PRO MEDICUS LIMITED — Annual Report 2007

Aug 27, 2007

Income Statement

	FOR THE YEAR ENDED 30 JUNE 2007	Notes	2007	2006
			$'000	$'000
	Continuing operations
	Sale of Goods	4(a)	347	305
	Cost of Sales		(164)	(215)
	Gross Profit		183	90
	Rendering of Services	4(a)	7,673	7,346
	Licence Revenue	4(a)	4,519	3,647
	Finance Revenue	4(a)	660	562
Revenue			13,035	11,645
	Other Income	4(b)	9	121
	Accounting & Secretarial Fees		(167)	(174)
	Advertising and Public Relations		(48)	(90)
	Depreciation & Amortisation	4(c)	(87)	(82)
Insurance			(150)	(129)
	Finance Costs	4(c)	—	—
	Legal Costs		(4)	(13)
payments	Operating Lease Expenditure - minimum lease		(179)	(149)
	Other Expenses		(80)	(62)
	Research & Development Costs (incl amortization)	4(c)	(746)	(710)
	Salaries and Employee Benefits Expense	4(c)	(1,670)	(1,608)
	Travel and Accommodation		(172)	(138)
	Profit before income tax		9,741	8,611
	Income tax expense	5	(2,689)	(2,496)
	Net Profit for the period	16	7,052	6,115
	Earnings per share (cents per share)	6
-	Basic for net profit for the year		7.1¢	6.1¢
-	Diluted –for net profit for the year		7.0¢	6.1¢
-	Franked dividends per share (cents per share)		7.0¢	5.5¢
	Dividends per share (cents per share)	7
-	Interim dividend paid per share		2.5¢	2.00¢
-	Special interim dividend paid per share		0.5¢	0.50¢
-			3.0¢	2.00¢
	Final dividend per share

Balance Sheet

AS AT 30 JUNE 2007	Notes	2007	2006
		$'000	$'000
Current Assets
Cash and cash equivalents	8	11,135	11,441
Trade and other receivables	9	4,335	2,346
Inventories	10	—	31
Prepayments		53	40
Total Current Assets		15,523	13,858
Non-current Assets
Deferred income tax asset	5	294	281
Plant and equipment	11	214	228
Intangible assets	12	1,523	1,145
Total Non-current Assets		2,031	1,654
TOTAL ASSETS		17,554	15,512
LIABILITIES
Current Liabilities
Trade and other payables	13	613	619
Income tax payable		1,413	470
Provisions	14	644	637
Total Current Liabilities		2,670	1,726
Non-current Liabilities
Deferred income tax liabilities	5	331	321
Provisions	14	296	259
Total Non-current Liabilities		627	580
TOTAL LIABILITIES		3,297	2,306
NET ASSETS		14,257	13,206
EQUITY
Contributed equity	15	32	32
Retained earnings	15	14,225	13,174
TOTAL EQUITY		14,257	13,206

Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2007	IssuedCapital	RetainedEarnings	Total Equity
	$'000	$'000	$'000
At 1 July 2005	9	12,809	12,818
Profit for the year	—	6,115	6,115
Conversion of Options to Shares	23	—	23
Equity dividends	—	(5,750)	(5,750)
At 30 June 2006	32	13,174	13,206

	IssuedCapital	RetainedEarnings	Total Equity
	$'000	$'000	$'000
At 1 July 2006	32	13,174	13,206
Profit for the year	—	7,052	7,052
Conversion of Options to Shares	—	—	—
Equity dividends	—	(6,001)	(6,001)
At 30 June 2007	32	14,225	14,257

Statement of Cash Flows

FOR THE YEAR ENDED 30 JUNE 2007		2007	2006
	Notes	$'000	$'000
Cash flows from operating activities
Receipts from customers		10,512	12,764
Payments to suppliers and employees		(2,957)	(3,127)
Borrowing costs		—	—
Income tax paid		(1,750)	(2,727)
Net cash flows from operating activities	8	5,805	6,910
Cash flows from investing activities
Capitalised Development Costs	12	(712)	(605)
Interest received	4(a)	660	562
Purchase of property, plant and equipment	11	(58)	(105)
Net cash flows used in investing activities		(110)	(148)
Cash flows from financing activities
Proceeds from issue of shares	15	—	23
Payment of dividends on ordinary shares	7	(6,001)	(5,750)
Net cash flows used in financing activities		(6,001)	(5,727)
Net increase/(decrease) in cash and cash equivalents		(306)	1,035
Cash and cash equivalents at beginning of period		11,441	10,406
Cash and cash equivalents at end of period	8	11,135	11,441

