Annual
Report
2021
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 2021 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 1
About Us
Paragon Care (ASX:PGC) is an Australian based listed company in the healthcare
sector. It is a leading provider of medical equipment, devices and consumables
to the healthcare markets in Australian and New Zealand. These are high growth
markets driven by the aging of the population, continuously rising consumer
expectations and increasing government spending. Paragon has a portfolio of
class-leading companies that are positioned to provide advanced technology
solutions including equipment, consumables, and services for acute and ancillary
care environments.
Covering healthcare across four strategic pillars
Devices
Diagnostics
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.
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.
Capital & Consumables
Service & 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 1
3
Contents
4Corporate directory5Chairman’s report6CEO Report8Directors’ 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 statements66Directors’ declaration67Independent auditor’s report to the members of Paragon Care Limited73Shareholder information 4
Corporate Directory
Directors
Shane Tanner - Chairman
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li
Company secretary
Melanie Leydin
Registered office
Level 4
96-100 Albert Road
South Melbourne VIC 3205 Telephone: 1300 369 559
Telephone: (03) 8833 7800
Facsimile: (03) 8833 7890
Principal place of business
Waterman Business Centres
Suite 46, 44 Lakeview Drive
Scoresby VIC 3179
Share register
Auditor
Solicitors
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: https://www.rsm.global/australia/
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 (Fourth Edition) (‘Recommendations’) to the extent appropriate to the size and nature of
its operations.
The Company’s 2021 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 2021 Company secretary
Melanie Leydin
Registered office
South Melbourne VIC 3205 Telephone: 1300 369 559
Principal place of business
Share register
Directors
Auditor
Solicitors
Bankers
Website
Shane Tanner - Chairman
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li
Level 4
96-100 Albert Road
Telephone: (03) 8833 7800
Facsimile: (03) 8833 7890
Waterman Business Centres
Suite 46, 44 Lakeview Drive
Scoresby VIC 3179
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: https://www.rsm.global/australia/
SOHO Lawyers
Level 5, 124 Exhibition Street
Melbourne VIC 3000
National Australia Bank
www.paragoncare.com.au
Stock exchange listing
Paragon Care Limited shares are listed on the Australian Securities Exchange (ASX code: PGC)
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 (Fourth Edition) (‘Recommendations’) to the extent appropriate to the size and nature of
its operations.
The Company’s 2021 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/
Chairman’s
Report
5
On behalf of the Board of Paragon Care Limited, I am pleased to present to you the Company’s 2021
Annual Report.
The financial year ended 30th June 2021 was again challenging in terms of a COVID-19 disrupted
business environment. This required the Company to fully draw on all of its resources to ensure
progress across several business initiatives. The team at Paragon Care have performed exceptionally
at all levels and have assisted in the re-establishment of solid growth strategies within the four pillar
businesses of Devices, Diagnostics, Capital & Consumables, and Service & Technology. All pillars are
now fully established and profitable.
The senior management team, led by Phil Nicholl, continued to grow revenues, expand gross margins
and reduce costs during the year. More specifically:
• EBITDA was up 16% on the normalised performance last year
•
•
•
•
Net operating cash flow increased 5-fold to $27.5m
Net Profit After Tax at $8.3 million was very strong
Net Debt reduced 7% year on year
Earnings per Share was 2.45c
In addition, one of the key highlights of the FY21 financial results was the re-establishment of dividends
for the first time in two years. The declaration of a 1c per share final dividend clearly indicates the
Board’s confidence in the Company’s future, despite the ongoing challenges of COVID-19 lockdowns and
business disruptions.
The Company’s planned expansion into the significant Chinese blood reagent market was announced
in June 2021 and work has commenced on building business relationships with our Chinese partners.
The Company’s intellectual property in this market sector is world-class and although revenues are
still sometime away, we view China as an attractive growth market for our diagnostic products over the
longer term.
Our new three-year banking facility with National Australia Bank (NAB) was successfully finalised during
the year and this now provides the Company with a solid runway for future growth. The relationship with
NAB is strong and the Company values this relationship.
Our international suppliers, who trust Paragon Care with the sales, distribution and servicing of their
high-tech medical equipment, continue to benefit from the strength of Paragon Care’s competitive
advantages and reach through its exceptional relationships with most of Australia’s major hospitals and
health networks. Paragon Care now distributes for over 100 overseas equipment manufacturers.
On behalf of the Board, I would like to again thank our shareholders, suppliers, medical equipment
partners and of course our great in-house team for their continued support. The Company enters the
2022 financial year with confidence, despite the ongoing challenges of the current global pandemic.
Yours faithfully,
Shane Tanner
Chairman
PARAGON CARE — FINANCIAL REPORT 2021 6
CEO Report
For the year ended 30 June 2021
CEO Report
Dear Shareholders,
We are very pleased to deliver these strong FY21 results, with improved cash flow and profitability, in a
challenging external environment. These results validate our hard work over the past year to implement
continuous improvement processes throughout the Company and to diversify our revenue streams across
product lines and geographies.
Overview of FY21 Financial Results
Paragon Care delivered a solid financial performance in FY21 with strong growth across all key performance
metrics. Revenue in FY21 was $235.8m, up 2% from $231.7m in FY20, which was a pleasing result in a
COVID-19 disrupted business environment. Pleasingly, growth in the Devices pillar and the expansion of
revenue from New Zealand was enough to offset the COVID-19 related adverse impacts in our aged care
related businesses in FY21.
Gross profit margins improved slightly to 38.3% in FY21, up from 37.5% in FY20, due to a change in the sales
mix away from lower margin product sales, such as personal protective equipment, and increased sales of
higher margin sales in the Diagnostic and Devices Product Line.
Earnings before interest, tax, depreciation and amortisation increased to $26.5m in FY21, a 16% increase
compared with the normalised result last year. The improvement reflects the successful execution of improved
operating processes and disciplined cost control. The Company has achieved a structurally lower cost base
through the successfully completed cost rationalisation program, which has now transitioned into a business-
as-usual approach focused on best practice and streamlined operations.
The net profit after tax result of $8.3m represents earnings per share of 2.45 cents.
Operating cash flow increased by 419% to $27.5m in FY21 up from $5.3m in FY20. This was primarily driven by
a tighter working capital cycle. All remaining vendor earn-outs relating to prior acquisitions totalling $15.3m
were paid in FY21 and the Company is now free of contingent vendor payments. In FY22, we expect a return to
normal trading conditions, under which operating cash flow will be aligned with earnings.
Overview of Operations
We continue to make good progress operationally. Our facilities consolidation is on track and we are leveraging
our buying power to gain efficiencies around freight. Our supply and operations planning initiatives have been
challenged due to the COVID-19 related disruptions and we are yet to realise the benefit of this in our inventory
management which we expect to see in FY22.
In May 2021, Paragon Care announced that the Company’s banking facilities were successfully renegotiated
with NAB. The new 3-year banking contract extends to July 2024 and the new covenants were designed
to support the future growth of the business. This enables Paragon Care to resume dividends and explore
acquisition opportunities.
Over the past year, we established a four pillar structure to provide a solid foundation for future growth.
Devices
The Devices pillar had strong revenue growth of 15% in FY21 to $85.8m, due to a significant increase in
elective surgery undertaken this year compared to last year. In addition, product sales relating to diagnostic
equipment, including Ophthalmology and Angio product lines, strengthened.
Diagnostics
The Diagnostic pillar had solid revenue growth of 11% in FY21 to $25.9m. This growth was driven by the
expansion of the product range into transplant and laboratory related products, as well as COVID testing
related product sales. Stronger growth across the Australian market generally offset sales through export
distribution.
Capital & Consumables
The Capital & Consumables pillar experienced difficult trading conditions in many markets in FY21. Despite
this, revenue was only down by 0.5% year on year to $105.2m, due to stronger custom procedure packs sales
and imaging equipment sales.
Service & Technology
The Service & Technology pillar was significantly impacted by COVID-19 business disruptions in FY21 with year
on year revenue down by 31.7% to $19m. The aged care portfolio continues to be adversely impacted with
most residential aged care providers not focused on technology rollouts and upgrades.
PARAGON CARE — FINANCIAL REPORT 2021 CEO Report Continued
For the year ended 30 June 2021
7
Expansion in China
On 2 June 2021, Paragon Care announced that its Diagnostics business, Immulab, entered into a joint
venture with Jiangsu Zojiwat Bio-Pharmaceuticals Co. Ltd, a Chinese healthcare company, for the
distribution of Immulab’s proprietary in vitro diagnostics blood bank reagents in China. These reagents
are world class products, originally developed by CSL Ltd and acquired by Paragon Care in 2018. Paragon
Care will work together with its Chinese partner to complete patient trials in at least three domestic
clinical institutions, in line with the recommended National Medical Products Administration (NMPA)
approval process, which is expected to take approximately two years. The opportunity for Paragon Care in
this new market is very significant.
I would like to thank our dedicated team for their hard work and resilience in a challenging year. We have
a strong management team which is comprised of former business owners, and complemented by new
capabilities in People and Culture and Operations. Our KPI’s which cascade throughout the organisation
are fully aligned to ensure that the team is all working together towards a common goal.
Outlook
In FY22, management is focused on expanding its product range and attracting new agency agreements.
There is also a focus on cross divisional selling to fully leverage the maturing pillar structure. Under this
streamlined cost structure, with business-as-usual continuous improvement and improved inventory
management, we are working towards 15% EBITDA margins. We are further developing initiatives around
talent retention and development and we are ready for growth in aged care in a post-COVID economy. We
have taken the first steps in our China growth strategy and we are now investing for growth to expand our
extensive portfolio of best-in-breed med-tech solutions.
Phil Nicholl
CEO
Paragon Care
PARAGON CARE — FINANCIAL REPORT 2021 8
Directors’ Report
For the year ended 30 June 2021
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 2021.
Directors
The following persons were directors of Paragon Care Limited during the whole of the financial year and up to
the date of this report, unless otherwise stated:
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li (appointed 27 January 2021)
Bruce Bian (resigned 20 August 2020)
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
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
There were no dividends paid, recommended or declared during the current or previous financial year.
Review of operations
The profit for the Group after providing for income tax amounted to $8,279,000 (30 June 2020: loss of
$77,269,000).
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
Change from
FY 20
%
2%
1%
4%
16%
2021
$’000
235,840
(145,527)
90,313
38.3%
1,508
(65,278)
26,543
-
26,543
(6,200)
(8,012)
12,331
(4,052)
8,279
-
8,279
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)
PARAGON CARE — FINANCIAL REPORT 2021
Directors’ Report Continued
For the year ended 30 June 2021
Revenue growth despite continue COVID-19 impacts
Share Capital Reduction
9
Revenue for the year reached $235.8 million (2020: $231.7 million)
which, given the impact of COVID-19 and numerous suspensions of
elective surgery during the year, was pleasing to see and consistent
with the company refocusing on growth after several years of difficult
trading.
