Download - Paragon Reports and Accounts 09
AnnuAl RepoRt & AccountsA Positive Outlook
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contents
01 Chairman’s statement04 Director’s report08 Statement of director’s responsibilities09 Group board of directors10 Independent auditors report12 Results13 Group statement of total recognised gains and losses13 Reconciliation of shareholders’ funds14 Group balance sheet15 Company balance sheet16 Group statement of cashflows18 Notes to the financial statements
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Chairman’s statement
our results refleCt a great deal of good work and the building of an even stronger foundation for the Paragon grouP.
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2 Paragon Annual Report & Accounts 2009
overviewI am proud to present our results for the year as these reflect a great deal of good work and the building of an even stronger foundation for the Paragon Group. In the year we made particular progress on reshaping our French business following the acquisition of Lithotech in the prior year whilst continuing to respond positively to our customers’ needs across Europe. I look forward with optimism to a future which will present many opportunities which our Group is very well placed to respond to in an effective and value enhancing way.
Challenging timesLike most businesses across the globe, the 12 months ending 30 June 2009 were a very challenging year for all, including the Paragon Group. Conditions in both our own market and the broader macro-economic environment placed considerable pressure on some of our operating divisions. We are satisfied, however, with our performance across the Group in the face of these challenges and wish to record the Board’s gratitude to all stakeholders in achieving this outcome.
financial resultsDespite the increased pressure on pricing and falling demand in our markets, Paragon has maintained revenue, in constant currency terms, in excess of €167 million. This represents a fall of just under 3.5% and should be viewed in the context of our ongoing strategy of discontinuing unprofitable business lines.
Of far greater focus for the Board is our underlying profitability and we are pleased to report that this has been maintained with a continuing operating margin of 5.5% and cash flow from operations in excess of €9.6 million. This in turn has seen Paragon reduce Net Debt by 14% and maintain its robust balance sheet. Critical to this progress has been our tight working capital management and return-on-investment driven capital expenditure policies.
As at 30 June 2009, the Group was backed by tangible assets of in excess of €30 million and shareholders funds of €35 million. This balance sheet strength underpins our strategy of consolidation and positions us favourably to continue to take advantage of the difficult trading conditions across all our markets.
Chairman’s statement CONTINUED
ConsolidationParagon remains committed to its strategy of consolidation and during the financial year we continued to integrate previously acquired businesses, while investigating further acquisition targets for consolidation onto our platform.
During 2009 we completed the integration of the profitable businesses rescued from Lithotech into our French businesses and the closure of the remaining. We have now successfully salvaged a profitable business and valuable real estate assets.
While none of the other businesses reviewed during 2009 met our acquisition criteria, we did make one further successful acquisition just after the year end. On 4 August 2009 Paragon announced the acquisition out of administration of Ward Knowles, a specialist business forms supplier in the UK. The Ward Knowles brand has over 100 years of expertise within the print industry and long standing relationships with major print management companies making it a suitable investment for Paragon. This acquisition further strengthens our position in the market and adds another manufacturing facility to our portfolio. As part of the investment, Paragon was able to rescue 70 jobs in the facility and is looking forward to growing the business with the help of the existing management team.
PeP - Paragon e-commerce PlatformDuring the year we further expanded the functionality of our proprietary e-commerce platform (PEP), with powerful document and image generation, enabling integrated cross-media campaigns of email, SMS, personalised web and digital print images. This was complemented by the on-going focus on cost, efficiency and enhancing our customers' experience in the use of this plug and play, multi-lingual management system that continues to secure more customers and provide greater efficiency. During the year we further expanded our ERP systems, directly integrating presses at our larger production sites. This enhanced our performance management and cost reduction programmes.
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Paragon Annual Report & Accounts 2009 3
outlookThe current trading environment is not easy and we do not expect it to improve in the near term. While this puts pressure on our operating businesses, we are confident in our proven management team's ability to profitably manage businesses through the down cycle and industry contraction. From a strategic perspective, this challenging environment is favourable to Paragon as it will result in further opportunities for consolidation and value extraction.
The climate in which we find ourselves permits only one direction - that is forward. It requires all levels of management and staff to pull together and deliver the best service to our customers, extracting the best support from our suppliers and thus ensuring we remain strong and even more robust as we exit this challenging economic environment.
Conor J donnellyExecutive Chairman of the Board
Date: 11th September 2009
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4 Paragon Annual Report & Accounts 2009
direCtors' rePort
AnnuAl TuRnoveR
€160m eBITDA
€10mneT AsseTs
€36m
Paragon is looking forward to a future that will present many opportunities to continue building an even stronger foundation.
Like most businesses across the Globe, the last financial year was challenging, with conditions in both our market and the broader macro-economic environment placing pressure on our operations. Paragon's demonstrated capacity to deal with costs in a difficult economic environment, has allowed it to emerge stronger, projecting the Group towards new and higher added-value products and services.
Over the last 12 months, Paragon has demonstrated its capability to adapt its offering and move further up the supply chain providing its customers with bespoke technology-led solutions.
From call centre operations, marketing campaigns and mailings management to the development of tailored dynamic publishing web portals, we have put our customers’ needs first. Our objective has always been to concentrate on what is best for our customers’ business; creating further efficiencies and reducing costs.
“the further develoPment of our e-CommerCe offering through the introduCtion of dynamiC Publishing, has given our Customers aCCess to an invaluable marketing CommuniCations tool allowing them to Control their budget and get suPerior value from their marketing CamPaigns.“
Conor donnellyexecuTIve chAIRmAn
“we have been true Partners to our Customers at a time whiCh was very diffiCult for them. they needed more than ever to work with a ComPany that was finanCially strong and that understood their business Challenges.“
iain blaCkGRouP sAles & mARkeTInG DIRecToR
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Paragon Annual Report & Accounts 2009 5
The directors present their report and the Group financial statements for the year to 30 June 2009. The financial statements are stated in Euros (€000) as this is the functional currency of the Group.
results and dividendsThe operating profit on continuing activities was €8,697,000 (2008: €10,813,000) while an operating loss of €2,828,000 (2008: €970,000) was suffered on discontinued activities.
The profit on ordinary activities after tax amounted to €1,528,000 (2008: €5,353,000).
EBITDA was €9,408,000 (2008: €14,907,000).
Operating cashflow from operations was €9,671,000 (2008: €7,485,000)
The cash position at the end of the year was €11,594,000 (2008: €12,813,000).
Net debt was reduced in the year by €3,607,000 (2008: €52,000)
The directors do not recommend the payment of a dividend.
Principal activities and review of the businessThe Group is engaged in the provision of solutions to their clients' printing, document management, tickets, labels and related fulfilment and transaction needs.
The performance of the Group reflects the impact of very different economic forces in the past year.
The results for the year can be distinguished between continuing activities and those that were exited and discontinued.
Sales from continuing activities have declined during the year as:
• the UK operation's sales that are translated to euro for reporting purposes have suffered an adverse currency hit of €7,000,000 due to the continued decline in sterling.
