PRO-PAC PACKAGING LIMITED — Annual Report 2009

Aug 26, 2009

PRO-PAC PACKAGING LIMITED (ASX: PPG)

RESULTS FOR THE YEAR ENDED 30 JUNE 2009

PRO-PAC RECORDS SOLID PERFORMANCE

In a challenging environment, Pro-Pac Packaging Limited (ASX: PPG) recorded a solid performance in the year ended 30 June 2009, with revenue growth of 3% to $73.9m and a 25% improvement in net profit after tax (PAT) to $2.3m.

The year was characterised by two distinct halves.

In the first six months ended 31 December 2008, profit contracted reflecting, in part, subdued consumer demand and supply chain deleveraging. These negative influences were further exacerbated by volatile input costs and volatile foreign exchange movements.

By contrast, during the second half of the financial year, despite being traditionally a slower trading period, the Company achieved improved revenues and significantly better profitability and cashflows.

While the improved performance in the second half was in part due to a reversal of the trends experienced in the first half, with more stable input prices and a relatively strong dollar, a major contributor to second half performance was the Company’s focus on winning new quality work from major corporate customers at acceptable margins. Organic growth was supplemented during the financial year by the acquisition of the businesses of Fastway Industrial Packaging and Packstrap International. Combined, these businesses made a positive contribution to both revenues and profits.

The new major account growth in the second half of the financial year required a significant increase in investment in working capital, constraining cashflow from operations which was $2.8m for the financial year.

Having regard to the improved performance in the second half, the Directors have resolved to declare a fully franked final dividend of 0.5 cents per share. The Company’s Dividend Reinvestment Plan (DRP) will apply. The Record Date for the dividend is 8 September 2009 and the Payment Date is 16 October 2009.

As the Company enters the 2010 financial year, its focus is on profitable growth and continued logistics and operational improvement. While management continues to assess new innovative products and continues to pursue new markets and new customers, management will also apply additional focus on operational and logistics efficiencies to manage higher trading volumes. With two acquisitions in 2008/09, the Company continues to deliver on its acquisitive growth program and is continuing to assess further strategic acquisition opportunities. The quality of acquisition candidates has improved and valuations have moderated as credit markets remain tight.

Pro Pac Packaging Limited Appendix 4E – 30 June 2009

About PPG

PPG is a leading Australian provider of innovative packaging solutions. Its operations span flexible, biodegradable void fill, and rigid packaging requirements. PPG is headquartered in Sydney, with offices in Adelaide, Brisbane and Melbourne. PPG’s securities are listed and quoted on the ASX.

For further information, please contact Mr John Read, Chairman, Pro-Pac Packaging Limited on (02) 9087 8000.

JOHN D READ

CHAIRMAN 27 AUGUST 2009

2

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

Appendix 4E

Preliminary Final Report Results for announcement to the market

Pro-Pac Packaging Limited for the year ended 30 June 2009

Reporting period : year to June 2009 Previous corresponding period : year to June 2008

Results

Revenues from ordinary activities	up	3%	to	$ 73,872,532
Profit from ordinary activities after tax attributable to
members	up	25%	to	$ 2,263,220
Net profit for the year attributable to members	up	25%	to	$ 2,263,220

Dividends (distributions )

	Amount per security	Amount per security	Franked amount per security
Final Dividend	0.5¢		0.5¢
Interim Dividend	Nil		Nil
Information on Dividends: The Company has declared a fully franked final dividend of 0.5 cents per share which will be paid on 16 October 2009. The Company’s Dividend Reinvestment Plan will apply to this dividend. A discount of 3% to the volume weighted average sale price per share during the four trading days up to and including the record date for determining the entitlements, will apply to shareholders who elect to participate in the Company’s Dividend Reinvestment Plan.
Record date for determiningentitlements to the final dividend		8 September 2009
Last date for elections toparticipate in the Dividend Reinvestment Plan		8 September 2009

Commentary

Please refer to the attached commentary for a more detailed review of the Group and the ongoing operations and expectations for the future of the underlying Pro-Pac Packaging business.

