisition change in the
Group’s share of net assets of the Associate Company. In addition the
Group’s share of the profit or loss of the Associate Company is included
in the Group’s profit or loss.
The carrying amount of the investment includes goodwill relating to
the associate. Any excess of the Group’s share of the net fair value of
the associate’s identifiable assets, liabilities and contingent liabilities
over the cost of the investment is excluded from the carrying amount of
the investment and is instead included as income in the determination
of the investor’s share of the associate’s profit or loss in the period in
which the investment is acquired.
Profits and losses resulting from transactions between the Group and
the associate are eliminated to the extent of the relation to the Group’s
investment in the associate.
When the reporting dates of the Group and the associate are different,
the associate prepares, for the Group’s use, financial statements
as of the same date as the financial statements of the Group with
adjustments being made for the effects of significant transactions
or events that occur between that date and the date of the investor’s
financial statements.
When the Group’s share of losses in an associate equals or exceeds its
interest in the associate, the Group discontinues recognising its share
of further losses unless it has incurred legal or constructive obligations
or made payments on behalf of the associate. When the associate
subsequently makes profits, the Group will resume the recognition of
its share of those profits once its share of the profits equals the share
of the losses not recognised.
(p) Intangible Assets
Goodwill
Goodwill represents the excess of the cost of an acquisition over the
fair value of the Group’s share of the net identifiable assets of the
acquired business at the date of acquisition.
Goodwill is not amortised. Instead, goodwill is tested for impairment
annually, or more frequently if events or changes in circumstances
indicate it might be impaired, and is carried at cost less accumulated
impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of
impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit
from the business combination in which the goodwill arose.
Software development
Software development costs are capitalised only when incurred.
Development costs have a finite life and are amortised on a systematic
basis matched to the future economic benefits over the useful life of
the software, generally about three years. Initial TGA registration costs
have a finite life and are amortised on a systematic basis matched
to the future economic benefits over the useful life of the product,
generally 2–3 years.
(q) Trade and other Payables
Trade and other payables represent liabilities for goods and services
provided to the group prior to the end of financial year which are
unpaid. The amounts are unsecured and are usually paid within 60
days of recognition. Trade and other payables are presented as
current liabilities unless payment is not due within 12 months from
the reporting date. They are recognised initially at their fair value
and subsequently measured at amortised cost using the effective
interest method.
(r) Provisions
Provisions are recognised when the Group has a legal or constructive
obligation, as a result of past events, for which it is probable that an
outflow of resources will be required to settle the obligation and the
amount has been reliably estimated.
22
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
(s) Employee Benefits
Wages and salaries and annual leave
(v) Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing the operating profit
after income tax attributable to the Group by the weighted average
number of ordinary shares outstanding during the financial year,
adjusted for bonus elements in ordinary shares issued during the
financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share by taking into account
amounts unpaid on ordinary shares and any reduction in earnings per
share that will probably arise from the exercise of options outstanding
during the year.
(w) Comparative Figures
When required by Accounting Standards, comparative figures have
been adjusted to conform to changes in presentation for the current
financial year.
When the Group applies an accounting policy retrospectively, makes
a retrospective restatement or reclassifies items in its financial
statements, a statement of financial position as at the beginning of the
earliest comparative period will be disclosed.
(x) New Accounting Standards for Application in Future Periods
At the date of this financial report the following standards and
interpretations, which may impact the entity in the period of initial
application, have been issued but are not yet effective. Other than
changes to disclosure formats, it is not expected that the initial
application of these new standards in the future will have any material
impact on the financial report.
Liabilities in respect of wages and salaries and annual leave
are recognised, and are measured as the amount unpaid at the
reporting date at current pay rates in respect of employees’
service up to that date.
Long service leave
A liability for long service leave is recognised, and is measured as the
present value of expected future payments to be made in respect of
services provided by employees up to the reporting date.
Consideration is given to expected future wages and salary levels,
experience of employee departures and periods of service. Expected
future payments are discounted using interest rates on national
corporate bond rates with terms of maturity that match, as closely as
possible, the estimated future cash outflows.
Superannuation
The Company contributed to multi-employer industry funds which
provide retirement, disability and death benefits for employees.
The Company is under no legal obligation to make up any shortfall
in any of these funds.
Share Based Payments
Share-based compensation benefits may be provided directly by the
issue of ordinary shares or options to employees. The fair value of
options granted is recognised as an employee benefits expenses with
a corresponding increase in equity. The total amount to be expensed is
determined by reference to the fair value of the options granted.
The fair value of ASX listed ordinary shares or options is measured
by the last sale price of the relevant ordinary shares or options on
the ASX on or immediately prior to the date of issue. The fair value of
unlisted options at grant date is determined using the Black-Scholes
model that takes into account the exercise price, the term of the
option, the vesting and performance criteria, the impact of dilution,
the non-tradeable nature of the option, the share price at grant date
and expected price volatility of the underlying share, the expected
dividend yield and the risk-free interest rate for the term of the
arrangement. An expense is taken up over the period during which
the employees become entitled to the option.
(t) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of
GST, except where the amount of GST incurred is not recoverable from
the Tax Office. In these circumstances the GST is recognised as part of
the cost of acquisition of the asset or as part of an item of the expense.
Receivables and payables in the statement of financial position are
shown inclusive of GST.
Cash flows are presented in the statement of cash flows on a gross
basis, except for the GST component of investing and financing
activities, which are disclosed as operating cash flows.
(u) Contributed Equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the
proceeds. Incremental costs directly attributable to the issue of new
shares or options for the acquisition of a business are not included in
the cost of the acquisition as part of the purchase consideration.
If the entity reacquires its own equity instruments, for example,
as the result of a share buy-back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or loss
is recognised in profit or loss and the consideration paid including
any directly attributable incremental costs (net of income taxes) is
recognised directly in equity.
23
Paragon Care Limited Financial Report 2015/16
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Reference
Title
Summary
Application Date
(Financial years beginning)
AASB 14
Regulatory Deferral Accounts
AASB 2014–1D
Amendments to Australian
Accounting Standards
AASB 2014–3
AASB 2014–4
AASB 2014–9
AASB 2014–10
Amendments to Australian
Accounting Standards—
Accounting for Acquisitions of
Interests in Joint Operations
Amendments to Australian
Accounting Standards—
Clarification of Acceptable
Methods of Depreciation and
Amortisation
Amendments to Australian
Accounting Standards—
Equity Method in Separate
Financial Statements
Specifies the financial reporting requirements for regulatory deferral
account balances that arise when an entity provides goods or services
to customers at a price or rate that is subject to rate regulation.
Part D of AASB 2014–1 makes amendments to AASB 1 First-time
Adoption of Australian Accounting Standards, which arise from the
issuance of AASB 14 Regulatory Deferral Accounts in June 2014.
This Standard amends AASB 11 to provide guidance on the accounting
for acquisitions of interests in joint operations in which the activity
constitutes a business.
