PPK GROUP LIMITED — Annual Report 2017

Aug 30, 2017

PPK Group Limited Appendix 4E: Results for Announcement to the Market Preliminary Final Report

1. Company details

Name of entity:ABN:Reporting period:Previous period:	PPK Group Limited65 003 964 181For the year ended 30 June 2017For the year ended 30 June 2016
2. Results for announcement to the market			2017$'000
Revenues from ordinary activities	up	9.6%	29,218
Profit/(loss) from ordinary activities after tax attributableto the owners of PPK Group Limited	up	107.2%	560
Profit/(loss) after tax attributableto the owners of PPK Group Limited	up	107.2%	560
Basic earnings per shareDiluted earnings per share	upup	2017Cents0.80.8	2016Cents(13.4)(13.4)

Comments

The after tax profit (loss) for the Group, after providing for non-controlling interests was $0.560M (30 June 2016: loss of $7.763M).

An explanation of the above figures is contained in the Commentary on Results in this Preliminary Final Report.

3. Net tangible assets

	2017	2016
	Cents	Cents
Net tangible assets per ordinary security	21.73	28.94

4. Control gained over entities

There were no entities acquired or disposed during the year - refer to note 15 "Investments Accounted for Using the Equity Method" in the attached Preliminary Final Report.

5. Loss of control over entities

There was no change in control of entities during the year - refer to Note 10 "Details of Changes in Investments in Controlled Entities" in the attached Preliminary Final Report.

6. Details of associates and joint ventures

There was no change in associates or joint ventures during the year - refer to note 15 "Investments Accounted for Using the Equity Method" in the attached Preliminary Final Report.

7. Details of available-for-sale financial assets

The Group has sold a significant number of listed shares during the year - refer to note 14 "Financial Assets" in the attached Preliminary Final Report.

8. Segment information

The Company operates in the following segments:

• The Investment Property segment sold its last industrial property during the year.
• The Investing segment still owns a small portfolio of listed shares at year end.
• The Mining Equipment segment designs, manufactures, distributes and services underground mining equipment.

Refer to note 18 in the Preliminary Final Report.

9. Dividends

Current period No dividends were declared for the year ended 30 June 2017 - refer to Note 8 in the Preliminary Final Report.

Previous period No dividends were declared for the year ended 30 June 2016 - refer to Note 8 in the Preliminary Final Report.

10. Dividend reinvestment plans

Not applicable.

11. Basis of Preparation of the Financial Statements

The Company is incorporated in Australia and its financial statements have been prepared in accordance with Australian Accounting Standards - refer to note 2 and note 3 in the Preliminary Final Report.

12. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The financial statements are in the process of being audited and an unqualified opinion is likely to be issued.

13. Attachments

Details of attachments (if any):

There are no attachments.

14. Signed

Signed 31 August 2017

Andrew J. Cooke Company Secretary Sydney

PPK Group Limited

ABN 65 003 964 181

Appendix 4E

(ASX LISTING RULE 4.3A)

PRELIMINARY FINAL REPORT FINANCIAL YEAR ENDED 30 JUNE 2017

Contents	Page
Highlights of Results for Announcement to the Market	4
Commentary on Results	4
Financial Information	5
Notes to the Financial Information	10

This information is provided to the Australian Securities Exchange (ASX) under ASX Listing Rule 4.3A and should be read in conjunction with the most recent annual financial report.

HIGHLIGHTS OF RESULTS FOR ANNOUNCEMENT TO THE MARKET

	30 June2017$000s	30 June2016$000s	Change$000s	Change%
REVENUE FROM ORDINARY ACTIVITIES	29,218	26,660	2,558	10%
PROFIT (LOSS) BEFORE INCOME TAX EXPENSE	560	(7,873)	8,433	107%
PROFIT (LOSS) AFTER INCOME TAX EXPENSE	560	(7,740)	8,300	107%
PROFIT (LOSS) AFTER TAX ATTRIBUTABLE TO OWNERS OF PPK GROUP LTD	560	(7,763)	8,323	107%
	cents	cents	cents
EARNINGS (LOSS) PER SHARE	0.8	(13.4)	14.2	106%

DIVIDENDS

INTERIM DIVIDEND PER SHARE (FULLY FRANKED) FINAL DIVIDEND PER SHARE

Current YearCents	Prior YearCents
-	-
-	-
-	-

The date, time and venue of the Company's Annual General Meeting is to be advised.

