Page 1

1 10 120

Further year high performance

Years profitable growth

Years of forward thinking

Annual Report & Accounts 2008 Strength in numbers


Paragon’s breadth of services and manufacturing capability enables integration of the end-to-end process across all inbound, outbound and transactional communications. In addition, our specialist Identification division provides people and product security, access and control solutions. PEP At the heart of Paragon’s offering is its technology capability, led by the Paragon eCommerce Platform (PEP), which allows customers to fully integrate with Paragon’s ordering and project management systems to monitor and control their orders.

European facilities network Sunderland Wakefield Europort

Oslo

Dublin Bradford Lutterworth Bailleul Cosne sur Loire Romorantin Rognac Lisbon

Gent Mame La Vallee Argent sur Sauldre Bucharest


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


GROWTH. PARAGON CONTINUES TO THRIVE WITH CONTINUED YEAR- ON -YEAR PROFITABLE GROWTH.

CONTENTS 01 01 04 08 09 11 13 13 14 15 16 18

Financial highlights Chairman’s statement Director’s report Statement of director’s responsibilities Independent auditors report Group profit and loss account Group statement of total recognised gains and losses Reconciliation of shareholders’ funds Group balance sheet Company balance sheet Group statement of cashflows Notes to the financial statements


Paragon Annual Report & Accounts 2008

Strength in numbers

01

Chairman’s statement

10 years of profitable growth: This year Paragon celebrates our 10th successful year under the current management and shareholders. In the context of our 120 year heritage, this decade has been significant given the accelerated pace of change in our industry and the increasingly challenging environment in which we operate today. The fact that Paragon Conor J Donnelly continues to thrive in this environment, with continued year-on-year Executive Chairman profitable growth, is testament to the hard work and dedication of each of our 1,178 employees, management and the loyalty and support of our customers. On behalf of the Board, I would like to take this opportunity to congratulate them all on this significant milestone in our history.

2008 Financial Highlights

€173m +8%

Turnover 2007: €160m

Fig 1: Total Revenue (continuing operations)

180 (Euro MM) 170

120 110

08

07

20

06

20

05

20

04

20

03

20

02

20

01

20

00

100

20

Net assets 2007: €35m

130

99

€36m

140

20

Operating profit 2007: €3m

150

19

€10m

160


02

Paragon Annual Report & Accounts 2008

Strength in numbers

Chairman’s statement CONTINUED

Evolution

Investment

The Group we acquired in 1998 was very different from the Paragon of today. Over the last ten years, a loss-making unfocused collection of companies has been transformed into a cohesive, tightly managed and consistently profitable Group, committed to its customers and markets and providing stable employment across our geographies.

We could not have achieved our success to date without our programme of continuous investment in our people, systems and solutions. In the last year, Paragon added strategic hires to add expertise in key areas of our business. We are currently in the process of further upgrading our ERP systems to reduce costs, increase efficiency and integrate seamlessly with our customerfacing ecommerce platform – PEP. As a customer procurementmanagement solution, PEP continues to increase functionality from design and order processing through to tracking, control, delivery and reporting. Paragon has also invested to maintain its leadership in specific customer solutions such as RFID. Each year Paragon consistently reinvests 25% of EBITDA into technology development.

Our two pronged strategy of unrelenting operational excellence, complemented by strategic acquisition, has seen Paragon acquire and integrate nine different businesses since 1998. In 2008 we continued this trend with the acquisition from administration of the principal assets of our primary competitor in the French market, Lithotech. This saw the addition of three new facilities in France, including our new strategically located logistics hub at Bailleul in the north of France, close to the Eurotunnel. Consistent investment over the past decade has seen Paragon develop industry leading solutions in areas such as RFID, as well as an advanced technology platform which allows for tight customer integration and the provision of complex outsourcing services. The geographic orientation of the Group has also evolved with the establishment and sustained development of our operations in Romania; these were expanded in the current financial year by relocation to a larger, more modern facility.

Commitment Paragon, through the hard work and loyalty of its people, is strongly committed to its customers and markets. This commitment has seen us adapt our product and service offering to satisfy the continually evolving commercial needs of our customer base. As part of this, services have taken on an increasingly important role in the last decade. The relocation of our service business in the UK to new state of the art facilities in 2007, coupled with our continued expansion in France and Romania, means that Paragon is well positioned to provide the full spectrum of products and services required. We continue to develop our design and prepress capabilities in tandem with our holistic service approach, while maintaining efficiency gains in our manufacturing services.

Outlook There is no doubt that we are facing difficult challenges as we look towards the next 10 years of our development, particularly in the near-term, however we are confident of our ability to thrive given the strong fundamentals of our business. • O  ur management team is committed and has a strong track record of developing and growing businesses in this industry through turbulent market conditions. • O  ur well invested asset base continues to provide industry leading products and services across our many markets. • O  ur prudent management style of never overstretching and continually reinvesting continues to bear fruit. • O  ur people continue to demonstrate their ability to exceed customer requirements through innovation and dedication. Paragon will continue its programme of investment to ensure our progression up the value chain, adapting our products and services to match evolving market demand. We will also take advantage of the economic shift in our market to further our consolidation strategy across Europe. Through our continued hard work and dedication we are confident that the next 10 years represent a major opportunity for Paragon to continue its trajectory of profitable growth and expansion, providing opportunities and rewards for all stakeholders.

Conor J Donnelly Executive Chairman Date: 23rd September 2008


FOCUS. We have made huge progress without ever losing sight of the absolute fundamentals of what our customers expect.

