CAPRAL LIMITED — Interim / Quarterly Report 2019

Aug 20, 2019

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CAPRAL ASX ANNOUNCEMENT

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21 August 2019

HY19 Results

Please see attached Capral’s Half Year Report 2019 and accompanying HY19 Results Presentation. Summarised below are the key highlights:

• Trading EBITDA[1] $2.4 million, down on $6.9 million in H1 2018, off 10% lower volume

• The downturn in residential construction has been sharper and faster than forecast. Sales to window fabricators were down 17% on H1 2018. Industrial markets were also weaker with sales down 6% on H1 2018

• Margins adversely impacted by lower manufacturing volume and fixed cost absorption

• Strong balance sheet with net cash at $18.7 million, after $5m dividend payment and increased capital expenditure

• LME fell in Q1 2019 and has remained reasonably stable since

• Key capital investment automation projects successfully completed

• Restructure and downsizing of major manufacturing plant in QLD results in $6.0 million restructuring provision

• Restructure of QLD plant and additional sub lease of free space will have a significant positive impact on profitability in H2 2019

• Increased anti-dumping measures on Chinese extrusion imports were announced in May 2019 and, together with a focus on circumvention surveillance, will lead to improved domestic extrusion volumes going forward

Capral’s Managing Director and Chief Executive Officer, Tony Dragicevich, and Chief Financial Officer, Tertius Campbell, will host a teleconference commencing at 11:00 am (AEST) today.

Dial-in details for the teleconference are as follows:

Australia: +61 2 9007 3187 or 1800 558 698 Conference ID : 1000 1452

For further information please contact:

Corporate Investors

Lyn McGee, Capral Adrian Mulcahy, Market Eye P: + 61 2 8222 0112 P: +61 3 9591 8902 E: lyn.mcgee@capral.com.au E: adrian.mulcahy@marketeye.com.au

Yours faithfully

Capral Limited ABN 78 004 213 692 ASX: CAA

Level 4, 60 Phillip St Parramatta NSW 2150 PO Box 209, Parramatta CBD BC NSW 2124

T 02 8222 0112 F 02 8222 0130

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Gillian Nairn Company Secretary

1 For an explanation refer to the documents attached to this release

www.capral.com.au

Page 1 of 1

APPENDIX 4D - HALF-YEAR REPORT FOR THE PERIOD ENDED 30 JUNE 2019

CAPRAL LIMITED

Name of Entity CAPRAL LIMITED A.B.N 78 004 213 692 Half-Year Ended 30/06/2019 Reporting Period 1 January 2019 to 30 June 2019 Previous Period 1 January 2018 to 30 June 2018

Results for announcement to the market

2.1 2.2 2.3 2.4	Revenues from ordinary activities (Loss)/profit from ordinary activities after tax attributable to members Net (loss)/profit for the period attributable to members Dividend Information	30 June 2019 30 June 2018 $'000 $'000	30 June 2019 30 June 2018 $'000 $'000	Change Change $'000 %	Change Change $'000 %
		201,242	222,561	(21,319)	(9.6)
		(8,384)	4,347	(12,731)	N/A
		(8,384)	4,347	(12,731)	N/A
		30 June 2019		30 June2018
		Amount per security	Imputed amount persecurity	Amount per security	Imputed amount per security
	Interimdividend	-	-	-	-
	Specialdividend	-	-	0.5 cents	0.5 cents

2.5 Record date for determining entitlements to and the date for payments of the dividends (if any)

Not Applicable

2.6 Explanation of 2.1 to 2.4

Please refer to the Directors’ Report (included with this Report).

3.0 Net Tangible Assets per security

Tangible Assets per security
	30 June 2019	30 June2018
NTA(cents pershare)	17.71	26.7
Number of shares	484,390,895	480,289,334

4.0 Entities over which control has been gained or lost

Not Applicable

5.0 Individual and total dividends

A final dividend in respect of the financial year ended 31 December 2018 was paid on 22 March 2019, at 1.00 cent per ordinary share fully franked.

