Financial Report
2017
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
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Audit Report
Shareholder Information
2
3
4
13
15
16
17
18
19
46
47
52
2
P A R A G O N C A R E L I M I T E D
Corporate Directory
Directors
Shane Tanner
Mark Simari
Non-Executive Chairman
Managing Director
Michael Newton
Non-Executive Director
Geoff Sam OAM
Non-Executive Director
Brett Cheong
Michael Rice
Executive Director
Alternate Director to Mr Simari
Company Secretary
John Osborne
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
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
Chairman’s
Report
Introduction
On behalf of the Board of Directors of Paragon Care Limited, I am pleased to present to you our
2017 Annual Report.
3
The Period in Review
The financial year ended 30th June 2017 was another record year for the company. The financial results
were again outstanding and these are detailed in the highlights below. Congratulations to all involved.
The focus for the 2017 year was the consolidation of the three major acquisitions made during the
2016 financial year — Designs For Vision, Western Biomedical, and Meditron. In addition, the company
continued to focus on organic growth of the core business, which included the development of our own
designed and sourced new product, namely the Stralus Aged Care bed. In its first year of operation,
this bed has exceeded all of our sales expectations and has been positively received by a number of
Aged Care groups. During the 2018 year, Paragon Care will further develop its Stralus range by the
introduction of a competitively priced and state-of-the-art hospital bed for the Australian market.
Highlights for the year ended 30 June 2017 included:
• Revenue up 25% to 117.2M
• EBITDA of $17.1M, up 41% over the prior period and slightly ahead of market guidance.
• Net Profit after tax of $10.2M up 36% over the prior year.
• Earnings per share of 6.2 cents, up 11%.
• The Company’s balance sheet remains sound with cash at year-end of $18.6M
• Paragon Care’s share price increased 10% over the course of the financial year as investors continued
to support the company strategy.
• Fully franked dividends for the year of 3 cents, up 36% from last year’s full year dividend of 2.2 cents.
Two modestly sized acquisitions were made in July 2016 — Midas, a Health IT business, and Electro
Medical Group, which operates in the medical equipment servicing sector. Both have fitted very well into
Paragon Care. Of considerable interest going forward is the Midas business. This is the company’s first
investment into the fast-growing sector of Heath IT. Midas operates an interpretive reporting system that
has outstanding applications and provides material efficiencies for both the Radiology and Cardiology
sectors. Subject to performance over the next 2–3 years, the company plans to introduce Midas globally.
On behalf of the Board, I would like to thank the employees, customers, suppliers and shareholders of
Paragon Care for their continued support. The management team led by Managing Director Mark Simari
continues to deliver outstanding results and we move into the 2018 year with great confidence.
Shane Tanner
Chairman
7 August 2017
Revenue
$117.2M
$93.4M
$32.2M
EBITDA
Net Profit
$17.1M
$12.1M
$3.7M
$10.2M
$7.5M
$2.1M
14/15
15/16
16/17
14/15
15/16
16/17
14/15
15/16
16/17
FINANCIAL REPORT 2016 / 17 4
Directors’ Report
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 2017.
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
2016/17
$117.2 M
$17.1 M
$10.2 M
$18.5 M
2015/16
$93.4 M
$12.1 M
$7.5 M
$19.0 M
The Group’s performance has significantly increased again in the
2016–17 financial year compared with 2015–16. Revenue increased
by 25% to $117.2 million whilst net profit grew 36% from a profit of
$7.5 million in 2016 to $10.2 million for 2017.
PARAGON CARE LIMITED
Directors’ Report Continued
For the year ended 30 June 2017
Highlights for the year included:
5
Revenue
increased by
25% to $117.2
million whilst net
profit grew 36%
from a profit of
$7.5 million in
2016 to $10.2
million for 2017.
• Revenues in excess of 117.2M and an EBITDA of $17.1M, a 41% increase from last year and illustrates 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 consolidation 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.
• Paragon Care continues to increase operations and presence in 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.
• 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.
• Two modestly sized acquisitions were made in July 2016 — Midas, a Health IT business, and Electro Medical,
which operates in the medical equipment servicing sector. Both have fitted very well into Paragon Care. Of
considerable interest going forward is the Midas business. This is the company’s first investment into the fast-
growing sector of Heath IT. Midas operates an interpretive reporting system that has outstanding applications
and provides material efficiencies for both the Radiology and Cardiology sectors.
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.
Further information on likely developments in the operations of the Group and the expected results of
operations have not been included in this Annual Financial Report because the Directors believe it would be
likely to result in unreasonable prejudice to the Group.
Environmental 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 $3,135,342 (1.90 cents per fully paid ordinary share) to be paid on 6th of October 2017
in respect of the financial year ended 30 June 2017.
The dividend will be paid to all shareholders on the register of members as at the Record Date of 8th of
September 2017. This dividend has not been included as a liability in these financial statements.
In April 2017, an interim dividend of 1.1 cents per share valuing $1,810,565 fully franked was paid. The record
date was 10th March 2017 with the payment date of 6 April 2017.
Combined with the interim dividend of 1.1 cents per fully paid ordinary share paid in April 2017 in respect of
the half year ended 31 December 2016, the full year dividend for 2017 will be 3.0 cents per fully paid ordinary
share, a 36% increase on the full year dividend of 2.2 cents per fully paid ordinary share for the 2016 financial
year and represents a 48.6% 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 2.20 cents per share with the value of $3,564,651 for the year
ended 30 June 2016 on 6th April 2016 (0.80 cents per share) and 6th of October 2016 (1.40 cents per share).
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.
FINANCIAL REPORT 2016 / 17
6
Directors’ Report Continued
For the year ended 30 June 2017
Information on Directors
The names of Directors in office at any time
during or since the end of the financial year are:
Mr Shane Tanner
Mr Mark Simari
Mr Michael Newton
Mr Geoffrey Sam
Mr Brett Cheong
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).
Directors’ Qualifications,
Experience, and Responsibilities
Mr. Shane F. Tanner
Non-Executive Chairman, Age 64
Qualifications
FCPA, AGIA
Experience
Currently Chairman of Funtastic Limited and Chairman of Zenitas
Healthcare Limited.
Appointed as a Director on 21 December 2005
Responsibilities
• Chairman of the Board
• Chairman of the Nominations & Remuneration Committee,
• Member of Investment Review Committee
Mr. Mark A. Simari
Managing Director, Age 48
Qualifications
B.Acc, Dip FS
Experience
Director of Novita Healthcare Limited
Appointed as a Director on 13 February 2007 and Managing Director on 15 April 2007
Responsibilities
• Managing Director
• Member of Investment Review Committee
Mr. Michael C. Newton
Non-Executive Director, Age 63
Qualifications
B.App Sci., Grad Dip Bus Adm.