12

Additional months solid performance

1,178 Employees

10,000+ Satisfied global customers


04

Paragon Annual Report & Accounts 2008

Strength in numbers

Directors’ report

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.

Patrick J Crean Chief Executive Officer

The directors present their report and the Group financial statements for the year to 30 June 2008. The financial statements are stated in Euros (€000) as this is the functional currency of the Group.

Results and dividends The trading operating profit is €8,820,000 (2007: €5,766,000). Trading operating profit is defined as operating profit before exchange gains goodwill amortisation and fair value depreciation. The operating profit on ordinary activities before exceptional items, interest and tax is €9,843,000 (2007: €2,828,000). The profit on ordinary activities before tax is €6,746,000 (2007: €1,675,000 loss). The profit on ordinary activities after tax amounted to €5,353,000 (2007: €1,858,000 loss). EBITDA is €14,907,000 (2007: €9,010,000). The directors do not recommend the payment of a dividend.

Principal activities and review of the business

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 2009. 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 developments Paragon 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. Paragon is also well positioned to take advantage of any further consolidation in its market.

Research and development

The Group is engaged in the provision of solutions to its clients’ printing, document management, tickets, labels and related fulfilment and transaction needs.

The Group carries out Research and Development both internally and through a number of international arrangements and collaborations.

During the year the Group continued its market consolidation strategy, in tandem with its progressive enhancement of its products and services. This has seen the Group migrate further up the value chain, with the increased provision of service solutions, embedding Paragon further within its customer base.

Political and charitable contributions

Paragon achieved significant advances in each of its principal geographies during the year: the relocation of its UK services business into new state of the art facilities; major consolidation in France with the acquisition of a main competitor; the continued expansion of the Group’s activities in Romania, with another year of very strong growth and the move to a new larger facility.

Market risk

Overcapacity continues to be a factor in the market. The prevailing economic downturn has accelerated the fall of a number of businesses, particularly those with high levels of

There were no charitable or political contributions made during the year.

Disabled employees The 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.


STRENGTH. OUR STRONG FINANCIAL FOOTING MEANS WE CAN TAKE ADVANTAGE OF MARKET CONDITIONS.

8%

Revenue growth

15

Geographic locations

€8m

Operating Cashflow


06

Paragon Annual Report & Accounts 2008

Strength in numbers

Directors’ report CONTINUED

Employee involvement The 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 Donnelly Patrick J Crean Iain S Black Laurent T Salmon

Financial risk management policy The 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 risk

The Group investments and activities are mainly located within the Euro zone as well as the UK. External currency exposures are closely managed to cover the levels of exposure on foreign exchange fluctuations. Separately, the Group has recorded an unrealised, non cash exchange gain on intra group loans. The loan was only implemented to satisfy inter-company considerations. These unrealised gains had to be reported in the Group profit and loss account. The directors do not expect such gains to arise again. Group will initiate actions so that these gains do not reverse in the future by reducing the favourable inter-company loans the gains arose from.

Price risk

Liquidity risk

The Group aims to mitigate liquidity risk by managing cash generated by its operations. Capital expenditures and related financing of investments are approved at Group level. Flexibility is maintained by retaining surplus cash in readily accessible bank accounts. Cash balances and forecasts are controlled at both local and Group level daily.

Creditor’s payment policy and practice It 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 2008, the Group had an average of 110 days (2007: 103 days) purchases outstanding in trade creditors due to the importance of the Group’s trading activity in France where Creditors are high due to the local standard credit terms that prevail in that country.

Disclosure of information to the auditors So 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.

Auditors A resolution to re-appoint Ernst & Young LLP as auditors will be put to the forthcoming Annual General Meeting. By order of the Board

There 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.

Credit risk

Group 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.

“Our proven track record of delivery to clients is first-class and makes us confident in our success” Patrick J Crean

Patrick J Crean Chief Executive Officer Date: 23rd September 2008


OUTLOOK. WE ARE CONFIDENT OF OUR ABILITY TO THRIVE GIVEN THE STRONG FUNDAMENTALS OF OUR BUSINESS.

25%

EBITDA investment in technology

+ 100% Growth in Romania

50,000+ Paragon E-commerce Platform users


08

Paragon Annual Report & Accounts 2008

Strength in numbers

STATEMENT OF Directors’ RESPONSIBILITIES

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

• s tate whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

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). The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing those financial statements, the directors are required to:

• p  repare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

• s elect suitable accounting policies and then apply them consistently;

The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Group and the Company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

• m  ake judgements and estimates that are reasonable and prudent;

GROUP Board of Directors

1. C  onor J Donnelly Executive Chairman Number of years in the print industry: 16 years 2. P  atrick J Crean Chief Executive Officer Number of years in the print industry: 28 years 3. L aurent T Salmon Group Finance Director Number of years in the print industry: 16 years 1. Conor J Donnelly Executive Chairman

3. Laurent T Salmon Group Finance Director

2. Patrick J Crean Chief Executive Officer

4. Iain S Black Group Sales and Marketing Director

4. Iain S Black Group Sales and Marketing Director Number of years in the print industry: 25 years


Paragon Annual Report & Accounts 2008

Strength in numbers

09

Independent auditors’ report to 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 2008 which comprise the Group Profit and Loss Account, 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 1 to 26. These financial statements have been prepared under the accounting policies set out therein. This report is made solely to the Company’s members, as a body, in accordance with Section 235 of the Companies Act 1985. 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 auditors’ 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 auditors The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable United Kingdom law and Accounting Standards (United Kingdom Generally Accepted Accounting Practice) as set out in the Statement of Directors’ Responsibilities. Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, consistently applied and adequately disclosed. We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion In our opinion: • the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the state of the Group’s and the parent Company’s affairs as at 30 June 2008 and of the Group’s profit for the year then ended; • the financial statements have been properly prepared in accordance with the Companies Act 1985; and

We report to you our opinion as to whether the financial statements give a true and fair view, are properly prepared in accordance with the Companies Act 1985 and whether the information given in the directors’ report is consistent with the financial statements.

