PPK GROUP LIMITED — Annual Report 2011

Aug 30, 2011

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PPK GROUP LIMITED

ABN 65 003 964 181

PRELIMINARY FINAL REPORT

APPENDIX 4E

FINANCIAL YEAR ENDED 30 JUNE 2011

Previous Corresponding Year 30 June 2010

This information is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.3A.

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HIGHLIGHTS OF RESULTS FOR ANNOUNCEMENT TO THE MARKET

(figures are in A$000s)

SALES REVENUE RENTAL INCOME FROM INVESTMENT PROPERTIES REALISED GAINS FROM INVESTING REALISED GAIN ON SALE OF INVESTMENT PROPERTY (LOSS)/PROFIT BEFORE INCOME TAX (LOSS)/PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS EARNINGS PER SHARE	June 2011 $000s	June 2010 $000s	Change $000s	Change %
SALES REVENUE	6,102	4,746	1,356	28.6%
RENTAL INCOME FROM INVESTMENT PROPERTIES	2,146	3,109	(963)	-31%
REALISED GAINS FROM INVESTING	10	1,022	(1,012)	-99%
REALISED GAIN ON SALE OF INVESTMENT PROPERTY	1,514	2,184	(670)	-31%
(LOSS)/PROFIT BEFORE INCOME TAX	(1,691)	1,246	(2,937)	Profit to loss
(LOSS)/PROFIT AFTER TAX ATTRIBUTABLE TO MEMBERS	(2,515)	762	(3,277)	Profit to loss
EARNINGS PER SHARE	(4.5)	1.3	(5.8)	Profit to loss

Interim Dividend Final Dividend	Current Year 1.00 cent 0.00 cent 1.00 cents	Previous Year 1.50 cents 1.00 cent
		2.50 cents

The Directors have resolved that no Final Dividend will be paid.

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COMMENTARY ON RESULTS

In the 2011 year PPK Group Limited ( PPK ) incurred:

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a pre-tax loss of $1,691,000; and

after tax loss of $2,515,000.

In the reporting period PPK’s profit before impairments was $4,281,000. This profit figure included:

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a net gain of $1,514,000 on the disposal of the industrial property at Kirrawee; and

a recovery of $1,585,000 from settlement of the Arndell Park property rental dispute litigation.

This profit was impacted by write downs and impairments of $5,972,000 relating to investments in:

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Frigrite Limited ( FRR );

Intelligent Solar Limited ( ISL );

Allied Brands Limited ( ABQ ).

PPK has written down to nil as at 30 June 2011 the value of its shareholdings in these three companies and the value of Convertible Notes issued by ISL and ABQ.

Notwithstanding that PPK incurred a pre-tax loss of $1,691,000, PPK has had to report an income tax expense of $824,000. The recorded impairments are capital losses for tax purposes and can only be applied against capital profits. The directors have only recognised a deferred tax asset to the extent that they have, at this point in time, reasonable certainty of realising capital profits. This gives rise to the income tax expense of $824,000.

PPK has $2,000,000 in Convertible Notes issued by FRR which are secured by Fixed and Floating Charges over FRR and its subsidiaries and a first mortgage over FRR owned property in Melbourne. The sale of the property is scheduled to complete in October 2011. PPK expects to recover the full $2,000,000 face value of the Convertible Notes in October 2011.

PPK now has no other major investments in any listed companies.

Property

The existing tenant of the property at Dandenong, Victoria has signed a four year extension to the lease which will now continue to August 2015.

The Seven Hills property remains leased pursuant to a lease expiring on 31 October 2012.

The property at Arndell Park continues to be marketed for lease or sale.

Rambor Pty Ltd

Sales and profitability of Rambor for the year were at record levels. Rambor delivered a pre-tax profit of $1,486,000 compared to $208,000 in the previous corresponding period.

Rambor has signed a further agreement with Hilti Corporation for the manufacture and sale of additional Rambor products.

Rambor has also generally expanded its range of products and has a strong order book for the first quarter of the 2012 year.

