Sirtex Medical Limited Annual Report 2009

Plain-text annual report

“Tomorrow’s Standard Practice for the Treatment of Liver Cancer” s t n e t n o C 02 04 10 Chairman’s report CEO report Corporate Governance Statement 15 Financial report 15 22 Directors’ Report Auditor’s Independence Declaration 23 24 26 27 28 Directors’ Declaration Independent Auditor’s Report Income Statement Balance Sheet Statement of Change in Equity 30 31 Cash Flow Statement Notes to the Financial Statements 55 Additional Information 56 Company Information Sirtex Medical Ltd ABN 35 078 166 122 Sitex Medical Ltd was listed on the Australian Stock exchange (ASX) in August 2000 As at 30 June 2009, there were 1,837 shareholders. ® SIR-Spheres is a Registered Trademark of Sirtex Medical Ltd. ® Thermospheres is a Registered Trademark of Sirtex Medical Ltd. Sirtex Annual Report 2009 01 t r o p e R ’ s n a m r i a h C The ﬁ nancial year ended 30 June 2009 was a year of signiﬁ cant progress for Sirtex Medical Limited (“Sirtex”). Sirtex is one of a small number of Australian biotech companies to have brought successfully a product to market not only in Australia, but in the substantial overseas markets of North America, Europe and Asia Paciﬁ c. In a year of global economic turmoil, it was pleasing that our shareholders were rewarded with attractive returns reﬂ ecting the strength of our ﬁ nancial performance and balance sheet. “Sirtex is one of a small number of Australian biotech companies to have brought successfully a product to market.” We reported net proﬁ t after tax of $18,229,000 for the year, compared with $1,210,000 in the previous year, and ﬁ nished the year with net cash of $26,521,000, up from $6,921,000 as at 30 June 2008. We remain focused on strategies to grow awareness, acceptance and use of our targeted liver cancer treatment SIR-Spheres microspheres in both existing and new markets. The results achieved by Sirtex in the ﬁ nancial year are testament to the effectiveness of SIR-Spheres microspheres and to our strategy. Total product sales revenue for the year was A$65,559,000, a 72 per cent increase from the previous year’s $38,125,000. This primarily reﬂ ected a 42 per cent increase in the number of SIR-Spheres microspheres doses sold. This was the fourth consecutive year of double digit growth in unit sales. Richard Hill Chairman 02 Sirtex Annual Report 2009 t r o p e R ’ s n a m r i a h C The sales revenue growth was also partly attributable to the depreciation of the Australian dollar against the US dollar and the Euro, in which 90 per cent of our revenue is denominated. Unit sales increased in all major markets during the ﬁ nancial year, with a particularly pleasing increase in Europe of 117 per cent. In the US, our largest market, we achieved commendable growth of 28 per cent. In Asia Paciﬁ c unit sales rose 17 per cent, with signiﬁ cant ground-work having been completed to establish new markets across the region. During the year we continued to increase our investment in sales and marketing, research and development, and clinical trials. This expenditure is necessary to underpin our continued growth and drive further penetration of the SIR-Spheres microspheres product in its existing niche for metastatic colorectal liver cancer, as well as drive mainstream acceptance of the product in other indications. The increase in expenditure was comfortably offset by our higher unit sales and stronger gross margin, with Sirtex reporting proﬁ t before tax of $23,152,000 for 2009, up from $2,499,000 in 2008. The 2009 result included realised and unrealised foreign exchange gains totalling $6,994,000. Proﬁ t after tax improved to $18,229,000, as mentioned above. The effective tax rate for the year was 21 per cent, reﬂ ecting a $2,409,000 one-off reduction in reported tax expense. This resulted from the improved performance of Sirtex’s European business which allowed us to recognise carried forward losses held by that business but not previously brought to account. Sirtex’s year-end cash of $26,591,000 was attributable to a signiﬁ cantly improved cash ﬂ ow performance. The business reported a $20,140,000 inﬂ ow from operating activities for the year compared with an outﬂ ow in the previous year of $3,486,000. This was due to the increase in operating proﬁ t, our focus on reducing debtors and a tax refund of $4,001,000. As shareholders will be aware, legal costs relating to the UWA proceedings have been a material cash ﬂ ow burden for the company in recent periods, with costs in excess of $5,500,000 incurred to date. We still expect to recover a signiﬁ cant proportion of these costs but the timing of any recovery remains uncertain. Shareholders should refer to note 23 in the ﬁ nancial section of this report for further detail regarding this matter. The sustained growth of the business over the last ﬁ ve years, the company’s continued signiﬁ cant investment in key growth areas and Sirtex’s sound ﬁ nancial position provides the Board and management conﬁ dence in Sirtex’s future. Richard Hill Chairman Sirtex Annual Report 2009 03 Overview Sirtex continues to take signiﬁ cant strides forward, with each of our regional businesses successfully building the awareness and reputation of SIR-Spheres microspheres in its respective markets. It is pleasing to see the business-building initiatives and investments we have made over the past ﬁ ve years starting to show results and this is clearly reﬂ ected in the 42 per cent increase in dose sales during the 2009 ﬁ nancial year. I would like to thank all our staff for their excellent efforts and valuable contributions throughout the 2009 year, and thank our shareholders for their support. All regions recorded double digit unit sales growth. The US business achieved growth of 28 per cent, selling approximately 2,300 doses. The European business had an outstanding year with unit sales growing 117 per cent to approximately 1,000 doses as a number of its marketing initiatives began to yield results. In Asia Paciﬁ c we achieved growth of approximately 17 percent, with promising opportunities as the business continues to develop new markets within the region. Our new purpose- built manufacturing facility in Wilmington, US, completed its ﬁ rst full year of production and easily supported the growth of the business by supplying the majority of US treatment centres with locally produced doses. Worldwide, well over 200 treatment centres offer patients selective internal radiation therapy (SIRT). Since the listing of Sirtex more than 11,000 doses of SIR-Spheres microspheres have now been provided to treat liver cancer patients in routine practice and in clinical trials conducted in major teaching hospitals and cancer centres. Government reimbursement is an important factor in the continued success of SIR-Spheres microspheres in our various markets. In the US, Centers for Medicare and Medicaid Services (CMS) are working on a new funding agreement, with a decision expected by November. In the UK, the National Institute of Clinical Excellence (NICE) is expected to provide guidelines on funding provisions for SIR-Spheres microspheres via the National Health Service (NHS) during the ﬁ rst quarter of 2010. In Australia the Medical Services Advisory Committee (MSAC) is scheduled to review the reimbursement provisions for the product by the end of the second quarter of 2010. “I would like to thank all our staff for their excellent efforts and valuable contributions throughout the 2009 year, and thank our shareholders for their support.” t r o p e R ’ s O E C Gilman Wong Chief Executive Ofﬁ cer 04 Sirtex Annual Report 2009 “More than 11,000 doses of SIR-Spheres microspheres have now been provided to treat liver cancer.” Our clinical program is focused on providing further evidence of the effectiveness and safety of SIR- Spheres microspheres in each of the three key indications: liver metastases from colorectal cancer, heptatocellular carcinoma, and liver metastases from neuroendocrine tumours. To this end we are sponsoring or supporting 15 clinical trials in primary and secondary liver cancer to provide additional clinical data with the aim of building acceptance of our treatment and expanding it’s treatment indications. Recruitment is progressing well for our largest initiative, the SIRFLOX study, an international randomised controlled trial of SIRT with FOLFOX, the “gold-standard” chemotherapy, as the ﬁ rst-line treatment for colorectal cancer patients with secondary liver tumours. Beyond our SIR-Spheres microspheres product, we have made pleasing progress with our expanded research and development initiatives with major universities, which we anticipate will yield a pipeline of promising new non-surgical cancer therapies over time. Sales and Marketing United States In the US we sold approximately 2,300 SIR-Spheres microspheres doses in the 2009 ﬁ nancial year, compared with 1,805 doses sold in 2008. During the year the US business developed and implemented an internal reimbursement capability to assist our customers obtain appropriate reimbursement for our product. The business focused on ensuring the effective and efﬁ cient delivery of our marketing efforts in the US. As a result we achieved the 28 per cent sales volume growth without increasing our US sales and marketing expenditure. Europe In Europe we achieved outstanding 117 per cent growth in unit sales during the ﬁ nancial year. We saw growth in both our existing and new geographic markets in the region. The European business continues its strategic focus on driving the awareness and acceptance of SIR-Spheres microspheres among a broader range of target audiences and building collaborative networks of SIRT users within the EU. The business is also actively supporting advocate groups and working to enhance SIRT credibility through scientiﬁ c presentations. Asia Paciﬁ c Unit sales in the Asia Paciﬁ c region increased by 17 per cent over the previous year. The primary strategic focus of the business during the year was increasing sales of SIR- Spheres microspheres in our existing markets of Australia, New Zealand, Hong Kong, Thailand, Singapore and Malaysia, and the establishment of markets in Taiwan, Korea and India. Submissions were presented to the regulators in the larger Asian markets, including the Taiwanese Department of Health, the Korean FDA and the Ministry of Health in India. We anticipate receiving approvals in the Taiwan, Korean and Indian markets in the 2010 ﬁ nancial year, which will have a positive impact on sales in the region. Clinical Activities The 2009 ﬁ nancial year was an exciting one for Sirtex on the clinical front and we are encouraged by our signiﬁ cant progress in our clinical strategy for SIR-Spheres microspheres across two broad areas: (cid:129) New clinical data supporting the use of SIR-Spheres microspheres as a standard therapy for patients with liver cancer (cid:129) Further expansion of clinical trials program Sirtex Annual Report 2009 05 New Clinical Data mCRC trial results At the Annual Meeting of the American Society of Clinical Oncology (ASCO) in June, Dr Marc Van den Eynde from the Université Libre de Bruxelles in Belgium presented the ﬁ nal results of the randomised controlled trial that tested SIR-Spheres microspheres in the treatment of patients with liver metastases from primary colon or rectal cancer (mCRC). This multi- centre trial evaluated the use of SIR-Spheres microspheres in patients who had failed all standard chemotherapy treatment options. Patients were randomised to receive either SIR-Spheres microspheres plus 5- ﬂ uorouracil chemotherapy or 5-ﬂ uorouracil chemotherapy alone. Signiﬁ cantly improved disease control The primary endpoint of the trial was to compare time to disease progression (TTP) in the liver. Median TTP in the liver was signiﬁ cantly increased to 5.5 months in the SIR-Spheres microspheres plus chemotherapy arm, compared with 2.1 months in the chemotherapy- only arm (p = 0.003). The median TTP elsewhere in the body was also signiﬁ cantly longer for patients receiving SIR-Spheres microspheres plus chemotherapy compared with those receiving chemotherapy alone at 4.6 months versus 2.1 months, respectively (p = 0.03). Despite no previous objective response to both modern “FOLFOX” and “FOLFIRI” chemotherapy, one patient (5 per cent) receiving SIR-Spheres microspheres plus chemotherapy had a sufﬁ ciently large reduction in tumour size to permit potentially curative surgical resection of the remaining disease. Improved overall survival After progression of their disease, 10 patients (43.5 per cent) who started the trial in the chemotherapy-only arm elected to “cross over” to the other arm of the trial and receive SIR-Spheres microspheres alone as salvage therapy. Overall survival was extended in both treatment arms by the targeted treatment of liver tumours using SIRSpheres microspheres. Overall, there was 2.5 months’ difference in the median survival of 9.9 months versus 7.4 months of the combination and chemotherapy-only arms, respectively (p = 0.80). “After progression of their disease, 10 patients (43.5 per cent) who started the trial in the chemotherapy-only arm elected to “cross over” to the other arm of the trial and receive SIR-Spheres microspheres alone as salvage therapy.” ) d e u n i t n o c ( t r o p e R ’ s O E C 06 Sirtex Annual Report 2009 “Research has progressed well and several small- scale test have increased our conﬁ dance in the capabilities of the technology” Further expansion of clinical trials program Sirtex believes there remains a major unmet clinical need for effective options for the treatment of both metastatic colorectal cancer and primary liver cancer, the leading cause of cancer death in Asia. To this end, we have signiﬁ cantly expanded the number and magnitude of clinical