&
Pro-Pac Packaging Limited Annual Report
1
Annual Report 02 Chairman’s Report
03 Directors’ Report
11 Auditor’s Independence Declaration
12 Corporate Governance Statement
21 Consolidated Statement of Profit or
Loss and Other Comprehensive Income
22 Consolidated Statement of
Financial Position
23 Consolidated Statement of Cash Flows
24 Consolidated Statement of
Changes in Equity
25 Notes to the Financial Statements
54 Directors’ Declaration
55 Independent Auditor’s Report
56 Additional Company Information
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Corporate Information
Pro-Pac Packaging Limited
ACN: 112 971 874 ABN: 36 112 971 874
DIRECTORS
Ahmed Fahour (Chairman)
Elliott Kaplan
Brandon Penn
Dr Gary Weiss
COMPANY SECRETARY
Mark Saus
REGISTERED OFFICE
Building 1, 147-151 Newton Road,
Wetherill Park NSW 2164
PRINCIPAL PLACE OF BUSINESS
Building 1, 147-151 Newton Road,
Wetherill Park NSW 2164
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
“THE COMPANY CONTINUES TO LOOK FOR
ATTRACTIVE ACQUISITIONS THAT ARE ACCRETIVE
AND MEET RETURN ON INVESTMENT HURDLES.”
Annual Report
1
Despite the challenging business conditions the Board
remains confident in the Company’s ability to continue to
grow profitably and when considered in conjunction with a
strong balance sheet and solid cash flows the Board decided
to maintain the final dividend at 1.5 cents per share for the
second half. This, combined with the interim dividend, resulted
in shareholders receiving a total dividend of 2.75 cents per
share fully franked for the financial year, an increase of 10%
over the prior year.
In July 2016 Peter Sutton resigned as CEO to pursue private
business interests and the Board and I thank Peter for his
contribution to the Group during his tenure. As previously
advised, former long term CEO, major shareholder and
Non-Executive Director, Brandon Penn, was appointed “acting
CEO” while an active formal executive search is finalised.
A leading executive search firm has been appointed by the
Board to recruit the next 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 Packaging Limited’s annual
report for the year ended 30 June 2016.
At the outset, I am pleased to note that for the year ended
30 June 2016, the Company reported a solid and pleasing set
of results including profit after tax up 19% to $6.9 million which
translates to an increase in earnings per share of 16% to 3.01
cents and dividends per share up 10% to 2.75 cents. Net cash
from operating activities was also up 162% to $14.2 million.
These results were achieved despite continued difficult general
industry trading conditions, rising raw material input prices
and adverse margin impacts from the significant downward
movement in the A$/US$ exchange rate during the year.
Sales were down 1% on the prior year reflecting a sluggish
Australian economy and competitive markets. As previously
reported, demand from the manufacturing, distribution,
resources and meat processing sectors was soft, particularly
later in the first half and continued for the remainder of the
financial year. However, the Company experienced good growth
in the pharmaceutical, healthcare, retail and dairy sectors.
Despite hedging strategies, adverse forex movements due
mainly to the ongoing decline of the AUD increased the cost
of imported goods sold relative to the prior year, particularly
during H1. Consequently, throughout the year the Company
progressively increased prices to its customers to recover this
cost increase. As a result, margins were maintained broadly
in line with the prior year but sales volumes were adversely
affected.
The maintenance of margins and the continued focus on cost
out strategies yielded substantial savings in administration,
distribution and selling expenses that enabled the Company to
record a profit before tax of $10.1 million, an increase of 20%
up on the prior year.
Rigid Division had an excellent year, with good top line growth
and lower resin costs resulting in EBITDA increasing 18% on the
prior year.
Industrial Division, which imports most of its products, was
adversely affected by the declining AUD. As alluded to above,
steps taken to stabilise margins within the division adversely
effected sales which finished lower than the prior year. EBITDA
for the division was however up 3% on the prior year, largely
due to effective cost control.
The Company expects the Australian economy and the
Company’s markets to remain subdued. Cost reduction
initiatives and measures to stabilise margins will continue
during FY17. The Company continues to look for attractive
acquisitions that are accretive and meet return on investment
hurdles.
2
Pro-Pac Packaging Limited + Controlled Entities
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 2016.
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 is the Managing Director and CEO of Australia Post.
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). He is the chairman of
LaunchVic and 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)
Mr Kaplan is a Chartered Accountant with extensive Board
experience following numerous 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 a Director of Eildon Capital Limited (formerly
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 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, appointed Acting CEO 13 July 2016)
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
2016 Annual Report
of a dominant software development company, Dealing
Information Systems (DIS), which developed wholesale
banking systems. DIS was acquired in 1996 by Sungard Data
Systems NYSE. Mr Penn assumed Asia-Pacific responsibility
for the Sungard companies and offices throughout the Asia
Pacific region.
Mr Penn is a member of the Remuneration Committee.
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 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, resigned
13 July 2016)
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.
3
Annual Report 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 the Company are shown in the table
below:
Ahmed Fahour
Elliott Kaplan
Brandon Penn
Dr Gary Weiss
Opening balance
10,000,000
216,357
24,958,817
300,000
ORDINARY SHARES
Additions
674,153
-
-
-
Disposals
Closing balance
-
-
-
-
10,674,153
216,357
24,958,817
300,000
Opening balance
Additions
Disposals
Closing balance
OPTIONS
Elliott Kaplan
1,200,000
-
-
1,200,000
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
6
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
Despite continued difficult general industry trading conditions,
rising raw material input prices and adverse margin impacts
from the significant downward movement in the A$/US$
exchange rate during the year, the business delivered a solid
result for the 12 months to 30 June 2016.
4
Sales were down 1% on the prior year reflecting a sluggish
Australian economy and competitive markets. As previously
reported, demand from the manufacturing, distribution,
resources and meat processing sectors was soft, particularly
later in the first half and continued for the remainder of the
financial year. However, the Company experienced good growth
in the pharmaceutical, healthcare, retail and dairy sectors.
Despite hedging strategies, adverse forex movements due mainly
to the ongoing decline of the AUD increased the cost of imported
goods sold relative to the prior year, particularly during H1.
Consequently, throughout the year the Company progressively
increased prices to its customers to recover this cost increase.
