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Simply Good FoodsPro-Pac
Packaging Limited
ACN: 112 971 874
Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap
Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective
apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives Meat trde tools Chain mesh gloves Lashing and twine
Stretch wrap machinery Carton sealers Strapping achines Hooding machines Patty presse Sausage fillers Service and maintenance Paper towels
Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures
Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void
fillPadded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers
Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton
sealers Strapping machines Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels Toilet tissue Dispensers
Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays
Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic
sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery
Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton sealers Strapping machines
Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels Toilet tissue Dispensers Sanitisers Cleaning chemicalsBi
n liners General industrial packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and
rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and
face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives
Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton sealers Strapping machines Hooding machines Patty
presses Sausage fillers Service and maintenane Paper towels Toilet tissue Dispensers Santisers Cleaning chemicals Bin liners General industrial
packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes
bbags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility
clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh
lgloves Lashing and twine Stretch wrap machinery Carton sealers Strapping mahines Hooding machines Patty presses Sausage fillers Service and
maintenance Paper towels Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom
Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap
Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective
apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knes Meat trade tools Chain mesh gloves Lashing and twine Stretch
wrap machinery Carton sealers Stra pping machines Hooding machines Pattpresses Sausage fillers Service and maintenance Paper towels Toilet
tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures Cubes
Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded
mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers Napkins
Pro-Pac
Packaging Limited
147-151 Newton Road
Wetherill Park
NSW Australia 2164
T // (02) 8781 0500
F // (02) 8781 0599
E // sales@pro-pac.com.au
www.ppgaust.com.au
For personal use only Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap
Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective
apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch
wrap machinery Carton sealers Strapping machines Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels
Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures
Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void
fillPadded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers
Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton
sealers Strapping machines Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels Toilet tissue Dispensers
Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays
Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic
sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery
Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton sealers Strapping machines
Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels Toilet tissue Dispensers Sanitisers Cleaning chemicals
Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and
rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and
face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives
Meat trade tools Chain mesh gloves Lashing and twine Stretch wrap machinery Carton sealers Strapping machines Hooding machines Patty
presses Sausage fillers Service and maintenance Paper towels Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial
packaging Food service Washroom Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes
bags Cartons Tape Bubble wrap Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility
clothing Disposable protective apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh
gloves Lashing and twine Stretch wrap machinery Carton sealers Strapping machines Hooding machines Patty presses Sausage fillers Service and
maintenance Paper towels Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom
Bottles Jars Caps closures Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap
Stretch wrap Strapping Void fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective
apparel Signage Cups Wipers Napkins Disposable cutlery Food Trays Punnets Knives Meat trade tools Chain mesh gloves Lashing and twine Stretch
wrap machinery Carton sealers Strapp ing machines Hooding machines Patty presses Sausage fillers Service and maintenance Paper towels
Toilet tissue Dispensers Sanitisers Cleaning chemicals Bin liners General industrial packaging Food service Washroom Bottles Jars Caps closures
Cubes Jerry cans Sprays Triggers Pails Pouches and rewind Custom printed boxes bags Cartons Tape Bubble wrap Stretch wrap Strapping Void
fill Padded mailers Plastic sheets Gloves Head, ear and face protection Hi-Visibility clothing Disposable protective apparel Signage Cups Wipers
Napkins
Industrial packaging and machinery // Rigid packaging and specialty
closures // Food service packaging and disposables // Industrial safety
apparel and equipment // Washroom supplies // Disposable personal
protection apparel and equipment
Leading supplier of business consumables tailored to the warehousing,
manufacturing, logistics, healthcare, pharmaceuticals, food service and
scientific industries. With locations across Australia we are able to offer
reliable supply and customised solutions that add measurable value to
our customers.
Our Environment
We believe very strongly in the conservation of our environment, its
resources and the recycling of as much product as possible. We believe
in living the practice of ‘reduce’, ‘reuse’, ‘recover’ and ‘recycle’. These four
practices are at the centre of our commitment to a better environment.
Wherever possible we endeavour to provide environmentally friendly
solutions to our customers, whether these are in the form of biodegradable
voidfill, plastics alternatives and formulas and/or an effort to reduce the
amount or type of packaging a customer requires. We recognise that
protecting the environment is the responsibility of us all.
Printed on Cyclus Offset // 100% Recycled
Paper made from 100% Post Consumer Waste
and is produced in EMAS accredited facilities.
design // Kettle of Fish Design
For personal use only corporate information
// 01
Directors
Elliott Kaplan (Chairman)
// 06
Solicitors
Thomsons Lawyers
Brandon Penn
Dr Gary Weiss
Level 25, 1 O’Connell Street
Sydney NSW 2000
// 02
Company Secretary
Mark Saus
// 07
Bankers
Commonwealth Bank of Australia
Premium Business Services
Level 1, 430 Forest Road
Hurstville NSW 2220
// 08
Auditors
UHY Haines Norton
Level 11 , 1 York Street
Sydney NSW 2000
// 03
Registered Office
147 - 151 Newton Road
Wetherill Park NSW 2164
// 04
Principal Place of Business
147 - 151 Newton Road
Wetherill Park NSW 2164
// 05
Share Register
Boardroom Pty Limited
Level 7, 207 Kent Street
Sydney NSW 2000
contents
// 02 Chairman’s Report
// 03 Directors’ Report
// 10 Auditors’ Independence Declaration
// 11 Corporate Governance Statement
// 17
// 18
Consolidated Statement of
Comprehensive Income
Consolidated Statement of
Financial Position
// 19
// 20
Consolidated Statement of
Cash Flows
Consolidated Statement of
Changes in Equity
// 21
Notes to the Financial Statements
// 50 Directors’ Declaration
// 51
Independent Auditor’s Report
// 52 Additional Company Information
2012 Annual Report // 1
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 02
chairman’s
report
On behalf of the Board of Directors and the management it is my pleasure to present
Pro-Pac’s annual report for the year ended 30 June 2012.
The 2012 financial year was an extremely busy and productive year for the Company.
Eight synergistic acquisitions were completed and integrated. Two major logistical
exercises were successfully undertaken – the industrial division’s site rationalisation and
consolidation in Qld which was completed in February and NSW which was completed
in June. Significant progress was made with our project to bring all of our various
business units and acquisitions onto a single IT platform.
The 2012 result was a record for the Company with revenue up 15% to $133m and
profit before tax up 16% at $8.1m. The result included $763,000 in expensed one off
relocation and rationalisation costs relating predominantly to the manufacturing and
distribution site consolidations in both NSW and Qld. These moves, together with the
Industrial Division’s Victorian site consolidation completed in the previous financial year,
now provide our largest division with the infrastructure and capacity to continue to grow
without further significant capital expenditure.
In April 2012, the Company raised $28m in new equity to fund growth, placing the
Company in a very strong position to continue to pursue its stated acquisition policy.
At balance date, the Company had virtually zero net debt and undrawn bank facilities
of approximately $24m.
Subsequent to the financial year end, the Company completed the acquisition of
the business and assets of Start Food-Tech (Australia) Pty Ltd, significantly expanding
its distribution business to the food processing industry. A pipeline of further acquisition
opportunities continues to be reviewed and there is momentum in organic growth from
existing businesses.
A fully franked interim dividend of 1 cent per share was paid in April and the Board has
declared a fully franked final dividend of 1 cent per share payable on 25 September
2012 with a record date of 11 September 2012.
Board renewal and strengthening is an important element of a strongly growing
company and in this regard, in May 2012 we welcomed the addition of Dr Gary
Weiss to the Board as a non-executive director. During the financial year Mr. Hadrian
Morrall announced his retirement from the Board. I would like to thank Hadrian for
his contribution as a Director over the previous five years and we look forward to his
ongoing contribution to the growth of the Company in his continuing role of MD of the
group’s Rigid Division. Companies and businesses do not prosper and grow without
competent and entrepreneurial management and dedicated and enthusiastic staff
and in this regard, Pro-Pac is most fortunate. On behalf of the Board I would once
again like to thank the rest of our senior management team, CEO Brandon Penn, CFO
Mark Saus and Industrial Division MD Wendy Penn for their hard work and leadership
and all our managers and staff for their initiatives, dedication and commitment to the
ongoing success of Pro-Pac.
Elliott Kaplan
Chairman
2 // Annual Report 2012
For personal use only // 03
directors’ report
The Directors present the Financial Report of Pro-Pac
Packaging Limited (“the Company”) and the Consolidated
Entity (“PPG”) being the company and its controlled entities,
for the year ended 30 June 2012, together with the Auditors’
report thereon.
directors
The Directors in office at the date of this report and during the
year are as follows:
Elliott Kaplan
BAcc, CA
(Chairman and Non-Executive Director – appointed Director
16 February 2005 and Chairman 25 February 2011)
Mr Kaplan is a Chartered Accountant with extensive
experience in senior financial and chief executive officer
roles in both private and public listed companies. His
experience, from both an investor and investee perspective,
spans a diverse range of industries including manufacturing,
environmental, distribution and services. Mr Kaplan is
Managing Director of CVC Private Equity Limited, a non-
executive director of Cellnet Limited and a director of a
number of unlisted companies. Mr Kaplan is also a former
director of DoloMatrix Limited and The Environmental Group
Limited.
Mr Kaplan is a member of the Audit and Remuneration
Committees.
Brandon Penn
B. Com
(Executive Director – appointed 16 August 2007)
Mr Penn is the founding director of the PB Group. He has had
extensive experience in start up businesses.
Mr Penn has had a number of business interests alongside
the PB Group including the establishment of a dominant
software development company, Dealing Information Systems
(DIS), which developed wholesale banking systems. DIS was
acquired in 1996 by Sungard Data Systems NYSE. Mr Penn
assumed Asia-Pacific responsibility for the Sungard companies
and offices throughout the Asia Pacific region.
On 1 March 2010 Mr Penn was appointed to the position of
Group CEO.
Dr Gary Weiss
LL.B (Hons), LL.M (with dist.), Doctor of Juridical Science (JSD)
(Non-Executive Director – appointed 28 May 2012)
Dr Weiss holds the degrees of LL.B (Hons) and LL.M (with dist.)
from Victoria University of Wellington, as well as a Doctor of
Juridical Science (JSD) from Cornell University, New York.
Dr Weiss has extensive international business experience
and has been involved in numerous cross-border mergers
and acquisitions. Dr Weiss is Chairman of Secure Parking
Pty Ltd, Executive Director of Ariadne Australia Ltd, and a
director of Premier Investments Limited, Ridley Corporation
Ltd, Mercantile Investment Company Limited, Victor Chang
Cardiac Research Institute and The Centre for Independent
Studies. He was Chairman of Coats plc from December 2003
until April 2012 and an executive director of Guinness Peat
Group plc from November 1990 to April 2011 and has held
directorships of numerous companies, including Westfield
Group, Tower Australia Ltd, Australian Wealth Management Ltd,
Tyndall Australia Ltd (Deputy Chairman), Joe White Maltings Ltd
(Chairman), CIC Ltd, Whitlam Turnbull & Co Ltd and Industrial
Equity Ltd.
He has authored numerous articles on a variety of legal and
commercial topics.
Hadrian Morrall
(Executive Director – appointed 16 August 2007; resigned
28 May 2012)
Mr Morrall was a director of the Board until his resignation on
28 May 2012. Mr Morrall remains the Managing Director of the
Rigid division.
company secretary
Mark Saus
B. Com, B. Compt (Hons), CPA
(Company Secretary and Chief Financial Officer – appointed
2 September 2005)
Mr Saus has more than 25 years experience in commercial
and financial management roles in private and public listed
companies both in Australia and overseas. His experience
spans a diverse range of industries including manufacturing,
distribution and retail. Past roles include head of finance
positions in high growth SME environments. Mr Saus is also
the Chief Financial Officer of the Group.
2012 Annual Report // 3
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 04
directors’ report
interests in the shares and options of the company
As at the date of this report, the relevant interests of the directors in the shares and options of Pro-Pac Packaging Limited are shown
in the table below:
Ordinary Shares
516,357
24,438,842
-
Interest in Ordinary Shares
through Directorships of
Corporate Shareholders
-
-
-
Elliott Kaplan
Brandon Penn
Dr Gary Weiss
meetings of directors
Attendances by each director during the year were:
Board
Audit committee
Number of Meetings
attended
meetings held
while in office
Number of
meetings held
while in office
Meetings
attended
Remuneration committee
Meetings
Number of
meetings held
attended
while in office
Elliott Kaplan
Hadrian Morrall
Brandon Penn
Dr Gary Weiss
12
11
12
1
12
11
12
1
3
-
-
-
3
-
-
-
1
-
-
-
1
-
-
-
principal activities
Pro-Pac Packaging Limited is a company limited by shares
that is incorporated and domiciled in Australia. The principal
activities of the consolidated entity during the year were the
manufacture and distribution of industrial, protective and rigid
packaging products.
There have been no significant changes in the nature of these
activities during the year.
overview of the company’s business
Pro-Pac Packaging Limited is a diversified manufacturing
and distribution company, providing end to end solutions for
general industrial and primary packaging, safety and PPE, food
services and food processing sectors with a national footprint.
operating and financial review
Results for the year ended 30 June 2012
The Company continues to grow strongly both organically and
through acquisitions. The Company grew revenue by 15% to
$133m. EBITDA was up 11% to $12m and profit before tax was
up 16% at $8.1m.
Revenue in the Industrial Division grew 29% to $93m (2011:
$72m) and pre-tax earnings for the Industrial Division were
4 // Annual Report 2012
$6.9m (2011: $5.2m). The Rigid Division’s sales were marginally
lower at $54.8m (2011: $54.9m) but margin and cost
pressures resulted in reduced pre-tax divisional earnings of
$4.6m (2011: $5.0m).
The 2012 result included $763,000 of one off relocation and
rationalisation costs relating predominantly to the consolidation
of the Industrial Division’s sites and operations in NSW and QLD
and adjusting for these costs, profit before tax was up 20% on
the prior year.
While these costs impact on earnings in the short term, as
previously highlighted, they provide the essential infrastructure
to support continued growth, allowing PPG capacity to
increase turnover through the new facilities by approximately
40% with minimal additional capex spend.
