For personal use only - ASX · DIRECTORS’ REPORT The Directors submit the financial report of...
Transcript of For personal use only - ASX · DIRECTORS’ REPORT The Directors submit the financial report of...
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES A.B.N. 91 075 170 151
ABN 91 075 170 151
INTERIM REPORT FOR THE HALF YEAR ENDED 31 DECEMBER 2016
PREPARED IN ACCORDANCE WITH ASX LISTING RULE 4.2A
This document should be read in conjunction with the most recent annual financial report
Contents Page
Results for Announcement to the market 1
Commentary on Result 2
Interim Financial Report 5
For
per
sona
l use
onl
y
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Page 1 A.B.N. 91 075 170 151
Appendix 4D Probiotec Limited Half Year Report For the half year ended 31 December 2016
Results for announcement to market Current Reporting Period: Half year ended 31 December 2016 Previous Corresponding Period: Half year ended 31 December 2015
Results from continuing operations Movement ($'000)
Sales Revenue from continuing operations
Down
4.4%
to
28,617
Earnings before interest, tax, depreciation & amortisation (EBITDA)
Up
9.5%
to
2,284
Earnings before interest and tax (EBIT)
Up
34.4%
to
886
Net profit from ordinary activities before tax attributable to members (NPBT)
Up
167.8%
to
701
Net profit for the period attributable to members (NPAT)
Up
81.3%
to
545
Earnings per share
Up
81.3%
to
1.03 ¢
Net Tangible assets per share as at 31 December 2016
Up
5.1%
to
46.0¢
Net Tangible assets per share as at 31 December 2015
43.8¢
Dividends (Ordinary shares)
Record Date Amount per Security
Franked Amount per Security
Interim Dividend 22 March 2017 0.5 of a cent 0.5 of a cent
Dividends The directors have today declared an interim dividend of 0.5 of a cent per ordinary share, fully franked, and to be paid on 21 April 2017. The dividend will be payable to shareholders of record on 22 March 2017. The resumption of an interim dividend is in recognition of the continued improvement in Probiotec’s earnings and cashflow. The company’s Dividend Reinvestment Plan will not be operational for this dividend. This dividend does not relate to any conduit foreign income. A final dividend of 1.5 cents per ordinary share relating to the 2016 financial year was paid during the half year. Please refer to the commentary on the following page for an explanation of the above movements.
For
per
sona
l use
onl
y
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Page 2 A.B.N. 91 075 170 151
Review of Results The Group’s net operating profit after tax from continuing activities attributable to members for the half year was $0.8 million compared to a profit of $0.3 million for the prior corresponding period. During the half year, the Company incurred $0.3 million in non-recurring costs. Excluding these costs, the net profit after tax from continuing activities grew by 151%, which represents a significant improvement over the prior corresponding period (see table below).
Normalised Results (in $’000) HY2017 Reported
Non-recurring costs
HY2017 Underlying
HY2016 Growth
EBITDA 2,284 298 2,582 2,087 +23.7%
EBIT 886 298 1,184 659 +79.6%
NPBT 701 298 999 262 +281.7%
NPAT 545 209 754 301 +150.7%
For the half year ended 31 December 2016, the Group’s sales revenue from continuing operations decreased by 4% to $28.6 million. This decrease in sales was primarily due to the rationalisation of several low margin products within the contract manufacturing segment together with supply disruptions within our Europe segment. Excluding these impacts, sales revenue was consistent with the prior corresponding period. The Group’s cash flow from operations grew by 171% to $0.8 million during the half year compared to the prior corresponding period. The result for the half year continues the ongoing improvement of the Group under its now streamlined
business model. The rationalisation of several low margin product lines and manufacturing contracts negatively
impacted on sales revenue but these contracts have been replaced with more attractive contracts and products,
which is resulting in increasing earnings and improving margins to the Group, which we expect to continue.
The Group now has a clear focus on the core pillars of the business into the future, being:
Contract manufacturing & intellectual property development;
Branded pharmaceutical products; and
Obesity and health products.
Pleasingly, despite the operations of the Group remaining seasonally weighted to the second half of the
financial year, due in part to the significant influence of Cold and Flu products and peak sales of weight loss
supplements occurring in the January to April period, a profitable and improved result for the first half was still
achieved.
Outlook The Directors are confident in the future growth and direction of the Company, which is underpinned by a new Board and an invigorated and committed executive team. In the absence of any significant deterioration in economic conditions, the Directors reasonably expect to deliver another improved result for the full year. The Company has a number of items of new business, along with opportunities in progress, that are expected to drive further growth in the 2018 financial year.