This Standard amends AASB 116 and AASB 138 to establish the
principle for the basis of depreciation and amortisation as being the
expected pattern of consumption of the future economic benefits of
an asset, and to clarify that revenue is generally presumed to be an
inappropriate basis for that purpose.
This amending standard allows entities to use the equity method
of accounting for investments in subsidiaries, joint ventures and
associates in their separate financial statements.
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
Amendments to Australian
Accounting Standards—
Sale or Contribution of Assets
between an Investor and its
Associate or Joint Venture
This amending standard requires a full gain or loss to be recognised
when a transaction involves a business (even if the business is not
housed in a subsidiary), and a partial gain or loss to be recognised when
a transaction involves assets that do not constitute a business
(even if those assets are housed in a subsidiary).
AASB 2015–1
AASB 2015–2
AASB 2015–5
AASB 15
Amendments to Australian
Accounting Standards—
Annual Improvements to
Australian Accounting
Standards 2012–2014 Cycle
Amendments to Australian
Accounting Standards—
Disclosure Initiative:
Amendments to AASB 101
Amendments to Australian
Accounting Standards—
Investment Entities: Applying
the Consolidation Exception
Revenue from Contracts with
Customers
AASB 2014–5
Amendments to Australian
Accounting Standards arising
from AASB 15
AASB 9
Financial Instruments
AASB 2014–7
Amendments to Australian
Accounting Standards arising
from AASB 9 (December 2014)
AASB 16
Leases
The Standard makes amendments to various Australian Accounting
Standards arising from the IASB’s Annual Improvements process, and
editorial corrections.
1 January 2016
The Standard makes amendments to AASB 101 Presentation of
Financial Statements arising from the IASB’s Disclosure Initiative
project.
1 January 2016
This Standard makes amendments to AASB 10, AASB 12 and AASB 128
arising from the IASB’s narrow scope amendments associated with
Investment Entities.
1 January 2016
This Standard establishes principles (including disclosure
requirements) for reporting useful information about the nature,
amount, timing and uncertainty of revenue and cash flows arising
from an entity’s contracts with customers.
1 January 2018
Consequential amendments arising from the issuance of AASB 15.
1 January 2017
This Standard supersedes both AASB 9 (December 2010) and AASB
9 (December 2009) when applied. It introduces a “fair value through
other comprehensive income” category for debt instruments, contains
requirements for impairment of financial assets, etc.
1 January 2018
Consequential amendments arising from the issuance of AASB 9.
1 January 2018
The standard replaces AASB17 “Leases” and for lessees will eliminate
the classification of operating leases and finance leases.
1 January 2019
24
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 2 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions concerning
the future, which, by definition will seldom represent actual results.
The estimates and assumptions that have a significant inherent risk
in respect of estimates based on future events, which could have a
material impact on the assets and liabilities in the next financial years,
are discussed below:
Impairment of Goodwill
The Group assesses impairment at the end of each reporting period
by evaluating conditions and events specific to the Group that
may be indicative of impairment triggers. Recoverable amounts of
relevant assets are reassessed using value-in-use calculations which
incorporate various key assumptions. With respect to cash flow
projections for the Group’s businesses based in Australia, revenue
growth rates of between 5% and 9% have been factored into valuation
models for the next five years. This is on the basis of management’s
expectation of increased government expenditure in both the acute
and aged care market sectors, much of which has already been
publicly announced, and their belief in the Group’s continued ability
to capture a significant share of this expenditure. The rates used
incorporate allowance for inflation. Pre-tax discount rates of 11.5%
have been used in all models. No impairment has been recognised in
respect of goodwill at the end of the reporting period.
Business combinations
Business combinations are initially accounted for on a provisional
basis as the consolidated entity has twelve months from acquisition
date to finalise acquisition accounting. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially
estimated by the consolidated entity taking into consideration all
available information at the reporting date. Further, the conditional
payments owing to the vendors is based on the performance of the
acquired entity which is measured by the EBITDA growth over a one
to two year period. The estimation of the likely conditional payment
was based on the consideration of all available information at the
reporting date.
Provision for stock obsolescence
The provision for impairment of inventories assessment requires
a degree of estimation and judgement. The level of the provision
is assessed by taking into account the recent sales experience,
the ageing of inventories and other factors that affect inventory
obsolescence.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a
degree of estimation and judgement. The level of provision is assessed
by taking into account the recent sales experience, the ageing of
receivables, historical collection rates and specific knowledge of the
individual debtor’s financial position.
25
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 3 Revenue
Revenue
Sale of Goods
Sundry Income
Interest
Total Sundry Income
Total Revenue
NOTE 4 Other Income
Net gain on disposal of fixed assets
NOTE 5 Expenses
Profit before income tax expense includes the following specific expenses:
Depreciation: Plant and equipment
Amortisation: Website development costs
Amortisation: TGA Costs
Amortisation: R&D Costs
Amortisation: Software development costs
Employee Benefits expense
NOTE 6 Auditors’ Remuneration
During the year the auditor of the Group earned the following remuneration:
Audit and review of financial reports
Tax consulting services
Other consulting services
Total remuneration
2016
$
2015
$
93,297,925
32,192,460
85,126
85,126
30,891
30,891
93,383,052
32,223,351
2016
$
36,872
36,872
2015
$
6,140
6,140
2016
$
2015
$
621,498
21,900
9,697
1,262
107,242
15,512,285
16,273,884
308,474
8,771
11,636
-
18,711
7,538,750
7,886,342
2016
$
79,010
24,108
-
103,118
2015
$
69,000
18,000
-
87,000
26
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 7 Income Tax
(a) Income tax expense / (benefit)
Current tax
Deferred tax
Adjustments for current tax of prior periods
(b) Deferred income tax (revenue) / expense included in income tax expense comprises:
Decrease / (increase) in deferred tax assets
(Decrease) / increase in deferred tax liability
2016
$
2015
$
2,550,142
(211,627)
85
2,338,600
629,557
(13,755)
(22,381)
593,421
(1,497,227)
(58,270)
-
-
(1,497,227)
(58,270)
(c) The prima facie tax payable on profit before income tax is reconciled to
the income tax expense as follows;
Prima facie income tax payable on profit before income tax at 30%
2,960,737
808,973
Add tax effect of:
- Entertainment expenses
Less tax effect of:
- Non-assessable income
- Overprovision of income tax in prior year
- Recognition of tax losses not previously brought to account
Income tax expense / (benefit) attributable to profit
(d) Deferred tax assets
The balance comprises:
- Provisions / accruals
- Provision for employee entitlements
- Prepayments
- Foreign exchange gains / losses
- Other assets
- Share issue costs
- Fixed Assets
- Carry forward tax losses
Balance after set off of deferred tax assets and (liabilities)
Deferred tax asset not recognised comprise:
Unrecognised tax losses
Timing differences
10,583
3,458
-
85
(632,805)
2,338,600
(36,629)
(22,381)
(160,000)
593,421
48,466
744,570
(11,323)
83,536
29,462
839,985
(1,719)
598,529
2,331,507
-
-
-
7,981
272,016
-
6,042
143,901
-
(12,754)
417,094
834,280
632,805
-
632,805
The amount of deferred tax assets which may be realised in the future is dependant on the assumption that no adverse change will occur in
income tax legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be
realised and comply with the conditions of deductibility imposed by the law.