As a result, margins were maintained broadly in line with the
prior year but sales volumes were adversely affected.
The maintenance of margins and the continued focus on cost
out strategies yielded substantial savings in administration,
distribution and selling expenses that enabled the Company to
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
record a profit before tax of $10.1 million, an increase of
20% up on the prior year.
Rigid Division had an excellent year, with good top line growth
and lower resin costs resulting in EBITDA increasing 18% on the
prior year.
Industrial Division, which imports most of its products, was
adversely affected by the declining AUD. As alluded to above,
steps taken to stabilise margins within the division adversely
effected sales which finished lower than the prior year. EBITDA
for the division was however up 3% on the prior year, largely
due to effective cost control.
DIVIDENDS
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
2016
$000’s
2015
$000’s
The Company has entered into a deed of access, indemnity and
insurance with each of the Directors, under which the Company
has agreed to:
Dividends paid during the year:
Final dividend for 2015 –
1.5 cents per ordinary share
(2014 – 1 cent per ordinary share)
Interim dividend for 2016 –
1.25 cents per ordinary share
(2015 – 1 cent per ordinary share)
3,427
2,267
2,953
6,380
2,266
4,533
In August 2016, the Company declared a fully franked final
dividend of 1.5 cents per share. The record date for
determining entitlement to the dividend is 8 September
2016 and the dividend will be paid on 22 September 2016.
The Company’s Dividend Reinvestment Plan will apply to this
dividend. No discount will apply to the issue price.
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
On 26 August 2016, the Company declared a fully franked final
dividend of 1.5 cents per share.
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
• continue to provide the Directors with access to certain
relevant information after they cease to be Directors;
• to the extent permitted by law, indemnify the Directors
against liabilities incurred in their capacity as Directors of
the Company and its subsidiaries; and
• maintain certain Directors’ liability insurance in respect
of Directors, both during and after the period they are
Directors.
The Company has paid insurance premiums in respect of
Directors’ and Officers’ liability and legal expense insurance for
the Directors of the Company.
These contracts of insurance prohibit the disclosure of the
nature of the liabilities covered and amount of the premium
paid. The Corporations Act 2001 does not require disclosure of
the information in these circumstances.
The 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 and Dr Gary Weiss who are
Non-Executive Directors. Mr Brandon Penn served on the
committee as a Non-Executive Director until 13 July 2016
when he assumed the position of Acting CEO.
5
Annual Report
Directors’ Report
The Remuneration Committee assesses the appropriateness
of the nature and amount of remuneration of Directors on a
periodic basis by reference to relevant employment market
conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality
Board and executive team. It is intended that the manner of
payments chosen will be optimal for the recipient without
creating undue cost for the Group. Further details on the
remuneration of Directors and executives are set out in this
Remuneration Report.
In accordance with best practice corporate governance, the
structure of non-executive Director and executive Director
remuneration is separate and distinct.
Non-Executive Directors 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 2016 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
6
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 2016 is set out in
Table 1 of this report.
Employment contracts
Chief Executive Officer
Mr Peter Sutton resigned on 13 July 2016.
The Company had 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 agreed 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 could have terminated 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 was 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 could terminate the agreement at any time with
immediate effect in the event of misconduct. The agreement
provided 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
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
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 2001. There are currently 4,900,000 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
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 the Company 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 3,300,000 shares were issued to staff and
executives under the ESPP, while 430,000 were forfeited
and were cancelled or await cancellation. At the end of the
year 4,900,000 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 years have been adjusted accordingly.
Grant date
Expiry Date
Price
Balance at
beginning of year
Granted
Exercised
Expired/
forfeited
Balance at
end of year
2016
17/10/12
22/07/13
25/03/14
07/10/15
Total
16/10/15
21/07/16
24/03/17
06/10/18
0.485
0.458
0.460
0.417
280,000
800,000
950,000
-
-
-
-
3,300,000
2,030,000
3,300,000
-
-
-
-
-
280,000
-
100,000
-
800,000
850,000
50,000
3,250,000
430,000
4,900,000
1,000,000 ESPP shares granted to Peter Sutton on 7 October 2015 were returned to the Company on his resignation on 13 July 2016 pending
cancellation at the next AGM.
2015
05/04/12
17/10/12
22/07/13
25/03/14
Total
04/04/15
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
7
Annual Report
Directors’ Report
Key Management Personnel at 30 June 2016
Ahmed Fahour
– Non-executive Chairman
Elliott Kaplan
– Non-executive Director
Dr Gary Weiss
– Non-executive Director
Brandon Penn
– Non-executive Director (acting CEO effective 13 July 2016)
Peter Sutton
– Chief Executive Officer (resigned 13 July 2016)
Hadrian Morrall – Divisional Managing Director (retired 30 June 2016)
Mark Saus
– Chief Financial Officer and Company Secretary
Remuneration of Key Management Personnel
Excluding the Directors, there are only three staff members of the Company who qualify as a “Key Management Personnel” for the
purposes of this report. The executive key management personnel are also the most highly paid executive officers of the consolidated
entity for the year under review.
Table 1
Short-term benefits
Post
employment
benefits
Other
long term
benefits
Share
based
payment
Total
Super-
annuation
Other Equity and
options
Performance
based
$
2,083
4,750
5,700
5,700
4,560
4,560
5,280
19,835
34,950
35,000
22,269
21,440
34,900
34,900
-
10,012
109,742
136,197
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
7,368
-
-
-
6,877
4,667
-
-
$
109,500
54,751
65,700
65,700
52,560
52,560
110,857
267,377
447,006
339,998
260,890
249,443
252,701
234,985
-
165,144
14,245
4,667
1,299,214
1,429,958
%
-
-
-
-
-
-
-
-
-
-
-
-
5%
5%
-
-
-
-
Cash, salary
Non-
and fees monetary
benefits
$
$
Ahmed Fahour
Elliott Kaplan
Gary Weiss
Brandon Penn
Peter Sutton
Hadrian Morrall
Mark Saus
Wendy Penn
Total Remuneration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
107,417
50,001
60,000
60,000
48,000
48,000
105,577
247,542
404,688
304,998
215,641
205,023
210,924
195,418
-
151,132
1,152,247
1,262,114
-
-
-
-
-
-
-
-
-
-
22,980
22,980
-
-
-
4,000
22,980
26,980
8
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Shares and Loans issued under the ESPP during the year ended 30 June 2016
ESPP Shares of Key Management Personnel as at the date of this report.
