Cenvet Group Holdings Limited ACN: 092 375 221
CONTENTS Letter from the Chairman
3
Business Overview
14
Board of Directors
6
Financial Report
24
Directors Report
8
End Notes
62
Industry Overview
10
Corporate Directory
63
LETTER FROM THE CHAIRMAN part of this year’s annual report. Our 2015 results reflect a positive outcome for all interested parties and one that will allow us to move forward at a rapid pace in the short to medium term. In addition to improving our overall fiscal performance this year, the company offered shareholders and new investors the opportunity to purchase Cenvet shares in March 2015. Over 1,800,000 shares were purchased by existing shareholders and 74 new investors with the majority of the new shareholders being veterinarians (or their related entities). The response to the share offer was tremendous and further demonstrates the level of investor confidence in our customer/shareholder co-operative model as we continue to widen our Dear Shareholder,
“Consistent with the board’s expectations and targets.” That’s probably the best way to describe Cenvet Group Holdings Ltd’s (“Cenvet”) impressive performance this year. Throughout 2015, our group has built considerable momentum as we continue to increase our share of the animal health sector and
shareholder base. Cenvet’s growth in recent years has created an immense amount of energy within the group as we totally rejuvenate our business portfolio with the full support of management and our employees. To ensure we remain on track and continue to deliver significant results against our objectives, the Board of Directors will be reviewing our current strategic plan in early 2016 to ensure Cenvet is well resourced
build a “best in class” business for all stakeholders.
for the future and has a strong foundation to support
In an industry with an annual forecasted growth rate
years.
of approximately 2.3% in 2015, Cenvet has increased sales revenue by over 10% to $106,121,811. At the same time, the group’s profit before income tax has more than doubled over the same period to $1,012,610. During the course of this financial year, the directors and executive team have continued to reduce expenses, strengthen the company’s balance sheet and deliver on a range of initiatives, which the
the projected growth and expansion over the next few
It’s exciting times for Cenvet and the directors would like to take this opportunity to thank our shareholders and valued customers for their on-going support. On behalf of the Cenvet directors, I am proud to present you the 2015 Annual Report for Cenvet Group Holdings Ltd. Your Faithfully
board believes will form the basis for even better performance outcomes in 2016. A detailed analysis of Cenvet’s results and achievements can be found in the directors’ report
Lionel Bloom
and the company’s financial accounts which from
Chairman
Cenvet Group Holdings Annual Report 2015
3
VISION & MISSION The Cenvet Group aspires to have the strength and resources of a large company with the sensitivity, flexibility and simplicity of a small business. Our strategic goals are TO • Achieve a sustainable business with revenue of $150,000,000 by 2017. • Continue to improve profitability. • Widen our shareholder base for the benefit of all stakeholders. We will achieve our goal by working as one team to grow a network of diversified businesses in multiple business channels.
$150,000,000
ACHIEVe A SUSTAINABLE business with revenue oF $150,000,000 BY 2017
4
IMPLEMENTING STRATEGIC GOALS The Board intends on achieving its strategic goals by
EXPANDING THE CO-OPERATIVE SHAREHOLDER MODEL Continuing to develop and roll out a co-operative shareholder model where the company’s future growth and success is shared with customers and employee shareholders.
BUSINESS EXPANSION Further expanding our business in the animal health sector, leveraging its core strengths across multiple markets, capitalizing on potential growth opportunities through acquisitions and mitigating the risk of a potential downturn in a single market.
WIDENING THE SHAREHOLDER BASE The goal is to widen the shareholder base to a minimum of 400 shareholders.
Cenvet Group Holdings Annual Report 2015
5
BOARD OF DIRECTORS
Mr Lionel Bloom
6
B.Com, GAICD
Dr Sam Haynes
BSc BVMS GCM (VP)
Chairman and CEO
Non-executive Director
Mr Lionel Bloom commenced with the Cenvet Group in 1984. He has a commerce degree from the University of New South Wales and has held the position of Chairman and CEO of the Cenvet Group for the past 12 years. He has a proven track record in business and brings to the Cenvet Group a high level of expertise in an number of areas including business management, marketing, supply chain management and stock control. Lionel is a member and graduate of the Australian Institute of Company Directors.
Dr Sam Haynes is the founder of the Sydney Animal Hospitals Group. He brings to the Cenvet Group Board a deep understanding of the changing needs of veterinarians and extensive veterinary hospital management experience. Sam is a member of the Australian Veterinary Association (AVA). He has held various committee and board roles with the AVA in the past, including being elected president of the NSW division of the AVA in 1997 and as a committee member of the ASAVA between 1999 and 2001 and the AVA board between 1996 and 1998.
Mr Michael Quirk
Mr Jason Phillips
BSc. Hns. Mech Eng, MBA
BCom, Grad Dip App Fin, Dip FS(FP), FCA
Non-executive Director
Non-executive Director
Mr Michael Quirk brings extensive business management experience to the Cenvet Group Board. Michael’s business experience ranges from working in a Divisional General Manager role for a multi-national construction products company to acquiring and developing a chain of childcare centres in Sydney in anticipation of an initial public offer (IPO) on the Australian Securities Exchange. In 2004, prior to an IPO, an offer to acquire the chain by a large listed childcare company was accepted. Following the sale of his chain of child care centres, Michael established Petcorp Pty Ltd in 2005. Petcorp is the owner and operator of the Vet Friends veterinary hospitals group.
Mr Jason Phillips was appointed as a non-executive director on the 22nd October 2015. Mr Jason Phillips brings extensive financial management and corporate advisory experience to the Cenvet Group Board. As a Chartered Accountant with over 25 years of public practice and commercial experience, Jason has held senior roles in some of Australia’s leading accounting firms and financial institutions. In these roles, Mr Phillips has advised clients on taxation, business valuation and corporate finance related matters. Jason is a Fellow and former Chairman (NSW State Council) of the Institute of Chartered Accountants Australia and New Zealand. Cenvet Group Holdings Annual Report 2015
The Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. Company Secretary The following person held the position of company secretary at the end of the financial year:
Danny Putica B.Com, CPA, MAICD Mr Danny Putica commenced with the Cenvet Group in 1995. He is currently the Head of Finance for the Cenvet Group. He has a Commerce degree from the University of Canberra and the University of Technology in Sydney. Danny has a high level of expertise in financial management and corporate governance. Danny is a member of the Certified Practising Accountants of Australia and the Australian Institute of Company Directors.
Meetings of Directors During the financial year, 10 meetings of directors (including committees of directors) were held. Attendance by each director during the year was as follows:
DIRECTOR MEETINGS
NUMBER ELIGIBLE TO ATTEND
NUMBER ATTENDED
MR LIONEL BLOOM
10
10
MR SAM HAYNES
10
10
MR MICHAEL QUIRK
10
10
Cenvet Group Holdings Annual Report 2015
7
DIRECTORS'
REPORT Review of Operations
2015 Highlights:
The directors present the report for the consolidated group
Our continuous operational improvement programme has
for the financial year ending 30 June 2015.
produced a further expense-to-sales ratio decrease of over
•
Total Revenue increased by 10.08% over the previous year to close at $106,121,811 for the full year.
•
Profit before tax and non-cash depreciation was $2,118,439 representing a further increase on last year's result of 25.18%.
•
The group’s profit for the financial year before providing for income tax amounted to $1,012,610. This represents an increase of 106%.
In an established market, the directors are extremely pleased with the results for the financial year. All indicators are in-line with our expectations for the business as the Cenvet group continues to execute the board’s strategic plan and increase market share in all sectors of the animal health and pet retail market. The consolidated group’s profit for the financial year (after providing for income tax) amounted to $556,959 and was up
0.82% over the prior year with direct costs being capped at a rate less than the overall increase in sales revenue. The profitability of the company has improved significantly in 2015 and continues to validate the fiscal disciplines being applied to all sectors of the business by the board. Net assets increased from $8,870,554 to $9,225,133 in 2015. This increase was a result of company profits generated in 2015 and should continue in 2016 as the company’s sales revenue is maintained at a growth rate well in excess of the forecasted industry rate. Based on retained profits and the financial performance of the company in 2015, the directors declared a fully franked ordinary interim dividend of 1.8 cents per share in November 2014. The dividend was paid in January 2015.
Significant Changes in the State of Affairs No significant changes in the group’s state of affairs occurred during the financial year.
a further 93% on the prior year.
Principal Activities
Based on current performance, the directors anticipate
The principal activities of the group during the financial year
further increases in profitability as the group realises cost
were the supply of veterinary pharmaceutical products, pet
efficiencies from improved resource management and
retail products and animal diets to veterinarians and pet
exponential sales growth over the short to medium term.
retailers throughout Australia.
A review of the operations of the company during the
No significant change in the nature of these activities
financial year and the results of those operations are as
occurred during the year.
follows: The directors and management team have continued to focus on streamlining the group’s operations, strengthening the company’s balance sheet and expanding the shareholder/customer model. The board’s priorities have continued to deliver noteworthy results in all areas of the business.
8
Cenvet Group Holdings Annual Report 2015
Events Subsequent to the End of the Reporting Period
Dividends
In March 2015, the company offered both existing
The directors declared a fully franked ordinary interim
shareholders and new investors the opportunity to purchase shares in Cenvet Group Holdings Ltd as part of an Information Memorandum (IM) which closed on the 30th
dividend of 1.8 cents per share in November 2014 which was paid in January 2015.