27
Paragon Care Limited Financial Report 2015/16
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 8 Statement of Cash Flows
(a) Cash at bank and on hand
(b) Reconciliation of operating profit (loss) after income tax to net cash used in operating activities
Operating profit after income tax
Non-cash items
Depreciation and Amortisation
Foreign exchange differences
(Profit)/loss on disposal of assets
Change in operating assets and liabilities
(Increase)/decrease in trade debtors
(Increase)/decrease in inventory
Increase/(decrease) in provisions
Increase/(decrease) in accounts payable and other payables
Increase/(decrease) in current tax provision and deferred tax asset
Net cash inflows from operating activities
(c) Non-cash financing and investing activities
Other Non-cash share issues
In financial year ended 30 June 2016
2016
$
2015
$
19,116,930
3,755,847
7,530,523
2,103,156
761,600
46,964
347,592
-
-
(6,140)
(6,027,013)
(1,237,920)
(526,441)
(1,962,755)
47,013
196,196
6,991,846
1,030,634
(1,065,272)
7,759,221
339,111
809,874
835,749 shares as consideration for services provided in the capital raising activities at a price of $0.5300 per share.
1,886,792 shares as part consideration for the acquisition of Meditron at a price of $0.5300 per share.
7,547,170 shares as part consideration for the acquisition of Designs for Vision at a price of $0.5300 per share.
In financial year ended 30 June 2015
There were no non cash issues of shares during the year ended 30 June 2015
2016
$
2015
$
379,871
124,075
22,111,939
22,615,886
400,489
48,390
7,964,622
8,413,501
(d) Financing Facilities
Refer Note 19 (c)
NOTE 9 Inventories
Current
Raw materials
Work in progress
Finished goods
28
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 10 Trade and Other Receivables
Current
Trade and other receivables
GST receivable
Other receivables
(a) Impaired trade receivables
As at 30 June 2016 current trade receivables of the Group with a nominal value of $nil (2015: $nil)
were impaired:
The ageing of these receivables is as follows:
Up to 3 months
4 to 6 months
Over 6 months
Movements in the provision for impairment of receivables are as follows:
At 1 July
Change for the year
Amounts written off as uncollectable
As at 30 June
(b) Past due but not impaired
As at 30 June 2016, trade receivables of $ 3,554,868 (2015: $2,463,141) were past due but not impaired.
These relate to a number of independent customers for whom there is no recent history of default.
The ageing analysis of these trade receivables is as follows:
Up to 3 months
3 to 6 months
(c) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the group.
(d) Fair value and credit risk
Due to the short term nature of these receivables, their carrying value is assumed to approximate their fair value.
The maximum exposure to credit risk is the fair value of receivables.
2016
$
2015
$
17,746,683
6,313,030
416,092
1,237,877
160,752
665,252
19,400,652
7,139,034
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,813,248
2,110,350
741,620
352,791
3,554,868
2,463,141
29
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 11 Derivative Financial Instruments
Current assets
Foreign exchange forward contracts—Cash flow hedges
Current liabilities
Foreign exchange forward contracts—Cash flow hedges
2016
$
2015
$
-
-
264,056
264,056
322,063
322,063
-
-
Foreign exchange forward contracts—Cash flow hedges
Companies within the group import materials from the United States, Europe and Asia. In order to protect against exchange rate
movements, the group has entered into forward exchange contracts to purchase US dollars and Euro. These contracts are hedging
highly probable forecasted purchases for the ensuing financial year. The contracts are timed to mature when payments for major
shipments are scheduled to be made.
The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other
comprehensive income. When the cash flows occur, the group adjusts the initial measurement of the component recognised in the
balance sheet by removing the related amount from other comprehensive income.
2016
$
2015
$
5,042,256
(2,493,045)
859,608
(426,195)
2,982,624
1,193,537
1,548,333
1,057,973
(195,720)
(621,498)
2,982,624
1,730,957
(911,674)
691,670
(317,418)
1,193,537
618,494
886,319
70,036
(72,838)
(308,474)
1,193,537
1,083,981
(406,785)
677,196
1,073,641
(344,614)
729,026
NOTE 12 Plant and Equipment
Non-Current Assets
Furniture, Fittings and Equipment—at cost
Less accumulated depreciation
Motor Vehicles—at cost
Less accumulated depreciation
Total Plant and Equipment
Movement in carrying amount during the year:
Beginning of year WDV
Additions at cost
Acquisition through business combinations
Disposals
Depreciation
End of year WDV
(a) Leased assets
Non-current assets includes the following amounts where the group is a lessee under a finance lease:
Leasehold equipment
Cost
Less accumulated depreciation
Written down value
30
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 13 Intangible Assets
Website Development Costs
TGA Costs (with business acquisition)
New product development projects
Software development costs
Goodwill
Website development costs
Beginning of year
Additions at cost
Amortisation
End of year
The website development costs are amortised over two years.
TGA Costs (with business acquisition)
Beginning of year
Additions—PM Medical
Amortisation
End of year
New product development projects
Beginning of year
Additions at cost
Amortisation
End of year
Software development costs
Beginning of year
Additions
Amortisation
End of year
Goodwill
Beginning of year
Additions
Tax Adjustments
End of year
Goodwill
2016
$
35,948
-
308,344
777,813
2015
$
7,258
9,697
60,587
308,486
79,916,800
18,599,684
81,038,905
18,985,712
7,258
50,590
(21,900)
35,948
9,697
-
(9,697)
-
60,587
249,019
(1,262)
308,344
308,486
576,569
(107,242)
777,813
14,710
1,319
(8,771)
7,258
21,333
-
(11,636)
9,697
-
60,587
-
60,587
-
327,197
(18,711)
308,486
18,599,684
13,564,343
61,317,116
5,035,341
-
-
79,916,800
18,599,684
After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not
amortised but is subject to impairment testing on an annual basis or whenever there is an indication of impairment. Goodwill is attributable to the
profitability of the business acquired. Impairment testing is undertaken by assessing the cash generated from the businesses and estimating the
value of the businesses using cash flow projections. Refer to note 2 for further details.