6.0 Dividend or dividend reinvestment plans

Not Applicable

7.0 Associates and joint venture entities

Not Applicable

8.0 Foreign Entities

Not Applicable

9.0 Audit dispute or qualification

Not Applicable

Capral Limited

CONTENTS

APPENDIX 4D	(Cover)
DIRECTORS’ REPORT	1
AUDITOR'S INDEPENDENCE DECLARATION	3
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME	4
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION	5
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS	6
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	7
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	8
DIRECTORS' DECLARATION	17
INDEPENDENT AUDITOR'S REVIEW REPORT	18

Capral Limited

DIRECTORS’ REPORT

The directors present their report on the consolidated entity consisting of Capral Limited ( Capral ) and the entities it controlled at the end of, or during, the half-year ended 30 June 2019 and the independent auditor's review report thereon.

Directors

The following persons were directors of Capral during the half-year and, except as indicated below, up to the date of this report:

f this report:
Name	Period Office Held
R. L. Wood-Ward	6 November 2008 - Date of this report
A. M. Dragicevich	15 April 2013 – Date of this report
P. J. Jobe	24 April 2009 - Date of this report
I. B. Blair	23 May2006 - Date of this report
G. F. Pettigrew	18 June 2010 - Date of this report

Review of operations and key results

Capral today announced a loss after tax of $8,384,000 for the half-year ended 30 June 2019, compared with a $4,347,000 profit after tax for the corresponding period last year.

No dividend has been declared for this half-year.

Results Overview

Capral delivered a Trading EBITDA* of $2.4 million as compared to $6.9 million in H1 2018 on 10% lower volumes and sales revenue. EBITDA¹ of $3.4 million as compared to $7.6 million profit in H1 2018, included a negative LME revaluation of $1.0 million and restructuring provision and one-off costs of $6.4m.

Dwelling commencements fell sharply in the first half and volumes to window fabricators fell by 17% on H1 2018. Commercial construction and key industrial markets (manufacturing and transport) also slowed in the first half with volumes down 6% on H1 2018. Margins were impacted by lower manufacturing volumes resulting in lower fixed cost absorption. LME fell in Q1 2019 and has remained reasonably stable since.

The balance sheet remains strong with net cash at $18.7 million, after making a $5 million dividend payment in March 2019 and increased capex spend on automation initiatives. Capral also renewed its $50 million finance facility with ANZ until January 2021.

The capital investment projects in new technology and automation to improve Capral’s long term competitive position were successfully completed during the first half.

A restructure and downsizing of our major manufacturing plant in Queensland resulted in a $5.4 million restructuring provision. This initiative, together with the sub-lease of additional free space at this site, will have a significant positive impact on profitability in H2 2019.

Increased anti-dumping measures on Chinese extrusions were announced in May 2019 and this, together with a focus on circumvention surveillance, should lead to improved domestic extrusion volumes going forward.

Please also refer to the 2019 Half Year Results Presentation lodged with this Report.

Auditor's independence declaration

The auditors' independence declaration as required under section 307C of the Corporations Act is set out on page 3.

1 EBITDA is defined as Earnings before Interest, Tax, Depreciation and Amortisation and incorporates AASB16 impact from 2019.

• Trading EBITDA is presented with reference to the ASIC Regulatory Guide 230 “Disclosing non-IFRS financial information” issued in December 2011. Trading EBITDA is EBITDA adjusted for significant items that are material items of revenue or expense that are unrelated to the underlying performance of the business. Capral believes that Trading EBITDA provides a better understanding of its financial performance and allows for a more relevant comparison of financial performance between financial periods. These items are LME and Premium revaluation ($1.0 million), one-off and other restructuring related costs ($6.4 million) that are non-recurring in nature and including the depreciation and interest on of Right of Use assets as proxy for rent ($8.4 million).

1

DIRECTORS' REPORT

Capral Limited

Rounding of amounts

Capral is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with this, amounts in the Directors' Report and the Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated.

Signed in accordance with a resolution of directors pursuant to s.306(3) of the Corporations Act 2001.