1. CORPORATE INFORMATION

Pro Medicus Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian stock exchange.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Preparation

The Appendix 4E report has been prepared in accordance with the Accounting Policies disclosed.

(b) Statement of compliance

Except for the amendments to AASB 101 Presentation of Financial Statements and AASB 2007-4 Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments, which the Company has early adopted, Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Company for the annual reporting period ending 30 June 2007. These are outlined in the table below.

Reference	Title	Summary	Applicationdate ofstandard*	Impact on Company financialreport	Applicationdate forCompany*
AASB2005-10	Amendments toAustralian AccountingStandards [AASB 132,AASB 101, AASB 114,AASB 117, AASB 133,AASB 139, AASB 1,AASB 4, AASB 1023 &AASB 1038]	Amending standard issued as aconsequence of AASB 7Financial Instruments:Disclosures.	1 January2007	AASB 7 is a disclosure standard sowill have no direct impact on theamounts included in the Company'sfinancial statements. However, theamendments will result in changes tothe financial instrument disclosuresincluded in the Company's financialreport.	1 July 2007
AASB2007-1	Amendments toAustralian AccountingStandards arising fromAASB Interpretation 11[AASB 2]	Amending standard issued as aconsequence of AASBInterpretation 11 AASB 2 –Company and Treasury ShareTransactions.	1 March2007	This is consistent with the Company'sexisting accounting policies for sharebased payments ,so the standard isnot expected to have any impact onthe Company's financial report.	1 July 2007
AASB2007-2	Amendments toAustralian AccountingStandards arising fromAASB Interpretation 12[AASB 1, AASB 117,AASB 118, AASB 120,AASB 121, AASB 127,AASB 131 & AASB139]	Amending standard issued as aconsequence of AASBInterpretation 12 ServiceConcession Arrangements.	1 January2007	The Company currently has noservice concession arrangements orpublic-private-partnerships (PPP), sothe standard is not expected to haveany impact on the Company'sfinancial report.	1 July 2007
AASB2007-3	Amendments toAustralian AccountingStandards arising fromAASB 8 [AASB 5,AASB, AASB 6, AASB102, AASB 107, AASB119, AASB 127, AASB134, AASB 136, AASB1023 & AASB 1038]	Amending standard issued as aconsequence of AASB 8Operating Segments.	1 January2009	AASB 8 is a disclosure standard sowill have no direct impact on theamounts included in the Company'sfinancial statements. However thestandard is expected to have animpact on the Company's segmentdisclosures as segment informationincluded in internal managementreports is more detailed than thatcurrently reported under AASB 114Segment Reporting.	1 July 2009
AASB 2007-5	Amendments toAustralian AccountingStandard – InventoriesHeld for Distribution byNot-for-Profit Entities[AASB 102]	This Standard makesamendments to AASB 102Inventories.	1 July 2007	This amendment only relates to Notfor-Profit Entities and as such is notexpected to have any impact on theCompany's financial report.	1July 2007
AASB 2007-6	Amendments toAustralian AccountingStandards arising fromAASB 123 [AASB 1,AASB 101, AASB 107,	Amending standard issued as aconsequence of revisions toAASB 123 Borrowing Costs.	1 January2009	The amendments to AASB 123require that all borrowing costsassociated with a qualifying asset becapitalised. The Company has noborrowing costs associated with	1 July 2009