31
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 14 Trade and Other Payables
Current
Trade creditors
Vendor earnout conditional payments
Other creditors
Deferred revenue
Accrued expenses
Non-Current
Vendor earnout conditional payments
Other Creditors
NOTE 15 Borrowings
Current
Secured
Trade Finance Facility
Bank Loans
Lease Liabilities
Unsecured
Loan
Total Current Borrowings
Non-Current
Secured
Bank Loans
Lease Liabilities
Unsecured
Loan
Total Non-Current Borrowings
(a) Secured liabilities and assets pledged as security
The total secured liabilities (current and non-current) are as follows:
Trade Finance Facility
Bank Loans
Lease Liabilities
Note
2016
$
2015
$
28
28
17,139,990
4,888,752
800,000
2,664,000
1,894,914
965,709
-
993,743
-
396,117
23,464,613
6,278,612
9,852,454
416,797
10,269,251
-
67,605
67,605
2016
$
2015
$
5,379,208
1,000,000
233,556
3,337,814
805,050
229,763
6,612,765
4,372,627
950,000
1,150,000
7,562,765
5,522,627
30,000,000
5,204,950
591,710
450,286
30,591,710
5,655,236
-
30,591,710
1,075,000
6,730,236
5,379,208
31,000,000
825,267
3,337,814
6,010,000
680,049
37,204,475
10,027,863
The bank has a first registered company charge over all assets and undertakings including uncalled capital of the consolidated entity.
Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the
event of default.
The company has entered into a trade finance facility agreement with National Australia Bank to facilitate the importation of goods into Australia
from overseas. Individual import transactions are financed for a period not exceeding 180 days after the arrival of goods in Australia. This facility
has been extended as part of the company’s overall banking arrangements with National Australia Bank and is therefore covered by the charge.
Unlike the Bank loans this revolving trade finance facility does not have a reducing principal balance and is continuously utilised to provide a
source of working capital more closely matching the inventory life cycle of imported products.
32
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 15 Borrowings (Continued)
Bank loans of $31,000,000 were borrowed, in combination with capital raising detailed in note 17, to fund the acquisitions of the three entities
detailed in note 28. The bank loans were provided on a four year term from the date of the first draw down.
NOTE 16 Provisions
Current
Employee entitlements
Non-Current
Employee entitlements
NOTE 17 Contributed Equity
Fully paid ordinary shares
(a) Ordinary shares
2016
$
1,823,933
1,823,933
416,483
416,483
2016
$
2015
$
786,317
786,317
48,771
48,771
2015
$
70,636,055
23,611,121
The Company has unlimited authorised capital with no par value. Ordinary shares entitle the holder to participate in dividends and the proceeds on
winding up of the Company in proportion to the number and amounts paid on the shares held. On a show of hands every holder of ordinary shares
present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.
Movements in ordinary share capital in the Company over the past two years were as follows:
Date
30 Jun 14
Balance
1 Oct 14
31 Oct 14
31 Mar 15
Placement to sophisticated and professional investors at issue price of $0.3280 per share.
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.3266
per share
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.4923
per share
Number of
Shares
$
65,179,543
22,808,822
1,966,405
277,855
645,278
90,747
134,619
66,274
30 Jun 15
Balance
67,558,422
23,611,121
18 Sep 15
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.6460
per share
128,237
82,841
6 Oct 15
6 Oct 15
6 Oct 15
6 Oct 15
8 Oct 15
9 Oct 15
6 Apr 16
Issue of shares pursuant to the company’s rights issue of 1 new share for each 5 shares
held at a price of $0.5300 per share
13,512,044
7,161,383
Placement to sophisticated and professional investors at issue price of $0.5300 per share.
65,990,114
34,974,760
Placement as part loan repayment of an outstanding loan at a price of $0.5300 per share
Placement as consideration for services provided in the capital raising activities at a price
of $0.5300 per share
Issue of shares as part consideration for the acquisition of Meditron at a price of $0.5300
per share
Issue of shares as part consideration for the acquisition of Designs for Vision at a price of
$0.5300 per share
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.5990
per share
2,260,178
835,749
1,197,894
442,947
1,886,792
1,000,000
7,547,170
4,000,000
215,812
129,271
30 Jun 16
Accumulated share issue costs incurred during 2016 (net of tax)
-
(1,964,164)
30 Jun 16
Closing Balance
159,934,518
70,636,055
33
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 17 Contributed Equity (Continued)
(b) Capital Management
When managing capital, the Directors’ objective is to ensure the Company continues as a going concern as well as to maintain optimal returns to
shareholders. The Directors also aim to maintain a capital structure that ensures the lowest cost of capital available to the Company. The Directors
are constantly monitoring the Company’s capital requirements and capital structure to take advantage of favourable opportunities for raising
capital. The Directors have no current plans to issue further shares or options on the market unless they conclude a further business acquisition.
The Directors monitor capital through the gearing ratio (net debt divided by total capital). The target for the Group’s gearing ratio is below 50%.
The gearing ratios for the years ending 30 June 2016 and 2015 were as follows:
Total Borrowings
Less Cash and Cash Equivalents
Net Debt
Total Equity
Total Capital
Gearing Ratio
The Group is not subject to any externally imposed capital requirements.
NOTE 18 Reserves
Currency hedge reserve
Currency translation reserve
Movements in currency hedge reserve were as follows:
Beginning of year
Revaluation
End of year
Movements in currency translation reserve were as follows:
Beginning of year
Revaluation
End of year
NOTE 19 Financial Risk Management
2016
$
2015
$
38,154,475
12,252,863
(19,116,930)
(3,755,847)
19,037,545
8,497,016
72,770,234
20,583,582
91,807,779
29,080,598
21%
29%
2016
$
(325,418)
38,871
(286,547)
2015
$
264,056
-
264,056
264,056
(589,474)
(325,418)
(113,938)
377,994
264,056
-
38,871
38,871
-
-
-
The Group’s activities expose it to a variety of financial risk: market risk (including currency risk and interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group. Derivative financial instruments are used by the Group to hedge exposure to exchange rate
risk associated with foreign currency transactions. Derivatives are used exclusively for hedging purposes, ie not as trading or other speculative
instruments.
(a) Market Risk
(i) Forward exchange risk
The Group enters into forward exchange contracts to buy and sell specified amounts of foreign currencies in the future at stipulated rates.
The objective in entering into the forward exchange contracts is to protect the economic entity against unfavourable exchange rate movements
for the purchases undertaken in foreign currencies.
The Group’s risk management policy is to hedge between 40% and 100% of anticipated cash flows (purchase of inventory) in Euro/US Dollars
for the subsequent 12 months. At 30 June 2016 70% of EURO/US Dollar projected FY17 inventory purchases were hedged.
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in Australian dollars, was as follows:
Forward exchange contracts
- Buy foreign currency (cash flow hedges)
USD
Euro
34
2016
$
2015
$
5,021,848
3,765,732
8,787,579
4,624,517
5,046,323
9,670,841
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 19 Financial Risk Management (Continued)
(ii) Interest Rate Risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s debt obligations with the floating
interest rate. The Company’s policy is not to actively manage interest cost. At 30 June 2016 $5,379,208 (2015: $3,337,815) of the Company’s debt
is at a variable rate of interest.