June 2015. The offer price was 63c per share. As a result,
Options
over 1,800,000 shares were purchased post year end by
No options over issued shares or interests in the company or
existing shareholders and 74 new shareholders. The majority of our new shareholders are veterinarians (or their related entities) and the total number of shareholders is now 231, further enhancing our shareholder/customer model. On 17 July 2015, the group acquired two veterinary practices for $2,500,000. The company is currently using these practices to test a strategy and concept which it expects to bring to market in late 2016. No other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group, the results of those operations, or the state of affairs of the group in future
a controlled entity were granted during or since the end of the financial year and there were no options outstanding at the date of this report.
Indemnification of Officers The directors and officers of the company have been given indemnities by the company and insurance premiums have been paid since the end of the financial year for directors and officers insurance.
Proceedings on Behalf of The Company In January 2014, an individual applied for leave of court to bring proceedings against one of the group’s companies
financial years.
with respect to a lease for leased premises that expired in
Likely Developments and Expected Results of Operations
against the subsidiary company. In April 2015, the directors
Likely developments in the operations of the group and the expected results of those operations in future financial years have not been included in this report, as the inclusion of such information is likely to result in unreasonable prejudice to the group.
April 2013. The individual was claiming substantial damages agreed to an out of court settlement of $5,000 to resolve the matter. No other person has applied for leave of court to bring proceedings on behalf of the group or intervene in any proceedings to which the group is a party for the purpose of taking responsibility on behalf of the group for all or any
Environmental Regulation
part of those proceedings.
The group’s operations are not regulated by any significant
The group was not a party to any such proceedings during
environmental regulation under a law of the Commonwealth
the year.
or of a state or territory.
Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under s 307C of the Corporations Act 2001 is set out on page 59. This report is signed in accordance with a resolution of the Board of Directors:
Director Director Lionel Bloom Sam Haynes Dated this 20th day of October 2015
Cenvet Group Holdings Annual Report 2015
9
INDUSTRY OVERVIEW The Cenvet Group wholesales and distributes products to the Australian veterinary market and retail pet product sector. These markets combined (at a retail level), generate annual revenues of approximately $5.2Bn1,2 excluding pet product sales in the grocery / supermarket segment.
3.0 2.6
2.6
VETERINARY
RETAIL PET PRODUCTS
$ BILLION
2.5 2.0 1.5 1.0 0.5 0.0
The Australian veterinary market and retail pet product sector are forecast to deliver annual growth, between 2015 and 2020, or 1.8% pa. Growth of 2.2% is expected in the veterinary market in 2015-2016 and growth of 2.5% in the retail pet sector is expected in 2015-2016. Over the next five years, revenue growth in the veterinary market will be driven by higher household disposable incomes, greater pet insurance levels, greater demand for imaging and diagnostic services, pricing increases and increased vet numbers1, 2.
3.0% 2.5% 2.0%
1.8%
1.8%
1.5% 1.0% 0.5% 0.0% VETERINARY
10
RETAIL PET PRODUCTS
Cenvet Group Holdings Annual Report 2015
Importance of domestic companion animals Approximately 75% of revenue generated by the Australian veterinary market and the retail pet product sector relate to domestic companion animals or pets1,2. Australia is an attractive market for veterinary services with one of the highest incidences of pet ownership in the world. Over 60% of Australian households own a pet. Over the next 5 years, IBIS World expects pet ownership to increase. The size of the pet population and therefore the demand for the Australian veterinary and retail pet product market, is mainly affected by household property sizes and types (owned vs rented), economic conditions and household disposable income levels. IBIS World expects disposable income and household numbers to increase in 2015-2016. Several trends over the last decade have led to an increase in demand for veterinary and household pet services and products. These include: •
increased awareness of animal health issues, resulting in an increased willingness to acquire higher value elective procedures including diagnostic and surgical procedures and increased demand for new pharmaceutical products and premium pet products;
•
changing demographics and increased urbanisation leading to a shift towards medium and high density housing encouraging a move towards smaller breeds, particularly in relation to dogs. Smaller breeds of pets generally live longer and require a greater level of veterinary care as they mature; and
•
changing attitudes towards pets (ie. treating the pet as part of the family), which results in increased demand for relatively new products and services such as pampering services and traditionally human services such as burials.
As illustrated in the table below, most spending on pets relate to veterinary services (~37%) and pet food (~31%)3.
10%
5%
PET CARE PRODUCTS
37%
VETERINARY SERVICES
PET PURCHASES
17% PET CARE SERVICES
31% PET FOOD
Cenvet Group Holdings Annual Report 2015
11
Australian Veterinary Market Market Definition and Growth Factors Cenvet Group Holdings, through its wholly owned subsidiary, Cenvet Australia Pty Ltd (Cenvet Australia), generates the majority of its revenue from wholesaling and distributing products to the Australian veterinary market. The Australian veterinary market is made up of veterinary practitioners and animal hospitals. At a retail level, the industry generates approximately $2.6bn per annum1. The Australian veterinary market’s growth, in general, can be monitored via the number of registered veterinarians. As shown in the graph below, the number of registered veterinarians has grown at an average compound annual growth rate (CAGR) of 4.4% since 1991. Going forward (2013-2018), the number of registered veterinarians is anticipated to grow at 2.7% per annum1. The number of vets, veterinary nurses and other support staff is forecasted to increase from 16,120 in 2010-2011 to 18,360 in 2015-2016
2.7% C
AG R
14,000 12,000
4.4%
C AG
R
%C
4.7
AG
R
10,000 4.1% C
8,000
AG R
6,000 4,000 2,000 0 1991
2001
Market Size The wholesale Australian veterinary market sources products from pharmaceutical and animal health manufacturers and supplies these to veterinary practices and animal health hospitals. Cenvet Group management estimates that the wholesale Australian veterinary market generates revenues of approximately $600m per annum.
2013
2018
2020
it relatively difficult for new participants to enter into the market and/or achieve significant market share in the short term. There has been strong acquisitive interest in the wholesale Australian veterinary market, with a number of major industry players having been acquired by international conglomerates in the last 4 years. This has resulted in Cenvet Australia being one of the largest companies still owned
Competitors
by Australian shareholders in the local veterinary market. Cenvet Group’s management believes that this 100%
Cenvet Group management believe the wholesale Australian
Australian owned status gives Cenvet Australia a competitive
veterinary market is highly concentrated with three
advantage to retain and attract customers and is also
distributors including Cenvet Australia, accounting for
beneficial in retaining and recruiting employees.
over 80% of the market in Australia. These dynamics make
12
Cenvet Group Holdings Annual Report 2015
RETAIL PET PRODUCT MARKET Market Definition and Forecast Growth In addition to supplying the Australian veterinary market, Cenvet Group, through its wholly owned subsidiary, Dr Neil’s Pet & Equine Pty Ltd (Dr Neil’s), is a wholesaler and distributor to the retail pet product market. This is a significant strength and unique point of difference of the Cenvet Group, compared to its major competitors in the Australian veterinary market, as it allows the company to leverage its logistical capabilities, product range, expertise and sales force across two complementary and growing market segments. The retail pet product market includes businesses that sell pets, pet products and provide pet services. Businesses in the industry include pet stores and other retailers that sell pet food (e.g: convenience stores and supermarkets), animal
as well as improving general economic conditions. This will drive greater demand for more premium products and services. Growth in the retail pet product sector has been driven, and continues to be driven, by the changing attitudes towards pets, resulting in new services being introduced to the market, including pet insurance, pet pampering, burial services and alternative medicine. Additionally, there has been an increased demand for higher margins and premium products including pet food and toys.
Market Size The wholesale and distribution market to the retail pet product sector sources products from various pet product
shelters, grooming and pet boarding operations
manufacturers which are predominantly overseas, and
At a retail level, the overall retail pet product market
Cenvet Group management estimates that the size of the
supplies these to speciality pet retailers and supermarkets.
generates approximately $4.1bn per annum Dr Neil’s
Australian wholesale pet product market, excluding the
target market is a sub-segment of the retail pet products
grocery/supermarket segment, is approximately $500
sector - pet specialty retail businesses excluding the grocery
million per annum.
2.
supermarket segment. There are over 1,720 businesses operating in the retail pet products sector in Australia with the top four players in the industry accounting for just under
Barriers to entry
50% of revenue. The grocery segment accounts for 36.4%
The principal barrier to entry for new market participants
of this revenue and the other 2 top players, Pet Barn and PETstock account for 10.7%.Besides these major players, the industry is mostly characterised by small retailers, veterinary practices and a few smaller chains. The industry has been in a growth phase over the last five years and is forecast to deliver slightly lower growth over the next five years as competitive conditions become more difficult for the industry. Projected growth of the sector between 2015 and 2020 is forecast at 1.8% per annum including the supermarket/ grocery segment 2. IBIS forecasts that growth will be slightly higher at 2.5% in 2015-2016 reflecting relatively strong growth in household
relates to the ability to secure distribution agreements with manufacturers. The manufacturer base is highly concentrated and if a manufacturer decides to supply an unproven new market participant, it is likely such an arrangement would include significant supply and/or financial burdens. It is also likely that the extent of market concentration in the wholesale product veterinary market would prove to be a natural barrier to entry, as it would be unlikely for a new market participant to achieve critical market share within a commercially viable time frame.
discretionary incomes 2. Cenvet Group management
Participants in the wholesale Australian veterinary and
believes that their target market of pet specialty retailers
pet product markets require a wholesale veterinarian drug
will enjoy a higher forecast growth rate over the next
licence to operate. In general terms, this is relatively easy
5 years of approximately 3%. Additionally, the Cenvet
to obtain and does not represent a barrier to entry for new
Group’s profit margin from supplying the retail pet product
competitors in the market.
sector is expected to grow as a result of greater industry consolidation, which reduces the cost of sales per customer
Cenvet Group Holdings Annual Report 2015
13
BUSINESS OVERVIEW The Cenvet Group is a well established Australian-owned and operated wholesaler and distributor of animal health and retail pet products. The business distributes a wide range of products including antibiotics, vaccines, surgical instruments, disposables, flea control and super-premium food for dogs and cats. The Cenvet Group supplies over 1,000 veterinary practices, as well as over 1,600 pet stores and retail outlets nationally. The business warehouses and distributes over 19,000 individual product lines and adds on average 125 new product lines into their system each month for over 175 manufacturers and suppliers. The Cenvet Group operates nationally, out of warehouses and customer support centres located in Sydney, Melbourne, Brisbane, Perth and Launceston under a third party logistics arrangement. With a strong focus on customer service and on-time deliveries, the Cenvet Group has a proven track record as one of Australia’s leading animal health and retail pet product supply companies.