• the global recession and credit crunch took its toll on our operations from quarter 2.
Whilst operating profits (EBIT) from continuing operations declined, they were satisfactory in light of these conditions.
The discontinued operations include all activities that were exited during the year as a result of the fundamental reorganisation in France. These activities did not meet our criteria for profitability. This process has cost the Group €3,772,000. This includes employee redundancy, closure of one production facility, downsizing of our Parisian operations, converting the Bailleul facility from industrial to a state of the art warehouse, service and distribution centre, relocation of machinery and equipment, associated charges, integration of the Paragon Lithotech Services SA trade into our existing French operations and radically reshaping and redirecting the remaining activities.
The operations in Romania and the UK traded well and provide much optimism for the future. The French operations have now been placed on a sound footing and together with all companies in the group we believe that they have exciting prospects in the coming years.
Our cash and debt balances have been carefully husbanded in light of tight credit markets. Net debt was reduced by 14% during the year as a result of cash generated from operations and through careful and tight management of working capital across all companies.
Our credit facilities contain a sensible balance of borrowings that combine medium and long term repayment schedules. No facilities are due to end or be renegotiated for several years and the Group has comfortably met its financial covenant targets with considerable headroom to spare.
market riskOvercapacity continues to be a factor in the market. The prevailing economic downturn has accelerated the number of business failures particularly those with high levels of gearing that have been unable to refinance in the current challenging credit environment. The Group expects these conditions to persist throughout the year ending 30 June 2010.
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6 Paragon Annual Report & Accounts 2009
direCtors’ rePort CONTINUED
The Group's strong financial footing, supported by its balance sheet and coupled with its operational experience of market downturns, means Paragon is confident it will take advantage of the current competitive market conditions. The Group expects further consolidation opportunities to present themselves during the coming year. In addition, Paragon's scale and diversity enables the Group to maintain investment in product and service enhancements despite competitive trading conditions.
future developmentsParagon continues to evolve the scope and sophistication of the products and services offered in its market. This is driven by investment in technology solutions to allow the Group to operate more efficiently and to integrate closer with its customer base. On 4 August 2009, Paragon acquired Ward Knowles out of administration. A specialist business forms supplier in the UK, the Ward Knowles brand has over 100 years of expertise within the print industry and long standing relationships with major print management companies.
Paragon remains well positioned to take advantage of any further consolidation in its market.
research and developmentThe Group carries out Research and Development both internally and through a number of international arrangements and collaborations.
Political and charitable contributionsThere were no charitable or political contributions made during the year.
disabled employeesThe Group gives full consideration to applications for employment from disabled persons where disabled persons can adequately fulfil the requirements of the job.
Where existing employees become disabled, it is the Group's policy wherever practicable to provide continuing employment under normal terms and conditions and provide training, career development and promotion wherever appropriate.
employee involvementThe Group is committed to involving its employees in the decisions that affect them. Regular meetings take place between local management and employees to allow a free flow of information and ideas. In addition, where practicable, the Group seeks to keep employees informed through regular meetings or newsletters.
directors The directors who served during the year were as follows:conor J DonnellyPatrick J creanIain s Blacklaurent T salmon
financial risk management policyThe main risks associated with the Group's assets and liabilities are set out below. Any other financial risks from a Paragon Group perspective are addressed on a case-by-case basis at Group level.
exchange rate riskThe Group investments and activities are mainly located within the Euro zone as well as the UK. External currency exposures are closely managed to provide a material level of cover on external foreign exchange fluctuations.
Cover is arranged through a combination of internal hedging of risks by matching sales and purchases where practical and forward contracts where considered necessary. In this current financial year the Group has recorded a non-cash exchange gain on full settlement of intra-group loans with a UK subsidiary. The directors do not expect this gain to arise again.
Price riskThere is no significant exposure to changes in the carrying value of assets and liabilities due to agreed pricing. Most price increases would be considered transferable as indicated within the trade terms agreements.
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Paragon Annual Report & Accounts 2009 7
credit riskGroup policies are aimed at minimising losses from credit risk and require that deferred terms are granted only to customers who demonstrate an appropriate payment history and satisfy creditworthiness procedures.
Individual exposures are monitored with customers subject to credit limits to ensure that the Group's exposure to bad debts is not significant. Goods may be sold on a cash-with-order basis to mitigate credit risk.
An appropriate level of credit insurance cover has been arranged in the UK to ensure that we have a cost effective means of protection against increased credit risks in the current economic environment.
The Group receives credit from funders and suppliers. Group policies are aimed at ensuring this credit is maintained at adequate levels for the purpose of funding the business operations.
liquidity riskThe Group aims to mitigate liquidity risk by managing cash generated by its operations and ensuring that adequate credit/borrowing facilities are in place. Capital expenditures and related financing of investments are approved at Group level. These are funded through a combination of internally generated cash resources and lease financing. Flexibility is maintained by retaining surplus cash in readily accessible bank accounts. Borrowing facilities are a combination of fixed term loan facilities with 8 years remaining and revolving facilities with no expiration date. Cash balances and forecasts are controlled at both local and Group level on a daily basis.
use of derivativesThe group uses forward currency contracts to reduce foreign exchange rate exposure on significant foreign currency payments. No other derivatives are used.
directors' qualifying third party indemnity provisionsThe company has granted an indemnity to one or more of its directors against liability in the event of proceedings being brought by third parties, subject to the conditions set out in the Companies Act 2006.
Such qualifying third party indemnity provision remains in force as at the date of approving the directors' report.
Creditor’s payment policy and practiceIt is the Group's policy that payments to suppliers are made in accordance with those terms and conditions agreed between the Group and its suppliers, provided that all trading terms and conditions have been complied with. At 30 June 2009, the Group had an average of 93 days (2008: 110 days) of purchases outstanding in trade creditors.
disclosure of information to the auditorsSo far as each person who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and the Group's auditor, each director has taken all the steps that he is obliged to take as a director in order to make himself aware of any relevant audit information and to establish that the auditor is aware of that information.
auditorsA resolution to re-appoint Ernst & Young LLP as auditors will be put to the forthcoming Annual General Meeting.
By order of the Board
Patrick J CreanChief Executive Officer and Secretary
Date: 11th September 2009
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8 Paragon Annual Report & Accounts 2009
statement of direCtors’ resPonsibilities
The directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and accounting estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
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Paragon Annual Report & Accounts 2009 9
grouP board of direCtors
1. Conor J donnellyExecutive Chairman
2. Patrick J CreanChief Executive Officer
3. laurent t salmonGroup Finance Director
4. iain s blackGroup Sales Development Director
1. 2.
3. 4.