Gross profit margin recovered during the year
Gross profit margins improved slightly to 38.3% in FY21, up from 37.5%
in FY20, due to a change in the sales mix away from lower margin
product sales, such as personal protective equipment, and increased
sales of higher margin sales in the Devices and Diagnostic Product Line.
EBITDA increased by 15.9% compared to FY20 Adjusted EBITDA
In FY21, Adjusted EBITDA increased by 16% to $26.5m, as a result
of stronger revenues and margins but also reflecting the successful
execution of improved operating processes and disciplined cost control.
The Group continues to be 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.
Significant changes in the state of affairs
The impact of the COVID-19 pandemic is ongoing, and it is not
practicable to estimate the potential continuing impact after the
reporting date. The situation is rapidly developing and is dependent
on measures imposed by the State and Federal Governments and
other countries, such as maintaining social distancing requirements,
quarantine, travel restrictions and any economic stimulus that may be
provided.
Sale of land and buildings
The land and buildings situated at 19-21 Peninsula Boulevard, Seaford
VIC was sold for $1.8 million on 3 August 2020.
Banking facilities
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. In May 2021,
Paragon Care announced that the Company’s banking facilities were
successfully renegotiated with NAB. The new 3-year banking contract
extends to July 2024 and the new covenants were designed to support
the future growth of the business. This enables Paragon Care to resume
dividends and explore acquisition opportunities.
The company reduced its share capital by $88,766,000 in accordance
with Section 258F of the Corporations Act. The capital reduction will have
the effect of reducing the share capital account and reducing Paragon
Care’s accumulated accounting losses. This is a technical adjustment
which does not require shareholder approval and allows the Company
to pay future franked dividends. The capital reduction has no impact on
the Group’s assets, nets assets, financial results, cash flow or funding
or that of the Group. The number of shares on issue will not change as a
result of the capital reduction. Under section 258F(1) of the Corporations
Act, a company may reduce its share capital without shareholder
approval by cancelling any paid-up share capital that is not represented
by available assets. The deficiency in Paragon Care’s assets arose
as a result of the impairment and subsequent sale of the Axis Health
businesses in FY19 and further the impairment and write-off of assets in
FY20 as a result of the business restructure undertaken during FY20.
Matters subsequent to the end of the financial year
Outside of the dividend declared below, no other matter or circumstance
has arisen since 30 June 2021 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.
Dividends declared
In keeping with Directors confidence in Paragon Care, the directors have
declared the payment of a fully franked final dividend of
$3,378,853 (1 cents per fully paid ordinary share) to be paid on 1st of
October 2021 in respect of the financial year ended 30 June 2021.
The dividend will be paid to all shareholders on the register of members
as at the Record Date of 14th of September 2021. This dividend has not
been included as a liability in these financial statements.
The dividend of 1 cents per fully paid ordinary share for the 2021
financial year and represents a 41% payout of NPAT which is in line with
the 40% to 60% company dividend payment policy.
Dividend reinvestment plan
Paragon Care operates a dividend reinvestment plan (DRP) that enables
shareholders to elect to reinvest all, or up to a portion of, their dividends
into additional shares in Paragon. Shares will be issued at the lower of
25.0 cents per share and the price derived by applying a discount of 5%
to the volume weighted average market price of shares sold on the ASX
over the 5 trading days commencing on and inclusive of the Ex-Dividend
Date (13th of September 2021), subject to the discretion of the Board to
determine the market price in certain circumstances.
The dividend payment will be fully underwritten by Taylor Collison
Limited and therefore not impact the company’s cash or net debt
position.
PARAGON CARE — FINANCIAL REPORT 2021 10
Directors’ Report Continued
For the year ended 30 June 2021
Information on Directors
Name:
Title:
Qualifications:
Experience and expertise:
Shane Tanner
Non-Executive Chairman
FCPA, ACIS, MAICD
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:
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:
1,000,000 Fully Paid Ordinary Shares at 30 June 2021 (held indirectly)
None
Name:
Title:
Qualifications:
Experience and expertise:
Geoffrey Sam OAM
Non-Executive Chairman
BCom, M.Hospital Administration, M.Economics and Social Studies, FAICD
Geoffrey has held numerous successful ASX listed board positions including
Chairman of Money 3, Director of Hutchison’s Childcare Services and Managing Director of Nova Health. Prior to his
appointments to ASX listed companies, Geoffrey undertook numerous Chief Executive positions at Adelaide based hospitals.
He is currently the Co-Founder and Director of HealtheCare Australia Pty Ltd, a privately owned health care company
comprising a portfolio of 35 hospitals and a community nursing and rehabilitation business.
Other current directorships:
EarlyPay Limited (ASX: EPY) formerly known as 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:
1,964,675 Fully Paid Ordinary Shares at 30 June 2021 (held indirectly)
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:
Name:
Title:
Qualifications:
Experience and expertise:
3,246,334 Fully Paid Ordinary Shares at 30 June 2021 (held indirectly)
None
Mark Simari
Non-Executive Director (appointed 27 November 2019)
Bachelor of Business (Accounting)
Mark 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 the 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 Pty Limited
and Akita Consulting. He also holds advisory roles with Fruitlink Pty Ltd.
Other current directorships:
None
Former directorships (last 3 years):
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 2021 (held indirectly)
None
PARAGON CARE — FINANCIAL REPORT 2021 11
Directors’ Report Continued
For the year ended 30 June 2021
Name:
Title:
Experience and expertise:
Xinzhou Paul Li
Non-Executive Director (appointed 27 January 2021)
Paul has over 30 years’ experience in the pharmaceutical services industry and rich experience in international trade and
management. He is also the Founder and Chairman of China Pioneer Pharma Holdings Limited, a company established stable
long-term business relations with many world-famous pharmaceutical and medical device enterprises and listed on the main
board of the Stock Exchange of Hong Kong Limited.
Other current directorships:
None
Former directorships (last 3 years):
Chair of China Pioneer Pharma Holdings Limited, a company listed on the Stock
Exchange of Hong Kong Limited (stock code HK.01345)
Director of Novabay Pharmaceuticals Inc., a company listed on the NYSE (NBY)
Special responsibilities:
Member – Investment Committee
Interests in shares:
Interests in rights:
50,418,386 Fully Paid Ordinary Shares at 30 June 2021 (held indirectly)
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:
Qualifications:
Experience and expertise:
Ms Melanie Leydin
Company Secretary
BBus (Acc. Corp Law) CA FGIA
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 2021, 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
14
13
14
14
6
1
14
14
14
14
6
1
4
-
4
4
-
-
4
-
4
4
-
-
-
2
3
3
-
-
-
3
3
3
-
-
-
2
2
-
-
2
-
2
2
-
-
2
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li
Bruce Bian
Held: represents the number of meetings held during the time the director held office.
PARAGON CARE — FINANCIAL REPORT 2021 12
Directors’ Report Continued
For the year ended 30 June 2021
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 15.0 cents and a high of 31.5 cents.
As at 30 June 2021 the Company’s share price (ASX: PGC) was 26.5
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
Shareholders approved the Paragon Care Employee Incentive Plan (‘EIP’)
at the 2018 Annual General Meeting (‘AGM’).
PARAGON CARE — FINANCIAL REPORT 2021 Directors’ Report Continued
For the year ended 30 June 2021
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.
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 will lapse.
13
Use of remuneration consultants
During the financial year, the Group did not engage remuneration
consultants.
Voting and comments made at the Company’s 18 November 2020
Annual General Meeting (‘AGM’)
At the 18 November 2020 AGM, 95.47% 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
• Mark Simari - Non-Executive Director
• Paul Li - Non-Executive Director (appointed 27 January 2021)
• Bruce Bian - Non-Executive Director (resigned 20 August 2020)
And the following persons:
•
•
Phil Nicholl - Chief Executive Officer
Stephen Munday - Chief Financial Officer
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 26 April 2019
include 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 26 April 2019 is
31 August 2022 and will lapse on 30 September 2022 if not vested and
exercised.
The vesting conditions for performance rights granted on 22 February
2021 include meeting the following:
• Tranche 1: One third to vest subject to continuous employment
and a minimum share price of 30c being achieved in the financial
year 2021 calculated on a 14-day VWAP;
• Tranche 2: One third to vest subject to continuous employment
and a minimum share price of 40c being achieved in the financial
year 2022 calculated on a 14-day VWAP; and
• Tranche 3: One third to vest subject to continuous employment
and a minimum share price of 50c being achieved in the financial
year 2023 calculated on a 14- day VWAP.
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
PARAGON CARE — FINANCIAL REPORT 2021
14
Directors’ Report Continued
For the year ended 30 June 2021
Amounts of remuneration
Details of the remuneration of key management personnel of the Group are set out in the following tables.
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Super-
annuation
Long Service
Leave
Performance
Rights
2021
Name
Short-Term Employee Benefits
Cash Salary
and Fees
$
Cash Bonus
Non-Monetary Termination
$
-
-
-
-
-
-
Non-Executive
Directors
Shane Tanner
117,000
Geoffrey Sam OAM 53,530
58,500
58,500
24,923
6,955
Brent Stewart
Mark Simari
Paul Li*
Bruce Bian**
Other Key
Management
Personnel
Phil Nicholl
492,367
157,500
Stephen Munday
302,992
-
Total
1,114,767
157,500
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
$
-
5,085
-
-
2,368
661
21,694
28,784
58,592
$
-
-
-
-
-
-
-
-
-
*
**
Remuneration is from date of appointment as key management personnel to 30 June 2021.
Remuneration is from 1 July 2020 to date of resignation as key management personnel.
$
-
-
-
-
-
-
Total
$
117,000
58,615
58,500
58,500
27,291
7,616
11,844
6,497
18,341
683,405
338,273
1,349,200
Short-Term Employee Benefits
Post
Employment
Benefits
Long-Term
Benefits
Share-Based
Payments
Non-Monetary Termination
Super-
annuation
Long Service
Leave
Performance
Rights
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
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
$
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
Total
$
111,000
83,238
55,500
55,847
30,500
88,550
662,438
266,376
131,300
220,809
1,705,558
*
**
***
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.
Geoffrey Sam OAM and Michael Newton were underpaid in FY19 resulting in a catch-up payment in FY20.
