Annual Report & Accounts

A Positive Outlook

09
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 CONTENTS

01 Chairman’s statement
04 Director’s report
08 Statement of director’s responsibilities
09 Group board of directors
10 Independent auditors report
12 Results
13 Group statement of total recognised gains and losses
13 Reconciliation of shareholders’ funds
14 Group balance sheet
15 Company balance sheet
16 Group statement of cashflows
18 Notes to the financial statements

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 Chairman’s statement

our results reflect

a great deal of
good work and
the building of
an even stronger
foundation for the
Paragon Group.

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 2 Paragon Annual Report & Accounts 2009
Chairman’s statement CONTINUED
Overview
I am proud to present our results for the year as these reflect a
great deal of good work and the building of an even stronger
foundation for the Paragon Group. In the year we made
particular progress on reshaping our French business following
the acquisition of Lithotech in the prior year whilst continuing
to respond positively to our customers’ needs across Europe. I
look forward with optimism to a future which will present many
opportunities which our Group is very well placed to respond to
in an effective and value enhancing way.
Challenging times
Like most businesses across the globe, the 12 months ending
30 June 2009 were a very challenging year for all, including
the Paragon Group. Conditions in both our own market and
the broader macro-economic environment placed considerable
pressure on some of our operating divisions. We are satisfied,
however, with our performance across the Group in the face of
these challenges and wish to record the Board’s gratitude to all
stakeholders in achieving this outcome.
Financial results
Despite the increased pressure on pricing and falling demand
in our markets, Paragon has maintained revenue, in constant
currency terms, in excess of €167 million. This represents a fall
of just under 3.5% and should be viewed in the context of our
ongoing strategy of discontinuing unprofitable business lines.
Of far greater focus for the Board is our underlying profitability
and we are pleased to report that this has been maintained
with a continuing operating margin of 5.5% and cash flow
from operations in excess of €9.6 million. This in turn has seen
Paragon reduce Net Debt by 14% and maintain its robust balance
sheet. Critical to this progress has been our tight working capital
management and return-on-investment driven capital expenditure
policies.
As at 30 June 2009, the Group was backed by tangible assets
of in excess of €30 million and shareholders funds of €35 million.
This balance sheet strength underpins our strategy of consolidation
and positions us favourably to continue to take advantage of the
difficult trading conditions across all our markets.
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Consolidation
Paragon remains committed to its strategy of consolidation and
during the financial year we continued to integrate previously
acquired businesses, while investigating further acquisition targets
for consolidation onto our platform.
During 2009 we completed the integration of the profitable
businesses rescued from Lithotech into our French businesses and
the closure of the remaining. We have now successfully salvaged
a profitable business and valuable real estate assets.
While none of the other businesses reviewed during 2009 met our
acquisition criteria, we did make one further successful acquisition
just after the year end. On 4 August 2009 Paragon announced
the acquisition out of administration of Ward Knowles, a specialist
business forms supplier in the UK. The Ward Knowles brand has
over 100 years of expertise within the print industry and long
standing relationships with major print management companies
making it a suitable investment for Paragon. This acquisition
further strengthens our position in the market and adds another
manufacturing facility to our portfolio. As part of the investment,
Paragon was able to rescue 70 jobs in the facility and is looking
forward to growing the business with the help of the existing
management team.
PeP - Paragon e-commerce Platform
During the year we further expanded the functionality of our
proprietary e-commerce platform (PEP), with powerful document
and image generation, enabling integrated cross-media
campaigns of email, SMS, personalised web and digital print
images. This was complemented by the on-going focus on cost,
efficiency and enhancing our customers' experience in the use of
this plug and play, multi-lingual management system that continues
to secure more customers and provide greater efficiency. During
the year we further expanded our ERP systems, directly integrating
presses at our larger production sites. This enhanced our
performance management and cost reduction programmes.
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 Paragon Annual Report & Accounts 2009 3

Outlook
The current trading environment is not easy and we do not expect
it to improve in the near term. While this puts pressure on our
operating businesses, we are confident in our proven management
team's ability to profitably manage businesses through the down
cycle and industry contraction. From a strategic perspective, this
challenging environment is favourable to Paragon as it will result in
further opportunities for consolidation and value extraction.
The climate in which we find ourselves permits only one direction
- that is forward. It requires all levels of management and staff
to pull together and deliver the best service to our customers,
extracting the best support from our suppliers and thus ensuring we
remain strong and even more robust as we exit this challenging
economic environment.

Conor J Donnelly
Executive Chairman of the Board
Date: 11th September 2009

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 4 Paragon Annual Report & Accounts 2009

DIRECTORS' REPORT

Paragon is looking forward to

a future that will present many
opportunities to continue building
an even stronger foundation.
Like most businesses across the Globe, the last financial Annual Turnover
year was challenging, with conditions in both our market

€160m
and the broader macro-economic environment placing
pressure on our operations. Paragon's demonstrated
capacity to deal with costs in a difficult economic
environment, has allowed it to emerge stronger, projecting
the Group towards new and higher added-value products
and services.
EBITDA
Over the last 12 months, Paragon has demonstrated

€10m
its capability to adapt its offering and move further up
the supply chain providing its customers with bespoke
technology-led solutions.
From call centre operations, marketing campaigns and
mailings management to the development of tailored
dynamic publishing web portals, we have put our Net Assets

€36m
customers’ needs first. Our objective has always been to
concentrate on what is best for our customers’ business;
creating further efficiencies and reducing costs.

“The further development of our
e-commerce offering through the
introduction of dynamic publishing,
has given our customers access to an
invaluable marketing communications
tool allowing them to control their
budget and get superior value from
their marketing campaigns.“
“We have been true partners to our
customers at a time which was very
difficult for them. They needed more
than ever to work with a company
that was financially strong and that
understood their business challenges.“
Iain BlacK
Group Sales & Marketing Director

