ParagonCare
Annual Report
2020
1
Health. Covered.
Paragon Care has become recognised as a
leading provider of equipment, devices and
consumables to the healthcare market. We
also offer equipment repair, maintenance
and total equipment management through
Paragon Care Service & Technology.
Our agility and experience enables you to
provide the right solution to achieve the
optimal outcome, today.
PARAGON CARE — FINANCIAL REPORT 2020 2
P A R A G O N C A R E — F I N A N C I A L R E P O R T 2 0 2 0
About Us
Striving to deliver world-class technology and support
across all healthcare sectors, Paragon Care’s vision is to
provide advanced solutions to improve patient experience
and user workflows. By leveraging our expertise, agility and
customer partnerships we are committed to finding the right
solutions to achieve better outcomes every day.
Covering healthcare across four strategic pillars
Specialty Diagnostics
Specialty Devices
Paragon Care Diagnostics provide high
quality, clinically advanced solutions to
Immunohaematology, Diagnostic and Scientific
Laboratories. Our solutions combine innovation,
reliability and insight into your needs to enable you
to deliver a best in class diagnostic or research
service, with the highest level of diagnostic
confidence, in the shortest time.
Paragon Care Specialty Devices includes businesses
focused in both Eye Care and Orthopaedics. Our
experienced team in eye care deliver comprehensive,
best in class solutions, with devices and equipment
for Optometry and Ophthalmic surgery, while our
Orthopaedic focus is on innovative hip and knee
prosthetic solutions, along with industry leading Pain
Management and advanced surgical spine solutions.
Capital Consumables
Service and Technology
Paragon Care’s Capital and Consumables business
sources clinically innovative products and solutions
to make your most difficult procedures easier. Our
solutions for Urology, Point of care, Anaesthetics
and ICU comprise best of class technology with
proven clinical benefits.
With a network of engineers across Australia and New
Zealand, Paragon Care has a team to support the
uptime and performance of your important equipment
and systems. Our experienced team and service
methodology enables your team to have full confidence
in their equipment and focus on their patients.
P A R A G O N C A R E — F I N A N C I A L R E P O R T 2 0 2 0
3
Contents
4Corporate directory5Chairman’s report6Directors’ report21Auditor’s independence declaration23Consolidated statement of profit or loss and other comprehensive income25Consolidated statement of financial position26Consolidated statement of changes in equity27Consolidated statement of cash flows28Notes to the financial statements69Directors’ declaration70Independent auditor’s report to the members of Paragon Care Limited77Shareholder information 4
Corporate Directory
Directors
Shane Tanner - Chairman
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Company secretary
Melanie Leydin
Registered office
Share register
Auditor
Solicitors
Level 4
96-100 Albert Road
South Melbourne VIC 3205 Telephone: 1300 369 559
Telephone: (03) 8833 7800
Facsimile: (03) 8833 7890
Link Market Services Limited
Level 13, Tower 4, 727 Collins Street
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 2020 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/
PARAGON CARE — FINANCIAL REPORT 2020 Company secretary
Melanie Leydin
Registered office
South Melbourne VIC 3205 Telephone: 1300 369 559
Directors
Share register
Auditor
Solicitors
Bankers
Website
Shane Tanner - Chairman
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Level 4
96-100 Albert Road
Telephone: (03) 8833 7800
Facsimile: (03) 8833 7890
Link Market Services Limited
Level 13, Tower 4, 727 Collins Street
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
National Australia Bank
www.paragoncare.com.au
Chairman’s
Report
On behalf of the Board of Paragon Care Limited, I am pleased to present to you our 2020 Annual Report.
The financial year ended 30th June 2020 was again challenging– both for external and internal reasons.
Externally, during the last quarter of the financial year, the impact of COVID-19 led to the deferment
of elective surgery – a key part of Paragon’s product offering. However, the Company adapted well in
replacing a considerable amount of this ‘lost’ revenue – albeit at lower gross margins.
5
The Company also experienced considerable internal challenges during the first six months of the
financial year with a poor implementation of its new ERP system as well as unacceptable delays in
implementing the restructure of our (then) 14 individual businesses into 4 pillars. These delays naturally
impacted the implementation of the Company’s operating cost out program.
Following major changes to the Senior Leadership Team in December 2019, our new CEO, CFO and
Senior Team members have made impressive strides in addressing all the Company’s outstanding
‘internal’ issues. In particular:
• The 4 pillars of Devices, Diagnostics, Capital & Consumables and Service & Technology are now
successfully in operation, each with very talented management teams.
• Considerable warehouse rationalisation has occurred in Victoria and New South Wales
• Significant operating cost reduction has taken place and this program will run through until
December 2020.
• Debtors that peaked at $60m following the roll out of the new ERP system, have now returned to
normality – around $30m or 45 days sales outstanding.
Our new CEO, Phil Nicholl (who was previously head of our Device division) and his senior team have
been thoroughly diligent in not only ‘right sizing’ the company’s cost base, but also developing a ‘can do’
and positive culture within our near 400 strong workforce.
On behalf of the Board, I would like to thank our customers, our medical equipment partners, our staff
and shareholders for their continued support. Shareholders should look forward to the 2021 Financial
Year with confidence. The Company continues to be focused on organic growth through new product
offerings, maximising our warehouse and operating cost base and ensuring dividends become part of
our shareholder offering as soon as possible.
Stock exchange listing
Paragon Care Limited shares are listed on the Australian Securities Exchange (ASX code: PGC)
Yours faithfully,
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 2020 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/
Shane Tanner
Chairman
PARAGON CARE — FINANCIAL REPORT 2020 6
Directors’ Report
For the year ended 30 June 2020
Directors’ Report
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 2020.
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:
Non-Executive Chairman
Shane Tanner
Non-Executive Director
Geoffrey Sam OAM
Brent Stewart
Non-Executive Director
Mark Simari (appointed 27 November 2019) Non-Executive Director
Bruce Bian (resigned 20 August 2020)
Michael Newton (resigned 30 June 2020)
Andrew Just (resigned 27 November 2019) Former Managing Director and Chief Executive Officer
Former Non-Executive Director
Former 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 of 2.0 cents per ordinary share
Interim dividend for the year ended 30 June 2019 of 1.1 cents per ordinary share
Consolidated
2020
Consolidated
2019
$’000
-
-
-
$’000
6,044
3,708
9,752
Review of operations
The loss for the Group after providing for income tax amounted to $77,269,000 (30 June 2019: $14,386,000).
Revenue from continuing operations
Revenue
Cost of sales
Gross profit
Gross profit margin %
Other income
Operating expenses
Normalised earnings before interest, tax,
depreciation and amortisation (‘Adjusted EBITDA’)
Abnormal expenses
Earnings before interest, tax, depreciation and
amortisation (‘EBITDA’)
Depreciation and amortisation
Interest expense
Profit/(loss) before tax
Tax (expense)/benefit
Profit/(loss) after tax from continuing operations
Loss after tax from discontinued operations
Loss after tax for the year attributable to owners
2020
$’000
231,689
(144,874)
86,815
37.5%
320
(64,232)
22,903
(84,989)
(62,086)
(8,053)
(7,064)
(77,203)
5,603
(71,600)
(5,669)
(77,269)
2019
$’000
Change from
FY 19
%
236,009
(140,981)
95,028
40.3%
1,737
(68,492)
28,273
-
28,273
(10,009)
(5,949)
12,315
(3,453)
8,862
(23,248)
(14,386)
(1.8%)
2.8%
(8.6%)
-
-
-
(19.0%)
-
-
-
-
-
-
-
-
PARAGON CARE — FINANCIAL REPORT 2020
Directors’ Report Continued
For the year ended 30 June 2020
Revenue from continuing operations rebounds from initial COVID-19
Revenue for the year reached $231.7 million (2019: $236.0 million) which, given the impact of COVID-19 and
suspension of elective surgery during much of the last quarter, was well ahead of the Group’s internal forecasts
when COVID-19 first impacted.
7
Gross margin lower due to COVID-19 and foreign currency movements
Whilst management was able to replace much of the elective surgery lost revenue with new income streams (e.g.
PPE sales), the gross margins on the new revenue were at a lower level than the lost revenue during the final
quarter of the FY20 year. Despite this, the Group’s gross margin for FY20 was still a respectable 37.5%.
Normalised EBITDA
Following changes to the Senior Leadership Team in January 2020, the Group finally experienced significant
restructure of its operations and cost base. Paragon’s 14 individual businesses were restructured into 4 Pillars
– Devices, Diagnostics, Capital & Consumables and Service & Technology. This restructure is now driving real
efficiency gains in both the Group’s cost base and its improved offering of products to the market. These cost
and efficiency improvements and savings will continue well into the FY21 year. Similarly to revenue, the final
normalised EBITDA result of $22.9 million (2019: $28 million) was significantly ahead of where the Group’s
internal forecasts were when COVID-19 impacted in March 2020.
Reductions in continuing operations overhead expenses
Management has continued to deliver significant long-term savings through the cost out program initiated
last year. The savings programs being implemented now target a much greater scope of savings than originally
envisaged, and as a consequence, they have incurred significant implementation costs and lead to the write-off
of significant assets discussed in detail in the following paragraphs.
COVID-19 impact and cost management
The Group initiated several cost management strategies in the early stages of the COVID-19 pandemic. This
includes salary and fees reductions between 20% for staff and 30% for board and leadership team across
the last quarter of FY20 as well as rent reductions negotiated with landlords and travel bans put in place
before border closures were initiated by governments. The Group also qualified and received $2.98 million in
government assistance to ensure eligible staff received JobKeeper support.
Abnormal Expenses
During the year the Group’s new leadership team reviewed many parts of the corporate strategy, and this when
combined with the impact of COVID-19 has seen the Group simplify its strategy by closing down many non-
strategic projects initiated over the last 18 months. The Group is modifying its intended restructure to focus on
its core products, operations, and markets. This refocus and the impact of COVID-19 has resulted in a write down
or write-off of significant amounts of assets this financial year.
• The simplification of corporate strategy has necessitated the closure of a number of non-strategic
projects started in the last 18 months to focus resources and management efforts at our core products
and customer segments to rebuild the business. These strategic decisions, which the Group believes will
drive business growth in financial year 2021 and beyond, have seen asset write-offs of $8.5 million of
historical costs capitalised or investments in relation to business or project now being closed.
• The significant restructure underway in the business saw $3 million of restructuring and redundancy costs
incurred in the first half of this financial year. It has seen further write-offs and provisions for restructure
and redundancies relating to the cost reduction process of $6 million booked in the second half as the
program picked up pace with significant warehouse closures in Victoria and New South Wales. Lastly the
refocusing onto core products and customer segments combined with the reduction of warehouse space
has seen write-offs of inventory, assets, and customer balances of $7.9 million.
• COVID-19 has also impacted the business. The Group has kept the market updated during the course of
this pandemic so shareholders will already be aware that the closure of medical facilities to non-essential
staff and cancellation of elective surgery hit the Group’s sales hard initially. Shareholders will also be
aware that the leadership team undertook expense management steps to manage through that crisis
and that the return of elective surgery in most states has lifted sales in the final months of this financial
year. As the pandemic now looks likely to continue in some way through FY21, the leadership team
has refocused sales efforts and modified operations to ensure the Group continues to grow in market
segments not impacted and deliver positive earnings returns overall.
• JobKeeper has not only allowed the Group to maintain staff salaries at 80% levels during the initial
months of the pandemic (70% for the Board and leadership team) but also to maintain breakeven cash
flows across the worst of the initial COVID-19 impacts on the business. Like many companies, we have and
continue to renegotiate with our bank to increase our funding limits and reduce covenant testing during
the COVID-19 pandemic. However, we have also been adversely impacted from the continued low interest
period with an interest rate swap entered into in FY19 becoming significantly above current and expected
market interest rates. This has required a derivative liability to be recognised in the balance sheet of
$4.6 million. This $4.6 million along with $0.8 million fees and charges capitalized from prior banking
arrangements have been recognised in the profit and loss this year.
