Paragon Care Limited
ABN 76 064 551 426
Annual Report - 30 June 2019
Paragon Care Limited
Contents
30 June 2019
Corporate directory
Chairman's report
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Paragon Care Limited
Shareholder information
2
3
4
18
19
21
22
23
24
70
71
76
1
Paragon Care Limited
Corporate directory
30 June 2019
Directors
Shane Tanner - Chairman
Andrew Just
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Company secretary
Melanie Leydin
Registered office
Share register
Auditor
Solicitors
50-54 Clayton Road
Clayton VIC 3168
Telephone: 1300 369 559
Telephone: (03) 8833 7800
Facsimile: (03) 8833 7890
Link Market Services Limited
Level 13, Tower 4
Melbourne VIC 3000
Telephone:1300 554 474
Facsimile: (02) 9287 303
Website: www.linkmarketservices.com.au
RSM Australia Partners
Level 21, 55 Collins Street
Melbourne VIC 3000
Website: www.rsmi.com.au
SOHO Lawyers
Level 5, 124 Exhibition Street
Melbourne VIC 3000
Bankers
National Australia Bank
Stock exchange listing
Paragon Care Limited shares are listed on the Australian Securities Exchange (ASX
code: PGC)
Website
www.paragoncare.com.au
Corporate Governance Statement
The directors and management are committed to conducting the business of Paragon
Care Limited in an ethical manner and in accordance with the highest standards of
corporate governance. Paragon Care Limited has adopted and has substantially
complied with the ASX Corporate Governance Principles and Recommendations
(Third Edition) ('Recommendations') to the extent appropriate to the size and nature
of its operations.
The Company’s 2019 Corporate Governance Statement, which sets out the corporate
governance practices that were in operation during the financial year and identifies
and explains any Recommendations that have not been followed, which is approved
at the same time as the Annual Report, can be found at:
www.paragoncare.com.au/corporate-governance-statement/
2
Paragon Care Limited
Chairman's report
30 June 2019
On behalf of the Board of Paragon Care Limited, I am pleased to present to you our 2019 Annual Report.
The financial year ended 30th June 2019 was both productive yet challenging and there were many highlights and issues
that were experienced throughout the year. The most pleasing aspect of the 2019 Financial Year was the transitioning of the
business from a very cyclical and sometimes commoditised business into a business that is significantly less seasonal and
now comprises many high quality and higher margin products and services. Most of Paragon’s high-tech products now are
sold with a strong trailing consumable business together with a fast-growing service and support division.
The key highlights for the 2019 Financial year included:
• Revenues grew 88% to $257m (Core Revenues were up 101%)
• Gross Margins were held at just over 40% which was very pleasing
•
•
The Sale of several underperforming, highly competitive and cyclical businesses effective, 30th June 2019
The integration of 14 businesses into 4 ‘Pillar’ business – Devices, Diagnostics, Capital & Consumables and
Services
• Organic revenue growth of 9% for the Device business – a business that now represents a third of Paragon’s total
revenue base
Paragon has a key objective in the current financial year to lift organic growth from 5% to an average of 7% per annum
across the board. In addition to this stronger revenue growth, the recent introduction of the Microsoft Dynamics ERP System
(single IT platform across Paragon) will greatly assist to bring operating costs down from around 29% of revenue to closer to
26% of revenue. This major ‘cost out’ program has been well researched and has involved a ‘top to toe’ review of every cost
category within the company. This reduction in operating costs is expected be higher than $6m over the next 18 months.
The recent doubling of the size of the Company’s revenue base has come with some challenges. However, the revenue and
gross margin performance has been exceptional. Now a more effective and efficiently managed ‘back office’ structure is
required. This will happen via tighter IT systems, a more streamlined financial structure together with a significant
rationalisation of our many property leases. With these expected improvements, the Company’s dividend program will be
swiftly returned.
On behalf of the Board, I would like to thank our customers, our key equipment partners, staff and shareholders for their
continued support. We move into the 2020 financial year with positivity but very mindful the Company must become more
profitable through smarter rationalisation and planning.
Yours faithfully
Shane Tanner
Chairman
3
Paragon Care Limited
Directors' report
30 June 2019
The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as
the 'Group') consisting of Paragon Care Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it
controlled at the end of, or during, the year ended 30 June 2019.
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:
Shane Tanner
Andrew Just
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian (appointed 13 March 2019)
Non-Executive Chairman
Managing Director and Chief Executive Officer
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
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.
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 (2018: 30 June 2017) of 2.0 cents (2018: 1.9
cents) per ordinary share
Interim dividend for the year ended 30 June 2019 (2018: 30 June 2018) of 1.1 cents (2018:
1.1 cents) per ordinary share
Consolidated
2019
$'000
2018
$'000
6,044
3,153
3,708
2,982
9,752
6,135
Review of operations
The loss for the Group after providing for income tax amounted to $14,386,000 (30 June 2018: profit of $10,951,000).
For further details on the review of operations for the year can be found in the Chairman's report preceding this Directors'
report.
Significant changes in the state of affairs
On 5 July 2018 the Company purchased Lovell Surgical Pty Ltd for a $1,000,000 cash payment. The business
manufactures surgical kits which are sold by distributors including Insight Surgical Pty Ltd (a wholly owned subsidiary of
Paragon Care Limited) to hospitals, day surgeries and other medical facilities across Australia. Lovell has manufacturing
plants located in Melbourne operated by 40 staff; at the date of acquisition Lovell had net assets in excess of $257,000 and
was operating at breakeven. The vendors of Lovell may be paid further consideration in September 2021 equal to 3.5 times
FY21 EBITDA should Lovell earnings in each of the years between FY18 and FY21 exceed the preceding year.
On 31 July 2018 the Company issued 2,056,256 ordinary shares at an issue price of $0.7650 as part consideration for the
acquisition of REM Systems Limited as announced on 8 June 2018.
On 27 August 2018 the Company announced an agreement to issue 50,418,386 shares at $0.91 to Pioneer Pharma
(Australia) Pty Ltd wholly owned subsidiary of China Pioneer Pharma Holdings Limited for consideration of $45,880,731.
The shares were allotted in two tranches, the first tranche of 16,483,517 shares were issued on 17 September 2018 and
the second tranche of 33,934,869 shares were issued on 20 November 2018.
4
Paragon Care Limited
Directors' report
30 June 2019
On 21 November 2018 the Company acquired 100% of the shares in Total Communication Pty Ltd. Total Communication
is a unique acquisition providing an integrated vendor management and support solution to the aged care sector. These
products cover Telephony, Nurse Calls, Access Control, CCTV, Cordless and Healthcare Wi-Fi requirements. As per the
sale agreement, the vendors are entitled to an earnout of 3 times the EBITDA growth on forecasted FY20. Whilst this
payment is uncapped, it’s unlikely to go beyond the anticipated range of $1,800,000 and $2,850,000.
Further details on the significant changes in the state of affairs of the Group can be found in the Chairman's report
preceding this Directors' report.
Matters subsequent to the end of the financial year
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
Likely developments and expected results of operations
Information on likely developments in the operations of the Group and the expected results of operations have not been
included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Group.
Environmental regulation
The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Shane Tanner
Non-Executive Chairman
FCPA, ACIS
Shane was one of the Co-Founders of Paragon Care Limited and has considerable
experience at both senior executive and board level, bringing more than 25 years’
experience in healthcare and strategy. Shane has orchestrated and been responsible
for numerous small and large-scale acquisitions. He has also helped to establish and
guide a number of significant businesses. Shane is also currently Chairman of two
successful ASX listed healthcare businesses, Zenitas Healthcare Limited and Rhythm
Biosciences Limited. Shane is also Chairman of ASX listed Funtastic Limited.
Previously, Shane was CEO of Symbion Health, one of Australia’s largest diagnostic
businesses and Chairman of Vision Eye Institute.
Funtastic Limited (ASX: FUN), Rhythm Biosciences Limited (ASX: RHY) and Victory
Offices Limited (ASX: VOL)
Former directorships (last 3 years): Vision Eye Institute
Special responsibilities:
Interests in shares:
Interests in rights:
Chairman of Nomination and Remuneration Committee and Member of Investment
Review Committee
850,000 fully paid ordinary shares
None
Name:
Title:
Qualifications:
Experience and expertise:
Andrew Just
Managing Director and Chief Executive Officer
BEc, HeC, MBA, GAICD
Andrew has more than 25 years global experience in the healthcare industry through
previous roles as Regional Director for Fortune 500 and ASX listed companies
including Danaher (Radiometer), Stryker, Cochlear, GE Healthcare, Roche and
Novartis. Andrew has worked across multiple healthcare sectors involving functional
leadership of sales, marketing, clinical, services, operations, supply chain and general
management. Andrew’s track record includes successfully delivering strong organic
growth through a clear focus on strategy and people, led by driving customer value.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in rights:
Member of Investment Review Committee
None
228,119 performance rights
5
Paragon Care Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Michael Newton
Non-Executive Director
B.App Sci., Grad Dip Bus Adm
Michael is an experienced operator specialising in the industrial chemical sector with
a long history in various executive roles with both Unilever and ICL PLC where he
worked across Europe, Asia, U.S. and Australia. Michael successfully managed major
diversification programs and exceptional business growth during his role at Symex
Holdings (now Pental Ltd). Michael is currently Chairman of the Power House Youth
Leadership Foundation.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Chairman of Audit and Risk Committee and Member of Nomination and
Remuneration Committee
403,134 fully paid ordinary shares
None
Geoffrey Sam OAM
Non-Executive Director
BCom, M.Hospital Administration, M.Economics and Social Studies, FAICD
Geoffrey has held numerous successful ASX listed board positions including
Chairman of Money 3, Director of Hutchison’s Childcare Services and Managing
Director of Nova Health. Prior to his appointments to ASX listed companies, Geoffrey
undertook numerous Chief Executive positions at Adelaide based hospitals. He is
currently the Co-Founder and Director of HealtheCare Australia Pty Ltd, a privately-
owned health care company comprising a portfolio of 35 hospitals and a community
nursing and rehabilitation business.
CML Group Limited (ASX: CGR)
Chairman of Investment Review Committee, Member of Audit and Risk Committee
and Member of Nomination and Remuneration Committee
1,466,417 fully paid ordinary shares
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in shares:
Interests in rights:
Interests in shares:
Interests in rights:
Name:
Title:
Qualifications:
Experience and expertise:
Name:
Title:
Qualifications:
Experience and expertise:
Brent Stewart
Non-Executive Director
B Sc, B Psych, FAICD
Brent is an experienced company executive and director having occupied numerous
senior executive and board roles over the past 25 years. He established and grew a
successful company in Australia and New Zealand (Market Equity Pty Ltd) before
selling to a large multinational group (Aegis PLC). Brent has a long association with
various segments of the healthcare sector in Australia and Internationally. Currently,
Brent occupies Non-Executive roles at HBF Health Ltd, Etherington Inc and Argonaut
Ltd.
None
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Member of the Audit and Rick Committee and Member of Nomination and
Remuneration Committee
2,983,466 fully paid ordinary shares
None
Interests in shares:
Interests in rights:
6
Paragon Care Limited
Directors' report
30 June 2019
Name:
Title:
Qualifications:
Experience and expertise:
Bruce Bian
Non-Executive Director (appointed 13 March 2019)
LL.B.
Bruce emigrated from China in 1988, and is an Australian citizen living in Sydney.
Bruce gained his law degree from Sydney University and has decades of experience
across multiple facets of practice including significant Chinese and Australian
relations. He brings to the boardroom team thirty five years of diverse industry
experience from Australia and Asia, and his strong understanding of market trends in
the Asia Pacific region support his demonstrated experience in driving strategic
business growth whilst overseeing strong
legal compliance and corporate
governance.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
None
None
Interests in shares:
None
Interests in rights:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
Company secretary
Name:
Title:
Qualifications:
Experience and expertise:
Melanie Leydin
Company Secretary
Bachelor of Business majoring in Accounting and Corporate Law
Melanie holds a Bachelor of Business majoring in Accounting and Corporate Law.
She is a member of Chartered Accountants Australia and New Zealand and is a
Registered Company Auditor. She graduated from Swinburne University in 1997,
became a Chartered Accountant in 1999 and since February 2000 has been the
principal of Leydin Freyer. The practice provides outsourced company secretarial and
accounting services to public and private companies. Melanie has over 25 years’
experience in the profession, including ASX and ASIC compliance, control and
implementation of corporate governance, statutory financial reporting and shareholder
relations.
Meetings of directors
The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the
year ended 30 June 2019, and the number of meetings attended by each director were:
Shane Tanner
Andrew Just
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Full Board
Nomination and
Remuneration Committee
Attended
Held
Attended
Held
13
13
13
13
13
3
13
13
13
13
13
3
2
-
3
1
1
-
3
-
3
1
1
-
7
Paragon Care Limited
Directors' report
30 June 2019
Shane Tanner
Andrew Just
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Audit and Risk Management
Committee
Investment Review
Committee*
Attended
Held
Attended
Held
-
-
2
2
1
-
-
-
2
2
1
-
-
-
-
-
-
-
-
-
-
-
-
-
*
There were no investment review committee meetings held during the year to 30 June 2019
Held: represents the number of meetings held during the time the director held office or was a member of the relevant
committee.
Remuneration report (audited)
The remuneration report details the key management personnel remuneration arrangements for the Group, in accordance
with the requirements of the Corporations Act 2001 and its Regulations.
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the
activities of the entity, directly or indirectly, including all directors.
