AN N UAL
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2014
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1. HIGHLIGHTS 2013/2014
3. CEO AND CHAIRMAN’S LETTER
5. FINANCIAL SUMMARY
7. BUSINESS BACKGROUND
9. GLOBAL LEADERSHIP TEAM
11. THE YEAR IN REVIEW
13. INTO THE FUTURE
15. FINANCIAL STATEMENTS
16. DIRECTOR’S REPORT
62. DIRECTOR’S DECLARATION
63. INDEPENDENT AUDITOR’S REPORT
65. ASX ADDITIONAL INFORMATION
66. CORPORATE GOVERNANCE
72. CORPORATE INFORMATION
FINANCIAL
SUMMARY
Profit turnaround
– NPAT $1.51 million for continuing
operations vs loss in previous year
Revenue of $14.27 million
– increase of 27.9%
Cash reserves of $15.26 million
– above historical levels
Strong balance sheet
– debt free
Dividend of 2.0c per share fully franked
BUSINESS
HIGHLIGHTS
First revenue from two major US contracts
Won third major US contract
– largest in company’s history
Contracted revenue stream
– $30 million plus over next six years
Visage 7 - increasing momentum in US
market
Australian Business improved.
HIGHLIGHTS
1
PROMEDICUS ANNUAL REPORT 2014 OUR REVENUE ROSE TO
$14.27 MILLION IN 2014,
AN INCREASE OF 28
PERCENT, WITH MUCH OF
THE GROWTH COMING FROM
OUR NORTH AMERICAN
BUSINESS.
CEO &
CHAIRMAN
LETTER
Dr Sam Hupert
Peter Kempen
Dear Shareholders,
The 2014 financial year was a
landmark year for Pro Medicus. We
saw our first revenue from two major
contracts in the US, with vRad, a
nationwide tele-radiology/remote
reading group, and with VISN23, a
mid-west based healthcare network
run by the US Department of Veterans
Affairs. We also won our biggest
contract ever, which will see us provide
Visage 7 to one of the largest health
networks in the US. These contracts
represent significant progress in the
strategy we adopted following our
acquisition of Visage Imaging in 2009.
That strategy is transforming the
company. Traditionally, Pro Medicus’
primary focus was as a provider
of RIS (Practice Management) and
related products to a largely Australian
customer base. Now, with our Visage
7 suite of products, we are well on the
way to becoming a major provider of
best in class 2D and 3D PACS and
advanced visualisation products to
a global market.
We were pleased to report a net profit
after tax of $1.51 million from our
continuing operations in 2014. This
was a welcome improvement on the
previous year, when we reported a
loss of $3.48 million which included
an after tax impairment expense of
$3.22 million relating to the write-off
of capitalised development costs.
The 2013 financial year also included
a contribution of $8.608 million from
“discontinued operations”, namely
the Amira software platform business,
which we sold in July 2012.
Our revenue rose to $14.27 million in
2014, an increase of 28 percent, with
much of the growth coming from our
North American business. We also saw
a stronger performance in Australia,
reversing a trend of recent years.
The contract with vRad is our 2nd
contract under an operational, or
fee for use, model. The operational
fee structure provides us with an
ongoing revenue stream over the life
of a contract, reflecting transaction
numbers, with minimum volumes
guaranteed. The contract with VISN23
is a more traditional capital contract
where the client pays license fees
upfront and then ongoing support and
maintenance over the contract period.
Our new contract with the large US
health system is also structured on
an operational model. The six year
contract has a total minimum value
of $20 million – the biggest contract
in the history of Pro Medicus. We
expect to start generating revenue
from the contract in the first half of
the 2015 financial year as we begin
implementing Visage 7 across the
client’s network.
It is expected to take 12 to 14 months
to fully roll out the technology across
the organisation because of the
large number of facilities it operates
and their geographical distribution.
This means revenue will build up
progressively over that period as the
technology goes live at more of the
client’s sites.
The major contracts we have won in
the US have significantly increased
our visibility in that market. They
also validate our technology in three
important segments of the radiology
market – Rays and vRad in the
tele-radiology market, VISN23 in a
government-run network and the
latest contract in the large Enterprise
Hospital space.
During the year we expanded our team
in North America to cater for the new
contracts and position ourselves to
address the many opportunities we
see in that market. Demand is being
driven by the explosion in the size of
the images generated by the latest
radiology equipment with Visage
7 uniquely well suited to handling
these huge data sets. At the same
time, there is a paradigm shift in the
way customers are purchasing this
technology, moving away from a
monolithic, single vendor solution
to a best in breed or “Deconstructed
PACS” model. This has resulted in
a growing pipeline of North American
opportunities that the company is
actively pursuing.
In Australia, revenue growth was
supported by sales of Visage RIS
(previously called Coral), the new RIS
platform we released last year. Over
the next 12 months we plan to move
the clients who have our traditional
RIS/practice management product
onto Visage RIS. We believe this will
create opportunities for further take-
up of Visage PACS in the Australian
market as clients learn about the
compelling benefits of the integrated
product.
Pro Medicus continued to generate
positive cash flow from operations
in 2014, and finished the year with
cash in hand of $15.26 million. This
was down from $18.02 million a year
earlier, primarily due to the payment
of dividends and further investments
in products and staff, but is still
high relative to historical levels. The
company remains debt free and we
believe we have sufficient reserves to
internally fund the organic growth of
the business.
Accordingly, your board was pleased
to declare dividends of 2.0 cents
per share, fully franked, for the year.
We believe our strong balance sheet
positions us well to maintain our
dividend policy as well as grow the
business in the years ahead.
Finally we would like to thank our
fellow directors and the capable and
hard-working teams at Pro Medicus
and Visage Imaging, all of whom
have made valued contributions to
our progress in 2014 positioning
us strongly for our future strategic
journey.
Yours faithfully
Peter Kempen
CHAIRMAN
Dr Sam Hupert
CHIEF EXECUTIVE OFFICE
3
PROMEDICUS ANNUAL REPORT 2014 FINANCIAL SUMMARY
PROFIT TURNAROUND
$2.23 MILLION
FROM CONTINUING
OPERATIONS
CASH RESERVES OF
$15.26 MILLION
– ABOVE HISTORICAL
LEVELS
STRONG BALANCE
SHEET– DEBT FREE
FINANCIAL
SUMMARY
YEAR
ENDED
30 JUNE 2014
ALL FIGURES IN $A
THOUSANDS UNLESS
OTHERWISE STATED
2014
$’000
14,447
+27.0%
-
-
14,447
+23.5%
2,273
-69.0%
1,509
-70.6%
2013
$’000
11,374
-0.04%
327
-89.1%
11,701
-18.7%
7,327
+190.2%
5,131
+186.5%
29,223
29,418
Revenues from Continuing Operations
Revenues from Discontinued Operations (Amira)
Total Revenues
Operating Profit Before Interest and Income Tax
Net Profit After Tax
Total Assets 30 June
Shareholders’ Funds 30 June
20,707
20,959
Net Tangible Assets per Share at 30 June (cents)
Earnings per Share (cents)
13.0
1.5
-70.6%
15.0
5.1
+183.3%
5
PROMEDICUS ANNUAL REPORT 2014 PRO MEDICUS IS A LEADING
PROVIDER OF RADIOLOGY
INFORMATION SYSTEMS (RIS)
AND PRACTICE MANAGEMENT
SOFTWARE.
THE ACQUISITION OF
VISAGE IMAGING IN 2009
TRANSFORMED THE COMPANY,
BRINGING TO OUR PRODUCT
OFFERING BEST-IN-CLASS 2D
AND 3D DIGITAL RADIOLOGY
(PACS) AND ADVANCED
VISUALISATION CLINICAL
CAPABILITIES.
BUSINESS
BACKGROUND
Pro Medicus is a leading provider of
Radiology Information system (RIS)
/ Practice Management software,
e-health and 2D/3D PACS digital
imaging products and services to the
healthcare industry. Traditionally, we
specialised in practice management
software, e-health and digital imaging
integration products. The acquisition
of Visage Imaging in 2009 transformed
the Company, bringing to our product
offering best-in-class 2D and 3D
digital radiology (PACS) and advanced
visualisation clinical capabilities in
the form of the Visage 7 suite of
products. Pro Medicus also provides
a comprehensive range of services
centred around these products,
including training and installation,
hardware configuration and ongoing
technical and end user support.
REVENUE STREAMS IN THE FINANCIAL YEAR
ENDING JUNE 30, 2014 WERE GENERATED BY THE
FOLLOWING PRODUCTS AND SERVICES:
RADIOLOGY INFORMATION
SYSTEMS (RIS)/PRACTICE
MANAGEMENT
Pro Medicus offers software
applications and services designed
to aid the management of medical
practices. The software includes
medical accounting, clinical reporting,
appointments/scheduling and
marketing/management information
modules and can be integrated with
third-party applications.
The recently developed Visage RIS
provides enterprise level scalability
coupled with powerful search
capability and configurable business
specific workflow and rules to meet
customers needs. Services include
implementation, hardware sourcing
and configuration, staff and
management training and ongoing
technical and end user support.
E-HEALTH
The Company’s Internet-based e-health
offering, promedicus.net, enables
referring doctors to receive encrypted
clinical reports via the Internet to a
centralised “in-tray” run on the doctor’s
computer. These reports are then
electronically incorporated into the
patients’ medical records, doing away
with the need for double handling or
manual filing. Over 26,000 Australian
doctors are registered users of
promedicus.net.
INTEGRATION PRODUCTS
Pro Medicus provides a range of highly
modular integration products which
provide a seamless interface between
the Visage RIS and third-party systems
including PACS/digital imaging
products. Revenue is generated from
the sale of software licenses for the
integration modules, implementation
services and ongoing support.
THE VISAGE 7
ENTERPRISE VIEWER
The Visage 7 Enterprise Viewer
combines 3D/4D and advanced
visualisation capabilities with the
full gamut of 2D reading functionality
creating a truly unique thin client
streaming universal viewing platform
that enables radiologists to read any
type of examination from a 2D chest
x-ray to a complicated 3D cardiac
study all within the one viewer. The
enterprise viewer can be interfaced
with a broad range of third-party image
archiving products. These include
other third-party PACS systems
on which Visage technology can
be overlaid, as well as the growing
industry trend for vendor neutral
archives (VNA). Traditionally revenue
for this product has been generated
from the sale of licences and ongoing
support, however we are seeing the
increased adoption of a pay per use fee
model which is helping to build growing
annuity revenue streams for the
Company in both the US and Australia.
VISAGE 3D PACS
As a result of the extensive R&D
undertaken post the Visage Imaging
acquisition, the Company now has
its own comprehensive 2D-3D/PACS
offering which combines the Visage
7 Enterprise Viewer with the ability
to store and archive radiological
images, creating one of the world’s
first 3D PACS. The Company is
now selling this solution in North
America, Australia, and select
countries within Europe. Due to the
highly modular nature of our product
offering, Visage technology can be
successfully deployed in the vast
majority of radiology environments
including private imaging centres,
remote reading/teleradiology groups
as well as community and large
teaching hospitals opening up markets
previously not available or only partially
accessible to us.
7
PROMEDICUS ANNUAL REPORT 2014 GLOBAL LEADERSHIP
TEAM
KEY PERSONNEL
DANNY TAUBER
General Manager
Australia
After graduating in 1986 Danny
Tauber started his career with
chartered accountants Warnocks
gaining experience in taxation
and general accounting. He
then started his own property
development company and
spent a number of years gaining
project management and general
finance skills. An interest in IT led
Danny into the computer industry
where he worked for a company
producing hotel management
systems. Danny joined Pro
Medicus in 1993 and has been
with the company for over 20
years. Danny has progressed
through the company to his current
position of General Manager –
Australia which he assumed on the
1st of January 2011.
MALTE
WESTERHOFF
General Manager
Europe
Malte Westerhoff is the General
Manager for Visage Imaging
GmbH, the European branch
of Visage Imaging. He is also
the Chief Technical Officer
and is responsible for product
management and the R&D groups
of Visage Imaging globally.
He has more than eleven years of
experience in medical imaging and
software development, holding
positions in research and industry.
Malte holds a master’s degree in
physics from Technical University,
Berlin, and a PhD in computer
science and mathematics from
Free University, Berlin.
Malte was one of the founders of
Indeed - Visual Concepts GmbH
and author and co-author of
many scientific papers in scientific
visualization and high performance
computing and is instrumental in
developing many of the patented
and patent pending technologies
that form the basis of Visage
Imaging’s product portfolio.
Prior to joining the Pro Medicus
group, he has served at Mercury
Computer Systems and Indeed -
Visual Concepts in senior positions.
Before that, he has worked at Zuse
Institute Berlin (ZIB) as scientist in
brain research.
BRAD LEVIN
General Manager
North America
& Global Vice President of Marketing
Brad Levin’s broad experience
has spanned a variety of
leadership roles, including
government, consulting, and
marketing. While in government,
Brad worked as a PACS subject
matter expert for the renowned US
Department of Defence’s Digital
Imaging Network–Picture Archiving
and Communications System
(DIN-PACS) initiative, as well as
consulting for top healthcare
institutions across the US.
After leaving his consulting role,
Brad went on to spearhead
marketing for two web-based
PACS start-ups, first AMICAS,
and then Dynamic Imaging.
Both firms experienced rapid
commercial growth leading to
acquisition, by Vitalworks and GE
Healthcare, respectively.
In his most recent role, Brad was
GE Healthcare’s commercial
Marketing Director, where he had
radiology and cardiology marketing
responsibility for their RIS, PACS
and CVIT product portfolios.
9
PROMEDICUS ANNUAL REPORT 2014 PRO MEDICUS AND
ASSOCIATED COMPANIES
EMPLOYS 69 PEOPLE:
NORTH AMERICA
THE GROUP EMPLOYS
11 STAFF
EUROPE
THE GROUP EMPLOYS
32 STAFF
AUSTRALIA
THE GROUP EMPLOYS
26 STAFF
REVIEW
2013 - 2014
NORTH AMERICA
The Group employs 11 people in
North America to fulfill the sales,
marketing and professional services
roles. Revenue from North America
increased by 85.1% compared to
the previous year. This was largely
attributable to new sales and an
increase in transaction based revenue
from sales of Visage technology as
more contracts come on stream.
EUROPE
The Group has 32 employees in its
Berlin office who undertake R&D for
the Visage Imaging products, including
the Visage 7 product line, as well as
sales, marketing and service/support
functions for the Group’s European
operations. Revenue from our
European operations was in line with
the previous year, increasing by 0.1%.
AUSTRALIA
The Group employs 26 people in
Australia who undertake R&D for
its Visage RIS and promedicus.net
products, as well as sales and service/
support functions.
The Group’s Australian revenue was
12.2% above last year’s as a result of
new sales of both the Visage PACS
and Visage RIS products with many
sales being for the combined product
offering. A growing percentage
of these sales are based on the
company’s transaction revenue model.
Promedicus.net, the company’s
e-health offering, continued to hold
its strong market position despite
increasing competition.
COMPANY OFFICES
Visage GmbH - Berlin
Visage Imaging Inc – San Diego
In addition to its Melbourne-based
Australian head office, the company
has two offshore offices:
This is the company’s European
headquarters and houses 32 staff
who are primarily involved in product
R&D and ongoing product support.
This office also forms the base of
the company’s European operations
including order administration and both
direct and OEM sales activities.
This is the company’s North American
headquarters and is the base for 11
staff involved in sales, marketing,
training/implementation and
applications support for both the Visage
Imaging and Pro Medicus products.
11
PROMEDICUS ANNUAL REPORT 2014 EXPANDED PRODUCT
PORTFOLIO
GROUND BREAKING
VISAGE 7 TECHNOLOGY
PAY PER USE
LICENSING MODEL
NEW RIS TECHNOLOGY
PLATFORM
ADDRESSING
HOSPITAL MARKETS
CONTINUED
US EXPANSION
INTO THE
FUTURE
PAY PER USE
LICENSING MODEL
NEW RIS TECHNOLOGY
PLATFORM
The Board and Management believe
the Company is well positioned for
growth after making encouraging
strategic progress in the 2014 financial
year, particularly in the North American
market. With three major contracts
in North America, two of which are
transaction-based, we now have a
substantial, guaranteed base level of
contracted revenue over the next five
years as well as potential upside as
contracted transaction numbers grow
and new contracts are won.
Industry recognition of the Company
in North America has increased
significantly with the recent winning
of major contracts, and the pipeline of
sales opportunities that the company
is actively pursuing has grown
accordingly.
In addition, we believe the continued
roll-out of the new Visage RIS
technology platform in Australia will
help us consolidate our position as
the premium provider of RIS systems
in this market and open further
opportunities for growth as clients
come to understand the benefits of the
integrated Visage RIS-PACS package.
KEY FACTORS PREDICTED TO DRIVE
GROWTH INCLUDE:
Expanded geographical
footprint
The Company is looking to further
build on its presence in North America
as well as consolidate its position
in Australia. In North America, our
strategy of developing direct sales
has been highly successful with
an increasing percentage of the
Company’s revenue coming from
this region, a trend we believe will
continue given the major contracts
won in the past two years.
Fully integrated product
offering
Our recently released Visage RIS
technology platform integrates fully
with our leading edge Visage 7.0
product suite, thereby creating the
first fourth-generation, end-to-end
single-vendor ‘thin client’ PACS/RIS
solution in the market. In Australia,
most of our sales to new clients
have been for the integrated product
suite, providing early confirmation
of our multi-product strategy. As
our existing Australian RIS clients
transition to Visage RIS, we believe
there is potential for further take-up of
the integrated product suite.
Multiple licencing models
Over the last two years, the Company
has seen a significant increase in
the pay per use licensing model in
both Australia and North America.
We believe this will continue to gain
momentum as more clients opt for this
model. This has the potential to build
significant annuity revenue streams to
supplement the upfront, capital licence
fees that we have traditionally received.
Highly Differentiated
Technology
The Company will maintain its
significant ongoing investment in
R&D for its flagship Visage 7 suite
of products which we believe will
continue to differentiate our offerings
in the 2D/3D PACS advanced
visualisation space.
The new Visage RIS platform is
the culmination of many years of
intense R&D effort and positions Pro
Medicus at the forefront of RIS and
practice management technology.
It is differentiated by its scalability,
powerful search capability and ability
to allow clients to configure their own
business-specific workflow and rules
to meet their needs.
Industry Trends
The Company believes the North
American market has reached a
tipping point as a result of two
significant industry trends that
combined, will continue to drive
demand for Visage 7 products.
The first is the explosion in the
size of the image files generated
by modern radiology equipment.
With developments in imaging
technology such as positron emission
tomography (PET) and high density
640 slice computed tomography
(CT) it is not uncommon for a single
examination image file to be in the
order of 1.5 to 2 Gigabytes or larger
in size. The recent introduction of
Digital breast tomosynthesis (DBT), a
new form of 3D breast imaging, has
added to the data explosion problem
producing image files as large as
4 to 6 Gigabytes per examination.
Traditional PACS/Digital Imaging
technology requires these files to be
transferred across the network to the
radiologist desktop in order to be
visualised. This has created significant
network bottlenecks which has limited
the widespread adoption and use of
these new imaging technologies.
Visage 7, with its unique server side
thin-client streaming technology,
enables the radiologist or referring
clinician to instantly visualise even the
largest examinations without having
to move the images to their desktop
thereby overcoming the bandwidth/
network bottleneck issue.
The second trend has been a large
paradigm shift in the way customers
are purchasing PACS/Digital Imaging
technology, moving away from a
monolithic, single vendor solution to
a best in breed or “Deconstructed
PACS” approach whereby multiple
components from different vendors
are integrated into a single solution.
Unlike systems from traditional PACS
vendors, Visage 7, with its highly
modular and scalable design is ideally
suited to this new paradigm resulting
in a growing pipeline of opportunities
that the company is actively pursuing.
13
PROMEDICUS ANNUAL REPORT 2014
FINANCIAL
STATEMENTS
CONTENTS
Directors’ Report ...................................................................................................................................................................... 16
Auditor’s Independence Declaration ........................................................................................................................................ 26
Statement of Comprehensive Income ...................................................................................................................................... 27
Statement of Financial Position ................................................................................................................................................ 28
Statement of Changes in Equity ............................................................................................................................................... 29
Statement of Cash Flows ......................................................................................................................................................... 30
Notes to the Financial Statements ........................................................................................................................................... 32
Note 1
Corporate Information ......................................................................................................................................... 32
Note 2
Summary of Significant Accounting Policies ...................................................................................................... 32
Note 3
Significant Accounting Judgements, Estimates and Assumptions ..................................................................... 42
Note 4
Financial Risk Management Objectives and Policies .......................................................................................... 43
Note 5
Operating Segments ........................................................................................................................................... 46
Note 6
Income and Expenses ......................................................................................................................................... 48
Note 7
Income Tax .......................................................................................................................................................... 49
Note 8
Discontinued Operations..................................................................................................................................... 50
Note 9
Earnings per Share .............................................................................................................................................. 51
Note 10
Dividends Paid and Proposed ............................................................................................................................. 51
Note 11
Cash and Cash Equivalents ................................................................................................................................ 52
Note 12
Trade and Other Receivables (Current) ............................................................................................................... 53
Note 13
Inventory.............................................................................................................................................................. 53
Note 14
Plant and Equipment ........................................................................................................................................... 54
Note 15
Intangible Assets ................................................................................................................................................. 55
Note 16
Trade and Other Payables (Current) .................................................................................................................... 56
Note 17
Provisions ............................................................................................................................................................ 56
Note 18
Contributed Equity and Reserves ...................................................................................................................... 57
Note 19
Share based Payment Plan ................................................................................................................................ 58
Note 20
Commitments ..................................................................................................................................................... 60
Note 21
Events after the Balance Sheet Date .................................................................................................................. 60
Note 22
Auditors’ Remuneration ...................................................................................................................................... 60
Note 23
Key Management Personnel ............................................................................................................................... 60
Note 24
Related Party Disclosure ..................................................................................................................................... 61
Note 25
Contingencies ..................................................................................................................................................... 62
Note 26
Parent Entity Information ..................................................................................................................................... 62
Directors’ Declaration ............................................................................................................................................................... 62
Independent Auditor’s Report .................................................................................................................................................. 63
ASX Additional Information ...................................................................................................................................................... 65
Corporate Governance Statement ........................................................................................................................................... 66
Corporate Information .............................................................................................................................................................. 72
15
PROMEDICUS ANNUAL REPORT 2014 DIRECTORS’
REPORT
THE NAMES AND DETAILS
OF THE COMPANY’S
DIRECTORS IN OFFICE
DURING THE FINANCIAL
YEAR AND UNTIL THE
DATE OF THIS REPORT
ARE AS FOLLOWS:
RODERICK LYLE
LL.B., B.Com, LL.M (Lond),
MBA (Melb)
Non Executive Director
Roderick joined Pro Medicus Limited
as a Director on 23 November 2010.