PARAGON CARE — FINANCIAL REPORT 2021 15
Directors’ Report Continued
For the year ended 30 June 2021
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Fixed remuneration
At risk - STI
At risk - LTI
2021
2020
2021
2020
2021
2020
Non-Executive Directors
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li
Bruce Bian
Michael Newton
Executive Directors
Andrew Just
Other Key Management Personnel
Phil Nicholl
Stephen Munday
Paul Smith
100%
100%
100%
100%
100%
100%
-
-
75%
98%
-
100%
100%
100%
100%
-
100%
100%
100%
100%
100%
100%
-
-
-
-
-
-
-
23%
-
-
The proportion of the cash bonus paid/payable or forfeited is as follows:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2%
2%
-
-
-
-
-
-
-
-
-
-
-
Other Key Management Personnel
Phil Nicholl
Cash bonus paid/payable
Cash bonus forfeited
2021
2020
2021
2020
100%
-
-
-
PARAGON CARE — FINANCIAL REPORT 2021 16
Directors’ Report Continued
For the year ended 30 June 2021
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.
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.
Paul Li
Non-Executive Director
Term of agreement:
No fixed term
Details:
Name:
Title:
Base salary including superannuation $60,000. No termination benefit.
Phil Nicholl
Chief Executive Officer
Term of agreement:
No fixed term
Details:
Name:
Title:
Base salary including superannuation $525,000. No termination benefit.
Stephen Munday
Chief Financial Officer
Term of agreement:
No fixed term
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 2021 17
Directors’ Report Continued
For the year ended 30 June 2021
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 2021.
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
22 February 2021
22 February 2021
22 February 2021
Vesting date and
exercisable date
30 June 2021
30 June 2022
30 June 2023
Expiry date
30 September 2023
30 September 2023
30 September 2023
Fair value per right at
grant date
$0.0030
$0.0030
$0.0031
*
In the event the performance hurdles are not achieved in the year of entitlement but are subsequently achieved (by no later than 30 June
2023), then concerned performance rights will automatically exercise into PGC Shares within a period specified by the Board. The Company
will conduct a share price review for each financial year on the 30th June of each year during the vesting period.
Name
Phillip Nicholl
Number of
rights granted
Grant date
Vesting date and
exercisable date
Expiry date
Fair value per
right at grant date
348,012
22 February 2021
30 June 2021 30 September 2023
348,012
22 February 2021
30 June 2022 30 September 2023
348,011
22 February 2021
30 June 2023 30 September 2023
Stephen Munday
190,909
22 February 2021
30 June 2021 30 September 2023
190,909
22 February 2021
30 June 2022 30 September 2023
190,909
22 February 2021
30 June 2023 30 September 2023
$0.0030
$0.0030
$0.0031
$0.0030
$0.0030
$0.0031
Performance rights granted carry no dividend or voting rights.
Details of performance rights over ordinary shares granted, vested and lapsed for directors and other key management personnel as part of
compensation during the year ended 30 June 2021 are set out below:
Name
Grant date
Vesting date
Number of
rights granted
Value of
rights granted
($)
Value of
rights vested
($)
Number of
rights lapsed
Value of
rights lapsed
($)
Phil Nicholl
22 February 2021
30 June 2021
22 February 2021
30 June 2022
22 February 2021
30 June 2023
Stephen Munday
22 February 2021
30 June 2021
22 February 2021
30 June 2022
22 February 2021
30 June 2023
348,012
348,012
348,011
190,909
190,909
190,909
10,440
10,440
10,788
5,727
5,727
5,918
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
PARAGON CARE — FINANCIAL REPORT 2021
18
Directors’ Report Continued
For the year ended 30 June 2021
Additional information
The factors that are considered to affect total shareholders return (‘TSR’) are summarised below:
Share price at financial year end (cents per share)
Total dividends declared (cents per share)
Basic earnings per share (cents per share)
Additional disclosures relating to key management personnel
2021
26.50
-
2.45
2020
19.00
-
(22.87)
2019
41.50
1.10
(4.49)
2018
82.50
4.20
5.40
2017
77.00
4.10
6.20
Shareholding
The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Group,
including their personally related parties, is set out below:
Ordinary shares
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li*
Bruce Bian**
Phil Nicholl
Stephen Munday
Balance at the
start of the year
Received as part
of remuneration
Additions
Disposals/other
Balance at the
end of the year
850,000
1,736,417
2,983,466
391,561
-
-
1,764,664
-
7,726,108
-
-
-
-
-
-
-
-
-
150,000
228,258
262,868
-
50,418,386
-
-
-
51,059,512
-
-
-
-
-
-
-
-
-
1,000,000
1,964,675
3,246,334
391,561
50,418,386
-
1,764,664
-
58,785,620
*
**
Additions represent interest in holding at date of appointment as a key management personnel.
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 ordinary shares
Shane Tanner
Geoffrey Sam OAM
Brent Stewart
Mark Simari
Paul Li
Bruce Bian
Phil Nicholl
Stephen Munday
Balance at the
start of the year
Granted
Vested
Expired/
forfeited/other
Balance at the
end of the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,044,035
572,727
1,616,762
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,044,035
572,727
1,616,762
This concludes the remuneration report, which has been audited.
PARAGON CARE — FINANCIAL REPORT 2021 19
Directors’ Report Continued
For the year ended 30 June 2021
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
22 February 2021
Expiry date
Exercise price
Number under rights
30 September 2022
30 September 2023
$0.0000
$0.0000
188,810
6,725,736
6,914,546
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 2021 and up to
the date of this report.
Indemnity and insurance of officers
The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which
they may be held personally liable, except where there is a lack of good faith.
During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a
liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the
amount of the premium.
Indemnity and insurance of auditor
The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related
entity against a liability incurred by the auditor.
During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity.
Proceedings on behalf of the Company
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to
intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those
proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 34
to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the
auditor’s behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 34 to the financial statements do not compromise the external auditor’s
independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional
Accountants (including Independence Standards) 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 2021 20
Directors’ Report Continued
For the year ended 30 June 2021
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
27 August 2021
Melbourne
PARAGON CARE — FINANCIAL REPORT 2021
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 2021, 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: 27 August 2021
Melbourne, Victoria
PARAGON CARE — FINANCIAL REPORT 2021
22
Financial
Statements
PARAGON CARE — FINANCIAL REPORT 2021 Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2021
23
Note
2021
$’000
2020
$’000
5
6
7
8
10
21
9
16
25
11
12
13
Revenue from continuing operations
Sale of goods
Cost of sales
Gross profit
Other income
Interest revenue calculated using the effective interest method
Expenses
Employee benefits expense
Depreciation and amortisation expense
Distribution expenses
Marketing expenses
Occupancy expenses
Other expenses
Impairment of goodwill
Impairment of other assets
Provision for obsolescence of inventory - change in accounting estimates
Fair value gain/(loss) on derivative liability
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
Total comprehensive income for the year attributable to the owners of Paragon Care Limited
Total comprehensive income for the year is attributable to:
Continuing operations
Discontinued operations
235,840
(145,527)
90,313
1,490
18
231,689
(144,874)
86,815
131
189
(47,226)
(46,678)
(6,200)
(6,331)
(911)
(1,398)
(10,937)
-
-
-
1,525
(8,012)
(8,053)
(4,186)
(3,434)
(1,269)
(15,124)
(54,235)
(14,016)
(5,702)
(4,577)
(7,064)
12,331
(77,203)
(4,052)
5,603
8,279
-
(71,600)
(5,669)
8,279
(77,269)
1,085
(196)
889
9,168
9,168
-
9,168
(998)
(1,768)
(2,766)
(80,035)
(73,221)
(6,814)
(80,835)
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 2021
24
Consolidated statement of profit or loss
and other comprehensive income
For the year ended 30 June 2021
Note
2021
cents
2020
cents
Earnings per share for profit from continuing operations attributable to the owners of
Paragon Care Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for loss from discontinued operations attributable to the owners of
Paragon Care Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit/(loss) attributable to the owners of Paragon Care Limited
Basic earnings per share
Diluted earnings per share
41
41
41
41
41
41
2.45
2.40
-
-
2.45
2.40
(21.19)
(21.19)
(1.68)
(1.68)
(22.87)
(22.87)
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 2021 Consolidated Statement of Financial Position
As at 30 June 2021
25
Note
2021
$’000
2020
$’000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Income tax refund due
Other assets
Financial derivative asset
Non-current assets classified as held for sale
Total current assets
Non-Current Assets
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 liabilities
Total current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Employee benefits
Total non-current liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Reserves
Retained earnings (Accumulated losses)
Total Equity
14
15
16
12
17
25
18
19
20
21
12
22
23
24
25
26
27
23
24
28
29
33,197
26,201
51,578
407
1,413
416
113,212
-
113,212
7,464
9,032
151,374
10,838
178,708
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
291,920
292,171
36,100
21,794
3,648
3,047
4,901
-
12,720
82,210
80,471
7,098
623
88,192
170,402
121,518
113,952
7,566
-
121,518
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
The above consolidated statement of financial position should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2021 26
Consolidated statement of changes in equity
For the year ended 30 June 2021
Group
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
Balance at 30 June 2020
Group
Consolidated
Balance at 1 July 2020
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transfer to dividend reserve
Transactions with owners in their capacity as owners:
Share-based payments (note 42)
Capital reduction (note 28)
Balance at 30 June 2021
Issued capital
Reserves Accumulated losses
Total equity
$’000
$’000
$’000
$’000
202,718
-
-
-
202,718
1,095
-
(2,766)
(2,766)
(1,671)
(11,497)
(77,269)
-
(77,269)
(88,766)
192,316
(77,269)
(2,766)
(80,035)
112,281
Issued capital
Reserves Accumulated losses
Total equity
$’000
$’000
$’000
$’000
202,718
(1,671)
-
-
-
-
-
(88,766)
113,952
-
889
889
8,279
69
-
7,566
(88,766)
8,279
-
8,279
(8,279)
-
88,766
-
112,281
8,279
889
9,168
-
69
-
121,518
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes
PARAGON CARE — FINANCIAL REPORT 2021 Consolidated Statement of Cash Flows
For the year ended 30 June 2021
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Government assistance received (JobKeeper subsidy)
Other income
Iinterest received
Interest and other finance costs paid
Income taxes refunded /(paid)
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of businesses, net of cash acquired
Payment for vendor earn out of prior business acquisitions
Payments for property, plant and equipment
Payments for intangibles
Payments for security deposits
Proceeds from disposal of investments
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from borrowings (net)
Repayment of borrowings (net)
Repayment of lease liabilities
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the financial year
14
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes
27
Note
2021
$’000
2020
$’000
264,516
(232,509)
265,178
(260,020)
40
2,985
1,413
18
(8,012)
(948)
27,463
-
(15,331)
(3,327)
(1,959)
(134)
-
1,948
998
-
189
(6,107)
5,049
5,287
(4,224)
-
(2,315)
(4,951)
(33)
22
-
(18,803)
(11,403)
4,140
(801)
(3,307)
32
8,692
24,505
33,197
6,076
(5,925)
(3,754)
(3,603)
(9,719)
34,224
24,505
PARAGON CARE — FINANCIAL REPORT 2021 28
Notes to and Forming Part of the Financial Statements
For the year ended 30 June 2021
NOTE 1. General information
The financial statements cover Paragon Care Limited as a Group consisting of Paragon Care Limited (‘Company’ or ‘parent entity’) and the entities it
controlled at the end of, or during, the year. Paragon Care Limited and its subsidiaries together are referred to in these financial statements as the
‘Group’. The financial statements are presented in Australian dollars, which is Paragon Care Limited’s functional and presentation currency.