Mr. Geoffrey J. Sam OAM
Non-Executive Director, Age 63
Qualifications
B. Commerce, M. Hospital
Administration and M. Economics
& Social Studies. FAICD
Experience
Managing Director of Symex Limited from 1999 to 2007and
Chairman of The Power House Youth Leadership Foundation.
Appointed as a Director on 25 June 2007
Experience
• Non-Executive Director, CML Group Limited.
• Co-founder, Director and former Executive Chairman, Healthecare Pty Ltd
• Former National President of the Australian Private Hospital Association
Responsibilities
Appointed as a Director on 3 June 2016
• Chairman of the Audit & Risk Management Committee
• Member of the Nominations & Remuneration Committee
Responsibilities
• Member of the Audit & Risk Management Committee
• Chairman of the Investment Review Committee
PARAGON CARE LIMITED Directors’ Report Continued
For the year ended 30 June 2017
Mr. Brett A. Cheong
Executive Director, Age 58
Mr. Michael G. Rice
Alternate Director, Age 41
7
Experience
Experience
Founder and Managing Director of Axishealth May 2002 – June 2009 and
with over 30 years experience in the durable medical equipment industry.
Founder and Managing Director of GM Medical — April 2002–June
2011, Over 20 years experience in the healthcare sector.
Appointed as a Director on 2 July 2009
Appointed as an Alternate Director to Mr Simari on 11 June 2015
Responsibilities
Marketing Manager
Responsibilities
Chief Operating Officer
Mr. John M. Osborne
Company Secretary, Age 68
Qualifications
BSc, FRMIT (Management),
Grad Dip Corp Gov.,AGIA
Mr. Stephen J. Munday
Chief Financial Officer and
Company Secretary, Aged 53
Qualifications
MBA, B Bus, FCIS, CA
Experience
Experience
Over 30 years of senior financial, administrative, commercial and
company secretarial experience with ASX listed companies.
Appointed as Company Secretary on 13 March 2013.
Over thirty years business experience in Australia and North America including
CFO and company secretarial positions in listed companies over the 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 and resigned 30 June 2017.
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 2017, and the number of meetings attended by each Director were:
Directors’ Meetings
Audit & Risk
Management Committee
Nominations &
Remuneration Committee
Investment Review
Committee
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
Number
eligible to
attend
Number
attended
12
12
12
12
12
12
12
12
12
11
10
11
1
-
2
-
2
-
1
-
2
-
1
-
3
-
3
-
-
-
3
-
3
-
-
-
1
1
-
-
1
-
1
1
-
-
1
-
Mr S F Tanner
Mr M A Simari
Mr M C Newton
Mr B A Cheong
Mr G J Sam
Mr M.G. Rice
(Alternate director)
FINANCIAL REPORT 2016 / 17 8
Directors’ Report Continued
For the year ended 30 June 2017
Director Shareholdings
Directors
S F Tanner
M A Simari
M C Newton
B A Cheong
G J Sam OAM
Balance
1 July 2016
610,000
1,707,611
307,699
2,642,640
585,526
Shares acquired
Shares disposed
Other changes
113,500
8,167
67,849
-
129,851
-
711,000
-
-
-
-
-
Balance
30 June 2017
723,500
1,004,778
375,548
2,642,640
715,377
-
-
-
-
-
-
-
134,058
38,239
Other key management personnel
M.G. Rice
S J Munday
134,058
38,239
-
-
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)
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:
S F Tanner
M C Newton
G J Sam OAM
M A Simari
B A Cheong
Base Fees
Chairman
Other Non-Executive Directors
30 June 2016
30 June 2017
$120,000
$50,000
$120,000
$50,000
Other key management personnel
M G Rice
S J Munday
Chief Financial Officer (until 30 June 2017)
L Kocovic
Chief Financial Officer (July 2017 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
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
personnel, and
• Non-Executive Directors fees
• Transparency
• Capital management
Their objective is to ensure that remuneration policies and structures
are fair, competitive and aligned with the long term interests of the
Company.
The Corporate Governance Statement provides further information on
the role of this committee.
Principles used to determine the nature and amount of remuneration
Non-Executive Directors
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
to the performance of the Company. However, to align Directors’
interests with shareholder interests, the Directors are encouraged
to hold shares in 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 Company did not receive any specific feedback at the AGM or
throughout the year on its remuneration practices.
PARAGON CARE LIMITED
Directors’ Report Continued
For the year ended 30 June 2017
Details of remuneration and service agreements
Service Agreements
9
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.
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 69.0¢ and a high of 91.0¢. As at 30 June 2017 the, Company’s share price
(ASX: PGC) was 77.0¢ 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 2012
30 June 2013
30 June 2014
30 June 2015
30 June 2016
30 June 2017
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
5.6
2.2
0.8
91.0
69.0
77.0
6.2
3.0
1.1
10.37
18.20
20.58
72.26
82.69
Major provisions of the agreements as at 30 June 2017 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 M G Rice
Alternate Director /
Chief Operating Officer
Other Key Management Personnel
Mr L Kocovic
Chief Financial Officer
Mr S J Munday
Chief Financial Officer
(Appointed June 2015,
resigned 6 June 2017)
No fixed term
$120,000
No termination benefit
No fixed term
No fixed term
$50,000
$50,000
No termination benefit
No termination benefit
No fixed term
$438,000
No termination benefit
No fixed term
$160,000
(consultancy package)
No termination benefit
No fixed term
$262,800
No termination benefit
No fixed term
$300,000
No termination benefit
No fixed term
$290,000
No termination benefit
FINANCIAL REPORT 2016 / 17 10
Directors’ Report Continued
For the year ended 30 June 2017
Emoluments of Directors, Executive officers and other Executives of the Company:
2017
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
Leave
Options
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
Other Key Management Personnel
Mr M G Rice
Mr S J Munday
Mr L Kocovic
Total
2016
Name
$
120,000
13,103
47,096
408,000
160,000
240,000
255,000
9,519
1,252,717
$
-
-
-
-
-
-
-
-
-
$
-
-
-
$
-
34,500
4,474
27,207
30,000
-
-
25,842
-
-
22,800
35,000
865
53,049
127,639
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
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
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
$
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
-
46,885
35,000
105,557
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
Total
$
120,000
47,603
51,570
465,207
160,000
288,642
290,000
10,384
1,433,406
Total
$
104,348
42,084
3,967
373,262
150,000
268,347
265,000
1,207,008
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.