On behalf of the directors

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R. Wood-Ward Chairman

A. Dragicevich Managing Director

Sydney 21 August 2019

2

DIRECTORS' REPORT

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Deloitte Touche Tohmatsu ABN: 74 490 121 060

Eclipse Tower Level 17 60 Station Street Parramatta NSW 2150 PO Box 38 Parramatta NSW 2124 Australia

The Board of Directors Capral Limited Level 4 60 Phillip Street PARRAMATTA NSW 2150

DX 28485 Tel: +61 (0) 2 9840 7000 Fax: +61 (0) 2 9840 7001 www.deloitte.com.au

21 August 2019

Dear Board Members

Auditor’s Independence Declaration to Capral Limited

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Capral Limited.

As lead audit partner for the review of the financial statements of Capral Limited for the half-year ended 30 June 2019, I declare that to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

Yours sincerely

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DELOITTE TOUCHE TOHMATSU

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David White Partner Chartered Accountants Parramatta, 21 August 2019

Liability limited by a scheme approved under P rofessional Standards Legislation. M ember of Deloitte A sia P acific Limited and the Deloitte Network.

3

Capral Limited

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the half-year ended 30 June 2019

Note Revenue Other income 5 Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Finance costs Freight expenses Occupancy costs Repair and maintenance expense Restructuring costs 6 Other expenses (Loss)/profit before income tax Income tax benefit 2 (Loss)/profit for the period Other comprehensive income Items that will not be reclassified subsequently to profit or loss Items that may be reclassified subsequently to profit or loss Total comprehensive (loss)/income for the period (Loss)/earnings per share Basic (cents per share) Diluted (cents per share)	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 201,242 222,561 162 206 (124,915) (135,019) (42,713) (44,838) (9,178) (2,794) (2,627) (500) (5,764) (5,874) (1,111) (10,169) (3,566) (3,791) (6,010) - (13,904) (15,435) (8,384) 4,347 - - (8,384) 4,347 - - - - (8,384) 4,347 2019 2018 Cents per share Cents per share (1.74) 0.91 (1.74) 0.89	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 201,242 222,561 162 206 (124,915) (135,019) (42,713) (44,838) (9,178) (2,794) (2,627) (500) (5,764) (5,874) (1,111) (10,169) (3,566) (3,791) (6,010) - (13,904) (15,435) (8,384) 4,347 - - (8,384) 4,347 - - - - (8,384) 4,347 2019 2018 Cents per share Cents per share (1.74) 0.91 (1.74) 0.89
		4,347 -
		4,347
		-
		-
		4,347
		2018 Cents per share 0.91 0.89

The weighted average number of ordinary shares on issue used in the calculation of basic (loss)/earnings per share was 482,600,711 (2018: 479,181,830) and the loss used in the same calculation was $8,384,000 (2018: the earnings $4,347,000).

The weighted average number of ordinary shares on issue used in the calculation of diluted (loss)/earnings per share was 491,889,781 (2018: 488,307,080) and the loss used in the same calculation was $8,384,000 (2018: the earnings $4,347,000).

The above condensed consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 4

Capral Limited

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 30 June 2019

Note ASSETS Current assets Cash and cash equivalents 12 Trade and other receivables Inventories Other financial assets Prepayments Total current assets Non-current assets Deferred tax assets Property, plant and equipment Right-of-use assets 1(d) Other intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Lease liabilities 1(d) Other financial liabilities Current provisions Deferred income Total current liabilities Non-current liabilities Lease liabilities 1(d) Non-current provisions Total non-current liabilities Total liabilities Net assets EQUITY Issued capital Reserves Accumulated losses Total equity	Consolidated 30 June 31 December 2019 2018 $'000 $'000 18,659 27,566 65,366 65,403 82,342 84,960 14 561 1,444 1,197 167,825 179,687 2,857 2,857 40,412 44,931 60,625 - 272 308 104,166 48,096 271,991 227,783 70,975 78,398 16,449 - 101 169 18,606 12,870 113 147 106,244 91,584 73,040 - 3,783 4,671 76,823 4,671 183,067 96,255 88,924 131,528 425,744 425,744 11,930 12,013 (348,750) (306,229) 88,924 131,528	Consolidated 30 June 31 December 2019 2018 $'000 $'000 18,659 27,566 65,366 65,403 82,342 84,960 14 561 1,444 1,197 167,825 179,687 2,857 2,857 40,412 44,931 60,625 - 272 308 104,166 48,096 271,991 227,783 70,975 78,398 16,449 - 101 169 18,606 12,870 113 147 106,244 91,584 73,040 - 3,783 4,671 76,823 4,671 183,067 96,255 88,924 131,528 425,744 425,744 11,930 12,013 (348,750) (306,229) 88,924 131,528
		179,687
		2,857 44,931 - 308
		48,096
		227,783
		78,398 - 169 12,870 147
		91,584
		- 4,671
		4,671
		96,255
		131,528
		425,744 12,013 (306,229)
		131,528