Paragon Care Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of
business are:
Registered office
Level 4
96-100 Albert Road
South Melbourne VIC 3205
Principal place of business
Waterman Business Centres
Suite 46, 44 Lakeview Drive
Scoresby VIC 3179
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 27 August 2021. 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 adoption of these Accounting Standards and Interpretations did not have any
significant impact on the financial performance or position of the Group.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
Change in expense classification
During the year, the Group modified the classification of certain expenses to reflect the financial performance of the Group more appropriately.
Comparative amounts in the statement of profit or loss and other comprehensive income have been restated for consistency.
The effect on the comparative expenses in the statement of profit or loss and other comprehensive income for the modification are as follows:
Year ended 30 June 2020
Employee benefits expense
Depreciation and amortisation expense
Distribution expenses
Marketing expenses
Occupancy expenses
Other expenses
Administration
Allowance for expected credit losses
Loss after tax for the year attributable to owners
Current
classification
$’000
46,678
8,053
4,186
3,434
1,269
15,124
-
-
78,744
Previous
classification
$’000
-
-
3,500
1,710
2,010
-
70,584
940
78,744
Change
$’000
46,678
8,053
686
1,724
(741)
15,124
(70,584)
(940)
-
PARAGON CARE — FINANCIAL REPORT 2021
29
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Foreign currency translation
Basis of preparation
These general purpose financial statements have been prepared in
accordance with Australian Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board (‘AASB’) and the
Corporations Act 2001, as appropriate for for-profit oriented entities.
These financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards
Board (‘IASB’).
Historical cost convention
The financial statements have been prepared under the historical cost
convention, except for, where applicable, the revaluation of financial
assets and liabilities at fair value through profit or loss and derivative
financial instruments.
Critical accounting estimates
The preparation of the financial statements requires the use of certain
critical accounting estimates. It also requires management to exercise
its judgement in the process of applying the Group’s accounting policies.
The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the financial
statements, are disclosed in note 3.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements
present the results of the Group only. Supplementary information about
the parent entity is disclosed in note 37.
Principles of consolidation
The consolidated financial statements incorporate the assets and
liabilities of all subsidiaries of Paragon Care Limited as at 30 June 2021
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.
The financial statements are presented in Australian dollars, which is
Paragon Care Limited’s functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into the Company’s
functional currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at financial
year-end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into
Australian dollars using the exchange rates at the reporting date.
The revenues and expenses of foreign operations are translated into
Australian dollars using the average exchange rates, which approximate
the rates at the dates of the transactions, for the period. All resulting
foreign exchange differences are recognised in other comprehensive
income through the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the
foreign operation or net investment is disposed of.
Revenue recognition
The Group recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to
which the Group is expected to be entitled in exchange for transferring
goods or services to a customer. For each contract with a customer, the
Group: identifies the contract with a customer; identifies the performance
obligations in the contract; determines the transaction price which takes
into account estimates of variable consideration and the time value of
money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognises revenue when or
as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
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
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.
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.
PARAGON CARE — FINANCIAL REPORT 2021
30
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Other revenue
Other revenue is recognised when it is received or when the right to
receive payment is established.
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.are intended to compensate.
Income tax
The income tax expense or benefit for the period is the tax payable on
that period’s taxable income based on the applicable income tax rate
for each jurisdiction, adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused tax losses and
the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary
differences at the tax rates expected to be applied when the assets are
recovered or liabilities are settled, based on those tax rates that are
enacted or substantively enacted, except for:
• When the deferred income tax asset or liability arises from
the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at
the time of the transaction, affects neither the accounting nor
taxable profits; or
• When the taxable temporary difference is associated with
interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences
and unused tax losses only if it is probable that future taxable amounts
will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax
assets are reviewed at each reporting date. Deferred tax assets
recognised are reduced to the extent that it is no longer probable that
future taxable profits will be available for the carrying amount to be
recovered. Previously unrecognised deferred tax assets are recognised
to the extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a
legally enforceable right to offset current tax assets against current tax
liabilities and deferred tax assets against deferred tax liabilities; and
they relate to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle simultaneously.
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.
Discontinued operations
A discontinued operation is a component of the Group that has been
disposed of or is classified as held for sale and that represents a
separate major line of business or geographical area of operations, is
part of a single co-ordinated plan to dispose of such a line of business or
area of operations, or is a subsidiary acquired exclusively with a view to
resale. The results of discontinued operations are presented separately
on the face of the statement of profit or loss and other comprehensive
income.
Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is classified as current when: it is either expected to be realised
or intended to be sold or consumed in the Group’s normal operating
cycle; it is held primarily for the purpose of trading; it is expected to
be realised within 12 months after the reporting period; or the asset is
cash or cash equivalent unless restricted from being exchanged or used
to settle a liability for at least 12 months after the reporting period. All
other assets are classified as non-current.
A liability is classified as current when: it is either expected to be settled
in the Group’s normal operating cycle; it is held primarily for the purpose
of trading; it is due to be settled within 12 months after the reporting
period; or there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period. All other
liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as non-current.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call
with financial institutions, other short-term, highly liquid investments
with original maturities of three months or less that are readily
convertible to known amounts of cash and which are subject to an
insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently
measured at amortised cost using the effective interest method,
less any allowance for expected credit losses. Trade receivables are
generally due for settlement within 30 days.
The Group has applied the simplified approach to measuring expected
credit losses, which uses a lifetime expected loss allowance. To
measure the expected credit losses, trade receivables have been
grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance
for expected credit losses.
Inventories
Raw materials, work in progress and finished goods are stated at the
lower of cost and net realisable value on a ‘first in first out’ basis. Cost
comprises of direct materials and delivery costs, direct labour, import
duties and other taxes, an appropriate proportion of variable and fixed
overhead expenditure based on normal operating capacity, and, where
applicable, transfers from cash flow hedging reserves in equity. Costs
of purchased inventory are determined after deducting rebates and
discounts received or receivable.
PARAGON CARE — FINANCIAL REPORT 2021
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Stock in transit 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.
Stock on hand is stated at the lower of cost and net realisable value.
Cost comprises of purchase and delivery costs, net of rebates and
discounts received or receivable.
Net realisable value is the estimated selling price in the ordinary course
of business less the estimated costs of completion and the estimated
costs necessary to make the sale.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative
contract is entered into and are subsequently remeasured to their fair
value at each reporting date. The accounting for subsequent changes in
fair value depends on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the
expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the Group’s exposure to variability
in cash flows that is attributable to particular risks associated with a
recognised asset or liability or a firm commitment which could affect
profit or loss. The effective portion of the gain or loss on the hedging
instrument is recognised in other comprehensive income through the
cash flow hedges reserve in equity, whilst the ineffective portion is
recognised in profit or loss. Amounts taken to equity are transferred out
of equity and included in the measurement of the hedged transaction
when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis both
retrospectively and prospectively to ensure that each hedge is highly
effective and continues to be designated as a cash flow hedge. If the
forecast transaction is no longer expected to occur, the amounts
recognised in equity are transferred to profit or loss.
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.
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.
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.
31
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.
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 are depreciated over the unexpired period of
the lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal
or when there is no future economic benefit to the Group. Gains and
losses between the carrying amount and the disposal proceeds are
taken to profit or loss.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as applicable, any
lease payments made at or before the commencement date net of any
lease incentives received, any initial direct costs incurred, and, except
where included in the cost of inventories, an estimate of costs expected
to be incurred for dismantling and removing the underlying asset, and
restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the Group expects to obtain ownership
of the leased asset at the end of the lease term, the depreciation is over
its estimated useful life. Right-of use assets are subject to impairment
or adjusted for any remeasurement of lease liabilities.
Right-of-use assets that meet the definition of investment property
are measured at fair value where the Group has adopted a fair value
measurement basis for investment property assets.
The Group has elected not to recognise a right-of-use asset and
corresponding lease liability for short-term leases with terms of 12
months or less and leases of low-value assets. Lease payments on
these assets are expensed to profit or loss as incurred.
Intangible assets
Intangible assets acquired as part of a business combination, other
than goodwill, are initially measured at their fair value at the date of
the acquisition. Intangible assets acquired separately are initially
recognised at cost. Indefinite life intangible assets are not amortised
and are subsequently measured at cost less any impairment. Finite life
intangible assets are subsequently measured at cost less amortisation
PARAGON CARE — FINANCIAL REPORT 2021
32
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Borrowings
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
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.
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.
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.
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.
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
rate specific to the liability. The increase in the provision resulting from
the passage of time is recognised as a finance cost.
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.
PARAGON CARE — FINANCIAL REPORT 2021 33
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Fair value measurement
Equity-settled transactions are awards of shares, or options over
shares, that are provided to employees in exchange for the rendering of
services. Cash-settled transactions are awards of cash for the exchange
of services, where the amount of cash is determined by reference to the
share price.
The cost of equity-settled transactions are measured at fair value on
grant date. Fair value is independently determined using either the
Binomial or Black-Scholes option pricing model that takes into account
the exercise price, the term of the option, the impact of dilution, the
share price at grant date and expected price volatility of the underlying
share, the expected dividend yield and the risk free interest rate for
the term of the option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle the
employees to receive payment. No account is taken of any other vesting
conditions.
The cost of equity-settled transactions are recognised as an expense
with a corresponding increase in equity over the vesting period. The
cumulative charge to profit or loss is calculated based on the grant
date fair value of the award, the best estimate of the number of awards
that are likely to vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the cumulative
amount calculated at each reporting date less amounts already
recognised in previous periods.
The cost of cash-settled transactions is initially, and at each reporting
date until vested, determined by applying either the Binomial or Black-
Scholes option pricing model, taking into consideration the terms and
conditions on which the award was granted. The cumulative charge to
profit or loss until settlement of the liability is calculated as follows:
• during the vesting period, the liability at each reporting date is
the fair value of the award at that date multiplied by the expired
portion of the vesting period.
• from the end of the vesting period until settlement of the award,
the liability is the full fair value of the liability at the reporting
date.
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.
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.
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.
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
PARAGON CARE — FINANCIAL REPORT 2021 34
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 2. Significant accounting policies (continued)
Rounding of amounts
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.