ESPP Shares
(number)
ESPP Shares
$
150,000
300,000
1,000,000
1,450,000
69,000
125,100
417,000
611,100
ESPP Loans
Outstanding
$
69,000
125,100
417,000
611,100
ESPP Issue Price
$
ESPP Expiry Date
0.46
24 March 2017
0.417
0.417
6 October 2018
6 October 2018
Mark Saus
Mark Saus
Peter Sutton
Total
300,000 shares awarded to Mark Saus did not qualify and were returned to the Company pending cancellation at the next AGM.
1,000,000 ESPP shares granted to Peter Sutton on 7 October 2015 were returned to the Company upon his resignation on 13 July 2016
pending cancellation at the next AGM.
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 $751,557 (incl GST) to entities associated with Key Management Personnel 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
$0.90
Number under option
1,200,000
The exercise price is $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 amounts contained in this report and in the financial report have been rounded to the nearest $1,000 (where rounding is applicable)
and where noted ($000’s) under the option available to the Company under ASIC Instrument 2016/191. The Company is an entity to
which that Instrument applies.
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
Annual Report
Directors’ Report
AUDITOR’S 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 2016, 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 2016
has been received and can be found on page 11 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 27 September 2016.
Ahmed Fahour
Chairman
Elliott Kaplan
Director
10
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
Auditor’s Independence
Declaration
under section 307C of the Corporations Act 2001
To the Directors of Pro-Pac Packaging Limited
As auditor for the audit of Pro-Pac Packaging Limited for the year ended 30 June 2016, I declare that, to the best of my knowledge
and belief, there have been:
(a)
no contraventions of the independence requirements of the Corporations Act 2001 in relation to the audit; and
(b)
no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Pro-Pac Packaging Limited and the entities it controlled during the period.
M.D. Nicholaeff
Partner
UHY Haines Norton
Chartered Accountants
Signed at Sydney on 27 September 2016.
11
Annual Report
Corporate Governance Statement
This Corporate Governance Statement of Pro-Pac Packaging
Limited (the ‘Company’) has been prepared in accordance
with 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 23 September 2016.
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) the respective roles and responsibilities of its board
and management; and
(b) 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;
reasonable person would expect to have a material effect on
the price or value of the Company’s securities;
• 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) undertake appropriate checks before appointing
a person, or putting forward to security holders a
candidate for election, as a Director; and
(b) 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 shareholders
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.
• overseeing the Company’s process for market disclosure
of all material information concerning the Company that a
The Company provides to shareholders for their consideration
information about each candidate standing for election or
12
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
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.
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 currently has a formal diversity policy that is
monitored at the end of each reporting period. The Company
respects people as individuals and values their differences. It
is committed to creating a working environment that is fair
and flexible, promotes personal and professional growth, and
benefits from the capabilities of its diverse workforce. The
organisation employs people of each gender as well as with
varying skills, cultural backgrounds, ethnicity and experience.
The Company 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
2016 are as follows:
Proportion of
women
Proportion of
men
On the Board
In senior executive positions
Across the whole organisation
-
16%
41%
100%
84%
59%
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
13
Annual Report
Corporate Governance Statement
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) have and disclose a process for periodically evaluating
the performance of the board, its committees and
individual Directors; and
(b) disclose, in relation to each reporting period, whether
a performance evaluation was undertaken in the
reporting period in accordance with that process.
The Company has in place systems designed to fairly review
and actively encourage enhanced Board and management
effectiveness. The Chairman has the responsibility to review
continually the performance of each Director and the Board as
a whole. The performance of the Board is reviewed regularly
against both measurable and qualitative indicators. The
performance criteria against which Directors and Executives
are assessed is aligned with the financial and non-financial
objectives of the Company. 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.
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.
The Board maintains a combined Nomination and
Remuneration Committee, whose members during the
financial year, were as follows:
Director’s
name
Executive
status
Ahmed Fahour Non-Executive Director
Chairman
Independence
status
Independent
Recommendation 1.7 - A listed entity should:
Elliott Kaplan
Non-Executive Director
Independent
(a) have and disclose a process for periodically evaluating
Dr Gary Weiss
Non-Executive Chairman
Independent
Brandon Penn
Non-Executive Director
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.
the performance of its senior executives; and
(b) 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,
14
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Skill category
Description of attributes required
Level of
importance
Existence in
current Board
Risk and compliance
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.
High
High
Financial and audit
Strategic
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
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
Performance assessments of senior executives, succession
planning for key executives, setting of key performance hurdles,
experience in industrial relations and organisational change
management programmes.
High
High
Age and gender
Board aims for equal gender representation and range of
experienced individuals to contribute towards better Board outcomes.
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
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 2014
2 years and 3 months
Independent Non-executive
Elliott Kaplan
1 March 2005
11 years and 8 months
Independent Non-executive
Brandon Penn
16 August 2007
9 years and 1 month
Not-independent Substantial shareholder
Gary Weiss
28 May 2012
4 years and 4 months
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 was the
Chief Executive Officer until 13 July 2016 and was succeeded
by Brandon Penn on that date as Acting Chief Executive Officer.
16
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.
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 the
Company’s honesty and integrity;
• the responsibility and accountability of individuals for
reporting and investigating reports of unethical practices.
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
The overriding principle is that all business affairs of the
Company 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.
The Company has in place a code of conduct which sets
standards for the Board and employees in dealing with the
Company’s customers, suppliers, shareholders and other
stakeholders. A copy of this code of conduct is available on the
Company’s 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 Company’s 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 2016 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.
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
17
Annual Report
Corporate Governance Statement
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 Company’s 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).
The Company 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 Company’s
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 the Company 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 the Company. 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
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
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.
19
are disclosed in the Directors’ Report. The Audit Committee has
reviewed the Company’s risk management framework during
the reporting period.