• the information given in the directors’ report is consistent with the financial statements.

We also report to you if, in our opinion, the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and other transactions is not disclosed.

Ernst & Young LLP Registered Auditor Newcastle upon Tyne

We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. This other information comprises only the Chairman’s Statement. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Date: 26th September 2008


10

Paragon Annual Report & Accounts 2008

Strength in numbers

RESULTS.


Paragon Annual Report & Accounts 2008

Strength in numbers

11

Group profit and loss account for the year ended 30 June 2008

Exceptional items

Exceptional items Notes

2008 €000

2008 €000

2

154,119

-

2008 €000

2007 €000

2007 €000

2007 €000

154,119

160,337

-

160,337

17,722

-

-

-

Turnover Continuing Acquisitions

17,722

Disposals

826

-

826

-

-

-

172,667

-

172,667

160,337

-

160,337

111,898

(150)

111,748

121,715

509

122,224

13,003

-

13,003

-

-

-

536

-

536

-

-

-

125,437

(150)

125,287

121,715

509

122,224

42,221

150

42,371

38,622

(509)

38,113

4,719

-

4,719

-

-

-

290

-

290

-

-

-

47,230

150

47,380

38,622

(509)

38,113

20,933

-

20,933

22,142

-

22,142

3,554

-

3,554

-

-

-

Cost of sales Continuing Acquisitions Disposals Gross Profit Continuing Acquisitions Disposals Selling and distribution costs Continuing Acquisitions Disposals

235

-

235

-

-

-

24,722

-

24,722

22,142

-

22,142

10,145

532

10,677

10,714

101

10,815

3,382

312

3,694

-

-

-

Administrative expenses Continuing Acquisitions Disposals

161

-

161

-

-

-

13,688

844

14,532

10,714

101

10,815

Continuing

11,143

(382)

10,761

5,766

(610)

5,156

Acquisitions (note 13)

(2,217)

(312)

(2,529)

-

-

-

(106)

-

(106)

-

-

-

8,820

(694)

8,126

5,766

(610)

5,156

Trading operating profit

Disposals Goodwill amortisation and depreciation of fair value adjustments to fixed assets

3

Admin. foreign exchange gains/(loss)

3

Operating profit

(648)

(2,151)

2,365

(177)

9,843

2,828


12

Paragon Annual Report & Accounts 2008

Strength in numbers

Group profit and loss account for the year ended 30 June 2008

Notes

2008 €000

2008 €000

2007 €000

9,843

Operating profit brought forward

2,828

Costs of fundamental reorganisation

4(c)

(992)

(2,686)

Gain on disposal of fixed assets

4(c)

71

-

Loss on termination of subsidiary

4(c)

(72)

Net interest payable and similar charges

7

Profit/(loss) on ordinary activities before tax Tax on loss on ordinary activities

8

Profit/(loss) on ordinary activities after tax

(993)

2007 €000

-

(2,686)

(2,104)

(1,817)

6,746

(1,675)

(1,393)

(183)

5,353

(1,858)

Equity minority interests

22

-

(96)

Profit/(loss) for the year

22

5,353

(1,954)


Paragon Annual Report & Accounts 2008

Strength in numbers

Group statement of total recognised gains and losses for the year ended 30 June 2008

Profit/(loss) attributable to the members of the Group

2008 €000

2007 €000

5,353

(1,954)

Exchange difference on retranslation of net assets of subsidiaries*

(3,486)

640

Actuarial loss recognised on pension scheme (note 24)

(1,215)

(148)

Deferred tax arising thereon

340

45

Total recognised gains and losses relating to the year

992

(1,417)

2008 €000

2007 €000

992

(1,417)

*Sterling has declined 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.

Reconciliation of shareholders’ funds for the year ended 30 June 2008

Total recognised gains and losses Total movements during the year

992

(1,417)

Opening shareholders’ funds

35,312

36,729

Closing shareholders’ funds

36,304

35,312

13


14

Paragon Annual Report & Accounts 2008

Strength in numbers

Group balance sheet at 30 June 2008

Notes

2008 €000

2007 €000

12

33,953

27,462

30,453

31,987

Fixed assets Tangible assets Positive goodwill and development expenditure Negative goodwill Intangible assets

11

(6,289)

-

24,164

31,987

58,117

59,449

Current assets Stocks

14

15,974

11,668

Debtors - amounts falling due after one year

15

473

428

15

44,742

41,147

- amounts falling due within one year

Deferred tax asset

9

Cash at bank and in hand

3,749

4,349

12,813

11,702

77,751

69,294

(64,199)

(57,221)

Net current assets

13,552

12,073

Total assets less current liabilities

71,669

71,522

17

(32,746)

(33,916)

Deferred income

18(a)

(728)

(890)

Provisions for liabilities and charges

18(b)

(1,961)

(1,499)

