PRO-PAC PACKAGING LIMITED — Annual Report 2016

Aug 25, 2016

PRO-PAC PACKAGING LIMITED (ASX: PPG)

HIGHLIGHTS FOR THE YEAR ENDED 30 JUNE 2016

• Profit after tax up 19% to $6.9 million
• Net cash from operating activities up 162% to $14.2m
• Earnings per share (EPS) up 16% to 3.01 cents
• Dividends per share of 2.75 cents, up 10%

Despite continued difficult general industry trading conditions, rising raw material input prices and adverse margin impacts from the significant downward movement in the A$/US$ exchange rate during the year, the business delivered a solid result for the 12 months to 30 June 2016.

Sales were down 1% on the prior year reflecting a sluggish Australian economy and competitive markets. As previously reported, demand from the manufacturing, distribution, resources and meat processing sectors was soft, particularly later in the first half and continued for the remainder of the financial year. However, the Company experienced good growth in the pharmaceutical, healthcare, retail and dairy sectors.

Despite hedging strategies, adverse forex movements due mainly to the ongoing decline of the AUD increased the cost of imported goods sold relative to the prior year, particularly during H1. Consequently, throughout the year the Company progressively increased prices to its customers to recover this cost increase. As a result, margins were maintained broadly in line with the prior year but sales volumes were adversely affected.

The maintenance of margins and the continued focus on cost out strategies yielded substantial savings in administration, distribution and selling expenses that enabled the Company to record a profit before tax of $10.1 million, an increase of 20% up on the prior year.

Rigid Division had an excellent year, with good top line growth and lower resin costs resulting in EBITDA increasing 18% on the prior year.

Industrial Division, which imports most of its products, was adversely affected by the declining AUD. As alluded to above, steps taken to stabilise margins within the division adversely effected sales which finished lower than the prior year. EBITDA for the division was however up 3% up on the prior year, largely due to effective cost control.

OUTLOOK

The Company expects the Australian economy and the Company's markets to remain subdued. Cost reduction initiatives and measures to stabilise margins will continue during FY17.

While FY16 was a year of consolidation, the Company has a current pipeline of acquisition opportunities which it is continuing to assess.

DIVIDEND

The Company has today declared a fully franked final dividend of 1.5 cents per share for H2 bringing the total dividend paid in respect of FY16 to 2.75 cents, up 10% on the prior year. The record date for determining entitlement to the dividend will be 8 September 2016 and the dividend will be paid on 22 September 2016. The Company's Dividend Reinvestment Plan will apply to this dividend. No discount will apply to the issue price.

Enquiries

For further information please contact Mr. Brandon Penn Acting 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 a national footprint including operations in all mainland states. PPG's securities are listed and quoted on the ASX. For further information on PPG visit www.ppgaust.com.au.

Appendix 4E

Preliminary Final Report

Company details

Name of entity:	Pro-Pac Packaging Limited
ABN:	36 112 971 874
Reporting period:	For the year ended 30 June 2016
Previous period:	For the year ended 30 June 2015

Results for announcement to the market

Revenue from ordinary activities	down	1%	to	$000's240,774
Profit from ordinary operations after tax attributable tothe owners of Pro-Pac Packaging Limited	up	19%	to	6,938
Profit for the year attributable to the owners of Pro-PacPackaging Limited	up	19%	to	6,938

Dividends	Amount persecuritycents	Franked amount persecuritycents
Final dividend for the year ended 30 Jun 2015 paid on 24 September2015	1.5	1.5
Interim dividend the year ended 30 Jun 2016 paid on 19 May 2016	1.25	1.25

On 26 August 2016, the directors declared a fully franked final dividend of 1.5 cent per ordinary share with a record date of 8 September 2016 to be paid on 22 September 2016.

The Company's Dividend Reinvestment Plan will apply to this final dividend. No discount will apply to the issue price. Under the Plan, shareholders can acquire shares in the Company at the volume weighted sale price during the four trading days up to and including the Record Date for determining entitlements. The last date for elections to participate in the Dividend Reinvestment Plan is 9 September 2016.

During the year, 8,629,936 shares were issued under the Dividend Reinvestment Plan.

