PPK GROUP LIMITED — Annual Report 2005

Aug 30, 2005

APPENDIX 4E

PRELIMINARY FINAL REPORT

PLASPAK GROUP LIMITED

ABN 65 003 964 181

FINANCIAL YEAR ENDED 30 JUNE 2005

HIGHLIGHTS OF RESULTS FOR ANNOUNCEMENT TO THE MARKET

(figures are in A$000s)

REVENUES FROM ORDINARY ACTIVITIES	UP	21% TO	90.893
OPERATING PROFIT FROM ORDINARY ACTIVITIES.BEFORE INCOME TAX	DOWN	29.5% TO	4.689
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS	DOWN	50.4% TO	3.424

2005 FULLY FRANKED FINAL DIVIDEND PER SHARE	-3.75c
2004 EULLY ERANKED EINAL DIVIDEND PER SHARE.	-3.75c
RECORD DATE FOR DETERMINING ENTITLEMENT TO DIVIDEND.	1-Nov-05

COMMENTARY ON RESULTS

Plaspak Group Limited ("Plaspak") achieved revenue of $90.9m for the year ended 30 June 2005, an increase of 21% over the corresponding prior period.

The increase in revenue was principally due to the inclusion of five months sales by York Group Limited ("York Group Limited ("York") which was acquired by Plaspak in January 2005 at a cost of $12.1m.

The York acquisiton was totally funded by bank debt. York is a small conglomerate of four industrial operations including York Precision Plastics which is involved in the import, manufacture and distribution of plastic sheeting. The acquisition offered Plaspak the opportunity to diversify its product offering.

Sales in Plaspak's traditional plastic packaging operations remained static and profitability was affected by:

• Intense competition within the industry;

• A slowing of consumer spending in areas which affected Plaspak's major customers;

:- Declining margins due to rising raw material costs.

There is a considerable time lag in recovering increased raw material costs from customers and Plaspak is still in the process of doing so. Consequently profit from ordinary activities before tax for the year dropped by 29.5% from $6.65m to $4.69m.

The after tax profit of $6.91m reported in 2004 was after a tax consolidation benefit which resulted in a $257,000 tax credit as distinct from a tax expense in the 2005 year. On a like for like basis (that is excluding the tax consolidation benefit in the 2004 year) the comparison is an after tax profit of $4.89m for the 2004 year as compared to an after tax profit of $3.44m for the 2005 vear.

The profit before tax for the second half of the 2005 year was $2.76m as compared to $1.93m for the first half. This improvement was predominantly due to the inclusion of profits earned by the York subsidiaries. However, there were also encouraging signs of improvement in sales and profit in the traditional Plaspak packaging businesses in the final quarter of 2005 as compared to the final quarter in 2004. This improvement has continued in the first two months of the current year.

Whilst continuing to concentrate on improving its traditional packaging businesses, Plaspak is also proceeding with the integration and rationalisation of the York subsidiaries. The first step was the sale of the ERT Pty Ltd wire distribution business at a profit of $160,000.

Debt levels of the Plaspak Group have increased as a result of:

• Borrowings for the York acquisition and the existing borrrowings of York;
• The inclusion of $7.6m in borrowings by Landmark Property Syndicate (which owns the Plaspak Contaplas Arndell Park site) as a result of Plaspak moving from 43.7% to 85.2% ownership of the Syndicate;
• Delays in the sale of Plaspak's property at Yalgar Road, Kirrawee as a result of regulatory issues associated with the tenants usage of the property which issues it is anticipated will be resolved to enable the sale of the property during the current year.

The directors are cognisant of the debt level and are addressing strategies which will achieve a reduction during the course of the current year.

The directors have resolved to pay a fully franked dividend of 3.75 cents per share, making a total dividend payout for the 2005 year of 6.5 cents per share fully franked.

CONSOLIDATED STATEMENT OF FINANCIAL PERFORMANCE

	CURRENT YEAR$000s	PRIOR YEAR$000s
Revenues from ordinary activities
Sales Revenue	89,572	73.817
Interest Revenue	113	100
Profit on sale of assets	158	692
Foreign exchange gains	8.	9
Other revenue	1,042	476
	90,893	75.094
Expenses from ordinary activities
Cost of sales	66,744	54.550
Warehouse & Distribution expenses	5,910	4,316
Selling Expenses	2,455	1,710
Administration Expenses	8,149	5,803
Borrowing costs	2,946	2.063
	86,204	68.442
Profit from ordinary activities before tax	4,689	6.652
Income Tax Expense / (Credit)	1,248	(257)
Profit affer Income fax	3,441	6,909
Outside equity interests in profit after income tax	(17)
Net Profit After tax attributable to members	3,424	6.909
Earnings per share	5.0 cents	$10.3$ cents
Diluted Earnings per share	5.0 cents	$10.3$ cents
INDIVIDUALLY SIGNIFICANT ITEMS
Sale of import & distribution business	160
Closure of Townsville manufacturing facility	(253)
Closure of Mordialloc manufacturing facility in Melbourne
Sale of surplus Mordialloc manufacturing building in Melbourne		608
Anti-dumping duty on PVC material imports		(352)
Relocation & Restructuring costs		(414)
	(93)	(158)
DEPRECIATION AND AMORTISATION COSTS
Depreciation & amortisation of property, plant & equipment	5.794	5.540
Amortisation of goodwill	196	171
Amortisation of other intangibles	84	60
	6.074	5.771