FOR THE YEAR ENDED 30 JUNE 2007

Reference	Title	Summary	Applicationdate ofstandard*	Impact on Company financialreport	Applicationdate forCompany*
	AASB 111, AASB 116 &AASB 138 andInterpretations 1 & 12]			qualifying assets and as such theamendments are not expected tohave any impact on the Company'sfinancial report.
AASB 2007-7	Amendments toAustralian AccountingStandards [AASB 1,AASB 2, AASB 4,AASB 5, AASB 107 &AASB 128]	Amending standards forwording errors, discrepanciesand inconsistencies.	1 July 2007	The amendments are minor and donot affect the recognition,measurement or disclosurerequirements of the standards.Therefore the amendments are notexpected to have any impact on theCompany's financial report.	1 July 2007
AASB 7	Financial Instruments:Disclosures	New standard replacingdisclosure requirements ofAASB 130 Disclosures in theFinancial Statements of Banksand Similar Financial Institutionsand AASB 132 FinancialInstruments: Disclosure andPresentation.	1 January2007	Refer to AASB 2005-10 above.	1 July 2007
AASB 8	Operating Segments	New standard replacing AASB114 Segment Reporting, whichadopts a managementapproach to segment reporting.	1 January2009	Refer to AASB 2007-3 above.	1 July 2009
AASB 123(amended)	Borrowing Costs	The amendments to AASB 123require that all borrowing costsassociated with a qualifyingasset must be capitalised.	1 January2009	Refer to AASB 2007-6 above.	1 July 2009
AASBInterpretation10	Interim FinancialReporting andImpairment	Addresses an inconsistencybetween AASB 134 InterimFinancial Reporting and theimpairment requirementsrelating to goodwill in AASB 136Impairment of Assets and equityinstruments classified asavailable for sale in AASB 139Financial Instruments:Recognition and Measurement.	1 November2006	The prohibitions on reversingimpairment losses in AASB 136 andAASB 139, which are to takeprecedence over the more generalstatement in AASB 134, are notexpected to have any impact on theCompany's financial report.	1 July 2007
AASBInterpretation11	Company and TreasuryShare Transactions	Addresses whether certaintypes of share-based paymenttransactions with employees (orother suppliers of good andservices) shouldbe accounted for as equitysettled or as cash-settledtransactions underAASB 2 Share-based Payment.It also specifies the accountingin a subsidiary's financialstatements for share-basedpayment arrangementsinvolving equity instruments ofthe parent.	1 March2007	Refer to AASB 2007-1 above.	1 July 2007
AASBInterpretation12	Service ConcessionArrangements	Clarifies how operatorsrecognise the infrastructure as afinancial asset and/or anintangible asset – not asproperty, plant and equipment.	1 January2008	Refer to AASB 2007-2 above.	1 July 2008

*designates the beginning of the applicable annual reporting period

(c) Significant accounting judgements, estimates and assumptions

(i) Significant accounting estimates and assumptions

The carrying amounts of certain assets are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets within the next annual reporting period are:

Impairment of intangibles with indefinite useful lives

The company determines whether intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units to which the intangibles with the indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of intangibles with indefinite useful lives are discussed in note 12.

(d) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the entity and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured. Risks and rewards are considered passed to the buyer at the time of delivery of the goods to the customer.

Rendering of services

Where the contract outcome can be reliably measured, control of the right to be compensated for the services and the stage of completion can be reliably measured. Stage of completion is measured by completion of identifiable service segments.

Service Revenue is recognised over the term of the contract. Where revenue is received in advance, revenue is recognised in the period during which service was provided.

Where the contract outcome cannot be reliably measured, revenue is recognised only to the extent that costs have been incurred.

Licences

Control of the right to receive licensing fees.

Interest

Revenue is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(e) Government Grants

Government grants are recognised when there is a reasonable assurance that the grant will be received and all attaching conditions will be complied with. Export Market Development Grant income is brought to account in the period after the costs, that the grant is intended to compensate, were incurred.

(f) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependant on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

(i) Company as a lessee

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(g) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above.

(h) Trade and other receivables

Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that Pro Medicus will not be able to collect the debts. Bad debts are written off when identified.

(i) Inventories

Inventories are valued at the lower of cost and net realisable value. The cost of finished goods represents the purchase cost.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(j) Derivative financial instruments and hedging

The Company uses derivative financial instruments in the form of forward currency contracts, to hedge its risk associated with foreign currency fluctuations. Fair value adjustments are deemed to be immaterial and any gains or losses arising from changes in the fair value are taken directly to net profit or loss for that year.