14
Cenvet Group Holdings Annual Report 2015
Cenvet Pty Ltd commenced business in July 1960.
THE CENVET STORY
Began importing agency lines from overseas for the vet market. Introduced the “Kiss” system. The first colour coded patient record keeping system for vets in Australia.
1967 1976
Sales reached $3.8m.
1984
Set-up a national warehouse distribution system with facilities in Sydney, Brisbane, Melbourne, Adelaide & Perth.
1985
Launched “Vetkem”. The first ‘Vet Only’ Flea control product line.
1986
Appointed the exclusive agent for Hills “Prescription
1988
Diets” in Australia.
Sales reached $18m.
1990
Launched CET (Pet Dental Homecare Care) in Australia.
1992
Launched “Advantage Club”- the first loyalty rewards program for Australian vets.
1994
Introduced frequent flyer points & credit card payments.
1998
Sales reached $39m.
2000
Launched “Greenies” dental dog treats in Australia.
2003
Sales reached $64.5m.
2005
Acquired Dr Neil’s Pet & Equine Pty Ltd.
2010
Launched Galaxy Rewards Program.
2011
Converted to a public company and created a co-operative equity model.
2013
Achieved sales of $95.5m.
2014
Achieved Sales of $106m. Launched shareholder rewards program, - CenSational Rewards. Increased shareholder base to 231 members.
Cenvet Group Holdings Annual Report 2015
1960
2015
15
CORPORATE & OPERATIONAL STRUCTURE Cenvet Group Holdings Limited ABN 55 092 375 221
Cenvet Australia Pty Ltd ABN 70 097 206 187
Dr Neils Pet & Equine Pty Ltd ABN 43 100 909 742
Veterinary Companies of Australia Pty Ltd ABN 39 054 801 231
Full Petential Pty Ltd (Trading as Obay) ABN 39 125 436 535
Vetstar Pty Ltd ABN 36 113 929 294
Star IP ABN 19 163 164 636
Supporting Business Unit
Subsidory Holding Company
Trading Business Units
The Cenvet Group’s core trading business units are Cenvet Australia Pty Ltd (Cenvet Australia) and Dr Neil’s Pet & Equine Pty Ltd (Dr Neil’s). These two businesses account for over 90% of the Cenvet Group’s revenue combined. The balance of Cenvet Group’s revenue is generated by Veterinary Companies of Australia Pty Ltd (VCA), Full Petential trading as Obay and Star I.P. VCA distributes exclusive agency and Cenvet branded products. Obay is an online vet endorsed retailer and Star I.P is the holding company for two businesses acquired in July 2015.
16
Cenvet Group Holdings Annual Report 2015
An overview of Cenvet Group’s trading and support business units are outlined in the table below:
BUSINESS
Cenvet Australia
SIZE
Sales
• National wholesaler and distributor of animal health and pet products to the Australian veterinary market.
FY15: $72.41m FY14: $67.47m FY13: $64.31m FY12: $64.15m
• Oldest and largest trading entity within the Cenvet Group, representing approximately 70% of Cenvet Group’s total revenue. • practice’ inventory management systems and customer loyalty programs.
Sales FY15: $29.39m Dr Neil’s
FY14: $23.95m FY13: $20.87m FY12: $21.97m Sales FY15: $4.02m
VCA
FY14: $4.1m FY13: $3.66m FY12: $4.30m
Sales Full Petential trading as Obay, Dr Pet, and Pet Pharm
Vetstar
DESCRIPTION
FY15: $225K FY14: $301K FY13: $285K FY12: $163K
N/A – Support Business Unit
Star IP
Cenvet Group Holdings Annual Report 2015
• National wholesaler and distributor of animal health and pet products to pet stores and related retail outlets. • Represents over 22% of Cenvet’s FY14 total revenue.
• Importer of exclusive agency and ‘private label’ lines for animal health and pet products. • These items are sourced from trade shows and are important for developing new markets products.
• Obay is an ecommerce business promoting online sales of animal health and pet products in partnership with veterinary practices. Veterinarians receive a commission when their customers order and reference their unique code. Customers are also eligible for discounts on particular products when the unique code is referenced. • important and growing sales channel for the Cenvet Group.
• Undertakes all warehouse and distribution activities for the Cenvet Group. • Provides centrally managed support services including: • Finance. • Administration. • Human Resource management; and • Information Technology support.
• Subsidiary holding company for two businesses acquired in July 2015.
17
REVENUE TRENDS Revenue ($m) $110.00 $106m
$105.00 11%
$100.00 $95.50m $95.00 5.6%
$90.00
$90.40m
$85.00
$80.00 FY13
FYI14
FYI15
Net profit before tax & non cash depreciation NPT & Depreciation ($m)
$2.25 $2.11m $2
25% $1.75 $1.69m 8.3%
$1.56m $1.5
$1.25 FY13
18
FYI14
FYI15
Cenvet Group Holdings Annual Report 2015
25%
increase in NET PROFIT BEFORE TAX & DEPRECIATION in 2015
Cenvet Group Holdings Annual Report 2015
19
SUPPORT CENTRE & WAREHOUSE LOCATIONS The Cenvet Group has support centres and warehouses situated in five locations around Australia. The locations of these centres have been strategically selected to ensure customer delivery times and freight costs are minimised. Launceston, Tasmania operates under a third party logistics arrangement (3PL), supplying local customers with Super Premium pet foods and bulky items.
QUEENSLAND
WESTERN AUSTRALIA
NEW SOUTH WALES
VICTORIA TASMANIA (3PL)
20
Cenvet Group Holdings Annual Report 2015
Logistics and Information Technology A core value proposition of the Cenvet Group, both from a customer service and profitability perspective, is its logistical capabilities. The Cenvet Group has developed a proprietary computerised warehousing and distribution system, which:
19,000 Cenvet group manages over 19,000 product lines from 175 different suppliers
•
caters for over 165,000 product movements per month
•
enables real-time comprehensive and exception reporting and information on stock availability, expiry dates and backorder due dates.
•
allows for multi-site warehouse distribution facilitating the holding of fast moving items in satellite warehouses around the country and allowing for the management of slower moving stock centrally from the Sydney head office distribution centre. Both these measures result in improved profitability through the holding of reduced stock levels; and
•
incorporates ‘split order’ technology which allows customers to order any Cenvet Group or Dr Neil’s product without any additional administrative cost or delivery times.
The Cenvet Group’s logistical capabilities enables the group to maintain ‘best practice’ inventory management, leading to lower warehouse leasing costs, efficient order timeframes and increased fulfilment accuracy rates for the benefit of the Cenvet Group’s customers.
Suppliers and Products The Cenvet Group distributes over 19,000 product lines from 175 different manufacturers and suppliers. The Cenvet Group’s wide range of products, include antibiotics and vaccines, surgical instruments, disposables, flea control and superpremium food for dogs and cats. The Cenvet Group contracts with suppliers are typically renewed on an annual basis. The Cenvet Group sources its products from a concentrated number of manufacturers with 20 suppliers accounting for 85% of the Cenvet Group’s purchases. In recent years, the Cenvet Group, through its VCA business, has also developed an extensive range of ‘private label’ consumable and disposable items, such as IV sets, extension sets, swabs, and examination gloves. For the retail pet products market, the Cenvet Group has also developed a comprehensive range of treats, shampoos and odour control products. These items have been sourced predominantly from overseas manufacturers. These ‘private label’ product lines: •
provide the business with more control over the supply of selected high volume items.
•
can be sourced more cost effectively resulting in higher margins.
•
if required, these items may also be used by the business as ‘loss leader’ products’ (as they are low cost) to source new customers and obtain greater market share.
In addition to the Cenvet Group’s strategy to develop an extensive range of ‘private label’ products, VCA’s focus has been, and will continue to be, on securing exclusive agency arrangements, (which normally enjoy higher margins) to create a point of difference in the market.
Cenvet Group Holdings Annual Report 2015
21
CENVET TEAM Cenvet Group Holdings has appointed four (4) directors who are responsible for the overall governance of the group including setting its strategic priorities and direction, monitoring its business affairs and its financial objectives and results. The Cenvet Group’s Board is supported by an experienced management team and wellestablished staff structure of approximately 100 full-time equivalent (FTE) employees. An overview of Cenvet’s operational team structure and the applicable head count for each function is outlined in the table below. Each functional team is headed up by an executive manager who is a long standing employee of the Group.
Group CEO / Managing Director
Cenvet Australia FTE=29
22
Dr Neils FTE=11
Logistics FTE=39
Finanace FTE=8.5
HR FTE=1.5
IT FTE=5
Cenvet Group Holdings Annual Report 2015
Vision & Future Initiatives The Cenvet Group’s Board has endorsed the strategic vision and core initiatives supporting the forecast financial performance of the group. This vision and initiatives are aimed at increasing revenue, improving profitability and maximising shareholder value. A summary of the Cenvet Group’s vision and supporting initiatives is outlined in the table below:
VISION / INITIATIVE Creation of a co-operative model where the company’s future growth and success is shared with customer and employee shareholders.