Financial risk
Loss of people
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
reviews the adequacy of the group’s insurance program. In
line with ASX Principle 7, the Company 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
23 September 2016.
Recommendation 7.3 - A listed entity should disclose:
(a) if it has an internal audit function, how the function is
structured and what role it performs; or
(b) 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:
Annual Report
Corporate Governance Statement
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.
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.
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
Company’s website.
This Committee is responsible for ensuring that the
recruitment and remuneration policies and practices of the
Company 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
needs and the remuneration framework for Directors (as
approved by shareholders). The Committee may consult with
remuneration advisors to the Company 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.
20
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
Consolidated Statement of Profit or
Loss and other Comprehensive Income
For the year ended 30 June 2016
Notes
Consolidated
2016
$000’s
Consolidated
2015
$000’s
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
Finance costs
Acquisition, rationalisation and relocation expenses
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
240,774
-
166
240,940
162,512
33,521
12,150
9,806
7,479
3,353
1,482
489
28
230,820
10,120
(3,182)
6,938
(1,214)
5,724
3.01
2.95
13
16
6
7
7
The above statements should be read in conjunction with the accompanying notes.
243,457
340
83
243,880
164,813
33,814
12,322
9,636
8,002
3,261
1,764
1,519
322
235,453
8,427
(2,585)
5,842
710
6,552
2.60
2.56
21
Annual Report
Consolidated Statement of
Financial Position
As at 30 June 2016
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax assets
Derivative financial asset
Other assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Total non-current assets
TOTAL ASSETS
Liabilities
Current liabilities
Trade and other payables
Derivative financial liability
Interest bearing trade finance
Interest bearing borrowings
Provisions
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
Notes
Consolidated
30 June 2016
$000’s
Consolidated
30 June 2015
$000’s
9
11
12
6
25
16
13
14
15
17
25
18
18
19
19
18
20
21
22
15,345
36,772
33,112
80
-
4,332
89,641
15,831
70,721
2,068
88,620
6,120
38,506
32,393
15
710
3,841
81,585
17,366
70,337
2,520
90,223
178,261
171,808
29,509
504
3,000
1,156
3,941
38,110
1,683
27,104
28,787
66,897
26,628
-
2,551
1,183
3,973
34,335
1,801
27,271
29,072
63,407
111,364
108,401
96,304
(343)
15,403
111,364
92,726
830
14,845
108,401
The above statements of financial position should be read in conjunction with the accompanying notes.
22
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Consolidated Statement of Cash Flows
For the year ended 30 June 2016
Notes
Consolidated
2016
$000’s
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
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
The above statements of cash flows should be read in conjunction with the accompanying notes.
243,281
(224,552)
166
(1,482)
(2,771)
(489)
14,153
(1,980)
176
(502)
(75)
(2,381)
(1,533)
1,339
449
(2,802)
(2,547)
9,225
6,120
15,345
1,339
3,578
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
23
Annual Report
Consolidated Statement of
Changes in Equity
For the year ended 30 June 2016
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
Consolidated
Balance as at 1 July 2015
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 2016
Issued
capital
$000’s
Retained
earnings
$000’s
Reserves
$000’s
Total
equity
$000’s
91,548
-
-
-
1,178
-
-
92,726
92,726
-
-
-
3,578
-
-
96,304
13,536
5,842
-
5,842
-
-
(4,533)
14,845
14,845
6,938
-
6,938
-
-
(6,380)
15,403
99
-
710
710
-
21
-
105,183
5,842
710
6,552
1,178
21
(4,533)
830
108,401
830
-
(1,214)
(1,214)
-
41
-
108,401
6,938
(1,214)
5,724
3,578
41
(6,380)
(343)
111,364
The above statements of changes in equity should be read in conjunction with the accompanying notes.
24
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 1: CORPORATE INFORMATION
The financial report of Pro-Pac Packaging Limited and its
subsidiaries (“the Group”) for the year ended 30 June 2016
was approved for issue in accordance with a resolution of the
Directors on 23 September 2016.
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.
(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 32.
(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 2016 and the
results of all subsidiaries for the year then ended. Pro-Pac
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
25
Annual Report Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
allocation of resources to operating segments and assessing
their performance.
(f) Foreign currency translation
The financial statements are presented in Australian dollars,
which is the Company’s functional and presentation currency.
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.
26
(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.
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
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
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/method
Depreciation rates
Plant and equipment
Method: Straight-line and diminishing value
Motor vehicles
Method: Straight-line and diminishing value
Computer equipment
Method: Straight-line and diminishing value
Furniture and Fittings
Method: Straight-line and diminishing value
Office equipment
Method: Straight-line and diminishing value
3% - 50%
7% - 30%
10% - 40%
5% - 25%
5% - 33%
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.
(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.
27
Annual Report Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
(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.
28
(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.
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.
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
(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
• 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.
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.
29
Annual Report Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
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.
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
30
periods of service. Expected future payments are discounted
using market yields at the reporting date on corporate 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 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
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
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.
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.
(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.
(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 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
31
Annual Report Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 2: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT.)
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
32
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 the Company, 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.
(ee) Rounding of amounts
The Company is of a kind referred to in ASIC Instrument
2016/191 (issued in 2016), and in accordance with that
instrument all financial information presented in AUD has been
rounded to the nearest one thousand dollars ($000’s), unless
otherwise stated.
(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 2016. 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.
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
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 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.
AASB 16 Leases
This standard is applicable to annual reporting periods
beginning on or after 1 January 2019. The standard replaces
AASB 117 ‘Leases’ and for lessees will eliminate the
classifications of operating leases and finance leases. Subject
to exceptions, a ‘right-of-use’ asset will be capitalised in the
statement of financial position, measured as the present value
of the unavoidable future lease payments to be made over
the lease term. The exceptions relate to short-term leases
of 12 months or less and leases of low-value assets (such
as personal computers and small office furniture) where an
accounting policy choice exists whereby either a ‘right-of-use’
asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised
lease will also be recognised, adjusted for lease prepayments,
lease incentives received, initial direct costs incurred and an
estimate of any future restoration, removal or dismantling
costs. Straight-line operating lease expense recognition will
be replaced with a depreciation charge for the leased asset
(included in operating costs) and an interest expense on the
recognised lease liability (included in finance costs). In the
earlier periods of the lease, the expenses associated with the
lease under AASB 16 will be higher when compared to lease
expenses under AASB 117. However EBITDA (Earnings Before
Interest, Tax, Depreciation and Amortisation) results will be
improved as the operating expense is replaced by interest
expense and depreciation in profit or loss under AASB 16. For
classification within the statement of cash flows, the lease
payments will be separated into both a principal (financing
activities) and interest (either operating or financing activities)
component. For lessor accounting, the standard does not
substantially change how a lessor accounts for leases. The
consolidated entity will adopt this standard from 1 July 2019
but the impact of its adoption is yet to be assessed by the
consolidated entity.
