PPK GROUP LIMITED — Annual Report 2006

Sep 12, 2006

APPENDIX 4E

PRELIMINARY FINAL REPORT

PPK GROUP LIMITED

ABN 65 003 964 181

FINANCIAL YEAR ENDED 30 JUNE 2006

HIGHLIGHTS OF RESULTS FOR ANNOUNCEMENT TO THE MARKET

(figures are in A$000s)

SALES REVENUES FROM ORDINARY ACTIVITIES.	U₽	10% TO	98,408
OPERATING PROFIT BEFORE INCOME TAXAND INDIVIDUALLY SIGNIFICANT ITEMS	DOWN	5.6% TO	3,998
OPERATING PROFIT BEFORE INCOME TAX	DOWN	28% TO	2,979
PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS	ШP	36% TO	4.292
EARNINGS PER SHARE	UР	37% TO	6.3 cents

2006 FULLY FRANKED FINAL DIVIDEND PER SHARE	3.76c
2005 FULLY FRANKED FINAL DIVIDEND PER SHARE.	3.75c
RECORD DATE FOR DETERMINING ENTITLEMENT TO DIVIDEND	31-Oct-06

COMMENTARY ON RESULTS

The financial information contained in the Appendix 4E has been separated into Continuing Operations and Discontinued Operations as a result of the sale by the Company of its plastics packaging business and AIFRS requirements.

Discontinued Operations information relates to the plastics packaging business which during the year continued to experience difficult trading conditions. Raw material prices remained at historically high levels and were extremely volatile. Short term spikes made it difficult to recover price increases from customers.

Major long term customers and traditional sources of work continued the trend of sourcing filled product supply from or relocating manufacturing and filling operations to South East Asia and India.

As it became increasingly evident that on a stand-alone basis the plastics packaging business was unable to achieve an acceptable return on shareholders' funds, the directors decided that a sale of that business was appropriate. A conditional contract was entered into on 27 June 2006.

Following shareholder approval at a General Meeting on 16 August 2006, the Company proceeded to completion of the sale of the plastics packaging business on 1 September 2006 and with a name change to PPK Group Limited.

The plastics packaging business was sold for $50 million less lease and hire purchase liabilities of $7.5 million assumed by the purchaser at completion. Additional payments of up to $5 million may also be payable to the Company for the provision of consultancy services assessed by the achievement of agreed performance criteria during the 18 months following completion of the sale ("Consultancy Services").

The sale of the plastics packaging business has enabled the Company to reduce debt to a level where the Company is now virtually debt free.

During the reporting period, total revenue increased by 10% to $98.4 million. This increase was primarily due to the inclusion of a full year's sales by York Precision Plastics Pty Ltd and Rambor Pty Ltd which were both acquired in February 2005 as part of the York Group Limited takeover.

Operating profit before tax and individually significant items was $3.998 million, 5.6% less than in the prior corresponding period. The reduction was due to a decline in the profitability of the plastics packaging business and to the loss of 5 months contribution by Advanced Power Pty Ltd and ERT Pty Ltd which were both acquired as part of the York Group Limited takeover and subsequently sold early in the reporting period.

Individually significant items impacting on operating profit before tax included $970,000.00 in costs incurred on the sale of the plastics packaging business which in accordance with AIFRS were required to be expensed in the 2006 year.

Net profit after tax increased by 36% to $4.292 million (6.3 cents per share). This was as a result of a tax credit of $1.993 million from the recognition of prior year

capital losses (which had not been previously brought to account) but which will now be utilised against the capital gain from the sale of the plastics packaging business.

It is projected that ongoing operating earnings from Continuing Operations in 2007 will be approximately 5.1 cents per share. This is without any contribution to earnings from the sale of the plastic packaging business or the provision of the Consultancy Services.

The directors have resolved to pay a fully franked dividend of 3.75 cents per share for the 6 months to 30 June 2006 representing a total dividend of 6.5 cents per share fully franked for the year.