3

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

INCOME STATEMENT

FOR THE YEAR TO 30 JUNE 2009

	Notes	Consolidated	Consolidated
		2009	2008
		$	$
Revenue from sale of goods and services		73,872,532	71,922,668
Interest income		72,115	163,838
		────────	────────
Total Revenues From Ordinary Activities		73,944,647	72,086,506
		────────	────────
Expenses
Amortisation of pre paid royalty		322,082	293,160
Depreciation		1,657,635	1,642,430
Distribution expenses		2,784,861	2,600,314
Employee expenses		14,080,075	13,710,088
Financing costs		708,408	679,242
Occupancy expenses		2,464,623	2,569,043
Other expenses from ordinary activities		4,947,212	4,986,977
Rationalisation and relocation expenses		-	647,053
Raw materials and consumables used		43,899,938	42,379,230
		────────	────────
Profit from Ordinary Activities Before Related Income Tax Expense		3,079,813	2,578,969
Income tax expense	5	816,593	771,218
		────────	────────
Net Profit	14	2,263,220	1,807,751
		════════	════════

4

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

BALANCE SHEET

AS AT 30 JUNE 2009

	Notes	Consolidated	Consolidated
		2009	2008
		$	$
CURRENT ASSETS
Cash and cash equivalents	15	2,174,457	2,562,730
Trade and other receivables	6	12,547,094	11,537,797
Inventories	7	7,622,320	6,181,090
Prepayments		766,234	707,851
		────────	────────
Total Current Assets		23,110,105	20,989,468
		────────	────────
NON-CURRENT ASSETS
Property, plant and equipment	8	9,845,985	9,003,040
Intangible assets	9	38,195,247	36,784,888
Deferred tax assets		634,690	600,133
Prepayments		1,638,658	1,992,786
		────────	────────
Total Non-Current Assets		50,314,580	48,380,847
		────────	────────
TOTAL ASSETS		73,424,685	69,370,315
		────────	────────
CURRENT LIABILITIES
Trade and other payables	10	9,933,254	9,811,012
Interest bearing borrowings		1,568,225	1,364,628
Provisions	11	1,547,302	1,194,918
Current tax liabilities		315,089	260,705
		────────	────────
Total Current Liabilities		13,363,870	12,631,263
		────────	────────
NON-CURRENT LIABILITIES
Provisions	11	403,602	310,496
Interest bearing borrowings		8,963,668	7,372,174
		────────	────────
Total Non-Current Liabilities		9,367,270	7,682,670
		────────	────────
TOTAL LIABILITIES		22,731,140	20,313,933
		────────	────────
NET ASSETS		50,693,545	49,056,382
		════════	════════
EQUITY
Contributed equity	12	48,153,866	47,605,676
Other reserves	13	20,116	8,884
Retained profits	14	2,519,563	1,441,822
		────────	────────
TOTAL EQUITY		50,693,545	49,056,382
		════════	════════

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Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

STATEMENT OF CASH FLOWS

FOR THE YEAR TO 30 JUNE 2009

	Notes	Consolidated	Consolidated
		2009	2008
		$	$
Cash flows from operating activities
Receipts from customers		73,325,914	71,925,474
Payments to suppliers and employees		(69,090,562)	(67,101,477)
Interest received		72,115	170,545
Interest paid		(698,981)	(775,254)
Income tax paid		(796,766)	(547,586)
		────────	────────
Net Cash flows from operating activities	15	2,811,720	3,671,702
		────────	────────
Cash flows from investing activities
Payments for property, plant and equipment		(641,296)	(1,091,716)
Proceeds from sale of property, plant and equipment		155,455	222,672
Payment for controlled entities net of cash		-	(12,984,737)
Payment for unincorporated businesses net of cash acquired		(2,227,439)	(193,508)
		────────	────────
Net Cash flows used in investing activities		(2,713,280)	(14,047,289)
		────────	────────
Cash flows from financing activities
Payment of hire purchase and finance lease liabilities		(1,326,555)	(1,328,518)
Proceeds from borrowings		1,477,133	2,955,851
Bank bills repaid		-	(6,630,000)
Proceeds from issue of shares		-	17,200,000
Dividends paid		(637,291)	(899,399)
Costs of issue of shares		-	(37,107)
		────────	────────
Net cash flows provided by / (used in) financing activities		(486,713)	11,260,827
		────────	────────
Net increase / (decrease) in cash and cash equivalents		(388,273)	885,240
Cash and cash equivalents at beginning of financial year		2,562,730	1,677,490
		────────	────────
Cash and cash equivalents at end of financial year	15	2,174,457	2,562,730
		════════	════════
Non cash financing transactions
Hire purchase and Finance lease liabilities raised		1,678,307	1,372,500
Issue of shares for dividend re-investment plan		548,190	699,388