33
Annual Report Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 3: RECLASSIFICATION OF
COMPARATIVES
Bank line fees, usage fees and facility establishment fees were
incorrectly included in “Other expenses from ordinary activities”
instead of “Finance costs” in the consolidated entity’s financial
statements for the year ended 30 June 2015. As such, earnings
before interest, taxes, depreciation and amortisation (EBITDA)
for the year ended 30 June 2015 was understated by $545,000.
The relevant comparative numbers for the year ended 30 June
2015 have accordingly been reclassified. Profit before and
after income tax expense for the year ended 30 June 2015
remains unchanged. Bank line fees, usage fees and facility
establishment fees are included in “Finance costs” in
the financial statements for the year ended 30 June 2016.
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.
34
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.
Pro-Pac Packaging Limited + Controlled Entities 2016 Annual Report
Intersegment
eliminations
/unallocated
$000’s
2016
Industrial
Rigid
Total packaging packaging
$000’s
$000’s
2015
2015
$000’s
2016
Intersegment
eliminations
/unallocated
$000’s
2015
Total
$000’s
2015
Rigid
Industrial
packaging packaging
$000’s
2016
$000’s
2016
(i) Segment performance
12 months ended 30 June
Revenue
External sales
Inter-segment sales
65,615
8,754
175,159
7,827
-
(16,581)
240,774
-
60,441
8,594
183,016
7,648
- 243,457
-
(16,242)
Total segment revenue
74,369
182,986
(16,581)
240,774
69,035
190,664
(16,242)
243,457
EBITDA
Depreciation and amortisation
Interest revenue
Finance costs
Profit before income tax
Income tax expense
Profit after income tax
(ii) Segment assets
As at 30 June
8,825
(1,496)
10,415
(1,697)
(4,423)
(188)
14,817
(3,381)
166
(1,482)
10,120
(3,182)
6,938
7,454
(1,618)
10,077
(1,736)
(3,840)
(229)
13,691
(3,583)
83
(1,764)
8,427
(2,585)
5,842
Segment assets
46,844
115,788
-
162,632
47,437
117,297
- 164,734
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
(1,870)
17,499
2,068
15,431
178,261
(1,634)
8,708
2,520
6,188
171,808
Segment liabilities
13,216
29,356
-
42,572
12,948
26,331
-
39,279
Reconciliation of segment
liabilities to group liabilities
Inter-segment eliminations
Unallocated liabilities
- Deferred tax liabilities
- Other liabilities
Total group liabilities from
continuing operations
(1,866)
26,191
-
26,191
66,897
(1,722)
25,850
-
25,850
63,407
(iv) Pro-Pac Packaging Limited has 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.
35
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
Consolidated
2016
$000’s
Consolidated
2015
$000’s
NOTE 5: EXPENSES
Profit before income tax includes the following expenses:
Superannuation expense
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 2016 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% (2016: 30.0%)
Income tax expense reported in statement of profit or loss and other comprehensive income
Tax consolidation
The Financial report has been prepared on the basis that the Group has adopted the provisions
of the tax consolidation regime for the years ended 30 June 2016 and 30 June 2015.
2,792
150
6,926
2,730
-
148
304
3,182
10,120
3,036
(2)
148
3,182
3,182
2,845
389
7,426
2,729
-
59
(203)
2,585
8,427
2,528
(2)
59
2,585
2,585
Current tax asset
80
15
36
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
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
2016
$000’s
6,938
230,470,499
3.01
2.95
Consolidated
2015
$000’s
5,842
224,290,226
2.60
2.56
* 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 26 August 2016, the Company declared a fully franked final dividend of 1.5 cents per share. The record date for determining
entitlements to the dividend is 8 September 2016 and the dividend will be paid on 22 September 2016. 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 1.25 cents, paid on 19 May 2016, this brings total fully franked dividends for the 2015/16 financial year to 2.75 cents per share.
Declared and paid during the year:
Final dividend for 2015 – 1.5 cents per ordinary share
(2014 – 1 cent per ordinary share)
Interim dividend for 2016 – 1.25 cents per ordinary share
(2015 – 1 cent per ordinary share)
Proposed for approval at the Directors Meeting
(not recognised as a liability as at 30 June)
Final dividend for 2016 – 1.5 cents per ordinary share
(2015 – 1.5 cents per ordinary share)
2016
$000’s
3,427
2,953
6,380
2015
$000’s
2,267
2,266
4,533
3,606
3,436
Franking credits
Franking credits available for subsequent financial years based on a tax rate of 30%
15,372
15,334
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.
37
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
Consolidated
2016
$000’s
Consolidated
2015
$000’s
NOTE 9: CASH AND CASH EQUIVALENTS
Cash at bank and in hand
15,345
6,120
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
15,345
6,120
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 Group acquired plant with an aggregate value of $1,339,233 (2015: $1,682,635)
by means of finance leases.
c) Credit standby arrangements with banks
Credit facility
Amount utilised
Loan facilities
Amount utilised
38
6,938
3,353
28
20
(65)
452
(244)
76
2,206
(583)
2,703
(212)
(519)
14,153
1,500
-
44,700
33,627
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
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Consolidated
2016
$000’s
Consolidated
2015
$000’s
35,767
(358)
1,363
36,772
(602)
94
150
(358)
37,626
(602)
1,482
38,506
(510)
(481)
389
(602)
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
Reduction/(addition) to the provision
Receivables written off during the year as uncollectable
Closing balance
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.
Consolidated
2016
Trade and term receivables
Other receivables
Total
2015
Trade and term receivables
Other receivables
Total
Gross
amount
$000’s
Past due and
impaired
$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
35,767
1,363
37,130
37,626
1,482
39,108
358
-
358
602
-
602
90
-
90
77
-
77
1,879
-
1,879
1,432
-
1,432
33,440
1,363
34,803
35,515
1,482
36,997
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.