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.
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
2021. 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.
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 2021
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 2021
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 2021 36
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 5. Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers, in respect of continuing operations, is as follows:
Major product lines
Devices Product Line
Diagnostic Product line
Capital and Consumables 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
Rental income
Rent concessions arising from COVID-19
Other income
Other income
2021
$’000
85,847
25,864
105,175
18,954
235,840
187,028
47,481
1,331
235,840
216,886
18,954
235,840
2021
$’000
80
-
1,410
1,490
2020
$’000
74,962
23,228
105,755
27,744
231,689
188,528
41,527
1,635
231,689
203,945
27,744
231,689
2020
$’000
-
131
-
131
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 7. Employee benefits expense
Payroll costs
Defined contributions superannuation expense
Share-based payments expense
JobKeeper subsidy
Total employee benefits expense
Share-based payments expense
37
2020
$’000
46,577
3,082
-
(2,981)
46,678
2021
$’000
47,591
3,041
69
(3,475)
47,226
On 22 February 2021, the company granted 6,725,736 Performance Rights (‘PRs’) to members of the leadership team for nil consideration. These
PRs have been granted in accordance with performance guidelines established by the Nomination and Remuneration Committee. The PRs vest in
three tranches and are dependent upon achievement of market conditions over the vesting period.
The fair value of the PRs is determined using the Binomial option pricing model that takes into account among other things, the exercise price,
the term of the PR, 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 PR.
The share-based payments expense recognised for the year ended 30 June 2021 is $69,000 (30 June 2020: $nil).
JobKeeper subsidy
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 employee benefits expense in the financial statements. The JobKeeper payment
scheme ran for the fortnights from 30 March 2020 until 27 September 2020. The Group was eligible for JobKeeper support from the government on
the condition that employee benefits continue to be paid.
NOTE 8. Depreciation and amortisation expense
Depreciation - Land and buildings
Depreciation - Leasehold improvements
Depreciation - Plant and equipment
Depreciation - Motor vehicles
Depreciation - Buildings right-of-use assets
Amortisation - Website
Amortisation - Contracts
Amortisation - Software development costs
Amortisation - R&D Projects (under construction)
2021
$’000
-
76
2,715
108
3,056
21
-
224
-
6,200
2020
$’000
34
224
3,029
87
3,998
73
393
199
16
8,053
PARAGON CARE — FINANCIAL REPORT 2021 38
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 9. Impairment of other assets
Sundry debtors
Buildings (note 19)
Leasehold improvements (note 19)
Plant and equipment (note 19)
Land and buildings - right-of-use (note 20)
Contracts (note 21)
Software development costs (note 21)
R&D projects (under construction) (note 21)
2021
$’000
-
-
-
-
-
-
-
-
-
2020
$’000
1,230
311
1,174
1,528
1,300
1,469
6,129
875
14,016
During the prior year the Group had undertaken a restructure of its business operations. This 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 were in the process of being closed. In addition the Group had 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 believed
will produce economic benefits in the future. The Group identified the costs associated with the ERP system implemented over the last two years
required a write off and required a complete re-implementation.
NOTE 10. Other expenses
Management consulting fees
Professional fees
Information technology
Travel costs
Allowance for expected credit losses
Net (gain)/loss on sale of assets
Net foreign exchange loss
Other corporate costs
NOTE 11. 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
2021
$’000
2,355
1,536
3,239
1,222
358
(8)
149
2,090
10,941
2021
$’000
5,142
2,033
837
8,012
2020
$’000
2,860
1,625
2,843
2,910
940
117
295
3,534
15,124
2020
$’000
4,783
826
1,455
7,064
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 12. 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
Non-deductible costs
Adjustment recognised for prior periods
Income tax expense/(benefit)
Amounts charged/(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
2020
$’000
607
(7,922)
567
(6,748)
(5,603)
(1,145)
(6,748)
2021
$’000
612
3,718
(278)
4,052
4,052
-
4,052
3,718
(7,922)
12,331
-
12,331
(77,203)
(6,814)
(84,017)
3,699
(25,205)
-
631
4,330
(278)
17,170
720
(7,315)
567
4,052
(6,748)
478
(10)
-
-
4,764
4,764
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 2021 40
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 12. 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
Borrowing costs
Trade and other receivables
Foreign exchange gains/(losses)
Other assets
Non-deductible capital expenditure
Amounts recognised in equity:
Derivative financial instruments
Deferred tax asset
Movements:
Opening balance
Credited/(charged) to profit or loss
Credited/(charged) to equity
Unders/overs
Closing balance
Income tax refund due
Income tax refund due
2021
$’000
2020
$’000
1,245
(17)
1,912
1,409
355
914
3,352
555
81
212
168
66
724
10,976
5,148
112
1,697
628
513
1,374
3,466
-
-
-
(82)
295
1,266
14,417
(138)
340
10,838
14,757
14,757
(3,718)
(478)
277
10,838
7,392
7,922
10
(567)
14,757
407
70
PARAGON CARE — FINANCIAL REPORT 2021
41
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 13. Discontinued operations
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 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.
Financial performance information
Sale of goods
Cost of sales
Gross profit
Employee benefits expense
Depreciation and amortisation expense
Impairment
Occupancy expenses
Other expenses
Total expenses
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit from discontinued operations
NOTE 14. Cash and cash equivalents
Current assets
Cash at bank and on hand
NOTE 15. Trade and other receivables
Current assets
Trade receivables
Less: Allowance for expected credit losses
Total assets
Other receivables
2021
$’000
-
-
-
-
-
-
-
-
-
-
-
-
2021
$’000
33,197
33,197
2021
$’000
26,659
(708)
25,951
250
26,201
2020
$’000
84
(6)
78
(360)
(3)
(6,177)
(21)
(331)
(6,892)
(6,814)
1,145
(5,669)
2020
$’000
24,505
24,505
2020
$’000
30,308
(940)
29,368
2,206
31,574
PARAGON CARE — FINANCIAL REPORT 2021 42
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 15. Trade and other receivables (continued)
Allowance for expected credit losses
The Group has recognised a loss of $33,000 (30 June 2020: $940,000) in profit or loss in respect of the expected credit losses for the year ended 30
June 2021. The Group does not believe that the recovery of its trade receivables will be materially impacted by COVID-19. 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 COVID-19
pandemic.
The ageing of the receivables and allowance for expected credit losses provided for above are as follows:
Expected credit loss rate
Carrying amount
Allowance for expected
credit loss rate
Not overdue
0 to 3 months overdue
3 to 6 months overdue
Over 6 months overdue
2021
%
-
17%
37%
100%
2020
%
-
8%
29%
93%
2021
$’000
24,004
2,046
406
203
2020
$’000
25,122
4,071
690
425
26,659
30,308
Movements in the allowance for expected credit losses are as follows:
Opening balance
Additional provisions recognised
Bad debt written off against provision
Closing balance
NOTE 16. Inventories
Raw materials - at a cost
Finished goods - at cost
Stock in transit - at cost
Less: Provision for impairment
2021
$’000
-
354
151
203
708
2021
$’000
940
33
(265)
708
2020
$’000
-
345
198
397
940
2020
$’000
-
940
-
940
2021
$’000
1,414
56,787
4,540
(11,163)
51,578
2020
$’000
950
55,563
1,704
(11,555)
46,662
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 16. Inventories (continued)
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
Inventory written off against provision
Balance at the end of the financial year
43
2021
$’000
(11,555)
(3,175)
-
3,567
(11,163)
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.
Prior to the 2020 financial year, 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%.
NOTE 17. Other assets
Current assets
Prepayments
Security deposits
NOTE 18. Non-current assets classified as held for sale
Current assets
Land and buildings
The land and buildings situated at 19-21 Peninsula Boulevard, Seaford VIC was sold on the 3 August 2020.
2021
$’000
1,279
134
1,413
2021
$’000
-
-
2020
$’000
1,694
-
1,694
2020
$’000
1,800
1,800
PARAGON CARE — FINANCIAL REPORT 2021 44
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 19. Property, plant and equipment
Non-current assets
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
2021
$’000
3,488
(959)
-
2,529
29,104
(24,270)
-
4,834
1,174
(1,073)
101
7,464
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 1 July 2019
Additions
Classified as held for sale (note 18)
Impairment of assets (note 8)
Depreciation expense
Balance at 30 June 2020
Additions
Disposals
Depreciation expense
Balance at 30 June 2021
Land and
buildings
$’000
2,145
-
(1,800)
(311)
(34)
-
-
-
-
-
Leasehold
improvements
$’000
3,335
371
-
(1,174)
(224)
2,308
297
-
(76)
2,529
Plant and
equipment
$’000
Motor
vehicles
$’000
7,213
1,944
-
(1,528)
(3,029)
4,600
3,031
(82)
(2,715)
4,834
363
-
-
-
(87)
276
-
(67)
(108)
101
2020
$’000
4,365
(883)
(1,174)
2,308
27,683
(21,555)
(1,528)
4,600
1,241
(965)
276
7,184
Total
$’000
13,056
2,315
(1,800)
(3,013)
(3,374)
7,184
3,328
(149)
(2,899)
7,464
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 20. Right-of-use assets
Non-current assets
Land and buildings - right-of-use
Less: Accumulated depreciation
45
2020
$’000
21,953
(7,688)
14,265
2021
$’000
19,052
(10,020)
9,032
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 2019
Additions
Reductions due to lease modifications
Impairment of assets (note 9)
Depreciation expense
Balance at 30 June 2020
Additions
Reductions due to lease modifications
Depreciation expense
Balance at 30 June 2021
For other AASB 16 and lease related disclosures, refer to the following:
• Refer note 11 for details of interest on lease liabilities and other lease payments;
• Refer note 24 for lease liabilities and maturity analysis at 30 June 2021; and
• Refer consolidated statement of cash flows for repayment of lease liabilities.
$’000
20,923
1,640
(3,000)
(1,300)
(3,998)
14,265
1,127
(3,304)
(3,056)
9,032
PARAGON CARE — FINANCIAL REPORT 2021 46
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 21. Intangibles
Non-current assets
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
2021
$’000
2020
$’000
221,700
(72,699)
149,001
329
(145)
184
-
-
-
-
5,345
(3,182)
-
2,163
212
(186)
-
26
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)
-
151,374
149,660
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:
Software
development
costs
R&D Projects
(under
construction)
Balance at 30 June 2019
Additions
Acquisition accounting
Disposals
Exchange differences
Impairment of assets - discontinued
operations
Impairment of assets
Amortisation expense
Balance at 30 June 2020
Additions
Acquisition accounting
Disposals
Impairment of assets (note 8)
Amortisation expense
Goodwill
$’000
196,184
-
9,433
-
619
(3,000)
(54,235)
-
149,001
-
-
-
-
Balance at 30 June 2021
149,001
Website
$’000
278
-
-
-
-
-
-
(73)
205
-
-
-
(21)
184
Contracts
$’000
1,742
120
-
-
-
-
(1,469)
(393)
-
-
-
-
-
-
$’000
5,876
4,180
-
(98)
-
(3,177)
(6,128)
(199)
454
1,933
-
-
(224)
2,163
$’000
241
650
-
-
-
-
(875)
(16)
-
26
-
-
-
Total
$’000
204,321
4,950
9,433
(98)
619
(6,177)
(62,707)
(681)
149,660
1,959
-
-
(245)
26
151,374
PARAGON CARE — FINANCIAL REPORT 2021 47
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 21. Intangibles (continued)
Impairment testing
Goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to
impairment testing on an annual basis or whenever there is an indication of impairment.
