PRO-PAC PACKAGING LIMITED — Annual Report 2014

Aug 21, 2014

PRO-PAC PACKAGING LIMITED (ASX: PPG)

COMMENTARY ON RESULTS FOR THE 2014 FINANCIAL YEAR

Momentum in top line growth continued with year on year revenue growing strongly by 26% ($45 million) to $218 million, of which organic growth accounted for approximately 50% of the total increase in sales. The Company is forecasting further revenue growth in both its Industrial and Rigid divisions in FY15.

Despite continued difficult general industry trading conditions, rising resin and raw material input prices and adverse margin impacts from the material downward movement in the A$/US$ exchange rate during the year, the strategies adopted together with the investment in infrastructure over the past couple of years enabled the Company to record a 22% increase in EBITDA, up from $11.1m in FY13 to $13.5m in FY14. Profit after tax was up 19% to $6.1m.

The focus on cost out strategies has started to yield results with administration, distribution and selling expenses reducing from 25.7% in FY13 to 22.1% as a percentage of sales in FY14. Ongoing cost saving initiatives should result in a further improvement in the 2015 financial year.

While FY14 was a year of consolidation, the Company has a current pipeline of acquisition opportunities which it is continuing to assess.

A fully franked interim dividend of one cent per share was paid on 20 May 2014. The Company has today declared a fully franked final dividend of one cent per share. The record date for determining entitlement to the dividend is 11 September 2014 and the dividend will be paid on 4 November 2014. The Company’s Dividend Reinvestment Plan will not apply to this dividend.

Enquiries

For further information please contact Mr. Brandon Penn, CEO, Pro-Pac Packaging Limited on Tel (02) 8781 0500.

About PPG

Pro-Pac Packaging Limited is a diversified manufacturing and distribution company, providing innovative, flexible and rigid packaging solutions for a broad group of clients. PPG is headquartered in Sydney with operations in Adelaide, Brisbane, Melbourne and Perth. PPG’s securities are listed and quoted on the ASX. For further information on PPG visit www.ppgaust.com.au

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

Appendix 4E

Preliminary Final Report Results for announcement to the market

Pro-Pac Packaging Limited for the year ended 30 June 2014

Reporting period : year to June 2014 Previous corresponding period : year to June 2013

Results

				$000’s
Revenue from ordinary activities	up	26%	to	218,273
Earnings Before Interest, Tax, Depreciation and Amortisation	up	22%	to	13,502
Profit from continuing operations after tax attributable
to shareholders	up	19%	to	6,131
Net profit for the year attributable to shareholders	up	19%	to	6,131

Dividends (distributions )

	Amount per security	Amount per security	Franked amount per security
Final Dividend	1.0¢		1.0¢
Interim Dividend	1.0¢		1.0¢
Information on Dividends: The Company has declared a fully franked final dividend of 1.0 cent per share which will be paid on 4 November 2014. The Company’s Dividend Reinvestment Plan will not apply to this dividend.
Record date for determiningentitlements to the final dividend		11 September 2014
Last date for elections toparticipate in the Dividend Reinvestment Plan		Not applicable

Commentary

Please refer to the attached commentary for a more detailed review of the Company.

2

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE YEAR TO 30 JUNE 2014

	Notes	Consolidated	Consolidated
		2014	2013
		$000’s	$000’s
Revenue
Sale of goods and services		218,273	173,131
Other income		415	234
Interest income		74	62
		────────	────────
Total Revenues		218,762	173,427
		────────	────────
Expenses
Amortisation of prepaid royalty		322	322
Depreciation expense		3,128	2,747
Distribution costs		8,067	6,220
Employee benefits expense		33,558	28,054
Finance costs		1,372	839
Occupancy costs		7,531	6,228
Other expenses from ordinary activities		11,025	11,316
Raw materials and consumables used		144,405	108,733
Relocation and rationalisation expenses		600	1,740
		────────	────────
Total Expenses		210,008	166,199
Profit before income tax		8,754	7,228
Income tax expense	4	(2,623)	(2,074)
		────────	────────
Profit after tax from continuing operations	13	6,131	5,154
Other comprehensive income		-	-
		────────	────────
Total comprehensive income for the period		6,131	5,154
		────────	────────
Earnings per share (cents per share) for the profit from continuing
operations attributable to the ordinary equity holders of the parent
- Basic earnings per share	1	2.91	2.46
- Diluted earnings per share	1	2.88	2.44