COMMENTARY ON THE RESULTS

PPK Group Limited (PPK) reported a net profit after tax attributable to owners of PPK of $0.560M for the 12 months to 30 June 2017 (2016: $7.763M loss). Group revenue for the 12 months was $29,218M (2016: $26,660M) with revenue from mining equipment sales and mining services of $28.945M (2016: $26.075M) and revenue from investment properties of $0.273M (2016: $0.585M).

Other income of $5.108M (2016: $1.597M) was primarily the gain from the sale of the Seven Hills Industrial property in January 2017 of $4.433M, gains from the sale of PPK's share portfolio of $0.244M (2016: $1.548M), recovery of a debt previously written off of $0.396M and other miscellaneous income of $0.030M (2016: $0.048M).

Please see the commentary from PPK's Chairman, Robin Levison, in the 2017 Annual Report which is to be lodged on Friday, 8 September 2017 for a more detailed analysis of the 2017 results and commentary on the state of the mining equipment business unit and general underground coal mining conditions.

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 JUNE 2017

		Consolidated Entity
	Note	2017$000s	2016$000s
REVENUE	6	29,218	26,660
Cost of Sales		(12,102)	(13,254)
GROSS PROFIT		17,116	13,406
Other Income	7	5,108	1,597
Mining services expenses	18	(20,510)	(19,219)
Property services expenses	18	(331)	(79)
Investment activity expenses	18	(29)	(323)
Administrative expenses	18	(1,754)	(1,898)
Research and development costs	18	(373)	(345)
Share-based payment expense		-	(103)
Share of profit (loss) of associates for the year accounted for using the equity method		-	(389)
Finance costs	18	(350)	(1,015)
Interest revenue	18	53	495
Reversal of onerous contract provision	18	1,630	-
PROFIT (LOSS) BEFORE INCOME TAX EXPENSE		560	(7,873)
Income tax benefit attributable to profit		-	133
PROFIT (LOSS) AFTER INCOME TAX EXPENSE		560	(7,740)
LOSS AFTER INCOME TAX EXPENSE IS ATTRIBUTABLE TO:Owners of PPK Group Limited		560	(7,763)
Non-controlling interests		-	23
		560	(7,740)
OTHER COMPREHENSIVE INCOME	`
Changes in fair value on available-for-sale financial assets		(927)	1,035
Provision for income tax on changes in fair value		-	-
Realised gain on sale of available-for-sale financial assets transferred to profit or loss from the asset revaluation reserve		(296)	(1,391)
Provision for income tax thereon		-	-
Realised loss on sale of available-for-sale financial assets transferred to profit or loss from the asset revaluationreserve		-	5
Income tax relating to these items		-	-
Foreign currency translation of controlled entities		(5)	(6)
OTHER COMPREHENSIVE (LOSS) INCOME NET OF INCOME TAX		(1,228)	(357)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR		(668)	(8,097)
TOTAL COMPREHENSIVE LOSS FOR THE YEAR IS ATTRIBUTABLE TO:
Owners of PPK Group Limited		(668)	(8,120)
Non-controlling interests		-	23
		(668)	(8,097)
EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS		Cents	Cents
Total basic earnings (loss) per shares	9	0.8	(13.4)
Diluted earnings (loss) per share	9	0.8	(13.4)

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

FOR THE YEAR ENDED 30 JUNE 2017

		Consolidated Entity
	Note	2017	2016
		$000s	$000s
CURRENT ASSETS
Cash and cash equivalents		1,104	945
Trade and other receivables		5,870	9,659
Inventories		10,198	9,956
Financial assets	14	275	-
Other current assets		324	419
TOTAL CURRENT ASSETS		17,771	20,979
NON-CURRENT ASSETS
Trade and other receivables		-	857
Investments in associated entities - equity accounted	11	19	19
Other financial assets		-	2,032
Investment properties		-	3,425
Property, plant and equipment		6,483	7,824
Intangible assets		386	252
TOTAL NON-CURRENT ASSETS		6,888	14,409
TOTAL ASSETS		24,659	35,388
CURRENT LIABILITIES
Trade and other payables		4,549	6,762
Interest bearing liabilities		1,282	5,806
Provisions		1,918	1,806
TOTAL CURRENT LIABILITIES		7,749	14,374
NON-CURRENT LIABILITIES
Interest bearing liabilities		-	2,730
Provisions		592	1,298
TOTAL NON-CURRENT LIABILITIES		592	4,028
TOTAL LIABILITIES		8,341	18,402
NET ASSETS		16,318	16,986
SHAREHOLDERS' EQUITY
Contributed equity	12	34,625	34,625
Reserves	13	1,401	2,629
Accumulated losses		(19,708)	(20,268)
Capital and reserves attributable to owners of PPK Group Ltd		16,318	16,986
Non-controlling interests		-	-
TOTAL EQUITY		16,318	16,986