PARAGON CARE LIMITED Directors’ Report Continued
For the year ended 30 June 2017
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:
11
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
Fully paid ordinary shares (PGC)
723,500
1,004,778
375,548
2,642,640
715,377
134,058
38,239
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.
Directors and Officers Indemnity
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
FINANCIAL REPORT 2016 / 17 12
Directors’ Report Continued
For the year ended 30 June 2017
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
122,830
79,010
2017
$
2016
$
Non Audit Services
Taxation Services
Other Services
36,075
-
24,108
-
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:
Shane Tanner
Chairman
7 August 2017
PARAGON CARE LIMITED Auditor’s Independence Declaration
13
FINANCIAL REPORT 2016 / 17 AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Paragon Care Limited for the year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS P A RANSOM Partner Melbourne, Victoria Dated: 7 August 2017 14
Financial
Statements
PARAGON CARE LIMITED Consolidated Statement of Profit or Loss
and Other Comprehensive Income
For the year ended 30 June 2017
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)
15
Note
3
4
2017
$
2016
$
117,192,924
93,383,052
(71,124,867)
(56,924,483)
46,068,057
36,458,569
364,325
36,872
(7,786,665)
(6,414,255)
(321,121)
(444,538)
(1,792,897)
(1,504,972)
(1,302,144)
(1,094,469)
(20,995,757)
(17,168,084)
14,233,798
9,869,123
7
(4,059,037)
(2,338,600)
10,174,761
7,530,523
131,822
131,822
(550,603)
(550,603)
10,306,583
6,979,920
10,174,761
7,530,523
10,306,583
6,979,920
22
22
6.2
6.2
5.6
5.6
FINANCIAL REPORT 2016 / 17 16
Consolidated Statement of Financial Position
As at 30 June 2017
Note
2017
$
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
Vendor conditional payables
Interest bearing liability
Other financial liabilities
Provision for Income Tax
Provisions
Total current liabilities
Non-current liabilities
Other Payables
Trade and other payables
Interest bearing liability
Provisions
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Contributed equity
Reserves
8
9
10
11
12
7
13
14
28b
15
11
16
14
28a
15
16
17
18
Retained earnings (Accumulated losses)
Total Equity
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
18,555,941
19,116,930
21,742,075
22,615,886
20,777,567
19,400,652
-
-
61,075,583
61,133,468
3,405,391
2,221,240
931,176
2,982,624
2,331,507
302,979
98,419,272
81,038,905
104,977,079
86,656,015
166,052,663
147,789,483
25,534,489
22,664,613
9,583,817
800,000
8,498,825
7,562,765
161,123
555,736
322,063
568,431
1,949,707
1,823,933
46,283,697
33,741,805
643,134
416,797
7,282,362
9,852,454
28,568,954
30,591,710
583,720
416,483
37,078,170
41,277,444
83,361,867
75,019,249
82,690,795
72,770,234
74,347,530
70,636,055
(154,724)
8,497,989
(286,547)
2,420,726
82,690,795
72,770,234
PARAGON CARE LIMITED Consolidated Statement of Changes in Equity
For the year ended 30 June 2017
17
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
$
23,611,121
-
-
-
-
Issue of share capital net of transaction costs
47,024,934
Dividend issued in the year
Balance at 30 June 2016
Balance at 1 July 2016
Profit / (loss) for the year
Gain / (loss) on cash flow hedge
Gain / (loss) on currency translation
Total comprehensive income for the year
Dividend issued in the year
Balance at 30 June 2017
Issue of share capital net of transaction costs
3,711,475
$
-
-
-
38,871
38,871
-
-
Currency
Translation
Reserve
Currency
Hedge Reserve
Retained Earnings
(Accumulated
Losses)
Total Equity
$
$
$
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)
2,420,726
70,636,055
38,871
(325,417)
2,420,726
72,770,234
-
-
11,157
11,157
-
-
-
10,174,761
10,174,761
120,665
-
-
-
120,665
11,157
120,665
10,174,761
10,306,583
-
-
-
3,711,475
(4,097,496)
(4,097,496)
74,347,530
50,028
(204,752)
8,497,989
82,690,795
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
FINANCIAL REPORT 2016 / 17 18
Consolidated Statement of Cash Flows
For the year ended 30 June 2017
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
2017
$
2016
$
117,291,989
87,307,784
(99,403,618)
(74,724,846)
(1,792,897)
(1,504,972)
50,753
85,126
(4,156,847)
(3,403,871)
Net cash provided by / (used in) operating activities
8(b)
11,989,380
7,759,221
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 Intangible Assets
Loan Advancement
Payment for development of website
Net cash provided by / (used in) investing activities
Cash flows from financing activities
(Repayment) / 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
(2,853,347)
(55,213,428)
-
195,720
(1,052,505)
(1,548,447)
(3,523,340)
(500,000)
-
-
-
(675,594)
(7,929,192)
(57,241,749)
(1,086,696)
27,113,505
-
42,136,144
(3,522,941)
(1,606,088)
(11,540)
(2,799,949)
(4,621,177)
64,843,612
(560,989)
15,361,083
19,116,930
3,755,847
Cash and cash equivalents at the end of the financial period
8(a)
18,555,941
19,116,930
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.
PARAGON CARE LIMITED 19
Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2017
NOTE 1 Summary of Significant Accounting Policies
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.
(d) Foreign Currency Translation
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.
FINANCIAL REPORT 2016 / 17
20
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(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.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 21
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(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.
(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.
Derecognition
Fair value estimation
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.
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.
FINANCIAL REPORT 2016 / 17
22
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(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 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.
The assets’ residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
Software development
Software development costs are capitalised only when incurred.
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.
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.
PARAGON CARE LIMITED Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(s) Employee Benefits
Wages and salaries and annual leave
(v) Earnings per share
Basic earnings per share
23
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.
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.
FINANCIAL REPORT 2016 / 17
24
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(x) New Accounting Standards for Application in Future Periods (Continued)
Reference
Title
Summary
Impact
Application Date
AASB 15
Revenue from Contracts with
Customers
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.
No material impact envisaged.
1 January 2018
AASB 2014–5
Amendments to Australian
Accounting Standards arising
from AASB 15
Consequential amendments
arising from the issuance of
AASB 15.
No material impact envisaged.
