CTI LOGISTICS LIMITED — Annual Report 2014

Aug 21, 2014

CTI LOGISTICS LIMITED ABN 69 008 778 925

ANNUAL REPORT 2014

Contents

• 2 Directory
• 3-7 Directors' Report
• 8 Lead Auditor's Independence Declaration
• 9 Consolidated Statement of Profit or Loss and other Comprehensive Income
• 10 Consolidated Statement of Financial Position
• 11 Consolidated Statement of Changes in Equity
• 12 Consolidated Statement of Cash Flows
• 13-44 Notes to the Financial Statements
• 45 Directors' Declaration
• 46-47 Independent Auditor's Report

Directory

DIRECTORS David Robert Watson (Executive Chairman)

David Anderson Mellor (Executive)

Bruce Edmond Saxild (Executive)

Peter James Leonhardt (Non-Executive)

Matthew David Watson (Non-Executive)

SECRETARY David Anderson Mellor

AUDITORS

KPMG 235 St. Georges Terrace Perth WA 6000 Telephone (08) 9263 7171

SHARE REGISTRY

Computershare Investor Services Pty Ltd Level 2, 45 St. Georges Terrace Perth Western Australia 6000 Telephone (08) 9323 2000

REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS

1 Drummond Place West Perth WA 6005 Telephone (08) 9422 1100 Facsimile (08) 9227 8000 E-mail corporate@ctilogistics.com Web www.ctilogistics.com

The financial report covers the group consisting of CTI Logistics Limited and its subsidiaries.

The financial report is presented in the Australian currency.

The financial report was authorised for issue by the directors on 21 August 2014. The directors have the power to amend and reissue the financial report.

CTI Logistics Limited is a company limited by shares, incorporated and domiciled in Australia.

YOUR DIRECTORS PRESENT THEIR REPORT ON THE GROUP CONSISTING OF CTI LOGISTICS LIMITED AND THE ENTITIES IT CONTROLLED AT THE END OF, OR DURING, THE YEAR ENDED 30 JUNE 2014.

Directors

Directors of the Company were in office during the whole of the financial year and up to the date of this report are:

David Robert Watson (Executive Chairman)

Mr Watson is the founder, executive chairman and chief executive officer of the group. Mr Watson is a member of the remuneration committee. Mr Watson has not held any other directorships in listed companies over the past 4 years.

David Anderson Mellor (Executive Director)

Mr Mellor is a Chartered Accountant who has been with the group since 1978. He is responsible for the group's finances and accounts. Mr Mellor has not held any other directorships in listed companies over the past 4 years.

Bruce Edmond Saxild (Executive Director)

Mr Saxild has been with the group since 1977. He is responsible for the group's logistics and transport operations. He is a member of the audit committee. Mr Saxild has not held any other directorships in listed companies over the past 4 years.

Peter James Leonhardt (Non-Executive Director)

Mr Leonhardt is a non-executive director of CTI Logistics Limited and has been with the group since 1999. During the past 4 years Mr Leonhardt has served as a director of Carnarvon Petroleum Limited (March 2005 and continuing). Mr Leonhardt is a former managing partner of Coopers & Lybrand (now PricewaterhouseCoopers). Mr Leonhardt is the chairman of the audit committee and the remuneration committee.

Matthew David Watson (Non-Executive Director)

Mr Watson is a non-executive director of CTI Logistics Limited and has been with the group since 2010. He has a Post Graduate Diploma of Business Information Systems and is a Chartered Management Accountant (CIMA). He is a member of the audit committee. Mr Watson has not held any other directorships in listed companies since his appointment.

Principal activities of the group

The principal activities of the group during the year were the provision of logistics and transport services, rental of property, manufacturing of plastic products and provision of security services.

Dividends

Dividends paid or declared by the Company to members since the end of the previous financial year were:

Declared and paid during the year	Cents per share	Total amount		Franked Date of payment
Interim 2014 ordinary	4.0	\$2,465,110	Franked	15 April 2014
Final 2013 ordinary	4.0	\$2,457,656	Franked	15 November 2013

Declared after end of year

After the balance sheet date the directors have declared the following dividend. The dividend has not been provided and there are no income tax consequences. Final 2014 ordinary 4.0 \$2,549,867 Franked 31 October 2014

The financial effect of this post year dividend has not been brought to account in the financial statements for the year ended 30 June 2014 and will be recognised in subsequent financial reports.

Review of operations and results

The group is a transport and logistics provider in courier, parcels, taxi trucks, fleet management, general and contract warehousing. It also has two smaller businesses in the plastics and security industries. The group operates primarily in Western Australia.

Profit before tax has decreased marginally by 1.5% to \$14,090,456 with profit after tax 0.1% up this year at \$9,835,919 compared with last year. Revenue from operations was up 11.1%, to \$140,693,568. The results for the period were impacted by a combination of:

• the increased pressure on margins as a result of continuing tough market conditions that have affected all businesses within the group • the additional costs of \$1.98 million incurred and expensed in the year relating to the on-going development of a regional road freight network in Western Australia
• completion of the second stage of our Hazelmere warehousing and distribution complex and a full year of first stage warehousing revenue
• a decline in courier and resources-related activities offset by organic growth in our truck and parcels businesses
• the sale of an investment property for a profit of \$2.9 million, with no tax effect following the recoupment of prior year capital losses, and an impairment totalling \$1.6 million on two other investment properties

The group's net assets increased by 25.2% compared with the previous year which is largely attributable to the current year's profit after tax, an issue of 3.1 million shares to institutional investors in August 2013 and the issue of shares from the Company's dividend re-investment plan in November 2013 and April 2014.

Operating cash flow fell from \$16.2 million to \$11.6 million, reflecting an increase in non-cash items net of gain on sale of an investment property together with movements in working capital returning to more normal levels.

The group's receivables and cash flow management remained well controlled with receivables increasing only marginally when compared to revenue growth. With a diverse and large customer base the strength of the group's focus on receivable management is reflected in the value of receivables written off during the year being \$124,224 (2013 - \$187,127) representing only 0.09% of revenue compared with prior year of 0.14% of revenue.

Interest bearing debt increased marginally by \$0.1 million following the acquisition of additional land adjacent to the Hazelmere facility for \$9.4 million in May 2014 and the cost of increasing the heavy truck fleet, net of the \$5.7 million equity placement to institutional investors in August 2013 and \$3.5 million proceeds on sale of an investment property together with cash generated from profits.

The board has declared an increased final dividend payment of 4.0 cents per share, fully franked. This together with the interim dividend of 4.0 cents, results in a total dividend increase of 6.7% on the previous year.

The 2014/15 year will see the Company look to expand its warehousing footprint, further develop its regional road freight business to a break even level, expand the metropolitan transport network and continue to explore opportunities for the acquisition of businesses in fields related to or compatible with the group's existing core operations.

Changes in the state of affairs

No other significant changes in the state of affairs of the group have occurred other than those matters referred to elsewhere in this report.

Events subsequent to balance date

The directors are not aware of any other matters or circumstances that has significantly or may significantly affect the operations of the group, the results of those operations, or the affairs of the group in subsequent financial years.

Likely developments

The major objectives encompassed in the Business Plan of the group are:

• (i) expansion of existing operations by aggressive marketing and by acquisition;
• (ii) establishment or acquisition of businesses in fields related to or compatible with the group's existing core operations; and
• (iii) to maximise the profits and returns to shareholders by constant review of existing operations.

Company secretary

The company secretary is Mr D A Mellor, who was appointed to the position in 1987. He is a Chartered Accountant.

Directors' meetings

The number of directors' meetings held in the period each director held office during the financial year and the number of meetings attended by each director were:

Board of Directors

	Number	Number
	Held	Attended
P J Leonhardt	7	7
D A Mellor	7	7
B E Saxild	7	7
D R Watson	7	7
M D Watson	7	7
Audit committee
	Number	Number
	Held	Attended
P J Leonhardt	3	3
B E Saxild	3	3
M D Watson	3	3
Remuneration committee
	Number	Number
	Held	Attended
P J Leonhardt	2	2
D R Watson	2	2

Corporate governance statement

This statement outlines the main corporate governance practices in place throughout the financial year, which comply with the ASX Corporate Governance Council recommendations, unless otherwise stated.

Particulars of directors' interests in shares of CTI Logistics Limited at the date of this report

The relevant interest of each director in the shares issued by the Company as notified by the directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:

	Direct	Indirect
	Holding	Holding
P J Leonhardt	-	527,836
D A Mellor	522,080	5,363,088
B E Saxild	347,120	4,618,058
D R Watson	18,062,683	11,497,809
M D Watson	324,512	-

Directors' and officers' indemnity insurance

The Company's directors' and officers' indemnity insurance policy indemnifies the directors named in this report in respect of their potential liability to third parties for wrongful acts committed by them in their capacity as directors (as defined in the policy). The disclosure of the premium paid in respect of the insurance policy is prohibited under the terms of the policy.

The Company has entered into an agreement with their current auditors, KPMG, indemnifying them against any claims by third parties arising from their report on the Annual Financial Report, except where the liability arises out of conduct involving a lack of good faith.

Environmental regulation

The operations of CTI Logistics Limited and its controlled entities are not subject to any particular or significant environmental regulation. However, the board believes that CTI Logistics Limited and its controlled entities have adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to CTI Logistics Limited and its controlled entities.