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2017

		Consolidated Entity
	2017Note	2016
	$000s	$000s
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers	31,196	30,170
Cash payments to suppliers and employees	(38,096)	(36,242)
Interest received	56	76
Income taxes refunded (paid)	-	311
Interest paid	(771)	(545)
NET CASH (USED IN) OPERATING ACTIVITIES	(7,615)	(6,230)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchase of plant and equipment	(215)	(284)
Proceeds from sale of investment property	7,540	-
Proceeds from sale of property, plant and equipment	3	171
Proceeds from sale of available-for-sale financial assets	774	2,618
Proceeds on return of subsidiary capital upon winding up (net of cash lost on deconsolidation)	-	(2)
Purchase of available-for-sale financial assets	(22)	-
Payments for intangibles	(171)	(179)
NET CASH PROVIDED BY INVESTING ACTIVITIES	7,909	2,324
CASH FLOWS FROM FINANCING ACTIVITIES
Other receivables - loans advanced	(47)	(3,165)
Other receivables - loans repaid	6,112	5,878
Proceeds from other borrowings	2,335	8,730
Repayment of other borrowings	(8,531)	(9,043)
Dividends paid8	-	-
Transactions with non-controlling interests	-	(23)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	(131)	2,377
NET INCREASE (DECREASE) IN CASH HELD	163	(1,529)
Cash at the beginning of the year	945	2,476
Effects of exchange rate changes on cash & cash equivalents	(4)	(2)
CASH AT THE END OF THE YEAR	1,104	945

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2017

	Issuedcapital	Accumulatedlosses	ShareOptionsReserve	Available-for-saleReserve	ForeignReserve	TotalCurrency AttributabletoTranslation Owners of PPKGroupLtd	Non-controllingInterests	TotalEquity
ConsolidatedEntity	$'000sNote	$'000s	$'000s	$'000s	$'000s	$'000s	$'000s	$'000s
At1July2016	34,625	(20,268)	1,338	1,295	(4)	16,986	-	16,986
Totalcomprehensive(loss)incomefortheyear
(Loss)profitfortheyear	-	560	-	-	-	560	-	560
Othercomprehensive(loss)income
Fairvalueadjustmentonavailable-for-salefinancialassets	-	-	-	(927)	-	(927)	-	(927)
Realisedgainonsaleofavailable-for-salefinancialassetstransferredtotheandlossstatementfromtheavailable-for-salereserve	profit-	-	-	(296)	-	(296)	-	(296)
Foreigncurrencytranslationofcontrolledentities	-	-	-	-	(5)	(5)	-	(5)
Totalcomprehensive(loss)incomefortheyear	-	560	-	(1,223)	(5)	(668)	-	(668)
TransactionswithownersintheircapacityasownersDividendspaid8
	--	--	--	--	--	--	--	--
At30June2017	34,625	(19,708)	1,338	72	(9)	16,318	-	16,318