24

70

95

36,304

35,312

35,000

35,000

Creditors: amounts falling due within one year

Creditors: amounts falling due after more than one year

Pension surplus

16

Net assets Capital and reserves Called up share capital

21

Profit and loss account

22

Equity shareholders’ funds

1,304

312

36,304

35,312

Conor J Donnelly

Patrick J Crean

Laurent T Salmon

Executive Chairman

Chief Executive Officer

Group Finance Director

Date: 23rd September 2008


Paragon Annual Report & Accounts 2008

Strength in numbers

15

Company balance sheet at 30 June 2008

Notes

2008 €000

2007 €000

13

74,879

74,879

15

160

-

Fixed assets Investment Current assets Debtors - amounts falling due within one year Cash at bank and in hand

-

-

160

-

(2,732)

(1,394)

Net current liabilities

(2,572)

(1,394)

Total assets less current liabilities

72,307

73,485

-

(1,818)

72,307

71,667

Creditors: amounts falling due within one year

Creditors: amounts falling due after more than one year

16

17

Net assets Capital and reserves Called up share capital

21

35,000

35,000

Profit and loss account

22

37,307

36,667

72,307

71,667

Equity shareholders’ funds

Conor J Donnelly

Patrick J Crean

Laurent T Salmon

Executive Chairman

Chief Executive Officer

Group Finance Director

Date: 23rd September 2008


16

Paragon Annual Report & Accounts 2008

Strength in numbers

Group statement of cash flows for the year ended 30 June 2008

Notes Net cash inflow from operating activities (excluding fundamental restructuring) Cash outflow in respect of fundamental restructuring Net cash inflow from operating activities

23(a)

2008 €000

2007 €000

8,381

9,402

(896)

(2,369)

7,485

7,033

Return on investments and servicing of finance Interest received from banks Interest paid to banks Interest element of finance lease payments

18

137

(2,011)

(1,496)

(303)

(207)

(2,296)

(1,566)

(485)

(514)

Payments to acquire tangible fixed assets

(2,285)

(2,421)

Receipt from sales of tangible fixed assets

447

12

18

-

(1,820)

(2,409)

Taxation Corporation tax paid Capital expenditure and financial investments

Cash on disposal of intangibles Acquisitions and disposals Cash paid for acquisition of business

13

(1,959)

-

Payments to acquire minority interest shareholding

22

-

(3,920)

(1,959)

(3,920)

Equity dividends paid

(40)

(5)

Net cash inflow/(outflow) before financing

885

(1,381)

Loans received from shareholders

1,000

2,425

Repayment of shareholder’s loans

(1,462)

(338)

-

(28,245)

Financing

Repayment of Barclays bank loans New long term loans

23(b)

-

11,832

3,744

17,691

Repayment of capital element of finance leases

(1,887)

(1,067)

Repayment of other loans

(1,524)

(1,196)

(129)

1,102

756

(279)

Other loans and borrowings

Increase/(decrease) in cash


Paragon Annual Report & Accounts 2008

Strength in numbers

17

Group statement of cash flows for the year ended 30 June 2008

Reconciliation of net cash flow to movement in net debt Notes

2008 â‚Ź000

2007 â‚Ź000

Increase/(decrease) in cash

23(b)

756

(279)

Repayment of capital element of finance leases

23(b)

1,270

1,067

Repayment of capital element of finance leases acquired (note 13)

23(b)

617

-

Increase in bank loans and other borrowings

23(b)

(2,220)

(82)

Shareholders loans

462

(2,087)

Movement in net debt arising from cash flows

885

(1,381)

(546)

(1,824)

New finance leases

23(b)

Exchange differences

23(b)

1,276

98

Debt acquired on Acquisition (note 13)

23(b)

(1,472)

-

Other movements

23(b)

(91)

(102)

Net debt at 1 July

23(b)

(25,760)

(22,551)

Net debt at 30 June

23(b)

(25,708)

(25,760)


18

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

1. Accounting policies Basis of preparation The financial statements are prepared under the historical cost convention. The financial statements are prepared in accordance with applicable accounting standards.

Basis of consolidation The Group financial statements consolidate the financial statements of Paragon Group Limited and all of its controlled subsidiary undertakings drawn up to 30 June 2008. No profit and loss account is presented for Paragon Group Limited as permitted by Section 230 of the Companies Act 1985.

Goodwill Positive 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.

Depreciation Depreciation 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 development Research 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 grants Grants 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 progress Stock 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 taxation Deferred 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: • p  rovision 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; • p  rovision 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; • d  eferred 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.

Investments Investments are stated at cost less provision for diminution in value.

Leasing and hire purchase Assets 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.


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

1. Accounting policies (continued) Foreign currencies Group The 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.

Company Transactions 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.

Pensions In 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 costs The 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.

19


20

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

2. Turnover and segmental analysis Turnover 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:

Europe Rest of the world

2008 €000

2007 €000

165,520

153,137

7,147

7,200

172,667

160,337

2008 €000

2007 €000

1,862

1,793

(2,522)

-

3. Operating profit This is stated after charging/(crediting):

Amortisation of goodwill (note 11) Amortisation of negative goodwill (note 11) Depreciation of fair value adjustment to fixed assets (note 12)

Foreign exchange (gain)/loss*

1,308

358

648

2,151

(2,365)

177

132

122

Auditors’ remuneration

- audit services UK**

- audit services - overseas

80

95

- non-audit services - UK

92

106

- non-audit services - overseas

12

18

Depreciation of owned assets (note 12)

2,817

3,191

Depreciation of assets held under finance leases and hire purchase contracts (note 12)

1,597

751

Release of government grants (note 18(a)) Amortisation of development expenditure (note 11)

(33)

(36)

35

125

Operating lease rentals

- land and buildings

1,047

554

- plant and machinery

1,623

1,445

Non audit services include €104,000 (2006: €124,000) relating to taxation services. *Exchange gains on Group loan balances **UK audit fees include €5,000 (2007: €2,000) in relation to the Company.