The above condensed consolidated statement of financial position should be read in conjunction with the accompanying notes.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 5

Capral Limited

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the half-year ended 30 June 2019

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest and other finance costs paid Net cash flows provided by operating activities Cash flows from investing activities Interest received Payments for property, plant and equipment Payments for intangible assets Proceeds from sale of property, plant and equipment Net cash flows provided by/(used in) investing activities Cash flows from financing activities Dividends paid Repayment of principal of lease liabilities 1(d) Net cash flows used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the half-year period Cash and cash equivalents at end of the half-year period 11	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 221,403 239,248 (216,902) (233,347) (2,538) (423) 1,963 5,478 4 11 (3,320) (4,995) (35) (31) 5,066 - 1,715 (5,015) (4,803) (5,964) (7,782) - (12,585) (5,964) (8,907) (5,501) 27,566 34,358 18,659 28,857	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 221,403 239,248 (216,902) (233,347) (2,538) (423) 1,963 5,478 4 11 (3,320) (4,995) (35) (31) 5,066 - 1,715 (5,015) (4,803) (5,964) (7,782) - (12,585) (5,964) (8,907) (5,501) 27,566 34,358 18,659 28,857
		5,478
		11 (4,995) (31) -
		(5,015)
		(5,964) -
		(5,964)
		(5,501) 34,358
		28,857

The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.

6

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capral Limited

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the half-year ended 30 June 2019

Consolidated Note Balance as at 1 January 2018 Profit for the period Total comprehensive profit for the period Dividends paid Share-based payment expense Balance as at 30 June 2018 Balance as at 1 January 2019 Loss for the period Total comprehensive loss for the period Dividends paid Share-based payment expense Shares acquired on conversion of vested rights Initial adoption of AASB 16 Leases 1(d) Balance as at 30 June 2019	Issued capital Equity-settled compensation reserve Asset revaluation reserve Accumulated losses Total $'000 $'000 $'000 $'000 $'000 425,744 10,413 1,014 (304,279) 132,892
	- - - 4,347 4,347
	- - - 4,347 4,347
	- - - (5,964) (5,964) - 196 - - 196
	425,744 10,609 1,014 (305,896) 131,471
	425,744 10,999 1,014 (306,229) 131,528
	- - - (8,384) (8,384)
	- - - (8,384) (8,384)
	- - - (4,803) (4,803) - 232 - - 232 - (315) - - (315) - - - (29,334) (29,334)
	425,744 10,916 1,014 (348,750) 88,924

The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

1 Significant accounting policies

Capral Limited ( Capral ) is a company domiciled in Australia. The consolidated half-year financial report of Capral for the half-year period ended 30 June 2019 comprises Capral and its subsidiaries ( consolidated entity ).

(a) Statement of compliance

The half-year financial report is a general purpose financial report prepared in accordance with Australian Accounting Standard AASB 134: Interim Financial Reporting (which complies with the International Financial Reporting Standard IAS 34: Interim Financial Reporting), other mandatory professional reporting requirements and the Corporations Act 2001.

This half-year financial report does not include all the notes of the type normally included in an annual financial report. This report is to be read in conjunction with the most recent annual financial report for the year ended 31 December 2018 and any public announcements made by Capral during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

(b) Basis of preparation

Capral is a company of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with this, amounts in the Directors' Report and the half-year financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

The half-year financial report has been prepared on the basis of historical cost, except for the revaluation of certain financial assets and liabilities at fair value through profit and loss and certain classes of property, plant and equipment. Cost is based on the fair values of consideration given in exchange for assets. Except where indicated otherwise, all amounts are presented in Australian dollars.

