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Deere & CompanyG R O U P L T D
AN N UAL R E P O RT 2020
Annual Report for the year ended 30 June 2020
PPK GROUP Limited
ABN 65 003 964 181
G R O U P L T D
Contents
Executive Chairman’s Report
2
7 Directors’ Report
23 Auditor’s Independence Declaration
24
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
26 Consolidated Statement of Financial Position
27 Consolidated Statement of Cash Flows
28 Consolidated Statement of Changes in Equity
30 Notes to the Consolidated Financial Statements
83 Directors’ Declaration
84
92 Shareholder Information
94 Corporate Directory
Independent Auditor’s Report
1
PPK Group Limited EXECUTIVE CHAIRMAN’S REPORT
Executive
Chairman’s
Report
BUSINESS OVERVIEW
As outlined in my change strategy
summary mentioned previously, your
directors and management have
incurred considerable time and cost
in developing a technology focus
for both BNNT related activities,
along with the existing mining unit.
I am very pleased at the progress
that has been made this year. With
the acquisition of BNNT Technology
Limited we have made significant
progress with four initial BNNT
application projects that are at
various stages of research and/
or development and I would like
to take the opportunity to provide
an update on each.
BNNT Technology Limited
(BNNTTL)
In an ASX announcement on
10 June 2020 PPK restated its three
strategies for BNNTTL:
Firstly, is to produce BNNT in pure
grade and in commercial quantities.
In that same ASX announcement
PPK was able to say that we had
achieved production of BNNT at 99%
purity using a single furnace. We
are not aware of another company
achieving these results globally and
we achieved it in just over 12 months.
Manufacturing design innovation
continues and additional equipment
has been acquired in order to
facilitate a move to a multi-furnace
configuration in a semi-automated
process which our scientists and
engineers believe will increase our
single shift production significantly.
We can then scale to demand by
increasing the number of shifts and/
or the number of production units.
The ultimate goal is to develop a
continuous production process that
will operate 24 x 7.
Over the last 24 months the PPK
Board has deliberately set about
repositioning the company into
a technology commercialisation
business. We have achieved this
change by implementing the
following strategies that have been
partially executed to date:
– The executing of a 2-year
program that has involved
significant investment in the
non-mining space by entering
into Joint Ventures with Deakin
University
– Vertically integrating the
production of high purity BNNT
into end markets such as Lithium
Sulphate battery technology,
3D dental technology, Ballistic
Armor, Ballistic Glass and other
blended or composite material
products
– Believing we can build a second
business around high quality
BNNT related opportunities which
we don’t yet believe investors
have been exposed to the scale of
the innovation and the potential
for exponential growth
– Continuing to lift investment in
technology commercialisation via
internal investment in our Original
Engineering Manufacturer (OEM)
and mining services business
which builds on the solid mining
services revenues that the
company enjoys from its large
multi-national and local mining
customers
– Implementing a review to
maximise value for all PPK
shareholders by potentially
separating the PPK Mining
business from the BNNT related
activities of PPK. The review
is broad ranging and includes
considering a separate ASX
listings, co-ventures, merger,
and whole or partial disposal.
– Creating the opportunity for
an ASX listing of Li-S Energy
Limited, the 58% PPK owned
Lithium Sulphur battery project.
In March 2019, PPK Group Limited
(PPK) acquired a 50% interest in
BNNT Technology Limited, with the
other 50% ownership held by Deakin
University and associated scientists.
This acquisition has been
transformative for PPK and presents
our company with enormous
potential in the production of Boron
Nitride Nanotubes (BNNT), an
innovative material which can in
turn be a game changer for a large
number of industries.
The BNNT investment led to
the 2020 financial year being
a very rewarding year with
significant progress being made
to reposition PPK as a technology
commercialisation business in
both a number of new technology
and mining sectors. The actual
production of high quality 99% pure
BNNT, along with the advancement
of the Li-S Energy Limited battery
project and PPK’s ongoing joint
venture relationship with Deakin
University (Deakin) have created a
step change in future opportunities
for PPK.