Paragon Annual Report & Accounts 2008

Strength in numbers

21

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

4. Exceptional items (a) Recognised in arriving at gross profit:

2008 €000

2007 €000

150

(509)

2008 €000

2007 €000

- administration

-

(101)

Factory relocation costs

- administration

(126)

-

Other (various)

- administration

(118)

-

Start up credits/(costs) in relation to radio frequency products

(b) Recognised in arriving at operating profit:

Refinancing costs

Compensation payments for employee termination

- administration

(600)

-

(844)

(101)

2008 €000

2007 €000

71

-

(c) Non operating exceptional items:

Gain on disposal of fixed assets Loss on termination of subsidiary

(72)

-

Costs of fundamental reorganisation

(992)

(2,686)

Non operating exceptional items

(993)

(2,686)

(1,687)

(3,296)

Total exceptional items Reorganisation costs of €992,000 include severance and industrial reorganisation costs incurred in the fundamental restructuring of the newly acquired operations in France.


22

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

5. Staff costs 2008 €000

2007 €000

Wages and salaries

37,156

33,229

Social security costs

10,421

8,582

32

27

Pension charge - defined benefit scheme Other pension (credits)/costs

(136)

504

47,473

42,342

2008

2007

The average monthly number of full-time, part-time and temporary employees during the year was:

Production Administration

No.

No.

777

701

401

365

1,178

1,066

6. Directors’ emoluments No emoluments were paid to the directors in the year (2007: €Nil). No Company contributions were paid to money purchase pension schemes for any of the directors. An unrelated company was paid €500,000 (€2007: €Nil) for the provision of services of each of the directors and in relation to costs of acquisition.

7. Net interest payable

Bank loans and overdrafts Net interest income on pension scheme assets and liabilities

2008 €000

2007 €000

1,963

1,604

(171)

(157)

Interest receivable

(18)

(137)

Finance charge on leased assets

303

207

27

300

2,104

1,817

Amortisation of loan issue costs


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

8. Tax on profit/(loss) on ordinary activities a) Tax on profit/(loss) on ordinary activities The tax charge for the year is made up as follows:

Profit/(loss) on ordinary activities before tax Tax on profit/(loss) on ordinary activities Profit/(loss) on ordinary activities after tax

2008 €000

2007 €000

6,746

(1,675)

(1,393)

(183)

5,353

(1,858)

395

435

650

224

(141)

(52)

Tax on profit/(loss) on ordinary activities UK corporation tax Foreign tax Prior year adjustment - UK corporation tax Prior year adjustment - foreign tax

-

12

904

619

489

(436)

1,393

183

Current tax charge (note 8(b)) Deferred tax

b) Factors affecting the tax charge for the year The tax assessed on the profit/(loss) on ordinary activities for the year is lower (2007: higher) than the standard rate of corporation tax in the UK. The differences are explained below:

2008 €000

2007 €000

Profit/(loss) on ordinary activities before tax

6,746

(1,675)

Profit/(loss) on ordinary activities multiplied by the standard rate of corporation tax in the UK of 29.5% (2007: 30%)

1,990

(503)

Disallowed expenses and non-taxable income

398

784

Capital allowances in advance of depreciation

(252)

(44)

Effects of:

Other timing differences Prior year adjustments to subsidiary entities Effect of overseas tax rates Utilisation of brought forward losses Current tax charge for year (note 8(a)) c) Factors that may affect the future tax charges There are tax losses carried forward as at 30 June 2008 of approximately €18,190,000 (2007: €24,776,000). These are available for offset against future taxable trading profits.

286

13

(141)

(40)

(90)

(245)

(1,287)

654

904

619

23


24

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

9. Deferred tax An analysis of the net deferred tax asset is as follows:

Accelerated capital allowances Other timing differences Tax losses

Recognised

Recognised

Not Recognised

Not Recognised

2008 €000

2007 €000

2008 €000

2007 €000

(1,099)

(1,232)

326

-

73

464

-

-

3,837

5,117

1,293

3,790

2,811

4,349

1,619

3,790

Recognised deferred tax €000 At 1 July 2007 Credit in the year

4,349 79

Impact of change in rates

(232)

Other

(798)

Exchange rate differences At 30 June 2008

(584) 2,811

On 21 March 2007, the UK Government announced a number of corporate tax reforms effective from 1 April 2008. The main change applicable to the Group is the reduction in the standard rate of corporation tax from 30% to 28%. The legislative changes were substantively enacted at the balance sheet date, therefore a proportion of the deferred tax asset has been recognised at 28% with the result that the deferred tax asset has been reduced by €232,000.

10. Profit attributable to members of the parent company The profit dealt with in the financial statements of the parent company was €640,000 (2007: €36,636,000).


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

11. Intangible assets Group

Development expenditure €000

Positive goodwill €000

Negative goodwill €000

€000

Total

Cost: At 30 June 2007

903

37,025

-

37,928

Additions (note 13)

-

368

(8,811)

(8,443)

Exchange movements

-

(5)

-

(5)

903

37,388

(8,811)

29,480

832

5,109

-

5,941

35

1,862

(2,522)

(625)

867

6,971

(2,522)

5,316

At 30 June 2007

71

31,916

-

31,987

At 30 June 2008

36

30,417

(6,289)

24,164

At 30 June 2008 Amortisation: At 30 June 2007 Amortised in the year At 30 June 2008 Net book value:

In accordance with the director’s estimate of useful lives, positive goodwill is amortised over a period of 20 years.