Financial position
The Group’s balance sheet continues to strengthen with
shareholders’ equity of the consolidated Group increasing by
$34m to $96m, as a result of further equity issued and the
Group’s earnings performance for the year. At balance date
the Company had virtually no net debt and undrawn bank
facilities of approximately $24m, placing the Company in a
very strong position to pursue its stated acquisition policy.
For personal use only
Capital structure
During the year 62.2m ordinary shares were issued as part
of an equity raising, a further 4.7m were issued under the
Dividend Reinvestment Plan and 4.1m shares were issued as
part consideration to vendors of businesses acquired during
the year. At 30 June 2012 there were 211m shares on issue.
Operating activities
During the year the Group completed eight acquisitions as
detailed in note 24 (Business Combinations).
The company also completed the consolidation of the
Industrial Division’s sites and operations in both Queensland
and NSW which will have a favourable effect on the division’s
operational efficiencies in future trading periods.
Outlook
Looking forward the momentum is continuing and the growth
prospects remain strong throughout the Group with good
organic growth predicted from the existing businesses. This
growth will come from continued cross selling of additional
products into the existing customer base as well as capitalising
on the Company’s aggressive sales and marketing activities.
The Company has embarked on a focused strategy of
growing its food service and food related business silos which
it views as strong growth sectors in the Australian industrial
landscape, where the Company currently has minimal overall
market share.
The Company has a pipeline of good quality accretive
acquisitions some of which are expected to close in the first
half of this financial year.
dividends
A fully franked interim dividend of one cent per share was
paid on 12 April 2012. In August 2012, the Company
declared a fully franked final dividend of one cent per share.
The record date for determining entitlement to the dividend
is 11 September 2012 and the dividend will be paid on
25 September 2012. The Company’s Dividend Reinvestment
Plan will not apply to this dividend.
significant changes in the state of affairs
During the year the Company undertook a $28m equity raising
pursuant to which 62.2m shares were issued. The Group also
completed eight acquisitions during the year under review.
significant events subsequent to
balance date
On 10 September 2012, Pro-Pac Packaging (Aust) Pty Limited,
a wholly owned subsidiary company, purchased the business
and assets of Start Food-Tech Australia Pty Ltd (“SFT”). SFT is a
Victorian based national supplier of packaging consumables
and products to the food processing industries.
likely developments
Apart from the commentary outlined above, the directors
have excluded from this report any further information on the
likely developments in the operations of the company and
the expected results of those operations in future financial
years, as the directors consider that it would be likely to result in
unreasonable prejudice to the Company.
environmental regulation and
performance
The consolidated entity’s operations are not regulated by
any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
indemnification and insurance of
directors and officers
The Company has entered into a deed of access, indemnity
and insurance with each of the Directors, under which the
Company has agreed to:
// continue to provide the Directors with access to certain
relevant information after they cease to be Directors;
// to the extent permitted by law, indemnify the Directors
against liabilities incurred in their capacity as directors of
the Company and its subsidiaries; and
// maintain certain Directors’ liability insurance in respect
of Directors, both during and after the period they are
Directors.
The Company has paid insurance premiums in respect of
Directors’ and Officers’ liability and legal expense insurance
for the Directors of the Company.
These contracts of insurance prohibit the disclosure of the
nature of the liabilities covered and amount of the premium
paid. The Corporations Act 2001 does not require disclosure
of the information in these circumstances.
The Group has not, during the year or since the end of the
financial year, in respect of any person who is or has been
an auditor of the Group, paid or agreed to pay a premium in
respect of a contract insuring against a liability for the costs or
expense of defending legal proceedings.
remuneration report
Remuneration policy
The performance of the Group depends upon the quality of
its directors and executives. To prosper, the Group must attract,
motivate and retain highly skilled directors and executives.
The Remuneration Committee comprises Dr Gary Weiss
(Chairman) and Mr Elliott Kaplan both of whom are
Non-Executive Directors.
2012 Annual Report // 5
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 06
directors’ report
The Remuneration Committee assesses the appropriateness
of the nature and amount of remuneration of directors on a
periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality
Board and executive team. It is intended that the manner
of payments chosen will be optimal for the recipient without
creating undue cost for the Group. Further details on the
remuneration of Directors and executives are set out in this
Remuneration Report.
In accordance with best practice corporate governance,
the structure of non-executive Director and executive
remuneration is separate and distinct.
Non-Executive Director remuneration
The Company seeks to set aggregate remuneration at a level
which provides the Company with the ability to attract, retain
and motivate directors of the highest quality, whilst incurring a
cost which is acceptable to shareholders.
The Constitution of the Company and the ASX Listing Rules
specify that non-executive directors are entitled to receive
remuneration for their services as determined by the Company
in a General Meeting. The Company has resolved that the
maximum aggregate amount of directors’ fees (which does
not include remuneration of executive directors and other
non-director services provided by directors) is $200,000 per
annum. Non-executive directors are entitled to be reimbursed
for their reasonable expenses incurred in connection with the
affairs of the Company. A director may also be remunerated
as determined by the directors if that director performs
additional or special duties for the Company.
The remuneration of the Company’s Non-Executive Directors
for the period ending 30 June 2012 is detailed in Table 1 of
this Remuneration Report.
Executive Director and Senior Management
remuneration
The Group aims to develop remuneration packages properly
reflecting each person’s duties and responsibilities and the
remuneration is competitive in attracting, retaining and
motivating people of the highest quality.
The Remuneration Committee is responsible for reviewing and
providing recommendations to the Board with respect to the
remuneration packages of senior management and executive
directors.
The Remuneration Committee is responsible for providing
advice to the Board with respect to non-executive directors’
remuneration.
The Board is responsible for determining remuneration
packages applicable to the Board members and the Chief
Executive Officer. The Chief Executive Officer determines
the remuneration packages for the senior executives of the
6 // Annual Report 2012
Company in accordance with compensation guidelines set
by the Board.
The remuneration of the Chief Executive Officer and senior
management for the year ending 30 June 2012 is set out in
Table 1 of this report.
Employment contracts
Chief Executive Officer
The Company has entered into an executive service
agreement with Mr Brandon Penn in relation to his role as
Chief Executive Officer of the Group. In his executive service
agreement, Mr Penn agrees that all intellectual property rights
created, developed or acquired by him in the course of his
employment, belong to the Company.
The Company or the executive may terminate the service
agreement by giving the other party three months notice.
The Company may terminate the agreement at any time with
immediate effect in the event of non-performance of duties
or in the event of dishonesty, a willful breach, non-observance
or neglect in the discharge of duties. The agreement provides
that for a period of twenty four months after termination of his
employment contract (less any served notice period) Mr Penn
will not compete with Pro-Pac in Australia.
Senior Management
Employment agreements entered into with senior
management contain the following key terms:
Event
Company Policy
Resignation / notice period
3 months or less
Serious misconduct
Company may terminate
at any time
Payouts upon resignation or
termination, outside industrial
regulations (ie ‘golden handshakes’) None
Executive Long Term Incentive Plan (ESPP)
The Company has established an ESPP to encourage
employees to share in the ownership of the Company and
promote the long-term success of the Company as a goal
shared by the employees. The ESPP has been approved
by members of the Company for the purposes of sections
260C(4)(a), 259B(2)(a), 257B(1) and paragraph (b) of the
definition of employee share scheme buy-back in section
9 of the Corporations Act. There are currently 1,535,000 shares
issued to employees under the Plan.
The following are the key terms and conditions of the ESPP:
// No Shares under the ESPP will be allotted unless the
requirements of the Corporations Act 2001 and the
ASX Listing Rules have been complied with.
For personal use only // Performance hurdles apply to the ESPP. The key
// The term of the loans and the vesting period for the shares
performance hurdle is that the total shareholder return
to shareholders of the Company must exceed the rate
of growth over the same period for the S&P/ASX Small
Ordinaries Accumulation Index (or any equivalent or
replacement of that index).
// Shares are allocated to employees at either the value
of shares as detailed in the latest disclosure document
issued by the Company or the 5-day weighted average
price immediately prior to the offer being made to the
employee.
from the date of issue of shares is 3 years.
// The Shares will be registered in the names of the Participants
from allotment, but will remain subject to restrictions on
dealing while they are pledged as security for a loan or
subject to performance hurdles specified.
// If the employee leaves the employment of the Group, the
loan balance must be repaid in full or the shares surrendered
in full settlement of the outstanding loan balance.
Key Management Personnel at 30 June 2012
// The Company may provide loans to participants to acquire
shares under the ESPP. As security for the loans, Participants
will pledge the shares acquired under the ESPP to the
Company at the time the loans are provided and will grant
a charge over any benefits attributable to the Shares,
including bonus shares, rights, and dividends. Any dividends
paid on the shares by Pro-Pac Packaging Limited are
treated as interest on the loan.
Elliott Kaplan
– Non-executive Chairman
Dr Gary Weiss
– Non-executive Director
Brandon Penn
– Executive Director
Hadrian Morrall
– Divisional Managing Director
Wendy Penn
– Divisional Managing Director
Mark Saus
–
Chief Financial Officer and
Company Secretary
Remuneration of Key Management Personnel
Excluding the Directors, there are only three staff members of the Company who qualify as a “Key Management Personnel” for
the purposes of this report. The executive key management personnel are also the most highly paid executive officers of the
consolidated entity for the year under review.
Table 1
Short-term benefits
Post
employment
benefits
Other
long term
benefits
Share
based
payment
Total
Cash, salary and
commissions
Cash profit
share and non-
cash benefit
$
Super-
annuation
Other
Equity and
options
Performance
based
Elliott Kaplan
Gary Weiss
Hadrian Morrall
Brandon Penn
Wendy Penn
Mark Saus
David Herlihy
Total
Remuneration
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
60,000
46,667
4,000
-
193,938
206,324
220,184
228,652
180,000
180,000
191,000
175,687
-
40,000
849,122
877,330
$
-
-
-
-
17,590
18,267
19,816
20,579
16,200
16,138
17,189
16,355
-
-
-
-
-
-
22,980
20,824
-
-
8,000
-
-
-
-
-
30,980
20,824
70,795
71,339
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
2,402
2,402
-
-
2,402
2,402
$
60,000
46,667
4,000
-
234,508
245,415
240,000
249,231
204,200
196,138
210,591
194,444
-
40,000
953,299
971,895
$
-
-
-
-
-
-
-
-
-
-
5%
-
-
-
-
-
2012 Annual Report // 7
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 08
directors’ report
Options issued as part of remuneration for the year ended 30 June 2012
No options were granted as remuneration during the year ended 30 June 2012.
Shares and Loans issued under the ESPP during the year ended 30 June 2012
200,000 shares and related loans with a total value of $100,000 were issued under the ESPP during the year ended 30 June 2012.
ESPP Shares of Key Management Personnel as at the date of this report
2009
Mark Saus
Total
ESPP Shares
(number)
ESPP Shares
$
300,000
300,000
97,500
97,500
ESPP Loans
Outstanding
$
97,500
97,500
ESPP Issue Price
$
ESPP Expiry Date
$
0.325
30 August 2013
Option Holdings of Key Management Personnel
There have been no options held by the Key Management Personnel during the year.
Loans to Key Management Personnel
Other than loans issued in relation to the Company’s ESPP shares detailed above, there were no loans to Key Management
Personnel during the year.
Other Transactions with Key Management Personnel
During the year the Company paid $790,680 (inc. GST) to entities associated with directors Hadrian Morrall and Brandon Penn for
property rental and outgoings, based on normal commercial terms and conditions.
share options
As at the date of this report (and at the balance date) there were no unissued ordinary shares under options.
proceedings on behalf of the company
No person has applied for leave of court to bring proceedings on behalf of the Company or intervene in any proceedings
to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those
proceedings. The Company was not a party to any such proceedings during the year.
rounding of accounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
8 // Annual Report 2012
For personal use only
auditors’ independence declaration and non-audit services
Other than as disclosed in Note 31, there were no non-audit services provided by the entity’s auditors UHY Haines Norton.
The Auditors’ independence declaration as required under section 307C of the Corporations Act 2001 for the year end
30 June 2012 has been received and can be found on page 10 of the Directors’ report.
This Directors’ Report is signed in accordance with a resolution of the Board of Directors.
Signed at Sydney on 25 September 2012.
Elliott Kaplan
Chairman
Brandon Penn
Director
2012 Annual Report // 9
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 10
auditors’ independence declaration
under section 307C of the Corporations Act 2001
To the Directors of Pro-Pac Packaging Limited
As auditor for the audit of Pro-Pac Packaging Limited for the year ended 30 June 2012, I declare that, to the best of my
knowledge and belief, there have been:
(i)
no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
no contraventions of any applicable code of professional conduct in relation to the audit.
Franco Giannuzzi
Partner
UHY Haines Norton
Chartered Accountants
Signed at Sydney on 25 September 2012.
10 // Annual Report 2012
For personal use only
// 11
corporate governance statement
The Board of Directors of Pro-Pac Packaging Limited is
responsible for the corporate governance of the Company
and its controlled entities (Pro-Pac) and to ensure that Pro-Pac
is directed and managed appropriately. In this regard, the
Board is committed to ensuring accountability and that control
systems are commensurate with the risks involved to enable
Pro-Pac to create value and optimise its performance.
During August 2007, the ASX Corporate Governance
Council released its Corporate Governance Principles and
Recommendations – 2nd edition (ASX Principles). The ASX
Listing Rules require Pro-Pac to provide a statement in its
Annual Report disclosing the extent to which they have
followed the best practice recommendations during the
reporting period, and if any recommendations are not
followed, an explanation is provided.