In testing whether goodwill is impaired, it is to be allocated to each cash generating unit (‘CGU’). In identifying the groups of assets that constitute a
CGU, it is the smallest group that generates largely independent cash inflows and cannot be larger than the Group’s reportable operating segments
before aggregation.
Under AASB 136, paragraph 68, an asset’s cash-generating unit is the smallest group of assets that includes the asset and generates cash inflows
that are largely independent of the cash inflows from other assets (or groups of assets). The Group views that its past business combinations giving
rise to Goodwill on acquisition relate to synergistic opportunities for its medical equipment operating and reportable segment. Therefore, it has been
determined that the Group has one CGU which also has a common management structure.
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 $67 million more
than the current book value as at 30 June 2021.
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. Discount rates applied to the future cashflows from the business have been reduced from 30 June 2020 following the increase on 2019 due to
the increased general business risk associated with the economic downturn being experienced across the economy at that time due to COVID. The pre-
tax discount rate of 12.5% has been used (14.6% in 2020) reflecting the decreased general business risk.
Key assumptions used for the discounted cash flow projections:
Revenue growth rate beyond first 2 years
Pre-tax discount rate
Terminal growth rate
Sensitivity
Rate
%
4.00%
12.5%
1.25%
As disclosed in note 3, the directors have made judgements and estimates in respect of impairment testing of goodwill. The calculations for
discounted cashflow valuation of the business on the value in use of the business were subject to sensitivity testing. This testing included a test
case for 5% lower sales which resulted in an operating cash flow generating a net present value of $205.8 million, $13.7million more than the
current book value and a test case for 5% higher Operating Expenses which resulted in an operating cash flow generating a net present value of
$221.2 million, $29.2 million more than the carrying value.
All things being equal, either the revenue growth rate would need to drop from 4% to 2.64% or the pre-tax discount rate would need to increase from
12.5% to 16.2% for the recoverable amount to equal the carrying amount.
Management believes that other reasonable changes in the key assumptions on which the recoverable amount of goodwill is based would not cause
the cash-generating unit’s carrying amount to exceed its recoverable amount. If there are any negative changes in the key assumptions on which the
recoverable amount of goodwill is based, this would result in a further impairment charge for goodwill.
PARAGON CARE — FINANCIAL REPORT 2021 48
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 22. Trade and other payables
Current liabilities
Trade payables
Goods and services tax payable
Other payables
Refer to note 31 for further information on financial instruments.
NOTE 23. Borrowings
Current liabilities
Bank loans
Trade finance facility
Hire purchase
Non-current liabilities
Bank loans
Hire purchase
2021
$’000
30,216
1,118
4,766
36,100
2021
$’000
6,000
15,587
207
21,794
80,397
74
80,471
2020
$’000
20,900
1,351
4,670
26,921
2020
$’000
4,500
11,447
820
16,767
81,897
262
82,159
Refer to note 31 for further information on financial instruments.
Assets pledged as security
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 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. In May 2021, Paragon Care announced that the Company’s
banking facilities were successfully renegotiated with NAB. The new 3-year banking contract extends to July 2024 and the new covenants were
designed to support the future growth of the business.
PARAGON CARE — FINANCIAL REPORT 2021
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 23. Borrowings (continued)
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
49
2021
$’000
86,575
28,500
2,800
2020
$’000
98,075
15,000
2,599
117,875
115,674
86,397
15,587
1,309
103,293
178
12,913
1,491
14,582
86,397
11,447
1,344
99,188
11,678
3,553
1,255
16,486
PARAGON CARE — FINANCIAL REPORT 2021 50
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 24. Current liabilities - lease liabilities
Current liabilities
Lease liability
Non-current liabilities
Lease liability
The maturity analysis for lease liabilities is as follows:
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 30 June
Lease liabilities included in the statement of financial position
Lease liabilities included in the statement of financial position at 30 June
NOTE 25. Derivative financial instruments
Current Asset
Forward foreign exchange contracts - cash flow hedges
Current liabilities
Forward foreign exchange contracts - cash flow hedges
Interest rate swap contracts - derivative liability
Refer to note 31 for further information on financial instruments.
Refer to note 32 for further information on fair value measurement.
NOTE 26. Vendor conditional payables
Current liabilities
Vendor conditional payables
2021
$’000
2020
$’000
3,648
3,722
7,098
12,380
2021
$’000
4,122
5,824
1,380
11,326
2020
$’000
3,894
9,217
5,265
18,376
10,746
16,102
2021
$’000
416
416
2021
$’000
-
3,047
3,047
2021
$’000
-
-
2020
$’000
-
-
2020
$’000
1,134
4,577
5,711
2020
$’000
15,331
15,331
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 26. Vendor conditional payables (continued)
Summary of vendor earnout is as follows:
Vendor payable from acquisitions during the year
Vendor payable from prior period acquisitions
Payments of $15,331,000 were made in the year in satisfaction of the conditional payables.
NOTE 27. Other liabilities
Current liabilities
Accrued expenses
Deferred revenue
NOTE 28. Issued capital
51
2020
$’000
-
15,331
15,331
2020
$’000
10,146
1,707
11,853
2021
$’000
-
-
-
2020
$’000
11,719
1,001
12,720
Ordinary shares - fully paid
337,885,292
337,885,292
2021
Shares
2020
Shares
2021
$’000
113,952
2020
$’000
202,718
Movements in ordinary share capital
Balance
Balance
Capital reduction under section 258F(1) of the Corporations Act
Balance
Ordinary shares
Date
Shares
$’000
1 July 2019
337,885,292
202,718
30 June 2020
337,885,292
31 May 2021
-
202,718
(88,766)
30 June 2021
337,885,292
113,952
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.
Capital Reduction
The Board has resolved to reduce Paragon Care’s share capital by $88,766,000 in accordance with Section 258F of the Corporations Act. The capital
reduction will have the effect of reducing the share capital account and reducing Paragon Care’s accumulated accounting losses. This is a technical
adjustment which does not require shareholder approval and allows the Company to pay future franked dividends. The capital reduction has no impact
on Paragon Care’s assets, nets assets, financial results, cash flow or funding or that of the Paragon Care Group. The number of shares on issue will not
change as a result of the capital reduction.
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.
PARAGON CARE — FINANCIAL REPORT 2021
52
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 28. Issued capital (continued)
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 30 June 2020 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 29. Reserves
Foreign currency translation reserve
Hedging reserve - cash flow hedges
Options reserve
Dividend Reserve
Foreign currency translation reserve
Note
23
23
14
2021
$’000
21,794
80,471
102,265
(33,197)
69,068
121,518
190,586
2020
$’000
16,767
82,159
98,926
(24,505)
74,421
112,281
186,702
36%
40%
2021
$’000
(1,073)
291
69
8,279
7,566
2020
$’000
(877)
(794)
-
-
(1,671)
The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian
dollars.
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.
PARAGON CARE — FINANCIAL REPORT 2021
53
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 29. Reserves (continued)
Option reserve
The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as
part of their compensation for services.
Dividend reserve
At 31 December 2020, the Company created a Dividend reserve to transfer profits generated during this half year and in future periods to ensure
profits are available for distribution to shareholders in future years rather than being offset against accumulated losses.
Movements in reserves
Movements in each class of reserve during the current and previous financial year are set out below:
Balance at 1 July 2019
Foreign currency translation
Net investment hedge
Balance at 30 June 2020
Deferred tax
Foreign currency translation
Net investment hedge
Share-based payments
Transfer of profit from retained earnings
Foreign
currency
translation
reserve
Hedging
reserve -
cash flow
hedges
$’000
891
(1,768)
-
(877)
-
(196)
-
-
-
$’000
204
-
(998)
(794)
138
-
947
-
-
Balance at 30 June 2021
(1,073)
291
Option
reserve
$’000
Dividend
reserve
$’000
-
-
-
-
-
-
-
69
-
69
-
-
-
-
-
-
-
-
8,279
8,279
Total
$’000
1,095
(1,768)
(998)
(1,671)
138
(196)
947
69
8,279
7,566
NOTE 30. Dividends
Dividends
There were no dividends paid or declared during the current or previous financial year. Subsequent to year end, in keeping with directors
confidence in Paragon Care, the directors have declared the payment of a fully franked final dividend of $3,378,853 (1 cents per fully paid ordinary
share) to be paid on 1st of October 2021 in respect of the financial year ended 30 June 2021. The dividend payment will be fully underwritten by
Taylor Collison Limited and therefore not impact the company’s cash or net debt position.
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
2021
$’000
17,703
17,703
2020
$’000
16,521
16,521
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
PARAGON CARE — FINANCIAL REPORT 2021 54
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 31. Financial instruments
Financial risk management objectives
The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency risk and interest rate risk), credit risk and liquidity
risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse
effects on the financial performance of the Group. The Group uses derivative financial instruments such as forward foreign exchange contracts to
hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments.
Risk management is carried out by senior finance executives (‘finance’) under policies approved by the Board of Directors (‘the Board’). These policies
include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates
and hedges financial risks within the Group’s operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate
fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency
that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting.
In order to protect against exchange rate movements, the Group has entered into forward foreign exchange contracts. These contracts are hedging
highly probable forecasted cash flows for the ensuing financial year. Management has a risk management policy to hedge between 20% and 100% of
anticipated foreign currency transactions for the subsequent 24 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
Interest rate risk
2021
$’000
18,935
12,851
10,645
503
42,934
2020
$’000
16,786
11,840
10,471
455
39,552
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 $71,000,000 as at 30 June 2021.