CONSOLIDATED INCOME STATEMENT

	CURRENT YEAR	PRIOR YEAR
	$000s	$000s
Revenues from continuing operations
Sales Revenue	22.081	9,300
Other Income
Interest Revenue	144	108
Profit on sale of assets	3	10
Foreign exchange gains	(89)	(4)
Rental Income charged to discontinuing operations	2,108	1.344
Other revenue	3022,468	8282,286
	24,549	11.586
Expenses from continuing operations
Cost of sales	15,042	6,292
Warehouse & Distribution expenses	1,819	610
Selling Expenses	1,928	974
Administration Expenses	2,498	1.144
Write-down in investments	220
Borrowing costs	1,167	564
	22.674	9,584
Profit from continuing operations before tax	1,875	2,002
Income Tax Expense / (Credit)	(1,559)	225
Profit after Income tax from continuing operations	3.434	1,777
Profit after income tax from discontinued operations	858	1,393
Profit after Income tax	4,292	3,170
Outside equity interests in profit after income tax		(17)
Net Profit After tax attributable to members	4,292	3,153
The financial performance of the discontinued operations is as follows
Revenue from ordinary activities	76,778	80,704
Expenses from ordinary activities		(78, 566)
	(75, 674)
Profit before income tax from discontinued operations	1.104	2.138
Income Tax Expense	246	745
Profit after income tax from discontinued operations	858	1,393
Earnings per share	6.3 cents	4.6 cents
Diluted Earnings per share	6.3 cents	4.6 cents
INDIVEDUALLY SIGNIFICANT ITEMS
Sale of import & distribution business		160
Closure of Townsville manufacturing facility		(253)
Sale of Advance Power	171
Write down in investment in EZI Automation	(220)
Costs associated with disposal of discontinued operations	(970)
	(1,019)	(93)
DEPRECIATION AND AMORTISATION COSTS
Depreciation & amortisation of property, plant & equipment	5,273	5.794
Amortisation of goodwill
Amortisation of other intangibles	110	84
	5,383	5,878

CONSOLIDATED BALANCE SHEET

		30-Jun-06$000s	30-Jun-05$000s
Current Assets
	Cash	218	187
	Receivables	6,295	4,163
	Inventories	5.550	5,560
	Derivatives	13	11
	Other	991	1.089
		13,067	11,010
	Assets classified as held for sale	57,153	67,532
	Total Current Assets	70,220	78,542
Non Current Assets
	Available-for-sale financial assets	266	266
	Property Plant & Equipment	46,665	46,655
	Intangibles	2,511	2,131
	Tax Assets	3.251	1,059
	Other	781	950
	Total non current assets	53,474	51,061
TOTAL ASSETS		123,694	129,603
Current Liabilities
	Payables	3,010	3,748
	Borrowings	5,291	3,906
	Tax Liabilities		82
	Provisions	545	526
	Derivatives
	Other
		8.846	8.262
	Liabilities directly associated with
	assets classified as held for sale	22,700	29,101
	Total Current Liabilities	31.546	37,363
Non Current liabilities
	Borrowings	45.001	44,454
	Payables
	Tax Liabilities	85
	Provisions	723	595
	Other
	Total Non Current liabilities	45.809	45,049
TOTAL LIABILITIES		77,355	82,412
NET ASSETS		46,339	47,191
Equity
	Contributed equity	38,885	38,773
	Reserves	32	61
	Retained profits	7,271	7,404
	Equity attributable to members
	of the parent entity	46,188	46,238
	Outside equity interests	151	953
TOTAL EQUITY		46,339	47,191