The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in Capral's annual report for the financial year ended 31 December 2018, except as noted in Note 1(d) below.

(c) Significant accounting judgements, estimates and assumptions

In the application of Capral's accounting policies, Management is required to make judgements, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

There are no changes to the significant accounting judgement, estimates and assumptions from 31 December 2018.

(d) Application of new and revised standards

Capral has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current reporting period. Adoption of these Standards and Interpretations except for AASB 16 Leases, did not have any material effect on the financial position or performance of the consolidated entity.

Application of AASB 16 Leases (‘AASB 16’)

The Group has applied AASB 16 in accordance with the transitional approach C5(b) to retrospectively adjust the cumulative effect of initially applying this standard recognised at the date of initial application i.e. 01 January 2019 in the opening retained earnings. Consequently, the Group has not restated the comparative information. In contrast to lessee accounting, AASB 16 substantially carries forward the lessor accounting requirements in AASB 117.

8

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

(d) Application of new and revised standards (Cont’d)

Impact of the new definition of a lease

The Group has not made use of the practical expedient available on transition to AASB 16 and has reassessed whether a contract is or contains a lease. The change in definition of a lease mainly relates to the concept of control. AASB 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is controlled by the lessee. Control is considered to exist if the lessee has:

• » The right to obtain substantially all of the economic benefits from the use of an identified asset; and

• » The right to direct the use of that asset.

The Group has applied the definition of a lease and related guidance set out in AASB 16 to all lease contracts (whether it is a lessor or a lessee in the lease contract). The new definition in AASB 16 does not change significantly the scope of contracts that meet the definition of a lease for the Group

AASB 16 has impacted how the Group accounts for leases previously classified as operating leases under AASB 117 which were off-balance sheet.

Financial impact of the initial application of AASB 16

The tables below show the amount of adjustment for each financial statement line item affected by the application of AASB 16 for the current period.

	Consolidated
	Half-year ended
	30 June 2019
	$’000
Impact on profit/(loss) for the half-year
Increase in depreciation and amortisation expenses (1)	6,351
Increase in finance costs (1)	1,997
Decrease in employee benefits expenses, occupancy costs and other expenses (1), (4)	(9,805)
Impact on (loss)/earnings per share	$
(Increase)/decrease in loss per share from continuing operations
Basic	0.25
Diluted	0.25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 9

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS for the half-year ended 30 June 2019

Impact on assets, liabilities and equity as at 30 June 2019

	Date of Initial Application (1 January 2019) $’000	New, Extensions & Renewal of Leases During Half- Year ended 30 June 2019 $’000	Lease Payments (Excl. Other Costs) $’000	Depreciation – Right of Use Assets for Half-Year ended 30 June 2019 $’000	Interest Expense – Lease Liabilities for Half-Year ended 30 June 2019 $’000	Impact as at 30 June 2019 $’000
Right of Use Assets (1),(2)	59,727	7,249	-	(6,351)	-	60,625
Net Impact on Total Assets	59,727	7,249	-	(6,351)	-	60,625
Lease Liabilities (1)	(90,022)	(7,249)	9,779	-	(1,997)	(89,489)
Lease Straight Lining Provision (4)	961	-	-	-	-	-
Net Impact on Total Liabilities	(89,061)	(7,249)	9,779	-	(1,997)	(88,528)
Net Impact of Retained Earnings	29,334	-	-	-	-	29,334
Net Impact on Total Liabilities and Equity	(59,727)	(7,249)	9,779	-	(1,997)	(59,194)

(1) The application of AASB 16 to leases previously classified as operating leases under AASB 117 resulted in the recognition of right-of-use assets and lease liabilities. It resulted in a decrease in ‘employee benefits expenses’, ‘occupancy costs’ and ‘other expenses’, and an increase in depreciation and interest expense.

(2) Equipment under finance lease arrangements previously presented within property, plant and equipment is now presented within the line item right-of-use assets. There has been no change in the amount recognised.