The financial instruments exposed to interest rate risk are as follows:
Financial Assets
Cash and cash equivalents (interest bearing)
Financial Liabilities
Interest bearing liabilities — variable rate (current)
Interest bearing liabilities — fixed rate (current)
Interest bearing liabilities — variable rate (non-current)
Interest bearing liabilities — fixed rate (non-current)
2016
$
2015
$
19,116,930
3,755,847
(5,379,208)
(3,337,814)
(2,183,557)
(2,184,812)
-
-
(30,591,710)
(6,730,236)
(38,154,475)
(12,252,864)
(b) Credit Risk
Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with
banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. For
banks and financial institutions, only independently rated parties with a minimum rating of “A” are accepted. For customers, risk control assesses
the credit quality of the customer, taking into account its financial position, past experience and other factors. The compliance with credit limits by
customers is regularly monitored by line management.
The Group has no significant exposure to any individual debtor of the Group and the credit risk is low for the majority of the balance. Receivables
balances are monitored on an ongoing basis and given the low risk profile of customers the Group’s exposure to bad debts is insignificant.
The Group does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments.
(c) Liquidity Risk
Prudent liquidity management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit
facilities. Forecast cash flows are used to calculate the forecast liquidity position and to maintain suitable liquidity levels.
Financing Arrangements
The Group had access to the following borrowing facilities at the end of the reporting period:
Floating Rate
Expiring within one year
Total Facility
Undrawn Amount
Expiring beyond one year
Total Facility
Undrawn Amount
Fixed Rate
Expiring within one year
Total Facility
Undrawn Amount
Expiring beyond one year
Total Facility
Undrawn Amount
Total
Total Facility
Undrawn Amount
2016
$
2015
$
8,000,000
2,620,607
4,000,000
662,186
-
-
-
-
1,233,556
805,000
-
-
32,591,710
5,215,000
2,000,000
10,000
41,825,267
10,020,000
4,620,607
672,186
35
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 19 Financial Risk Management (Continued)
Maturities of financial liabilities
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date
to the contractual maturity date. The amounts disclosed in the table are the undiscounted cashflows.
Contractual maturities
of financial liabilities
Weighted
average
interest rate
2016
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total
2015
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total
%
-
4.1
4.6
4.5
-
4.8
6.5
6.0
Less than 6
Months
$
23,602,307
5,379,208
1,564,881
30,546,396
6 to 12
Months
Between
1 and 2 Years
Between
2 and 5 Years
$
-
-
$
-
-
$
-
-
618,675
618,675
233,556
233,556
30,358,154
30,358,154
Total
contractual
cash flows
$
23,602,707
5,379,208
32,775,267
61,756,782
6,278,612
3,337,814
413,231
10,029,657
-
-
-
-
-
-
1,771,581
1,771,581
2,318,163
2,318,163
4,412,073
4,412,073
6,278,612
3,337,814
8,915,048
18,531,476
(d) Fair value measurements
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(b) inputs other than quoted prices included in level 1 that are observable for the asset or
liability either directly (as prices) or indirectly (derived from prices) (level 2); and
(c) inputs for the asset or liability that are not based on observable market data
(unobservable inputs) (level 3).
The following table presents the Group’s assets and liabilities measured and recognised at fair value at 30 June 2016 and 30 June 2015.
At 30 June 2016
Assets
Forward foreign exchange contracts
Total assets
Liabilities
Forward foreign exchange contracts
Total liabilities
At 30 June 2015
Assets
Forward foreign exchange contracts
Total assets
Liabilities
Forward foreign exchange contracts
Total liabilities
36
Level 1
Level 2
Level 3
Total
$
-
-
-
-
Level 1
$
-
-
-
-
$
-
-
322,063
322,063
Level 2
$
264,056
264,056
-
-
$
-
-
-
-
Level 3
$
-
-
-
-
$
-
-
322,063
322,063
Total
$
264,056
264,056
-
-
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 20 Related Party Disclosure
Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties
unless otherwise stated.
(a) Subsidiaries
Parent Entity
Paragon Care Limited
Subsidiaries
Paragon Care Group Pty Ltd
GM Medical Pty Ltd ¹
Paragon Medical Ltd #¹
Meditron Pty Ltd ¹
Western Biomedical Pty Ltd ¹
Designs For Vision Holding Pty Ltd ¹
Designs For Vision (Aust) Pty Ltd
4
5
Designs For Vision Pty Ltd
Paragon Medical Pty Ltd
Scanmedics Pty Ltd *²
Axishealth Pty Ltd *²
Rapini Pty Ltd *²
Paragon Healthcare Pty Ltd ²
Iona Medical Products Pty Ltd *²
Volker Australia Pty Ltd *³
L.R. Instruments Pty Ltd *²
Richards Medical Pty Ltd *²
Unikits Pty Ltd *²
Ownership
30 June 2016
Ownership
30 June 2015
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
N/A
N/A
N/A
N/A
N/A
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
All entities are incorporated in Australia except for Paragon Medical Ltd which is incorporated in New Zealand.
* Dormant company
# Incorporated in New Zealand
¹ Subsidiary of Paragon Care Group Pty Ltd
² Subsidiary of Paragon Medical Pty Ltd
³ Subsidiary of Iona Medical Products Pty Ltd
Subsidiary of Designs For Vision Holding Pty Ltd
4
5
Subsidiary of Designs For Vision (Aust) Pty Ltd
(b) Ultimate Parent
Paragon Care Limited is a public company listed on ASX and details of major shareholders are shown in Shareholder Information.
(c) Transactions with related parties.
Employees and Contractors
Contributions to superannuation funds on behalf of employees are disclosed in the Remuneration Report in the Directors’ Report.
(d) Loan to related parties.
The parent entity has provided intercompany loans to its subsidiaries for working capital purposes. The intercompany loans are repayable to the
parent entity at call and no interest is payable. Details of the loans are shown below.
Loans to / (from):
Paragon Care Group Pty Ltd
Paragon Medical Pty Ltd
2016
$
2015
$
52,529,337
-
6,600,950
4,978,664
52,529,337
11,579,614
37
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
NOTE 21 Key Management Personnel Disclosures
(a) Details of Key Management Personnel
Details of the Key Management Personnel remuneration and services agreements are provided in the Remuneration Report section of the
Directors’ Report.
The following table discloses the aggregate remuneration of the Key Management Personnel of the Group. Details by director and executive are
shown in the Remuneration Report section of the Directors’ Report.