PARAGON CARE — FINANCIAL REPORT 2020
8
Directors’ Report Continued
For the year ended 30 June 2020
Goodwill Impairment
The Group’s goodwill on acquisitions impairment testing has been impacted by both the slower cash
generation expected as the economy slowly recovers from the pandemic and the increased discount rates
which need to be applied to future cash flows because of the uncertainty around the length and depth of the
impacts of the pandemic. This has seen a once- off abnormal impairment charge this year of $54 million in
the profit and loss. One of the causes of the overall goodwill impairment was the reduction in future expected
cash flows due to the loss of business in Western Biomedical which is the subject of ongoing litigation by
Paragon Care against the Western Biomedical vendor.
Discontinued Operations
In reviewing the operations of the MIDAS software business during the year, the board concluded that with
fewer than 10 customers and requiring significantly more development than initially planned at acquisition,
the MIDAS software is unlikely to result in sufficient returns to justify continued investment. The closure of
MIDAS business has been progressively undertaken since late in the financial year. The total cost of closure
will be $6.5 million and has been provided for in this financial year, this and the FY20 operating loss of $0.3
million less an income tax benefit of $1.1 million has been classified as a loss after tax from discontinued
operations this year of $5.7 million.
The Group is now totally focused on building capabilities in the product verticals of Devices, Diagnostics,
Capital & Consumable, Services and Technology and on focusing these capabilities into profitable market
segments. The rationalisation of product lines, focus on customer service and empowerment of our highly
dedicated and skilled staff will result in stronger growth and profitability as the Group and economy in
general recovers from the impacts of the COVID-19 pandemic.
The COVID-19 pandemic has impacted our community in devastating ways; it has been no less devastating
financially or economically, as our significant asset write-downs attest to. However, its has also highlighted
the need for a strong, well- funded national healthcare system.
Paragon Care is playing its small part in the COVID-19 pandemic response. Our customers continue to rely
on our ability to source and deliver products, including at this critical time Personal Protective Equipment.
Our Lovell surgical manufacturing facilities are involved in the creation of sterile COVID-19 testing swab
packages. Our Immulab manufacturing facilities continue to supply reagent red blood cells, monoclonal blood
grouping reagents and ancillary products. Our Total Communications technology solutions are continuing to
assist aged care facilities with the digital recording and monitoring of their service delivery to that vulnerable
segment of our population.
Whilst some of our products and services have been impacted by COVID-19 and whilst we are currently
experiencing that impact in the midst of our restructuring, the market segment in which we operate has never
been more recognised and important.
The Board is confident that in this nationally critical market, with the renewed strategic focus on core
products, customer service and with its highly skilled and dedicated staff, the Group will see a solid
performance notwithstanding COVID-19 in FY21 and a return to dividend payments in the near term.
Significant changes in the state of affairs
During the year, the Company made a change to its leadership team which resulted in a review of corporate
strategy. The strategic review combined with the impacts of COVID-19 has seen the Company simplified
its strategy, closing down many projects initiated over the last 18 months. The Company is modifying its
intended restructure to focus on its core products, operations, and markets. This refocus and the impact of
COVID-19 have resulted in the discontinuance and write-off of the MIDAS software business and impairment
or write-off totalling $91.8 million of net assets. For further details please see the Review of operations
section of this Directors’ report.
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
PARAGON CARE — FINANCIAL REPORT 2020
Directors’ Report Continued
For the year ended 30 June 2020
9
Matters subsequent to the end of the financial year
The impact of the COVID-19 pandemic is ongoing, and it is not practicable to estimate the potential impact
after the reporting date. The situation is rapidly developing and is dependent on measures imposed by
the Australian Government and other countries, such as maintaining social distancing requirements,
quarantine, travel restrictions and any economic stimulus that may be provided.
The land and buildings situated at 19-21 Peninsula Boulevard, Seaford VIC was sold on the 3 August 2020.
As at the reporting date the property was actively for sale and the property was classified as held-for-sale.
On 26 August 2020, the Group received approval from its bankers for an amendment to its banking facilities.
This has resulted in a relaxation of the Group’s obligation to comply with the existing facility covenants
through to September 2021. The amendment also resulted in the deferment of the Group’s quarterly facility
repayments until December 2021, totalling $6 million.
No other matter or circumstance has arisen since 30 June 2020 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.
PARAGON CARE — FINANCIAL REPORT 2020 10
Directors’ Report Continued
For the year ended 30 June 2020
Information on Directors
Name:
Title:
Shane Tanner
Non-Executive Chairman
Qualifications:
FCPA, ACIS, MAICD
Experience and expertise:
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 currently Chairman of Guardian Alphabet Holdco Pty Ltd (formerly a ASX listed company under the name of Zenitas
Healthcare Limited). Previously, Shane was CEO of Symbion Health, one of Australia’s largest diagnostic businesses and
Chairman of Vision Eye Institute.
Other current directorships:
Victory Offices Limited (ASX: VOL) and Cronos Australia Limited (CAU)
Former directorships (last 3 years):
Vision Eye Institute, Funtastic Limited, Rhythm Biosciences Limited
Special responsibilities:
Member of Nomination and Remuneration Committee and Member of Investment Review Committee
Interests in shares:
Interests in rights:
850,000 Fully Paid Ordinary Shares at 30 June 2020
None
Name:
Title:
Geoffrey Sam OAM
Non-Executive Chairman
Qualifications:
BCom, M.Hospital Administration, M.Economics and Social Studies, FAICD
Experience and expertise:
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.
Other current directorships:
CML Group Limited (ASX: CGR)
Former directorships (last 3 years):
None
Special responsibilities:
Chairman of Investment Review Committee and Member of Audit and Risk Committee
Interests in shares:
Interests in rights:
1,736,417 Fully Paid Ordinary Shares at 30 June 2020
None
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.
Other current directorships:
Former directorships (last 3 years):
None
None
Special responsibilities:
Chairman of Nomination and Remuneration Committee and Member of the Audit and Risk Committee
Interests in shares:
Interests in rights:
2,983,466 Fully Paid Ordinary Shares at 30 June 2020
None
PARAGON CARE — FINANCIAL REPORT 2020 11
Directors’ Report Continued
For the year ended 30 June 2020
Name:
Title:
Mark Simari
Non-Executive Director (appointed 27 November 2019)
Qualifications:
Bachelor of Business (Accounting)
Experience and expertise:
Mark Simari is an experienced and accomplished professional in the health industry and has over 12 years’ Board experience
in a diverse range of organisations, including not-for profits. Mark was the former Chief Executive Officer and Managing
Director and Co-Founder of Paragon Care during his tenure (between 2008 and 2018). He was instrumental in Paragon Care
becoming one of the largest independent healthcare suppliers in Australian and New Zealand Market, creating a healthcare
platform spanning across capital equipment, consumables, devices and service and maintenance. Mark has also held various
directorship positions in other companies such as Tali Digital Limited, Social Investment Australia Limited, Sage Capital Group
Pty Ltd, InterPrac Financial Planning Pty Ltd and DKN Financial Group. Mark is presently the Chairman of Unisono Limited and
Akita Consulting. He also holds advisory roles with Fruitlink Pty Ltd.
Other current directorships:
None
Former directorships (last 3 years):
Novita Healthcare Limited (now Tali Digital Ltd)
Special responsibilities:
Interests in shares:
Interests in rights:
Chair - Audit & Risk Committee
Member – Nomination & Remuneration Committee
Member – Investment Committee
391,561 Fully Paid Ordinary Shares at 30 June 2020
None
'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.
Name:
Title:
Ms Melanie Leydin
Company Secretary
Qualifications:
BBus (Acc. Corp Law) CA FGIA
Experience and expertise:
Melanie Leydin holds a Bachelor of Business majoring in Accounting and Corporate Law. She is a member of the Institute of
Chartered Accountants, Fellow of the Governance Institute of Australia 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
across a host of industries including but not limited to the Resources, technology, bioscience, biotechnology and health sectors.
Melanie has over 25 years’ experience in the accounting profession and over 15 years as a Company Secretary. She has
extensive experience in relation to public company responsibilities, including ASX and ASIC compliance, control and
implementation of corporate governance, statutory financial reporting, reorganisation of Companies 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 2020, and
the number of meetings attended by each director were:
Full Board
Nomination and
Remuneration Committee
Audit and Risk
Management Committee
Investment Review
Committee
Attended
Held
Attended
Held
Attended
Held
Attended
Held
12
12
12
12
6
12
5
12
12
12
12
7
12
5
4
-
4
-
-
4
-
4
-
4
-
-
4
-
-
2
2
-
-
2
-
-
2
2
-
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Mark Simari
Michael Newton
Andrew Just
Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee.
PARAGON CARE — FINANCIAL REPORT 2020 12
Directors’ Report Continued
For the year ended 30 June 2020
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
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 2018. Shareholders approved a maximum annual
aggregate remuneration of $450,000.
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
• performance linkage / alignment of executive compensation
leave
• 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
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 9.5 cents and a high of 52.0 cents.
As at 30 June 2020 the Company’s share price (ASX: PGC) was 19.0
cents per share.
Additionally, the reward framework should seek to enhance executives’
interests by:
Refer to the section ‘Additional information’ below for details of the
earnings and total shareholders return for the last five years.
• rewarding capability and experience
• reflecting competitive reward for contribution to growth in
shareholder wealth
• providing a clear structure for earning rewards
Employee Incentive Plan
During the year, shareholders approved the Paragon Care Employee
Incentive Plan (‘EIP’) at the 2018 Annual General Meeting (‘AGM’).
PARAGON CARE — FINANCIAL REPORT 2020 13
Directors’ Report Continued
For the year ended 30 June 2020
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.
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.
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.
Use of remuneration consultants
During the financial year, the Group did not engage remuneration
consultants.
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 include meeting the following:
Voting and comments made at the Company’s 26 November 2019
Annual General Meeting (‘AGM’)
At the 26 November 2019 AGM, 97.66% of the votes received supported
the adoption of the remuneration report for the year ended 30 June
2020. The Company did not receive any specific feedback at the AGM
regarding its remuneration practices.
Details of remuneration
Amounts of remuneration
Details of the remuneration of key management personnel of the Group
are set out in the following tables.
The key management personnel of the Group consisted of the following
directors of Paragon Care Limited:
• Shane Tanner - Non-Executive Chairman
• Geoffrey Sam OAM - Non-Executive Director
• Brent Stewart - Non-Executive Director
• Service up to 31 August 2021; and
• Bruce Bian - Non-Executive Director (resigned 20 August 2020)
• 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%.
• Mark Simari - Non-Executive Director
(appointed 27 November 2019)
• Michael Newton - Former Non-Executive Director
(resigned 30 June 2020)
• Andrew Just - Former Managing Director and Chief Executive
Officer (resigned 27 November 2019)
The vesting conditions for performance rights granted on 26 April 2019
will depend on meeting the following:
And the following persons:
• 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%.
• Phil Nicholl - Chief Executive Officer
(appointed 27 November 2019)
• Stephen Munday - Chief Financial Officer
(appointed 13 December 2019)
• Paul Smith - Former Chief Financial Officer
(resigned 13 December 2019)
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.
PARAGON CARE — FINANCIAL REPORT 2020
14
Directors’ Report Continued
For the year ended 30 June 2020
2020
Name
Non-Executive Directors
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Mark Simari*
Michael Newton**
Executive Directors
Andrew Just**
Other Key Management Personnel
Phil Nicholl*
Stephen Munday*
Paul Smith**
Total
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Short-Term Employee Benefits
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Non-Monetary Termination
Super-
annuation
Long Service
Leave
Performance
Rights
Cash Salary
and Fees
$
111,000
76,016
55,500
51,002
30,500
62,623
207,693
255,875
120,021
126,114
$
-
-
-
-
-
20,006
-
-
-
-
1,096,344
20,006
$
-
-
-
-
-
-
$
-
7,222
-
4,845
-
5,921
444,244
10,501
-
-
84,194
528,438
10,501
11,279
10,501
60,770
$
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
*
**
Remuneration is from date of appointment as key management personnel to 30 June 2020.