The Company’s Corporate Governance Statement is
structured with reference to the Australian Securities Exchange
(“ASX”) Corporate Governance Council’s (the “Council”)
“Corporate Governance Principles and Recommendations”,
which are as follows:
Principle 1 –
Lay solid foundations for management and
oversight
Principle 2 –
Structure the Board to add value
Principle 3 –
Promote ethical and responsible decision
making
Principle 4 –
Safeguard integrity in financial reporting
Principle 5 – Make timely and balanced disclosure
Principle 6 – Respect the rights of shareholders
Principle 7 – Recognise and manage risk
Principle 8 – Remunerate fairly and responsibly
A copy of the “Corporate Governance Principles and
Recommendations” can be found on the ASX’s website at
www.asx.com.au
However, the ASX Corporate Governance Council
acknowledged that “a one size fits all” approach is
inappropriate and that it is unwise to require all companies
to apply the same rules because different companies face
different circumstances hence some recommendations are
unnecessary or may even be counter-productive. In particular
it acknowledged that it may be inappropriate or uneconomic
for smaller companies, such as Pro-Pac, to follow the same
rules as Australia’s largest listed companies. Instead the
Council chose to issue a full suite of recommendations and
require companies to adopt an ‘if not why not’ approach to
reporting compliance with the recommendations. Companies
are at liberty to determine whether each recommendation
is appropriate to them. They are required to disclose in the
Corporate Governance Statement of their annual reports those
recommendations which they have not adopted during each
reporting period and provide explanations for their decisions.
A number of the best practice recommendations require the
formal documentation of policies and procedures that Pro-Pac
already substantially performs. Pro-Pac considers that to create
such further documentation independently and specifically for
Pro-Pac would have minimal additional benefit but substantial
additional expense. Pro-Pac is also mindful to not adopt such
procedures solely for the sake of adoption or where they could
actually inhibit the proper function or opportunities of Pro-Pac.
However it recognises that it has to put in place a compliance
program which includes the documentation of its compliance
policies and procedures and a Risk Management Statement
which considers the major risks to Pro-Pac operations, the
rating and ranking of these risks to set priorities in the treatment
of the risks. The Board has determined that the adoption of
such formal policies and procedures must be tailored to Pro-
Pac at minimal expense and must be appropriate for Pro-Pac,
taking into account the size and complexity of its operations.
This statement summarises the corporate governance practices
currently in place at Pro-Pac. The Board recognises that in a
changing world, it is important to review these practices and
policies from time to time to ensure they continue to reflect
local and international developments and assist Pro-Pac in
optimising its corporate performance and accountability. Pro-
Pac will continue to keep its corporate governance practices
under review. Key summaries of the corporate governance
practices and policies and other key documents can be found
on Pro-Pac’s website at www.ppgaust.com.au
ASX Principle 1 - Lay solid foundations for
management and oversight
Companies should establish and disclose the
respective roles and responsibilities of board
and management.
// Recommendation 1.1: Companies should establish the
functions reserved to the board and those delegated to
senior executives and disclose those functions.
// Recommendation 1.2: Companies should disclose the
process for evaluating the performance of senior executives.
// Recommendation 1.3: Companies should provide the
information indicated in the Guide to reporting on Principle 1.
Role of the Board
The Board has adopted a charter that establishes the role of the
Board and its relationship with management. The primary role
of the Board is the protection and enhancement of long-term
shareholder value. Its responsibilities include the overall strategic
direction of Pro-Pac, establishing goals for management and
monitoring the achievement of these goals. The functions and
responsibilities of the Board and management are consistent
with ASX Principle 1. A summary of the matters reserved for the
Board can be found in the corporate governance section of
the Pro-Pac website. (www.ppgaust.com.au)
2012 Annual Report // 11
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 12
corporate governance statement
Pro-Pac has in place systems designed to fairly review and
actively encourage enhanced Board and management
effectiveness. The Chairman has the responsibility to review
continually the performance of each director and the Board
as a whole. The performance of the Board is reviewed regularly
against both measurable and qualitative indicators. The
performance criteria against which Directors and Executives
are assessed is aligned with the financial and non-financial
objectives of Pro-Pac. From time to time and, as considered
appropriate, the Chairman will seek external assistance and
advice to undertake these performance reviews.
A performance evaluation for senior executives was undertaken
during the reporting period. This entails an evaluation of the
executive against a pre-determined set of objectives and key
performance areas.
ASX Principle 2 - Structure the Board to
add value
Companies should have a board of an effective
composition, size and commitment to adequately
discharge its responsibilities and duties.
// Recommendation 2.1: A majority of the board should be
independent directors.
// Recommendation 2.2: The chair should be an independent
director.
// Recommendation 2.3: The roles of chair and chief
executive officer should not be exercised by the same
individual.
// Recommendation 2.4: The board should establish a
nomination committee.
// Recommendation 2.5: Companies should disclose the
process for evaluating the performance of the board, its
committees and individual directors.
// Recommendation 2.6: Companies should provide the
information indicated in the Guide to reporting on
Principle 2.
Structure of the Board
The skills, experience and expertise relevant to the position of
director held by each Director in office at the date of this Report
is included in the Directors’ Report. Corporate Governance
Council Recommendation 2.1 recommends that a majority
of the Board to be independent Directors. The Corporate
Governance Council defines independence as being free from
any business or other relationship that could materially interfere
with – or could reasonably be perceived to materially interfere
with – the independent exercise of their judgement.
When determining the independent status of a director the
Board would consider whether the Director is, inter alia:
// a substantial shareholder of the company or an officer
of, or otherwise associated directly with, a substantial
shareholder of the company
12 // Annual Report 2012
// employed, or has previously been employed in an
executive capacity by the company or another group
member, and there has not been a period of at least three
years between ceasing such employment and serving on
the board
In accordance with the above criteria, the following Director is
not considered to be independent:
Name
Reason for non-compliance
Brandon Penn
Executive Director
Mr Penn is employed by the Company
in an executive capacity, is a substantial
shareholder and a supplier of leasehold
premises.
Mr Kaplan and Dr Weiss are considered to be independent
and as such the Company does satisfy Corporate Governance
Council Recommendation 2.1 as it does have a majority of
independent directors.
The Board distinguishes between the concept of
independence and the issues of conflict of interest or material
personal interests which may arise from time to time.
Wherever there is an actual or potential conflict of interest or
material personal interest, the Board’s policies and procedures
ensure that the directors:
// fully and frankly inform the Board about the circumstances
giving rise to the conflict; and
// abstain from voting on any motion relating to the matter
and absenting himself or herself from Board deliberations
relating to the matter including receipt of Board papers
bearing on the matter.
If the Board resolves to permit a Director to have any
involvement in a matter involving possible circumstances of
conflicting interests, the Board will minute full details of the
basis of the determination and the nature of the conflict
including a formal resolution concerning the matter.
If a Director believes that he or she may have a conflict of
interest or duty in relation to a particular matter, the Director
should immediately consult with the Chairman. The Company
Secretary will maintain a register of all possible conflict of
interest situations.
The Company also has a Director’s Code of Conduct which
sets out standards to which each director will adhere whilst
conducting his duties. The code requires a Director, amongst
other things, to:
// act honestly, in good faith and in the best interests of the
Company as a whole;
// perform the functions of office and exercise the powers
attached to that office with a degree of care and diligence
that a reasonable person would exercise if he were a
Director in the same circumstances; and
For personal use only // consider matters before the Board having regard to any
possible personal interests, the amount of information
appropriate to properly consider the subject matter and
what is in the best interests of the Company.
The Company considers industry experience and specific
expertise, as well as general corporate experience, to be
important attributes of its Board members. The Directors
noted above have been appointed to the Board due to their
considerable industry and corporate experience.
There are procedures in place, agreed by the Board, to
enable Directors, in furtherance of their duties, to seek
independent professional advice at the Company’s expense.
The term in office held by each Director in office at the date
of this report is listed below. Note that the Company was
incorporated in February 2005.
Name
Term in office
Elliott Kaplan
Brandon Penn
Gary Weiss
7 years and 8 months
5 years and 1 month
4 months
The Company now complies with the following best practice
recommendations although this was not the case throughout
the financial year ended 30 June 2012:
// having a majority of independent Directors;
// having an independent Chairman for its Audit Committee;
Evaluation of the Board, its committees and directors is
undertaken by the Chairman during the course of the year.
Nomination and appointment of new directors
The Board has elected not to establish a formal Nominations
Committee to oversee the appointment and induction
process for Directors. The Board has determined that it may
deal more effectively with such matters as a single body. The
ASX Guidelines contemplate that a Nomination Committee
may not always be appropriate for Company’s with smaller
boards of directors.
ASX Principle 3 - Promote ethical and
responsible decision-making
Companies should actively promote ethical and
responsible decision-making.
// Recommendation 3.1: Companies should establish a code
of conduct and disclose the code or a summary of the
code as to:
– the practices necessary to maintain confidence in the
company’s integrity;
– the practices necessary to take into account their legal
– the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
// Recommendation 3.2: Companies should establish a policy
concerning diversity and disclose the policy or a summary
of that policy. The policy should include requirements for
the board to establish measurable objectives for achieving
gender diversity for the board to assess annually both the
objectives and progress in achieving them.
// Recommendation 3.3: Companies should disclose in each
annual report the measurable objectives for achieving
gender diversity set by the board in accordance with the
diversity policy and progress towards achieving them.
// Recommendation 3.4: Companies should disclose in each
annual report the proportion of women employees in the
whole, organisation, women in senior executive positions
and women on the board.
// Recommendation 3.5: Companies should provide the
information indicated in the Guide to reporting on Principle 3.
In line with ASX Principle 3, the Board has established a Code
of Conduct and Securities Trading Policy.
Code of Conduct
The purpose of the Code of Conduct is to guide all
employees, including Directors as to:
// the practices necessary to maintain confidence in Pro-Pac’s
honesty and integrity;
// the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
The overriding principle is that all business affairs of Pro-
Pac must be conducted legally, ethically and with strict
observance of the highest standards of propriety and
business ethics. If there are any doubts as to how to respond
to a particular circumstance, Directors and employees are
encouraged to consult with the Chairman or Company
Secretary and, if necessary, seek external professional advice.
Pro-Pac has in place a code of conduct which sets standards
for the Board and employees in dealing with Pro-Pac’s
customers, suppliers, shareholders and other stakeholders.
A copy of this code of conduct is available on the Pro-Pac
website.
Diversity at Pro-Pac
The company respects people as individuals and values their
differences. It is committed to creating a working environment
that is fair and flexible, promotes personal and professional
growth, and benefits from the capabilities of its diverse
workforce. The organisation employs people of each gender
as well as with varying skills, cultural backgrounds, ethnicity and
experience. Pro-Pac believes it’s diverse workforce is the key to
its continued growth, improved productivity and performance.
obligations and the reasonable expectations of their
stakeholders; and
The company continually monitors the number of females
in executive, manager, supervisory and other roles in the
2012 Annual Report // 13
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 14
corporate governance statement
business. A summary of the number of females and males in
the company records:
Executive managers
Managers
Staff
Total
Women
1
9
121
131
Men
3
12
232
247
The company also maintains a flexible working policy to
provide flexible working arrangements including part time
and working from home. This is to ensure employees with
children are able to continue working and meet their home
responsibilities. The table below indicates the number of
people who have accessed the flexible working arrangement
during the year.
Full time
Part time
Casual
Total
Women
112
12
7
131
Men
231
4
12
247
Securities Trading Policy
A securities trading policy has been adopted and is binding
on all Directors, officers and employees of Pro-Pac. This
policy imposes trading restrictions on all Directors, officers
and employees of Pro-Pac in possession of ‘inside information’.
A copy of the Securities Trading Policy is posted on the
Pro-Pac website.
Directors are required to comply with the requirements of the
ASX Listing Rules and their letter of appointment and promptly
advise Pro-Pac of any dealing in Pro-Pac shares to allow
Pro-Pac to make the necessary disclosures to the ASX.
ASX Principle 4 - Safeguard integrity in
financial reporting
Companies should have a structure to independently
verify and safeguard the integrity
of their financial reporting.
// Recommendation 4.1: The board should establish an audit
committee.
// Recommendation 4.2: The audit committee should be
structured so that it:
– consists only of non-executive directors
– consists of a majority of independent directors
14 // Annual Report 2012
– is chaired by an independent chair, who is not chair of
the board
– has at least three members.
// Recommendation 4.3: The audit committee should have a
formal charter.
// Recommendation 4.4: Companies should provide the
information indicated in the Guide to reporting on Principle 4.
ASX Principle 4 requires Pro-Pac to “have a structure to
independently verify and safeguard the integrity of the
company’s financial reporting”. The Board believes its
practices are in accordance with this principle.
Audit Committee
To assist in the execution of its responsibilities, the Board has
established an Audit Committee.
The structure of the Audit Committee and its responsibilities
reflect in part the requirements of ASX Principle 4. A summary
of the Charter setting out the Committee’s responsibilities is
posted on the Pro-Pac website.
It is the Board’s responsibility to ensure that an effective internal
control framework exists within the Company.
This includes internal controls to deal with both the effectiveness
and efficiency of significant business processes, the
safeguarding of assets, the maintenance of proper accounting
records, and the reliability of financial information as well
as non-financial considerations such as the benchmarking
of operational key performance indicators. The Board has
delegated the responsibility for the establishment and
maintenance of a framework of internal control and ethical
standards for the management of the Company to the Audit
Committee.
The Committee also provides the Board with additional
assurance regarding the reliability of financial information for
inclusion in the financial reports.
The Committee comprises Dr Weiss and Mr Kaplan. Each
member is financially literate (i.e. they are able to read and
understand financial statements) and Mr Kaplan has financial
expertise (i.e. he is a Chartered Accountant). All members
have some understanding of the industry in which the
Company operates.
Recommendation 4.2 requires that the composition of Audit
Committee comprises a majority of independent Directors
and that the committee have at least three members.
The Company does not, given its size and the size of its
Board, satisfy this requirement although both members are
independent.
For additional details of Directors’ attendance at Audit
Committee meetings and to review the qualifications of
the members of the Audit Committee, please refer to the
Directors’ Report.
For personal use only
ASX Principle 5 - Make timely and
balanced disclosure
Companies should promote timely and balanced
disclosure of all material matters concerning the
company.
// Recommendation 5.1: Companies should establish written
policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability
at a senior executive level for that compliance and disclose
those policies or a summary of those policies.
// Recommendation 5.2: Companies should provide the
information indicated in the Guide to reporting on Principle 5.