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2017

	Issuedcapital	Accumulatedlosses	ShareOptionsReserve	Available-for-saleReserve	ForeignReserve	TotalCurrency AttributabletoTranslation Owners of PPKGroupLtd	Non-controllingInterests	TotalEquity
ConsolidatedEntity	$'000sNote	$'000s	$'000s	$'000s	$'000s	$'000s	$'000s	$'000s
At1July2015	34,125	(12,505)	1,735	1,646	2	25,003	2	25,005
Totalcomprehensive(loss)incomefortheyear
(Loss)profitfortheyear	-	(7,763)	-	-	-	(7,763)	23	(7,740)
Othercomprehensive(loss)income
Fairvalueadjustmentonavailable-for-salefinancialassets	-	-	-	1,035	-	1,035	-	1,035
Realisedgainonsaleofavailable-for-salefinancialassetstransferredtotheandlossstatementfromtheavailable-for-salereserve	profit-	-	-	(1,391)	-	(1,391)	-	(1,391)
Realisedlossonavailable-for-salefinancialassetstransferredtotheprofitstatementfromtheavailable-for-salereserve	andloss-	-	-	5	-	5	-	5
Foreigncurrencytranslationofcontrolledentities	-	-	-	-	(6)	(6)	-	(6)
Totalcomprehensive(loss)incomefortheyear	-	(7,763)	-	(351)	(6)	(8,120)	23	(8,097)
Transactionswithownersintheircapacityasowners
Dividendspaid	9-	-	-	-	-	-	-	-
Trustdistributions	-	-	-	-	-	-	(23)	(23)
Sharesissued-shareandloanplan	500	-	(500)	-	-	-	-	-
Employee share-basedpayment	-	-	103	-	-	103	-	103
Changesinholdingofnon-controllinginterests	-	-	-	-	-	-	(2)	(2)
	500	-	(397)	-	-	103	(25)	78
At30June2016	34,625	(20,268)	1,338	1,295	(4)	16,986	-	16,986

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2017

Note 1. Nature of operations

The principal activities of the Group are:

• design, manufacture, distribution and servicing of underground mining equipment; and

• property ownership and management.

The Group still retains a small portfolio of listed shares.

Note 2. General Information and Basis of Preparation

This consolidated financial report for the year ended 30 June 2017 has been prepared in accordance with the Australian Securities Exchange Listing Rules as they relate to an Appendix 4E, Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, and the Corporations Act 2001.

The parent entity receives relief and exemption under ASIC Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191and accordingly, amounts in the Highlights of Results for Announcement to the Market, in the Commentary on Results and in the financial report have been rounded to the nearest thousand dollars or in certain cases to the nearest dollar.

They do not include all of the information required in annual financial statements and should be read in conjunction with the consolidated financial statements of the Group for the year ended 30 June 2016 and any public announcements made by the Group during the year in accordance with continuous disclosure requirements arising under the Australian Stock Exchange Listing Rules and Corporations Act 2001.

The financial statements have been approved and authorised for issue by the board of directors on 31 August 2017.

Note 3. Significant Accounting Policies

The financial statements have been prepared in accordance with the accounting policies adopted in the Group's last annual financial statements for the year ended 30 June 2016.

The accounting policies have been applied consistently throughout the Group for the purposes of the preparation of these financial statements

Note 4. Estimates

When preparing the financial statements, the directors evaluate estimates and judgements incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. The actual result may differ from the judgements, estimates and assumptions made by the directors and will seldom equal the estimated results.

The judgements, estimates and assumptions applied in the financial statements, including the key sources of estimation uncertainty were the same as those applied in the Group's last financial statements for the year ended 30 June 2016.

Note 5. Significant events and transactions

Debt Restructure

The Group continues to restructure its debt and pay down its loans. In September 2016, the loans owing by Couran Cove Holdings Pty Ltd ATF CCH were repaid in full and the funds were used to repay the borrowings to Atkone Pty Ltd and Contemplator Pty Ltd in their entirety.

In January 2017, PPK used the surplus proceeds from the sale of the Seven Hills Industrial property to fully repay both the Neruj Pty Ltd ATF Wemole Funding Trust loan and the CBA loan. As a result of this sale, PPK no longer has 100% ownership of investment properties.

In addition, PPK has sold the majority of its listed investments during the year and has used the proceeds to continue to fund the operations of the business. At the year end, PPK retained a small portfolio of listed shares.

On 10 May 2017, PPK borrowed $650,000 from the Fiona Testamentary Trust, of which PPK Director Glenn Molloy is a trustee, and $600,000 from the Wavet Fund No 2 Pty Ltd ATF Wavet Holdings Pty Ltd Superannuation Fund No 2, of which PPK Director Glenn Molloy is a director. Both loans have an interest rate of 10% per annum, payable quarterly, with the full amount of the loan to be repaid within one year. The proceeds have been used to repay the outstanding borrowings to Sunlea Investments Pty Ltd, for the purchase of the land and property in Mt Thorley used by the Group,

Leased Coaltrams

On 27 June 2016, Glegra Pty Ltd ATF The Coaltram Trust ("TCT") acquired the rights and obligations of the lessor on arms-length commercial terms. Effective 1 May 2017, PPK Mining Equipment Hire Pty Ltd, a subsidiary company of PPK Mining Equipment Group Pty Ltd, renegotiated the terms and conditions of the lease arrangements of the 7 Coaltrams it leases from Glegra Pty Ltd ATF The CoalTram Trust ("Glegra") as follows:

• the monthly ongoing lease payments have reduced to $0.020M from $0.135M over the period of the lease term, a savings of $0.115M per month. The expiry

dates of the leases vary with 4 terminating on 15 October 2019, 1 on 15 January 2020 and the remaining 2 on 13 April 2020.