6

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR TO 30 JUNE 2009

	Issued	Retained	Option	Total
	Capital	Earnings	Reserve	Equity
	$	$	$	$
Balance as at 1 July 2008	47,605,676	1,441,822	8,884	49,056,382
Issue of shares for dividend re-investment plan	548,190	-	-	548,190
Dividend paid	-	(1,185,479)	-	(1,185,479)
Recognition of share based payments	-	-	11,232	11,232
Profit for the year	-	2,263,220	-	2,263,220
	───────	───────	───────	───────
At 30 June 2009	48,153,866	2,519,563	20,116	50,693,545
	───────	───────	───────	───────
Balance as at 1 July 2007	18,729,203	1,222,496	11,300	19,962,999
Shares issued to Plastic Bottles Group shareholders	11,003,060	-	-	11,003,060
Shares issued under share placement	17,200,000	-	-	17,200,000
Costs of raising shares	(37,107)	-	-	(37,107)
Future income tax benefit associated with costs of raising
shares	11,132	-	-	11,132
Issue of shares for dividend re-investment plan	699,388	-	-	699,388
Dividend paid	-	(1,598,787)	-	(1,598,787)
Recognition of share based payments	-	-	7,946	7,946
Cancellation of cost of ESPP shares	-	10,362	(10,362)	-
Profit for the year	-	1,807,751	-	1,807,751
	───────	───────	───────	───────
Balance as at 30 June 2008	47,605,676	1,441,822	8,884	49,056,382
	───────	───────	───────	───────

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Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 1: AUSTRALIAN EQUIVALENTS TO INTERNATIONAL FINANCIAL REPORTING STANDARDS

This financial report is prepared in accordance with Australian Equivalents to International Financial Reporting Standards (“AIFRS”).

NOTE 2: EARNINGS PER SHARE

OTE 2: EARNINGS PER SHARE
	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 09	30 June 08
	Cents	Cents
Basic earnings per share *	1.90	1.69
	═════	═════
Diluted earnings per share *	1.90	1.69
	═════	═════
Reconciliation of earnings used in calculation of earnings per share:
	$	$
Profit after income tax	2,263,220	1,807,751
	═════	═════
	No. of Shares	No. of Shares
Weighted average number of ordinary shares used in the calculation of basic and diluted earnings per share	119,011,351	106,919,186
	═════	═════
Number of ordinary shares on issue at year end (including ESPP shares)	120,160,300	120,027,989
	═════	═════

• The difference between basic and diluted shares on issue represents the PPG Executive Long Term Incentive Plan shares on issue which are treated as an option grant. As the average exercise price of the options was higher than the average market price per share during both the current and prior years, the options would not have been exercised and therefore no dilution has occurred.

NOTE 3: DIVIDENDS

The Directors of Pro-Pac Packaging Limited have declared a final fully franked dividend of one half cent (0.5c) per share in respect of the financial year ended 30 June 2009. No interim was paid.

NOTE 4: NET TANGIBLE ASSETS PER SECURITY

OTE 4: NET TANGIBLE ASSETS PER SECURITY
	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 09	30 June 08
	Cents	Cents
Net tangible assets per security - basic	8.29	8.21
	═══════	═══════
Net tangible assets per security - diluted	8.24	8.07
	═══════	═══════
Net assets per security – basic	42.43	41.62
	═══════	═══════
Net assets per security - diluted	42.19	40.87
	═══════	═══════

8

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2009	30 June 2008
	$	$
NOTE 5: TAXATION
a) Income Tax Expense:	816,593	771,218
Income tax expense:
Prima facie income tax expense calculated at 30% on the profit from ordinary activities	923,944	773,691
Decrease in income tax expense due to:
Special tax allowances net of expenditure not allowable for tax purposes	(57,713)	6,659
Adjustment in respect of prior years	(49,638)	(9,132)
	────────	────────
Income tax expense attributable to profit from ordinary activities	816,593	771,218
	════════	════════
b) Current Tax Liabilities:
Income tax payable	315,089	260,705
	════════	════════
c) Non-Current Tax Assets:
Deferred tax asset	634,690	600,133
	════════	════════
NOTE 6: RECEIVABLES
Current
Trade receivables	12,423,718	11,300,130
Provision for doubtful debts	(198,400)	(101,095)
	────────	────────
	12,225,318	11,199,035
Other debtors	321,776	338,762
	────────	────────
Total Current Receivables	12,547,094	11,537,797
	════════	════════
NOTE 7: INVENTORIES
Current
Raw materials and work in progress	831,280	483,313
Finished goods at net realisable value	6,791,040	5,697,777
	────────	────────
Total Inventories	7,622,320	6,181,090
	════════	════════

