CTI LOGISTICS LIMITED — Annual Report 2004

Aug 30, 2004

CTI Logistics Limited

ABN 69 008 778 925

Appendix 4E Preliminary final report

For the year ended 30 June 2004

	For announcement to the market Extracts from this report for announcement to the market				\$A'000
	Revenues from ordinary activities (item 1.1)	down.	$18.8\%$	to	74,302
Profit from ordinary activities after tax attributable to members (item 1.6)		up	696 %	to	1,711
Net profit for the period attributable to members (item 1.6)	up	696 %	to	1,711
Dividends			Amount per security	Franked amount per security
Final dividend	Current year		1¢		1¢
	Previous corresponding period		1¢		1¢.
Interim dividend	Current year		1¢		1¢.
	Previous corresponding period		-¢		-е
	*Record date for determining entitlements to the dividend		29 October 2004

Consolidated statement of financial performance

		Current period SA'000	Previous corresponding period SA'000
1.1	Revenue from ordinary activities	74,302	91,521
1.2 1.3	Borrowing costs expense Other expenses from ordinary activities	1,092 71,200	1,790 89,277
1.4	Profit from ordinary activities before income tax expense	2,010	454
1.5	Income tax expense	299	239
1.6	Net profit attributable to members of the Company	1,711	215
		Cents	Cents
	Earnings per share	6.76	0.85
	Consolidated statement of retained profits
1.7	Retained profits at the beginning of the financial period	1,009	794
1.8	Adjustment resulting from change in accounting policy for		249
1.9	providing for dividends Net profits attributable to members (item 1.6)	1,711	215
1.10	Dividends paid or payable	(506)	(249)
1.11	Retained profits at end of financial period	2,214	1,009

	Revenue and expenses from ordinary activities	Current period SA'000	Previous corresponding period SA'000
	Revenue from operating activities
	Sale of goods	18,661	18,720
	Services	42,515	77,536
	Deduct agency sales, excise and other duties		(8,601)
		61,176	87,655
	Revenue from outside the operating activities
	Interest	115	80
	Dividends	3	4
	Rent	320	66
	Grant	26	229
	Proceeds from sale of business, property, plant and
	equipment	11,255	2,759
	Other	1,407	728
		13,126	3,866
1.12	Total revenue from ordinary activities (item 1.1)	74,302	91,521
	Expenses from ordinary activities
	Changes in inventories of finished goods and
	Work in progress	98	(79)
	Raw materials and consumables used	9,498	10,044
	Employee benefits expense	19,514	26,332
	Subcontractor expense	16,886	35,120
	Depreciation of non-current assets	3,355	3,837
	Amortisation of non-current assets	243	460
	Motor vehicle and transportation costs	5,672	5,776
	Property costs Write-down of investment	943. 71	1,619 462
	Provision for share scheme loan		381
	Other expenses from operating activities	5,537	3,187
	Carrying value of business, property, plant and equipment
	sold	9,383	2,138
1.13	Expenses from ordinary activities, excluding borrowing costs expense (item 1.3)	71,200	89,277

Consolidated statement of financial position

	At end of current period SA'000	As shown in last annual report SA'000	As in last half yearly report SA'000
Current assets
Cash assets	453.		766
Receivables	12,636	14,958	13,738
Inventories	1,453	1,355	1,479
Tax assets	1,275	1,162	1,014
Other assets	2,561	4,797	3,018
Total current assets	18,378	22,272	20,015
Non-current assets
Receivables	1,579	1,837	3,545
Other financial assets	257	328	328
Property, plant and equipment	20,945	25,735	20,164
Tax assets	237	272	224
Intangible assets	404	3,357	688
Other assets	2	5	8
Total non-current assets	23,424	31,534	24,957
Total assets	41,802	53,806	44,972
Current liabilities
Payables	6,770	8,818	8,443
Interest bearing liabilities	2,828	10,753	1,448
Tax liabilities	233	454	285
Provisions	1,214	1,923	1,144
Total current liabilities	11,045	21,948	11,320
Non-current liabilities
Payables	83	417	250
Interest bearing liabilities	6,475	8,181	9,322
Tax liabilities	1,405	1,698	1,438
Provisions	536	509	372
Total non-current liabilities	8,499	10,805	11,382
Total liabilities	19,544	32,753	22,702
Net assets	22,258	21,053	22,270
Equity
Contributed equity	20,044	20,044	20,044
Retained profits	2,214	1,009	2,226
Total equity	22,258	21,053	22,270