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10 Paragon Annual Report & Accounts 2009
indePendent auditors’ rePortto the members of Paragon Group Limited
We have audited the Group and parent Company financial statements of Paragon Group Limited for the year ended 30 June 2009 which comprise the Group Consolidated Income Statements, the Group statement of Total Recognised Gains and Losses, Reconciliation of Shareholders' Funds, the Group and Company Balance Sheets, the Group statement of Cash Flows and the related notes I to 27. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company's members, as a body, in accordance with Sections 495 and 496 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
respective responsibilities of directors and auditorsAs explained more fully in the Directors' Responsibilities Statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group's and the parent company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.
opinion on financial statementsIn our opinion the financial statements:
• give a true and fair view of the state of the group's and the parent company's affairs as at 30 June 2009 and of the group's profit for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
opinion on other matter prescribed by the Companies act 2006In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
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Paragon Annual Report & Accounts 2009 11
matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
mark hattonfor and on behalf of Ernst & Young LLP, Registered Auditor
Date: 11th September 2009
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12 Paragon Annual Report & Accounts 2009
results.
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Paragon Annual Report & Accounts 2009 13
grouP Consolidated inCome statementfor the year ended 30 June 2009
Notes
2009€000
2008€000
turnover
Continuing 2 157,540 165,612
Discontinued 2,607 7,055
160,147 172,667
Cost of sales
Continuing 117,634 119,076
Discontinued 4,301 6,859
121,935 125,935
gross profit
Continuing 39,906 46,536
Discontinued (1,694) 196
38,212 46,732
selling and distribution costs
Continuing 21,056 24,040
Discontinued 555 682
21,611 24,722
administrative expenses
Continuing 10,153 11,683
Discontinued 579 484
10,732 12,167
operating profit (ebit)
Continuing 8,697 10,813
Discontinued (2,828) (970)
5,869 9,843
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14 Paragon Annual Report & Accounts 2009
grouP statement of total reCognised gains and lossesfor the year ended 30 June 2009
grouP reConCiliation of shareholders’ fundsfor the year ended 30 June 2009
2009€000
2008€000
Total recognised gains and losses (770) 992
Total movements during the year (770) 992
Opening shareholders’ funds 36,304 35,312
Closing shareholders’ funds 35,534 36,304
Notes
2009€000
2008€000
Costs of fundamental reorganisation 4 (3,772) (992)
Gain on disposal of fixed assets 4 1 71
Gain on disposal of trade 4 50 -
Loss on termination of subsidiary 4 - (72)
Non-operating exceptional items (3,721) (993)
Net interest payable and similar charges 7 (1,616) (2,104)
Profit on ordinary activities before tax 532 6,746Tax on profit on ordinary activities 8 996 (1,393)
Profit for the year 1,528 5,353
Exchange difference on retranslation of net assets of subsidiaries* (1,897) (3,486)
Actuarial loss recognised on pension scheme (note 24) (557) (1,215)
Deferred tax arising thereon 156 340
total recognised gains and losses relating to the year (770) 992
* Sterling has continued its decline in value with the Euro since the prior year-end consolidated financial statements were prepared. As a result of this decline in Sterling, a non-cash exchange loss arises on consolidation of the Group's UK subsidiaries. The directors expect this to reverse in the near future.
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Paragon Annual Report & Accounts 2009 15
grouP Consolidated balanCe sheetat 30 June 2009
Notes
2009€000
2008€000
fixed assets
Tangible assets 12 30,493 33,953
Positive goodwill and development expenditure 28,356 30,453
Negative goodwill (2,127) (6,289)
Intangible assets 11 26,229 24,164
56,722 58,117
Current assets
Stocks 14 12,362 15,974
Debtors 15 33,037 45,215
Deferred tax asset 9 4,579 3,749
Cash at bank and in hand 11,594 12,813
61,572 77,751
Creditors: amounts falling due within one year 16 (53,975) (64,199)
net current assets 7,597 13,552
total assets less current liabilities 64,319 71,669
Creditors: amounts falling due after more than one year 17 (23,369) (32,746)
Deferred income 18(a) (648) (728)
Provisions for liabilities and charges 18(b) (4,571) (1,961)
Pension (deficit)/surplus 24 (197) 70
net assets 35,534 36,304
Capital and reserves
Called up share capital 21 35,000 35,000
Profit and loss account 22 534 1,304
equity shareholders’ funds 35,534 36,304
Conor J donnellyExecutive Chairman
Date: 11th September 2009
Patrick J CreanChief Executive Officer
laurent t salmonGroup Finance Director
Approved by the Board
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16 Paragon Annual Report & Accounts 2009
ComPany balanCe sheetat 30 June 2009
Notes
2009€000
2008€000
fixed assets
Investment 13 74,879 74,879
Current assets
Debtors 15 - 160
- 160
Creditors: amounts falling due within one year 16 (2,262) (2,732)
net current liabilities (2,262) (2,572)
total assets less current liabilities 72,617 72,307
net assets 72,617 72,307
Capital and reserves
Called up share capital 21 35,000 35,000
Profit and loss account 22 37,617 37,307
equity shareholders’ funds 72,617 72,307
Conor J donnellyExecutive Chairman
Date: 11th September 2009
Patrick J CreanChief Executive Officer
laurent t salmonGroup Finance Director
Approved by the Board
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Paragon Annual Report & Accounts 2009 17
grouP statement of Cash flowsfor the year ended 30 June 2009
Notes
2009€000
2008€000
net cash inflow from operating activities (excluding fundamental restructuring) 10,734 8,381Cash outflow in respect of fundamental restructuring (1,063) (896)
net cash inflow from operating activities 23(a) 9,671 7,485
return on investments and servicing of finance
Interest received from banks 47 18
Interest paid to banks (1,457) (2,011)
Interest element of finance lease payments (217) 303
Interest of shareholders' loans (195) -
(1,822) (2,296)
taxation
Corporation tax paid (609) (485)
Capital expenditure and financial investments
Payments to acquire tangible fixed assets (1,313) (2,285)
Receipt from sales of tangible fixed assets 36 447
Cash on disposal of intangibles 50 18
(1,227) (1,820)
acquisitions and disposals
Cash paid for acquisition of business (1,450) (1,959)
(1,450) (1,959)
equity dividends paid - (40)
net cash inflow before financing 4,563 885
financing 23(b)
Loans received from shareholders - 1,000
Repayment of shareholder’s loans (705) (1,462)
Other loans and borrowings 870 3,744
Repayment of capital element of finance leases (1,826) (1,887)
Repayment of other loans (5,654) (1,524)
net cash outflow on financing (7,315) (129)
net (decrease)/increase in cash after financing movements (2,752) 756
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18 Paragon Annual Report & Accounts 2009
reconciliation of net cash flow to movement in net debt
Notes
2009€000
2008€000
Net (decrease)/increase in cash after financing movements 23(b) (2,752) 756
Repayment of capital element of finance leases 23(b) 1,826 1,270
Repayment of capital element of finance leases acquired (note 13) 23(b) - 617
Decrease/(increase) in bank loans and other borrowings 23(b) 4,784 (2,220)
Shareholders' loans 23(b) 705 462
New finance leases 23(b) (1,334) (546)
reduction in net debt arising from cash flows 3,229 339
Exchange differences 23(b) 221 1,276
Debt acquired on Acquisition (note 13) 23(b) 187 (1,472)
Other movements 23(b) (30) (91)
reduction in net debt 3,607 52
net debt at 1 July 23(b) (25,708) (25,760)
net debt at 30 June 23(b) (22,101) (25,708)
grouP statement of Cash flowsfor the year ended 30 June 2009
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Paragon Annual Report & Accounts 2009 19
notes to the finanCial statementsat 30 June 2009
1. accounting policiesBasis of preparationThe financial statements are prepared under the historical cost convention. The financial statements are prepared in accordance with applicable accounting standards.