Conor Donnelly
Executive Chairman

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The directors present their report and the Group financial
statements for the year to 30 June 2009. The financial statements
are stated in Euros (€000) as this is the functional currency
of the Group.
Results and dividends
The operating profit on continuing activities was €8,697,000
(2008: €10,813,000) while an operating loss of €2,828,000
(2008: €970,000) was suffered on discontinued activities.
The profit on ordinary activities after tax amounted to
€1,528,000 (2008: €5,353,000).
EBITDA was €9,408,000 (2008: €14,907,000).
Operating cashflow from operations was €9,671,000
(2008: €7,485,000)
The cash position at the end of the year was €11,594,000
(2008: €12,813,000).
Net debt was reduced in the year by €3,607,000
(2008: €52,000)
The directors do not recommend the payment of a dividend.
Principal activities and review
of the business
The Group is engaged in the provision of solutions to their clients'
printing, document management, tickets, labels and related
fulfilment and transaction needs.
The performance of the Group reflects the impact of very different
economic forces in the past year.
The results for the year can be distinguished between continuing
activities and those that were exited and discontinued.
Sales from continuing activities have declined during the year as:
• the UK operation's sales that are translated to euro for reporting
purposes have suffered an adverse currency hit of €7,000,000
due to the continued decline in sterling.
• the global recession and credit crunch took its toll on our
operations from quarter 2.
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Paragon Annual Report & Accounts 2009 5
Whilst operating profits (EBIT) from continuing operations declined,
they were satisfactory in light of these conditions.
The discontinued operations include all activities that were exited
during the year as a result of the fundamental reorganisation in
France. These activities did not meet our criteria for profitability.
This process has cost the Group €3,772,000. This includes
employee redundancy, closure of one production facility,
downsizing of our Parisian operations, converting the Bailleul
facility from industrial to a state of the art warehouse, service
and distribution centre, relocation of machinery and equipment,
associated charges, integration of the Paragon Lithotech Services
SA trade into our existing French operations and radically
reshaping and redirecting the remaining activities.
The operations in Romania and the UK traded well and provide
much optimism for the future. The French operations have now
been placed on a sound footing and together with all companies
in the group we believe that they have exciting prospects in the
coming years.
Our cash and debt balances have been carefully husbanded
in light of tight credit markets. Net debt was reduced by 14%
during the year as a result of cash generated from operations and
through careful and tight management of working capital across
all companies.
Our credit facilities contain a sensible balance of borrowings
that combine medium and long term repayment schedules. No
facilities are due to end or be renegotiated for several years and
the Group has comfortably met its financial covenant targets with
considerable headroom to spare.
Market risk
Overcapacity continues to be a factor in the market. The
prevailing economic downturn has accelerated the number of
business failures particularly those with high levels of gearing
that have been unable to refinance in the current challenging
credit environment. The Group expects these conditions to persist
throughout the year ending 30 June 2010.
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 6 Paragon Annual Report & Accounts 2009
Directors’ report CONTINUED
The Group's strong financial footing, supported by its balance
sheet and coupled with its operational experience of market
downturns, means Paragon is confident it will take advantage
of the current competitive market conditions. The Group expects
further consolidation opportunities to present themselves during
the coming year. In addition, Paragon's scale and diversity
enables the Group to maintain investment in product and service
enhancements despite competitive trading conditions.
Future 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.
On 4 August 2009, Paragon acquired Ward Knowles out of
administration. A specialist business forms supplier in the UK, the
Ward Knowles brand has over 100 years of expertise within
the print industry and long standing relationships with major print
management companies.
Paragon remains well positioned to take advantage of any further
consolidation in its market.
Research and development
The Group carries out Research and Development both internally
and through a number of international arrangements and
collaborations.
Political and charitable contributions
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.
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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 provide a material level of cover on external
foreign exchange fluctuations.
Cover is arranged through a combination of internal hedging
of risks by matching sales and purchases where practical and
forward contracts where considered necessary. In this current
financial year the Group has recorded a non-cash exchange gain
on full settlement of intra-group loans with a UK subsidiary. The
directors do not expect this gain to arise again.
Price risk
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.
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 Paragon Annual Report & Accounts 2009 7

Credit risk Such qualifying third party indemnity provision remains in force as
Group policies are aimed at minimising losses from credit risk at the date of approving the directors' report.
and require that deferred terms are granted only to customers
who demonstrate an appropriate payment history and satisfy Creditor’s payment policy and practice
creditworthiness procedures.
It is the Group's policy that payments to suppliers are made in
Individual exposures are monitored with customers subject to accordance with those terms and conditions agreed between
credit limits to ensure that the Group's exposure to bad debts is the Group and its suppliers, provided that all trading terms and
not significant. Goods may be sold on a cash-with-order basis to conditions have been complied with. At 30 June 2009, the Group
mitigate credit risk. had an average of 93 days (2008: 110 days) of purchases
outstanding in trade creditors.
An appropriate level of credit insurance cover has been arranged
in the UK to ensure that we have a cost effective means of
protection against increased credit risks in the current economic Disclosure of information to the auditors
environment. So far as each person who was a director at the date of
The Group receives credit from funders and suppliers. Group approving this report is aware, there is no relevant audit
policies are aimed at ensuring this credit is maintained at information, being information needed by the auditor in
adequate levels for the purpose of funding the business operations. connection with preparing its report, of which the auditor is
unaware. Having made enquiries of fellow directors and the
Liquidity risk Group's auditor, each director has taken all the steps that he is
The Group aims to mitigate liquidity risk by managing cash obliged to take as a director in order to make himself aware of
generated by its operations and ensuring that adequate credit/ any relevant audit information and to establish that the auditor is
borrowing facilities are in place. Capital expenditures and aware of that information.
related financing of investments are approved at Group level.
These are funded through a combination of internally generated Auditors
cash resources and lease financing. Flexibility is maintained
by retaining surplus cash in readily accessible bank accounts. A resolution to re-appoint Ernst & Young LLP as auditors
Borrowing facilities are a combination of fixed term loan facilities will be put to the forthcoming Annual General Meeting.
with 8 years remaining and revolving facilities with no expiration
By order of the Board
date. Cash balances and forecasts are controlled at both local
and Group level on a daily basis.
Use of derivatives
The group uses forward currency contracts to reduce foreign
exchange rate exposure on significant foreign currency payments.
No other derivatives are used.
Patrick J Crean
Directors' qualifying third party Chief Executive Officer and Secretary
indemnity provisions
Date: 11th September 2009
The company has granted an indemnity to one or more of its
directors against liability in the event of proceedings being
brought by third parties, subject to the conditions set out in the
Companies Act 2006.