3

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2014

	Notes	Consolidated	Consolidated
		2014	2013
		$000’s	$000’s
ASSETS
CURRENT ASSETS
Cash and cash equivalents	14	3,580	2,247
Trade and other receivables	5	35,592	30,645
Inventories	6	34,235	28,091
Prepayments		3,399	3,125
		────────	────────
Total Current Assets		76,806	64,108
		────────	────────
NON-CURRENT ASSETS
Property, plant and equipment	7	16,962	17,610
Intangible assets	8	68,793	67,867
Deferred tax assets	4	2,323	2,101
Prepayments		28	350
		────────	────────
Total Non-Current Assets		88,106	87,928
		────────	────────
TOTAL ASSETS		164,912	152,036
		────────	────────
LIABILITIES
CURRENT LIABILITIES
Trade and other payables	9	30,385	24,681
Interest bearing trade finance		2,559	2,036
Interest bearing borrowings		1,550	1,666
Provisions	10	3,705	3,651
Current tax liabilities	4	648	569
		────────	────────
Total Current Liabilities		38,847	32,603
		────────	────────
NON-CURRENT LIABILITIES
Other payables	9	-	2,625
Provisions	10	773	695
Interest bearing borrowings		19,791	18,780
		────────	────────
Total Non-Current Liabilities		20,564	22,100
		────────	────────
TOTAL LIABILITIES		59,411	54,703
		────────	────────
NET ASSETS		105,501	97,333
		════════	════════
EQUITY
Issued capital	11	91,548	85,285
Other reserves	12	99	71
Retained earnings	13	13,854	11,977
		────────	────────
TOTAL EQUITY		105,501	97,333
		════════	════════

4

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR TO 30 JUNE 2014

	Notes	Consolidated	Consolidated
		2014	2013
		$000’s	$000’s
Cash flows from operating activities
Receipts from customers (inclusive of GST)		217,434	176,071
Payments to suppliers and employees (inclusive of GST)		(208,256)	(167,194)
Interest received		74	62
Finance costs		(1,448)	(777)
Income tax paid		(2,766)	(2,353)
Relocation, restructuring and business combination costs		(600)	(1,740)
		────────	────────
Net cash flows from operating activities	14	4,438	4,069
		────────	────────
Cash flows from investing activities
Payments for property, plant and equipment		(2,872)	(2,938)
Proceeds from sale of property, plant and equipment		377	61
Payment for unincorporated businesses net of cash acquired		(1,051)	(10,907)
Working capital for businesses acquired		(3,062)	(5,839)
		────────	────────
Net cash flows used in investing activities		(6,608)	(19,623)
		────────	────────
Cash flows from financing activities
Payment of hire purchase and finance lease liabilities		(2,091)	(2,040)
Finance leases raised		1,803	1,267
Proceeds from borrowings		1,783	18,886
Proceeds from issue of shares		4,515	-
Proceeds from vesting of ESPP shares		368	-
Dividends paid		(2,875)	(4,223)
		────────	────────
Net cash flows provided by financing activities		3,503	13,890
		────────	────────
Net increase / (decrease) in cash and cash equivalents		1,333	(1,664)
Cash and cash equivalents at beginning of financial year		2,247	3,911
		────────	────────
Cash and cash equivalents at end of financial year	14	3,580	2,247
		════════	════════
Non cash financing transactions
Hire purchase and finance lease liabilities raised		1,803	1,267
Issue of shares for dividend re-investment plan		1,380	-

5

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR TO 30 JUNE 2014

	Issued	Retained	Option	Total
	Capital	Earnings	Reserve	Equity
	$000’s	$000’s	$000’s	$000’s
Consolidated
Balance as at 1 July 2012	85,285	11,046	56	96,387
Dividends paid	-	(4,223)	-	(4,223)
Recognition of share based payments	-	-	15	15
Total comprehensive income for the year	-	5,154	-	5,154
	───────	───────	───────	───────
Balance as at 30 June 2013	85,285	11,977	71	97,333
	───────	───────	───────	───────
Issue of shares for dividend re-investment plan	1,380	-	-	1,380
Dividends paid	-	(4,254)	-	(4,254)
Recognition of share based payments	-	-	28	28
Vesting of ESPP shares	368			368
Shares issued under share placement	4,515			4,515
Total comprehensive income for the year	-	6,131	-	6,131
	───────	───────	───────	───────
Balance as at 30 June 2014	91,548	13,854	99	105,501
	───────	───────	───────	───────

