PRO-PAC PACKAGING LIMITED
2015 Annual Report
2015 ANNUAL REPORT
PRO-PAC PACKAGING LIMITED
WE ARE FOCUSED
ON LOOKING AFTER
OUR EMPLOYEES AND
CUSTOMERS AND
TOGETHER CONTINUING
TO GROW A SUCCESSFUL
PACKAGING AND
DISTRIBUTION COMPANY
IN AUSTRALIA THAT
CREATES SHARED VALUE.
CORPORATE INFORMATION
Pro-Pac Packaging Limited
ACN: 112 971 874 ABN: 36 112 971 874
CONTENTS
02 CHAIRMAN’S REPORT
03 DIRECTORS’ REPORT
11
AUDITORS’ INDEPENDENCE DECLARATION
12 CORPORATE GOVERNANCE STATEMENT
DIRECTORS
Ahmed Fahour (Chairman)
Elliott Kaplan
Brandon Penn
Dr Gary Weiss
COMPANY SECRETARY
Mark Saus
REGISTERED OFFICE
147 - 151 Newton Road
Wetherill Park NSW 2164
21
22
23
24
25
55
56
57
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE
INCOME
PRINCIPAL PLACE OF BUSINESS
147 - 151 Newton Road
Wetherill Park NSW 2164
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
CONSOLIDATED STATEMENT OF
CASH FLOWS
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
NOTES TO THE FINANCIAL STATEMENTS
DIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
ADDITIONAL COMPANY INFORMATION
SHARE REGISTER
Boardroom Limited
Level 12, 225 George Street
Sydney NSW 2000
SOLICITORS
Thomson Geer
Level 25, 1 O’Connell Street
Sydney NSW 2000
BANKERS
Commonwealth Bank of Australia
Premium Business Services
Level 1, 430 Forest Road
Hurstville NSW 2220
AUDITORS
UHY Haines Norton
Level 11, 1 York Street
Sydney NSW 2000
STOCK EXCHANGE LISTING
Pro-Pac Packaging Limited shares are listed on the
Australian Securities Exchange (ASX code: PPG)
WEBSITE
www.ppgaust.com.au
1
2015 Annual Report
In May 2015 Brandon Penn retired from his role
as CEO of the Company. Brandon served as CEO
for over five years and during that time the Company
grew three fold in the packaging and distribution
industry in Australia. On behalf of the Board I want
to thank Brandon for his significant contribution to
the Company over many years. Brandon remains a
Director and a substantial shareholder of the
Company. In August 2014 the Board appointed
Peter Sutton as COO. Peter has extensive senior
management experience in the packaging industry
and in May 2015 Peter assumed the role of CEO.
Finally, I would like to thank my fellow Directors
and the management team which are focused on
looking after our employees and customers and
together continuing to grow a successful packaging
and distribution company in Australia that creates
shared value.
Ahmed Fahour
Chairman
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 2015.
The highlight of the year was revenue growth of 12%
($25 million) by comparison with the prior year. The
Company completed only one small acquisition in the
year and therefore the revenue growth was primarily
achieved through the successful implementation
of sales and business development strategies. This
achievement is particularly pleasing in the context of
weak economic growth and very competitive markets.
Profit before income tax, relocation and business
combination costs increased by 12% to $9.9 million
by comparison with the prior year. However, one-off
costs of approximately $1.5 million were incurred to
restructure the existing business and integrate the
Nelson Joyce acquisition which resulted in profit
after tax increasing by only 1% to $5.8 million. Many
of the products sold by Pro-Pac are imported from
overseas and the declining value of the Australian
dollar resulted in significant cost increases for these
products. It is estimated that the total cost impost to
Pro-Pac was $6 million by comparison with the prior
year. It is a credit to our management and sales staff
that the majority of this cost was recovered in very
competitive market conditions.
The Company continues to look for attractive
acquisitions that are accretive and meet return on
investment hurdles. The Board expects further
value-adding acquisitions to be completed in the
coming year. Opportunities also exist to continue
to lower the Company’s cost base and grow sales
with new and existing customers.
Despite the challenging business conditions the
Board remains confident in the Company’s ability
to continue to grow both sales and profit and when
considered in conjunction with a strong balance
sheet and solid cash flows the Board decided to
increase the final dividend to one and half cents
per share for the second half. This, combined with
the interim dividend, resulted in shareholders
receiving a total dividend of two and half cents
per share fully franked for the financial year.
2
PRO-PAC PACKAGING LIMITED and Controlled Entities
HEADING EXTRA DIRECTORS’ REPORT
The Directors present their report, together with the financial
statements, on the consolidated entity (“the Group”)
consisting of Pro-Pac Packaging Limited (“the Company”)
and the entities it controlled at the end of the year ended
30 June 2015.
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.
DIRECTORS
The Directors in office at the date of this report and during
the whole of the financial year are as follows:
Ahmed Fahour
B Econ, MBA
(Non-Executive Director – appointed director 28 March 2014
and Chairman 25 November 2014)
Mr Fahour was appointed Managing Director and CEO of
Australia Post in February 2010. He has held a number of
senior executive positions within the finance and banking
industries in Australia and overseas and was previously
CEO of Citigroup (Australia and New Zealand) and National
Australia Bank (Australia), and he is the former chairman of
Rip Curl Group. Mr Fahour is currently Executive Chairman
of Our Neighbourhood and Star Track, as well as a director
of the Carlton Football Club. He is also an Adjunct Professor
in the Faculty of Business, Economics and Law at La Trobe
University.
Mr Fahour is Chairman of the Remuneration Committee of
Pro-Pac.
Elliott Kaplan
BAcc, CA
(Non-Executive Director – appointed Director 1 March 2005
and Chairman 25 February 2011, resigned as chairman
25 November 2014)
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, The Environmental Group
Limited and ASX listed Grays Ecommerce Group Limited.
Mr Kaplan is Chairman of the Audit and a member of the
Remuneration Committees.
Brandon Penn
B. Com
(Non-Executive Director – appointed 16 August 2007,
resigned as CEO 12 May 2015)
Mr Penn is the founding director of the PB Group which
merged with PPG in 2007. He has had a number of
business interests alongside the PB Group including
the establishment of a dominant software development
Mr Penn is a member of the Remuneration Committee.
On 1 March 2010 Mr Penn was appointed to the position of
Group CEO. He resigned as CEO on 12 May 2015.
Dr Gary Weiss
LL.B (Hons), LL.M (with dist.), Doctor of Juridical Science (JSD)
(Non-Executive Director – appointed 28 May 2012)
Dr Weiss is Chairman of ClearView Wealth Ltd and Ridley
Corporation Ltd. He is Executive Director of Ariadne Australia
Ltd and a director of several other public companies
including Premier Investments Ltd, Thorney Opportunities
Ltd and The Straits Trading Company Ltd.
Dr Weiss is a member of both the Audit and Remuneration
Committees.
CHIEF EXECUTIVE OFFICER
Peter Sutton
B. Eng.
(Chief Executive Officer – appointed 13 May 2015)
Mr Sutton has over 25 years’ experience in senior
management roles in the packaging industry in Australia,
New Zealand and Asia. Prior to joining PPG as CEO he was
Managing Director and CEO of the private equity owned
company Aperio Group, the largest supplier of plastic
flexible packaging in Australasia. Mr Sutton has also served
in large public companies including Managing Director
of Amcor Australasia and Executive General Manager of
Southcorp Packaging.
Mr Sutton holds a Bachelor of Engineering and is a graduate
of the Advanced Management Program at Harvard Business
School.
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 30 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.
2015 Annual Report
3
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:
Elliott Kaplan
Ahmed Fahour
Brandon Penn
Dr Gary Weiss
Opening balance
Additions
Disposals
Closing balance
ORDINARY SHARES
216,357
10,000,000
24,958,817
500,000
-
-
-
-
-
-
-
200,000
216,357
10,000,000
24,958,817
300,000
Elliott Kaplan
1,200,000
-
-
1,200,000
Opening balance
Additions
Disposals
Closing balance
OPTIONS
MEETINGS OF DIRECTORS
Attendances by each director during the year were:
BOARD
AUDIT COMMITTEE
Number of
meetings held
while in office
Meetings
attended
Number of
meetings held
while in office
Meetings
attended
REMUNERATION COMMITTEE
Meetings
attended
Number of
meetings held
while in office
Elliott Kaplan
Ahmed Fahour
Dr Gary Weiss
Brandon Penn
7
7
7
7
7
7
7
7
3
-
3
-
3
-
3
-
1
1
1
1
1
1
1
1
PRINCIPAL ACTIVITIES
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, food
services and food processing sectors with a national
footprint.
During the 2015 Financial Year, the Company continued to
achieve good top line growth, both organically and through
acquisitions. Revenue grew 12% (or $25 million) to $243
million of which organic growth accounted for approximately
three quarters of the total increase in sales. Cross selling
benefits continue to be realised between the various
businesses acquired and integrated into the Company in
recent years.
The volatile trading conditions experienced in H1 continued
during H2 with the AUD declining even further and the
resultant unfavourable exchange rate impost on our
imported products and margins was circa $6 million for
the financial year relative to the prior 12 month period.
The latter was however partly mitigated by price increases
to customers, predominantly during H2.
Cost out strategies and related costs savings continued
during the year with administration, distribution and selling
expenses (before acquisition, rationalisation and relocation
expenses) reducing further during the year from 22.0% to
21.3% as a percentage of sales. Further ongoing cost saving
initiatives are planned for FY16. In particular savings are
expected from more efficient use of overheads across the
expanded Group and supply chain improvements.
Acquisition, rationalisation and relocation expenses of circa
$1.5 million were incurred during the period. The latter
arose mainly from the relocation of the Company’s Industrial
4
PRO-PAC PACKAGING LIMITED and Controlled Entities
distribution businesses in Corio, Melbourne and in Adelaide
to more cost effective facilities. Relocation and integration
costs of the Nelson Joyce business acquired in October
2014 also form part of this abnormal cost impost.
Accordingly, EBITDA before accounting for the above once
off costs of $1.5 million was up 6% at $14.7 million while
underlying PBT calculated on the same basis was up 12%
at $9.9 million.
The Industrial Division finished the year with encouraging
sales growth of 10% (6% organic) and EBITDA grew 7% -
a particularly pleasing result given the division’s heavy
reliance on imports and the adverse effects experienced
from a declining AUD.
The strong performance of the Rigid Division during H1
continued for the remainder of FY15 with 10% growth on
the top line for FY15 while EBITDA grew by 17% as a result
of the increased volumes, resulting economies of scale
and effective cost control.
Profit after tax has risen 1% on last year and absorbed many
one off costs noted above.
In line with its ambitious growth plans, the Company
continues to evaluate a healthy pipeline of potentially
accretive acquisitions.
DIVIDENDS
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 OFFICERS AND THE AUDITOR
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
2015
$000’s
2014
$000’s
> maintain certain Directors’ liability insurance in respect
of Directors, both during and after the period they are
Directors.
Dividend paid during the year:
Final dividend for 2014 –
1 cent per ordinary share
(2013 – 1 cent per ordinary share)
Interim dividend for 2015 –
1 cent per ordinary share
(2014 – 1 cent per ordinary share)
2,267
2,122
2,266
2,132
4,533
4,254
In August 2015, the Company declared a fully franked
final dividend of 1.5 cent per share. The record date for
determining entitlement to the dividend is 9 September 2015
and the dividend will be paid on 24 September 2015. The
Company’s Dividend Reinvestment Plan will apply to this
dividend. No discount will apply to the issue price.
SIGNIFICANT CHANGES IN THE STATE
OF AFFAIRS
There were no changes in the state of affairs of the
Company during the year.
SIGNIFICANT EVENTS SUBSEQUENT
TO BALANCE DATE
There were no significant events subsequent to balance
date.
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 Company 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 (AUDITED)
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 Mr Ahmed Fahour
(Chairman), Mr Elliott Kaplan, Dr Gary Weiss and Mr Brandon
Penn who are Non-Executive Directors.
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
5
2015 Annual Report
DIRECTORS’ REPORT
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
Director 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
$400,000 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 2015 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 also 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
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 2015 is set out in
Table 1 of this report.
6
Employment contracts
Chief Executive Officer
The Company has entered into an executive service
agreement with Mr Peter Sutton in relation to his role as
Chief Executive Officer of the Group. In his executive service
agreement, Mr Sutton 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.
In the event of a completion of a sale of all or substantially
all of the assets or shares in the Company (a Change of
Control) or the sale of a significant part of the Company that
would materially change the scope and responsibilities of
the CEO role, then the notice period required to be given
to Mr Sutton is six months, which he may elect to receive in
payment in lieu of notice instead of working part or all of the
notice period.