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 8 Paragon Annual Report & Accounts 2009

STATEMENT OF Directors’ RESPONSIBILITIES

The directors are responsible for preparing the Directors' Report The directors are responsible for keeping adequate accounting
and the financial statements in accordance with applicable law records that are sufficient to show and explain the company's
and regulations. transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure
Company law requires the directors to prepare financial
that the financial statements comply with the Companies Act
statements for each financial year. Under that law the directors
2006. They are also responsible for safeguarding the assets of the
have elected to prepare the financial statements in accordance
company and hence for taking reasonable steps for the prevention
with United Kingdom Generally Accepted Accounting Practice
and detection of fraud and other irregularities.
(United Kingdom Accounting Standards and applicable law).
The directors are responsible for the maintenance and integrity of
Under company law the directors must not approve the financial
the corporate and financial information included on the company's
statements unless they are satisfied that they give a true and fair
website. Legislation in the United Kingdom governing the
view of the state of affairs of the company and of the profit or
preparation and dissemination of financial statements may differ
loss of the company for that period. In preparing these financial
from legislation in other jurisdictions.
statements, the directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgments and accounting estimates that are reasonable
and prudent;
• state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business.

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 Paragon Annual Report & Accounts 2009 9

GROUP Board of Directors

1. Conor J Donnelly
Executive Chairman

2. Patrick J Crean
Chief Executive Officer

3. Laurent T Salmon
Group Finance Director

1. 2. 4. Iain S Black
Group Sales Development Director

3. 4.

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 10 Paragon Annual Report & Accounts 2009
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 2009 which comprise the Group Consolidated Income
Statements, the Group statement of Total Recognised Gains and
Losses, Reconciliation of Shareholders' Funds, the Group and
Company Balance Sheets, the Group statement of Cash Flows
and the related notes I to 27. The financial reporting framework
that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the company's members, as a body,
in accordance with Sections 495 and 496 of the Companies
Act 2006. Our audit work has been undertaken so that we might
state to the company's members those matters we are required
to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the company and the
company's members as a body, for our audit work, for this report,
or for the opinions we have formed.
Respective responsibilities of directors
and auditors
As explained more fully in the Directors' Responsibilities
Statement set out on page 8, the directors are responsible for
the preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
the financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's
(APB's) Ethical Standards for Auditors.
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Scope of the audit
of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate
to the group's and the parent company's circumstances and
have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the group's and the
parent company's affairs as at 30 June 2009 and of the
group's profit for the year then ended;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
Opinion on other matter prescribed
by the Companies Act 2006
In our opinion the information given in the Directors' Report for the
financial year for which the financial statements are prepared is
consistent with the financial statements.
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 Paragon Annual Report & Accounts 2009 11

Matters on which we are required to

report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law
are not made; or
• we have not received all the information and explanations we
require for our audit.

Mark Hatton
for and on behalf of Ernst & Young LLP, Registered Auditor
Date: 11th September 2009

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 12 Paragon Annual Report & Accounts 2009

RESULTS.

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 Paragon Annual Report & Accounts 2009 13

Group consolidated income statement

for the year ended 30 June 2009

2009 2008
Notes €000 €000
Turnover
Continuing 2 157,540 165,612
Discontinued 2,607 7,055
160,147 172,667
Cost of sales
Continuing 117,634 119,076
Discontinued 4,301 6,859
121,935 125,935
Gross profit
Continuing 39,906 46,536
Discontinued (1,694) 196
38,212 46,732
Selling and distribution costs
Continuing 21,056 24,040
Discontinued 555 682
21,611 24,722
Administrative expenses
Continuing 10,153 11,683
Discontinued 579 484
10,732 12,167
Operating profit (EBIT)
Continuing 8,697 10,813
Discontinued (2,828) (970)
5,869 9,843

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 14 Paragon Annual Report & Accounts 2009

Group statement of total recognised gains and losses

for the year ended 30 June 2009

2009 2008
Notes €000 €000

Costs of fundamental reorganisation 4 (3,772) (992)

Gain on disposal of fixed assets 4 1 71
Gain on disposal of trade 4 50 -
Loss on termination of subsidiary 4 - (72)

Non-operating exceptional items (3,721) (993)

Net interest payable and similar charges 7 (1,616) (2,104)

Profit on ordinary activities before tax 532 6,746

Tax on profit on ordinary activities 8 996 (1,393)

Profit for the year 1,528 5,353

Exchange difference on retranslation of net assets of subsidiaries* (1,897) (3,486)
Actuarial loss recognised on pension scheme (note 24) (557) (1,215)
Deferred tax arising thereon 156 340

Total recognised gains and losses relating to the year (770) 992

*Sterling has continued its decline in value with the Euro since the prior year-end consolidated financial statements were prepared.
As a result of this decline in Sterling, a non-cash exchange loss arises on consolidation of the Group's UK subsidiaries.
The directors expect this to reverse in the near future.

GROUP Reconciliation of shareholders’ funds

for the year ended 30 June 2009

2009 2008
€000 €000

Total recognised gains and losses (770) 992

Total movements during the year (770) 992
Opening shareholders’ funds 36,304 35,312

Closing shareholders’ funds 35,534 36,304

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 Paragon Annual Report & Accounts 2009 15

Group CONSOLIDATED balance sheet

at 30 June 2009

2009 2008
Notes €000 €000
Fixed assets
Tangible assets 12 30,493 33,953
Positive goodwill and development expenditure 28,356 30,453
Negative goodwill (2,127) (6,289)
Intangible assets 11 26,229 24,164
56,722 58,117
Current assets
Stocks 14 12,362 15,974
Debtors 15 33,037 45,215
Deferred tax asset 9 4,579 3,749
Cash at bank and in hand 11,594 12,813
61,572 77,751
Creditors: amounts falling due within one year 16 (53,975) (64,199)

Net current assets 7,597 13,552

Total assets less current liabilities 64,319 71,669

Creditors: amounts falling due after more than one year 17 (23,369) (32,746)
Deferred income 18(a) (648) (728)

Provisions for liabilities and charges 18(b) (4,571) (1,961)

Pension (deficit)/surplus 24 (197) 70

Net assets 35,534 36,304

Capital and reserves

Called up share capital 21 35,000 35,000
Profit and loss account 22 534 1,304

Equity shareholders’ funds 35,534 36,304

Approved by the Board

Conor J Donnelly Patrick J Crean Laurent T Salmon

Executive Chairman Chief Executive Officer Group Finance Director

Date: 11th September 2009

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 16 Paragon Annual Report & Accounts 2009

Company balance sheet

at 30 June 2009

2009 2008
Notes €000 €000
Fixed assets
Investment 13 74,879 74,879

Current assets
Debtors 15 - 160

- 160
Creditors: amounts falling due within one year 16 (2,262) (2,732)

Net current liabilities (2,262) (2,572)

Total assets less current liabilities 72,617 72,307

Net assets 72,617 72,307

Capital and reserves

Called up share capital 21 35,000 35,000
Profit and loss account 22 37,617 37,307