1 January 2018
AASB 9
Financial Instruments
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.
No material impact envisaged.
1 January 2018
AASB 2014–7
Amendments to Australian
Accounting Standards arising
from AASB 9 (December 2014)
Consequential amendments
arising from the issuance of
AASB 9.
No material impact envisaged.
1 January 2018
AASB 16
Leases
The standard replaces AASB17
“Leases” and for lessees will
eliminate the classification of
operating leases and finance
leases
1 January 2019
Given the number of operating
leases the group has on hand
with its properties, there will be a
material impact on the statement
of financial position. The operating
leases will no longer be off the
balance sheet and will instead be
recognised on the balance sheet.
A right of use asset and lease
liability will be recognised,
initially measured at present
value of unavoidable future lease
payments. The impact on gross
assets and gross liabilities is
estimated to be approximately
$5.25 million. There will be no
material impact on a net basis.
Further, there will be no material
impact on the statement of
comprehensive income although
instead of a rental expense,
depreciation on right of use assets
and interest on lease liabilities will
be recognised.
2016-5
Amendments to Australian
Accounting Standards –
Classification
and Measurement of Share-
based Payment Transactions
Consequential amendments arising
from the issuance of International
Financial Reporting Standard
“Classification and Measurement
of Share-based Payment
Transactions” by the International
Accounting Standards Board (June
2016)
No material impact envisaged.
1 January 2018
PARAGON CARE LIMITED 25
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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. Fair value adjustments on the finalisation of the business
combination accounting is retrospective, where applicable, to the period the combination occurred and may
have an impact on the assets and liabilities reported.
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.
FINANCIAL REPORT 2016 / 17 26
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
NOTE 3 Revenue
Revenue
Sale of Goods
Sundry Income
Interest
Total Sundry Income
Total Revenue
NOTE 4 Other Income
Write back of vendor earnout payable (i)
Other income
(i) During the year ending 30 June 2017 the conditional payments on the earn outs for Western Biomedical
and Designs for Vision have been finalised with the respective vendors. The amounts agreed to be paid
to the respective vendors was different to the contingent consideration estimated in the final acquisition
accounting. The impact was a reduction to the vendor earnout payable resulting in a write back of
$268,637. Refer Note 28.
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
2017
$
2016
$
117,142,171
93,297,925
50,753
50,753
85,126
85,126
117,192,924
93,383,052
2017
$
268,637
95,688
364,325
2016
$
-
36,782
36,782
2017
$
804,533
24,858
-
14,831
288,485
2016
$
621,498
21,900
9,697
1,262
107,242
19,172,825
15,512,285
20,305,532
16,273,885
2017
$
122,830
36,075
-
2016
$
79,010
24,108
-
158,905
103,118
PARAGON CARE LIMITED
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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
27
2017
$
2016
$
3,600,449
621,835
(163,247)
4,059,037
2,550,142
(211,627)
85
2,338,600
110,267
(1,497,227)
-
-
110,267
(1,497,227)
(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%
4,270,140
2,960,737
Add tax effect of:
• Entertainment expenses
Less tax effect of:
• Non-assessable income
• (Overprovision) / Underprovision 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
32,736
10,583
(80,592)
(163,247)
-
4,059,037
-
85
(632,805)
2,338,600
42,520
813,824
(243)
(37,477)
755,391
273,399
(3,834)
377,660
48,466
744,570
(11,322)
83,536
29,462
839,985
(1,719)
598,529
Balance after set off of deferred tax assets and (liabilities)
2,221,240
2,331,507
Deferred tax asset not recognised comprise:
Unrecognised tax losses
Timing differences
-
-
-
-
-
-
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.
FINANCIAL REPORT 2016 / 17
28
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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
Writeback of provision for vendor earnout
Foreign exchange differences
(Profit)/loss on disposal of assets
Change in operating assets and liabilities
(Increase)/ decrease in trade and other receivables
(Increase)/ decrease in inventory
Increase /(decrease) in provisions
Increase /(decrease) in accounts payable and other payables
Increase/(decrease) in current tax provision and deferred taxes
Net cash inflows from operating activities
(c) Non-cash financing and investing activities
Other Non-cash share issues
In financial year ended 30 June 2017
707,214 shares as part consideration for the acquisition of Meditron at a price of $0.7050 per share.
2,709,046 shares as part consideration for the acquisition of Midas Software at a price of $0.7100 per share.
902,784 shares as part consideration for the acquisition of Electro Medical Group at a price of $0.8400 per share.
In financial year ended 30 June 2016
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.
2017
$
2016
$
18,555,941
19,116,930
10,174,761
7,530,523
1,132,707
(268,637)
11,157
-
761,600
-
46,964
-
54,130
(6,027,013)
(655,856)
27,234
1,611,694
(526,441)
47,013
6,991,846
(97,810)
(1,065,272)
11,989,380
7,759,221
(d) Financing Facilities
Refer Note 19 (c)
NOTE 9 Inventories
Current
Raw materials
Work in progress
Finished goods
2017
$
292,236
45,810
2016
$
379,871
124,075
21,404,029
22,111,939
21,742,075
22,615,886
PARAGON CARE LIMITED
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
NOTE 10 Trade and Other Receivables
Current
Trade and other receivables
GST receivable
Other receivables
(a) Impaired trade receivables
As at 30 June 2017 current trade receivables of the Group with a nominal value of $nil (2016: $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 2017, trade receivables of $ 7,314,840 (2016: $3,554,868) 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
Total overdue
(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.
29
2017
$
2016
$
19,485,685
17,746,683
433,866
858,016
416,092
1,237,877
20,777,567
19,400,652
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,919,786
395,054
7,314,840
2,813,248
741,620
3,554,868
FINANCIAL REPORT 2016 / 17 30
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
NOTE 11 Derivative Financial Instruments
2017
2016
Current assets
Foreign exchange forward contracts—Cash flow hedges
Current liabilities
Foreign exchange forward contracts—Cash flow hedges
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.
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
$
-
-
$
-
-
161,123
161,123
322,063
322,063
2017
$
2016
$
6,315,345
5,042,256
(3,352,819)
(2,493,045)
1,094,810
(651,945)
3,405,391
859,608
(426,195)
2,982,624
2,982,624
1,187,658
156,022
(112,635)
(808,278)
1,193,537
1,548,333
1,057,973
(195,720)
(621,498)
3,405,391
2,982,624
1,116,953
1,083,981
(292,650)
824,303
(406,785)
677,196
PARAGON CARE LIMITED Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
NOTE 13 Intangible Assets
Website development costs
TGA Costs (with business acquisition)
R&D Projects (Under construction)
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
R&D Projects (Under construction)
Beginning of year
Additions at cost
Amortisation
End of year
Software development costs
Beginning of year
Additions
Acquisition through business combinations
Amortisation
End of year
Goodwill
Beginning of year
Additions
Finalisation of Acquisition Accounting Adjustment (Refer Note 28b)
End of year
Goodwill
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 note 2 for further details.