Remuneration is from 1 July 2019 to date of resignation as key management personnel.
2019
Name
Non-Executive Directors
Shane Tanner
Michael Newton
Geoffrey Sam
Brent Stewart
Bruce Bian*
Executive Directors
Andrew Just
Other Key Management Personnel
Paul Smith*
Leonard Kocovic**
Total
Short-Term Employee Benefits
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Cash Salary
and Fees
Cash Bonus
Non-Monetary
Benefits
Super-
annuation
Long Service
Leave
Performance
Rights
$
120,000
23,466
43,473
60,000
16,438
500,000
200,071
134,462
$
-
-
-
-
-
-
-
55,275
1,097,910
55,275
$
-
20,006
-
-
-
-
-
21,192
41,198
$
-
4,130
4,130
-
1,562
25,000
16,955
16,954
68,731
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
*
**
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.
Geoff Sam OAM and Michael Newton were underpaid in FY19 resulting in a catch-up payment in FY20.
Total
$
111,000
83,238
55,500
55,847
30,500
88,550
662,438
266,376
131,300
220,809
1,705,558
Total
$
120,000
47,602
47,603
60,000
18,000
525,000
217,026
227,883
1,263,114
PARAGON CARE — FINANCIAL REPORT 2020 15
Directors’ Report Continued
For the year ended 30 June 2020
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Non-Executive Directors
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Mark Simari*
Michael Newton**
Executive Directors
Andrew Just
Other Key Management Personnel
Phil Nicholl
Stephen Munday
Paul Smith
Leonard Kocovic
Other Key Management Personnel:
Leonard Kocovic
Fixed remuneration
At risk - STI
At risk - LTI
2020
2019
2020
2019
2020
2019
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
-
-
-
100%
76%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Cash bonus paid/payable
Cash bonus forfeited
2020
2019
2020
2019
-
100%
-
-
PARAGON CARE — FINANCIAL REPORT 2020 16
Directors’ Report Continued
For the year ended 30 June 2020
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:
Shane Tanner
Non-Executive Chairman
Term of agreement:
No fixed term, no notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $120,000. No termination benefit.
Geoffrey Sam OAM
Non-Executive Director
Term of agreement:
No fixed term, no notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $60,000. No termination benefit.
Brent Stewart
Non-Executive Director
Term of agreement:
No fixed term, no notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $60,000. No termination benefit.
Bruce Bian
Non-Executive Director
Term of agreement:
No fixed term, no notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $60,000. No termination benefit.
Mark Simari
Non-Executive Director
Term of agreement:
No fixed term, no notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $60,000. No termination benefit.
Phil Nicholl
Chief Executive Officer
Term of agreement:
No fixed term, 3 month notice period required for termination
Details:
Name:
Title:
Base salary including superannuation $525,000. No termination benefit.
Stephen Munday
Chief Financial Officer
Term of agreement:
No fixed term, no notice period required for termination
Details:
Base salary including superannuation $336,000. No termination benefit.
Key management personnel have no entitlement to termination payments in the event of removal for
misconduct.
PARAGON CARE — FINANCIAL REPORT 2020 17
Directors’ Report Continued
For the year ended 30 June 2020
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 2020.
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
Fair value per right at
grant date
$0.8055
$0.4450
Number of
rights granted
Grant date
Vesting date and
exercisable date
Expiry date
Fair value per
right at grant date
228,119
137,316
14 Dec 2018
31 Aug 2021
30 Sep 2021
26 Apr 2019
31 Aug 2022
30 Sep 2022
$0.8055
$0.4450
Performance rights granted carry no dividend or voting rights.
The number of performance rights over ordinary shares granted to and vested by directors and other key management personnel as part of
compensation during the year ended 30 June 2020 are set out below:
Name
Andrew Just
Paul Smith
Number of rights during
the year 2020
Number of rights granted
during the year 2019
Number of rights during
the year 2020
Number of rights during
the year 2019
-
-
228,119
137,316
-
-
-
-
Details of performance rights over ordinary shares granted, vested and lapsed for directors and other key management personnel as part of
compensation during the year ended 30 June 2020 are set out below:
Name
Grant date
Vesting date
Number of
rights granted
Value of
rights granted
($)
Value of
rights vested
($)
Number of
rights lapsed
Value of
rights lapsed
($)
Andrew Just
Paul Smith
14 Dec 2018
31 Aug 2021
26 Apr 2019
31 Aug 2022
-
-
-
-
-
-
228,119
137,316
183,750
65,911
PARAGON CARE — FINANCIAL REPORT 2020 18
Directors’ Report Continued
For the year ended 30 June 2020
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)
2020
19.00
-
(22.87)
2019
41.50
1.10
(4.49)
2018
82.50
4.20
5.40
2017
2016
77.00
4.10
6.20
70.00
3.00
5.60
Additional disclosures relating to key management personnel
Shareholding
The number of shares in the Company held during the financial year by
including their personally related parties, is set out below:
each director and other members of key management personnel of the Group,
Ordinary shares
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Mark Simari*
Michael Newton
Andrew Just
Phil Nicholl
Stephen Munday
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
1,466,417
2,983,466
-
-
403,134
-
-
-
-
5,703,017
-
-
-
-
-
-
-
-
-
-
-
-
270,000
-
-
-
-
-
-
-
-
-
-
-
-
391,561
(403,134)
-
850,000
1,736,417
2,983,466
-
391,561
-
-
1,764,664
1,764,664
-
-
-
-
270,000
1,753,091
7,726,108
*
**
Disposals/other represent existing holding of shares when appointed to the Board
Disposals/other represent no longer a key management personnel not necessarily a disposal of holding.
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 rdinary shares
Balance at the
start of the year
Granted
Vested
Expired/
forfeited/other
Balance at the
end of the year
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Bruce Bian
Mark Simari*
Michael Newton
Andrew Just
Phil Nicholl
Stephen Munday
Paul Smith
-
-
-
-
-
-
228,119
-
-
137,316
365,435
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(228,119)
-
-
(137,316)
(365,435)
-
-
-
-
-
-
-
-
-
-
-
This concludes the remuneration report, which has been audited.
PARAGON CARE — FINANCIAL REPORT 2020 19
Directors’ Report Continued
For the year ended 30 June 2020
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
26 April 2019
Expiry date
30 September 2022
Exercise price
$0.4450
Number under rights
318,574
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.
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 2020 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 37
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 37 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.
PARAGON CARE — FINANCIAL REPORT 2020 20
Directors’ Report Continued
For the year ended 30 June 2020
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.
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
Chiarman
31 August 2020
Melbourne
PARAGON CARE — FINANCIAL REPORT 2020
Auditor’s Independence Declaration
21
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 2020, 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
M PARAMESWARAN
Partner
Dated: 31 August 2020
Melbourne, Victoria
PARAGON CARE — FINANCIAL REPORT 2020
22
Financial
Statements
PARAGON CARE — FINANCIAL REPORT 2020 Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2020
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
Allowance for expected credit losses
Impairment of goodwill
Impairment of other assets
Provision for obsolescence of inventory - change in accounting estimates
Fair value loss on derivative liabilities
Finance costs
Profit/(loss) before income tax (expense)/benefit from continuing operations
Income tax (expense)/benefit
Profit/(loss) after income tax (expense)/benefit 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
Cash flow hedges transferred to profit or loss, net of tax
Foreign currency translation
Other comprehensive income for the year, net of tax
23
Note
2020
$’000
2019
$’000
5
6
7
7
12
21
8
13
25
7
9
10
231,689
236,009
(144,874)
(140,981)
86,815
95,028
131
189
1,162
575
(3,500)
(1,710)
(2,010)
(70,584)
(940)
(54,235)
(14,016)
(5,702)
(4,577)
(7,064)
(4,459)
(2,665)
(1,336)
(67,669)
(37)
-
(2,335)
-
-
(5,949)
(77,203)
12,315
5,603
(3,453)
(71,600)
(5,669)
8,862
(23,248)
(77,269)
(14,386)
(998)
(1,768)
(2,766)
(436)
1,632
1,196
Total comprehensive income for the year attributable to the owners of Paragon Care Limited
(80,035)
(13,190)
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
(73,221)
(6,814)
(80,835)
9,970
(23,160)
(13,190)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2020
24
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2020
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
Earnings per share for profit/(loss) attributable to the owners of Paragon Care Limited
Basic earnings per share
Diluted earnings per share
Note
45
45
45
45
45
45
2020
cents
(21.19)
(21.19)
(1.68)
(1.68)
(22.87)
(22.87)
2019
cents
2.77
2.77
(7.26)
(7.26)
(4.49)
(4.49)
The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2020 Consolidated Statement of Financial Position
As at 30 June 2020
25
Note
2020
$’000
2019
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Investments
Derivative financial instruments
Income tax refund due
Other
Non-current assets classified as held for sale
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
Derivative financial instruments
Employee benefits
Vendor conditional payables
Other
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Employee benefits
Vendor conditional payables
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings (Accumulated losses)
Total Equity
11
12
13
14
15
9
16
17
18
19
20
21
9
22
23
24
25
26
27
28
29
30
31
32
24,505
31,574
46,662
-
-
70
1,694
104,505
1,800
106,305
-
7,184
14,265
149,660
14,757
185,866
34,224
44,133
51,407
22
291
5,736
2,117
137,930
-
137,930
574
13,056
20,923
204,321
7,392
246,266
292,171
384,196
26,921
16,767
3,722
5,711
4,572
15,331
11,853
84,877
82,159
12,380
474
-
95,013
179,890
112,281
202,718
(1,671)
(88,766)
112,281
47,947
10,136
3,031
-
4,296
-
7,462
72,872
89,243
19,221
871
9,673
119,008
191,880
192,316
202,718
1,095
(11,497)
192,316
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2020 26
Consolidated statement of changes in equity
For the year ended 30 June 2020
Consolidated
Balance at 1 July 2018
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 31)
Dividends paid (note 33)
Balance at 30 June 2019
Foreign
currency
translation
reserve
Hedging
reserve - cash
flow hedges
Issued capital
Accumulated
losses
Total Equity
$’000
$’000
$’000
$’000
$’000
156,930
-
-
-
45,788
-
202,718
(741)
-
1,632
640
-
(436)
12,641
(14,386)
-
169,470
(14,386)
1,196
1,632
(436)
(14,386)
(13,190)
-
-
891
-
-
204
-
(9,752)
(11,497)
45,788
(9,752)
192,316
Foreign
currency
translation
reserve
Hedging
reserve - cash
flow hedges
Issued capital
Accumulated
losses
Total Equity
$’000
$’000
$’000
$’000
$’000
Consolidated
Balance at 1 July 2019
Loss after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
202,718
-
-
-
Balance at 30 June 2020
202,718
891
-
(1,768)
(1,768)
(877)
204
-
(998)
(998)
(794)
(11,497)
(77,269)
-
(77,269)
(88,766)
192,316
(77,269)
(2,766)
(80,835)
112,281
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2020 Consolidated Statement of Cash Flows
For the year ended 30 June 2020
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Government assistance received (JobKeeper subsidy)
Interest received
Interest and other finance costs paid
Income taxes refunded
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of businesses, net of cash acquired
Payments for investments
Payments for property, plant and equipment
Payments for intangibles
Payments for security deposits
Proceeds from disposal of business
Proceeds from disposal of investments
Proceeds from disposal of property, plant and equipment
Proceeds from release of security deposits
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)
Repayment of lease liabilities
Dividends paid
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
27
Note
2020
$’000
2019
$’000
265,178
(260,020)
261,874
(246,629)
998
189
(6,107)
5,049
-
5,287
-
381
(5,959)
-
(8,509)
1,158
(4,224)
(28,196)
-
(2,315)
(4,951)
(33)
-
22
-
98
(1)
(5,828)
(3,893)
-
1,352
-
1,012
80
(11,403)
(35,474)
-
-
6,076
(5,925)
(3,754)
-
(3,603)
(9,719)
34,224
24,505
45,196
(2,907)
-
(4,488)
(950)
(8,703)
28,148
(6,168)
40,392
34,224
44
41
31
33
11
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2020 28
Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2020
NOTE 1. General information
Historical cost convention
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:
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.