For
per
sona
l use
onl
y
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Page 3 A.B.N. 91 075 170 151
The primary drivers of this growth are expected to be: • Contract Manufacturing:
o Full year impact of contracted and existing business o New contracts which are executed or expected to be executed in the near future coming
online during the 2018 financial year o Synergies and margin improvement o Cost management
• Obesity and Weight Management
o New distribution for the Companies Impromy range of products and services o New product launches planned for the 2018 financial year
With the simplified strategy of the Company now in place the Board believes that the business is positioned to deliver improved results from leveraging the core assets of the business. Segment Review Contract Manufacturing The Group’s contract manufacturing segment generated $16.8 million in sales, broadly in line with the prior corresponding period. The Group is continuing to experience solid demand in contract manufacturing and has a strong order book for the balance of the 2017 financial year. The Group’s capabilities are becoming increasingly well recognised in the market and the Group is experiencing an increased number of sales inquiries, leads and contracted work. The demand for the Group’s manufacturing services and innovative consumer products continues to underpin strong orders for this segment and this is expected to contribute to further growth in the second half of this financial year. The first of the new contract manufacturing contracts announced in March 2016 has now come on line with first orders delivered in December 2016. The balance of the new products will continue to come on line progressively over the balance of this financial year. Intellectual Property development The Group continues to invest in the development of its intellectual property with over one third of its contract manufacturing sales underpinned by Probiotec intellectual property. This intellectual property continues to deliver increasing sales levels with a high level of security. The Group is also pleased to be continuing to expand our research and development relationships with Griffith University, CSIRO and Adelaide University. Branded Pharmaceuticals The Group’s branded pharmaceuticals segment generated $4.0 million in sales, an increase of 4% compared to the prior corresponding period. Under the distribution agreement with the Valeant Group, the Group’s established product ranges performed well in an increasingly competitive pharmacy environment with growth in both sales and earnings during the half year. The Group is confident that its branded pharmaceutical products will continue to perform well with a range of new products under development.
For
per
sona
l use
onl
y
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES Page 4 A.B.N. 91 075 170 151
Obesity and weight management Earnings from the Group’s obesity and weight management segment grew to $1.1 million for the half year, compared to $0.8 million for the prior corresponding period. This segment generated $6.9 million in sales from continuing operations, a decrease of 4% compared to the prior corresponding period. Notably, despite the decline in revenue the earnings generated from this segment grew materially under this streamlined model as efficiencies in the business were increasingly realised and the product portfolio was rationalised to maximise returns. This trend in margin expansion is expected to continue into the second half of the 2017 financial year. The Impromy brand continues to experience growth in distribution levels and the directors expect to see strong growth in both sales and earnings from this brand over the coming years as both new products and new distribution come on line. Europe The Group’s European segment generated $0.9 million in sales, a decrease of $1.3 million from the prior corresponding period. This decrease was caused by a combination of a weaker economy throughout the United Kingdom (and the associated fall in foreign currency rates) together with supply issues during the first half, which have now been resolved. Specialty products The Group’s specialty products segment generated nominal sales for the period. Audit Status This report is based on accounts which have been reviewed. The accounts are not subject to any dispute, emphasis of matter or qualification.
---------- About Probiotec Probiotec Limited is a brand owner, manufacturer, marketer and distributor of a range of prescription and over-the-counter (OTC) pharmaceuticals, complementary medicines, consumer health products and specialty ingredients. The company owns four manufacturing facilities in Australia and Ireland and distributes its products both domestically and internationally. Products are manufactured by Probiotec for both its own products and on behalf of others, including major international pharmaceutical companies. Further details about Probiotec are available at www.probiotec.com.au For further details, please contact: Wesley Stringer Geoff Pearce Managing Director Chairman 0412 647 200 (03) 9278 7555 F
or p
erso
nal u
se o
nly
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES
A.C.N. 075 170 151
FINANCIAL REPORT
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
For
per
sona
l use
onl
y
INDEX TO FINANCIAL REPORT FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Section Page
DIRECTORS' REPORT………………………………………………………………………………………………
1
AUDITOR'S INDEPENDENCE DECLARATION………………………………………………………………
4
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME…….
5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION………………………..…………………..