Dividend

Although PPK has strong cash flow and satisfies the relevant tests under the Corporations Act to pay a dividend, the ability to pay a franked dividend is unclear as a result of the Draft Fact Sheet issued by the Australian Taxation Office on 21 June 2011.

The directors are currently reviewing alternatives in relation to payment of a dividend and other capital management initiatives.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

REVENUES Mining equipment manufacture Investment properties Investment activities Interest receivable TOTAL REVENUE OTHER INCOME EXPENDITURE Mining equipment manufacture Investment properties Investment activities Administrative expenses Finance costs TOTAL EXPENDITURE Share of (loss) from associated companies (LOSS) / PROFIT BEFORE INCOME TAX EXPENSE Income tax (expense) (LOSS) / PROFIT AFTER INCOME TAX OTHER COMPREHENSIVE INCOME Changes in value on available-for-sale financial assets Provision for income tax thereon Unrealised impairment losses on available-for-sale financial assets transferred to the income statement from the asset revaluation reserve Provision for income tax thereon Realised gain on sale of available-for-sale financial assets transferred to the income statement from the asset revaluation reserve Provision for income tax thereon OTHER COMPREHENSIVE INCOME NET OF INCOME TAX TOTAL COMPREHENSIVE INCOME FOR THE YEAR Earnings per share Continuing operations Diluted Earnings per share	30 June 2011 $000s 6,102 2,146 23 1,589 9,860 3,158 (4,665) (1,071) (4,254) (2,889) (1,418) (14,297) (412) (1,691) (824) (2,515) 163 (49) (13) 4 (10) 3 98 (2,417) (4.5) cents (4.5) cents	30 June 2010 $000s 4,746 3,109 59 1,158 9,072 3,894 (4,538) (3,515) (700) (1,165) (1,118) (11,036) (684) 1,246 (484) 762 194 (58) - - (146) 44 34 796 1.3 cents 1.3 cents

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Current Assets Cash Trade and other Receivables Inventories Other Assets classified as held for sale Total Current Assets Non Current Assets Trade and other Receivables Financial assets Investments in associated companies Investment Property Other Property Plant & Equipment Intangibles Deferred Tax Assets Derivatives Total non current assets TOTAL ASSETS Current Liabilities Payables Borrowings Current Tax Liabilities Provisions Total Current Liabilities Non Current liabilities Borrowings Deferred Tax Liabilities Provisions Total Non Current liabilities TOTAL LIABILITIES NET ASSETS Equity Contributed equity Reserves (Accumulated losses) Retained profits TOTAL EQUITY	30 June 2011 $000s 9,681 4,367 1,813 395 16,256 - 16,256 5,166 745 - 24,486 1,412 742 1,646 - 34,197 50,453 625 1,074 122 247 2,068 18,500 35 68 18,603 20,671 29,782 29,782 122 (122) 29,782	30 June 2010 $000s
		23 7,153 1,509 410
		9,095 7,103
		16,198
		7,617 1,105 3,692 24,248 1,624 779 2,036 128
		41,229
		57,427
		413 2,944 458 215
		4,030 18,500 55 48
		18,603
		22,633
		34,794
		31,249 24 3,521
		34,794