Level 4
96-100 Albert Road
South Melbourne VIC 3205
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 31 August 2020. 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 early adopted new Accounting Standard AASB 16 ‘Leases’,
which replaced AASB 117 ‘Leases’ in the previous financial year. In the
current financial year, the Group early adopted the following:
AASB 2020-4 Amendment to Australian Accounting Standards -
COVID-19-Related Rent Concessions
The Group has early adopted the amendment to AASB 16 from 1 July
2019. The amendment provides a practical expedient for lessees
to account for COVID-19-related rent concessions that: result in
lease payments that are substantially the same as, or less than, the
consideration for the lease immediately prior to the change; where any
reduction in the lease payments affects only payments originally due
on or before 30 June 2021; and where there is no substantive change
to other terms and conditions of the lease. The practical expedient
allows an entity not to assess rent concessions meeting the criteria as
a lease modification. As a result, to the extent that lease concessions
represent a forgiveness or waiver of lease payments, such concessions
are treated as variable lease payments recognised in profit or loss with
a corresponding adjustment to the lease liability. To the extent that the
lease concession in substance represents a delay in lease repayments
such that lease consideration is not changed, the lease liability is not
extinguished. Interest continues to accrue for that period.
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’).
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 40.
Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Paragon Care Limited as at 30 June 2020
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.
Operating segments
Operating segments are presented using the ‘management approach’,
where the information presented is on the same basis as the internal
reports provided to the Chief Operating Decision Makers (‘CODM’). The
CODM is responsible for the allocation of resources to operating segments
and assessing their performance.
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.
PARAGON CARE — FINANCIAL REPORT 2020
29
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
Income tax
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.
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
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.
Paragon Care Limited (the ‘head entity’) and its wholly-owned Australian
subsidiaries have formed an income tax consolidated group under the
tax consolidation regime. The head entity and each subsidiary in the tax
consolidated group continue to account for their own current and deferred
tax amounts. The tax consolidated group has applied the ‘separate
taxpayer within group’ approach in determining the appropriate amount of
taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity
also recognises the current tax liabilities (or assets) and the deferred tax
assets arising from unused tax losses and unused tax credits assumed
from each subsidiary in the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax
consolidated entities are recognised as amounts receivable from or
payable to other entities in the tax consolidated group. The tax funding
arrangement ensures that the intercompany charge equals the current
tax liability or benefit of each tax consolidated group member, resulting
in neither a contribution by the head entity to the subsidiaries nor a
distribution by the subsidiaries to the head entity.
Other revenue is recognised when it is received or when the right to receive
payment is established.
Discontinued operations
Government grants
Government grants relating to costs are deferred and recognised in profit
or loss over the period necessary to match them with the costs that they
are intended to compensate.
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.
PARAGON CARE — FINANCIAL REPORT 2020
30
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected to be
realised or intended to be sold or consumed in the Group’s normal
operating cycle; it is held primarily for the purpose of trading; it is
expected to be realised within 12 months after the reporting period;
or the asset is cash or cash equivalent unless restricted from being
exchanged or used to settle a liability for at least 12 months after the
reporting period. All other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled
in the Group’s normal operating cycle; it is held primarily for the purpose
of trading; it is due to be settled within 12 months after the reporting
period; or there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
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.
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.
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.
Interest rate swaps
Certain derivative instruments do not qualify for hedge accounting.
Changes in the fair value of any derivative instrument that does not
qualify for hedge accounting are recognised immediately in profit or
loss.
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.
Non-current assets or disposal groups classified as held for sale
Non-current assets and assets of disposal groups are classified as
held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continued use. They are
measured at the lower of their carrying amount and fair value less costs
of disposal. For non-current assets or assets of disposal groups to be
classified as held for sale, they must be available for immediate sale in
their present condition and their sale must be highly probable.
An impairment loss is recognised for any initial or subsequent write
down of the non-current assets and assets of disposal groups to fair
value less costs of disposal. A gain is recognised for any subsequent
increases in fair value less costs of disposal of a non-current assets
and assets of disposal groups, but not in excess of any cumulative
impairment loss previously recognised.
Non-current assets are not depreciated or amortised while they are
classified as held for sale. Interest and other expenses attributable to
the liabilities of assets held for sale continue to be recognised.
Non-current assets classified as held for sale and the assets of disposal
groups classified as held for sale are presented separately on the face
of the statement of financial position, in current assets. The liabilities of
disposal groups classified as held for sale are presented separately on
the face of the statement of financial position, in current liabilities.
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
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
substantially all the risks and rewards of ownership. When there is no
reasonable expectation of recovering part or all of a financial asset, its
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
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
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
31
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.
Research and development (‘R&D’) projects
Research costs are expensed in the period they are incurred.
Development expenditure is capitalised only when incurred and when it
is probable that the project will be a success considering its commercial
and technical feasibility; the Group is able to use or sell the asset; the
Group has sufficient resources and intent to complete the development;
and its costs can be measured reliably. 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.
PARAGON CARE — FINANCIAL REPORT 2020
32
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
rate specific to the liability. The increase in the provision resulting from
the passage of time is recognised as a finance cost.
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.
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.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits
are provided to employees.
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.
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.
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.
Provisions
Provisions are recognised when the Group has a present (legal or
constructive) obligation as a result of a past event, it is probable the
Group will be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation. The amount recognised as
a provision is the best estimate of the consideration required to settle
the present obligation at the reporting date, taking into account the
risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax
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.
PARAGON CARE — FINANCIAL REPORT 2020
33
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
Business combinations
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.
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.
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.
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.
PARAGON CARE — FINANCIAL REPORT 2020 34
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 2. Significant accounting policies (continued)
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.
d. narrow the definitions of a business and of outputs by focusing
on goods and services provided to customers and by removing the
reference to an ability to reduce costs; and
e. add an optional concentration test that permits a simplified
assessment of whether an acquired set of activities and assets is
not a business.
AASB 2018-7 Amendments to Australian Accounting Standards –
Definition of Material
The amendments are applicable to annual reporting periods beginning
on or after 1 January 2020 and early adoption is permitted. The
amendments refine the definition of material in AASB 101 to clarify the
definition of material and its application by improving the wording and
aligning the definition across AASB Standards and other publications.
The amendment also includes some supporting requirements in
AASB 101 in the definition to give it more prominence and clarifies the
explanation accompanying the definition of material. The adoption of
these amendments from 1 July 2020 will not have a material impact on
the Group.
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
2020. 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.
Conceptual Framework for Financial Reporting (Conceptual Framework)
The revised Conceptual Framework is applicable to annual reporting
periods beginning on or after 1 January 2020 and early adoption is
permitted. The Conceptual Framework contains new definition and
recognition criteria as well as new guidance on measurement that
affects several Accounting Standards. Where the Group has relied
on the existing framework in determining its accounting policies for
transactions, events or conditions that are not otherwise dealt with
under the Australian Accounting Standards, the Group may need to
review such policies under the revised framework. At this time, the
application of the Conceptual Framework is not expected to have a
material impact on the Group’s financial statements.
AASB 2018-6 Amendments to Australian Accounting Standards –
Definition of a business
The amendments are applicable to annual reporting periods beginning
on or after 1 January 2020 and early adoption is permitted.
The amendments:
a. clarify that to be considered a business, an acquired set of
activities and assets must include, at a minimum, an input and a
substantive process that together significantly contribute to the
ability to create outputs;
b. remove the assessment of whether market participants are
capable of replacing any missing inputs or processes and
continuing to produce outputs;
c. add guidance and illustrative examples to help entities assess
whether a substantive process has been acquired;
AASB 2020-1 Amendments to Australian Accounting Standards –
Classifications of Liabilities as Current or Non-Current
The amendments are applicable to annual reporting periods beginning
on or after 1 January 2022 and early adoption is permitted. This
Standard amends AASB 101 to clarify requirements for the presentation
of liabilities in the statement of financial position as current or non-
current.
For example, the amendments clarify that a liability is classified as
non-current if an entity has the right at the end of the reporting period to
defer settlement of the liability for at least 12 months after the reporting
period. The meaning of settlement of a liability is also clarified. At this
time, the application of the amendments is not expected to have a
material impact on the Group.
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.
Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts that the
COVID-19 pandemic has had, or may have, on the Group based on
known information. This consideration extends to the nature of the
products and services offered, customers, supply chain, staffing
and geographic regions in which the Group operates. Other than as
addressed in specific notes, there does not currently appear to be either
any significant impact upon the financial statements or any significant
uncertainties with respect to events or conditions which may impact the
Group unfavourably as at the reporting date or subsequently as a result
of the COVID-19 pandemic.
Allowance for expected credit losses
The allowance for expected credit losses assessment requires a degree
of estimation and judgement. It is based on the lifetime expected
credit loss, grouped based on days overdue, and makes assumptions
to allocate an overall expected credit loss rate for each group. These
assumptions include recent sales experience and historical collection
rates.
PARAGON CARE — FINANCIAL REPORT 2020
35
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.
Lease term
The lease term is a significant component in the measurement of both
the right-of-use asset and lease liability. Judgement is exercised in
determining whether there is reasonable certainty that an option to
extend the lease or purchase the underlying asset will be exercised, or
an option to terminate the lease will not be exercised, when ascertaining
the periods to be included in the lease term. In determining the lease
term, all facts and circumstances that create an economical incentive
to exercise an extension option, or not to exercise a termination option,
are considered at the lease commencement date. Factors considered
may include the importance of the asset to the Group’s operations;
comparison of terms and conditions to prevailing market rates;
incurrence of significant penalties; existence of significant leasehold
improvements; and the costs and disruption to replace the asset.
The Group reassesses whether it is reasonably certain to exercise
an extension option, or not exercise a termination option, if there is a
significant event or significant change in circumstances.
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.
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 3. Critical accounting judgements, estimates and assumptions
(continued)
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.
PARAGON CARE — FINANCIAL REPORT 2020 36
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
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
NOTE 6. Other Income
Write back of earn-out
Rent concessions arising from COVID-19
Other income
Write back of earn-out
2020
$’000
23,228
105,755
74,962
27,744
231,689
190,024
41,527
138
231,689
203,945
27,744
231,689
2020
$’000
-
131
131
2019
$’000
23,425
119,363
76,498
16,723
236,009
191,129
43,481
1,399
236,009
219,286
16,723
236,009
2019
$’000
1,162
-
1,162
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.