6
CONSOLIDATED STATEMENT ON CHANGES IN EQUITY……………………..………………………
7
CONSOLIDATED STATEMENT OF CASH FLOWS…….……………………………………..……………
8
NOTES TO THE FINANCIAL STATEMENTS…………………………………………………………………
9
DIRECTORS’ DECLARATION…………………………………………………………………………………….
14
INDEPENDENT AUDITOR’S REVIEW REPORT……………………..……………………………………
15
For
per
sona
l use
onl
y
Page 1
DIRECTORS’ REPORT
The Directors submit the financial report of Probiotec Limited (Company) and its controlled entities (Group) for the half-year ended 31 December 2016. Directors The names of the directors in office at any time during or since the end of the half-year are: Geoffrey Ronald Pearce Chairman (appointed 28 November 2016) Graham Morton Non-Executive Director (appointed 19 October 2016) Wesley Stringer Managing Director Robert Maxwell Johnston Chairman (resigned 28 November 2016) Graham Harry Buckeridge Non-Executive Director (resigned 28 November 2016) Richard David Kuo Non-Executive Director (resigned 28 November 2016) Robin Tedder Non-Executive Director (resigned 26 August 2016) Directors have been in office since the start of the half-year reporting period to the date of this report unless otherwise stated. Company Secretary The company secretary to the date of this financial report was: Jared Stringer The company secretary has been in office since the start of the half-year reporting period to the date of this report. Dividends
A dividend of 0.5 cents per fully paid ordinary share has been declared for the half year ended 31 December 2016 (2015: $nil). A dividend of 1.5 cents per fully paid ordinary share was paid during the half year ended 31 December 2016, being the final dividend relating to the financial year ended 30 June 2016. No dividend was paid or declared during the half-year ended 31 December 2015. Review of operations The Group’s net operating profit after tax from continuing activities attributable to members for the half year was $0.8 million compared to a profit of $0.3 million for the prior corresponding period. During the half year, the Company incurred $0.3 million in non-recurring costs. Excluding these costs, the net profit after tax from continuing activities grew by 151%, which represents a significant improvement over the prior corresponding period. For the half year ended 31 December 2016, the Group’s sales revenue from continuing operations decreased by 4% to $28.6 million. This decrease in sales was primarily due to the rationalisation of several low margin products within the contract manufacturing segment together with supply disruptions within our Europe segment. Excluding these impacts, sales revenue was consistent with the prior corresponding period. The Group’s cash flow from operations grew by 171% to $0.8 million during the half year compared to the prior corresponding period.
For
per
sona
l use
onl
y
Page 2
The result for the half year continues the ongoing improvement of the Group under its now streamlined
business model. The rationalisation of several low margin product lines and manufacturing contracts
negatively impacted on sales revenue but these contracts have been replaced with more attractive
contracts and products, which is resulting in increasing earnings and improving margins to the Group,
which we expect to continue.
The Group now has a clear focus on the core pillars of the business into the future, being:
Contract manufacturing & intellectual property development;
Branded pharmaceutical products; and
Obesity and health products.
Pleasingly, despite the operations of the Group remaining seasonally weighted to the second half of the
financial year, due in part to the significant influence of Cold and Flu products and peak sales of weight
loss supplements occurring in the January to April period, a profitable and improved result for the first half
was still achieved.
Contract Manufacturing The Group’s contract manufacturing segment generated $16.8 million in sales, broadly in line with the prior corresponding period. The Group is continuing to experience solid demand in contract manufacturing and has a strong order book for the balance of the 2017 financial year. The Group’s capabilities are becoming increasingly well recognised in the market and the Group is experiencing an increased number of sales inquiries, leads and contracted work. The demand for the Group’s manufacturing services and innovative consumer products continues to underpin strong orders for this segment and this is expected to contribute to further growth in the second half of this financial year. The first of the new contract manufacturing contracts announced in March 2016 has now come on line with first orders delivered in December 2016. The balance of the new products will continue to come on line progressively over the balance of this financial year. Intellectual Property development The Group continues to invest in the development of its intellectual property with over one third of its contract manufacturing sales underpinned by Probiotec intellectual property. This intellectual property continues to deliver increasing sales levels with a high level of security. The Group is also pleased to be continuing to expand our research and development relationships with Griffith University, CSIRO and Adelaide University. Branded Pharmaceuticals The Group’s branded pharmaceuticals segment generated $4.0 million in sales, an increase of 4% compared to the prior corresponding period. Under the distribution agreement with the Valeant Group, the Group’s established product ranges performed well in an increasingly competitive pharmacy environment with growth in both sales and earnings during the half year. The Group is confident that its branded pharmaceutical products will continue to perform well with a range of new products under development.