25


26

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

12. Tangible fixed assets Group

Freehold land and buildings €000

Machinery and equipment €000

Fixtures and fittings €000

€000

23,446

66,878

2,260

92,584

Total

Cost: At 30 June 2007 Additions

687

2,067

77

2,831

9,430

1,822

-

11,252

-

(1,255)

(23)

(1,278)

Exchange movements

(1,170)

3,409)

(118)

(4,697)

At 30 June 2008

32,393

66,103

2,196

100,692

At 30 June 2007

9,796

53,630

1,696

65,122

Charge for the year

2,440

3,161

121

5,722

Acquisitions Disposals

Depreciation:

Disposals

-

(889)

(13)

(902)

(399)

(2,712)

(92)

(3,203)

11,837

53,190

1,712

66,739

At 30 June 2007

13,650

13,248

564

27,462

At 30 June 2008

20,556

12,913

484

33,953

Exchange movements At 30 June 2008 Net book value:

The net book value of machinery and equipment above includes an amount of €5,034,000 (2007: €5,649,000) in respect of assets held under finance leases and hire purchase contracts (see note 23 regarding the remaining debts). Included in freehold land and buildings is an amount of €8,945,000 (2007: €Nil), which relates to land and buildings acquired as part of this year’s acquisition. The debt taken on acquisition of these assets was €1,472,000 while the debt remaining at the end of June 2008 was €856,000. After payment of the debt balance, the freehold title of the land and buildings will automatically pass to the company. An accelerated depreciation charge of €950,000 was agreed by the Directors of the Company and processed through profit with regard to an old factory in Castleford (UK). This was done in order to reflect what the directors think is the current value of this old factory that is currently not being used.


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

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 Company

Country of incorporation

Holding

Proportion of voting rights and shares held

Grenadier Holdings Limited

England

Ordinary

100%

Grenadier (UK) Limited

England

Ordinary

100%

(6)

Holding company

CD-Paragon BV

Netherlands

Ordinary

100%

(6)

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

Ordinary Ordinary

100% 100%

(4)

Tickets and labels

Paragon Transaction SA

France France

(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

England

Ordinary

100%

(1)

Dormant

Contiforme 2

Portugal

Ordinary

25%

(5)

Printing

Sepedo

Portugal

Ordinary

20%

(5)

Card personalisation

Paragon Romania SRL

Romania

Ordinary

100%

(2)

Printing

Eddotrans SAS

France

Ordinary

100%

(7)

Printing

Paragon Transaction Belgium BVBA

Belgium

Ordinary

100%

(7)

Printing

Paragon Transaction UK

England

Ordinary

100%

(7)

Holding company

Paragon Print Management SAS

France

Ordinary

100%

(6)

Print management

Paragon Lithotech SA

France

Ordinary

100%

(7)

Print and print management

Total

Nature of business Holding company

(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

27


28

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

13. Investments (continued) Company

2008 €000

2007 €000

74,879

70,000

-

4,879

74,879

74,879

Cost: At 1 July 2007 Additions At 30 June 2008

Additions A newly incorporated subsidiary in France – Paragon Lithotech S.A. was formed and on 24 October 2007 acquired the trade and assets of Lithotech SA.

Tangible fixed assets

Provisional fair value to group* €000 11,252

Intangible fixed assets

368

Stocks Borrowings due within one year

5,128 (1,472)

Creditors due within one year

(3,078)

Net assets

12,198

Negative goodwill arising on acquisition

(8,811) 3,387

Discharged by: Cash

1,959

Creditors

1,428 3,387

This business has incurred an operating loss of €(2,217,000) since acquisition. To be a success, it will require the Group’s attention and turn-around expertise. This operating loss does not include the benefit of negative goodwill amortisation income of €2,522,000 that has been reported separately. * The book value and provisional fair value to Group reflects the external fair value of the assets as indicated by third party valuers. No UK GAAP accounts had previously been prepared in France for the business acquired during the period and the Directors had to reflect the value of these assets in their books. Disposals Paragon Suisse S.A. was voluntarily terminated on 30 June 2008. The loss on termination was €72,000.


Paragon Annual Report & Accounts 2008

Strength in numbers

29

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

14. Stocks Group

Raw materials and consumables Work in progress Finished goods and goods for resale

15. Debtors

2008 €000

2007 €000

3,559

2,242

1,111

1,590

11,304

7,836

15,974

11,668

Company

Group 2008 €000

2007 €000

2008 €000

2007 €000

Trade debtors

42,064

38,741

-

-

Other debtors

1,132

969

-

-

488

422

-

-

1,058

1,015

-

-

Amounts falling due within one year are:

Corporation tax debtor Prepayments and accrued income Amounts owed by group undertakings

-

-

160

-

44,742

41,147

160

-

473

428

Amounts falling due after more than one year are: Prepayments and accrued income

16. C  reditors: amounts falling due within one year

Group

Company

2008 €000

2007 €000

2008 €000

2007 €000

834

294

-

-

2,117

1,831

-

-

36,574

38,534

-

-

Amounts falling due within one year are: Bank overdraft Bank loans and other borrowings (note 19) Trade creditors Dividends payable to minority interest

-

40

-

-

Corporation tax

1,169

684

-

-

Other taxes and social security costs

7,391

6,627

-

-

Other creditors

6,008

3,598

1,107

43

Accruals and deferred income

5,731

3,233

-

-

Finance leases and hire purchase contracts (note 20)