The Company may terminate the agreement at any time with
immediate effect in the event of misconduct. The agreement
provides that for a period of six months after termination
of his employment contract (less any served notice period)
Mr Sutton will not compete with the Group in Australia.
Senior Management
Employment agreements entered into with senior
management contain the following key terms:
Event
Company Policy
Resignation / notice period
6 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 2,030,000
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.
> 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
PRO-PAC PACKAGING LIMITED and Controlled Entities 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.
> 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 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.
> During the year no shares were issued to staff and
executives under the ESPP, while 650,000 were forfeited
and were cancelled or await cancellation. At the end of
the year 2,030,000 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.
> 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. Comparative
figures for the prior financial year have been adjusted
accordingly.
Set out below are summaries of ESPP shares granted under the scheme:
Grant date
Expiry Date
Price
Balance at
beginning of year
Granted
Exercised
Expired/
forfeited
Balance at
end of year
2015
05/04/12
04/04/15
17/10/12
22/07/13
25/03/14
TOTAL
16/10/15
21/07/16
24/03/17
0.500
0.485
0.458
0.460
200,000
330,000
1,100,000
1,050,000
2,680,000
-
-
-
-
-
-
-
-
-
-
200,000
50,000
300,000
100,000
-
280,000
800,000
950,000
650,000
2,030,000
Grant date
Expiry Date
Price
Balance at
beginning of year
Granted
Exercised
Expired/
forfeited
Balance at
end of year
2014
30/08/10
05/04/12
17/10/12
22/07/13
25/03/14
TOTAL
30/08/13
04/04/15
16/10/15
21/07/16
24/03/17
0.325
0.500
0.485
0.458
0.460
1,175,000
200,000
430,000
-
-
-
- 1,100,000
- 1,050,000
1,125,000
50,000
-
-
-
-
-
-
200,000
100,000
330,000
-
-
1,100,000
1,050,000
1,805,000
2,150,000
1,125,000
150,000
2,680,000
7
2015 Annual Report
DIRECTORS’ REPORT
Key Management Personnel at 30 June 2015
Ahmed Fahour
Elliott Kaplan
Dr Gary Weiss
Brandon Penn
Peter Sutton
Hadrian Morrall
Mark Saus
>
>
>
>
>
>
>
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Chief Executive Officer
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 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
Ahmed Fahour
Elliott Kaplan
Gary Weiss
Brandon Penn
Peter Sutton
Hadrian Morrall
Mark Saus
Wendy Penn
Short-term benefits
Cash, salary
and fees
Non-
monetary
Post
employment
benefits
Other
long term
benefits
Super-
annuation
benefits
$
Other
$
4,750
1,103
5,700
5,550
4,560
4,269
19,835
20,978
35,000
-
21,440
20,280
34,900
25,000
10,012
17,149
136,197
94,329
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share
based
payment
Equity and
options
$
-
-
-
12,440
-
-
-
-
-
-
-
-
4,667
4,667
-
-
$
-
-
-
-
-
-
-
-
-
-
22,980
22,980
-
-
4,000
8,000
26,980
30,980
Total
Performance
based
$
%
54,751
13,026
65,700
77,990
52,560
50,422
267,377
247,771
339,998
-
249,443
243,949
234,985
210,863
165,144
210,542
-
-
-
-
-
-
-
-
-
-
-
-
5%
-
-
-
-
-
$
50,001
11,923
60,000
60,000
48,000
46,153
247,542
226,793
304,998
-
205,023
200,689
195,418
181,196
151,132
185,393
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
2015
2014
Total Remuneration 2015
2014
1,262,114
912,147
4,667
17,107
1,429,958
1,054,563
The differences between remuneration for the year ended 30 June 2015 and 30 June 2014 are mainly due to commencement
and resignation dates. Ahmed Fahour commenced on 28 March 2014, Peter Sutton commenced on 18 August 2014 and
Wendy Penn resigned on 31 December 2014.
8
PRO-PAC PACKAGING LIMITED and Controlled Entities
Shares and Loans issued under the ESPP during the year ended 30 June 2015
No shares or related loans were issued under the ESPP during the year ended 30 June 2015.
ESPP Shares of Key Management Personnel as at the date of this report
ESPP Shares
(number)
ESPP Shares
$
Mark Saus
Mark Saus
Total
300,000
150,000
450,000
137,400
69,000
206,400
206,400
ESPP Loans
Outstanding
$
137,400
69,000
ESPP Issue Price
$
ESPP Expiry Date
$
0.458
0.46
21 July 2016
24 March 2017
Option Holdings of Key Management Personnel
1,200,000 options were granted to Mr Kaplan during the year ended 30 June 2014 as approved by a shareholders’ meeting.
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 $796,405 (incl GST) to entities associated with directors Hadrian Morrall and Brandon
Penn for property rental and outgoings, based on normal commercial terms and conditions.
This concludes the remuneration report, which has been audited.
SHARES UNDER OPTION
As at the date of this report (and at the balance date) there were 1,200,000 unissued ordinary shares under options.
Grant date
25/06/2014
Expiry date
25/06/2017
Exercise price
Number under option
$0.62
1,200,000
The exercise price is $0.62 from 26 June 2015 to 25 June 2016 and $0.90 from 26 June 2016 to 25 June 2017.
PROCEEDINGS ON BEHALF OF THE COMPANY
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave 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.
OFFICERS OF THE COMPANY WHO ARE FORMER PARTNERS OF THE AUDITOR
There are no officers of the company who are former audit partners of UHY Haines Norton, the auditor of the company.
9
2015 Annual Report
DIRECTORS’ REPORT
AUDITORS’ INDEPENDENCE DECLARATION AND NON-AUDIT SERVICES
UHY Haines Norton continues in office in accordance with section 327 of the Corporations Act 2001.
During the year ended 30 June 2015, there were no non-audit services provided by the Company’s auditors
UHY Haines Norton.
The Auditor’s independence declaration as required under section 307C of the Corporations Act 2001 for the
year end 30 June 2015 has been received and can be found on page 1 1 of the financial report.
This Directors’ Report is signed in accordance with a resolution of the Board of Directors pursuant to section 298 (2) (a)
of the Corporations Act 2001.
Signed at Sydney on 24 September 2015.
Ahmed Fahour
Chairman
Brandon Penn
Director
10
PRO-PAC PACKAGING LIMITED and Controlled Entities
AUDITORS’ INDEPENDENCE
DECLARATION
under section 307C of the Corporations Act 2001
To The Directors of Pro-Pac Packaging Limited
I declare that, to the best of my knowledge and belief, during the year ended 30 June 2015, 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.
M.D. Nicholaeff
Partner
UHY Haines Norton
Chartered Accountants
Signed at Sydney on 24 September 2015.
11
2015 Annual Report
CORPORATE GOVERNANCE STATEMENT
This Corporate Governance Statement of Pro-Pac Packaging
Limited (the ‘company’) has been prepared in accordance with
the 3rd Edition of the Australian Securities Exchange’s (‘ASX’)
Corporate Governance Principles and Recommendations of
the ASX Corporate Governance Council (‘ASX Principles and
Recommendations’) and is included in the company’s Annual
Report pursuant to ASX Listing Rule 4.10.3. This listing rule
requires the company to disclose the extent to which it has
followed the recommendations during the financial year,
including reasons where the company has not followed a
recommendation and any related alternative governance
practice adopted.
The company’s ASX Appendix 4G, which is a checklist
cross-referencing the ASX Principles and Recommendations
to the relevant disclosures in either this statement, our
website or Annual Report, is contained on our website at
www.ppgaust.com.au.
Both this Corporate Governance Statement and the
ASX Appendix 4G have been lodged with the ASX. This
statement has been approved by the company’s Board of
Directors (‘Board’) and is current as at 16 September 2015.
The ASX Principles and Recommendations and the
company’s response as to how and whether it follows those
recommendations are set out below.
PRINCIPLE 1: LAY SOLID
FOUNDATIONS FOR MANAGEMENT
AND OVERSIGHT
Recommendation 1.1 - A listed entity should disclose:
(a)
(b)
the respective roles and responsibilities of its board
and management; and
those matters expressly reserved to the board and
those delegated to management.
The company’s Board maintains the following roles and
responsibilities:
> providing leadership and setting the strategic objectives
of the company;
> appointing the Chair and/or the “senior independent
director”;
> appointing, and when necessary replacing, the Chief
Executive Officer (‘CEO’);
> assessing the performance of the CEO and overseeing
succession plans for senior executives;
> overseeing management’s implementation of the
company’s strategic objectives;
> approving operating budgets and major capital expenditure;
> overseeing the integrity of the company’s accounting and
corporate reporting systems, including the external audit;
> overseeing the company’s process for market disclosure
of all material information concerning the company that a
reasonable person would expect to have a material effect
on the price or value of the company’s securities;
12
> ensuring that the company has in place an appropriate risk
management framework and setting the risk parameters
within which the Board expects management to operate;
> approving the company’s remuneration framework;
> monitoring the effectiveness of the company’s
governance practices; and
> reporting to and communications with shareholders.
The Board has delegated the day-to-day management
of the company to the CEO and other senior executives
(‘management’). The company’s management is responsible
for the following:
> being accountable for the performance of the company;
> implementing the strategic objectives set by the Board;
> operating within the risk parameters set by the Board;
> operational and business management of the company;
> managing the company’s reputation and operating
performance in accordance with parameters set by the
Board;
> day-to-day running of the company;
> providing the Board with accurate, timely and clear
information to enable the Board to perform its
responsibilities; and
> approving capital expenditure (except acquisitions) within
delegated authority levels.
Senior executives have their roles and responsibilities
defined in specific position descriptions.
Recommendation 1.2 - A listed entity should:
(a)
(b)
undertake appropriate checks before appointing
a person, or putting forward to security holders a
candidate for election, as a director; and
provide security holders with all material information in
its possession relevant to a decision on whether or not
to elect or re-elect a director.
Before appointing a director, or putting forward to share-
holders a director for appointment, the company undertakes
comprehensive reference checks that cover elements such
as the person’s character, experience, employment history,
qualifications and other appropriate checks.
An election of directors is held each year. A director that
has been appointed during the year must stand for election
at the next Annual General Meeting (‘AGM’). Directors are
generally appointed for a term of three years. Retiring
directors are not automatically re-appointed.
The company provides to shareholders for their consideration
information about each candidate standing for election or
re-election as a director that the Board considers necessary
for shareholders to make a fully informed decision. Such
information includes the person’s biography, which include
experience and qualifications, details of other directorships,
adverse information about the person that the Board is aware
of including material that may affect the person’s ability to act
independently on matters before the Board, and whether the
Board supports the appointment or re-election.
PRO-PAC PACKAGING LIMITED and Controlled Entities Recommendation 1.3 - A listed entity should have
a written agreement with each director and senior
executive setting out the terms of their appointment.
The terms of the appointment of a non-executive director
are set out in writing and cover matters such as the term
of appointment, time commitment envisaged, required
committee work and other special duties, requirements
to disclose their relevant interests which may affect
independence, corporate policies and procedures,
indemnities, and remuneration entitlements.
Executive directors and senior executives are issued with
service contracts which detail the above matters as well as
the person or body to whom they report, the circumstances
in which their service may be terminated (with or without
notice), and any entitlements upon termination.
Recommendation 1.4 - The company secretary of a
listed entity should be accountable directly to the board,
through the chair, on all matters to do with the proper
functioning of the board.
The Company Secretary reports directly to the Board
through the Chairman and is accessible to all directors.
The Company Secretary’s role, in respect of matters relating
to the proper functioning of the Board, includes:
> advising the Board and its Committees on governance
matters;
> monitoring compliance of the Board and associated
committees with policies and procedures;
> coordinating all Board business;
> retaining independent professional advisors;
> ensuring that the business at Board and committee
meetings is accurately minuted; and
> assisting with the induction and development of directors.
Recommendation 1.5 - A listed entity should:
(a)
have a diversity policy which includes requirements for
the board or a relevant committee of the board to set
measurable objectives for achieving gender diversity
and to assess annually both the objectives and the
entity’s progress in achieving them;
(b) disclose that policy or a summary of it; and
(c)
disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity
set by the board or a relevant committee of the board
in accordance with the entity’s diversity policy and its
progress towards achieving them, and either:
(1) the respective proportions of men and women on
the board, in senior executive positions and across
the whole organisation (including how the entity has
defined “senior executive” for these purposes); or
(2) if the entity is a “relevant employer” under the
Workplace Gender Equality Act, the entity’s most
recent “Gender Equality Indicators”, as defined in
and published under that Act.