(3) Lease liability on leases previously classified as finance leases under AASB 117 and previously presented within obligations under finance leases is now presented in the line ‘lease liabilities’. There has been no change in the liability recognised.

(4) Lease liability incentives previously recognised in respect of the operating leases have been derecognised by an adjustment to retained earnings whereas under AASB 117, they resulted in the recognition of a lease liability incentive, amortised as a reduction of rental expenses on a straight-line basis.

Impact on the statement of cash flows

» Cash paid for the interest portion of lease liabilities is included under interest paid as part of operating activities

» Cash payments for the principal portion of leases liabilities is included as part of financing activities.

Under AASB 117, all lease payments on operating leases were presented as part of cash flows from operating activities. Consequently, the net cash generated by operating activities has increased by $7,782,000 and net cash used in financing activities increased by the same amount.

The adoption of AASB 16 did not have an impact on net cash flows.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 10

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

(e) Standards and interpretations in issue not yet adopted

In the current year, the company has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to its operations and effective for the current annual reporting period.

(f) Impairment of non-current assets

At each reporting date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit (CGU) to which that asset belongs. Management views the Group as representing one CGU.

If there is an indication of impairment, the recoverable amount of property, plant & equipment and intangible assets will be determined by reference to a value in use discounted cash flow valuation of the Group, utilising financial forecasts and projections.

Recoverable amount is the higher 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 post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted. Cash flows that may result from prior period tax losses are not taken into account. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised in profit or loss immediately.

As at 30 June 2019 the group has assessed both the internal and the external indicators of impairment, including completing value in use models.

• The key assumptions used in the value in use assumptions calculations as at 30 June 2019 were as follows:  Revenue Growth rate used to extrapolate the cash flow beyond the forecast period: 1%

• Pre Tax discount rate: 11.41%

No impairment was recognised as at 30 June 2019.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 11

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

2 Income tax (a) Tax reconciliation The income tax expense for the half year differs from the prima facie amount calculated by reference to the pre-tax (loss)/profit. The differences are reconciled as follows: (Loss)/profit from continuing operations before income tax expense Income tax (benefit)/expense calculated at 30% Tax effect of non-assessable / non-deductible items: Effect of items that are not deductible or taxable in determining taxable profit Effective income tax (benefit)/expense Effect of tax losses utilised Effect of unused tax losses not recognised as deferred tax assets Income tax expense recognised in profit or loss (b) Tax losses Accumulated unused gross tax losses for which no deferred tax asset has been recognised. Potential tax benefit @ 30% All unused tax losses were incurred by Australian entities. 3 Dividends Fully paid ordinary shares Interim dividend (cents per share) Final dividend paid (cents per share) - fully franked Special dividend (cents per share) - fully franked	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 (8,384) 4,347 (2,515) 1,304 (332) 1,305 (2,847) 2,609 - (2,609) 2,847 - - - 289,111 279,045 86,733 83,714 - - 1.00 1.25 - 0.50	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 (8,384) 4,347 (2,515) 1,304 (332) 1,305 (2,847) 2,609 - (2,609) 2,847 - - - 289,111 279,045 86,733 83,714 - - 1.00 1.25 - 0.50
		1,304 1,305
		2,609 (2,609) -
		-
		279,045
		83,714
		- 1.25 0.50

4 Segment information

The information reported to the consolidated entity's chief operating decision maker for the purposes of resource allocation and assessment of performance is focused on the type of goods supplied, being aluminium products. As such, in 2019 and 2018, the consolidated entity operated in one reportable segment under AASB 8.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 12

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

5 Other income Royalties	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 162 206 162 206	Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000 162 206 162 206
		206

6 Restructuring costs

In June 2019, a restructuring process was started to right size the Group’s manufacturing operations to match current levels of demand. The restructuring involves reduction of the extrusion press operation, closures of an anodising plant and a vertical paint line, reorganisation to allow the sublet of additional floor space, and restructuring and consolidation of roles and operations. To the extent that employees could not be redeployed, redundancy terms were agreed.