6

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 1: EARNINGS PER SHARE

OTE 1: EARNINGS PER SHARE
	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 14	30 June 13
	Cents	Cents
Basic earnings per share *	2.91	2.46
Diluted earnings per share *	2.88	2.44
Reconciliation of earnings used in calculation of earnings per share:
	$000’s	$000’s
Profit after income tax	6,131	5,154
	═════	═════
	No. of Shares	No. of Shares
Weighted average number of ordinary shares used in the calculation of basic earnings per share	210,854,244	209,452,804
Weighted average number of ordinary shares used in the calculation of basic diluted earnings per share	212,967,211	211,195,716
	═════	═════
Number of ordinary shares on issue at year end (including ESPP shares)	226,693,758	211,257,804
	═════	═════

• The difference between basic and diluted shares on issue represents the PPG Executive Long Term Incentive Plan (ESPP) shares on issue which are treated as an option grant as well as options issued.

NOTE 2: DIVIDENDS

The Directors of Pro-Pac Packaging Limited have declared a final fully franked dividend of one cent (1.0 c) per share in respect of the financial year ended 30 June 2014. When combined with the interim dividend of one cent (1.0 c) per share paid on 20 May 2014, this represents fully franked dividends of two cents (2.0 c) per share for the 2013/14 financial year.

NOTE 3: NET TANGIBLE ASSETS PER SECURITY

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 14	30 June 13
	Cents	Cents
Net tangible assets per security – basic	15.19	12.74
	═══════	═══════
Net assets per security – basic	47.10	46.47
	═══════	═══════

7

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2014	30 June 2013
	$000’s	$000’s
NOTE 4: TAXATION
a) Income Tax Expense:	2,623	2,074
Income tax expense:
Prima facie income tax expense calculated at 30% on the profit from ordinary activities	2,626	2,168
Decrease in income tax expense due to:
Other income not subject to tax net of expenditure not allowable for tax purposes	(3)	(94)
	────────	────────
Income tax expense attributable to profit from ordinary activities	2,623	2,074
	════════	════════
b) Current Tax Liabilities:
Income tax payable	648	569
	════════	════════
c) Non-Current Tax Assets:
Deferred tax asset	2,323	2,101
	════════	════════
NOTE 5: TRADE AND OTHER RECEIVABLES
Current
Trade receivables	34,784	29,767
Provision for impairment of receivables	(510)	(338)
	────────	────────
	34,274	29,429
Other debtors	1,318	1,216
	────────	────────
Total Current Receivables	35,592	30,645
	════════	════════
NOTE 6: INVENTORIES
Current
Raw materials and work in progress (lower of cost and net realisable value)	985	983
Finished goods (lower of cost and net realisable value)	33,250	27,108
	────────	────────
Total Inventories	34,235	28,091
	════════	════════

8

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2014	30 June 2013
	$000’s	$000’s
Note 7: PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost	28,670	27,787
Accumulated depreciation	(11,708)	(10,177)
	────────	────────
Total plant and equipment	16,962	17,610
	════════	════════
Note 8: INTANGIBLE ASSETS
Goodwill	68,793	67,867
	════════	════════
Reconciliation
Carrying amount at beginning of the year	67,867	56,226
Acquisition of businesses	926	11,641
	────────	────────
Total goodwill	68,793	67,867
	════════	════════
NOTE 9: PAYABLES
Current
Unsecured
Trade payables	18,222	15,355
GST payable	741	808
Other tax payable	672	525
Sundry creditors and accruals	6,760	4,431
Contingent deferred payments to vendors for acquisitions	3,990	3,562
	────────	────────
	30,385	24,681
	════════	════════
Non-current
Unsecured
Contingent deferred payments to vendors for acquisitions	-	2,625
	════════	════════
NOTE 10: PROVISIONS
Current
Employee entitlements	3,705	3,651
	════════	════════
Non-Current
Employee entitlements	773	695
	════════	════════