He is a Senior Partner of Clayton Utz
and is former Managing Partner of the
Melbourne office.
Roderick is a member of the Law
Institute of Victoria, a member of the
Law Society of New South Wales and
a member of the Law Society London.
Roderick is recognised as one of
Australia’s leading commercial
lawyers. He has been a key advisor in
a large number of significant mergers
and acquisitions and equity capital
markets transactions. Roderick also
serves on the audit committee.
DR SAM
AARON HUPERT
M.B.B.S.
Managing Director and
Chief Executive Officer
Co-founder of Pro Medicus Limited
in 1983, Sam Hupert is a Monash
University Medical School graduate
who commenced General Practice
in 1980. Realising the significant
potential for computers in medicine
he left general practice in late 1984 to
devote himself full time to managing
the Group.
Sam served as CEO from the time he
co-founded the company until October
2007 at which time he stepped down
to become an executive director. Sam
resumed full time CEO activities in
October of 2010.
CLAYTON
JAMES HATCH
CPA
Chief Financial Officer and
Company Secetary
Clayton was appointed Company
Secretary on 1 July 2009.
Clayton has strong experience
in financial and management
accounting having worked in
a Finance role for several years.
Clayton joined Pro Medicus in June
2008 and has progressed through
the company to his current position
of Chief Financial Officer which he
assumed on the 1st July 2012.
ANTHONY
BARRY HALL
B.Sc. (Hons), M.Sc.
Executive Director and
Technology Director
Co-founder of Pro Medicus Limited in
1983, Anthony Hall has been principal
architect and developer of the core
software systems. His current focus is
the transition to and development of
the company’s next generation
RIS systems.
PETER
TERENCE KEMPEN
F.C.A, F.A.I.C.D
Chairman
Peter Kempen joined Pro Medicus
as a Director on 12 March 2008. He
is Chairman of Ivanhoe Grammar
School and Chairman of Australasian
Leukaemia and Lymphoma Group.
He is also a Director of the Yara
Pilbara group of companies.
Peter has previously been Chairman
of Patties Food Limited, Chairman
of Danks Holdings Limited and
Managing Partner of Ernst & Young
Corporate Finance Australia.
Peter is a Fellow of the Institute of
Chartered Accountants in Australia
and a Fellow of the Australian
Institute of Company Directors.
Peter became Chairman in August
2010 before which he served
as a Non Executive Director of
the company.
Peter is also Chairman of the
audit committee.
16
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the interests of the directors in the shares and options of the Company were:
Ordinary Shares
Options over Ordinary Shares
30,068,500
30,107,660
378,082
140,000
CENTS
1.0
1.0
1.0
A. B. Hall
S. A. Hupert
P. T. Kempen
R. Lyle
EARNINGS PER SHARE
Basic earnings per share
Diluted earnings per share
DIVIDENDS
ORDINARY SHARES
Final dividends recommended:
Normal dividend plan
Dividends paid in the year:
Interim for the year
Final dividend for 2012 shown as recommended in the 2012 report:
Normal dividend plan
OPERATING AND FINANCIAL REVIEW
Corporate Structure
Pro Medicus Limited is a company
limited by shares that is incorporated
and domiciled in Australia.
Nature of operations and
principal activities
The principal activities of the Group
during the year were the supply of
product and services to diagnostic
imaging groups and a range of
other entities predominately within
the private medical market. These
products and services include:
Radiology Information Systems (RIS)
▶ Innovative proprietary medical
software for practice management
(RIS);
▶ Training, installation and professional
services;
▶ After sale support and service
products;
▶ Promedicus.net secure email; and
▶ Digital radiology integration products
Visage PACS
▶ Innovative clinical software that
provides radiologist with advanced
visualisation capability for viewing
3-D and 4-D images;
▶ PACS/Digital imaging software that
is sold both direct and to original
equipment manufacturers (OEM).
▶ Training, installation and
professional services;
▶ Support and service products;
The Company undertakes R&D in
Australia for it Practice Management
(RIS) and promedicus.net products
including R&D for Coral, its new
technology platform.
Its R&D base in Europe is where
the bulk of the R&D for the Visage
Imaging product set is carried
out. The Company has continued
development of the Visage 7 product
line throughout the period.
NIL
NIL
200,000
200,000
Cents
1.51
1.51
$’000
1,002
1,002
1,002
17
PROMEDICUS ANNUAL REPORT 2014
17
PROMEDICUS ANNUAL REPORT 2014 DIRECTORS’ REPORT cont.
REVIEW AND RESULTS OF OPERATIONS
Investment Activities
Surplus funds which are held in several currencies are
invested by the Group in a cash management account
and terms deposits to maximise the interest return.
Performance Indicators
Management and the Board monitor overall performance,
from the strategic plan through to the performance of the
Group against operating plans and financial budgets.
The Board, together with management, have identified
key performance indicators (KPIs) that are used to monitor
performance. Key management monitor these KPIs on a
regular basis and Directors receive appropriately structured
board reports for review prior to each monthly Board
meeting allowing them to actively monitor the Group’s
performance.
Dynamics of the Business
Australia
The Group employs 26 people in Australia who undertake
research and development of Pro Medicus products (RIS)
as well as sales and service/support functions.
The Group’s Australian revenue was 12.2% above last year’
as a result of new sales of both the Visage PACS and Visage
RIS products with many sales being for the combined
product offering. A growing percentage of these sales are
being based on the company’s transaction revenue model.
Promedicus.net, the company’s e–health offering,
continued to hold its strong market position despite
increasing competition.
North America
The Group employs 11 people in North America to fulfil the
sales marketing and professional services roles. Revenue
from North America increased by 85.1% compared to the
previous year. This was largely attributable to new sales
and an increase in transaction based revenue from sales
of Visage technology as more contracts came on stream.
Europe
The Group employs 32 employees in its Berlin office who
undertake research and development of Visage Imaging
products worldwide as well as sales, marketing and service/
support functions for the Group’s European operations.
Revenue from our European operations was in line with
the previous year increasing by 0.14%.
Financials
Reported profit after tax for the period was $1.51m
a decrease of $3.62m (70.6%) from the previous year.
Full year revenue of the Group from continuing operations,
increased from $11.37m to $14.45m, an increase of 27.1%.
The result from the underlying operations for the year was
a profit of $1.58m compared to an underlying loss of
$0.65m from the previous year. The underlying profit is
made up of reported profit after–tax of $1.51m and adding
back the after–tax net currency loss of $0.07m.
Last year’s underlying loss was made up of reported profit
after–tax of $5.13m, less the after–tax profit of $8.61m from
the sale of the Amira business and after–tax net currency
gain of $0.39m, and adding back the after–tax impairment
expense of $3.22m.
The key driver of the underlying profit increase was the
significant improvement in the performance of the North
American operations supplemented by the increase in
Australian sales.
Investments for Future Performance
The Company will continue to direct resources into
the development of new products and is committed to
the continued development of Visage RIS, its new RIS
technology platform as well as the ongoing development
of the Visage Imaging PACS product.
It is anticipated that this strategy of ongoing development
will continue to position Pro Medicus as a market leader
and enable the Group to further leverage its expanded
product portfolio and geographical spread.
The Group remains committed to providing staff with access
to appropriate training and development programs, together
with the resources to complete their duties.
The Directors express their gratitude for the efforts of
the management team and all employees in achieving
this year’s result.
REVIEW OF FINANCIAL CONDITION
Capital Structure
The Company has a sound capital structure with a strong
financial position, with no debt.
Treasury Policy
With the increase in overseas operations there is an
increased currency risk as a consequence of contracts
written in and cash being held in foreign currencies.
Whilst this is offset to a degree by having operations in
North America and Europe, this change in risk profile has
been noted by the Board and action is being taken to
manage this risk.
The treasury function, co–ordinated within Pro Medicus
Limited, is limited to maximising interest return on surplus
funds and managing currency risk. The treasury operates
within policies set by the Board, which is responsible for
ensuring that management’s actions are in line with Board
policy.
Cash from Operations
Net cash flows from operating activities for the current
period was a positive $4.23m, with receipts from customers
totalling $13.50m compared with payments of $8.56m to
suppliers and employees. During the year the Company
paid out a total of $2.01m in dividends, the net result
being total cash assets of $15.26m; a decrease of 15.3%
from last year.
18
Liquidity and Funding
The Group is cash flow positive, has adequate cash
reserves and has no overdraft facility. Sufficient funds
are held to finance operations.
Risk Management
The Company takes a proactive approach to risk
management. The Board is responsible for ensuring that
risks, and also opportunities, are identified on a timely basis
and that the Group’s objectives and activities are aligned
with the risks and opportunities identified by the Board.
The Company believes that it is crucial for all Board
members to participate in this process, as such the Board
has not established separate committees for areas such
as risk management, environmental issues, occupational
health and safety or treasury.
The Board has a number of mechanisms in place to ensure
that management’s objectives and activities are aligned
with the risks identified by the Board. These include
the following:
▶ Board approval of strategic plans, which encompass
the Company’s vision, mission and strategy statements,
designed to meet stakeholder needs and manage
business risk;
▶ Implementation of Board approved operating plans
and budgets and Board monitoring of progress against
these budgets, including the establishment and
monitoring of KPIs;
▶ Overseeing of appropriate backup procedures for
important company data; and
▶ Routine review by key executives of its established
Quality Assurance program and corrective action
recommendations stemming from it.
Corporate Governance
In recognising the need for the highest standards
of corporate behaviour and accountability, the directors
of Pro Medicus Limited support and have adhered to the
principles of good corporate governance. Please refer to
the separate “Corporate Governance” section for more
details of specific policies.
SIGNIFICANT CHANGES IN THE STATE
OF AFFAIRS
Shareholders’ equity decreased by 1.2% from $20.96m to
$20.71m. This movement was largely the result of profit during
the year, offset by dividends paid out during the year.
SIGNIFICANT EVENTS AFTER THE
BALANCE DATE
A Final Dividend of 1.0 cents per share has been declared
post 1 July. Please refer Note 10.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS
The Directors anticipate that the 2015 financial year will
see more opportunity crystallise for the company due to
improved prospects in North America and the continued
commercialisation and roll out of Visage RIS, the company’s
new technology RIS platform.
Key components that are likely to affect the performance of
the company are:
▶ Increased revenue being generated from recently won
transaction based contracts which are scheduled to come
on stream in the first half of the 2015 financial year.
▶ Strong interest in the Visage suite of products in the
North American market has resulted in a number of sales
opportunities that the Company is actively pursuing.
▶ The ability of the expanded Visage product set to address
key market segments such as large Health Systems
and Hospitals in addition to the private radiology and
teleradiology markets.
▶ The continued adoption of advanced visualisation and
3–D capability throughout the radiology profession.
▶ Improved sales prospects for Visage RIS, the company’s
New Technology RIS platform as the rollout of this new
platform continues.
As a result, it is anticipated that the 2015 financial year
will show a continuing improvement in operational results,
however this is dependent upon many market factors over
which the Directors have limited or no control.
ENVIRONMENTAL REGULATION AND
PERFORMANCE
The Group has no identified risk with regard to
environmental regulations currently in force. There have
been no known breaches by the Group of any regulations.
SHARE OPTIONS
Un–issued Shares
As at the date of this report, there were 1,675,000
un–issued ordinary shares under options refer to
Note 19 of the financial statements for further details
of the options outstanding.
Option holders do not have any right, by virtue of the
option, to participate in any share issue of the Company.
19
PROMEDICUS ANNUAL REPORT 2014 DIRECTORS’ REPORT cont.
Shares Issued as a Result
of the Exercise of Options
During the financial year, no share options were exercised by
current employees. During the financial year no share options
expired. No directors or key management personnel in the
current year have exercised any option to acquire fully paid
ordinary shares in Pro Medicus Limited.
INDEMNIFICATION AND INSURANCE
OF DIRECTORS AND OFFICERS
During the year, Pro Medicus Limited indemnified Clayton
Utz and each one or more of the past, present or future
partners of Clayton Utz (other than Mr. Lyle) against any
liability (including a liability incurred by Clayton Utz to pay
legal costs) arising out of Mr. Lyle’s activities as a Director
of Pro Medicus Limited.
During or since the financial year, the Company has paid
premiums in respect of a contract for Directors’ & Officers’/
Company Re–Imbursement Liability insurance for directors,
officers and Pro Medicus Limited for costs incurred in
defending proceedings against them.
Disclosure of the amount of insurance and the terms of this
cover is prohibited by the insurance policy.
(i) Non –executive directors
Peter Terence Kempen Chairman
Roderick Lyle
Director (non–executive)
(ii) Executive directors
Dr Sam Aaron Hupert Managing Director and CEO
Anthony Barry Hall
Technology Director
(iii) Other Executives
Danny Tauber
Malte Westerhoff
Brad Levin
General Manager
– Pro Medicus Limited
Managing Director
– Visage Imaging GmbH
General Manager
– Visage Imaging Inc
Remuneration committee
Remuneration and nomination issues are handled at the
full Board level. Due to the small number of Directors no
Committee has been established for this purpose.
Board members, as per groupings detailed below,
are responsible for determining and reviewing
compensation arrangements.
INDEMNIFICATION OF AUDITORS
To the extent permitted by law, the Company has agreed to
indemnify its auditors, Ernst & Young, as part of the terms
of its audit engagement agreement against claims by third
parties arising from the audit (for an unspecified amount).
No payment has been made to indemnify Ernst & Young
during or since the financial year.
In order to maintain good corporate governance the Non–
Executive Directors assume responsibility for determining
and reviewing compensation arrangements for the Executive
Directors of the Group. The Executive Directors in turn are
responsible for determining and reviewing the compensation
arrangements for the Non–Executive Directors. The CEO,
in conjunction with the full Board reviews the terms of
employment for all executives.
REMUNERATION REPORT (audited)
This remuneration report for the year ended 30 June 2014
outlines the remuneration arrangements of the Group in
accordance with the requirements of the Corporations Act
2001 and its Regulations. This information has been audited
as required by section 308(3C) of the Act.
The assessment considers the appropriateness of the
nature and amount of remuneration of such executives on a
periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality
Board and executive team.
The remuneration report details the remuneration
arrangements for key management personnel (KMP)
who are defined as those persons having authority and
responsibility for planning, directing and controlling the
major activities of the Company and the Group, directly
or indirectly, including any director (whether executive or
otherwise) of the Group.
For the purposes of this report, the term ‘executive’
includes the Chief Executive Officer (CEO), executive
directors and other senior executives of the Group.
Remuneration philosophy
The performance of the group depends upon the quality
of its Directors and Executives. To prosper, the Company
must attract, motivate and retain highly skilled Directors
and Executives.
To this end, the Company provides competitive rewards
to attract high calibre Executives.
Remuneration structure
In accordance with best practice corporate governance,
the structure of Non–Executive Director and Executive’s
remuneration is separate and distinct.
20
Non–Executive Director remuneration
Objective
The Board seeks to set aggregate remuneration at a level
which provides the Company with the ability to attract and
retain Directors of the highest calibre, whilst incurring a cost
which is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the
aggregate remuneration of Non–Executive Directors shall
be determined from time to time by a general meeting.
An amount not exceeding the amount determined is
then divided between the Directors as agreed. The latest
determination was at the Annual General Meeting held on
4 November 2005 when shareholders approved an
aggregate remuneration of $500,000 per year.
The amount of the aggregate remuneration sought to be
approved by shareholders and the manner in which it is
apportioned amongst Directors is reviewed annually.
The Board considers fees paid to Non–Executive Directors
of comparable companies when undertaking the annual
review process.
Each Director receives a fee for being a Director of the
Company. No additional fee is paid for time spent on
Audit Committee business.
Non–Executive Directors have long been encouraged by
the Board to hold shares in the Company (purchased by
the Director on market). It is considered good governance
for the Directors to have a stake in the Company on
whose board they sit. The Non–Executive Directors of
the Company participate in the Employee Share Incentive
Scheme [Option based] which was established in 2000
to provide incentive for participants.
The remuneration of Non–Executive Directors for the period
ended 30 June 2014 is detailed in Table 1 of this report.
Executives
(including Executive Directors remuneration)
Objective
The Group aims to reward Executives with a level and
mix of remuneration commensurate with their position
and responsibilities within the Group and so as to:
▶ align the interests of Executives with those
of shareholders;
▶ ensure total remuneration is competitive by
market standards.
Structure
Employment Contracts have been entered into with all
Executives of the Group. Details of these contracts are
provided on page 22.
Remuneration consists predominately of fixed remuneration.
Variable remuneration is provided occasionally at the
Board’s discretion including both short term incentives
(STI) and long term incentives (LTI).
The Company does not have a policy regarding Executives
entering into contracts to hedge their exposure to share
options granted as part of their remuneration package.
The Board has not used any external consultants to
undertake a review of the remuneration of Executives.
Fixed Remuneration
Objective
The level of fixed remuneration is set so as to provide
a base level of remuneration which is both appropriate
to the position and is competitive in the market.
Fixed remuneration is reviewed annually and the process
consists of a review of Group wide, business and individual
performance, relevant comparative remuneration in the
market and internal and, where appropriate, external advice
on policies and practices. As noted above, the company
conducting the review has access to external advice
independent of management.
Executives, including Executive Directors are given the
opportunity to receive their fixed (primary) remuneration in
a variety of forms including cash and fringe benefits such
as motor vehicles and expense payment plans. It is
intended that the manner of payment chosen will be optimal
for the recipient without creating undue cost for the group.
The fixed remuneration is detailed in Table 1 of this report.
Variable Remuneration – Long Term Incentive (LTI)
Roderick Lyle was granted options in 2011–12 under
the Employee Share Option Scheme with a 5 year
vesting period.
A long term incentive plan was established during
2011–12 whereby Senior Executives of Group were
offered performance rights over the ordinary shares of Pro
Medicus Limited. The performance rights, issued for nil
consideration, are offered over a 5 year period and vest
3 years after granting date on completion of service.
This long term incentive plan includes performance hurdles
related to profitability (EBIT – 75%) which is set on an
annualised basis by the Board and individual performance
(25%). These measures have been selected and set to
align to Company performance and to reflect individual
contribution to the Company.
21
PROMEDICUS ANNUAL REPORT 2014 DIRECTORS’ REPORT cont.
The table below outlines the proportion of LTI that were
granted since the plan was established.
2014
2013
2012
STI bonus for 2014
For the 2014 financial year, the total amount of STI cash
bonus either paid or accrued at year end was $276,225.
The maximum amount payable under STI was $276,225.
75% EBIT targets met
90%*
0% 60%
Key Performance Indicators
25% Individual targets met
75–100%*
96% 60%
* subject to Board approval
Variable Pay – Short Term Incentive (STI)
Short term incentives in the form of cash bonuses were
paid to key staff based on a mix of Company based and
personal performance targets.
Actual STI payments granted to key staff depended
on the extent to which specific targets set at the time of
employment were met. The targets consist of a number of
Key Performance Indicators (KPIs) covering both financial
(Sales Targets) and non–financial measures
of performance.
Shareholder Returns
The Directors are confident that the holdings of reserve cash is sufficient to underpin the development and expansion
needs of the Company as the business looks to increase its penetration of existing markets.
The return on net assets and equity are shown in the table below.
Basic earnings per share – reported (cents)
Return on assets (%)
Return on equity (%)
Dividend payout ratio (%) – normal dividend plan
Dividend payout ratio (%) – total dividend
Available franking credits ($’000)
2014
1.5
8.4
7.3
132.8
132.8
782
2013
5.1
25.6
24.2
39.7
39.7
2012
1.8
11.3
11.2
84.0
84.0
2011
0.5
3.0
3.3
0.0
0.0
2010
3.9
23.8
23.5
51.2
51.2
1,641
2,638
2,921
4,821
Executives
(excluding Executive Directors)
All Executives have rolling contracts. The Group may
terminate the Executive’s employment agreement by
providing six months written notice or providing payment in
lieu of the notice period (based on the fixed component of
the executive’s remuneration). The Group may terminate the
contract at any time without notice if serious misconduct
has occurred. Where termination with cause occurs the
Executive is only entitled to that portion of remuneration
that is fixed, and only up to the date of termination.
On termination with cause any unvested options will
immediately be forfeited.
Remuneration of key management personnel of the
Company and the Group.
Employment Contracts
Executive Directors
Executive Service Contracts, on similar terms and
conditions, have been prepared for all Executive Directors
of the Company.
These agreements provide the following major terms:
▶ Each Executive will receive a remuneration package per
annum which is to be reviewed annually;
▶ The agreements protect the Company and Group’s
confidential information and provide that any inventions
or discoveries of an Executive become the property
of the Group;
▶ Non–competition during employment and for a period
of 12 months thereafter; and
▶ Termination by the Company on six months notice or
payment of six months remuneration in lieu of notice or a
combination of both (or without notice or payment in lieu in
the event of misconduct or other specified circumstances).