31
2017
$
11,090
-
1,072,141
4,221,076
2016
$
35,948
-
308,344
777,813
93,114,965
79,916,800
98,419,272
81,038,905
35,948
-
(24,858)
11,090
-
-
-
-
308,344
778,628
(14,831)
1,072,141
777,813
2,779,518
952,230
(288,485)
4,221,076
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
79,916,800
12,036,331
1,161,834
18,599,684
61,317,116
-
93,114,965
79,916,800
FINANCIAL REPORT 2016 / 17 32
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
NOTE 14 Trade and Other Payables
Current
Trade creditors
Other creditors
Deferred revenue
Accrued expenses
Non-Current
Other Creditors
NOTE 15 Borrowings
Current
Secured
Trade Finance Facility
Bank Loans
Lease Liabilities
Unsecured
Loan (b)
Total Current Borrowings
Non-Current
Secured
Bank Loans
Lease Liabilities
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
2017
$
2016
$
18,529,369
17,139,990
3,562,154
2,144,595
1,298,371
2,664,000
1,894,914
965,709
25,534,489
22,664,613
643,134
643,134
416,797
416,797
2017
$
2016
$
6,263,812
2,000,000
235,013
5,379,208
1,000,000
233,556
8,498,825
6,612,765
-
950,000
8,498,825
7,562,765
28,000,000
30,000,000
568,954
591,710
28,568,954
30,591,710
28,568,954
30,591,710
6,263,812
5,379,208
30,000,000
31,000,000
803,967
825,267
37,067,779
37,204,475
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 Westpac and is therefore covered by the charge. Unlike the Bank loans
this revolving trade finance facility does not have a reducing principle balance and is continuously utilised to provide a source of working capital
more closely matching the inventory life cycle of imported products.
PARAGON CARE LIMITED
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
(b) Loan
The parent entity borrowed $2,225,000 from a private investor in June 2012. The loan is in two tranches. The company repaid $1,275,000 during the
year through the issue of 2,260,178 shares @ $0.53 and the payment of $77,106. The balance of $950,000 was due for repayment on 1 July 2016.
Interest, at 9.5% per annum, is payable quarterly in arrears. The Loan was repaid in July 2016.
33
NOTE 16 Provisions
Current
Employee entitlements
Non-Current
Employee entitlements
NOTE 17 Contributed Equity
Fully paid ordinary shares
(a) Ordinary shares
2017
$
2016
$
1,949,707
1,949,707
1,823,933
1,823,933
583,720
583,720
416,483
416,483
2017
$
2016
$
74,347,530
70,636,055
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-15 Balance
Number of
Shares
$
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
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
6-Oct-15
Placement to sophisticated and professional investors at issue price of $0.5300 per share.
65,990,114
34,974,760
6-Oct-15
Placement as part loan repayment of an outstanding loan at a price of $0.5300 per share
2,260,178
1,197,894
6-Oct-15
Placement as consideration for services provided in the capital raising activities at a price of
$0.5300 per share
835,749
442,947
8-Oct-15
Issue of shares as part consideration for the acquisition of Meditron at a price of $0.5300 per share
1,886,792
1,000,000
9-Oct-15
Issue of shares as part consideration for the acquisition of Designs for Vision at a price of $0.5300
per share
7,547,170
4,000,000
6-Apr-16
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.5990 per share
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
18-Jul-16
25-Jul-16
Issue of shares as part consideration for the Meditron acqusition earn-out at a price of $0.7050 per share
707,214
500,000
Issue of shares as part consideration for the Midas Software Solutions acquisition at a price of
$0.7100 per share
2,709,046
1,904,459
6-Oct-16
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.8350 per share
7-Oct-16
Issue of shares as part consideration for the EMG acquisition at a price of $0.8400 per share
6-Apr-17
Issue of shares pursuant to the company’s dividend re-investment plan price of $0.7900 per share
30-Jun-17
Accumulated share issue costs incurred during 2017 (net of tax)
30-Jun-17
Closing Balance
343,802
902,784
420,645
-
275,042
740,554
299,499
(8,079)
165,018,009
74,347,530
FINANCIAL REPORT 2016 / 17
34
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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 30%.
The gearing ratios for the years ending 30 June 2017 and 2016 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
2017
$
2016
$
37,067,779
38,154,475
(18,555,941)
(19,116,930)
18,511,838
19,037,545
82,690,795
72,770,234
101,202,633
91,807,779
18%
21%
2017
$
(204,752)
50,028
(154,724)
2016
$
(325,418)
38,871
(286,547)
(325,418)
120,666
(204,752)
264,056
(589,474)
(325,418)
38,871
11,157
50,028
-
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 anticiptated cash flows (purchase of inventory) in Euro / US Dollars for
the subsequent 12 months.
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
2017
$
2016
$
8,579,418
7,142,562
5,021,848
3,765,732
15,721,980
8,787,580
PARAGON CARE LIMITED
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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 2017 $6,263,812 (2016: $5,379,208) of the Company’s
debt is at a variable rate of interest.
The financial instruments exposed to interest rate risk are as follows:
35
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)
2017
$
2016
$
18,555,941
19,116,930
(6,263,812)
(5,379,208)
(2,235,013)
(2,183,557)
-
-
(28,568,954)
(30,591,710)
(37,067,779)
(38,154,475)
(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. Forecasted cash flows are used to calculate the forecasted 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
2017
2016
$
-
-
$
-
-
8,000,000
1,736,188
8,000,000
2,620,607
-
-
-
-
60,053,967
33,825,266
29,250,000
2,000,000
68,053,967
41,825,266
30,986,188
4,620,607
FINANCIAL REPORT 2016 / 17
36
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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.
On 30 May 2017 National Australia Bank granted Paragon Care Ltd credit approval to increase their lending agreement facility to $50,000,000.00
to support organic growth and the company’s acquistion strategy.