The Euro/Sterling exchange rate at 30 June 2009 was 1.173 (2008: 1.264).
The directors have amended the format of the Group consolidated income statement compared to last year. They are of the opinion that this summarises the results of the Group more effectively.
Basis of consolidationThe Group financial statements consolidate the financial statements of Paragon Group Limited and all of its controlled subsidiary undertakings drawn up to 30 June 2009. No profit and loss account is presented for Paragon Group Limited as permitted by Section 408 of the Companies Act 2006.
GoodwillPositive goodwill arising on acquisitions is capitalised, classified as an asset on the balance sheet and amortised on a straight-line basis over its useful economic life. It is reviewed for impairment at the end of the first full financial year following the acquisition and in other periods if events or changes in circumstances indicate that the carrying value may not be recoverable.
Negative goodwill, being the excess of the fair value of assets and liabilities acquired over the cost of their acquisition, is capitalised and classified on the balance sheet as a negative fixed asset. It is amortised in the periods in which the non-monetary assets acquired are depreciated or sold.
DepreciationDepreciation is provided on all tangible fixed assets, at rates calculated to write off the cost or valuation, less estimated residual value based on prices prevailing at the date of acquisition, of each asset evenly over its expected useful life as follows:
Freehold buildings - 20 to 50 years
Machinery and equipment - 3 to 20 years
Fixtures and fittings - 10 to 20 years
Costs incurred in the development of IT systems are capitalised up to the point at which the system is ready for use. These include an element of internal costs but exclude general overheads. The carrying values of tangible fixed assets are reviewed for impairment in periods if events or changes in circumstances indicate the carrying values may not be recoverable.
Research and developmentResearch and development expenditure is written off as incurred, except that development expenditure incurred on an individual project is carried forward, in intangible assets, when its future recoverability can reasonably be regarded as assured. Any expenditure carried forward is amortised in line with the expected future sales from the related project.
Government grantsGrants relating to expenditure on tangible fixed assets are credited to deferred income and amortised to the profit and loss account over the useful economic lives of the assets to which they relate.
stock and work in progressStock and work in progress has been valued at the lower of cost and net realisable value. The cost of manufactured goods and work in progress includes direct materials and an appropriate proportion of overhead expenses.
Deferred taxationDeferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the following exceptions:
• provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, and gains on disposal of fixed assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold;
• provision is made for deferred tax that would arise on remittance of the retained earnings of overseas subsidiaries, associates and joint ventures only to the extent that, at the balance sheet date, dividends have been accrued as receivable;
• deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.
InvestmentsInvestments are stated at cost less provision for diminution in value.
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20 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2008
1. accounting policies (continued)leasing and hire purchaseAssets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the Group, and hire purchase contracts are capitalised in the balance sheet and are depreciated over the shorter of their useful lives or the lease term. The capital elements of future obligations under leases and hire purchase contracts are included as liabilities in the balance sheet. The interest element of rental obligations is charged in the profit and loss account over the periods of the leases and hire purchase contracts and represents a constant proportion of the balance of capital repayments outstanding. Rentals payable under operating leases are charged in the profit and loss account on a straight-line basis over the lease term.
Foreign currencies
GroupThe financial statements of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. The exchange difference arising on the re-translation of opening net assets is taken directly to reserves. All other translation differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings to the extent that they are used to finance or provide a hedge against Group equity investments in foreign enterprises, which are taken directly to reserves together with the exchange difference on the net investment in these enterprises. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in reserves.
companyTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account with the exception of differences on foreign currency borrowings, to the extent that they are used to finance or provide a hedge against foreign equity investments, which are taken directly to reserves together with the exchange difference on the carrying amount of the related investments. Tax charges and credits attributable to exchange differences on those borrowings are also dealt with in reserves.
PensionsIn the United Kingdom, the Group operates a defined benefit pension scheme. For this scheme, the amount charged to the profit and loss account in respect of pension costs is the service cost of providing the benefits accrued in the period plus interest payable on pension scheme liabilities. The amount credited to the profit and loss account is the return on pension scheme assets. This scheme was frozen to future accruals from 3 August 2005.
Defined benefit schemes are funded with the assets of the scheme held in a separate trustee administered fund. The surplus or deficit on the defined benefit scheme is shown on the balance sheet as either an asset or liability respectively. The actuarial loss or gain is the movement of the surplus or deficit in the period (adjusted for the profit and loss account items) and is recognised in the statement of total recognised gains and losses.
In the United Kingdom, the Group also operates a number of defined contribution schemes. Contributions are charged in the profit and loss account in the period that they are incurred.
Outside of the United Kingdom, the Group participates in a number of state-sponsored and industry schemes. These schemes are similar to defined contribution schemes. Contributions are charged in the profit and loss account in the period that they are incurred and where the schemes do not require contributions to be immediately paid to an outside agency, they are treated as long term liabilities until they are required to be paid.
Finance costsThe finance cost recognised in the profit and loss account in respect of capital instruments other than equity shares is allocated to periods over the terms of the instrument at a constant rate on the carrying amount.
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Paragon Annual Report & Accounts 2009 21
notes to the finanCial statementsat 30 June 2009
2. turnover and segmental analysisTurnover represents the amounts derived from the provision of goods and services which fall within the Group’s ordinary activities, stated net of value added tax. The Group operates in one principal area of activity that of document management, printing labels and printing services.
An analysis of turnover by geographical market is given below:
2009€000
2008€000
Europe 155,582 165,520
Rest of the world 4,565 7,147
160,147 172,667
3. operating profitThis is stated after charging/(crediting):
2009€000
2008€000
Amortisation of goodwill (note 11) 2,062 1,862
Release of negative goodwill (note 11) (3,345) (2,522)
(1,283) (660)
Foreign exchange gain* (1,285) (2,365)
Auditors’ remuneration - audit services UK** 110 132
- audit services - overseas 15 15
- non-audit services - UK 120 92
- non-audit services - overseas 12 12
Depreciation of owned assets (note 12) 3,147 4,125
Depreciation of assets held under finance leases and hire purchase contracts (note 12) 1,670 1,597
Release of government grants (note 18(a)) (28) (33)
Amortisation of development expenditure (note 11) 33 35
Operating lease rentals - land and buildings 1,428 1,047
- plant and machinery 1,561 1,623
Non-audit services include €132,000 (2008: €104,000) relating to taxation services.