The remuneration report is set out under the following main headings:
●
●
●
●
●
●
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
Additional disclosures relating to key management personnel
Principles used to determine the nature and amount of remuneration
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 the achievement of strategic objectives
and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of
reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good
reward governance practices:
●
●
●
●
competitiveness and reasonableness
acceptability to shareholders
performance linkage / alignment of executive compensation
transparency
The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements
for its directors and executives. The performance of the Group depends on the quality of its directors and executives. The
remuneration philosophy is to attract, motivate and retain high performance and high quality personnel.
In consultation with external remuneration consultants (refer to the section 'Use of remuneration consultants' below), the
Nomination and Remuneration Committee has structured an executive remuneration framework that is market competitive
and complementary to the reward strategy of the Group.
The reward framework is designed to align executive reward to shareholders' interests. The Board has considered that it
should seek to enhance shareholders' interests by:
●
●
having economic profit as a core component of plan design
focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering
constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value
attracting and retaining high calibre executives
●
8
Paragon Care Limited
Directors' report
30 June 2019
Additionally, the reward framework should seek to enhance executives' interests by:
●
●
●
rewarding capability and experience
reflecting competitive reward for contribution to growth in shareholder wealth
providing a clear structure for earning rewards
In accordance with best practice corporate governance, the structure of non-executive director and executive director
remuneration is separate.
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands and responsibilities of their role. Non-executive
directors' fees and payments are reviewed annually by the Nomination and Remuneration Committee. The Nomination and
Remuneration Committee may, from time to time, receive advice from independent remuneration consultants to ensure
non-executive directors' fees and payments are appropriate and in line with the market. The chairman's fees are
determined independently to the fees of other non-executive directors based on comparative roles in the external market.
The chairman is not present at any discussions relating to the determination of his own remuneration. Non-executive
directors do not receive share options or other incentives.
ASX listing rules require the aggregate non-executive directors' remuneration be determined periodically by a general
meeting. The most recent determination was at an Annual General Meeting and came into effect on 1 July 2015.
Shareholders approved a maximum annual aggregate remuneration of $350,000.
Executive remuneration
The Group aims to reward executives based on their position and responsibility, with a level and mix of remuneration which
has both fixed and variable components.
The executive remuneration and reward framework has four components:
●
●
●
●
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the
Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of
the Group and comparable market remunerations.
Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the Group and provides additional value to the executive.
Consolidated entity performance and link to remuneration
The consolidated entity performance is not directly linked to remuneration. However, to align directors’ interests with
shareholder interests, the directors are encouraged to hold shares in the Company.
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 41.0 cents and a high of 83.0 cents. As at 30 June 2019 the Company’s share price (ASX: PGC) was 41.5 cents per
share.
Refer to the section 'Additional information' below for details of the earnings and total shareholders return for the last five
years.
Employee Incentive Plan
During the year, shareholders approved the Paragon Care Employee Incentive Plan ('EIP') at the 2018 Annual General
Meeting ('AGM').
The EIP is an employee equity plan developed to meet contemporary equity design standards and to provide the greatest
possible flexibility in the design and offer choices available in respect of various new equity schemes.
9
Paragon Care Limited
Directors' report
30 June 2019
The EIP enables the Company to offer employees a range of different employee share scheme ('ESS') interests. These
ESS interests of 'awards' include options, performance rights, service rights, deferred shares, exempt shares, cash rights
and stock appreciation rights.
The type of ESS interest that may be offered to employees will be determined by a number of factors, including:
●
●
●
●
the remuneration or incentive purpose of the award;
the tax jurisdiction that the participating employee lives and/or works in;
the laws governing equity incentives where the participating employee lives and/or works; and
the logistics and compliance costs associated with offering quality incentives where the participating employee lives
and/or works.
Performance rights
Vesting conditions and important dates
The vesting conditions for these performance rights will depend on meeting the following:
●
●
Service up to 31 August 2021; and
If Paragon Care Limited achieves a compound annual growth rate ('CAGR') in earnings per share ('EPS') of between
10% (50% vests) and 15% (100% vests) per annum above the base year (financial year ended 30 June 2018), EPS of
5.4 cents per share over the period 1 July 2018 to 30 June 2021. Straight line interpolation will apply between 10%
and 15%.
The vesting conditions for performance rights granted on 26 April 2019 will depend on meeting the following:
●
●
Service up to 31 August 2022; and
If Paragon Care Limited achieves a compound annual growth rate ('CAGR') in earnings per share ('EPS') of between
10% (50% vests) and 15% (100% vests) per annum above the base year (financial year ended 30 June 2019), EPS of
5.4 cents per share over the period 1 July 2019 to 30 June 2022. Straight line interpolation will apply between 10%
and 15%.
The first vesting date of performance rights issued on 14 December 2018 is 31 August 2021 and all these performance
rights will lapse on 30 September 2021 if not vested and exercised. The first vesting date of performance rights issued on
26 April 2019 is 31 August 2022 and all these performance rights will lapse on 30 September 2022 if not vested and
exercised.
Other conditions
Unvested performance rights may, in certain circumstances, vest early in accordance with the terms of the EIP rules, and
any leaver's policy that may apply from time to time, as approved by the Board.
Any dealing in shares is subject to the constraints of Australian insider trading laws and the Company's share trading
policy. Participants are specifically prohibited from hedging their Company share price exposure in respect of their
performance rights during the vesting period.
If, in the Board's opinion, an employee acts fraudulently or dishonestly or is in breach of their material obligations to the
Company, the Board may determine that any or all of their performance rights which have not yet vested, lapse.
Use of remuneration consultants
During the financial year, the Group did not engage remuneration consultants.
Voting and comments made at the Company's 20 November 2018 Annual General Meeting ('AGM')
At the 20 November 2018 AGM, 97.87% of the votes received supported the adoption of the remuneration report for the
year ended 30 June 2018. The Company did not receive any specific feedback at the AGM regarding its remuneration
practices.
10
Paragon Care Limited
Directors' report
30 June 2019
Details of remuneration
Shane Tanner - Non-Executive Chairman
Andrew Just - Managing Director
The key management personnel of the Group consisted of the following directors of Paragon Care Limited:
●
●
● Michael Newton - Non-Executive Director
●
●
●
Geoffrey Sam OAM - Non-Executive Director
Brent Stewart - Non-Executive Director
Bruce Bian - Non-Executive Director (appointed 13 March 2019)
And the following persons:
●
●
Paul Smith - Group General Manager of Finance and Operations (appointed 29 October 2018)
Leonard Kocovic - Chief Financial Officer (resigned effective 14 September 2018)
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
2019
Non-Executive Directors:
Shane Tanner
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian*
Executive Directors:
Andrew Just
Other Key Management
Personnel:
Paul Smith*
Leonard Kocovic**
Cash salary
and fees
$
Cash
bonus
$
Non-
monetary
$
Super-
annuation
$
Long
service
leave
$
Perform-
ance
rights
$
120,000
23,466
43,473
60,000
16,438
500,000
-
-
-
-
-
-
-
20,006
-
-
-
-
4,130
4,130
-
1,562
-
25,000
200,071
134,462
1,097,910
-
55,275
55,275
-
21,192
41,198
16,955
16,954
68,731
-
-
-
-
-
-
-
-
-
Total
$
120,000
47,602
47,603
60,000
18,000
525,000
-
-
-
-
-
-
217,026
-
-
227,883
- 1,263,114
*
**
Remuneration is from date of appointment as key management personnel to 30 June 2019.
Remuneration is from 1 July 2018 to date of resignation as key management personnel.
11
Paragon Care Limited
Directors' report
30 June 2019
2018
Non-Executive Directors:
Shane Tanner
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Executive Directors:
Andrew Just
Mark Simari
Brett Cheong
Other Key Management
Personnel:
Michael Rice*
Leonard Kocovic
Short-term benefits
Post-
employment
benefits
Long-term
benefits
Share-
based
payments
Cash salary
and fees
$
Cash
bonus
$
Non-
Super-
monetary annuation
$
$
Long
service
leave
$
Perform-
ance
rights
$
120,000
43,473
43,473
5,000
223,718
267,839
160,000
250,000
275,000
1,388,503
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,130
4,130
-
-
10,849
-
11,878
22,094
-
7,532
15,806
34,187
23,750
25,000
90,982
-
-
-
-
-
-
-
-
-
-
Total
$
120,000
47,603
47,603
5,000
235,596
300,782
160,000
-
-
-
-
-
-
-
281,282
-
-
315,806
- 1,513,672
*
Remuneration is from 1 July 2017 to date of resignation as key management personnel.
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
Shane Tanner
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Executive Directors:
Andrew Just
Other Key Management
Personnel:
Paul Smith
Michael Rice
Leonard Kocovic
Fixed remuneration
2018
2019
At risk - STI
At risk - LTI
2019
2018
2019
2018
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
-
-
-
-
-
-
100%
-
76%
-
100%
100%
-
-
24%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The proportion of the cash bonus paid/payable or forfeited is as follows:
Name
Other Key Management Personnel:
Leonard Kocovic
Cash bonus paid/payable
2019
2018
Cash bonus forfeited
2018
2019
100%
-
-
-
-
-
-
-
-
-
-
-
-
12
Paragon Care Limited
Directors' report
30 June 2019
Service agreements
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 key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Name:
Title:
Term of agreement:
Details:
Shane Tanner
Non-Executive Chairman
No fixed term
Base salary including superannuation $120,000. No termination benefit.
Michael Newton
Non-Executive Director
No fixed term
Base salary including superannuation $50,000. No termination benefit.
Geoffrey Sam OAM
Non-Executive Director
No fixed term
Base salary including superannuation $50,000. No termination benefit.
Brent Stewart
Non-Executive Director
No fixed term
Base salary including superannuation $60,000. No termination benefit.
Bruce Bian
Non-Executive Director
No fixed term
Base salary including superannuation $60,000. No termination benefit.
Andrew Just
Managing Director and Chief Executive Officer
No fixed term
Base salary including superannuation $525,000. No termination benefit.
Paul Smith
Group General Manager of Finance and Operations
No fixed term
Base salary including superannuation $323,025.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
Share-based compensation
Issue of shares
There were no shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2019.
13
Paragon Care Limited
Directors' report
30 June 2019
Performance rights
The terms and conditions of each grant of performance rights over ordinary shares affecting remuneration of directors and
other key management personnel in this financial year or future reporting years are as follows:
Grant date
14 December 2018
26 April 2019
Name
Andrew Just
Paul Smith
Vesting date and
exercisable date
31 August 2021
31 August 2022
Expiry date
30 September 2021
30 September 2022
Number of
rights
granted
Grant date
Vesting date and
exercisable date
Expiry date
Fair value
per right
at grant date
$0.8055
$0.8055
Fair value
per right
at grant date
228,119 14 December 2018
137,316 26 April 2019
31 August 2021
31 August 2022
30 September 2021
30 September 2022
$0.8055
$0.8055
Performance rights granted carry no dividend or voting rights.
The number of performance rights over ordinary shares granted to and vested by directors and other key management
personnel as part of compensation during the year ended 30 June 2019 are set out below:
Name
Andrew Just
Paul Smith
Number of
rights
granted
during the
year
2019
Number of
rights
granted
during the
year
2018
Number of
rights
vested
during the
year
2019
Number of
rights
vested
during the
year
2018
228,119
137,316
-
-
-
-
-
-
Values of performance rights over ordinary shares granted, vested and lapsed for directors and other key management
personnel as part of compensation during the year ended 30 June 2019 are set out below:
Name
Andrew Just
Paul Smith
Value of
rights
granted
during the
year
$
Value of
rights
vested
during the
year
$
Value of
rights
lapsed
during the
year
$
Remuneration
consisting of
rights
for the
year
%
183,750
65,911
-
-
-
-
5%
-
Details of performance rights over ordinary shares granted, vested and lapsed for directors and other key management
personnel as part of compensation during the year ended 30 June 2019 are set out below:
Name
Grant date
Vesting date
Number of
rights
granted
Value of
rights
granted
$
Value of Number of
rights
vested
$
rights
lapsed
Value of
rights
lapsed
$
Andrew Just
Paul Smith
14 December 2018 31 August 2021
31 August 2022
26 April 2019
228,119
137,316
183,750
65,911
-
-
-
-
-
-
14
Paragon Care Limited
Directors' report
30 June 2019
Additional information
The factors that are considered to affect total shareholders return ('TSR') are summarised below:
Share price at financial year end ($)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
41.50
1.10
(4.49)
82.50
4.20
5.40
77.00
4.10
6.20
70.00
3.00
5.60
59.00
1.95
3.20
2019
2018
2017
2016
2015
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key
management personnel of the Group, including their personally related parties, is set out below:
Ordinary shares
Shane Tanner
Michael Newton
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Andrew Just
Paul Smith
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
Balance at
the end of
the year
850,000
403,134
1,343,974
2,823,466
-
-
-
5,420,574
-
-
-
-
-
-
-
-
-
-
621,306
160,000
-
-
-
781,306
-
-
(498,863)
-
-
-
-
(498,863)
850,000
403,134
1,466,417
2,983,466
-
-
-
5,703,017
Performance rights holding
The number of performance rights over ordinary shares in the Company held during the financial year by each director and
other members of key management personnel of the Group, including their personally related parties, is set out below:
Performance rights over ordinary shares
Shane Tanner
Michael Newton
Geoffrey Sam
Brent Stewart
Bruce Bian
Andrew Just
Paul Smith
Balance at
the start of
the year
Granted
Vested
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
-
-
-
-
-
-
-
-
-
228,119
137,316
365,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
228,119
137,316
365,435
This concludes the remuneration report, which has been audited.