The company does not currently have a formal diversity
policy. It is the Board’s intention to formulate and implement
a formal policy during FY16. The company however 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 its diverse workforce is the
key to its continued growth, improved productivity and
performance.
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 respective proportion of women and men in the
company including its subsidiaries (‘consolidated entity’) as
at 30 June 2015 are as follows:
Proportion of Proportion of
men
women
On the Board
In senior executive positions
Across the whole organisation
-
28%
37%
100%
72%
63%
For this purpose, the Board defines a senior executive
as a person who makes, or participates in the making
of, decisions that affect the whole or a substantial part
of the business or has the capacity to affect significantly
the company’s financial standing. This therefore includes
all senior management and senior executive designated
positions as well as senior specialised professionals.
The company is a ‘relevant employer’ for the purposes of
the Workplace Gender Equality Act 2012 on the basis that
the entity employs 100 or more employees in Australia. The
company makes annual filings of Gender Equality Indicators
with the Workplace Gender Equality Agency (WGEA). This
information is accessible on https://www.wgea.gov.au
Recommendation 1.6 - A listed entity should:
(a)
(b)
have and disclose a process for periodically evaluating
the performance of the board, its committees and
individual directors; and
disclose, in relation to each reporting period, whether
a performance evaluation was undertaken in the
reporting period in accordance with that process.
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
13
2015 Annual Report
CORPORATE GOVERNANCE STATEMENT
The Board maintains a combined Nomination and
Remuneration Committee, whose members during the
financial year, were as follows:
Director’s name
Executive
status
Independence
status
Ahmed Fahour
Chair
Elliott Kaplan
Dr Gary Weiss
Brandon Penn
Non-Executive
Director
Non-Executive
Director
Non-Executive
Chairman
Non-Executive
Director
(from 13 May 2015)
Independent
Independent
Independent
Not-independent
The Charter of the Committee is available at the company’s
website. It details the roles and responsibilities of the
Committee.
The number of Committee meetings held and attended by
each member is disclosed in the ‘Meetings of directors’
section of the Directors’ report.
Recommendation 2.2 - A listed entity should have and
disclose a board skills matrix setting out the mix of skills
and diversity that the board currently has or is looking to
achieve in its membership.
The Board’s skills matrix indicates the mix of skills,
experience and expertise that are considered necessary
at Board level for optimal performance of the Board. It is
therefore used when recruiting new directors and assessing
which skills need to be outsourced based on the attributes
of the current Board members. The existence of each
attribute is assessed by the Board as either, High, Medium
or Low.
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 review was conducted by the Chairman during
the year.
Recommendation 1.7 - A listed entity should:
(a)
(b)
have and disclose a process for periodically evaluating
the performance of its senior executives; and
disclose, in relation to each reporting period, whether
a performance evaluation was undertaken in the
reporting period in accordance with that process.
The Board conducts an annual performance assessment
of the CEO against agreed performance measures
determined at the start of the year. The CEO undertakes
the same assessments of senior executives. In assessing
the performance of the individual, the review includes
consideration of the senior executive’s function, individual
targets, group targets, and the overall performance of the
company.
The CEO provides a report to the Board on the performance
of senior executives together with remuneration
recommendations which must be approved by the Board
after consultation with the Nomination and Remuneration
Committee. A review of the CEO and senior executives was
undertaken during the year.
PRINCIPLE 2: STRUCTURE THE BOARD
TO ADD VALUE
Recommendation 2.1 - The board of a listed entity should:
(a) have a nomination committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director, and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b)
if it does not have a nomination committee, disclose
that fact and the processes it employs to address board
succession issues and to ensure that the board has the
appropriate balance of skills, knowledge, experience,
independence and diversity to enable it to discharge its
duties and responsibilities effectively.
14
PRO-PAC PACKAGING LIMITED and Controlled Entities
Skill category
Description of attributes required
Level of
importance
Existence in
current Board
Risk and compliance
Financial and audit
Strategic
Identification of key risks to the company related to
each key area of operations. Monitoring of risks,
satisfy compliance issues and knowledge of legal
and regulatory requirements.
Analysis and interpretation of accounting and finance
issues including assessment and resolution of audit
and financial reporting risks, contribution to budgeting
and financial management of projects and company,
assessing and supervising capital management.
Development of strategies to achieve business
objectives, oversee implementation and maintenance
of strategies, and identification and critical assessment
of strategic opportunities and threats to the company.
High
High
High
High
High
High
Operating policies
Key issue identification representing operational and
reputational risks and development of policy responses
and parameters within which the company should operate.
Medium
Medium
Information technology
Knowledge of IT governance including privacy, data
management and security.
Medium
Medium
Executive management
Age and gender
Performance assessments of senior executives,
succession planning for key executives, setting of key
performance hurdles, experience in industrial relations
and organisational change management programmes.
Board aims for equal gender representation and range
of experienced individuals to contribute towards better
Board outcomes.
High
High
Medium
Medium
The Board currently believes that its membership adequately represents the required skills as set out in the matrix and
therefore does not intend to seek any new or alternative candidates. External consultants may be brought in with specialist
knowledge to address areas where this is an attribute deficiency in the Board.
In addition to the specific areas that are required at Board level identified the matrix above, all members of the Board are
assessed for the following attributes before they are considered an appropriate candidate.
Board Member Attributes
Leadership
Represents the company positively amongst stakeholders and external parties; decisively acts
ensuring that all pertinent facts considered; leads others to action; proactive solution seeker.
Ethics and integrity
Awareness of social, professional and legal responsibilities at individual, company and community
level; ability to identify independence conflicts; applies sound professional judgement; identifies
when external counsel should be sought; upholds Board confidentiality; respectful in every situation.
Communication
Effective in working within defined corporate communications policies; makes constructive and
precise contribution to the Board both verbally and in written form; an effective communicator with
executives.
Negotiation
Negotiation skills which engender stakeholder support for implementing Board decisions.
Corporate governance
Experienced director that is familiar with the mechanisms, controls and channels to deliver effective
governance and manage risks.
15
2015 Annual Report
CORPORATE GOVERNANCE STATEMENT
Recommendation 2.3 - A listed entity should disclose:
(a) the names of the directors considered by the Board to be independent directors;
(b)
if a director has an interest, position, association or relationship of the type described in Box 2.3 but the board is of the
opinion that it does not compromise the independence of the director, the nature of the interest, position, association or
relationship in question and an explanation of why the board is of that opinion; and
(c)
the length of service of each director.
The Board assesses annually the independence of each director to ensure that those designated as independent do not have
any alliance to the interests of management, substantial shareholders or other relevant stakeholders. They must be free of
any interest, position, association or relationship that might influence, or reasonably be perceived to influence, in a material
respect, their capacity to bring an independent judgement to bear on issues before the Board and to act in the best interests
of the company and its security holders generally.
Details of the Board of directors, their appointment dated, length of service as independence status is as follows:
Director’s name
Appointment date
Length of service at reporting date
Independence status
Ahmed Fahour
28 March 2015
1 year and 3 months
Elliott Kaplan
1 March 2005
10 years and 8 months
Brandon Penn
16 August 2007
8 years and 1 month
Gary Weiss
28 May 2012
3 years and 4 months
Independent
Non-executive
Independent
Non-executive
Not-independent
Substantial shareholder
Independent
Non-executive
The Board may determine that a director is independent notwithstanding the existence of an interest, position, association
or relationship of the kind identified in the examples listed under Recommendation 2.3 of the ASX Principles and
Recommendations.
As part of its independence assessment, the Board considers the length of time that the director has been on the Board, as a
prolonged service period may also be seen to impair independence. The Board concluded that no non-executive director has
been on the Board for a period which could be seen to compromise their independence.
Where it is determined that a non-executive director should no longer be considered independent, the company shall make
an announcement to the market.
Recommendation 2.4 - A majority of the board of a listed entity should be independent directors.
Having regard to the response to Recommendation 2.3 above, the majority of the Board at the reporting date were
independent.
Recommendation 2.5 - The chair of the board of a listed entity should be an independent director and, in particular,
should not be the same person as the CEO of the entity.
Ahmed Fahour is Chair of the Board and is considered to be an independent director of the company. Peter Sutton is the
Chief Executive Officer.
Recommendation 2.6 - A listed entity should have a program for inducting new directors and provide appropriate
professional development opportunities for directors to develop and maintain the skills and knowledge needed to
perform their role as directors effectively.
New directors undertake an induction program coordinated by the Company Secretary on behalf of the Nomination and
Remuneration Committee. The program includes strategy briefings, explanations of company policies and procedures,
governance frameworks, cultures and values, company history, director and executive profiles and other pertinent company
information.
16
PRO-PAC PACKAGING LIMITED and Controlled Entities
PRINCIPLE 3: ACT ETHICALLY AND
RESPONSIBLY
Recommendation 3.1 - A listed entity should:
(a)
have a code of conduct for its directors, senior
executives and employees; and
(b)
disclose that code or a summary of it.
The company maintains a 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; and
> 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.
PRINCIPLE 4: SAFEGUARD INTEGRITY
IN CORPORATE REPORTING
Recommendation 4.1 - The board of a listed entity should:
(a) have an audit committee which:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
(2) is chaired by an independent director, who is not the
chair of the board, and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of
times the committee met throughout the period and
the individual attendances of the members at those
meetings; or
(b)
if it does not have an audit committee, disclose that fact
and the processes it employs that independently verify
and safeguard the integrity of its corporate reporting,
including the processes for the appointment and
removal of the external auditor and the rotation of the
audit engagement partner.
To assist in the execution of its responsibilities, the Board
has established an Audit and Risk Committee.
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 Mr Kaplan and Dr Weiss. 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 4.1 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.
Recommendation 4.2 - The board of a listed entity
should, before it approves the entity’s financial
statements for a financial period, receive from its CEO
and CFO a declaration that, in their opinion, the financial
records of the entity have been properly maintained
and that the financial statements comply with the
appropriate accounting standards and give a true and
fair view of the financial position and performance of
the entity and that the opinion has been formed on the
basis of a sound system of risk management and internal
control which is operating effectively.
In relation to the financial statements for the financial year
ended 30 June 2015 and the half-year ended 31 December
2015, the company’s CEO and CFO have provided the Board
with declarations, that in their opinion:
> the financial records of the company have been properly
maintained;
> the financial statements comply with the appropriate
accounting standards and give a true and fair view of the
financial position and performance of the company; and
> has been formed on the basis of a sound system of risk
management and internal control which is operating
effectively.
17
2015 Annual Report
CORPORATE GOVERNANCE STATEMENT
Recommendation 4.3 - A listed entity that has an AGM
should ensure that its external auditor attends its AGM
and is available to answer questions from security
holders relevant to the audit.
The engagement partner for the company’s audit attends
the AGM and is available to answer shareholder questions
from shareholders relevant to the audit.
PRINCIPLE 5: MAKE TIMELY AND
BALANCED DISCLOSURE
Recommendation 5.1 - A listed entity should:
(a)
have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
(b) disclose that policy or a summary of it.
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.
PRINCIPLE 6: RESPECT THE RIGHTS
OF SECURITY HOLDERS
Recommendation 6.1 - A listed entity should provide
information about itself and its governance to investors
via its website.
The company maintains information in relation to governance
documents, directors and senior executives, Board and
committee charters, annual reports, ASX announcements
and contact details on the company’s website.
Recommendations 6.2 and 6.3
A listed entity should design and implement an investor
relations program to facilitate effective two-way
communication with investors (6.2).
A listed entity should disclose the policies and processes
it has in place to facilitate and encourage participation at
meetings of security holders (6.3).
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).
18
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.
Recommendation 6.4 - A listed entity should give security
holders the option to receive communications from,
and send communications to, the entity and its security
registry electronically.
This option is available to security holders.
PRINCIPLE 7: RECOGNISE AND
MANAGE RISK
Recommendations 7.1 and 7.2 - The board of a listed
entity should:
(a)
have a committee or committees to oversee risk, each
of which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director, and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b)
if it does not have a risk committee or committees that
satisfy (a) above, disclose that fact and the processes
it employs for overseeing the entity’s risk management
framework (7.1).
The Board or a committee of the Board should: (a) review
the entity’s risk management framework at least annually to
satisfy itself that it continues to be sound; and (b) disclose, in
relation to each reporting period, whether such a review has
taken place (7.2).
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. Details of directors’ attendance at Audit Committee
meetings are disclosed in the Directors’ Report.
In performing this function, the Committee receives periodic
reports from the Group’s Risk Committee (comprising key
stakeholders from the management team and the Group’s
insurance advisers), external auditor 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
PRO-PAC PACKAGING LIMITED and Controlled Entities
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 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 16 September 2015.