(k) Derecognition of financial Instruments

The derecognition of a financial instrument takes place when the Company no longer controls the contractual rights that comprise the financial instrument, which is normally the case when the instrument is sold, or all the cash flows attributable to the instrument are passed through to an independent third party.

(l) Foreign currency translation

Both the functional and presentation currency of Pro Medicus Limited is Australian dollars (A$).

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

(m) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences, except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on the tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in the income statement.

(n) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

(o) Property, plant and equipment

Property plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

	2007	2006
Property Improvements	2 to 7 years	2 to 7 years
Motor Vehicles	4 to 5 years	4 to 5 years
Office Equipment	2 to 7 years	2 to 7 years
Furniture and Fittings	5 years	5 years
Research and Development Equipment	3 to 4 years	3 to 4 years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period the item is derecognised.

Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

(p) Intangible assets

Separately acquired intangible assets

Intangible assets acquired separately are capitalised at cost.

Amortisation is calculated on a straight-line basis over the estimated useful life of the asset. The useful life of the capitalised software licence was assessed to be 5 years.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred.

Intangible assets are tested for impairment where an indicator of impairment exists, either individually or at the cash generating level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Research and development costs

Research costs are expensed as incurred.

Development expenditure incurred on an individual project is carried forward when its future recoverability can reasonably be regarded as assured.

Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.

Any expenditure carried forward is amortised over the period of expected future sales from the related project.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use, or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.

(q) Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

(r) Provisions

Dividends payable are recognised when a legal or constructive obligation to pay the dividend arises, typically following approval of the dividend at a meeting of directors.

(s) Employee leave benefits

Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date.

Liabilities arising in respect of wages and salaries and annual leave, expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.

(i) Wages salaries, annual leave and sick leave

Liabilities for wages and salaries and annual leave, expected to be settled within twelve months of the reporting date are recognised in other payables in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for sick leave are recognised when the leave is taken and measured at the rates paid.

(ii) Long Service Leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible the estimated future cash outflows.

(t) Share based payment transactions

The company provides benefits to employees (including directors) of the Company in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares ('equity settled transactions').

There is currently one plan in place to provide these benefits being the Employee Share Incentive Scheme, which provides benefits to directors and staff by way of options to shares in the Company.

As these options were granted prior to 7 November 2002 they are exempted from the requirements of AASB 2 "Share-based Payment." As such no expense has been recorded in the income statement.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(u) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(v) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends) divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the Company adjusted for

• Costs of servicing equity (other than dividends)
• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
• Other non-discretionary changes in revenue or expenses during the period that would result from the dilution of potential ordinary shares

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares adjusted for any bonus element.

(w) Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

3. SEGMENT INFORMATION

The Company operates predominantly in one industry being, information technology within the health care industry and in two geographical areas being Australia and North America.

Geographic Segments

	Australia		North America		Pro Medicus Ltd
	2007	2006	2007	2006	2007	2006
Revenue	$'000	$'000	$'000	$'000	$'000	$'000
Sales to customers outside thecompany	9,455	9,110	3,093	2,309	12,548	11,419
Total segment revenue	9,455	9,110	3,093	2,309	12,548	11,419
Interest Revenue					660	562
Total Revenue					13,208	11,981
Results
Segment Result	7,278	6,932	2,463	1,679	9,741	8,611
Non segment expenses
Income Tax Expense					(2,689)	(2,496)
Net Profit					7,052	6,115
Assets
Segment Assets	12,618	10,876	4,642	4,355	17,260	15,231
Non segment assetsIncome Tax Assets					294	281
Total Assets					17,554	15,512
Liabilities
Segment Liabilities	1,553	1,515	—	—	1,553	1,515
Non segment liabilities
Tax Liabilities					1,744	791
Total Liabilities					3,297	2,306
			Notes		2007	2006
					$'000	$'000
4INCOME AND EXPENSES
Income and expenses from continuing operations
4 (a) Revenue
Sale of goods					347	305
Rendering of services					7,673	7,346
Licence revenue					4,519	3,647
Finance revenue					660	562
					13,199	11,860
Breakdown of finance revenue
Bank and deposit interest receivable					660	562
					660	562
4 (b) Other income
Government Grants					9	60
Net Foreign Exchange Differences					—	61
					9	121

An Export Market Development Grant [EMDG] has been received for expenses incurred in 2004/5 in developing overseas markets.