*Includes exchange gains on Inter-Group loan balances denominated in Sterling.
**UK audit fees include €5,000 (2008: €5,000) in relation to the Company.
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22 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2009
4. non-operating exceptional items
2009€000
2008€000
Gain on disposal of fixed assets 1 71
Gain on disposal of trade 50 -
Loss on termination of subsidiary - (72)
Costs of fundamental reorganisation (3,772) (992)
Non-operating exceptional items (3,721) (993)
Total exceptional items (3,721) (993)
Reorganisation costs of €3,772,000 comprise severance and industrial reorganisation costs incurred in the fundamental restructuring of the operations in France.
5. staff costs
2009€000
2008€000
Wages and salaries 33,181 37,156
Social security costs 10,626 10,421
Pension charge - defined benefit scheme - 32
Other pension costs/(credits) 257 (136)
44,064 47,473
The number of full-time, part-time and temporary employees at the year-end was:
2009 No.
2008 No.
Production 752 823
Administration 358 413
1,110 1,236
R&A09-10.indd 22 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 23
notes to the finanCial statementsat 30 June 2008
6. directors’ emoluments
2009€000
2008€000
Emoluments 171 377
Company contributions paid to money purchase scheme 15 15
2009 No.
2008 No.
Members of money purchase pension schemes 1 1
The emoluments from the Company of the highest paid director were €95,000 (2008: €189,000). No contributions were paid into money purchase pension schemes for the highest paid director (2008: €nil). An unrelated company was paid €nil (2008: €500,000) for the provision of services of each of the directors in relation to the acquisition of Paragon Lithotech Services SA in 2008.
7. net interest payable
2009€000
2008€000
Bank loans and overdrafts 1,465 1,868
Net interest income on pension scheme assets and liabilities (106) (171)
Interest receivable (47) (18)
Finance charge on leased assets 217 303
Amortisation of loan issue costs 30 27
Loan from shareholders 57 95s
1,616 2,104
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24 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2009
8. tax on profit on ordinary activities (a) tax on profit on ordinary activities
The tax (credit)/charge for the year is made up as follows: 2009€000
2008€000
Profit on ordinary activities before tax 532 6,746
Tax on profit on ordinary activities 996 (1,393)
Profit on ordinary activities after tax 1,528 5,353
tax on profit on ordinary activities
UK corporation tax 261 395
Foreign tax 429 650
Prior year adjustment - UK corporation tax 76 (141)
Prior year adjustment - foreign tax (13) -
Current tax charge (note 8(b)) 753 904
Deferred tax (1,749) 489
(996) 1,393
(b) factors affecting the tax charge for the year
The tax assessed on the profit on ordinary activities for the year is higher (2008: lower) than the standard rate of corporation tax in the UK. The differences are explained below:
2009€000
2008€000
Profit on ordinary activities before tax 532 6,746
Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28% (2008: 29.5%) 149 1,990
Effects of:
Disallowed expenses and non-taxable income (67) 398
Capital allowances in advance of depreciation 47 (252)
Other timing differences 188 286
Prior year adjustments to subsidiary entities 63 (141)
Capital Gains 640 -
Effect of overseas tax rates (473) (90)
Utilisation of brought forward losses 206 (1,287)
Current tax charge for year (note 8(a)) 753 904
(c) factors that may affect the future tax charges
There are tax losses carried forward as at 30 June 2009 of approximately €15,767,000 (2008: €16,053,000). These are available for offset against future taxable trading profits.
R&A09-10.indd 24 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 25
9. deferred tax
RecognisedNot
RecognisedNot
RecognisedAn analysis of the net deferred tax asset is as follows: Recognised
2009€000
2008€000
2009€000
2008€000
Accelerated capital allowances (510) (1,099) - 326
Other timing differences 563 73 - -
Tax losses 4,313 3,837 2,120 1,293
4,366 2,811 2,120 1,619
Recognised net deferred
tax asset
€000
At 1 July 2008 2,811
Credit in the year 1,801
Exchange rate differences (246)
At 30 June 2009 4,366
A deferred tax liability of €213,OOO (2008: €938,OOO) is included in creditors: amount falling due within one year (note 16). The recognised net deferred tax asset is stated net of this.
The deferred tax asset is expected to be recovered in future periods over one year from the balance sheet date.
10. Profit attributable to members of the parent companyThe profit dealt with in the financial statements of the parent company was €310,000 (2008: €640,000).
notes to the finanCial statementsat 30 June 2009
R&A09-10.indd 25 2/3/10 11:40 AM
26 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2009
11. intangible assetsGroup Development
expenditurePositive
goodwillNegativegoodwill Total
€000 €000 €000 €000
Cost:
At 30 June 2008 903 37,388 (8,811) 29,480
Fair value adjustment (note 13) - - 817 817
Exchange movements - (2) - (2)
At 30 June 2009 903 37,386 (7,994) 30,295
Amortisation:
At 30 June 2008 867 6,971 (2,522) 5,316
Amortised in the year 33 2,062 (3,345) (1,250)
At 30 June 2009 900 9,033 (5,867) 4,066
Net book value:
At 30 June 2008 36 30,417 (6,289) 24,164
At 30 June 2009 3 28,353 (2,127) 26,229
In accordance with the director’s estimate of useful lives, positive goodwill is amortised over a period of 20 years.
R&A09-10.indd 26 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 27
notes to the finanCial statementsat 30 June 2009
12. tangible fixed assetsLand and
buildings
Machineryand
equipment
Fixturesand
fittingsGroup Total
€000 €000 €000 €000
cost:
At 30 June 2008 32,393 66,103 2,196 100,692
Revision of fair values (380) (183) - (563)
Additions 367 2,122 158 2,647
Disposals - (514) (3) (517)
Exchange movements (436) (1,638) (28) (2,102)
At 30 June 2009 31,944 65,890 2,323 100,157
Depreciation:
At 30 June 2008 11,837 53,190 1,712 66,739
Charge for the year 1,451 3,254 112 4,817
Disposals - (479) (3) (482)
Exchange movements 70 (1,460) (20) (1,410)
At 30 June 2009 13,358 54,505 1,801 69,664
net book value:
At 30 June 2008 20,556 12,913 484 33,953
At 30 June 2009 18,586 11,385 522 30,493
The net book value of machinery and equipment above includes an amount of €5,044,000 (2008: €5,034,000) in respect of assets held under finance leases and hire purchase contracts.
The net book value of land and buildings above includes an amount of €2,250,000 (2008: €6,907,000) in respect of assets held under finance leases and hire purchase contracts.