For
per
sona
l use
onl
y
Page 3
Obesity and weight management Earnings from the Group’s obesity and weight management segment grew to $1.1 million for the half year, compared to $0.8 million for the prior corresponding period. This segment generated $6.9 million in sales from continuing operations, a decrease of 4% compared to the prior corresponding period. Notably, despite the decline in revenue the earnings generated from this segment grew materially under this streamlined model as efficiencies in the business were increasingly realised and the product portfolio was rationalised to maximise returns. The Impromy brand continues to experience growth in distribution levels and the directors expect to see strong growth in both sales and earnings from this brand over the coming years as both new products and new distribution come on line. Europe The Group’s European segment generated $0.9 million in sales, a decrease of $1.3 million from the prior corresponding period. This decrease was caused by a combination of a weaker economy throughout the United Kingdom (and the associated fall in foreign currency rates) together with supply issues during the first half, which have now been resolved. Specialty products The Group’s specialty products segment generated nominal sales for the period. Significant Changes in State of Affairs There was no other significant change in the state of affairs of the Group other than that referred to in the financial statements or notes thereto and elsewhere in the financial report of the Company and its controlled entities for the half-year ended 31 December 2016.
Significant After Balance Date Events There has not been any matters or circumstances that have arisen since the end of the half-year that have significantly affected or may significantly affect, the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in half-year subsequent to the end of the half-year. Auditor's Independence Declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4 of this report. Signed in accordance with a resolution of the Board of Directors.
…………………………………………….
Director Wesley Stringer Signed at Melbourne this 23rd day of February 2017
For
per
sona
l use
onl
y
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.
Auditor’s Independence Declaration under Section 307C of the Corporations Act
2001 to the Members of Probiotec Limited and its Controlled Entities
I declare that, to the best of my knowledge and belief, during the half-year ended 31 December 2016 there has been: (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in
relation to the review, and
(ii) no contraventions of any applicable code of professional conduct in relation to the review.
ShineWing Australia Chartered Accountants Rami Eltchelebi Partner Melbourne, 23 February 2017
Page 4
For
per
sona
l use
onl
y
Half-year Half-year
ended ended
31 Dec 2016 31 Dec 2015
$ $
Sales revenue from continuing operations 28,616,769 29,931,913
Cost of goods sold (17,861,739) (19,088,046)
Gross profit 10,755,030 10,843,867
Other income 4 31,024 42,702
Warehousing and distribution expenses (2,254,545) (2,436,770)
Sales and marketing expenses (3,294,137) (3,586,957)
Finance costs (185,311) (397,635)
Administration and other expenses 5 (4,351,544) (4,203,585)
Profit / (loss) from continuing activities before income tax expense 700,517 261,622
Income tax benefit relating to continuing activities (155,177) 39,133
Profit / (loss) for the period attributable to members of the parent
entity from continuing activities545,340 300,755
Profit / (loss) from discontinued operations 6 (125,580) 1,759,771
Profit / (loss) for the period attributable to members of the parent
entity419,760 2,060,526
Other Comprehensive income
Items that will not be reclassified subsequently to profit or loss:
Foreign currency translation differences (11,796) 33,689
Other comprehensive income for the half-year, net of tax (11,796) 33,689
Total comprehensive income for the half-year 407,964 2,094,215
Total comprehensive income for the half-year attributable to
members of the parent entity407,964 2,094,215
Basic (cents per share) 0.79 3.89
Diluted (cents per share) 0.79 3.89
Basic (cents per share) 1.03 0.57
Diluted (cents per share) 1.03 0.57
PROBIOTEC LIMITED
A.C.N. 075 170 151
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE INCOME
Note
Earnings per share for profit attributable to members of the parent entity
The accompanying notes form part of these financial statements
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Consolidated
Earnings per share for profit from continuing activities attributable to members of the parent entity
Page 5
For
per
sona
l use
onl
y
Note 31 Dec 2016 30 Jun 2016
$ $
Current Assets
Cash and cash equivalents 141,203 505,622
Trade and other receivables 9,325,312 8,695,008