Recommendation 7.3 - A listed entity should disclose:
(a)
(b)
if it has an internal audit function, how the function is
structured and what role it performs; or
if it does not have an internal audit function, that
fact and the processes it employs for evaluating and
continually improving the effectiveness of its risk
management and internal control processes.
The company does not have an internal audit function.
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.
Recommendation 7.4 - A listed entity should disclose
whether it has any material exposure to economic,
environmental and social sustainability risks and, if it
does, how it manages or intends to manage those risks.
The management of the company and the execution of its
growth strategies are subject to a number of risks which
could adversely affect the company’s future development.
The following is not an exhaustive list or explanation of all
risks and uncertainties associated with the company (and its
subsidiaries), but those considered by management to be
the principal material risks:
Financial risk
Loss of people
The company is exposed to financial risks
such as foreign currency risk and interest
rate risk. Refer to the ‘Financial Instrument’
note to the financial statements for further
information on these risks and how they are
managed.
The company’s senior executive team is
instrumental in implementing the company’s
strategies and executing business plans
which support the business operations
and growth. Service agreements are
in place and the risk of the loss of key
personnel is mitigated by regular reviews
of remuneration packages (including short
and long term incentive schemes) and
succession planning within the team.
Refer to commentary at Recommendations 7.1 and 7.2 for
information on the company’s risk management framework.
PRINCIPLE 8: REMUNERATE FAIRLY
AND RESPONSIBLY
Recommendation 8.1 - The board of a listed entity should:
(a) have a remuneration committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director, and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number
of times the committee met throughout the period
and the individual attendances of the members at
those meetings; or
(b)
if it does not have a remuneration committee, disclose
that fact and the processes it employs for setting the
level and composition of remuneration for directors and
senior executives and ensuring that such remuneration
is appropriate and not excessive.
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’ remuneration 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 Messrs Fahour
(Chairman) and Kaplan and Dr Weiss all of whom are
independent Directors. Mr Penn joined the Committee after
he relinquished his executive position. 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
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
19
2015 Annual Report
CORPORATE GOVERNANCE STATEMENT
Recommendation 8.3 - A listed entity which has an
equity-based remuneration scheme should:
(a)
have a policy on whether participants are permitted
to enter into transactions (whether through the use of
derivatives or otherwise) which limit the economic risk of
participating in the scheme; and
(b) disclose that policy or a summary of it.
The company operates an Executive Long Term Incentive
Plan to encourage employees to share ownership of the
company and promote long-term success of the company as
a goal shared by the employees. Please see the Directors’
report for further details of the plan.
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 as is the number of times that
the Remuneration Committee met during the year.
Recommendation 8.2 - A listed entity should separately
disclose its policies and practices regarding the
remuneration of non-executive directors and the
remuneration of executive directors and other senior
executives.
Non-executive directors are remunerated by way of
cash fees and superannuation contributions. The level of
remuneration reflects the anticipated time commitments and
responsibilities of the position. Performance based incentives
are not available to non-executive directors as it could be
perceived to impair their independence in decision making.
For the same reason, equity based remuneration is limited to
non-performance based instruments such as shares.
Executive directors and other senior executives are
remunerated using combinations of fixed and performance
based remuneration. Fees and salaries and set at levels
reflecting market rates having regard to the individual’s
performance and responsibilities. Performance based
remuneration is linked directly to specific performance
targets that are aligned to both short and long term
objectives. Share options and rights are aligned to longer
term performance hurdles. Termination payments are
detailed in individual contracts and payable on early
termination with the exclusion of termination in the event
of misconduct.
Further details in relation to the company’s remuneration
policies are contained in the Remuneration Report, within
the Directors’ report.
20
PRO-PAC PACKAGING LIMITED and Controlled Entities CONSOLIDATED STATEMENT OF PROFIT OR
LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2015
Revenue
Sale of goods
Other income
Interest income
Total Revenue
Expenses
Raw materials and consumables used
Employee benefits expense
Other expenses from ordinary activities
Distribution costs
Occupancy costs
Depreciation expense
Acquisition, rationalisation and relocation expenses
Finance costs
Amortisation of prepaid royalty
Total Expenses
Profit before income tax from continuing operations
Income tax expense
Profit after income tax expense for the year
Other comprehensive income
Items that will be reclassified to profit and loss
Movements in reserves
Total comprehensive income for the year
Earnings per share (cents per share)
- Basic earnings per share
- Diluted earnings per share
Notes
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
243,457
340
83
243,880
164,813
33,814
12,867
9,636
8,002
3,261
1,519
1,219
322
235,453
8,427
(2,585)
5,842
710
6,552
218,273
415
74
218,762
144,686
33,558
11,025
8,067
7,531
3,311
600
1,372
322
210,472
8,290
(2,483)
5,807
-
5,807
13
16
6
7
7
2.60
2.56
2.75
2.73
The above statements should be read in conjunction with the accompanying notes.
21
2015 Annual Report
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
Notes
Consolidated
30 June 2015
$000’s
Restated
Consolidated
30 June 2014
$000’s
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Interest bearing trade finance
Interest bearing borrowings
Provisions
Current tax liabilities
Total current liabilities
Non-current liabilities
Provisions
Interest bearing borrowings
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Other reserves
Retained earnings
TOTAL EQUITY
9
11
12
6
16
13
14
15
16
17
18
18
19
6
19
18
20
21
22
6,120
38,500
32,393
15
4,551
81,579
17,366
70,337
2,520
-
90,223
171,802
26,628
2,551
1,183
3,973
-
34,335
1,801
27,271
29,072
63,407
108,395
92,726
830
14,839
108,395
3,580
35,592
34,235
-
3,402
76,809
17,382
68,793
2,376
28
88,579
165,388
30,666
2,559
1,550
3,705
564
39,044
1,376
19,791
21,167
60,211
105,177
91,548
99
13,530
105,177
The above statements of financial position should be read in conjunction with the accompanying notes.
22
PRO-PAC PACKAGING LIMITED and Controlled Entities
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2015
Notes
Consolidated
2015
$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
Relocation, restructuring and business combination costs
Net cash flows provided by operating activities
10
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
Working capital for businesses 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
Proceeds from issue of shares
Proceeds from vesting of ESPP shares
Dividend paid
Net cash flows provided 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
9
Non-cash financing transactions
Hire purchase and finance lease liabilities raised
Issue of shares for dividend re-investment plan
241,220
(229,852)
83
(1,219)
(3,309)
(1,519)
5,404
(3,666)
799
(2,150)
(1,597)
(6,614)
(1,976)
1,683
7,397
-
-
(3,354)
3,750
2,540
3,580
6,120
1,683
1,178
The above statements of cash flows should be read in conjunction with the accompanying notes.
Restated
Consolidated
2014
$000’s
217,434
(208,256)
74
(1,448)
(2,766)
(600)
4,438
(2,872)
377
(1,051)
(3,062)
(6,608)
(2,091)
1,803
1,783
4,515
368
(2,875)
3,503
1,333
2,247
3,580
1,803
1,380
23
2015 Annual Report
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2015
Restated Consolidated
Balance as at 1 July 2013
Profit after income tax expense for the year
Adjustment for correction of error
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of shares for dividend re-investment plan
Recognition of share based payment
Vesting of ESPP shares
Shares issued under share placement
Dividends paid
At 30 June 2014
Consolidated
Balance as at 1 July 2014
Profit after income tax expense for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with owners in their capacity as owners:
Issue of shares for dividend re-investment plan
Recognition of share based payment
Dividends paid
At 30 June 2015
Issued
capital
$000’s
85,285
-
-
-
-
1,380
-
368
4,515
-
91,548
91,548
-
-
-
1,178
-
-
92,726
Retained
earnings
$000’s
Reserves
$000’s
Total
equity
$000’s
11,977
6,131
(324)
-
5,807
-
-
-
-
(4,254)
13,530
13,530
5,842
-
5,842
-
-
(4,533)
14,839
71
-
-
-
-
-
28
-
-
-
99
99
-
710
710
-
21
-
97,333
6,131
(324)
-
5,807
1,380
28
368
4,515
(4,254)
105,177
105,177
5,842
710
6,552
1,178
21
(4,533)
830
108,395
The above statements of changes in equity should be read in conjunction with the accompanying notes.
24
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 1: CORPORATE INFORMATION
The financial report of Pro-Pac Packaging Limited and its
subsidiaries (“the Group”) for the year ended 30 June 2015
was approved for issue in accordance with a resolution of
the Directors on 16 September 2015.
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.
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation
of the financial statements are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated.
(a) New, revised or amending Accounting
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.
The adoption of these Accounting 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 2012-3 Amendments to Australian Accounting
Standards - Offsetting Financial Assets and Financial
Liabilities
The consolidated entity has applied AASB 2012-3 from 1 July
2014. The amendments add application guidance to address
inconsistencies in the application of the offsetting criteria in
AASB 132 'Financial Instruments: Presentation', by clarifying
the meaning of 'currently has a legally enforceable right of
set-off'; and clarifies that some gross settlement systems
may be considered to be equivalent to net settlement.
AASB 2013-3 Amendments to AASB 136 - Recoverable
Amount Disclosures for Non-Financial Assets
The consolidated entity has applied AASB 2014-3 from 1 July
2014. The disclosure requirements of AASB 136 'Impairment
of Assets' have been enhanced to require additional
information about the fair value measurement when the
recoverable amount of impaired assets is based on fair
value less costs of disposals. Additionally, if measured using
a present value technique, the discount rate is required to
be disclosed.
AASB 2014-1 Amendments to Australian Accounting
Standards (Parts A to C)
The consolidated entity has applied Parts A to C of AASB
2014-1 from 1 July 2014. These amendments affect the
following standards: AASB 2 'Share-based Payment':
clarifies the definition of 'vesting condition' by separately
defining a 'performance condition' and a 'service condition'
and amends the definition of 'market condition'; AASB
3 'Business Combinations': clarifies that contingent
consideration in a business combination is subsequently
measured at fair value with changes in fair value recognised
in profit or loss irrespective of whether the contingent
consideration is within the scope of AASB 9; AASB 8
'Operating Segments': amended to require disclosures
of judgements made in applying the aggregation criteria
and clarifies that a reconciliation of the total reportable
segment assets to the entity's assets is required only if
segment assets are reported regularly to the chief operating
decision maker; AASB 13 'Fair Value Measurement': clarifies
that the portfolio exemption applies to the valuation of
contracts within the scope of AASB 9 and AASB 139;
AASB 116 'Property, Plant and Equipment' and AASB 138
'Intangible Assets': clarifies that on revaluation, restatement
of accumulated depreciation will not necessarily be in the
same proportion to the change in the gross carrying value
of the asset; AASB 124 'Related Party Disclosures': extends
the definition of 'related party' to include a management
entity that provides KMP services to the entity or its parent
and requires disclosure of the fees paid to the management
entity; AASB 140 'Investment Property': clarifies that the
acquisition of an investment property may constitute a
business combination.
(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. These financial statements also
comply with International Financial Reporting Standards
as issued by the International Accounting Standards
Board ('IASB').The financial report has been prepared on
an accruals basis and unless otherwise stated is based
on historical costs. The financial report is presented in
Australian dollars.
(c) Parent entity information
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 31.
(d) Principles of consolidation
The consolidated financial statements incorporate the assets
and liabilities of all subsidiaries of Pro-Pac Packaging Limited
('company' or 'parent entity') as at 30 June 2015 and the
results of all subsidiaries for the year then ended. Pro-Pac
25
2015 Annual Report NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
Packaging Limited and its subsidiaries together are referred
to in these financial statements as the 'consolidated entity'.
Subsidiaries are all those entities over which the
consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains
on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless
the transaction provides evidence of the impairment of the
asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with
the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share of
the non-controlling interest acquired is recognised directly in
equity attributable to the parent.
Non-controlling interest in the results and equity of
subsidiaries are shown separately in the statement of profit
or loss and other comprehensive income, statement of
financial position and statement of changes in equity of the
consolidated entity. Losses incurred by the consolidated
entity are attributed to the non-controlling interest in full,
even if that results in a deficit balance.
Where the consolidated entity loses control over a subsidiary,
it derecognises the assets including goodwill, liabilities and
non-controlling interest in the subsidiary together with any
cumulative translation differences recognised in equity.
The consolidated entity recognises the fair value of the
consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
(e) Operating segments
Operating segments are presented using the 'management
approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating
Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing
their performance.
(f ) Foreign currency translation
The financial statements are presented in Australian
dollars, which is Pro-Pac Packaging Limited’s functional and
presentation currency.