1,812

1,029

-

-

Loan from shareholders (note 19)

1,625

Deferred tax

1,351

1,625

1,351

938

-

-

-

64,199

57,221

2,732

1,394


30

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

17. C  reditors: amounts falling due after more than one year

Group 2008 €000

Company

2007 €000

2008 €000

2007 €000

2,701

3,605

-

-

29,431

28,616

-

-

-

-

-

123

614

959

-

959

-

736

-

736

32,746

33,916

-

1,818

Amounts falling due after more than one year are: Finance leases and hire purchase contracts (note 20) Bank loans (note 19) Amount owed to subsidiary undertaking Other creditors Loan from shareholders

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 2007

890

Released in the year

(33)

Exchange movements

(129) 728

(b) Provisions for liabilities and charges

Retirement provision €000 At 30 June 2007 Utilised in the year

1,499 (165)

Acquisition

351

Charge in the year

276

At 30 June 2008

1,961

Retirement provisions Certain 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.


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

19. Loans Group 2008 €000

2007 €000

Bank loans and other borrowings

2,117

1,831

Loan from shareholders

1,625

1,351

In one year or less (note 16)

3,742

3,182

Amounts falling due (gross of finance costs):

In more than one year but not more than two years

5,807

6,327

In more than two years but not more than five years

18,264

16,335

5,467

6,888

33,280

32,732

(107)

(198)

33,173

32,534

(3,742)

(3,182)

29,431

29,352

In more than five years Less: unamortised finance costs Less: amounts falling due within one year

The bank loans and other borrowings are secured by fixed charges over various of the Group’s assets. These borrowings are shown net of unamortised issue costs of €107,000 (2007: €198,000). €9,700,000 of the borrowings are repayable in instalments over nine years while the balance has no 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.

31


32

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

20. Obligations under leases and hire purchase contracts Amounts due under finance leases and hire purchase contracts:

2008 €000

2007 €000

Within one year

2,084

1,439

In one to two years

1,174

1,226

In two to five years

1,193

2,330

329

-

Group Amounts payable:

In more than five years Less: finance charges allocated to future periods

(267)

(361)

4,513

4,634

2008 €000

2007 €000

Current obligations (note 16)

1,812

1,029

Non-current obligations (note 17)

2,701

3,605

4,513

4,634

Finance leases and hire purchase contracts are analysed as follows:

Annual commitments under non-cancellable operating leases are as follows:

Group

Land and buildings 2008 €000

2007 €000

2008 €000

Other 2007 €000

Total 2008 €000

Total 2007 €000

Within one year

114

93

294

157

408

250

In one to two years

189

123

335

298

524

421

In two to five years

500

156

701

599

1,201

755

803

372

1,330

1,054

2,133

1,426

Operating leases which expire:


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

21. Share capital 2008 No.

2007 No.

2008 €000

2007 €000

35,000,000

35,000,000

35,000

35,000

35,000,000

35,000,000

35,000

35,000

Authorised Ordinary shares of €1.00 each Allotted, called up and fully paid Ordinary shares of €1.00 each

22. Movements in reserves and minority interests

Profit and loss account €000

At 30 June 2007

312

Profit for the year

5,353

Actuarial loss net of deferred tax thereon Exchange difference on retranslation of net assets of subsidiary undertakings At 30 June 2008

Company

(875) (3,486) 1,304

Profit and loss account €000

At 30 June 2007

36,667

Profit for the year

640

At 30 June 2008

37,307

33


34

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

23. Notes to the statement of cash flows (a) Reconciliation of operating profit to net inflow from operating activities

2008 €000

2007 €000

Operating profit

9,843

2,828

Depreciation

5,722

4,300

Amortisation of positive goodwill

1,862

1,793

Amortisation of negative goodwill

(2,522)

-

Amortisation of development costs

35

125

(33)

(36)

EBITDA

14,907

9,010

Increase in debtors

(5,185)

(3,721)

145

(611)

(582)

4,755

100

(28)

(1,004)

(3)

Deferred government grants released

Decrease/(increase) in stocks (Decrease)/increase in creditors Decrease/(increase) in other provisions Pension scheme liability movement in respect of contributions, current service cost, settlements and curtailments and exchange differences Cash inflow before fundamental restructuring Cash outflow in respect of fundamental restructuring Net cash inflow from operating activities

8,381

9,402

(896)

(2,369)

7,485

7,033

(b) Analysis of net (debt) and cash

Cash at bank and in hand Bank overdraft

At 1 July 2007

Cash flow

Exchange difference

Acquisitions

Non cash movements

At 30 June 2008

€000

€000

€000

€000

€000

€000

11,702

1,296

(185)

-

-

12,813

(294)

(540)

-

-

-

(834)

11,408

756

(185)

-

-

11,979

(30,447)

(2,220)

1,209

-

(91)

(31,549)

Finance leases

(4,634)

1,341

252

(1,472)

-

(4,513)

Shareholders loans

(2,087)

462

-

-

-

(1,625)

(25,760)

339

1,276

(1,472)

(91)

(25,708)

Bank and other borrowings

Net (debt) and cash


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

24. Pension commitments FRS 17 disclosures The actuarial valuation was updated to 30 June 2008 by a qualified independent actuary. The defined benefit section is now closed to new entrants. The projected unit method has been used to calculate the current service cost and this will rise over time (as a percentage of payroll) as the members of the scheme approach retirement. The major assumptions used by the actuary were (in nominal terms):

2008

2007

n/a

n/a

Rate of increase of pensions in payment

3.80%

3.30%

Discount rate

6.10%

6.00%

Inflation assumption

4.00%

3.40%

Rate of increase in salaries

The assets in the scheme and the expected rate of return* were:

2008

2008 â‚Ź000

2007

2007 â‚Ź000

Equities

8.50%

4,817

8.00%

6,574

Bonds

5.63%

668

5.61%

653

Other

5.00%

594

5.50%

446

Total market value of assets Actuarial value of liability Recoverable surplus in the scheme Related deferred tax liability

Net pension asset

(*) The rates of return are gross rates before allowing for the expenses of running the scheme.