RATIONALE & BENEFITS TO CENVET SHAREHOLDERS
By creating a co-operative style model, Cenvet’s customers and key employees have the opportunity to share expected to retain and increase sales from existing customers and attract new customers and therefore grow
Further expansion of leveraging its core strengths across multiple markets, capitalising on potential growth opportunities and mitigating the risk of a potential downturn (slower growth) in a single market.
is forecast for the sector and the wholesale and distribution market to that industry is relatively fragmented (compared to the veterinary services industry) presenting Cenvet with opportunities to gain market share in the sector. Cenvet’s superior logistical capabilities will be increasingly important as the retail pet product sector consolidates.
and secure contracts in the sector.
Share Price The last recorded sale of shares was on the 9/10/2015 at a purchase price of 63c per share.
Cenvet Group Holdings Annual Report 2015
23
FINANCIAL REPORT Cenvet Group Holdings Limited and Controlled Entities STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2015 Note Consolidated Group
Revenue
3
2015
2014
$
$
106,121,811
96,403,886
Discounts allowed
(3,268,756)
(2,914,866)
Consumables used
(87,372,033)
(76,334,557)
3,832,923
755,188
Gross profit
19,313,945
17,909,651
Employee benefits expense
(7,086,039)
(6,835,254)
Depreciation and amortization expenses
(1,105,829)
(1,201,819)
(450,733)
(504,745)
(1,316,760)
(1,005,066)
Changes in inventories
Finance costs Promotional expenses Advertising expenses
(448,220)
(322,693)
Accounting and audit fees
(97,748)
(101,727)
Commissions
(30,123)
(53,992)
(2,716,573)
(2,583,059)
Freight and cartage
(5,049,310)
(4,810,026)
Profit before income tax
Other administrative expenses 5
1,012,610
491,270
Tax expense
4
(455,651)
(202,993)
556,959
288,277
556,959
288,277
556,959
288,277
Other
-
-
Other comprehensive income for the year, net of tax
-
-
556,959
288,277
556,959
288,277
Profit for the year Profit attributable to: Members of the parent entity
Other comprehensive income
Total comprehensive income for the year
Total comprehensive income attributable to: Members of the parent entity
The accompanying notes form part of these financial statements
24
Cenvet Group Holdings Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Note
Consolidated Group 2015
2014
$
$
ASSETS CURRENT ASSETS Cash and cash equivalents
8
252,854
294,270
Trade and other receivables
9
12,349,486
11,263,993
Inventories
10
14,146,487
10,313,564
Other assets
11
126,298
113,350
26,875,125
21,985,177
TOTAL CURRENT ASSETS NON-CURRENT ASSETS Property, plant and equipment
13
2,118,050
2,407,710
Intangible assets
14
5,178,225
5,874,129
Deferred tax assets
19
828,392
614,632
Other non-current assets
11
312,953
61,811
8,437,620
8,958,282
35,312,745
30,943,459
TOTAL NON-CURRENT ASSETS TOTAL ASSETS LIABILITIES CURRENT LIABILITIES Trade and other payables
15
13,609,309
12,295,055
Borrowings
16
10,955,959
8,728,793
Current tax payable
19
524,975
121,288
Provisions
18
645,870
472,300
25,736,113
21,617,435
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES Trade and other payables
15
-
19,249
Borrowings
16
115,756
164,666
Provisions
18
235,743
271,555
351,499
455,470
26,087,612
22,072,905
9,225,133
8,870,554
TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES
NET ASSETS
Cenvet Group Holdings Annual Report 2015
25
Cenvet Group Holdings Limited and Controlled Entities STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015 Note
Consolidated Group 2015
2014
$
$
5,460,720
4,403,678
Retained earnings
3,764,413
4,466,876
TOTAL EQUITY
9,225,133
8,870,554
EQUITY Issued capital
20
The accompanying notes form part of these financial statements
26
Page 10 of 47 Cenvet Group Holdings Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2015 Ordinary shares
Retained earnings
Total
$
$
$
4
5,357,176
5,357,180
Opening adjustment
-
409
409
Profit for the year
-
288,277
288,277
Note
Balance at 1 July 2013 Comprehensive income:
Dividends paid
7
-
(1,178,986)
(1,178,986)
Shares issued during the year
20
4,403,674
-
4,403,674
Balance at 30 June 2014
4,403,678
4,466,876
8,870,554
Balance at 1 July 2014
4,403,674
4,466,876
8,870,180
Opening adjustment
-
-
-
Profit for the year
-
556,959
556,959
Comprehensive income:
Dividends paid
7
-
(1,259,422)
(1,259,422)
Shares issued during the year
20
1,057,046
-
1,057,046
5,460,720
3,764,413
9,225,133
Balance at 30 June 2015
The accompanying notes form part of these financial statements
Cenvet Group Holdings Annual Report 2015
Page 11 of 47
27
Cenvet Group Holdings Limited and Controlled Entities STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2015 Note
Consolidated Group 2015
2014
$
$
115,413,538
105,191,457
(116,459,836)
(104,523,518)
11,924
12,768
Income tax (paid) refunded
(450,733)
78,647
Interest paid
(265,724)
(504,745)
(1,750,831)
254,609
Proceeds from sale of plant and equipment
43,000
15,909
Purchase of property, plant and equipment
(33,248)
(26,634)
Purchase of investments
(250,000)
-
Net cash provided by (used in) investing activities
(240,248)
(10,725)
2,375,805
(297,341)
(49,902)
(2,706,246)
(376,240)
(368,851)
-
3,224,689
1,949,663
(147,749)
Net increase (decrease) in cash and cash equivalents
(41,416)
96,135
Cash and cash equivalents at beginning of year
294,270
198,135
252,854
294,270
CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received
Net cash provided by (used in) operating activities
23
CASH FLOWS FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES Increase (Reduction) in receivables finance facility Loan repayment to related party Lease payments Proceeds from issuing shares Net cash provided by (used in) financing activities
Cash and cash equivalents at end of year
8
The accompanying notes form part of these financial statements
28
Page 12 of Annual 47 Cenvet Group Holdings Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial report includes the consolidated financial statements and notes of Cenvet Group Holdings Limited and Controlled Entities (the “consolidated group” or “group”). Basis of Preparation The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards – Reduced Disclosure Requirements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The company is a for-profit entity for financial reporting purposes under Australian Accounting Standards. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Material accounting policies adopted in the preparation of the financial statements are presented below and have been consistently applied unless stated otherwise. The financial statements, except for the cash flow information, have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. The amounts presented in the financial statements have been rounded to the nearest dollar. The financial statements were authorised for issue on 20 October 2015 by the directors of the company. Accounting Policies a.
Principles of Consolidation The consolidated financial statements incorporate all of the assets, liabilities and results of the parent entity (“the parent”), Cenvet Group Holdings Limited, and its subsidiaries. Subsidiaries are entities the parent controls. The parent controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Details of the subsidiaries are provided in Note 12. The assets, liabilities and results of all subsidiaries are fully consolidated into the financial statements of the Group from the date on which control is obtained by the Group. The consolidation of a subsidiary is discontinued from the date that control ceases. Intercompany transactions, balances and unrealised gains or losses on transactions between group entities are fully eliminated on consolidation. Accounting policies of subsidiaries have been changed and adjustments made where necessary to ensure uniformity of the accounting policies adopted by the Group. Equity interests in a subsidiary not attributable, directly or indirectly, to the Group are presented as “noncontrolling interests”. The Group initially recognises non-controlling interests that are present ownership interests in subsidiaries either at fair value or at the non-controlling interests’ proportionate share of the subsidiary’s net assets when the holders are entitled to a proportionate share of the subsidiary’s net assets on liquidation. All other components of non-controlling interests are initially measured at their acquisition-date fair value. Subsequent to initial recognition, non-controlling interests are attributed their share of profit or loss and each component of other comprehensive income. Non-controlling interests (when applicable) are shown separately within the equity section of the statement of financial position and statement of comprehensive income.
Cenvet Group Holdings Annual Report 2015
Page 13 of 47
29
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES b.
Business Combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained whereby the fair values of the identifiable assets acquired and liabilities (including contingent liabilities) assumed are recognised (subject to certain limited exceptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are recognised as expenses in profit or loss. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Goodwill Goodwill is carried at cost less any accumulated impairment losses. The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds a less than 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (“full goodwill method”) or at the non-controlling interest’s proportionate share of the subsidiary’s identifiable net assets (“proportionate interest method”). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination. Under the full goodwill method, the fair values of the non-controlling interest are determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or groups of cash-generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold. Changes in the ownership interests in a subsidiary that do not result in loss of control are accounted for as equity transactions and do not affect the carrying amounts of goodwill.
30
PageHoldings 14 of 47 Cenvet Group Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES c.
Income Tax The income tax expense/(income) for the year comprises current income tax expense/(income) and deferred tax expense/(income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities/(assets) are therefore measured at the amounts expected to be paid to/(recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense/(income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the Group in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of setoff exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation Cenvet Group Holdings Limited and its wholly owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation legislation. Each entity in the Group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the “stand-alone taxpayer� approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax losses and tax credits in the subsidiaries are immediately transferred to the head entity. The Group notified the Australian Taxation Office that it had formed an income tax consolidated group to apply from 1 July 2003. The tax consolidated group has entered into a tax-funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contribution to the Group’s taxable income. Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a contribution by, or distribution to, the head entity.
Cenvet Group Holdings Annual Report 2015
Page 15 of 47
31
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES d.
Inventories Inventories are measured at the lower of cost and net realisable value.
e.