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	30-Jun-05$000s	30-Jun-04$000s	31-Dec-04$000s
Current Assets
Cash	346	123.	96.
Receivables	23,183	14,440	17.495
Inventories	18,621	11,094	11,983
Prop, Plant & Equip held for sale	2,438	2,226	2,422
Other	1,343	753	627
Total Current Assets	45,931	28,636	32.623
Non Current Assets
Investments	266	4,932	9,502
Property Plant & Equipment	76,192	52,389	51,826
Intangibles	4,383	2,412	2.384
Tax Assets	1,510	979	953
Ofher	1,011	1,341	1.272
Total non current assets	83,362	62,053	65.937
TOTAL ASSETS	129,293	90,689	98,560
Current Liabilities
Payables	17,862	10,621	10,027
Borrowings	8,099	6,287	7.573
Tax Liabilities	82
Provisions	1,875	1,233	1.150
Other	19.	30	24
Total Current Liabilities	27,937	18,171	18,774
Non Current liabilities
Borrowings	51,208	23,361	31.142
Payables			168
Tax Liabilities	1,057	747	855
Provisions	2,003	1,319	1.421
Other	129	246	15
Total Non Current liabilities	54,397	25,673	33,601
TOTAL LIABILITIES	82,334	43,844	52,375
NET ASSETS	46,959	46,845	46,185
Equity
Contributed equity	38,773	38,475	38.775
Reserves	57	47	50
Retained profits	7,176	8,172	7.209
Equity attributable to members
of the parent entity	46,006	46,694	46.034
Outside equity interests	953	151	151
TOTAL EQUITY	46,959	46,845	46,185

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

	Year Ended30-Jun-05$000s	Year Ended30-Jun-04$000s
Cash flows related to operating activities
Receipts from customers	97,004	82.643
Payments to suppliers and employees	(82,097)	(66, 708)
Other Revenue	1.015	457
Interest Revenue	113	100
Income taxes paid	(544)	(1,303)
Other	(1,729)	(1,582)
Net Operating Cash Flows	13.762	13,607
Cash flows related to investing activities
Payment for purchases of property, plant and equipment	(3,623)	(7, 436)
Proceeds from sale of property, plant and equipment	207.	7.077
Payment for purchases of equity investments net of cash acquired	(13, 261)
Other	(33)	(160)
Net Investing cash flows	(16, 710)	(519)
Cash flows related to financing activities
Proceeds from issues of securities (shares, options, etc)	155	233
Proceeds from borrowings	14,124	7.000
Repayment of borrowings	(4, 408)	(14, 619)
Dividends paid	(4, 437)	(3,614)
Interest and costs of borrowings	(3,009)	(2,068)
Net financing cash flows	2,425	(13,068)
Net increase (decrease) in cash held	(523)	20
Cash at beginning of period	(785)	(805)
Cash at end of period	(1,308)	(785)
Reconciliation of cash
Reconcilation of cash at the end of the period (as shown inthe consolidated statement of cash flows) to the related itemsin the accounts is as follows.
Cash on hand and at bank	346	123
Bank Overdraft	(1,654)	(908)
Total cash at end of period	(1.308)	(785)
Non Cash Financing and Investing Activities		$000s
Employee share loans for exercise of options under Plaspak Executive Incentive SchemeAddition to Plant & Equipment under finance leases and		143
hire purchase agreements.		3,515

Earnings per security (EPS)

Details of basic and diluted EPS reported separately in accordance with paragraph 9 and 18 of AASB 1027: Earnings per share are as follows:

		2005	2004
Earnings used in the calculation of basis EPSEarnings used in the calculation of diluted EPS		3.424.0003.424.000	6.909.0006.909.000
Weighted average number of ordinary shares outstandingDuring the year used in the calculation of:
Basic EPSDiluted FPS		67,925,42067.985.441	67,135,29367.301.761
Basic EPS - CentsDiluted EPS - Cents		5.05.0	10.310.3
NTA Backing	Current period	Previous correspondingperiod
Net tangible asset backing per share	$62.6$ cents		65.8 cents

DIVIDENDS

Final dividend resolved to be paid		3.75 cents / share fully franked
Date dividend is payable	11 November 2005
Record date	1 November 2005
	CurrentYear	PreviousYear
Interim DividendFinal Dividend	2.75 cents3.75 cents	2.75 cents3.75 cents
	6.5 cents	6.5 cents

The amount of retained profits and reserves that could be distributed as fully franked dividends from franking credits that exist or will arise after payment of income tax in the next year in respect to the 2005 year is $14,712,813.We anticipate that dividends will be fully franked for the forseeable future.