trials of SIR-Spheres microspheres in these two disease indications. As SIRT therapy is gaining “standard of care” status in Europe and the US, we have focussed our clinical trials program on the northern hemisphere and Asia. Recruitment to Sirtex’s “SIRFLOX” multi-centre randomised controlled trial in metastatic colorectal cancer has opened at institutions in the US, Germany, Spain, Belgium and Italy. This trial is expected to report early clinical data in 2011 and will be combined with the clinical data from Oxford University’s UK “FOXFIRE” clinical trial of a similar design. Final planning for randomised controlled trials in primary liver cancer were also completed during the year and it is anticipated that these studies will open in Europe and the US over coming months. Research and Development During 2009 we increased our investment in our R&D program to ensure the continued evolution of the SIR-Spheres microspheres product and the development of new therapies to encompass the three key non-surgical treatment options for liver cancer: radiation, hyperthermia, and drug delivery. Our R&D program is largely outsourced to major Australian universities and research groups. Typically, any new patent derived from this research is held by the institution where it was developed and Sirtex is granted licence rights. Our New Opportunities Committee (NOC) actively assesses potential opportunities for new product development that emerge from our collaborations or are presented from external sources. During the year, no new developments were added to the Sirtex R&D program. Evolution of SIR-Spheres Microspheres In collaboration with scientists at the Australian National University (ANU) and several academic institutions in the US, this program consists of several sub-projects aimed at enabling improved precision in calculating and delivering individualised patient-speciﬁ c doses of SIR-Spheres microspheres. Having also gathered feedback from opinion leaders and many of our key customers, we have developed a comprehensive R&D program to provide the market with desired improvements. Research has progressed well, increasing our conﬁ dence in the capabilities of the technology and our ability to make ongoing improvements to SIR-Spheres microspheres. Sirtex Annual Report 2009 07 ) d e u n i t n o c ( t r o p e R ’ s O E C Targeted Hyperthermia Progress continues with Sirtex’s targeted hyperthermia project, with preparartion for pre-clinical studies commenced during the 2009 ﬁ nancial year. The project is based on the premise that targeted heating of tumours may signiﬁ cantly enhance the effectiveness of SIR-Spheres microspheres. Hollow Microspheres Sirtex has exclusive worldwide rights to the hollow, biodegradable microsphere technology developed by the University of New South Wales (UNSW). We are investigating the potential use of hollow microspheres as a programmable and targeted delivery mechanism for a range of therapeutic agents, including chemotherapy drugs. Radioprotector Technology In October 2007, Sirtex executed two contracts with the Peter MacCallum Cancer Centre in Melbourne, obtaining exclusive worldwide licence rights to an innovative technology based on radioprotector compounds. These compounds offer a means of protecting healthy tissue from the harmful effects of exposure to ionising radiation, potentially providing enormous beneﬁ t to a range of cancer patients. The use of radioprotector compounds could also expand the number of patients able to be treated with SIR-Spheres microspheres; in particular, patients with very small reserves of healthy liver could potentially be eligible for treatment. It could also be potentially used prior to radiation treatment or exposure, such as external beam radiation for cancers of the breast, head and neck, and prostate. Work is proceeding according to plan and good progress has been made on the development of lead compounds with an improved radioprotection and toxicity proﬁ le as determined in cell culture tests (i.e. in vitro). Manufacturing Sirtex’s new purpose-built manufacturing facility in Wilmington in the US received regulatory approval from the FDA in January 2008, enabling us to commence US production of SIR-Spheres microspheres. From February 2008, we began a controlled ramp-up program to supply doses for the 140+ US treatment centres that offer SIRT and which previously relied on doses air-freighted from Australia. As anticipated, from August 2008 the majority of the US market has been supplied from the Wilmington facility. The Wilmington facility incorporates state-of-the-art robotic and computer-controlled manufacturing equipment to ensure product quality and signiﬁ cantly enhance the safety of production personnel. It has the capacity to produce an average of 200 doses of SIR-Spheres microspheres each week on a single shift and will therefore be able to fully support our forecast sales growth in the US market. “The use of a radioprotector could also expand the number of patients who are able to be treated with SIR-Spheres microsphere.” 08 Sirtex Annual Report 2009 “Sirtex continues to meet its quality objectives through ongoing development, improvement and compliance of the Quality system” SIR-Spheres microspheres have a three-day shelf life, so a local product supply means US doctors have more ﬂ exibility in scheduling SIRT procedures, which may help increase the number of patients treated each week. The facility’s proximity to major US population centres and transport hubs ensures seamless, timely and cost effective transfer from manufacture to patient treatment. Market demand for SIR-Spheres microspheres from the European and Asia Paciﬁ c regions continues to be supported by the manufacturing facility at Lucas Heights in Sydney, Australia. This facility is well equipped to support our future growth from these regions. With new regions opening up through Asia in 2010, in particular Taiwan, South Korea and India, it has been a signiﬁ cant challenge to ensure SIR-Spheres microspheres doses arrive at the treating hospitals on time and available for patient treatment. We are working with global freight forwarders to ensure this occurs with every dose supplied. Strategies are in place to ensure the airlines and courier companies we use are fully aware of our product and the need to ensure on-time delivery. Regulatory Affairs and Quality Assurance Sirtex continues to meet its quality objectives through its ongoing development and improvement of and compliance with the Sirtex Quality System in line with regulatory requirements to support the ongoing supply of our products into global markets. Over the past year, external assessments of the Sirtex Quality System were effected by each of our main regulators: British Standards Institution (BSI) for our CE Mark, the Australian Therapeutic Goods Administration (TGA) and the US Food & Drug Administration (FDA). Regulatory data was supplied to Korea, Taiwan and India for local regulatory approval applications, which have recently been approved. Looking Forward We will maintain our strategic focus on sales and marketing, extensive clinical trial activities and innovative research and development, coupled with sound manufacturing, regulatory and quality control processes, ensuring Sirtex’s continued growth and robustness. “We are conﬁ dent that Sirtex has an extremely bright future.” We are conﬁ dent Sirtex has an extremely bright future. We look forward to continuing our proﬁ table growth, improving both returns to shareholders and the lives of cancer patients around the world. Gilman Wong Chief Executive Ofﬁ cer Sirtex Annual Report 2009 09 t n e m e t a t S e c n a n r e v o G e t a r o p r o C 10 Sirtex Annual Report 2009 The Board of Directors of Sirtex Medical Limited is responsible for the corporate governance of the Group and guides and monitors the business and affairs of Sirtex Medical Limited on behalf of its shareholders. Sirtex Medical Limited is committed to ensuring that its policies and practices reﬂ ect good corporate governance. In developing these policies and practices, the Board has taken into account the ASX Corporate Governance Council’s “Corporate Governance Principles and Recommendations”. The Council, however, states that these recommendations are not prescriptive; they are guidelines. If a company decides not to adopt a speciﬁ c recommendation it has the ﬂ exibility not to do so providing it explains the reason for not adopting the recommendation. The Company has structured its Corporate Governance Statement with reference to the Corporate Governance Council’s principles and recommendations, which are as follows: Principle Note 1 2 3 4 5 6 7 8 Lay solid foundation for management and oversight Structure the board to add value Promote ethical and responsible decision making Safeguard integrity in ﬁ nancial reporting Make timely and balanced disclosure Respect the rights of shareholders Recognise and manage risk Renumerate fairly and responsibly Sirtex Medical Limited corporate governance practices were in place throughout the year ended 30 June 2009 and with the exception of the recommendation regarding the establishment of a Nomination Committee, were compliant in all material respects with the Council’s recommendations. The reason for not establishing this committee is explained below at the end of the section headed Board Functions. For further information on corporate governance policies adopted by Sirtex Medical Limited, refer to the company website: www.sirtex.com Board Functions The Board’s prime responsibility is to oversee Sirtex’s business activities for the beneﬁ t of all its shareholders. The Board’s responsibilities are detailed on the Company’s website in the “Corporate Governance” web pages. The Board also recognises that the Company has other corporate and community responsibilities. The Board has delegated certain responsibilities for the management of operations and administration of the Company to the CEO and the executive management. The Chief Executive Ofﬁ cer is accountable to the Board for all delegated authority to executive management. The responsibilities of management are detailed on the Company’s website in the “Corporate Governance” web pages. The Board recognises that at all times it retains full responsibility for guiding and “Sirtex Medical Limited to ensuring that its policies and practices reﬂ ect good corporate governance.” monitoring the Company. In discharging this stewardship the Board makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and provide informed feedback to the Board. To this end the board has established the following committees: (cid:129) (cid:129) Remuneration Audit The roles and responsibilities of these committees are discussed later in this statement. Further detail can be found on the Company’s website in the “Corporate Governance” web pages. As previously mentioned, the Board does not have a Nomination Committee (recommendation 2.4). The charter of the Nomination Committee has been incorporated into the Board Charter. The Sirtex Board believes that as it is not large (4 directors), a formal Nomination Committee would not provide any marked efﬁ ciencies or enhancements. The charter of the nomination committee has been included into the board charter and as such the Board considers all matters that would be relevant regarding Board appointments. For further information refer to the Company’s website in the “Corporate Governance” web pages. advice at the Company’s expense. For further information refer to the Company’s website in the “Corporate Governance” web pages. The term in ofﬁ ce of each Director at the date of this report is as follows Name Term Richard Hill 5 years John Eady 4 years Grant Boyce 7 years Gilman Wong 4 years CEO and CFO Certiﬁ cation The Chief Executive Ofﬁ cer and Chief Financial Ofﬁ cer have provided a written certiﬁ cation to the Board that: (cid:129) (cid:129) The Company’s ﬁ nancial reports are complete and present a true and fair view, in all material respects, of the ﬁ nancial condition and operational results of the Company and Group and are in accordance with the relevant accounting standards and; The above statement is founded on a sound system of risk management and internal controls are operating efﬁ ciently and effectively in all material respects. Structure of the Board The skill, experience and expertise relevant to the position of Director, held by each Director in ofﬁ ce at the date of this report, are included in the Directors’ Report under the section headed Directors. All three Non-Executive Directors of Sirtex Medical Ltd are considered to be independent with reference to the Company’s independence criteria as contained on the Company’s website in the “Corporate Governance” web pages. These independent Directors are: Name Position Richard Hill Non-Executive Chairman John Eady Non-Executive Deputy Chairman Grant Boyce Non-Executive Director The Board has procedures to permit Directors, in the furtherance of their duties, to seek independent professional Sirtex Annual Report 2009 11 “The performance evaluation process has been completed for all Directors and Senior Executives within the last twelve months, in line with Company policy.” Performance Audit Committee The Audit committee 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 group. This includes ensuring that there are internal controls to deal with both effectiveness and efﬁ ciency of signiﬁ cant business processes, safeguarding of assets, the maintenance of proper accounting records and the reliability of the ﬁ nancial information as well as non ﬁ nancial considerations. The Board has delegated the responsibility for the establishment and maintenance of a framework of internal control and the ethical standards for the management of the