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 7. Expenses
Profit before income tax from continuing operations includes the following specific expenses:
Administration costs
Depreciation (included in Administration expenses)
Buildings
Leasehold improvements
Plant and equipment
Motor vehicles
Land and buildings right-of-use assets
Total depreciation
Amortisation (included in Administration expenses)
Website
Contracts
Software development costs
R&D Projects (under construction)
Total amortisation
37
2020
$’000
2019
$’000
34
224
3,029
87
3,998
7,372
73
393
199
16
681
-
103
3,452
78
3,784
7,417
54
751
1,661
125
2,591
Total depreciation and amortisation
8,053
10,008
Employee benefits expense (included in administration costs) Finance costs
Payroll costs
Defined contributions superannuation expense
Provision for restructure - redundancies
JobKeeper subsidy (refer below)
Total employee benefits expense
Net foreign exchange loss
Other administration costs
Management consulting fees
Telephone and internet costs
Travel costs
Corporate costs
Other
Total other administration costs
Administration costs expensed
Occupancy costs
Leasehold property outgoing costs
Provision for restructure costs relation to property rationalisation (refer below)
Total occupancy costs
Finance costs
Interest and finance charges paid/payable on borrowings
Loan facility fees and ancillary costs expensed
Interest and finance charges paid/payable on lease liabilities
Total finance costs
JobKeeper subsidy
50,277
3,082
646
(2,981)
51,024
46,209
3,052
-
-
49,261
285
-
2,396
1,015
2,248
1,128
4,435
11,222
70,584
962
1,048
2,010
4,783
826
1,455
7,064
428
1,110
2,525
912
3,425
8,400
67,669
1,336
-
1,336
4,772
-
1,177
5,949
During the COVID-19 pandemic, the Group has received JobKeeper support payments from the Australian Government which are passed on to
eligible employees. These have been recognised as a reduction in administration expense in the financial statements. The JobKeeper payment
scheme in its current form runs for the fortnights from 30 March until 27 September 2020. The Group is eligible for JobKeeper support from the
government on the condition that employee benefits continue to be paid.
Provision for restructure costs relation to property rationalisation
During the year, as part of the Group’s restructure, the Group embarked on warehouse closures to reduce the number of warehouses and move into
other warehouse space to fit the Group’s strategy going forward (refer note 8). A provision has been made for known costs of closures underway but
not yet complete, these costs include make good, relocation, property closure and other associated costs.
PARAGON CARE — FINANCIAL REPORT 2020 38
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 8. Impairment of other assets
Sundry debtors
Buildings
Leasehold improvements
Plant and equipment
Land and buildings - right-of-use
Contracts
Software development costs
R&D projects (under construction)
Note
19
19
19
20
21
21
21
2020
$’000
1,230
311
1,174
1,528
1,300
1,469
6,129
875
14,016
2019
$’000
-
-
-
-
-
-
2,335
-
2,335
During the year the Group has undertaken a restructure of its business operations. This has led to the rationalisation of sites across Australia
necessitating the impairment of building, leasehold, plant and equipment and right of use assets associated with those sites that have been
closed or are in the process of being closed. In addition the Group has undertaken a review of historical software development and research and
development and identified, closed and impaired the non-strategic projects undertaken during the past few years which it no longer believes will
produce economic benefits in the future. The Group has identified the costs associated with the ERP system implemented over the last two years
requires a write off and will require a complete re-implementation.
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 9. 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 benefit is attributable to:
Profit/(loss) 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/(loss) before income tax (expense)/benefit 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:
Impairment of goodwill
Earn-out write-back
Capital loss on divestment of business
Non-deductible costs
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
2019
$’000
1,788
(2,378)
(100)
(690)
3,453
(4,143)
(690)
2020
$’000
607
(7,922)
567
(6,748)
(5,603)
(1,145)
(6,748)
(7,922)
(2,378)
(77,203)
(6,814)
(84,017)
12,315
(27,391)
(15,076)
(25,205)
(4,523)
17,170
-
-
720
-
(7,315)
567
(6,748)
-
(349)
3,951
271
60
(590)
(100)
(690)
(10)
(1,364)
4,764
4,764
3,951
3,951
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.
PARAGON CARE — FINANCIAL REPORT 2020 40
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 9. Income Tax (continued)
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
Derivative liabilities/assets
Inventories
Prepayments
Foreign exchange gains/(losses)
Other assets
Amounts recognised in equity:
Transaction costs on share issue
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss
Credited to equity
Additions through business combinations (note 41)
Unders/overs
Closing balance
Income tax refund due
Income tax refund due
NOTE 10 Discontinued operations
2020
$’000
2019
$’000
5,148
112
1,697
628
513
1,714
3,466
-
(82)
295
2,108
(9)
1,713
254
250
-
528
(6)
313
226
13,491
5,377
1,266
14,757
7,392
7,922
10
-
(567)
14,757
2,015
7,392
3,703
2,378
1,364
131
(184)
7,392
70
5,736
2020
In reviewing the operations of the MIDAS software business during the year, the board concluded that with fewer than 10 customers and requiring
significantly more development than initially planned at acquisition, the MIDAS software is unlikely to result in sufficient returns to justify continued
investment. The closure of MIDAS business has been progressively undertaken since late in the financial year. The total cost of closure will be $6.5
million (being goodwill write-off of $3 million, software assets write-off of $3.2 million and costs to windup operations of $0.3 million) and has been
provided for in this financial year, this and the FY20 operating loss of $0.3 million less an income tax benefit of $1.1 million has been classified as a loss
after tax from discontinued operations this year of $5.7 million.
The Midas software business operating loss of $0.07 million in 2019 financial year has been reclassified into discontinued operations comparative
number for 2019 financial year.
2019
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.
This strategic review included an evaluation of the business. The Company renewed its vision and strategy with an increased focus on ‘high technology
and recurring revenues’. The 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.
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 10. Discontinued operations (continued)
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
41
2019
$’000
20,689
(13,057)
7,632
994
70
1,064
(995)
(48)
(288)
(13,004)
(76)
(274)
2020
$’000
84
(6)
78
-
-
-
-
-
(21)
(694)
(6,177)
-
(6,892)
(14,685)
(6,814)
1,145
(5,989)
4,143
(5,669)
(1,846)
-
-
-
(21,402)
-
(21,402)
Loss after income tax benefit from discontinued operations
(5,669)
(23,248)
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
2020
$’000
-
-
-
-
-
-
-
-
2019
$’000
99
7,595
1,545
1,000
10,239
576
576
9,663
PARAGON CARE — FINANCIAL REPORT 2020 42
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 10. 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 11. Current assets - cash and cash equivalents
Cash at bank and on hand
NOTE 12. Current assets - trade and other receivables
Trade receivables
Less: Allowance for expected credit losses
Other receivables
Goods and services tax receivable
2020
$’000
-
-
-
-
-
2019
$’000
3,725
(9,663)
(5,938)
(15,464)
(21,402)
2020
$’000
2019
$’000
24,505
34,224
2020
$’000
30,308
(940)
29,368
2,206
-
31,574
2019
$’000
39,447
-
39,447
3,921
765
44,133
Allowance for expected credit losses
The Group has recognised a loss of $940,000 (2019: $37,000) in profit or loss in respect of the expected credit losses for the year ended 30 June 2020.
The Group has increased its monitoring of debt recovery as there is an increased probability of customers delaying payment or being unable to pay,
pursuant to the COVID19 pandemic. As a result, the calculation of expected credit losses has been revised as at 30 June 2020.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
Expected credit loss rate
Expected credit loss rate
Allowance for expected
credit loss rate
2020
%
-
8%
29%
93%
2019
%
-
-
-
-
2020
25,122
4,071
690
425
2019
$
19,126
18,509
1,812
-
30,308
39,447
2020
%
-
345
198
397
940
2019
%
-
-
-
-
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 12. Current assets - trade and other receivables (continued)
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Closing balance
NOTE 13. Current assets - inventories
Raw materials - at a cost
Finished goods - at cost
Stock in transit - at cost
Less: Provision for impairment
Provision for impairment
The movement in provision for impairment, for the current and previous financial year, is as follows:
Balance at the start of the financial year
Increase in provision during the year
Increase in provision due to change in accounting estimates
Balance at the end of the financial year
43
2019
$’000
-
-
-
2019
$’000
976
55,180
-
(4,749)
51,407
2019
$’000
(465)
(4,284)
-
(4,749)
2020
$’000
-
940
940
2020
$’000
950
55,563
1,704
(11,555)
46,662
2020
$’000
(4,749)
(1,104)
(5,702)
(11,555)
During the 2020 financial year the Group made a change to accounting estimates in relation to inventory obsolescence policy to match a change to
inventory provisioning policy. The Company has increased the allowance for obsolescence for most inventory held in excess of 9 months sales to 100%
as well as writing off all inventory of product lines identified for rationalisation as a result of an inventory review undertaken as part of the Company’s
ongoing restructure and as a result of the impacts of COVID-19. The policy now matches the Company’s new strategy of lean and agile sales and
operations planning to reduce inventory holdings and warehouse space.
The Group previously provided for obsolescence in relation to inventory with no sales history ranging from 2 years up until 4 years at percentages
ranging from 20% to 40%.
PARAGON CARE — FINANCIAL REPORT 2020 44
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 14. 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
Disposals
Closing fair value
NOTE 15. Current assets -derivative financial instruments
Forward foreign exchange contracts - cash flow hedges
Refer to note 35 for further information on fair value measurement.
NOTE 16. Current assets -other
Prepayments
Security deposits
NOTE 17. Current assets - non-current assets classified as held for sale
Land and buildings
2020
$’000
-
22
-
(22)
-
2020
$’000
-
-
2020
$’000
1,694
-
1,694
2020
$’000
1,800
1,800
2019
$’000
22
21
1
-
22
2019
$’000
291
291
2019
$’000
2,150
(33)
2,117
2019
$’000
-
-
The land and buildings situated at 19-21 Peninsula Boulevard, Seaford VIC was sold on the 3 August 2020. As at the reporting date the property was
actively for sale, the property was classified as held-for-sale.
NOTE 18. Non-current assets - receivables
Other receivables
2020
$’000
-
-
2019
$’000
574
574
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 19. Non-current assets - property, plant and equipment
Land and buildings - at cost
Leasehold improvements - at cost
Less: Accumulated depreciation
Less: Impairment
Plant and equipment - at cost
Less: Accumulated depreciation
Less: Impairment
Motor vehicles - at cost
Less: Accumulated depreciation
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Land and
buildings
Leasehold
improvements
Plant and
equipment
Balance at 1 July 2018
Additions
Additions through business combinations (note 41)
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2019
Additions
Classified as held for sale (note 17)
Impairment of assets (note 8)
Depreciation expense
$’000
-
2,145
-
-
-
-
2,145
-
(1,800)
(311)
(34)
$’000
3,358
80
-
-
-
(103)
3,335
371
-
(1,174)
(224)
$’000
8,129
3,655
736
(1,583)
(43)
(3,681)
7,213
1,944
-
(1,528)
(3,029)
Balance at 30 June 2020
-
2,308
4,600
Motor
vehicles
$’000
685
-
-
(244)
-
(78)
363
-
-
-
(87)
276
45
2020
$’000
2019
$’000
-
2,145
4,365
(883)
(1,174)
2,308
27,683
(21,555)
(1,528)
4,600
1,241
(965)
276
7,184
3,994
(659)
-
3,335
25,739
(18,526)
-
7,213
1,241
(878)
363
13,056
Total
$’000
12,172
5,880
736
(1,827)
(43)
(3,862)
13,056
2,315
(1,800)
(3,013)
(3,374)
7,184
PARAGON CARE — FINANCIAL REPORT 2020 46
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 20. Non-current assets - right-of-use assets
Land and buildings - right-of-use
Less: Accumulated depreciation
2020
$’000
21,953
(7,688)
14,265
2019
$’000
24,707
(3,784)
20,923
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:
Land and buildings
right-of-use
Balance at 1 July 2018
Recognition on early adoption of AASB 16
Depreciation expense
Balance at 30 June 2019
Impairment of assets (note 8)
Additions during the year
Reductions due to lease modifications
Depreciation expense
Balance at 30 June 2020
NOTE 21. Non-current assets - intangibles
Goodwill - at cost
Less: Impairment
Website - at cost
Less: Accumulated amortisation
Contracts - at cost
Less: Accumulated amortisation
Less: Impairment
Software development costs - at cost
Less: Accumulated amortisation
Less: Impairment
R&D Projects (under construction) - at cost
Less: Accumulated amortisation
Less: Impairment
$’000
-
24,707
(3,784)
20,923
(1,300)
1,640
(3,000)
(3,998)
14,265
2019
$’000
211,648
(15,464)
196,184
584
(306)
278
2,493
(751)
-
1,742
10,970
(2,759)
(2,335)
5,876
411
(170)
-
241
2020
$’000
221,700
(72,699)
149,001
329
(124)
205
2,613
(1,144)
(1,469)
-
11,876
(2,958)
(8,464)
454
1,061
(186)
(875)
-
149,660
204,321
PARAGON CARE — FINANCIAL REPORT 2020 47
Total
$’000
190,131
3,893
29,281
4,501
(1,730)
(1,365)
(17,799)
(2,591)
204,321
4,950
9,433
(98)
619
(6,177)
(62,707)
(681)
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 21. Non-current assets - intangibles (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Balance at 30 June 2018
Additions
Additions through business
combinations (note 38)
Finalisation of acquisition accounting
Disposals
Exchange differences
Impairment of assets
Amortisation expense
Balance at 30 June 2019
Additions
Acquisition accounting
Disposals
Exchange differences
Impairment of assets -
discontinued operations (note 10)
Impairment of assets (note 8)
Amortisation expense
Balance at 30 June 2020
Impairment testing
Goodwill
$’000
179,231
-
29,281
4,501
-
(1,365)
(15,464)
-
196,184
-
9,433
-
619
(3,000)
(54,235)
-
149,001
Website
$’000
141
191
Contracts
$’000
2,493
-
Software
development
costs
R&D Projects
(under
construction)
$’000
6,345
3,527
-
-
-
-
(2,335)
(1,661)
5,876
4,180
-
(98)
-
(3,177)
(6,128)
(199)
$’000
1,921
175
-
-
(1,730)
-
-
(125)
241
650
-
-
-
-
(875)
(16)
-
-
-
-
-
(751)
1,742
120
-
-
-
-
(1,469)
(393)
-
-
-
-
-
(54)
278
-
-
-
-
-
-
(73)
205
-
454
-
149,660
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.