CONSOLIDATED CASH FLOW STATEMENT

	Year Ended30-Jun-06$000s	Year Ended30-Jun-05$000s
Cash flows related to operating activities
Receipts from customers	109,551	97,004
Payments to suppliers and employees	(95, 645)	(82,097)
Other Revenue	620	1,015
Interest Revenue	149	113
Income taxes paidOther	(902)(1, 849)	(544)(1, 729)
Net Operating Cash Flows	11,924	13,762
Cash flows related to investing activities
Payment for purchases of property, plant and equipment	(761)	(3,623)
Proceeds from sale of property, plant and equipment	174	207
Payment for purchases of equity investments net of cash acquired		(13,261)
Proceeds from sale of Advance Power	797
Purchase of other investments	(219)
Purchase of minority interest	(1,087)
Other	(445)	(33)
Net Investing cash flows	(1, 541)	(16, 710)
Cash flows related to financing activities
Proceeds from issues of securities (shares, options, etc)	112	155
Proceeds from borrowings	3,600	14,124
Repayment of borrowings	(5, 672)	(4,408)
Dividends paid	(4.425)	(4, 437)
Interest and costs of borrowings	(4.077)	(3,009)
Net financing cash flows	${10,462}$	2,425
Net increase (decrease) in cash held	(79)	(523)
Cash at beginning of period	(1,308)	(785)
Cash at end of period	(1, 387)	(1,308)
Reconciliation of cash
Reconciliation of cash at the end of the period (as shown inthe consolidated statement of cash flows) to the related items
in the accounts is as follows.Continuing operations
Cash on hand and at bank	218	187.
Bank Overdraft	(1,649)	(1, 515)
Continuing operations	(1,431)	(1, 328)
Olscontinuing operationsCash on hand and at bank	44	159
Bank Overdraft		(139)
Discontinuing operations	44	20
Total cash at end of period	(1, 387)	(1, 308)
Non Cash Financing and Investing Activities		$000s
Addition to Plant & Equipment under finance leases and

hire purchase agreements.

3,074

Earnings per security (EPS)

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

		2006	2005
Earnings used in the calculation of basic EPS		4,292,000	3,153,000
Earnings used in the calculation of diluted EPS		4.292.000	3.153.000
Weighted average number of ordinary shares outstandingDuring the year used in the calculation of:
Basic EPS		68,067,420	67,925,420
Diluted EPS		68.067.420	67.985.441
Basic EPS - Cents		6.3	4.6
Diluted EPS - Cents		6.3	4.6
NTA Backing	Current period	Previous correspondingperiod
Net tangible asset backing per share	61.1 cents		63.3 cents

OIVIDENDS

Final dividend resolved to be paid		3.75 cents / share fully franked
Date dividend is payable	10 November 2006
Record date	31 October 2006
	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 thatexist or will arise after payment of income tax in the next year in respect to the 2006 year is $1

	CurrentYear$000s	PriorYear$000s
Amount of final dividend payable - fully franked	2.556	2.550
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	7.404	8,671
Net profit attributable to members	4.292	3,153
Dividends paid	(4, 425)	(4, 420)
Retained profits at the end of the financial year	7,271	7,404
ORDINARY SHARES ON ISSUE		NUMBER
Number of securities on issue at beginning of year		68,003.105
Shares issued through exercise of options granted to employees underthe Plaspak Executive Incentive Schemes at an average price of $0.73		150,000
		68,153,105

OPTIONS

There were 1,475,000 options outstanding as at balance date.

These consisted of:

• 375,000 executive share options with exercise prices ranging from 83 cents to $1.21;

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

• 200,000 executive director options granted to the Managing Director, David Hoff, in 2003with an exercise price of $1.40.

150,000 executive options were exercised during the year at an average exercise price of $0.73.

IMPACT OF ADOPTING AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS ("AIFRs"

(a) AASB 1 Transitional Exemptions

.The Group bas elected to use the following transitional exemptions allowed by AASR 1: Eirst-Time Adoption of Australian Equivalents to International Financial Reporting Standards:

Share-based payments

AASB 2: Share-Based payments has only been applied to equity instruments granted after 7 November 2002 that had not vested by 1 January 2005.

Business combinations

AASB 3: Business Combinations has not been applied retrospectively to business combinations that were effected prior to transition date.