Net tangible assets

ConsolidatedYear Ended	ConsolidatedYear Ended
30 June 16	30 June 15
Cents	Cents
Net tangible assets per ordinary security16.41═══════	15.68═══════

Control gained over entities

During the year, there was one minor acquisition by Pro-Pac Packaging (Aust) Pty Limited, a wholly owned subsidiary of Pro-Pac Packaging Limited.

Loss of control over entities

Not applicable.

Details of associates and joint venture entities

Not applicable.

Foreign entities

Details of origin of accounting standards used in compiling the report:

Pro-Pac Packaging Limited has a wholly owned subsidiary, PPG Services SDN BHD, which is a company incorporated in Malaysia. This company provides support services for all Group companies. The financial statements for this company are prepared under Malaysian Financial Reporting Standards, which are compliant with International Financial Reporting Standards.

Audit qualification or review

This report is based on financial statements which are in the process of being audited.

Attachments

Details of attachments (if any):

The consolidated preliminary financial statements of Pro-Pac Packaging Limited for the year ended 30 June 2016 are attached.

Signed

________________________________ Date: 26 August 2016

Ahmed Fahour Director Sydney

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

FOR THE YEAR TO 30 JUNE 2016

		Consolidated2016	Consolidated2015
	Notes	$ 000	$ 000
Revenue
Sales of goods		240,774	243,457
Other income		-	340
Interest income		166	83
Total Revenue		240,940	243,880
Expenses
Raw materials and consumables used		162,512	164,813
Employee benefits expense		33,521	33,814
Other expenses from ordinary activities		12,150	12,322
Distribution costsOccupancy costs		9,8067,479	9,6368,002
Depreciation expense		3,353	3,261
Finance costs		1,482	1,764
Acquisition, rationalisation and relocation expenses		489	1,519
Amortisation of prepaid royalty		28	322
Total Expenses		230,820	235,453
Profit before income tax from continuing operations		10,120	8,427
Income tax expense	4	(3,182)	(2,585)
Profit after income tax expense for the year	12	6,938	5,842
Other comprehensive income / (costs)Items that will be reclassified to profit & loss
Movements in reserves	14	(1,214)	710
Total comprehensive income for the year		5,724	6,552
Earnings per share (cents per share)
- Basic earnings per share	1	3.01	2.60
- Diluted earnings per share	1	2.95	2.56

PRO‐PAC PACKAGING LIMITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2016

ASSETSCURRENT ASSETSCash and cash equivalents13Trade and other receivables5	2016$000's15,34536,77233,112804,332────────	2015$000's6,12038,50632,393
Inventories6
Current tax assets4		15
Other assets		4,551────────
Total Current Assets	89,641	81,585
NON‐CURRENT ASSETS	────────	────────
Property, plant and equipment7	15,831	17,366
Intangible assets8	70,721	70,337
Deferred tax assets4	2,068────────	2,520────────
Total Non‐Current Assets	88,620	90,223
TOTAL ASSETS	────────178,261	────────171,808
LIABILITIES	────────	────────
CURRENT LIABILITIES
Trade and other payables9	30,013	26,628
Interest bearing trade finance	3,000	2,551
Interest bearing borrowings	1,156	1,183
Provisions10	3,941────────	3,973────────
Total Current Liabilities	38,110────────	34,335────────
NON‐CURRENT LIABILITIES
Provisions10	1,683	1,801
Interest bearing borrowings	27,104	27,271
Total Non‐Current Liabilities	────────28,787	────────29,072
TOTAL LIABILITIES	────────66,897	────────63,407
NET ASSETS	────────111,364	────────108,401
	════════	════════
EQUITY
Issued capital11	96,304	92,726
Other reserves14	(343)	830
Retained earnings12	15,403────────	14,845────────
TOTAL EQUITY	111,364════════	108,401════════

PRO‐PAC PACKAGING LIMITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR TO 30 JUNE 2016