The carrying value of assets retired as part of the restructuring was offset with the impairment provision recognised in 2013. Therefore, no additional impairment was recognised as at 30 June 2019.

The restructuring costs charged to profit or loss consist of the following:

Machinery and equipment dismantling and relocation Redundancy costs Site Consolidation	2,342 3,248 420 6,010	- - -
		-

7 Issuance of equity securities

Performance Rights - Managing Director

During the half-year, 2,350,000 performance rights were issued to Mr Dragicevich under the Long Term Incentive Plan ( LTIP ) pursuant to shareholder approval at Capral’s AGM in April 2019. These rights were issued subject to the achievement of performance conditions and have been independently valued as follows:

• EPS – 1,175,000 rights at $0.10 per right

• TSR – 1,175,000 rights at $0.07 per right

During the half-year, 2,451,925 rights granted to Mr. Dragicevich as part of the 2016 LTIP award vested and converted on a 1 on 1 basis to Capral ordinary shares in April 2019.

During the half-year, 48,075 performance rights granted as part of the 2016 LTIP award lapsed.

The total number of performance rights outstanding to Mr Dragicevich as at 30 June 2019 is 6,550,000 (31 December 2018: 6,700,000).

Performance Rights - Executive and Senior Management

During the half-year, 4,650,000 performance rights were issued under the LTIP. The new rights were issued subject to the achievement of performance conditions. These rights have been independently valued as follows:

• EPS – 2,325,000 rights at $0.105 per right

• TSR – 2,325,000 rights at $0.075 per right

During the half-year, 4,168,277 rights granted as part of the 2016 LTIP award vested and converted on a 1 on 1 basis to Capral ordinary shares in March and April 2019.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

7 Issuance of equity securities (cont’d)

During the half-year, 81,723 performance rights granted as part of the 2016 LTIP award lapsed.

During the half-year 2,100,000 performance rights were forfeited due to the departure of two senior managers.

The total number of performance rights outstanding to Executive and Senior Management as at 30 June 2019 is 11,950,000 (31 December 2018: 13,650,000).

Ordinary Shares

During the half-year, 6,620,202 performance rights granted to Capral’s managing director, executives and senior management vested and converted on a 1 on 1 basis to Capral ordinary shares.

Capral issued 4,101,561 new ordinary shares and purchased 2,518,641 of its shares to satisfy the obligation to deliver shares resulting from the conversion of those vested performance rights.

8 Contingent liabilities

Claims and possible claims, indeterminable in amount, have arisen in the ordinary course of business against Capral entities. Capral has fully provided for all known and determinable claims.

Capral's bankers have issued guarantees in respect of rental obligations on lease commitments, use of utilities infrastructure, specialised trade facilities and corporate credit cards. These guarantees total $3,937,087 (31 December 2018: $3,897,087).

Capral's bankers have issued letters of credit in respect of Capral’s purchases internationally. These letters of credit total $24,188,312 (31 December 2018: $22,622,355).

	Consolidated	Consolidated
30	June	31 December
	2019	2018
	$'000	$'000

9 Capital commitments

Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities payable:

Not longer than 1 year 251 1,521

10 Related parties

Refer to Note 7 above in relation to equity securities granted, lapsed and converted to Capral ordinary shares during the half year under the LTIP that include rights granted to Capral's Managing Director, and rights granted and shares issued to the Chief Financial Officer (31 December 2018: Chief Financial Officer, General Manager - Operations and Company Secretary) (who are key management personnel).

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

Consolidated Half-year ended 30 June 30 June 2019 2018 $'000 $'000

11 Cash and cash equivalents Reconciliation of cash and cash equivalents For the purposes of the Condensed Consolidated Statement of Cash Flows, cash and cash equivalents includes cash on hand and at bank and short term deposits at call net of bank overdrafts, ANZ Multi-option facility balance. Cash as at the end of the half year as shown in the Condensed Consolidated Statement of Cash Flows is reconciled to the related items in the Condensed Consolidated Statement of Financial Position as follows:

Cash at bank and on hand Cash and cash equivalents at end of the half-year period 12 Stand by arrangement and credit facilities As at 30 June 2019, the following facilities were in place: Secured facilities Total secured facilities Facilities utilised: Trade loan Cash loan Bank guarantees Trade finance – letters of credit Asset finance – in the form of finance lease	18,659 28,857 18,659 28,857 Consolidated Half-year ended 30 June 31 December 2019 2018 $'000 $'000 50,000 50,000 50,000 50,000 - - - - 3,937 3,897 24,188 22,622 5,000 - 33,125 26,519	28,857
		28,857
		50,000
		- - 3,897 22,622 -
		26,519

The original expiry of the facilities is 31 January 2020. Subsequently, the facilities have been renewed for another term to 31 January 2021.