9

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
NOTE 11: ISSUED CAPITAL
2014	Number	$000’s
Issued and Paid-Up Share Capital
Fully paid ordinary shares:	226,693,758	91,548
	════════	════════
Movements during the year:
Balance at beginning of year	211,257,804	85,285
Vesting of ESPP shares	2,150,000	368
Cancellation of shares for Executive Long Term Incentive Plan	(150,000)	-
Issue of shares	10,500,000	4,515
Issue of shares for dividend re-investment plan	2,935,954	1,380
	────────	────────
	226,693,758	91,548
2013	Number	$000’s
Issued and Paid-Up Share Capital
Fully paid ordinary shares:	211,257,804	85,285
	════════	════════
Movements during the year:
Balance at beginning of year	210,987,804	85,285
Issue of shares for Executive Long Term Incentive Plan	430,000	-
Cancellation of shares for Executive Long Term Incentive Plan	(160,000)	-
	────────	────────
	211,257,804	85,285

During the year 1,200,000 share options were issued.

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2014	30 June 2013
	$000’s	$000’s
NOTE 12: OTHER RESERVES
Options Reserve
Balance brought forward	71	56
Recognition of share based payments	28	15
	────────	────────
Balance carried forward	99	71
	════════	════════

10

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED

NOTES TO THE PRELIMINARY FINAL REPORT

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 2014	30 June 2013
	$000’s	$000’s
NOTE 13: RETAINED PROFITS
Retained profits at the beginning of the year	11,977	11,046
Net profit attributable to members of the company	6,131	5,154
Dividends paid	(4,254)	(4,223)
	────────	────────
Retained profits at the end of the year	13,854	11,977
	════════	════════

NOTE 14: 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 statement of cash flows is reconciled to the related items in the statement of financial position as follows:

Cash Assets	3,580	2,247
	════════	════════
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	6,131	5,154
Add/(Less) non-cash items:
Depreciation and amortisation of plant and equipment	3,128	2,727
Amortisation of prepaid royalty	322	322
(Profit) / loss on disposal of assets	108	69
Movement in income tax provision	78	95
Movement in deferred tax assets & liabilities	(221)	(542)
Movement in provision for bad debts	183	(54)
Other non-cash movements	34	29
Changes in Assets and Liabilities:
Receivables	(3,831)	941
Inventories	(4,450)	(1,772)
Payables	3,137	(1,558)
Provisions	92	414
Prepayments	(273)	(1,756)
	────────	────────
Net cash flows from operating activities	4,438	4,069
	════════	════════

11

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 15: 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 except for PPG Services SDN BHD which is incorporated in Malaysia.

	Parent Company
	Interest Held
Direct Controlled Entities:
Pro-Pac Group Pty Ltd	100%
Plastic Bottles Pty Ltd	100%
PPG Services SDN BHD	100%
Controlled Entities owned 100% by Pro-Pac Group Pty Ltd
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%
Creative Packaging 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 16: OPERATING SEGMENTS

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group is managed primarily on the basis of product category and service offerings since the diversification of the Group’s operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis.

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

• the products sold and/or services provided by the segment;

• the manufacturing process;

Types of products and services by segment

Industrial packaging

The Industrial packaging division manufactures, sources and distributes industrial packaging materials and related products and services. All products produced or distributed are aggregated as one reportable segment as the products are similar in nature and are distributed to similar types of customers. The industrial packaging segment also installs, supports and maintains packaging machines.

12

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 16: OPERATING SEGMENTS (CONTINUED)

Rigid packaging

The Rigid packaging division manufactures, sources and distributes containers and closures and related products and services. All products produced or distributed are aggregated as one reportable segment as the products are similar in nature and are manufactured and distributed to similar types of customers.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter-segment transactions

An internally determined transfer price is set for all inter-entity sales. This price is re-set regularly and is usually based on what would be realised in the event the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation for the Group’s financial statements.

Inter-segment loans payable and receivable are initially recognised at the consideration received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates.

Segment Assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances segment assets are clearly identifiable on the basis of their nature and physical location.

Unless indicated otherwise in the assets role, investments in financial assets, deferred tax assets and intangible assets have not been allocated to operating segments.

Segment Liabilities

Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain borrowings.

Unallocated items

The following items of revenue, expenses, asset and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: impairment of assets and other non-recurring revenue or expenses; income tax expense; deferred tax asset and liabilities; current tax liabilities; other financial liabilities; intangible assets.