39
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
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
2016
$000’s
Consolidated
2015
$000’s
1,071
32,041
33,112
1,225
31,168
32,393
33,119
(17,288)
15,831
31,749
(14,383)
17,366
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.
Plant and
Motor
Equipment Vehicles
Computer Furniture
Office
Equipment & Fittings Equipment
Leasehold
Improvement
2016
$000’s
2016
$000’s
2016
$000’s
2016
$000’s
2016
$000’s
2016
$000’s
Total
2016
$000’s
13,509
1,748
552
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
-
1,245
-
(30)
(2,150)
26
295
-
(128)
(492)
Carrying amount at the end of the year
12,574
1,449
397
-
59
-
(3)
(60)
393
546
-
102
-
(8)
(111)
529
614
17,366
-
-
28
(21)
(226)
26
1,954
28
(190)
(3,353)
395
15,831
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
13,329
2,195
674
362
-
136
-
(11)
(1)
(89)
397
402
11
155
-
(6)
68
(84)
546
420
17,382
-
-
285
-
-
(91)
147
3,666
285
(853)
-
(3,261)
614
17,366
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
75
2,829
-
(610)
(29)
(2,085)
54
332
-
(226)
(38)
(569)
Carrying amount at the end of the year
13,509
1,748
40
-
253
-
-
(314)
491
7
214
-
-
-
(343)
552
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Consolidated
2016
$000’s
Consolidated
2015
$000’s
70,337
384
70,721
70,721
-
70,721
68,793
1,544
70,337
70,337
-
70,337
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
Impairment Test for Goodwill
The Group is 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 29).
NOTE 15: DEFERRED TAX ASSETS
Deferred tax assets
Deferred tax assets comprise:
Provisions and other timing differences
Transactions costs on equity issue
Closing balance
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
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
2,059
9
2,068
2,520
(148)
(304)
2,068
2,424
33
(398)
2,059
96
6
(33)
(60)
9
2,424
96
2,520
2,376
(59)
203
2,520
2,242
-
182
2,424
134
33
-
(71)
96
41
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 16: OTHER ASSETS
Current assets
Other prepayments
Prepaid royalty
Total current assets
Consolidated
2016
$000’s
Consolidated
2015
$000’s
4,332
-
4,332
3,813
28
3,841
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 2016 amounted to $28,261 (2015: $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
Total
21,391
580
358
7,065
115
29,509
18,202
716
524
7,131
55
26,628
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
Total
Non-current
Finance lease and hire purchase (see note 24)
Bank loan (secured)
Total
1,156
3,000
4,156
1,604
25,500
27,104
1,183
2,551
3,734
1,771
25,500
27,271
a) The bank loan and trade finance facilities are secured as follows:
first ranking registered equitable mortgage over the Company and all wholly owned subsidiaries; and
i)
ii) cross interlocking guarantees from the Company and all wholly owned subsidiaries.
b)
the Interest Coverage Ratio for the Group will at all times be greater than 4.00:1;
In respect of the 2016 financial year, the bank loan is subject to the following covenants on a 12 month rolling basis:
i)
ii) the Gross Leverage Ratio for the Group will at all times not be greater than 3.00:1; and
iii) the Net Tangible Asset Cover Ratio for the Group will at all times be greater than 1.50:1.
c)
The Company 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 30 September 2017.
42
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Consolidated
2016
$000’s
Consolidated
2015
$000’s
3,973
7
2,270
(2,309)
3,941
912
12
271
(450)
745
889
49
938
1,801
12
320
(450)
1,683
3,705
57
2,508
(2,297)
3,973
773
149
229
(239)
912
603
286
889
1,376
149
515
(239)
1,801
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.
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.
43
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 20: ISSUED CAPITAL
Ordinary shares
Issued and fully paid
Movement in ordinary shares on issue
Balance at 1 July 2014
Cancellation of shares for Executive Long Term Incentive Plan
Issue of shares under the dividend re-investment plan
Balance at 30 June 2015
Issue of shares for Executive Long Term Incentive Plan
Cancellation of shares for Executive Long Term Incentive Plan
Issue of shares under the dividend re-investment plan
Balance at 30 June 2016
Consolidated
2016
$000’s
Consolidated
2015
$000’s
96,304
92,726
Number
226,693,758
(75,000)
2,454,499
229,073,257
3,300,000
(575,000)
8,629,936
240,428,193
$000’s
91,548
-
1,178
92,726
-
-
3,578
96,304
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 2015 Annual Report.
44
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Consolidated
2016
$000’s
Consolidated
2015
$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
Cash flow hedge reserve
Closing balance
161
(504)
(343)
120
710
830
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 1.3%.
14,845
6,938
(6,380)
15,403
13,536
5,842
(4,533)
14,845
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
44.8% 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.
45
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
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
2016
$000’s
2016
$000’s
2016
$000’s
2016
$000’s
2016
%
15,335
-
15,335
-
-
3,000
25,500
-
28,500
-
-
-
1,156
1,604
-
-
2,760
10
36,772
36,782
-
-
-
30,013
30,013
15,345
36,772
52,117
1,156
1,604
3,000
25,500
30,013
61,273
1.3
6.3
6.3
4.5
4.5
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
Net financial assets/(liabilities)
(13,165)
(2,760)
6,769
(9,156)
There is no interest rate applicable on receivables or payables.
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
2015
$000’s
2015
$000’s
2015
$000’s
2015
$000’s
2015
%
6,110
-
6,110
-
-
2,551
25,500
-
28,051
-
-
-
1,183
1,771
-
-
2,954
10
38,506
38,516
-
-
-
26,628
26,628
6,120
38,506
44,626
1,183
1,771
2,551
25,500
26,628
57,633
2.1
6.9
6.9
5.6
5.6
Net financial assets/(liabilities)
(21,941)
(2,954)
11,888
(13,007)
46
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
NOTE 24: FINANCIAL INSTRUMENTS (CONT.)