consolidated entity to the Audit Committee. The Audit Committee also provides the Board with additional assurances regarding the reliability of the ﬁ nancial information for inclusion in the ﬁ nancial report. All members of the Audit Committee are independent Non-Executive Directors’. The members of the audit committee during the year were Grant Boyce (Chairman), Richard Hill and John Eady. The qualiﬁ cations of the members of the Audit Committee are contained in the Directors Report. In addition the Directors’ report sets out the number of meetings attended by each member. The Audit Committees is also responsible for nomination of the external auditors and reviewing the adequacy of the scope and quality of the annual statutory audit and half year statutory review. The Audit Committees charter can be found on the Company’s website in the “Corporate Governance” web pages. Policies and procedures in place with respect to monitoring the performance of the Directors and Senior Executives are set out in the Directors’ Report under the section headed “Remuneration Report”. The performance evaluation process has been completed for all Directors and Senior Executives within the last twelve months, in line with Company policy. Remuneration Committee The Remuneration Committee operates under a charter approved by the Board. The charter can be viewed on the company website. It augments the work of the Board through the development and monitoring of the Company’s remuneration policies and processes and the through the provision of feedback to the Board and recommendations for action. The Committee reviews the remuneration of the Non Executive Directors, Executive Directors and key Executives by reference to independent data, external professional advice and the requirements to retain high quality management. Refer to the Directors’ Report for details of performance evaluation, remuneration policy and the value of remuneration (both monetary and non- monetary) paid to each Director and Key Executive during the year. There is no scheme to provide retirement beneﬁ ts, other than superannuation, for Non Executive Directors. The members of the Remuneration Committee are all independent Non-Executive Directors. During the year the members were John Eady (Chairman), Richard Hill and Grant Boyce. Details of the number of meetings held during the year and the number of meetings attended by each member during the year are contained in the Directors’ Report. 12 Sirtex Annual Report 2009 (cid:129) • Occupational health and safety and equal opportunity laws Information technology To this end, comprehensive practices are in place that are directed towards achieving the following objectives (cid:129) • (cid:129) Effective and efﬁ cient use of the Company’s resources Compliance with applicable laws and regulations Preparation of reliable published ﬁ nancial information The Board oversees an annual assessment of the effectiveness of risk management and internal compliance and control. The responsibility for undertaking and assessing risk management and internal control effectiveness is delegated to management. Annually, management is required and has provided to the Board a report assessing the efﬁ ciency and effectiveness of risk management and associated internal compliance and control procedures. Risk Management The Board determines the Company’s risk proﬁ le and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Board has delegated monitoring Risk Management performance to the Audit Committee and its operation has been delegated to Sirtex’s Executive Management. Employees are required to be conversant with the company’s risk management policies, standard operational procedures associated with risk management and their employment, and to actively participate in risk management matters. The Board and Executive Management continue to identify and monitor the general areas of risk including: (cid:129) • (cid:129) • (cid:129) • (cid:129) • Economic outlook Political policy regarding healthcare and reimbursement Competitor products / research and development programs Market demand and prices, including supplies Legal proceedings commenced against the company (if any) Environmental regulations Ethical issues including those relating to pharmaceutical research and development Other government regulation including those speciﬁ cally relating to the biotechnology and heath industries ) d e u n i t n o c ( t n e m e t a t S e c n a n r e v o G e t a r o p r o C Sirtex Annual Report 2009 13 t r o p e R l a i c n a n i F 15 Directors’ Report 22 Auditor’s Independence Declaration 23 Directors’ Declaration 24 Independent Auditor’s Report 26 Income Statement 27 Balance Sheet 28 Statements of change in equity 30 Cash ﬂ ow statement 31 Notes to the ﬁ nancial statements 55 Additional Information SIRTEX MEDICAL LTD AND ITS CONTROLLED ENTITIES A.B.N.: 35 078 166 122 FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2009 14 Sirtex Annual Report 2009 Directors’ Report (continued) Directors’ Report For the year ended 30 June 2009 For the year ended 30 June 2009 For the year ended 30 June 2009 The Directors of Sirtex Medical Ltd present their report, together with the ﬁ nancial statements of the Group, being the Company and its controlled entities (consolidated entity), for the year ended 30 June 2009. Directors The Directors of Sirtex Medical Ltd during the ﬁ nancial year and until the date of this report are Mr R. Hill, Dr J. Eady, Mr G. Boyce, and Mr G. Wong. Details of the Directors, including their skills, experience, and expertise, are set out below. Richard Hill - Chairman, B.A, LL.B (Sydney), LL.M (London) Experience and Expertise Mr Hill was appointed a director in September 2004 and Chairman in August 2006. He previously held senior executive positions with HSBC Investment Bank in Hong Kong and New York and has extensive experience in international M&A and Capital raising. He is a founding partner of Hill Young & Associates, a corporate advisory ﬁ rm. He is also an attorney of the New York State Bar. Other Current Directorships Calliden Limited - Chairman Biota Holdings Limited Pelorus Property Group Limited Special Responsibilities Member of the Audit Committee and the Remuneration Committee Interest in Shares and Options Nil Dr. John Eady – Non-executive Director, Deputy Chairman, B.Sc. (Hons), Ph.D, FTSE Experience and Expertise Dr Eady was appointed director in March, 2005. He spent most of his career with CRA limited in a range of senior executive positions. He has broad Board experience including that with the Australian Federal Government’s Industry, Research and Development Board. Dr Eady is a Fellow of the Academy of Technological Sciences and Engineering and is also an Adjunct Professor within RMIT University’s Graduate School of Business. He consults extensively on business improvement in Asia & North America. Special Responsibilities Chairman of the Remuneration Committee and Member of the Audit Committee. Former Directorships in the last 3 years Frigrite Limited Interest in Shares and Options Nil Grant Boyce – Non-executive Director, CA, B.Com Experience and Expertise Mr Boyce was appointed director in December 2002. He is a Chartered Accountant and the founder of Montrose Partners, a West Australian ﬁ rm of chartered accountants. He was a partner with Ernst & Young and worked in their Perth and New York ofﬁ ces. He has also served previously as Company Secretary for Sirtex. Special Responsibilities Chairman of the Audit Committee and Member of the Remuneration Committee. Interest in Shares and Options 5,000 ordinary shares in Sirtex Limited Sirtex Annual Report 2009 15 Directors’ Report (continued) For the year ended 30 June 2009 Gilman Wong - Executive Director and Chief Executive Ofﬁ cer Experience and Expertise Mr Wong was appointed Chief Executive Ofﬁ cer in May 2005 and director in June 2005. Mr Wong previously held CEO and senior executive positions in the commercial and industry sector including 10 years with Email Limited. He has a strong planning and sales and marketing background. Interest in Shares and Options Nil Company Secretary Darren Smith – Company Secretary and Chief Financial Ofﬁ cer, MBA, BBus, CPA Experience and Expertise Mr Smith was appointed company secretary in July 2008 and Chief Financial Ofﬁ cer in February 2009 (previously interim CFO). Mr Smith previously held CFO and senior executive ﬁ nance and general management positions in a number of international, Australian listed and private companies. He has signiﬁ cant experience in a range of commercial environments including FMCG, services and manufacturing industries. Interest in Shares and Options 15,000 ordinary shares in Sirtex Limited Directors’ meetings The number of Directors’ meetings (including meetings of committees of Directors) and number of meetings attended by each of the Directors of the company during the ﬁ nancial year are: Directors Board of Directors Remuneration Committee Audit Committee Held Attended Held Attended Held Attended R. Hill (Chairman) Dr J. Eady G. Boyce G. Wong 11 11 11 11 10 11 11 11 4 4 4 - 4 4 4 - 6 6 6 - 6 6 6 - Principal activities Sirtex Medical Ltd and its controlled entities form a biotechnology and medical device company whose primary objective is to manufacture and to distribute effective liver cancer treatments utilizing small particle technology to approved markets in Asia-Paciﬁ c, Europe and the United States of America. Review of operations Revenue from the sale of goods for the year ended 30 June 2009 was $65,559,000 representing revenue growth of 72% above last year’s $38,125,000. There were two key factors inﬂ uencing revenue growth. Firstly a 42% growth in the number of SIR-Spheres microspheres doses sold and secondly the favourable impact of the depreciation of the Australian dollar against the US dollar and the Euro (as a majority of revenue is currently earned in these currencies). 16 Sirtex Annual Report 2009 Directors’ Report (continued) Directors’ Report (continued) For the year ended 30 June 2009 For the year ended 30 June 2009 All regional markets performed with double digit growth. In doses sold, the US achieved approximately 28% growth selling approximately 2,300 doses. Europe had an outstanding year with 117% growth selling approximately 1,000 doses as a number of the business’s marketing initiatives begin to yield results. Asia Paciﬁ c achieved approximately 17% growth with promising opportunities as the business continues to develop new markets within Asia Paciﬁ c. Gross margin improved to 80.7% for the year ended 30 June 2009 compared to 73.6% for last ﬁ nancial year. This is partly due to the beneﬁ t from the full year operation of our manufacturing facility in Wilmington, USA that was commissioned in February 2008. Proﬁ t after tax for the year ended 30 June 2009 was $18,229,000 compared to last year $1,210,000. The weighted average effective tax rate for the year was 21%. Dividends No dividends have been paid or declared since the start of the ﬁ nancial year. Signiﬁ cant changes in state of affairs During the ﬁ nancial year there were no signiﬁ cant changes in the state of affairs of the Consolidated Entity other than that referred to in the ﬁ nancial statements or notes thereto. Future developments, prospects and business strategies Disclosure of information regarding likely developments in the operations of the Consolidated Entity in future ﬁ nancial years and the expected results of those operations is likely to result in unreasonable prejudice to the Consolidated Entity. Accordingly, this information has not been disclosed in this report. Environmental regulations The operations are not subject to signiﬁ cant environmental regulation under the law of the Commonwealth or state. Share options Share options granted to key management personnel There were no share options granted to the directors or other key management personnel of the Group during or since the end of the ﬁ nancial year. Share options on issue at year end or exercised during the year During the year ended 30 June 2009, there were no ordinary shares of Sirtex Medical Ltd issued on the exercise of options. A total of 200,000 share options lapsed during the year, and no further share options have been issued since 30 June 2009. Directors’ interests The relevant interest of each director in the share capital of the Company, as notiﬁ ed by the directors to the ASX in accordance with section 205G(1) of the Corporations Act 2001, at the date of this Report is as follows: Directors 2009 2009 2008 2008 Ordinary Shares Share Options Ordinary Shares Share Options R. Hill Dr J. Eady G. Boyce G. Wong - - 5,000 - - - - - - - 5,000 - - - - - Sirtex Annual Report 2009 17 Directors’ Report (continued) For the year ended 30 June 2009 Indemniﬁ cation of ofﬁ cers and auditors During or since the ﬁ nancial year, the Company has paid premiums to insure each of the directors of the Group against liabilities incurred by them arising out of their conduct while acting in the capacity of director, subject to certain terms and conditions. The insurance policy prohibits disclosure of the value of the premium. During or since the ﬁ nancial year, the Company has also agreed to continue to indemnify the directors of the Group against certain liabilities incurred by them arising out of their conduct while acting in the capacity of director, subject to certain terms and conditions, and to the applicable requirements of the Corporations Act. Events after balance date There has not been any matter or circumstance, other than that referred to in the ﬁ nancial statements or notes thereto, that has arisen since the end of the ﬁ nancial year, that has signiﬁ cantly affected, or may signiﬁ cantly affect, the operations of the Consolidated Entity, the results of those operations, or the state of affairs of the Consolidated Entity in future ﬁ nancial years. Proceedings on behalf of the Company No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year except for those mentioned in Note 23. Non-audit services The Board of Directors, in accordance with advice from the audit committee, is satisﬁ ed that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisﬁ ed that their services disclosed below did not compromise the external auditor’s independence for the following reasons: (cid:129) (cid:129) all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of ethics for Professional Accountants set out by the Accounting Profession Ethical Standards Board. There were no non-audit services performed during the year. Details of amounts paid or payable to the auditor for services provided during the year are outlined in Note 28. Auditor’s independence declaration The auditor’s independence declaration for the year ended 30 June 2009 has been received and can be found on page 22. Rounding off of amounts The company is an entity to which ASIC Class Order 98/100 applies and, accordingly, amounts in the ﬁ nancial statements and directors’ report have been rounded to the nearest thousand dollars, unless otherwise indicated. Remuneration report This report details the nature and amount of remuneration for each of the key management personnel (KMP). Remuneration policy The remuneration policy of Sirtex Medical Ltd has been designed to align director and other KMP objectives with shareholder and business objectives. The Board of Sirtex Medical Ltd believes the remuneration policy to be appropriate and effective in its ability to attract and retain appropriate KMP to run and manage the Consolidated Entity, as well as create goal congruence between directors, other KMP and shareholders. 