Equity shareholders’ funds 72,617 72,307

Approved by the Board

Conor J Donnelly Patrick J Crean Laurent T Salmon

Executive Chairman Chief Executive Officer Group Finance Director

Date: 11th September 2009

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 Paragon Annual Report & Accounts 2009 17

Group statement of cash flows

for the year ended 30 June 2009

2009 2008
Notes €000 €000

Net cash inflow from operating activities

(excluding fundamental restructuring) 10,734 8,381
Cash outflow in respect of fundamental restructuring (1,063) (896)
Net cash inflow from operating activities 23(a) 9,671 7,485

Return on investments and servicing of finance

Interest received from banks 47 18
Interest paid to banks (1,457) (2,011)
Interest element of finance lease payments (217) 303
Interest of shareholders' loans (195) -
(1,822) (2,296)
Taxation
Corporation tax paid (609) (485)

Capital expenditure and financial investments

Payments to acquire tangible fixed assets (1,313) (2,285)
Receipt from sales of tangible fixed assets 36 447
Cash on disposal of intangibles 50 18
(1,227) (1,820)
Acquisitions and disposals
Cash paid for acquisition of business (1,450) (1,959)
(1,450) (1,959)
Equity dividends paid - (40)

Net cash inflow before financing 4,563 885

Financing 23(b)
Loans received from shareholders - 1,000
Repayment of shareholder’s loans (705) (1,462)
Other loans and borrowings 870 3,744
Repayment of capital element of finance leases (1,826) (1,887)
Repayment of other loans (5,654) (1,524)
Net cash outflow on financing (7,315) (129)

Net (decrease)/increase in cash after financing movements (2,752) 756

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 18 Paragon Annual Report & Accounts 2009

Group statement of cash flows

for the year ended 30 June 2009

Reconciliation of net cash flow to movement in net debt

2009 2008
Notes €000 €000

Net (decrease)/increase in cash after financing movements 23(b) (2,752) 756

Repayment of capital element of finance leases 23(b) 1,826 1,270
Repayment of capital element of finance leases acquired (note 13) 23(b) - 617
Decrease/(increase) in bank loans and other borrowings 23(b) 4,784 (2,220)
Shareholders' loans 23(b) 705 462
New finance leases 23(b) (1,334) (546)
Reduction in net debt arising from cash flows 3,229 339

Exchange differences 23(b) 221 1,276

Debt acquired on Acquisition (note 13) 23(b) 187 (1,472)
Other movements 23(b) (30) (91)
Reduction in net debt 3,607 52

Net debt at 1 July 23(b) (25,708) (25,760)

Net debt at 30 June 23(b) (22,101) (25,708)

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 Paragon Annual Report & Accounts 2009 19

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

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.
The Euro/Sterling exchange rate at 30 June 2009 was 1.173
(2008: 1.264).
The directors have amended the format of the Group consolidated
income statement compared to last year. They are of the opinion that
this summarises the results of the Group more effectively.
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.

Basis of consolidation Deferred taxation

The Group financial statements consolidate the financial statements of
Paragon Group Limited and all of its controlled subsidiary undertakings
drawn up to 30 June 2009. No profit and loss account is presented for
Paragon Group Limited as permitted by Section 408 of the Companies
Act 2006.
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:

• provision is made for tax on gains arising from the revaluation

Goodwill
(and similar fair value adjustments) of fixed assets, and gains on
Positive goodwill arising on acquisitions is capitalised, classified as an
disposal of fixed assets that have been rolled over into replacement
asset on the balance sheet and amortised on a straight-line basis over
assets, only to the extent that, at the balance sheet date, there is a
its useful economic life. It is reviewed for impairment at the end of the
binding agreement to dispose of the assets concerned. However,
first full financial year following the acquisition and in other periods if
no provision is made where, on the basis of all available evidence
events or changes in circumstances indicate that the carrying value may
at the balance sheet date, it is more likely than not that the taxable
not be recoverable.
gain will be rolled over into replacement assets and charged to tax
Negative goodwill, being the excess of the fair value of assets and only where the replacement assets are sold;
liabilities acquired over the cost of their acquisition, is capitalised
• provision is made for deferred tax that would arise on remittance of
and classified on the balance sheet as a negative fixed asset. It is
the retained earnings of overseas subsidiaries, associates and joint
amortised in the periods in which the non-monetary assets acquired are
ventures only to the extent that, at the balance sheet date, dividends
depreciated or sold.
have been accrued as receivable;
Depreciation
• deferred tax assets are recognised only to the extent that the directors
Depreciation is provided on all tangible fixed assets, at rates calculated
consider that it is more likely than not that there will be suitable
to write off the cost or valuation, less estimated residual value based on
taxable profits from which the future reversal of the underlying timing
prices prevailing at the date of acquisition, of each asset evenly over its
differences can be deducted.
expected useful life as follows:
Deferred tax is measured on an undiscounted basis at the tax rates
Freehold buildings - 20 to 50 years
that are expected to apply in the periods in which timing differences
Machinery and equipment - 3 to 20 years reverse, based on tax rates and laws enacted or substantively enacted
Fixtures and fittings - 10 to 20 years at the balance sheet date.

Costs incurred in the development of IT systems are capitalised up to Investments

the point at which the system is ready for use. These include an element Investments are stated at cost less provision for diminution in value.
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.

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 20 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2008

1. Accounting policies (continued)

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.
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.
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.

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.

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 Paragon Annual Report & Accounts 2009 21

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

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:

2009 2008
€000 €000

Europe 155,582 165,520

Rest of the world 4,565 7,147
160,147 172,667

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

2009 2008
€000 €000

Amortisation of goodwill (note 11) 2,062 1,862

Release of negative goodwill (note 11) (3,345) (2,522)
(1,283) (660)

Foreign exchange gain* (1,285) (2,365)

Auditors’ remuneration - audit services UK** 110 132

- audit services - overseas 15 15
- non-audit services - UK 120 92
- non-audit services - overseas 12 12
Depreciation of owned assets (note 12) 3,147 4,125
Depreciation of assets held under finance leases and hire purchase contracts (note 12) 1,670 1,597
Release of government grants (note 18(a)) (28) (33)
Amortisation of development expenditure (note 11) 33 35
Operating lease rentals - land and buildings 1,428 1,047
- plant and machinery 1,561 1,623

Non-audit services include €132,000 (2008: €104,000) relating to taxation services.

*Includes exchange gains on Inter-Group loan balances denominated in Sterling.