Non-audit services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor's expertise and experience with the Company and/or the group are important.

Details of the amounts paid or payable to the auditor, KPMG, for audit services provided during the year are set out in Note 26 of the financial statements. There were no non-audit services provided during the year. The directors are satisfied the auditor did not therefore compromise the auditor independence requirements of the Corporations Act 2001.

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 8.

Remuneration report - audited

The remuneration report is set out under the following main headings:

• A. Principles used to determine the nature and amount of remuneration
• B. Details of remuneration
• C. Service agreements
• D. Key management personnel transactions
• E. Additional information

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration

Executive directors

The remuneration committee makes specific recommendations on remuneration packages and other terms of employment for executive directors. Remuneration is set to competitively reflect market conditions for comparable roles. There are no guaranteed base pay increases each year, no element of the remuneration is based upon the Company's performance and no bonus schemes operated during the financial year.

Non-executive directors

Remuneration of non-executive directors is determined by the board within the maximum amount of \$300,000, approved by shareholders at the annual general meeting on 26 November 2009.

B. Details of remuneration

Details of the nature and amount of each element of the emoluments of each director of the Company and the group is set out in the following table.

			Post
	Short-term		employment
		Non
	Cash salary and fees \$	monetary benefits \$	Superannuation \$	Share-based payments \$	Total \$
2014
P J Leonhardt	55,595	-	-	-	55,595
D A Mellor	434,227	10,114	33,322	29,679	507,342
B E Saxild	522,368	22,684	24,160	29,679	598,891
D R Watson	469,201	20,595	33,299	-	523,095
M D Watson	32,375	-	2,994	-	35,369
Total	1,513,766	53,393	93,775	59,358	1,720,292
2013
P J Leonhardt	49,600	-	-	-	49,600
D A Mellor	433,207	10,345	23,158	69,666	536,376
B E Saxild	481,471	12,336	23,456	69,666	586,929
D R Watson	439,883	12,205	23,531	-	475,619
M D Watson	28,514	-	2,566	-	31,080
Total	1,432,675	34,886	72,711	139,332	1,679,605

	Balance at the	Other changes	Balance at the
2014	start of the year	during the year	end of the year
P J Leonhardt	527,836		527,836
D A Mellor	5,818,428	66,740	5,885,168
B E Saxild	4,921,582	43,596	4,965,178
D R Watson	29,493,752	66,740	29,560,492
M D Watson	324,512		345,512
2013
P J Leonhardt	527,836		527,836
D A Mellor	6,218,428	(400,000)	5,818,428
B E Saxild	4,921,582		4,921,582
D R Watson	29,493,752		29,493,752
M D Watson	324,512	$\overline{\phantom{a}}$	324,512

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To: the directors of CTI Logistics Limited

I declare that, to the best of my knowledge and belief, in relation to the audit for the financial year ended 30 June 2014 there have been:

• (i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
• (ii) no contraventions of any applicable code of professional conduct in relation to the audit.

KPMG

Brent Steedman Partner

Perth

21 August 2014

KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.

Liability limited by a scheme approved under Professional Standards Legislation.

Consolidated Statement of Profit or Loss and other Comprehensive Income for the year ended 30 June 2014

		Consolidated
		2014	2013
	Notes	\$	\$
Revenue from operations	5	140,693,568	126,668,709
Other income	6	3,234,818	411,003
Changes in inventories of finished goods and work in progress		(855,463)	(104,858)
Raw materials and consumables used		(6,751,640)	(8,789,500)
Employee benefits expense		(48,450,310)	(37,641,985)
Subcontractor expense		(37,519,324)	(39,863,588)
Depreciation and amortisation expense	7	(5,290,686)	(3,532,826)
Motor vehicle and transport costs		(14,005,705)	(9,343,785)
Property costs		(5,586,640)	(5,472,132)
Other expenses		(9,549,956)	(6,429,394)
Results from operating activities		15,918,662	15,901,644
Finance income		100,904	87,138
Finance expenses	7	(1,929,110)	(1,684,335)
Net finance costs		(1,828,206)	(1,597,197)
Profit before income tax		14,090,456	14,304,447
Income tax expense	8	(4,254,537)	(4,480,953)
Profit for the year	23	9,835,919	9,823,494
Other comprehensive income
Items that may be reclassified subsequently to profit or loss
Available-for-sale financial assets – net change in fair value		4,486	5,685
Total comprehensive income		9,840,405	9,829,179
		Cents	Cents
Earnings per share for profit attributable to the ordinary equity holders of the Company
Basic earnings per share	31a	15.59	16.56
Diluted earnings per share	31b	15.44	16.46

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

Consolidated Statement of Financial Position as at 30 June 2014

	Consolidated
		2014	2013
	Notes	\$	\$
ASSETS
Current assets
Cash and cash equivalents	9	2,251,430	4,440,952
Trade and other receivables	10	22,224,381	21,604,640
Inventories	11	1,778,196	2,633,659
Total current assets		26,254,007	28,679,251
Non-current assets
Available-for-sale financial assets	12	77,409	71,000
Property, plant and equipment	13	70,537,198	56,449,648
Investment properties	14	7,543,368	9,781,361
Deferred tax assets	15	695,756	992,517
Intangible assets	16	5,510,345	5,878,074
Total non-current assets		84,364,076	73,172,600
Total assets		110,618,083	101,851,851
LIABILITIES
Current liabilities
Trade and other payables	17	11,733,802	14,016,490
Borrowings	18	2,494,848	1,965,520
Current tax liabilities		86,188	1,163,873
Provisions	21	2,749,228	2,609,084
Total current liabilities		17,064,066	19,754,967
Non-current liabilities
Borrowings	19	34,685,156	35,100,966
Provisions	21	765,928	589,463
Total non-current liabilities		35,451,084	35,690,429
Total liabilities		52,515,150	55,445,396
Net assets		58,102,933	46,406,455
EQUITY
Contributed equity	22	15,698,075	9,187,090
Reserves	23a	1,035,057	762,717
Retained profits	23b	41,369,801	36,456,648
Total equity		58,102,933	46,406,455

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

Consolidated Statement of Changes in Equity for the year ended 30 June 2014

	Contributed		Retained
Notes	\$	\$	\$	Total equity \$
	7,292,807	275,728	30,630,281	38,198,816
	-	5,685	9,823,494	9,829,179
22	1,894,283	-	-	1,894,283
34	-	481,304	-	481,304
24	-	-	(3,997,127)	(3,997,127)
	9,187,090	762,717	36,456,648	46,406,455
	-	4,486	9,835,919	9,840,405
22	6,510,985	-	-	6,510,985
34	-	267,854	-	267,854
24	-	-	(4,922,766)	(4,922,766)
	15,698,075	1,035,057	41,369,801	58,102,933
		equity	Reserves	profits

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

Consolidated Statement of Cash Flows for the year ended 30 June 2014

			Consolidated
		2014	2013
	Notes	\$	\$
Cash flows from operating activities
Receipts from customers (inclusive of goods and
services tax)		154,667,425	136,250,148
Payments to suppliers and employees (inclusive of
goods and services tax)		(136,770,360)	(114,499,937)
Dividends received		3,933	4,049
Interest received		100,904	87,137
Interest paid		(1,349,613)	(1,060,670)
Income tax refund received		137,487	17,648
Income taxes paid		(5,174,871)	(4,621,915)
Net cash inflow from operating activities	30	11,614,905	16,176,460
Cash flows from investing activities
Payments for property, plant and equipment		(17,756,940)	(12,867,572)
Payments for intangibles - security lines		(6,105)	-
Payments for intangibles - software		(126,171)	(19,675)
Payments for purchase of business	33	-	(6,808,592)
Proceeds from sale of property, plant and equipment		4,131,836	303,365
Net cash outflow from investing activities		(13,757,380)	(19,392,474)
Cash flows from financing activities
Proceeds from borrowings		900,000	8,500,000
Proceeds from issue of shares		6,510,985	1,873,175
Repayment of borrowings		(2,535,266)	(126,574)
Dividend paid to Company's shareholders		(4,922,766)	(3,997,127)
Net cash (outflow)/inflow from financing activities		(47,047)	6,249,474
Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the		(2,189,522)	3,033,460
financial year		4,440,952	1,407,492
Cash and cash equivalents at the end of the financial
year	9	2,251,430	4,440,952

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

REPORTING ENTITY

CTI Logistics Limited (the "Company") is a company domiciled in Australia. The address of the Company's registered office is 1 Drummond Place, West Perth, Western Australia. The consolidated financial statements of the Company as at and for the year ended 30 June 2014 comprise the Company and its subsidiaries (together referred to as the "group" and individually as "group entities"). The group is a for-profit entity and primarily is involved in the provision of logistics and transport services, rental of property, manufacturing of plastic products and provision of security services.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of the consolidated financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report is for the consolidated entity consisting of CTI Logistics Limited and its subsidiaries.

(a) BASIS OF PREPARATION OF FINANCIAL REPORT

This general purpose financial report has been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board and the Corporations Act 2001.

Certain comparative amounts have been re-classified to conform with current year presentation.

Compliance with IFRS

The consolidated financial statements of the CTI Logistics Limited group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

The consolidated financial statements were authorised for issue by the board of directors on 21 August 2014.

Historical cost convention

These financial statements have been prepared under the historical cost convention except for available-for-sale financial assets which are measured at fair value.