Inventories 9,357,426 9,118,207
Assets held for sale 159,536 -
Other current assets 489,864 290,618
Total Current Assets 19,473,341 18,609,455
Non-Current Assets
Property, plant and equipment 26,833,123 26,726,419
Deferred tax assets 5,093,088 5,020,844
Intangible assets 18,886,821 18,816,609
Total Non-Current Assets 50,813,032 50,563,872
Total Assets 70,286,373 69,173,327
Current Liabilities
Trade and other payables 9,870,406 10,099,892
Short-term borrowings 8,269,624 6,444,552
Short-term provisions 877,684 865,586
Total Current Liabilities 19,017,714 17,410,030
Non-Current Liabilities
Long-term borrowings 572,025 1,013,141
Deferred tax liabilities 6,783,771 6,555,700
Long-term provisions 664,152 559,770
Total Non-Current Liabilities 8,019,948 8,128,611
Total Liabilities 27,037,662 25,538,641
Net Assets 43,248,711 43,634,686
Equity
Contributed equity 3 33,686,519 33,686,519
Foreign Currency Translation Reserve (403,762) (391,968)
Share Based Payments Reserve 18,931 18,933
Asset Revaluation Reserve 4,320,595 4,320,595
Retained earnings 5,626,428 6,000,607
Total Equity 43,248,711 43,634,686
The accompanying notes form part of these financial statements
PROBIOTEC LIMITED
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2016
A.C.N. 075 170 151
Consolidated
Page 6
For
per
sona
l use
onl
y
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Ordinary
Share Retained
Capital Reserves Earnings Total
$ $ $ $
Balance as at 1 July 2015 33,686,519 3,957,494 1,987,142 39,631,155
Total comprehensive income for the half-year
Profit for the half-year - - 2,060,526 2,060,526
Other comprehensive income - 33,689 - 33,689
Total comprehensive income for the half-year - 33,689 2,060,526 2,094,215
Transactions with owners in their capacity as owners
Balance as at 31 December 2015 33,686,519 3,991,183 4,047,668 41,725,370
Total comprehensive income for the half-year
Profit for the half-year - - 1,952,939 1,952,939
Other comprehensive income - (43,623) - (43,623)
Total comprehensive income for the half-year - (43,623) 1,952,939 1,909,316
Transactions with owners in their capacity as owners
Balance as at 1 July 2016 33,686,519 3,947,560 6,000,607 43,634,686
Total comprehensive income for the half-year
Profit for the half-year - - 419,760 419,760
Other comprehensive income - (11,796) - (11,796)
Total comprehensive income for the half-year - (11,796) 419,760 407,964
Transactions with owners in their capacity as owners
Dividends paid or provided for - - (793,939) (793,939)
Balance as at 31 December 2016 33,686,519 3,935,764 5,626,428 43,248,711
PROBIOTEC LIMITED
A.C.N. 075 170 151
The accompanying notes form part of these financial statements
Page 7
For
per
sona
l use
onl
y
Half-year Half-year
ended ended
31 Dec 2016 31 Dec 2015
Note $ $
Cash Flows From Operating Activities
Receipts from customers 27,496,601 29,117,924
Payments to suppliers and employees (26,560,782) (28,442,950)
Interest and other costs of finance paid (185,311) (397,635)
Net cash provided by operating activities 750,508 277,339
Cash Flows From Investing Activities
Payments for property, plant and equipment (1,254,583) (1,534,294)
Proceeds from sale of property, plant and equipment - 6,825,000
Payments for intangible assets (450,361) (409,442)
Net cash (used in) / provided by investing activities (1,704,944) 4,881,264
Cash Flows From Financing Activities
Dividends Paid (793,939) -
Proceeds from borrowings 2,000,000 670,557
Repayment of borrowings (616,044) (5,825,942)
Net cash (used in) / provided by financing activities 590,017 (5,155,385)
Net increase / (decrease) in cash and cash equivalents (364,419) 3,218
Cash and cash equivalents at the beginning of the period 505,622 120,296
Cash and cash equivalents at the end of the period 141,203 123,514
The accompanying notes form part of these financial statements
PROBIOTEC LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
A.C.N. 075 170 151
Consolidated
Page 8
For
per
sona
l use
onl
y
1
(a)
(b)
31 Dec 2016 31 Dec 2015
2 DIVIDENDS $ $
Ordinary Shares
Dividends paid for during the half-year 793,939 -
Dividends not recognised at the end of the half-year 264,647 -
3 CONTRIBUTED EQUITY
Balance at 1 July 2016 33,686,519
Issue of shares -
Cancellation of shares -
Share issue costs -
Balance at 31 December 2016 33,686,519
4 OTHER INCOME
31 Dec 2016 31 Dec 2015
Other income for the half-year comprised: $ $
Government grants - 2,016
Other income 31,024 40,686
31,024 42,702
5 ADMINISTRATION & OTHER EXPENSES
Administration & other expenses comprises:
289,608 -
Insurance 174,712 193,919
Employee costs 2,422,765 2,855,966
Office expenses 204,219 204,946
Compliance costs 97,804 88,538
Other expenses 1,162,436 860,216
4,351,544 4,203,585
These interim financial statements were authorised for issue on 23 February 2017.