The agreements may be terminated by the Executives on
the giving of six months notice.
22
Table 1: Remuneration of key management personnel for the year ended 30 June 2014.
SHORT-TERM
NON-
MONETARY
BENEFITS
POST
EMPLOYMENT
SUPER-
ANNUATION
LONG
TERM
LONG
SERVICE
LEAVE
SHARE-BASED PAYMENT
TOTAL
TOTAL
PERFORMANCE
RELATED %
PERFORMANCE
RIGHTS
OPTIONS
30 JUNE 2014
Directors
SALARY &
FEES
CASH
BONUS
P T Kempen
41,716
255,000
255,000
45,767
S A Hupert
A B Hall
R. Lyle
Executives
D Tauber
301,871
–
–
–
–
–
8,284
–
–
–
–
30,000
25,000
25,000
4,233
–
4,897
4,897
–
–
–
–
–
–
–
–
80,000
284,897
284,897
6,040
56,040
13,129
5,240
12,229
2,374
334,843
M Westerhoff
423,196
221,745
13,355
2,590
B Levin
207,024
54,480
–
–
–
–
15,021
510
676,417
833
–
262,337
1,529,574
276,225
21,639
99,952
15,034
28,083
8,924 1,979,431
–
–
–
–
4.4%
35.1%
21.1%
Compensation options granted, vested and exercised during the year as part of remuneration
54,250 shares with a fair value of $13,563 ($0.25 per performance right) were granted as performance rights to Malte
Westerhoff with a grant date of 15 September 2013. The performance rights have a 3 year vesting period and are
automatically exercised upon completion of the vesting period.
38,750 shares with a fair value of $9,688 ($0.25 per performance right) were granted as performance rights to Danny
Tauber with a grant date of 15 September 2013. The performance rights have a 3 year vesting period and are automatically
exercised upon completion of the vesting period.
Table 2: Remuneration of key management personnel for the year ended 30 June 2013.
SHORT-TERM
NON-
MONETARY
BENEFITS
POST
EMPLOYMENT
LONG
TERM SHARE-BASED PAYMENT
SUPER-
ANNUATION
LONG
SERVICE
LEAVE
PERFORMANCE
RIGHTS
OPTIONS
TOTAL
PERFORMANCE
RELATED %
TOTAL
8,280
24,000
–
25,000
4,897
25,000
4,897
–
–
–
–
–
–
80,000
284,897
284,897
4,128
–
– 11,270
61,270
–
–
–
–
SALARY &
FEES
CASH
BONUS
47,720
255,000
255,000
45,872
–
–
–
–
30 JUNE 2013
Directors
P T Kempen
S A Hupert
A B Hall
R. Lyle
Executives
D Tauber
301,871
35,000
M Westerhoff
295,323
138,666
B Levin
185,136
29,232
–
–
–
–
–
–
13,129
5,511
9,000
4,606
369,117
2,209
–
–
–
10,500
1,415
448,113
–
–
214,368
13.2%
33.6%
13.6%
1,385,922
202,898
8,280
93,466 15,305
19,500 17,291 1,742,662
23
PROMEDICUS ANNUAL REPORT 2014
DIRECTORS’ REPORT cont.
Compensation options granted, vested and exercised during the year as part of remuneration
126,000 shares with a fair value of $31,500 ($0.25 per performance right) were granted as performance rights to Malte
Westerhoff with a grant date of 24 September 2012. The performance rights have a 3 year vesting period and are
automatically exercised upon completion of the vesting period.
108,000 shares with a fair value of $27,000 ($0.25 per performance right) were granted as performance rights to
Danny Tauber with a grant date of 24 September 2012. The performance rights have a 3 year vesting period and are
automatically exercised upon completion of the vesting period.
For details of the valuation of options, including models and assumptions used please refer to Note 19.
Table 3: Option holdings of Key Management Personnel.
BALANCE AT
BEGINNING OF
YEAR
GRANTED AS
REMUNERATION
OPTIONS
EXERCISED
BALANCE
AT END OF YEAR
30 JUNE 2014
1 JULY 2013
30 JUNE 2014
NOT VESTED
VESTED/
EXERCISABLE
TOTAL
Directors
P T Kempen
200,000
S A Hupert
A B Hall
R Lyle
Executives
D Tauber
M Westerhoff
B Levin
Total
–
–
200,000
350,000
350,000
–
1,100,000
# Includes forfeitures
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
200,000
–
–
–
–
–
200,000
200,000
–
–
–
–
200,000
120,000
80,000
200,000
350,000
350,000
140,000
70,000
210,000
280,000
350,000
350,000
–
–
–
–
1,100,000
330,000
770,000
1,100,000
Table 4: Shareholdings of Key Management Personnel
SHARES HELD IN
PROMEDICUS LIMITED
(NUMBER)
BALANCE 1 JULY 2013
GRANTED AS
REMUNERATION
ON EXERCISE OF
OPTIONS
NET CHANGE OTHER
BALANCE 30 JUNE
2014
30 JUNE 2014
ORDINARY
ORDINARY
ORDINARY
ORDINARY
ORDINARY
Directors
P T Kempen
S A Hupert
A B Hall
R Lyle
Executives
D Tauber
M Westerhoff
B Levin
Total
378,082
30,072,660
30,068,500
140,000
150,000
–
–
60,809,242
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
80,000*
35,000*
–
–
–
–
–
458,082
30,107,660
30,068,500
140,000
150,000
–
–
115,000
60,924,242
* Peter Kempen purchased 80,000 shares throughout the year at the prevailing market share price and
Sam Hupert purchased 35,000 shares throughout the year at the prevailing market share price.
24
GRANTED AS
REMUNERATION
PERFORMANCE
RIGHTS
EXERCISED
BALANCE
AT END OF YEAR
30 JUNE 2014
NOT VESTED
VESTED/
EXERCISABLE
TOTAL
Table 5: Performance Rights of Key Management Personnel
BALANCE
AT
BEGINNING
OF YEAR
1 JULY 2013
–
–
–
–
–
–
–
–
108,000
126,000
–
38,750
54,250
10,000
234,000
103,000
30 JUNE 2014
Directors
P T Kempen
S A Hupert
A B Hall
R Lyle
Executives
D Tauber
M Westerhoff
B Levin
Total
# Includes forfeitures
A long term incentive plan was established during
2011–12 whereby Senior Executives of Group were
offered performance rights over the ordinary shares of Pro
Medicus Limited. The performance rights, issued for nil
consideration, are offered over a 5 year period and vest 3
years after granting date on completion of service. This long
term incentive plan includes performance hurdles related
to the company and vesting conditions relating to the
employee’s period of service. Refer to Note 19.
Loans to Key Management Personnel
No loans are made to Key Management Personnel or staff.
Other transactions and balances with
Key Management Personnel
Purchases
During the year lease payments of $169,476 (2013:
$169,476) in respect of the Group’s operating premises
at 450 Swan Street Richmond were paid to Champagne
Properties Pty. Ltd., an entity controlled by S. Hupert and A.
Hall. Commercial arrangements on an ‘arm’s length basis’
have been determined by an independent assessment of
rental and lease terms.
DIRECTORS’ MEETINGS
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
146,750
180,250
10,000
337,000
146,750
180,250
10,000
337,000
Committee membership
–
–
–
–
–
–
–
–
–
–
–
–
146,750
180,250
10,000
337,000
As at the 30 June 2014, the company had an Audit
Committee comprising the 2 Non–Executive Directors and 2
Executive Directors.
ROUNDING
The amounts contained in this report and in the financial
report have been rounded to the nearest $1,000 (where
rounding is applicable) under the option available to the
Company under ASIC Class Order 98/0100. The Company
is an entity to which the Class Order applies.
AUDITOR INDEPENDENCE
AND NON–AUDIT SERVICES
The Directors received a declaration from the auditor
of Pro Medicus Limited (refer page 26).
NON–AUDIT SERVICES
The following non–audit services were provided by
the company’s auditor, Ernst & Young. The directors
are satisfied that the provision of non–audit services is
compatible with the general standard of independence
for the auditors imposed by the Corporations Act.
The nature and scope of the non–audit service provided
means that auditor independence is not compromised.
The numbers of meetings of Directors (including meetings of
committees of Directors) held during the year and the number
of meetings attended by each director were as follows:
Ernst & Young received the following amount for
the provision of non–audit services:
DIRECTORS’
MEETINGS
ELIGIBLE
TO ATTEND
AUDIT
COMMITTEE
ELIGIBLE
TO ATTEND
Number of meetings held
11
Number of meetings attended
P. T. Kempen
R. Lyle
A. B. Hall
S. A. Hupert
11
11
11
11
11
11
11
11
2
2
2
2
2
2
2
2
2
Professional services rendered in respect
to taxation matters
$28,650
Signed in accordance with a resolution of the Directors.
P T Kempen
Director
Melbourne, 22 August 2014
25
PROMEDICUS ANNUAL REPORT 2014 Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
AUDITOR’S INDEPENDENCE DECLARATION
To the Directors of Pro Medicus Limited
Auditor's Independence Declaration to the Directors of Pro Medicus
Limited
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
In relation to our audit of the financial report of Pro Medicus Limited for the financial year ended
30 June 2014, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Auditor's Independence Declaration to the Directors of Pro Medicus
Limited
Ernst & Young
In relation to our audit of the financial report of Pro Medicus Limited for the financial year ended
30 June 2014, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001 or any applicable code of
professional conduct.
Paul Gower
Partner
Melbourne
22 August 2014
Ernst & Young
Paul Gower
Partner
Melbourne
22 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
26
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
14
14
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
CONSOLIDATED
FOR THE YEAR ENDED 30 JUNE 2014
Continuing operations
Revenue
Finance Revenue
Revenue
Cost of Sales
Gross Profit
Other Income/(Expenses)
Accounting and Secretarial Fees
Advertising and Public Relations
Depreciation and Amortisation
Insurance
Legal Costs
Operating Lease Expense – minimum lease payments
Impairment Expense
Other Expense
Salaries and Employee Benefits Expense
Travel and Accommodation
Profit/(loss) for the year from continuing operations before tax
Income tax benefit/(expense)
Profit/(loss) for the year from continuing operations
Discontinued operations
Profit/(loss) after tax for the year from discontinued operations
Profit for the year
Other Comprehensive Income
Items that may be reclassified subsequently to profit and loss
Foreign Currency translation
Other comprehensive income for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
Earnings per share (cents per share)
– Basic for net profit for the year
– Diluted for net profit for the year
Earnings per share for continued operations
(cents per share)
– Basic for net profit for the year from continued operations
– Diluted – for net profit for the year from continued operations
NOTES
5
6(a)
6(b)
15 (iii)
6(b)
7
8
18
9
9
2014
$’000
14,268
179
14,447
(281)
14,166
(94)
(399)
(607)
(3,266)
(485)
(169)
(370)
–
(441)
(5,283)
(600)
2,452
(943)
1,509
–
1,509
186
186
1,695
1.5¢
1.5¢
1.5¢
1.5¢
2013
$’000
11,154
220
11,374
(473)
10,901
686
(440)
(670)
(2,948)
(362)
(108)
(338)
(4,600)
(604)
(5,915)
(504)
(4,902)
1,425
(3,477)
8,608
5,131
1,777
1,777
6,908
5.1¢
5.1¢
(3.5¢)
(3.5¢)
27
PROMEDICUS ANNUAL REPORT 2014
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
NOTES
CONSOLIDATED
2014
$’000
11
12
13
7
14
15
16
17
7
17
18
18
18
18
15,259
3,299
135
100
358
19,151
625
302
9,145
10,072
29,223
1,251
3,748
1,340
6,339
2,118
59
2,177
8,516
20,707
327
284
282
19,814
20,707
2013
$’000
18,023
2,648
–
113
101
20,885
1,089
334
7,110
8,533
29,418
1,046
4,176
1,310
6,532
1,903
24
1,927
8,459
20,959
327
226
96
20,310
20,959
AS AT 30 JUNE 2014
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Accrued Revenue
Inventories
Prepayments
Total Current Assets
Non–current Assets
Deferred tax asset
Plant and equipment
Intangible assets
Total Non–current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Income tax payable
Provisions
Total Current Liabilities
Non–current Liabilities
Deferred tax liabilities
Provisions
Total Non–current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Share Reserve
Foreign Currency Translation Reserve
Retained earnings
TOTAL EQUITY
28
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2014
At 1 July 2012
Profit for the year
Other comprehensive income
Total comprehensive income for the period
Transaction with owners in their capacity as owners
Share Based Payment
Dividends
At 30 June 2013
CONSOLIDATED
ISSUED
CAPITAL
SHARE
RESERVE
FOREIGN CURRENCY
TRANSLATION RESERVE
RETAINED
EARNINGS
TOTAL
EQUITY
$’000
327
$’000
172
$’000
$’000
$’000
(1,681)
17,184
16,002
–
–
–
–
–
327
–
–
–
54
–
226
–
5,131
5,131
1,777
1,777
–
1,777
5,131
6,908
–
–
96
–
54
(2,005)
(2,005)
20,310
20,959
At 1 July 2013
327
226
96
20,310
20,959
Profit for the year
Other comprehensive income
Total comprehensive income for the period
Transaction with owners in their capacity as owners
Share Based Payment
Dividends
At 30 June 2014
–
–
–
–
–
327
–
–
–
58
–
284
–
186
186
1,509
1,509
–
186
1,509
1,695
–
–
–
58
(2,005)
(2,005)
282
19,814
20,707
29
PROMEDICUS ANNUAL REPORT 2014 CONSOLIDATED STATEMENT
OF CASH FLOW
FOR THE YEAR ENDED 30 JUNE 2014
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax (paid)/refunded
Net cash flows from operating activities
Cash flows from investing activities
Capitalised Development Costs
Interest received
Net inflow from sale of Amira, net of cash disposed
Purchase of plant and equipment
Proceeds from disposal of plant & equipment
Net cash flows used in investing activities
Cash flows from financing activities
Payment of dividends on ordinary shares
Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange differences
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Consolidated
2014
$’000
13,489
(8,564)
(692)
4,233
(5,162)
179
–
(110)
2
(5,091)
(2,005)
(2,005)
(2,863)
99
18,023
15,259
2013
$’000
11,681
(8,260)
392
3,813
(3,239)
220
13,883
(137)
7
10,734
(2,005)
(2,005)
12,542
288
5,193
18,023
Notes
11
15
8
14
14
10
11
30
NOTES TO THE
FINANCIAL STATEMENTS
31
PROMEDICUS ANNUAL REPORT 2014 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2014
assets or liabilities carried at fair value.
This includes information about the
assumptions made and the qualitative
impact of those assumptions on the
fair value determined.
AASB 119 — Employee Benefits —
The main change introduced by this
standard is to revise the accounting for
defined benefit plans. The amendment
removes the options for accounting
for the liability, and requires that the
liabilities arising from such plans is
recognized in full with actuarial gains
and losses being recognized in other
comprehensive income. It also revised
the method of calculating the return
on plan assets. The revised standard
changes the definition of short–term
employee benefits. The distinction
between short–term and other long–
term employee benefits is now based
on whether the benefits are expected
to be settled wholly within 12 months
after the reporting date.
AASB 2011–4 — Amendments to
Australian Accounting Standards to
Remove Individual Key Management
Personnel Disclosure Requirements
(AASB 124) — This amendment
deletes from AASB 124 individual key
management personnel disclosure
requirements for disclosing entities
that are not companies. It also
removes the individual KMP disclosure
requirements for all disclosing entities
in relation to equity holdings, loans and
other related party transactions.
(ii) Accounting Standards and
Interpretation issued but not
yet effective
Australian Accounting Standards
and Interpretations that have
recently been issued or amended
but are not yet effective have
not been adopted by the Group
for the annual reporting period
ending 30 June 2014. These are
outlined in the table overleaf.
1. CORPORATE INFORMATION
(i) Changes in Accounting policy
The financial report of Pro Medicus
Limited (the Company) for the year
ended 30 June 2014 was authorised
for issue in accordance with a
resolution of directors on
22 August 2014.
Pro Medicus Limited is a for
profit company limited by shares
incorporated in Australia whose
shares are publicly traded on the
Australian Securities Exchange.
The nature of the operations and
principal activities of the Group are
described in the Directors’ Report.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(a) Basis of Preparation
The financial report is a general–
purpose financial report, which
has been prepared in accordance
with the requirements of the
Corporations Act 2001, Australian
Accounting Standards and other
authoritative pronouncements
of the Australian Accounting
Standards board. The financial
report has also been prepared on
a historical cost basis.
The financial report is presented
in Australian dollars and all
values are rounded to the nearest
thousand dollars ($000) unless
otherwise stated.
(b) Statement of compliance
with IFRS
The financial report complies with
Australian Accounting Standards
and International Financial
Reporting Standards (IFRS)
as issued by the International
Accounting Standards Board.
(c) New accounting standards
and interpretations
and disclosures
The accounting policies adopted
are consistent with those of the
previous financial year except
as follows:
The Group has adopted the
following new and amended
Australian Accounting Standards
and AASB Interpretations as of
1 July 2013. Adoption of these
standards did not have any
effect on the financial position
or performance of the Group.
The necessary disclosures have
been updated to reflect amended
accounting standards.
AASB 10 — Consolidated Financial
Statements — This standard
establishes a new control model that
applies to all entities. The new control
model broadens the situations when
an entity is considered to be controlled
by another entity and includes new
guidance for applying the model to
specific situations, including when
acting as a manager may give control,
the impact of potential voting rights
and when holding less than a majority
voting rights may give control.
AASB 12 — Disclosure of Interests
in Other Entities — AASB 12
includes all disclosures relating to
an entity’s interests in subsidiaries,
joint arrangements, associates and
structured entities. New disclosures
have been introduced about the
judgments made by management to
determine whether control exists, and
to require summarised information
about joint arrangements, associates,
structured entities and subsidiaries
with non–controlling interests.
AASB 13 — Fair Value Measurement
— AASB 13 establishes a single
source of guidance for determining
the fair value of assets and liabilities.
AASB 13 does not change when an
entity is required to use fair value, but
rather, provides guidance on how to
determine fair value when fair value is
required or permitted. Application of
this definition may result in different
fair values being determined for the
relevant assets. AASB 13 also expands
the disclosure requirements for all
32
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
APPLICATION
DATE OF
STANDARD
IMPACT
ON GROUP
FINANCIAL
REPORT
APPLICATION
DATE FOR GROUP
1 January 2014
No impact
1 July 2014
1 January 2014
No impact
1 July 2014
1 January 2014
1 July 2014
The Group will
amend the
future financial
reports to
comply with
AASB 2013–3
1 January 2014
No impact
1 July 2014
1 January 2014
No impact
1 July 2014
REFERENCE
TITLE
SUMMARY
AASB 2012–3
Amendments to Australian
Accounting Standards –
Offsetting Financial Assets
and Financial Liabilities
Interpretation 21
Levies
AASB 2013–3
Amendments to AASB
136 – Recoverable Amount
Disclosures for Non –
Financial Assets
AASB 2013–4
Amendments to Australian
Accounting Standards –
Novation of Derivatives
and Continuation of Hedge
Accounting (AASB 139)
AASB 2013–5
Amendments to Australian
Accounting Standards –
Investment Entities
[AASB 1, AASB 3, AASB 7,
AASB 10, AASB 12, AASB
107, AASB 112, AASB 124,
AASB 127, AASB 132, AASB
134 & AASB 139]
AASB 2012–3 adds application guidance to AASB
132 Financial Instruments: Presentation to address
inconsistencies identified in applying some of the
offsetting criteria of AASB 132, including clarifying
the meaning of "currently has a legally enforceable
right of set–off" and that some gross settlement
systems may be considered equivalent to net
settlement.
This Interpretation confirms that a liability to
pay a levy is only recognised when the activity
that triggers the payment occurs. Applying the
going concern assumption does not create a
constructive obligation.
AASB 2013–3 amends the disclosure
requirements in AASB 136 Impairment of Assets.
The amendments include the requirement to
disclose additional information about the fair value
measurement when the recoverable amount of
impaired assets is based on fair value less costs
of disposal.
AASB 2013–4 amends AASB 139 to permit the
continuation of hedge accounting in specified
circumstances where a derivative, which has
been designated as a hedging instrument, is
novated from one counterparty to a central
counterparty as a consequence of laws or
regulations.
These amendments define an investment
entity and require that, with limited exceptions,
an investment entity does not consolidate
its subsidiaries or apply AASB 3 Business
Combinations when it obtains control of
another entity.
These amendments require an investment entity
to measure unconsolidated subsidiaries at fair
value through profit or loss in its consolidated and
separate financial statements.
These amendments also introduce new disclosure
requirements for investment entities to AASB 12
and AASB 127.
33
PROMEDICUS ANNUAL REPORT 2014 APPLICATION
DATE OF
STANDARD
1 July 2014
APPLICATION
DATE FOR GROUP
1 July 2014
IMPACT
ON GROUP
FINANCIAL
REPORT
The Group will
amend the
future financial
reports to
comply
with Annual
Improvements
1 July 2014
No impact
1 July 2014
1 July 2014
No impact
1 July 2014
REFERENCE
TITLE
SUMMARY
AASB 2014–1 Part A: This standard sets
out amendments to Australian Accounting
Standards arising from the issuance by the
International Accounting Standards Board (IASB)
of International Financial Reporting Standards
(IFRSs) Annual Improvements to IFRSs 2010–
2012 Cycle and Annual Improvements to IFRSs
2011–2013 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle
addresses the following items:
▶ AASB 2 – Clarifies the definition of ‘vesting
conditions’ and ‘market condition’ and
introduces the definition of ‘performance
condition’ and ‘service condition’.
▶ AASB 3 – Clarifies the classification
requirements for contingent consideration
in a business combination by removing all
references to AASB 137.