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28 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2009
13. investments Details of the investments in which the Group or the Company holds more than 20% of the nominal value of any class of share capital are as follows:
subsidiary undertakings
name of companycountry of incorporation holding
Proportion of voting rights and shares held Total nature of business
Grenadier Holdings Limited England Ordinary 100% Holding company
Grenadier (UK) Limited England Ordinary 100% (6) Holding company
CD-Paragon BV Netherlands Ordinary 100% (9) Holding company
Paragon Group UK Limited England Ordinary 100% (8) Print and print management
Paragon France SAS France Ordinary 100% (2) Holding company
Paragon Identification SAS France Ordinary 100% (4) Tickets and labels
Paragon Transaction SA France Ordinary 100% (3) Print and print management
Wordcraft Digital Print Limited England Ordinary 100% (1) Dormant
Hardy of Castleford Limited England Ordinary 100% (1) Dormant
Impetus Direct Limited England Ordinary 100% (1) Dormant
Contiforme 2 SA Portugal Ordinary 25% (5) Printing
Sepedo SA Portugal Ordinary 20% (5) Card personalisation
Paragon Romania SRL Romania Ordinary 100% (1) Printing
Paragon Transaction Belgium BVBA Belgium Ordinary 100% (7) Printing
Paragon Transaction UK Limited England Ordinary 100% (7) Holding company
Paragon Print Management SAS France Ordinary 100% (6) Print management
Paragon Lithotech Services SA France Ordinary 100% (7) Print and print management
(1) Held via Paragon Group UK Limited
(2) Held via CD-Paragon BV
(3) Held via Paragon France SAS and GHL
(4) Held via Paragon France SAS
(5) Not consolidated within the Group figures, investment of CD-Paragon BV. The Group do not have a participating interest or the ability to exercise significant influence over the entities operation and financial policies.
(6) Held via Grenadier Holdings Limited
(7) Held via Paragon Transaction SA
(8) Held via Paragon Transaction UK
(9) Held via Grenadier (UK) Limited
R&A09-10.indd 28 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 29
notes to the finanCial statementsat 30 June 2009
13. investments (continued)
company 2009€000
2008€000
Cost:
At 1 July 2008 and 30 June 2009 74,879 74,879
additions
The provisional fair value adjustments recorded in relation to Paragon Lithotech S.A. that was formed on 24 October 2007 to acquire the trade and assets of Lithotech SA have been finalised.
Provisional fair value to group
€000
Adjustment€000
Final fair value
€000
Tangible fixed assets 11,252 (563) 10,689
Intangible fixed assets 368 - 368
Stocks 5,128 (458) 4,670
Borrowings due within one year (1,472) 187 (1,285)
Creditors due within one year (3,078) 17 (3,061)
Net assets 12,198 (817) 11,381
Negative goodwill arising on acquisition (8,811) 817 (7,994)
3,387 - 3,387
Discharged by:
Cash 1,959 - 1,959
Creditors 1,428 - 1,428
3,387 - 3,387
As permitted by FRS7, adjustments totaling €817,000 have been made to the provisional fair values in the 2009 financial statements. Based on third party professional valuations, the fair value of tangible fixed assets at Marne La Vallee and Rognac have been reduced. As a result of further information becoming available, the fair value of stocks, creditors and borrowings have also been amended. The total adjustment of €817,000 has been reflected as a reduction of negative goodwill that arose on acquisition.
R&A09-10.indd 29 2/3/10 11:40 AM
30 Paragon Annual Report & Accounts 2009
14. stocks
Group 2009€000
2008€000
Raw materials and consumables 2,551 3,559
Work in progress 1,242 1,111
Finished goods and goods for resale 8,569 11,304
12,362 15,974
15. debtors Group Company
2009€000
2008€000
2009€000
2008€000
Amounts falling due within one year are:
Trade debtors 29,970 42,064 - -
Other debtors 1,502 1,132 - -
Corporation tax debtor 158 488 - -
Prepayments and accrued income 891 1,058 - -
Amounts owed by group undertakings - - - 160
32,521 44,742 - 160
Amounts falling due after more than one year are: 516 473
Prepayments and accrued income 33,037 45,215
16. Creditors: amounts falling due within one year
Group Company
2009€000
2008€000
2009€000
2008€000
Bank overdraft 2,710 834 - -
Bank loans and other borrowings (note 19) 5,432 2,117 - -
Trade creditors 29,779 36,574 - -
Corporation tax 960 1,169 120 -
Other taxes and social security costs 7,075 7,391 - -
Other creditors 3,134 6,008 - 1,107
Accruals and deferred income 2,329 5,731 11 -
Finance leases and hire purchase contracts (note 20) 1,423 1,812 - -
Loan from shareholders (note 19) 920 1,625 920 1,625
Amount owed to subsidiary undertaking - - 1,211 -
Deferred tax 213 938 - -
53,975 64,199 2,262 2,732
notes to the finanCial statementsat 30 June 2009
R&A09-10.indd 30 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 31
17. Creditors: amounts falling due after more than one year
Group 2009€000
2008€000
Amounts falling due after more than one year are:
Finance leases and hire purchase contracts (note 20) 2,290 2,701
Bank loans (note 19) 20,920 29,431
Other creditors 159 614
23,369 32,746
Net debt and cash are summarised on note 23.
18. deferred income and provisions for liabilities and charges(a) deferred income
Government grants
€000
At 30 June 2008 728
Released in the year (28)
Exchange movements (52)
At 30 June 2009 648
(b) Provisions for liabilities and charges
Retirement provision
Restructuring provision
Other provision
Total provisions
€000 €000 €000 €000
At 30 June 2008 1,961 - - 1,961
Utilised in the year (180) (1,063) - (1,243)
Other movements - - 145 145
Exchange movements - - (28) (28)
(Credit)/charge in the year (36) 3,772 - 3,736
At 30 June 2009 1,745 2,709 117 4,571
notes to the finanCial statementsat 30 June 2009
retirement provisionsCertain European countries in which the Group operates oblige the employer to provide lump sum termination payments. The provisions have been calculated with reference to specified individuals who are likely to be offered this arrangement.
restructuring provisionsThis provision includes redundancy and other charges incurred on the closure and fundamental restructuring of Paragon Lithotech Services SA.
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32 Paragon Annual Report & Accounts 2009
19. loans and other borrowings
Group Amounts falling due (gross of finance costs):
2009€000
2008€000
Bank loans and other borrowings 5,432 2,117
Loan from shareholders 920 1,625
In one year or less (note 16) 6,352 3,742
In more than one year but not more than two years 5,152 5,807
In more than two years but not more than five years 10,446 18,264
In more than five years 5,399 5,467
27,349 33,280
Less: unamortised finance costs (77) (107)
27,272 33,173
Less: amounts falling due within one year (6,352) (3,742)
20,920 29,431
notes to the finanCial statementsat 30 June 2009
The bank loans and other borrowings comprise both fixed term and revolving credit facilities and are secured by fixed charges over several of the Group's fixed assets, and a floating charge over debtors.
These borrowings are shown net of unamortised issue costs of €77,000 (2008: €107,000).
€8,700,000 of the borrowings is repayable in instalments over eight years while the balance is a revolving facility with no fixed expiration date.
The main Group borrowings are denominated in Euros at a rate of 0.55% above EURIBOR while the sterling denominated borrowings are at a rate of 0.65% above LIBOR. Some other long term loans are also denominated in Euros and sterling at a rate of 1.1% above both EURIBOR and LIBOR.