Functional and presentation currency

All group entities are based in Australia. The consolidated financial statements are presented in Australian dollars, which is the group's functional and presentation currency.

(b) PRINCIPLES OF CONSOLIDATION

(i) Subsidiaries

The financial statements incorporate the assets and liabilities of all entities controlled by CTI Logistics Limited ("Company") as at 30 June 2014 and the results of all subsidiaries for the period the Company controlled them during the year then ended. CTI Logistics Limited and its subsidiaries together are referred to in these financial statements as the "group".

Subsidiaries are all those entities (including special purpose entities) over which the group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date control ceases.

The acquisition method of accounting is used to account for business combinations by the group (refer to note 1(h)).

Intercompany transactions, balances and unrealised gains on transactions within the group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.

(c) SEGMENT REPORTING

Determination and presentation of operating segments

An operating segment is a component of the group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the group's other components. All operating segments' operating results are reviewed regularly by the group's executive chairman ("CEO") to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial information is available.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) SEGMENT REPORTING (continued)

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly parent company and items that cannot be allocated to specific segments in respect of revenue, profit, assets and liabilities.

(d) FOREIGN CURRENCY TRANSLATION

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are restated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

(e) REVENUE RECOGNITION

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue is recognised for the major business activities as follows:

• (i) Logistics and transport
• A sale is recorded when the goods or services have been delivered to or collected by a customer in accordance with the arrangements made with the group.
• (ii) Security, manufacturing and other

A sale is recorded when goods have been despatched to a customer pursuant to a sales order and the associated risks of ownership have transferred to the customer. A sale is recorded for services when the service has been performed.

• (iii) Interest income
• Interest income is recognised on a time proportion basis using the effective interest method.
• (iv) Dividends
• Dividends are recognised as revenue when the right to receive payment is established.
• (v) Other revenue

Revenue from outside the operating activities includes rent. This revenue is recognised on a straight-line basis in accordance with note 1(g).

(f) INCOME TAX

Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

The income tax expense or benefit for the period is the tax payable on the current period's taxable income based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(f) INCOME TAX (continued)

Tax consolidation

CTI Logistics Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation. As a consequence, these entities are taxed as a single entity and the deferred tax assets and liabilities of these entities are set off in the consolidated financial statements.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

(g) LEASES

Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges are included in other long term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the asset's useful life and the lease term.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a straight-line basis over the period of the lease.

Lease income from operating leases is recognised in income on a straight-line basis over the lease term.

(h) BUSINESS COMBINATIONS

The acquisition method of accounting is used to account for all business combinations entities regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any preexisting equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net identifiable assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.

(i) IMPAIRMENT OF ASSETS

Non-derivative financial assets

The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered an indicator that the assets are impaired.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(i) IMPAIRMENT OF ASSETS (continued)

(i) Assets carried at amortised cost

For loans and receivables, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the group may measure impairment on the basis of an instrument's fair value using an observable market price.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

Impairment testing of trade receivables is described in note 1(k).

(ii) Assets classified as available-for-sale

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

Non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

Value-in-use calculations are described in note 16.

(j) CASH AND CASH EQUIVALENTS

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

(k) TRADE RECEIVABLES

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 days. They are presented as current assets unless collection is not expected for more than 12 months after the reporting date.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 60 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

The amount of the impairment loss is recognised in profit or loss within other expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectible in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(l) INVENTORIES

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriated proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(m) INVESTMENTS AND OTHER FINANCIAL ASSETS

Classification

The group classifies its investments in the following categories: loans and receivables, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

(i) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet.

(ii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Recognition and derecognition

Purchases and sales of financial assets are recognised on trade-date – the date on which the group commits to purchase or sell the asset. Financial assets are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership.

When securities classified as available-for-sale are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit and loss as gains and losses from investment securities.

Measurement

At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.

Loans and receivables and held-to-maturity investments are subsequently carried at amortised cost using the effective interest method.

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Gains or losses arising from changes in the fair value of the 'financial assets at fair value through profit or loss' category are presented in profit or loss within other income or other expenses in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in profit or loss as part of revenue from continuing operations when the group's right to receive payments is established. Interest income from these financial assets is included in the net gains/(losses).

Changes in the fair value of monetary securities classified as available-for-sale are recognised in other comprehensive income.

Impairment

Impairment testing of financial assets is described in note 1(i).

(n) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment other than freehold land is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit and loss during the financial period in which they are incurred.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(n) PROPERTY, PLANT AND EQUIPMENT (continued)

Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost net of their residual values, over their estimated useful lives, as follows:

Buildings	25 - 40 years
Plant & equipment	5 - 15 years
Motor vehicles	5 - 10 years
Furniture and fittings	3 - 8 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 1(i)).

Gains and losses on disposals are determined by comparing proceeds with carrying amounts. These are included in profit or loss under other income and other expenses.

(o) INVESTMENT PROPERTY

Investment property, principally comprising freehold land and buildings, is held for long-term rental yields and is not occupied by the group. Investment property other than freehold land is held at historical cost less depreciation. Investment property includes properties that are under construction for future use as investment property and is carried at historical cost. Investment buildings are depreciated using the straight line method over their estimated useful lives of 10 to 40 years.

(p) INTANGIBLE ASSETS

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of the net identifiable assets acquired. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose, identified according to operating segments (note 4).

(ii) Security Lines

Security lines have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.

(iii) Software

Costs incurred in acquiring software and licences that will contribute to future period financial benefits through revenue generation and/or cost reduction are capitalised to software.

(iv) Trade names

Trade names have a finite useful life and are carried at cost less accumulated amortisation and impairment losses.

(v) Customer relationships

Customer relationships acquired as part of a business combination are recognised separately from goodwill. The customer relationships are carried at their fair value at the date of acquisition less accumulated amortisation and impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill is recognised in profit or loss as incurred.

Amortisation

Amortisation is calculated over the cost of the asset less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(p) INTANGIBLE ASSETS (continued)

5 - 7 years
2.5 - 4 years
8 years
5 years

Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.

(q) TRADE AND OTHER PAYABLES

These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year and which are unpaid. The amounts are unsecured and are paid based on the terms of trade which are usually 30 to 60 days from the date of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method.

(r) BORROWINGS

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.

The group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

(s) BORROWING COSTS

Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed.

(t) PROVISIONS

Provisions are recognised when the group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date.

(u) EMPLOYEE BENEFITS

(i) Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables.

(ii) Other long-term employee benefit obligations

The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Retirement benefit obligations

Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(u) EMPLOYEE BENEFITS (continued)

(iv) Bonus

The group recognises a liability and an expense for bonuses where contractually obliged or when past events have created a constructive obligation.

(v) Share-based payment transactions

An Employee Share Plan ("ESP") allows certain group employees to acquire shares of the Company. The grant date fair value of the shares granted to employees is recognised as an employee expense with a corresponding increase in equity, over the period during which the employees become unconditionally entitled to the shares. The fair value of the shares granted is measured using a Black-Scholes pricing model, taking into account the terms and conditions upon which the shares were granted. The amount recognised as an expense is adjusted to reflect the actual number of shares that vest. Employees have been granted a limited recourse 10 year interest-free loan in which to acquire the shares. The loan has not been recognised as the Company only has recourse to the value of the shares.

(v) CONTRIBUTED EQUITY

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

(w) DIVIDENDS

Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end of the year but not distributed at balance date.

(x) EARNINGS PER SHARE

(i) Basic earnings per share

Basic earnings per share is determined by dividing profit for the year by the weighted average number of ordinary shares outstanding during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(y) GOODS AND SERVICES TAX (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amounts of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(z) PARENT ENTITY FINANCIAL INFORMATION

The financial information for the parent entity, CTI Logistics Limited, disclosed in note 33 has been prepared on the same basis as the consolidated financial statements, except as set out below.

(i) Investments in subsidiaries

Investments in subsidiaries are accounted for at cost in the financial statements of CTI Logistics Limited.

(ii) Tax consolidation legislation

CTI Logistics Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.

The head entity, CTI Logistics Limited, and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(z) PARENT ENTITY FINANCIAL INFORMATION (continued)

In addition to its own current and deferred tax amounts, CTI Logistics Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

The entities have also entered into tax sharing and funding agreements. Under the terms of these agreements, the controlled entities will reimburse the Company for any current tax payable by the Company arising in respect of their activities and the Company will reimburse the controlled entities for any tax refund due to the Company arising in respect of their activities. The reimbursements are payable by the Company and will limit the joint and several liability of the controlled entities in the case of default by the Company.

Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable from or payable to other entities in the group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

(iii) Financial guarantees

Where the parent entity has provided financial guarantees in relation to loans and payables of subsidiaries for no compensation, the fair values of these guarantees is not recognised as contributions or as part of the cost of the investment.

(aa) NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2014, and have not been applied in preparing these consolidated financial statements. Those which may be relevant to the group are set out below. The group does not plan to adopt these standards early.

(i) AASB 9 Financial Instruments (2013), AASB 9 Financial Instruments (2010) and AASB 9 Financial Instruments (2009) (together AASB 9)

AASB 9 (2009) introduces new requirements for the classification and measurement of financial assets. Under AASB 9 (2009), financial assets are classified and measured based on the business model in which they are held and the characteristics of their contractual cash flows. AASB 9 (2010) introduces additional changes relating to financial liabilities. The IASB currently has an active project to make limited amendments to the classification and measurement requirements of AASB 9 and add new requirements to address the impairment of financial assets.