• A release and discharge from all claims now and in the future for rental arrears of $1.080M. The conditions imposed to receive the release of the rental arrears have been met.

PPK Directors Glenn Molloy, Graeme Webb and Dale McNamara have a beneficial interest in Glegra Pty Ltd.

	NOTES TO AND FORMING PART OF THE ACCOUNTS
	FOR THE YEAR ENDED 30 JUNE 2017
			Consolidated Entity
Note 6.	Revenue		2017	2016
		Notes	$000s	$000s
REVENUE
	Mining equipment sale / service / hire revenue		28,945	26,075
	Rental income from investment properties		273	585
	Dividends received - other parties		-	-
			29,218	26,660
Note 7.	Other Income
Other items
	Net gain on sale of investment property		4,433	-
	Net gain on sale of available-for-sale financial assets		244	1,548
	Foreign currency translation gain (loss)		-	1
	Recovery of Debts previously written off		396	-
Sundry Income			35	48
			5,108	1,597
Note 8.	Dividends
(a) Dividends paid
	2017 No interim ordinary dividend was declared or paid (prior year nil)		-	-
	2016 No final ordinary dividend was declared or paid (prior year nil)		-	-
	The directors do not recommend a dividend be paid with respect to the year ended 30 June 2017.
			2017	2016
Note 9.	Earnings Per Share		Cents	Cents
Basic earnings per share			0.8	(13.4)
Diluted earnings per share			0.8	(13.4)
	Net tangible asset backing per share		21.7	28.9
			$000s	$000s
	(a) Reconciliation of Earnings to Net Profit attributable to owners of PPK Group Ltd
	Earnings used in calculating Basic and Dilutive EPS		560	(7,763)
			Number	Number
	(b) Weighted average number of ordinary shares outstanding during the year

used in calculation of basic and diluted EPS 73,314,570 57,814,570

(c) Classification of Securities

15.5 million loan plan shares were excluded from the computation of diluted earnings per share for 30 June 2016 as they would have resulted in a decrease in loss per share for continuing operations.

Note 10. Details of Changes in Investments in Controlled Entities `

There were no new entities created by the Group in 2017. In 2016, the following entities were created by the Group:

Name of entity	Country of incorporation	Date of incorporation	2017	2016
PPK (CC) Pty Ltd	Australia	15 September 2015	100%	100%
PPK Couran Cove Pty Ltd	Australia	16 September 2015	100%	100%

Percentage Owned

At the 2017 year end, the Group is in the process of liquidating PPK (Beijing) Mining Equipment Co. Ltd.

Note 11. Investments in Associates

		Consolidated Entity
2017	2016	2017	2016
Ownership	Ownership	Units Held	Units Held
Interest	Interest	$1 each	$1 each
18.75%	18.75%	275	275
22.86%	22.86%	40	40
		315	315
		$000s	$000s
		-	-
		19	19
		19	19

NOTES TO AND FORMING PART OF THE ACCOUNTS

	Consolidated Entity
	2017	2016
Note 12.Ordinary Shares on Issue
	Number	Number
Movement in number of ordinary shares
Number of securities on issue at beginning of year	73,314,570	72,647,903
New share issue - share based payment	-	666,667
	73,314,570	73,314,570

The number of shares reported includes 15,500,000 share and loan plan shares treated as options for financial reporting purposes. The terms of the non-recourse loan provide no obligation on the senior executive to repay the full amount of the outstanding loan balance and the Group has the option to sell or buy-back the plan shares as full satisfaction of the outstanding loan balance. The non-recourse loan expired on 27 April 2017, the loans have not been paid back and the Group is considering its options.