**UK audit fees include €5,000 (2008: €5,000) in relation to the Company.

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 22 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

4. Non-operating exceptional items

2009 2008
€000 €000

Gain on disposal of fixed assets 1 71

Gain on disposal of trade 50 -
Loss on termination of subsidiary - (72)
Costs of fundamental reorganisation (3,772) (992)
Non-operating exceptional items (3,721) (993)

Total exceptional items (3,721) (993)

Reorganisation costs of €3,772,000 comprise severance and industrial reorganisation

costs incurred in the fundamental restructuring of the operations in France.

5. Staff costs

2009 2008
€000 €000

Wages and salaries 33,181 37,156

Social security costs 10,626 10,421
Pension charge - defined benefit scheme - 32
Other pension costs/(credits) 257 (136)
44,064 47,473

The number of full-time, part-time and temporary employees at the year-end was:

2009 2008
No. No.

Production 752 823

Administration 358 413
1,110 1,236

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 Paragon Annual Report & Accounts 2009 23

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2008

6. Directors’ emoluments

2009 2008
€000 €000

Emoluments 171 377

Company contributions paid to money purchase scheme 15 15

2009 2008
No. No.

Members of money purchase pension schemes 1 1

The emoluments from the Company of the highest paid director were €95,000 (2008: €189,000). No contributions were paid
into money purchase pension schemes for the highest paid director (2008: €nil). An unrelated company was paid €nil (2008:
€500,000) for the provision of services of each of the directors in relation to the acquisition of Paragon Lithotech Services SA
in 2008.

7. Net interest payable

2009 2008
€000 €000

Bank loans and overdrafts 1,465 1,868

Net interest income on pension scheme assets and liabilities (106) (171)
Interest receivable (47) (18)
Finance charge on leased assets 217 303
Amortisation of loan issue costs 30 27
Loan from shareholders 57 95s
1,616 2,104

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 24 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

8. Tax on profit on ordinary activities

(a) Tax on profit on ordinary activities

The tax (credit)/charge for the year is made up as follows: 2009 2008
€000 €000

Profit on ordinary activities before tax 532 6,746

Tax on profit on ordinary activities 996 (1,393)
Profit on ordinary activities after tax 1,528 5,353

Tax on profit on ordinary activities

UK corporation tax 261 395
Foreign tax 429 650
Prior year adjustment - UK corporation tax 76 (141)
Prior year adjustment - foreign tax (13) -
Current tax charge (note 8(b)) 753 904
Deferred tax (1,749) 489
(996) 1,393

(b) Factors affecting the tax charge for the year

The tax assessed on the profit on ordinary activities for the year is higher (2008: lower)
than the standard rate of corporation tax in the UK. The differences are explained below:

2009 2008
€000 €000

Profit on ordinary activities before tax 532 6,746

Profit on ordinary activities multiplied by the standard rate
of corporation tax in the UK of 28% (2008: 29.5%) 149 1,990
Effects of:
Disallowed expenses and non-taxable income (67) 398
Capital allowances in advance of depreciation 47 (252)
Other timing differences 188 286
Prior year adjustments to subsidiary entities 63 (141)
Capital Gains 640 -
Effect of overseas tax rates (473) (90)
Utilisation of brought forward losses 206 (1,287)
Current tax charge for year (note 8(a)) 753 904

(c) Factors that may affect the future tax charges

There are tax losses carried forward as at 30 June 2009 of approximately €15,767,000
(2008: €16,053,000). These are available for offset against future taxable trading profits.

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 Paragon Annual Report & Accounts 2009 25

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

9. Deferred tax
Not Not
An analysis of the net deferred tax asset is as follows:
Recognised Recognised Recognised Recognised

2009 2008 2009 2008

€000 €000 €000 €000

Accelerated capital allowances (510) (1,099) - 326

Other timing differences 563 73 - -
Tax losses 4,313 3,837 2,120 1,293
4,366 2,811 2,120 1,619

Recognised
net deferred
tax asset
€000
At 1 July 2008 2,811
Credit in the year 1,801
Exchange rate differences (246)
At 30 June 2009 4,366

A deferred tax liability of €213,OOO (2008: €938,OOO) is included in creditors: amount falling due within one year (note 16).
The recognised net deferred tax asset is stated net of this.
The deferred tax asset is expected to be recovered in future periods over one year from the balance sheet date.

10. Profit attributable to members of the parent company

The profit dealt with in the financial statements of the parent company was €310,000 (2008: €640,000).

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 26 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

11. Intangible assets

Group Development Positive Negative
expenditure goodwill goodwill Total

€000 €000 €000 €000

Cost:
At 30 June 2008 903 37,388 (8,811) 29,480
Fair value adjustment (note 13) - - 817 817
Exchange movements - (2) - (2)

At 30 June 2009 903 37,386 (7,994) 30,295

Amortisation:
At 30 June 2008 867 6,971 (2,522) 5,316
Amortised in the year 33 2,062 (3,345) (1,250)

At 30 June 2009 900 9,033 (5,867) 4,066

Net book value:

At 30 June 2008 36 30,417 (6,289) 24,164

At 30 June 2009 3 28,353 (2,127) 26,229

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

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 Paragon Annual Report & Accounts 2009 27

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

12. Tangible fixed assets

Land Machinery Fixtures
Group and and and Total
buildings equipment fittings

€000 €000 €000 €000

Cost:
At 30 June 2008 32,393 66,103 2,196 100,692
Revision of fair values (380) (183) - (563)
Additions 367 2,122 158 2,647
Disposals - (514) (3) (517)
Exchange movements (436) (1,638) (28) (2,102)

At 30 June 2009 31,944 65,890 2,323 100,157

Depreciation:
At 30 June 2008 11,837 53,190 1,712 66,739
Charge for the year 1,451 3,254 112 4,817
Disposals - (479) (3) (482)
Exchange movements 70 (1,460) (20) (1,410)

At 30 June 2009 13,358 54,505 1,801 69,664

Net book value:

At 30 June 2008 20,556 12,913 484 33,953

At 30 June 2009 18,586 11,385 522 30,493

The net book value of machinery and equipment above includes an amount of €5,044,000 (2008: €5,034,000) in respect of
assets held under finance leases and hire purchase contracts.
The net book value of land and buildings above includes an amount of €2,250,000 (2008: €6,907,000) in respect of assets
held under finance leases and hire purchase contracts.