13

Pro-Pac Packaging Limited

Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 16: OPERATING SEGMENTS (CONTINUED)

(i) Segment performance 12 months ended 30 June Revenue External sales	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 2014 2014 2014 2014 2013 2013 2013 2013 53,653 164,620 - 218,273 51,815 121,316 - 173,131	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 2014 2014 2014 2014 2013 2013 2013 2013 53,653 164,620 - 218,273 51,815 121,316 - 173,131	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 2014 2014 2014 2014 2013 2013 2013 2013 53,653 164,620 - 218,273 51,815 121,316 - 173,131	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 2014 2014 2014 2014 2013 2013 2013 2013 53,653 164,620 - 218,273 51,815 121,316 - 173,131
Inter-segment sales	9,247 8,989 (18,236) - 7,687 8,338 (16,025) -
Total segment revenue	62,900 173,609 (18,236) 218,273 59,502 129,654 (16,025) 173,131
EBITDA	6,372 9,705 (2,575) 13,502 6,724 7,349 (2,999) 11,074
Depreciation and amortisation Interest revenue Finance costs Profit before income tax Income tax expense Profit after income tax	(1,502) (1,775) (173) (3,450) (1,427) (1,498) (144) (3,069) 74 62 (1,372) (839) 8,754 7,228 (2,623) (2,074) 6,131 5,154
				7,228
				(2,074)
				5,154
(ii) Segment assets As at 30 June
Segment assets	46,442 113,047 -	159,489 45,538 103,257 -		148,795
Reconciliation of segment assets to group assets Inter -segment eliminations Unallocated assets Deferred tax assets Other Total group assets from continuing operations		(1,463) 6,886		(1,497) 4,738
		2,323 4,563		2,101 2,637
		164,912
				152,036
(iii) Segment liabilities As at 30 June Segment liablities Reconciliation of segment liablities to group liabilities Inter -segment eliminations	11,314 28,109 -	39,423 10,479 27,846 - (1,538)		38,325 (1,451)
Unallocated liabilities		21,526		17,829
* Deferred tax liabilities Other liabilities Total group liabilities from continuing operations*		- 21,526		- 17,829
		59,411
				54,703
(iv)Pro-Pac Packaging Limited have an operation, PPG Services SDN BHD, which is a company incorporated in Malaysia. This company provides support servic Group companies. The financial statements for this company are prepared under Malaysian Financial Reporting Standards, which are compliant with Internationa Reporting Standards.				es for all l Financial

NOTE 17: AUDIT STATUS

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

NOTE 18: 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 statement of financial position and do not form part of the asset base in the calculation of the basic net assets and basic net tangible assets per security.

14

Pro-Pac Packaging Limited Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 19: SIGNIFICANT EVENTS DURING THE PERIOD

Acquisition of businesses

The Group acquired the business and assets of the following:

**Effective date **	Acquired	Business description
01/08/2013	Fast Labels	Niche label manufacturer
14/02/2014	Australian Film Manufacturers	Niche film importer and distributor

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

	$000's
Assets	Fair value
Current Assets
Other receivables	66
Total Current Assets	66
	100
Non-Current Assets
Property, plant and equipment
Total Non-Current Assets	100
Total Assets	166
	20
Liabilities
Current Liabilities
Trade and otherpayables
Total Current Liabilities	20
Non-Current Liabilities	21
Otherpayables
Total Non-Current Liabilities	21
Total Liabilities	41
NET ASSETS	125
CONSIDERATION PAID	1,051
Cash
Total	1,051
	926
GOODWILL

15

Pro-Pac Packaging Limited

Appendix 4E – 30 June 2014

PRO-PAC PACKAGING LIMITED

NOTES TO THE PRELIMINARY FINAL REPORT

NOTE 19: SIGNIFICANT EVENTS DURING THE PERIOD (CONTINUED)

Contribution of revenue andprofits from acquired entities	Contribution of revenue andprofits from acquired entities
	$000
Total revenue to 30/06/2014	2,029
Profit after tax to 30/06/2014	153
Total revenue to 30/06/2014 if acquired at 1/7/13	3,583
Profit after tax to 30/06/2014 if acquired at 1/7/13	167

NOTE 20: CONTINGENT LIABILITIES

As at balance sheet date, the company issued security deposit guarantees to the value of $1,673,781 to the landlords of rented premises and overseas suppliers.

NOTE 21: CAPITAL EXPENDITURE COMMITMENTS

As at reporting date the company had commitments for future capital expenditure of $318,729.

NOTE 22: EVENTS SUBSEQUENT TO YEAR END

There were no events subsequent to year end.

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