	Notes	Consolidated	Consolidated
		2016	2015
		$000's	$000's
Cash flows from operating activities
Receipts from customers (inclusive of GST)		243,281	241,220
Payments to suppliers and employees (inclusive of GST)		(224,552)	(229,852)
Interest receivedFinance costs		166(1,482)	83(1,219)
Income tax paid		(2,771)	(3,309)
Relocation, restructuring and business combination costs		(489)	(1,519)
		────────	────────
Net cash flows from operating activities	13	14,153────────	5,404────────
Cash flows from investing activities
Payments for property, plant and equipment		(1,980)	(3,666)
Proceeds from sale of property, plant and equipment		176	799
Payment for unincorporated business net of cash acquired		(502)	(2,150)
Working capital for business acquired		(75)	(1,597)
Net cash flows used in investing activities		────────(2,381)────────	────────(6,614)────────
Cash flows from financing activities
Payment of hire purchase and finance lease liabilities		(1,533)	(1,976)
Finance leases raised		1,339	1,683
Proceeds from borrowings		449	7,397
Dividends paid		(2,802)	(3,354)
Net cash flows provided by financing activities		────────(2,547)	────────3,750
Net increase / (decrease) in cash and cash equivalents		────────9,225	────────2,540
Cash and cash equivalents at beginning of financial year		6,120────────	3,580────────
Cash and cash equivalents at end of financial year	13	15,345════════	6,120════════
Non cash financing transactions
Hire purchase and finance lease liabilities raised			1,339 1,683
Issue of shares for dividend re‐investment plan			3,578 1,178

PRO‐PAC PACKAGING LIMITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR TO 30 JUNE 2016

	Issuedcapital	Retainedearnings	Reserves	Totalequity
	$ 000	$ 000	$ 000	$ 000
Consolidated
Balance as at 1 July 2014	91,548	13,536	99	105,183
Profit after income tax expense for the year	-	5,842	-	5,842
Other comprehensive income for the year, net of
tax	-	-	710	710
Total comprehensive income for the year	-	5,842	710	6,552
Transactions with owners in their capacity asowners:
Issue of shares for dividend re-investment plan	1,178	-	-	1,178
Recognition of share based payment	-	-	21	21
Dividends paid	-	(4,533)	-	(4,533)
At 30 June 2015	92,726	14,845	830	108,401
	Issuedcapital$ 000	Retainedearnings$ 000	Reserves$ 000	Totalequity$ 000
Consolidated
Balance as at 1 July 2015	92,726	14,845	830	108,401
Profit after income tax expense for the year	-	6,938	-	6,938
Other comprehensive income for the year, net of
tax	-	-	(1,214)	(1,214)
Total comprehensive income for the year	-	6,938	(1,214)	5,724
Transactions with owners in their capacity asowners:
Issue of shares for dividend re-investment plan	3,578	-	-	3,578
Recognition of share based payment	-	-	41	41
Dividends paid	-	(6,380)	-	(6,380)
At 30 June 2016	96,304	15,403	(343)	111,364

NOTE 1: EARNINGS PER SHARE

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 16	30 June 15
	Cents	Cents
Basic earnings per share *	3.01	2.60
Diluted earnings per share *	2.95	2.56
Reconciliation of earnings used in calculation of earnings per share:	$000's	$000's
Profit after income tax	6,938	5,842
	═════	═════
	No. of Shares	No. of Shares
Weighted average number of ordinary shares used in the calculation of basic earnings pershare	230,470,499	224,290,226
Weighted average number of ordinary shares used in the calculation of basic dilutedearnings per share	236,346,047	228,125,721
	═════	═════
Number of ordinary shares on issue at year end (including ESPP shares)	240,428,193	229,073,257
	═════	═════

* 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 1.5 c per share in respect of the financial year ended 30 June 2016. When combined with the interim dividend of 1.25 c per share paid on 19 May 2016, this represents fully franked dividends of 2.75 c per share for the 2015/16 financial year.

NOTE 3: NET TANGIBLE ASSETS PER SECURITY

	Consolidated	Consolidated
	Year Ended	Year Ended
	30 June 16	30 June 15
	Cents	Cents
Net tangible assets per security – basic	16.41═══════	15.68═══════
Net assets per security – basic	47.37═══════	47.86═══════