Consistent with ASX Principle 5, the Board aims to ensure
that all investors have equal and timely access to material
information concerning the Company, that there is
compliance with continuous disclosure requirements and that
announcements made by the Company are factual and
presented in a clear and balanced way.
The Company has adopted an External Communications
Policy reflecting the principles set out in ASX Principle 5. This
policy has been placed on the Pro-Pac website.
ASX Principle 6 - Respect the rights of
shareholders
Companies should respect the rights of
shareholders and facilitate the effective exercise
of those rights
// Recommendation 6.1: Companies should design
a communications policy for promoting effective
communication with shareholders and encouraging their
participation at general meetings and disclose their policy
or a summary of that policy.
// Recommendation 6.2: Companies should provide the
information indicated in the Guide to reporting on Principle 6.
Pro-Pac has adopted a number of different practices
designed to promote effective communication with
shareholders as recommended by ASX Principle 6 and as
reflected in the Company’s External communications policy,
published on its website. These practices include placing
on the Pro-Pac website relevant information, including ASX
announcements, annual and half-year reports, copies of
notices of meetings, analyst briefings and presentations given
by the Chairman or Chief Executive Officer. Annual reports
are distributed to all shareholders by mail or email (unless a
shareholder has specifically requested not to receive these
documents).
A representative from the auditors of Pro-Pac attends the
annual general meeting and any other meeting as required
by the Board and is available to answer shareholder questions
about the conduct of the audit and preparation and content
of the auditor’s report. Shareholders are given the opportunity
to raise questions with any of the Directors at shareholder
meetings, both formally and informally.
The External communications policy also elaborates on the
Company’s continuous disclosure policy.
ASX Principle 7 - Recognise and manage
risk
Companies should establish a sound system of
risk oversight and management and internal
control.
// Recommendation 7.1: Companies should establish policies
for the oversight and management of material business risks
and disclose a summary of those policies.
// Recommendation 7.2: The board should require
management to design and implement the risk
management and internal control system to manage
the company’s material business risks and report to it on
whether those risks are being managed effectively. The
board should disclose that management has reported to it
as to the effectiveness of the company’s management of
its material business risks.
// Recommendation 7.3: The board should disclose whether
it has received assurance from the chief executive officer
(or equivalent) and the chief financial officer (or equivalent)
that the declaration provided in accordance with section
295A of the Corporations Act is founded on a sound system
of risk management and internal control and that the
system is operating effectively in all material respects in
relation to financial reporting risks.
// Recommendation 7.4: Companies should provide the
information indicated in the Guide to reporting on Principle 7.
ASX Principle 7 recommends that a company “establish a
sound system of risk and oversight and management and
internal control.”
In addition to its financial reporting obligations, the Audit
Committee is responsible for reviewing the risk management
framework and policies of Pro-Pac. The structure of the
Audit Committee and its responsibilities reflect in part the
requirements of ASX Principle 7 and are set out in the
Company’s Audit committee charter, published on its website.
In performing this function, the Committee receives periodic
reports from the external auditor, senior management and,
in some instances, external consultants detailing compliance
with statutory requirements and the adequacy of the risk
management programs and systems in place. In addition,
the Committee reviews the adequacy of the group’s insurance
program. In line with ASX Principle 7, Pro-Pac adopted the
policy requiring the Chief Executive Officer and Chief Financial
Officer to confirm in writing that, to the best of their knowledge,
the integrity of the financial statements is founded on a sound
2012 Annual Report // 15
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 16
corporate governance statement
they should operate, the introduction and operation of share
plans, executive succession planning and development
programs to ensure that they are appropriate to the Group’s
needs and the remuneration framework for Directors (as
approved by shareholders). The Committee may consult with
remuneration advisors to Pro-Pac to assist in its role.
The remuneration committee is also responsible to determine
and review compensation arrangements for the directors
and to ensure that the Board continues to operate within
the established guidelines, including when necessary,
selecting candidates for the position of director. In carrying
out its functions the Remuneration Committee considers
remuneration issues annually and otherwise as required
in conjunction with the regular meetings of the Board.
Compensation arrangements are determined subject to the
Company’s constitution and prior shareholder approvals.
Remuneration of non-executive Directors is in accordance with
resolutions of shareholders in general meeting. The Company
does not have any schemes for retirement benefits, other than
statutory superannuation for non-executive Directors.
Details of the directors and key executives remuneration are
set out in the Directors’ Report.
system of risk management and internal compliance and
control which operates efficiently and effectively in all material
respects. The board has received the relevant declarations on
25 September 2012.
Note 21 details the policies set in place by the Board to
manage the risks arising from the Company’s financial
instruments.
ASX Principle 8 - Remunerate fairly and
responsibly
Companies should ensure that the level and
composition of remuneration is sufficient and
reasonable and that its relationship to performance
is clear.
// Recommendation 8.1: The board should establish a
remuneration committee.
// Recommendation 8.2: The remuneration committee should
be structured.
// Recommendation 8.3: Clearly distinguish the structure
of non-executive director’s remuneration from that of
executive directors and senior executives.
// Recommendation 8.4: Provide the information indicated in
the Guide to reporting on Principle 8.
It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a high quality Board and
Executive team by remunerating directors and key executives
fairly and appropriately with reference to relevant employment
market conditions. To assist in achieving this objective, the
Board will link the nature and amount of directors’ emoluments
to the Company’s financial and operations performance.
The Board has in place a Remuneration Committee to assist
the Board in relation to human resources issues affecting
the Pro-Pac Group. The structure of this Committee and its
responsibilities reflect in part the requirements of ASX Principle 8.
The Committee comprises Dr Weiss (Chairman) and Mr Kaplan.
In addition to the members, the Chief Executive is invited to the
meetings at the discretion of the Committee. Refer schedule of
meetings of directors on page 4.
A charter setting out the responsibilities of the Committee has
been adopted and a summary of this charter is posted on the
Pro-Pac website.
This Committee is responsible for ensuring that the recruitment
and remuneration policies and practices of Pro-Pac are
consistent with its strategic goals and human resources
objectives and are designed to enhance corporate and
individual performance as well as meet the appropriate
recruitment and succession planning needs.
To do this the Committee, among other things, is responsible
for reviewing and monitoring executive performance,
remuneration and incentive policies and the manner in which
16 // Annual Report 2012
For personal use only // 17
consolidated statement of comprehensive income
for the year to 30 June 2012
Notes
Consolidated
2012
$000’s
Consolidated
2011
$000’s
Revenue
Sale of goods
Interest income
Reversal of deferred acquisition consideration
Total Revenue
Expenses
Amortisation of prepaid royalty
Depreciation expense
Distribution costs
Employee benefits expense
Finance costs
Occupancy costs
Other expenses from ordinary activities
Raw materials and consumables used
Rationalisation and relocation expenses
Total Expenses
Profit before income tax from continuing operations
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Total comprehensive income for the year
Earnings per share (cents per share)
– Basic earnings per share
– Diluted earnings per share
133,053
106
-
133,159
322
2,493
4,050
23,785
1,160
4,771
7,129
80,545
763
115,238
93
247
115,578
322
2,315
4,029
21,071
1,287
4,083
6,871
68,186
403
125,018
108,567
8,141
(2,373)
5,768
-
5,768
3.65
3.61
7,011
(1,964)
5,047
-
5,047
3.74
3.74
15
5
6
6
The above statements should be read in conjunction with the accompanying notes.
2012 Annual Report // 17
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 18
consolidated statement of financial position
as at 30 June 2012
Notes
Consolidated
2012
$000’s
Consolidated
2011
$000’s
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Prepayments
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Prepayments
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Provisions
Borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued Capital
Reserves
Retained earnings
TOTAL EQUITY
8
10
11
15
12
13
14
15
17
18
19
5
19
18
20
3,911
25,599
18,698
1,370
49,578
14,921
56,226
1,559
672
73,378
122,956
18,683
1,745
2,597
474
23,499
498
2,572
3,070
26,569
96,387
85,285
56
11,046
96,387
1,461
19,852
13,057
1,172
35,542
13,099
46,758
962
994
61,813
97,355
14,344
1,670
2,212
918
19,144
395
15,657
16,052
35,196
62,159
54,005
44
8,110
62,159
The above statements should be read in conjunction with the accompanying notes.
18 // Annual Report 2012
For personal use only
// 19
consolidated statement of cash flows
for the year to 30 June 2012
Notes
Consolidated
2012
$000’s
Consolidated
2011
$000’s
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Finance costs
Income tax paid
Net cash flows provided by/(used in) operating activities
9
Cash flows from investing activities
Payments for property, plant and equipment
Proceeds from sale of property, plant and equipment
Payments for unincorporated businesses net of cash acquired
Net cash flows used in investing activities
Cash flows from financing activities
Payment of hire purchase and finance lease liabilities
Finance leases raised
Proceeds from borrowing
Repayment of loans
Proceeds from issue of shares
Dividend paid
Share issue transaction costs
Net cash flows provided/(used in) by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Cash and cash equivalents at end of financial year
8
Non-cash financing transactions
Hire purchase and finance lease liabilities raised
Issue of shares for dividend re-investment plan
The above statements should be read in conjunction with the accompanying notes.
128,887
(123,920)
106
(1,160)
(3,096)
817
(4,268)
336
(7,628)
(11,560)
(2,135)
2,220
6,400
(19,469)
28,000
(918)
(905)
13,193
2,450
1,461
3,911
2,220
1,914
112,462
(104,435)
93
(1,241)
(2,741)
4,138
(3,676)
91
(3,049)
(6,634)
(1,549)
1,691
2,500
-
-
(756)
-
1,886
(610)
2,071
1,461
1,691
1,948
2012 Annual Report // 19
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 20
consolidated statement of changes in equity
for the year to 30 June 2012
Issued
capital
$000’s
Retained
earnings
$000’s
Option
reserve
$000’s
Total
equity
$000’s
Consolidated
Balance as at 30 June 2010
52,057
5,767
Issue of shares for dividend re-investment plan
Dividend paid
Recognition of share based payments
Total comprehensive income for the year
Balance as at 30 June 2011
Issue of shares for dividend re-investment plan
Dividend paid
Shares issued to vendors of businesses acquired
Recognition of share based payments
Shares issued under share placement
Cost of raising shares
Tax effect on cost of raising shares
Total comprehensive income for the year
Balance as at 30 June 2012
1,948
-
-
-
54,005
1,914
-
1,998
-
28,000
(905)
273
-
85,285
-
(2,704)
5,047
8,110
-
(2,832)
-
-
-
-
-
5,768
11,046
The above statements should be read in conjunction with the accompanying notes.
30
-
-
14
-
44
-
-
-
12
-
-
-
-
56
57,854
1,948
(2,704)
14
5,047
62,159
1,914
(2,832)
1,998
12
28,000
(905)
273
5,768
96,387
20 // Annual Report 2012
For personal use only
// 21
notes to the financial statements
for the year to 30 June 2012
note 1: corporate information
The financial report of Pro-Pac Packaging Limited and its
subsidiaries (“the Group”) for the year ended 30 June 2012
was approved for issue in accordance with a resolution of
the Directors on 25 September 2012.
Pro-Pac Packaging Limited is a company limited by shares
incorporated in Australia whose shares are publicly traded
on the Australian Securities Exchange.
The nature of the operations and principal activities of the
Group are described in the Directors’ Report.
Comparatives
Comparative figures have been adjusted where necessary
to conform to changes in the presentation for the current
financial year where required by accounting standards or
as a result of changes in accounting policies.
note 2: summary of significant
accounting policies
(a) New, revised or amending Standards and
Interpretations adopted
The consolidated entity has adopted all of the new, revised or
amending Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board (‘AASB’) that are
mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or
Interpretations that are not yet mandatory have not been early
adopted.
Any significant impact on the accounting policies of the
consolidated entity from the adoption of these Accounting
Standards and Interpretations are disclosed in the relevant
accounting policy. The adoption of these Standards and
Interpretations did not have any significant impact on the
financial performance or position of the consolidated entity.
The following Accounting Standards and Interpretations are
most relevant to the consolidated entity:
AASB 2010-4 Amendments to Australian Accounting
Standards arising from the Annual Improvements Project
The consolidated entity has applied AASB 2010-4
amendments from 1 July 2011. The amendments made
numerous non-urgent but necessary amendments to a range
of Australian Accounting Standards and Interpretations. The
amendments provided clarification of disclosures in AASB 7
‘Financial Instruments Disclosures’ in particular emphasis of the
interaction between quantitative and qualitative disclosures
and the nature and extent of risks associated with financial
instruments, clarified that an entity can present an analysis
of other comprehensive income for each component of
equity, either in the statement of changes in equity or in the
notes in accordance with AASB 101 ‘Presentation of Financial
Instruments’ and provided guidance on the disclosure of
significant events and transactions in AASB 134 ‘Interim
Financial Reporting’.
AASB 2010-5 Amendments to Australian Accounting
Standards
The consolidated entity has applied AASB 2010-5
amendments from 1 July 2011. The amendments made
numerous editorial amendments to a range of Australian
Accounting Standards and Interpretations including
amendments to reflect changes made to the text of
International Financial Reporting Standards by the
International Accounting Standards Board.
AASB 124 Related Party Disclosures (December 2009)
The consolidated entity has applied AASB 124 (revised) from
1 July 2011. The revised standards simplified the definition
of a related party by clarifying its intended meaning and
eliminating inconsistencies from the definition a subsidiary
and an associate with the same investor are related parties
of each other, entities significantly influenced by one person
and entities significantly influenced by a close member of the
family of that person are no longer related parties of each
other and whenever a person or entity has both joint control
over a second entity and joint control or significant influence
over a third party and the second and third entities are related
to each other.
AASB 2010-6 Amendments to Australian Accounting
Standards – Disclosures on Transfer of Financial Assets
The consolidated entity has applied AASB 2010-6
amendments from 1 July 2011. These amendments add and
amended disclosure requirements in AASB 7 about transfer
of financial assets, including the nature of the financial assets
involved the risk associated with them. Additional disclosures
are now required when (i) an asset is transferred but is not
derecognised and (ii) when assets are derecognised but the
consolidated entity has a continuing exposure to the asset
after the sale.