Shares under performance rights
Unissued ordinary shares of Paragon Care Limited under performance rights at the date of this report are as follows:
Grant date
14 December 2018
26 April 2019
Expiry date
30 September 2021
30 September 2022
Exercise
price
Number
under rights
$0.8055
$0.8055
228,119
633,886
862,005
No person entitled to exercise the performance rights had or has any right by virtue of the performance right to participate
in any share issue of the Company or of any other body corporate.
15
Paragon Care Limited
Directors' report
30 June 2019
Shares issued on the exercise of performance rights
There were no ordinary shares of Paragon Care Limited issued on the exercise of performance rights during the year
ended 30 June 2019 and up to the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of
the Company against a liability 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.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
Company or any related entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the
Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking
responsibility on behalf of the Company for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 34 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 34 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company,
acting as advocate for the Company or jointly sharing economic risks and rewards.
●
Officers of the Company who are former partners of RSM Australia Partners
There are no officers of the Company who are former partners of RSM Australia Partners.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
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
immediately after this directors' report.
16
Paragon Care Limited
Directors' report
30 June 2019
Auditor
RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Shane Tanner
Chairman
23 September 2019
Melbourne
17
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report of Paragon Care Limited and its controlled entities for the year
ended 30 June 2019, I declare that, to the best of my knowledge and belief, there have been no contraventions
of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
P A RANSOM
Partner
Dated: 23 September 2019
Melbourne, Victoria
18
Paragon Care Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue from continuing operations
Sale of goods
Cost of sales
Gross profit
Other income
Interest revenue calculated using the effective interest method
Expenses
Distribution
Marketing
Occupancy
Administration
Impairment of assets
Finance costs
Profit before income tax expense from continuing operations
Income tax expense
Profit after income tax expense from continuing operations
Loss after income tax benefit from discontinued operations
Profit/(loss) after income tax (expense)/benefit for the year attributable to the
owners of Paragon Care Limited
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Net gain on hedge of net investment, net of tax
Net loss on hedge of net investment, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
Paragon Care Limited
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
Note
Consolidated
2019
$'000
2018
$'000
5
6
7
7
8
9
236,094
(140,992)
117,200
(69,024)
95,102
48,176
1,162
575
4,670
245
(4,459)
(2,672)
(1,336)
(70,186)
(37)
(5,959)
(1,186)
(1,125)
(1,976)
(28,778)
-
(2,164)
12,190
17,862
(3,416)
(3,976)
8,774
13,886
(23,160)
(2,935)
(14,386)
10,951
-
(436)
1,632
1,196
845
-
(791)
54
(13,190)
11,005
9,970
(23,160)
13,940
(2,935)
(13,190)
11,005
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
19
Paragon Care Limited
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Note
Consolidated
2019
$'000
2018
$'000
Cents
Cents
Earnings per share for profit from continuing operations attributable to the
owners of Paragon Care Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for loss from discontinued operations attributable to the
owners of Paragon Care Limited
Basic earnings per share
Diluted earnings per share
42
42
42
42
Earnings per share for profit/(loss) attributable to the owners of Paragon Care
Limited
Basic earnings per share
Diluted earnings per share
42
42
2.74
2.74
6.84
6.84
(7.24)
(7.24)
(1.45)
(1.45)
(4.49)
(4.49)
5.39
5.39
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
20
Paragon Care Limited
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Investments
Derivative financial instruments
Income tax refund due
Other
Total current assets
Non-current assets
Receivables
Property, plant and equipment
Right-of-use assets
Intangibles
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Income tax
Employee benefits
Vendor conditional payables
Other
Total current liabilities
Non-current liabilities
Payables
Borrowings
Lease liabilities
Employee benefits
Vendor conditional payables
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained profits/(accumulated losses)
Total equity
Note
Consolidated
2019
$'000
2018
$'000
10
11
12
13
14
8
15
16
17
18
19
8
20
21
8
22
23
24
25
26
27
28
29
34,224
44,133
51,407
22
291
5,736
2,117
137,930
574
13,056
20,923
204,321
7,392
246,266
40,392
43,808
55,301
21
1,315
-
1,480
142,317
1,425
12,172
-
190,131
3,703
207,431
384,196
349,748
47,947
10,136
3,031
-
4,296
-
7,462
72,872
-
89,243
19,221
871
9,673
119,008
53,862
10,743
-
767
4,514
1,201
4,638
75,725
1,457
94,074
-
257
8,093
103,881
191,880
179,606
192,316
170,142
202,718
1,095
(11,497)
156,930
(101)
13,313
192,316
170,142
The above statement of financial position should be read in conjunction with the accompanying notes
21
Paragon Care Limited
Statement of changes in equity
For the year ended 30 June 2019
Consolidated
Balance at 1 July 2017
Profit after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 28)
Dividends paid (note 30)
Foreign
currency
translation
reserve
$'000
Hedging
reserve -
cash flow
hedges
$'000
Retained
profits
$'000
Total equity
$'000
50
-
(791)
(791)
(205)
8,498
82,690
-
10,951
10,951
845
-
54
845
10,951
11,005
Issued
capital
$'000
74,347
-
-
-
82,583
-
-
-
-
-
-
(6,136)
82,583
(6,136)
Balance at 30 June 2018
156,930
(741)
640
13,313
170,142
Consolidated
Foreign
currency
translation
reserve
$'000
Hedging
reserve -
cash flow
hedges
$'000
Issued
capital
$'000
Accumulated
losses
$'000
Total equity
$'000
Balance at 1 July 2018
156,930
(741)
640
13,313
170,142
Adjustment on adoption of AASB 16
-
-
-
(672)
(672)
Balance at 1 July 2018 - restated
156,930
(741)
640
12,641
169,470
Loss after income tax expense for the year
Other comprehensive income for the year, net
of tax
Total comprehensive income for the year
Transactions with owners in their capacity as
owners:
Contributions of equity, net of transaction costs
(note 28)
Dividends paid (note 30)
-
-
-
-
-
(14,386)
(14,386)
1,632
(436)
-
1,196
1,632
(436)
(14,386)
(13,190)
45,788
-
-
-
-
-
-
(9,752)
45,788
(9,752)
Balance at 30 June 2019
202,718
891
204
(11,497)
192,316
The above statement of changes in equity should be read in conjunction with the accompanying notes
22
Paragon Care Limited
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Note
Consolidated
2019
$'000
2018
$'000
261,874
(246,629)
381
(5,959)
(8,509)
132,449
(119,081)
246
(2,172)
(3,883)
Net cash from operating activities
41
1,158
7,559
Cash flows from investing activities
Payment for purchase of businesses, net of cash acquired
Payment for prior period purchase of businesses
Payments for investments
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of business
Proceeds from disposal of property, plant and equipment
Proceeds from release of security deposits
Loan repayment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Proceeds from borrowings (net)
Repayment of borrowings (net)
Dividends paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
38
28
30
(28,196)
-
(1)
(5,828)
(3,893)
1,352
1,012
80
-
(102,548)
(4,276)
-
(2,762)
(3,790)
-
-
-
500
(35,474)
(112,876)
45,196
(2,907)
-
(5,438)
(8,703)
69,980
(5,880)
67,749
-
(4,696)
28,148
127,153
(6,168)
40,392
21,836
18,556
Cash and cash equivalents at the end of the financial year
10
34,224
40,392
The above statement of cash flows should be read in conjunction with the accompanying notes
23
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 1. General information
The financial statements cover Paragon Care Limited as a Group consisting of Paragon Care Limited ('Company' or 'parent
entity') and the entities it controlled at the end of, or during, the year. Paragon Care Limited and its subsidiaries together
are referred to in these financial statements as the 'Group'. The financial statements are presented in Australian dollars,
which is Paragon Care Limited's functional and presentation currency.
Paragon Care Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered
office and principal place of business is:
50-54 Clayton Road
Clayton VIC 3168
A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is
not part of the financial statements.
The financial statements were authorised for issue, in accordance with a resolution of directors, on 23 September 2019.
The directors have the power to amend and reissue the financial statements.
Note 2. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
The Group has early adopted new Accounting Standard AASB 16 'Leases', which replaces AASB 117 'Leases'. No other
new or amended Accounting Standards or Interpretations that are not yet mandatory have been early adopted.
The following Accounting Standards and Interpretations are most relevant to the Group:
AASB 9 Financial Instruments
The Group has adopted AASB 9 from 1 July 2018. The standard introduced new classification and measurement models
for financial assets. A financial asset shall be measured at amortised cost if it is held within a business model whose
objective is to hold assets in order to collect contractual cash flows which arise on specified dates and that are solely
principal and interest. A debt investment shall be measured at fair value through other comprehensive income if it is held
within a business model whose objective is to both hold assets in order to collect contractual cash flows which arise on
specified dates that are solely principal and interest as well as selling the asset on the basis of its fair value. All other
financial assets are classified and measured at fair value through profit or loss unless the entity makes an irrevocable
election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading or contingent
consideration recognised in a business combination) in other comprehensive income ('OCI'). Despite these requirements, a
financial asset may be irrevocably designated as measured at fair value through profit or loss to reduce the effect of, or
eliminate, an accounting mismatch. For financial liabilities designated at fair value through profit or loss, the standard
requires the portion of the change in fair value that relates to the entity's own credit risk to be presented in OCI (unless it
would create an accounting mismatch). New simpler hedge accounting requirements are intended to more closely align the
accounting treatment with the risk management activities of the entity. New impairment requirements use an 'expected
credit loss' ('ECL') model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the
credit risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL
method is adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected
loss allowance is available.
24
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
AASB 15 Revenue from Contracts with Customers
The Group has adopted AASB 15 from 1 July 2018. The standard provides a single comprehensive model for revenue
recognition. The core principle of the standard is that an entity shall recognise revenue to depict the transfer of promised
goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services. The standard introduced a new contract-based revenue recognition model with a
measurement approach that is based on an allocation of the transaction price. This is described further in the accounting
policies below. Credit risk is presented separately as an expense rather than adjusted against revenue. Contracts with
customers are presented in an entity's statement of financial position as a contract liability, a contract asset, or a
receivable, depending on the relationship between the entity's performance and the customer's payment. Customer
acquisition costs and costs to fulfil a contract can, subject to certain criteria, be capitalised as an asset and amortised over
the contract period.
The Group manufactures and sells a range of medical products to the wholesale and end user market. Sales are
recognised when the Company has delivered products and there is no unfilled obligation that could affect the customer’s
acceptance of the product. The consideration receivable is typically on terms of between 30 to 60 days. The transaction
price is allocated to all performance obligations identified in the contract. Amounts disclosed as revenue are net of returns,
trade allowances and rebates.
The Group has a Technology and Service platform. Revenue from services is recognised in the accounting period in which
the services are rendered. For fixed-price contracts, revenue is recognised over time using the percentage of completion
method, based on actual service provided as a percentage of the total service to be provided.
AASB 16 Leases
The Group early adopted AASB 16 from 1 July 2018 notwithstanding that the standard is mandatorily effective for
accounting periods beginning on or after 1 January 2019. The standard replaces AASB 117 'Leases' and for lessees
eliminates the classifications of operating leases and finance leases. Except for short-term leases and leases of low-value
assets, right-of-use assets and corresponding lease liabilities are recognised in the statement of financial position. Straight-
line operating lease expense recognition is replaced with a depreciation charge for the right-of-use assets (included in
operating costs) and an interest expense on the recognised lease liabilities (included in finance costs). In the earlier
periods of the lease, the expenses associated with the lease under AASB 16 will be higher when compared to lease
expenses under AASB 117. However, EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) results
improve as the operating expense is now replaced by interest expense and depreciation in profit or loss. For classification
within the statement of cash flows, the interest portion is disclosed in operating activities and the principal portion of the
lease payments are separately disclosed in financing activities. For lessor accounting, the standard does not substantially
change how a lessor accounts for leases.
Impact of adoption
The Group has assessed the requirement of AASB 9 and there was no impact from the adoption of AASB 9.
The impact on the financial performance and position of the Group from the adoption of AASB 15 is immaterial. There is no
retrospective adjustment to the financial report required.
AASB 16 'Leases' had a material impact on the financial statements. The Group previously classified operating or finance
leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to
ownership of the underlying asset to the Group. Under AASB 16, the Group recognises right-of-use assets and liabilities for
most leases on the statement of financial position.
The Group has applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12
months remaining to the lease term.
The Group applied AASB 16 using the modified retrospective approach and therefore the comparative information has not
been restated. For the purposes of applying the modified retrospective approach to the leases, the Group has elected to
measure the right-of-use assets at carrying amounts determined as if it had applied AASB 16 since the commencement
date of the lease using its incremental borrowing rate at the date of initial application.
Ongoing lease payments are split between depreciation and interest expenses. Interest expenses on the lease liability is a
component of financial costs, which are presented in the statement of profit or loss.