Short term employee benefits
Post employment benefits
Others — long term benefits
Share-based payments
2016
$
1,101,431
105,577
-
-
2015
$
781,382
80,366
-
-
1,207,008
861,748
(b) Equity Holdings of Key Management Personnel
Details of the Key Management Personnel holdings of ordinary shares in the Company is shown in the following table:
Directors
S F Tanner
M A Simari
M C Newton
B A Cheong
G J Sam OAM
Other key management personnel
M G Rice
S J Munday
Directors
S F Tanner
M A Simari
M C Newton
B A Cheong
Balance
1 July 2015
502,867
1,674,204
205,148
2,633,208
-
134,058
Shares
Acquired
107,133
33,407
102,551
9,432
-
-
-
38,239
Shares
Disposed
Other
Changes
Balance
30 June 2016
-
-
-
-
-
-
-
-
-
-
-
582,526
610,000
1,707,611
307,699
2,642,640
582,526
-
-
134,058
38,239
Shares
Disposed
Other
Changes
Balance
30 June 2015
Balance
1 July 2014
502,867
1,416,914
198,128
2,833,208
Shares
Acquired
-
257,290
7,020
-
-
-
-
(200,000)
-
-
-
-
-
502,867
1,674,204
205,148
2,633,208
134,058
Other key management personnel
M G Rice
100,000
34,058
-
(c) Other Transactions with Key Management Personnel
The Paragon Care Group business leased premises from Mr Brett Cheong and Mrs Lynn Cheong, Mr Cheong being a Director of the Company
to 1 January 2016. The rent paid was on commercial terms and the directors consider Mr Cheong’s association with the arrangement is
on arm’s-length terms and conditions. The total rent payable to Mr and Mrs Cheong by the Company for the year ended 30 June 2016 was
$78,300 (2015 $193,164).
38
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 22 Earnings per share
(a) Basic (loss) / Earnings per share (cents per share)
(b) Diluted (loss) / Earnings per share (cents per share)
(c) Reconciliation of earnings used in calculating earnings per share
Profit / (Loss) used in calculating basic earnings per share
Profit / (Loss) used in calculating diluted earnings per share
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
Weighted average number of ordinary shares used as the denominator
in calculating diluted earnings per share
Note 23 Parent Entity Disclosures
(a) Financial Information
Profit for the Year
Total Comprehensive Income
Current Assets
Total Assets
Current Liabilties
Total Liabilties
Shareholders Equity
Issued Capital
Reserves
Retained Earnings
Total Equity
b) Guarantees
2016
Cents
5.6
5.6
2015
Cents
3.2
3.2
7,530,523
7,530,523
2,103,156
2,103,156
135,026,163
66,754,955
135,026,163
66,754,955
2016
$
2015
$
(1,432,073)
(1,120,204)
(1,432,073)
(1,120,204)
2,385,296
1,193,312
55,201,028
13,417,524
103,618
810,062
106,557
2,502,529
70,636,055
23,611,121
-
-
(16,245,087)
(12,696,125)
54,390,967
10,914,995
The Company and its controlled entities, as listed in note 20(a), are party to a deed of cross guarantee under which each company guarantees the
debts of the others.
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and a directors’
report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’). The above companies
represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled
by Paragon Care Limited, they also represent the ‘Extended Closed Group’.
The Consolidated Statement of Profit or Loss and Other Comprehensive Income on page 15 and Consolidated Statement of Financial Position on
page 16 are the Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated Statement of Financial Position of
the ‘Closed Group’.
The parent entity has also given unsecured guarantees in respect of:
(i) Finance leases of subsidiaries amounting to $nil (2015 — $nil)
c) Other Commitments
The Company has no commitments to acquire property, plant and equipment.
d) Contingent Liabilities
The parent entity did not have any contingent liabilities as at 30 June 2016.
39
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 24 Contingent Liabilities
Since the last annual reporting date, there have been no material changes of any contingent liabilities or contingent assets.
The Group has bank guarantees outstanding totalling $884,942 (2015 $444,651)
Note 25 Subsequent Events
On 8 July 2016 the company announced the acquisition of MIDAS Software Solutions Pty Ltd (owner of the MIDAS intellectual property) and the
business and the assets of Spintech Oceania Pty Ltd (owner of the distribution rights to MIDAS). The acquisition consideration will be as follows:
- $2 million (less minimum working capital adjustments) via the issuing of fully paid ordinary shares in PCG, with appropriate escrow
arrangements. The issue price for the calculation of the fully paid shares will be $0.703, which is the 5-day volume weighted average of the PCG
share price to the 6 July 2016.
- An earn-out of 4 times MIDAS profit before tax (including R&D expenses) will apply for the incremental growth from FY16 to FY18.
- 2.5% MIDAS revenue royalty for each founder following the initial 2-year period, as long as they remain contracted with PGC.
The company expects the cash flow impact and the earnings impact from this acquisition will not be material in FY17.
On 18 July 2016 the company announced the Meditron business acquired in October 2015 performed well in the year to 30 June 2016. As a
result, the vendor is entitled to receive the full earn-out amount of $800,000 as advised in the Acquisition & Capital Raising Presentation of
26 August 2015. The vendor of the Meditron business has decided to accept part of the earn-out consideration in an issue of new fully paid
ordinary shares to the value of $500,000 and the balance in cash. The issue price of the new shares was $0.70 being the five day VWAP up to
and including 15 July 2016 and the new shares were issued on 18 July 2016.
No other matters or circumstances have arisen since the year ended 30 June 2016 that significantly affect or may significantly affect the
operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.
Note 26 Commitments
Lease Commitments
The Group leases various offices under non-cancellable operating leases expiring within two to five years. The leases have various terms,
escalation clauses and renewal rights. On renewal the terms of the leases are renegotiated.
Commitments for minimum lease payments in relation to non-cancellable operating
leases are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
2016
$
2015
$
1,807,172
5,340,820
1,966,342
9,114,334
536,683
3,291,666
2,027,678
5,856,027
Note 27 Segment Reporting
The consolidated entity operates within one operating segment only — Medical Equipment. The Medical Equipment segment supplies durable
medical equipment and consumable medical product to hospitals, medical centres and aged care facilities in Australia predominantly.
The consolidated entity does not have any other reporting segments.
40
Paragon Care Limited Financial Report 2015/16
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 28 Business Combinations
Summary of business combinations during the period:
Purchase consideration
Cash
Conditional payment
Shares
Fair value and carrying value of net assets acquired
Net working capital
Plant and equipment
Employee entitlements
Deferred tax asset
Goodwill on consolidation
Reconciliation to cashflow
Purchase consideration
Conditional payment
Equity funding
Net outflow of cash
Western
Biomedical
$
Meditron
$
Designs for
Vision
$
Total
$
29,278,554
6,189,164
21,872,440
1,533,976
-
30,812,530
800,000
1,000,000
7,989,164
8,318,478
4,000,000
57,340,158
10,652,454
5,000,000
34,190,918
72,992,612
1,748,537
404,935
(226,698)
77,459
28,808,297
30,812,530
3,122,791
7,036,141
11,907,469
176,030
(394,216)
118,265
4,966,294
7,989,164
128,433
(737,401)
221,220
27,542,525
34,190,918
709,398
(1,358,315)
416,944
61,317,116
72,992,612
30,812,530
(1,533,976)
7,989,164
34,190,918
72,992,612
(800,000)
(8,318,478)
(10,652,454)
-
(1,000,000)
(4,000,000)
29,278,554
6,189,164
21,873,440
(5,000,000)
57,340,158
41
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 28 Business Combinations (Continued)
Western Biomedical Pty Ltd
On 15th of October 2015 the Company acquired 100% of the shares in Western Biomedical Pty Ltd. Operating since 1978, Western Biomedical is
the leading supplier of medical and surgical products/consumables to hospitals and specialists in Western Australia. Western Biomedical can now
expand its portfolio nationally via Paragon’s existing sales and distribution channels. Paragon now has a platform for a direct to market strategy
for the West Australian health and aged care sectors. Paragon has inherited a highly skilled and experienced management team.