FOR THE YEAR ENDED 30 JUNE 2007

	Notes2007	2006
	$'000	$'000
4. Incomes and expenses (continued)
(c) Other Expenses
Finance costs	—	—
Total borrowing costs expensed	—	—
Depreciation and Amortisation
Motor Vehicles	20	24
Office Equipment	21	21
Furniture and Fittings	11	4
Research & Development Equipment	20	18
Intangible Asset	15	15
Total Depreciation and Amortisation Expenses	87	82
Costs of inventories recognised as an expense	31	18
Research and Development Expense
Research expenses	427	586
Amortization on capitalized development costs12	319	124
	746	710
Salaries and Employee Benefits Expense
Wages & Salaries	1,532	1,475
Long service leave provision	54	18
Defined contribution plan expense	84	115
Total Salaries and Employee Benefits Expense	1,670	1,608
Foreign Exchange Loss	(40)	—
5. INCOME TAX
The major components of income tax expense are:
Income Statement
Current income tax
Current income tax charge	2,881	2,583
Adjustments in respect of current income tax of previous	(189)	(9)
yearsDeferred income tax
Relating to origination and reversal of temporary	(3)	(78)
differences
Income tax expense reported in the income statement	2,689	2,496
A reconciliation between tax expense and the product ofaccounting profit before income tax multiplied by the
Company's applicable income tax rate is as follows:Accounting profit before tax from continuing operations	9,741	8,611
At the Company's statutory income tax rate of 30% (2006:	2,922	2,583
30%)
Adjustments in respect of current income tax of previousyears	(189)	(9)
Expenditure not allowable for income tax purposes	42	52
Other	(86)	(130)
Income tax expense reported in the income statement	2,689	2,496

FOR THE YEAR ENDED 30 JUNE 2007

	Notes	2007$'000	2006$'000
Deferred income tax
Deferred income tax at 30 June relates to the following:
Deferred tax liabilities
Capitalised development expenses		331	321
Deferred income tax liabilities		331	321
Deferred tax assets
Employee Entitlements		282	269
Audit Fee Accrual		12	12
Deferred income tax assets		294	281
6. EARNINGS PER SHARE
The following reflects the income and share data used in the
basic and diluted earnings per share computations:
		2007	2006
		$	$
Net Profit attributable to ordinary equity holders fromcontinuing operations		7,051,732	6,114,959
Weighted average number of ordinary shares for basic		100,020,000	100,000,603
earnings per share
Effect of dilution:
Share options		727,184	727,184
Weighted average number of ordinary shares adjusted for theeffect of dilution		100,747,184	100,727,787

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements

	Notes	2007	2006
		$'000	$'000
7. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year:
Dividends on ordinary shares
Final franked dividend for 2006: 3.00 cents (2005: 3.25 cents)		3,000	3,250
Interim franked dividend for 2007: 3.00 cents (2006: 2.50cents)		3,001	2,500
		6,001	5,750
Proposed for approval by directors (not recognised as aliability as at 30 June):
Dividends on ordinary shares:
Final franked dividend for 2007: 3.0 cents (2006: 2.00 cents)		3,000	2,000
Final franked special dividend for 2007: 1.0 cent (2006: 1.0cent)		1,000	1,000
Total dividends proposed		4,000	3,000
8. CASH AND CASH EQUIVALENTS
Cash at bank and in hand		1,793	2,901
Short-term deposits		9,342	8,540
		11,135	11,441
Cash at bank earns interest at floating rates based on dailybank deposit rates
Short term deposits are made for varying periods of
between 20 days and 35 days, depending on the
immediate cash requirements of the Company, and earninterest at the respective short-term deposit rates.

The fair value of cash and cash equivalents is $11,135,000 (2006: $11,441,000)

The fair value approximates carrying value due to the short term nature of cash at bank and short term deposits.