▶ AASB 8 – Requires entities to disclose
factors used to identify the entity’s reportable
segments when operating segments have
been aggregated. An entity is also required
to provide a reconciliation of total reportable
segments’ asset to the entity’s total assets.
▶ AASB 116 & AASB 138 – Clarifies that the
determination of accumulated depreciation
does not depend on the selection of the
valuation technique and that it is calculated
as the difference between the gross and net
carrying amounts.
▶ AASB 124 – Defines a management entity
providing KMP services as a related party of
the reporting entity. The amendments added
an exemption from the detailed disclosure
requirements in paragraph 17 of AASB 124
for KMP services provided by a management
entity. Payments made to a management
entity in respect of KMP services should be
separately disclosed.
Annual Improvements to IFRSs 2011–2013 Cycle
addresses the following items:
▶ AASB13 – Clarifies that the portfolio exception
in paragraph 52 of AASB 13 applies to all
contracts within the scope of AASB 139 or
AASB 9, regardless of whether they meet
the definitions of financial assets or financial
liabilities as defined in AASB 132.
▶ AASB40 – Clarifies that judgment is needed
to determine whether an acquisition of
investment property is solely the acquisition
of an investment property or whether it is the
acquisition of a group of assets or a business
combination in the scope of AASB 3 that
includes an investment property. That judgment
is based on guidance in AASB 3.
The revised AASB 1031 is an interim standard
that cross–references to other Standards and
the Framework (issued December 2013) that
contain guidance on materiality.
AASB 1031 will be withdrawn when
references to AASB 1031 in all Standards and
Interpretations have been removed.
AASB 2014–1 Part C issued in June 2014
makes amendments to eight Australian
Accounting Standards to delete their references
to AASB 1031. The amendments are effective
from 1 July 2014*.
AASB 2014–1
Part A – Annual
Improvements
2010–2012 Cycle
Amendments to Australian
Accounting Standards –
Part A
Annual Improvements to
IFRSs 2010–2012 Cycle
AASB 2014–1
Part A –Annual
Improvements
2011–2013 Cycle
Amendments to Australian
Accounting Standards –
Part A
Annual Improvements to
IFRSs 2011–2013 Cycle
AASB 1031
Materiality
34
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
APPLICATION
DATE OF
STANDARD
IMPACT
ON GROUP
FINANCIAL
REPORT
APPLICATION
DATE FOR GROUP
1 January 2014
No impact
1 July 2014
1 January 2016
No impact
1 July 2016
REFERENCE
TITLE
SUMMARY
AASB 2013–9
Amendments to Australian
Accounting Standards –
Conceptual Framework,
Materiality and Financial
Instruments
The Standard contains three main parts and
makes amendments to a number Standards and
Interpretations.
Part A of AASB 2013–9 makes consequential
amendments arising from the issuance of AASB
CF 2013–1.
Part B makes amendments to particular
Australian Accounting Standards to delete
references to AASB 1031 and also makes
minor editorial amendments to various other
standards.
Part C makes amendments to a number of
Australian Accounting Standards, including
incorporating Chapter 6 Hedge Accounting into
AASB 9 Financial Instruments.
AASB 14 ^^^
Regulatory deferral accounts AASB 14 permits first–time adopters to continue
to account for amounts related to rate regulation
in accordance with their previous GAAP when
they adopt Australian Accounting Standards.
However, to enhance comparability with entities
that already apply Australian Accounting
Standards and do not recognise such amounts,
AASB 14 requires that the effect of rate
regulation must be presented separately from
other items. An entity that is not a first–time
adopter of Australian Accounting Standards will
not be able to apply AASB 14.
AASB 2014–1 Part D makes amendments
to AASB 1 First–time Adoption of Australian
Accounting Standards, which arise from the
issuance of AASB 14 Regulatory Deferral
Accounts in June 2014.
Amendments to
IAS 16 and IAS
38*****
Clarification of Acceptable
Methods of Depreciation and
Amortisation (Amendments
to IAS 16 and IAS 38)
IAS 16 and IAS 38 both establish the principle
for the basis of depreciation and amortisation as
being the expected pattern of consumption of
the future economic benefits of an asset.
1 January 2016
No impact
1 July 2016
IFRS 15 *****
Revenue from Contracts with
Customers
The IASB has clarified that the use of revenue–
based methods to calculate the depreciation
of an asset is not appropriate because revenue
generated by an activity that includes the use
of an asset generally reflects factors other than
the consumption of the economic benefits
embodied in the asset.
The IASB also clarified that revenue is generally
presumed to be an inappropriate basis for
measuring the consumption of the economic
benefits embodied in an intangible asset. This
presumption, however, can be rebutted in
certain limited circumstances.
In May 2014, the IASB issued IFRS 15 Revenue
from Contracts with Customers, which replaces
IAS 11 Construction Contracts, IAS 18 Revenue
and related Interpretations (IFRIC 13 Customer
Loyalty Programmes, IFRIC 15 Agreements
for the Construction of Real Estate, IFRIC
18 Transfers of Assets from Customers and
SIC–31 Revenue—Barter Transactions Involving
Advertising Services).
The core principle of IFRS 15 is that an entity
recognises revenue to depict the transfer of
promised goods or services to customers in an
amount that reflects the consideration to which
the entity expects to be entitled in exchange for
those goods or services. An entity recognises
revenue in accordance with that core principle
by applying the following steps:
(a) Step 1: Identify the contract(s) with a customer
(b) Step 2: Identify the performance obligations
in the contract
(c) Step 3: Determine the transaction price
(d) Step 4: Allocate the transaction price to the
performance obligations in the contract
(e) Step 5: Recognise revenue when (or as) the
entity satisfies a performance obligation
Early application of this standard is permitted.
1 January 2017
1 July 2017
The Group will
amend the
future financial
reports to
comply with
IFRS 15
35
PROMEDICUS ANNUAL REPORT 2014 APPLICATION
DATE OF
STANDARD
IMPACT
ON GROUP
FINANCIAL
REPORT
APPLICATION
DATE FOR GROUP
1 January 2018
No impact
1 July 2018
REFERENCE
TITLE
SUMMARY
AASB 9/IFRS 9
Financial Instruments
On 24 July 2014 The IASB issued the final
version of IFRS 9 which replaces IAS 39
and includes a logical model for classification
and measurement, a single, forward–looking
‘expected loss’ impairment model and
a substantially–reformed approach to
hedge accounting.
IFRS 9 is effective for annual periods beginning on
or after 1 January 2018. However, the Standard
is available for early application. The own credit
changes can be early applied in isolation without
otherwise changing the accounting for financial
instruments.
The final version of IFRS 9 introduces a new
expected–loss impairment model that will
require more timely recognition of expected
credit losses. Specifically, the new Standard
requires entities to account for expected credit
losses from when financial instruments are
first recognised and to recognise full lifetime
expected losses on a more timely basis.
The AASB is yet to issue the final version of
AASB 9. A revised version of AASB 9 (AASB
2013–9) was issued in December 2013
which included the new hedge accounting
requirements, including changes to hedge
effectiveness testing, treatment of hedging
costs, risk components that can be hedged and
disclosures.
AASB 9 includes requirements for a simplified
approach for classification and measurement of
financial assets compared with the requirements
of AASB 139.
The main changes are described below.
a. Financial assets that are debt instruments
will be classified based on (1) the objective of
the entity’s business model for managing the
financial assets; (2) the characteristics of the
contractual cash flows.
b. Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are
not held for trading in other comprehensive
income. Dividends in respect of these
investments that are a return on investment
can be recognised in profit or loss and there
is no impairment or recycling on disposal of
the instrument.
c. Financial assets can be designated and
measured at fair value through profit or loss
at initial recognition if doing so eliminates
or significantly reduces a measurement
or recognition inconsistency that would
arise from measuring assets or liabilities, or
recognising the gains and losses on them, on
different bases.
d. Where the fair value option is used for
financial liabilities the change in fair value is
to be accounted for as follows:
▶ The change attributable to changes in credit
risk are presented in other comprehensive
income (OCI)
▶ The remaining change is presented in profit
or loss
AASB 9 also removes the volatility in profit or
loss that was caused by changes in the credit
risk of liabilities elected to be measured at fair
value. This change in accounting means that
gains caused by the deterioration of an entity’s
own credit risk on such liabilities are no longer
recognised in profit or loss.
Consequential amendments were also made
to other standards as a result of AASB 9,
introduced by AASB 2009–11 and superseded
by AASB 2010–7, AASB 2010–10 and AASB
2014–1 – Part E.
36
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
(cont’d)
(d) Basis of consolidation
The consolidated financial
statements comprise the financial
statements of Pro Medicus Limited
and its subsidiaries as at 30 June
each year (the Group). Control
is achieved when the Group is
exposed, or has rights, to variable
returns from its involvement with the
investee and has the ability to affect
those returns through its power over
the investee. Specifically, the Group
controls an investee if and only if the
Group has:
▶ Power over the investee (i.e. existing
rights that give it the current ability to
direct the relevant activities of
the investee)
▶ Exposure, or rights, to variable returns
from its involvement with the investee,
and
▶ The ability to use its power over the
investee to affect its returns.
When the Group has less than a
majority of the voting or similar rights
of an investee, the Group considers
all relevant facts and circumstances
in assessing whether it has power
over an investee, including:
▶ The contractual arrangement with the
other vote holders of the investee
▶ Rights arising from other contractual
arrangements
▶ The Group’s voting rights and
potential voting rights
The Group re–assesses whether or
not it controls an investee if facts
and circumstances indicate that
there are changes to one or more
of the three elements of control.
Consolidation of a subsidiary begins
when the Group obtains a control
over the subsidiary and ceases
when the Group loses control of the
subsidiary. Assets, liabilities, income
and expenses of a subsidiary
acquired or disposed of during the
year are included in the statement
of comprehensive income from the
date the Group gains control until
the date the Group ceases to control
the subsidiary.
Profit or loss and each component of
other comprehensive income (OCI)
are attributed to the equity holders
of the parent of the Group and to
the non–controlling interests, even
if this results in the non–controlling
interests having a deficit balance.
When necessary, adjustments are
made to the financial statements of
subsidiaries to bring their accounting
policies into line with the Group’s
accounting policies. All intra–group
assets and liabilities, equity, income,
expenses and cash flows relating to
transactions between members of
the Group are eliminated in full on
consolidation.
A change in the ownership interest
of a subsidiary, without a loss of
control, is accounted for as an
equity transaction. If the Group loses
control over a subsidiary, it:
~Derecognises the assets (including
goodwill) and liabilities of the
subsidiary.
~Derecognises the carrying amount
of any non–controlling interest.
~Derecognises the cumulative
translation differences, recorded
in equity.
~Recognises the fair value of the
consideration received.
~Recognises the fair value of any
investment retained.
~Recognises any surplus or deficit
in profit or loss.
~Reclassifies the parent’s share of
components previously recognised
in OCI to profit or loss or retained
earnings, as appropriate, as would
be required if the Group had
directly disposed of the related
assets or liabilities.
(e) Business combinations
Business combinations are
accounted for using the acquisition
method. The acquisition method of
accounting involves recognising at
acquisition date, separately from
goodwill, the identifiable assets
acquired, the liabilities assumed
and any non–controlling interest
in the acquiree. For each business
combination, the acquirer measures
the non–controlling interest in the
acquiree either at fair value or at
the proportionate share of the
acquiree’s identifiable net assets.
Acquisition–related costs are
expensed as incurred.
When the Group acquires a
business, it assesses the financial
assets 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 as at the
acquisition date.
If the business combination is
achieved in stages, the acquisition
date fair value of the acquirer’s
previously held equity interest in the
acquiree is remeasured at fair value
as at the acquisition date through
profit or loss.
Any contingent consideration to
be transferred by the acquirer
will be recognised at fair value at
the acquisition date. Subsequent
changes to the fair value of the
contingent consideration which is
deemed to be an asset or liability
will be recognised in accordance
with AASB 139 Financial
Instruments: Recognition and
Measurement either in profit or loss
or in other comprehensive income.
If the contingent consideration is
classified as equity, it shall not be
remeasured.
(f) Operating segments
An operating segment is a component
of an entity that engages in business
activities from which it may earn
revenues and incur expenses
(including revenues and expenses
relating to transactions with other
components of the same entity),
whose operating results are regularly
reviewed by the entity’s chief
operating decision maker to make
decisions about resources to be
allocated to the segment and assess
its performance and for which discrete
financial information is available. This
includes start up operations which are
yet to earn revenues.
Management will also consider
other factors in determining
operating segments such as the
existence of a line manager and
the level of segment information
presented to the board of directors.
Operating segments have been
identified based on the information
provided to the chief operating
decision makers – being the
executive management team.
The group aggregates two or more
operating segments when they have
similar economic characteristics
and the segments are similar in
each of the following respects:
▶ Nature of the products and services
▶ Type or class of customer for the
products and services
▶ Nature of the regulatory environment
37
PROMEDICUS ANNUAL REPORT 2014 Operating segments that meet the
quantitative criteria as prescribed
by AASB 8 are reported separately.
However, an operating segment
that does not meet the quantitative
criteria is still reported separately
where information about the
segment would be useful to users of
the financial statements
Information about other business
activities and operating segments
that are below the quantitative
criteria are combined and disclosed
in a separate category for all other
segments.
(g) Revenue recognition
Revenue is recognised to the extent
that it is probable that the economic
benefits will flow to the Group
and the revenue can be reliably
measured. The following specific
recognition criteria must also be met
before revenue is recognised:
Rendering of services
Revenue from the installation
and ongoing support of software
applications and services is
recognised by reference to the
stage of completion of a contract
or contracts in progress. Stage
of completion is measured by
completion of identifiable service
segments as a percentage of the
total services to be provided for
each contract, which is determined
by a quotation with the customer.
Service Revenue is recognised over
the term of the contract. Where
revenue is received in advance,
revenue is recognised in the period
during which the service is provided.
Where the contract outcome cannot
be reliably measured, revenue is
recognised only to the extent that
costs have been incurred.
Licences
License revenue is recognised
when control of the right to be
compensated for the license can be
reliably measured. License revenue
is recognised when ownership of
the goods have passed to the buyer,
which is usually after the software
application has been installed and is
ready for use by the buyer.
Interest
Revenue is recognised as the
interest accrues (using the effective
interest method, which is the rate
that exactly discounts estimated
future cash receipts through
the expected life of the financial
instrument) to the net carrying
amount of the financial asset.
38
(h) Leases
The determination of whether
an arrangement is or contains a
lease is based on the substance of
the arrangement and requires an
assessment of whether the fulfilment
of the arrangement is dependant on
the use of a specific asset or assets
and the arrangement conveys a right
to use the asset.
Group as a lessee
Leases where the lessor retains
substantially all the risks and
benefits of ownership of the asset
are classified as operating leases.
Operating lease payments are
recognised as an expense in the
statement of comprehensive income
on a straight–line basis over the
lease term.
(i) Cash and cash equivalents
Cash and cash equivalents in the
statement of financial position
comprise cash at bank and in hand
and short term deposits with an
original maturity of three months or
less that are readily convertible to
known amounts of cash and which
are subject to an insignificant risk of
changes of value.
For the purposes of the Statement
of Cash Flows, cash and cash
equivalents consist of cash and cash
equivalents as defined above.
(j) Trade and other receivables
Trade and intercompany receivables
are recognised initially at fair value
and subsequently measured at
amortised cost less an allowance for
any uncollectible amounts.
A provision for impairment is made
when there is objective evidence
that Pro Medicus will not be able
to collect the debts. Financial
difficulty of the debtors is considered
objective evidence by the Group.
Bad debts are written off when
identified.
(k) Inventories
Inventories are valued at the lower
of cost and net realisable value. The
cost of finished goods represents
the purchase cost.
Net realisable value is the estimated
selling price in the ordinary course
of business, less estimated costs of
completion and the estimated costs
necessary to make the sale.
(l) Derivative financial
instruments and hedging
The Group has not transacted any
derivative financial instruments
to hedge its risk associated
foreign currency and interest rate
fluctuations.
(m) Investments and other
financial assets
Investments and financial assets in
the scope of AASB 139 Financial
Instruments: Recognition and
Measurement are categorised
as either financial assets at fair
value through profit or loss, loans
and receivables, held–to–maturity
investments, or available–for–sale
financial assets. The classification
depends on the purpose for which
the investments were acquired
or originated. Designation is re–
evaluated at each reporting date, but
there are restrictions on reclassifying
to other categories. When financial
assets are recognised initially, they
are measured at fair value, plus,
in the case of assets not at fair
value through profit or loss, directly
attributable transaction costs.
Recognition and derecognition
All regular way purchases and sales
of financial assets are recognised
on the trade date i.e., the date that
the Group commits to purchase
the asset. Regular way purchases
or sales are purchases or sales of
financial assets under contracts that
require delivery of the assets within
the period established generally
by regulation or convention in the
market place. Financial assets are
derecognised when the right to
receive cash flows from the financial
assets has expired or when the
entity transfers substantially all the
risks and rewards of the financial
assets. If the entity neither retains
nor transfers substantially all of the
risks and rewards, it derecognises
the asset if it has transferred control
of the assets.
Subsequent measurement
(i) Financial assets at fair
value through profit or loss
Financial assets classified as
held for trading are included in
the category “financial assets at
fair value through profit or loss”.
Financial assets are classified as
held for trading if they are acquired
for the purpose of selling in the near
term with the intention of making a
profit. Derivatives are also classified
as held for trading unless they are
designated as effective hedging
instruments. Gains or losses on
financial assets held for trading
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
are recognised in profit or loss and
the related assets are classified as
current assets in the statement of
financial position.
Exchange variations resulting from
the translation are recognised in the
foreign currency translation reserve
in equity.
(ii) Loans and receivables
Loans and receivables including
loan notes and loans to key
management personnel are non–
derivative financial assets with fixed
or determinable payments that are
not quoted in an active market.
Such assets are carried at amortised
cost using the effective interest
rate method. Gains and losses are
recognised in profit or loss when
the loans and receivables are
derecognised or impaired. These are
included in current assets, except for
those with maturities greater than 12
months after reporting date, which
are classified as non–current.
(n) Foreign currency translation
(i) Functional and presentation
currency
Both the functional and presentation
currency of Pro Medicus Limited
and its Australian subsidiaries are
Australian dollars ($). The United
States subsidiaries’ functional
currency is United States Dollars.
The subsidiary in Germany has a
functional currency of Euro. Foreign
subsidiaries are translated to
presentation currency (see below for
consolidated reporting).
(ii) Transactions and balances
Transactions in foreign currencies
are initially recorded in the functional
currency by applying the exchange
rates ruling at the date of the
transaction. Monetary assets and
liabilities denominated in foreign
currencies are retranslated at the
rate of exchange ruling at the
reporting date.
Non–monetary items that are
measured in terms of historical cost in
a foreign currency are translated using
the exchange rate as at the date of
the initial transaction. Non–monetary
items measured at fair value in a
foreign currency are translated using
the exchange rates at the date when
the fair value was determined.
(iii) Translation of Group
Companies’ functional
currency to presentation
currency
The results of the United States and
German subsidiaries are translated
into Australian dollars (presentation
currency) using an average exchange
rate for the trading period. Assets and
liabilities are translated at exchange
rates prevailing at reporting date.
On consolidation, exchange
differences arising from the translation
of the net investments in foreign
subsidiaries are taken to the foreign
currency translation reserve. If a foreign
subsidiary were sold, the proportionate
share of exchange differences would
be transferred out of equity and
recognised in profit or loss.
(o) Income tax
Current tax assets and liabilities for
the current and prior periods are
measured at the amount expected
to be recovered from or paid to the
taxation authorities. The tax rates
and tax laws used to compute the
amount are those that are enacted
or substantively enacted by the
reporting date.
Deferred income tax is provided
on all temporary differences at the
reporting date between the tax
bases of assets and liabilities and
their carrying amounts for financial
reporting purposes.
Deferred income tax liabilities are
recognised for all taxable temporary
differences, except:
▶ where the deferred income tax liability
arises from the initial recognition of an
asset or liability in a transaction that
is not a business combination and,
at the time of the transaction, affects
neither the accounting profit nor
taxable profit or loss.
▶ when the taxable temporary difference
is associated with investments in
subsidiaries, associates or interests
in joint ventures, and the timing of the
reversal of the temporary difference
can be controlled and it is probable
that the temporary difference will not
reverse in the foreseeable future.
Deferred income tax assets are
recognised for all deductible
temporary differences, carry forward
of unused tax assets and unused
tax losses, to the extent that it is
probable that taxable profit will
be available against which the
deductible temporary differences,
and the carry–forward of unused tax
assets and unused tax losses can be
utilised, except:
▶ where the deferred income tax asset
relating to the deductible temporary
difference arises from the initial
recognition of an asset or liability in
a transaction that is not a business
combination and, at the time of
the transaction, affects neither the
accounting profit nor taxable profit
or loss.
▶ when the deductible temporary
difference is associated with
investments in subsidiaries,
associates or interests in joint
ventures, in which case a deferred
tax asset is only recognised to the
extent that it is probable that the
temporary difference will reverse in the
foreseeable future and taxable profit
will be available against which the
temporary difference can be utilised.
The carrying amount of deferred
income tax assets is reviewed at each
reporting date and reduced to the
extent that it is no longer probable that
sufficient taxable profit will be available
to allow all or part of the deferred
income tax asset to be utilised.
Unrecognised deferred income
tax assets are reassessed at each
reporting date and are recognised
to the extent that it has become
probable that future taxable profit
will allow the deferred tax asset to
be recovered.
Deferred income tax assets and
liabilities are measured at the tax
rates that are expected to apply to
the year when the asset is realised
or the liability is settled, based on
the tax rates (and tax laws) that
have been enacted or substantively
enacted at the reporting date.