18 Sirtex Annual Report 2009 Directors’ Report (continued) For the year ended 30 June 2009 The Remuneration Committee reviews and develops the remuneration policies and reviews parameters applicable to all Sirtex employees, and recommends their approval to the Board. It also reviews and recommends approval by the Board of remuneration packages, terms of employment and termination packages applicable to all directors and those other KMP reporting directly to the CEO. The Board’s policy for determining the nature and amount of remuneration for board members and other KMP of the Consolidated Entity is as follows: (cid:129) (cid:129) (cid:129) The remuneration policy, setting the terms and conditions for the executive directors and other KMP, was developed by the Remuneration Committee and approved by the Board after reviewing extensive market data and seeking professional advice from independent external consultants. All other KMP receive a base salary (based on factors such as role and experience), superannuation and are eligible for fringe beneﬁ ts, and performance incentives. The remuneration committee reviews executive packages annually by reference to the Consolidated Entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The performance of other KMP is measured against criteria agreed at least annually, directly with the CEO or through him for his direct reports. These criteria reﬂ ect current strategic initiatives and goals. The performance of the CEO and non-executive directors is measured against criteria that are determined annually by the Board. These criteria detail expectations and reﬂ ect short and long-term goals and stakeholder interests. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. The policy is designed to attract the highest caliber of key management personnel and reward them for performance that results in long-term growth in stakeholder value. The executive director (CEO) and other key management personnel receive a superannuation guarantee contribution required by the government, and do not receive any other retirement beneﬁ ts. Some individuals, however, have chosen to sacriﬁ ce part of their salary to increase payments towards superannuation. All remuneration paid to key management personnel is valued at the cost to the company and expensed. The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration committee recommends payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought. The maximum aggregate amount of fees that can be paid to non- executive directors is subject to approval by shareholders at the Annual General Meeting. In accordance with recommended good practice, non-executive directors do not receive incentive payments. Performance based remuneration As part of each executive director and other key management personnel’s remuneration package, there is a performance-based component, reﬂ ecting agreed key performance indicators (KPIs). The intention is to facilitate goal congruence between executive director and other key management personnel with that of the business and stakeholders. The KPIs are speciﬁ cally tailored to the accountabilities of the executive director and other key management personnel. They target areas the board believes hold greater potential for group expansion and proﬁ t, covering both short- and long-term goals. The level set for each KPI is based on budgeted ﬁ gures for the group and respective industry standards. Performance in relation to the KPIs is assessed annually, with bonuses being awarded depending on that performance and its relative effect on Group operations. Sirtex Annual Report 2009 19 Directors’ Report (continued) For the year ended 30 June 2009 Key management personnel remuneration details The following table provides the remuneration details of key management personnel of the Group Short-term Post-employment Salary & fees Bonus Non- monetary Super- annuation Beneﬁ ts Equity Other Long Term Options Total Perfor- mance related $ $ $ $ $ Non-executive Directors R. Hill Dr J. Eady G. Boyce Subtotal 2009 2008 2009 2008 2009 2008 2009 2008 119,600 115,000 15,624 30,046 62,400 60,000 197,624 205,046 - - - - - - - - - - - - - - - - - - 52,496 35,454 - - 52,496 35,454 - - - - - - - - Other key management personnel G. Wong (1) Dr D. Cade N. Geissel (2) J. Reddington (3) N. Lange A. Axisa (4) D. Smith (5) Dr M. Vandenberg D. Turner (6) Subtotal Total 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 402,255 381,002 214,109 205,827 - 122,757 362,124 93,497 364,308 523,038 233,596 203,345 276,485 1,200 212,975 187,464 276,450 160,902 30,950 72,797 - - - 81,342 - 161,759 - - - 83,727 - 50,683 - 90,440 - - - - - - 26,061 - 176,822 88,975 - 14,885 - - - - 25,264 13,745 17,807 13,745 19,086 - - - - - - 3,120 18,711 4,582 - 13,745 32,262 50,520 2009 2008 2,342,302 1,718,130 701,650 30,950 228,147 103,860 99,520 87,866 2009 2008 2,539,926 1,923,176 701,650 30,950 228,147 103,860 151,954 123,320 - - - - - 20,777 - - - - - - - - - - - - 20,777 - 20,777 $ - - - - - - - - - - - - - - - - - - - - - - - - - - - - - $ $ % - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 28 7 24 - - - 17 - 23 - - - 23 - 18 - 20 20 7 119,600 115,000 68,120 65,500 62,400 60,000 250,120 240,500 576,902 429,759 300,651 224,913 - 143,534 469,527 93,497 702,889 612,013 236,716 236,941 364,794 1,200 277,403 219,726 442,674 3,371,557 1,961,583 3,621,677 2,202,083 (1) The bonus value for G Wong represents an accounting provision. As at the time of release of this report, the board has yet to approve a value. (2) N Geissel departed from the Group on 3/12/07 (3) J Reddington commenced employment on 3/3/08 (4) A Axisa commenced maternity leave on 30/7/08 and departed from the Group on 25/2/09. The salary paid to her during the year ended 30 June 2009 includes a termination payment of $183,000. (5) D Smith commenced on 30/6/08 as interim CFO and was appointed CFO on 26/2/09 (6) D Turner was appointed Head of Global Marketing on 1/3/08 20 Sirtex Annual Report 2009 Directors’ Report (continued) Directors’ Report (continued) For the year ended 30 June 2009 For the year ended 30 June 2009 Performance conditions linked to Remuneration G. Wong’s remuneration has the following performance based elements: (cid:129) Annual bonus available up to 25% of base salary made up of 10% on achieving total company budget proﬁ t, 5% on achieving North American budgeted proﬁ t, 5% on achieving European budgeted proﬁ t, and 5% on achieving Rest of World budgeted proﬁ t. (cid:129) Up to futher 15% of base salary at the discretion of the Board No other Director’s remuneration includes performance based elements. G. Wong is employed by Sirtex Medical Ltd under an employment agreement with no ﬁ xed term. The notice period is 3 month (if the employment is terminated by G. Wong). and 6 months (if the employment is terminated by the company). Other key management personnel remuneration includes a performance-based element based on KPI’s of the Group and of the regions. The Report of the Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors Gilman Wong Director 28 August 2009 Sirtex Annual Report 2009 21 Auditor’s Independence Declaration For the year ended 30 June 2009 Grant Thornton NSW ABN 25 034 787 757 Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Ofﬁ ce Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@grantthornton.com.au W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of Sirtex Medical Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of Sirtex Medical Limited for the year ended 30 June 2009, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON NSW Chartered Accountants N J Bradley Partner Sydney, 28 August 2009 Grant Thornton Australia Limited is a member ﬁ rm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member ﬁ rms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards legislation. 22 Sirtex Annual Report 2009 Directors’ Declaration For the year ended 30 June 2009 The directors of the company declare that: 1. The ﬁ nancial atatements and notes, as set out on pages 13 to 41, are in accordance with the Corporation Act 2001 and: a. comply with Accounting Standards and Corporations Regulations 2001; and b. give a true and fair view of the company’s and consolidated entity’s ﬁ nancial position as at 30 June 2009 and of their performance for the year ended on that date. 2. The Chief Executive Ofﬁ cer and Chief Finance Ofﬁ cer have each declared that a. the ﬁ nancila records of the company for the ﬁ nancial year have been properly maintained in accordance with section 286 of the Corporation Act 2001; b. the ﬁ nancial statements and notes for the ﬁ nancial year comply with Accounting Standards and c. the ﬁ nancial statements and notes for the ﬁ nancial year give a true and fair view 3. In the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable. This declaration is made in accordane with a resolution of the Boards Directors. On behalf of the directors Gilman Wong Director 28 August 2009 Sirtex Annual Report 2009 23 Independent Auditor’s Report For the year ended 30 June 2009 Grant Thornton NSW ABN 25 034 787 757 Level 17, 383 Kent Street Sydney NSW 2000 PO Locked Bag Q800 QVB Post Ofﬁ ce Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@grantthornton.com.au W www.grantthornton.com.au Independent Auditor’s Report To the members of Sirtex Medial Limited Report on the Financial Report We have audited the accompanying ﬁ nancial report of Sirtex Medical Limited, (the company) which comprises the balance sheet as at 30 June 2009, and the income statement, statement of changes in equity and cash ﬂ ow statement for the year ended on that date, a summary of signiﬁ cant accounting policies, other explanatory notes 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 ﬁ nancial year. Directors’ responsibility for the ﬁ nancial report The directors of the company are responsible for the preparation and fair presentation of the ﬁ nancial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the ﬁ nancial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the ﬁ nancial report, comprising the ﬁ nancial statements and notes, complies with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the ﬁ nancial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the ﬁ nancial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁ nancial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the ﬁ nancial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the ﬁ nancial 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 control. 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 ﬁ nancial report. We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinions. 24 Sirtex Annual Report 2009 Independent Auditor’s Report (continued) For the year ended 30 June 2009 Independence In conducting our audit, we complied with applicable independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a. the ﬁ nancial report of Sirtex Medical Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the company’s and consolidated entity’s ﬁ nancial position as at 30 June 2009 and of their performance for the year ended on that date; and ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b. the ﬁ nancial report also complies with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report Our responsibility is to express an opinion on the ﬁ nancial report based on our audit. We conducted our audit in We have audited the Remuneration Report included on pages 6 to 8 of the directors’ report for the year ended 30 June 2009. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion the Remuneration Report of Sirtex Medical Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Act 2001. GRANT THORNTON NSW Chartered Accountants N J Bradley Partner Grant Thornton Australia Limited is a member ﬁ rm within Grant Thornton International Ltd. Grant Thornton International Ltd and the member ﬁ rms are not a worldwide partnership. Grant Thornton Australia Limited, together with its subsidiaries and related entities, delivers its services independently in Australia. Liability limited by a scheme approved under Professional Standards legislation. Sirtex Annual Report 2009 25 Income Statement For the year ended 30 June 2009 2009 $’000 Note 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Consolidated Company Revenue from the sales of goods 2(a) 65,559 38,125 Cost of sales Gross proﬁ t Other revenue Other income Marketing expenses Research expenditure Regulatory expenses Quality assurance expenses Clinical trials expenses Administration expenses Other expenses from ordinary activities Proﬁ t before income tax expense Income tax expense Net proﬁ t attributable to members of the parent entity Earnings per share Basic earnings per share Diluted earnings per share Dividends per share 2(b) 2(c) 4 19 19 (12,606) (10,043) 52,953 28,082 1,334 6,994 927 324 (19,342) (15,978) (2,889) (1,551) (189) (438) (6,005) (8,211) (1,055) 23,152 (4,923) (269) (149) (2,262) (6,453) (172) 2,499 (1,289) - - - - - - 13,564 - (623) 9,671 49 (1,368) - - - - (6,601) (131) 6,209 (2,056) - - - - (4,496) (457) 3,399 (1,395) 18,229 1,210 4,153 2,004 Cents Cents 32.7 32.7 - 2.2 2.2 - The ﬁ nancial statements should be read in conjunction with the accompanying notes. 26 Sirtex Annual Report 2009 Balance Sheet As at 30 June 2009 Consolidated Company Note 2009 $’000 2008 $’000 2009 $’000 2008 $’000 CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Financial assets Other current assets Current tax assets Total – CURRENT ASSETS NON-CURRENT ASSETS Financial assets Property, plant and equipment Intangible assets Deferred tax assets Total - NON-CURRENT ASSETS TOTAL ASSETS 5(a) 6 7 8 9 10(a) 8 11 12 10(b) 26,521 12,438 1,399 230 582 460 41,630 - 3,512 1,617 3,164 8,293 6,921 9,623 594 163 497 2,950 20,748 - 3,254 1,762 2,608 7,624 49,923 28,372 24,712 3,973 - 80 157 - 28,922 62 327 1,502 369 2,260 31,182 4,934 26,477 - 141 128 2,943 34,623 62 383 1,747 381 2,573 37,196 CURRENT LIABILITIES Trade and other payables Current tax liabilities Short-term provisions Interest-bearing loans Other current liabilities Total - CURRENT LIABILITIES NON-CURRENT LIABILITIES Long-term provisions Deferred tax liabilities Total - NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings / (accumulated losses) Total – EQUITY 13 14(a) 15(a) 16 15(b) 14(b) 17 18 5,791 2,110 1,605 64 - 4,701 21,713 32,198 231 46 - 11 36 145 64 - - - - - 9,570 4,989 21,958 32,198 185 989 1,174 10,744 96 - 96 37 53 90 17 - 17 5,085 22,048 32,215 39,179 23,287 9,134 4,981 23,521 (882) 16,540 39,179 23,521 2,012 (2,246) 23,287 23,521 - (14,387) 9,134 23,521 557 (19,097) 4,981 The ﬁ nancial statements should be read in conjunction with the accompanying notes. Sirtex Annual Report 2009 27 Statement of changes in equity As at 30 June 2009 Ordinary Shares $’000 Option Reserve $’000 FC Translation Reserve $’000 Retained Proﬁ ts $’000 Total $’000 Consolidated Entity Balance at 1 July 2007 Foreign currency translation reserve Net income recognised directly in equity Proﬁ t attributable to members of parent entity Total recognised income and expense for the period Transfer from option reserve to retained proﬁ ts Dividends paid or provided for Balance at 30 June 2008 Foreign currency translation reserve Net income recognised directly in equity Proﬁ t attributable to members of parent entity Total recognised income and expense for the period Transfer from option reserve to retained proﬁ ts Dividends paid or provided for Balance at 30 June 2009 23,521 638 1,142 (3,537) 21,764 - - - - - - - - - - (81) - 313 313 - - - - - - 313 313 1,210 1,210 1,210 1,210 81 - - - 23,521 557 1,455 (2,246) 23,287 - - - - - - 23,521 - - - - (557) - - (2,337) (2,337) - - (2,337) (2,337) - - - - 18,229 18,299 18,299 18,299 557 - - - (882) 16,540 39,179 The ﬁ nancial statements should be read in conjunction with the accompanying notes. 28 Sirtex Annual Report 2009 Statement of changes in equity (continued) As at 30 June 2009 Ordinary Shares $’000 Option Reserve $’000 FC Translation Reserve $’000 Retained Proﬁ ts $’000 Total $’000 Parent Entity Balance at 1 July 2007 Foreign currency translation reserve Net income recognised directly in equity Proﬁ t attributable to members of parent entity Total recognised income and expense for the period Transfer from option reserve to retained proﬁ ts Dividends paid or provided for Balance at 30 June 2008 Foreign currency translation reserve Net income recognised directly in equity Proﬁ t attributable to members of parent entity Total recognised income and expense for the period Transfer from option reserve to retained proﬁ ts Dividends paid or provided for Balance at 30 June 2009 23,521 638 - - - - - - 23,521 - - - - - - 23,521 - - - - (81) - 557 - - - - (557) - - - - - - - - - - - - - - - - - (21,182) 2,977 - - - - 2,004 2,004 2,004 2,004 81 - - - (19,097) 4,981 - - - - 4,153 4,153 4,153 4,153 557 - - - (14,387) 9,134 The ﬁ nancial statements should be read in conjunction with the accompanying notes. Sirtex Annual Report 2009 29 Cash Flow Statement For the year ended 30 June 2009 2009 $’000 CASH FLOWS FROM OPERATING ACTIVITIES Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Receipts from customers 62,557 34,331 1 (6,481) Payments to suppliers and employees (42,664) (32,374) (1,797) Receipts from government grants Receipts from license fees Interest received Interest paid 248 113 450 (9) 812 - 439 - Net income tax (paid) / received (555) (6,694) 208 - 413 (9) 924 72 227 - 351 - (6,696) Net cash provided by / (used in) operating activities 5(b) 20,140 (3,486) (260) (12,527) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds received from sale of plant and equipment Purchase of plant and equipment Purchase of short term funds - (604) - - (169) (85) - (151) - (7) (87) (86) Net cash used in investing activities (604) (254) (151) (180) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from short term borrowings Repayment of short term borrowings Net cash provided by ﬁ nancing activities Net increase / (decrease) in cash held Cash at the beginning of ﬁ nancial year Cash at the end of ﬁ nancial year 5(a) 96 (32) 64 19,600 6,921 26,521 - - - (3,740) 10,661 6,921 20,221 13,560 (32) - 20,189 19,778 4,934 24,712 13,560 853 4,081 4,934 The ﬁ nancial statements should be read in conjunction with the accompanying notes. 30 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 NOTE 1: STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The ﬁ nancial report is a general-purpose ﬁ nancial report which has been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The report includes the consolidated ﬁ nancial statements and notes of Sirtex Medical Ltd and controlled entities, and the separate ﬁ nancial statements and notes of Sirtex Medical Ltd as an individual parent entity (“Parent entity”). Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the ﬁ nancial report of Sirtex Medical Ltd complies with International Financial Reporting Standards (IFRS) in their entirety. Material accounting policies adopted in the preparation of this ﬁ nancial report are presented below and have been consistently applied unless otherwise stated. This ﬁ nancial report has been prepared on an accruals basis and is based on historical costs, modiﬁ ed, where applicable, by the measurement at fair value of selected non-current assets, ﬁ nancial assets and ﬁ nancial liabilities. (a) Principles of consolidation A controlled entity is any entity Sirtex Medical Ltd has the power to control the ﬁ nancial and operating policies of so as to obtain beneﬁ ts from its activities. A list of controlled entities is contained in Note 25 to the ﬁ nancial statements. All controlled entities have a June ﬁ nancial year-end. As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated ﬁ nancial statements as well as their results for the year then ended. Where controlled entities have entered or left the consolidated group during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased. All inter-company balances and transactions between entities in the consolidated group, including any unrealised proﬁ ts or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity. Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated ﬁ nancial report. (b) Goods and services tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Ofﬁ ce. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are shown inclusive of GST. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash ﬂ ows are presented in the cash ﬂ ow statement on a gross basis, except for the GST component of investing and ﬁ nancing activities, which are disclosed as operating cash ﬂ ows. (c) Government Grants Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at amortised fair value and are credited to income over the expected useful life of the asset on a straight-line basis. (d) Provisions Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outﬂ ow of economic beneﬁ ts will result and that outﬂ ow can be reliably measured. (e) Intangibles Goodwill Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business combination exceeds the fair value attributed to the interest in the net fair value of identiﬁ able assets, liabilities and contingent liabilities at date of acquisition. Sirtex Annual Report 2009 31 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Intellectual property The fair value of intellectual property contributed by an outside equity interest holder to Sirtex Medical Ltd, has been capitalised and recorded at fair value at the time of the contribution. The asset will be amortised on a straightline basis over a period of 20 years. Research and development Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic beneﬁ ts and these beneﬁ ts can be measured reliably. (f) Acquisition of assets All assets acquired, including plant and equipment and intangibles other than goodwill, are initially recorded at their cost of acquisition, being fair value of the consideration provided plus incidental costs directly attributable to the acquisition and depreciation or amortisation as outlined below. The cost of plant and equipment constructed by the Consolidated Entity includes the cost of material and direct labour, an appropriate proportion of ﬁ xed and variable overheads and capitalised interest. Carrying value All items of plant and equipment are carried at the lower of cost less accumulated depreciation, amortisation and impairment losses and their recoverable amount. The carrying amount is reviewed annually by directors to ensure it is not in excess of the recoverable amount. The recoverable amount is assessed on the basis of the expected discounted present value net cash ﬂ ows that will be received from the asset’s employment and subsequent disposal. (g) Depreciation and amortisation Items of plant and equipment, including leasehold assets, are depreciated or amortised on a reducing balance basis so as to write off the net cost of each asset over its expected useful life. Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. Depreciation and amortisation rates are reviewed annually for appropriateness. When changes are made, adjustments are reﬂ ected prospectively in current and future ﬁ nancial periods only. The annual depreciation and amortisation rates used for each class of asset are as follows: Plant & Equipment 10%-50% Intellectual Property 5% (h) Impairment of assets At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement. Impairment testing is performed annually for intangible assets with indeﬁ nite lives. Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs. (i) Leases Lease payments for operating leases, where substantially all the risks and beneﬁ ts remain with the lessor, are charged as expenses in the periods in which they are incurred. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term. 32 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 (j) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and ﬁ xed overheads. Costs are assigned on the basis of weighted average costs. (k) Employee beneﬁ ts Wages, salaries and annual leave Liabilities for employee beneﬁ ts for wages, salaries and annual leave expected to settle within 12 months of the year end represent present obligations resulting from employees’ services provided up to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Consolidated Entity expects to pay as at reporting date including related on costs, such as workers’ compensation insurance and payroll tax. Employee beneﬁ ts expected to be settled beyond 12 months are carried at the present value of the estimated future cash ﬂ ows. Long service leave The provision for employee beneﬁ ts to long service leave represents the present value of estimated future cash outﬂ ows to be made by the employer resulting from employees’ services provided up to reporting date. The provision is calculated using expected future increases in remuneration rates, including related costs, and expected settlement dates based on turnover history, and is discounted using the rates attaching to national government securities at reporting date, which most closely match the terms of maturity of the related liabilities. Superannuation plans The Consolidated Entity contributes to various employee superannuation plans. Contributions are charged against expense as they are made. Share-based payments The group has in the past operated a share-based compensation plan in form of an employee option plan. The amount to be expensed over the vesting period has been determined by reference to the fair value of the shares of the options granted. (l) Receivables Trade debtor terms vary from market to market depending on the economic factors relevant to the individual market. The Consolidated Entity has actual trading terms ranging up to 120 debtor days. The collectability of debts is assessed at reporting date and allowance made for any doubtful accounts. The allowance for doubtful debts is speciﬁ c with reference to the proﬁ le of debtors in the Consolidated Entity’s sales and marketing regions. (m) Income tax The charge for current income tax expense is based on the proﬁ t for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the ﬁ nancial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable proﬁ t or loss. Sirtex Annual Report 2009 33 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity. Deferred income tax assets are recognised to the extent that it is probable that future tax proﬁ ts will be available against which deductible temporary differences can be utilised. The amount of beneﬁ ts brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufﬁ cient future assessable income to enable the beneﬁ t to be realised and comply with the conditions of deductibility imposed by the law. Sirtex Medical Ltd and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. Each entity in the group recognises its own current and deferred tax liabilities, except for any deferred tax liabilities resulting from unused tax losses and tax credits, which are immediately assumed by the parent entity. The current tax liability of each group entity is then subsequently assumed by the parent entity. The group notiﬁ ed the Australian Tax Ofﬁ ce that it had formed an income tax consolidated group to apply from 1 July 2004. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net proﬁ t before tax of the consolidated group. (n) Accounts payable Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Company or Consolidated Entity. (o) Borrowings Bank loans are carried in the balance sheet at their principal amount. Interest expense is recognised on an accruals basis. (p) Comparative ﬁ gures Where required by Accounting Standards, comparative ﬁ gures have been adjusted to conform to changes in presentation for the current ﬁ nancial year. (q) Earnings per share Basic earnings per share (EPS) is calculated by dividing the net proﬁ t attributable to members of the parent entity for the ﬁ nancial period, after excluding any costs of servicing equity (other than ordinary shares) by the weighted average number of ordinary shares of the Company, adjusted for any bonus issue. Diluted EPS is calculated by dividing the basic EPS earnings, adjusted by the after tax effect of ﬁ nancing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to ordinary shares associated with dilutive potential ordinary shares, by the weighted average number of ordinary shares and dilutive potential ordinary shares of the Company adjusted for any bonus issue. (r) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in the income statement in the period incurred. 34 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 (s) Financial instruments Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below. Loans and receivables are non-derivative ﬁ nancial assets with ﬁ xed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Non- derivative ﬁ nancial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation. Foreign currency options entered into to hedge highly probable forecast transactions are accounted for as a derivative. Changes in the fair value of derivatives are recorded in the Income Statement, together with any changes in the fair value of hedged assets or liabilities that are attributable to the hedged risk. (t) Cash and cash equivalents Cash and cash equivalents include cash on hand and deposits held at call with banks and other short-term highly liquid instruments with original maturity of three months or less. Restricted cash assets are shown within other current ﬁ nancial assets. (u) Key estimates – impairment The group assesses impairment at each reporting date by evaluating conditions speciﬁ c to the group that may lead to impairment of assets. Where impairment exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Impairment of trade receivables is based on best estimates of amounts that will not be collected from debtors for doses sold. For the year ended 30 June 2009, a total of $395,000 (2008: $165,000) of trade receivables has been estimated as being impaired, the majority of which are in Europe. (v) New Accounting Standards for Application in Future Periods The AASB has issued new, revised and amended standards and interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards and does not expect these requirements to have any material effect on the Group’s ﬁ nancial statements. AASB 8 – Operating Segments: effective for reporting periods commencing on or after 1 January 2009, application by Group on 1 July 2009. Application of AASB8 may result in different segments, segment results and different information being reported in one segment. AASB 101 – Presentation of Financial Statements: effective for reporting periods commencing on or after 1 January 2009, application by Group on 1 July 2009. Application of AASB 101 will require the presentation of a statement of comprehensive income and will make changes to the statement of changes in equity. AASB 123 – Borrowing Costs: effective for reporting periods commencing on or after 1 January 2009, application by Group on 1 July 2009. Application of AASB 123 will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset. AASB 2008-1 (Amendments to AASB 2 – Share based Payments): effective for reporting periods commencing on or after 1 January 2009, application by Group on 1 July 2009. Application of AASB 2008-1 will restrict vesting conditions to service and performance conditions only. Sirtex Annual Report 2009 35 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2. REVENUE AND OTHER INCOME (a) Revenue from the sale of goods 65,559 38,125 - - (b) Other revenue from ordinary activities Grant income Licensing income License and management fees Interest income Other (c) Other income Realised foreign exchange gains Unrealised foreign exchange gains 358 113 - 602 261 1,334 4,758 2,236 6,994 252 175 - 439 61 927 - 324 324 208 - 12,788 565 3 13,564 - - - 175 - 9,142 351 3 9,671 49 - 49 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 3. PROFIT FOR THE YEAR Proﬁ t from ordinary activities before income tax includes the following expense items: Cost of sales License and management fees Legal fees Bad and doubtful debts Employee beneﬁ ts expense Depreciation and amortisation of Plant and equipment Intangible assets Operating lease expenses Minimum lease payments Foreign exchange losses 36 Sirtex Annual Report 2009 12,606 10,043 - 1,121 230 15,686 436 434 296 - - 1,096 - - 102 970 - 10,815 3,226 385 180 238 1,302 47 339 177 431 - 453 1,096 - 1,849 156 180 192 115 Notes to the Financial Statements (continued) For the year ended 30 June 2009 4. INCOME TAX EXPENSE (a) The components of tax expense comprise: Current tax Deferred tax Recoupment of prior year losses Under provision in respect of prior years (b) The prima facie tax on proﬁ t from ordinary activities before income tax is reconciled to the income tax as follows: Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 6,282 813 (2,355) 183 4,923 1,265 453 (429) - 1,289 2,033 23 - - 1320 75 - - 2,056 1,395 Net proﬁ t before tax 23,152 2,499 6,209 3,399 Prima facie tax payable on proﬁ t from ordinary activities before income tax at 30% 6,946 759 1,863 1,029 Add/(less): Tax effect of - Non deductible amortisation - Non-deductible expenses - Over provision in respect of prior years Effect of higher tax rates on overseas income Effect of Foreign Currency translation of tax balances Timing differences and tax losses not brought to account as deferred tax assets Current and deferred taxes relating to transactions, events and balances of wholly-owned subsidiaries in the tax consolidated group Eliminations for the tax consolidated group Other 54 241 183 139 (277) (2,409) - 46 - 54 438 12 88 (368) 306 - - - Income tax attributable to entity 4,923 1,289 54 116 54 312 - - - - - - 23 2,056 - - - - - - - 1,395 The applicable weighted average effect tax rates are as follows 21% 51% 31% 41% (c) Franking Account Franking Account Balance 9,209 11,182 9,209 11,182 Legislation to allow groups, comprising a parent entity and its Australian resident wholly-owned entities, to elect to consolidate and be treated as a single entity for income tax purposes was substantially enacted on 21 October 2002. This legislation, which includes both mandatory and elective elements, is applicable to the company. The directors elected for those entities within the consolidated entity that are wholly-owned Australian resident entities to be taxed as single entity from 1 July 2004. The implementation of the tax consolidation system was notiﬁ ed to the Australian Tax Ofﬁ ce. The head entity within the tax- consolidated group for the purposes of the tax consolidation system is Sirtex Medical Limited. Sirtex Annual Report 2009 37 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 5. CASH AND CASH EQUIVALENTS (a) Reconciliation of cash Cash at the end of the ﬁ nancial year as shown in the cash ﬂ ow statement is reconciled to items in the balance sheet as follows: Cash at bank and in hand Short-term bank deposits 3,342 23,179 26,521 2,772 4,149 6,921 1,533 23,179 24,712 785 4,149 4.934 The effective interest rate on short-term bank deposits was 3.87% (2008: 5.24%). The deposits have an average maturity of 43 days. (b) Reconciliation of cash ﬂ ow from operations with proﬁ t after income tax Proﬁ t after income tax Non-cash ﬂ ows in proﬁ t: Deprecation and amortisation Share options expensed Decrease/ (increase) in current tax assets Decrease/ (increase) in deferred assets Net foreign exchange differences Changes in net assets and liabilities, net of the effect effects of purchase or disposal of subsidiaries (Increase)/ decrease in assets Trade receivables Other receivables Inventories Other current assets (Increase)/ decrease in liabilities Payables Current tax liabilities Short-term provisions Other current liabilities Long-term provisions Deferred tax liabilities Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 18,229 1,210 4,153 2,004 870 - 2,489 (556) (2,715) 565 227 386 - 336 1 (2,950) 2,943 (2,943) 453 313 12 (27) 75 - (3,264) (1,071) (1) (12,659) 424 (804) (128) (604) 1,879 1,548 1,694 89 989 - (368) - 866 (2,782) 11 (4) 44 - 22,702 - (74) (18) 36 145 (30,591) 21 53 - - - 3,652 (2,991) - (12) 10 - Net cash ﬂ ow from operating activities 20,140 (3,486) (260) (12,527) 38 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 6. TRADE AND OTHER RECEIVABLES (a) Trade receivables Trade receivables Provision for impairment (b) Other receivables Receivables from employees GST receivables Receivables from subsidiaries Other receivables Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 11,944 (395) 11,549 35 445 - 409 889 8,450 (165) 8,285 - 528 - 810 1,338 1 - 1 - 54 3,671 247 3,972 - - - - 95 26,319 63 26,477 12,438 9,623 3,973 26,477 Receivables are assessed for recoverability based on the underlying terms of the contract. A provision for impairment is recognised when there is objective evidence that an individual trade or term receivable is impaired. These amounts have been included in the other expenses item (refer Note 3). Movement in the provision for impairment of receivables is as follows: Opening balance $’000 Change for the yr $’000 Amounts written off $’000 Closing balance $’000 Consolidated Group Trade receivables Company Trade receivables (165) (230) - - - - Impaired trade receivables An amount of $395,000 was considered impaired as at 30 June 2009 (2008: $165,000). Trade receivables past due but not impaired Less than 30 days overdue 30-60 days overdue More than 60 days overdue No other receivables are past due. Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 1,616 557 671 810 520 1,862 - - - (395) - - - - Credit risk The Group has no signiﬁ cant concentration of credit risk with respect to any single counter party or group of counter parties other than those receivables speciﬁ cally provided for and shown above. The class of assets described as Trade and other Receivables is considered to be the main source of credit risk related to the Group. No collaterals have been received from any of the trade debtors in form of a ﬁ nancial guarantee. Sirtex Annual Report 2009 39 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 1,399 594 - - Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 230 230 - - 163 163 - - 80 80 62 62 141 141 62 62 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 582 582 497 497 157 157 128 128 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 460 2,950 - 2,943 369 299 2,496 3,164 2,608 556 3,164 381 145 2,082 2,608 3,061 (453) 2,608 369 - - 369 381 (12) 369 381 - - 381 456 (75) 381 7. INVENTORIES Raw materials – at cost 8. OTHER FINANCIAL ASSETS (a) Other current ﬁ nancial assets Security deposits paid (b) Non-current ﬁ nancial assets Investments in wholly-owned subsidiaries Controlled entities: refer Note 25 9. OTHER CURRENT ASSETS Prepayments 10. TAX ASSETS (a) Current tax assets Current tax assets (b) Deferred tax assets Timing differences attributable to: Parent entity Entities in the tax consolidated group Overseas entities The overall movement in the deferred tax account is as follows: Opening balance (Charge)/ credit to the income statement 40 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 11. PROPERTY, PLANT AND EQUIPMENT Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 Land and buildings At cost Accumulated depreciation Net carrying amount Plant and equipment At cost Accumulated depreciation Net carrying amount Assets work in progress At cost Accumulated depreciation Net carrying amount Total Property, Plant and Equipment At cost Accumulated depreciation Net carrying amount Movements in carrying amounts Land and