25
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
The impact upon disclosure in the current financial statements of adoption of the new standards is presented below:
EXTRACT
Disclosure
Disclosure
under current
standards
$'000
(as reported)
under
previous
standards
$'000
Change
$'000
Statement of profit or loss
Revenue - interest (AASB 15)
Interest revenue calculated using the effective interest method (AASB 15)
Administration (AASB 9 and AASB 16)
Impairment of assets (AASB 9)
Profit before income tax expense from continuing operations
Income tax expense
236,094
575
(69,730)
(37)
236,669
-
(69,016)
-
12,190
(3,416)
12,941
(3,416)
Profit after income tax expense from continuing operations
8,774
9,525
(575)
575
(714)
(37)
(751)
-
(751)
EXTRACT
Statement of financial position
Right-of-use assets
Lease liabilities - current
Lease liabilities - non-current
Net assets
AASB 16
Right-of-use assets (AASB 16)
Lease liabilities (AASB 16)
Accrued lease liability (AASB 16)
Decrease in opening retained earnings as at 1 July 2018
Disclosure
Disclosure
under current
standards
(as reported)
$'000
under
previous
standards
Change
$'000
$'000
20,923
(3,031)
(19,221)
-
-
-
20,923
(3,031)
(19,221)
192,316
193,645
(1,329)
1 July
2018
$
27,702
(27,702)
(672)
(672)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and
Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for, where applicable, the
revaluation of financial assets and liabilities at fair value through profit or loss and derivative financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
26
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the Group only.
Supplementary information about the parent entity is disclosed in note 37.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Paragon Care Limited as at
30 June 2019 and the results of all subsidiaries for the year then ended.
Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted
by the Group.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Foreign currency translation
The financial statements are presented in Australian dollars, which is Paragon Care Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are translated into the Company's functional currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average
exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the
contract with a customer; identifies the performance obligations in the contract; determines the transaction price which
takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be
delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
27
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts,
rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates
are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable
consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts
received that are subject to the constraining principle are recognised as a refund liability.
Sale of goods
Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is
generally at the time of delivery.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
nor taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and
the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the
foreseeable future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Discontinued operations
A discontinued operation is a component of the Group that has been disposed of or is classified as held for sale and that
represents a separate major line of business or geographical area of operations, is part of a single co-ordinated plan to
dispose of such a line of business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The
results of discontinued operations are presented separately on the face of the statement of profit or loss and other
comprehensive income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial position based on current and non-current classification.
28
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the
Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months
after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle
a liability for at least 12 months after the reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held
primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no
unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities
are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within
30 days.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value on a 'first in first
out' basis. Cost comprises of direct materials and delivery costs, direct labour, import duties and other taxes, an
appropriate proportion of variable and fixed overhead expenditure based on normal operating capacity, and, where
applicable, transfers from cash flow hedging reserves in equity. Costs of purchased inventory are determined after
deducting rebates and discounts received or receivable.
Stock on hand is stated at the lower of cost and net realisable value. Cost comprises of purchase and delivery costs, net of
rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the Group's exposure to variability in cash flows that is attributable to particular risks
associated with a recognised asset or liability or a firm commitment which could affect profit or loss. The effective portion of
the gain or loss on the hedging instrument is recognised in other comprehensive income through the cash flow hedges
reserve in equity, whilst the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of
equity and included in the measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both retrospectively and prospectively to ensure that each
hedge is highly effective and continues to be designated as a cash flow hedge. If the forecast transaction is no longer
expected to occur, the amounts recognised in equity are transferred to profit or loss.
29
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
Investments and other financial assets
Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the
initial measurement, except for financial assets at fair value through profit or loss. Such assets are subsequently measured
at either amortised cost or fair value depending on their classification. Classification is determined based on both the
business model within which such assets are held and the contractual cash flow characteristics of the financial asset
unless, an accounting mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of
recovering part or all of a financial asset, it's carrying value is written off.
Investments
Investments includes non-derivative financial assets with fixed or determinable payments and fixed maturities where the
Group has the positive intention and ability to hold the financial asset to maturity. This category excludes financial assets
that are held for an undefined period. Investments are carried at amortised cost using the effective interest rate method
adjusted for any principal repayments. Gains and losses are recognised in profit or loss when the asset is derecognised or
impaired.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on financial assets which are either measured at
amortised cost or fair value through other comprehensive income. The measurement of the loss allowance depends upon
the Group's assessment at the end of each reporting period as to whether the financial instrument's credit risk has
increased significantly since initial recognition, based on reasonable and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected
credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable
to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where
it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected
credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present
value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate.
Property, plant and equipment
Land and buildings are shown at fair value, based on periodic, at least every 3 years, valuations by external independent
valuers, less subsequent depreciation and impairment for buildings. The valuations are undertaken more frequently if there
is a material change in the fair value relative to the carrying amount. Any accumulated depreciation at the date of
revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued
amount of the asset. Increases in the carrying amounts arising on revaluation of land and buildings are credited in other
comprehensive income through to the revaluation surplus reserve in equity. Any revaluation decrements are initially taken
in other comprehensive income through to the revaluation surplus reserve to the extent of any previous revaluation surplus
of the same asset. Thereafter the decrements are taken to profit or loss.
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment
(excluding land) over their expected useful lives as follows:
Land
Leasehold improvements
Plant and equipment
Motor vehicles
Not depreciated
3-10 years
3-7 years
3-5 years
30
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or
the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in
the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset,
and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful
life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of
the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted
for any remeasurement of lease liabilities.
Right-of-use assets that meet the definition of investment property are measured at fair value where the Group has
adopted a fair value measurement basis for investment property assets.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with
terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss
as incurred.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Website
Significant costs associated with the development of the revenue generating aspects of the website, including the capacity
of placing orders, are deferred and amortised on a straight-line basis over the period of their expected benefit, being their
finite life of 10 years.
Customer contracts
Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their
expected benefit, being their finite life of 5 years.
Software development
Software development costs are capitalised only when incurred. Development costs have a finite life and are amortised on
a systematic basis matched to the future economic benefit over the useful life of the software.
31
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
R&D Projects
R&D Projects are capitalised only when incurred. R&D Projects are amortised when the items developed are ready for
market use. They are amortised over the expected useful life of the items developed.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The
amounts are unsecured and are usually paid within 30 days of recognition.
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Lease liabilities
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed
payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts
expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option
is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend
on an index or a rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured
if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual
guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an
adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use
asset is fully written down.
Finance costs
Finance costs are expensed in the period in which they are incurred.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be
settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities
are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 wage and salary levels, experience of employee departures
and periods of service. Expected future payments are discounted using market yields at the reporting date on high-quality
corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
32
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for
the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of
cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined
using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, 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 option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken
of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the
best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount
recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already
recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the
Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was
granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
●
during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the
expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the
reporting date.
●
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to
settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions
are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are
satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made.
An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair
value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a
cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting
period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and
new award is treated as if they were a modification.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
33
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Dividends
Dividends are recognised when declared during the financial year and no longer at the discretion of the Company.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value
or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to
profit or loss.
On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
34
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 2. Significant accounting policies (continued)
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of Paragon Care Limited, excluding
any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the
weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential
ordinary shares.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
Rounding of amounts
The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that
Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2019. The Group's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to the Group,
are set out below.
New Conceptual Framework for Financial Reporting
A revised Conceptual Framework for Financial Reporting has been issued by the AASB and is applicable for annual
reporting periods beginning on or after 1 January 2020. This release impacts for-profit private sector entities that have
public accountability that are required by legislation to comply with Australian Accounting Standards and other for-profit
entities that voluntarily elect to apply the Conceptual Framework. Phase 2 of the framework is yet to be released which will
impact for-profit private sector entities. The application of new definition and recognition criteria as well as new guidance on
measurement will result in amendments to several accounting standards. The issue of AASB 2019-1 Amendments to
Australian Accounting Standards – References to the Conceptual Framework, also applicable from 1 January 2020,
includes such amendments. Where the Group has relied on the conceptual framework in determining its accounting
policies for transactions, events or conditions that are not otherwise dealt with under Australian Accounting Standards, the
Group may need to revisit such policies. The Group will apply the revised conceptual framework from 1 July 2020 and is
yet to assess its impact.
35
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 3. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next
financial year are discussed below.
Provision for impairment of inventories
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.
Fair value measurement hierarchy
The Group is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on
the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted)
in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
The fair value of assets and liabilities classified as level 3 is determined by the use of valuation models. These include
discounted cash flow analysis or the use of observable inputs that require significant adjustments based on unobservable
inputs.
Estimation of useful lives of assets
The Group determines the estimated useful lives and related depreciation and amortisation charges for its property, plant
and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical
innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less
than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be
written off or written down.
Goodwill and other indefinite life intangible assets
The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The Group assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at
each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment.
If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of
disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Income tax
The Group is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in
determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary
course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax
audit issues based on the Group's current understanding of the tax law. Where the final tax outcome of these matters is
different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in
which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the Group considers it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
36
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 3. Critical accounting judgements, estimates and assumptions (continued)
Business combinations
As discussed in note 2, business combinations are initially accounted for on a provisional basis. The fair value of assets
acquired, liabilities and contingent liabilities assumed are initially estimated by the Group 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, depreciation and amortisation reported.
Note 4. Operating segments
The Group 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 Group does not have any other reporting segments.
Note 5. Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major product lines
Diagnostic Product line
Capital and Consumables Product Line
Devices Product Line
Services and Technology
Geographical regions
Australia
New Zealand
Other
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
Consolidated
2019
$'000
23,425
119,363
76,498
16,808
236,094
191,214
43,481
1,399
236,094
219,286
16,808
236,094
AASB 15 was adopted using the modified retrospective approach. As a result, comparative information is not disclosed.
Note 6. Other income
Write back of earn-out
Other income
Other income
Consolidated
2019
$'000
2018
$'000
1,162
-
4,068
602
1,162
4,670
37
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 6. Other income (continued)
Write back of earn-out
In June 2019, the conditional payments on the earn outs for Labgear Pty Ltd were 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. Labgear Pty Ltd has no final earn-out due. The impact was a reduction of the vendor earn-out
payable, resulting in a write back of $1,162,777.
In June 2018, the conditional payments on the earn outs for Midas Software Solutions and Electro Medical Group were
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. Electro Medical Groups final earn-out was $695,669
and Midas Software Solutions has no final earn-out due. Total final earn-out payables due of the two entities is $695,669.
The impact was a reduction of the vendor earn-out payable, resulting in a write back of $4,072,517.
Note 7. Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Depreciation (included in Administration expenses)
Leasehold improvements
Plant and equipment
Motor vehicles
Leasehold improvements right-of-use assets
Total depreciation
Amortisation (included in Administration expenses)
Website
Contracts
Software development costs
R&D Projects (under construction)
Total amortisation
Consolidated
2019
$'000
2018
$'000
103
3,452
78
3,784
264
896
148
-
7,417
1,308
54
751
1,661
125
2,591
25
-
684
29
738
Total depreciation and amortisation
10,008
2,046
Finance costs
Interest and finance charges paid/payable
Interest and finance charges paid/payable on lease liabilities
Finance costs expensed
Rental expense relating to operating leases
Minimum lease payments
Superannuation expense (included in Administration expenses)
Defined contribution superannuation expense
4,782
1,177
2,164
-
5,959
2,164
-
1,559
3,052
1,680
Employee benefits expense excluding superannuation (included in Administration expenses)
Employee benefits expense excluding superannuation
46,209
25,976
38
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 8. Income tax
Income tax expense/(benefit)
Current tax
Deferred tax - origination and reversal of temporary differences
Adjustment recognised for prior periods
Aggregate income tax expense/(benefit)
Income tax expense/(benefit) is attributable to:
Profit from continuing operations
Loss from discontinued operations
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit) comprises:
Decrease/(increase) in deferred tax assets
Numerical reconciliation of income tax expense/(benefit) and tax at the statutory rate
Profit before income tax expense from continuing operations
Loss before income tax benefit from discontinued operations
Tax at the statutory tax rate of 30%
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Earn-out write-back
Capital loss on divestment of business
Non-deductible costs
Other deductible expenses
Sundry items
Adjustment recognised for prior periods
Income tax expense/(benefit)
Amounts credited directly to equity
Deferred tax assets
Deferred tax assets not recognised
Deferred tax assets not recognised comprises temporary differences attributable to:
Unrecognised tax capital losses
Total deferred tax assets not recognised
39
Consolidated
2019
$'000
2018
$'000
1,788
(2,378)
(100)
2,491
308
(81)
(690)
2,718
3,416
(4,106)
3,976
(1,258)
(690)
2,718
(2,378)
308
12,190
(27,266)
17,862
(4,193)
(15,076)
13,669
(4,523)
4,101
(349)
3,951
271
-
60
(590)
(100)
(690)
35
-
268
(382)
(1,223)
2,799
(81)
2,718
Consolidated
2019
$'000
2018
$'000
(1,364)
(1,099)
Consolidated
2019
$'000
2018
$'000
3,951
3,951
-
-
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 8. Income tax (continued)
The above potential tax benefit, which excludes tax losses, for deductible temporary differences has not been recognised
in the statement of financial position as the recovery of this benefit is uncertain.
Deferred tax asset
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Property, plant and equipment
Employee benefits
Accrued expenses
Right of use asset/lease liability
Inventories
Prepayments
Foreign exchange gains/(losses)
Other assets
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss
Credited to equity
Additions through business combinations (note 38)
Unders/overs
Closing balance
Income tax refund due
Income tax refund due
Provision for income tax
Provision for income tax
Note 9. Discontinued operations
Consolidated
2019
$'000
2018
$'000
2,108
(9)
1,713
254
250
528
(6)
313
226
153
298
1,508
11
-
140
(11)
(558)
270
5,377
1,811
2,015
1,892
7,392
3,703
3,703
2,378
1,364
131
(184)
2,221
(308)
1,099
691
-
7,392
3,703
Consolidated
2019
$'000
2018
$'000
5,736
-
Consolidated
2019
$'000
2018
$'000
-
767
Description
On 29 November 2018, the Company announced that as part of the Group-wide transformation program, it had
commenced a strategic review of the business operations, particularly the capital equipment operations.