	ConsolidatedYear Ended30 June 2016$000's	ConsolidatedYear Ended30 June 2015$000's
NOTE 4: TAXATION
a) Income Tax Expense:	3,182	2,585
Income tax expense:Prima facie income tax expense calculated at 30% on the profit from ordinaryactivities	3,036	2,528
Increase / (decrease) in income tax expense due to:Difference in income tax rate of overseas entity and AustraliaOther income not subject to tax net of expenditure not allowable for tax purposes	(2)148	(2)59
Income tax expense attributable to profit from ordinary activities	────────3,182════════	────────2,585════════
b) Current Tax Liabilities:Income tax payable	‐════════	‐════════
c) Current Tax Assets:Current tax asset	80	15
d) Non‐Current Tax Assets:Deferred tax asset	════════2,068════════	════════2,520════════
NOTE 5: TRADE AND OTHER RECEIVABLES
CurrentTrade receivablesProvision for impairment of receivables	35,767(358)	37,626(602)
	────────35,409	────────37,024
Other debtors	1,363────────	1,482────────
Total Current Receivables	36,772════════	38,506════════
NOTE 6: INVENTORIES
CurrentRaw materials and work in progress (lower of cost and net realisable value)Finished goods (lower of cost and net realisable value)	1,07132,041	1,22531,168
Total Inventories	────────33,112════════	────────32,393════════

════════ ════════

PRO‐PAC PACKAGING LIMITED NOTES TO THE PRELIMINARY FINAL REPORT

	ConsolidatedYear Ended30 June 2016$000's	ConsolidatedYear Ended30 June 2015$000's
Note 7: PROPERTY, PLANT AND EQUIPMENT
Plant and Equipment
At cost	33,119	31,749
Accumulated depreciation	(17,288)────────	(14,383)────────
Total plant and equipment	15,831════════	17,366════════
Note 8: INTANGIBLE ASSETS
Goodwill	70,721════════	70,337════════
Reconciliation
Carrying amount at beginning of the year	70,337	68,793
Acquisition of businesses	384────────	1,544────────
Total goodwill	70,721════════	70,337════════
NOTE 9: PAYABLESCurrent
Unsecured
Trade payablesGST payable	21,391580	18,202716
Other tax payable	358	524
Sundry creditors and accruals	7,569	7,131
Contingent deferred payments to vendors for acquisitions	115────────	55────────
	30,013════════	26,628════════
NOTE 10: PROVISIONS
Current
Employee entitlements	3,941════════	3,973════════
Non‐Current
Make good provisionEmployee entitlements	938745	889912
	────────1,683	────────1,801

NOTE 11: ISSUED CAPITAL	Consolidated	Consolidated
2016	Number	$000's
Issued and Paid‐Up Share Capital
Fully paid ordinary shares:	240,428,193════════	96,304════════
Movements during the year:
Balance at beginning of year	229,073,257	92,726
Issue of shares for Executive Long Term Incentive Plan	3,300,000	‐
Cancellation of shares for Executive Long Term Incentive Plan	(575,000)	‐
Issue of shares for dividend re‐investment plan	8,629,936	3,578
	────────240,428,193	────────96,304
2015
Issued and Paid‐Up Share Capital
Fully paid ordinary shares:	229,073,257════════	92,726════════
Movements during the year:
Balance at beginning of year	226,693,758	91,548
Cancellation of shares for Executive Long Term Incentive Plan	(75,000)	‐
Issue of shares for dividend re‐investment plan	2,454,499	1,178
	────────229,073,257	────────92,726

	ConsolidatedYear Ended30 June 2016$000's	ConsolidatedYear Ended30 June 2015$000's
NOTE 12: RETAINED PROFITS
Retained profits at the beginning of the year	14,845	13,536
Net profit attributable to members of the company	6,938	5,842
Dividends paid	(6,380)	(4,533)
Retained profits at the end of the year	────────15,403════════	────────14,845════════

Consolidated	Consolidated
Year Ended	Year Ended
30 June 2016	30 June 2015
$000's	$000's

NOTE 13: 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	15,345════════	6,120════════
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	6,938	5,842
Add/(Less) non‐cash items:
Depreciation and amortisation of plant and equipment	3,353	3,261
Amortisation of prepaid royalty	28	322
(Profit) / loss on disposal of assets	20	63
Movement in income tax provision	(65)	(579)
Movement in deferred tax assets & liabilities	452	(144)
Movement in provision for bad debts	(244)	92
Other non‐cash movements	76	21
Changes in Assets and Liabilities:
Receivables	2,206	(1,546)
Inventories	(583)	2,884
Payables	2,703	(4,276)
Provisions	(212)	201
Prepayments	(519)	(737)
Net cash flows from operating activities	────────14,153════════	────────5,404════════

NOTE 14: MOVEMENT IN RESERVES

The movement in the Cash flow hedge reserve reflects the difference between contracted values and market values of the foreign currency forward contracts that the Company holds as at balance sheet date.