26
Foreign currency transactions
Foreign currency transactions are translated into Australian
dollars using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses
resulting from the settlement of such transactions and
from the translation at financial year-end exchange rates
of monetary assets and liabilities denominated in foreign
currencies are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated
into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign
operations are translated into Australian dollars using the
average exchange rates, which approximate the rate at the
date of the transaction, for the period. All resulting foreign
exchange differences are recognised in other comprehensive
income through the foreign currency reserve in equity.
(g) Revenue recognition
Revenue is recognised when it is probable that the
economic benefit will flow to the consolidated entity and the
revenue can be reliably measured. Revenue is measured at
the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of
sale, which is where the customer has taken delivery of
the goods, the risks and rewards are transferred to the
customer. Amounts disclosed as revenue are net of sales
returns and trade discounts.
Interest
Interest revenue is recognised as interest accrues using the
effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest
income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future
cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the
right to receive payment is established.
(h) 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 to profit or loss.
PRO-PAC PACKAGING LIMITED and Controlled Entities
On the acquisition of a business, the consolidated entity
assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation
in accordance with the contractual terms, economic
conditions, the consolidated entity's operating or accounting
policies and other pertinent conditions in existence at the
acquisition-date.
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.
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.
(i) Property, plant and equipment
Plant and equipment is stated at historical cost less
accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the
acquisition of the items. Plant and equipment is depreciated
using the straight line and diminishing value methods over
the estimated useful lives.
Depreciation rates used for each class of assets vary to the estimated useful lives at the time of acquisition, and are typically:
Class of fixed asset
Depreciation rates
Method
Plant and equipment
Motor vehicles
Computer equipment
Furniture and Fittings
Office equipment
4% - 50%
7% - 30%
10% - 40%
5% - 25%
5% - 30%
Straight-line and diminishing value
Straight-line and diminishing value
Straight-line and diminishing value
Straight-line and diminishing value
Straight-line and diminishing value
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the
consolidated entity. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss.
27
2015 Annual Report NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
( j) Leases
The determination of whether an arrangement is or contains
a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the
arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the Company
substantially all the risks and benefits incidental to ownership
of leased assets, and operating leases, under which the
lessor effectively retains substantially all such risks and
benefits.
Finance leases are capitalised. A lease asset and liability are
established at the fair value of the leased assets, or if lower,
the present value of minimum lease payments. Lease payments
are allocated between the principal component of the lease
liability and the finance costs, so as to achieve a constant
rate of interest on the remaining balance of the liability.
Leased assets acquired under a finance lease are
depreciated over the asset's useful life or over the shorter
of the asset's useful life and the lease term if there is no
reasonable certainty that the consolidated entity will obtain
ownership at the end of the lease term.
Operating lease payments, net of any incentives received
from the lessor, are charged to profit or loss on a straight-
line basis over the term of the lease.
(k) Goodwill
Goodwill arises on the acquisition of a business. Goodwill
is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in
circumstances indicate that it might be impaired, and
is carried at cost less accumulated impairment losses.
Impairment losses on goodwill are taken to profit or loss
and are not subsequently reversed.
(l) Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite
useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or
changes in circumstances indicate that they might be
impaired. Other non-financial assets are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which
the asset's carrying amount exceeds its recoverable amount.
Recoverable amount is the higher of an asset's fair value
less costs of disposal and value-in-use. The value-in-use is
the present value of the estimated future cash flows relating
to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
28
(m) Inventories
Raw materials, work in progress and finished goods are
stated at the lower of cost and net realisable value. Cost in
relation to work in progress and finished goods comprises
direct materials and delivery costs, direct labour, import
duties and other taxes, an appropriate proportion of variable
and fixed overhead expenditure based on normal operating
capacity. Costs of purchased inventory are determined after
deducting rebates and discounts received or receivable.
Stock in transit is stated at the lower of cost and net
realisable value. Cost comprises purchase and delivery
costs, net of rebates and discounts received or receivable.
Net realisable value is the estimated selling price in the
ordinary course of business less the estimated costs of
completion and the estimated costs necessary to make
the sale.
(n) Derivative financial instruments
Derivatives are initially recognised at fair value on the date
a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The
accounting for subsequent changes in fair value depends
on whether the derivative is designated as a hedging
instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current
depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to cover the consolidated
entity's exposure to variability in cash flows that is
attributable to particular risk associated with a recognised
asset or liability or a firm commitment which could affect
profit or loss. The effective portion of the gain or loss on
the hedging instrument is recognised directly in equity,
whilst the ineffective portion is recognised in profit or loss.
Amounts taken to equity are transferred out of equity and
included in the measurement of the hedged transaction
when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular
basis both retrospectively and prospectively to ensure
that each hedge is highly effective and continues to be
designated as a cash flow hedge. If the forecast transaction
is no longer expected to occur, amounts recognised in
equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires,
exercised without replacement or rollover, or if the hedge
becomes ineffective and is no longer a designated hedge,
amounts previously recognised in equity remain in equity
until the forecast transaction occurs.
(o) Trade and other receivables
Trade receivables are initially recognised at fair value and
subsequently measured at amortised cost using the
effective interest method, less any provision for impairment.
Trade receivables are generally due for settlement within
30-60 days.
PRO-PAC PACKAGING LIMITED and Controlled Entities Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectable are written
off by reducing the carrying amount directly. A provision
for impairment of trade receivables is raised when there is
objective evidence that the consolidated entity will not be
able to collect all amounts due according to the original
terms of the receivables. Significant financial difficulties of
the debtor, probability that the debtor will enter bankruptcy
or financial reorganisation and default or delinquency in
payments (more than 60 days overdue) are considered
indicators that the trade receivable may be impaired.
Other receivables are recognised at amortised cost, less any
provision for impairment.
(p) Current and non-current classification
Assets and liabilities are presented in the statement of financial
position based on current and non-current classification.
An asset is current when: it is expected to be realised or
intended to be sold or consumed in normal operating cycle;
it is held primarily for the purpose of trading; it is expected
to be realised within 12 months after the reporting period;
or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are
classified as non-current.
A liability is current when: it is expected to be settled in normal
operating cycle; it is held primarily for the purpose of trading; it
is due to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period.
All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified as
non-current.
(q) Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or
less that are readily convertible to known amounts of cash
and which are subject to an insignificant risk of changes
in value. For the statement of cash flows presentation
purposes, cash and cash equivalents also includes bank
overdrafts, which are shown within borrowings in current
liabilities on the statement of financial position.
(r) Trade and other payables
These amounts represent liabilities for goods and services
provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually
paid within 30-60 days of recognition.
(s) Borrowings
Loans and borrowings are initially recognised at the fair
value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using
the effective interest method.
Where there is an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date,
the loans or borrowings are classified as non-current.
(t) Finance costs
Finance costs are expensed in the period in which they are
incurred, including:
> interest on the bank overdraft;
> interest on short-term and long-term borrowings;
> interest on finance leases; and
> unwinding of the discount on provisions.
(u) Provisions
Provisions are recognised when the consolidated entity
has a present (legal or constructive) obligation as a result
of a past event, it is probable the consolidated entity will
be required to settle the obligation, and a reliable estimate
can be made of the amount of the obligation. The amount
recognised as a provision is the best estimate of the
consideration required to settle the present obligation
at the reporting date, taking into account the risks and
uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current
pre-tax rate specific to the liability.
(v) Income tax
The income tax expense or benefit for the period is the
tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted
by changes in deferred tax assets and liabilities attributable
to temporary differences, unused tax losses and the
adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to apply
when the assets are recovered or liabilities are settled,
based on those tax rates that are enacted or substantively
enacted, except for:
> When the deferred income tax asset or liability arises from
the initial recognition of goodwill or an asset or liability
in a transaction that is not a business combination and
that, at the time of the transaction, affects neither the
accounting nor taxable profits; or
> When the taxable temporary difference is associated
with interests in subsidiaries, associates or joint ventures,
and the timing of the reversal can be controlled and it is
probable that the temporary difference will not reverse in
the foreseeable future.
Deferred tax assets are recognised for deductible temporary
differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those
temporary differences and losses.
29
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed each reporting date.
Deferred tax assets recognised are reduced to the extent
that it is no longer probable that future taxable profits will be
available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the
extent that it is probable that there are future taxable profits
available to recover the asset.
Deferred tax assets and liabilities are offset only where there
is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against
deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different
taxable entities which intend to settle simultaneously.
Pro-Pac Packaging Limited (the 'head entity') and its wholly-
owned Australian subsidiaries have formed an income tax
consolidated group under the tax consolidation regime.
The head entity and each subsidiary in the tax consolidated
group continue to account for their own current and
deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in
determining the appropriate amount of taxes to allocate to
members of the tax consolidated group.
In addition to its own current and deferred tax amounts,
the head entity also recognises the current tax liabilities (or
assets) and the deferred tax assets arising from unused tax
losses and unused tax credits assumed from each subsidiary
in the tax consolidated group.
Assets or liabilities arising under tax funding agreements
with the tax consolidated entities are recognised as amounts
receivable from or payable to other entities in the tax
consolidated group. The tax funding arrangement ensures
that the intercompany charge equals the current tax liability
or benefit of each tax consolidated group member, resulting
in neither a contribution by the head entity to the subsidiaries
nor a distribution by the subsidiaries to the head entity.
Pro-Pac Packaging Ltd (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.
(w) Goods and Services Tax (‘GST’)
and other similar taxes
Revenues, expenses and assets are recognised net of
the amount of associated GST, unless the GST incurred
is not recoverable from the tax authority. In this case it is
recognised as part of the cost of the acquisition of the
asset or as part of the expense.
30
Receivables and payables are stated inclusive of the amount
of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included
in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST
components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax
authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the
amount of GST recoverable from, or payable to, the tax
authority.
(x) Employee benefits
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary
benefits, annual leave and long service leave expected
to be settled within 12 months of the reporting date are
recognised in current liabilities in respect of employees'
services up to the reporting date and are measured at the
amounts expected to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not
expected to be settled within 12 months of the reporting date
are recognised in non-current liabilities, provided there is an
unconditional right to defer settlement of the liability. The
liability is measured as the present value of expected future
payments to be made in respect of services provided by
employees up to the reporting date using the projected unit
credit method. Consideration is given to expected future wage
and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted
using market yields at the reporting date on coporate bonds
with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Share-based payments
Equity-settled transactions are awards of shares, or options
over shares, that are provided to employees in exchange for
the rendering of services.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined
using the Black-Scholes option pricing model that takes into
account the exercise price, the term of the option, the impact
of dilution, the share price at grant date and expected price
volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option,
together with non-vesting conditions that do not determine
whether the consolidated entity receives the services that
entitle the employees to receive payment. No account is
taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an
expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is
calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely
PRO-PAC PACKAGING LIMITED and Controlled Entities to vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
Market conditions are taken into consideration in
determining fair value. Therefore any awards subject to
market conditions are considered to vest irrespective
of whether or not that market condition has been met,
provided all other conditions are satisfied.
If the non-vesting condition is within the control of the
consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation.
(y) Fair value measurement
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interest. For
non-financial assets, the fair value measurement is based
on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient
data are available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
(z) Issued capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net
of tax, from the proceeds.
(aa) Dividends
Dividends are recognised when declared during the financial
year and no longer at the discretion of the company.
(bb) Investments and other financial
assets
Investments and other financial assets are initially measured
at fair value. Transaction costs are included as part of the
initial measurement. They are subsequently measured
at either amortised cost or fair value depending on their
classification. Classification is determined based on the
purpose of the acquisition and subsequent reclassification to
other categories is restricted.
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or have
been transferred and the consolidated entity has transferred
substantially all the risks and rewards of ownership.
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are either:
i) held for trading, where they are acquired for the purpose
of selling in the short-term with an intention of making a
profit; or ii) designated as such upon initial recognition,
where they are managed on a fair value basis or to eliminate
or significantly reduce an accounting mismatch. Except
for effective hedging instruments, derivatives are also
categorised as fair value through profit or loss. Fair value
movements are recognised in profit or loss.
Impairment of financial assets
The consolidated entity assesses at the end of each
reporting period whether there is any objective evidence
that a financial asset or group of financial assets is impaired.
Objective evidence includes significant financial difficulty
of the issuer or obligor; a breach of contract such as
default or delinquency in payments; the lender granting to
a borrower concessions due to economic or legal reasons
that the lender would not otherwise do; it becomes probable
that the borrower will enter bankruptcy or other financial
reorganisation; the disappearance of an active market for
the financial asset; or observable data indicating that there is
a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for financial assets
carried at cost is the difference between the asset's carrying
amount and the present value of estimated future cash
flows, discounted at the current market rate of return for
similar financial assets.