Less
than one
year
$000’s
Between
1 and 2
years
$000’s
Between
2 and 3
years
$000’s
Between
3 and 4
years
$000’s
Between
4 and 5
years
$000’s
More
than 5
years
$000’s
Total
$000’s
15,335
3,000
1,156
-
6,110
2,551
1,183
-
-
-
770
25,500
-
-
887
25,500
-
-
544
-
-
-
506
-
-
-
249
-
-
-
312
-
-
-
41
-
-
-
63
-
-
-
-
-
-
-
3
-
15,335
3,000
2,760
25,500
6,110
2,551
2,954
25,500
Year ended 30 June 2016
Consolidated
Cash assets
Trade Finance
Finance leases
Bank loans
Year ended 30 June 2015
Consolidated
Cash assets
Trade Finance
Finance leases
Bank loans
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.
2016
+/- 1% in interest rates
+/- 10% in AUD/USD
2015
+/- 1% in interest rates
+/- 10% in AUD/USD
Consolidated
Profit
$000’s
Consolidated
Equity
$000’s
+/- 287
+/- 8,467
+/- 277
+/- 6,776
+/- 287
+/- 8,467
+/- 277
+/- 6,776
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 (2015: 3 months).
47
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 24: FINANCIAL INSTRUMENTS (CONT.)
Foreign currency risk (cont.)
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 dollar
Maturity:
0 - 3 months
3 - 6 months
6 - 12 months
Sell Australian dollars
2016
$000’s
20,877
1,996
1,098
2015
$000’s
22,231
-
1,197
NOTE 25: DERIVATIVE FINANCIAL INSTRUMENTS
Forward foreign exchange contracts - cash flow hedges – current asset
Forward foreign exchange contracts - cash flow hedges – current liability
Refer to note 26 for further information on fair value measurement.
NOTE 26: FAIR VALUE MEASUREMENT
Average exchange rates
2016
2015
0.7275
0.7315
0.7386
0.7814
-
0.7683
Consolidated
2016
$000’s
Consolidated
2015
$000’s
-
504
710
-
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.
Level 1
$000’s
Level 2
$000’s
Level 3
$000’s
Total
$000’s
CONSOLIDATED - 2016
Liabilities
Derivative liability
Total liabilities
CONSOLIDATED - 2015
Assets
Derivative asset
Total assets
48
-
-
-
-
504
504
710
710
-
-
-
-
504
504
710
710
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
NOTE 26: FAIR VALUE MEASUREMENT (CONT.)
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.
NOTE 27: 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
2016
Equity
Holding
2015
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
Australian Bottle Manufacturers Pty Ltd
Bev-Cap Pty Ltd
Ctech Closures Pty Ltd
Specialty Products and Dispensers Pty Ltd
Controlled Entities owned 100% by Pro-Pac Packaging (Aust) Pty Ltd
Creative Packaging Pty Ltd
Pro-Pac Packaging Manufacturing (Syd) Pty Ltd
Pro-Pac Packaging Manufacturing (Melb) Pty Ltd
Pro-Pac Packaging Manufacturing (Bris) Pty Ltd
Controlled Entities owned 100% by Bev-Cap Pty Ltd
Finpact (Pty) Ltd
Great Lakes Moulding Pty Ltd
Australia
Australia
Malaysia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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%
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
49
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 27: CONTROLLED ENTITIES (CONT.)
Entities subject to class order relief (cont.)
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.
NOTE 28: 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
Total
Figures exclude GST
Consolidated
2016
$000’s
Consolidated
2015
$000’s
5,764
9,798
-
15,562
4,911
10,372
30
15,313
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:
2016
Minimum
payments
$000’s
2016
Present value
of payments
$000’s
2015
Minimum
payments
$000’s
2015
Present value
of payments
$000’s
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
Total
The weighted average interest rate implicit in the leases is 6.3%.
50
1,183
1,771
2,954
-
2,954
1,292
1,724
3,016
(256)
2,760
2016
1,156
1,604
2,760
1,156
1,604
2,760
-
2,760
1,340
1,912
3,252
(298)
2,954
2016
1,183
1,771
2,954
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
NOTE 28: COMMITMENTS AND CONTINGENCIES (CONT.)
Contingent Liability
As at statement of financial position date, the Company issued security deposit guarantees and standby letters of credits to the value
of $1,865,015 (2015: $2,418,092) to the landlords of rented premises and overseas suppliers.
As at statement of financial position date, the Company is defending a claim of $1.2 million arising from the acquisition of the assets
and businesses of Eco Food Pack Australia Pty Limited. The Company has lodged counter claims in excess of $4.0 million.
Capital Expenditure Commitments
As at statement of financial position date the Company had no commitments for future capital expenditure.
NOTE 29: 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
Consolidated
2016
$000’s
Consolidated
2015
$000’s
48,626
22,095
70,721
48,242
22,095
70,337
The Group is 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) 4.9% pre-tax discount rate; (2015: 7.5%);
b) 4.0% for industrial division (2015: 5.5%) and 3.9% for rigid division (2015: 3.2%) per annum projected revenue growth rate; and
c) 4.0% for industrial division (2015: 5.5%) and 3.9% for rigid division (2015: 3.2%) per annum increase in operating costs and overheads.
The discount rate of 4.9% pre-tax reflects management’s estimate of the time value of money and the consolidated entity’s weighted
average cost of capital, the risk free rate and the volatility of the share price relative to market movements.
Projected growth rates are based on historical performance over the last three years and current trends which management believes
are achievable during the forecasted period.
Sensitivity
The Directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and
estimates not occur the resulting goodwill may vary in the carrying amount. The sensitivities are as follows:
a) the discount rate would need to increase to 9.5% for the Industrial division and to 18.0% for the Rigid division before goodwill would
be impaired. A rate of 4.9% was used in the assessment of goodwill; and
b) the EBITDA growth rate would need to decrease to negative 63.4% in the Industrial division and to negative 58.6% in the Rigid
division before goodwill would be impaired. EBITDA growth rates of 4.0% and 3.9% respectively, were used in the assessment of
goodwill for the Industrial and Rigid divisions respectively.
51
Annual Report
Notes to the Financial Statements
For the year ended 30 June 2016
NOTE 30: 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 27.
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.