AASB 9 (2013) introduces new requirements for hedge accounting.

AASB 9 is effective for annual periods beginning on or after 1 January 2017. The effective date is subject to review pending the finalisation of the outstanding phases of the standard. However, early adoption is permitted. The adoption of these standards is expected to have an impact on the Group's financial assets, but no impact on the Group's financial liabilities. The Group has not yet determined the impact on its hedging arrangements.

2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates, assumptions and judgements may be used to assess the measurement of certain items of income and expense, and assets and liabilities. Such estimates, assumptions and judgements are regularly evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

Where estimates and assumptions are made concerning the future, the resulting accounting estimates may not equal the related actual outcome. The estimates and assumptions which give rise to a risk of causing an adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of goodwill

The group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations as described in note 16.

3. FINANCIAL RISK MANAGEMENT

Overview

The group has exposure to the following risks from their use of financial instruments:

• (i) Credit risk
• (ii) Liquidity risk
• (iii) Market risk

This note presents information about the group's exposure to each of the above risks, the group's objectives, policies and processes for measuring and managing risk, and the group's management of capital.

Risk management framework

The board of directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management is carried out by the director responsible for finance under the guidance of the board of directors. The board of directors considers principles for overall risk management, as well as determining policies covering specific areas, such as mitigating interest rate and credit risks and investing excess liquidity.

The group's risk management policies are established to identify and analyse the risks faced by the group. These policies are reviewed regularly to reflect changes in market conditions and the group's activities.

a) Market risk

(i) Foreign exchange risk

The group operates wholly in Australia and is not exposed to material foreign exchange risk arising from currency exposure.

(ii) Price risk

The group is exposed to equity securities price risk. This arises from investments held by the group and classified on the balance sheet as available-for-sale.

The price risk for listed and unlisted securities is immaterial in terms of the possible impact on profit or loss or total equity. It has therefore not been included in a sensitivity analysis.

The group is not exposed to commodity price risk.

(iii) Cash flow and fair value interest rate risk

The group's interest rate risk arises from borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk. Borrowings issued at fixed rates expose the group to fair value interest rate risk. At the year end, 13.93% (2013 – 16.10%) of borrowings were at fixed rates.

(iv) Borrowings and cash and cash equivalents

At the reporting date the group had the following borrowings and cash and cash equivalents.

	Weighted		Consolidated Weighted
	average interest rate		average interest rate
	2014 %	2014 \$	2013 %	2013 \$
Bank loans and other loans	3.65	32,000,000	3.42	31,100,000
Cash and cash equivalents	2.38	2,251,430	3.13	4,440,952
Hire purchase liabilities	5.44	5,180,004	5.73	5,966,486

An analysis by maturities is provided in (c) below.

The group manages interest rate risk by assessing the appropriateness of fixed or floating rate debt when funding is required.

3. FINANCIAL RISK MANAGEMENT (continued)

Group sensitivity

The group's main interest rate risk arises from loans and cash and cash equivalents. At 30 June 2014, if the interest rates had changed by -/+ 100 basis points from the year-end rates with all other variables held constant, post-tax profit for the year would have been higher/lower by \$224,000 (2013 - change of 100bps: \$217,700 higher/lower) for loans and higher/lower by \$15,760 (2013 change of 100bps: \$31,087 higher/lower) for cash and cash equivalents, mainly as a result of higher/lower interest expense from borrowings and higher/lower interest income from cash and cash equivalents.

(b) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions.

The group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. The group has no significant concentrations of credit risk. Cash transactions are limited to high credit quality financial institutions. The group has policies that limit the amount of credit exposure to any one financial institution.

There is no independent rating of individual customers. Financial institutions have credit ratings of AA* and higher at 30 June 2014. Risk control assesses the credit quality of the customer, taking into account its financial position, past experience and other factors. Customers that are graded as "high risk" are placed on a restricted customer list and monitored on a weekly basis. Receivables balances are monitored on an ongoing basis.

*Standard and Poor credit rating

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as follows:

		Consolidated
	2014	2013
	\$	\$
Cash and cash equivalents	2,251,430	4,440,952
Trade receivables	20,028,997	19,556,171
Other receivables	397,503	485,464
	22,677,930	24,482,587

Trade receivables are non-interest bearing and terms of trade are 30 days from month end. At 30 June 2014, 6.65% (2013 – 5.26%) of trade receivables of the group exceed 30 days but are not considered impaired.

Other receivables are non-interest bearing and have repayment terms exceeding 30 days but are not considered impaired.

The ageing of receivables that are past due but not impaired at the reporting date is as follows:

		Past due but not impaired
	30-60 days \$	> 60 days \$	Total \$
2014
Consolidated
Trade receivables	1,874,101	535,352	2,409,453
Total	1,874,101	535,352	2,409,453
2013 Consolidated
Trade receivables	548,876	473,970	1,022,846
Total	548,876	473,970	1,022,846

3. FINANCIAL RISK MANAGEMENT (continued)

At the reporting date the group has impaired trade receivables of \$82,676 (2013 - \$98,566) (refer note 10). The individually impaired receivables mainly relate to customers which are in unexpectedly difficult economic situations and they were fully provided for at reporting date.

The ageing of the impaired receivables is as follows:

	Consolidated
	2014	2013
	\$	\$
1 to 30 days	4,052	358
30 to 60 days	43,143	28
Over 60 days	35,481	98,180
Total	82,676	98,566
Provision for impairment of trade receivables Movements in the provision for impairment of receivables are as follows:
Balance 1 July	98,566	108,815
Provision for impairment recognised during the year	81,649	47,702
Receivables written off during the year as uncollectable	(61,636)	(3,571)
Unused amount reversed	(35,903)	(54,380)
Balance 30 June	82,676	98,566

The creation and release of the provision for impaired receivables has been included in 'other expenses' in profit or loss. Amounts charged to the allowance account are generally written off when there is no expectation of recovering cash.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities and the availability of funding through an adequate amount of committed credit facilities. The group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of current financial assets and liabilities. Due to the dynamic nature of the underlying businesses, the board of directors aims at maintaining flexibility in funding by keeping committed credit lines available with a variety of counterparties. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.

Financing arrangements

The group had access to the following undrawn borrowing facilities at the reporting date:

	Consolidated
	2014 \$	2013 \$
Floating rate
- Expiring within one year (bill facility)	7,750,000	5,150,000
- Expiring beyond one year (bill facility)	6,000,000	2,900,000
	13,750,000	8,050,000

The bank overdraft facilities may be drawn at any time and are subject to annual review. The bill acceptance facilities have defined maturity dates. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time.

Maturities of financial liabilities

The table below sets out the group's financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

3. FINANCIAL RISK MANAGEMENT (continued)

		Maturity
Consolidated 2014	1 year or less \$	1 to 2 years \$	2 to 5 years \$	Total contractual cash flows \$	Carrying amount \$
Non-interest bearing	11,733,802	-	-	11,733,802	11,733,802
Variable rate	1,167,400	23,112,619	10,796,467	35,076,486	32,000,000
Fixed rate	2,709,499	2,395,366	370,804	5,475,669	5,180,004
Total	15,610,701	25,507,985	11,167,271	52,285,957	48,913,806
2013
Non-interest bearing	14,016,490	-	-	14,016,490	14,016,490
Variable rate	1,063,680	23,311,446	9,020,267	33,395,393	31,100,000
Fixed rate	2,259,386	2,259,387	1,940,413	6,485,791	5,966,486
Total	17,339,556	25,570,833	10,960,680	53,897,674	51,082,976

(d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The following tables present the group's assets measured and recognised at fair value at 30 June 2014.

	Consolidated
2014	2013
Level 1	Level 1
\$	\$
77,409	71,000

Capital risk management

The group's objectives when managing capital are to safeguard their ability to continue as a going concern, so that they continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistently with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including 'borrowings' and 'trade and other payables' as shown in the balance sheet) less cash and cash equivalents. Total capital is calculated as 'equity' as shown in the balance sheet plus net debt.

During 2014, the group's gearing ratio decreased due to a share issue and shareholders taking up the dividend reinvestment plan. The gearing ratios at 30 June 2014 and 30 June 2013 were as follows:

		Consolidated
	Notes	2014	2013
		\$	\$
Total payables and borrowings	17,18,19	48,913,806	51,082,976
Less: cash and cash equivalents	9	(2,251,430)	(4,440,952)
Net debt		46,662,376	46,642,024
Total equity		58,102,933	46,406,455
Total capital		104,765,309	93,048,479
Gearing ratio		45%	50%

4. SEGMENT INFORMATION

(a) Description of segments

Management has determined the operating segments based on the reports reviewed by the CEO.

The group's CEO considers the business from a product and services perspective and has identified three reportable segments: logistics, transport and property segments.

The reportable segments operate solely in Australia and are involved in the following operations:

• � Transport services includes the provision of courier, taxi truck, parcel distribution and fleet management.
• � Logistics services includes the provision of warehousing and distribution, supply based management services and document storage services.
• � Property rental of owner-occupied and investment property.

"Other" segments include the manufacturing of plastic products and provision of security services. Neither of these segments meets any of the quantitative thresholds for determining reportable segments.