(cc) Critical accounting judgements,
estimates and assumptions
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management
bases its judgements, estimates and assumptions on
historical experience and on other various factors, including
expectations of future events, management believes to
be reasonable under the circumstances. The resulting
accounting judgements and estimates will seldom equal
the related actual results. The judgements, estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities
(refer to the respective notes) within the next financial year
are discussed below.
Share-based payment transactions
The consolidated entity measures the cost of equity-settled
transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted.
The fair value is determined by using either the Binomial
or Black-Scholes model taking into account the terms and
conditions upon which the instruments were granted. The
accounting estimates and assumptions relating to equity-
settled share-based payments would have no impact on
31
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
the carrying amounts of assets and liabilities within the
next annual reporting period but may impact profit or loss
and equity.
Provision for impairment of receivables
The provision for impairment of receivables assessment
requires a degree of estimation and judgement. The level of
provision is assessed by taking into account the recent sales
experience, the ageing of receivables, historical collection
rates and specific knowledge of the individual debtors
financial position.
Provision for impairment of inventories
The provision for impairment of inventories assessment
requires a degree of estimation and judgement. The level of
the provision is assessed by taking into account the recent
sales experience, the ageing of inventories and other factors
that affect inventory obsolescence.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges for
its property, plant and equipment and finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
Goodwill
The consolidated entity tests annually, or more frequently
if events or changes in circumstances indicate impairment,
whether goodwill have suffered any impairment, in
accordance with the accounting policy stated in note 2.
The recoverable amounts of cash-generating units have
been determined based on value-in-use calculations. These
calculations require the use of assumptions, including
estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Income tax
The consolidated entity is subject to income taxes in the
jurisdictions in which it operates. Significant judgement is
required in determining the provision for income tax. There
are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate
tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based
on the consolidated entity's current understanding of the tax
law. Where the final tax outcome of these matters is different
from the carrying amounts, such differences will impact the
current and deferred tax provisions in the period in which
such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to
utilise those temporary differences and losses.
Employee benefits provision
As discussed in note 2, the liability for employee benefits
expected to be settled more than 12 months from the
reporting date are recognised and measured at the
present value of the estimated future cash flows to be
made in respect of all employees at the reporting date.
In determining the present value of the liability, estimates
of attrition rates and pay increases through promotion and
inflation have been taken into account.
Lease make good provision
A provision has been made for the present value of
anticipated costs for future restoration of leased premises.
The provision includes future cost estimates associated with
closure of the premises. The calculation of this provision
requires assumptions such as application of closure dates
and cost estimates. The provision recognised for each site
is periodically reviewed and updated based on the facts and
circumstances available at the time. Changes to the estimated
future costs for sites are recognised in the statement of
financial position by adjusting the asset and the provision.
Reductions in the provision that exceed the carrying amount
of the asset will be recognised in profit or loss.
Business combinations
Business combinations are initially accounted for on a
provisional basis. The fair value of assets acquired, liabilities
and contingent liabilities assumed are initially estimated by
the consolidated entity taking into consideration all available
information at the reporting date. Fair value adjustments
on the finalisation of the business combination accounting
is retrospective, where applicable, to the period the
combination occurred and may have an impact on the assets
and liabilities, depreciation and amortisation reported.
(dd) Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of Pro-Pac Packaging Limited,
excluding any costs of servicing equity other than ordinary
shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into
account the after income tax effect of interest and other
financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares
assumed to have been issued for no consideration in
relation to dilutive potential ordinary shares.
32
PRO-PAC PACKAGING LIMITED and Controlled Entities customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for
those goods or services. The standard will require: contracts
(either written, verbal or implied) to be identified, together
with the separate performance obligations within the
contract; determine the transaction price, adjusted for the
time value of money excluding credit risk; allocation of the
transaction price to the separate performance obligations
on a basis of relative stand-alone selling price of each
distinct good or service, or estimation approach if no distinct
observable prices exist; and recognition of revenue when
each performance obligation is satisfied. Credit risk will be
presented separately as an expense rather than adjusted to
revenue. For goods, the performance obligation would be
satisfied when the customer obtains control of the goods.
For services, the performance obligation is satisfied when
the service has been provided, typically for promises to
transfer services to customers. For performance obligations
satisfied over time, an entity would select an appropriate
measure of progress to determine how much revenue
should be recognised as the performance obligation is
satisfied. Contracts with customers will be presented in
an entity's statement of financial position as a contract
liability, a contract asset, or a receivable, depending on
the relationship between the entity's performance and the
customer's payment. Sufficient quantitative and qualitative
disclosure is required to enable users to understand the
contracts with customers; the significant judgments made
in applying the guidance to those contracts; and any assets
recognised from the costs to obtain or fulfil a contract with
a customer. The consolidated entity will adopt this standard
from 1 July 2018 but the impact of its adoption is yet to be
assessed by the consolidated entity.
(ee) Rounding of amounts
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.
(ff ) New Accounting Standards and
Interpretations not yet mandatory or
early adopted
Australian Accounting Standards and Interpretations that
have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated
entity for the annual reporting period ended 30 June 2015.
The consolidated entity's assessment of the impact of these
new or amended Accounting Standards and Interpretations,
most relevant to the consolidated entity, are set out below.
AASB 9 Financial Instruments
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard replaces
all previous versions of AASB 9 and completes the project
to replace IAS 39 'Financial Instruments: Recognition and
Measurement'. AASB 9 introduces new classification and
measurement models for financial assets. A financial asset
shall be measured at amortised cost, if it is held within a
business model whose objective is to hold assets in order
to collect contractual cash flows, which arise on specified
dates and solely principal and interest. All other financial
instrument assets are to be classified and measured at
fair value through profit or loss unless the entity makes an
irrevocable election on initial recognition to present gains
and losses on equity instruments (that are not held-for-
trading) in other comprehensive income ('OCI'). For financial
liabilities, the standard requires the portion of the change
in fair value that relates to the entity's own credit risk to
be presented in OCI (unless it would create an accounting
mismatch). New simpler hedge accounting requirements
are intended to more closely align the accounting treatment
with the risk management activities of the entity. New
impairment requirements will use an 'expected credit loss'
('ECL') model to recognise an allowance. Impairment will be
measured under a 12-month ECL method unless the credit
risk on a financial instrument has increased significantly
since initial recognition in which case the lifetime ECL
method is adopted. The standard introduces additional new
disclosures. The consolidated entity will adopt this standard
from 1 July 2018 but the impact of its adoption is yet to be
assessed by the consolidated entity.
AASB 15 Revenue from Contracts with Customers
This standard is applicable to annual reporting periods
beginning on or after 1 January 2018. The standard provides
a single standard for revenue recognition. The core principle
of the standard is that an entity will recognise revenue
to depict the transfer of promised goods or services to
33
2015 Annual Report NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 3: RESTATEMENT OF COMPARATIVES
The consolidated entity’s financial statements for the year ended 30 June 2014 were restated to account for the understatement
of duty payable on imported products and the make good provision for leased premises. The profit after income tax expense
was overstated by $324,000. Property, plant and equipment, deferred tax assets, make good provision were understated and
current tax liabilities were overstated. The comparative figures in the financial statements for the year ended 30 June 2015 and
accompanying notes have been restated. Extracts (being only those line items affected) are disclosed below.
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME - Extract
Expenses
Raw materials and consumables used
Depreciation expense
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
Reported
Consolidated
2014
$000’s
Adjustment
Consolidated
2014
$000’s
Restated
Consolidated
2014
$000’s
144,405
3,128
210,008
8,754
(2,623)
6,131
-
6,131
281
183
464
(464)
140
144,686
3,311
210,472
8,290
(2,483)
(324)
-
5,807
-
(324)
5,807
2.91
2.88
(0.16)
(0.15)
2.75
2.73
CONSOLIDATED STATEMENT OF FINANCIAL POSITION - Extract
Assets
Current assets
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Current tax liabilities
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Retained earnings
TOTAL EQUITY
34
3,399
76,806
16,962
2,323
88,106
164,912
30,385
648
38,847
773
20,564
59,411
105,501
13,854
105,501
3
3
420
53
473
476
281
(84)
197
603
603
800
(324)
(324)
(324)
3,402
76,809
17,382
2,376
88,579
165,388
30,666
564
39,044
1,376
21,167
60,211
105,177
13,530
105,177
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 4: 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; and
> 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 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. All inter-segment loans
payable and receivable are eliminated on consolidation for
the Group’s 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 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; and
> other financial liabilities.
35
2015 Annual Report NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 4: OPERATING SEGMENTS (CONT.)
Rigid
Industrial
packaging packaging
$ 000’s
2015
$ 000’s
2015
Intersegment
eliminations
/ unallocated
$ 000’s
2015
Total
$ 000’s
2015
Rigid
packaging
$ 000’s
2014
Intersegment
Industrial eliminations
/ unallocated
packaging
$ 000’s
$ 000’s
2014
2014
Total
$ 000’s
2014
(i) Segment performance
12 months ended 30 June
Revenue
External sales
Inter-segment sales
60,441
8,594
183,016
7,648
- 243,457
-
(16,242)
53,653
9,247
164,620
8,989
- 218,273
(18,236)
-
Total segment revenue
69,035
190,664
(16,242) 243,457
62,900
173,609
(18,236) 218,273
EBITDA
7,454
Depreciation and amortisation (1,618)
Interest revenue
Finance costs
10,077
(1,736)
(4,385)
(229)
13,146
(3,583)
83
(1,219)
8,427
(2,585)
5,842
6,372
(1,577)
9,424
(1,883)
(2,575)
(173)
13,221
(3,633)
74
(1,372)
8,290
(2,483)
5,807
47,437
117,297
-
164,734
46,601
113,308
-
159,909
(1,634)
8,702
2,520
6,182
171,802
(1,463)
6,942
2,379
4,563
165,388
Profit before income tax
Income tax expense
Profit after income tax
(ii) Segment assets
As at 30 June
Segment assets
Reconciliation of segment
assets to group assets
Inter-segment eliminations
Unallocated assets
– Deferred tax assets
– Other
Total group assets from
continuing operations
(iii) Segment liabilities
As at 30 June
Segment liablities
12,948
26,331
-
39,279
11,525
28,642
-
40,167
Reconciliation of segment
liablities to group liabilities
Inter-segment eliminations
Unallocated liabilities
– Deferred tax liabilities
– Other liabilities
Total group liabilities from
continuing operations
(1,722)
25,850
-
25,850
63,407
(1,538)
21,582
-
21,582
60,211
(iv) Pro-Pac Packaging Limited have an operation, PPG Services SDN BHD, which is a company incorporated in Malaysia.
This company provides support services for all Group companies. The financial statements for this company are prepared
under Malaysian Financial Reporting Standards, which are compliant with International Financial Reporting Standards.
36
PRO-PAC PACKAGING LIMITED and Controlled Entities
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
NOTE 5: EXPENSES
Profit before income tax includes the following expenses:
Bad and doubtful debts – trade
Rental expense on operating leases:
- minimum lease payments
NOTE 6: INCOME TAX
Major components of income tax for the year ended 30 June are:
Current income tax
Current income tax charge
Adjustments in respect of previous years
Adjustments in respect of permanent differences
Deferred income tax
Relating to temporary differences
Income tax expense in statement of profit or loss and other 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 2015 is as follows:
Accounting profit before tax
At the statutory income tax rate of 30%
Which is adjusted by the tax effect of:
Different rates of tax on overseas income
Adjustments in respect of permanent differences
At effective income tax rate of 30.7% (2015: 30.0%)
Income tax expense reported in statement of profit or loss and other
comprehensive income
389
7,426
2,729
-
59
(203)
2,585
8,427
2,528
(2)
59
2,585
2,585
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 2015 and 30 June 2014.
Current tax asset
Current tax liability
15
-
226
6,908
2,720
38
(1)
(274)
2,483
8,290
2,487
(3)
(1)
2,483
2,483
-
564
37
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 7: 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
2015
$000’s
5,842
224,290,226
2.60
2.56
Restated
Consolidated
2014
$000’s
5,807
210,854,244
2.75
2.73
*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.
NOTE 8: DIVIDENDS PAID AND PROPOSED
On 27 August 2015, the Company declared a fully franked final dividend of 1.5 cent per share. The record date for determining
entitlements to the dividend is 9 September 2015 and the dividend will be paid on 24 September 2015. The Company’s
Dividend Reinvestment Plan will apply to the final dividend. No discount will apply to the issue price. When combined with
PPG’s interim dividend of 1.0 cent, paid on 20 May 2015, this brings total fully franked dividends for the 2014/15 financial year
to 2.5 cents per share.