Contractual maturities
of financial liabilities
Weighted
average
interest rate
2017
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total
2016
Non-derivatives
Non-interest bearing
Variable rate
Fixed rate
Total
%
-
3.1
3.6
3.5
-
4.1
4.6
4.5
Less than 6
Months
$
35,118,306
6,263,812
1,124,333
42,506,452
6 to 12
Months
Between
1 and 2 Years
Between
2 and 5 Years
$
-
-
1,110,680
1,110,680
$
7,282,362
-
2,235,013
9,517,375
$
-
-
26,333,941
26,333,941
Total
contractual
cash flows
$
42,400,668
6,263,812
30,803,967
79,468,447
23,602,307
5,379,208
1,564,881
30,546,396
-
-
9,852,454
-
-
-
33,454,761
5,379,208
618,675
618,675
233,556
30,358,154
32,775,267
10,086,010
30,358,154
71,609,235
(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:
(i) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(ii) 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
(iii) 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 2017 and 30 June 2016.
At 30 June 2017
Assets
Forward foreign exchange contracts
Total assets
Liabilities
Forward foreign exchange contracts
Total liabilities
At 30 June 2016
Assets
Forward foreign exchange contracts
Total assets
Liabilities
Forward foreign exchange contracts
Total liabilities
Level 1
Level 2
Level 3
Total
$
-
-
-
-
$
-
-
161,123
161,123
$
-
-
-
-
$
-
-
161,123
161,123
Level 1
Level 2
Level 3
Total
$
-
-
-
-
$
-
-
322,063
322,063
$
-
-
-
-
$
-
-
322,063
322,063
PARAGON CARE LIMITED Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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.
37
(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
Designs For Vision Pty Ltd 5
Electro Medical Group Pty Ltd 1
MIDAS Software Solutions Pty Ltd 1
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 2017
Ownership
30 June 2016
100%
100%
100%
100%
100%
100%
100%
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
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
4 Subsidiary of Designs For Vision Holding Pty Ltd
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
Designs For Vision (Aust) Pty Ltd
Meditron Pty Ltd
Western Biomedical Pty Ltd
2017
$
2016
$
52,093,172
52,529,337
1,166,231
350,233
1,100
-
-
-
53,259,403
52,529,337
FINANCIAL REPORT 2016 / 17 38
P A R A G O N C A R E L I M I T E D
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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
(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:
2017
$
1,305,767
127,639
-
-
2016
$
1,101,431
105,577
-
-
1,433,406
1,207,008
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
G J Sam OAM
Other key management personnel
M G Rice
S J Munday
Balance
1 July 2016
610,000
1,707,611
307,699
2,642,640
585,526
134,058
38,239
Balance
1 July 2015
502,867
1,674,204
205,148
2,633,208
-
134,058
Shares
Acquired
113,500
8,167
67,849
-
129,851
-
-
Shares
Acquired
107,133
33,407
102,551
9,432
-
-
-
38,239
Shares
Disposed
-
711,000
-
-
-
-
-
Other
Changes
Balance
30 June 2017
-
-
-
-
-
-
-
723,500
1,004,778
375,548
2,642,640
715,377
134,058
38,239
Shares
Disposed
Other
Changes
Balance
30 June 2016
-
-
-
-
-
-
-
-
-
-
-
585,526
610,000
1,707,611
307,699
2,642,640
585,526
-
-
134,058
38,239
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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
39
2016
Cents
5.6
5.6
2017
Cents
6.2
6.2
Profit / (Loss) used in calculating basic earnings per share
Profit / (Loss) used in calculating diluted earnings per share
10,174,761
10,174,761
7,530,523
7,530,523
164,137,722
135,026,163
164,137,722
135,026,163
2017
$
2016
$
(2,514,743)
(1,432,073)
(2,514,743)
(1,432,073)
(2,618,225)
2,385,296
51,746,495
55,201,028
123,014
746,808
103,618
810,062
74,347,530
70,636,055
-
-
(23,344,379)
(16,245,087)
51,003,151
54,390,967
(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
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 Instrument 2016/785 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 (2016 — $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 2017.
FINANCIAL REPORT 2016 / 17
40
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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 $717,166 (2016 $884,942)
Note 25 Subsequent Events
No subsequent events to report.
Note 26 Commitments
Lease Commitments
The group leases various offices under non-cancellable operating leases expiring within one to eight 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
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.
2017
$
2016
$
1,645,983
5,123,994
857,251
7,627,228
1,807,172
5,340,820
1,966,342
9,114,334
PARAGON CARE LIMITED Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
Note 28 Business Combinations
(a) 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
Identifiable Intangible - Software
Employee Entitlements
Deferred Tax Asset
Goodwill on consolidation
Reconciliation to cashflow
Consideration of Purchase
Conditional Payment
Equity Funding
Net Outflow of cash
41
Total
$
3,440,937
7,282,362
2,645,012
13,368,311
387,298
178,542
952,230
(265,842)
79,752
12,036,330
13,368,311
13,368,312
(7,282,362)
(2,645,012)
3,440,937
MIDAS Software
Solutions
Electro Medical
Group
$
-
4,489,704
1,904,459
6,394,163
(30,000)
5,000
952,230
(66,093)
19,828
5,513,198
6,394,163
$
3,440,937
2,792,658
740,553
6,974,148
417,298
173,542
-
(199,749)
59,924
6,523,133
6,974,148
6,394,163
(4,489,704)
(1,904,459)
-
6,974,149
(2,792,658)
(740,553)
3,440,937
FINANCIAL REPORT 2016 / 17 42
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
Note 28 Business Combinations (Continued)
MIDAS Software Solutions
On the 25th July 2016 the Company acquired 100% of the shares in MIDAS Software Solutions Pty Ltd and the
business and assets of Spintech Oceania Pty Ltd. Midas is a world first, fully customised interpretive reporting
software platform for a wide range of diagnostic medical examinations. It produces a provisional report
complete with key images, worksheets diagrams graphs and charts within a few seconds by interpreting the
measurements and observations from study data. This innovative, cloud based web platform significantly
boosts productivity in practice workflow and can connect with any system across any network globally.
Purchase consideration
Contingent Consideration (a)
Ordinary Shares in PCG 2,709,046 @ $0.703
Fair value and carrying value of net assets acquired
Net working capital
Plant and equipment
Identifiable Intangible - Software
Employee Entitlements
Deferred Tax Asset
Goodwill on consolidation
Reconciliation to cashflow
Consideration of purchase
Conditional Payment due August 2018
Equity Funding
Net outflow of cash
$
4,489,704
1,904,459
6,394,163
(30,000)
5,000
952,230
(66,092)
19,828
5,513,197
6,394,163
6,394,163
(4,489,704)
(1,904,459)
-
(a) The vendors are entitled to a payment of 4 times the EBITDA growth between FY16 and FY18. The payment
is uncapped. The contingent consideration was estimated by calculating the present value of the future
expected cash flows. The likely range is anticipated to be between $1 million and $5 million.