(b) Reconclilation of total equity presented under AGAAP to that under AIFRs

the impact of adopting Al-RS on the total could be reported under Australian Accounting Standards applicable before 1 July 2004 ("AGAAP") is as follows:

Total equity under AGAAP	Notes	CONSOLIDATED CONSOLIDATEDENTITY30 June 2005$'00046.960	ENTITY1 Jul 2004$'00846,845
Increase in retained earningsIncrease in option fee reserve		2274	4952
Total equity under AIFRs		47.191	47,342

(c) Reconciliation of retained earnings presented under AGAAP to that under AIFRs

.The impact of adopting AIFRs on the retained earnings as reported under Australian Accounting Standards applicable before 1 July 2004 ("AGAAP") is as follows

Total retained earnings under AGAAF		7.176	8.172
Adjustments to retained earningsShare based payment expense		٠	(2)
Adjustment to current year profit		(270)
Recognition of additional deferred tax asset	(v)	507	507
Impairment of goodwill	(i)	(10)	(10)
Increase in relained eamings		227	495
Total retained earnings under AIFRs		7.403	8.667

(d) Reconciliation of profit after tax presented under AGAAP to that under AIFRs

The impact of adopting AIFRs on the profit as reported under Australian Accounting Standards applicable before 1 July 2004 ("AGAAP") is as follows:

Profit after tax under AGAAF		3.424
Adjustments to profit:
Reversal of goodwill amortisation	(8)	167
Increase in cost of stock acquired	(iv)	(769)
Foreign exchange gain	(ii)	56
Interest rate hedge gain/(loss)	(ii)	2
Share-based payment expense	(注)	(4)
Tax effect of above	(iv)	213
Other tax adjustments	$\langle v \rangle$	65
Total adjustment to profit		(270)
Profit after tax under AIFRs		3.154

Notes

(i) Goodwill was amortised under AGAAP but is no longer amortised under AASB 3: Business Combinations. This results in a positive impact on profit and retained earnings for the comparative AIFRs period.

Under AGAAP, the recoverable amounts of assets were not determined on the basis of discounted cash flows. Under AASB 136: Impairment of Assets, the recoverable amount is determined as the higher of fair value less costs to sell and value in use (based on discounted cashflows).

The requirement to discount cashflows when determining value in use has resulted in an initial impairment write down of $10,000 in Goodwill, assuming a 12% discount rate

(ii) Under AGAAP Derivatives were not recognised separately on the Balance Sheet. There was no recognition of interest rate swaps. Purchases in foreign currency were taken up in trade creditors at forward cover rates. Under AIFRS Plaspak has elected not to hedge account. As a result the value of foreign currency liabilities is taken up at the spot rate at balance date and the value of all derivatives taken up as a Hedge Asset or Liability.

(iii) Share-based payments must now be expensed under AIFRs. AASB 2: Share-Based Payments.

• (iv) Under AIFRS the cost of stock purchased following the acquisition of York Group Ltd was increased by $769,000 with a corresponding reduction in the value of goodwill previously disclosed being made. The tax benefit resulting from this increase in the cost of stock was recorded at $231,000.
• (v) Under AIFRS amounts there is a requirement that a deferred tax asset be recognised for a deductible temporary difference to the extent that it is probable that a taxable profit will be available against which the deduclible temporary difference can be utilised. This has resulted in the recognition of a deferred tax

assel in relation to the difference between the written down value of buildings and the tax cost of such buildings. It has also resulted in an adjustment to theamount initially recorded as goodwill on the acquisition of t

POST BALANCE DATE EVENTS

The previously announced sale of the plastics packaging business was settled on 1st September 2006. At 30 June 2006 the Directors determined that the sale was "highly probable" and as such the company has pepared and disclosed the profits of this business segment as a discontinued operations and disclosed the assets and liabilities of this disposal group separate from those of the continuing operations.

No other matters or circumstances have arisen since the end of the financial year which significantly affected the operations ofthe economic entity, the results of those operations or the state of affairs of the economic

AUDIT STATUS

The accounts are currently in the process of being audited.