Declared and paid during the year:
Final dividend for 2014 – 1 cent per ordinary share
(2013 – 1 cent per ordinary share)
Interim dividend for 2015 – 1 cent per ordinary share
(2014 – 1 cent per ordinary share)
Proposed for approval at the Directors Meeting
(not recognised as a liability as at 30 June):
Final dividend for 2015 – 1.5 cents per ordinary share
(2014 – 1 cent per ordinary share)
2015
$000’s
2014
$000’s
2,267
2,122
2,266
4,533
2,132
4,254
3,436
2,267
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
15,334
13,968
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
> franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date;
> franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and
> franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
38
PRO-PAC PACKAGING LIMITED and Controlled Entities
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
NOTE 9: CASH AND CASH EQUIVALENTS
Cash at bank and in hand
6,120
3,580
Cash at bank and in hand earns interest at floating rates based on daily bank deposit rates
Reconciliation of cash
For the purposes of the Statement of cash flow, cash and cash equivalents comprise
the following at 30 June:
Cash at bank and in hand
6,120
3,580
NOTE 10: CASH FLOW 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 pre-paid 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
During the year, the consolidated Group acquired plant with an aggregate value of
$1,682,635 (2014: $1,803,090) by means of finance leases.
c) Credit standby arrangements with banks
Credit facility
Amount utilised
Loan facilities
Amount utilised
5,842
3,261
322
63
(579)
(144)
92
21
(1,546)
2,884
(4,276)
201
(737)
5,404
1,500
-
44,700
33,159
5,807
3,311
322
108
(62)
(221)
183
34
(3,831)
(4,450)
3,418
92
(273)
4,438
1,500
-
29,750
23,659
39
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 11: TRADE AND OTHER RECEIVABLES
Current:
Trade receivables
Provision for impairment of receivables
Other debtors
Total current receivables
Movements in the provision for impairment of receivables are as follows:
Opening balance
Additional provision recognised
Receivables written off during the year as uncollectable
Closing balance
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
37,626
(602)
1,476
38,500
(510)
(481)
389
(602)
34,784
(510)
1,318
35,592
(338)
(398)
226
(510)
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 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 below table) are considered to be of
high credit quality.
Gross
amount
Past due and
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
37,626
1,476
39,102
34,784
1,318
36,102
602
-
602
510
-
510
77
-
77
346
-
346
1,432
-
1,432
1,656
-
1,656
35,515
1,476
36,991
32,272
1,318
33,590
Consolidated
2015
Trade and term receivables
Other receivables
Total
2014
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. The consolidated entity did not consider a credit risk on the aggregate balance that are
past due but not impaired based on recent collection practices.
40
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 12: INVENTORIES
Raw materials
Finished goods
Total inventories
NOTE 13: PROPERTY, PLANT AND EQUIPMENT
At 30 June
Plant and equipment
At cost
Accumulated depreciation
Total property, plant and equipment
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
1,225
31,168
32,393
985
33,250
34,235
31,749
(14,383)
17,366
29,273
(11,891)
17,382
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.
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
2015
$000’s $000’s
Plant and
Equipment Vehicles
Motor Computer
Office
Furniture
Equipment & Fittings Equipment
Leasehold
Improvement
Total
Balance at the beginning
of the year
Additions arising from business
acquisitions during the year
Additions
Make good provision capitalised
Disposals
Reclassification
Depreciation charge for the year
Carrying amount at the
end of the year
13,329
2,195
674
75
2,829
-
(610)
(29)
(2,085)
54
332
-
(226)
(38)
(569)
7
214
-
-
-
(343)
362
-
136
-
(11)
(1)
(89)
402
11
155
-
(6)
68
(84)
420
17,382
-
-
285
-
-
(91)
147
3,666
285
(853)
-
(3,261)
13,509
1,748
552
397
546
614
17,366
2014
$000’s
2014
$000’s
2014
$000’s
2014
$000’s
2014
$000’s
2014
2014
$000’s $000’s
Plant and
Equipment Vehicles
Motor Computer
Office
Furniture
Equipment & Fittings Equipment
Leasehold
Improvement
Total
Balance at the beginning
of the year
Additions arising from business
acquisitions during the year
Additions
Make good provision capitalised
Disposals
Depreciation charge for the year
Carrying amount at the
end of the year
13,722
2,376
100
1,874
-
(288)
(2,079)
-
651
-
(204)
(628)
681
-
308
-
-
(315)
386
-
22
-
-
(46)
445
-
17
-
-
(60)
-
17,610
-
-
603
-
(183)
100
2,872
603
(492)
(3,311)
13,329
2,195
674
362
402
420
17,382
41
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 14: 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
2015
$000’s
Restated
Consolidated
2014
$000’s
68,793
1,544
67,867
926
70,337
68,793
70,337
-
70,337
68,793
-
68,793
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 28).
NOTE 15: DEFERRED 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
Other permanent differences brought to account
Charge to statement of comprehensive income
Closing balance
2,424
96
2,520
2,376
(59)
203
2,520
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 / (charge) 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
42
2,242
-
182
2,424
134
33
-
(71)
96
2,242
134
2,376
2,101
1
274
2,376
1,940
(27)
329
2,242
161
11
27
(65)
134
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 16: OTHER ASSETS
(a) Current assets
Other prepayments
Derivative asset
Prepaid royalty
Total current assets
(b) Non-current assets
Prepaid royalty
Total non-current assets
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
3,813 3,080
-
322
710
28
4,551
3,402
-
-
28
28
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 2015
amounted to $322,082 (2014: $322,082).
NOTE 17: TRADE AND OTHER PAYABLES
Current
Unsecured:
Trade payables
GST payable
Other tax payable
Sundry creditors and accruals
Contingent deferred payments to vendors for acquisitions
18,202
716
524
7,131
55
26,628
18,222
741
672
7,041
3,990
30,666
Trade 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.
NOTE 18: INTEREST BEARING LOANS AND BORROWINGS
Current
Finance lease and hire purchase (see note 24)
Trade Finance
Non-current
Finance lease and hire purchase (see note 24)
Bank loan (secured)
1,183
2,551
3,734
1,771
25,500
27,271
1,550
2,559
4,109
1,696
18,095
19,791
a) The bank loan and trade finance are secured as follows:
first ranking registered equitable mortgage over Pro-Pac Packaging Limited and all wholly owned subsidiaries; and
i)
ii) cross interlocking guarantees from Pro-Pac Packaging Limited and all wholly owned subsidiaries.
b) In respect of the 2015 financial year, the bank loan is subject to the following covenants on a 12 month rolling basis:
i)
the Interest Coverage Ratio for the Group will at all times be greater than 4.00:1;
the Gross Leverage Ratio for the Group will at all times not be greater than 3.00:1; and
ii)
iii) the Net Tangible Asset Cover Ratio for the Group will at all times be greater than 1.50:1.
c)
Pro-Pac Packaging Limited undertakes to the bank that any dividends or distribution payments paid to shareholders or
members for a financial year will not exceed more than 70% of net profit after tax for that financial year.
d) The bank loan facility is subject to review on 31 July 2016.
43
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
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
Make good provision
Opening balance
Additional provisions
Closing balance
Total non-current provisions
Opening balance
Arising on acquisition of business combinations
Additional provisions
Amount used
Closing balance
Amounts not expected to be settled within the next 12 months
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
3,705
57
2,508
(2,297)
3,973
773
149
229
(239)
912
603
286
889
1,376
149
515
(239)
1,801
3,651
20
2,236
(2,202)
3,705
695
21
315
(258)
773
-
603
603
695
21
918
(258)
1,376
The current provision for employee benefits includes all unconditional entitlements where employees have completed
the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances.
The entire amount is presented as current, since the consolidated entity does not have an unconditional right to defer
settlement. However, based on past experience, the consolidated entity does not expect all employees to take the full
amount of accrued leave or require payment within the next 12 months.
44
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 20: ISSUED CAPITAL
Ordinary shares
Issued and fully paid
Movement in ordinary shares on issue
Balance at 1 July 2013
Vesting of ESPP shares
Issue of shares for Executive Long Term Incentive Plan
Cancellation of shares for Executive Long Term Incentive Plan
Issue of shares
Issue of shares under the dividend re-investment plan
Balance at 30 June 2014
Cancellation of shares for Executive Long Term Incentive Plan
Issue of shares under the dividend re-investment plan
Balance at 30 June 2015
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
92,726
91,548
Number
211,257,804
-
2,150,000
(150,000)
10,500,000
2,935,954
226,693,758
(75,000)
2,454,499
229,073,257
$000’s
85,285
368
-
-
4,515
1,380
91,548
-
1,178
92,726
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 remuneration report on page 6).
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
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 2014 Annual Report.
45
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
NOTE 21: RESERVES
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.
Option reserve
Cashflow hedge reserve
Closing balance
120
710
830
99
-
99
Option reserve
The reserve is used to recognise the value of share options at an agreed price, where certain employees are granted options
for shares that vest at a future date subject to the employee still being employed at that vesting date.
Hedging reserve - cash flow hedges
The reserve is used to recognise the effective portion of the gain or loss of cash flow hedge instruments that is determined to
be an effective hedge.
NOTE 22: RETAINED EARNINGS
Retained profits at the beginning of the year
Net profit attributable to members of the company
Dividends paid
Retained profits at the end of the year
NOTE 23: 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 2.1%.
46
13,530
5,842
(4,533)
14,839
11,977
5,807
(4,254)
13,530
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 38.3% of purchases of materials and capital items.
Commodity price risk
The Group’s exposure to commodity price risk is relatively
low although certain petrochemical based products are
affected by 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.
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 24: 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.
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
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
%
Consolidated
(i) Financial assets
Cash Assets
Receivables
6,110
-
-
-
10
38,500
6,120
38,500
Total financial assets
6,110
-
38,510
44,620
(ii) Financial liabilities
Finance Leases (current)
Finance Leases (non-current)
Trade Finance (current)
Bank loans (non-current)
Payables (current)
Total financial liabilities
-
-
2,551
25,500
-
28,051
1,183
1,771
-
-
2,954
-
-
-
26,628
26,628
1,183
1,771
2,551
25,500
26,628
57,633
Net financial assets/(liabilities)
(21,941)
(2,954)
11,882
(13,013)
There is no interest rate applicable on receivables or payables.
2014
$000’s
2014
$000’s
2014
$000’s
2014
$000’s
Restated Consolidated
(i) Financial assets
Cash Assets
Receivables
Total financial assets
(ii) Financial liabilities
Finance Leases (current)
Finance Leases (non-current)
Trade Finance (current)
Bank loans (non-current)
Payables (current)
Total financial liabilities
3,569
-
-
-
11
35,592
3,580
35,592
3,569
-
35,603
39,172
-
-
2,559
18,095
-
20,654
1,550
1,696
-
-
3,246
-
-
-
30,666
30,666
1,550
1,696
2,559
18,095
30,666
54,566
Net financial assets/(liabilities)
(17,085)
(3,246)
4,937
(15,394)
2.1
6.9
6.9
3.1
3.1
2014
%
2.5
7.9
7.9
5.7
5.7
47
2015 Annual Report
NOTE 24: 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 2015
Less
than one
year
$000’s
Between
1 and 2
years
$000’s
Between
2 and 3
years
$000’s
Between Between
4 and 5
years
$000’s
3 and 4
years
$000’s
More
than 5
years
$000’s
Total
$000’s
Consolidated
Cash assets
Trade Finance
Finance leases
Bank loans
6,110
2,551
1,183
-
-
-
887
25,500
-
-
506
-
-
-
312
-
-
-
63
-
-
-
3
-
6,110
2,551
2,954
25,500
Year ended 30 June 2014
Less
than one
year
$000’s
Between
1 and 2
years
$000’s
Between
2 and 3
years
$000’s
Between Between
4 and 5
years
$000’s
3 and 4
years
$000’s
More
than 5
years
$000’s
Total
$000’s
Consolidated
Cash assets
Trade Finance
Finance leases
Bank loans
3,569
2,559
1,550
-
-
-
890
18,095
-
-
559
-
-
-
189
-
-
-
40
-
-
-
18
-
3,569
2,559
3,246
18,095
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 indicates the impact on how profit and equity values reported at the 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 variable is independent of other variables
Consolidated
Profit
$000’s
Restated
Consolidated
Equity
$000’s
+/- 228
+/- 6,776
+/- 196
+/- 6,689
+/- 228
+/- 6,776
+/- 196
+/- 6,689
2015
+/- 1% in interest rates
+/- 10% in AUD / USD
2014
+/- 1% in interest rates
+/- 10% in AUD / USD
48
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 24: FINANCIAL INSTRUMENTS (CONT.)