Consolidated statement of cash flows

	Current period	Previous corresponding period
	SA'000	SA'000
Cash flows from operating activities
Receipts from trade and other debtors	75.214	108,812
Payments of accounts payable and to other suppliers and creditors
and employees	(67,351)	(101, 506)
Interest received	115	80.
Borrowing costs	(1,092)	(1,790)
Dividends received	3	3.
Income taxes paid	(892)	(51)
Net cash flows from operating activities	5.997	5.548
Cash flows from investing activities
Loan repayments received	21	6
Payments for property, plant and equipment	(1,987)	(1,261)
Deferred payments for purchase of business	(333)	(52)
Proceeds from sale of business, property, plant and equipment	8.575	5.455
Net cash flows from investing activities	6,276	4,148
Cash flows from financing activities
Repayment of borrowings	(11, 245)	(10,272)
Dividends paid	(506)	(249)
Net cash flows from financing activities	(11,751)	(10, 521)
Net decrease in cash held	522	(825)
Cash at the beginning of the financial year	(69)	756
Cash at the end of the financial year	453	(69)
Non-cash financing and investing activities Acquisition of plant and equipment by means of finance leases and hire purchase	1.602	3.076
Sale of business, plant and equipment for deferred consideration	2.680	1.800
NTA backing
Net tangible asset backing per ordinary security	86.28 cents	69.86 cents

Dividend

Details of dividends declared or paid during or subsequent to the year ended 30 June 2004 are as follows:

	Payment date	Amount	Total	Franked	Foreign sourced
		per	dividend	amount per	dividend amount
		security		security	per security
Final dividend - Current year	12 November	l cent	\$253,299	l cent
(fully franked at 30%)	2004
Final dividend - Previous year	21 November	l cent	\$253,299	1 cent
(fully franked at 30%)	2003
Interim dividend - Current year	14 May 2004	l cent	\$253,299	l cent
(fully franked at 30%)
Interim dividend - Previous		- cent		- cent
year (fully franked at 30%)

Dividends not recognised at year end

Since the end of the year the directors have declared a final dividend of 1 cent per ordinary share, fully franked at 30%. The aggregate amount of the dividend payable on 12 November 2004 out of retained profits at 30 June 2004, but not recognised as a liability at year end is \$253,299 (2003 - \$253,299).

The Dividend Re-investment Plan and Bonus Share Plan are currently being suspended.

Commentary on results for the period

For commentary see attached letter to shareholders.

Basis of financial report preparation

This report has been prepared in accordance with the ASX Listing Rules and should be read in conjunction with the last annual report and any announcements to the market made by the Entity during the period. This report does not include all the notes of the type normally included in an annual report.

Changes in accounting policies since the last annual report

There have been no changes in accounting policies since the last annual report except for the change described below.

Tax consolidation

CTI Logistics is currently in the process of reviewing the impact of tax consolidation legislation on the consolidated group. Based on our review to date, we are of the opinion that the consolidated entity is likely to benefit from the implementation of the tax consolidations in the form of an uplift in tax cost bases.

At the date of issuing the Preliminary Final Report, the review is not at a stage which allows the impact of the possible implementation to be accurately quantified. As a result the tax balances disclosed here in have been prepared under the current system of taxation. The market will be advised of the impact of the implementation and any changes to the financial results for the year ended 30 June 2004 as soon as the information becomes available.

International Financial Reporting Standards (IFRS)

The Australian Accounting Standards Board (AASB) is adopting IFRS for application to reporting periods beginning on or after 1 January 2005. The AASB has issued Australian equivalents to IFRS, and the Urgent Issues Group will issue abstracts corresponding to IASB interpretations originated by the International Financial Reporting Interpretations Committee or the former Standing Interpretations Committee. The adoption of Australian equivalents to IFRS will be first reflected in the consolidated entity's financial statements for the half-year ending 31 December 2005 and the year ending 30 June 2006.

Entities complying with Australian equivalents to IFRS for the first time will be required to restate their comparative financial statements to amounts reflecting the application of IFRS to that comparative period. Most adjustments required on transition to IFRS will be made, retrospectively, against opening retained earnings as at 1 July 2004.

CTI Logistics has conducted a high level review of the likely impact of transition to Australian equivalents to IFRS.

Major changes identified to date that will be required to the consolidated entity's existing accounting policies include the following:

$\hat{I}$ . Income tax

Under the AASB112 Income Taxes, deferred tax balances are determined using the balance sheet method which calculates temporary differences based on the carrying amounts of an entity's assets and liabilities in the statement of financial position and their associated tax bases. In addition, current and deferred taxes attributable to amounts recognised directly in equity are also recognised directly in equity.

This will result in a change to the current accounting policy, under which deferred tax balances are determined using the income statement method, items are only tax-effected if they are included in the determination of pre-tax accounting profit or loss and/or taxable income or loss and current and deferred taxes cannot be recognised directly in equity.