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 28 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

13. Investments
Details of the investments in which the Group or the Company holds more than 20% of the nominal value of any class
of share capital are as follows:

Subsidiary undertakings
Proportion of
Country of voting rights
Name of Company incorporation Holding and shares held Total Nature of business

Grenadier Holdings Limited England Ordinary 100% Holding company

Grenadier (UK) Limited England Ordinary 100% (6) Holding company
CD-Paragon BV Netherlands Ordinary 100% (9) Holding company
Paragon Group UK Limited England Ordinary 100% (8) Print and print management
Paragon France SAS France Ordinary 100% (2) Holding company
Paragon Identification SAS France Ordinary 100% (4) Tickets and labels
Paragon Transaction SA France Ordinary 100% (3) Print and print management
Wordcraft Digital Print Limited England Ordinary 100% (1) Dormant
Hardy of Castleford Limited England Ordinary 100% (1) Dormant
Impetus Direct Limited England Ordinary 100% (1) Dormant
Contiforme 2 SA Portugal Ordinary 25% (5) Printing
Sepedo SA Portugal Ordinary 20% (5) Card personalisation
Paragon Romania SRL Romania Ordinary 100% (1) Printing
Paragon Transaction Belgium BVBA Belgium Ordinary 100% (7) Printing
Paragon Transaction UK Limited England Ordinary 100% (7) Holding company
Paragon Print Management SAS France Ordinary 100% (6) Print management
Paragon Lithotech Services SA France Ordinary 100% (7) Print and print management

(1) Held via Paragon Group UK Limited

(2) Held via CD-Paragon BV
(3) Held via Paragon France SAS and GHL
(4) Held via Paragon France SAS
(5) Not consolidated within the Group figures, investment of CD-Paragon BV. The Group do not have a participating interest
or the ability to exercise significant influence over the entities operation and financial policies.
(6) Held via Grenadier Holdings Limited
(7) Held via Paragon Transaction SA
(8) Held via Paragon Transaction UK
(9) Held via Grenadier (UK) Limited

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 Paragon Annual Report & Accounts 2009 29

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

13. Investments (continued)

Company 2009 2008

€000 €000

Cost:
At 1 July 2008 and 30 June 2009 74,879 74,879

Additions

The provisional fair value adjustments recorded in relation to Paragon Lithotech S.A. that was formed on 24 October 2007
to acquire the trade and assets of Lithotech SA have been finalised.

Provisional Adjustment Final

fair value €000 fair value
to group €000
€000

Tangible fixed assets 11,252 (563) 10,689

Intangible fixed assets 368 - 368
Stocks 5,128 (458) 4,670
Borrowings due within one year (1,472) 187 (1,285)
Creditors due within one year (3,078) 17 (3,061)
Net assets 12,198 (817) 11,381
Negative goodwill arising on acquisition (8,811) 817 (7,994)
3,387 - 3,387
Discharged by:
Cash 1,959 - 1,959
Creditors 1,428 - 1,428
3,387 - 3,387

As permitted by FRS7, adjustments totaling €817,000 have been made to the provisional fair values in the 2009 financial
statements. Based on third party professional valuations, the fair value of tangible fixed assets at Marne La Vallee and Rognac
have been reduced. As a result of further information becoming available, the fair value of stocks, creditors and borrowings
have also been amended. The total adjustment of €817,000 has been reflected as a reduction of negative goodwill that arose
on acquisition.

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 30 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

14. Stocks

Group 2009 2008

€000 €000

Raw materials and consumables 2,551 3,559

Work in progress 1,242 1,111
Finished goods and goods for resale 8,569 11,304
12,362 15,974

15. Debtors Group Company

2009 2008 2009 2008

€000 €000 €000 €000

Amounts falling due within one year are:

Trade debtors 29,970 42,064 - -
Other debtors 1,502 1,132 - -
Corporation tax debtor 158 488 - -
Prepayments and accrued income 891 1,058 - -
Amounts owed by group undertakings - - - 160
32,521 44,742 - 160

Amounts falling due after more than one year are: 516 473
Prepayments and accrued income 33,037 45,215

16. C
 reditors: amounts falling Group Company
due within one year
2009 2008 2009 2008
€000 €000 €000 €000

Bank overdraft 2,710 834 - -

Bank loans and other borrowings (note 19) 5,432 2,117 - -
Trade creditors 29,779 36,574 - -
Corporation tax 960 1,169 120 -
Other taxes and social security costs 7,075 7,391 - -
Other creditors 3,134 6,008 - 1,107
Accruals and deferred income 2,329 5,731 11 -
Finance leases and hire purchase contracts (note 20) 1,423 1,812 - -
Loan from shareholders (note 19) 920 1,625 920 1,625
Amount owed to subsidiary undertaking - - 1,211 -
Deferred tax 213 938 - -
53,975 64,199 2,262 2,732

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 Paragon Annual Report & Accounts 2009 31

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

17. Creditors: amounts falling due after more than one year

Group 2009 2008

€000 €000

Amounts falling due after more than one year are:

Finance leases and hire purchase contracts (note 20) 2,290 2,701
Bank loans (note 19) 20,920 29,431
Other creditors 159 614
23,369 32,746

Net debt and cash are summarised on note 23.

18. Deferred income and provisions for liabilities and charges Government
(a) Deferred income grants
€000

At 30 June 2008 728

Released in the year (28)
Exchange movements (52)
At 30 June 2009 648

(b) Provisions for liabilities and charges

Retirement Restructuring Other Total
provision provision provision provisions
€000 €000 €000 €000

At 30 June 2008 1,961 - - 1,961

Utilised in the year (180) (1,063) - (1,243)
Other movements - - 145 145
Exchange movements - - (28) (28)
(Credit)/charge in the year (36) 3,772 - 3,736
At 30 June 2009 1,745 2,709 117 4,571

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.

Restructuring provisions
This provision includes redundancy and other charges incurred on the closure and fundamental restructuring of Paragon Lithotech
Services SA.

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 32 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

19. Loans and other borrowings

Group 2009 2008

Amounts falling due (gross of finance costs): €000 €000

Bank loans and other borrowings 5,432 2,117

Loan from shareholders 920 1,625
In one year or less (note 16) 6,352 3,742
In more than one year but not more than two years 5,152 5,807
In more than two years but not more than five years 10,446 18,264
In more than five years 5,399 5,467
27,349 33,280
Less: unamortised finance costs (77) (107)
27,272 33,173
Less: amounts falling due within one year (6,352) (3,742)
20,920 29,431

The bank loans and other borrowings comprise both fixed term and revolving credit facilities and are secured by fixed charges
over several of the Group's fixed assets, and a floating charge over debtors.
These borrowings are shown net of unamortised issue costs of €77,000 (2008: €107,000).
€8,700,000 of the borrowings is repayable in instalments over eight years while the balance is a revolving facility with no fixed
expiration date.
The main Group borrowings are denominated in Euros at a rate of 0.55% above EURIBOR while the sterling denominated
borrowings are at a rate of 0.65% above LIBOR. Some other long term loans are also denominated in Euros and sterling at a rate
of 1.1% above both EURIBOR and LIBOR.