Movement in share capital	$000s	$000s
Balance at the beginning of the financial year	34,625	34,125
Share Issue - share based payment	-	500
	34,625	34,625
	Consolidated Entity

Note 13.	Reserves	2017	2016
		$000s	$000s
RESERVES
Available-for-salefinancialassets(1)		72	1,295
Foreign currency translation (2)		(9)	(4)
Share options (3)		1,338	1,338
		1,401	2,629

Movement in reserves

Available-for-sale financial assets
Balance at the beginning of the financial year	1,295	1,646
Revaluation	(927)	1,035
Realised gains to (profit) loss	(296)	(1,391)
Realised loss to (profit) loss	-	5
	72	1,295
Foreign currency translation
Balance at the beginning of the financial year	(4)	2
Foreign translation gain (loss)	(5)	(6)
	(9)	(4)
Share options
Balance at the beginning of the financial year	1,338	1,735
Share based payment expense	-	103
Shares allocated under agreement	-	(500)
	1,338	1,338

Options

There were no options outstanding at balance date.

Nature and purpose of reserves

(1) The available for sale financial assets reserve carries fair value adjustments made to available-for-sale assets which are recognised in other comprehensive income. When an available-for-sale financial asset is either sold or considered impaired, the amount held in this reserve is recognised in the profit or loss.

(2) The foreign currency translation reserve is used for consolidation purposes to recognise exchange differences arising on translation of PPK's foreign subsidiary PPK (Beijing) Mining Equipment Co. Ltd.

(3) The share options reserve is used to recognise the value of equity settled share-based payments provided to employees, including key management personnel, as part of their remuneration and business vendors as part of business combination agreements. The previous financial year's share based payment expense of $0.103M relates wholly to a business combination. In accordance with the terms of the business combination in October 2014 the vendor employee could receive $1.000M in PPK Group Limited ordinary share capital in two $0.500M tranches over two years. As per this agreement and having met the initial vesting conditions the vendor was issued 0.667M shares on 16 October 2015 being the first $0.500M tranche. The vesting conditions for the second tranche of $0.500M shares due on 16 October 2016 were not met and accordingly no shares issued.

The terms and conditions of the contract effectively makes the agreement a share options instrument under AASB 2 Share-based Payments and does not form part of the consideration paid for the acquisition in accordance AASB 3 Business Combinations. The fair value of the options at issue date is deemed to represent the value of employee services received over the vesting period, recognised as a proportional share-based payment expense during each reporting period, with the corresponding credit taken to a Share Option Reserve.

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2017

Note 14. Financial Assets

Fair value hierarchy

AASB 13 requires disclosure of fair value measurements by level of fair value hierarchy, as follows:

• Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - a valuation technique is used using inputs other than quoted prices within Level 1 that are observable for financial instruments, either directly (i.e. as prices), or indirectly (i.e. derived from prices); or

• Level 3 - a valuation technique is used using inputs that are not based on observable market data (unobservable inputs).

Assets		Level 1	Level 2	Level 3	Total
30 June 2017
Available-for-sale financial assets
Listed equity securities	(a)	275	-	-	275
Unlisted equity securities		-	-	-	-
		275	-	-	275
30 June 2016
Available-for-sale financial assets
Listed equity securities	(a)	2,032	-	-	2,032
Unlisted equity securities		-	-	-	-
		2,032	-	-	2,032

(a) Listed Securities

Fair values have been determined by reference to their quoted bid prices at reporting date.

Note 15. Investments Accounted for Using the Equity Method

Summary of Acquisitions

In 2017, there were nil acquisitions (2016: nil).

Summary of Disposals

In 2017, there were nil disposals (2016: nil).

Note 16. Contingent Liabilities

The Group has a contingent liability of $4.808M, being the amount of the rental arrears of $1.080M waived and all rent reductions of approximately $3.728M to the end of the lease term for each Coaltram, in the event that PPK Mining Equipment Group Pty Ltd, PPK Mining Equipment Pty Ltd, PPK Mining Equipment Hire Pty Ltd, PPK Mining Repairs Alternators Pty Ltd or PPK Firefly Pty Ltd experiences an insolvency event before 13 October 2020.

The Group has a bank guarantee of $0.140M 100% secured by a term deposit of the same amount (2016: $0.140M).

Note 17. Events subsequent to the end of the Reporting Date

PPK held its Annual General Meeting for the year ended 30 June 2015 and 30 June 2016 on Monday, 14 August 2017 and was relisted on the ASX on Wednesday, 16 August 2017.

Other than the aforementioned matters, no other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in this report or in the Consolidated Financial Statements that has significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in subsequent financial years.