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
2021
$’000
2020
$’000
33,197
24,505
(21,587)
(207)
(9,397)
(71,074)
(3,047)
(15,947)
(820)
(6,897)
(75,262)
(4,577)
(105,313)
(103,503)
PARAGON CARE — FINANCIAL REPORT 2021 55
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 31. Financial instruments (continued)
For the Group bank loans outstanding, totalling $102,266,000 (2020: $98,926,039), are principal and interest payment loans. Of this, $71,000,000
(2020: $75,000,000) 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 $30,984,000
(2020: $22,844,333). Monthly cash outlays of approximately $391,542 (2020: $396,890) per month are required to service the interest payments. An
official increase/decrease in interest rates of 100 (2020: 100) basis points would have an adverse/favourable effect on profit before tax of $309,840
(2020: $228,443) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. In
additional, minimum principal repayments of $6,000,000 (2020: $4,500,000) are due during the year ending 30 June 2022 (2020: 30 June 2021).
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
2021
$’000
178
12,913
1,491
14,582
2020
$’000
11,678
3,553
1,255
16,486
Remaining contractual maturities
The following tables detail the Group’s remaining contractual maturity for its non-derivative 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.
Group 2021
Non-derivatives
Non-interest bearing
Interest-bearing - variable
Interest-bearing - fixed rate
Total non-derivatives
Derivatives
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
-
3.19%
5.25%
-
-
-
36,098
20,072
104
56,274
-
-
-
1,500
104
1,604
3,047
3,047
-
7,000
74
7,074
-
-
-
2,397
71,000
73,397
36,098
30,969
71,282
138,349
-
-
3,047
3,047
PARAGON CARE — FINANCIAL REPORT 2021 56
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 31. Financial instruments (continued)
Group 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
-
2.74%
4.00%
-
-
-
-
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
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
NOTE 32. Fair value measurement
Fair value hierarchy
The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level
of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly
Level 3: Unobservable inputs for the asset or liability
Group 2021
Assets
Level 1
$’000
Level 2
$’000
Level 3
$’000
Forward foreign exchange contract - cashflow hedges
Total Assets
-
-
416
416
-
-
Total
$’000
416
416
Group 2021
Liabilities
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Interest rate swap contracts - derivative liability
Total liabilities
-
-
(3,047)
(3,047)
-
-
(3,047)
(3,047)
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 32. Fair value measurement (continued)
Group 2020
Liabilities
57
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)
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.
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 2019
Additions
Disposals
Balance at 30 June 2020
Additions during the year
Payments during the year
Balance at 30 June 2021
Vendor conditional payable
$’000
(9,673)
(9,183)
3,525
(15,331)
-
15,331
-
NOTE 33. Key management personnel disclosures
Compensation
The aggregate compensation made to directors and other members of key management personnel of the Group is set out below:
Short-term employee benefits
Termination benefits
Post-employment benefits
Share -based payment
2021
$
2020
$
1,272,267
1,116.350
-
58,592
18,341
528,438
60,770
-
1,349,200
1,705,558
PARAGON CARE — FINANCIAL REPORT 2021 58
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 34. Remuneration of auditors
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
2021
$
2020
$
186,500
216,000
115,430
83,520
198,950
385,450
67,675
33,400
101,075
317,075
28,500
48,615
-
28,500
12,165
60,780
NOTE 35. Contingent liabilities / assets / commitments
The Group has given bank guarantees as at 30 June 2021 of $1,467,196 (30 June 2020: $5,004,123).
Legal proceedings
The Company’s legal proceedings were settled on 7 December 2020. The litigation was settled through mediation with the Defendants and their
legal representatives. The details of the mediation and the outcome of the settlement terms are confidential and privileged. The Company will not
be commenting further in relation to them.
There were no contingent assets as at 30 June 2021 and 30 June 2020.
There were no capital commitments as at 30 June 2021 and 30 June 2020.
NOTE 36. Related party transactions
Parent entity
Paragon Care Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 38.
Key management personnel
Disclosures relating to key management personnel are set out in note 33 and the remuneration report included in the directors’ report.
Transactions with related parties
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 $148,500 (30 June 2020: $90,000) of which Charkroo was entitled to $63,113 (30 June 2020: $38,250).
Mark Simari, director, is a shareholder of Akita Consulting. Akita Consulting are contracted to provide consultancy services for potential business
opportunities that arise from time to time. There were no transactions or balances payable with this business during the current or prior financial year.
Brent Stewart, director, was a director of Brent Michael Stewart and Michelle Jane Stewart ATF the Brent Stewart Superannuation Fund, when it
received $1,365,178 (2020: $1,193,894) during the financial year for Surgical Specialties Pty Ltd earn out payment.
Geoff Sam, director, is a director for HealtheCare Surgical. HealtheCare is a client of the group, purchasing $3,187,809 (2020:$3,278,137) of products
during the year.
Receivable from and payable to related parties
Geoff Sam, director, is a director for HealtheCare Surgical. At 30 June 2021 HealtheCare owes the Group $412,072 (2020:$532,313).
There were no other trade receivables from or trade payables to related parties at the current and previous reporting date.
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 36. Related party transactions (continued)
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.
NOTE 37. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Hedging reserve - cash flow hedges
Options reserve
Accumulated losses
59
2021
$’000
(3,387)
(3,387)
2021
$’000
2020
$’000
(3,536)
(3,536)
2020
$’000
615
3,531
154,845
157,810
2,274
4,813
113,952
(546)
69
36,557
715
716
202,530
(546)
-
(44,890)
Total equity
150,032
157,094
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 2021 and 30 June 2020.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2021 and 30 June 2020.
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 2021 60
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 38. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting
policy described in note 2:
Name
Paragon Care Group New Zealand Management
Services Ltd
Paragon Care Group New Zealand Ltd
Paragon Care Group Management Services Pty Ltd
Paragon Care Group Australia Pty Ltd
Paragon Care Group Holding Company Pty Ltd
Medtek Pty Ltd*
Paragon Medical Ltd*
Designed for Vision Ltd*
REM Systems Ltd*
REM Systems Pty Ltd*
Meditron Pty Ltd*
Western Biomedical Pty Ltd*
Designs For Vision Holdings Pty Ltd*
Designs For Vision (Aust) Pty Ltd*
Designs For Vision Pty Ltd*
Electro Medical Group Pty Ltd*
MIDAS Software Solutions Pty Ltd*
Immulab Pty Ltd*
Insight Surgical Pty Ltd*
MedTech Solution Pty Ltd*
Surgical Specialities Holdings Pty Ltd*
Surgical Specialities Group Pty Ltd*
Surgical Specialities Pty Ltd*
Therapy Specialities Pty Ltd*
Surgical Specialities (NZ) Ltd*
Therapy Specialities Ltd*
Pergamon Technologies Pty Ltd*
Immuno Pty Ltd*
Immuno Ltd*
Labgear Australia Pty Ltd*
Paragon Medical Pty Ltd*
Scanmedics Pty Ltd*
Lovell Surgical Supplies International Pty Ltd*
Lovell Surgical Supplies Pty Ltd*
Lovell Surgical Solutions Pty Ltd*
Total Communications Pty Ltd*
AXIS Health Pty Ltd**
Rapini Pty Ltd**
Paragon Healthcare Pty Ltd**
GM Medical Pty Ltd**
Iona Medical Products Pty Ltd**
Volker Australia Pty Ltd**
L.R. Instruments Pty Ltd**
Richards Medical Pty Ltd**
Unikits Pty Ltd**
*
**
Subsidiary of Paragon Care Group Holding Company Pty Ltd
Subsidiary of AH563 Pty Ltd
Principal place of business /
Country of incorporation
Ownership
2021 (%)
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
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
PARAGON CARE — FINANCIAL REPORT 2021 61
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 39. Deed of cross guarantee
The Company and its controlled entities, as listed in note 38 ‘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 40. Cash flow information
Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax (expense)/benefit for the year
Adjustments for:
Depreciation and amortisation
Impairment of goodwill
Impairment of other assets
Share based payments
Allowance for expected credit losses
Change in operating assets and liabilities:
(Increase)/decrease in trade and other receivables
Decrease/(increase) in inventories
Increase in income tax refund due
Increase in deferred tax assets
Decrease in derivative assets
Increase/(decrease) in trade and other payables
Increase in derivatives liabilities
Increase/(decrease) in employee benefits
2021
$’000
2020
$’000
8,279
(77,269)
6,200
-
-
69
(232)
6,207
(4,916)
(337)
3,919
(416)
9,790
(1,578)
478
8,053
57,235
17,192
-
940
11,421
4,745
5,666
(7,365)
294
(20,079)
4,577
(121)
Net cash from operating activities
27,463
5,287
Non-cash investing and financing activities
Reduction in lease liability arising from lease modification
2021
$’000
(2,049)
(2,049)
2020
$’000
(3,000)
(3,000)
PARAGON CARE — FINANCIAL REPORT 2021 62
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
NOTE 40. Cash flow information (continued)
Changes in liabilities arising from financing activities
Balance at 1 July 2019
Net cash from/(used in) financing activities
Reduction in lease liability arising from lease modification
Balance at 30 June 2020
Net cash from/(used in) financing activities
Reduction in lease liability arising from lease modification
Bank
loans
$’000
Trade finance
facility
$’000
Lease liability/
hire purchase
$’000
92,322
(5,925)
-
86,397
-
-
5,371
6,076
-
11,447
4,140
-
23,938
(3,754)
(3,000)
17,184
(4,108)
(2,049)
Total
$’000
121,631
(3,603)
(3,000)
115,028
32
(2,049)
Balance at 30 June 2021
86,397
15,587
11,027
113,011
Note 41. 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
2021
$’000
8,279
8,279
2020
$’000
(71,600)
(71,600)
2021
Number
2019
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
337,885,292
337,885,292
Adjustments for calculation of diluted earnings per share:
Performance rights
6,914,546
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
344,799,838
337,885,292
Basic earnings per share
Diluted earnings per share
2021
cents
2.45
2.40
2019
cents
(21.19)
(21.19)
PARAGON CARE — FINANCIAL REPORT 2021 Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
Note 41. Earnings per share (continued)
Discontinued operations
Earnings per share for loss from discontinued operations
Loss after income tax attributes to the owners of Paragon Care Limited
63
2021
$’000
2020
$’000
-
-
(5,669)
(5,669)
2021
Number
2020
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
337,885,292
337,885,292
Adjustments for calculation of diluted earnings per share:
Performance rights
-
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
337,885,292
337,885,292
Basic earnings per share
Diluted earnings per share
Overall profit/(loss)
Earnings per share for profit/(loss)
Profit/(loss) after income tax attributable to the owners of Paragon Care Limited
2021
cents
-
-
2021
$’000
8,279
8,279
2021
Number
2020
cents
(1.68)
(1.68)
2020
$’000
(77,269)
(77,269)
2020
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
Adjustments for calculation of diluted earnings per share:
Performance rights
337,885,292
337,885,292
6,914,546
-
Weighted average number of ordinary shares used in calculating diluted earnings per share
344,799,838
337,885,292
Basic earnings per share
Diluted earnings per share
2021
cents
2.45
2.40
2020
cents
(22.87)
(22.87)
PARAGON CARE — FINANCIAL REPORT 2021 64
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
Note 42. Share-based payments
Employee Incentive Plan (‘EIP’)
During the year, shareholders approved the Paragon Care Employee Incentive Plan (‘EIP’) at the 2018 Annual General
Meeting (‘AGM’).