40
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 9. Discontinued operations (continued)
This strategic review included an evaluation of the business. Paragon renewed its vision and strategy with an increased
focus on 'high technology and recurring revenues'. This Company decided to divest its Capital and Consumable operations
as part of the wider strategic review of its operations and growth targets.
On 30 June 2019, the Company completed the divestment of the Capital and Consumable operation to Cabrini Health
Limited, a well-established not-for-profit operator of hospitals and aged care facilities for a sale price of $3,725,000.
Financial performance information
Sale of goods
Cost of sales
Gross profit
Other income
Interest revenue calculated using the effective interest method
Distribution
Marketing
Occupancy
Administration
Impairment of assets
Finance costs
Total expenses
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit
Loss on disposal before income tax
Income tax expense
Loss on disposal after income tax expense
Consolidated
2019
$'000
2018
$'000
20,604
(13,046)
7,558
19,302
(12,812)
6,490
994
(194)
800
(995)
(41)
(288)
(12,822)
(76)
-
(14,222)
(5,864)
4,106
5
-
5
(570)
(10)
(1,122)
(8,977)
(1)
(8)
(10,688)
(4,193)
1,258
(1,758)
(2,935)
(21,402)
-
(21,402)
-
-
-
Loss after income tax benefit from discontinued operations
(23,160)
(2,935)
Carrying amounts of assets and liabilities disposed
Trade and other receivables
Inventories
Property, plant and equipment
Other non-current assets
Total assets
Provisions
Total liabilities
Net assets
41
Consolidated
2019
$'000
2018
$'000
99
7,595
1,545
1,000
10,239
576
576
9,663
-
-
-
-
-
-
-
-
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 9. Discontinued operations (continued)
Details of the disposal
Total sale consideration
Carrying amount of net assets disposed
Loss on disposal before income tax
Impairment of goodwill
Loss on disposal after income tax
Note 10. Current assets - cash and cash equivalents
Cash at bank and on hand
Note 11. Current assets - trade and other receivables
Trade receivables
Other receivables
Goods and services tax receivable
Consolidated
2019
$'000
2018
$'000
3,725
(9,663)
(5,938)
(15,464)
(21,402)
-
-
-
-
-
Consolidated
2019
$'000
2018
$'000
34,224
40,392
Consolidated
2019
$'000
2018
$'000
39,447
3,921
765
37,967
3,520
2,321
44,133
43,808
Allowance for expected credit losses
The Group has recognised a loss of $37,000 in profit or loss in respect of the expected credit losses for the year ended 30
June 2019.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Consolidated
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Expected
credit loss
rate
2019
%
Carrying
amount
2019
$'000
Allowance
for expected
credit losses
2019
$'000
-
-
-
19,126
18,509
1,812
39,447
-
-
-
-
AASB 9 was adopted using the modified retrospective approach. As a result, comparative information is not disclosed.
42
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 12. Current assets - inventories
Raw materials - at cost
Work in progress - at cost
Finished goods - at cost
Less: Provision for impairment
Note 13. Current assets - investments
Listed shares
Reconciliation
Reconciliation of the fair values at the beginning and end of the current and previous
financial year are set out below:
Opening fair value
Additions
Closing fair value
Refer to note 32 for further information on fair value measurement.
Note 14. Current assets - derivative financial instruments
Consolidated
2019
$'000
2018
$'000
976
-
55,180
(4,749)
1,947
31
53,788
(465)
51,407
55,301
Consolidated
2019
$'000
2018
$'000
22
21
21
1
22
-
21
21
Consolidated
2019
$'000
2018
$'000
Forward foreign exchange contracts - cash flow hedges
291
1,315
Refer to note 32 for further information on fair value measurement.
Note 15. Current assets - other
Prepayments
Security deposits
Consolidated
2019
$'000
2018
$'000
2,150
(33)
1,432
48
2,117
1,480
43
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 16. Non-current assets - receivables
Other receivables
Note 17. Non-current assets - property, plant and equipment
Land and buildings - at cost
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Consolidated
2019
$'000
2018
$'000
574
1,425
Consolidated
2019
$'000
2018
$'000
2,145
3,994
(659)
3,335
25,739
(18,526)
7,213
1,241
(878)
363
-
3,914
(556)
3,358
13,197
(5,068)
8,129
1,485
(800)
685
13,056
12,172
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Additions through business combinations (note
38)
Disposals
Depreciation expense
Balance at 30 June 2018
Additions
Additions through business combinations (note
38)
Disposals
Exchange differences
Depreciation expense
Land and
buildings
$'000
Leasehold
improve-
ments
$'000
Plant and
equipment
$'000
Motor
vehicles
$'000
Total
$'000
-
-
-
-
-
-
2,145
-
-
-
-
825
-
2,797
-
(264)
3,358
80
-
-
-
(103)
2,138
2,762
4,494
(49)
(1,216)
8,129
3,655
736
(1,583)
(43)
(3,681)
443
-
390
-
(148)
685
-
-
(244)
-
(78)
3,406
2,762
7,681
(49)
(1,628)
12,172
5,880
736
(1,827)
(43)
(3,862)
Balance at 30 June 2019
2,145
3,335
7,213
363
13,056
44
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 18. Non-current assets - right-of-use assets
Land and buildings - right-of-use
Less: Accumulated depreciation
Consolidated
2019
$'000
2018
$'000
24,707
(3,784)
20,923
-
-
-
During the year the Group implemented accounting for leases under AASB 16. The impact of adopting this standard is set
out in note 2.
The Group leases land and buildings for its offices under agreements of between one to eight years with, in some cases,
options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated.
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Balance at 30 June 2018
Recognition on early adoption of AASB 16
Depreciation expense
Balance at 30 June 2019
Land and
buildings
$'000
-
-
24,707
(3,784)
20,923
45
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 19. Non-current assets - intangibles
Goodwill - at cost
Less: Impairment
Website - at cost
Less: Accumulated amortisation
Contracts - at cost
Less: Accumulated amortisation
Software development costs - at cost
Less: Accumulated amortisation
Less: Impairment
R&D Projects (under construction) - at cost
Less: Accumulated amortisation
Consolidated
2019
$'000
2018
$'000
211,648
(15,464)
196,184
179,231
-
179,231
584
(306)
278
2,493
(751)
1,742
10,970
(2,759)
(2,335)
5,876
411
(170)
241
393
(252)
141
2,493
-
2,493
7,443
(1,098)
-
6,345
1,966
(45)
1,921
204,321
190,131
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Consolidated
Balance at 1 July 2017
Additions
Additions through business
combinations (note 38)
Finalisation of acquisition
accounting
Exchange differences
Amortisation expense
Balance at 30 June 2018
Additions
Additions through business
combinations (note 38)
Finalisation of acquisition
accounting
Disposals
Exchange differences
Impairment of assets
Amortisation expense
Goodwill
Website
Contracts
$'000
$'000
$'000
Software
development
costs
$'000
R&D Projects
(under
construction)
$'000
Total
$'000
93,115
-
88,212
(2,492)
396
-
179,231
-
29,281
4,501
-
(1,365)
(15,464)
-
11
155
-
-
-
2,493
-
-
(25)
141
191
-
-
-
-
-
(54)
-
-
-
2,493
-
-
-
-
-
-
(751)
4,221
2,808
-
-
-
(684)
6,345
3,527
1,072
878
98,419
3,841
-
90,705
-
-
(29)
(2,492)
396
(738)
1,921
175
190,131
3,893
-
-
29,281
-
-
-
(2,335)
(1,661)
-
(1,730)
-
-
(125)
4,501
(1,730)
(1,365)
(17,799)
(2,591)
Balance at 30 June 2019
196,184
278
1,742
5,876
241
204,321
46
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 19. Non-current assets - intangibles (continued)
Impairment testing
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.
In testing whether goodwill is impaired, it is to be allocated to each cash generating unit ('CGU'). In identifying the groups of
assets that constitute a CGU, it is the smallest group that generates largely independent cash inflows and cannot be larger
than the Group’s reportable operating segments before aggregation.
Under AASB 136, paragraph 68, an asset’s cash-generating unit is the smallest group of assets that includes the asset and
generates cash inflows that are largely independent of the cash inflows from other assets (or groups of assets). The Group
views that its past business combinations giving rise to Goodwill on acquisition relate to synergistic opportunities for its
medical equipment operating and reportable segment. Therefore, it has been determined that the Group has one CGU
which also has a common management structure.
Based on the discounted cash projections, the Company has anticipated positive operating cash flows generating a net
present value greater than the current book value as at 30 June 2019.
Key assumptions used for the discounted cash flow projection:
Revenue growth rate
Pre-tax discount rate
Terminal growth rate
Rate
%
5.0%
11.6%
2.0%
Sensitivity
As disclosed in note 3, the directors have made judgements and estimates in respect of impairment testing of goodwill.
Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The sensitivities
are as follows:
●
revenue would need to decrease by more than 1% before goodwill would need to be impaired, with all other
assumptions remaining constant.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of goodwill
is based would not cause the cash-generating unit’s carrying amount to exceed its recoverable amount.
If there are any negative changes in the key assumptions on which the recoverable amount of goodwill is based, this would
result in a further impairment charge for goodwill.
Note 20. Current liabilities - trade and other payables
Consolidated
2019
$'000
2018
$'000
40,450
2,890
-
4,607
41,711
4,889
1,578
5,684
47,947
53,862
Trade payables
Goods and services tax payable
Deferred purchase price
Other payables
Refer to note 31 for further information on financial instruments.
47
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 21. Current liabilities - borrowings
Bank loans
Trade finance facility
Lease liability
Consolidated
2019
$'000
2018
$'000
4,000
5,371
765
4,000
5,859
884
10,136
10,743
Refer to note 25 for further information on assets pledged as security and financing arrangements.
Refer to note 31 for further information on financial instruments.
Note 22. Current liabilities - vendor conditional payables
Vendor conditional payables
Note 23. Current liabilities - other
Accrued expenses
Deferred revenue
Note 24. Non-current liabilities - payables
Other payables
Refer to note 31 for further information on financial instruments.
Note 25. Non-current liabilities - borrowings
Bank loans
Lease liability
Refer to note 31 for further information on financial instruments.
48
Consolidated
2019
$'000
2018
$'000
-
1,201
Consolidated
2019
$'000
2018
$'000
5,594
1,868
2,530
2,108
7,462
4,638
Consolidated
2019
$'000
2018
$'000
-
1,457
Consolidated
2019
$'000
2018
$'000
88,322
921
92,322
1,752
89,243
94,074
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 25. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Trade finance facility
Lease liability
Consolidated
2019
$'000
2018
$'000
92,322
5,371
1,686
96,322
5,859
2,636
99,379
104,817
Assets pledged as security
The bank has a first registered company charge over all assets and undertakings including uncalled capital of the Group.
The lease liabilities are effectively secured as the rights to the leased assets, recognised in the statement of financial
position, revert to the lessor in the event of default.
The Company has entered into a trade finance facility agreement with National Australia Bank to facilitate the importation
of goods into Australia from overseas. Individual import transactions are financed for a period not exceeding 180 days after
the arrival of goods in Australia. This facility has been extended as part of the Company’s overall banking arrangements
with National Australia Bank and is therefore covered by the charge. Unlike the bank loans this revolving trade finance
facility does not have a reducing principal balance and is continuously utilised to provide a source of working capital more
closely matching the inventory life cycle of imported products.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Trade finance facility
Bank guarantees and others
Lease liability
Used at the reporting date
Bank loans
Trade finance facility
Bank guarantees and others
Lease liability
Unused at the reporting date
Bank loans
Trade finance facility
Bank guarantees and others
Lease liability
49
Consolidated
2019
$'000
2018
$'000
109,000
10,000
6,172
1,686
126,858
92,322
5,371
-
1,686
99,379
16,678
4,629
6,172
-
27,479
120,641
5,859
-
2,636
129,136
96,322
5,859
-
2,636
104,817
24,319
-
-
-
24,319
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 26. Non-current liabilities - lease liabilities
Lease liability
Refer to note 31 for further information on financial instruments.
The maturity analysis for lease liabilities is as follows:
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 30 June
Lease liabilities included in the statement of financial position
Lease liabilities included in the statement of financial position at 30 June
Lease liabilities included in the statement of financial position at 30 June
Lease liabilities - current
Lease liabilities - non-current
Note 27. Non-current liabilities - vendor conditional payables
Vendor conditional payables
Refer to note 38 for further information on vendor conditional payables.