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
Consolidated
2016
$
Consolidated
2015
$
260,890
751,557
581,505
125,203
44,849
110,857
751,557
581,505
125,203
44,849
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 2016 was $1,123,304 (2015: $1,313,225).
NOTE 31: KEY MANAGEMENT PERSONNEL DISCLOSURE
Key Management Personnel at 30 June 2016
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 (acting CEO effective 13 July 2016)
Chief Executive Officer (resigned 13 July 2016)
Divisional Managing Director (resigned 30 June 2016)
Chief Financial Officer and Company Secretary
Total remuneration made to above key management personnel during the year ended 30 June 2016 was $1,299,214 (2015:
$1,429,958). 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.
52
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Parent
2016
$000’s
2015
$000’s
6,950
6,950
12,436
94,817
213
213
96,304
6,878
94,604
4,535
4,535
4,014
95,094
2,345
2,345
92,726
4,844
92,749
NOTE 32: 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
Retained profits/(accumulated losses)
Total equity
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 33: EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE
On 26 August 2016, the Company declared a fully franked final dividend of 1.5 cents per share. For details refer to the
Directors’ Report on page 5.
NOTE 34: AUDITORS’ REMUNERATION
Amounts paid or due payable to UHY Haines Norton for:
– audit or review of the financial report and half-year financial report
Consolidated
2016
$
Consolidated
2015
$
123,250
118,000
NOTE 35: 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 2016. The Group does not at this time believe these have any material impact on the 2016 financial report or for the
ensuing year.
53
Annual Report
Directors’ Declaration
The Directors of the Company declare that:
1.
The financial statements and notes, as set out on pages 21 to 53, 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 2016 and of its performance for the year
ended on that date;
c)
comply with International Financial Reporting Standards as disclosed in Note 2 (b) to the financial statements.
2.
The Chief Executive Officer and Chief Financial Officer have each declared that:
a)
the financial records of the Company for the financial year have been properly maintained in accordance with section 286 of
the Corporations Act 2001;
b)
the financial statements and notes for the financial year comply with the accounting standards; and
c)
the financial statements and notes for the financial year give a true and fair view; and
3.
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 27 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 27 September 2016.
Ahmed Fahour
Chairman
Elliott Kaplan
Director
54
Pro-Pac Packaging Limited + Controlled Entities
2016 Annual Report
Independent Auditor’s
Report
To the members of Pro-Pac Packaging Limited
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
2016, 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
Pro-Pac Packaging Limited and the entities it controlled at year’s
end or from time to time during the financial 30 June 2016.
Directors’ Responsibility for the Financial Report
The Directors of the Company are responsible for the preparation
of the financial report that gives a true and fair view in
accordance with Australian Accounting Standards and the
Corporations Act 2001, and for such internal control as the
Directors determine is necessary to enable the preparation of
the financial report that is free from material misstatement,
whether due to fraud or error. In Note 2(b), the Directors also
state, in accordance with Accounting Standards 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.
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 2016 and of its
performance for the year ended on that date; and;
ii. complying with 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 2016. 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 2016, complies with section
300A of the Corporations Act 2001.
M.D. Nicholaeff
Partner
UHY Haines Norton
Chartered Accountants
Signed at Sydney on 27 September 2016.
55
Annual Report
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 16 September 2016.
(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
99
110
117
736
140
1,202
Total Units
11,060
351,900
960,187
30,091,168
209,013,878
240,428,193
%
0.005
0.146
0.399
12.516
86.934
100.00
There are ninety nine holders of unmarketable parcels totalling 11,060 shares representing 0.005% of the Company’s issued capital.
(c) Substantial shareholders
The names of substantial shareholders who have notified the
Company in accordance with Section 671B of the Corporations
Act 2001 are:
Bennamon Pty Limited
120,193,402 ordinary shares
Mr Brandon Penn
24,958,817 ordinary shares
Trustees Australia Limited for
Lanyon Australian Value Fund
17,404,015 ordinary shares
(d) Voting rights
All ordinary shares carry one vote per share without restriction.
(e) Restricted securities
Restricted securities total 4,900,000.
ESPP Shares under escrow
until 21 July 2016
800,000 ESPP shares
(returned to Company, pending
cancellation at the next AGM)
ESPP Shares under escrow
until 24 March 2017
ESPP Shares under escrow
until 6 October 2018
850,000 ESPP shares
3,250,000 ESPP shares
(f) Business objectives
The Company has used its cash and assets that are readily
convertible to cash in a way consistent with its business
objectives
(b) Twenty largest holders
Table 2: The names of the twenty largest holders, in each class
of security are:
Rank Holder
1 BENNAMON PTY LTD
2 MR BRANDON ARI PENN
3
AUST EXECUTOR TRUSTEES LTD
EQUITAS NOMINEES PTY LIMITED
4
5 BNP PARIBAS NOMS PTY LTD
6
MR BRANDON PENN & MRS WENDY PENN
NATIONAL NOMINEES LIMITED
MISCHKE INVESTMENTS PTY LTD
7
8
Number
%
120,193,402 49.99
22,279,165 9.27
17,404,015 7.24
10,674,153 4.44
3,673,951 1.53
2,297,872 0.96
1,507,958 0.63
1,044,777 0.43
1,033,180 0.43
834,628 0.35
9 MRS NATALIE PENN
10 CVC LIMITED
11
MISCHKE INVESTMENTS PTY LTD
SONHILL INVESTMENTS PTY LTD
WILBOW GROUP PTY LTD
W & S SEJA INVESTMENTS PTY LTD
PHILANTHROPIC INVESTORS CLUB PTY LTD
MR GREGORY RIDDER & MRS LEE RIDDER
RUBI HOLDINGS PTY LTD
MR CRAIG STEWART FOX & MRS TONI ROSEMARY
FOX
12
13
14
15
16
17
18
19 DONALD CANT PTY LTD
20
DR JEFFREY CHAITOW & MRS TANYA CHAITOW
754,850 0.31
723,310 0.30
618,242 0.26
601,972 0.25
600,000 0.25
531,724 0.22
514,146 0.21
512,780 0.21
450,000 0.19
416,171 0.17
Top 20
186,666,296 77.64
56
Pro-Pac Packaging Limited + Controlled Entities
Pro-Pac Packaging Limited
Building 1, 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
Design - Kettle of Fish Design