Purchase consideration
Cash and cash equivalents
Conditional payment (a)
Fair value and carrying value of net assets acquired
Net working capital
Plant and equipment
Employee entitlements
Deferred tax asset
Goodwill on consolidation
Reconciliation to cashflow
Consideration of purchase
Conditional payment
Net outflow of cash
$
29,278,554
1,533,976
30,812,530
1,748,537
404,935
(226,698)
77,459
28,808,297
30,812,530
30,812,530
(1,533,976)
29,278,554
(a) The vendors are entitled to a payment of 2 times the EBITDA growth between FY15 and FY17. The payment is uncapped, its likely range is
anticipated to be between $1 million and $2 million.
Impact of acquisition on the results of the Group
As the acquisition of Western Biomedical Pty Ltd occurred on 15 October 2015 the revenue and profit of the Group for the year ended 30 June 2016
reflects trading for 15 October to 30 June 2016 of the acquired business.
AASB 3 Business Combinations requires disclosure of revenue and profit and loss of the acquired entity from date of acquisition, and disclosure of
revenue and profit and loss of the consolidated entity for the current reporting period as though the acquisition date for all business combinations
had been as of 1 July 2015. However, management has determined that this is impracticable after considering the various factors contained
within the definitions contained within paragraph 5 (a) through to (c) (inclusive) of AASB 108 Accounting Policies, Changes in Accounting Estimates
and Errors to the pre-acquisition operating environment of each acquisition.
Provisional amounts
As the acquisition has only recently occurred the numbers presented for Net working capital, Plant and equipment, Employee Entitlements,
Deferred Tax Asset and Goodwill on consolidation, including the estimate of vendor earn-out are presented as provisional amounts pending the
completion of the fair valuation of assets acquired and forecasting of earnings for Financial year 2017.
42
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 28 Business Combinations (Continued)
Meditron Pty Ltd
On 1st Oct 2015 the Company acquired 100% of the shares in Meditron Pty Ltd. Meditron specialises in the sales and servicing of premium
medical devices in the urology and ultrasound markets. Meditron is the Australia and New Zealand distributor for international brands including
Dornier Med Tech, Civco, D+K Technologies and Sonacare. Meditron has an established customer base, deep industry knowledge and contacts
and operates with positive cash flow at healthy margins.
Purchase consideration
Cash and cash equivalents
Conditional payment (a)
Ordinary shares in Paragon Care (1,886,792) at $0.53
Fair value and carrying value of net assets acquired
Net working capital
Plant and equipment
Employee entitlements
Deferred tax asset
Goodwill on consolidation
Reconciliation to cashflow
Consideration of purchase
Conditional payment
Equity funding
Net outflow of cash
$
6,189,164
800,000
1,000,000
7,989,164
3,122,791
176,030
(394,216)
118,265
4,966,294
7,989,164
7,989,164
(800,000)
(1,000,000)
6,189,164
(a) The vendors are entitled to a payment of 2 times the EBITDA growth between FY15 and FY16. The payment is capped at $800,000; which has
subsequently been paid see note 25.
Impact of acquisition on the results of the Group
As the acquisition of Meditron Pty Ltd occurred on 1 October 2015 the revenue and profit of the Group for the year ended 30 June 2016 reflects
trading for 1 October to 30 June 2016 of the acquired business.
AASB 3 Business Combinations requires disclosure of revenue and profit and loss of the acquired entity from date of acquisition, and disclosure of
revenue and profit and loss of the consolidated entity for the current reporting period as though the acquisition date for all business combinations
had been as of 1 July 2015. However, management has determined that this is impracticable after considering the various factors contained
within the definitions contained within paragraph 5 (a) through to (c) (inclusive) of AASB 108 Accounting Policies, Changes in Accounting Estimates
and Errors to the pre-acquisition operating environment of each acquisition.
43
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 28 Business Combinations (Continued)
Designs For Vision Holdings Pty Ltd
On 1st October 2015 the Company acquired 100% of the shares in Designs For Vision Holdings Pty Ltd, 100% of the units in Designs For Vision unit
trust . Designs for Vision specialises in providing products to the ophthalmic and optometry sector. It repesents over 50 global manufacturers
in the Australian and NZ markets. It has expanded Paragon’s customer base by providing access to the ophthalmic market where there will be
growth opportunities for some of Paragon’s existing products.
Purchase consideration
Cash and cash equivalents
Conditional payment (a)
Ordinary shares in Paragon Care (7,547,170) at $0.53
Fair value and carrying value of net assets acquired
Net working capital
Plant and equipment
Employee entitlements
Deferred tax asset
Goodwill on consolidation
Reconciliation to cashflow
Consideration of purchase
Conditional payment
Equity funding
Net outflow of cash
$
21,872,440
8,318,478
4,000,000
34,190,918
7,036,141
128,433
(737,401)
221,220
27,542,525
34,190,918
34,190,918
(8,318,478)
(4,000,000)
21,872,440
(a) The vendors are entitled to a payment of 3.5 times the EBITDA growth between FY15 and FY17. The payment is uncapped; its likely range is
anticipated to be between $5.5 and $10.5 million.
Impact of acquisition on the results of the Group
As the acquisition of Designs For Vision occurred on 1 October 2015 the revenue and profit of the Group for the year ended 30 June 2016 reflects
trading for 1 October to 30 June 2016 of the acquired business.
AASB 3 Business Combinations requires disclosure of revenue and profit and loss of the acquired entity from date of acquisition, and disclosure of
revenue and profit and loss of the consolidated entity for the current reporting period as though the acquisition date for all business combinations
had been as of 1 July 2015. However, management has determined that this is impracticable after considering the various factors contained
within the definitions contained within paragraph 5 (a) through to (c) (inclusive) of AASB 108 Accounting Policies, Changes in Accounting Estimates
and Errors to the pre-acquisition operating environment of each acquisition.
Provisional amounts
As the acquisition has only recently occurred the numbers presented for Net working capital, Plant and equipment, Employee Entitlements, the
Deferred Tax Asset and Goodwill on consolidation, including the estimate of vendor earnout are presented as provisional amounts pending the
completion of the fair valuation of assets acquired and forecasting of earnings for Financial year 2017.