The recoverable amount of the consolidated entity’s goodwill has been determined by a value-in-use calculation using a discounted cash flow model,
based on a 2 year projection period approved by management and extrapolated for a further 3 years using a steady rate, together with a terminal value.
Based on the discounted cash projections, the Company has anticipated positive operating cash flows generating a net present value $54 million less
than the current book value as at 30 June 2020.
The Group’s goodwill on acquisitions has been impacted by both the slower cash generation expected as the economy slowly recovers from the
pandemic and the increased discount rates which need to be applied to future cash flows because of the uncertainty around the length and depth of
the impacts of the pandemic. One of the reasons for the impairment was the reduction in future expected cash flows due to the loss of business in
Western Biomedical which is the subject of ongoing litigation by Paragon Care against the Western Biomedical vendor.
Management believes the projected 4% revenue growth rate beyond the first 2 years is prudent and justified, based on the general slowing in the
market. The discount rate of 14.6% pre-tax reflects management’s estimate of the time value of money and the Group’s weighted average cost of
capital, the risk-free rate and the volatility of the share price relative to market movements.
Key assumptions used for the discounted cash flow projections:
Revenue growth rate beyond first 2 years
Pre-tax discount rate
Terminal growth rate
Rate
%
4.00%
14.60%
1.25%
PARAGON CARE — FINANCIAL REPORT 2020 48
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 21. Non-current assets - intangibles (continued)
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:
•
Year 2 projections assume that the Group will return to pre-COVID-19 budgeted revenue levels of $256 million. Should COVID-19 further
negatively impact on the Group’s operations resulting in the Group not returning to pre-COVID-19 revenue levels until year 3, there may be a
further increase in the impairment charge by $20 million.
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 (after allowing for the $54 million impairment booked this year) 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 22. Current liabilities - trade and other payables
Trade payables
Goods and services tax payable
Other payables
Refer to note 34 for further information on financial instruments.
NOTE 23. Current liabilities - borrowings
Bank loans
Trade finance facility
Lease liability
Refer to note 28 for further information on assets pledged as security and financing arrangements.
Refer to note 34 for further information on financial instruments.
NOTE 24. Current liabilities - lease liabilities
Lease liability
Refer to note 34 for further information on financial instruments.
2020
$’000
20,900
1,351
4,670
26,921
2020
$’000
4,500
11,447
820
16,767
2019
$’000
40,450
2,890
4,607
47,947
2019
$’000
4,000
5,371
765
10,136
2020
$’000
3,722
3,722
2019
$’000
3,031
3,031
PARAGON CARE — FINANCIAL REPORT 2020
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 25. Current liabilities - derivative financial instruments
Forward foreign exchange contracts - cash flow hedges
Interest rate swap contracts - derivative liability
Refer to note 34 for further information on financial instruments.
Refer to note 35 for further information on fair value measurement.
NOTE 26. Current liabilities - vendor conditional payables
Vendor conditional payables
Refer to note 41 for further information on vendor conditional payables.
NOTE 27. Current liabilities - other
Accrued expenses
Deferred revenue
NOTE 28. Non-current liabilities - borrowings – Financing Arrangements
Bank loans
Hire purchase
Refer to note 34 for further information on financial instruments.
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Trade finance facility
Hire purchase
49
2019
$’000
-
-
2019
$’000
-
-
2019
$’000
5,594
1,868
7,462
2019
$’000
88,322
921
89,243
2019
$’000
92,322
5,371
1,686
99,379
2020
$’000
1,134
4,577
5,711
2020
$’000
15,331
15,331
2020
$’000
10,146
1,707
11,853
2020
$’000
81,897
262
82,159
2020
$’000
86,397
11,447
1,082
98,926
PARAGON CARE — FINANCIAL REPORT 2020
50
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 28. Non-current liabilities - borrowings – Financing Arrangements (continued)
Assets pledged as security
The bank has a first registered company charge over all assets and undertakings including uncalled capital of the Group.
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.
On 29 June 2020, the Group received approval from its bankers for an amendment to its banking facilities. This has resulted in a relaxation of the
Group’s obligation to comply with the existing facility covenants through to September 2020. The amendment also resulted in the deferment of the
Group’s quarterly facility repayments until December 2020, totalling $1.5 million. Post balance sheet date, there have been amendments to the loan
arrangements - refer to Note 47 for further details.
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
Used at the reporting date
Bank loans
Trade finance facility
Bank guarantees and others
Unused at the reporting date
Bank loans
Trade finance facility
Bank guarantees and others
2020
$’000
2019
$’000
98,075
15,000
2,599
115,674
86,397
11,447
1,344
99,188
11,678
3,553
1,255
16,486
109,000
10,000
6,172
125,172
92,322
5,371
-
97,693
16,678
4,629
6,172
27,479
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 29. Non-current liabilities - lease liabilities
Lease liability
Refer to note 34 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
51
2019
$’000
19,221
19,221
2019
$’000
4,047
15,452
7,008
26,507
2020
$’000
12,380
12,380
2020
$’000
3,894
9,217
5,265
18,376
Lease liabilities included in the statement of financial position
Lease liabilities included in the statement of financial position at 30 June
16,102
22,252
Lease liabilities included in the statement of financial position at 30 June
Lease liabilities - current
Lease liabilities - non-current
NOTE 30. Non-current liabilities - vendor conditional payables
Vendor conditional payables
Refer to note 41 for further information on vendor conditional payables.
3,722
12,380
16,102
3,031
19,221
22,252
2020
$’000
-
-
2019
$’000
9,673
9,673
PARAGON CARE — FINANCIAL REPORT 2020
52
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 31. Equity - issued capital
Ordinary shares - fully paid
337,885,292
337,885,292
2020
Shares
2019
Shares
2020
$’000
202,718
2019
$’000
202,718
Movements in ordinary share capital
Date
Shares
Issue Price
$’000
Balance
1 July 2018
283,647,930
- 156,930
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
2 August 2018
2,056,256
$0.7650
1,578
14 September 2018
16,483,517
$0.9100
15,000
Issue of shares pursuant to the Company’s dividend re-investment plan
12 October 2018
1,004,167
$0.7167
720
Issue of shares to Pioneer Australia, Pioneer Hong Kong, Pioneer Holdings,
PioneerBV1, Tian Tian, UBS Trustees and the Lis
20 November 2018
33,934,869
$0.8900
30,203
Issue of shares pursuant to the Company’s dividend re-investment plan
26 April 2019
758,553
$0.4331
329
Share issue transaction costs
-
-
-
(2,042)
Balance
Balance
Ordinary shares
30 June 2019
337,885,292
- 202,718
30 June 2020
337,885,292
- 202,718
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.
PARAGON CARE — FINANCIAL REPORT 2020 53
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 31. 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.
The capital risk management policy remains unchanged from the 2019 Annual Report.
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
Non-current liabilities - borrowings
Total borrowings
Current assets - cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
The Group is not subject to any externally imposed capital requirements.
Note
23
28
11
2020
$’000
16,767
82,159
98,926
(24,505)
74,421
112,281
186,702
2019
$’000
10,136
89,243
99,379
(34,224)
65,155
192,316
257,471
40%
25%
PARAGON CARE — FINANCIAL REPORT 2020 54
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 32. Equity - reserves
Foreign currency translation reserve
Hedging reserve - cash flow hedges
Foreign currency translation reserve
2020
$’000
(877)
(794)
(1,671)
2019
$’000
891
204
1,095
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 33. Equity - dividends
Dividends
Dividends paid during the financial year were as follows:
Final dividend for the year ended 30 June 2018 of 2.0 cents per ordinary share
Interim dividend for the year ended 30 June 2019 of 1.1 cents per ordinary share
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
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
2020
$’000
-
-
-
2020
$’000
16,521
16,521
2019
$’000
6,044
3,708
9,752
2019
$’000
22,585
22,585
NOTE 34. 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.
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.
PARAGON CARE — FINANCIAL REPORT 2020 55
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 34. Financial instruments (continued)
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 Euro
2020
$’000
16,786
11,840
10,471
455
39,552
2019
$’000
19,268
14,010
4,500
10,494
48,272
Interest rate risk
The Group’s main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the Group to interest rate risk.
Borrowings obtained at fixed rates expose the Group to fair value interest rate risk. In order to mitigate the risk of variable interest rates, the Group
has entered into an interest rate swap arrangement with the bank for loans outstanding of $75,000,000 as at 30 June 2020.
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)
Derivative liability
2020
$’000
2019
$’000
24,505
34,224
(15,947)
(820)
(6,897)
(75,262)
(4,577)
(9,371)
(765)
(9,322)
(79,921)
-
(103,503)
(99,379)
For the Group bank loans outstanding, totalling $98,926,039 (2019: $99,378,860), are principal and interest payment loans. Of this, $75,000,000
(2019: $78,000,000) is managed under an interest rate swap arrangement, whereby the Group exchanges the banks floating rate (BBSYbid
rate+spread) for a fixed interest rate of 2.22%. The Group has bank loans outstanding subject to variable interest rates of $22,844,333 (2019:
$18,693,000). Monthly cash outlays of approximately $396,890 (2019: $277,182) per month are required to service the interest payments. An official
increase/decrease in interest rates of 100 (2019: 100) basis points would have an adverse/favourable effect on profit before tax of $228,443 (2019:
$186,930) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. In
addition, minimum principal repayments of $4,500,000 (2019: $4,000,000) are due during the year ending 30 June 2021 (2019: 30 June 2020).