The interim dividend was declared on 23 February 2017 and is payable on 21 April 2017 with a record date for determining
entitlements to the dividend of 22 March 2017.
ACCOUNTING POLICIES
PROBIOTEC LIMITEDA.C.N. 075 170 151
BASIS OF FINANCIAL REPORT PREPARATION
NOTES TO THE FINANCIAL STATEMENTS
This interim financial report is intended to provide users with an update on the latest annual financial statements of Probiotec
Limited and its controlled entities (referred to as the “consolidated group” or “group”). As such, it does not contain information that
represents relatively insignificant changes occurring during the half-year within the Group. It is therefore recommended that this
financial report be read in conjunction with the annual financial statements of the Group for the year ended 30 June 2016, together
with any public announcements made during the following half-year.
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
These general purpose interim financial statements for half-year reporting period ended 31 December 2016 have been prepared in
accordance with requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134: Interim Financial
Reporting. The Group is a for-profit entity for financial reporting purposes under Australian Accounting Standards.
Reconciliation of fully paid ordinary shares
The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the
most recent annual financial statements. The Group has considered the implications of new or amended Accounting Standards, but
determined that their application to the financial statements is either not relevant or not material.
Since the end of the half-year the directors have declared an interim dividend of 0.5 cents per fully paid ordinary share.
Non recurring legal costs associated with dispute between former directors, the Company and
shareholders
Page 9
For
per
sona
l use
onl
y
PROBIOTEC LIMITEDA.C.N. 075 170 151
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
6 DISCONTINUED OPERATIONS
7 SUBSEQUENT EVENTS
8 FAIR VALUE MEASUREMENTS
(a)
(b)
Carrying
Amount Fair Value
Carrying
Amount Fair Value
Financial assets:
Cash and cash equivalents 141,203 141,203 505,622 505,622
Trade and other receivables 9,815,176 9,815,176 8,695,008 8,695,008
9,956,379 9,956,379 9,200,630 9,200,630
Financial liabilities:
Trade and other payables 9,870,406 9,870,406 10,099,892 10,099,892
Borrowings 8,841,649 8,841,649 7,457,693 7,457,693
18,712,055 18,712,055 17,557,585 17,557,585
(c)
Recurring fair value measurements Level 1 Level 2 Level 3 Total
Non-financial assets $ $ $ $
Freehold land - 3,800,000 - 3,800,000
Freehold buildings - 8,869,000 - 8,869,000
Total non-financial assets recognised at fair value
on a recurring basis - 12,669,000 - 12,669,000
Total non-financial assets recognised at fair value - 12,669,000 - 12,669,000
Each valuation technique requires inputs that reflect the assumptions that buyers and sellers would use when pricing the asset or
liability, including assumptions about risks. When selecting a valuation technique, the Group gives priority to those techniques that
maximise the use of observable inputs and minimise the use of unobservable inputs. Inputs that are developed using market data
(such as publicly available information on actual transactions) and reflect the assumptions that buyers and sellers would generally
use when pricing the asset or liability are considered observable, whereas inputs for which market data is not available and
therefore are developed using the best information available about such assumptions are considered unobservable.
Financial Instruments
31 December 2016
31-Dec-16 30-Jun-16
The following tables provide the fair values of the Group's assets and liabilities measured and recognised on a recurring basis after
initial recognition and their categorisation within the fair value heirarchy:
During the half year, the Group agreed the sale of the remainder of its Irish manufacturing assets and also finalised all obligations in
regards to the sale of the Group's former ADP Protein Plant. These actions resulted in a loss of $125,580 being incurred during the
half year ended 31 December 2016. The Irish manufacturing assets are classified as held for sale as at 31 December 2016 with a
carrying value of $159,536.