FOR THE YEAR ENDED 30 JUNE 2007

Notes	2007$'000	2006$'000
8. CASH AND CASH EQUIVALENTS (continued)
Reconciliation of net profit after tax to net cash flows fromoperations
Net profitAdjustments for:	7,052	6,115
Depreciation of non-current assets
Amortisation of Intangible Asset	72334	66139
Interest Received classified in Investing Activities	(660)	(562)
Changes in assets and liabilities
(Increase)/decrease in trade and other receivables(Increase)/decrease in inventory	(1,989)	1,491
(Increase)/decrease in future income tax benefit	31	(13)
(Increase)/decrease in prepayments	(13)	(2)
(Decrease)/increase in deferred income	(13)	(29)
(Decrease)/increase in trade and other creditors	9	(138)
	(94)	80
(Decrease)/increase in tax provision	943	(365)
(Decrease)/increase in deferred income tax liability	10	135
(Decrease)/increase in goods and services tax payable	79	(16)
(Decrease)/increase in employee entitlements	44	9
Net cash flow from operations	5,805	6,910
9. TRADE AND OTHER RECEIVABLES (CURRENT)
Trade receivables	4,335	2,346
Allowance for doubtful debts	—	—
	4,335	2,346
Terms and conditions relating to the above financial
instruments
Trade receivables are on 30 day trading terms.
Fair value approximates carrying value due to the short term nature of trade receivables.
10. INVENTORIES (CURRENT)
Finished goodsAt cost	—	31
Total inventories at lower of cost and net realisable value	—	31
11. PLANT AND EQUIPMENT
Property Improvements
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment	56	2
AdditionsDisposals	——	54—
Depreciation charge for the year	(11)	—
At 30 June 2007, net of accumulated depreciation and	45	56
impairment
At 1 July 2006
Cost	238	184
Accumulated depreciation and impairment	(182)	(182)
Net carrying amount	56	2
At 30 June 2007

Cost 238 238 Accumulated depreciation and impairment (194) (183) Net carrying amount 44 55 11. PLANT AND EQUIPMENT (continued) Motor Vehicles Year ended 30 June 2007 As at 1 July 2006, Net of accumulated depreciation and impairment 86 110 Additions — — Disposals — — Depreciation charge for the year (20) (24) At 30 June 2007, net of accumulated depreciation and impairment 66 86 At 1 July 2006 Cost 480 480 Accumulated depreciation and impairment (394) (370) Net carrying amount 86 110 At 30 June 2007 Cost 480 480 Accumulated depreciation and impairment (413) (394) Net carrying amount 67 86 Office Equipment Year ended 30 June 2007 As at 1 July 2006, Net of accumulated depreciation and impairment 55 41 Additions 6 35 Disposals — — Depreciation charge for the year (20) (21) At 30 June 2007, net of accumulated depreciation and impairment 41 55 At 1 July 2006 Cost 207 172 Accumulated depreciation and impairment (152) (131) Net carrying amount 55 41 At 30 June 2007 Cost 213 207 Accumulated depreciation and impairment (172) (152) Net carrying amount 41 55 Furniture & Fittings Year ended 30 June 2007 As at 1 July 2006, Net of accumulated depreciation and impairment 2 6 Additions 3 — Disposals — — Depreciation charge for the year (1) (4) At 30 June 2007, net of accumulated depreciation and impairment 4 2 At 1 July 2006 Cost 216 216 Accumulated depreciation and impairment (214) (210) Net carrying amount 2 6