R&A09-10.indd 32 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 33
notes to the finanCial statementsat 30 June 2009
20. obligations under leases and hire purchase contracts
Amounts due under finance leases and hire purchase contracts: Group
2009€000
2008€000
Amounts payable:
Within one year 1,479 2,084
In one to two years 893 1,174
In two to five years 1,646 1,193
In more than five years - 329
Less: finance charges allocated to future periods (305) (267)
3,713 4,513
Finance leases and hire purchase contracts are analysed as follows:
2009€000
2008€000
Current obligations (note 16) 1,423 1,812
Non-current obligations (note 17) 2,290 2,701
3,713 4,513
Annual commitments under non-cancellable operating leases are as follows:
Group Land and buildings Other Total
2009€000
2008€000
2009€000
2008€000
2009€000
2008€000
Operating leases which expire:
Within one year 89 114 339 294 428 408
In one to two years 146 189 186 335 332 524
In two to five years 776 500 740 701 1,516 1,201
1,011 803 1,265 1,330 2,276 2,133
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34 Paragon Annual Report & Accounts 2009
21. share capital
2009No.
2008No.
2009€000
2008€000
Authorised:
Ordinary shares of €1.00 each 35,000,000 35,000,000 35,000 35,000
Allotted, called up and fully paid:
Ordinary shares of €1.00 each 35,000,000 35,000,000 35,000 35,000
22. movements in reserves Profit and loss account
€000
At 30 June 2007 312
Profit for the year 5,353
Actuarial loss net of deferred tax thereon (875)
Exchange difference on retranslation of net assets of subsidiary undertakings (3,486)
At 30 June 2008 1,304
Profit for the year 1,528
Actuarial loss net of deferred tax thereon (1,897)
Exchange difference on retranslation of net assets of subsidiary undertakings (401)
At 30 June 2009 534
company Profit and loss account
€000
At 30 June 2007 36,667
Profit for the year 640
At 30 June 2008 37,307
Profit for the year 310
At 30 June 2009 37,617
notes to the finanCial statementsat 30 June 2009
R&A09-10.indd 34 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 35
notes to the finanCial statementsat 30 June 2009
23. notes to the statement of cash flows (a) reconciliation of operating profit to net inflow from operating activities
2009€000
2008€000
operating profit 5,869 9,843
Depreciation 4,817 5,722
Amortisation of positive goodwill 2,062 1,862
Release of negative goodwill (3,345) (2,522)
Amortisation of development costs 33 35
Deferred government grants released (28) (33)
ebitda 9,408 14,907
Decrease/(increase) in debtors 11,029 (5,185)
Decrease in stocks 2,812 145
Decrease in creditors (12,363) (582)
Decrease/(increase) in other provisions (70) 100Pension scheme liability movement in respect of contributions, current service cost, settlements and curtailments and exchange differences (82) (1,004)
Cash inflow before fundamental restructuring 10,734 8,381
Cash outflow in respect of fundamental restructuring (1,063) (896)
net cash inflow from operating activities 9,671 7,485
(b) analysis of net debt and cash
At 1 July 2008
Cash flow
Exchange difference
Fair value adjustment
Non cash movements
At 30 June 2009
€000 €000 €000 €000 €000 €000
cash at bank and in hand 12,813 (876) (343) - - 11,594
Bank overdraft (834) (1,876) - - - (2,710)
11,979 (2,752) (343) - - 8,884
Bank and other borrowings (31,549) 4,784 443 - (30) (26,352)
Finance leases (4,513) 492 121 187 - (3,713)
Shareholders loans (1,625) 705 - - - (920)
Net debt and cash (25,708) 3,229 221 187 (30) (22,101)
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36 Paragon Annual Report & Accounts 2009
24. Pension commitments The company operates a final salary defined benefit pension plan. No benefits have accrued since 3 August 2005. Pension benefits for deferred members are based on the members' final pensionable salaries and service at the date accrual ceased (or date of leaving if earlier).
The most recent formal actuarial valuation was carried out as at 30 June 2006. The results have been updated to 30 June 2009 by a qualified independent actuary. The assumptions used were as follows:
2009 2008
Discount rate 6.40% 6.10%
Price inflation 3.25% 4.00%
Salary increases n/a n/a
Rate of increases of pensions in payment 3.15% 3.80%
Rate of increase for deferred pensioners 3.25% 4.00%
Expected return on assets 6.52% 7.84%
notes to the finanCial statementsat 30 June 2009
The overall expected return on assets assumption of 6.52% as at 30 June 2009 has been derived by calculating the weighted average of the expected rate of return for each asset class. The following approach has been used to determine the expected rate of return for each asset class:
• fixed interest securities, current market yields
• equities, allowance for an additional return of 3.25% above that available on UK government securities
• cash, current Bank of England base rate
demographic assumptions
Year ended30/06/2009
Year ended30/06/2008
Mortality (pre retirement) AM00/AF00 AM00/AF00
Mortality (post retirement) 110% of PCA00
mc (yob)
110% of PCA00
mc (yob)
Year ended 30/06/2009 Year ended 30/06/2008
Males Females Males Females
Life expectancy for a current 65 year old 20.9 years 23.2 years 20.9 years 23.2 years
Life expectancy at age 65 for current 45 year old 22.1 years 24.3 years 22.1 years 24.3 years
R&A09-10.indd 36 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 37
notes to the finanCial statementsat 30 June 2009
24. Pension commitments (continued)assetsThe assets of the plan are invested in a diversified portfolio
Year ended 30/06/2009 Year ended 30/06/2008 Year ended 30/06/2007
Market value€000
% of total plan
assets
Market value€000
% of total plan
assets
Market value€000
% of total plan
assets
Equities 3,816 77% 4,817 79% 6,559 85%
Bonds 388 8% 319 5% 291 4%
Gilts 324 7% 349 6% 359 5%
Cash 378 8% 594 10% 445 6%
Total 4,906 6,079 7,654
The actual return on assets over the period was:
(707) (501)
reconciliation to the balance sheet 2009€000
2008€000
Market value of assets 4,906 6,079
Present value of liabilities (5,179) (5,984)
(Deficit)/surplus in the plan (273) 95Pension (liability)/asset recognised in the balance sheet before allowance for deferred tax (273) 95
analysis of changes in the value of the plan liabilities over the year 2009€000
2008€000
Value of liabilities at start of year 5,984 7,539
Foreign exchange movements (431) (1,118)
Service cost - -
Interest cost 335 332
Settlements - (847)
Benefits paid (118) (133)
Actuarial (gains)/losses (591) 211
Value of liabilities at end of year 5,179 5,984
R&A09-10.indd 37 2/3/10 11:40 AM
38 Paragon Annual Report & Accounts 2009
notes to the finanCial statementsat 30 June 2009
24. Pension commitments (continued)analysis of changes in the value of the plan asset over the year
2009€000
2008€000
Market value of assets at start of year 6,079 7,654
Foreign exchange movements (430) (1,134)
Expected return on scheme assets 441 503
Actuarial losses (1,148) (1,004)
Employer contributions 82 193
Benefits paid (118) (133)
Market value of assets at end of year 4,906 6,079
amounts recognised in profit and loss
2009€000
2008€000
Gain on settlement - (847)
Analysis of other amount charged to other finance income
Interest on liabilities (335) (332)
Expected return on plan assets 441 503
Net credit to other finance income 106 171
Total profit and loss credit before deduction for tax (106) (1,018)
amounts recognised in statement of total recognised gains and losses (strgl)
2009€000
2008€000
Actuarial losses (557) (1,215)
Total amount recognised in STRGL (557) (1,215)
R&A09-10.indd 38 2/3/10 11:40 AM
Paragon Annual Report & Accounts 2009 39
notes to the finanCial statementsat 30 June 2009
24. Pension commitments (continued)history of assets, liabilities, experience gains and losses
2009€000
2008€000
2007€000
2006€000
2005€000
Market value of plan assets 4,906 6,079 7,654 6,606 9,077
Value of plan liabilities 5,179 5,984 7,539 6,498 9,975
(Deficit)/surplus in the plan (273) 95 115 108 (898)
(Losses)/gains arising on plan liabilities:
Due to experience (86) (34) 239 (19) 80
% of liabilities (2)% (1)% 3% 0% 1%
Due to change of basis 677 (177) (868) (1,295) 114
% of liabilities 13% (3)% (12)% (20)% 1%
Experience (losses)/gains:
Arising on plan assets (1,148) (1,004) 479 796 785
% of assets (23)% (17)% 6% 12% 9%
The cumulative amount of actuarial gains and losses recognised in the STRGL (since 2002) is €2,675,000.