The following table represents a comparison between the carrying amounts and fair values of financial assets and liabilities:
In the absence of an active market for an identical asset or liability, the Group selects and uses one or more valuation techniques to
measure the fair value of the asset or liability. The Group selects a valuation technique that is appropriate in the circumstances and
for which sufficient data is available to measure fair value. The availability of sufficient and relevant data primarily depends on the
specific characteristics of the asset or liability being measured. The valuation techniques selected by the Group are consistent with
one or more of the following valuation approaches:
- Market approach : valuation techniques that use prices and other relevant information generated by market transactions for
identical or similar assets or liabilities.
There has not been any matter or circumstance that has arisen since the end of the half year that has significantly affected or may
significantly affect, the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs
after the half year.
Manufacturing assets
- Income approach : valuation techniques that convert estimated future cash flows or income and expenses into a single discounted
present value.
- Cost approach : valuation techniques that reflect the current replacement cost of an asset at its current service capacity.
Valuation Techniques
Page 10
For
per
sona
l use
onl
y
PROBIOTEC LIMITEDA.C.N. 075 170 151
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Recurring fair value measurements Level 1 Level 2 Level 3 Total
Non-financial assets $ $ $ $
Freehold land - 3,800,000 - 3,800,000
Freehold buildings - 9,059,000 - 9,059,000
Total non-financial assets recognised at fair value
on a recurring basis - 12,859,000 - 12,859,000
(d) Valuation techniques and inputs used to measure Level 2 fair values
Description
Fair Value at
31 Dec 2016
Non-financial assets
Freehold land * 3,800,000
Freehold buildings 8,869,000
12,669,000
Price per square metre ($140 -
$160 psm);
* The fair value of freehold land and buildings is determined at least every three years based on valuations by an independent
valuer. At the end of each intervening period, the directors review the independent valuation and, when appropriate, update the fair
value measurement to reflect current market conditions using a range of valuation techniques, including recent observable market
data.
30 June 2016
Valuation technique(s)
Market approach using recent
observable market data for
similar properties;
Market approach using recent
observable market data for
similar properties;
Price per square metre ($140 -
$160 psm);
Inputs used
Page 11
For
per
sona
l use
onl
y
9 SEGMENT INFORMATION
(a)
Business Segments Segment name
Segment 1 Branded Pharmaceuticals
Segment 2 Contract manufacturing
Segment 3 Obesity and weight management
Segment 4 Europe
Segment 5 Specialty products
Half year ended 31 December 2016 Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Consolidated
($'000) ($'000) ($'000) ($'000) ($'000) ($'000)
- - 7 - - 7
3,972 16,823 6,872 872 78 28,617
Total segmental revenue 3,972 16,823 6,879 872 78 28,624
- - - (119) - (119)
768 898 1,108 (54) 28 2,747
Total segmental profit 768 898 1,108 (173) 28 2,628
Interest (185)
(1,868)
(2,053)
701
(126)
575
Income tax expense (155)
Net profit after tax 420
Total unallocated income / (expense)
Revenue from discontinued operations
The specialty products segment is involved in the sale of human and animal nutrition products, incorporating the sale of ingredients and
additives for use in the pharmaceutical and food industries. This segment previously incorporates the Group's ADP Protein Plant, which
was sold in September 2015.
Description of segments
Management has determined the operating segments based on reports reviewed by the executive management committee for making
strategic decision. The executive management committee comprises the chief executive officer, chief financial officer and divisional
managers. The committee monitors the business based on product and geographic factors and have identified 5 reportable segments.
Branded Pharmaceuticals
The branded pharmaceuticals segment involves the sale of branded pharmaceutical products (both owned and licensed brands)
predominantly throughout Australia and also to selected South East Asian countries.
Contract manufacture
Specialty products
The contract manufacturing segment involves the contract manufacturing of pharmaceutical, food and animal nutrition products on
behalf of domestic and international pharmaceutical and food companies.
The obesity and weight management segment is involved in the manufacture and sale of a range of products across a number of
channels including FMCG, pharmacy, health food stores and online. The majority of sales of this segment are made domestically with a
small portion being sold to New Zealand and several other countries. This segment includes the Celebrity Slim brand along with the
Impromy program.
Europe
The Europe segment is involved in the sale of products within Europe. This segment operates a sales and marketing office in the United
Kingdom with the majority of sales revenue generated from the United Kingdom and Ireland.