At 30 June 2007
CostAccumulated depreciation and impairment		219(215)	216(214)
Net carrying amount		4	2
	Notes	2007$'000	2006$'000
11. PLANT AND EQUIPMENT (continued)
Research & Development Equipment
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment		29	31
AdditionsDisposals		49—	16—
Depreciation charge for the year		(20)	(18)
At 30 June 2007, net of accumulated depreciation and impairment		58	29
At 1 July 2006
Cost		135	119
Accumulated depreciation and impairment		(106)	(88)
Net carrying amount		29	31
At 30 June 2007
CostAccumulated depreciation and impairment		184(126)	135(106)
Net carrying amount		58	29
TOTAL PLANT AND EQUIPMENT
Year ended 30 June 2007
As at 1 July 2006,
Net of accumulated depreciation and impairment		228	190
Additions		58	105
DisposalsDepreciation charge for the year		—(72)	—(67)
At 30 June 2007, net of accumulated depreciation and impairment		214	228
At 1 July 2006
Cost		1,276	1,171
Accumulated depreciation and impairment		(1,048)	(981)
Net carrying amount		228	190
At 30 June 2007
Cost		1,334	1,276
Accumulated depreciation and impairmentNet carrying amount		(1,120)214	(1,048)228

Notes $'000 $'000 $'000 12. INTANGIBLE ASSETS At 1 July 2006 Development Costs $'000 Software Licences $'000 Total $'000 Cost (gross carrying amount) 1,224 75 1,299 Accumulated amortisation and impairment (124) (30) (154) Net carrying amount 1,100 45 1,145 Year ended 30 June 2007 At 1 July 2006, net of accumulated amortisation and impairment 1,100 45 1,145 Additions – internal development 712 — 712 Amortisation (319) (15) (334) At 30 June 2007, net of accumulated amortisation and impairment 1,493 30 1,523 At 30 June 2007 Cost (gross carrying amount) 1,936 75 2,011 Accumulated amortisation and impairment (443) (45) (488) Net carrying amount 1,493 30 1,523

Development costs have been capitalised at cost. This intangible asset has been assessed as having a finite life and is amortised using the straight line method over a period of 10 years. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.

Software licences have been assessed as having a finite life and are amortised using the straight line method over a period of 5 years.

At 1 July 2005	DevelopmentCosts$'000	SoftwareLicences$'000	Total$'000
Cost (gross carrying amount)	619	75	694
Accumulated amortisation and impairment	—	(15)	(15)
Net carrying amount	619	60	679
Year ended 30 June 2006
At 1 July 2004, net of accumulated amortisation and impairment	619	60	679
Additions – internal development	605	-	605
Amortisation	(124)	(15)	(139)
At 30 June 2005, net of accumulated amortisation and impairment	1,100	45	1,145
At 30 June 2006
Cost (gross carrying amount)	1,224	75	1.299
Accumulated amortisation and impairment	(124)	(30)	(154)
Net carrying amount	1,100	45	1,145

	Notes	2007	2006
		$'000	$'000
13. TRADE AND OTHER PAYABLES (CURRENT)
Trade payables		93	110
Other creditors and accruals		424	422
		517	532
Deferred Income		96	87
		613	619

(i) Trade payables are non-interest bearing and are normally settled on 30-day terms.

(ii) Other creditors are non-interest bearing and have an average term of 1 month.

Fair value approximates carrying value due to the short term nature of trade and other payables

14. PROVISIONS

	AnnualLeave	Long ServiceLeave	Total
	$'000	$'000	$'000
At 1 July 2006	519	377	896
Arising during the year	131	68	199
Utilised	(141)	(14)	(155)
	509	431	940
	Annual	Long Service	Total
	Leave	Leave
	$'000	$'000	$'000
Current 2007	509	135	644
Non-current 2007	—	296	296
	509	431	940
Current 2006	519	118	637
Non-current 2006	—	259	259
	519	377	896

	2007	2006
15. CONTRIBUTED EQUITY AND RESERVES	$'000	$'000
(i) Ordinary shares	32	32
Issued and fully paid	32	32
Fully paid ordinary shares carry one vote per share and carry the right to dividends
(ii) Movements in shares on issue		2007
	Number ofShares	$'000
At 1 July 2006	100,020,000	32
	—	—
At 30 June 2007	100,020,000	32
		2006
	Number of	$'000
	Shares
At 1 July 2005	100,000,000	9
Issued on 20 June 2006 for cash on exercise of	20,000	23

options
At 30 June 2006	100,020,000	32
Retained earnings	2007	2006
	$'000	$'000
Balance 1 July	13,174	12,809
Net profit for the year	7,052	6,115
Dividends	(6,001)	(5,750)
Balance 30 June 2007	14,225	13,174