Note 28. Equity - issued capital
Consolidated
2019
$'000
2018
$'000
19,221
-
2019
$'000
4,047
15,452
7,008
26,507
22,252
3,031
19,221
22,252
Consolidated
2019
$'000
2018
$'000
9,673
8,093
Ordinary shares - fully paid
337,885,292 283,647,930
202,718
156,930
Consolidated
2019
Shares
2018
Shares
2019
$'000
2018
$'000
50
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 28. Equity - issued capital (continued)
Movements in ordinary share capital
Details
Date
Shares
Issue price
$'000
Balance
Issue of shares as part consideration for the
acquisition of Medtek Pty Ltd
Issue of shares for part consideration for the earn-out
payable to the vendors of the Western Biomedical
business acquired in October 2015
Issue of shares pursuant to the Company’s dividend
re-investment plan
Issue of shares as part consideration for the
acquisition of the Anaequip Medical Trust business
Issue of shares pursuant to the Company’s
entitlement issue to institutional investors of 1 new
share for each 2.8 shares held
Placement to sophisticated and professional
investors
Issue of shares as part consideration for the
acquisition of Surgical Specialities business
Issue of shares pursuant to the Company’s
entitlement issue to retail investors of 1 new share
Issue of shares of the shortfall of the Company’s
entitlement issue to retail investors of 1 new share for
each 2.8 shares held
Issue of shares pursuant to the Company’s dividend
re-investment plan
Issue of shares as part consideration for the
acquisition of REM Systems business
Share issue transaction costs
Balance
Issue of shares as part consideration for the
acquisition of REM Systems business
Issue of shares to Pioneer Australia, Pioneer Hong
Kong, Pioneer Holdings, PioneerBV1, Tian Tian, UBS
Trustees and the Lis
Issue of shares pursuant to the Company’s dividend
re-investment plan
Issue of shares to Pioneer Australia, Pioneer Hong
Kong, Pioneer Holdings, PioneerBV1, Tian Tian, UBS
Trustees and the Lis
Issue of shares pursuant to the Company’s dividend
re-investment plan
Share issue transaction costs
1 July 2017
165,018,009
74,347
14 August 2017
55,432
$0.9020
50
14 August 2017
470,488
$0.9020
6 October 2017
670,677
$0.8870
25 January 2018
550,898
$0.8350
424
595
460
19 February 2018
25,077,179
$0.7250
18,181
19 February 2018
36,694,414
$0.7250
26,603
2 March 2018
8,823,338
$0.7250
6,397
5 March 2018
15,704,966
$0.7250
11,386
5 March 2018
18,778,957
$0.7250
13,615
12 April 2018
1,203,572
$0.7020
845
12 June 2018
10,600,000
$0.7673
30 June 2018
283,647,930
2 August 2018
2,056,256
$0.7650
1,578
14 September 2018
16,483,517
$0.9100
15,000
12 October 2018
1,004,167
$0.7167
720
20 November 2018
33,934,869
$0.8900
30,203
26 April 2019
758,553
$0.4331
8,134
(4,107)
156,930
329
(2,042)
202,718
Balance
30 June 2019
337,885,292
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the
Company does not have a limited amount of authorised capital.
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.
51
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 28. Equity - issued capital (continued)
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce
the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders,
return capital to shareholders, issue new shares or sell assets to reduce debt.
The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current Company's share price at the time of the investment. The Group is not actively pursuing additional
investments in the short term as it continues to integrate and grow its existing businesses in order to maximise synergies.
The Group is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
When managing capital, the directors’ objective is to ensure the Company continues as a going concern as well as to
maintain optimal returns to shareholders. The directors also aim to maintain a capital structure that ensures the lowest cost
of capital available to the Company. The directors are constantly monitoring the Company’s capital requirements and
capital structure to take advantage of favourable opportunities for raising capital. The directors have no current plans to
issue further shares or options on the market unless they conclude a further business acquisition. The directors monitor
capital through the gearing ratio (net debt divided by total capital). The target for the Group's gearing ratio is below 50%.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net
debt is calculated as 'borrowings' as shown in the statement of financial position less 'cash and cash equivalents' as shown
in the statement of financial position. Total capital is calculated as 'total equity' as shown in the statement of financial
position (including non-controlling interest) plus net debt.
The gearing ratio at the reporting date was as follows:
Current liabilities - borrowings (note 21)
Non-current liabilities - borrowings (note 25)
Total borrowings
Current assets - cash and cash equivalents (note 10)
Net debt
Total equity
Total capital
Gearing ratio
The Group is not subject to any externally imposed capital requirements.
Consolidated
2019
$'000
2018
$'000
10,136
89,243
99,379
(34,224)
65,155
192,316
257,471
10,743
94,074
104,817
(40,392)
64,425
170,142
234,567
25%
27%
52
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 29. Equity - reserves
Foreign currency translation reserve
Hedging reserve - cash flow hedges
Consolidated
2019
$'000
2018
$'000
891
204
1,095
(741)
640
(101)
Foreign currency translation reserve
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign
operations.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined
to be an effective hedge.
Note 30. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 (2018: 30 June 2017) of 2.0 cents (2018: 1.9
cents) per ordinary share
Interim dividend for the year ended 30 June 2019 (2018: 30 June 2018) of 1.1 cents (2018:
1.1 cents) per ordinary share
Franking credits
Consolidated
2019
$'000
2018
$'000
6,044
3,153
3,708
2,982
9,752
6,135
Consolidated
2019
$'000
2018
$'000
Franking credits available for subsequent financial years based on a tax rate of 30%
22,585
9,689
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
●
●
●
franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date
Note 31. Financial instruments
Financial risk management objectives
The Group's activities expose it to a variety of financial risks: market risk (including foreign 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. The Group uses
derivative financial instruments such as forward foreign exchange contracts to hedge certain risk exposures. Derivatives
are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments.
53
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 31. Financial instruments (continued)
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors
('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating
units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk
through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
In order to protect against exchange rate movements, the Group has entered into forward foreign exchange contracts.
These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Management has a risk
management policy to hedge between 40% and 100% of anticipated foreign currency transactions 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):
AUD to USD
AUD to Euro
NZD to USD
NZD to AUD
AUD to NZD
Consolidated
2019
$'000
2018
$'000
19,268
14,010
4,500
10,494
-
24,738
7,461
11,700
10,659
654
48,272
55,212
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s debt obligations with
the floating interest rate. The Company’s policy is not to actively manage interest cost. At 30 June 2019, $9,371,034 (2018:
$9,859,215) of the Group’s debt is at a variable rate of interest.
The financial instruments exposed to interest rate risk are as follows:
Financial assets
Cash and cash equivalents (interest bearing)
Financial liabilities
Interest bearing liabilities - variable rate (current)
Interest bearing liabilities - fixed rate (current)
Interest bearing liabilities - variable rate (non-current)
Interest bearing liabilities - fixed rate (non-current)
54
Consolidated
2019
$'000
2018
$'000
34,224
40,392
(9,371)
(765)
(9,322)
(79,921)
(99,379)
(9,859)
(884)
(64,322)
(29,752)
(104,817)
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 31. Financial instruments (continued)
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.
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
Unused borrowing facilities at the reporting date:
Bank loans
Trade finance facility
Bank guarantees and others
Consolidated
2019
$'000
2018
$'000
16,678
4,629
6,172
27,479
24,319
-
-
24,319
Remaining contractual maturities
The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Consolidated - 2019
Non-derivatives
Non-interest bearing
Weighted
average
interest rate
%
Less than 6
months
$'000
Between 6 to
12 months
$'000
Between 1
and 2 years
$'000
Between 2
and 6 years
$'000
Remaining
contractual
maturities
$'000
-
58,443
-
9,673
-
68,116
Interest-bearing - variable
3.30%
7,371
2,000
2,000
7,322
18,693
Interest-bearing - fixed rate
Total non-derivatives
4.30%
383
66,197
383
2,383
765
12,438
79,156
86,478
80,687
167,496
55
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 31. Financial instruments (continued)
Consolidated - 2018
Non-derivatives
Non-interest bearing
Weighted
average
interest rate
%
Between 6
Less than 6
months
$'000
and 12
months
$'000
Between 1
and 2 years
$'000
Between 2
and 6 years
$'000
Remaining
contractual
maturities
$'000
-
59,701
-
8,093
-
67,794
Interest-bearing - variable
3.10%
7,859
2,000
4,000
60,322
74,181
Interest-bearing - fixed rate
Total non-derivatives
3.60%
442
68,002
442
2,442
884
12,977
28,868
89,190
30,636
172,611
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 32. Fair value measurement
Fair value hierarchy
The following tables detail the Group's assets and liabilities, measured or disclosed at fair value, using a three level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Consolidated - 2019
Assets
Listed shares
Forward foreign exchange contracts - cash flow hedges
Total assets
Liabilities
Vendor conditional payable
Total liabilities
Consolidated - 2018
Assets
Listed shares
Forward foreign exchange contracts - cash flow hedges
Total assets
Liabilities
Vendor conditional payable
Total liabilities
There were no transfers between levels during the financial year.
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
22
-
22
-
-
-
291
291
-
-
-
22
291
313
-
-
9,673
9,673
9,673
9,673
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
21
-
21
-
-
-
1,316
1,316
-
-
-
-
-
9,294
9,294
21
1,316
1,337
9,294
9,294
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
56
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 32. Fair value measurement (continued)
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use
of observable market data where it is available and relies as little as possible on entity specific estimates.
Level 3 assets and liabilities
Movements in level 3 assets and liabilities during the current and previous financial year are set out below:
Consolidated
Balance at 1 July 2017
Gains recognised in profit or loss
Additions
Disposals
Balance at 30 June 2018
Gains recognised in profit or loss
Additions
Disposals
Balance at 30 June 2019
Vendor
conditional
payable
$'000
(16,865)
4,268
(8,599)
11,902
(9,294)
1,163
(2,817)
1,275
(9,673)
Note 33. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out
below:
Short-term employee benefits
Post-employment benefits
Consolidated
2019
$
2018
$
1,194,383
68,731
1,422,690
90,982
1,263,114
1,513,672
57
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 34. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the
auditor of the Company, and its network firms:
Audit services - RSM Australia Partners
Audit or review of the financial statements
Other services - RSM Australia Partners
Tax compliance services
Audit services - network firms
Audit or review of the financial statements
Note 35. Contingent liabilities
Consolidated
2019
$
2018
$
322,450
221,003
90,170
106,418
412,620
327,421
64,520
-
The Group has given bank guarantees as at 30 June 2019 of $5,019,613 (2018: $1,070,787).
Note 36. Related party transactions
Parent entity
Paragon Care Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 39.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the
directors' report.
Transactions with related parties
There were no transactions with related parties during the current and previous financial year.
Receivable from and payable to related parties
There were no trade receivables from or trade payables to related parties at the current and previous reporting date.
Loans to/from related parties
There were no loans to or from related parties at the current and previous reporting date.
58
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 37. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Hedging reserve - cash flow hedges
Accumulated losses
Total equity
Parent
2019
$'000
2018
$'000
3,695
(2,132)
3,695
(2,132)
Parent
2019
$'000
2018
$'000
15,670
11
162,879
124,042
864
885
2,150
349
203,402
(54)
(41,354)
155,170
(52)
(31,425)
161,994
123,693
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The parent entity and its controlled entities are party to a deed of cross guarantee under which each company guarantees
the debts of the others.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the
following:
●
●
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Investments in associates are accounted for at cost, less any impairment, in the parent entity.
Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an
indicator of an impairment of the investment.
59
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 38. Business combinations
2019
Lovell Surgical Pty Ltd
On 5 July 2018, the Company acquired 100% of the shares in Lovell Surgical Pty Ltd.
Total Communications Pty Ltd
On 21 November 2018 the Company acquired 100% of the shares in Total Communication Pty Ltd. Total Communication
is a unique acquisition providing an integrated vendor management and support solution to the aged care sector. These
products cover Telephony, Nurse Calls, Access Control, CCTV, Cordless and Healthcare Wi-Fi requirements. As per the
sale agreement, the vendors are entitled to an earnout of 3 times the EBITDA growth on forecasted FY20. Whilst this
payment is uncapped, it’s unlikely to go beyond the anticipated range of $1.80 million and $2.85 million.
Impact of acquisition on the results of the Group
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 Group for the current reporting period as though the
acquisition date for all business combinations had been as of 1 July 2018. Management has determined that this is
impracticable after consideration of all relevant factors in accordance with AASB 108 'Accounting Policies, Changes in
Accounting Estimates and Errors'.
Details of the business combinations during the year are as follows:
Net working capital
Plant and equipment
Deferred tax asset
Employee benefits
Net assets acquired
Goodwill
Lovell
Surgical
Fair value
Total
Communi-
cations
Total
Fair value
Fair value
$'000
$'000
$'000
8
367
50
(168)
257
743
1,397
369
70
(235)
1,405
736
120
(403)
1,601
28,538
1,858
29,281
Acquisition-date fair value of the total consideration transferred
1,000
30,139
31,139
Representing:
Cash paid or payable to vendor
Vendor earnout
Cash used to acquire business, net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Less: payments to be made in future periods
Net cash used
1,000
-
27,323
2,817
28,323
2,817
1,000
30,140
31,140
1,000
-
30,140
(2,817)
31,140
(2,817)
1,000
27,323
28,323
60
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 38. Business combinations (continued)
2018
REM Systems
On 8 June 2018 the Company acquired 100% of the shares in REM Systems Limited a medical distribution company
based in New Zealand. It is the leading supplier of medical and surgical products/consumables to hospitals and specialists
in Australasia. Paragon now has a platform for a direct to market strategy for the New Zealand health and aged care
sectors. Paragon has inherited a highly skilled and experienced management team.
As the acquisition of REM Systems Limited occurred on 8 June 2018 the revenue and profit of the Group for the year
ended 30 June 2018 reflects trading for 8 June to 30 June 2018 of the acquired business.
The vendors are entitled to a payment of 4.5 times the EBITDA growth from 2017 in 2019 and 2020. The payments are
calculated on the 12 months trading to 31 March 2020 and 2021. Any payment made in respect of FY20 is deducted from
any amount payable in FY21. The payment is uncapped. The contingent consideration was estimated by calculating the
present value of the future expected cashflows. The likely range is anticipated to be between $3,800,000 and $5,800,000.