AASB 1054 Australian Additional Disclosures
The consolidated entity has applied AASB 1054 from 1 July
2011. The standard sets out the Australian-specific disclosures
as a result of Phase 1 of the Trans-Tasman Convergence
Project, which are in addition to International Financial
Reporting Standards for entities that have adopted Australian
Accounting Standards.
AASB 2011-1 Amendments to Australian Accounting
Standards arising from the Trans-Tasman Convergence
Project
The consolidated entity has applied AASB 2011-1
amendments from 1 July 2011. These amendments made
changes to a range of Australian Accounting Standards
and Interpretations for the purpose of closer alignment
to International Financial Reporting Standards (IFRSs) and
2012 Annual Report // 21
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 22
notes to the financial statements
for the year to 30 June 2012
note 2: summary of significant
accounting policies (cont.)
harmonisation between Australian and New Zealand Standards.
The amendments removed certain guidance and definitions
from Australian Accounting Standards for conformity of drafting
with IFRSs but without any intention to change requirements.
AASB 2011-5 Amendments to Australian Accounting
Standards – Extending Relief from Consolidation the
Equity Method and Proportionate Consolidation
The consolidated entity has applied AASB 2011-5
amendments from 1 July 2011. These amendments extended
relief from consolidation the entity method and proportionate
consolidation where the ultimate or intermediate parent
applied not-for-profit Aus paragraphs in Australian IFRSs as
adopted in Australia.
(b) Basis of preparation
The financial report is a general purpose financial report, which
has been prepared in accordance with Australian Accounting
Standards, Australian Accounting Interpretations, other
authoritative pronouncements of the Australian Accounting
Standards Board and the requirements of the Corporations
Act 2001. The financial report has also been prepared on an
accruals basis and is based on historical costs. The financial
report is presented in Australian dollars.
In accordance with the Corporations Act 2001, these financial
statements present the results of the consolidated entity only,
supplementary information about the parent entity is disclosed
in note 29.
(c) Statement of compliance
The financial report complies with Australian Accounting
Standards. This ensures that the financial report, comprising
the financial statements and notes thereto, complies with
International Financial Reporting Standards.
(d) Basis of consolidation
The consolidated financial statements comprise the financial
statements of Pro-Pac Packaging Limited and its subsidiaries as
at 30 June 2012.
A list of controlled entities is contained in Note 23 to the
Financial Statements.
The financial statements of subsidiaries are prepared for the
reporting year ended 30 June 2012 using accounting policies
consistent with the parent entity.
Adjustments are made to bring into line any dissimilar
accounting policies that may exist. All inter-company balances
and transactions, including unrealised profits or losses arising
from intra-group transactions, have been eliminated in full.
Subsidiaries are consolidated from the date on which control
is transferred to the Group and cease to be consolidated
22 // Annual Report 2012
from the date on which control is transferred out of the Group.
Where there is loss of control of a subsidiary, the consolidated
financial statements include the results for the part of the
reporting period during which Pro-Pac Packaging Limited had
control.
(e) Business combinations
The acquisition method of accounting is used to account for
business combinations regardless of whether equity instruments
or other assets are acquired.
The consideration transferred is the sum of the acquisition-date
fair values of the assets transferred, equity instruments issued
or liabilities incurred by the acquirer to former owners of the
acquiree and the amount of any non-controlling interest in the
acquiree. For each business combination, the non-controlling
interest in the acquiree is measured at either fair value or
at the proportionate share of the acquiree’s identifiable net
assets. All acquisition costs are expensed as incurred.
Where the business combination is achieved in stages, the
consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value
and the difference between the fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer
is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of contingent consideration classified
as an asset or liability is recognised in profit or loss. Contingent
consideration classified as equity is not remeasured and its
subsequent settlement is accounted for within equity.
The difference between the acquisition-date fair value of
assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration
transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration
transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain
purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-
date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling
interest in the acquiree, if any, the consideration transferred
and the acquirer’s previously held equity interest in the
acquirer.
Business combinations are initially accounted for on a
provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises
additional assets or liabilities during the measurement period,
based on new information obtained about the facts and
circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months
from the date of the acquisition or (ii) when the acquirer
receives all the information possible to determine fair value.
For personal use only Goodwill is recognised initially at the excess of cost over the
acquirer’s interest in net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If the fair value
of the acquirer’s interest is greater than cost, the surplus is
immediately recognised in profit or loss.
(f) Property, plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation. Plant and equipment is depreciated using the
straight line and diminishing value methods over the estimated
useful lives.
The current depreciation rates are over 1 to 25 years.
An item of property, plant and equipment is de-recognised
upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any
gain or loss arising on de-recognition of the asset (calculated
as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the statement of
comprehensive income in the year the item is de-recognised.
Impairment
The carrying values of plant and equipment are reviewed
for impairment when events or changes in circumstances
indicate the carrying value may not be recoverable. For
an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs.
If any such indication exists and where the carrying values
exceed the estimated recoverable amount, the assets or
cash-generating units are written down to their recoverable
amount.
The recoverable amount of plant and equipment is the
greater of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset.
(g) Borrowing costs
Borrowing costs are recognised as an expense when incurred.
(h) Goodwill
Goodwill on acquisition is initially measured at cost being
the excess of the cost of the business combination over the
acquirer’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities.
Following initial recognition, goodwill is measured at cost
less any accumulated impairment losses. Goodwill is not
amortised. Goodwill is reviewed for impairment annually
or more frequently if events or changes in circumstances
indicate that the carrying value may be impaired.
Impairment is determined by assessing the recoverable
amount of the cash generating unit to which the goodwill
relates. Where the recoverable amount of the cash generating
unit is less than the carrying amount, an impairment loss is
recognised.
Where goodwill forms part of a cash-generating unit and part
of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is included in the
carrying amount of the operation when determining the gain
or loss on disposal of the operation. Goodwill disposed of in
this circumstance is measured on the basis of the relative
values of the operation disposed of and the portion of the
cash generating unit retained.
(i) Recoverable amount of assets
At each reporting date, the Group assesses whether there
is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes a formal
estimate of recoverable amount. Where the carrying amount
of an asset exceeds its recoverable amount the asset is
considered impaired and is written down to its recoverable
amount.
Recoverable amount is the greater of fair value less costs to
sell and value in use. It is determined for an individual asset,
unless the asset’s value in use cannot be estimated to be
close to its fair value less costs to sell and it does not generate
cash inflows that are largely independent of those from other
assets or groups of assets, in which case the recoverable
amount is determined for the cash-generating unit to which
the asset belongs.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of
money and the risks specific to the asset.
(j) Inventories
Inventories are valued at the lower of cost and net realisable
value.
Costs incurred in bringing each product to its present location
and condition are accounted for as follows:
// Raw materials – purchase cost on a first-in, first-out basis.
// Finished goods and work-in-progress – cost of direct
materials and direct labour and a proportion of
manufacturing overheads based on normal operating
capacity.
(k) Trade and other receivables
Trade receivables, which generally have 30-90 day terms,
are recognised and carried at original invoice amount less
an allowance for any uncollectible amounts.
An estimate for doubtful debts is made when collection of
the full amount is no longer probable. Bad debts are written
off when identified.
2012 Annual Report // 23
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 24
notes to the financial statements
for the year to 30 June 2012
note 2: summary of significant
accounting policies (cont.)
(l) Cash and cash equivalents
Cash and short-term deposits in the statement of financial
position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less.
For the purposes of the Statement of cash flow, cash and cash
equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
(m) Interest bearing loans and borrowings
All loans and borrowings are initially recognised at cost, being
the fair value of the consideration received net of issue costs
associated with the borrowing.
After initial recognition, interest bearing loans and borrowings
are subsequently measured at amortised cost using the
effective interest method. Amortised cost is calculated by
taking into account any issue costs, and any discount or
premium on settlement.
(n) Provisions
Provisions are recognised when the Group has a present
obligation (legal or constructive) as a result of a past event, for
which it is probable that an outflow of resources embodying
economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows
at a pre-tax rate that reflects current market assessments of
the time value of money and, where appropriate, the risks
specific to the liability.
Where discounting is used, the increase in the provision due to
the passage of time is recognised as a finance cost.
(o) Equity-settled compensation
The group operates equity-settled share-based payment
employee share and option schemes. The fair value of the
equity to which employees become entitled is measured at
grant date and recognised as an expense over the vesting
period, with a corresponding increase in an equity account.
The fair value of shares is ascertained as the market bid price.
The fair value of options is ascertained using a Black-Scholes
model which incorporates all market vesting conditions. The
number of shares and options expected to vest is reviewed
and adjusted at each reporting date such that the amount
recognised for services received as consideration for the
equity instruments granted shall be based on the number of
equity instruments that eventually vest.
(p) Leases
A distinction is made between finance leases which effectively
transfer from the lessor to the lessee substantially all the risks
and benefits incidental to ownership of the leased property,
without transferring the legal ownership, and operating leases
24 // Annual Report 2012
under which the lessor effectively retains substantially all the
risks and benefits.
Where assets are acquired by means of finance leases, the
present value of minimum lease payments is established as
an asset at the beginning of the lease term and amortised
on a straight line basis over the expected economic life. A
corresponding liability is also established and each lease
payment is allocated between such liability and interest
expense. Operating lease payments are charged to expense
on a basis which is representative of the pattern of benefits
derived from the leased property.
(q) Revenue
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can
be reliably measured. The following specific recognition criteria
must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of
ownership of the goods have passed to the buyer and can be
measured reliably. Risks and rewards are considered passed to
the buyer at the time of delivery of the goods to the customer.
Interest
Revenue is recognised as the interest accrues (using the
effective interest method, which is the rate that exactly
discounts estimated future cash receipts through the expected
life of the financial instrument) to the net carrying amount of
the financial asset.
Dividends
Revenue is recognised when the shareholders’ right to receive
the payment is established.
(r) Income tax
The income tax expense (revenue) for the year comprises
current income tax (income) and deferred tax expense
(income).
Current income tax expense charged to the profit or loss is the
tax payable on taxable income calculated using applicable
income tax rates enacted, or substantially enacted, as at
reporting date. Current tax liabilities (assets) are therefore
measured at the amounts expected to be paid to (recovered
from) the relevant taxation authority.
Deferred income tax expense reflects movements in the
deferred tax asset and deferred tax liability balances during
the year as well as unused tax losses.
Current and deferred income tax expense (income) is
charged or credited directly to equity instead of the profit or
loss when the tax relates to items that are credited or charged
directly to equity.
Deferred tax assets and liabilities are ascertained based on
temporary differences arising between the tax base of assets
and liabilities and their carrying amounts in the financial
statements. Deferred tax assets also result where amounts
For personal use only have been fully expensed but future tax deductions are
available. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or
taxable profit or loss.
payables in the statement of financial position. Cash flows are
included in the Statement of cash flow on a gross basis and
the GST component of cash flows arising from investing and
financing activities, which is recoverable from, or payable to,
the taxation authority are classified as operating cash flows.
Deferred tax assets and liabilities are calculated at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates enacted or
substantially enacted at reporting date. Their measurement also
reflects the manner in which management expects to recover
or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against
which the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in
subsidiaries, branches, associates and joint ventures, deferred
tax assets and liabilities are not recognised where the timing
of the reversal of the temporary difference can be controlled
and it is not probable that the reversal will occur in the
foreseeable future.
Current tax assets and liabilities are offset where a legally
enforceable right of set-off exists and it is intended that net
settlement or simultaneous realisation and settlement of the
respective asset and liability will occur. Deferred tax assets and
liabilities are offset where a legally enforceable right of set-off
exists, the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and settlement
of the respective asset and liability will occur in future periods
in which significant amounts of deferred tax assets are
expected to be recovered or settled.
Pro-Pac Packaging Limited (the “head entity”) and its wholly
owned Australian controlled entities have formed a tax
consolidated group under the tax consolidated regime. Each
entity in the Group recognises its own current and deferred
tax liabilities, except for any deferred tax liabilities resulting
from unused tax losses and tax credits which are immediately
assumed by the parent entity. The current tax liability of each
group entity is then subsequently assumed by the parent entity.
(s) Other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
// where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
// receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the taxation
authority.
(t) Employee benefits
Provision is made for employee benefits accumulated as a
result of employees rendering services up to the reporting
date. These benefits include wages and salaries, annual leave
and long service leave. Liabilities arising in respect of wages
and salaries, annual leave and any other employee benefits
expected to be settled within 12 months of the reporting date
are measured at the amounts expected to be paid when
the liability is settled. All other employee benefit liabilities
are measured at the present value of the estimated future
cash outflow to be made in respect of services provided by
employees up to the reporting date.
(u) Financial Instruments
Recognition
Financial instruments are initially measured at cost on trade
date, which includes transactions costs, when the related
contractual rights or obligations exist. Subsequent to initial
recognition these instruments are measured as set out below.
Loans and receivables
Loans and receivables are non-derivate financial assets with
fixed or determinable payments that are not quoted in an
active market and are stated at amortised cost using the
effective interest rate method.
Financial liabilities
Non-derivate financial liabilities are recognised at amortised
cost, comprising original debt less principal payments and
amortisation.
(v) Foreign Currency Transactions and Balances
Foreign currency transactions are translated into functional
currency using the exchange rates prevailing at the date
of the transaction. Foreign currency monetary items are
translated at the year-end exchange rate. Exchange
differences arising on the translation of monetary items are
recognised in the statement of comprehensive income.
(w) Critical Accounting estimates and judgements
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.
2012 Annual Report // 25
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 26
notes to the financial statements
for the year to 30 June 2012
note 2: summary of significant
accounting policies (cont.)
Key estimates
(i) Impairment
The Group assesses impairment at each reporting date
by evaluating conditions and events specific to the Group
that may be indicative of impairment triggers. Recoverable
amounts of relevant assets are reassessed using value in-use
calculations which incorporate various key assumptions.
No impairment is considered necessary in respect of goodwill
based on key estimates used in assessing recoverable
amounts.