Impact of acquisition on the results of the Group
As the acquisition of MIDAS Pty Ltd occurred on 25 July 2016 the revenue and profit of the Group for the year
ended 30 June 2017 reflects trading from 25 July 2016 to 30 June 2017 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 2016. 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
AASB108 Accounting Policies, Changes in Accounting Estimates and Errors to the pre- acquisition operating
environment of each acquisition.
PARAGON CARE LIMITED 43
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
Note 28 Business Combinations (Continued)
Electro Medical Group
On 7th October the Company acquired 100% of the shares in Electro Medical Group Pty Ltd. Electro Medical
Group specialises in providing reliable and high quality service support and technology management to the
Medical, Scientific, Aged Care and Allied Health industry of Australia and New Zealand. EMG has established
agreements in place with a number of major healthcare providers throughout the region.
Purchase consideration
Cash and Cash Equivalents
Contingent Consideration (a)
Ordinary Shares in PCG 902,784 @ $0.8203
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
$
3,440,937
2,792,658
740,553
6,974,148
417,297
173,542
(199,748)
59,924
6,523,133
6,974,148
6,974,148
(2,792,658)
(740,553)
3,440,937
(a) The vendors are entitled to a payment of 3 times the EBITDA growth between FY16 and FY17.
The payment is uncapped. The contingent consideration was estimated by calculating the present value of the
future expected cash flows. The likely range is anticipated to be between $2 million and $3 million.
Impact of acquisition on the results of the Group
As the acquisition of Electro Medical Group Pty Ltd occurred on 7 October 2016 the revenue and profit of the
Group for the year ended 30 June 2017 reflects trading from 7 October 2016 to 30 June 2017 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 2016. 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
AASB108 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.
FINANCIAL REPORT 2016 / 17
44
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
Note 28 Business Combinations (Continued)
(b) Prior Period Business Combination Provisional Amounts Finalised
During the year ended 30 June 2017, 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 presented as provisional amounts for the business combinations of Meditron Pty Ltd, Western Biomedical
Pty Ltd and Designs For Vision Pty Ltd as at 30 June 2016 were finalised following completion of the fair
valuation of assets acquired and forecasting of earnings for earn out purposes.
In July the Purchase Consideration – contingent was paid to the vendor of Meditron in a combination of cash and
shares. Rental equipment with a written down value of $348,575 was reclassified from Working Capital to Plant
and Equipment. In September a review of the acquisition of Western Biomedical was completed.
Inventory was reduced by $251,000 to reflect fair value at acquisition; Goodwill has been adjusted to reflect this.
In September, negotiations around the assets acquired at acquisition were settled with the vendors of Designs
For Vision repaying $436,000 of the Purchase Consideration – cash and the Working Capital acquired was
reduced by $1,346,062 to reflect fair value at acquisition after completing a review inventory at acquisition;
Goodwill has been adjusted to reflect this. The impact of the above is to increase goodwill by $1,161,834 (as
disclosed in note 13).
Purchase consideration
Purchase Consideration - cash
Purchase Consideration -
contingent
Purchase Consideration - 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
Consideration of Purchase
Conditional Payment
Equity Funding
Net Outflow of cash
Western Biomedical
Meditron
Designs for Vision
$
$
29,278,554
1,533,976
-
30,812,530
1,496,765
404,935
(226,698)
77,459
29,060,069
30,812,530
30,812,530
(1,533,976)
-
29,278,554
6,189,164
800,000
1,000,000
7,989,164
2,774,216
524,605
(394,216)
118,265
4,966,294
7,989,164
7,989,164
(800,000)
(1,000,000)
6,189,164
21,436,440
8,318,478
4,000,000
33,754,918
5,690,078
128,433
(737,401)
221,220
28,452,588
33,754,918
33,754,918
(8,318,478)
(4,000,000)
21,436,440
During the year ending 30 June 2017 the conditional payments on the earn outs for Western Biomedical and
Designs for Vision have been finalised with the respective vendors. The amounts agreed to be paid to the
respective vendors was different to the contingent consideration estimated in the final acquisition accounting.
WBM’s final earnout was $424,380 and DFV’s final earnout was $9,159,437. Total final earnout of the two entities
is $9,583,817.
The impact was a reduction to the vendor earnout payable, resulting in a write back of $268,637. Refer other
income Note 4.
Total
$
56,904,158
10,652,454
5,000,000
72,556,612
9,961,059
1,057,973
(1,358,315)
416,944
62,478,950
72,556,612
72,556,612
(10,652,454)
(5,000,000)
56,904,158
PARAGON CARE LIMITED 45
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2017
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 Instrument 2016/785 (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’.
FINANCIAL REPORT 2016 / 17 46
Directors’
Declaration
For the year ended 30 June 2017
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 Corporation 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 2017 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.