Immuno Pty Ltd
On 24 May 2018 the Company acquired 100% of the shares in Immuno Pty Ltd a Supplier of advanced Pathology
equipment, reagents and software for customers who include major hospitals, Government and private pathology labs,
medical research centres and larger medical practices in Australia and New Zealand. Paragon has inherited a highly skilled
and experienced management team.
As the acquisition of Immuno Pty Ltd occurred on 24 May 2018 the revenue and profit of the Group for the year ended 30
June 2018 reflects trading for 24 May to 30 June 2018 of the acquired business.
Immulab Pty Ltd
On 9 April 2018 the Company acquired 100% of CSL Immunohaematology business (renamed Immulab Pty Ltd) a
Supplier of vital reagent red blood cell products used in pathology laboratories across Australia and New Zealand. It is the
leading supplier of vital reagent red blood cell products to laboratories, hospitals and specialists in Australia and New
Zealand. Paragon has inherited a highly skilled and experienced management team.
As the acquisition of 100% of CSL Immunohaematology business occurred on 9 April 2018 the revenue and profit of the
Group for the year ended 30 June 2018 reflects trading for 9 April to 30 June 2018 of the acquired business.
Labgear Pty Ltd
On 15 May 2018 the Company acquired 100% of the shares in Labgear Pty Ltd a medical distribution company based in
Queensland. It is the leading supplier of scientific products including equipment, consumables and technical service with a
national presence. Paragon now has a platform for a direct to market strategy for the Queensland. Paragon Care has
inherited a highly skilled and experienced management team.
As the acquisition of 100% of shares in Labgear Pty Ltd occurred on 15 May 2018 the revenue and profit of the Group for
the year ended 30 June 2018 reflects trading for 15 May to 30 June 2018 of the acquired business.
An amount of $1,163,000 recognised as an earn-out payment has been written back during the year as the earn-out
hurdles were not achieved.
Surgical Specialties Pty Ltd
On 28 February 2018 the Company acquired 100% of the shares in Surgical Specialties Group a distributor of surgical
medical devices to the Australian and New Zealand market, based in Sydney. It is the leading distributors in Orthopaedic,
Pain Management and Infection Prevention sectors. Paragon now has a strong platform foundation in the Orthopaedic,
Pain Management and Infection Prevention sectors of the rapidly growing medical device market in both Australia and New
Zealand. Paragon Care has inherited a highly skilled and experienced management team.
As the acquisition of 100% of shares in Surgical Specialties Group occurred on 28 February 2018 the revenue and profit of
the Group for the year ended 30 June 2018 reflects trading for 28 February to 30 June 2018 of the acquired business.
61
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 38. Business combinations (continued)
The vendors are entitled to a payment of 4.5 times the EBITDA growth between CY18 and CY19. The payments are
calculated on the 12 months trading to 31 Dec 2019 and 2020. Any payment made in respect of 2019 is deducted from any
amount payable in 2020. The total payment is uncapped. The contingent consideration was estimated by calculating the
present value of the future expected cashflows. The likely range is anticipated to be between $1,100,000 and $3,100,000.
Medtech Solutions Pty Ltd
On 15 January 2018 the Company acquired 100% of the shares in Medtech Solutions as a “Third Party” Medical
Engineering company servicing multi-vendor, multi-modality equipment of varying technical complexity, based in NSW.
This business is highly complementary to Paragon’s existing service offerings under the branding of Paragon Service &
Technology.
As the acquisition of 100% of shares in Medtech Solution on 15 January 2018 the revenue and profit of the Group for the
year ended 30 June 2018 reflects trading for 15 January to 30 June 2018 of the acquired business.
Anaequip Medical Pty Ltd
On 26 January 2018 the Company acquired 100% of the shares in Anaequip Medical, a multi-agency distributor of medical
products based in South Australia. Anaequip has strong long-standing relationships with Australian medical suppliers and
distributes to a wide range of South Australian healthcare facilities in the acute, aged care, allied health and laboratory
sectors. Paragon now has increasing its geographic reach through complimentary acquisitions and organic growth.
Paragon Care has inherited a highly skilled and experienced management team.
As the acquisition of 100% of shares in Anaequip Medical on 26 January 2018 the revenue and profit of the Group for the
year ended 30 June 2018 reflects trading for 26 January to 30 June 2018 of the acquired business.
Insight Surgical Pty Ltd
On 22 December 2017 the Company acquired 100% of the shares in Insight Surgical Pty Ltd, a leading supplier of
ophthalmic products servicing customers Australia-wide. Insight Surgical offers a highly complementary portfolio to
Paragon’s existing business, Designs for Vision. Paragon Care has inherited a highly skilled and experienced management
team.
As the acquisition of 100% of shares in Insight Surgical Pty Ltd on 22 December 2017 the revenue and profit of the Group
for the year ended 30 June 2018 reflects trading for 22 December to 30 June 2018 of the acquired business.
Medtek Pty Ltd
On 14 August 2017 the Company acquired 100% of the Medtek Pty Ltd, Medtek focuses on the Far North Queensland
region and specialises in providing high-quality biomedical engineering services and preventative maintenance to the
Medical, Scientific, Aged Care and Allied Health clientele in the region. Paragon now has increased penetration into the
region with direct representation, has expanded its service and maintenance offering and established a sales gateway for
the balance of its product portfolio. Paragon Care has inherited a highly skilled and experienced management team.
As the acquisition of 100% of Medtek Pty Ltd, on 14 August 2017 the revenue and profit of the Group for the year ended 30
June 2018 reflects trading for 14 August to 30 June 2018 of the acquired business.
Impact of acquisition on the results of the Group
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 Group for the current reporting period as though the
acquisition date for all business combinations had been as of 1 July 2017. Management has determined that this is
impracticable after consideration of all relevant factors in accordance with AASB 108 'Accounting Policies, Changes in
Accounting Estimates and Errors'.
62
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 38. Business combinations (continued)
Summary of business combinations during the year are as follows:
REM
Systems
Fair value
Immulab
Fair value
Immuno
Fair value
Labgear
Fair value
Surgical
Specialities
Fair value
Sub-total
c/fwd
Fair value
Net working capital
Plant and equipment
Contract
Deferred tax asset
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the
total consideration transferred
Representing:
Cash paid or payable to vendor
Paragon Care Limited shares
issued to vendor
Vendor earnout
Cash used to acquire business,
net of cash acquired:
Acquisition-date fair value of the
total consideration transferred
Less: payments to be made in
future periods
Less: vendor earnout not
achieved
Less: shares issued by
Company as part of
consideration
$'000
$'000
$'000
$'000
$'000
$'000
19,514
3,698
2,493
177
(415)
25,467
42,110
2,978
-
-
259
(863)
2,374
4,107
523
64
-
77
(257)
407
1,499
445
74
-
28
(94)
1,340
3,277
-
112
(261)
453
6,463
4,468
28,943
24,800
7,113
2,493
653
(1,890)
33,169
83,122
67,577
6,481
1,906
6,916
33,411
116,291
53,060
6,481
1,906
5,753
24,888
92,088
9,712
4,805
-
-
-
-
-
1,163
6,397
2,126
16,109
8,094
67,577
6,481
1,906
6,916
33,411
116,291
67,577
6,481
1,906
6,916
33,411
116,291
(4,805)
-
(9,712)
-
-
-
-
-
-
-
(2,126)
(6,931)
(1,163)
-
(1,163)
-
(6,397)
(16,109)
Net cash used
53,060
6,481
1,906
5,753
24,888
92,088
63
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 38. Business combinations (continued)
Sub-total
b/fwd
Fair value
Medtech
Solutions
Fair value
Anaequip
Medical
Fair value
Insight
Surgical
Fair value
Medtek
Fair value
Total
Fair value
$'000
$'000
$'000
$'000
$'000
$'000
Net working capital
Plant and equipment
Contract
Deferred tax asset
Employee benefits
Net assets/(liabilities) acquired
Goodwill
Acquisition-date fair value of the
total consideration transferred
Representing:
Cash paid or payable to vendor
Paragon Care Limited shares
issued to vendor
Vendor earnout
Cash used to acquire business,
net of cash acquired:
Acquisition-date fair value of the
total consideration transferred
Less: payments to be made in
future periods
Less: vendor earnout not
achieved
Less: shares issued by
Company as part of
consideration
24,800
7,113
2,493
653
(1,890)
33,169
83,122
(85)
-
-
-
-
(85)
2,640
334
176
-
36
(120)
426
1,854
1,044
94
-
14
(45)
1,107
4,702
208
143
-
19
(63)
307
393
26,301
7,526
2,493
722
(2,118)
34,924
92,711
116,291
2,555
2,280
5,809
700
127,635
92,088
2,555
1,820
5,303
650
102,416
16,109
8,094
-
-
460
-
-
506
50
-
16,619
8,600
116,291
2,555
2,280
5,809
700
127,635
116,291
2,555
2,280
5,809
700
127,635
(6,931)
(1,163)
(16,109)
-
-
-
-
-
(460)
(506)
-
-
-
-
(7,437)
(1,163)
(50)
(16,619)
Net cash used
92,088
2,555
1,820
5,303
650
102,416
Summary of vendor earnout is as follows:
Vendor payables
Vendor payable from acquisitions during the year
Vendor payable from prior period acquisitions
Total vendor payables
Represented by:
Current - Vendor payables
Non-current - Vendor payables
64
Consolidated
2019
$'000
2018
$'000
3,317
6,336
8,599
695
9,653
9,294
-
9,653
1,201
8,093
9,653
9,294
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 39. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 2:
Name
Paragon Care Group New Zealand Management
Services Ltd
Paragon Care Group New Zealand Ltd
Paragon Care Group Management Services Pty Ltd
Paragon Care Group Australia Pty Ltd
Paragon Care Group Holding Company Pty Ltd
Medtek Pty Ltd*
Paragon Medical Ltd*
Designed for Vision Ltd*
REM Systems Ltd*
REM Systems Pty Ltd*
Meditron Pty Ltd*
Western Biomedical Pty Ltd*
Designs For Vision Holdings Pty Ltd*
Designs For Vision (Aust) Pty Ltd*
Designs For Vision Pty Ltd*
Electro Medical Group Pty Ltd*
MIDAS Software Solutions Pty Ltd*
Immulab Pty Ltd*
Insight Surgical Pty Ltd*
MedTech Solution Pty Ltd*
Surgical Specialities Holdings Pty Ltd*
Surgical Specialities Group Pty Ltd*
Surgical Specialities Pty Ltd*
Therapy Specialities Pty Ltd*
Surgical Specialities (NZ) Ltd*
Therapy Specialities Ltd*
Pergamon Technologies Pty Ltd*
Immuno Pty Ltd*
Immuno Ltd*
Labgear Australia Pty Ltd*
Paragon Medical Pty Ltd*
Scanmedics Pty Ltd*
Lovell Surgical Supplies International Pty Ltd*
Lovell Surgical Supplies Pty Ltd*
Lovell Surgical Solutions Pty Ltd*
Total Communications Pty Ltd*
AXIS Health Pty Ltd**
Rapini Pty Ltd**
Paragon Healthcare Pty Ltd**
GM Medical Pty Ltd**
Iona Medical Products Pty Ltd**
Volker Australia Pty Ltd**
L.R. Instruments Pty Ltd**
Richards Medical Pty Ltd**
Unikits Pty Ltd**
Walkit Pty Ltd**
Principal place of business /
Country of incorporation
Ownership interest
2018
2019
%
%
New Zealand
New Zealand
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
*
**
Subsidiary of Paragon Care Group Holding Company Pty Ltd
Subsidiary of AXIS Health Pty Ltd
65
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 40. Deed of cross guarantee
The Company and its controlled entities, as listed in note 20 'Interests in subsidiaries', 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 Corporations Instrument 2016/785 issued by the Australian Securities and
Investments Commission.
The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, 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 statement of profit or loss and other comprehensive income and statement of financial position are substantially the
same as the Group and therefore have not been separately disclosed.
Note 41. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax (expense)/benefit for the year
(14,386)
10,951
Consolidated
2019
$'000
2018
$'000
Adjustments for:
Depreciation and amortisation
Impairment of non-current assets
Loss on disposal of business
Write-back of provision for vendor earn-out
Initial recognition of right of use assets on adoption of AASB 16
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Increase in inventories
Increase in income tax refund due
Increase in deferred tax assets
Decrease in derivative assets
Increase/(decrease) in trade and other payables
Decrease in provision for income tax
Increase in employee benefits
10,008
17,799
5,938
(1,163)
(2,455)
4,750
(7,443)
(5,736)
(2,696)
1,024
(4,284)
(767)
569
2,365
-
-
(4,073)
-
(4,655)
(2,579)
-
-
-
6,448
(1,165)
267
Net cash from operating activities
1,158
7,559
Non-cash investing and financing activities
Shares issued in relation to business combinations
3,093
15,465
Consolidated
2019
$'000
2018
$'000
66
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 41. Cash flow information (continued)
Changes in liabilities arising from financing activities
Consolidated
Balance at 1 July 2017
Net cash from/(used in) financing activities
Balance at 30 June 2018
Net cash used in financing activities
Bank
loans
$'000
Trade finance
facility
$'000
Lease
liability
$'000
30,000
66,322
96,322
(4,000)
6,264
(405)
5,859
(488)
804
1,832
2,636
(950)
Total
$'000
37,068
67,749
104,817
(5,438)
Balance at 30 June 2019
92,322
5,371
1,686
99,379
Note 42. Earnings per share
Continuing operations
Earnings per share for profit from continuing operations
Profit after income tax attributable to the owners of Paragon Care Limited
Consolidated
2019
$'000
2018
$'000
8,774
13,886
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
320,062,582 203,113,038
Performance rights
238,340
-
Weighted average number of ordinary shares used in calculating diluted earnings per share 320,300,922 203,113,038
Basic earnings per share
Diluted earnings per share
Discontinued operations
Earnings per share for loss from discontinued operations
Loss after income tax attributable to the owners of Paragon Care Limited
Cents
Cents
2.74
2.74
6.84
6.84
Consolidated
2019
$'000
2018
$'000
(23,160)
(2,935)
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
320,062,582 203,113,038
Weighted average number of ordinary shares used in calculating diluted earnings per share 320,062,582 203,113,038
Basic earnings per share
Diluted earnings per share
Cents
Cents
(7.24)
(7.24)
(1.45)
(1.45)
67
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 42. Earnings per share (continued)
Performance rights issued in the year have not been included in the calculation of diluted earnings per share as their
inclusion would be anti-dilutive due to the losses incurred in the year.