PARAGON CARE — FINANCIAL REPORT 2020 56
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 34. 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
2020
$’000
11,678
3,553
1,255
16,486
2019
$’000
16,678
4,629
6,172
27,479
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 2020
Non-derivatives
Non-interest bearing
Interest-bearing - variable
Interest-bearing - fixed rate
Total non-derivatives
Derivatives
Forward foreign exchange contracts
Interest rate swap contracts
Total derivatives
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
-
2.79%
2.22%
-
-
-
-
26,921
12,947
410
40,278
870
-
870
15,331
3,000
410
18,741
236
4,577
4,813
-
6,897
262
7,159
28
-
28
-
-
75,000
75,000
-
-
-
42,252
22,844
76,082
141,178
1,134
4,577
5,711
PARAGON CARE — FINANCIAL REPORT 2020 57
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 34. Financial instruments (continued)
Consolidated 2019
Non-derivatives
Non-interest bearing
Interest-bearing - variable
Interest-bearing - fixed rate
Total non-derivatives
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
-
3.30%
4.30%
-
58,443
7,371
383
66,197
-
2,000
383
2,383
9,673
2,000
765
12,438
-
7,322
79,156
86,478
68,116
18,693
80,687
167,496
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 35. 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 2020
Liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Forward foreign exchange contracts - cash flow hedges
Interest rate swap contracts - derivative liability
Vendor conditional payable
Total liabilities
-
-
-
-
(1,134)
(4,577)
-
(5,711)
-
-
(15,331)
(15,331)
(1,134)
(4,577)
(15,331)
(21,042)
Consolidated 2019
Assets
Listed shares
Forward foreign exchange contracts - cash flow hedges
Total assets
Liabilities
Vendor conditional payable
Total liabilities
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)
Assets and liabilities held for sale are measured at fair value on a non-recurring basis.
There were no transfers between levels during the financial year.
PARAGON CARE — FINANCIAL REPORT 2020 58
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 35. Fair value measurement (continued)
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.
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:
Balance at 1 July 2018
Gains recognised in profit or loss
Additions
Disposals
Balance at 30 June 2019
Additions during the year
Payments during the year
Balance at 30 June 2020
Vendor conditional payable
$’000
(9,295)
1,163
(2,817)
1,276
(9,673)
(9,183)
3,525
(15,331)
NOTE 36. 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
Termination benefits
Post-employment benefits
2020
$
2019
$
1,116.350
1,194,383
528,438
60,770
-
68,731
1,705,558
1,263,114
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 37. 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:
59
Audit services - RSM Australia Partners
Audit or review of the financial statements
Other services - RSM Australia Partners
Tax compliance services
Other services
Audit services - network firms
Audit or review of the financial statements
Other services - network firms
Tax compliance services
2020
$
2019
$
216,000
322,450
67,675
33,400
101,075
317,075
90,170
-
90,170
412,620
48,615
64,520
12,165
60,780
-
64,520
NOTE 38. Contingent liabilities and contingent assets
The Group has given bank guarantees as at 30 June 2020 of $5,004,123 (2019: $5,019,613).
Legal proceedings
The company has commenced legal proceedings via its fully owned subsidiary Western Biomedical Pty Ltd, in the Supreme Court of Western Australia against two former
employees and the vendor of Western Biomedical as a consequence of the loss of key clients/contracts.
Apart from the above, there have been no material changes to contingent liabilities or contingent assets since the end of the previous reporting period.
NOTE 39. Related party transactions
Parent entity
Paragon Care Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 42.
Key management personnel
Disclosures relating to key management personnel are set out in note 36 and the remuneration report included in the directors’ report.
Transactions with related parties
Shane Tanner, director, is a shareholder in and director of Adphence Australia Pty Ltd which received $75,000 (2019: $nil) in consulting fees during the
financial year.
Mark Simari, director, is a shareholder and director of Charkaroo Pty Ltd which is a corporate authorised representative under Sequoia Wealth
Management Pty Limited’s AFSL. Through that relationship Mark has an interest in a corporate advisory mandate in place between the company and
Charkaroo Pty Ltd under Sequoia’s licence. Charkaroo Pty Ltd is entitled to 42.5% of fees charged by Sequoia to Paragon Care, total fees charged by
Sequoia during the financial year were $90,000 (2019: $nil) of which Charkroo was entitled to $38,250 (2019: $nil).
Bruce Bian, director, was a director of OPUZ Pty Ltd when it received $215,000 (2019: $nil) during the financial year as research and development
funding to develop a wearable blood glucose monitoring technology authorised by the previous managing director of the company. The company has no
ongoing relationship with that technology or that company.
Brent Stewart, director , was a director of Brent Michael Stewart and Michelle Jane Stewart ATF The Brent Stewart Superannuation Fund, when it
received $1,193,894 during the financial year for Surgical Specialties Pty Ltd earn out payment.
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.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
PARAGON CARE — FINANCIAL REPORT 2020 60
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 40. 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
2020
$’000
(3,536)
(3,536)
2019
$’000
3,695
3,695
2020
$’000
2019
$’000
3,531
15,670
157,810
162,879
715
716
864
885
202,530
(546)
(44,890)
203,402
(54)
(41,354)
157,094
161,994
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 2020 and 30 June 2019.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2020 and 30 June 2019.
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.
PARAGON CARE — FINANCIAL REPORT 2020 61
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 41. Business combinations
2020
There were no business combinations during the year ended 30 June 2020.
The business combinations that occurred in the previous financial year have now been finalised and detailed below are the final values. The
finalisation of business combination accounting in accordance with AASB 3 ‘Business Combinations’ has resulted in an increase of $9,433,000 to
goodwill mainly due to increase in vendor earnout.
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, at 30 June 2019 it was considered 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’.
Summary of business combinations for which the business combination accounting was finalised during the year are as follows:
Lovell Surgical
Fair value
$’000
Total Communications
Fair Value
$’000
Total fair value
$’000
Net working capital
Plant and equipment
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
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
8
367
50
(168)
257
743
1,000
1,000
-
1,000
1,000
-
1,000
1,715
369
70
(235)
1,919
37,971
39,890
27,890
12,000
39,890
39,890
(12,000)
27,890
1,723
736
120
(403)
2,176
38,714
40,890
28,890
12,000
40,890
40,890
(12,000)
28,890
PARAGON CARE — FINANCIAL REPORT 2020 62
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 41. Business combinations (continued)
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
2020
$’000
-
15,331
2019
$’000
2,817
6,856
15,331
9,673
15,331
-
15,331
-
9,673
9,673
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 42. 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:
63
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 (Australia) Pty Ltd*
AH563 Pty Ltd**
RA483 Pty Ltd**
Paragon Healthcare Pty Ltd**
GM374 Pty Ltd**
IM633 Pty Ltd**
Volker Australia Pty Ltd**
LR142 Pty Ltd**
RM988 Pty Ltd**
UN609 Pty Ltd**
Walkit Pty Ltd**
*
**
Subsidiary of Paragon Care Group Holding Company Pty Ltd
Subsidiary of AH563 Pty Ltd
Principal place of business /
Country of incorporation
Ownership
2020 (%)
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%
Interest
2019 (%)
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%
PARAGON CARE — FINANCIAL REPORT 2020 64
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
NOTE 43. Deed of cross guarantee
The Company and its controlled entities, as listed in note 42 ‘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 44. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Loss after income tax (expense)/benefit for the year
(77,269)
(14,386)
2020
$’000
2019
$’000
Adjustments for:
Depreciation and amortisation
Impairment of non-current assets
Impaiment of other assets
Allowance for expected credit losses
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 in trade and other receivables
Decrease/(increase) in inventories
Decrease/(increase) in income tax refund due
Increase in deferred tax assets
Decrease in derivative assets
Decrease in trade and other payables
Increase in derivative liabilities
Decrease in provision for income tax
Increase/(decrease) in employee benefits
8,053
57,234
17,194
940
-
-
-
11,421
4,745
5,666
(7,365)
291
(20,079)
4,577
-
(121)
10,008
17,799
-
-
5,938
(1,163)
(2,455)
4,750
(7,443)
(5,736)
(2,696)
1,024
(4,284)
-
(767)
569
Net cash from operating activities
5,287
1,158
Non-cash investing and financing activities
Shares issued in relation to business combinations
Reduction in lease liability arising from lease modification
2020
$’000
-
(3,000)
(3,000)
2019
$’000
3,093
-
3,093
PARAGON CARE — FINANCIAL REPORT 2020 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
Note 44. Cash flow information (continued)
Changes in liabilities arising from financing activities
Balance at 1 July 2018
Net cash used in financing activities
Acquisition of leases
Balance at 30 June 2019
Net cash used in financing activities
Reduction in lease liability arising from lease modification
Bank
loans
$’000
Trade finance
facility
$’000
Lease liability/
hire purchase
$’000
96,322
(4,000)
-
92,322
(5,925)
-
5,859
(488)
-
5,371
6,076
-
2,636
(950)
22,252
23,938
(3,754)
(3,000)
65
Total
$’000
104,817
(5,438)
22,252
121,631
(3,603)
(3,000)
Balance at 30 June 2020
86,397
11,447
17,184
115,028
Note 45. Earnings per share
Continuing operations
Earnings per share for profit/(loss) from continuing operations
Profit/(loss) after income tax attributable to the owners of Paragon Care Limited
2020
$’000
(71,600)
(71,600)
2019
$’000
8,862
8,862
2020
Number
2019
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
337,885,292
320,062,582
Adjustments for calculation of diluted earnings per share:
Performance rights
-
238,340
Weighted average number of ordinary shares used in calculating diluted earnings per share
337,885,292
320,300,922
Basic earnings per share
Diluted earnings per share
2020
cents
(21.19)
(21.19)
2019
cents
2.77
2.77
PARAGON CARE — FINANCIAL REPORT 2020 66
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
Note 45. Earnings per share (continued)
Discontinued operations
Earnings per share for loss from discontinued operations
Loss after income tax attributable to the owners of Paragon Care Limited
2020
$’000
2019
$’000
(5,669)
(5,669)
2020
Number
(23,248)
(23,248)
2019
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
Weighted average number of ordinary shares used in calculating diluted earnings per share
337,885,292
320,062,582
337,885,292
320,062,582
Basic earnings per share
Diluted earnings per share
2020
cents
(1.68)
(1.68)
2019
cents
(7.26)
(7.26)
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.
Overall profit/(loss)
Earnings per share for profit/(loss)
Profit/(loss) after income tax attributable to the owners of Paragon Care Limited
2020
$’000
2019
$’000
(77,269)
(77,269)
2020
Number
(14,386)
(14,386)
2019
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
Weighted average number of ordinary shares used in calculating diluted earnings per share
337,885,292
320,062,582
337,885,292
320,062,582
Basic earnings per share
Diluted earnings per share
2020
cents
(22.87)
(22.87)
2019
cents
(4.49)
(4.49)
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.
PARAGON CARE — FINANCIAL REPORT 2020 67
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
Note 46. Share-based payments
Employee Incentive Plan (‘EIP’)
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
•
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 extrapolation 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 extrapolation 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.
PARAGON CARE — FINANCIAL REPORT 2020 68
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2020
Note 46. Share-based payments (continued)
Summary of performance rights granted
Set out below are summaries of performance rights granted under the plan:
2020
Grant date
Expiry date
14/12/2018
26/04/2019
30/09/2021
30/09/2022
2019
Grant date
Expiry date
14/12/2018
26/04/2019
30/09/2021
30/09/2022
Balance at the
start of the year
Granted
Exercised Expired/forfeited/
other
Balance at the end
of the year
228,119
633,886
862,005
Balance at the
start of the year
-
-
-
-
-
-
Granted
228,119
633,886
862,005
-
-
-
(228,119)
(315,312)
(543,431)
-
318,574
318,574
Exercised Expired/forfeited/
other
Balance at the end
of the year
-
-
-
-
-
-
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 previous 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
Share price at grant date
Fair value at grant date
$0.8055
$0.4450
$0.8055
$0.4450
Note 47. Events after the reporting period
The impact of the COVID-19 pandemic is ongoing, and it is not practicable to estimate the potential impact after the reporting date. The situation is
rapidly developing and is dependent on measures imposed by the Australian Government and other countries, such as maintaining social distancing
requirements, quarantine, travel restrictions and any economic stimulus that may be provided.