9

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2009	30 June 2008
	$	$
Note 8: PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost	19,281,111	17,298,602
Accumulated depreciation	(9,435,126)	(8,295,562)
	────────	────────
Total plant and equipment	9,845,985	9,003,040
	════════	════════
Note 9: INTANGIBLE ASSETS
Goodwill	38,195,247	36,784,888
	════════	════════
Reconciliation
Carrying amount at beginning of the year	36,784,888	14,369,928
Acquisition of businesses	1,410,359	22,414,960
	────────	────────
Total goodwill	38,195,247	36,784,888
	════════	════════
NOTE 10: PAYABLES
Current
Trade creditors	8,175,857	8,156,226
GST payable	421,870	324,934
Other tax payable	243,476	93,226
Sundry creditors and accruals	1,092,051	1,236,626
	────────	────────
	9,933,254	9,811,012
	════════	════════
NOTE 11: PROVISIONS
Current
Employee entitlements	1,547,302	1,194,918
	════════	════════
Non-Current
Employee entitlements	403,602	310,496
	════════	════════

10

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
NOTE 12: CONTRIBUTED EQUITY
2009	Number	$
Issued and Paid-Up Share Capital
Fully paid ordinary shares:	120,160,300	48,153,866
	════════	════════
Movements during the year:
Balance at beginning of year	120,027,989	47,605,676
Issue of shares for executive long term incentive plan
Cancellation of shares for executive long term incentive plan	(1,480,000)	-
Issue of shares for dividend re-investment plan	1,612,311	548,190
	────────	────────
	120,160,300	48,153,866
	════════	═══════
2008	Number	$
Issued and Paid-Up Share Capital
Fully paid ordinary shares:	120,027,989	47,605,676
	════════	════════
Movements during the year:
Balance at beginning of year	43,255,437	18,729,203
Issue of shares for executive long term incentive plan	625,000	-
Cancellation of shares for executive long term incentive plan	(2,044,311)	-
Cost of raising shares	-	(37,107)
Future income tax benefit associated with costs of raising shares	-	11,132
Shares issued to Plastic Bottle Group shareholders	29,738,000	11,003,060
Shares issued under share placement	46,486,486	17,200,000
Issue of shares for dividend re-investment plan	1,967,377	699,388
	────────	────────
	120,027,989	47,605,676
	════════	═══════

Shares issued under the Long Term Executive Incentive Plan are subject to restrictions until January 2010 and November 2010 in accordance with the terms of the plan.

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2009	30 June 2008
	$	$
NOTE 13: OTHER RESERVES
Options Reserve
Balance brought forward	8,884	11,300
Recognition of share based payments	11,232	7,946
Transfer to retained earnings on cancellation of ESPP shares	-	(10,362)
	────────	────────
Balance carried forward	20,116	8,884
	════════	════════

11

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2009	30 June 2008
	$	$
NOTE 14: RETAINED PROFITS
Retained profits at the beginning of the year	1,441,822	1,222,496
Net profit attributable to members of the company	2,263,220	1,807,751
Dividend paid	(1,185,479)	(1,598,787)
Transfer from Other reserve	-	10,362
	────────	────────
Retained Profits at the End of the year	2,519,563	1,441,822
	════════	════════

NOTE 15: NOTES TO THE STATEMENT OF CASH FLOWS

a) Reconciliation of Cash

For the purposes of the statements of cash flows, cash includes cash on hand and at bank and short-term deposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statements of cash flows is reconciled to the related items in the statements of financial position as follows:

Cash Assets	2,174,457	2,562,730
	════════	════════
b) Reconciliation of profit from ordinary activities after income tax to the net cash provided by operating activities:
Profit from ordinary activities after income tax	2,263,220	1,807,751
Add/(Less) non-cash items:
Depreciation and amortisation of plant and equipment	1,657,635	1,642,430
Amortisation of pre paid royalty	322,082	293,160
(Profit) / loss on disposal of assets	(5,450)	183,464
Movement in income tax provision	54,383	195,916
Movement in deferred tax assets & liabilities	(34,556)	27,716
Movement in provision for bad debts	97,305	23,584
Other Non-cash movements	20,474	-
Changes in Assets and Liabilities:
Receivables	(1,105,990)	177,177
Inventories	(853,468)	(906,959)
Payables	230,737	150,618
Provisions	329,938	(68,304)
Prepayments	(164,590)	233,215
Other Current Assets	-	(88,066)
	────────	────────
Net cash flows from operating activities	2,811,720	3,671,702
	════════	════════

12

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 16: CONTROLLED ENTITIES

a) Particulars in Relation to Controlled Entities

The consolidated entity includes the following controlled entities. The financial years of all controlled entities are the same as that of the parent entity. All companies are incorporated in Australia.