Key Judgements
(i) Provision for impairment of receivables
Current trade and term receivables are non-interest bearing
loans and generally on 30-60 days terms. Non-current trade
and term receivables are assessed for recoverability based
on the underlying terms of the contract. A provision for
impairment is recognised when there is objective evidence
that an individual trade or term receivable is impaired. These
amounts have been included in the other expenses from
ordinary activities item.
note 3: 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.
Rigid packaging
The Rigid packaging division manufactures, sources and
distributes containers and closures and related products and
26 // Annual Report 2012
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 quarterly and is 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. This policy represents a departure from
that applied to the statutory financial statements.
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 assets and liabilities;
// current tax liabilities;
// other financial liabilities.
For personal use only note 3: operating segments (cont.)
Rigid
packaging
$ 000’s
2012
Industrial
packaging
$ 000’s
2012
Intersegment
eliminations
unallocated
$ 000’s
2012
(i) Segment performance
Twelve months ended 31 December
Industrial
Rigid
Total packaging packaging
$ 000’s
2011
$ 000’s
2011
$ 000’s
2012
Intersegment
eliminations
unallocated
$ 000’s
2011
Total
$ 000’s
2011
Revenue
External sales
Inter-segment sales
47,901
6,850
85,152
7,756
133,053
-
(14,606)
48,235
6,618
67,003
4,895
115,238
-
(11,513)
Total segment revenue
54,751
92,908
(14,606)
133,053
54,853
71,898
(11,513) 115,238
6,262
8,045
(2,297)
12,010
(2,815)
106
(1,160)
8,141
(2,373)
5,768
6,687
6,192
(2,037)
10,842
(2,637)
93
(1,287)
7,011
(1,964)
5,047
EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
(ii) Segment assets
As at 30 June
Segment assets
45,534
73,206
118,740
44,778
50,409
95,187
Reconciliation of segment
assets to group assets
Inter-segment eliminations
Unallocated assets
– Deferred tax assets
– Other
Total group assets from
continuing operations
(1,959)
6,175
1,559
4,616
122,956
(1,253)
3,421
962
2,459
97,355
2012 Annual Report // 27
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 28
notes to the financial statements
for the year to 30 June 2012
note 3: operating segments (cont.)
Rigid
packaging
$ 000’s
2012
Industrial
packaging
$ 000’s
2012
Intersegment
eliminations
unallocated
$ 000’s
2012
Total
$ 000’s
2012
Rigid
Industrial
packaging packaging
$ 000’s
2011
$ 000’s
2011
Intersegment
eliminations
unallocated
$ 000’s
2011
Total
$ 000’s
2011
(iii) Segment liabilities
As at 30 June
Segment liabilities
10,988
16,531
27,519
10,740
11,376
22,116
Reconciliation of segment
liabilities to group liabilities
Inter-segment eliminations
Unallocated liabilities
– Deferred tax liabilities
– Other liabilities
Total group liabilities from
continuing operations
(1,665)
715
-
715
26,569
(1,038)
14,118
-
14,118
35,196
(iv) The Group operates solely within Australia. As such there is only one geographical segment.
note 4: expenses
Bad and doubtful debts – trade
Rental expense on operating leases:
– minimum lease payments
Consolidated
2012
$000’s
Consolidated
2011
$000’s
199
4,453
143
3,842
28 // Annual Report 2012
For personal use only
note 5: income tax
Major components of income tax for the year ended 30 June are:
Statement of comprehensive income
Current income tax
Current income tax charge/(refund)
Adjustments in respect of previous years
Deferred income tax
Relating to temporary differences
Income tax expense/(refund) in statement of comprehensive income
A reconciliation of income tax expense applicable to accounting profit before
income tax at the statutory income tax rate to income tax expense at the Group’s
effective income tax rate for the year ended 30 June 2012 is as follows:
Accounting profit before tax
At the statutory income tax rate of 30%
Special tax allowances net of expenditure not allowable for tax purposes
Adjustments in respect of previous years
At effective income tax rate of 29.1% (2011: 28.0%)
Income tax expense reported in statement of comprehensive income
Tax consolidation
The Financial report has been prepared on the basis that the Group has
adopted the provisions of the tax consolidation regime for the years ended
30 June 2012 and 30 June 2011.
Consolidated
2012
$000’s
Consolidated
2011
$000’s
2,664
34
(325)
2,373
8,141
2,442
(17)
(52)
2,373
2,373
2,205
(87)
(154)
1,964
7,011
2,103
(52)
(87)
1,964
1,964
Current tax liability
474
918
note 6: earnings per share
Basic and diluted earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the period.
The following reflects the income and share data used in the total operations basic and diluted earnings per share computations:
Net profit attributable to equity holders ($000’s)
Weighted average number of ordinary shares for basic earnings per share
Basic earnings per share (cents per share) *
Diluted earnings per share (cents per share) *
Consolidated
2012
5,768
158,176,354
3.65
3.61
Consolidated
2011
5,047
135,092,131
3.74
3.74
* 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. During the prior period the average exercise price of the options was higher than the
average market price per share as such, the options would not have been exercised and therefore no dilution would have occurred.
2012 Annual Report // 29
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 30
notes to the financial statements
for the year to 30 June 2012
note 7: dividends paid and proposed
On 29 August 2012, the Company declared a fully franked final dividend of 1.0 cent per share. The record date for determining
entitlements to the dividend is 11 September 2012 and the dividend will be paid on 25 September 2012. The Company’s
Dividend Reinvestment Plan did not apply to the final dividend. When combined with PPG’s interim dividend of 1.0 cent, paid on
12 April 2012, this brings total fully franked dividends for the 2011/12 financial year to 2.0 cents per share.
Declared and paid during the year:
Final dividend for 2011 – 1 cent per ordinary share
(2010 – 1 cent per ordinary share)
Interim dividend for 2012 – 1 cents per ordinary share
(2011 – 1 cent per ordinary share)
Proposed for approval at the Directors Meeting
(not recognised as a liability as at 30 June):
Final dividend for 2012 – 1 cent per ordinary share
(2011 – 1 cent per ordinary share)
2012
$000’s
1,397
1,435
2,832
2011
$000’s
1,338
1,366
2,704
2,110
1,397
Franking credit balance
As indicated in note 5, the financial report has been prepared on the basis that the
group has adopted the provisions of the tax consolidation regime for the years ended
30 June 2012 and 30 June 2011. As such franking credits arising from the other Group
companies totalling $12,481,697 (2011: $10,599,156) will be available to the parent entity.
Franking credits available at the reporting date based on a tax rate of 30%
Franking credits that will arise from the payment of the amount of the provision
for income tax at the reporting date based on a tax rate of 30%
Franking credits available for subsequent financial years based on a tax rate of 30%
Franking debits that will arise from the payment of dividends declared subsequent to
the reporting date based on a tax rate of 30%
Net franking credits available based on a tax rate of 30%
10,599
3,097
13,696
(1,214)
12,482
9,016
2,742
11,758
(1,159)
10,599
30 // Annual Report 2012
For personal use only
Consolidated
2012
$000’s
Consolidated
2011
$000’s
note 8: cash and cash equivalents
Cash at bank and in hand
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates
The fair value of cash and cash equivalents
Reconciliation of cash
For the purposes of the Statement of cash flow, cash and cash equivalents comprise the
following at 30 June:
3,911
3,911
1,461
1,461
Cash at bank and in hand
3,911
1,461
note 9: cashflow information
(a) Reconciliation from the net profit after tax to the net cash flows from operations
Net profit after tax
Add/(Less) non-cash items:
Depreciation and amortisation of plant and equipment
Amortisation of prepaid royalty
(Profit)/Loss on disposal of assets
Movement in income tax provision
Movement in deferred tax assets and liabilities
Movement in provision for bad debts
Other non-cash movements
Changes in assets and liabilities:
Receivables
Inventories
Payables
Provisions
Prepayments
Net cash flows from operating activities
(b) Non-cash financing and investing activities
1.
2.
During the year, the company issued shares to the value of $1,914,364 (2011: $1,948,514)
in accordance with the dividend reinvestment plan.
During the year, the consolidated Group acquired plant with an aggregate value of
$2,219,825 (2011:$1,690,580) by means of finance leases. These acquisitions are not
reflected in the statement of cash flow.
(c) Credit standby arrangements with banks
Credit facility
Amount utilised
Loan facilities
Amount utilised
5,768
2,493
322
257
(441)
(283)
87
11
(5,830)
(1,973)
227
378
(199)
817
1,000
-
24,100
-
5,047
2,315
322
156
(618)
(157)
28
6
(4,457)
(1,299)
2,614
257
(76)
4,138
1,000
-
20,100
13,077
2012 Annual Report // 31
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 32
notes to the financial statements
for the year to 30 June 2012
note 10: trade and other receivables
Current:
Trade receivables
Provision for impairment of receivables
Opening balance
Additional provision recognised
Receivables written off during the year as uncollectable
Other debtors
Total current receivables
Consolidated
2012
$000’s
Consolidated
2011
$000’s
23,779
(309)
(219)
(289)
199
2,129
25,599
19,463
(219)
(191)
(171)
143
608
19,852
Trade receivables are non-interest bearing and are generally on terms between 30 and 60 days.
Credit risk – Trade and Other Receivables
The Group has no significant concentration of credit risk with respect to any single counter party or group of counter parties. The
class of assets described as Trade and Other Receivables is considered to be the main source of credit risk related to the Group.
The following table details the Group’s trade and other receivables exposed to credit risk (prior to collateral and other credit
enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt
has not been settled, with the terms and conditions as agreed between the Group and the customer or counter party to the
transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided
for where there are specific circumstances indicating that the debt may not be fully repaid to the Group.
The balances of receivables that remain within initial trading terms (as detailed in the table) are considered to be of high credit
quality.
Gross
amount
Past due &
impaired
$000’s
$000’s
Past due but
not impaired
> 90
$000’s
Past due but
not impaired
61 - 90
$000’s
Within initial
trade terms
$000’s
23,779
2,129
25,908
19,463
608
20,071
309
-
309
219
-
219
83
-
83
90
-
90
1,594
-
1,594
1,517
-
1,517
21,793
2,129
23,922
17,637
608
18,245
Consolidated
2012
Trade and term receivables
Other receivables
Total
2011
Trade and term receivables
Other receivables
Total
Neither the Group nor parent entity holds any financial assets with terms that have been renegotiated, but which would otherwise
be past due or impaired.
32 // Annual Report 2012
For personal use only
note 11: inventories
Raw materials (lower of cost and net realisable value)
Finished goods (lower of cost and net realisable value)
Total inventories at lower of cost and net realisable value
note 12: property, plant and equipment
At 30 June
Plant and equipment
At cost
Accumulated depreciation
Leased plant and equipment
Capitalised leased plant and equipment
Accumulated depreciation
Consolidated
2012
$000’s
Consolidated
2011
$000’s
913
17,785
18,698
22,601
(7,680)
14,921
-
-
-
797
12,260
13,057
19,519
(6,456)
13,063
106
(70)
36
Total property, plant and equipment
14,921
13,099
(a) Movement in the carrying amounts for each class of property, plant and equipment between the beginning
and the end of the current financial year.
Balance at the beginning of the year
Additions arising from acquisitions
Additions
Disposals
Reclassifications
Depreciation charge for the year
Carrying amount at the end of the year
Balance at the beginning of the year
Additions arising from acquisitions
Additions
Disposals
Reclassifications
Depreciation charge for the year
Carrying amount at the end of the year
Consolidated
2012
$000’s
Owned
13,063
663
4,246
(594)
26
(2,483)
14,921
Consolidated
2011
$000’s
Owned
11,804
105
3,630
(251)
50
(2,275)
13,063
Consolidated
2012
$000’s
Leased
36
-
-
-
(26)
(10)
-
Consolidated
2011
$000’s
Leased
126
-
-
-
(50)
(40)
36
Consolidated
2012
$000’s
Total
13,099
663
4246
(594)
-
(2,493)
14,921
Consolidated
2011
$000’s
Total
11,930
105
3,630
(251)
-
(2,315)
13,099
2012 Annual Report // 33
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 34
notes to the financial statements
for the year to 30 June 2012
note 13: intangible assets
Goodwill
Carrying amount at beginning of the year
Acquisition through business combinations
Closing value
At 30 June
Gross
Accumulated impairment losses
Net carrying value
Consolidated
2012
$000’s
Consolidated
2011
$000’s
Notes
24
46,758
9,468
56,226
56,226
-
56,226
44,477
2,281
46,758
46,758
-
46,758
Impairment Test for Goodwill
The Group and all of its subsidiaries are divided into two major cash generating units as these are the smallest groups of identifiable
assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Goodwill
acquired through business combinations has been allocated to the cash-generating-units for impairment testing.
The recoverable amount of the cash generating unit has been determined based on a value-in-use calculation. Based on the
value-in-use calculations undertaken by management, Goodwill has not been impaired (see note 26).
note 14: defered tax assets
Deferred tax assets
Deferred tax assets comprise:
Provisions and other timing differences
Transactions costs on equity issue
Reconciliation of gross movements
The overall movement in the deferred tax account is as follows:
Opening balance
Tax effect of share issue cost
Charge to statement of comprehensive income
Closing balance
Deferred tax assets
The movement in deferred tax assets for each temporary difference during the year is as follows:
Provisions and other timing differences at 1 July
Reclassification
Credit to statement of comprehensive income
At 30 June
Transaction cost to equity issue at 1 July
Tax effect of share issue cost
Reclassification
Charge to statement of comprehensive income
At 30 June
34 // Annual Report 2012
1,338
221
1,559
962
272
325
1,559
893
73
372
1,338
69
289
(73)
(64)
221
893
69
962
805
-
157
962
729
-
164
893
76
-
-
(7)
69
For personal use only
note 15: prepayments
(a) Current prepayments
Other prepayments
Prepaid royalty
Total current prepayments
(b) Non-current prepayments
Prepaid royalty
Total non-current prepayments
Consolidated
2012
$000’s
Consolidated
2011
$000’s
1048
322
1,370
672
672
850
322
1,172
994
994
Prepayment of royalty
The prepayment of the royalty is amortised over the remaining period of the exclusive licence to manufacture and distribute
biodegradable flowable void fill products. The prepaid royalty amortised for the year ended 30 June 2012 amounted to
$322,082 (2011: $322,082).
note 16: employee benefits
Executive Long Term Incentive Plan
In March 2005 the Company established an ESPP to encourage employees to share in the ownership of the Company and
promote the long-term success of the Company as a goal shared by the employees. The ESPP has been approved by members
of the Company for the purposes of sections 260C(4)(a), 259B(2)(a), 257B(1) and paragraph (b) of the definition of employee share
scheme buy-back in section 9 of the Corporations Act.