Property, Plant and Equipment Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than its estimated recoverable amount, the carrying amount is written down immediately to its estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note 1(g) for details of impairment). The cost of fixed assets constructed within the Group includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Depreciation is recognised in profit or loss. The depreciation rates used for each class of depreciable assets are: Class of Fixed Asset
Depreciation Rate
Leasehold improvements
10-50%
Plant and equipment
15%
Motor Vehicles
25%
Office Equipment
30%
Furniture & Fittings
15%
Leased Assets
10-25%
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.
32
PageHoldings 16 of 47 Cenvet Group Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES f.
Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset (but not the legal ownership) are transferred to entities in the Group, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term. Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.
g.
Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the company commits itself to either purchase or sell the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss� in which case transaction costs are recognised immediately as expenses in profit or loss. Classification and subsequent measurement Financial instruments are subsequently measured at fair value (refer to Note 1(r)), amortised cost using the effective interest method, or cost. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of an income or expense item in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. Accordingly, such interests are accounted for on a cost basis in the parent’s separate financial statements.
Cenvet Group Holdings Annual Report 2015
Page 17 of 47
33
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (i)
Financial assets at fair value through profit or loss Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying amount being included in profit or loss.
(ii)
Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.
(iii)
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised.
(iv)
Available-for-sale investments Available-for-sale investments are non-derivative financial assets that are either not capable of being classified into other categories of financial assets due to their nature or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments. They are subsequently measured at fair value with any remeasurements other than impairment losses and foreign exchange gains and losses recognised in other comprehensive income. When the financial asset is derecognised, the cumulative gain or loss pertaining to that asset previously recognised in other comprehensive income is reclassified into profit or loss. Available-for-sale financial assets are classified as non-current assets when they are not expected to be sold within 12 months after the end of the reporting period. All other available-forsale financial assets are classified as current assets.
(v)
Financial liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised.
Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial asset has been impaired. A financial asset (or a group of financial assets) is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a “loss event”) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of available-for-sale financial assets, a significant or prolonged decline in the market value of the instrument is considered to constitute a loss event. Impairment losses are recognised in profit or loss immediately. Also, any cumulative decline in fair value previously recognised in other comprehensive income is reclassified into profit or loss at this point. In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults.
34
Page Holdings 18 of 47Annual Report 2015 Cenvet Group
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Group recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. Derecognition Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged or cancelled, or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. h.
Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information, including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. 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. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.
i.
Intangibles Other than Goodwill Patents and Trademarks Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life, with trademarks having a useful life of 10 years and other intangibles having a useful life of 5 years.
j.
Employee Benefits Short-term employee benefits Provision is made for the Group’s obligation for short-term employee benefits. Short-term employee benefits are benefits (other than termination benefits) that are expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service, including wages, salaries and sick leave. Short-term employee benefits are measured at the (undiscounted) amounts expected to be paid when the obligation is settled. The Group’s obligations for short-term employee benefits such as wages, salaries and sick leave are recognised as a part of current trade and other payables in the statement of financial position. Other long-term employee benefits The Group classifies employees’ long service leave and annual leave entitlements as other long-term employee benefits, as they are not expected to be settled wholly within 12 months after the end of the annual reporting period in which the employees render the related service. Provision is made for the Group’s obligation for other long-term employee benefits, which is measured at the present value of the expected future payments to be made to employees. Expected future payments incorporate anticipated future wage and salary levels, durations of service and employee departures and are discounted at rates
Cenvet Group Holdings Annual Report 2015
Page 19 of 47
35
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES determined by reference to market yields at the end of the reporting period on government bonds that have maturity dates that approximate the terms of the obligations. Upon the remeasurement of obligations for other long-term employee benefits, the net change in the obligation is recognised in profit or loss as a part of employee benefit expense. The Group’s obligations for long-term employee benefits are presented as non-current provisions in its statement of financial position, except where the Group does not have an unconditional right to defer settlement for at least 12 months after the reporting date, in which case the obligations are presented as current provisions. Retirement benefit obligations Defined contribution superannuation benefits All employees of the Group receive defined contribution superannuation entitlements, for which the Group pays the fixed superannuation guarantee contribution (currently 9.25% of the employee’s average ordinary salary) to the employee’s superannuation fund of choice. All contributions in respect of employees’ defined contribution entitlements are recognised as an expense when they become payable. The Group’s obligation with respect to employees’ defined contribution entitlements is limited to its obligation for any unpaid superannuation guarantee contributions at the end of the reporting period. All obligations for unpaid superannuation guarantee contributions are measured at the (undiscounted) amounts expected to be paid when the obligation is settled and are presented as a part of current trade and other payables in the Group’s statement of financial position. k.
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 outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.
l.
Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits held at-call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities in the statement of financial position.
m.
Revenue and Other Income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods. Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets. Dividend revenue is recognised when the right to receive a dividend has been established. All revenue is stated net of the amount of goods and services tax.
36
PageHoldings 20 of 47 Cenvet Group Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES n.
Trade and Other Payables Trade and other payables represent the liabilities for goods and services received by the Group during the reporting period that remain unpaid at the end of the reporting period, and are recognised as a current liability.
o.
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 Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers.
p.
Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.
q.
Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated in the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Key estimates (i)
Impairment - general
The Group assesses impairment at the end of each reporting period by evaluation of conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations which incorporate various key assumptions. Key judgements (i)
Employee benefits
For the purpose of measurement, AASB 119: Employee Benefits (September 2011) defines obligations for short-term employee benefits as obligations expected to be settled wholly before 12 months after the end of the annual reporting period in which the employees render the related services. As the Group expects that most employees will not use all of their annual leave entitlements in the same year in which they are earned or during the 12-month period that follows (despite an informal group policy that requires annual leave to be used within 12 months), the directors believe that obligations for annual leave entitlements satisfy the definition of other long-term employee benefits and, as a result, are required to be measured at the present value of the expected future payments to be made to employees.
Cenvet Group Holdings Annual Report 2015
Page 21 of 47
37
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES r.
Fair Value of Assets and Liabilities The Group measures some of its assets and liabilities at fair value on either a recurring or non-recurring basis, depending on the requirements of the applicable Accounting Standard. “Fair value” is the price the Group would receive to sell an asset or would have to pay to transfer a liability in an orderly (ie unforced) transaction between independent, knowledgeable and willing market participants at the measurement date. As fair value is a market-based measure, the closest equivalent observable market pricing information is used to determine fair value. Adjustments to market values may be made having regard to the characteristics of the specific asset or liability. The fair values of assets and liabilities that are not traded in an active market are determined using one or more valuation techniques. These valuation techniques maximise, to the extent possible, the use of observable market data. To the extent possible, market information is extracted from the principal market for the asset or liability (ie the market with the greatest volume and level of activity for the asset or liability). In the absence of such a market, market information is extracted from the most advantageous market available to the entity at the end of the reporting period (ie the market that maximises the receipts from the sale of the asset or minimises the payments made to transfer the liability, after taking into account transaction costs and transport costs). For non-financial assets, the fair value measurement also takes into account a market participant’s ability to use the asset in its highest and best use or to sell it to another market participant that would use the asset in its highest and best use. The fair value of liabilities and the entity’s own equity instruments (excluding those related to share-based payment arrangements) may be valued, where there is no observable market price in relation to the transfer of such financial instruments, by reference to observable market information where such instruments are held as assets. Where this information is not available, other valuation techniques are adopted and, where significant, are detailed in the respective note to the financial statements.
s.
New Accounting Standards for Application in Future Periods The AASB has issued a number of new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods, some of which are relevant to the Group. The Group has decided not to early adopt any of the new and amended pronouncements. The Group’s assessment of the new and amended pronouncements that are relevant to the Group but applicable in future reporting periods is set out below: –
AASB 9: Financial Instruments (December 2010) and associated Amending Standards (applicable for annual reporting periods commencing on or after 1 January 2018). These Standards will be applicable retrospectively and include revised requirements for the classification and measurement of financial instruments, revised recognition and derecognition requirements for financial instruments and simplified requirements for hedge accounting. The key changes that may affect the Group on initial application of AASB 9 and associated Amending Standards include certain simplifications to the classification of financial assets, and the irrevocable election to recognise gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Although, the directors anticipate that the adoption of AASB 9 may have an impact on the Group’s financial instruments, it is impracticable at this stage to provide a reasonable estimate of such impact.
–
AASB 15: Revenue from contracts with customers (applicable for annual reporting periods commencing on or after 1 January 2017). AASB 2014-5 Amendments to Australian Accounting Standards arising from AASB 15. AASB 15 introduces a five step process for revenue recognition with the core principle of the new Standard being for entities to recognise revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration (that is, payment) to which the entity expects to be
38
of 47Annual Report 2015 CenvetPage Group 22 Holdings
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES entitled in exchange for those goods or services. Accounting policy changes will arise in timing of revenue recognition, treatment of contract costs and contracts which contain a financing element. AASB 15 will also result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively (for example, service revenue and contract modifications) and improve guidance for multiple-element arrangements. The changes in revenue recognition requirements in AASB 15 may cause changes to the timing and amount of revenue recorded in the financial statements as well as additional disclosures. AASB 15 is not expected to significantly impact the Group’s financial statements.