AUDIT STATUS

The accounts are currently in the process of being audited.

NOTES TO AND FORMING PART OF THE ACCOUNTS

FOR THE YEAR ENDED 30 JUNE 2017

Note 18. Segment Information

The segments are as follows:

• The Investment Property segment sold its last industrial property during the year.
• The Investing segment still owns a small portfolio of listed shares at year end.
• The Mining Equipment segment designs, manufactures and distributes underground mining equipment.

Year ended 30 June 2017	Investment	Investing	Mining
Business Segments	Properties		Equipment	Total
	$000s	$000s	$000s	$000s
Segment revenue from external customers
Sales, Service, Hire Revenue	-	-	28,945	28,945
Rental income	273	-	-	273
	273	-	28,945	29,218
Segment other income
Gain on sale of investment property	4,433	-	-	4,433
Gain on sale of available-for-sale financial assets	-	244	-	244
Sundry Income	-	-	35	35
Recovery of debt previously written off	-	396	-	396
	4,433	640	35	5,108
Finance income	-	53	-	53
Total revenue and other income	4,706	693	28,980	34,379
Segment expenses include
Employee Benefits	-	-	11,227	11,227
Defined contribution superannuation expenses	-	-	829	829
Administration expense	306	5	2,580	2,891
Rental expense on operating lease			2,710	2,710
Warranty costs			98	98
Doubtful debts			159	159
Redundancy and relocation costs	-	-	23	23
Depreciation and amortisation	25	-	1,467	1,492
Impairment of available-for-sale financial assets	-	24	-	24
Impairment of plant and equipment	-	-	42	42
Inventory write-down	-	-	436	436
Provision for major overhaul	-	-	930	930
Net loss on disposal of fixed asset	-	-	9	9
	331	29	20,510	20,870
Cost of Sales	-	-	12,102	12,102
Research and Development	-	-	373	373
Unwind/(reversal) of onerous contract provision	-	-	(1,630)	(1,630)
Interest Expense			530	530
Unwind/(reversal) of discount on onerous lease contract			(180)	(180)
Total Expense	331	29	31,705	32,065
Segment result	4,375	664	(2,725)	2,314
Reconciliation of segment result to net profit attributable to owners of PPK Group Limited	d
Amounts not included in segment result but reviewed by the Board
Share of profit from associates accounted for using the equity method				-
Unallocated corporate income & expenses				(1,754)
Consolidated operating profit (loss) before income tax				560
Non-controlling interests share of after tax profit				-
Income tax benefit (expense)				-
Consolidated operating profit (loss) after income tax attributable to owners of PPK Group	Ltd			560

Cost of sales includes a credit for $1.080M for the rental arrears of the Coaltrams leases waived in relation to the Glegra transaction (see Note 5).

FOR THE YEAR ENDED 30 JUNE 2017

NOTES TO AND FORMING PART OF THE ACCOUNTS

Note 18. Segment Information (Cont'd) Year ended 30 June 2016

Business Segments	Investment	Investing	Mining
	Properties		Equipment	Total
	$000s	$000s	$000s	$000s
Segment revenue from external customers
Sales Revenue	-	-	26,075	26,075
Rental income	585	-	-	585
Interest Received	-	495	-	495
	585	495	26,075	27,155
Segment other income
Gain on sale of available-for-sale financial assets	-	1,548	-	1,548
Sundry Income	4	1	44	49
	4	1,549	44	1,597
Total revenue and other income	589	2,044	26,119	28,752
Segment expenses include
Depreciation and amortisation	79	-	1,218	1,297
Impairment of available-for-sale financial assets	-	82	-	82
Impairment of intangibles	-	-	-	-
Impairment of plant & equipment	-	-	-	-
Inventory write-down	-	-	682	682
Unwind of onerous contract liability	-	-	(550)	(550)
Segment result	510	1,721	(6,699)	(4,468)

Reconciliation of segment result to net profit attributable to owners of PPK Group Ltd

Amounts not included in segment result but reviewed by the Board
Share of profit from associates accounted for using the equity method	(389)
Share-based payment expense	(103)
Unallocated corporate income & expenses	(1,898)
Unallocated interest expense	(1,015)
Consolidated operating loss before income tax	(7,873)
Non-controlling interests share of after tax profit	(23)
Income tax (expense)	133
Consolidated operating loss after income tax attributable to owners of PPK Group Ltd	(7,763)