6,079

7,673

(5,984)

(7,538)

95

135

(25)

(40)

70

95

35


36

Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

24. Pension commitments (continued) Analysis of the amount (credited)/charged to operating profit

Service cost Settlements and curtailments

2008 €000

2007 €000

-

(27)

847

-

847

(27)

2008 €000

2007 €000

503

507

(332)

(350)

171

157

Amount recognised in statement of total recognised gains and losses

2008 €000

2007 €000

Actual return less expected return on assets

(978)

481

Changes in assumptions

(270)

239

Analysis of net return on pension scheme

Expected return on pension scheme assets Interest on pension liabilities Net return

Experience gains and losses arising on the plan liabilities

33

(868)

(1,215)

(148)

2008 €000

2007 €000

135

123

-

(27)

Contributions

177

27

Net return on assets

171

157

Settlements and curtailments

847

-

Actuarial loss recognised

Movement in surplus during the year

Surplus in scheme at the beginning of the year Movement in year: Current service cost

Exchange movement Actuarial loss Surplus in scheme at end of year

(20)

3

(1,215)

(148)

95

135


Paragon Annual Report & Accounts 2008

Strength in numbers

nOTES TO THE FINANCIAL STATEMENTS at 30 June 2008

24. Pension commitments (continued) 2008 €000

History of experience gains and losses

2007 €000

Difference between expected return and actual return on pension scheme assets: Amount % scheme of assets

(978)

481

(16.09%)

6.30%

33

(868)

0.50%

(11.50%)

(1,215)

(148)

(20.30%)

(2.00%)

Experience gains and losses arising on the scheme liabilities: Amount % of scheme liabilities Total actuarial loss recognised in statement of total recognised gains and losses: Amount % of the present value of scheme liabilities

Defined contribution scheme The 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 €337,000 (2007: €314,000). Contributions totalling €31,000 (2007: €48,000) were payable to the fund at the year end and are included in creditors.

25. Related party transactions There were no related party transactions during the year (2007: €Nil).

26. Controlling party In the directors’ opinion there is no overall controlling party.

Directors

Auditors

Bankers

Registered Office

Conor J Donnelly (Executive Chairman)

Ernst & Young LLP Citygate St James’ Boulevard Newcastle upon Tyne NE1 4JD

Credit Agricole Centre-Loire Centre D’affaires 45 26 Rue de la Godde 45 800 St Jean de Braye France

Factory 42 Pallion Way Pallion Trading Estate Sunderland Tyne and Wear SR4 6ST

Credit Lyonnais Orleans SDC Centre 7 Place du Martroi 45000 Orleans France

Paragon Group Limited Registered No: 05258175

Patrick J Crean (Chief Executive Officer) Iain S Black (Group Sales and Marketing Director) Laurent T Salmon (Group Finance Director)

Secretary

Solicitors Nabarro Nathanson Lacon House Theobald’s Road London WC1X 8RW

Patrick J Crean

Designed and produced by TMS Group 01322 626630 Printed in the UK on 9lives Offset which is manufactured from FSC certified 100% recycled fibre.

37


Principal offices France Paragon Identification Les Aubépins 18410 Argent sur Sauldre France

UK Paragon Group UK Ltd Pallion Trading Estate Sunderland, SR4 6ST UK

Tel: +33 (0) 2 48 81 61 00 Fax: +33 (0) 2 48 81 61 49

Tel: +44 (0) 191 514 0716 Fax: +44 (0) 191 514 6361

Paragon Lithotech Services ZA Les Portes de la Forêt Allée du Clos des Charmes Collégien 77615 Marne la Vallée cedex 3 France

Paragon Services Wakefield Europort, Gilcar Way Castleford, WF10 5QS UK

Tel: +33 (0) 1 64 62 71 75 Fax: +33 (0) 1 64 62 71 93

Tel: +44 (0) 1977 669 700 Fax: +44 (0) 1977 603 036

Paragon 56 rue des Hautes Patûres Bâtiment LE NAXOS 92737 Nanterre Cedex France

Romania Paragon Romania str. Drumul Garii Otopeni, 49-51A Otopeni, 075100, Jud. Ilfov Bucharest, Romania

Tel: +33 (0) 1 46 49 41 00 Fax: +33 (0) 1 46 49 41 99

Tel: +40 21 350 42 96 Fax: +40 21 350 42 97

Paragon Transaction 39 Rue des Rivières St Agnan 58200 Cosne sur Loire France

Ireland Paragon Group Ltd The Paragon Suite Irish Management Institute Sandyford Road Dublin 16 Ireland

Tel: +33 (0) 3 86 26 51 51 Fax: +33 (0) 3 86 26 66 33

Tel: +353 (0) 1279 3100 Fax: +353 (0) 1279 3110

www.paragon-europe.com

Paragon Group Ltd 2008  

Paragon Group Ltd 2008

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