The group does not have a single external customer which represents greater than 10% of the entity's revenue.

The group's CEO assesses the performance of the operating segments based on segment profit before income tax, as included in internal management reports. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

(b) Accounting policies

Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1(c) and accounting standard AASB 8 Operating Segments.

Inter-segment transfers

Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an arm's length basis and are eliminated on consolidation.

Segment assets and liabilities

Segment assets are allocated based on the operations of the segment and the physical location of the asset. Segment liabilities are allocated based on the operations of the segment.

Unallocated amounts

Unallocated amounts are made up of the parent company and amounts that cannot be allocated to specific segments in respect of revenue, profit, assets and liabilities.

4. SEGMENT INFORMATION (continued)

(c) Information about reportable segments

The segment information provided to the group's CEO for the reportable segments for the year ended 30 June 2014 is as follows:

2014	Transport \$	Logistics \$	Property \$	Other \$	Total \$
Reportable segment revenue Sales to external customers Intra and inter-segment	79,364,054	48,787,674	584,827	11,174,408	139,910,963
revenue	8,096,022	181,512	5,274,261	1,277,973	14,829,768
Total segment revenue	87,460,076	48,969,186	5,859,088	12,452,381	154,740,731
Interest expense Depreciation and amortisation Impairment	468,380 2,673,267 -	19,207 728,038 -	809,425 672,631 1,600,000	45,539 755,600 -	1,342,551 4,829,536 1,600,000
Reportable segment profit before income tax	4,680,967	5,743,874	4,405,931	869,881	15,700,653
Reportable segment assets	29,594,032	9,929,451	57,384,648	7,615,191	104,523,322
Reportable segment liabilities	10,696,817	2,942,551	27,488,125	2,498,239	43,625,732
2013
Reportable segment revenue Sales to external customers Intra and inter-segment	73,033,054	41,877,478	764,102	10,238,938	125,913,572
revenue	5,544,264	37,332	3,932,171	464,997	9,978,764
Total segment revenue	78,577,318	41,914,810	4,696,273	10,703,935	135,892,336
Interest expense	136,516	3,959	866,338	22,259	1,029,072
Depreciation and amortisation	1,497,032	667,956	436,125	590,579	3,191,692
Reportable segment profit before income tax	8,534,234	6,009,364	1,997,513	4,373	16,545,484
Reportable segment assets	30,652,450	9,010,750	47,593,742	7,540,122	94,797,064
Reportable segment liabilities	10,015,542	3,020,603	28,267,952	2,518,016	43,822,113

4. SEGMENT INFORMATION (continued)

(d) Reconciliations of reportable segment revenues, profit, assets and liabilities and other material items

	Notes	2014 \$	2013 \$
Revenues Total segment revenue for reportable segments Elimination of intra-segment and inter-segment revenue Unallocated revenue Consolidated revenue	5	154,740,731 (14,829,768) 782,605 140,693,568	135,892,336 (9,978,764) 755,137 126,668,709
Profit Total profit before tax for reportable segments Unallocated amounts Consolidated profit before income tax		15,700,653 (1,610,197) 14,090,456	16,545,484 (2,241,037) 14,304,447
Assets Total assets for reportable segments Unallocated amounts Consolidated total assets		104,523,322 6,094,761 110,618,083	94,797,064 7,054,787 101,851,851
Liabilities Total liabilities for reportable segments Unallocated amounts Consolidated total liabilities		43,625,732 8,889,418 52,515,150	43,822,113 11,623,283 55,445,396
Other material items Interest Income Unallocated amounts Consolidated interest income		100,904 100,904	87,138 87,138
Interest expense Total for reportable segments Unallocated amounts Consolidated interest expense		1,342,551 7,062 1,349,613	1,029,072 31,598 1,060,670
Depreciation and amortisation Total for reportable segments Unallocated amounts Consolidated depreciation and amortisation	7	4,829,536 461,150 5,290,686	3,191,692 341,134 3,532,826

The reports provided to the CEO with respect to reconciliation of reportable segment revenues, profit, assets and liabilities are measured in a manner consistent with that of the financial statements.

5. REVENUE

Revenue from operations
Sales revenue
Sale of goods	8,694,348	9,204,882
Services	131,410,460	116,795,624
	140,104,808	126,000,506
Other revenue
Dividends	3,933	4,049
Rent	584,827	664,154
	588,760	668,203
	140,693,568	126,668,709

	2014	2013
	\$	\$
6. OTHER INCOME Net gain/(loss) on disposal of:
- property	2,933,721	-
- motor vehicles	(67,382)	135,524
Other	368,479	275,479
	3,234,818	411,003
7. EXPENSES
Profit before income tax includes the following specific expenses:
Defined contribution superannuation expense	3,207,242	2,314,314
Depreciation Buildings	683,882	429,283
Plant and equipment	4,106,799	2,705,033
Total depreciation	4,790,681	3,134,316
Amortisation Security lines	8,613	11,062
Software	80,806	42,511
Trade name and customer relationships	410,586	344,937
	500,005	398,510
Finance expenses
Interest	1,349,613	1,060,670
Finance charges	579,497	623,665
	1,929,110	1,684,335
Rental expense relating to operating leases
Minimum lease payments	5,220,253	2,864,460
8. INCOME TAX EXPENSE
(a) Income tax expense
Current tax	3,726,156	4,559,002
Deferred tax	294,838	(51,170)
Under/(over) provided in prior years	233,543	(26,879)
Income tax expense	4,254,537	4,480,953
Deferred income tax (benefit) expense included in income tax expense comprises:
Increase in deferred tax assets (note 15)	(118,233)	(100,440)
Increase in deferred tax liabilities (note 20)	413,071	49,270
	294,838	(51,170)

8.	INCOME TAX EXPENSE (continued)
		2014	2013
		\$	\$
(b)	Numerical reconciliation of income tax expense to prima facie tax payable
	Profit before income tax expense	14,090,456	14,304,447
	Tax at the Australian rate of 30% (2013 - 30%)	4,227,137	4,291,334
income:	Tax effect of amounts which are not deductible (taxable) in calculating taxable
	Depreciation and amortisation	136,649	124,202
	Share-based payment	80,356	144,391
	Acquisition related cost	-	(36,055)
	Rebatable dividends	(1,686)	(1,735)
	Impairment of investment property	480,000	-
	Sale of investment property	(880,505)	-
	Sundry items	(20,957)	(14,305)
		4,020,994	4,507,832
	Under/(over) provision in prior years Income tax expense	233,543 4,254,537	(26,879) 4,480,953
(c)	Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not
	recognised in net profit or loss but directly debited or credited to equity
	Net deferred tax – debited (credited) directly to equity (note 15)	1,923	(18,672)
9.	CURRENT ASSETS - CASH AND CASH EQUIVALENTS
	Cash at bank and in hand at the end of the financial year as shown in the
	statement of cash flows	2,251,430	4,440,952
	Cash at bank earns interest at varying rates between nil and 2.35% per annum (2013 - nil and 3.5% per annum).
10.	CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
	Trade receivables	20,111,673	19,654,737
	Provision for impairment of receivables (note 3(b))	(82,676)	(98,566)
		20,028,997	19,556,171
	Other receivables	397,503	485,464
	Prepayments	1,797,881	1,563,005
		2,195,384	2,048,469
		22,224,381	21,604,640
11.	CURRENT ASSETS - INVENTORIES
	Raw materials - at cost	246,228	360,367
	Work in progress - at cost	181,382	579,810
	Finished goods - at cost	1,350,586	1,693,482
		1,778,196	2,633,659

12. NON-CURRENT ASSETS - AVAILABLE-FOR-SALE FINANCIAL ASSETS

		Consolidated
	2014 \$	2013 \$
Listed securities
Equity securities at fair value	77,409	71,000

13. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT

Consolidated	Freehold land \$	Freehold buildings \$	Plant and equipment \$	Motor vehicles \$	Total \$
1 July 2012
Cost	12,254,012	15,679,019	17,663,801	8,772,105	54,368,937
Accumulated depreciation	-	(3,536,898)	(11,300,407)	(3,817,272)	(18,654,577)
Net book amount	12,254,012	12,142,121	6,363,394	4,954,833	35,714,360
Year ended 30 June 2013
Opening net book amount	12,254,012	12,142,121	6,363,394	4,954,833	35,714,360
Additions	2,804,604	9,305,190	3,563,941	7,785,085	23,458,820
Acquired through business
combination – refer note 33			100,000	370,000	470,000
Disposals	-	-	(8,668)	(159,173)	(167,841)
Depreciation charge	-	(320,658)	(1,559,751)	(1,145,282)	(3,025,691)
Closing net book amount	15,058,616	21,126,653	8,458,916	11,805,463	56,449,648
At 30 June 2013
Cost	15,058,616	24,984,209	20,965,912	16,245,602	77,254,339
Accumulated depreciation	-	(3,857,556)	(12,506,996)	(4,440,139)	(20,804,691)
Net book amount	15,058,616	21,126,653	8,458,916	11,805,463	56,449,648
Year ended 30 June 2014
Opening net book amount	15,058,616	21,126,653	8,458,916	11,805,463	56,449,648
Additions	10,101,960	3,168,343	2,641,416	3,594,007	19,505,726
Disposals	-	(29,893)	(2,371)	(699,027)	(731,291)
Depreciation charge	-	(580,086)	(1,886,407)	(2,220,392)	(4,686,885)
Closing net book amount	25,160,576	23,685,017	9,211,554	12,480,051	70,537,198
At 30 June 2014
Cost	25,160,576	28,122,659	23,502,342	18,869,774	95,655,351
Accumulated depreciation	-	(4,437,642)	(14,290,788)	(6,389,723)	(25,118,153)
Net book amount	25,160,576	23,685,017	9,211,554	12,480,051	70,537,198

(a) Valuations

Freehold land and buildings were valued by the directors at 30 June 2014 at \$76,395,392 (2013 - directors' valuation \$62,985,051). The basis of valuation of land and buildings is fair value being the amounts for which the properties could be exchanged between willing parties in an arm's length transaction, based on current prices in an active market for similar properties in the same location and condition.