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency
risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities
denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and
cash flow forecasting.
In order to protect against exchange rate movements, the consolidated entity has entered into forward foreign exchange
contracts. These contracts are hedging highly probable forecasted cash flows for the ensuing financial year. Management
has a risk management policy to hedge 100% of anticipated USD foreign currency transactions for the subsequent 3 months
(2014: 6 months).
The maturity, settlement amounts and the average contractual exchange rates of the consolidated entity's outstanding
forward foreign exchange contracts at the reporting date were as follows:
Buy US dollars
Maturity:
0 - 3 months
3 - 6 months
Sell Australian dollars
2015
$'000
22,231
1,197
2014
$'000
15,316
9,989
Average exchange rates
2015
2014
0.7814
0.7683
0.8881
0.9010
NOTE 25: FAIR VALUE MEASUREMENT
Fair value hierarchy
The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three
level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date;
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly; and
Level 3: Unobservable inputs for the asset or liability.
Consolidated - 2015
Assets
Derivative asset
Total assets
Consolidated - 2014
Assets
Derivative asset
Total assets
Level 1
$'000
-
-
Level 1
$'000
-
-
Level 2
$'000
710
710
Level 2
$'000
-
-
Level 3
$'000
-
-
Level 3
$'000
-
-
Total
$'000
710
710
Total
$'000
-
-
Derivative financial instruments have been valued using market rates. This valuation technique maximises the use of
observable market data where it is available and relies as little as possible on entity specific estimates.
The carrying amounts of trade and other receivables and trade and other 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 liabilities.
49
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 26: CONTROLLED ENTITIES
The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries
in accordance with the accounting policy described in note 2. The financial years of all controlled entities are the same as that
of the parent entity.
Country of
Incorporation
Class of
Shares
Equity
Holding
2015
Equity
Holding
2014
Direct Controlled Entities:
Pro-Pac Group Pty Ltd
Plastic Bottles Pty Ltd
PPG Services SDN BHD
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
Australia
Australia
Malaysia
Ordinary
Ordinary
Ordinary
Australia
Australia
Ordinary
Ordinary
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
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
Australia
Australia
Australia
Australia
Controlled Entities owned 100% by Bev-Cap Pty Ltd
Great Lakes Moulding Pty Ltd
Finpact (Pty) Ltd
Australia
Australia
Ordinary
Ordinary
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
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').
As parent entity, Pro-Pac Packaging Limited and other group entities, Pro-Pac Group Pty Ltd and Plastic Bottles Pty Ltd as
disclosed above are party to the deed of cross guarantee, the Statement of Profit and Loss and Other Comprehensive Income
and the Statement of Financial Position of the entities that are party to the deed of cross guarantee are as presented in the
Consolidated Statement of Profit and Loss and Other Comprehensive Income on page 21 and Consolidated Statement of
Financial Position presented on page 22. PPG Services SDN BHD does not form part of the deed of cross guarantee. The
impact on the net assets and profit for the year of the Group is not considered to be material.
50
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 27: 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
2015
$000’s
4,911
10,372
30
15,313
Restated
Consolidated
2014
$000’s
4,292
9,538
-
13,830
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
2015
Minimum
payments
$000’s
2015
Present value
of payments
$000’s
2014
Minimum
payments
$000’s
2014
Present value
of payments
$000’s
1,550
1,696
3,246
-
3,246
1,340
1,912
3,252
(298)
2,954
2015
$000’s
1,183
1,771
2,954
1,183
1,771
2,954
-
2,954
1,718
1,823
3,541
(295)
3,246
2015
$000’s
1,550
1,696
3,246
The weighted average interest rate implicit in the leases is 6.9%.
Contingent Liability
As at statement of financial position date, the Company issued security deposit guarantees and standby letters of credits
to the value of $2,418,092 (2014: $1,673,781) to the landlords of rented premises and overseas suppliers.
51
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 27: COMMITMENTS AND CONTINGENCIES (CONT.)
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
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
-
-
-
318,729
-
318,729
NOTE 28: IMPAIRMENT TESTING OF GOODWILL
Carrying amount of goodwill
Carrying amount of goodwill Industrial Division
Carrying amount of goodwill Rigid Division
Total Carrying amount of goodwill
48,242
22,095
70,337
46,698
22,095
68,793
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) 7.5% pre-tax discount rate; (2014: 6.7%)
b) 5.5% for Industrial division (2014: 5.0%) and 3.2% for Rigid division (2014: 2.2%) per annum projected revenue growth rate;
c)
5.5% for Industrial division (2014: 5.0%) and 3.2% for Rigid division (2014: 2.2%) per annum increase in operating costs and
overheads.
The discount rate of 7.5% 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:
the discount rate would need to increase to 12.0% for the Industrial division and to 16.5% for the Rigid division before
goodwill would be impaired. A rate of 7.5% was used in the assessment of goodwill.
the EBITDA growth rate would need to decrease to negative 60.6% in the Industrial division and to negative 50.7% in the
Rigid division before goodwill would be impaired. EBITDA growth rates of 5.5% and 3.2% respectively, were used in the
assessment of goodwill for the Industrial and Rigid divisions respectively.
a)
b)
52
PRO-PAC PACKAGING LIMITED and Controlled Entities
NOTE 29: 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 26.
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
2015
$
Restated
Consolidated
2014
$
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 Road, 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 Road, Mordialloc, VIC
249,443
796,405
581,505
125,203
89,697
267,377
796,405
581,505
125,203
89,697
Total payments to related parties during the year ended 30 June 2015 was $1,313,225 (2014: $1,288,125).
243,949
796,405
581,505
125,203
89,697
247,771
796,405
581,505
125,203
89,697
NOTE 30: KEY MANAGEMENT PERSONNEL DISCLOSURE
Key Management Personnel at 30 June 2015
Ahmed Fahour
Elliott Kaplan
Dr Gary Weiss
Brandon Penn
Peter Sutton
Hadrian Morrall
Mark Saus
Non-executive Chairman
Non-executive Director
Non-executive Director
Non-executive Director
Chief Executive Officer
Divisional Managing Director
Chief Financial Officer and Company Secretary
Total remuneration made to above key management personnel during the year ended 30 June 2015 was $1,264,814
(2014: $844,021). Details of remuneration made to above key management personnel are disclosed in the directors’ report
on page 8.
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. For more details refer to the remuneration report as included in directors’ report.
53
2015 Annual Report
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2015
NOTE 31: 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
2015
$'000
4,535
4,535
4,014
95,094
2,345
2,345
92,726
-
23
92,749
Parent
2014
$'000
5,788
5,788
591
93,104
1,535
1,535
91,548
-
21
91,569
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.
NOTE 32: EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
On 22 August 2015, the Company declared a fully franked final dividend of one and half cent per share. For details refer to
the Directors’ Report on page 5.
Consolidated
2015
$000’s
Restated
Consolidated
2014
$000’s
NOTE 33: AUDITORS' REMUNERATION
Amounts paid or due payable to UHY Haines Norton for:
– audit or review of the financial report and half-year financial report
118,000
112,000
NOTE 34: 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 2015. The Group does not at this time believe these have any material impact on the 2015 financial
report or for the ensuing year.
54
PRO-PAC PACKAGING LIMITED and Controlled Entities
DIRECTORS’ DECLARATION
The directors of the company declare that:
1.
The financial statements and notes, as set out on pages 21 to 54, are in accordance with the Corporations Act 2001
and:
a)
b)
comply with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional
reporting requirements;
give a true and fair view of the consolidated entity’s financial position at 30 June 2015 and of its performance
for the year ended on that date;
c)
comply with International Financial Reporting Standards as disclosed in Note 2 (c) to the financial statements.
2.
The Chief Executive Officer and Chief Financial Officer have each declared that:
a)
b)
c)
the financial records of the company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001;
the financial statements and notes for the financial year comply with the accounting standards; and
the financial statements and notes for the financial year give a true and fair view; and
3.
4.
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.
At the date of this declaration, there are reasonable grounds to believe that the entities that are party to the deed of
cross guarantee as described in note 26 to the financial statements will be able to meet any obligation or liabilities to
which they are, or may become, subject by virtue of the deed of cross guarantee.
Signed in accordance with a resolution of the Board of Directors pursuant to section 295 (5) (a) of the Corporations Act 2001.
On behalf of the Board on 24 September 2015.
Ahmed Fahour
Chairman
Brandon Penn
Director
55
2015 Annual Report
INDEPENDENT AUDITOR'S
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.
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 consolidated
entity’s financial position as at 30 June 2015 and of
its performance for the year ended on that date; and
ii.
complying with the Australian Accounting Standards
and the Corporations Regulations 2001; and
(b)
the financial report also complies with International
Financial Reporting Standards as disclosed in Note 2(b).
Report on the Remuneration Report
We have audited the Remuneration Report included on
pages 5 to 9 of the directors' report for the year ended
30 June 2015. 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.
Opinion
In our opinion, the Remuneration Report of Pro-Pac
Packaging Limited for the year ended 30 June 2015,
complies with section 300A of the Corporations Act 2001.
M.D. Nicholaeff
Partner
UHY Haines Norton
Chartered Accountants
Signed at Sydney on 24 September 2015
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 (the Company), which comprises
the consolidated statement of financial position as at
30 June 2015, the consolidated statement of profit or
loss and other 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 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
controls as the directors determine are necessary to enable
the preparation of the financial report that is free from
material misstatements, whether due to fraud or error.
In Note 2(b), 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
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.
56
PRO-PAC PACKAGING LIMITED and Controlled Entities
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 9 September 2015.
(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
94
109
113
727
137
1,180
Total Units
9,520
340,863
908,531
29,132,500
198,681,843
229,073,257
%
0.004
0.149
0.397
12.718
86.732
100.00
There are ninety-five holders of unmarketable parcels totalling 10,560 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
The names of substantial shareholders who have
notified the Company in accordance with Section 671B
of the Corporations Act 2001 are:
Bennamon Pty Limited
112,602,277 ordinary shares
Mr Brandon Penn
24,958,817 ordinary shares
Trustees Australia Limited
for Lanyon Australian
Value Fund
(d) Voting rights
16,387,253 ordinary shares
All ordinary shares carry one vote per share without
restriction.
(e) Restricted securities
Restricted securities total 2,030,000.
ESPP Shares under escrow
until 16 October 2015
ESPP Shares under escrow
until 21 July 2016
ESPP Shares under escrow
until 24 March 2017
(f) Business objectives
280,000 ESPP shares
800,000 ESPP shares
950,000 ESPP shares
The Company has used its cash and assets that are
readily convertible to cash in a way consistent with its
business objectives.
of security are:
Rank Holder
1 BENNAMON PTY LTD
2 MR BRANDON ARI PENN
3
4
10
5
6
11
12
7
8
9
AUST EXECUTOR TRUSTEES LTD
EQUITAS NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
MR BRANDON PENN & MRS WENDY PENN
NATIONAL NOMINEES LIMITED
MRS NATALIE PENN
MISCHKE INVESTMENTS PTY LTD
MISCHKE INVESTMENTS PTY LTD
CVC LIMITED
SONHILL INVESTMENTS PTY LTD
W&S SEJA INVESTMENTS PTY LTD
D & M TULLOCH PTY LTD
PHILANTHROPIC INVESTORS CLUB PTY LTD
WOLBOW GROUP PTY LTD
MR CRAIG STEWART FOX &
MES TONI ROSEMARY FOX
MR GREGORY RIDDER & MRS LEE RIDDER
RUBI HOLDING PTY LTD
20 DONALD CANT PTY LTD
16
15
19
18
14
13
17
Number
%
112,602,277
22,279,165
49.16
9.73
16,387,253
10,000,000
3,673,951
2,297,872
1,507,958
1,200,344
7.15
4.37
1.60
1.00
0.66
0.52
978,792
0.43
854,850
781,914
0.37
0.34
723,310
0.32
601,972
0.26
600,000
0.26
600,000
0.26
579,195
0.25
537,280
0.24
531,724
0.23
514,146
450,000
0.22
0.20
TOP 20
177,702,003
77.57
2015 Annual Report 57
PRO-PAC PACKAGING LIMITED
147 - 151 Newton Road, Wetherill Park NSW Australia 2164
Tel (02) 8781 0500 Fax (02) 8781 0599
Email sales@pro-pac.com.au Web www.ppgaust.com.au
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