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 Paragon Annual Report & Accounts 2009 33

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

20. Obligations under leases and hire purchase contracts

Amounts due under finance leases and hire purchase contracts: 2009 2008
Group €000 €000

Amounts payable:
Within one year 1,479 2,084
In one to two years 893 1,174
In two to five years 1,646 1,193
In more than five years - 329
Less: finance charges allocated to future periods (305) (267)
3,713 4,513

Finance leases and hire purchase contracts are analysed as follows:

2009 2008
€000 €000

Current obligations (note 16) 1,423 1,812

Non-current obligations (note 17) 2,290 2,701
3,713 4,513

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

Group
Land and buildings Other Total

2009 2008 2009 2008 2009 2008

€000 €000 €000 €000 €000 €000
Operating leases
which expire:
Within one year 89 114 339 294 428 408
In one to two years 146 189 186 335 332 524
In two to five years 776 500 740 701 1,516 1,201
1,011 803 1,265 1,330 2,276 2,133

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 34 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

21. Share capital

2009 2008 2009 2008

No. No. €000 €000

Authorised:
Ordinary shares of €1.00 each 35,000,000 35,000,000 35,000 35,000
Allotted, called up and fully paid:
Ordinary shares of €1.00 each 35,000,000 35,000,000 35,000 35,000

22. Movements in reserves Profit and

loss account
€000

At 30 June 2007 312

Profit for the year 5,353
Actuarial loss net of deferred tax thereon (875)
Exchange difference on retranslation of net assets of subsidiary undertakings (3,486)

At 30 June 2008 1,304

Profit for the year 1,528
Actuarial loss net of deferred tax thereon (1,897)
Exchange difference on retranslation of net assets of subsidiary undertakings (401)

At 30 June 2009 534

Company Profit and

loss account
€000

At 30 June 2007 36,667

Profit for the year 640
At 30 June 2008 37,307
Profit for the year 310
At 30 June 2009 37,617

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 Paragon Annual Report & Accounts 2009 35

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

23. Notes to the statement of cash flows

(a) Reconciliation of operating profit to net inflow from operating activities
2009 2008
€000 €000

Operating profit 5,869 9,843

Depreciation 4,817 5,722
Amortisation of positive goodwill 2,062 1,862
Release of negative goodwill (3,345) (2,522)
Amortisation of development costs 33 35
Deferred government grants released (28) (33)
EBITDA 9,408 14,907

Decrease/(increase) in debtors 11,029 (5,185)

Decrease in stocks 2,812 145
Decrease in creditors (12,363) (582)
Decrease/(increase) in other provisions (70) 100
Pension scheme liability movement in respect of contributions, current service cost,
settlements and curtailments and exchange differences (82) (1,004)

Cash inflow before fundamental restructuring 10,734 8,381

Cash outflow in respect of fundamental restructuring (1,063) (896)
Net cash inflow from operating activities 9,671 7,485

(b) Analysis of net debt and cash

At 1 July Cash Exchange Fair value Non cash At 30 June

2008 flow difference adjustment movements 2009
€000 €000 €000 €000 €000 €000

Cash at bank and in hand 12,813 (876) (343) - - 11,594

Bank overdraft (834) (1,876) - - - (2,710)
11,979 (2,752) (343) - - 8,884
Bank and other borrowings (31,549) 4,784 443 - (30) (26,352)
Finance leases (4,513) 492 121 187 - (3,713)
Shareholders loans (1,625) 705 - - - (920)
Net debt and cash (25,708) 3,229 221 187 (30) (22,101)

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 36 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

24. Pension commitments

The company operates a final salary defined benefit pension plan. No benefits have accrued since 3 August 2005. Pension
benefits for deferred members are based on the members' final pensionable salaries and service at the date accrual ceased
(or date of leaving if earlier).
The most recent formal actuarial valuation was carried out as at 30 June 2006. The results have been updated to 30 June 2009
by a qualified independent actuary. The assumptions used were as follows:

2009 2008

Discount rate 6.40% 6.10%

Price inflation 3.25% 4.00%
Salary increases n/a n/a
Rate of increases of pensions in payment 3.15% 3.80%
Rate of increase for deferred pensioners 3.25% 4.00%

Expected return on assets 6.52% 7.84%

The overall expected return on assets assumption of 6.52% as at 30 June 2009 has been derived by calculating the weighted
average of the expected rate of return for each asset class. The following approach has been used to determine the expected rate
of return for each asset class:
• fixed interest securities, current market yields
• equities, allowance for an additional return of 3.25% above that available on UK government securities
• cash, current Bank of England base rate

Demographic assumptions
Year ended Year ended
30/06/2009 30/06/2008

Mortality (pre retirement) AM00/AF00 AM00/AF00

Mortality (post retirement) 110% of 110% of

PCA00 PCA00
mc (yob) mc (yob)

Year ended 30/06/2009 Year ended 30/06/2008

Males Females Males Females

Life expectancy for a current 65 year old 20.9 years 23.2 years 20.9 years 23.2 years
Life expectancy at age 65 for current 45 year old 22.1 years 24.3 years 22.1 years 24.3 years

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 Paragon Annual Report & Accounts 2009 37

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

24. Pension commitments (continued)

Assets
The assets of the plan are invested in a diversified portfolio

Year ended 30/06/2009 Year ended 30/06/2008 Year ended 30/06/2007

Market % of Market % of Market % of

value total plan value total plan value total plan
€000 assets €000 assets €000 assets

Equities 3,816 77% 4,817 79% 6,559 85%

Bonds 388 8% 319 5% 291 4%
Gilts 324 7% 349 6% 359 5%
Cash 378 8% 594 10% 445 6%
Total 4,906 6,079 7,654

The actual return on assets over the period was:

(707) (501)

Reconciliation to the balance sheet 2009 2008

€000 €000

Market value of assets 4,906 6,079

Present value of liabilities (5,179) (5,984)
(Deficit)/surplus in the plan (273) 95
Pension (liability)/asset recognised in the balance sheet
(273) 95
before allowance for deferred tax

Analysis of changes in the value of the plan liabilities over the year 2009 2008
€000 €000