Cenvet Group Holdings Annual Report 2015
Page 23 of 47
39
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 2: PARENT INFORMATION The following information has been extracted from the books and records of the parent and has been prepared in accordance with Australian Accounting Standards. 2015 $
2014 $
Current assets
2,230,135
1,627,847
Non-current assets
5,786,795
6,274,331
TOTAL ASSETS
8,016,930
7,902,178
863,004
341,512
Non-current liabilities
91,563
140,472
TOTAL LIABILITIES
954,567
481,984
Issued capital
5,460,720
4,403,678
Retained earnings
1,601,643
3,016,516
TOTAL EQUITY
7,062,363
7,420,194
78,288
81,268
Income tax expense
(233,739)
(769,159)
Total comprehensive income (loss)
(155,451)
(687,891)
Statement of Financial Position ASSETS
LIABILITIES Current liabilities
EQUITY
Statement of Profit or Loss and Other Comprehensive Income Total profit before tax
Guarantees Cenvet Group Holdings Ltd has not entered into any guarantees, in the current or previous financial years, in relation to the debts of its subsidiaries. Contingent liabilities At 30 June 2015, Cenvet Group Holdings Ltd had no contingent liabilities to disclose (2014 Nil). Contractual commitments At 30 June 2015, Cenvet Group Holdings Ltd had not entered into any contractual commitments (2014 Nil).
Page 24 of 47
40
Cenvet Group Holdings Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 3: REVENUE AND OTHER INCOME Consolidated Group 2015
2014
$
$
104,620,723
95,327,489
1,349,477
961,008
139,686
102,621
106,109,886
96,391,118
11,924
12,768
-
-
11,924
12,768
106,121,810
96,403,886
Revenue Sales revenue: – Sale of goods – Rebates and recoveries – Settlement discount received Total sales revenue
Other revenue: – Interest received – Other income Total other revenue Total Revenue
NOTE 4: INCOME TAX EXPENSE Consolidated Group
a.
2014
$
$
669,411
266,202
(213,760)
(9,463)
-
(53,746)
455,651
202,993
303,783
147,381
151,868
109,358
-
(53,746)
455,651
202,993
The components of tax expense/(income) comprise: Current tax expense (income) Deferred tax expense (income) Under (over) provision in respect of prior years
b.
2015
The prima facie tax on profit (loss) before income tax is reconciled to income tax as follows: Prima facie tax on profit before income tax at 30% (2014: 30%): –
consolidated group
Add tax effect of: –
other non-allowable items
–
Under (over) provision in respect of prior years
Tax expense
Cenvet Group Holdings Annual Report 2015
Page 25 of 47
41
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 5: PROFIT/(LOSS) BEFORE INCOME TAX Consolidated Group 2015
2014
$
$
Finance costs
450,733
504,745
Bad and doubtful debts
112,555
5,926
1,007,577
1,090,452
Utility costs
149,098
165,905
Superannuation
651,015
591,165
Insurance
266,864
309,842
Legal fees
147,986
120,033
Motor vehicle expenses
337,295
382,031
Packaging costs
372,833
277,286
Payroll tax
346,306
328,962
2015
2014
$
$
Profit before income tax from continuing operations includes the following specific expenses: (a) Expenses
Rental expense
(b) Significant revenue and expenses The following significant revenue and expense items are relevant in explaining the financial performance:
NOTE 6: KEY MANAGEMENT PERSONNEL COMPENSATION
Key management personnel compensation
253,907
279,328
The totals represent the remuneration paid to key management personnel (KMP) of the Group during the year, being paid by a subsidiary entity. Other KMP transactions For details of other transactions with KMP, refer to Note 21: Related Party Transactions.
42
PageHoldings 26 of 47 Cenvet Group Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 7: DIVIDENDS
Consolidated Group 2015
2014
$
$
1,259,422
1,178,986
3,725,548
3,250,520
1.8
1.8
Distributions paid: Declared fully franked ordinary dividend of 1.8 cents per share (2014: 1.8 cents) franked at the tax rate of 30% (2014: 30%) Balance of franking account at year-end adjusted for franking credits arising from: –
payment of provision for income tax
–
dividends recognised as receivables, franking debits arising from payment of proposed dividends and franking credits that may be prevented from distribution in subsequent financial years
Total dividends (cents) per share for the period
NOTE 8: CASH AND CASH EQUIVALENTS Consolidated Group Note Cash on hand Cash at bank 17
2015
2014
$
$
2,500
2,500
250,354
291,770
252,854
294,270
252,854
294,270
-
-
252,854
294,270
Reconciliation of cash Cash and cash equivalents at the end of the financial year as shown in the statement of cash flows are reconciled to items in the statement of financial position as follows: Cash and cash equivalents Bank overdraft 17 There are no restrictions with respect to access to the cash and cash equivalent balances shown.
Cenvet Group Holdings Annual Report 2015
Page 27 of 47
43
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 9: TRADE AND OTHER RECEIVABLES
Note
Consolidated Group 2015
2014
$
$
11,821,795
10,801,041
(123,019)
(50,382)
11,698,776
10,750,659
14,228
951
636,482
355,801
-
156,582
12,349,486
11,263,993
CURRENT Trade receivables Provision for impairment
9a
Goods and services tax Other receivables Other related parties
21
Total current trade and other receivables a.
Provision for impairment of receivables Movement in the provision for impairment of receivables is as follows: Opening Balance
Charge for the Year
Amounts Written Off
Closing Balance
$
$
$
$
(23,746)
(38,746)
112,554
(39,917)
1 July 2013 Current trade receivables
112,875
30 June 2014
1 July 2014 Current trade receivables
50,382
30 June 2015
Note
b.
50,382
123,019
Consolidated Group 2015
2014
$
$
11,713,003
10,908,192
-
-
11,713,003
10,908,192
Financial assets classified as loans and receivables Trade and other receivables: –
total current
–
total non-current
Financial assets
17
Page 28 of 47
44
Cenvet Group Holdings Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 10: INVENTORIES
Consolidated Group 2015
2014
$
$
14,387,864
10,441,066
(241,377)
(127,502)
14,146,487
10,313,564
CURRENT At cost: –
Stock on hand
–
Less provision for obsolescence
NOTE 11: OTHER ASSETS Consolidated Group 2015
2014
$
$
126,298
113,350
126,298
113,350
312,953
61,811
CURRENT Prepayments
NON-CURRENT Deposits
Cenvet Group Holdings Annual Report 2015
Page 29 of 47
45
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 12: CONTROLLED ENTITIES Information about Principal Subsidiaries The subsidiaries listed below have share capital consisting solely of ordinary shares which are held directly by the parent entity. The assets, liabilities, income and expenses of the subsidiaries have been consolidated on a line-by-line basis in the consolidated financial statements of the Group. The proportion of ownership interests held equals the voting rights held by the Group. Name of subsidiary
Proportion of Ownership Interest Held by the Group* 2015
2014
Cenvet Australia Pty Ltd
100%
100%
Dr Neil’s Pet & Equine Pty Ltd
100%
100%
Veterinary Companies of Australia Pty Ltd
100%
100%
Full Petential Pty Ltd
100%
100%
Vetstar Logistics Pty Ltd
100%
100%
Vetstar Pty Ltd
100%
100%
Vet Extra Pty Ltd
100%
100%
Go Fetch International Pty Ltd
100%
100%
Star IP Pty Ltd
100%
100%
Doctor Pet Pty Ltd
100%
100%
*Percentage of voting power in proportion to ownership
Subsidiary financial statements used in the preparation of these consolidated financial statements have also been prepared as at the same reporting date as the Group’s financial statements.
46
Page Holdings 30 of 47Annual Report 2015 Cenvet Group
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 13: PROPERTY, PLANT AND EQUIPMENT Note
Consolidated Group 2015
2014
$
$
Leasehold improvements at cost
1,309,945
1,305,555
Less accumulated depreciation
(528,590)
(421,389)
781,355
884,166
974,662
755,185
(561,067)
(303,789)
413,595
451,396
37,526
53,809
(15,484)
(23,368)
22,042
30,441
882,729
834,387
(730,278)
(669,226)
152,451
165,161
245,945
424,796
(154,189)
(256,950)
91,756
167,846
Fixed assets under lease at cost
1,003,691
1,050,070
Less accumulated depreciation
(346,840)
(341,370)
656,851
708,700
2,118,050
2,407,710
Leasehold improvements:
13a Plant and equipment: Plant and equipment at cost Less accumulated depreciation 13a Motor vehicles: Motor vehicles at cost Less accumulated depreciation 13a Office equipment: Office equipment at cost Less accumulated depreciation 13a Furniture, fixtures and fittings: Furniture, fixtures and fittings at cost Less accumulated depreciation 13a Fixed assets under lease:
13a Total property, plant and equipment
Cenvet Group Holdings Annual Report 2015
Page 31 of 47
47
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 13: PROPERTY, PLANT AND EQUIPMENT (CONTINUED) a.
Movements in Carrying Amounts Movement in the carrying amounts for each class of property, plant and equipment:
Leasehold
Plant &
Motor
Office
Furniture,
Fixed
improvements
Equipment
vehicles
equipment
fixtures &
assets
fittings
under lease
Total
$
$
$
$
$
$
$
July 2014
884,166
451,396
30,441
165,161
167,846
708,700
2,407,710
Additions
4,390
33,247
61,856
48,342
617
72,000
220,452
Disposals
-
-
(56,667)
-
(51,564)
8,043
(100,188)
(107,201)
(71,048)
(13,588)
(61,052)
(25,143)
(131,892)
(409,924)
781,355
413,595
22,042
152,451
91,756
656,851
2,118,050
July 2013
1,003,107
436,756
82,140
238,480
195,735
614,358
2,570,576
Additions
12,131
104,942
-
15,982
2,617
314,451
450,123
Disposals
-
(18,813)
(38,306)
(13,319)
(801)
(80,811)
(152,050)
(131,072)
(71,489)
(13,393)
(75,982)
(29,705)
(139,298)
460,939
884,166
451,396
30,441
165,161
167,846
708,700
2,407,710
Balance at 1
Depreciation expense Balance at 30 June 2015
Balance at 1
Depreciation expense Balance at 30 June 2014
NOTE 14: INTANGIBLE ASSETS Note
Goodwill Accumulated impairment Net carrying amount
14a
Patents & Trademarks Less accumulated amortisation Net carrying amount Total intangibles
48
14a
Consolidated Group 2015
2014
$
$
56,029
56,029
-
-
56,029
56,029
8,820,743
8,820,743
(3,698,547)
(3,002,643)
5,122,196
5,818,100
5,178,225
5,874,129
Cenvet Group Holdings Annual Report 2015
Page 32 of 47
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 14: INTANGIBLE ASSETS (CONTINUED) Movements in Carrying Amounts
a.