future funding obligationThe last actuarial valuation of the plan was performed by the Actuary for the Trustees as at 30 June 2006. The company agreed to make payments to pay off the deficit of a lump sum of €126,000 in October 2007 followed by €82,000 p.a paid monthly until June 2016. The employer expects to pay €82,000 to the plan during the accounting year beginning I July 2009.
defined contribution schemeThe defined contribution scheme is funded by the payment of contributions to an independently administered fund and the assets of the scheme are held separately from those of the Group. The pension cost charge for the year amounted to €270,000 (2008: €337,000).
Contributions totalling €28,000 (2008: €31,000) were payable to the fund at the year end and are included in creditors.
25. related party transactionsDuring the year loan repayments to related parties amounted to €705,000 (2008: €462,000). Interest payments to related parties amounted to €195,000 (2008: €nil).
26. Controlling partyIn the directors' opinion there is no overall controlling party.
27. Post balance sheet eventsSubsequent to the year end the Group acquired the trade and assets of Ward Knowles Limited.
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40 Paragon Annual Report & Accounts 2009
Paragon grouP limitedRegistered No: 05258175
directors
conor J Donnelly (Executive Chairman)
Patrick J crean (Chief Executive Officer)
Iain s Black (Group Sales Development Director)
laurent T salmon (Group Finance Director)
secretary
Patrick J crean
auditors
ernst & Young llP
Citygate St James' Boulevard Newcastle upon Tyne NE1 4JD
bankers
credit Agricole
Centre-Loire Centre D'affaires 45 26 Rue de la Godde 45 800 St Jean de Braye France
credit lyonnais
Orleans SDC Centre 7 Place du Martroi 45000 Orleans France
Barclays Bank Plc
71 Grey Street Newcastle upon Tyne NA99 1JP
solicitors
nabarro
Lacon House Theobald's Road London WC1X 8RW
cabinet lipworth 18 avenue Franklin Roosevelt 75008 Paris France
registered officeFactory 42 Pallion Way Pallion Trading Estate Sunderland Tyne and Wear SR4 6ST
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At the heart of Paragon’s offering is its technology capability, led by the Paragon eCommerce Platform (PEP), which provides extensive procurement, supply chain, inventory, document creation and project management services, fully integrated with customers’ internal processes.
pep
paragon’s breadth of servicesand manufacturing capabilityenables integration of theend-to-end process across allinbound, outbound andtransactional communications.In addition, our specialistIdentification division providespeople and product security,access and control solutions.
Paragon supports its customers’ requirements through the following services:
specialist consulting Specialists in client communication, POS, Direct Mail, VAT optimisation, postage and business process
creative design & workflow management Communication design, budget planning, campaign briefing, automated approval loops, price requisition, stock retrieval, dynamic publishing
Manufacturing Critical transactional communication, marketing collateral, personalisation, POS, direct mail, operational material, forms and packaging
security & identification solutions People access and control, product identification, technical labels, RFID
Data management Cleansing, manipulation, formatting, asset/content management, version control
procurement & inventory management Storage, pick & pack, push/pull models, usage analysis, stock management, destruction and obsolescence
outsourcing Network supply, kitting, fulfilment, vote management
Multi-channel delivery Transactional, digital, e-mail, MMS, SMS, web and telephony
Bucharest
BailleulMarne La ValléeCosne sur Loire
RomorantinArgent sur Sauldre
Lisbon
Gent
DublinOswaldtwistle
Lutterworth
Sunderland
Bradford
Wakefield Europort
European facilitiesnetwork
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principal offices
France Paragon Identification SAS Les Aubépins18410 Argent sur SauldreFrance
Tel: +33 (0) 2 48 81 61 00 Fax: +33 (0) 2 48 81 61 49
Paragon Services 56 rue des Hautes Patûres Bâtiment LE NAXOS 92737 Nanterre CedexFrance
Tel: +33 (0) 1 46 49 41 00 Fax: +33 (0) 1 46 49 41 99 Paragon Transaction SA39 Rue des Rivières St Agnan58200 Cosne sur LoireFrance
Tel: +33 (0) 3 86 26 51 51 Fax: +33 (0) 3 86 26 66 33
IrelandParagon Group LtdThe Paragon SuiteIrish Management Institute Sandyford Road Dublin 16Ireland
Tel: +353 (0) 1 293 8100Fax: +353 (0) 1 293 0230
www.paragon-europe.com
uK Paragon Group UK Ltd Pallion Trading EstateSunderland, SR4 6STUK
Tel: +44 (0) 191 514 0716 Fax: +44 (0) 191 514 6361
Paragon Services Wakefield Europort, Gilcar WayCastleford, WF10 5QSUK
Tel: +44 (0) 1977 669 700Fax: +44 (0) 1977 603 036
Ward KnowlesBrookside Lane, OswaldtwistleAccrington, BB5 3NYUK
Tel: +44 (0) 1254 383 335Fax: +44 (0) 1254 396 009
RomaniaParagon Romania str. Drumul Garii Otopeni, 49-51AOtopeni, 075100, Jud. Ilfov Bucharest, Romania
Tel: +40 21 350 42 96 Fax: +40 21 350 42 97
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