Shane Tanner
Chairman
7 August 2017
PARAGON CARE LIMITED
47
Auditor’s
Report
FINANCIAL REPORT 2016 / 17 48
Independent Audit Report
For the year ended 30 June 2017
PARAGON CARE LIMITED Level 21, 55 Collins Street Melbourne VIC 3000 Level 21, 55 Collins Street Melbourne V INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PARAGON CARE LIMITED Opinion We have audited the financial report of Paragon Care Limited, which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, 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.. In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2017 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Independent Audit Report Continued
For the year ended 30 June 2017
49
FINANCIAL REPORT 2016 / 17 Key Audit Matter How our audit addressed this matter Accounting for Business Combinations Refer to Note 28 in the financial statements During the year, the consolidated entity completed two acquisitions of Midas Software Solutions Pty Ltd (“Midas”) and Electro Medical Group Pty Ltd (“EMG”), as described in Note 28 of the consolidated financial statements. The consolidated entity has determined these acquisitions to be business combinations for which the purchase price of $13.368 million, includes contingent consideration of $7.282 million. The purchase price is allocated between acquired assets and liabilities (including identified intangible assets), at their respective fair values and goodwill of $12.036 million. The accounting for the business combinations was conducted on a final basis for Midas and provisional basis for EMG. This was considered a key audit matter as the accounting for the transaction is complex, and involves significant judgements in applying the accounting standards. This includes the recognition and valuation of consideration paid, including contingent consideration, the identification and valuation of intangible assets, and the determination of the fair value of the tangible assets acquired. Our procedures to assess the accounting treatment of the acquisition included: Obtaining the share purchase agreement and other associated documents, and ensuring that the transaction had been accounted for in compliance with AASB 3 Business Combinations. Testing the initial consideration to the signed purchase agreement and to bank statements and assessing the appropriateness of the fair value of the transaction including evaluating the recognition of the contingent consideration included in the purchase price to determine a final adjustment within the measurement period and assessing the forecasts used for determining the contingent consideration and comparing these against actual performance; Assessing the consolidated entity’s determination of the fair value of the remaining assets and liabilities, having regard to the completeness of assets and liabilities identified, and the reasonableness of any underlying assumptions in their respective valuations, including useful lives of the intangible and tangible assets acquired; and Reviewing the disclosures in Note 28 to the financial statements in order to assess compliance with the disclosure requirements of AASB 3. Impairment of Goodwill Refer to Note 13 in the financial statements The consolidated entity has goodwill of $93.114 million relating to its numerous acquisitions in recent years. This was considered a Key Audit Matter due to the materiality of the goodwill balance, and because the directors’ assessment of the ‘value in use’ of the cash generating unit (“CGU”) involves judgements about the future underlying cash flows of the business and the discount rates applied to it. For the year ended 30 June 2017 management have performed an impairment assessment over the goodwill balance by: Our audit procedures in relation to management’s impairment assessment involved the assistance of our Corporate Finance team where required, and included: Assessing management’s determination that the goodwill should be allocated to a single CGU based on the nature of the Group’s business and the manner in which results are monitored and reported; Assessing the valuation methodology used; Challenging the reasonableness of key assumptions, including the cash flow projections, exchange rates, discount rates, and sensitivities used; and 50
Independent Audit Report Continued
For the year ended 30 June 2017
PARAGON CARE LIMITED Impairment of Goodwill (CONT.) Refer to Note 13 in the financial statements calculating the value in use for the CGU using a discounted cash flow model. This model used cash flows (revenues, expenses and capital expenditure) for the CGU for 5 years, with a terminal growth rate applied to the 5th year. The cash flows was then discounted to net present value using the Company’s weighted average cost of capital (WACC); and comparing the resulting value in use of the CGU to their respective book values. Management also performed a sensitivity analysis over the value in use calculations, by varying the assumptions used (growth rates, terminal growth rate and WACC) to assess the impact on the valuations. Management have concluded there is no impairment of the carrying value of Goodwill. Checking the mathematical accuracy of the cash flow model, and reconciling input data to supporting evidence, such as approved budgets and considering the reasonableness of these budgets. Inventory Valuation Refer to Note 9 in the financial statements The consolidated entity’s inventory balance, as disclosed in Note 9, consists primarily of finished goods of various medical equipment held for distribution. Inventory is valued at the lower of cost or net realisable value. The assessment of the net realisable value of inventory requires a significant degree of management judgment. It includes assumptions concerning the provision for obsolescence, as well as future market conditions based on changing customer needs and market trends. On the basis of the factors set out above, the valuation of inventory was considered to be a key audit matter. Our audit procedures in relation to the existence and valuation of inventory included: Evaluating management assumptions and estimates applied to the provision for obsolescence through analysis of historical sales levels by inventory product from the date the product was purchased in conjunction with assessing the quantity of products; Assessing the company’s application of its policy for determining the provision for obsolescence; Performing analytical procedures in respect of inventory holdings and inventory turnover; and Testing the sales prices of inventory to ensure inventory is not being sold at less than cost. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2017, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Independent Audit Report Continued
For the year ended 30 June 2017
51
FINANCIAL REPORT 2016 / 17 Responsibilities of the Directors 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 gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2017. In our opinion, the Remuneration Report of Paragon Care Limited, for the year ended 30 June 2017, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS P A Ransom Partner Melbourne, Victoria Dated: 7 August 2017 52
Shareholder
Information
PARAGON CARE LIMITED Shareholder Information
For the year ended 30 June 2017
The shareholders information set out below was applicable as at 28 July 2017.
(a) 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
721
997
546
1,131
141
3,536
There are 497 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
JMT INVESTMENT GROUP VIC PTY LTD
CITICORP NOMINEES PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
DAK DRAFTING SERVICES PTY LTD
MIRRABOOKA INVESTMENTS LIMITED
POSSE INVESTMENT HOLDINGS PTY LIMITED
SHEMOZEL PTY LTD
GRILLS INVESTMENTS PTY LTD
BNP PARIBAS NOMINEES PTY LTD
AMCIL LIMITED
BRETT CHEONG & LYNN CHEONG
LORA FALLS PTY LTD
MR PETER JOHN DIAMOND & MRS DIANA ELIZABETH DIAMOND
LIONEL RICHARDS NO 2 PTY LTD
SPINTECH OCEANIA PTY LTD
MOSTYN PTY LTD
BRISPOT NOMINEES PTY LTD
GUERILLA NOMINEES PTY LTD
MR GREGORY STEPHEN VAWDREY & MRS CHERYL MARGARET VAWDREY
Total Top 20 PGC Shareholders
Balance of Register
Grand Total
53
Units
23,692,733
9,662,006
9,383,903
7,896,620
4,500,000
4,000,000
4,000,000
3,773,585
3,773,585
3,351,428
2,956,500
2,642,640
2,594,006
1,900,000
1,371,622
1,306,447
1,230,000
1,205,216
1,161,291
1,000,000
91,401,582
73,616,427
165,018,009
% of Issued Shares
14.4
5.9
5.7
4.8
2.7
2.4
2.4
2.3
2.3
2.0
1.8
1.6
1.6
1.2
0.8
0.8
0.7
0.7
0.7
0.6
55.4%
44.6%
100.0%
FINANCIAL REPORT 2016 / 17 54
Shareholder information Continued
For the year ended 30 June 2017
(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
FIRST SAMUEL LIMITED
JMT INVESTMENT GROUP VIC PTY LTD
TOTAL SUBSTANTIAL SHAREHOLDERS
Total PGC Shares
(e) Corporate Governance Statement
Units
12,702,333
9,662,006
22,364,339
165,018,009
% of Issued
Ordinary Shares
7.7
5.9
13.6
In accordance with ASX Listing Rule 4.10.3, the Company’s 2017 Corporate Governance Statement can be
found on its website at www.paragoncare.com.au/corporate-governance-statement/
PARAGON CARE LIMITED