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONSOLIDATED ENTITY At 1 July 2009 Total comprehensive income for the year Profit for the year Other comprehensive income Fair value adjustment on available-for-sale financial assets expensed on impairment less deferred tax impact Fair value adjustment on available-for-sale financial assets less deferred tax impact Total comprehensive income for the year Transactions with owners in their capacity as owners Dividends paid Shares repurchased At 30 June 2010 Total comprehensive income for the year Loss for the year Other comprehensive income Fair value adjustment on available-for-sale financial assets expensed on impairment less deferred tax impact Realised gain on available-for-sale financial assets less deferred tax impact Fair value adjustment on available-for-sale financial assets less deferred tax impact Total comprehensive income for the year Transactions with owners in their capacity as owners Dividends paid Shares repurchased At 30 June 2011	Issued Retained Other Total Capital Earnings Reserves Equity $000s $000s $000s $000s 31,249 4,209 (9) 35,449 - 762 - 762 - - (147) (147) - - 44 44 - - 194 194 - - (58) (58)
	- 762 33 795
	- (1,450) - (1,450) - - - -
	- (1,450) - (1,450)
	31,249 3,521 24 34,794
	(2,515) (2,515) - - (13) (13) - - 4 4 - - (10) (10) - - 3 3 - - 163 163 - - (49) (49)
	- (2,515) 98 (2,417)
	- (1,128) - (1,128) (1,467) - - (1,467)
	(1,467) (1,128) - (2,595)
	29,782 (122) 122 29,782

CONSOLIDATED STATEMENT OF CASH FLOWS

Cash flows related to operating activities Receipts from customers Payments to suppliers and employees Other Revenue Interest received Dividends received Income taxes paid Interest and costs of borrowings Net Operating Cash Flows Cash flows related to investing activities Payment for purchases of property, plant and equipment Proceeds from sale of investment property Proceeds from sale of plant and equipment Payment for investments in associated companies Proceeds from sale of investments in associated companies Payment for convertible notes Proceeds from sale of available-for-sale financial assets Payments for available for sale-financial-assets Payments for investments in derivatives Payment for intangibles Net Investing cash flows Cash flows related to financing activities Loans Advanced Payment for buyback of shares (Repayment) / Proceeds from Bank loans Repayment of borrowings Loans repaid Dividends paid Net financing cash flows Net increase (decrease) in cash held Cash at beginning of period Cash at end of period Reconciliation of cash Reconciliation of cash at the end of the period (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows. Continuing operations Cash on hand and at bank Bank Overdraft Total cash at end of period Non Cash Financing and Investing Activities during the year Fair value adjustments in Derivatives - (decrease) / increase in value	Year Ended 30 June 2011 $000s 7,624 (6,517) 1,627 1,141 23 (831) (1,418) 1,649 (533) 8,085 8 (19) 15 - 516 (87) - (11) 7,974 - (1,467) - - 4,500 (1,128) 1,905 11,528 (2,921) 8,607 9,681 (1,074) 8,607 $000s (76)	Year Ended 30 June 2010 $000s 7,992 (7,282) 241 451 191 (869) (1,118)
		(394) (293) 5,166 - (2,829) - (2,000) 2,452 (1,161) (272) (2)
		1,061 (8,700) - 6,400 (23) 149 (1,450)
		(3,624) (2,957) 36
		(2,921) 23 (2,944)
		(2,921)
		$000s 380

NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

30 June 2011 $000s REVENUE, OTHER INCOME & EXPENSES FROM OPERATIONS REVENUE Sale of goods 6,102 Rental income from investment properties 2,146 Dividends received - other parties 23 Interest receivable 1,589 9,860 OTHER INCOME Net gain on disposal of investment properties 1,514 Net gain on sale of available-for-sale financial assets 10 Net gain on disposal of plant and equipment 5 Proceeds from rental property dispute resolution 1,585 Fair value adjustment on derivatives - Foreign currency translation gains 2 Sundry income 42 3,158 INTEREST INCOME Other persons 1,589 1,589 SHARE OF PROFIT (LOSS) FROM ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD Fair value adjustment to carrying value of available-for-sale financial assets at the time the entities became associates - Impairment to carrying value of associate at year end - Share of after tax profit (loss) from associates accounted for under the equity method (412) (412) EXPENSES (Loss) / Profit before income tax has been determined after: Amortisation of intangibles 48 Cost of sales - mining equipment manufacture 3,275 Depreciation - investment properties 339 - plant and equipment 528 867 Fair value adjustment on derivatives 76 Foreign currency translation losses - Impairment - investment properties 169 Impairment of available-for-sale financial assets - Listed investments 22 Impairment of carrying value of investment in associates 4,140 Impairment other receivables -convertible notes 1,322 Interest paid - other 1,418 Doubtful debts - trade receivables - - other receivables 237 Defined contribution superannuation expense 208 Employee benefit expenses 1,921 Rental expense on operating leases 160 INDIVIDUALLY SIGNIFICANT ITEMS - Gains or ( losses ) Net Gain on Sale of rental property 1,514 Fair value adjustment on derivatives (76) Fair value adjustment on exercise of derivatives - Realised gain on sale of Industrea limited shares - Realised gain on sale of Alchemy Resources Limited shares - Impairment of carrying value of investment in associates (4,140) Proceeds from rental property dispute resolution 1,585 Impairment of investment property (169) Provision for doubtful debts - other receivables (237) Impairment other receivables - convertible notes (1,322) Impairment of available-for-sale financial assets (22) (2,867)	30 June 2010 $000s 4,746 3,109 59 1,158
	9,072
	2,184 1,022 - - 380 - 308
	3,894
	1,158
	1,158
	580 (589) (675)
	(684)
	80 3,279 432 486
	918
	- 23 1,159 740 - - 1,118 12 1,249 207 1,705 114
	2,184 (267) 647 588 415 - - (1,159) (1,249) - (740)
	419

NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

30 June 2011 $000s COMPARISON OF HALF-YEAR PROFITS Consolidated (loss) / profit after tax attributable to members reported for the 1st half-yearly report (1,381) Consolidated profit / (loss) after tax attributable to members for the 2nd half-yearly report (1,134) (Loss) / Profit after income attributable to members reported for the year (2,515) DETAILS OF INVESTMENTS IN ASSOCIATES Fair value of investments in associates Ownership Ownership Interest Interest Frigrite Limited 27.92% - 33.96% Intelligent Solar Limited (formerly Cool or Cosy Limited) 26.39% - 23.42% PPK Willoughby Funding Unit Trust 22.86% - 22.86% - Aggregate share of associates' profit or (loss) Profit (loss) before income tax (412) Income tax expense or (credit) - Net profit (loss) after income tax (412) Earnings per security (EPS) Details of basic and diluted EPS reported separately in accordance with paragraph 9 and 18 of_AASB 133_ _Earnings per share_are as follows: Earnings used in the calculation of basic EPS (2,515) Earnings used in the calculation of diluted EPS (2,515) Weighted average number of ordinary shares outstanding During the year used in the calculation of: Number Basic EPS 56,398,923 Diluted EPS 56,398,923 Cents Basic EPS - Cents (4.5) Diluted EPS - Cents (4.5) Net Tangible Asset Backing Net tangible asset backing per share 54.0	30 June 2010 $000s 3,609 (2,847)
	762
	2,693 999 -
	3,692
	(684) -
	(684)
	762 762 Number 58,006,650 58,006,650 Cents 1.3 1.3 58.6

NOTES TO THE CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

DIVIDENDS

The Directors have resolved that no Final dividend will be paid.

Interim Dividend Final Dividend 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 2011 year is $nil. Amount of final dividend payable - fully franked Both current and prior year dividends were fully franked. CONSOLIDATED RETAINED PROFITS Retained profits at the beginning of the financial year Net (loss) / profit attributable to members Dividends paid Retained profits at the end of the financial year ORDINARY SHARES ON ISSUE Number of securities on issue at beginning of year Shares repurchased through approved buyback scheme Number of securities on issue at end of year	30 June 2011 1.00 cent 0.00 cent 1.00 cents $000s nil 3,521 (2,515) (1,128) (122) NUMBER 58,006,650 (4,193,871) 53,812,779	30 June 2010 1.50 cents 1.00 cent
		2.50 cents
		$000s 580 4,209 762 (1,450)
		3,521
		NUMBER 58,006,650 -
		58,006,650

OPTIONS

There were no options outstanding at balance date

POST BALANCE DATE EVENTS

No matter or circumstances have arisen since the end of the financial year which will 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