Deferred tax assets and deferred tax
liabilities are offset only if a legally
enforceable right exists to set off
current tax assets against current tax
liabilities and the deferred tax assets
and liabilities relate to the same taxable
entity and the same taxation authority.
Income taxes relating to items
recognised directly in equity are
recognised in equity and not in the
statement of comprehensive income.
Tax consolidation legislation
Pro Medicus Limited and its wholly–
owned Australian controlled entities
implemented the tax consolidation
legislation as of 1 July 2009.
The head entity, Pro Medicus Limited
and the controlled entities in the
tax consolidated group continue to
account for their own current and
deferred tax amounts. The Group has
applied the Group allocation approach
to determining the appropriate amount
of current taxes and deferred taxes
to allocate to members of the tax
consolidated group.
39
PROMEDICUS ANNUAL REPORT 2014
In addition to its own current and
deferred tax amounts, Pro Medicus
also recognises the current tax
liabilities (or assets) and the deferred
tax assets arising from unused
tax losses and unused tax credits
assumed from controlled entities in
the tax consolidated group.
Pro Medicus Limited and its
100% owned Australian resident
subsidiaries formed a tax
consolidated group with effect
from 1 January 2009. Pro Medicus
Limited is the head entity of the tax
consolidated group. An allocation
of income tax liabilities between
the entities of the tax consolidated
group will be made should the head
entity default on its tax payment
obligations. No such amounts have
been recognised in the financial
statements on the basis that the
possibility of default is remote.
(p) Other taxes
Revenues, expenses and assets
are recognised net of the amount
of GST except:
▶ when the GST incurred on a
purchase of goods and services is
not recoverable from the taxation
authority, in which case the GST is
recognised as part of the cost of
acquisition of the asset or of the
expense item as applicable; and
▶ receivables and payables are stated
with the amount of GST included.
The net amount of GST recoverable
from, or payable to, the taxation
authority is included as part of
receivables or payables in the
statement of financial position.
Cash flows are included in the
Statement of Cash Flows on a gross
basis and the GST component of
cash flows arising from investing
and financing activities, which is
recoverable from, or payable to, the
taxation authority are classified as
operating cash flows.
Commitments and contingencies are
disclosed net of the amount of GST
recoverable from, or payable to, the
taxation authority.
(q) Non–current assets held for
sale and discontinued operations
The Group classifies non–current
assets and disposal groups as held
for sale if their carrying amounts will
be recovered principally through a
sale transaction rather than through
continuing use. Non–current assets
and disposal groups classified as
held for sale are measured at the
lower of their carrying amount and
40
fair value less costs to sell. The
criteria for held for sale classification
is regarded as met only when the
sale is highly probable and the
asset or disposal group is available
for immediate sale in its present
condition. Management must be
committed to the sale, which should
be expected to qualify for recognition
as a completed sale within one year
from the date of classification.
Discontinued operations are
excluded from the results of
continuing operations and are
presented as a single amount
as profit or loss after tax from
discontinued operations in the
income statement.
Property, plant and equipment and
intangible assets are not depreciated
or amortised once classified as held
for sale.
(r) Plant and equipment
Plant and equipment is stated at
cost less accumulated depreciation
and any impairment in value.
Depreciation is calculated on
a straight–line basis over the
estimated useful life of the asset as
follows:
Property
Improvements
Motor Vehicles
Office Equipment
2014
2013
2 to 7
years
4 to 5
years
2 to 7
years
2 to 7
years
4 to 5
years
2 to 7
years
Furniture and Fittings
5 years
5 years
Research and
Development
Equipment
3 to 4
years
3 to 4
years
An item of plant and equipment is
derecognised upon disposal or when
no future economic benefits are
expected to arise from the continued
use of the asset.
Any gain or loss arising on de–
recognition of the asset (calculated
as the difference between the net
disposal proceeds and the carrying
amount of the item) is included in the
statement of comprehensive income
in the period the item is derecognised.
Impairment
The carrying values of plant
and equipment are reviewed for
impairment at each reporting date,
with recoverable amount being
estimated when events or changes
in circumstances indicate that the
carrying value may be impaired.
For an asset that does not generate
largely independent cash inflows, the
recoverable amount is determined
for the cash generating unit to which
the asset belongs.
If any such indication exists and
where the carrying values exceed
the estimated recoverable amount,
the assets or cash–generating units
are written down to their recoverable
amount.
The recoverable amount of plant
and equipment is the greater of fair
value less costs to sell and value
in use. In assessing value in use,
the estimated future cash flows are
discounted to their present value
using a pre–tax discount rate that
reflects current market assessments
of the time value of money and the
risks specific to the asset.
(s) Intangible assets
Intangible assets acquired
separately are initially measured
at cost. The cost of an intangible
asset acquired in a business
combination is its fair value as at
date of acquisition. Following initial
recognition, intangible assets with a
finite life are carried at cost less any
accumulated amortisation and any
accumulated impairment losses.
Amortisation is calculated on
a straight–line basis over the
estimated useful life of the asset.
Intangible assets, excluding
development costs, created within
the business are not capitalised
and expenditure is charged against
profits in the period in which the
expenditure is incurred.
Intangible assets are tested for
impairment where an indicator of
impairment exists, either individually
or at the cash generating unit
level. The recoverable amount is
estimated and an impairment loss
is recognised to the extent that the
recoverable amount is lower than the
carrying value.
The amortisation period and method
is renewed at each financial year end
and adjustments, where applicable,
are made on a prospective basis.
Research and development costs
Research costs are expensed as
incurred.
An intangible asset arising from
development expenditure on an
internal project is recognised only
when the group can demonstrate the
technical feasibility of completing
the intangible asset so that it
will be available for sale or use,
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
its intention to complete and its
ability to use or sell the asset,
how the asset will generate future
economic benefits, the availability
of resources to complete the
development and the ability to
measure reliably the expenditure
attributable to the intangible asset
during its development. Following
initial recognition of the development
expenditure, the cost model is
applied requiring the asset be
carried at cost less any accumulated
amortisation and accumulated
impairment losses. Any expenditure
so capitalised is amortised on a
straight line basis over the period of
expected benefit from the related
project (5 years).
Development expenditure includes
costs of materials and services
and salaries and wages and other
employee related costs arising from
the generation of the intangible asset.
The carrying value of an intangible
asset arising from development
expenditure is tested for impairment
annually when the asset is not yet
available for use or more frequently
when an indication of impairment
arises during the reporting period.
Intellectual Property – Software
Three separately identifiable intangible
assets, in the form of software
intellectual property, have previously
been identified in the business
acquisition of Visage Imaging;
▶ Visage CS
▶ Visage PACS and
▶ Amira
Following initial recognition,
Intellectual property is measured
at cost less any accumulated
amortisation. A useful life of 5 years
has been determined.
Software Licenses
The Group identified a separate
intangible asset in the form of
software licenses, in the business
acquisition of Visage Imaging.
Following initial recognition, software
licenses are measured at cost less any
accumulated amortisation. A useful life
of 4 years has been determined.
Customer List
The Group identified a separate
intangible asset in the form of
a customer list, in the business
acquisition of Visage Imaging.
Following initial recognition, the
customer list is measured at cost less
any accumulated amortisation. A useful
life of 4 years has been determined.
(t) Trade and other payables
Trade payables and other payables
are carried at amortised cost and
represent liabilities for goods and
services provided to the Group prior
to the end of the financial year that
are unpaid and arise when the Group
becomes obliged to make future
payments in respect of the purchase
of these goods and services.
(u) Provisions
Provisions are recognised when the
Group has a present obligation (legal
or constructive) as a result of a past
event, it is probable that an outflow
of resources embodying economic
benefits will be required to settle the
obligation and a reliable estimate
can be made of the amount of the
obligation.
When the Group expects some or
all of a provision to be reimbursed,
for example under an insurance
contract, the reimbursement is
recognised as a separate asset but
only when the reimbursement is
virtually certain. The expense relating
to any provision is presented in the
statement of comprehensive income
net of any reimbursement.
Provisions are measured at the
present value of management’s best
estimate of the expenditure required
to settle the present obligation at the
reporting date.
Dividends payable are recognised
when a legal or constructive
obligation to pay the dividend arises,
typically following approval of the
dividend at a meeting of directors.
(v) Employee leave benefits
Provision is made for employee
entitlement benefits accumulated
as a result of employees rendering
services up to the reporting date.
(i) Annual leave and sick leave
The liability for annual leave is
recognised and measured as the
present value of expected future
payments to be made in respect
of services provided by employees
up to the reporting date, using
the projected unit credit method.
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 national government bonds with
terms to maturity and currencies that
match, as closely as possible the
estimated future cash outflows.
Expenses for non–accumulating sick
leave are recognised when the leave
is taken and are measured at the
rates paid.
(ii) Long Service Leave
The liability for long service leave
is recognised and measured as the
present value of expected future
payments to be made in respect
of services provided by employees
up to the reporting date, using
the projected unit credit method.
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 national government bonds with
terms to maturity and currencies that
match, as closely as possible the
estimated future cash outflows.
(w) Share based payment
transactions
(i) Equity settled transactions:
The Group provides benefits to its
employees (including KMP) in the
form of share–based payments,
whereby employees render services
in exchange for shares or rights over
shares (equity–settled transactions).
There are currently two plans in
place to provide these benefits:
▶ The Employee Share Option Plan
(ESOP), which provides benefits to
directors and senior executives.
▶ The Long Term Incentive Plan (LTIP),
which provides benefits to directors
and senior executives.
The cost of these equity–settled
transactions with employees (for
awards granted after 7 November
2002 that were unvested at 1
January 2005) is measured by
reference to the fair value of the
equity instruments at the date at
which they are granted. The fair
value is determined using a Black
Scholes model, further details of
which are given in note 19.
41
PROMEDICUS ANNUAL REPORT 2014 In valuing equity–settled
transactions, no account is taken of
any vesting conditions, other than
conditions linked to the price of
the shares of Pro Medicus Limited
(market conditions) if applicable.
The cost of equity–settled transactions
is recognised, together with a
corresponding increase in equity, over
the period in which the performance
and/or service conditions are fulfilled
(the vesting period), ending on the
date on which the relevant employees
become fully entitled to the award (the
vesting date).
At each subsequent reporting date
until vesting, the cumulative charge
to the statement of comprehensive
income is the product of:
(i) The grant date fair value
of the award;
(ii) For options with non–market
vesting conditions, the current best
estimate of the number of awards
that will vest, taking into account
such factors as the likelihood of
employee turnover during the vesting
period and the likelihood of non–
market performance conditions being
met; and
(iii) The expired portion of the vesting
period.
The charge to the statement of
comprehensive income for the period
is the cumulative amount as calculated
above less the amounts already
charged in previous periods. There is
a corresponding entry to equity.
Until an award has vested, any
amounts recorded are contingent
and will be adjusted if more or fewer
awards vest than were originally
anticipated to do so. Any award
subject to a market condition is
considered to vest irrespective of
whether or not that market condition
is fulfilled, provided that all other
conditions are satisfied.
If the terms of an equity–settled
award are modified, as a minimum
an expense is recognised as if the
terms had not been modified. An
additional expense is recognised for
any modification that increases the
total fair value of
the share–based payment
arrangement, or is otherwise
beneficial to the employee, as
measured at the date of modification.
If an equity–settled award is
cancelled, it is treated as if it had
vested on the date of cancellation,
and any expense not yet recognised
for the award is recognised
immediately. However, if a new award
is substituted for the cancelled award
and designated as a replacement
award on the date that it is granted,
the cancelled and new award are
treated as if they were a modification
of the original award, as described in
the previous paragraph.
The dilutive effect, if any, of
outstanding options is reflected
as additional share dilution in the
computation of diluted earnings per
share (see note 9).
(x) Contributed equity
Ordinary shares are classified as
equity. Incremental costs directly
attributable to the issue of new
shares or options are shown in
equity as a deduction, net of tax,
from the proceeds.
(y) Earnings per share
Basic earnings per share is
calculated as net profit attributable
to members of the Group, adjusted
to exclude any costs of servicing
equity (other than dividends) divided
by the weighted average number
of ordinary shares, adjusted for any
bonus element.
Diluted earnings per share is
calculated as net profit attributable
to members of the Group adjusted for
~Costs of servicing equity (other
than dividends)
~The after tax effect of dividends
and interest associated with
dilutive potential ordinary shares
that have been recognised as
expenses; and
~Other non–discretionary changes
in revenue or expenses during
the period that would result from
the dilution of potential ordinary
shares and
~Dilutive potential ordinary shares
adjusted for any bonus element.
and then divided by the weighted
average number of ordinary shares.
(z) Comparatives
Where necessary, comparatives
have been reclassified and
repositioned for consistency with
current year disclosures.
(aa) Government Grants
Research and Development tax
credits are recognized in accordance
with AASB 120: Accounting for
Government Grants and Government
Assistance. The Research and
development tax credit is recognised
when there is reasonable assurance
that the grant will be received and
all conditions have been complied
with. The Grant is recognised as a
reduction to the cost base of the
intangible and released to income
as a reduction in amortization
expense over the expected useful
life of the related asset. The amount
recognised for the period to 30 June
2014 is $642,403 (2013:$654,439).
3. SIGNIFICANT 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 and estimates on
historical experience and on other
various factors it believes to be
reasonable under the circumstances,
the result of which form the basis
of the carrying values of assets
and liabilities that are not readily
apparent from other sources.
Actual results may differ from
these estimates under different
assumptions and conditions.
Management has identified the
following critical accounting policies
for which significant judgements,
estimates and assumptions are
made. Actual results may differ
from these estimates under different
assumptions and conditions and
may materially affect financial results
or the financial position reported in
future periods.
Further details of the nature of these
assumptions and conditions may
be found in the relevant notes to the
financial statements.
42
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
(i) Significant accounting
judgements
Recovery of deferred tax assets
Deferred tax assets are recognised
for un–recouped tax losses and
deductible temporary differences
as management considers that it is
probable that future taxable profits
will be available to utilise those
temporary differences.
Capitalisation of Development costs
Development costs are only
capitalised by the Group when it can
be demonstrated that the technical
feasibility of completing the intangible
asset is valid so that the asset will be
available for use or sale.
Impairment of non–financial assets
The Group assesses impairment
of all 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. Given the current
uncertain economic environment
management considered that the
indicators of impairment were
significant enough and as such
these assets have been tested for
impairment in this financial period.
Taxation
The Group’s accounting policy for
taxation requires management’s
judgement as to the types of
arrangements considered to be
a tax on income in contrast to
an operating cost. Judgement
is also required in assessing
whether deferred tax assets and
certain deferred tax liabilities are
recognised on the statement of
financial position. Deferred tax
assets, including those arising from
un–recouped tax losses, capital
losses and temporary differences,
are recognised only where it is
considered more likely than not
that they will be recovered, which
is dependent on the generation
of sufficient future taxable profits.
Deferred tax liabilities arising
from temporary differences in
investments, caused principally by
retained earnings held in foreign tax
jurisdictions, are recognised unless
repatriation of retained earnings can
be controlled and are not expected
to occur in the foreseeable future.
Assumptions about the generation
of future taxable profits and
repatriation of retained earnings
depend on management’s estimates
of future cash flows. These depend
on estimates of future sales
volumes, operating costs, capital
expenditure, dividends and other
capital management transactions.
Judgements are also required
about the application of income
tax legislation. These judgements
and assumptions are subject to
risk and uncertainty, hence there
is a possibility that changes in
circumstances will alter expectations,
which may impact the amount of
deferred tax assets and deferred tax
liabilities recognised on the statement
of financial position and the amount
of other tax losses and temporary
differences not yet recognised. In
such circumstances, some or all of
the carrying amounts of recognised
deferred tax assets and liabilities
may require adjustment, resulting in a
corresponding credit or charge to the
statement of comprehensive income.
Net investment in Foreign Operations
The Group maintains inter–company
loans it assesses to represent a part
of its net investment in its foreign
operations. The judgements made in
assessing these loans to represent
net investments are on the basis the
loans are neither planned nor likely
to be settled within the foreseeable
future, the loans do not include
trade receivables or trade payable
and the loans represent a return of
funds from their investment in the
respective subsidiaries.
(ii) Significant accounting
estimates and assumptions
Capitalisation of development costs
The capitalisation of development
costs includes an overhead rate
which has been estimated from total
costs. The estimated development
overheads rate has been calculated
by dividing the development labour
costs over total labour costs to
give a percentage of development
labour rate. The development labour
rate is then applied against the
total overheads of the company,
to give an estimate of the amount
of overheads that relates to
development.
Share–based payments
The Group measures the cost of
equity–settled transactions with
employees by reference to the
fair value of equity instruments
at the date at which they are
granted. Estimating fair value for
share–based payment transactions
requires determination of the
most appropriate valuation model,
which is dependent on the terms
and conditions of the grant. This
estimate also requires determination
of the most appropriate inputs to
the valuation model including the
expected life of the share option/
performance rights, volatility
and dividend yield and making
assumptions about them. The
assumptions and models used for
estimating fair value of share–based
payment transactions are disclosed
in Note 19.
4. FINANCIAL RISK
MANAGEMENT OBJECTIVES
AND POLICIES
The Group’s principal financial
instruments are cash and short–term
deposits.
The main purpose of these financial
instruments is to provide finance
for the Group’s operations. The
Group has various other financial
assets and liabilities such as
trade receivables and trade
payables, which arise directly
from its operations. The main risks
arising from the Group’s financial
instruments are foreign currency
risk, interest risk and credit risk. The
Board manages each of these risks
as detailed below.
Foreign currency risk
The Group has transactional
currency exposure, which arise from
sales made in currencies other than
the Group’s functional currency.
Approximately 57% (2013: 51%) of
the Group’s sales are denominated
in currencies other than the
functional currency, and these sales
would be predominately offset
by currency exposure on costs.
Foreign bank accounts have also
been established, to create a natural
hedge and reduce the need for
regular transfers from the functional
currency (AUD) cash holdings.
43
PROMEDICUS ANNUAL REPORT 2014 At 30 June the Group had the following exposure to US$ foreign currency that is not designated in cash flow hedges or
recorded in the subsidiary currency.
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Net exposure
CONSOLIDATED
2014
$000
329
329
–
329
2013
$000
25
25
–
25
At 30 June the Group had the following exposure to CAD$ foreign currency that is not designated in cash flow hedges or
recorded in the subsidiary currency.
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Net exposure
CONSOLIDATED
2014
$000
917
917
–
917
2013
$000
1,145
1,145
–
1,145
At 30 June the Group had the following exposure to GBP₤ foreign currency that is not designated in cash flow hedges or
recorded in the subsidiary currency.
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Net exposure
CONSOLIDATED
2014
$000
720
720
–
720
2013
$000
566
566
–
–
566
At 30 June the Group had the following exposure to EUR€ foreign currency that is not designated in cash flow hedges or
recorded in the subsidiary currency.
Financial assets
Cash and cash equivalents
Financial liabilities
Trade and other payables
Net exposure
44
CONSOLIDATED
2014
$000
8,694
8,694
–
8,694
2013
$000
9,295
9,295
–
–
9,295
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
At 30 June, had the Australian Dollar moved, as illustrated in the table below, with all other variables held constant, post tax
profit and equity (excluding retained profits) would have been affected as follows:
JUDGEMENTS OF REASONABLY
POSSIBLE MOVEMENTS:
AUD/USD +10%
AUD/USD – 5%
AUD/CAD +10%
AUD/CAD – 5%
AUD/GBP +10%
AUD/GBP – 5%
AUD/EUR +10%
AUD/EUR – 5%
POST TAX PROFIT
HIGHER/(LOWER)
OTHER COMPREHENSIVE INCOME HIGHER/(LOWER)
2014
$’000
(33)
16
(92)
46
(72)
36
(869)
435
2013
$’000
(2)
1
(114)
57
(57)
28
(930)
465
2014
$’000
(18)
9
–
–
–
–
(127)
64
2013
$’000
(24)
12
–
–
–
–
(107)
54
Management believe the reporting
date risk exposures are representative
of the risk exposure inherent in the
financial instruments.
In addition, receivable balances are
monitored on an ongoing basis with the
result that the Group’s exposure to bad
debts is not significant.
Credit risk
Credit risk arises from the financial
instruments of the Group, which
comprise cash and cash equivalents and
trade and other receivables. The Group’s
exposure to credit risk arises from
potential defaults of the counter–party,
with a maximum exposure equal to the
carrying amount of the financial assets.
The Group trades only with recognised,
credit worthy third parties.
It is the Group’s policy that all
customers who wish to trade on credit
terms are subject to credit assessment.
As the Group trades predominantly
within the Diagnostic Imaging market
there is a concentration of credit risk.
Given the underlying Government
funding support for Radiology in
Hospital settings and the Imaging
Centre and Diagnostic Imaging market,
and the commercial successes
achieved by the Group to date, credit
risk is considered to be minimal.
Cash and cash equivalents are held
with several financial institutions, with
the majority held with the Westpac
Banking Corporation, a AA rated bank.
Interest risk
The Group exposure to market interest
rates relates primarily to the company’s
cash and cash equivalents.
At reporting date, the Group had the
following financial assets exposed to
Australian Variable interest rate risk that
are not designated in cash flow hedges:
Cash and Cash equivalents in the
Group ($’000’s) $15,259 (2013:
$18,023).
The Group’s policy is to place cash
balances in either 30 day term deposits
or commercial bills that earn higher
interest rates.
45
PROMEDICUS ANNUAL REPORT 2014
At 30 June 2014, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax
profit and equity (excluding retained profits) would have been affected as follows:
CONSOLIDATED
JUDGEMENTS OF REASONABLY POSSIBLE
MOVEMENTS:
+1% (100 basis points)
-0.5% (50 basis points)
POST TAX PROFIT
HIGHER/(LOWER)
OTHER COMPREHENSIVE INCOME
HIGHER/(LOWER)
2014
$’000
153
(76)
2013
$’000
180
(90)
2012
$’000
–
–
2013
$’000
–
–
Liquidity risk
The Group has minimal liquidity risk as it has cash reserves
of $15.3m, with no borrowings.