Note
2015
2014
$
$
56,029
56,029
-
-
56,029
56,029
5,818,100
6,558,980
-
-
(695,904)
(740,880)
-
-
5,122,196
5,818,100
Goodwill: Balance at beginning of year Additions Balance at end of year Patents & Trademarks: Balance at beginning of year Additions Amortisation charge Impairment losses Balance at end of year
NOTE 15: TRADE AND OTHER PAYABLES
Note
Consolidated Group 2015
2014
$
$
CURRENT Unsecured liabilities: Trade payables Loyalty programs Operating lease payable (straight lining)
12,087,294
11,050,350
1,033,188
722,106
5,673
23,857
Payable to related party
211,299
-
Sundry payables and accrued expenses
271,855
498,742
15a
13,609,309
12,295,055
15a
-
19,249
13,603,636
12,271,198
-
19,249
13,603,636
12,290,447
(5,673)
(43,106)
13,597,963
12,247,341
NON-CURRENT Operating lease payable (straight lining) a.
Financial liabilities at amortised cost classified as trade and other payables Trade and other payables: –
total current
–
total non-current
Less other payables Financial liabilities as trade and other payables
Cenvet Group Holdings Annual Report 2015
17
Page 33 of 47
49
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 b.
Lines of credit During the reporting period the company utilised lines of credit made available by employees. The lines provide up to 55 days credit from transaction date. The amount transacted during the reporting period was $13,315,036 (2014 $10,534,460). At balance date the amount owing disclosed within current liabilities was $993,989 (2014 $981,142).
NOTE 16: BORROWINGS
Note
Consolidated Group 2015
2014
$
$
CURRENT Lease liability secured
16c
220,394
319,131
Loan from related party, unsecured, interest bearing
16d
29,845
79,747
Trade receivables financing facility
16b
10,705,720
8,329,915
10,955,959
8,728,793
Total current borrowings NON-CURRENT Lease liability secured
16c
115,756
164,666
Loan from related party, unsecured, interest bearing
16d
-
-
Total non-current borrowings Total borrowings a.
115,756
164,666
11,071,715
8,893,459
10,705,720
8,329,915
Total current and non-current secured liabilities: Trade receivables financing facility
17
Lease liability secured
336,150
483,797
11,041,870
8,813,712
b.
Guarantees and indemnities exist by and between all controlled entities in favour of the finance provider for obligations under the receivables financing agreement.
c.
Lease liabilities are secured by the underlying leased assets.
d.
The unsecured loans were advanced by a director of Cenvet Group Holdings Limited on commercial terms. Refer to note 21 for further disclosure.
Page 34 of 47
50
Cenvet Group Holdings Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 17: FINANCIAL RISK MANAGEMENT The Group financial instruments consist mainly of accounts receivable and payable. The carrying amounts for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows: Note
Consolidated Group 2015
2014
$
$
Financial assets Cash and cash equivalents
8
252,854
294,270
Loans and receivables
9
11,713,003
10,908,192
11,965,857
11,202,462
Financial liabilities Financial liabilities at amortised cost: Trade and other payables
15
13,597,963
12,247,341
Trade receivables financing facility
16
10,705,720
8,329,915
24,303,683
20,577,256
NOTE 18: PROVISIONS Consolidated Group 2015
2014
$
$
645,870
472,300
645,870
472,300
235,743
271,555
235,743
271,555
CURRENT Employee benefits
NON-CURRENT Employee benefits
Cenvet Group Holdings Annual Report 2015
Page 35 of 47
51
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 18: PROVISIONS (CONTINUED) Employee Benefits $ Analysis of provisions: Opening balance at 1 July 2014
743,855
Additional provisions raised during the year
527,610
Amounts used
(389,852)
Unused amounts reversed during the year
-
Balance at 30 June 2015
881,613
Provision for employee benefits Provision for employee benefits represents amounts accrued for annual leave and long service leave. The current portion for this provision includes the total amount accrued for annual leave entitlements and the amounts accrued for long service leave entitlements that have vested due to employees having completed the required period of service. Based on past experience, the Group does not expect the full amount of annual leave or long service leave balances classified as current liabilities to be settled wholly within the next 12 months. However, these amounts must be classified as current liabilities since the Group does not have an unconditional right to defer the settlement of these amounts in the event employees wish to use their leave entitlement. The non-current portion for this provision includes amounts accrued for long service leave entitlements that have not yet vested in relation to those employees who have not yet completed the required period of service.
52
Cenvet Group Annual Report 2015 PageHoldings 36 of 47
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 19: TAX
Consolidated Group 2015
2014
$
$
524,975
121,288
Opening Balance
(Charged)/ Credited to Profit or Loss
Closing Balance
$
$
$
Provisions – employee benefits
220,287
2,869
223,156
Accrued loyalty program
166,182
42,121
208,303
Other
240,066
(56,893)
183,173
626,535
(11,903)
614,632
Provisions – employee benefits
223,156
41,328
264,484
Accrued loyalty program
208,303
93,423
301,726
Other
183,173
79,009
262,182
614,632
213,760
828,392
CURRENT Income tax payable (refundable)
2014 Deferred tax asset on:
2015 Deferred tax asset on:
Cenvet Group Holdings Annual Report 2015
Page 37 of 47
53
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 20: ISSUED CAPITAL Consolidated Group
69,568,961 fully paid ordinary shares (2014: 67,502,054)
2015
2014
$
$
5,460,720
4,403,678
Consolidated Group
a.
2015
2014
No.
No.
67,502,054
60,000,000
2,066,907
7,502,054
69,568,961
67,502,054
Fully paid ordinary shares At the beginning of the reporting period Shares issued during the year At the end of the reporting period
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. At shareholders’ meetings, each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. On 20 November 2014 the company declared a dividend of 1.8c per share. Under the company’s DRP program 2,066,907 ordinary shares were issued.
54
PageHoldings 38 of 47 Cenvet Group Annual Report 2015
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: RELATED PARTY TRANSACTIONS Related Parties The Group’s main related parties are as follows: a.
Parent entity and controlled entities Cenvet Group Holdings Limited (“the parent”) exercises control over its subsidiaries listed in Note 12. The parent and the subsidiaries are collectively referred to as the “consolidated group” and are constituent parts of the consolidated financial statements. Accordingly, the subsidiaries are considered related parties in the separate financial statements of the parent entity rather than in the consolidated financial statements. Cenvet Group Holdings Limited is an unlisted public company. Despite a relatively large number of shareholders, a director (L Bloom) and his spouse collectively own 92% of the company and are therefore considered related parties.
b.
Key management personnel Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity is considered key management personnel. For details of disclosures relating to key management personnel, refer to Note 6: Key Management Personnel Compensation.
c.
Other related parties Other related parties include close family members of key management personnel and entities that are controlled or jointly controlled by those key management personnel individually or collectively with their close family members.
d.
Transactions with related parties Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. The following transactions occurred with related parties: Premises lease: The lessor of the company’s principal place of business is a close member of the director’s family. The premises are leased under a five year term expiring 31 October 2018. Rent paid for the year amounted to $407,280. Line of credit: The company utilised a line of credit made available by a director. The line provides for up to 55 days credit from transaction date. The amount transacted during the reporting period was $902,400 with $41,950 payable at year end. 2015
2014
$
$
(29,845)
(79,747)
(211,299)
156,582
Loans to and from related parties: Net loan from L Bloom (Director) Net loan to L Bloom’s spouse*
*Payable for collecting funds upon sale of shares. This money has been paid post year end.
Cenvet Group Holdings Annual Report 2015
Page 39 of 47
55
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 21: RELATED PARTY TRANSACTIONS Sales and Purchases: Director L Bloom has interests in customers of the Group. Transactions with those entities were sales of $531,507. Director S Haynes has interests in customers of the Group. Transactions with those entities were sales of $1,682,721. Director M Quirk has interests in customers of the Group. Transactions with those entities were sales of $5,406,625. 2015
2014
No.
No.
31,818,239
30,844,211
266,039
257,895
-
-
31,924,653
30,952,368
106,416
103,158
2015
2014
Directors fees paid:
$
$
L Bloom
-
-
S Haynes
32,850
32,775
M Quirk
32,850
32,775
Shareholdings of Directors in parent entity: L Bloom S Haynes M Quirk L Bloom - relatives L Bloom – super fund
56
Page Holdings 40 of 47Annual Report 2015 Cenvet Group
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 NOTE 22: CAPITAL AND LEASING COMMITMENTS Consolidated Group 2015
2014
$
$
not later than one year
168,547
334,443
between one and five years
191,863
180,716
Minimum lease payments
360,410
515,159
Less future finance charges
(24,260)
(31,362)
Present value of minimum lease payments
336,150
483,797
not later than one year
1,048,514
1,078,269
between one and five years
2,189,708
1,869,279
3,238,222
2,947,548
(a) Finance Lease Commitments Leasing commitments capitalised in the financial statements Payable:
(b) Operating Lease Commitments Non-cancellable operating leases contracted for but not capitalised in the financial statements Payable – minimum lease payments:
There are 4 property leases in place; each is non-cancellable, expiring at various dates in the future, with 3 to 5 year terms. Contingent rental provisions within the lease agreements require that the minimum lease payments shall be increased by the lower of the consumer price index (CPI) or 3.5% per annum. An option exists to renew the leases at the end of the term for an additional period.