(b) Non-current assets pledged as security

Refer to note 19(b) for information on non-current assets pledged as security.

14. NON-CURRENT ASSETS - INVESTMENT PROPERTIES

Consolidated	Freehold land	Freehold buildings	Total
	\$	\$	\$
1 July 2012
Cost	8,138,384	2,968,844	11,107,228
Accumulated depreciation	-	(1,217,242)	(1,217,242)
Net book amount	8,138,384	1,751,602	9,889,986
Year ended 30 June 2013
Opening net book amount	8,138,384	1,751,602	9,889,986
Depreciation charge	-	(108,625)	(108,625)
Closing net book amount	8,138,384	1,642,977	9,781,361
At 30 June 2013
Cost	8,138,384	2,968,844	11,107,228
Accumulated depreciation	-	(1,325,867)	(1,325,867)
Net book amount	8,138,384	1,642,977	9,781,361
Year ended 30 June 2014
Opening net book amount	8,138,384	1,642,977	9,781,361
Disposal	(250,000)	(284,197)	(534,197)
Depreciation charge	-	(103,796)	(103,796)
Impairment loss	(1,600,000)	-	(1,600,000)
Closing net book amount	6,288,384	1,254,984	7,543,368
At 30 June 2014
Cost	6,288,384	2,261,210	8,549,594
Accumulated depreciation	-	(1,006,226)	(1,006,226)
Net book amount	6,288,384	1,254,984	7,543,368

(a) Valuations

Investment freehold land and buildings were valued by the directors at 30 June 2014 at \$11,271,220 (2013 - directors' valuation \$15,738,222). The basis of the valuation of investment properties is fair value being the amounts for which the properties could be exchanged between willing parties in an arm's length transaction, based on current prices in an active market for similar properties in the same location and condition and subject to similar leases.

(b) Impairment loss

The group has impaired two of its investment properties by \$1,600,000 to reflect a downturn in property values.

(c) Disposal

During the year, the group sold an investment property for \$3,500,000 resulting in a profit on sale of \$2,933,721 after sale costs, with no tax effect following the recoupment of prior year capital losses.

(d) Contractual obligations

There are no contractual obligations to purchase, construct or develop investment property or for repairs, maintenance or enhancements.

(e) Leasing arrangements

The group has investment properties that are leased to tenants on monthly operating leases or fixed terms not exceeding five years.

Commitments in relation to these leases that are contracted for at reporting date but not recognised as assets are: receivable within one year - \$258,460 (2013 - \$251,353), receivable later than one year but not later than five years - \$13,200 (2013 - \$64,353).

15. NON-CURRENT ASSETS - DEFERRED TAX ASSETS

	Consolidated
	2014	2013
	\$	\$
The balance comprises temporary differences attributable
to:
Amounts recognised in profit or loss
Doubtful debts	24,803	29,570
Employee benefits	1,054,547	952,467
Depreciation and amortisation	372,949	377,712
Other	147,302	102,947
	1,599,601	1,462,696
Amounts recognised directly in equity
Available-for-sale financial assets	(1,923)	(2,436)
Share issue expenses (note 22a)	-	21,108
	1,597,678	1,481,368
Set-off of deferred tax liabilities (note 20)	(901,922)	(488,851)
Net deferred tax assets	695,756	992,517
Deferred tax assets to be recovered within 12 months	1,033,109	961,315
Deferred tax assets to be recovered after more than 12 months	564,569	520,053
	1,597,678	1,481,368
Opening balance at 1 July	1,481,368	1,362,256
Credited to profit and loss (note 8)	118,233	100,440
(Debited) credited to equity	(1,923)	18,672

Closing balance at 30 June 1,597,678 1,481,368

16. NON-CURRENT ASSETS - INTANGIBLE ASSETS

Consolidated	Goodwill \$	Trade names \$	Customer relationships \$	Security lines \$	Software \$	Consolidated Total \$
At 1 July 2012
Cost	3,350,542	436,945	1,332,135	1,443,587	404,894	6,968,103
Accumulated amortisation	-	(107,985)	(295,590)	(1,411,221)	(326,398)	(2,141,194)
Net book amount	3,350,542	328,960	1,036,545	32,366	78,496	4,826,909
Year ended 30 June 2013
Opening net book amount	3,350,542	328,960	1,036,545	32,366	78,496	4,826,909
Additions	-	-	-	-	19,675	19,675
Acquired through business
combination – refer note 33	892,959	157,119	379,922	-	-	1,430,000
Amortisation charge	-	(78,523)	(266,414)	(11,062)	(42,511)	(398,510)
Closing net book amount	4,243,501	407,556	1,150,053	21,304	55,660	5,878,074
At 30 June 2013
Cost	4,243,501	594,064	1,712,057	1,443,587	424,569	8,417,778
Accumulated amortisation	-	(186,508)	(562,004)	(1,422,283)	(368,909)	(2,539,704)
Net book amount	4,243,501	407,556	1,150,053	21,304	55,660	5,878,074
Year ended 30 June 2014
Opening net book amount	4,243,501	407,556	1,150,053	21,304	55,660	5,878,074
Additions	-	-	-	6,105	126,171	132,276
Amortisation charge	-	(74,256)	(336,330)	(8,613)	(80,806)	(500,005)
Closing net book amount	4,243,501	333,300	813,723	18,796	101,025	5,510,345
At 30 June 2014
Cost	4,243,501	594,064	1,712,057	1,449,692	550,740	8,550,054
Accumulated amortisation	-	(260,764)	(898,334)	(1,430,896)	(449,715)	(3,039,709)
Net book amount	4,243,501	333,300	813,723	18,796	101,025	5,510,345

16. NON-CURRENT ASSETS - INTANGIBLE ASSETS (continued)

Impairment tests for goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the group's share of the net identifiable assets acquired. Goodwill is allocated to the group's cash-generating units (CGUs) identified according to business segment.

The segment-level summary of goodwill allocation is presented below.

	Transport \$	Logistics \$	Property \$	Other \$	Total \$
2014	4,111,690	-	-	131,811	4,243,501
2013	4,111,690	-	-	131,811	4,243,501

The recoverable amount of a CGU is determined based on value-in-use calculations which are based on budgets. These calculations use cash flow projections based on current sustainable earnings and financial budgets approved by management. Cash flows indicate that the carrying amounts are substantially recoverable and that there is no impairment.

Key assumptions used for value-in-use calculations

Growth rate of 3.5% (2013-3.5%) based on the inflation rate is used to extrapolate cash flows beyond the one year budget for an additional four years and a terminal value was calculated after 5 years. Nominal post tax discount rate of 10.5% (2013-10.5%), (equivalent nominal pre-tax rate 15% (2013 - 15%)), is used to discount the forecast future attributable post-tax cash flows when performing the value-in-use calculations. The same post-tax and pre-tax discount rates were applied in both 2014 and 2013.

17. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

	Consolidated
	2014	2013
	\$	\$
Trade and other payables	11,532,352	14,016,490
Trade payable (secured)	201,450	-
	11,733,802	14,016,490

18. CURRENT LIABILITIES - BORROWINGS

Secured
Hire purchase liabilities (note 27)	2,494,848	1,965,520

19. NON-CURRENT LIABILITIES - BORROWINGS

	Consolidated
	2014 \$	2013 \$
Secured
Bank loans	32,000,000	31,100,000
Hire purchase liabilities (note 27)	2,685,156	4,000,966
Total secured non-current interest-bearing borrowings	34,685,156	35,100,966

19. NON-CURRENT LIABILITIES – BORROWINGS (continued)

	Consolidated
	2014	2013
	\$	\$
(a) Total secured liabilities
The total secured liabilities (current and non-current)
are as follows:
Secured
Bank loans	32,000,000	31,100,000
Hire purchase liabilities	5,180,004	5,966,486
Total secured liabilities	37,180,004	37,066,486

(b) Assets pledged as security

Bank overdrafts and bank loans are secured by mortgages over the group's freehold land and buildings, investment properties and fixed and floating charges over the remaining group assets.

Hire purchase liabilities are effectively secured as the rights to the assets recognised in the financial statements revert to the financier in the event of default.