These cash reserves are deemed to be adequate and
the Board believes they will underpin the ongoing growth
of the business.
The table below reflects all contractually fixed pay–offs
for settlement and repayments resulting from recognised
financial liabilities. Cash flows for financial liabilities without
fixed amount of timing are based on the conditions existing
at 30 June 2014
The remaining contractual maturities of the Group’s
financial liabilities are:
CONSOLIDATED
5. OPERATING SEGMENTS
The Group has identified its operating segments based
on the internal reports that are reviewed and used by the
executive management team (the chief operating decision
makers) in assessing performance and in determining the
allocation of resources.
The operating segments are identified by management based
on country of origin. Discrete financial information is reported to
the executive management team on at least a monthly basis.
Impairment is not monitored at segment level.
Types of products and services
The Group produces integrated software applications for the
health care industry. In addition, the Group provides services
in the form of installation and support.
<30 days
31–60 days
61–90 days
Over 90 days
TOTAL
2014
$000
572
81
26
572
1,251
2013
$000
407
18
33
588
1,046
Accounting policies and inter–segment transactions
The accounting policies used by the Group in reporting
segments internally is the same as those contained in note 2
to the financial statements and in the prior periods except as
detailed below:
Inter–entity sales
Inter–entity sales are recognised based on an internally set
transfer price. The price aims to reflect what the business
operation could achieve if they sold their output and services
to external parties at arm’s length.
46
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
OPERATING SEGMENTS
Revenue
Sales to external customers
Inter–segment Sales
Total segment revenue
Inter–segment elimination
Total consolidation revenue
Results
Segment Result
Interest Revenue
Non segment expenses
Impairment Expenses
Income Tax Expense
Net Profit
Assets
Non–Current Assets
Deferred Tax Asset
Current Assets
Segment Assets
Inter–segment elimination
Total Assets
Liabilities
Segment Liabilities
Inter–segment elimination
Total Liabilities
Other segment information
Capital expenditure
Depreciation and amortisation
Cash flow information
AUSTRALIA
EUROPE
NORTH AMERICA
TOTAL OPERATIONS
2014
$’000
2013
$’000
2014
$’000
2013
$’000
2014
2013
$’000
$’000
2014
$’000
2013
$’000
6,147
2,615
8,762
5,479
1,750
7,229
2,811
4,504
7,315
2,807
3,519
6,326
5,310
2,868
14,268
11,154
–
–
5,310
2,868
7,119
21,387
(7,119)
5,269
16,423
(5,269)
14,268
11,154
1,182
(744)
734
342
357
(120)
2,273
179
(522)
220
–
(4,600)
(943)
1,509
1,425
(3,477)
13,133
11,052
491
29,798
43,422
822
26,386
38,260
178
–
185
–
23,128
23,306
22,688
22,873
37
134
6,413
6,584
42
267
2,503
2,812
13,348
625
59,339
73,312
11,279
1,089
51,577
63,945
(44,089)
(34,527)
29,223
29,418
37,906
31,545
4,683
5,045
5,825
2,379
48,414
38,969
(39,898)
(30,510)
8,516
8,459
4,803
2,788
2,999
2,498
442
449
346
413
26
29
23
37
5,271
3,266
3,368
2,948
Net cash flow from operating activities
5,268
3,458
(2,871)
Net cash flow from investing activities
Net cash flow from financing activities
(4,624)
(2,005)
(2,885)
(2,005)
(442)
–
(1,567)
11,713
–
1,836
(25)
–
1,922
1,906
–
4,233
(5,091)
(2,005)
3,813
10,734
(2,005)
47
PROMEDICUS ANNUAL REPORT 2014 5. OPERATING SEGMENTS (cont’d)
Product information
Revenue from external customers
Radiology Information Systems (RIS)
Picture Archiving Communications Systems (Visage 7/PACS)
Other income
NOTES
CONSOLIDATED
2014
$’000
5,939
8,311
18
2013
$’000
5,817
5,272
65
Total revenue per statement of comprehensive income
14,268
11,154
Revenue from major customers
Included in revenue are revenues of 11.4% (2013: 11.2%) from one party. No other customer contributed 10% or more to
the Group’s revenue for 2014 (2013: nil)
14
14
14
14
15
15
1,681
(1,782)
7
(94)
3
126
11
–
2,905
221
3,266
1,590
(1,034)
130
686
3
135
13
1
2,419
377
2,948
4,302
5,054
60
58
863
5,283
27
54
780
5,915
6. INCOME AND EXPENSES
(a) Other Income
Net Currency Gains
Net Currency (Loss)
Other
Total Other Income
(b) Expenses
Depreciation and Amortisation
Motor Vehicles
Office Equipment
Furniture and Fittings and Property Improvements
Research & Development Equipment
Amortisation on capitalised development costs
Intangible assets
Total Depreciation and Amortisation Expense
Salaries and Employee Benefits Expense
Wages & Salaries
Long service leave provision
Share–based payment
Defined contribution plan expense
Total Salaries and Employee Benefits Expense
48
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
NOTES
CONSOLIDATED
2014
$’000
2013
$’000
7. INCOME TAX
The major components of income tax expense are:
Statement of Comprehensive Income
Current income tax
Current income tax charge/(benefit)
Prior year adjustment
Deferred income tax
Relating to origination and reversal of temporary differences
Income tax expense reported in the statement of comprehensive income
A reconciliation between tax expense and the product of accounting profit
before income tax multiplied by the Group’s applicable income tax rate is
as follows:
Accounting profit before tax
At the applicable statutory income tax rate in each country
– Australia
– United States of America
– Germany
Prior year adjustment
Discontinued operations
Expenditure not allowable for income tax purposes
Other
Income tax expense reported in the statement of comprehensive income
330
(66)
679
943
(324)
(276)
(825)
(1,425)
2,452
7,547
354
122
170
(66)
–
168
195
943
(2,352)
690
4,027
(276)
(3,841)
139
188
(1,425)
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred Tax liabilities
Foreign Currency Exchange Gain
Intellectual Property expenses
Capitalised development expenses
Liabilities directly associated with the assets classified
as held for sale
Other
Deferred tax assets
Employee Entitlements
Tax Losses in Subsidiaries
Audit Fee Accrual
Other
Deferred income tax assets
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
2014
$’000
2013
$’000
545
(364)
1,935
–
2
561
(318)
1,658
–
2
2014
$’000
16
46
(277)
–
–
2,118
1,903
(215)
295
299
27
4
625
283
786
16
4
1,089
12
(487)
11
–
(464)
2013
$’000
126
(203)
(1,936)
681
–
(1,332)
17
488
2
–
507
49
PROMEDICUS ANNUAL REPORT 2014 Unrecognised temporary differences
At 30 June 2014, there are no
temporary differences associated with
the Group’s investments in subsidiaries
being recognised as the parent is able
to control the timing of the reversal of
any temporary differences and it is not
probable any temporary difference will
reverse in the foreseeable future.
Tax Consolidation
Pro Medicus Limited and its 100%
owned Australian resident subsidiaries
formed a tax consolidated group
with effect from 1 January 2009.
Pro Medicus Limited is the head entity
of the tax consolidated group.
8. DISCONTINUED
OPERATIONS
On 2 July 2012, the Group publicly
announced the decision of its Board
of Directors to sell its life sciences
division of Visage Imaging, Amira.
The business division of Amira is
considered non–core to the operations
of the Group and an offer to purchase
the business was made from a French
IT company, Visualization Sciences
Group (VSG). The disposal of Amira
was completed on 31 July 2012 for
$14,144,000 in cash resulting in a
pre–tax gain of $12,216,800.
The results of Amira for the period are presented below:
2014
$’000
Revenue
Cost of Goods Sold
Gross Profit
Operating Expenses
Profit/(loss) before tax from a discontinued operation
Income tax expense
Profit/(loss) for the year from a discontinued operation
Gain on disposal of the discontinued operations
Attributable tax expense
Profit/(loss) after tax on disposal of
the discontinued operation
Total profit after tax for the period from
a discontinued operation
Cash inflow on sale:
Consideration received
Net cash disposed of with the discontinued operations
Net cash inflow
The net cash flows incurred by Amira are as follows:
Operating
Investing
Financing
Net cash (outflow)/inflow
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2013
$’000
327
(4)
323
(91)
232
(71)
161
12,217
(3,770)
8,447
8,608
14,144
(261)
13,883
276
–
–
276
Earning per share
Basic, from discontinued operations
Diluted, from discontinued operations
CENTS
CENTS
–
–
8.6
8.6
50
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
9. EARNINGS PER SHARE
The following reflects the income and share data used in the basic and diluted
earnings per share computations:
Net Profit attributable to ordinary equity holders of the parent from continuing
operations
Profit/(loss) attributable to ordinary equity holders of the parent from discontinuing
operations
Consolidated
2014
$
2013
$
1,509,443
(3,477,399)
–
8,608,352
Net Profit attributable to ordinary equity holders
1,509,443
5,130,953
Weighted average number of ordinary shares for basic earnings per share
Effect of dilution:
Share options
Weighted average number of ordinary shares adjusted for the effect
of dilution
Number
Number
100,263,406
100,263,406
–
–
100,263,406
100,263,406
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date
and the date of completion of these financial statements
10. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2013: 1.0 cent (2012: 1.0 cent)
Interim franked dividend for 2014: 1.0 cent (2013: 1.0 cent)
Proposed for approval by directors (not recognised as a liability as at 30 June):
Dividends on ordinary shares:
Final franked dividend for 2014: 1.0 cents (2013: 1.0 cents)
Total dividends proposed
Franking credit balance
Consolidated
2014
$
1,003
1,002
2,005
1,002
1,002
2013
$
1,003
1,002
2,005
1,002
1,002
– franking account balance as at the end of the financial year at 30% (2013: 30%)
782
1,641
– franking credits that will arise from the payment of income tax payable as at the end of the financial year
– franking debits that will arise from the payment of dividends as at the end of the financial year
– franking credits that the entity may be prevented from distributing in the subsequent financial year
The amount of franking credits available for future reporting periods:
–impact on the franking account of dividends proposed or declared before the financial
report was authorised for issue but not recognised as a distribution to equity holders
during the period
The tax rate at which paid dividends have been franked is 30% (2013: 30%).
Dividends proposed will be fully franked.
–
–
–
–
–
–
782
1,641
(430)
(430)
352
1,211
51
PROMEDICUS ANNUAL REPORT 2014
11. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short–term deposits
CONSOLIDATED
2014
$’000
13,152
2,107
15,259
2013
$’000
16,002
2,021
18,023
Cash at bank earns interest at floating rates based on daily bank deposit rates.
Short term deposits are made for varying periods of between 30 days and 120 days, depending on the immediate cash
requirements of the Group, and earn interest at the respective short–term deposit rates.
The fair value of cash and cash equivalents is their carrying value.
Reconciliation of net profit after tax to net cash flows from operations
1,509
5,131
140
3,126
(179)
101
(135)
58
–
–
–
(651)
13
464
(257)
100
92
(428)
215
65
4,233
152
2,796
(220)
(566)
–
54
(13,883)
4,600
2,269
1,479
(13)
507
56
(570)
(357)
4,312
(2,013)
79
3,813
Net profit
Adjustments for:
Depreciation of Property Plant and Equipment
Amortisation of Intangible Assets
Interest Received classified in Investing Activities
Foreign currency (gain)/loss
Accrued revenue
Share option expense
Net inflow from sale of Amira, net of cash disposed
Impairment expense
Write back of discontinued intangible asset
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables
(Increase)/decrease in inventory
(Increase)/decrease in deferred tax asset
(Increase)/decrease in prepayments
(Decrease)/increase in deferred income
(Decrease)/increase in trade and other payables
(Decrease)/increase in tax provision
(Decrease)/increase in deferred income tax liability
(Decrease)/increase in employee entitlements
Net cash flow from operations
52
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
12. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables
Provision for impairment
Research & development tax receivable
Other receivables
Fair value approximates carrying value due to the short term nature of receivables
a) Allowance for impairment loss
Movements in the provision for impairment loss were as follows:
At 1 July
Charge to/(write back of) provision for the year
Foreign exchange translation
At 30 June
At June 30, the ageing analysis of trade receivables is as follows:
2,513
(97)
2,416
642
241
3,299
CONSOLIDATED
2014
$’000
65
32
–
97
1,830
(65)
1,765
654
229
2,648
2013
$’000
86
(29)
8
65
Total
0–30 days
31–60 days
61–90 days
+91 days
+91 days
2014 Consolidated
2013 Consolidated
2,513
1,830
2,013
811
* Past due not impaired (‘PDNI’)
** Considered Impaired (‘CI’)
PDNI*
81
158
PDNI*
192
194
PDNI*
227
667
Payment terms on $60,795 (2013: nil) of trade receivables have been renegotiated. The Company has been in direct
contact with these debtors and is satisfied that payment will be received in full.
13. INVENTORIES (CURRENT)
Finished goods
Inventory write downs recognised as an expense total nil (2013: nil)
CONSOLIDATED
2014
$’000
100
CI**
97
65
2013
$’000
113
53
PROMEDICUS ANNUAL REPORT 2014
TOTAL
$’000
334
104
(2)
6
(140)
302
3,222
(2,920)
302
356
99
(7)
38
(152)
334
–
–
–
–
–
_
209
(209)
–
1
–
–
–
(1)
–
209
(209)
3,176
(2,842)
–
334
14. PLANT & EQUIPMENT
CONSOLIDATED
PROPERTY
IMPROVEMENTS
MOTOR
VEHICLES
OFFICE
EQUIPMENT
FURNITURE &
FITTINGS
RESEARCH &
DEVELOPMENT
EQUIPMENT
$’000
$’000
$’000
$’000
$’000
Year ended 30 June 2014
At 1 July 2013 net of
accumulated depreciation
Additions
Disposals
Exchange differences
Depreciation charge for the year
At 30 June 2014 net of
accumulated depreciation
At 30 June 2014
Cost
Accumulated depreciation and
impairment
Net carrying amount
Year ended 30 June 2013
At 1 July 2012 net of
accumulated depreciation
Additions
Disposals
Exchange differences
Depreciation charge for the year
At 30 June 2013 net of
accumulated depreciation
At 30 June 2013
Cost
Accumulated depreciation and
impairment
Net carrying amount
29
–
–
–
(4)
25
11
–
–
–
(3)
8
328
(303)
480
(472)
25
22
9
–
2
(4)
29
8
14
–
–
–
(3)
11
259
104
(2)
5
(126)
240
1,861
(1,621)
240
274
85
(3)
38
(135)
259
326
(297)
29
560
(549)
1,739
(1,480)
11
259
35
–
–
1
(7)
29
344
(315)
29
45
5
(4)
(2)
(9)
35
342
(307)
35
54
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
15. INTANGIBLE ASSETS
CONSOLIDATED
Year ended 30 June 2014
At 1 July 2013 net of accumulated
amortisation and impairment
Additions – internal development
Disposals
Exchange differences
Amortisation charge for the year
At 30 June 2014 net of accumulated
amortisation and impairment
At 30 June 2014
INTELLECTUAL
PROPERTY i)
CUSTOMER
LIST ii)
DEVELOPMENT
COSTS iii)
SOFTWARE
LICENSES iv)
TOTAL
$’000
216
–
–
–
(216)
–
$’000
$’000
$’000
$’000
–
_
–
–
–
–
6,882
5,162
–
–
(2,905)
9,139
12
–
–
(1)
(5)
6
7,110
5,162
–
(1)
(3,126)
9,145
Cost
Accumulated amortisation and impairment
Net carrying amount
1,848
(1,848)
–
213
(213)
–
21,684
(12,545)
9,139
288
(282)
6
24,033
(14,888)
9,145
Year ended 30 June 2013
At 1 July 2012 net of accumulated
amortisation and impairment
Additions – internal development
Disposals
Exchange differences
Impairment
Amortisation charge for the year
At 30 June 2013 net of accumulated
amortisation and impairment
At 30 June 2013
Cost
Accumulated amortisation and impairment
Net carrying amount
585
21
10,642
19
11,267
–
–
–
–
(369)
216
1,848
(1,632)
216
–
(21)
–
–
–
–
213
(213)
–
3,259
–
–
(4,600)
(2,419)
6,882
16,522
(9,640)
6,882
–
–
1
–
(8)
12
3,259
(21)
1
(4,600)
(2,796)
7,110
282
(270)
12
18,865
(11,755)
7,110
i) Intellectual Property was acquired
in 2009 through the Visage Imaging
business combination and is
carried at cost less accumulated
amortisation. Three separately
identifiable intangible assets, in
the form of software intellectual
property, have been identified in
the business acquisition of Visage
Imaging; Visage CS, Visage PACS
and Amira. These intangible assets
have been assessed as having
a finite life and have been fully
amortised using the straight line
method over a period of 5 years,
commencing February 2009. Amira
was sold in July 2012 (refer Note 8)
ii) A Customer List was acquired in
2009 through the Visage Imaging
business combination and has since
been sold with the Amira sale (refer
Note 8).
iii) Development costs have been
capitalised at cost. This intangible
asset has been assessed as having
a finite life and is amortised using the
straight line method over a period
of 5 years. As at 30 June 2014
the carrying values of capitalised
development costs are Visage CS
($5,311,388) RIS ($3,249,097) and
Visage PACS ($578,352), all sits within
the Australian operating segment.
The Group undertook an impairment
assessment of the capitalised
development costs as at 30 June
2014. The recoverable amount
of development costs have been
determined based on a value in use
calculation using cash flow projections
from financial budgets approved by
the Board of Directors covering a five–
year period. The projected cash flows
were updated to reflect the change
in forecast revenues and a post–
tax discount rate of 18% (30 June
2013:20%) was applied. Cash flows
beyond a 5 year period have been
extrapolated using a 2.5% growth
rate (30 June 2013:2.5%). All other
assumptions remained consistent
with those disclosed in Note 2(s).
The Groups recoverable value was in
excess of the carrying value using the
value in use calculation and as such no
impairment charges were recorded at
30 June 2014.
Key assumptions used in value in use
calculations
The calculation of value in use for
development costs is most sensitive to
the following assumptions:
– Revenue forecasts
– Discount rates
– Growth rates used to extrapolate
cash flows beyond the forecast
period
55
PROMEDICUS ANNUAL REPORT 2014 Revenue forecasts – Revenue forecasts are based on
current year consolidated budgets for each geographical
segment. Estimated growth rates are then used to forecast
the following four years revenue for each product used in
each geographical segment. Total forecast segment growth
rates range from (15%) to 25% across the 4 year period.
Discount rates – Discount rates represent the current market
assessment of risks specific to each cash generating unit
(CGU), taking into consideration the time value of money
and individual risks of the underlying assets that have not
been incorporated in the cash flow estimates. The discount
rate calculation is based on the specific circumstances
of the Group and its operating segments and is derived
from its weighted average return on assets (WARA). The
WARA takes into account the cost of equity from expected
return on investments by the Groups investors, whilst there
is no debt for the group to take into account. Specific
risk is associated with the intangible asset nature and is
incorporated by applying individual beta factors, which are
evaluated annually.
Growth rate estimates – rates are based on industry based
customer price index (CPI) forecasts. The long term rate of
2.5% was used in the current assessment.
Sensitivity to changes in assumptions
With regard to the assessment of value in use of
development costs, the estimated recoverable amount is
in excess of its carrying value for each product, however
adverse changes in assumptions could result in an
impairment loss. Management has considered the possible
change in each of the key assumptions applied to the
respective capitalised development costs recoverable
amount assessments. A reasonably possible adverse
change in the revenue forecasts for the RIS product could
have the potential to give rise to circumstance where the
recoverable amount may be lower than the carrying amount.
To illustrate the sensitivity of this assumption, if forecast
cash flows were to decrease materially, that is in the range
of 5–10%, across the five year forecast period without
the implementation of mitigation plans, cost reductions
or restructure which management would look to do if
such decreases were to arise, this could lead to a future
impairment write–down of approximately $0.5–$2.2 million.
iv) Software Licences have been assessed as having a
finite life and are amortised using the straight line method
over a period of 4 years.
16. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables
Other payables and accruals
Deferred Income
CONSOLIDATED
2014
$’000
177
757
934
317
2013
$’000
199
629
828
218
1,251
1,046
(i) Trade payables are non–interest bearing and are normally settled on 30–day terms.
(ii) Other payables, other than inter–company payables are non–interest bearing and have an average term of 30 days.
Fair value approximates carrying value due to the short term nature of trade and other payables.
17. PROVISIONS
Current
Long service leave
Annual leave
Non Current
Long service leave
(i) Long Service Leave
513
827
1,340
59
59
487
823
1,310
24
24
Refer to note 2 (v)(ii) for the relevant accounting policy and a discussion of the significant estimations and assumptions
applied in the measurement of this provision.
56
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
18. CONTRIBUTED EQUITY AND RESERVES
(i) Ordinary shares
Issued and fully paid
CONSOLIDATED
2014
$’000
327
327
Fully paid ordinary shares carry one vote per share and carry the right to dividends
(ii) Movements in shares on issue
At 1 July 2013
Cancellation for share buy–back
Issued for cash on exercise of options
At 30 June 2014
At 1 July 2012
Cancellation for share buy–back
Issued for cash on exercise of options
At 30 June 2013
Share Reserve (i)
Balance at 1 July
Share options expensed
Balance at 30 June
Foreign Currency Translation Reserve (ii)
Balance at 1 July
Foreign Currency Movement
Balance at 30 June
Retained Earnings
Balance at 1 July
Net profit for the year
Dividends
Balance at 30 June
NUMBER OF SHARES
100,263,406
–
–
100,263,406
NUMBER OF SHARES
100,263,406
–
–
100,263,406
CONSOLIDATED
2014
$’000
226
58
284
96
186
282
20,310
1,509
(2,005)
19,814
2013
$’000
327
327
$’000
327
–
–
327
2014
$’000
327
–
–
327
2013
$’000
172
54
226
(1,681)
1,777
96
17,184
5,131
(2,005)
20,310
57
PROMEDICUS ANNUAL REPORT 2014 i) Share Reserve
The share reserve is used to record the value of share
based payments provided to employees, including KMP,
as part of their remuneration. Refer to note 19 for further
details of these plans.
ii) Foreign Currency translation reserve
The foreign currency translation reserve is used to
record exchange differences arising from the translation
of the financial statements of foreign subsidiaries and
for exchange differences arising from long term loan
accounts resulting from net investment in subsidiaries.