The land and buildings situated at 19-21 Peninsula Boulevard, Seaford VIC was sold on the 3 August 2020. As at the reporting date the property was
actively for sale, the property was classified as held-for-sale.
On 26 August 2020, the Group received approval from its bankers for an amendment to its banking facilities. This has resulted in a relaxation of the
Group’s obligation to comply with the existing facility covenants through to September 2021. The amendment also resulted in the deferment of the
Group’s quarterly facility repayments until December 2021, totalling $6 million.
No other matter or circumstance has arisen since 30 June 2020 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.
PARAGON CARE — FINANCIAL REPORT 2020 Directors’
Declaration
For the year ended 30 June 2020
69
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 2020 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 43 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
Chiarman
31 August 2020
Melbourne
PARAGON CARE — FINANCIAL REPORT 2020 70
Auditor’s
Report
PARAGON CARE — FINANCIAL REPORT 2020 Independent Audit Report
For the year ended 30 June 2020
71
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 2020,
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 2020 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 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.
PARAGON CARE — FINANCIAL REPORT 2020
72
Independent Audit Report Continued
For the year ended 30 June 2020
Key Audit Matters
Key Audit Matter
How our audit addressed this matter
Impairment of Goodwill on acquisition
Refer to Note 21 in the financial statements
As at 30 June 2020, the Group had goodwill with a
carrying amount of $149 million relating to its numerous
acquisitions in recent years
As required by AASB 136
Impairment of Assets,
management has performed an impairment assessment
over the goodwill balance as at 30 June 2020 by:
•
calculating the recoverable amount of the cash
generating unit (“CGU”), which was determined to be
the value in use of the CGU, using a discounted cash
flow model. This model used cash flow projections for
the CGU for 5 years, with a terminal growth rate
applied to the 5th year. The cash flow projections were
then discounted to net present value using the
Company’s weighted average cost of capital
(“WACC”); and
•
comparing the resulting value in use of the CGU to
the CGU’s carrying amount.
recognised during
As a result of this exercise, an impairment of goodwill of
$54.2 million was
the year.
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.
We determined the impairment of goodwill to be a Key
Audit Matter due to the materiality of the goodwill balance,
and because the directors’ assessment of the ‘value in
use’ of the CGU involves judgements about the future
underlying cash flows of the business, estimated growth
rates for the CGU for the next 5 years as well as in
perpetuity, and the discount rates applied to the estimated
cash flows. We note that the impact of the COVID-19
pandemic on the current market conditions has increased
the level of judgement by the directors in estimating future
cash flows.
Our audit procedures in relation to management’s
impairment assessment involved the assistance of our
Corporate Finance
required, and
included:
team where
• 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 value in use calculations;
• Challenging
the
reasonableness
key
assumptions, including the cash flow projections,
future growth rates, discount rates and terminal
values, with a particular focus on the impact of
COVID-19 on these assumptions;
of
• Checking the mathematical accuracy of the cash
flow model and
to
supporting evidence, such as approved budgets
and considering the reasonableness of these
budgets; and
input data
reconciling
• Reviewing management’s sensitivity analysis over
the key assumptions in the model, including the
consideration of additional
impairment and
assessing whether the assumptions have been
applied on a consistent basis across each
scenario;
• Reviewing management’s calculation of
impairment amount as at 30 June 2020; and
the
• Assessing the disclosures in Note 21 to the
financial statements to assess compliance with
the disclosure
requirements of AASB136
Impairment of assets and AASB138 Intangible
assets.
PARAGON CARE — FINANCIAL REPORT 2020
Independent Audit Report Continued
For the year ended 30 June 2020
73
Key Audit Matters (Continued)
Impairment of assets and discontinued operations
Refer to Note 8 and 10 in the financial statements
During the year the Group has undertaken a restructure
of its business operations, resulting in rationalisation of
sites across Australia and necessitating the impairment of
buildings, leasehold improvements, plant and equipment
and right-of-use assets.
The Group has also undertaken a review of historical
software development and research and development
and closed and impaired the non-strategic projects
undertaken during the past few years which it no longer
believes will produce economic benefits in the future. The
Group has also impaired the costs associated with the
ERP system implemented over the last two years as the
old ERP system is being abandoned.
This has resulted in recognition of an impairment loss of
$14 million during the year.
In addition, the directors approved during the year, the
closure of the MIDAS software business as they believe
the software is unlikely to result in sufficient returns to
justify continued
in
recognition of an impairment loss of $6.2 million during
the year.
investment. This has resulted
This was identified as a Key Audit Matter due to the
materiality of the impairment expenses recognised during
the year and because
involves significant
management estimates and judgements in identification
of assets which are impaired.
this
Our audit procedures in relation to impairment of
assets and discontinued operations included, among
others:
• Obtaining an understanding of key controls
relating to the impairment review process and
identification of discontinued operations;
• Performed enquiries of management and
the minutes of Board meetings
inspected
approving the closure of projects, rationalisation of
business operations, and the MIDAS software
business;
• Evaluating and
challenging management’s
impairment assessment with due consideration
paid to the estimated profitability and performance
of development projects and systems;
• Assessing the mathematical accuracy of the
calculations and accounting for the impairment
expense; and
• Assessing accounting policy, account balance
classifications and note disclosures to ensure that
they are in accordance with the requirements of
the Australian Accounting Standards.
PARAGON CARE — FINANCIAL REPORT 2020
74
Independent Audit Report Continued
For the year ended 30 June 2020
Key Audit Matters (Continued)
Inventory Valuation, including provision for inventory obsolescence
Refer to Note 13 in the financial statements
The Group’s inventory balance, as disclosed in Note 13,
consists primarily of finished goods of various medical
equipment held for distribution.
to
in relation
the provision
During the year, the Group made a change in accounting
estimate
inventory
obsolescence as well as impairing all inventory product
lines identified for rationalisation as a result of an
inventory review undertaken as part of the Group's
ongoing restructure and as a result of the impacts of
COVID-19.
for
Inventory is valued at the lower of cost and net realisable
value. The determination of net realisable value of
inventory requires a significant degree of management
judgement
the
provision for obsolescence, as well as future market
conditions based on changing customer needs and
market trends.
including assumptions concerning
On the basis of the factors set out above, the valuation of
inventory was considered to be a Key Audit Matter.
Our audit procedures in relation to the valuation of
inventory and provision for obsolescence included:
• Obtained an understanding of key controls
relating to inventory management and its revised
provision for inventory obsolescence policy;
to
the
applied
• Evaluating management’s assumptions and
for
estimates
inventory
obsolescence
ageing and historical sales levels by inventory
product from the date the product was purchased
in conjunction with assessing the quantity of
products held;
through analysis of
provision
• Understanding the changes in the provisioning
methodology and assessing the appropriateness
thereof;
in estimating
• Assessing and validating the key assumptions
the
applied by management
provision, with particular reference to the impact
of COVID-19 on
sales and purchasing
assumptions, by performing enquiries of
management
current
purchasing strategy and rationalisation plans;
reviewing
and
the
• Testing the accuracy of the process used by
management
impaired
inventory across a representative sample of
individual product lines; and
identify potentially
to
• Assessing the completeness and accuracy of
disclosures in relation to change in accounting
the
estimates within
in
financial statements
the Australian Accounting
accordance with
Standards.
PARAGON CARE — FINANCIAL REPORT 2020
Independent Audit Report Continued
For the year ended 30 June 2020
75
Key Audit Matters (Continued)
Recognition of Revenue
Refer to Note 5 in the financial statements
The Group’s revenue from continuing operations for the
year ended 30 June 2020 was $231.7 million.
Our audit procedures in relation to revenue recognition
included:
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 consumables, devices, services and
technology) across 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.
• 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 key 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.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Group's annual report for the year ended 30 June 2020, 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.
PARAGON CARE — FINANCIAL REPORT 2020
76
Independent Audit Report Continued
For the year ended 30 June 2020
Responsibilities of the Directors for the Financial Report (Continued)
In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic
alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: 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 2020.
In our opinion, the Remuneration Report of Paragon Care Limited, for the year ended 30 June 2020, 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
M PARAMESWARAN
Partner
Dated: 31 August 2020
Melbourne, Victoria
PARAGON CARE — FINANCIAL REPORT 2020
77
Shareholder
Information
PARAGON CARE — FINANCIAL REPORT 2020 78
Shareholder Information
For the year ended 30 June 2020
The shareholder information set out below was applicable as at 11 August 2020.
Distribution of equity securities
Analysis of numbers of equity security holders by size of holding:
Fully Paid Ordinary Shares
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Number of holders of
ordinary shares
Number of shares
941
1,980
1,101
2,333
322
407,792
5,576,082
8,671,929
73,621,345
249,608,144
%
0.12
1.65
2.57
21.79
73.87
6,677
337,885,292
100.00
Unlisted Performance Rights – Issued under the Company’s Employee Incentive Plan
Number of Units
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and Over
Number of holders of
ordinary shares
Number of shares
-
-
-
4
-
4
-
-
-
318,574
-
318,574
%
-
-
-
100.00
-
100.00
PARAGON CARE — FINANCIAL REPORT 2020 Shareholder information Continued
For the year ended 30 June 2020
Equity Security Holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary Shares
Name
PERPETUAL CORPORATE TRUST LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
JMT INVESTMENT GROUP VIC PTY LTD
BUTTONWOOD NOMINEES PTY LTD
NEGRONI HOLDINGS PTY LTD
MR PAUL ANDREW SCHOLLUM & MR JOHN KEITH RADLEY
SHEMOZEL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JMT INVESTMENT GROUP VIC PTY LTD
NEWMELD PTY LTD
GRILLS INVESTMENTS PTY LTD
NEWECONOMY COM AU NOMINEES PTY LIMITED
MR PAUL ANDREW SCHOLLUM & MRS KATRINA MAREE CALDWELL & MRS DEBORAH ANNE MOSS
LORA FALLS PTY LTD
BRENT MICHAEL STEWART & MICHELLE JANE STEWART
JOHN KEITH RADLEY & PAUL ANDREW SCHOLLUM
MR BRIAN DUNCAN WILSHER
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2
GRAYSON NOMINEES PTY LTD
Substantial holders
79
Units
% of Issued Shares
50,418,386
40,736,228
15,710,093
5,000,000
4,904,174
4,727,531
4,717,320
4,561,256
4,424,719
4,240,000
4,078,172
3,773,585
3,251,132
3,106,538
3,000,000
2,823,466
2,595,540
2,301,147
1,970,344
1,934,720
14.92
12.06
4.65
1.48
1.45
1.40
1.40
1.35
1.31
1.25
1.21
1.12
0.96
0.92
0.89
0.84
0.77
0.68
0.58
0.57
168,274,351
49.81
The names of substantial shareholders and the number of shares to which each substantial shareholder and their associates have a relevant
interest, as disclosed in substantial shareholding notices given to the Company, are set out below:
Pioneer Hong Kong Group and the Lis
First Samuel Limited
Number held
57,856,735
39,705,148
% of total shares issued
17.12
11.75
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares:
Fully Paid Ordinary Shares
Holdings less than a marketable parcel
Holders
2,017
Number of shares
2,381,606
%
30.21
Voting rights
The voting rights attached to ordinary shares are set out below:
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.
Unlisted performance rights
Unlisted performance rights do not carry any voting rights.
There are no other classes of equity securities.
Additional shareholder information
The 2020 Annual General Meeting will be held on Wednesday, 18 November 2020 at 1.00pm (AEDT).
In accordance with rule 3.5 of the Company’s constitution, the Closing Date for Nomination of Director is Wednesday, 7 October 2020.
PARAGON CARE — FINANCIAL REPORT 2020 80
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