Revenue from continuing operations
Segmental profit / (loss) from continuing operations
Segmental profit / (loss) from discontinued operations
Profit from continuing activities before income tax
PROBIOTEC LIMITEDA.C.N. 075 170 151
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Unallocated corporate expenses
Loss from discontinued operations before income tax
Obesity and weight management
Page 12
For
per
sona
l use
onl
y
Half year ended 31 December 2015 Segment 1 Segment 2 Segment 3 Segment 4 Segment 5 Consolidated
($ '000) ($ '000) ($ '000) ($ '000) ($ '000) ($ '000)
- - 212 175 - 387
3,831 16,917 7,162 2,004 18 29,932
Total segmental revenue 3,831 16,917 7,374 2,179 18 30,319
- - 13 (293) 2,040 1,760
299 547 767 392 - 2,005
Total segmental profit 299 547 780 99 2,040 3,765
Interest (398)
(1,345)
(1,743)
262
1,760
2,022
Income tax expense 39
Net profit after tax 2,061
(b) Reconciliation of segmental revenue to total revenue 2016 2015
$ $
Segmental revenue 28,616,769 29,931,913
Other income 31,024 42,702
Total revenue 28,647,793 29,974,615
(c) Segment revenue
(d) Segment profit
Loss from discontinued operations before income tax
Revenue from continuing operations
NOTES TO THE FINANCIAL STATEMENTS
FOR THE HALF-YEAR ENDED 31 DECEMBER 2016
Sales between segments (if they occur) are carried out at arm's length and are eliminated on consolidation. The revenue from external
parties reported to the board is measured in a manner consistent with that in the statement of comprehensive income.
A.C.N. 075 170 151
Revenues from external customers are derived from the sale of products on both a wholesale and business-to-business basis from each
of the business segments outlined earlier in this note. A breakdown of revenue is provided in the tables above.
Revenue from discontinued operations
Segmental profit / (loss) from discontinued operations
The board assesses the performance of the operating segments based on a measure of adjusted EBIT. This measurement basis excludes
the effects of non-recurring expenditure from the operating segments such as restructuring costs, legal expenses and goodwill
impairments when the impairment is the result of an isolated, non-recurring event. This measurement basis also exlcudes the effects of
any non-recurring items of revenue or income. Interest income and expenditure are not allocated to segments, as this type of activity is
driven by the central treasury function, which manages the cash position of the group.
Segmental profit from continuing operations
Unallocated corporate expenses
Total unallocated income / (expense)
Profit from continuing activities before income tax
PROBIOTEC LIMITED
Page 13
For
per
sona
l use
onl
y
Page 14
PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES
A.C.N. 075 170 151
DIRECTORS’ DECLARATION
In accordance with a resolution of the directors of Probiotec Limited, the directors of the
company declare that:
The financial statements and notes are in accordance with the Corporations Act 2001,
including:
a. complying with Accounting Standard AASB 134: Interim Financial Reporting; and
b. giving a true and fair view of the consolidated entity’s financial position as at 31
December 2016 and of its performance for the half-year ended on that date.
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.
………………………………………………….. Director Wesley Stringer Dated at Melbourne this 23rd day of February 2017
For
per
sona
l use
onl
y
ShineWing Australia ABN 39 533 589 331. Liability limited by a scheme approved under Professional Standards Legislation. ShineWing Australia is an independent member of ShineWing International Limited – members in principal cities throughout the world.
INDEPENDENT AUDITOR’S REVIEW REPORT
TO THE MEMBERS OF PROBIOTEC LIMITED AND ITS CONTROLLED ENTITIES
Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Probiotec Limited and its Controlled Entities which comprises the consolidated statement of financial position as at 31 December 2016, and the consolidated statement of profit or loss and comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and explanatory information and the directors’ declaration. Directors’ Responsibility for the Half-Year Financial Report The directors of Probiotec Limited and its Controlled Entities(“the company”) are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard ASRE 2410: Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the company’s financial position as at 31 December 2016 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134: Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Probiotec Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence
In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Probiotec Limited, would be in the same terms of provided to the directors as at the time of this auditor’s review report.
Page 15
For
per
sona
l use
onl
y
,
Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Probiotec Limited and its Controlled Entities is not in accordance with the Corporations Act 2001 including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its
performance for the half-year ended on that date; and (ii) complying with AASB 134: Interim Financial Reporting and the Corporations Regulations 2001.
ShineWing Australia Chartered Accountants Rami Eltchelebi Partner Melbourne, 23 February 2017
Page 16
For
per
sona
l use
onl
y