The following are the key terms and conditions of the ESPP:
// No Shares under the ESPP will be allotted unless the requirements of the Corporations Act 2001 and the ASX Listing Rules have
been complied with.
// Performance hurdles apply to the ESPP. The key performance hurdle is that the total shareholder return to shareholders of the
Company must exceed the rate of growth over the same period for the S&P/ASX Small Ordinaries Accumulation Index (or any
equivalent or replacement of that index).
// Shares are allocated to employees at either the value of shares as detailed in the latest disclosure document issued by the
Company or the 5-day weighted average price immediately prior to the offer being made to employee.
// The Company may provide loans to participants to acquire shares under the ESPP. As security for the loans, Participants will
pledge the shares acquired under the ESPP to the Company at the time the loans are provided and will grant a charge over any
benefits attributable to the Shares, including bonus shares, rights, and dividends. Any dividends paid on the shares by Pro-Pac
Packaging Limited are treated as interest on the loan.
// The term of the loans and the vesting period for the shares from the date of issue of the ESPP is 3 years.
// The Shares will be registered in the names of the Participants from allotment, but will remain subject to restrictions on dealing while
they are pledged as security for a loan or subject to performance hurdles specified.
// If the employee leaves the employment of the Group, the loan balance must be repaid in full or the shares would be
surrendered in full settlement of the outstanding loan balance.
// During the year 200,000 shares were issued to staff and executives under the ESPP. At the end of the year 1,535,000 shares were
in issue under the ESPP.
// No other features of the benefit provided (including vesting conditions) were incorporated into the measurement of fair value.
2012 Annual Report // 35
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 36
notes to the financial statements
for the year to 30 June 2012
note 16: employee benefits (cont.)
Executive Long Term Incentive Plan (cont.)
// The fair value of the employee benefit provided under the ESPP plan is estimated at the date of grant using the binomial model,
and the following assumptions: expected volatility, risk-free interest rate, expected life of option, share price, dividend yield and
probability of achievement.
// Under Australian Accounting Standards, shares issued to executives under the Long Term Executive Incentive Plan are now
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. Comparative figures for the prior financial year have been adjusted
accordingly.
Grant Date
Expiry Date
Price
Balance at
beginning of year
Granted
Exercised
Expired/
forfeited
Balance at
end of year
30/08/2013
11/04/2014
04/04/2015
0.325
0.325
0.500
2012
30/08/2010
12/04/2011
05/04/2012
2011
30/08/2010
12/04/2011
30/08/2013
11/04/2014
0.325
0.325
1,325,000
10,000
-
200,000
1,335,000
200,000
1,325,000
10,000
1,335,000
-
1,325,000
10,000
200,000
-
1,535,000
1,325,000
10,000
-
1,335,000
-
-
note 17: trade and other payables
Unsecured:
Trade payables
GST payable
Other tax payable
Sundry creditors and accruals
Consolidated
2012
$000’s
Consolidated
2011
$000’s
13,278
609
448
4,348
18,683
11,567
579
405
1,793
14,344
All payables are non-interest bearing and are normally settled on 60 day terms. The net of GST payable and GST receivable is
remitted to the appropriate tax body on a quarterly basis.
36 // Annual Report 2012
For personal use only
note 18: interest bearing loans and borrowings
Current
Finance lease and hire purchase (see note 25)
Bank loan (secured)
Non-current
Finance lease and hire purchase (see note 25)
Bank loan (secured)
Consolidated
2012
$000’s
Consolidated
2011
$000’s
1,737
8
1,745
2,572
-
2,572
1,670
-
1,670
2,580
13,077
15,657
(a) The bank loan is secured as follows:
i) first ranking registered equitable mortgage over Pro-Pac Packaging Limited and all wholly owned subsidiaries;
ii) cross interlocking guarantees from Pro-Pac Packaging Limited and all wholly owned subsidiaries.
(b) The bank loan is subject to the following covenants:
i) it will ensure that for each 2 consecutive reporting periods ending 30 June and 31 December, the ratio of EBITDA to total
debt service will not fall below 2.00:1 and further ensure that the ratio of EBITDA to total debt service will not fall below 1.50:1
for any 6 month reporting period
ii) it will ensure that for each preceding 12 calendar month period the ratio of total senior debt to EBITDA does not exceed
3.00:1; and
iii) it will ensure that for each 6 month period ending 30 June and 31 December, the ratio of total tangible assets to total senior
debt will not fall below 1.45:1.
(c) The bank loan facility is subject to review on 30 November 2013.
note 19: provisions
Current
Employee entitlements
Opening balance
Arising on acquisition of business combinations
Additional provisions
Amount used
Closing balance
Non-current
Employee entitlements
Opening balance
Arising on acquisition of business combinations
Additional provisions
Amount used
Closing balance
2,212
53
1816
(1,484)
2,597
395
58
140
(95)
498
1,837
39
1,651
(1,315)
2,212
437
37
(4)
(75)
395
2012 Annual Report // 37
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 38
notes to the financial statements
for the year to 30 June 2012
note 20: issued capital
Ordinary shares
Issued and fully paid
Movement in ordinary shares on issue
Balance at 1 July 2010
Issue of shares under the Executive Long Term Incentive Plan
Cancellation of shares under the Executive Long Term Incentive Plan
Issue of shares under the dividend re-investment plan
Balance at 30 June 2011
Issue of shares under the Executive Long Term Incentive Plan
Capital raising
Cost of raising shares
Issue of shares under the dividend re-investment plan
Shares issued to vendors of businesses acquired
Balance at 30 June 2012
Consolidated
2012
$000’s
Consolidated
2011
$000’s
85,285
54,005
Number
133,143,012
1,335,000
(675,000)
5,932,564
139,735,576
200,000
62,222,223
-
4,746,673
4,083,332
210,987,804
$000’s
52,057
-
-
1,948
54,005
-
28,000
(632)
1,914
1,998
85,285
There was no par value for the shares issued. The company has an Executive Long Term Incentive Plan under which the
company’s shares have been granted (refer note 16).
Share buy-back
There is no current on-market share buy-back.
Capital risk management
The consolidated entity’s and parent entity’s objectives when managing capital are to safeguard their ability to continue as a going
concern, so that they can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the consolidated entity and parent entity may adjust the amount of dividends
paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The consolidated entity and parent entity would look to raise capital when an opportunity to invest in a business or company was
seen as value adding relative to the current parent entity’s share price at the time of the investment.
The consolidated entity and parent entity are subject to certain financing arrangements covenants and meeting these are given
priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the
financial year.
The capital risk management policy remains unchanged from the 30 June 2011 Annual Report.
38 // Annual Report 2012
For personal use only
note 21: financial risk management objectives and policies
The Group’s principal financial instruments comprise bank loans, finance leases and hire purchase contracts, cash and short-term
deposits. The main purpose of these financial instruments is to finance the Group’s operations.
The Group has various other financial instruments such as trade debtors and trade creditors, which arise directly from its operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be
undertaken.
The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign currency risk and credit risk. The
board reviews and agrees policies for managing each of these risks and they are summarised below.
Interest rate risk
The Group’s exposure to interest rate risk is limited to interest receivable and payable on bank accounts and drawn down bank
loans. The interest rates contained in the finance lease and hire purchase agreements are fixed for the term of those arrangements.
All cash balances are at call and the average interest rate on the deposits is 4.1%.
Foreign currency risk
The Group has transactional currency exposures. Such exposure arises from purchases by the operating unit in currencies other than
the unit’s measurement currency which accounted for 18.4% of purchases of materials and capital items. Forward contracts are
used to manage foreign currency risk.
Commodity price risk
The Group’s exposure to commodity price risk is relatively low although certain petrochemical based products are affected by the
oil price.
Credit risk
The Group has policies in place to ensure that customers who wish to trade on credit terms are subject to credit verification
procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad
debts is not significant.
With respect to credit risk arising from the other financial assets of the Group, which comprise cash and cash equivalents, the
Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of
these instruments. There are no significant concentrations of credit risk within the Group.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and
finance leases and hire purchase contracts.
note 22: financial instruments
Unless otherwise stated the carrying amounts of financial instruments reflect their fair value. The carrying amounts of trade
receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of
financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is
available for similar financial instruments.
2012 Annual Report // 39
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only // 40
notes to the financial statements
for the year to 30 June 2012
note 22: financial instruments (cont.)
Interest rate risk
The following table sets out the interest rates applicable to financial instruments that are exposed to interest rate risk:
Floating
interest rate
Fixed
interest rate
Non-interest
bearing
Total carrying
amount per the
statement of
financial position
Weighted
average
interest rate
2012
$000’s
2012
$000’s
2012
$000’s
2012
$000’s
2012
%
Consolidated
(i) Financial assets
Cash Assets
Receivables
Total financial assets
(ii) Financial liabilities
Finance Leases (current)
Finance Leases (non-current)
Bank loans (current)
Bank loans (non-current)
Payables (current)
Total financial liabilities
3,898
-
3,898
-
-
-
-
-
-
-
-
-
1,745
2,572
-
-
-
4,317
Net financial assets/(liabilities)
3,898
(4,317)
There is no interest rate applicable on receivables or payables.
13
25,599
25,612
-
-
-
-
18,683
18,683
6,929
2011
$000’s
2011
$000’s
2011
$000’s
Consolidated
(i) Financial assets
Cash Assets
Receivables
Total financial assets
(ii) Financial liabilities
Finance Leases (current)
Finance Leases (non-current)
Bank loans (current)
Bank loans (non-current)
Payables (current)
Total financial liabilities
1,452
-
1,452
-
-
-
13,077
-
13,077
-
-
-
1,670
2,580
-
-
-
4,250
Net financial assets/(liabilities)
(11,625)
(4,250)
9
19,852
19,861
-
-
-
-
14,344
14,344
5,517
40 // Annual Report 2012
4.0
7.9
7.9
7.0
7.0
2011
%
4.7
10.0
10.0
7.1
7.1
3,911
25,599
29,510
1,745
2,572
-
-
18,683
23,000
6,510
2011
$000’s
1,461
19,852
21,313
1,670
2,580
-
13,077
14,344
31,671
(10,358)
For personal use only
note 22: financial instruments (cont.)
The following table sets out the carrying amount, by maturity, of the financial instruments that are exposed to interest rate risk:
Year ended 30 June 2012
< 1
year
$000’s
>1 - <2
years
$000’s
>2 - <3
years
$000’s
>3 - <4
years
$000’s
>4 - <5
years
$000’s
> 5
years
$000’s
Consolidated
Cash assets
Finance leases
Bank loans
3,898
1,745
-
-
1,372
-
-
840
-
-
253
-
-
107
-
-
-
-
Year ended 30 June 2011
< 1
year
$000’s
>1 - <2
years
$000’s
>2 - <3
years
$000’s
>3 - <4
years
$000’s
>4 - <5
years
$000’s
> 5
years
$000’s
Consolidated
Cash assets
Finance leases
Bank loans
1,452
1,670
-
-
1,207
13,077
-
807
-
-
481
-
-
85
-
-
-
-
Total
$000’s
3,898
4,317
-
Total
$000’s
1,452
4,250
13,077
The other financial instruments of the Group and Parent that are not included in the above tables are non-interest bearing and are
therefore not subject to interest rate risk.
Sensitivity analysis
The following table illustrates sensitivities to the Group’s exposures to changes in interest rates and exchange rates. The table indi-
cates the impact on how profit and equity values reported at reporting date would have been affected by changes in the relevant
risk variable that managers considers to be reasonably possible. These sensitivities assume that the movement in a particular vari-
able is independent of other variables.
2012
+/- 1% in interest rates
+/- 10% in AUD / USD
2011
+/- 1% in interest rates
+/- 10% in AUD / USD
Consolidated
Profit
$000’s
Consolidated
Equity
$000’s
+/- 110
+/- 1,586
+/- 130
+/- 994
+/- 110
+/- 1,586
+/- 130
+/- 994
2012 Annual Report // 41
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 42
notes to the financial statements
for the year to 30 June 2012
note 23: 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.
Direct Controlled Entities:
Pro-Pac Group Pty Ltd
Plastic Bottles Pty Ltd
Controlled Entities owned 100% by Pro-Pac Group Pty Ltd
Pro-Pac Packaging (Aust) Pty Ltd
Pro-Pac (GLP) Pty Ltd
Controlled Entities owned 100% by Plastic Bottles Pty Ltd
Specialty Products and Dispensers Pty Ltd
Australian Bottle Manufacturers Pty Ltd
Ctech Closures Pty Ltd
Bev-Cap Pty Ltd
Controlled Entities owned 100% by Pro-Pac Packaging (Aust) Pty Ltd
Pro-Pac Packaging Manufacturing (Syd) Pty Ltd
Pro-Pac Packaging Manufacturing (Melb) Pty Ltd
Pro-Pac Packaging Manufacturing (Bris) Pty Ltd
Creative Packaging Pty Ltd
Controlled Entities owned 100% by Bev-Cap Pty Ltd
Great Lakes Moulding Pty Ltd
Finpact Pty Ltd
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Class of
Shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Equity
Holding
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Entities subject to class order relief
The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others:
Pro-Pac Packaging Limited
Plastic Bottles Pty Ltd
Pro-Pac Group Pty Ltd
Pro-Pac Packaging (Aust) Pty Ltd
By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare a financial report and
directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and Investments Commission (‘ASIC’).