For profit/(loss)
Earnings per share for profit/(loss)
Profit/(loss) after income tax attributable to the owners of Paragon Care Limited
Consolidated
2019
$'000
2018
$'000
(14,386)
10,951
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
320,062,582 203,113,038
Weighted average number of ordinary shares used in calculating diluted earnings per share 320,062,582 203,113,038
Basic earnings per share
Diluted earnings per share
Cents
Cents
(4.49)
(4.49)
5.39
5.39
Performance rights issued in the year have not been included in the calculation of diluted earnings per share as their
inclusion would be anti-dilutive due to the losses incurred in the year.
Note 43. Share-based payments
Employee Incentive Plan ('EIP')
During the year, shareholders approved the Paragon Care Employee Incentive Plan ('EIP') at the 2018 Annual General
Meeting ('AGM').
The EIP is an employee equity plan developed to meet contemporary equity design standards and to provide the greatest
possible flexibility in the design and offer choices available in respect of various new equity schemes.
The EIP enables the Company to offer employees a range of different employee share scheme ('ESS') interests. These
ESS interests of 'awards' include options, performance rights, service rights, deferred shares, exempt shares, cash rights
and stock appreciation rights.
The type of ESS interest that may be offered to employees will be determined by a number of factors, including:
●
●
●
●
the remuneration or incentive purpose of the award;
the tax jurisdiction that the participating employee lives and/or works in;
the laws governing equity incentives where the participating employee lives and/or works; and
the logistics and compliance costs associated with offering quality incentives where the participating employee lives
and/or works.
Performance rights
Vesting conditions and important dates
The vesting conditions for performance rights granted on 14 December 2018 will depend on meeting the following:
●
●
Service up to 31 August 2021; and
If Paragon Care Limited achieves a compound annual growth rate ('CAGR') in earnings per share ('EPS') of between
10% (50% vests) and 15% (100% vests) per annum above the base year (financial year ended 30 June 2018), EPS of
5.4 cents per share over the period 1 July 2018 to 30 June 2021. Straight line interpolation will apply between 10%
and 15%.
68
Paragon Care Limited
Notes to the financial statements
30 June 2019
Note 43. Share-based payments (continued)
The vesting conditions for performance rights granted on 26 April 2019 will depend on meeting the following:
●
●
Service up to 31 August 2022; and
If Paragon Care Limited achieves a compound annual growth rate ('CAGR') in earnings per share ('EPS') of between
10% (50% vests) and 15% (100% vests) per annum above the base year (financial year ended 30 June 2019), EPS of
5.4 cents per share over the period 1 July 2019 to 30 June 2022. Straight line interpolation will apply between 10%
and 15%.
The first vesting date of performance rights issued on 14 December 2018 is 31 August 2021 and all these performance
rights will lapse on 30 September 2021 if not vested and exercised. The first vesting date of performance rights issued on
26 April 2019 is 31 August 2022 and all these performance rights will lapse on 30 September 2022 if not vested and
exercised.
Other conditions
Unvested performance rights may, in certain circumstances, vest early in accordance with the terms of the EIP rules, and
any leaver's policy that may apply from time to time, as approved by the Board.
Any dealing in shares is subject to the constraints of Australian insider trading laws and the Company's share trading
policy. Participants are specifically prohibited from hedging their Company share price exposure in respect of their
performance rights during the vesting period.
If, in the Board's opinion, an employee acts fraudulently or dishonestly or is in breach of their material obligations to the
Company, the Board may determine that any or all of their performance rights which have not yet vested, lapse.
Summary of performance rights granted
Set out below are summaries of performance rights granted under the plan:
2019
Grant date
Expiry date
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
14/12/2018
26/04/2019
30/09/2021
30/09/2022
$0.0000
$0.0000
-
-
-
228,119
633,886
862,005
-
-
-
-
-
-
228,119
633,886
862,005
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3
years.
For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair
value at the grant date, are as follows:
Grant date
14/12/2018
26/04/2019
Expiry date
30/09/2021
30/09/2022
Note 44. Events after the reporting period
Share price Fair value
at grant date at grant date
$0.8055
$0.4450
$0.8055
$0.4450
No matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly affect the
Group's operations, the results of those operations, or the Group's state of affairs in future financial years.
69
Paragon Care Limited
Directors' declaration
30 June 2019
In the directors' opinion:
●
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to the financial statements;
the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June
2019 and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed
Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed
of cross guarantee described in note 40 to the financial statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Shane Tanner
Chairman
23 September 2019
Melbourne
70
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF PARAGON CARE LIMITED
Opinion
We have audited the financial report of Paragon Care Limited (“the Company”) and its subsidiaries (together referred to as
“the Group”) which comprises the consolidated statement of financial position as at 30 June 2019, the consolidated statement
of profit or loss and other 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.
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 Group’s financial position as at 30 June 2019 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.
71
Key Audit Matters (Continued.)
Key Audit Matter
How our audit addressed this matter
Accounting for Business Combinations
Refer to Note 38 in the financial statements
During the year, the Group completed two acquisitions and has
finalised the acquisition accounting for nine acquisitions effected
in the financial year 2018 as described in Note 38 of the
consolidated financial statements. The Group has determined
these acquisitions to be business combinations for which the
purchase price includes contingent consideration.
For the acquisitions effected in the current year, the purchase
price is allocated between acquired assets and liabilities
(including identified intangible assets), at their respective fair
values and goodwill of $29.3 million.
This was considered a key audit matter as the accounting for
the transactions is complex and involves significant judgements
in applying the relevant 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 and liabilities assumed.
Impairment of Goodwill on acquisition
Refer to Note 19 in the financial statements
The Group has goodwill of $196.2 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 2019, management has performed
an impairment assessment over the goodwill balance by:
•
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 were then discounted to net present value using the
Company’s weighted average cost of capital (WACC); and
72
Our procedures to assess the accounting treatment of the
acquisitions included:
• Obtaining the securities and business purchase agreements
and other associated documents and ensuring that the
transactions had been accounted for in accordance with
AASB 3 Business Combinations.
•
Testing the initial consideration to the signed purchase
agreements and to bank statements;
• Assessing the appropriateness of the fair values of the net
assets acquired in the current year 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;
• Evaluating the contingent consideration included in the
purchase price including assessing the forecasts used for
determining contingent consideration
for current year
acquisitions;
• Evaluating the contingent consideration included in the
purchase price for prior year acquisitions to determine a final
adjustment within the measurement period; and
• Assessing the disclosures in Note 38 to the financial
statements in order to assess compliance with the disclosure
requirements of AASB 3.
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;
• 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; and
Key Audit Matters (Continued.)
Key Audit Matter
Impairment of Goodwill on acquisition
Refer to Note 19 in the financial statements
•
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.
Discontinued Operations
Refer to Note 9 in the financial statements
The Company has completed the divestment of the Capital and
Consumable Operations on 30 June 2019, as part of the Group-
wide transformation program.
AASB 5 Non-current Assets Held for Sale and Discontinued
Operations requires specific recognition, measurement and
disclosure requirements relating to assets, liabilities, revenues
and expenses of discontinued operations.
This was identified as a Key Audit Matter as this transaction
in
involves management estimates and
identification of account balances, revenue and expenses
relating to the discontinued operations and related Note
disclosures in the financial statements.
judgements
Inventory Valuation (including provision for obsolescence)
Refer to Note 12 in the financial statements
The Group’s inventory balance, as disclosed in Note 12,
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.
How our audit addressed this matter
• Assessing the disclosures in Note 19 to the financial
statements in order to assess compliance with the disclosure
requirements of AASB136 and AASB138.
Our audit procedures in relation to accounting and disclosure of
Discontinued Operations included:
• Obtaining and reviewing the sale agreements to understand
the key terms and conditions;
• Assessing the calculations and accounting for the sale of
businesses to ensure assets, liabilities, revenues and
expenses relating
the discontinued operations are
accurately identified and reported;
to
• Assessing management’s determination of the impairment of
goodwill relating to the discontinued operations; and
• Assessing accounting policy, account balance classifications
and Note disclosures to ensure that they are in accordance
with the requirements of AASB 5.
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
inventory ageing and historical sales levels by inventory
product from the date the product was purchased in
conjunction with assessing the quantity of products held;
• 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.
73
Key Audit Matters (Continued.)
Key Audit Matter
How our audit addressed this matter
Recognition of Revenue
Refer to Note 5 in the financial statements
The Group’s revenue from continuing operations for the year
ended 30 June 2019 was $236.1 Million.
Whilst Revenue recognition does not
involve significant
management estimates or judgements, it is considered a Key
Audit Matter because of its significance to the Group’s reported
financial performance.
The risk is heightened due to having distinct product lines within
the medical equipment business (diagnostics, capital and
technology) across
consumables, devices, services and
different accounting systems.
Revenue recognition can be impacted by a failure to correctly
measure revenue in accordance with applicable accounting
standards and/or by applying an incorrect approach to period
end cut-off.
Other Information
Our audit procedures in relation to revenue recognition included:
• Assessing whether the Group’s revenue recognition policies
were in compliance with the requirements of AASB 15
Revenues from Contracts with Customers;
• Evaluating and
testing
the operating effectiveness of
management’s controls related to revenue recognition;
• Reviewing any large or unusual transactions close to the end
of the financial year;
• Conducting a combination of tests of controls, substantive
analytical procedures and tests of details in respect of
revenue related transactions; and
• Reviewing disclosures in relation to impact on adoption of
AASB 15 and the disaggregation of revenues in the financial
statements.
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 2019, 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.
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.
74
Auditor's Responsibilities for the Audit of the Financial Report (Continued.)
A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance
Standards Board website at: https://www.auasb.gov.au/auditors_responsibilities/ar1.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 2019.
In our opinion, the Remuneration Report of Paragon Care Limited, for the year ended 30 June 2019, 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
Dated: 24 September 2019
Melbourne, Victoria
75
Paragon Care Limited
Shareholder information
30 June 2019
The shareholder information set out below was applicable as at 11 September 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Number
of holders
of ordinary
shares
1,035
2,325
2,453
255
1,176
7,244
1,345
J P Morgan Nominees Australia Pty Limited
Perpetual Corporate Trust Ltd (PPAPL A/C)
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
ARGO Investments Limited
National Nominees Limited
JMT Investment Group VIC Pty Ltd (John Turner Super Fund A/C)
JMT Investment Group VIC Pty Ltd
Negroni Holdings Pty Ltd (The DFN A/C)
Mr Paul Andrew Schollum & Mr John Keith Radley (Estate of Leon Schollum)
Grills Investments Pty Ltd (Grills Discretionary Trust)
Shemozel Pty Ltd (Shemozel A/C)
Est Shirley May Schollum
Lora Falls Pty Ltd (The Fehrmann Family Trust)
Brent Michael Stewart & Michelle Jane Stewart (Brent Stewart Superannuation Fund)
CA Fourth Nominees Pty Limited (HSBC Cust Nom AU Ltd 11 A/C)
John Keith Radley & Paul Andrew Schollum (Paul Schollum Family)
ECapital Nominees Pty Limited (Accumulation A/C)
Brispot Nominees Pty Ltd (House Head Nominee A/C)
Mr Brian Duncan Wilsher
Unquoted equity securities
Performance rights
76
Ordinary shares
Number held
% of total
shares
issued
55,842,802
50,418,386
9,748,745
9,526,355
6,644,661
6,178,147
5,337,489
5,221,517
4,727,531
4,717,320
3,773,585
3,622,351
3,106,538
3,000,000
2,823,466
2,768,908
2,595,540
2,540,291
2,319,700
2,301,147
187,214,479
16.53
14.92
2.89
2.82
1.97
1.83
1.58
1.55
1.40
1.40
1.12
1.07
0.92
0.89
0.84
0.82
0.77
0.75
0.69
0.68
55.44
Number
on issue
Number
of holders
862,005
8
Paragon Care Limited
Shareholder information
30 June 2019
Substantial holders
Substantial holders in the Company are set out below:
J P Morgan Nominees Australia Pty Limited
Perpetual Corporate Trust Ltd (PPAPL A/C)
Voting rights
The voting rights attached to ordinary shares are set out below:
Ordinary shares
Number held
% of total
shares
issued
55,842,802
50,418,386
16.53
14.92
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.
There are no other classes of equity securities.
77