	Current	Prior
	Year$000s	Year$000s
Amount of final dividend payable - fully franked	2.550	2.533

Both current and prior year dividends were fully franked.

CONSOLIDATED RETAINED PROFITS	CurrentYear$000s	PriorYear$000s
Retained profits at the beginning of the financial year	8.172	5.457
Net profit attributable to members	3,424	6.909
Dividends paid	(4, 420)	(4, 194)
Retained profits at the end of the financial year	7,176	8.172
ORDINARY SHARES ON ISSUE		NUMBER
Number of securities on issue at beginning of year		67,558,105
Shares issued through exercise of options granted to employees underthe Plaspak Executive Incentive Schemes at an average price of $0.67		445.000
		68.003.105

OPTIONS

There were 1,875,000 options outstanding as at balance date.

These consisted of:

• 575,000 executive share options with exercise prices ranging from 73 cents to $1.21;

• 900,000 non-executive director options with an exercise price of $1.65; and

• 400,000 executive director options granted to the Managing Director, David Hoff, in prior years with exercise prices ranging from $0.90 to $1.86.

445,000 executive options were exercised during the year at an average exercise price of $0.67.

POST BALANCE DATE EVENTS

No matters or circumstances have arisen since the end of the period which significantly affected the operations of the economic entity, the results of those operations or the state of affairs of the economic entity in subsequent periods.

AUDIT STATUS

The accounts are currently in the process of being audited.

CONTROL GAINED OVER ENTITIES DURING THE PERIOD

In January 2005 Plaspak obtained a controlling interest in York Group Limited. Remaining shares were subsequently compulsorily acquired. The accounts of York Group Limited were consolidated into Plaspak Group Limited from 1 February 2005.

	Current
	Year$000s
Profit from ordinary activities after income tax of York Group Limited after adjusting
for additional borrowing expenses of Plaspak Group Limited to finance the acquisition.	734

At the end of February 2005 Landmark Syndicate No4, which has as its' only remaining asset Plaspak's Arndell Park property, entered into a buyback of units. This had the effect of increasing Plaspak's interest in this property trust from 43.7% to 85.2%. Subsequent to the 30 June 2005, Plaspak is in the process of acquiring the remaining units to move to 100%. The effect of the above transaction on the 2005 accounts has been that the Landmark Syndicate No 4 has been consolidated for the last 4 months of the financial year rather than been treated as an an investment as it was in previous periods. This has not had a material effect on the Statement of Financial Performance. The principal changes to the Statement of Financial Position were as follows; $\overline{a}$

	5000s
(Decrease) in investments	(4.932)
Increase in Land & Buildings	13.708
(Increase) in Other Loans	(7.601)
(Increase) in Outside Equity Interests	(802)

AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

For vears ending on or after 30 June 2006, all general purpose financial reports prepared in accordance with the requirements of Chapter 2M of the Corporations Act will be required to comply with Australian equivalents to International Financial Reporting Standards (IFRSs) instead of Australian Accounting Standards presently on issue

Comparative financial statements must also be oresepted in accordance with Australian equivalents to IERSs for the vear ending 30 June 2005

Ptaspak's management has assessed the significance of these changes and is preparing for their implementation. An IFRS committee has been established to oversee and manage Plaspak's transition to IFRS. This committee reports to the audit committee. The impact of the alternative treatments and elections under AASB 1: First Time Adoption of Australian Equivalents to International Financial Reporting Standards have been considered where annlicable

Figures disclosed are best estimates at this point - actual effects may differ from these estimates due to:-

• engoing work of the IFRS committee.
• potential amendments to AIFRS and interpretation thereof by the AASB, and
• emerging accepted practice.

The directors are of the opinion that the key differences in Piaspak's accounting policies which will arise from the adoption of IFRS are:

1. Impairment of Assets

The group currently assesses the amount of impairment of assets by determining the recoverable amount on the basis of undiscounted oash flows Under Australian equivalents to IFRSs, the group will be required to determine the recoverable amount as the higher of fair value less costs to sell and value in use (which is determined using discounted cash flows). It is likely that this change in policy and basis for calculation will not lead to the finance of the 1982 you are the problems of the state of the control of the deviation of the the the the the the state of the the the the the the the the the the impairment losses will need to be recognised.