buildings Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end Plant and equipment Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end Assets work in progress Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end Total Property, Plant and Equipment Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end 1,234 (87) 1,147 3,819 (1,458) 2,361 4 - 4 5,057 (1,546) 3,512 1,023 194 - (70) 1,040 (17) 1,023 3,168 (966) 2,202 29 - 29 4,237 (983) 3,254 - 1,040 - (17) 1,147 1,023 2,202 753 (68) (526) 2,361 29 - (25) - 4 3,254 918 (68) (592) 3,512 625 1,875 (6) (292) 2,202 201 - (172) - 29 826 2,915 (178) (309) 3,254 - - - 1,169 (846) 323 4 - 4 1,173 (846) 327 - - - - - 354 164 (8) (187) 323 29 - (25) - 4 383 164 (33) (187) 327 - - - 1,035 (681) 354 29 - 29 1,064 (681) 383 - - - - - 391 71 (4) (104) 354 201 - (172) - 29 592 71 (176) (104) 383 Sirtex Annual Report 2009 41 Notes to the Financial Statements (continued) For the year ended 30 June 2009 12. INTANGIBLE ASSETS Software At cost Accumulated depreciation Net carrying amount Intellectual property At cost Accumulated depreciation Net carrying amount Total intangible assets At cost Accumulated depreciation Net carrying amount Movements in carrying amounts Software Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end Intellectual property Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 458 (254) 204 3,607 (2,194) 1,413 4,065 (2,448) 1,617 169 162 - (127) 204 296 (126) 169 3,607 (2,014) 1,593 3,902 (2,140) 1,762 12 249 - (91) 169 320 (231) 89 3,607 (2,194) 1,413 3,927 (2,425) 1,502 154 47 - (112) 89 273 (119) 154 3,607 (2,014) 1,593 3,880 (2,133) 1,747 9 232 - (87) 154 Carrying amount at beginning 1,593 1,773 1,593 1,773 Additions Disposals Depreciation expense Carrying amount at end Total intangible assets Carrying amount at beginning Additions Disposals Depreciation expense Carrying amount at end - - (180) 1,413 1,762 162 - (307) 1,617 - - (180) 1,593 - - (180) 1,413 - - (180) 1,593 1,785 1,747 1,782 249 - (272) 1,762 47 - (292) 1,502 232 - (267) 1,747 42 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 13. TRADE AND OTHER PAYABLES Trade payables Payables to wholly owned subsidiaries Other accruals and payables 14. CURRENT TAX LIABILITIES (a) Current tax liabilities Current tax liability (b) Deferred tax liabilities Timing differences attributable to: Parent entity Entities in the tax consolidated group Overseas entities The overall movement in the deferred tax account is as follows: Opening balance (Charge)/ credit to the income statement 15. PROVISIONS AND ACCRUALS (a) Short-term Provisions Employee beneﬁ ts * (b) Long-term Provisions Employee beneﬁ ts * * Employee beneﬁ ts include provisions for annual leave, bonus and for long service leave The overall movement in the deferred tax account is as follows: Opening balance Additional provisions for the year Amounts used during the year Closing balance Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 3,233 - 2,558 5,791 2,607 - 2,094 4,701 234 20,231 1,248 27,713 240 31,640 318 32,198 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2,110 2,110 231 231 53 735 201 989 - 989 - - - - - - 36 36 53 - - 53 - 53 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 1,605 1,605 185 185 46 1,961 (402) 1,605 46 46 96 96 - 91 (45) 46 145 145 38 38 - 257 (112) 145 - - - - - - - - - - 17 17 - 13 (13) - Sirtex Annual Report 2009 43 Notes to the Financial Statements (continued) For the year ended 30 June 2009 15. PROVISIONS & ACCRUALS CONTINUED The overall movement in the deferred tax account is as follows: Opening balance Additional provisions for the year Amounts used during the year Closing balance 16. INTEREST -BEARING LOANS Effective Interest Maturity Rate (%) Current Insurance premium funding - unsecured 6.56 Aug 09 17. ISSUED CAPITAL Issued capital Share issue cost Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 96 112 (23) 185 52 44 - 96 17 6 (15) 38 7 10 - 17 Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 64 64 - - 64 64 - - Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 24,779 (1,258) 23,521 24,779 (1,258) 23,521 24,779 (1,258) 23,521 24,779 (1,258) 23,521 Number of shares issued 55,768,136 55,768,136 55,768,136 55,768,136 Fully paid ordinary shares Balance at beginning of the year Balance at end of the year Consolidated 2009 Company 2008 No (000) $’000 No (000) $’000 55,768 55,768 23,521 23,521 55,768 55,768 23,521 23,521 Fully paid ordinary shares carry one vote per share and carry the right to dividends. On winding up, ordinary shares participate in dividends and the proceeds, in proportion to the number of shares held. The Company does not have a limited number of authorized capital and issued shares do not have a par value. Share options At reporting date, there were no share options outstanding. 44 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Capital management Management controls the capital of the group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the group can fund its operations and continue as a going concern. Management effectively manages the group’s capital by assessing the group’s ﬁ nancial risk and adjusting its capital structure in response to changes in these risks and in the market. The responses include the management of debt levels, distributions to shareholders, and share issues. The company currently has no debt with the exception of a $64,000 debt funding for insurance premium which will be fully repaid in August 2009. 18. RESERVES Foreign Currency Translation Reserve (1) Option Reserve (2) Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 (882) - (882) 1,455 557 2,012 - - - - 557 557 (1) The translation of foreign controlled subsidiaries into the functional currency of the group gives rise to a foreign currency translation reserve. (2) Options issued under an Executive and Employee Share Option Plan in 2003 lapsed during the ﬁ nancial year. There is currently no option plan in place. 19. EARNINGS PER SHARE (a) Basic earnings per share Proﬁ t from continuing operations attributable to equity holders Weighted average number of shares used in the calculation of basic earnings per share (a) Diluted earnings per share Consolidated 2009 $ 2008 $ 18,299,000 1,210,000 55,768,136 55,768,136 Proﬁ t from continuing operations attributable to equity 18,299,000 1,210,000 holders Weighted average number of shares used in the calculation of diluted earnings per share 55,818,136 55,970,328 Sirtex Annual Report 2009 45 Notes to the Financial Statements (continued) For the year ended 30 June 2009 20. SEGMENT INFORMATION Segment revenues External sales Inter-segment(i) Other Total 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2,738 43,957 18,863 2,356 69,006 37,764 321 28,254 7,516 4,362 102 - - - - 562 189 - 72,065 48,319 18,965 40,682 28,443 7,516 139,350 76,641 (73,469) (37,764) 8,007 499 73,887 39,376 2009 $’000 2008 $’000 11,621 1,295 10,398 23,314 (162) 23,152 (4,923) 1,338 876 285 2,499 - 2,499 (1,289) 18,229 1,210 Assets Liabilities 2009 $’000 2008 $’000 2009 $’000 2008 $’000 83,499 118,955 17,652 22,605 7,036 6,741 41,973 20,722 6,058 85,418 25,688 13,953 108,187 148,301 68,753 125,059 (58,264) (119,929) (58,009) (119,974) 49,923 28,372 10,744 5,085 Asia Paciﬁ c North America Europe Total of all segments Eliminations Unallocated Consolidated Segment results Asia Paciﬁ c North America Europe Total of all segments Eliminations Proﬁ t before income tax expense Income tax expense Proﬁ t after income tax expense Segment assets and liabilities Asia Paciﬁ c North America Europe Total of all segments Eliminations Consolidated 46 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Other segment information: Segment assets and liabilities Acquisition of segment assets - Land and buildings - Plant and equipment Depreciation and amortisation of segment assets - Plant and equipment - Intangibles Asia Paciﬁ c North America Europe 2009 $’000 2008 $’000 2009 $’000 2008 $’000 2009 $’000 2008 $’000 - - 70 428 52 287 214 180 - 725 410 - 51 56 126 - - 132 57 - - 41 45 - For management purposes and reporting on primary segment information, the group is organized in three geographical areas – Asia Paciﬁ c, North America and Europe. The group operates in only one business segment being the manufacturing and sale of SIR-Spheres for treatment of liver cancer. 21. KEY MANAGEMENT PERSONNEL Refer to the Remuneration Report contained in the Report of the Directors for details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2009. The totals of remuneration paid to key management personnel of the consolidated entity during the year are as follows: Short-term employee beneﬁ ts Post-employment beneﬁ ts Other long-term beneﬁ ts Termination beneﬁ ts Share-based payment 2009 $ 2008 $ 3,333,594 2,057,986 105,083 - 183,000 - 123,320 20,777 - - 3,621,677 2,202,083 Key management personnel shareholdings The number of fully paid ordinary shares in Sirtex Medical Ltd held by each key management personnel of the Group during the ﬁ nancial year is as follows: Balance at beginning Granted as remuneration Issued on exercise of options Other changes Balance at end 30 June 2009 G.Boyce D.Smith 30 June 2008 G.Boyce 5,000 - 5,000 - - - - - - - 15,000 5,000 15,000 - 5,000 Sirtex Annual Report 2009 47 Notes to the Financial Statements (continued) For the year ended 30 June 2009 22. SHARE OPTIONS (a) Executive and employee share option plan At reporting date, there was no Executive and Employee Share Option Plan in place. All options outstanding from the 2003 plan lapsed during the year. Balance at beginning of the ﬁ nancial year (I) Granted during the ﬁ nancial year (II) Exercised during the ﬁ nancial year (III) Lapsed during the ﬁ nancial year (IV) Balance at end of the ﬁ nancial year (V) (I) Balance at beginning of the ﬁ nancial year Options – Series No. Grant date 2009 No. 2008 No. 200,000 250,000 - - - - (200,000) - (50,000) 200,000 Expiry/ exercise date Exercise price $ Issued 1 October 2003 200,000 01/10/03 30/09/08 4.85 (II) Granted during the ﬁ nancial year Options – Series No. Grant date No options were granted during the ﬁ nancial year III) Exercised during the ﬁ nancial year Options – Series No. Grant date No options were exercised during the ﬁ nancial year. IV) Lapsed during the ﬁ nancial year Options – Series No. Grant date Expiry/ exercise date Exercise price $ Expiry/ exercise date Exercise price $ Expiry/ exercise date Exercise price $ Issued 1 October 2003 200,000 01/10/03 30/09/08 4.85 (V) Balance at end of ﬁ nancial year Options – Series No. Grant date Expiry/ exercise date Exercise price $ The balance at the end of ﬁ nancial year was nil 48 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 (b) Share options outside executive and employee share option plan Balance at beginning of the ﬁ nancial year Granted during the ﬁ nancial year Exercised during the ﬁ nancial year Lapsed during the ﬁ nancial year Balance at end of the ﬁ nancial year 2009 No. 2008 No. - - - - - - - - - - 23. Contingent assets and contingent liabilities (1) Contingent assets As previously reported, Sirtex Medical Limited (Sirtex) is a party to proceedings in the Federal Court of Australia issued by the University of Western Australia (UWA Proceedings). Dr Bruce Gray (former director and a substantial shareholder of Sirtex) is also a party to the UWA Proceedings. The UWA Proceedings are summarised as follows: On 17 April 2008 Justice French delivered a judgment in the UWA Proceedings which included the Court: 1. dismissing the claims by UWA against Sirtex and Dr Gray; 2. ﬁ nding in favour of Sirtex on its cross claim against Dr Gray; 3. ordering UWA to pay Sirtex’s costs of UWA’s claim against Sirtex; and 4. ordering Dr Gray to pay Sirtex’s costs of Sirtex’s cross claim against Dr Gray. Sirtex has the beneﬁ t of the general costs orders in its favour against UWA and Dr Gray and its claim for damages against Dr Gray in respect of which Sirtex will be claiming any costs not recovered from UWA. Sirtex is pursuing both claims as it has incurred in excess of $5.5 million in legal costs and expenses in relation to the UWA Proceedings and related matters. The Court has scheduled a hearing of these claims for 9-13 November 2009 and Sirtex expects the claims to be determined some time after the conclusion of the hearing when the Court delivers its Judgment. Whilst UWA and Dr Gray dispute various aspects of Sirtex’s costs and claim for damages, Sirtex expects to recover a signiﬁ cant proportion of the above amount as part of its costs award against UWA and a signiﬁ cant proportion of the balance from Dr Gray as damages. However, it is not possible to provide a useful or precise estimate of the likely amount to be recovered at this time. Sirtex expects the Court will deliver its Judgment on these issues in the ﬁ rst half of 2010. (2) Contingent liabilities Dr Gray Proceedings As previously reported, Sirtex was the defendant in proceedings in the Supreme Court of Western Australia brought by Dr Gray seeking declaration that certain terms of his employment contracts and the Subscription and Shareholders Agreement were unenforceable as unreasonable restraints of trade (Dr Gray Proceedings). The Dr Gray Proceedings are summarised in an announcement of Sirtex dated 12 December 2008. On 14 May 2009, Justice Le Miere delivered a Judgment in the Dr Gray Proceedings in favour of Dr Gray and ordered Sirtex to pay Dr Gray’s costs of the proceedings. Dr Gray is yet to inform Sirtex of the amount of costs he seeks to recover or to initiate the process by which those costs are assessed or determined. In those circumstances, it is not possible to provide a useful or precise estimate of the likely amount of Sirtex’s liability for Dr Gray’s costs at this time, and therefore no provision has been recognized on this matter. Sirtex Annual Report 2009 49 Notes to the Financial Statements (continued) For the year ended 30 June 2009 24. COMMITMENTS Operating Leases The consolidated entity leases ofﬁ ces in Sydney, in Germany and in the United States, with no option to purchase the leased assets at the expiry of the leased assets The Sydney ofﬁ ce has a lease term of 36 months, with a remaining period of 17 months. The German ofﬁ ce has a lease term of 60 months, with a remaining period of 55 months, and the US ofﬁ ce has a lease term of 1 year with a remaining period of 6 months. The consolidated entity also leases various items of plant and equipment in Germany with lease terms from 36 to 48 months, and remaining periods of 15 to 33 months. Non-cancellable operating leases Not longer than 1 year Longer than 1 year and not longer than 5 years Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 337 480 817 375 513 888 156 66 222 330 467 797 Research Commitments The consolidated entity has entered into various research and development agreements with Universities and other external research institutions for ongoing research and clinical trials. Under these agreements, the consolidated entity is committed to providing funds over future periods, payable within one year, of $432,000 (2008: $Nil). 