The ANZ facility is for a renewed term expiring on 31 January 2021 (originally 31 January 2020) and is fully secured against the Capral group, consisting of:

• $45 million Multi-option Facility which includes a Loan Facility, Trade Instruments and Trade Finance;

• $5 million Asset Finance Facility.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Capral Limited

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the half-year ended 30 June 2019

13 Deed of Cross Guarantee

Pursuant to ASIC Class Order 98/1418, the wholly owned subsidiary, Aluminium Extrusion and Distribution Pty Limited ( AED ) is relieved from the Corporations Act 2001 requirement for the preparation, audit and lodgement of financial reports.

It is a condition of that class order that Capral and AED enter into a Deed of Cross Guarantee ( Deed ). Under the Deed, Capral guarantees the payment of all debts of AED in full, in the event of a winding up. AED in turn has guaranteed the payment of the debts of Capral in full in the event that it is wound up.

AED has been deregistered on 24 July 2019.

In connection with deregistration of AED, the Deed was revoked on 13 May 2019.

14 Key management personnel

Remuneration arrangements of key management personnel are disclosed in the 2018 annual financial report. In addition, refer to Notes 7 and 10 in relation to changes during the half year; performance rights granted, expired and conversion to ordinary shares to Capral’s Managing Director, executive and senior management, under the LTIP.

15 Subsequent events

The wholly owned subsidiary, Aluminium Extrusion and Distribution Pty Limited was deregistered on 24 July 2019.

No other matter or circumstance has arisen since the end of the half-year that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations or the consolidated entity’s state of affairs in future financial years.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 16

Capral Limited

DIRECTORS' DECLARATION

The directors declare that:

• a) in the directors' opinion, there are reasonable grounds to believe that Capral will be able to pay its debts as and when they become due and payable; and

• b) in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the consolidated entity.

At the date of this declaration, Capral is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross guarantee is such that each company which is party to the deed, guarantees to each creditor payment in full of any debt in accordance with the deed of cross guarantee.

In the directors’ opinion, there are reasonable grounds to believe that Capral and the companies to which the ASIC Class Order applies, as detailed in Note 13 of the half-year report will, as a group, be able to meet any obligations or liabilities to which they are, or may become, liable by virtue of the deed of cross guarantee.

Signed in accordance with a resolution of the directors made pursuant to s.303 (5) of the Corporations Act 2001.

On behalf of the directors

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R. Wood-Ward Chairman

A. Dragicevich Managing Director

Sydney 21 August 2019

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DIRECTORS' DECLARATION

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Deloitte Touche Tohmatsu ABN: 74 490 121 060 Eclipse Tower Level 19 60 Station Street Parramatta NSW 2150 PO Box 38 Parramatta NSW 2124 Australia DX 28485 Tel: +61 (0) 2 9840 7000 Fax: +61 (0) 2 9840 7001 www.deloitte.com.au

Independent Auditor’s Review Report to the Members of Capral Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Capral Limited, which comprises the condensed consolidated statement of financial position as at 30 June 2019, and the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in equity for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 4 to 17.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and its performanc e for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of Capral Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

Liability limited by a scheme approved under P rofessional Standards Legislation. M ember of Deloitte Asia Pacific Limited and the Deloitte Network.

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A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Auditor’s Independence Declaration

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Capral Limited, would be in the same terms if given to the directors as at the time of this auditor’s review report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Capral Limited is not in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

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DELOITTE TOUCHE TOHMATSU

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David White Partner Chartered Accountants Parramatta, 21 August 2019

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