42 // Annual Report 2012
For personal use only
note 24: business combinations
Acquisition of businesses
Pro-Pac Packaging (Aust) Pty Limited, a wholly owned subsidiary, acquired the business and assets of the following:
Effective Date
Acquired
Location
Business description
01/04/2012
01/03/2012
01/01/2012
01/12/2011
01/11/2011
01/10/2011
01/09/2011
Preferred Packaging
Deandy Packaging
Hills Industrial Products
Stanli Packaging
Heron Professional Products
Space Pac
Medirite
Sydney
Adelaide
Sydney
Adelaide
Perth
Sydney
Sydney
Industrial packaging and safety products
Importer and distributor of food services packaging
Catalogue-based distributor
Industrial packaging and safety products
Industrial packaging and safety products
Void-fill
Safety Products
Plastic Bottles Pty Ltd, a wholly owned subsidiary, acquired the business and assets of the following:
Effective Date
Acquired
Location
Business description
01/05/2012
Australian Pharmaceutical Containers
Sydney
Importer and distributors of pharmaceutical containers
The effect of the above transactions can be summarised as follows:
Assets
Current Assets
Inventories
Total Current Assets
Non-current Assets
Property, plant and equipment
Deferred tax asset
Total Non-current Assets
Total Assets
Liabilities
Current Liabilities
Trade and other payables
Total Current Liabilities
Non-current Liabilities
Other liabilities
Total Non-current Liabilities
Total Liabilities
NET ASSETS
Consideration Paid
Cash
Deferred payments
Shares
Contingent liability
Total
GOODWILL
Fair Value
$000’s
3,668
3,668
663
45
708
4,376
393
393
58
58
451
3,925
7,628
3,052
1,998
715
13,393
9,468
2012 Annual Report // 43
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 44
notes to the financial statements
for the year to 30 June 2012
note 24: business combinations (cont.)
Part of the Groups business plan is to grow through both organic growth and acquisitions. Acquisitions are undertaken to expand
the product offering and the sectors in which the Group operates.
Goodwill comprises inter alia the loyalty attached to trading names and brands acquired, contracts secured with major customers
and established chains of supply.
For the year ended 30 June 2012, the acquired businesses contributed the following earnings to the consolidated Group.
Period to
30 June 2012
Revenue
$000’s
Period to
30 June 2012
Profit before income tax
$000’s
Annualised as at
June 2012
Revenue
$000’s
Annualised as at
June 2012
Profit before income tax
$000’s
Medirite
Space Pac
Heron Professional Products
Stanli Packaging
Hills Industrial Products
Deandy Packaging
Australian Pharmaceutical
Containers
Preferred Packaging
5,933
1,029
1,473
1,190
2,880
4,340
349
212
584
131
49
133
382
625
57
49
Total business acquisitions
17,407
2,010
7,120
1,372
2,210
2,040
5,760
13,021
1,398
847
33,768
701
174
74
228
764
1,875
227
196
4,240
44 // Annual Report 2012
For personal use only
note 25: commitments and contingencies
Operating lease commitments – Group as lessee
The Group has entered into commercial leases which are non-cancellable. The leases have varying terms, escalation clauses and
renewal rights. On renewal, the terms of the leases are renegotiated. Renewals are at the option of the specific entity that holds the
lease.
The Group also leases various items of machinery under cancellable operating leases.
There are no restrictions placed upon the lessee by entering into these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but not more than five years
More than five years
Figures exclude GST
Consolidated
2012
$000’s
Consolidated
2011
$000’s
3,950
11,544
1,352
16,846
2,664
3,717
-
6,381
Finance lease and hire purchase commitments
The Group has finance leases and hire purchase contracts for various items of plant and machinery.
Future minimum lease payments under finance leases and hire purchase contracts together with the present value of the net
minimum lease payments are as follows:
Within one year
After one year but not more than five years
Total minimum lease payments
Less amounts representing future finance charges
Present value of minimum lease payments
Representing lease liabilities
Current
Non-current
2012
Minimum
payments
$000’s
2012
Present value
of payments
$000’s
2011
Minimum
payments
$ $000’s
2011
Parent value
of payments
$000’s
1,670
2,580
4,250
-
4,250
2,031
2,797
4,828
(519)
4,309
2012
$000’s
1,737
2,572
4,309
1,737
2,572
4,309
-
4,309
1,996
2,884
4,880
(630)
4,250
2011
$000’s
1,670
2,580
4,250
The weighted average interest rate implicit in the leases is 7.9%.
2012 Annual Report // 45
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 46
notes to the financial statements
for the year to 30 June 2012
note 25: commitments and contingencies (cont.)
Contingent Liability
As at statement of financial position date, the Company issued security deposit guarantees and standby letters of credits to the
value of $1,412,517 to the landlords of rented premises and overseas suppliers.
Capital Expenditure Commitments
As at statement of financial position date the Company had no commitments for future capital expenditure.
Capital commitments - Property, plant and equipment
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
note 26: impairment testing of indefinite life goodwill
Carrying amount of goodwill
Carrying amount of goodwill Industrial Division
Carrying amount of goodwill Rigid Division
Total carrying amount of goodwill
Consolidated
2012
$000’s
Consolidated
2011
$000’s
-
-
-
31,839
24,387
56,226
89,141
-
89,141
22,660
24,098
46,758
The Group and all of its subsidiaries are divided into two major cash generating units, the industrial and rigid divisions, as these are
the smallest groups of identifiable assets that generate cash inflows that are largely independent of the cash inflows from other
assets or groups of assets. Goodwill acquired through business combinations has been allocated to the cash-generating-units for
impairment testing.
The recoverable amount of the consolidated entity’s goodwill has been determined by a value-in-use calculation using a
discounted cash flow model, based on a one year projection period approved by management and extrapolated for a further
4 years using a steady growth rate, together with a terminal value.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the discounted cash flow model for the industrial and rigid divisions:
(a) 12.2% pre-tax discount rate; (2011: 14.5%)
(b) 8% for industrial division (2011: 8%) and 1.6% for rigid division (2011: 3%) per annum projected revenue growth rate;
(c) 8% for industrial division (2011: 8%) and 1.6% for rigid division (2011: 3%) per annum increase in operating costs and overheads.
The discount rate of 12.2% pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s
weighted average cost of capital, the risk free rate and the volatility of the share price relative to market movements.
Projected growth rates are based on historical performance over the last three years and current trends which management
believes are achievable during the forecasted period.
Sensitivity
The directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and
estimates not occur the resulting goodwill may vary in the carrying amount. The sensitivities are as follows:
(a) the discount rate would need to increase to 13.8% for the Industrial division and to 15.5% for the Rigid division before goodwill
would be impaired. A rate of 12.2% was used in the assessment of goodwill.
(b) the EBITDA growth rate would need to decrease to 1% in the Industrial division and to negative 1.5% in the Rigid division before
goodwill would be impaired. EBITDA growth rates of 8% and 1.6% respectively, were used in the assessment of goodwill for the
Industrial and Rigid divisions respectively.
46 // Annual Report 2012
For personal use only
note 27: related party disclosure
Parent Entity
Pro-Pac Packaging Limited is the ultimate parent entity of the Group.
Subsidiaries
Interests in subsidiaries are set out in note 23.
Transactions with Key Management Personnel
The Company or members of the Group have entered into the following agreements with the following Key Management Personnel
or entities related to them: Hadrian Morrall and Brandon Penn.
Consolidated
2012
$000’s
Consolidated
2011
$000’s
Hadrian Morrall
• Remuneration paid
• Payments to Morrall Penn Holdings Pty Ltd and The Penn Morrall Partnership for
rental related to the Sydney, Melbourne and Brisbane properties (inc GST)
– 9 Widemere Road, Wetherill Park, NSW
– Unit 15/129 Robinson Road, Geebung, QLD
– 32 Hinkler Street, Mordialloc, VIC
Brandon Penn
• Remuneration paid
• Payments to Morrall Penn Holdings Pty Ltd and The Penn Morrall Partnership for
rental related to the Sydney, Melbourne and Brisbane properties (inc GST)
– 9 Widemere Road, Wetherill Park, NSW
– Unit 15/129 Robinson Road, Geebung, QLD
– 32 Hinkler Street, Mordialloc, VIC
234,508
790,680
587,055
116,351
87,274
240,000
790,680
587,055
116,351
87,274
Total payments to related parties during the year ended 30 June 2012 was $1,265,188 (2011: $1,285,326).
245,415
790,680
587,055
116,351
87,274
249,231
790,680
587,055
116,351
87,274
2012 Annual Report // 47
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 48
notes to the financial statements
for the year to 30 June 2012
note 28: key management personnel disclosure
Key Management Personnel at 30 June 2012
Elliott Kaplan
Dr Gary Weiss
Brandon Penn
Hadrian Morrall
Wendy Penn
Mark Saus
Non-executive Chairman
Non-executive Director
Executive Director
Divisional Managing Director
Divisional Managing Director
Chief Financial Officer and Company Secretary
Remuneration of Key Management Personnel
Excluding the Directors, there are only three staff members of the Company who qualify as “Key Management Personnel” for
the purposes of this report. The executive key management personnel are also the most highly paid executive officers of the
consolidated entity for the year under review.
note 29: parent entity information
Set out below is the supplementary information about the parent entity.
Profit for the year
Total comprehensive income
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Reserves
Retained profits/(accumulated losses)
Total equity
2012
$’000
Parent
2011
$’000
4,258
4,258
3,008
87,336
2,042
2,042
85,285
-
9
85,294
3,010
3,010
465
55,161
1,140
1,140
54,005
-
16
54,021
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except
for the following:
– Investments in subsidiaries are accounted for at cost, less any impairment.
48 // Annual Report 2012
For personal use only
note 30: events after the statement of financial position date
On 10 September 2012, Pro-Pac Packaging (Aust) Pty Limited, a wholly owned subsidiary company, purchased the business and as-
sets of Start Food-Tech Australia Pty Ltd. Start Food-Tech Australia is a long established Victorian based national supplier of packag-
ing consumables and products to the food processing industry with an annualised turnover of approximately $11m. The fair value of
property, plant and equipment is to be determined in order for the final acquisition accounting to be complete.
note 31: auditors’ remuneration
Amounts paid or due payable to UHY Haines Norton for:
– audit or review of the financial report
– due diligence relating to acquisitions
Consolidated
2012
$000’s
Consolidated
2011
$000’s
105,000
51,000
90,466
-
note 32: accounting standards issued or amended
A number of accounting standards have either been issued or amended since year end but are not effective for the financial year
ended 30 June 2012. The Group does not at this time believe these have any material impact on the 2012 financial report or for
the ensuing year.
2012 Annual Report // 49
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
// 50
directors’ declaration
The directors of the company declare that:
1.
the financial statements and notes, as set out on pages 17 to 49, are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards; and
(b) give a true and fair view of the Company’s financial position at 30 June 2012 and of its performance for the year
ended on that date of the company and consolidated group;
2.
the Chief Executive Officer and Chief Financial Officer have each declared that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the accounting standards; and
(c)
the financial statements and notes for the financial year give a true and fair view; and
3.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and
when they become due and payable.
This declaration is made in accordance with a resolution of the Board of Directors
On behalf of the Board on 25 September 2012.
Elliott Kaplan
Chairman
Brandon Penn
Director
50 // Annual Report 2012
For personal use only
// 51
independent auditor’s report
To the members of Pro-Pac Packaging Limited
Report on the Financial Report
We have audited the accompanying financial report of
Pro-Pac Packaging Limited, which comprises the consolidated
statement of financial position as at 30 June 2012, the
consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then
ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors’
declaration of the company and the consolidated entity
comprising the company and the entities it controlled at the
year’s end or from time to time during the financial year.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the
preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and
the Corporations Act 2001 and for such internal control as the
directors determine is necessary to enable the preparation
and fair presentation of the financial report that is free from
material misstatement, whether due to fraud or error.
In Note 2, the directors also state, in accordance with
Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with
International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or
error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair
presentation of the financial report that gives a true and fair
view in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the entity’s internal control.
An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Independence
In conducting our audit, we have complied with the
independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required
by the Corporations Act 2001, which has been given to the
directors of Pro-Pac Packaging Limited, would be in the same
terms if given to the directors as at the date of the auditor’s
report.
Opinion
In our opinion:
(a) the financial report of Pro-Pac Packaging Limited is in
accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the company’s and
consolidated entity’s financial position as at 30 June
2012 and of their performance for the year ended on
that date; and
ii. complying with the Australian Accounting Standards
and the Corporations Regulations 2001; and
(b) the consolidated financial report also complies with
International Financial Reporting Standards as disclosed
in Note 2.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages
5 to 8 of the directors’ report for the year ended 30 June
2012. The directors of the company are responsible for the
preparation and presentation of the Remuneration Report in
accordance with section 300A of the Corporations Act 2001.
Our responsibility is to express an opinion on the Remuneration
Report, based on our audit conducted in accordance with
Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Pro-Pac Packaging
Limited for the year ended 30 June 2012, complies with
section 300A of the Corporations Act 2001.
Franco Giannuzzi
UHY Haines Norton
Partner
Chartered Accountants
Signed at Sydney on 27 September 2012.
2012 Annual Report // 51
Pro-Pac Packaging Limited // Controlled EntitiesFor personal use only
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additional company information
Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as follows.
The information is current as at 14 September 2012.
(a) Distribution of equity securities
Table 1: The number of holders, by size of holding, in each class of security are (includes ESPP shares):
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Totals
Holders
Total Units
77
118
121
489
109
914
10,766
375,664
976,196
16,508,641
193,116,537
210,987,804
%
0.005
0.178
0.463
7.824
91.530
100.00
There are seventy seven holders of unmarketable parcels totalling 10,766 shares representing 0.005% of the Company’s issued capital.
(b) Twenty largest holders
(c) Substantial shareholders
Table 2: The names of the twenty largest holders, in each
class of security are:
Rank Holder
No. Ordinary Shares
%
The names of substantial shareholders who have notified
the Company in accordance with section 671B of the
Corporations Act 2001 are:
1 BENNAMON PTY LTD
2 MR BRANDON ARI PENN
3 MR HADRIAN REUBEN MORRALL
4 NATIONAL NOMINEES LIMITED
5 AUST EXECUTOR TRUSTEES LTD
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