Consolidated ‐ 2016	Cash flow hedgereserve$ʹ000	Optionreserve$ʹ000	Total$ʹ000
Balance as at 1 July 2015	710	120	830
Movement during the year	(1,214)	41	(1,173)
Balance as at 30 June 2016	(504)	161	(343)

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.

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.

NOTE 16: OPERATING SEGMENTS (CONTINUED)

	Rigidpackaging$ 000	Industrialpackaging$ 000	Intersegmenteliminations/ unallocated$ 000	Total$ 000	Rigidpackaging$ 000	Industrialpackaging$ 000	Intersegmenteliminations/ unallocated$ 000	Total$ 000
	2016	2016	2016	2016	2015	2015	2015	2015
(i) Segment performance12 month ended 30 JuneRevenue
External sales	65,615	175,159	-	240,774	60,441	183,016	-	243,457
Inter-segment sales	8,754	7,827	(16,581)	-	8,594	7,648	(16,242)	-
Total segment revenue	74,369	182,986	(16,581)	240,774	69,035	190,664	(16,242)	243,457
EBITDA	8,825	10,415	(4,423)	14,817	7,454	10,077	(3,840)	13,691
Depreciation and amortisation	(1,496)	(1,697)	(188)	(3,381)	(1,618)	(1,736)	(229)	(3,583)
Interest revenue				166				83
Finance costs				(1,482)				(1,764)
Profit before income tax				10,120				8,427
Income tax expense				(3,182)				(2,585)
Profit after income tax				6,938				5,842
(ii) Segment assetsAs at 30 June
Segment assets	46,844	115,788	-	162,632	47,437	117,297	-	164,734
Reconciliation of segment assets to group assets
Inter -segment eliminations				(1,870)				(1,634)
Unallocated assets				17,499				8,708
* Deferred tax assets				2,068				2,520
* Other				15,431				6,188
Total group assets from continuing operations				178,261				171,808
(iii) Segment liabilitiesAs at 30 June
Segment liablitiesReconciliation of segment liablities to groupliabilities	13,216	29,356	-	42,572	12,948	26,331	-	39,279
Inter -segment eliminations				(1,866)				(1,722)
Unallocated liabilities				26,191				25,850
* Deferred tax liabilities				-				-
* Other liabilities				26,191				25,850
Total group liabilities from continuing operations				66,897				63,407

(iv) Pro-Pac Packaging Limited have an operation, PPG Services SDN BHD, which is a company incorporated in Malaysia. This company provides support services for all Group companies. The financial statements for this company are prepared under Malaysian Financial Reporting Standards, which are compliant with International Financial Reporting Standards

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.

NOTE 19: CONTINGENT LIABILITIES

As at balance sheet date, the company issued security deposit guarantees and standby letters of credits to the value of $1,865,015 to the landlords of rented premises and overseas suppliers.

As at statement of financial position date, the company is defending a claim of $1.2m arising from the acquisition of the assets and businesses of Eco Food Pack Australia Pty Limited. The company has lodged counter claims in excess of $4.0m.

NOTE 20: CAPITAL EXPENDITURE COMMITMENTS

As at reporting date the company had no commitments for future capital expenditure.

NOTE 21: EVENTS SUBSEQUENT TO YEAR END

There were no events subsequent to year end.

NOTE 22: RECLASSIFICATION

Bank line fees, usage fees and facility establishment fees were incorrectly included in "Other expenses from ordinary activities" instead of "Finance costs" in the consolidated entity's financial statements for the year ended 30 June 2015. As such, earnings before interest, taxes, depreciation and amortization (EBITDA) for the year ended 30 June 2015 was understated by $545,000. The relevant comparative numbers for the year ended 30 June 2015 have accordingly been reclassified. Profit before and after income tax expense for the year ended 30 June 2015 remains unchanged. Bank line fees, usage fees and facility establishment fees are included in "Finance costs" in the financial statements for the year ended 30 June 2016.