44
Paragon Care Limited Financial Report 2015/16 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2016
Note 29 Deed of Cross Guarantee
All entities of the consolidated entity, as listed in note 20(a), are party
to a deed of cross guarantee under which each company guarantees
the debts of the others.
By entering into the deed, the wholly-owned entities have been relieved
from the requirement to prepare financial statements and directors’
report under Class Order 98/1418 (as amended) issued by the
Australian Securities and Investments Commission (‘ASIC’). The above
companies represent a ‘Closed Group’ for the purposes of the Class
Order, and as there are no other parties to the deed of cross guarantee
that are controlled by Paragon Care Limited, they also represent the
‘Extended Closed Group’.
The Consolidated Statement of Profit or Loss and Other
Comprehensive Income on page 15 and Consolidated Statement of
Financial Position on page 16 are the Consolidated Statement of Profit
or Loss and Other Comprehensive Income and Consolidated Statement
of Financial Position of the ‘Closed Group’.
45
Paragon Care Limited Financial Report 2015/16 Directors’ Declaration
For the year ended 30 June 2016
In the Directors’ opinion:
a) The financial statements and notes set out on pages 15 to 45
are in accordance with the Corporations Act 2001, including;
(i) Complying with Accounting Standards, the Corporations
Regulations 2001 and other mandatory professional
requirements; and
(ii) Giving a true and fair view of the consolidated entity’s
financial position as at 30 June 2016 and of its performance
for the financial year ended on that date; and
b) There are reasonable grounds to believe that Paragon Care
Limited will be able to pay its debts as and when they
become due and payable.
The Directors have been given the declaration by the Chief
Executive Officer and Chief Financial Officer required by section
295A of the Corporations Act 2001.
This declaration is made in accordance with the resolution
of the Directors.
S F Tanner
Chairman
8 August 2016
46
Paragon Care Limited Financial Report 2015/16
AUDITOR’S
REPORT
Independent Audit Report
For the year ended 30 June 2016
RSM Australia Partners
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF
PARAGON CARE LIMITED
Report on the Financial Report
We have audited the accompanying financial report of Paragon Care Limited, which comprises the consolidated
statement of financial position as at 30 June 2016, and the consolidated statement of comprehensive income,
consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended,
notes comprising a summary of significant accounting policies and other explanatory information, and the
directors' declaration of the consolidated entity comprising the company and the entities it controlled at the year’s
end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that is free from
material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial report. The procedures selected depend on the auditor's judgement, including the assessment of the
risks of material misstatement of the financial report, whether due to fraud or error. In making those risk
assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made
by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
THE POWER OF BEING UNDERSTOOD
AUDIT | TAX | CONSULTING
RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
48
Paragon Care Limited Financial Report 2015/16
Independent Audit Report
For the year ended 30 June 2016
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We
confirm that the independence declaration required by the Corporations Act 2001, which has been given to the
directors of Paragon Care Limited, would be in the same terms if given to the directors as at the time of this
auditor's report.
Opinion
In our opinion:
a)
the financial report of Paragon Care Limited is in accordance with the Corporations Act 2001, including:
i
ii
giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its
performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001; and
b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2016. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion the Remuneration Report of Paragon Care Limited for the year ended 30 June 2016 complies with
section 300A of the Corporations Act 2001.
RSM AUSTRALIA PARTNERS
R B MIANO
Partner
Melbourne, Victoria
Dated: 8 August 2016
49
Paragon Care Limited Financial Report 2015/16 SHAREHOLDER
INFORMATION
Shareholder information
For the year ended 30 June 2016
The shareholders information set out below was applicable as at
1 August 2016.
(b) Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Number of Units
1–1,000
1,001–5,000
5,001–10,000
10,000–100,000
100,001 and over
Total Holders
PGC
605
540
292
717
136
2,290
There are 468 holders of less than a marketable parcel of ordinary shares
(b) Equity Security Holders
Twenty largest quoted equity security holders:
Ordinary shares
Ordinary Shares
Name
J P MORGAN NOMINEES AUSTRALIA LIMITED
NATIONAL NOMINEES LIMITED
JMT INVESTMENT GROUP VIC PTY LTD
DAK DRAFTING SERVICES PTY LTD
POSSE INVESTMENT HOLDINGS PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
MIRRABOOKA INVESTMENTS LIMITED
AMCIL LIMITED
UBS NOMINEES PTY LTD
SHEMOZEL PTY LTD
GRILLS INVESTMENTS PTY LTD
BRISPOT NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
BRETT CHEONG & LYNN CHEONG
LORA FALLS PTY LTD
RBC INVESTOR SERVICES AUSTRALIA PTY LIMITED
MR IAN GIBSON & MRS MARYANNE TAYLOR-GIBSON
WHOTIF PTY LIMITED
MR PETER JOHN DIAMOND & MRS DIANA ELIZABETH DIAMOND
CS FOURTH NOMINEES PTY LIMITED
Total Top 20 PGC Shareholders
Balance of Register
Grand Total
Units
22,588,692
11,228,135
9,662,006
5,300,000
4,610,000
4,540,652
4,000,000
4,000,000
3,998,316
3,773,585
3,773,585
3,639,205
3,054,082
2,642,640
2,594,006
2,527,371
2,239,686
1,854,200
1,800,000
1,685,531
99,511,692
63,839,086
163,350,778
% of Issued Shares
13.8%
6.9%
5.9%
3.2%
2.8%
2.8%
2.4%
2.4%
2.4%
2.3%
2.3%
2.2%
1.9%
1.6%
1.6%
1.5%
1.4%
1.1%
1.1%
1.0%
60.9%
39.1%
100.0%
51
Paragon Care Limited Financial Report 2015/16 Shareholder information Continued
For the year ended 30 June 2016
(c) Voting Rights
The voting rights attaching to each class of equity securities are set
out below:
i) 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
d) Substantial Holders
Name
JMT INVESTMENT GROUP PTY LTD
FIRST SAMUEL LIMITED
AUSTRALIAN ETHICAL INVESTMENTS LIMITED
TOTAL SUBSTANTIAL SHAREHOLDERS
Units
9,662,006
9,241,663
8,886,856
27,790,525
% of Issued
Ordinary Shares
5.9
5.6
5.4
16.9
Total PGC Shares
163,350,778
(e) Corporate Governance Statement
In accordance with ASX Listing Rule 4.10.3, the Company’s 2016
Corporate Governance Statement can be found on its website at
www.paragoncare.com.au/corporate-governance-statement/
52
Paragon Care Limited Financial Report 2015/16 Paragon CareLimited
ABN 76 064 551 426
Registered Office
11 Dalmore Drive,
Scoresby VIC 3179
T_ 1300 369 559
F_ 03 8833 7890
paragoncare.com.au
paragoncare.com.au
PARAGON CARE FINANCIAL REPORT 2016