The EIP is an employee equity plan developed to meet contemporary equity design standards and to provide the greatest possible flexibility in the
design and offer choices available in respect of various new equity schemes.
The EIP enables the Company to offer employees a range of different employee share scheme (‘ESS’) interests. These ESS interests of ‘awards’ include
options, performance rights, service rights, deferred shares, exempt shares, cash rights and stock appreciation rights.
The type of ESS interest that may be offered to employees will be determined by a number of factors, including:
• the remuneration or incentive purpose of the award;
• the tax jurisdiction that the participating employee lives and/or works in;
• the laws governing equity incentives where the participating employee lives and/or works; and
• the logistics and compliance costs associated with offering quality incentives where the participating employee lives and/or works.
Performance rights
Vesting conditions and important dates
The vesting conditions for performance rights granted on 26 April 2019 include 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 26 April 2019 is 31 August 2022 and will lapse on 30 September 2022 if not vested and exercised.
The vesting conditions for performance rights granted on 22 February 2021 include meeting the following:
• Tranche 1: One third to vest subject to continuous employment and a minimum share price of 30c being achieved in the financial year 2021
calculated on a 14-day VWAP;
•
•
Tranche 2: One third to vest subject to continuous employment and a minimum share price of 40c being achieved in the financial year 2022
calculated on a 14-day VWAP; and
Tranche 3: One third to vest subject to continuous employment and a minimum share price of 50c being achieved in the financial year 2023
calculated on a 14- day VWAP.
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 2021 65
Notes to and forming part of the Financial Statements Continued
For the year ended 30 June 2021
Note 42. Share-based payments (continued)
Summary of performance rights granted
Set out below are summaries of performance rights granted under the plan:
2021
Grant date
Expiry date
26/04/2019
22/02/2021
30/09/2022
30/09/2023
2020
Grant date
Expiry date
14/12/2018
26/04/2019
30/09/2021
30/09/2022
Balance at the
start of the year
318,574
-
318,574
Granted
-
6,725,736
6,725,736
Exercised Expired/forfeited/
other
Balance at the end
of the year
-
-
-
(129,764)
-
(129,764)
188,810
6,725,736
6,914,546
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
-
-
-
-
-
-
(228,119)
(315,312)
(543,431)
-
318,574
318,574
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year was 3 years.
For the performance rights granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date,
are as follows:
Grant date
22/02/2021
Expiry date
30/09/2023
Share price at grant date
Fair value at grant date
$0.2700
$0.0030
Note 43. Events after the reporting period
Outside of the dividend declared subsequent to balance date detailed in note 30, no other matter or circumstance has arisen since 30 June
2021 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 2021 66
Directors’
Declaration
For the year ended 30 June 2021
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 2021 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 39 to the financial
statements.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations
Act 2001.
On behalf of the directors
Shane Tanner
Chairman
27 August 2021
Melbourne
PARAGON CARE — FINANCIAL REPORT 2021 67
Auditor’s
Report
PARAGON CARE — FINANCIAL REPORT 2021 68
Auditor’s Report Continued
For the year ended 30 June 2021
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 2021,
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 2021 and of its financial
performance for the year then ended; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial
report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
PARAGON CARE — FINANCIAL REPORT 2021
Auditor’s Report Continued
For the year ended 30 June 2021
69
Key Audit Matters (continued)
Key Audit Matter
How our audit addressed this matter
Our audit procedures
to management’s
impairment assessment involved the assistance of our
Corporate Finance team where required, and included:
in relation
• Assessing management’s determination
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;
that
• Assessing the value-in-use calculations;
• Challenging the reasonableness of key assumptions,
including the cash flow projections, future growth rates,
discount rates and terminal values;
• Checking the mathematical accuracy of the cash flow
model and reconciling
to supporting
evidence, such as approved budgets and considering
the reasonableness of these budgets;
input data
• Reviewing management’s sensitivity analysis over the
key assumptions in the model and assessing whether
the assumptions have been applied on a consistent
basis across each scenario; and
• 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.
Impairment of Goodwill
Refer to Note 21 in the financial statements
As at 30 June 2021, 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 2021 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.
As a result of this exercise, no impairment of goodwill was
considered necessary during 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.
PARAGON CARE — FINANCIAL REPORT 2021
70
Auditor’s Report Continued
For the year ended 30 June 2021
Key Audit Matters (continued)
Inventory Valuation, including provision for inventory obsolescence
Refer to Note 16 in the financial statements
The Group’s inventory balance, as disclosed in Note 16,
consists primarily of finished goods of various medical
equipment held for distribution.
Our audit procedures in relation to the valuation of
inventory and provision for obsolescence included:
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
The Group carries a provision for inventory obsolescence
of $11.2 million (2020: $11.6 million) as a result of an
inventory review undertaken as part of the Group's sales
strategy and as a result of the impacts of COVID-19.
On the basis of the factors set out above, the valuation of
inventory was considered to be a Key Audit Matter.
• Obtained an understanding of key controls relating to
inventory management and its revised provision for
inventory obsolescence policy;
• Evaluating management’s assumptions and estimates
applied to the provision for obsolescence through
analysis of inventory ageing and historical sales levels
by inventory product from the date the product was
purchased in conjunction with assessing the quantity of
products held;
• Understanding
the provisioning methodology and
assessing the appropriateness thereof;
• Assessing and validating the key assumptions applied
the provision, by
in estimating
by management
performing enquiries of management and reviewing the
current purchasing strategy and rationalisation plans;
• Testing
the accuracy of
the process used by
management to identify potentially impaired inventory
across a representative sample of individual product
lines; and
• Assessing
the completeness and accuracy of
disclosures in relation to the accounting estimates
within the financial statements in accordance with the
Australian Accounting Standards.
PARAGON CARE — FINANCIAL REPORT 2021
Auditor’s Report Continued
For the year ended 30 June 2021
71
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 2021 was $235.8 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.
• Assessing whether the Group’s revenue recognition
policies were in compliance with the requirements of
AASB 15 Revenues from Contracts with Customers;
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.
• 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;
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.
• 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 2021, 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 2021
72
Auditor’s Report Continued
For the year ended 30 June 2021
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/admin/file/content102/c3/ar1_2020.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 2021.
In our opinion, the Remuneration Report of Paragon Care Limited, for the year ended 30 June 2021, 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: 27 August 2021
Melbourne, Victoria
PARAGON CARE — FINANCIAL REPORT 2021 73
Shareholder
Information
PARAGON CARE — FINANCIAL REPORT 2021 74
Shareholder Information
For the year ended 30 June 2021
Details of Shares and Performance Rights as at 13 August 2021:
Top Holders
The 20 largest holders of Fully Paid Ordinary Shares as at were:
Ordinary Shares
Name
PERPETUAL CORPORATE TRUST LTD
FIRST SAMUEL LTD ACN 086243567
BERNE NO 132 NOMINEES PTY LTD <737539 A/C>
CITICORP NOMINEES PTY LIMITED
BUTTONWOOD NOMINEES PTY LTD
JMT INVESTMENT GROUP VIC PTY LTD
NEGRONI HOLDINGS PTY LTD
MR PAUL ANDREW SCHOLLUM & MRS KATRINA MAREE CALDWELL & MRS DEBORAH ANNE MOSS
SHEMOZEL PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
JMT INVESTMENT GROUP VIC PTY LTD
NEWMELD PTY LTD
HEATH NOMINEES (AUST) PTY LTD
GRILLS INVESTMENTS PTY LTD
MRS MICHELLE STEWART & MR BRENT MICHAEL STEWART
MR PAUL ANDREW SCHOLLUM & MRS KATRINA MAREE CALDWELL & MRS DEBORAH ANNE MOSS
LORA FALLS PTY LTD
HEATH SUPER (AUST) PTY LTD
JOHN KEITH RADLEY & PAUL ANDREW SCHOLLUM
GRAYSON NOMINEES PTY LTD
Distribution Schedules
A distribution of each class of equity security as at 13 August 2021:
Fully Paid Ordinary Shares
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total holders
Number of shares
313
2,037
926
1,668
876
5,820
258,227,067
67,351,798
7,257,840
4,695,860
352,727
337,885,292
Unlisted Performance Rights – Issued under the Company’s Employee Incentive Plan
Number of Units
100,001 and Over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total holders
Number of shares
15
2
0
0
0
17
6,725,736
188,810
0
0
0
6,914,546
100.00
Units
% of Issued Shares
50,418,386
24,885,164
16,717,541
16,329,042
5,678,195
5,000,000
4,727,531
4,717,320
4,561,256
4,506,273
4,240,000
4,078,172
3,782,924
3,773,585
3,246,334
3,106,538
3,000,000
2,870,092
2,595,540
2,500,000
14.92
7.36
4.95
4.83
1.68
1.48
1.40
1.40
1.35
1.33
1.25
1.21
1.12
1.12
0.96
0.92
0.89
0.85
0.77
0.74
170,733,893
50.53
% Units
76.42
19.93
2.15
1.39
0.10
100.00
% Units
97.27
2.73
0.00
0.00
0.00
PARAGON CARE — FINANCIAL REPORT 2021 75
Shareholder information Continued
For the year ended 30 June 2021
Substantial shareholders
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:
Substantial shareholders
Pioneer Hong Kong Group
First Samuel Limited
No. of shares
57,856,735
26,674,651
%
14.92
7.89
Unmarketable parcels
Holdings less than a marketable parcel of ordinary shares (being 965,115 at $0.29 per share as at 27 July 2021):
Fully Paid Ordinary Shares
Holdings less than a marketable parcel
Holders
1,317
No. of shares
959,808
% of issue shares
0.28
Voting rights
The voting rights attaching to fully paid ordinary shares are:
On a show of hands every member present in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Unquoted Performance Rights do not carry any voting rights.
Additional shareholder information
The 2021 Annual General Meeting will be held on Thursday, 18 November 2021 at 1.00pm (Melbourne time). Further details relating to the meeting
will be advised in the Notice of Meeting to be sent to all Shareholders and released to ASX immediately upon despatch.
In accordance with rule 3.5(c) of the Company’s constitution, the Closing Date for Nomination of Director is Wednesday, 6 October 2021. Any
nomination must be received in writing no later than 5.00pm (Melbourne time) on Wednesday, 6 October 2021 at the Company’s Registered Office.
PARAGON CARE — FINANCIAL REPORT 2021