2. Hedging

The group does not currently recognise derivative financial instruments in the financial statements. Under AIFRS, all derivatives contracts, predominativ bedoian instruments, will be carried at fair value in the Statements of Financial Position. The group has currently elected not to hedge account these instruments.

3. Share-Based Payments

.The group does not currently recognise an expense for options issued to staff, under the Plaspak Executive Incentive Scheme. On adoption of Australian equivalents to IFRSs, the group will recognise an expense for all share-based remuneration, including deferred shares and options, and will amortise those expenses over the relevant vesting periods. This will result in additional expenses being recorded and therefore lower earnings There will be an initial negative impact on opening balances of retained earnings at 1 July 2004 when retrospective adjustments are made for options that have not vested by 1 January 2005. However as relatively few options have been granted in recent years this should have an immaterial efferd

4. Revenue on disposal of property, plant & equipment

Currently the orbus includes orgas revenue received on discosal of property, plant and equipment as revenue. Under Australian equivalents to IFRS. gains and losses on sale of assets will be recognised on a net basis in revenue, resulting in lower revenue being recorded by the group. However this will have no impact on earnings

5. Non-Current Investments

Investments in controlled entities

Currently the parent entity measures non-current investments at cost, with an annual review by directors to ensure that their carrying amounts are not in excess of their recoverable amount. Under Australian equivalents to IFRSs, these investments will be measured by the parent entity at cost with impairment tests performed when indicators of impairment are identified in apportance with AASB 136 Irrogiment of Assets. Initial impairment adjustments may arise because of the requirement to discount cash flows but it is unlikely these will have a negative impact on opening balances of retained earnings at 1 July 2004.

Available-For-Sale Financial Assets

Available-For-Sale financial assets will be measured at fair value under Australian equivalents to IERSs, with changes in fair value being recognised directly in equity until the asset is sold, at which time the cumulative gain/loss is taken to profit. It is unlikely that initially this will have any impact.

6. Taxation

A "balance sheet" approach will be adopted under Australian equivalents to IFRSs, replacing the "statement of financial performance" approach currently used by Australian companies. The "balance sheet" method reconnises deferred tax balances when there is a difference between the carrying value of an asset or liability, and its tax base. Any initial adjustments to calculate deferred tax assets and liability balances on transition using the new basis will be made through opening balances of retained eamings at 1 July 2004. As Deferred Tax balances were restated under Tax consolidation there should be no impact on the opening statement of financial position and fittle or no impact on the statement of financial performance.

7. Goodwill

AASB 3 Business Combinations prohibits goodwill from being amortised and instead requires an accrual impairment test to be carried out. This will result in a change to the group's current accounting policy, which currently amortises goodwill over its useful life of less than 20 years. The goodwill balance on transition at 1 July 2004 has not been restated restrospectively because the group is applying the exemption available in AASB1 First-lime Adoption of Australian Equivalents to International Financial Reporting Standards.

fortied accounting for the acquisition of York Group Limited is loased on a provisional determination of the fair value of assets acquired. This determination and the resulting accounting may be revised up to 12 months after the acquisition date, as permitted by the AASB 3 Business Combinations.

8. Intangible Assets

Existing group accounting policy for intangible assets other than goodwill is to carry them at cost less accumulated amortistation.

Under AASB 138 Intangible Assets, it will be necessary to determine whether an intangible asset has a finite useful life and will therefore be amortised over that useful life or an indefinite useful life and will therefore not be amortised. Such indefinite useful life intangible assets will be subject to an annual impairment review

Brand names currently carried at amortised cost in the Statements of Financial Position will be classified as indefinite useful life intangible assets under AASB 138 Intangible Assets. This will have the effect of reducing annual amortisation charges.

On transition to AIFRS the estimated cumulative financial effect of the reliably known differences on the reported net profit and equity as at 30 June 2005 is summarised below. These represent management's best estimates, and could differ from actuals.

	EconomicEntity2005$000s
Reconciliation of Net Profit
Net profit after tax reported under Australian Accounting Standards	3.441
Key transitional adjustments:
- Recognition of impairment loss	-10
- Reversal of amortisation of goodwill	196
- Reversal of amortisation of brand names.	11
- Expensing of the value of options granted in prior years which had not vested
at 1 July 2004.	-4
- Effect of not electing to hedge account. Liabilities at balance date taken up
at spot rates and value of forward cover hedge taken to Net ProfitTotal transitional adjustments	41234
Net profit after tax reported under AIFRS	3.675
Reconciliation of Equity
Total equity reported under Australian Accounting Standards	46.959
Retrospective adjustments to equity at 1 July 2004
- Recognition of impairment loss	$-10$
- Expensing of the value of options granted in prior years which had vested
at 1 July 2004.	-2
	-12
Increase in current year profit resulting from transition to AIFRS	234
Total equity under AIFRS	47.181