Capital Management
When managing capital, management’s objective is to
ensure the entity continues as a going concern as well as
to maintain optimal returns to shareholders and benefits
for other stakeholders. Management also aims to maintain
a capital structure that ensures the lowest cost of capital
available to the entity.
Management review the capital structure to take advantage
of favourable costs of capital or high returns on assets.
As the market is constantly changing, management may
change the amount of dividends to be paid to shareholders,
return capital to shareholders, or issue new shares.
During the year, the company paid dividends of $2,005,268
(2013: $2,005,268).
19. SHARE BASED PAYMENT PLAN
Employee Share Option Scheme
An employee share incentive scheme was established
on 25th August 2000 whereby directors and staff of the
Company were issued with options over the ordinary
shares of Pro Medicus Limited. The options, issued for nil
consideration, had an exercise price of $1.15 and 2,100,000
share options expired under the scheme on 25 August 2010.
Options vested at 20% per annum commencing on the first
anniversary of issue. The options cannot be transferred and
will not be quoted on the ASX.
200,000 shares were granted as options to Peter Kempen
on becoming a Director of the company in 2008 under a
separate agreement. The options had a grant date of 12
March 2008 and an exercise price of $1.25. The fair value
of the options at grant date was $40,852 ($0.13 – $0.29 per
option). The options have a first exercise date of 12 March
2009 and can be exercised at anytime through to expiry date
of 12 March 2018. The options vest over a 5 year period
on completion of service. At reporting date all options had
vested. No options were exercised during the year.
900,000 shares were granted as options to key Visage
Imaging employees under a separate agreement. The options
had a grant date of 1 April 2010 and an exercise price of
$1.00. The fair value of the options at grant date was $67,278
($0.07 per option). The options have a first exercise date of 1
April 2011 and can be exercised at anytime through to expiry
date of 1 April 2020. The options vest over a 5 year period
on completion of service. At reporting date 580,000 (64%)
options had vested and 175,000 (19%) options had expired.
No options were exercised during the year.
550,000 shares were granted as options to Key Executives
under a separate agreement. The options had a grant date
of 25 August 2010 and an exercise price of $1.00. The fair
value of the options at grant date was $54,109 ($0.10 per
option). The options have a first exercise date of 25 August
2011 and can be exercised at anytime through to expiry date
of 25 August 2020. The options vest over a 5 year period on
completion of service. At reporting date 330,000 (60%) options
had vested. No options were exercised during the year.
200,000 shares were granted as options to Roderick Lyle
on becoming a Director of the company in 2011 under a
separate agreement. The options had a grant date of 18
November 2011 and an exercise price of $0.55. The fair value
of the options at grant date was $45,116 ($0.23 per option).
The options have a first exercise date of 18 November 2012
and can be exercised at anytime through to expiry date of
18 November 2021. The options vest over a 5 year period on
completion of service. At reporting date 80,000 (40%) options
had vested. No options were exercised during the year.
Information with respect to the number of
options granted under the employee share
option scheme is as follows:
2014
2013
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
NUMBER OF OPTIONS
WEIGHTED AVERAGE
EXERCISE PRICE
Outstanding at the beginning of the year
1,675,000
$0.98
1,675,000
$0.98
– granted
– forfeited
– exercised
– expired
–
–
–
–
–
–
–
–
–
–
–
–
Outstanding at the end of the year
Exercisable at end of year
1,675,000
1,190,000
$0.98
$0.98
1,675,000
895,000
–
–
–
–
$0.98
$0.98
58
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
All options above have been recognised
in accordance with AASB 2 as
the options were granted after
7 November 2002.
The outstanding balance as at
30 June 2014 is represented by:
▶ 200,000 options over ordinary shares
with an exercise price of $1.25 each,
exercisable until 12 March 2018
▶ 725,000 options over ordinary share
with an exercise price of $1.00 each,
exercisable until 1 April 2020
▶ 550,000 options over ordinary share
with an exercise price of $1.00 each,
exercisable until 25 August 2020
▶ 200,000 options over ordinary shares
with an exercise price of $0.55 each,
exercisable until 18 November 2021
Weighted average remaining
contractual life
The weighted average remaining
contractual life for share options
outstanding at 30 June 2014 is 5.94 years
(2013: 6.94 Years)
Range of exercise price
The range of exercise prices for options
outstanding at the end of the year was
$0.55 – $1.25 (2013: $0.55 – $1.25).
Weighted average fair value
The weighted average fair value of
options granted during the year was
nil (2013: nil).
Option pricing model
The fair value of the equity–settled
share options granted is estimated as
at the date of the grant using a Black
Scholes Model taking into account the
terms and conditions upon which the
options were granted.
The following table lists the inputs to the models used for the year ended 30 June 2014
Dividend yield
Expected volatility*
Risk–free interest rate
Expected life of options
Option exercise price
Weighted average share price at measurement date
2014
2013
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
nil
*The expected volatility rate was calculated measuring the standard deviation between the
historical share price movements for the past 12 months.
Performance Rights
A long term incentive plan was established on 18th November 2011 whereby
Senior Executives of Group were offered performance rights over the ordinary
shares of Pro Medicus Limited. The performance rights, issued for nil
consideration, are offered for a 5 year period and vest 3 years after granting date
on completion of service. The performance rights cannot be transferred and will
not be quoted on the ASX. This long term incentive plan includes performance
hurdles related to the company and vesting conditions relating to the employee’s
period of service.
At reporting date 176,375 performance rights had been granted during the year.
The performance rights had a grant date of 15 September 2013 and vest over 3
years on completion of service. The fair value of the performance rights at grant
date was $44,094 ($0.25 per performance right).
387,000 performance rights were granted during the 2012–13 financial year.
The performance rights had a grant date of 1 July 2012 and vest over 3 years on
completion of service. The fair value of the performance rights at grant date was
$96,750 ($0.25 per performance right).
Information with respect to the number of performance rights granted under
the long term incentive scheme is as follows:
Outstanding at the beginning of the year
– granted
– forfeited
– exercised
– expired
2014
2013
NUMBER OF
PERFORMANCE
RIGHTS
NUMBER OF
PERFORMANCE
RIGHTS
387,000
176,375
–
387,000
–
–
–
–
–
–
Outstanding at the end of the year
Exercisable at end of year
563,375
–
387,000
–
Weighted average remaining contractual life
The weighted average remaining contractual life for performance rights at 30
June 2014 is 2.3 years (2013: 3 Years)
Performance rights pricing model
The fair value of the equity–settled performance rights granted is estimated as at
the date of the grant using a Black Scholes Model taking into account the terms
and conditions upon which the performance rights were granted.
59
PROMEDICUS ANNUAL REPORT 2014 The following table lists the inputs to the models used for the year ended 30 June 2014
Dividend yield
Expected volatility*
Risk–free interest rate
Expected life of performance rights
Performance rights exercise price
Weighted average share price at
measurement date
2014
5.66%
70%
5%
3 years
$0.00
$0.25
2013
5.66%
70%
5%
3 years
$0.00
$0.25
* The expected volatility rate was calculated measuring the standard deviation between the historical share price movements for
the past 12 months.
20. COMMITMENTS
a) Operating lease commitments – Group as lessee
The Parent has entered into a commercial property lease
for office premises. This lease has a life of 5 years with an
option for a further 5 year period. There is no restriction
placed upon the lessee by entering into this lease. The US
operations have entered into a commercial property lease
for office premises from 1 May 2010 for a 5 year period.
The German operations have entered into a commercial
property lease for office premises and can give notice to
vacate 3 months prior to 30 April each year, whereby they
sign into another 12 months.
The German operations also have several motor vehicles
leases which expire at various stages between October 2014
and September 2015.
CONSOLIDATED
2014
$’000
2013
$’000
Future minimum rentals payable under non–cancellable
operating lease as at 30 June are as follows:
– Within one year
– After one year and not more than
five years
– After more than five years
368
729
–
372
777
–
1,097
1,149
21. EVENTS AFTER THE BALANCE SHEET DATE
On 22 August 2014, the directors of Pro Medicus Limited declared a final dividend on ordinary shares in respect of the
2014 financial year. This dividend comprises a normal dividend of 1.0 cents per share. The total amount of the dividend is
$1,002,634 which represents a fully franked dividend of a total of 1.0 cents per share. The dividend has not been provided for
in the 30 June 2014 financial statements.
22. AUDITOR’S REMUNERATION
Amounts received or due and receivable by Ernst & Young (Australia) for:
CONSOLIDATED
2014
$’000
2013
$’000
– an audit or review of the financial report of the Company and any other entity in the
136,150
135,300
Consolidated Group
– other services in relation to the Company or Group
Amounts received or due and receivable by related practices of Ernst & Young (Australia):
– audit of the financial report of Visage Imaging GmbH
23. KEY MANAGEMENT PERSONNEL
(a) Compensation for key management personnel
Short–term employee benefits
Post–employment benefits
Other long–term benefits
Share–based payment
Total compensation
60
28,650
164,800
74,376
239,176
64,080
199,380
63,410
262,790
1,827,438
1,597,100
99,952
15,034
37,007
93,466
15,305
36,791
1,979,431
1,742,662
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2014 cont.
(b) Loans to Key Management Personnel
No loans are made to Key Management Personnel or staff.
(c) Other transactions and balances with Key Management Personnel
Purchases
During the year lease payments of $169,476 (2013: $169,476) in respect of the Group’s operating premises at 450 Swan
Street Richmond were paid to Champagne Properties Pty. Ltd., an entity controlled by S. Hupert and A. Hall. Commercial
arrangements on an ‘arm’s length basis’ have been determined by an independent assessment of rental and lease terms.
24. RELATED PARTY DISCLOSURE
(a) Subsidiaries
The consolidated financial statements include the financial statements of Pro Medicus Limited and the subsidiaries listed in
the following tablw:
Name
Country of incorporation
Promed (USA) Pty Ltd
PME IP Australia Pty Ltd
Visage Imaging (Aust) Pty Ltd
Pro Medicus (USA) LLC
Visage Imaging Inc
Visage Imaging GmbH
Australia
Australia
Australia
United States
United States
Germany
% EQUITY INTEREST
INVESTMENT $000
2014
100
100
100
100
100
100
2013
100
100
100
100
100
100
2014
2013
–
–
–
–
2,389
3,638
6,027
–
–
–
–
2,389
3,638
6,027
(b) Ultimate parent
Pro Medicus Limited is the ultimate Australian parent entity and the ultimate parent of the Group.
(c) Key management personnel
Details relating to KMPs, including remuneration paid, are included in note 23.
(d) Transactions with related parties
The following table provides the total amount of transactions that were entered into with related parties for the relevant
financial year.
SALES TO RELATED
PARTIES
$000
PURCHASES FROM
RELATED PARTIES
$000
OTHER TRANSACTIONS
WITH RELATED
PARTIES $000
Related party
Consolidated
Champagne Properties Pty Ltd – Rental lease
Champagne Properties Pty Ltd – Rental lease
2014
2013
–
–
169
169
–
–
Terms and conditions of transactions with related parties
Sales to and purchases from related parties are made in arm’s length transactions both at normal market prices and on normal
commercial terms.
Outstanding balances at year end are unsecured, interest free and payable on demand.
Entities within the Group that own the Intellectual Property earn a 50% royalty from the sales made by other entities
within the Group.
Development costs undertaken by the German operations are reimbursed by the parent on commercial terms.
61
PROMEDICUS ANNUAL REPORT 2014
25. CONTINGENCIES
Tax related contingencies
26. PARENT ENTITY INFORMATION
Information relating to Pro Medicus Limited 2014
Amended assessments from the Australian Taxation
Office (ATO)
As a result of the ATO’s program of routine and regular tax
audit, the Group anticipates that ATO audits may occur
in the future. The Group is similarly subject to routine
tax audits in certain overseas jurisdictions. The ultimate
outcome of any future tax audits cannot be determined with
an acceptable degree of reliability at this time. Nevertheless,
the Group believes that it is making adequate provision for
its taxation liabilities (including amounts shown as deferred
and current tax liabilities) and is taking reasonable steps
to address potentially contentious issues with the ATO.
However, there may be an impact to the Group of any of
the revenue authority investigations results in an adjustment
that increases the Group’s taxation liabilities.
Ongoing transactions – transfer pricing
The Group has offshore operations in the United States
and Germany (note 24). As disclosed in note 24, there are
extra Group transactions, which include the Company and
its US and German based subsidiaries Visage Imaging
Inc and Visage Imaging GmbH and Pro Medicus Limited.
These transactions are on an arm’s length basis and
are conducted at normal market prices and on normal
commercial terms.
Whilst there are no investigations currently in progress, such
transactions are not subject to any statutory limit in Australia.
Current assets
Total assets
Current Liabilities
Total Liabilities
Issued capital
Retained Earnings
Foreign Currency
Translation Reserve
Share Reserve
Total shareholders’ equity
Profit/(loss) of the parent entity
Total comprehensive income
of parent entity
2014
$000
29,798
38,111
25,611
26,404
327
11,902
(1,448)
284
11,065
642
642
2013
$000
26,386
34,236
20,207
21,145
327
13,855
(1,317)
226
13,091
(1,689)
(1,689)
The parent entity has not entered into any guarantees
in relation to the debts of its subsidiaries. There are no
contingent liabilities held against the parent entity. The
parent entity does not have any contractual commitments
for the acquisition of property, plant and equipment.
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Pro Medicus Limited, I state that:
(1) In the opinion of the directors:
(a) the financial statements, notes and the additional disclosures included in the directors’ report designated as
audited, of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of the
performance for the year ended on that date; and
(ii) complying with Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and
when they become due and payable.
(c) the financial statements and notes comply with International Financial Reporting Standards (IFRS) as
disclosed in Note 2(b).
(2) This declaration has been made after receiving the declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2014.
On behalf of the Board
P T Kempen
Chairman
Melbourne, 22 August 2014
62
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
INDEPENDENT AUDITOR’S REPORT
Independent auditor's report to the members of Pro Medicus Limited
Report on the financial report
Ernst & Young
8 Exhibition Street
Melbourne VIC 3000 Australia
GPO Box 67 Melbourne VIC 3001
Tel: +61 3 9288 8000
Fax: +61 3 8650 7777
ey.com/au
We have audited the accompanying financial report of Pro Medicus Limited which comprises the
consolidated statement of financial position as at 30 June 2014, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
other explanatory information, and the directors' declaration of the consolidated entity comprising the
company and the entities it controlled at the year's end or from time to time during the financial year.
Independent auditor's report to the members of Pro Medicus Limited
Report on the financial report
Directors' responsibility for the financial report
We have audited the accompanying financial report of Pro Medicus Limited which comprises the
The directors of the company are responsible for the preparation of the financial report that gives a true
consolidated statement of financial position as at 30 June 2014, the consolidated statement of
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
comprehensive income, the consolidated statement of changes in equity and the consolidated statement
such internal controls as the directors determine are necessary to enable the preparation of the financial
of cash flows for the year then ended, notes comprising a summary of significant accounting policies and
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
other explanatory information, and the directors' declaration of the consolidated entity comprising the
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
company and the entities it controlled at the year's end or from time to time during the financial year.
the financial statements comply with International Financial Reporting Standards.
Directors' responsibility for the financial report
Auditor's responsibility
The directors of the company are responsible for the preparation of the financial report that gives a true
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
such internal controls as the directors determine are necessary to enable the preparation of the financial
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
report that is free from material misstatement, whether due to fraud or error. In Note 2, the directors
reasonable assurance about whether the financial report is free from material misstatement.
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
fair presentation of the financial report in order to design audit procedures that are appropriate in the
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
reasonable assurance about whether the financial report is free from material misstatement.
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
our audit opinion.
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which follows in the directors’ report.
Independence
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which follows in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
55
55
63
PROMEDICUS ANNUAL REPORT 2014
INDEPENDENT AUDITORS REPORT
Opinion
In our opinion:
a.
the financial report of Pro Medicus Limited is in accordance with the Corporations Act 2001,
including:
i
giving a true and fair view of the consolidated entity's financial position as at 30 June 2014
and of its performance for the year ended on that date; and
Opinion
Opinion
ii
In our opinion:
In our opinion:
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
a.
a.
b.
the financial report of Pro Medicus Limited is in accordance with the Corporations Act 2001,
the financial report of Pro Medicus Limited is in accordance with the Corporations Act 2001,
the financial report also complies with International Financial Reporting Standards as disclosed
including:
including:
in Note 2.
Report on the remuneration report
giving a true and fair view of the consolidated entity's financial position as at 30 June 2014
and of its performance for the year ended on that date; and
giving a true and fair view of the consolidated entity's financial position as at 30 June 2014
and of its performance for the year ended on that date; and
i
i
ii
ii
We have audited the Remuneration Report included in pages 7 - 12 of the directors' report for the year
complying with Australian Accounting Standards and the Corporations Regulations 2001;
complying with Australian Accounting Standards and the Corporations Regulations 2001;
ended 30 June 2014. The directors of the company are responsible for the preparation and presentation
and
and
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.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.
the financial report also complies with International Financial Reporting Standards as disclosed
in Note 2.
b.
b.
Opinion
Report on the remuneration report
Report on the remuneration report
In our opinion, the Remuneration Report of Pro Medicus Limited for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001.
We have audited the Remuneration Report included in pages 7 - 12 of the directors' report for the year
We have audited the Remuneration Report included in pages 7 - 12 of the directors' report for the year
ended 30 June 2014. The directors of the company are responsible for the preparation and presentation
ended 30 June 2014. 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
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
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
accordance with Australian Auditing Standards.
20–25
Opinion
Opinion
Ernst & Young
In our opinion, the Remuneration Report of Pro Medicus Limited for the year ended 30 June 2014,
In our opinion, the Remuneration Report of Pro Medicus Limited for the year ended 30 June 2014,
complies with section 300A of the Corporations Act 2001.
complies with section 300A of the Corporations Act 2001.
Paul Gower
Partner
Ernst & Young
Ernst & Young
Melbourne
22 August 2014
Paul Gower
Paul Gower
Partner
Partner
Melbourne
Melbourne
22 August 2014
22 August 2014
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
64
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
56
56
56
ASX ADDITIONAL INFORMATION
Additional information required by the Australian Stock Exchange Ltd and not shown elsewhere in this report is as follows.
(a) Distribution of equity securities
ORDINARY SHARES
The number of shareholders, by size of holding, in each class of share are:
NUMBER OF HOLDERS
NUMBER OF SHARES
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – and Over
The number of shareholders holding less than a marketable parcel are:
133
313
193
270
50
959
55
84,668
934,663
1,555,888
8,203,859
89,484,328
100,263,406
12,521
(b) Twenty largest shareholders
LISTED ORDINARY SHARES
The names of the twenty largest holders of quoted shares are:
NUMBER OF SHARES
PERCENTAGE OF ORDINARY
SHARES
1 Dr S Hupert (multiple shareholdings)
2 Mr A Hall (multiple shareholdings)
3 RBC Dexia Investor Services Australia Nominees P/L
4 Citicorp Nominees Pty Ltd
5 Equitas Nominees Pty Ltd
6 Mr Bram Vander Jagt & Mrs Maaike Vander Jagt
7 BNP Parabis Nominees Pty Ltd
8 J P Morgan Nominees Australia Limited
9 Brazil Farming Pty Ltd
10 Grain Exporters (Australia) Pty Ltd
11 Dr Russell Kay Hancock
12 Mr Peter Terence Kempen & Mrs Elaine Margaret Kempen
13 Mr Alan Graham Rochford
14 Mr Ralph Ronald Stadus & Ms Denise Leslie Stadus
15 Mr Evan Philip Clucas & Ms Leanne Jane Weston
16 Mr John Charles Plummer
17 National Nominees Limited
18 Mr Stephen Geoffrey Wilson & Ms Denise Adele Prandi
19 Mr Kenneth John Vander Jagt & Mrs Tanya Vander Jagt
20 Mr Timothy John Hannigan & Mrs Kerrie Helen Hannigan
30,107,660
30,068,500
7,834,214
6,323,158
1,553,572
1,000,000
924,199
894,285
710,000
686,575
650,000
458,082
458,052
455,556
368,217
365,000
342,474
337,537
317,000
300,000
30.03%
29.99%
7.81%
6.31%
1.55%
1.00%
0.92%
0.89%
0.71%
0.68%
0.65%
0.46%
0.46%
0.45%
0.37%
0.36%
0.34%
0.34%
0.32%
0.30%
(c) Substantial shareholders) Substantial shareholders
The names of substantial shareholders who have notified the Company in accordance with section
671B of the Corporations Law are:
NUMBER OF SHARES
84,154,081
83.94%
S. Hupert
A Hall
Perpetual Limited RBC Dexia Investor Services Australia Nominees P/L
Commonwealth Bank of Australia
(d) Voting rights
All ordinary shares carry one vote per share without restriction.