The other loans are secured mortgages over certain group freehold land and buildings. The carrying amounts of assets pledged as security for current and non-current interest-bearing liabilities are:

	Consolidated
	2014	2013
	\$	\$
Current
Floating charge
Cash and cash equivalents	2,251,430	4,440,952
Receivables	20,426,500	20,041,635
Inventories	1,778,196	2,633,659
Total current assets pledged as security	24,456,126	27,116,246
Non-current
First mortgage
Freehold land and buildings	36,430,129	33,842,504
Investment properties	1,472,148	2,224,332
	37,902,277	36,066,836
Floating charge
Available-for-sale financial assets	77,409	71,000
Plant, equipment and motor vehicles	21,691,605	20,264,379
Freehold land and buildings	12,415,458	2,201,575
Investment properties	6,071,220	7,698,219
Intangible assets	119,821	76,964
	40,375,513	30,312,137
Total non-current assets pledged as security	78,277,790	66,378,973
Total assets pledged as security	102,733,916	93,495,219
(c) Financing arrangements
Unrestricted access was available at balance date to the following lines of credit:
Credit standby arrangements
Total facilities
Bank overdrafts	300,000	300,000
Secured financial guarantee and documentary credit	1,450,000	850,000
Secured bill acceptance facility	38,250,000	38,850,000
	40,000,000	40,000,000

19. NON-CURRENT LIABILITIES – BORROWINGS (continued)

	Consolidated
	2014 \$	2013 \$
Credit standby arrangements (continued)
Used at balance date
Secured bill acceptance facility	32,000,000	31,100,000
Secured financial guarantee and documentary credit
facility	201,450	642,787
	32,201,450	31,742,787
Bank loan facility
Total facility	40,000,000	40,000,000
Used at balance date	(32,201,450)	(31,742,787)
Unused at balance date	7,798,550	8,257,213

The bank overdraft facilities may be drawn at any time and are subject to annual review. The bill acceptance facilities have defined maturity dates. Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time.

The current interest rates are 2.90% - 4.84% per annum on the bill facilities, 9.34% per annum on overdraft (2013 - bill facilities (2.85% - 4.84%), overdraft – 9.59%).

(d) Interest rate risk exposure

Information concerning interest rate risk is set out in note 3.

(e) Fair value

The carrying amounts and fair values of interest-bearing liabilities at balance date are:

	2014		2013
Consolidated	Carrying amount \$	Fair value \$	Carrying amount \$	Fair value \$
On-balance sheet Non-traded financial liabilities
Bank loans	32,000,000	32,000,000	31,100,000	31,100,000
Hire purchase liabilities	5,180,004	5,519,796	5,966,486	6,457,454
Total secured liabilities	37,180,004	37,519,796	37,066,486	37,557,454

20. NON-CURRENT LIABILITIES - DEFERRED TAX LIABILITIES

	Consolidated
	2014	2013
The balance comprises temporary differences attributable to:	\$	\$
Amounts recognised in profit or loss Depreciation Set-off of deferred tax assets (note 15)	901,922 (901,922)	488,851 (488,851)
Net deferred tax liabilities	-	-
Deferred tax liabilities to be settled within 12 months Deferred tax liabilities to be settled after more than 12 months	170,498 731,424	61,050 427,801
	901,922	488,851
Movements
Opening balance at 1 July Debited to profit and loss (note 8)	488,851 413,071	439,581 49,270
Closing balance at 30 June	901,922	488,851

21. NON-CURRENT LIABILITIES - PROVISIONS

	Consolidated
	2014	2013
Employee benefits	\$	\$
Current	2,749,228	2,609,084
Non-current	765,928	589,463
	3,515,156	3,198,547

22. CONTRIBUTED EQUITY

(a) Share capital

Ordinary shares (fully paid)

	Number of shares	\$
At 30 June 2013
Opening balance	59,066,899	7,292,807
Shares issued	925,822	1,709,808
Dividend reinvestment plan	89,855	170,725
Employee share plan	10,000	13,750
Bonus share plan	72,345	-
Closing balance	60,164,921	9,187,090
At 30 June 2014
Opening balance	60,164,921	9,187,090
Share issued	3,065,820	5,665,678
Dividend reinvestment plan	441,773	845,307
Bonus share plan	74,167	-
Closing balance	63,746,681	15,698,075

During the year the Company made bonus issues of 74,167 (2013 - 72,345) new ordinary shares under the Company's Bonus Share Plan.

Consolidated

At 30 June 2014 there were 1,590,000 contingently issuable shares (2013 – 1,590,000) relating to shares issued under the Company's Employee Share Plan (refer to note 34).

(b) Ordinary shares

All ordinary shares are fully paid and entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

23. RESERVES AND RETAINED PROFITS

	Consolidated
	2014	2013
	\$	\$
(a) Reserves
Available-for-sale investments revaluation reserve	265	(4,221)
Share-based payment reserve	1,034,792	766,938
	1,035,057	762,717
Movements:
Available-for-sale investments revaluation reserve
Balance 1 July	(4,221)	(9,906)
Revaluation, net of tax	4,486	5,685
Balance 30 June	265	(4,221)
Share-based payment reserve
Balance 1 July	766,938	285,634
Share-based payment transactions	267,854	481,304
Balance 30 June	1,034,792	766,938

23. RESERVES AND RETAINED PROFITS (continued)

	Consolidated
	2014 \$	2013 \$
(d) Retained profits
Movement in retained profits were as follows:
Balance 1 July	36,456,648	30,630,281
Profit for the year	9,835,919	9,823,494
Dividends	(4,922,766)	(3,997,127)
Balance 30 June	41,369,801	36,456,648

(c) Nature and purpose of reserves

Available-for-sale investments revaluation reserve

Changes in the fair value of investments, such as equities, classified as available-for-sale financial assets, are taken to the available-for-sale investments revaluation reserve, as described in note 1(m). Amounts are recognised in profit or loss when the associated assets are sold or impaired.

Share-based payment reserve

The share-based payment reserve comprises the expenses incurred from the issue of the Company's shares under the Employee Share Plan. Refer to note 34 and note 1(u).

24. DIVIDENDS

	Parent Entity
	2014 \$	2013 \$
(a) Ordinary shares
Final dividend for the year ended 30 June 2013 of 4.0 cents (2012 – 3.5 cents) per fully paid share, paid on 15 November 2013 (2012 - 16 November 2012)
Fully franked dividend (2012 - fully franked) based on tax paid @ 30% (2012 - 30%)	2,529,229	2,067,341
Less – bonus issue of ordinary shares under the Company's Bonus Share Plan.	(71,573)	-
	2,457,656	2,067,341
Interim dividend for the year ended 30 June 2014 of 4.0 cents (2013 – 3.5 cents) per fully paid share, paid on 15 April 2014 (2013 - 3 May 2013)
Fully franked dividend (2013 - fully franked) based on tax paid @ 30% (2013 - 30%)	2,536,585	2,067,341
Less – bonus issue of ordinary shares under the Company's Bonus Share Plan.	(71,475)	(137,555)
	2,465,110	1,929,786
(b) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since year end the directors have declared the payment of a
final dividend of 4.0 cents per fully paid ordinary share, (2013 – 4.0 cents) fully franked based
on tax paid at 30% (2013 - 30%). The aggregate amount of the proposed dividend expected to
be paid on 31 October 2014 out of retained profits at 30 June 2014, but not recognised as a
liability at year end, is	2,549,867	2,406,597
(c) Franked dividends

The franked portion of the final dividend recommended after 30 June 2014 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the year ending 30 June 2014.

Franking credits available for subsequent financial years based on a tax rate of 30% - \$16,308,420 (2013 - \$13,488,545 - 30%).

The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:

• (a) franking credits that will arise from the payment of the amount of the provision for income tax
• (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date, and
• (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.

The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends.

The impact on the franking account of the dividend declared by the directors since year end, but not recognised as a liability at year end, will be a reduction in the franking account of \$1,092,800 (2013 - \$1,031,399).

25. RELATED PARTIES

(a) Parent entity

CTI Logistics Limited is the ultimate Australian parent entity of the group and head entity of the tax consolidated group.

(b) Transactions with key management personnel

Key management personnel compensation

Key management personnel compensation comprised the following.

	Consolidated
	2014	2013
	\$	\$
Short-term	1,567,159	1,467,561
Post-employment	93,775	72,711
Share-based payments	59,358	139,332
	1,720,292	1,679,604

26. REMUNERATION OF AUDITORS

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: Audit services KPMG Australia
Audit and review of financial reports	98,000	95,750
27. COMMITMENTS
(a) Capital commitments Capital expenditure contracted for at the reporting date but not recognised as liabilities: Property, plant and equipment: Payable within one year	1,071,035	3,443,292
(b) Lease commitments: group company as lessee Commitments in relation to leases contracted for at the reporting date are as follows: (i) Operating leases The group leases offices and warehouses under non-cancellable operating leases. Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:
Less than one year Between one and five years	4,255,858 15,086,445	4,184,941 8,794,928
Later than five years	338,045	366,667
	19,680,348	13,346,536
(ii) Hire purchase commitments Commitments in relation to hire purchase are payable as follows:
Less than one year	2,709,498	2,259,386
Between one and five years	2,766,170	4,226,405
Minimum payments	5,475,668	6,485,791
Future finance charges	(295,664)	(519,305)
Recognised as a liability	5,180,004	5,966,486
Representing:
Current	2,494,848	1,965,520
Non-current Total hire purchase liabilities	2,685,156 5,180,004	4,000,966 5,966,486

28. SUBSIDIARIES

All subsidiaries are incorporated in Australia.