	Parent Company
	Interest Held
Direct Controlled Entities:
Pro-Pac Group Pty Ltd	100%
Plastic Bottles Pty Ltd	100%
Controlled Entities owned 100% by Pro-Pac Group Limited
Pro-Pac Packaging (Aust) Pty Ltd	100%
Pro-Pac (GLP) Pty Ltd	100%
Controlled Entities owned 100% by Pro-Pac Packaging (Aust) Pty Ltd
Pro-Pac Packaging Manufacturing (Syd) Pty Ltd	100%
Pro-Pac Packaging Manufacturing (Melb) Pty Ltd	100%
Pro-Pac Packaging Manufacturing (Bris) Pty Ltd	100%
Controlled Entities owned 100% by Plastic Bottles Pty Ltd
Speciality Products and Dispensers Pty Ltd	100%
Australian Bottle Manufacturers Pty Ltd	100%
Ctech Closures Pty Ltd	100%
Bev Cap Pty Ltd	100%
Controlled Entities owned 100% by Bev Cap Pty Ltd
Great Lakes Moulding Pty Ltd	100%
Finpact Pty Ltd	100%

NOTE 17: SEGMENT REPORTING

The Group operates solely as a distributor and manufacturer of packaging materials within Australia. As such there is only one business and geographical segment.

NOTE 18: AUDIT STATUS

This report is based on financial reports that are in the process of being audited.

Note 19: LONG TERM EXECUTIVE INCENTIVE PLAN

Under AIFRS, shares issued to executives under the Long Term Executive Incentive Plan are considered to be options granted. As such, the contributed equity (share capital) as well as the related receivable are not recognised on the balance sheet and do not form part of the asset base in the calculation of the basic net assets and basic net tangible assets per security.

13

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

NOTE 20: SIGNIFICANT EVENTS DURING THE PERIOD

Acquisition of businesses

Effective 1 November 2008, Pro-Pac Packaging (Aust) Pty Ltd, a wholly owned subsidiary, acquired the business and assets of a complementary Sydney based, general packaging distributor.

Effective 3 March 2009, Pro-Pac Packaging (Aust) Pty Ltd, acquired the business and assets of the Sydney and Melbourne based, niche general packaging distributor.

The effect of the above transactions can be summarised as follows:

NET ASSETS ACQUIRED Assets Current Assets Inventories Total Current Assets Non-Current Assets Property, plant and equipment Total Non-Current Assets Total Assets Liabilities Current Liabilities Other liabilities Total Current Liabilities Non-Current Liabilities Other liabilities Total Non-Current Liabilities Total Liabilities NET ASSETS CONSIDERATION PAID Cash Deferred consideration Total GOODWILL	$
	592,608
	592,608
	340,023
	340,023
	932,631
	77,015
	77,015
	38,536
	38,536
	115,551
	817,080
	1,757,439 470,000
	2,227,439
	1,410,359

14

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

NOTE 21: CONTINGENT LIABILITIES

As at balance sheet date the company issued security deposit guarantees to the value of $46, 743 to the landlords of rented premises.

NOTE: 22 CAPITAL EXPENDITURE COMMITMENTS

As at balance sheet date the company had commitments for future capital expenditure of $290,582.

NOTE: 23 EVENTS SUBSEQUENT TO YEAR END

There are no significant events subsequent to year end.

15

Pro Pac Packaging Limited

Appendix 4E – 30 June 2009

PRO-PAC PACKAGING LIMITED

(AND ITS CONTROLLED ENTITIES)

Compliance statement

1. This preliminary report has been prepared in accordance with Australian Accounting Standards which includes Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures compliance with International Financial Reporting Standards (IFRS). The preliminary report is also in accordance with other AASB authoritative pronouncements and Urgent Issues Group Consensus Views or other standards acceptable to ASX.

2. This preliminary report, and the accounts upon which the report is based, use the same accounting policies.

3. This preliminary report does give a true and fair view of the matters disclosed.

4. The accounts are in the process of being audited, no audit report is attached.

5. The entity has a formally constituted audit committee.

==> picture [124 x 43] intentionally omitted <==

Sign here: Date: 27 August 2009 (Director)

Print Name: Brandon Penn

16