$\overline{2}$ . Intangible $asserts - good will$

Under the AASB3 Business Combinations, amortisation of goodwill will be prohibited, and will be replaced by annual impairment testing focusing on the cash flows of the related cash generating unit.

This will result in a change to the current accounting policy, under which goodwill is amortised on a straight line basis over the period during which the benefits are expected to arise and not exceeding 20 years.

International Financial Reporting Standards (IFRS) continued

The above should not be regarded as a complete list of changes in accounting policies that will result from the transition to Australian equivalents to IFRS, as not all standards have been analysed as yet, and some decisions have not yet been made where choices of accounting policies are available. For these reasons it is not yet possible to quantify the impact of the transition to Australian equivalents to IFRS on the consolidated entity's financial position and reported results.

Controlled entities acquired or disposed of

There were no acquisitions or disposals of controlled entities during the current period.

Disposal of businesses

During the period, the consolidated entity sold Logistics and Transport businesses:

	Current period	Previous corresponding period
	SA'000	\$A'000
Proceeds received or receivable:
Cash consideration received	6,280	450
Deferred consideration	2,680	1,800
Total consideration	8,960	2,250
Carrying value of assets disposed of:
Plant and equipment	4,842	206
Intangible assets	2,886	1,435
	7,728	1,641
Other costs on disposal	362	157
	8,090	1,798

Segment information
The economic entity operates predominantly in Australia and is involved in the production and sale of the following products and services:

$\blacktriangleright$ Logistics and Transport services

$\triangleright$ Manufacturing, Security and other services

	Logistics and Transport	Manufacturing, Security and Other	Intersegment eliminations	Consolidated
	2004 \$A'000	2004 \$A'000	2004 \$A'000	2004 \$A'000
Sales to customers outside the consolidated entity	50,354	23,372		73,726
Intersegment sales	141	19	(160)
Total segment revenue	50,495	23,391	(160)
Unallocated Sales				576
Consolidated revenue from ordinary activities				74,302
Segment result	2,568	2,817	(181)	5,385
Unallocated result
Interest Expense				(687)
Other				(2,688)
Consolidated profit from ordinary activities before income tax				2,010
Income tax expense				299
Net profit				1,711

Segment information (continued)

	Logistics and Transport	Manufacturing, Security and Other	Intersegment eliminations	Consolidated
	2003 \$A'000	2003 \$A'000	2003 \$A'000	2003 \$A'000
Sales to customers outside the consolidated entity	67,951	22,996		90,947
Intersegment sales	162	57	(219)
Total segment revenue	68,113	23,053	(219)
Unallocated Sales				574
Consolidated revenue from ordinary activities				91,521
Segment result	1,747	3,178	(152)	4,773
Unallocated result
Interest Expense				(1,405)
Provision for diminution of investments				(462)
Provision for restricted recovery of share scheme loans				(381)
Other				(2,071)
Consolidated profit from ordinary activities before income tax				454
Income tax expense				(239)
Net profit				215

Compliance statement

• 1. This report has been prepared in accordance with AASB Standards, other AASB authoritative pronouncements and Urgent Issues Group Consensus Views or other standards acceptable to ASX.
• 1. This report, and the accounts upon which the report is based use the same accounting policies.
• 1. This report does give a true and fair view of the matters disclosed.
• $\ddot{4}$ . This report is based on accounts which are in the process of being audited.
• The entity has a formally constituted audit committee. 5.

David Mellor Company Secretary

31 August 2004

ABN 69 008 778 925

328 Aberdeen Street West Perth WA 6005

Postal Address PO Box 400 West Perth Mestern Australia 6872 Telephone (08) 9227 6333 Facsimile (08) 9227 8000 Email corporate@ctilogistics.com Web www.ctilogistics.com

31 August 2004

Dear Shareholder,

The Company today released its annual results to the Australian Stock Exchange in respect of the 2003-2004 financial vear.

Net profit for the year was \$1,711,000, compared with \$215,000 the previous year. Revenue from ordinary activities was \$74,302,000. This was down \$17,219,000 on the previous year, and reflects the sales of several businesses over the last vear and a half. Net interest bearing liabilities have been reduced by \$9,630,000 in the year under review, and borrowing costs have been reduced by \$698,000 to \$1,092,000.

A fully franked dividend of 1 cent per share will be paid to shareholders on 12 November 2004, bringing the total dividend to 2 cents per share for the full year.

The board recognises that the Company is too small to be on the radar screens of brokers and analysts and there is little liquidity in the market for the Company's shares, the price of which suffers accordingly. It is difficult for current shareholders to exit the register without affecting the share price, so subject to operating requirements and market conditions, the Company is also proposing to buy back up to ten percent of its issued share capital over the next twelve months.

Yours faithfully

DAVID WATSON EXECUTIVE CHAIRMAN