25. CONTROLLED ENTITIES Name of entity Country of incorporation Ownership interest 2009 % 2008 % Parent entity Sirtex Medical Limited Controlled entities Sirtex Medical Products Pty Ltd Sirtex Global Pty Ltd Sirtex Technology Pty Ltd Sirtex SIR-Spheres Pty Ltd Sirtex Thermospheres Pty Ltd Sirtex Medical Holdings Inc Sirtex Medical Inc Sirtex Wilmington LLC Sirtex Medical Europe GmbH Australia Australia Australia Australia Australia Australia USA USA USA Germany 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 Sirtex Medical Holdings Inc was incorporated on 25 July 2006. The company holds 100% interest in Sirtex Medical and in Sirtex Wilmington LLC. Sirtex Medical Ltd and all its Australian controlled entities are included in the tax consolidated group and is head entity for tax consolidation. 50 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 26. RELATED PARTY TRANSACTIONS (a) Equity interests in related parties Details of the percentage of ordinary shares held in controlled entities are disclosed in Note 25. (b) Transactions with key management personnel related entities. At 30 June 2009, $Nil (2008: $Nil) was payable to directors, key management personnel and director related entities. At 30 June 2009, $22,474 (2008: $Nil) was receivable from key management personnel. There is no interest payable on the receivable, and repayment is due no later than 31 December 2009. c) Transactions with the wholly-owned group The wholly-owned group includes: the ultimate parent entity in the wholly-owned group, and wholly-owned entities. wholly-owned controlled entities The ultimate parent entity in the wholly-owned group is Sirtex Medical Limited. Amounts receivable from and payable to entities in the wholly owned group are disclosed in the notes to the ﬁ nancial statement. During the ﬁ nancial year, Sirtex Medical Ltd provided management services, on normal commercial terms and conditions, to entities in the wholly-owned group and received licence fees from entities in the wholly-owned group. (d) Controlling entities The parent entity in the consolidated entity is Sirtex Medical Ltd. The ultimate parent entity in the wholly-owned group is Sirtex Medical Ltd. 27. EVENTS AFTER BALANCE SHEET DATE No matters or circumstances have arisen since the end of the ﬁ nancial year which signiﬁ cantly affected or may signiﬁ cantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in future ﬁ nancial years. 28. REMUNERATION OF AUDITORS During the year, the following were paid or were payable for services provided by the auditor of the parent entity, its related party practices and non-related audit ﬁ rms: Consolidated Company Remuneration of the auditor of the parent entity for audit and review of ﬁ nancial reports Other non-audit services Remuneration of other auditors of subsidiaries for audit and review of ﬁ nancial reports 2009 $’000 2008 $’000 2009 $’000 2008 $’000 96 - 25 60 - 20 96 - - 55 - - The auditor of Sirtex Medical Ltd and its Australian and German subsidiaries is Grant Thornton NSW. The auditor of the US entities is Grant Thornton LLP. Sirtex Annual Report 2009 51 Notes to the Financial Statements (continued) For the year ended 30 June 2009 29. FINANCIAL RISK MANAGEMENT The Audit Committee has been delegated responsibility by the Board of Directors for, amongst other issues, monitoring and managing ﬁ nancial risk exposures of the Group. The Audit Committee monitors the Group’s ﬁ nancial risk management policies and exposures and approves ﬁ nancial transactions within the scope of its authority. It also reviews the effectiveness of internal controls relating to counter party credit risk, currency risk, and interest rate risk. The Groups’ activities expose it to a variety of ﬁ nancial risks, including but not limited to, market risk (currency risk and interest rate risk), credit risk and liquidity risk. The overall risk management strategy seeks to measure and to mitigate these risks, in using different methods measure the different types of risk, and in using derivate instruments to minimize certain risk exposures. The Group’s ﬁ nancial instruments consist mainly of deposits with banks, short-term investments, account receivable and payable, and loans to and from subsidiaries. The totals for each category of ﬁ nancial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these ﬁ nancial instruments, are as follows Financial Assets Cash and cash equivalents Trade and other receivables Other ﬁ nancial assets * Financial Liabilities Trade and other payables Borrowings Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 26,521 12,438 230 39,185 5,791 64 5,855 6,921 10,120 163 17,204 24,712 3,973 80 28,765 4,934 26,605 203 31,742 4,701 21,713 32,198 - 64 - 4,701 21,777 32,198 * Other ﬁ nancial assets comprise security deposits and investments in wholly owned subsidiaries. The carrying amounts of ﬁ nancial assets and ﬁ nancial liabilities recorded in the ﬁ nancial statements represent their respective net fair values, determined in accordance with the accounting policies disclosed in note 1 to the ﬁ nancial statements. Financial Risk Exposures and Management The main risks the Group is exposed to through its ﬁ nancial instruments are interest rate risk, foreign exchange risk, liquidity risk and credit risk as follows: (a) Interest rate risk The Group’s exposure to interest rate risk relates to its cash and short-term deposits. The interest rate as at 30 June 2009 on cash was 2.5% (2008: 5.9%) and on short-term deposits 3.87% (2008:7.95%). The interest-bearing loan is a ﬁ xed rate loan with an effective interest rate of 6.56%The totals for each category of ﬁ nancial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these ﬁ nancial instruments, are as follows 52 Sirtex Annual Report 2009 Notes to the Financial Statements (continued) For the year ended 30 June 2009 Sensitivity analysis A change in interest rate on cash and short-term deposits would result in a change in proﬁ t as follows: Change in proﬁ t: Increase in interest rate by 2% Decrease in interest rate by 2% Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 371 (371) 98 (98) 346 (346) 85 (85) (b) Credit risk Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in ﬁ nancial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufﬁ cient collateral or other securities where appropriate, as a means of mitigating the risk of ﬁ nancial loss from defaults. The Group measures credit risk on a fair value basis. The Group does not have any signiﬁ cant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The carrying amounts of ﬁ nancial assets recorded in the ﬁ nancial statements, net of any provision for impairment, represent the Group’s maximum exposure to credit risk without taking into account any collateral or other security obtained. (c) Foreign exchange risk The Group is exposed to foreign exchange risk resulting in ﬂ uctuations in the fair value and in future cash ﬂ ows of its ﬁ nancial instruments due to a movement in foreign exchange rates of currencies other than the Group’s measurement currency. It is the Group’s policy that hedging, as a percentage of net foreign exchange rate exposure, be maintained within the limits of the foreign exchange risk management policy. The Group has open currency options at balance date relating to highly probable forecast transactions. These options give the Group the right to purchase foreign currencies at a speciﬁ ed exchange rate if the actual exchange rate at expiry date of the options is higher than the speciﬁ ed rate. Sensitivity analysis A change in foreign exchange rates would result in a change in proﬁ t as follows: Change in proﬁ t: Increase of AUD to USD by 15% Decrease of AUD to USD by 15% Increase of AUD to EUR by 15% Decrease of AUD to EUR by 15% Consolidated Company 2009 $’000 2008 $’000 2009 $’000 2008 $’000 (6,576) 6,576 (2,829) 2,829 (2,188) 2,960 (23) 30 - - - - - - - - Sirtex Annual Report 2009 53 Notes to the Financial Statements (continued) For the year ended 30 June 2009 The following table shows the foreign currency risk on the ﬁ nancial assets and liabilities of the Group’s operations, denominated in currencies other than the functional currency of the operations. The foreign currency risk in the books of the parent entity is considered immaterial and is therefore not shown. 2009 - Consolidated Net ﬁ nancial assets/ (liabilities) in ‘000 Group entity (Functional currency) North American entities (USD) European entity (EUR) Balance sheet exposure USD 4,869 - 4,869 EUR AUD - 2,460 2,460 6,001 4,227 10,228 2008 - Consolidated Net ﬁ nancial assets/ (liabilities) in ‘000 Group entity (Functional currency) North American entities (USD) European entity (EUR) Balance sheet exposure Foreign Currency Call/ Put Options USD 5,346 - 5,346 EUR - 1,573 1,573 AUD 5,554 2,581 8,135 The Group has European style call/ put options open at balance date relating to highly probable forecast transactions and recognised ﬁ nancial assets and ﬁ nancial liabilities. These options consist of two components: 1. The right to buy speciﬁ ed amounts of AUD against foreign currencies in the future at speciﬁ ed exchange rates. 2. The obligation to buy speciﬁ ed amounts of AUD against foreign currencies in the future at speciﬁ ed exchange rates if the AUD falls below a speciﬁ ed rate. The following table summarises the notional amounts and terms of these options. Consolidated Group Call Options (Sell USD/ Buy AUD) Settlement - less than 6 months Put Options (Sell USD/ Buy AUD) Settlement - less than 6 months (1) Notional Amounts Average Exchange Rate 2009 USD ’000 2008 USD ’000 2009 2008 3,000 3,000 - - 0.82 0.82 - - (1) The obligation to purchase AUD at the speciﬁ ed rate of $0.82 occurs, should on expiry date of the option the spot exchange rate is $0.725 or less. 54 Sirtex Annual Report 2009 Additional Information For the year ended 30 June 2009 Additional stock exchange information as at 20 August 2009 Number of holders of equity securities (ordinary share capital) 55,768,136 fully paid ordinary shares are held by 1,936 individual shareholders. All issued ordinary shares carry one vote per share, however, partly paid shares do not carry the rights to dividends. Distribution of holders of equity securities Ordinary Shares Holders 1 - 1,000 460,873 1,001 - 5,000 2,212,977 5,001 - 10,000 1,382,094 10,001 - 100,000 4,056,556 100,001 and over 47,655,636 752 841 175 146 22 55,768,136 1,936 Substantial shareholders Ordinary shareholders Fully paid Number Percentage COGENT NOMINEES PTY LIMITED 16,457,284 ACN 132442114 PTY LIMITED 16,462,283 CANCER RESEARCH FUND CITICORP NOMINEES 4,568,526 3,092,531 40,580,624 29.510 29.519 8.192 5.545 72,766 Twenty largest holders of quoted equity securities Ordinary shareholders COGENT NOMINEES PTY LIMITED ACN 132442114 PTY LIMITED CANCER RESEARCH FUND CITICORP NOMINEES EQUITY TRUSTEES LIMITED JP MORGAN NOMINEES AUSTRALIA PINERIDGE HOLDINGS PTY LTD HSBC CUSTODY NOMINEES AUSTRALIA ANZ NOMINEES ADRIAANSE ERIK SANDHURST TRUSTEES APOLLO SOLUTIONS LIMITED CITY AND WESTMINSTER LIMITED PACIFIC SECURITIES INC BANNABY INVESTMENTS PTY LTD TILL NO 54 PTY LTD EQUITY TRUSTEES ATTUNGA NOMINEES PANACCIO CHRISTIANA WARK TIM BRADFIELD ROBERT Fully paid Number Percentage 16,457,284 16,462,283 4,568,526 3,092,531 1,786,859 861,600 720,000 562,357 515,417 500,000 421,403 284,491 250,000 250,000 210,000 190,000 172,000 135,385 115,000 100,500 100,000 29.510 29.519 8.192 5.545 3.204 1.545 1.291 1.008 0.924 0.897 0.756 0.510 0.448 0.448 0.377 0.341 0.308 0.243 0.206 0.180 0.179 47,755,636 85.632 Sirtex Annual Report 2009 55 Company Information Company Secretary Mr Darren Smith Stock exchange listing Australian Stock Exchange Limited ASX code SRX Share registrar Registries Ltd Level 7 207 Kent Street Sydney, NSW, 2000, Australia Tel: 61-2-29290-9600 Registered ofﬁ ce Unit F6, Parkview, 16 Mars Road, Lane Cove, NSW, 2066 Tel: +61-2-9936-1400 Auditors Grant Thornton NSW Level 17, 383 Kent Street, Sydney, NSW, 2000, Australia Principal Places of Business are: Australian Ofﬁ ce Unit F6, Parkview, 16 Mars Road, Lane Cove, NSW, 2066 Tel: +61-2-9936-1400 United States Ofﬁ ce 2-4, 16 Upton Drive, Wilmington, MA, 01887 Tel: +1-978- 694-9099 European Ofﬁ ce Walter-Flex-Strasse 2, 53113 Bonn, Germany Tel: +49-228-1840-730 n o i t a m r o f n I y n a p m o C Annual General Meeting The Annual General Meeting will be held at 10.00am Tuesday 27 October 2009 at the Stamford Grand Hotel North Ryde, NSW Australia. 56 Sirtex Annual Report 2009

Continue reading text version or see original annual report in PDF format above