Value of liabilities at start of year 5,984 7,539

Foreign exchange movements (431) (1,118)
Service cost - -
Interest cost 335 332
Settlements - (847)
Benefits paid (118) (133)
Actuarial (gains)/losses (591) 211
Value of liabilities at end of year 5,179 5,984

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 38 Paragon Annual Report & Accounts 2009

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

24. Pension commitments (continued)

Analysis of changes in the value of the plan asset over the year
2009 2008
€000 €000

Market value of assets at start of year 6,079 7,654

Foreign exchange movements (430) (1,134)
Expected return on scheme assets 441 503
Actuarial losses (1,148) (1,004)
Employer contributions 82 193
Benefits paid (118) (133)
Market value of assets at end of year 4,906 6,079

Amounts recognised In profit and loss

2009 2008
€000 €000

Gain on settlement - (847)

Analysis of other amount charged to other finance income
Interest on liabilities (335) (332)
Expected return on plan assets 441 503
Net credit to other finance income 106 171
Total profit and loss credit before deduction for tax (106) (1,018)

Amounts recognised in statement of total recognised gains and losses (STRGL)

2009 2008
€000 €000

Actuarial losses (557) (1,215)

Total amount recognised in STRGL (557) (1,215)

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 Paragon Annual Report & Accounts 2009 39

nOTES TO THE FINANCIAL STATEMENTS

at 30 June 2009

24. Pension commitments (continued)

History of assets, liabilities, experience gains and losses

2009 2008 2007 2006 2005

€000 €000 €000 €000 €000

Market value of plan assets 4,906 6,079 7,654 6,606 9,077

Value of plan liabilities 5,179 5,984 7,539 6,498 9,975
(Deficit)/surplus in the plan (273) 95 115 108 (898)

(Losses)/gains arising on plan liabilities:

Due to experience (86) (34) 239 (19) 80
% of liabilities (2)% (1)% 3% 0% 1%
Due to change of basis 677 (177) (868) (1,295) 114
% of liabilities 13% (3)% (12)% (20)% 1%
Experience (losses)/gains:
Arising on plan assets (1,148) (1,004) 479 796 785
% of assets (23)% (17)% 6% 12% 9%

The cumulative amount of actuarial gains and losses recognised in the STRGL (since 2002) is €2,675,000.

Future funding obligation

The last actuarial valuation of the plan was performed by the Actuary for the Trustees as at 30 June 2006.
The company agreed to make payments to pay off the deficit of a lump sum of €126,000 in October 2007 followed
by €82,000 p.a paid monthly until June 2016. The employer expects to pay €82,000 to the plan during the accounting
year beginning I July 2009.

Defined contribution 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 €270,000
(2008: €337,000).
Contributions totalling €28,000 (2008: €31,000) were payable to the fund at the year end and are included in creditors.

25. Related party transactions

During the year loan repayments to related parties amounted to €705,000 (2008: €462,000). Interest payments to related parties
amounted to €195,000 (2008: €nil).

26. Controlling party

In the directors' opinion there is no overall controlling party.

27. Post balance sheet events

Subsequent to the year end the Group acquired the trade and assets of Ward Knowles Limited.

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 40 Paragon Annual Report & Accounts 2009

PARAGON GROUP LIMITED

Registered No: 05258175

Directors Bankers Solicitors

Conor J Donnelly Credit Agricole Nabarro
(Executive Chairman)
Centre-Loire Lacon House
Patrick J Crean Centre D'affaires 45 Theobald's Road
(Chief Executive Officer) 26 Rue de la Godde London
45 800 St Jean de Braye WC1X 8RW
Iain S Black France
(Group Sales Development Director) Cabinet Lipworth
Credit Lyonnais 18 avenue Franklin Roosevelt
Laurent T Salmon 75008 Paris
Orleans SDC Centre
(Group Finance Director) France
7 Place du Martroi
45000 Orleans
France
Secretary Registered office
Barclays Bank PLC
Patrick J Crean Factory 42
71 Grey Street
Pallion Way
Newcastle upon Tyne
Pallion Trading Estate
NA99 1JP
Sunderland
Auditors Tyne and Wear
SR4 6ST
Ernst & Young LLP
Citygate
St James' Boulevard
Newcastle upon Tyne
NE1 4JD

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 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 provides
extensive procurement, supply
chain, inventory, document
creation and project management
services, fully integrated with
customers’ internal processes.
European facilities
network
Sunderland
Wakefield Europort
Dublin
Oswaldtwistle
Bradford
Lutterworth
Bailleul
Cosne sur Loire
Romorantin
Lisbon
R&A09-10-cover.indd 3
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
Gent Network supply, kitting, fulfilment,
Marne La Vallée vote management
Argent sur Sauldre
Bucharest
Multi-channel delivery
Transactional, digital, e-mail, MMS,
SMS, web and telephony
2/3/10 11:40 AM


Principal offices

France UK
Paragon Identification SAS Paragon Group UK Ltd
Les Aubépins Pallion Trading Estate
18410 Argent sur Sauldre Sunderland, SR4 6ST
France UK
Tel: +33 (0) 2 48 81 61 00 Tel: +44 (0) 191 514 0716
Fax: +33 (0) 2 48 81 61 49 Fax: +44 (0) 191 514 6361

Paragon Services Paragon Services

56 rue des Hautes Patûres
Bâtiment LE NAXOS
92737 Nanterre Cedex
France
Tel: +33 (0) 1 46 49 41 00 Fax: +44 (0) 1977 603 036
Fax: +33 (0) 1 46 49 41 99
Paragon Transaction SA
39 Rue des Rivières St Agnan
58200 Cosne sur Loire
France
Tel: +33 (0) 3 86 26 51 51
Fax: +33 (0) 3 86 26 66 33
Ireland
Paragon Group Ltd
The Paragon Suite
Irish Management Institute
Sandyford Road
Dublin 16
Ireland
Tel: +353 (0) 1 293 8100
Fax: +353 (0) 1 293 0230
Wakefield Europort, Gilcar Way
Castleford, WF10 5QS
UK
Tel: +44 (0) 1977 669 700
Ward Knowles
Brookside Lane, Oswaldtwistle
Accrington, BB5 3NY
UK
Tel: +44 (0) 1254 383 335
Fax: +44 (0) 1254 396 009
Romania
Paragon Romania
str. Drumul Garii Otopeni, 49-51A
Otopeni, 075100, Jud. Ilfov
Bucharest, Romania
Tel: +40 21 350 42 96
Fax: +40 21 350 42 97

www.paragon-europe.com

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