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b):

	Country of Incorporation	Equity holding (Ordinary shares)
Name of entity		2014 %	2013 %
CTI Logistics Limited	Australia
Directly controlled by CTI Logistics Limited Controlled entities
Bring Transport Industries Pty Ltd Mercury Messengers Pty Ltd CTI Security Services Pty Ltd CTI Transport Systems Pty Ltd CTI Taxi Trucks Pty Ltd CTI Security Systems Pty Ltd CTI Fleet Management Pty CTI Freight Management Pty Ltd Action Logistics (WA) Pty Ltd CTI Freight Systems Pty Ltd CTI Couriers Pty Ltd CTI Swinglift Services Pty Ltd CTI Xpress Systems Pty Ltd	Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia	100 100 100 100 100 100 100 100 100 100 100 100 100	100 100 100 100 100 100 100 100 100 100 100 100 100
CTI Investments Pty Ltd Consolidated Transport Industries Pty Ltd	Australia Australia	100 100	100 100
Other controlled entities
Directly controlled by CTI Investments Pty Ltd Lafe (WA) Pty Ltd CTI Freightlines Pty Ltd (formerly Western Logistics Pty Ltd) Blackwood Industries Pty Ltd Australian Fulfilment Services Pty Ltd	Australia Australia Australia Australia	100 100 100 100	100 100 100 100
Directly controlled by Blackwood Industries Pty Ltd Efal Pty Ltd Ausplastics Pty Ltd CTI Records Management Pty Ltd CTI Waste Management Pty Ltd	Australia Australia Australia Australia	100 100 100 100	100 100 100 100
Directly controlled by Consolidated Transport Industries Pty Ltd Foxline Logistics Pty Ltd	Australia	100	100

These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. For further information refer to note 29.

29. DEED OF CROSS GUARANTEE

CTI Logistics Limited and its wholly-owned entities are parties to a deed of cross guarantee under which each company guarantees the debts of the others. By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and directors' report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission. The above companies represent a 'Closed Group' for the purposes of the Class Order, and as there are no other parties to the Deed of Cross Guarantee, they also represent the Extended Closed Group.

The consolidated results of the Company and all the parties to the Deed are the same as the consolidated results of the group.

30. RECONCILIATION OF PROFIT AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES

	Consolidated
	2014	2013
	\$	\$
Profit for the year	9,835,919	9,823,494
Depreciation and amortisation	5,290,686	3,532,825
Impairment of property	1,600,000	-
Provision for doubtful debts	(15,890)	(10,249)
Net gain on sale of non-current assets	(2,866,339)	(135,524)
Share-based payment amortisation	267,854	481,304
Change in operating assets and liabilities
Increase in trade and other debtors	(603,851)	(4,199,904)
Decrease in inventories	855,463	99,844
Decrease in provision for income taxes payable	(1,077,685)	(72,144)
Decrease/(increase) in provision for deferred tax assets	294,838	(51,483)
(Decrease)/increase in trade creditors, employee benefits
and other provisions	(1,966,090)	6,708,297
Net cash inflow from operating activities	11,614,905	16,176,460

31. EARNINGS PER SHARE

	Consolidated 2014 Cents per share	2013
(a) Basic earnings per share Basic earnings per share attributable to the ordinary equity holders of the Company.	15.59	16.56
	\$	\$
Profit attributable to ordinary shareholders used in calculating basic earnings per share.	9,835,919	9,823,494
	Number	Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share.	63,086,822	59,303,604
	2014 Cents per share	2013
(b) Diluted earnings per share Diluted earnings per share attributable to the ordinary equity holders of the Company.	15.44	16.46
	\$	\$
Profit attributable to ordinary shareholders used in calculating diluted earnings per share.	9,835,919	9,823,494
Weighted average number of ordinary shares used as the denominator in calculating diluted earnings per share.	Number	Number
Weighted average number of shares (basic).	63,086,822	59,303,614
The effect of the vesting of contingently issuable shares Weighted average number of shares (diluted)	618,712 63,705,534	371,569 59,675,183

The average market value of the Company's shares for the purposes of calculating the dilutive effect of the vesting of contingently issuable shares was based on quoted market prices for the period during which the contingently issuable shares were outstanding.

32. PARENT ENTITY FINANCIAL INFORMATION

(a) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

	2014	2013
	\$	\$
Balance sheet
Current assets	28,395,669	18,113,729
Total assets	40,444,941	29,996,189
Current liabilities	1,382,462	4,272,642
Total liabilities	11,632,837	13,595,240
Net assets	28,812,104	16,400,949
Shareholders' equity
Issued capital	15,698,075	9,187,090
Reserves	1,052,247	780,141
Retained earnings	12,061,782	6,433,718
	28,812,104	16,400,949
Profit for the year	10,550,832	8,532,673
Total comprehensive income/(loss)	10,540,404	8,522,245
(b) Guarantees entered into by the parent entity
Carrying amount included in
- current liabilities	2,454,036	1,926,967
- non-current liabilities	24,615,919	26,190,917
	27,069,955	28,117,884

The parent entity has provided financial guarantees in respect of loans and hire purchase commitments of subsidiaries amounting to \$27,069,955 (2013 - \$28,117,884). The loans are secured by registered mortgages over the freehold properties of the subsidiaries.

In addition, there are cross guarantees given by CTI Logistics Limited, as described in note 30. No deficiencies of assets exist in any of these entities.

(c) Contingent liabilities of the parent entity

The parent entity did not have any contingent liabilities as at 30 June 2014 (30 June 2013 - \$nil). For information about guarantees given by the parent entity, refer note (b).

(d) Contractual commitments for the acquisition of property, plant or equipment

The parent entity had no contractual commitments for the acquisition of property, plant or equipment at 30 June 2014 (2013 - \$nil).

33. BUSINESS COMBINATION

There are no business combinations in the current year.

During the prior year the group acquired the following businesses:

Ontraq Haulage/Broome Freightlines was acquired on 28 March 2013 for a total consideration of \$4.5 million. The acquisition relates to the purchase of assets. As the consideration paid equals the fair value of identifiable assets, no goodwill was recognised as a result of the acquisition.

Bunbury Freight Service was acquired on 2 April 2013 and details of the purchase consideration, the net assets acquired and goodwill were as follows:

	2013 \$
Purchase consideration
Cash paid	1,900,000
Total purchase consideration	1,900,000
Assets acquired
The assets recognised as a result of the acquisition were as follows:
	2013
	Fair value
	\$
Plant and equipment	470,000
Intangible assets: trade name	157,119
Intangible assets: customer relationships	379,922
Total identifiable assets	1,007,041
	2013
	\$
Goodwill
Goodwill recognised as a result of the acquisition were as follows:
Total consideration	1,900,000
Less fair value of identifiable assets	(1,007,041)
Goodwill	892,959

The goodwill was attributable to the workforce, synergies, mutual client base and profitability of the acquired business. The fair value of trade name and customer relationships acquired were based on discounted cash flow models.

Acquisition related costs of \$70,362 was included in other expenses in profit or loss in the prior year.

34. SHARE-BASED PAYMENT PLAN

Employee Share Plan

Senior employees are offered the opportunity to purchase shares in the Company under the Employee Share Plan (ESP). The shares may be purchased with the assistance of an interest-free, limited recourse loan for a term of 10 years and is repayable by dividends.

In the current financial year no shares were offered to employees by the Company under the ESP. In the previous financial year the opportunity to purchase shares under the ESP was offered to senior employees.

Measurement of fair values

The fair value of the shares granted under the ESP was measured based on the Black-Scholes formula. Expected volatility is estimated by considering historic average share price volatility.

The inputs used in the measurement of the fair values at grant date of the share-based payment plan were as follows.

	Employee Share Plan
	Key		Key
	management personnel 2014	Senior employees 2014	management personnel 2013	Senior employees 2013
Fair value at grant date	-	-	-	\$0.86
Share price at grant date	-	-	-	\$1.41
Exercise price	-	-	-	\$1.41
Expected volatility (weighted average)	-	-	-	44%
Term	-	-	-	10 years
Risk-free interest rate Fair value recognised as	-	-	-	2.5%
remuneration during the year	\$59,359	\$208,495	\$139,332	\$341,972

35. EVENTS OCCURRING AFTER THE BALANCE SHEET DATE

No other events have occurred since the end of the financial year that provide additional evidence of conditions that existed at the end of the financial year or that reveal for the first time a condition that existed at the end of the financial year.

Independent auditor's report to the members of CTI Logistics Limited

Report on the financial report

We have audited the accompanying financial report of CTI Logistics Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2014, and consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information and the directors' declaration of the Group comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' responsibility for the financial report

The directors of the company are responsible for the preparation of the 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 financial report that is free from material misstatement whether due to fraud or error. In note 1, the directors also state, in accordance with Australian Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements of the Group comply with International Financial Reporting Standards.

Auditor's responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We performed the procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001 and Australian Accounting Standards, a true and fair view which is consistent with our understanding of the Group's financial position and of its performance.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor's opinion

In our opinion:

(a) the financial report of the Group is in accordance with the Corporations Act 2001, including:

• (i) giving a true and fair view of the Group's financial position as at 30 June 2014 and of its performance for the year ended on that date; and
• (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001.

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 1.

Report on the remuneration report

We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with Section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with auditing standards.

Auditor's opinion

In our opinion, the remuneration report of CTI Logistics Limited for the year ended 30 June 2014, complies with Section 300A of the Corporations Act 2001.

KPMG

Brent Steedman Partner

Perth 21 August 2014