30,107,660
30,068,500
7,834,214
6,323,158
65
PROMEDICUS ANNUAL REPORT 2014 CORPORATE GOVERNANCE STATEMENT
FOR THE YEAR ENDED 30 JUNE 2014
The Board of Directors of Pro Medicus Limited is responsible for the corporate governance of the entity having regard
to the ASX Corporate Governance Council (CGC) published guidelines as well as its corporate governance principles
and recommendations. The Board guides and monitors the business and affairs of Pro Medicus Limited on behalf of the
shareholders by whom they are elected and to whom they are accountable.
The table below summaries the Group’s compliance with the CGC’s recommendations.
RECOMMENDATION
COMPLY
YES/NO
REFERENCE/
EXPLANATION
ASX LISTING
RULE/CGC
Principle 1 – Lay solid foundations for management and oversight
1.1
1.2
1.3
Companies should establish the functions reserved to the board
and those delegated to senior executives and disclose those
functions
Companies should disclose the process for evaluating the
performance of senior executives.
Yes
Page 70
ASX CGC 1.1
Yes
Page 68
ASX CGC 1.2
Companies should provide the information indicated in the guide to
reporting on Principle 1.
Yes
ASX CGC 1.3
Principle 2 – Structure the board to add value
2.1
2.2
2.3
2.4
2.5
2.6
A majority of the board should be independent directors.
The chair should be an independent director.
The roles of chair and chief executive officer (CEO) should not be
exercised by the same individual.
The board should establish a nomination committee.
Companies should disclose the process for evaluating the
performance of the board, its committees and individual directors.
Companies should provide the information indicated in the guide to
reporting on Principle 2.
Yes
Yes
Yes
No
Yes
Yes
Principle 3 – Promote ethical and responsible decision–making
Page 68
ASX CGC 2.1
Page 68
ASX CGC 2.2
Page 68
ASX CGC 2.3
Page 69
ASX CGC 2.4
Page 68
ASX CGC 2.5
ASX CGC 2.6
3.1
Companies should establish a code of conduct and disclose the
code or a summary of the code as to:
Yes
Page 69
ASX CGC 3.1
• The practices necessary to maintain confidence in the company’s
integrity.
• The practices necessary to take into account their legal
obligations and the reasonable expectations of their
stakeholders.
• The responsibility and accountability of individuals for reporting
and investigating reports of unethical practices.
Companies should establish a policy concerning diversity and
disclose the policy or a summary of that policy. The policy should
include requirements for the board to establish measureable
objectives for achieving gender diversity for the board to assess
annually both the objectives and progress in achieving them.
Companies should disclose in each annual report the measureable
objectives for achieving gender diversity set by the board in
accordance with the diversity policy and progress towards
achieving them.
Companies should disclose in each annual report the proportion
of women employees in the whole organization, women in senior
executive positions and women on the board.
Yes
Page 69
ASX CGC 3.2
Yes
Page 69
ASX CGC 3.3
Yes
Page 69
ASX CGC 3.4
Companies should provide the information indicated in the guide to
reporting on Principle 3.
Yes
ASX CGC 3.5
3.2
3.3
3.4
3.5
66
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JULY 2014
RECOMMENDATION
COMPLY
YES/NO
REFERENCE/
EXPLANATION
ASX LISTING
RULE/CGC
Principle 4 – Safeguard integrity in financial reporting
4.1
4.2
4.3
4.4
The board should establish an audit committee.
The audit committee should be structured so that it:
• Consists only of non–executive directors.
• Consists of a majority of independent directors.
• Is chaired by an independent chair, who is not chair of the board.
• Has at least three members.
The audit committee should have a formal charter.
Companies should provide the information indicated in the guide to
reporting on Principle 4.
Yes
No
Yes
Yes
Page 70
ASX CGC 4.1
Page 70
ASX CGC 4.2
ASX LR 12.7
Page 70
ASX CGC 4.3
ASX CGC 4.4
Principle 5 – Make timely and balanced disclosure
5.1
5.2
Companies should establish written policies designed to ensure
compliance with ASX Listing Rule disclosure requirements and to
ensure accountability at a senior executive level for that compliance
and disclose those policies or a summary of those policies.
Yes
Page 70
ASX CGC 5.1
Companies should provide the information indicated in the guide to
reporting on Principle 5.
Yes
ASX CGC 5.2
Principle 6 – Respect the rights of shareholders
6.1
6.2
Companies should design a communications policy for promoting
effective communication with shareholders and encouraging their
participation at general meetings and disclose their policy or a
summary of that policy.
Yes
Page 70
ASX CGC 6.1
Companies should provide the information indicated in the guide to
reporting on Principle 6.
Yes
ASX CGC 6.2
Principle 7 – Recognise and manage risk
7.1
7.2
7.3
Companies should establish policies for the oversight and
management of material business risks and disclose a summary of
those policies.
The board should require management to design and implement
the risk management and internal control system to manage the
company’s material business risks and report to it on whether those
risks are being managed effectively. The board should disclose
that management has reported to it as to the effectiveness of the
company’s management of its material business risks.
The board should disclose whether it has received assurance from
the CEO [or equivalent] and the Chief Financial Officer (CFO) [or
equivalent] that the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound system of risk
management and internal control and that the system is operating
effectively in all material respects in relation to financial reporting risks.
Yes
Page 71
ASX CGC 7.1
Yes
Page 71
ASX CGC 7.2
Yes
Page 71
ASX CGC 7.3
7.4
Companies should provide the information indicated in the guide to
reporting on Principle 7.
Yes
ASX CGC 7.4
Principle 8 – Remunerate fairly and responsibly
8.1
8.2
8.3
The board should establish a remuneration committee.
Companies should clearly distinguish the structure of non–
executive directors’ remuneration from that of executive directors
and senior executives.
Companies should provide the information indicated in the guide to
reporting on Principle 8.
Yes
Yes
Yes
Page 69
ASX CGC 8.1
Refer to
Remunaration
Report
ASX CGC 8.2
ASX CGC 8.3
67
PROMEDICUS ANNUAL REPORT 2014
Pro Medicus Limited’s corporate
governance practices were in place
throughout the year ended
30 June 2014.
Structure of the Board
The skills, experience and expertise
relevant to the position of director held
by each director in office at the date
of the annual report is included in the
Directors’ Report.
The composition of the Board was
determined in accordance with the
following principles and guidelines:
▶ The Board should comprise at least
four directors and should maintain a
majority of non–executive directors,
or at least a 50/50 ratio of non–
executives and executive directors;
▶ The Chairperson must be a non–
executive director and not occupy
the role of CEO;
▶ The Board should comprise directors
with an appropriate range of
qualifications and expertise; and
▶ The Board shall meet monthly and
follow meeting guidelines set down
to ensure all directors are made
aware of, and have available all
necessary information, to participate
in an informed discussion of all
agenda items.
Directors of Pro Medicus Limited are
considered to be independent when
they are independent of management
and free from any business or other
relationship that could materially
interfere with – or could reasonably be
perceived to materially interfere with
the exercise of their unfettered and
independent judgement.
In the context of director independence,
“materiality” is considered from both
the company and individual director
perspective. The determination of
materiality requires consideration of both
quantitative and qualitative elements.
An item is presumed to be quantitatively
immaterial if it is equal or less than 5%
of the appropriate base amount. It is
presumed to be material (unless there
is qualitative evidence to the contrary) if
it is equal to or greater than 10% of the
appropriate base amount.
Qualitative factors considered include whether a relationship is strategically
important, the competitive landscape, the nature of the relationship and the
contractual or other arrangements governing it and other factors which point
to the actual ability of the director in question to shape the direction of the
company’s loyalty.
In accordance with the definition of independence above, and the materiality
thresholds set, the following directors of Pro Medicus Limited are considered to
be independent:
Name
Position
P T Kempen Chairman, Non–Executive Director, Chairman Audit Committee
R Lyle
Non–Executive Director
The Board wishes to advise that it continues to maintain responsibility for the
actions of the chief executive officer and any tasks delegated to the management
by the Board.
Directors’ Appointment Letters have not been revised in the prescribed format as
the board considered this unnecessary given the small number of fairly recently
appointed current directors who understand their roles and responsibilities. The
board has undertaken that the recommended format should be used for any
future director appointments.
Mr. Sam Hupert and Mr. Anthony Hall were directors in Pro Medicus Pty Ltd since
incorporation in 1983. Mr. Peter Kempen was appointed in March 2008 and Mr
Roderick Lyle was appointed in November 2010.
Performance
The performance of the board and key executives is reviewed regularly against
both measurable and qualitative indicators. During the reporting period the board
conducted performance evaluations that involved an assessment of each board
member’s and key executive’s performance against specific and measurable
qualitative and quantitative performance criteria.
The performance criteria against which directors and executives are assessed are
aligned with the financial and non–financial objectives of Pro Medicus Limited.
In order to ensure that the Board continues to discharge its responsibilities
in an appropriate manner, the Chairman annually reviews the performance of
all Directors who will be asked to retire from the board if not performing in a
satisfactory manner.
Trading policy
Under the group’s security trading policy, an executive, director, or any employee
of the group, must not trade in any securities of the parent company at any
time when they are in possession of unpublished, price–sensitive information in
relation to those securities.
Before commencing to trade, an executive must first obtain the approval of
the Company Secretary to do so and a director must obtain approval of the
Chairman.
Only in exceptional circumstances will approval be forthcoming inside of the
period which is 30 days after:–
▶ One day following the announcement of the half–yearly and full year results as
the case may be.
▶ One day following the holding of the annual general meeting.
▶ One day after any other form of earnings forecast update is given to
the market.
As required by the ASX listing rules, the Group notifies the ASX of any transaction
conducted by directors in the securities of the parent company.
68
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JULY 2014
Code of Conduct
The board has developed a “Code
of Conduct”” consistent with the
recommendations and details are
disclosed on the company website.
Diversity
The Group recognises the value
contributed to the organisation by
employing people with varying skills,
cultural backgrounds, ethnicity and
experience. Pro Medicus believes
its diverse workforce is the key to
its continued growth, improved
productivity and performance.
We actively value and embrace the
diversity of our employees and are
committed to creating an inclusive
workplace where everyone is
treated equally and fairly, and where
discrimination, harassment and
inequity are not tolerated. While Pro
Medicus is committed to fostering
diversity at all levels, gender diversity
has been and continues to be a priority
for the Group.
To this end, the Group supports and
complies with the recommendations
contained in the ASX Corporate
Governance Principles and
Recommendations. The Group has
established a diversity policy outlining
the board’s measureable objectives for
achieving diversity. This is assessed
annually to measure the progress
towards achieving those objectives.
The table below outlines the diversity
objectives established by the board, the
steps taken during the year to achieve
these objectives and the outcomes.
OBJECTIVES
STEPS TAKEN/OUTCOME
Increase the
number of women
in the workforce,
including senior
management
positions and at
board level.
Promote an
inclusive culture
that treats the
workforce with
fairness and
respect.
Provide career
development
opportunities for
every employee,
irrespective of any
cultural, gender or
other differences.
▶ There were no key senior female appointments
made during the year as there were no key senior
appointments made during the year.
▶ Pro Medicus appointed 2 females in managerial roles
▶ As at 30 June 2014, women represented 19% in
the Group’s workforce (2013:20%), 20% in key
executive positions (2013:20%) and 0% at board level
(2013:0%)
▶ Women represented 67% of new hires during the year
(2013:20%)
For the upcoming financial year, the Group targets
to increase female representation in the Group’s
workforce to 25–30%
▶ Pro Medicus has set a zero tolerance policy against
discrimination of employees at all levels. The company
also provides avenues for employees to voice their
concerns or report any discrimination.
▶ No cases of discrimination were reported during the
year (2013: nil).
▶ Whilst Pro Medicus place focus on gender diversity,
career development opportunities are equal for all
employees.
▶ During the year, representation at training and
development programs was based on performance of
the employees.
The achievement of the measurable objectives in the current financial year was
taken into consideration in assessing bonuses for employees. The Group will
continue to review and update the measureable objectives to promote diversity
for the upcoming year.
Committees
Due to the small number of Directors, the Board decided it was more appropriate
to handle nomination and remuneration issues at full Board level. No Committees
for these functions have been established at this time.
In addition the full Board handles any matters as and when they arise concerning
environmental issues, occupational health and safety, finance and treasury.
In order to maintain good corporate governance the Non–Executive Directors
assume responsibility for determining and reviewing compensation arrangements
for the Executive Directors of the Group. The Executive Directors in turn are
responsible for determining and reviewing the compensation arrangements for
the Non–Executive Directors. The CEO, in conjunction with the full Board reviews
the terms of employment for all executives.
The Board has delegated the responsibility of executive remuneration to the
management who will assess the appropriateness of the nature and amount of
remuneration of such executives on a periodic basis by reference to relevant
employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality board and executive team.
The appointment of appropriately skilled Non–Executive Directors, together with
a broadly unchanged business base has meant no new director nominations
have been required to date.
69
PROMEDICUS ANNUAL REPORT 2014 Strategic planning has been an
important objective of the Board.
Meetings are scheduled so that all
Board members can attend and are
conducted in an informal fashion to
allow non–executive directors to gain
enhanced industry, customer, product
and research knowledge.
Audit Committee
The board has established an audit
committee, which operates under a
charter approved by the Board.
It is the Board’s responsibility to
ensure that an effective internal control
framework exists within the entity. This
includes internal controls to deal with
both the effectiveness and efficiency
of significant business processes.
This also includes the safeguarding
of assets, the maintenance of proper
accounting records, and reliability
of financial information as well as
non–financial considerations such as
the benchmarking of operational key
performance indicators.
The members of the audit committee are:
P T Kempen Chairman
S A Hupert
A B Hall
R Lyle
The audit committee is also
responsible for nomination of the
external auditor and reviewing the
adequacy of the scope and quality
of the annual statutory audit and half
yearly audit review.
Due to the small number of Directors,
all members of the Board serve on
the Audit Committee, whilst the Board
Chairman is also the Audit Committee
Chairman as his area of expertise is in
Accounting and Finance.
70
Board Functions
As the Board acts on behalf of and is accountable to the shareholders, it seeks
to identify the expectations of the shareholders, as well as other regulatory and
ethical expectations and obligations. In addition, the Board is responsible for
identifying areas of significant business risk and ensuring arrangements are in
place to adequately manage those risks. The Board seeks to discharge these
responsibilities in a number of ways.
The Board has delegated responsibility for the operation and administration of
the group to the Chief Executive Officer and the executive team (as detailed
in Note 23). The Board ensures that this team is appropriately qualified and
experienced to discharge their responsibilities and has in place procedures to
assess the performance of the Chief Executive and the executive team.
The Board is responsible for ensuring that management’s objectives and
activities are aligned with the expectations and risks identified by the Board.
The Board has a number of mechanisms in place to ensure this is achieved.
In addition to the establishment of the committee referred to above, these
mechanisms include the following:
▶ Approval of strategic plans, which encompass the entity’s vision, mission
and strategy statements, designed to meet stakeholders’ needs and manage
business risk;
▶ Involvement in developing the strategic plan (a dynamic document) and
approving initiatives and strategies designed to ensure the continued growth
and success of the entity;
▶ Overseeing implementation of operating plans and budgets by management
and monitoring of progress against budget – this includes the establishment
and monitoring of key performance indicators (both financial and non–financial)
for all significant business processes; and
▶ Utilising appropriately skilled professionals to provide advice on relevant
discussion topics and procedures to allow Directors, in the furtherance of their
duties, to seek independent professional advice at the Company’s expense.
Monitoring of the Board’s Performance and
Communication to Shareholders – Continuous
Disclosure Policy
The board has developed a written policy to ensure compliance with the ASX
Listing Rules on continuous disclosure and has adopted measures to ensure
the market and shareholders are fully informed. The measures in place require
all potential market sensitive matters are discussed with the Chief Executive
Officer who in conjunction with the Chairman and other relevant directors decide
whether to make an appropriate announcement to the market.
Only nominated authorised persons have the authority to release these
communications to the ASX. This policy is displayed on the company website.
Shareholder Communication
The Board of Directors aims to ensure that the shareholders, on behalf of whom
they act, are informed of all information necessary to assess the performance of
the Directors. Information is communicated to the shareholders through:
▶ The annual report which is distributed to all shareholders registered to receive copies;
▶ Through the release of information to the market via the ASX
▶ The annual general meeting and other meetings so called to obtain approval
for Board action as appropriate;
▶ An up to date website – www.promedicus.com.au;
▶ Email contact with registered users; and
▶ Special written communications to shareholders distributed with the dividend
notifications.
The company is adopting procedures to ensure that any material given to a
particular group is available to all interested parties via the company website.
This includes any material presented at the Annual General Meeting.
A representative of the external auditors Ernst & Young will continue to attend the
Annual General Meeting.
CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED 30 JULY 2014
Risk Management Policies
The Company takes a proactive approach to risk management. The Board is
responsible for ensuring that risks are identified on a timely basis and that the
Group’s objectives and activities are aligned with the risks identified by the Board.
The Company believes that it is crucial for all Board members to participate in
this process; as such the Board has not established separate committees for
areas such as risk management, environmental issues, occupational health and
safety or treasury.
The Company is committed to the identification; monitoring and management of
risks associated with its business activities and has included in its management
and reporting systems a number of risk management controls, such as:
▶ Annual budgeting and monthly reporting systems for all operations which
enable the monitoring of progress against performance targets and to evaluate
trends
▶ Guidelines and limits on capital expenditure and purchasing authority matrix
▶ Executive approvals for staffing requirements
▶ Detailed monthly management reports including cash flow reports, and to
identify any foreign currency risks associated with contracts written in and cash
being held in foreign currencies
In accordance with ASX Principle 7, the Board has received from the
Management an assurance that internal risk management and internal control
systems are effective. The Board has also received a declaration from the Chief
Executive Officer and Chief Financial Officer in accordance with section 295A
of the Corporations Act founded on the sound system of risk management
an internal compliance and control which is operating effectively in respect to
financial reporting risks.
The Company up until late in the financial period was not exposed to any interest
rate or significant currency sensitive loans or debts. Given the increase in
overseas operations there is now an increased currency risk as a consequence
of contracts written in and cash being held in foreign currencies. This change in
risk profile has been noted by the board and action is being taken to manage this
risk. The Board oversees appropriate backup procedures for important company
data. Detailed annual review of insurance policies in force to ensure cover is at
appropriate levels to safeguard key executives, Company assets and operations.
The Board regularly considers succession planning to ensure staff of appropriate
skill and experience are available to the Company.
71
PROMEDICUS ANNUAL REPORT 2014 SHARE
REGISTRY
Link Market Services Limited
Level 12, 680 George Street
Sydney NSW 2000
Australia
Mailing address:
Link Market Services Limited
Locked Bag A14
Sydney South NSW 1235
Australia
Telephone +612 8280 7111
Toll free 1300 554 474
Facsimile +612 9287 0303
Facsimile (proxy forms only) +612 9287 0309
E–mail registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
CORPORATE
INFORMATION
ABN 25 006 194 752
Directors
The names of the Directors of the Company in office during
the year and until the date of this report are:
Peter Terence Kempen
Chairman/Non–Executive Director/Chairman Audit
Committee
Dr Sam Aaron Hupert
Chief Executive Officer/Managing Director
Anthony Barry Hall
Technology Director
Roderick Lyle
Non–Executive Director
Company Secretary
Clayton James Hatch
Registered Office
450 Swan Street
Richmond, VIC, 3121
(03) 9429 8800
Internet Address
www.promedicus.com.au
www.promedicus.com
www.visageimaging.com
Solicitors
Sci–Law Strategies
Bankers
Westpac Banking Corporation
Auditors
Ernst & Young
Designed by Kajetan Design Group Pty. Ltd. Melbourne
72
YOU CAN DO
SO MUCH MORE ONLINE
Did you know that you can access – and even update
information about your holdings in Pro Medicus Limited via
the Internet.
Visit Link Market Services’ website www.linkmarketservices.
com.au and access a wide variety of holding information,
make some changes online or download forms. You can:
Don’t miss out on your dividends
Dividend cheques that are not banked are required to be
handed over to the State Trustee under the Unclaimed
Monies Act. You are reminded to bank cheques
immediately.
Better still, why not have us do your banking for you.
Check your current and previous holding balances
Choose your preferred annual report delivery option
Update your address details
Update your bank details
Lodge, or confirm lodgement of, your Tax File Number
(TFN), Australian Business Number (ABN) or exemption
Check transaction and dividend history
Enter your email address
Check the share prices and graphs
Download a variety of instruction forms
Subscribe to email announcements
You can access this information via a security login using
your Security holder Reference Number (SRN) or Holder
Identification Number (HIN) as well as your surname (or
company name) and postcode (must be the postcode
recorded on your holding record).
Wouldn’t you prefer to have immediate access to your
dividend payment? Your dividend payments can be credited
directly into any nominated bank, building society or credit
union account in Australia as cleared funds on dividend
payment date – and we will still mail [(or email if you prefer)]
you a dividend advice confirming your payment details.
Not only can we do your banking for you, but payment by
direct credit eliminates the risk of cheque fraud.
Top 5 tips for Pro Medicus Limited investors visiting Link’s
(our registry) website
1. Bookmark www.linkmarketservices.com.au – to
bookmark, click on ‘Favourites’ on the menu bar at the
top of your browser then select ‘Add to Favourites’
2. Create a portfolio for your holding or holdings and you
don’t have to remember your SRN or HIN every time
you visit
3. Lodge your email via the ‘Communications Options’
and benefit from the online communications options
Pro Medicus Limited offers its investors
4. Check out the ‘FAQs’ page (accessible via the orange
menu bar) for answers to frequently asked questions
5. Use the ‘Client List’ page (accessible via the orange
menu bar) to link to Pro Medicus Limited website and
the website of the other Link clients in which you invest.
Contact Information
You can also contact the Pro Medicus Limited share registry
by calling
+61 2 8280 7111 or Toll Free 1300 554 474
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450 Swan Street
Richmond, VIC, 3121
(03) 9429 8800
www.promedicus.com.au
www.promedicus.com
www.visageimaging.com