Cenvet Group Holdings Annual Report 2015
Page 41 of 47
57
Cenvet Group Holdings Limited and Controlled Entities NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015
Cenvet Group Holdings Limited and Controlled Entities
NOTE 23: CASH FLOW INFORMATION NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2015 2015 NOTE 23: CASH FLOW INFORMATION Reconciliation of Cash Flow from Operations with Profit after Income Tax Profit after income tax Reconciliation of Cash Flow from Operations with Non-cash in profit: Profit afterflows Income Tax – depreciation Profit after income tax – lossinon disposal of plant and equipment Non-cashnet flows profit: –
other depreciation
Changes in assets liabilities: – net loss onand disposal of plant and equipment –
(increase) decrease in receivables other
– decrease in other assets Changes(increase) in assets and liabilities:
2014
$
$
2015
2014
$ 556,959
$ 288,277
1,105,829 556,959
1,201,819 288,277
17,576
61,151
81,001 1,105,829
(57,440) 1,201,819
17,576
61,151
(1,229,993) 81,001
(857,266) (57,440)
(14,090)
136,382
(3,832,923) (1,229,993)
(755,188) (857,266)
1,237,126 (14,090)
(54,330) 136,382
137,758 (3,832,923)
9,566 (755,188)
–
(increase) decrease in inventories receivables
–
increase payables (increase)(decrease) decrease in other assets
–
increase provisions (increase)(decrease) decrease in inventories
–
increase (decrease) in income tax payable payables
403,688 1,237,126
269,736 (54,330)
–
(increase) decrease in deferred tax asset increase (decrease) provisions
(213,760) 137,758
11,902 9,566
–
increase (decrease) in income tax payable
(1,750,831) 403,688
254,609 269,736
–
(increase) decrease in deferred tax asset
(213,760)
11,902
(1,750,831)
254,609
NOTE 24: CONTINGENT LIABILITIES Estimates of the potential financial effect of contingent liabilities that may become payable: Guarantees: NOTE 24: CONTINGENT LIABILITIES Guarantees relationeffect to amounts extended by Estimates ofare the provided potential in financial of contingent liabilities that may become payable: our bankers under provisions relating to operating property Guarantees: 109,101 leases Guarantees are provided in relation to amounts extended by our bankers under provisions relating to operating property 109,101 Contingent Liability: leases
109,101 109,101
The Directors are not aware of any contingent liabilities to disclose at year end or at the date of signing this report. Contingent Liability: The Directors are not aware of any contingent liabilities to disclose at year end or at the date of signing this report. NOTE 25: EVENTS AFTER THE REPORTING PERIOD
On 17 July 2015 the group acquired two Holdings veterinary hospitals for $2,500,000. No other matters or circumstances Cenvet Group Limited and Controlled Entities have arisen since the end of the financial year which significantly affected or may significantly affect the operations NOTE 25: EVENTSgroup, AFTERthe THE REPORTING PERIOD or the state of affairs of the consolidated group in future of the consolidated results of those operations, On 17 July 2015 the group acquired two veterinary hospitals for $2,500,000. No other matters or circumstances financial years. have arisen since the end the financial yearSTATEMENTS which significantly affected or mayENDED significantly affect2015 the operations NOTES TOofTHE FINANCIAL FOR THE YEAR 30 JUNE of the consolidated group, the results of those operations, or the state of affairs of the consolidated group in future financial years. NOTE 26: COMPANY DETAILS
The registered office of the company is: Cenvet Group Holdings Limited 26 Binney Road, Kings Park NSW 2148 The principal place of business: Cenvet Group Holdings Limited 26 Binney Road, Kings Park NSW 2148
Page 42 of 47
Page 42 of 47
58
Cenvet Group Holdings Annual Report 2015
AUDITOR’S INDEPENDENCE DECLARATION UNDER S 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF CENVET GROUP HOLDINGS LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015 there have been no contraventions of: i.
the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii.
any applicable code of professional conduct in relation to the audit.
CIB Accountants & Advisers Chartered Accountants
Radlee Moller Partner th
Dated this 20 day of October 2015 Parramatta, NSW
Page 7 of 47
Cenvet Group Holdings Annual Report 2015
59
Cenvet Group Holdings Limited and Controlled Entities DIRECTORS’ DECLARATION In accordance with a resolution of the directors of Cenvet Group Holdings Limited, the directors of the company declare that: 1.
2.
The financial statements and notes, as set out on pages 24 to 58, are in accordance with the Corporations Act 2001 and: a.
comply with Australian Accounting Standards – Reduced Disclosure Requirements; and
b.
give a true and fair view of the financial position as at 30 June 2015 and of the performance for the year ended on that date of the consolidated group.
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
Director Lionel Bloom
Sam Haynes
th
Dated this 20 day of October 2015
60
Cenvet Group PageHoldings 44 of 47Annual Report 2015
Report on the Financial Report We have audited the accompanying financial report of Cenvet Group Holdings Limited (the company), which Cenvet Group Holdings Limited and Controlled Entities comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the CENVET GROUP aHOLDINGS LIMITED ANDpolicies CONTROLLED ENTITIES year then ended, notes comprising summary of significant accounting and other explanatory information, AUDITOR’S REPORT TO THEthe MEMBERS CENVET GROUP andINDEPENDENT the directors’ declaration, of the consolidated entity comprising company and OF the entities it controlled at the HOLDINGS LIMITED year’s end or from time to time during the financial year. Report onResponsibility the Financialfor Report Directors’ the Financial Report We have audited the accompanying financial report of Cenvet Group Holdings Limited (the company), which The directors of the company are responsible for the preparation of the financial report that gives a true and fair view comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of in accordance with Australian Accounting Standards – Reduced Disclosure Requirements and the Corporations Act comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the 2001 and for such internal control as the directors determine is necessary to enable the preparation of a financial year then ended, notes comprising a summary of significant accounting policies and other explanatory information, report that is free from material misstatement, whether due to fraud or error. and the directors’ declaration, of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year. Auditor’s Responsibility Our responsibility is to express opinionReport on the financial report based on our audit. We conducted our audit in Directors’ Responsibility for the an Financial accordance with Australian Auditing Standards. These standards require that we comply with relevant ethical The directors relating of the company are responsible forplan the preparation theaudit financial report that gives assurance a true and about fair view requirements to audit engagements and and performofthe to obtain reasonable in accordance with Australian Accounting Standards – Reduced Disclosure Requirements and the Corporations Act whether the financial report is free from material misstatement. 2001 and for such internal control as the directors determine is necessary to enable the preparation of a financial An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report that is free from material misstatement, whether due to fraud or error. report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to Auditor’s Responsibility design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accordance with Australian Auditing Standards. These standards require that we comply with relevant ethical accounting policies used and the reasonableness of accounting estimates made by the directors, as well as requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance about evaluating the overall presentation of the financial report. whether the financial report is free from material misstatement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial opinion. report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’s preparation and fair presentation of the financial report in order to Independence design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. 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 financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s Opinion In our opinion the financial report of the company is in accordance with the Corporations Act 2001, including: a. b.
Group and Controlled Entities giving a trueCenvet and fair view of theHoldings company’s Limited and consolidated entity’s financial positions as at 30 June 2015 and of their performance for the year ended on that date; and complying with Australian Accounting Standards – Reduced Disclosure Requirements (including Australian Accounting Interpretations) and the Corporations Regulations 2001.
CIB ACCOUNTANTS & ADVISERS
Auditor’s Opinion
Chartered Accountants
In our opinion the financial report of the company is in accordance with the Corporations Act 2001, including: a.
of 472015 giving a true and fair view of the company’s and consolidated entity’s financial positions as Page at 3045 June and of their performance for the year ended on that date; and
b.
complying with Australian Accounting Standards – Reduced Disclosure Requirements (including Australian Accounting Interpretations) and the Corporations Regulations 2001.
Radlee Moller Partner Parramatta, NSW th
Dated this 20 day of October 2015
Cenvet Group Holdings Annual Report 2015
Page 45 of 47
61
END NOTES 1. IBISWorld industry report M690, Veterinarian Services in Australia, July 2015. 2. IBISWorld industry report OD5128 – Pets and Pet Supplies Retailers in Australia, December 2014. 3. Contribution of the pet care industry to the Australian economy, 7th edition, 2010, Australian Companion Animal Council
62
Cenvet Group Holdings Annual Report 2015
CORPORATE DIRECTORY Board of Directors Mr Lionel Bloom Chairman and Chief Executive Officer Dr Sam Haynes Non-executive Director Mr Michael Quirk Non-executive Director Mr Jason Phillips Non-executive Director Mr Danny Putica Company Secretary
Registered Office Address 26 Binney Road Kings Park NSW 2148
Principal Place of Business 26 Binney Road Kings Park NSW 2148
Auditor CIB Accountants and Advisor Suite 6, 5-7 Ross Street Parramatta NSW 2150
Lawyer Minter Ellison Governor Maquarie Tower 1 Farrer Place Sydney NSW 2000
www.cenvet.com.au Shareholder Enquiries Locked Bag 4365 Blacktown BC NSW 2148 shareholders@cenvet.com.au
Cenvet Group Holdings Annual Report 2015
63
CENVET GROUP HOLDINGS LIMITED P. 02 9679 5777 F. 02 9679 5767 E. NSWsales@cenvet.com.au 26 Binney Road, Kings Park NSW 2148
www.cenvet.com.au