2
PPK Group Limited Technology
Energy
Ballistics
Investing in Boron Nitride
Nanotubes (BNNT),
Commercialisation of High
Performance Batteries,
Ballistic Armour, Dental
Products & World Class
Mining Technology.
Dental
Mining
Equipment
3
PPK Group Limited EXECUTIVE CHAIRMAN’S REPORT (CONT’D)
Executive Chairman’s Report
Secondly, to supply BNNT to select
parties as the manufacturers of
products into which BNNT may
be blended or infused. BNNT has
multiple attractions because of
its immense strength, lightness,
conductivity and radiation qualities.
Thirdly, and the most exciting is
the upstream opportunities where
PPK can identify and partner with
application or industry leaders to
blend or infuse BNNT into their
products to enhance or create new
products. In doing so, PPK retains
a financial interest in the new entity
with multiple opportunities to
generate future revenues.
To date, PPK has three upstream
applications in progress with Deakin
University as its partner to provide
ongoing research and development.
The three are summarised following.
Li-S Energy Limited
(Li-S Energy)
The purpose of this project is to
develop BNNT as a nano-insulator
in lithium sulphur batteries to
significantly increase the energy
density capability, lower re-charge
times, increase discharge/charge
cycles while addressing existing
stability and safety issues relating
to the use of lithium ion batteries
in general. This advancement of a
lithium sulphur battery project has
been underway at Deakin University
for some six years and since the
introduction of BNNT positive
progress has been made during
recent months.
Li-S Energy is an unlisted public
company that undertook a $3.250M
capital raising in June/July 2020.
It was oversubscribed and the
pricing valued Li-S Energy at more
than $35.000M. PPK’s holds a
58% interest in Li-S Energy post
that capital raising. This alone
demonstrates the significant value
PPK can generate from these BNNT
application ventures.
At the same time as the capital
raising, an opportunity was
presented to Li-S Energy to acquire
an interest in Zeta Energy LLC, a
4
Delaware limited liability company
that is itself in pre-IPO status. Li-S
Energy agreed to issue 2.0% of its
share capital (pre Li-S Energy’s
capital raise) to Zeta Energy and
receiving 2.0% of the non-voting
limited liability interest in Zeta Energy
(pre-IPO capital raise). Li-S Energy
made a further cash investment of
$500,000 in the company for a total
investment of circa 2.4% of Zeta
Energy. Zeta Energy was valued at
US$70M prior to its capital raise,
so valuing the investment by Li-S
Energy at US$1.730M.
Zeta Energy is developing battery
technology developed at Rice
University in Houston, Texas.
Its battery uses a hybrid anode
created from graphene and carbon
nanotubes. Zeta Energy is in the
prototype development stage aiming
to build a low volume pilot facility
and targets commercial sales within
the next 2 years thereafter.
3D Dental Technology Limited
The purpose of this project is to
infuse BNNT into nanocomposites
within frequently used dental
materials including zirconia, lithium
disilicate, alumina and ceramic
composite resins. Based on the
fabrication of BNNT in the molecular
matrix to manufacture advanced
dental applications commonly
used in prosthetic and implant
dentistry (ie inlays, onlays, veneers,
crowns, bridges) it is expected to
lower the risk of implant failure,
allow smaller configurations and
be more fracture resistant.
The project has been scoped
and research and development
agreements are being finalised,
a funding grant applied for
and International (PCT) Patent
Applications having been filed.
Success in this project could be
substantial as it is estimated that the
size of the implants and prosthetics
global market is US$4.6 Billion
in 2019.
PPK has a 45% interest in 3D Dental
Technology Limited.
Craig International Ballistics
(CIB) & Ballistic Glass Pty Ltd
PPK holds a 45% interest in CIB,
having purchase that interest in
the year being reported.
The BNNT project is to infuse
BNNT in bullet resistant glass so
as to improve resistance at a lower
weight. Cost savings are potentially
significant. The project is working
with two separate industry specialists
seeking alternative solutions from
different directions with the results
that we may have two or more new
products available to market.
PPK Mining Equipment (PPKME)
The mining equipment business is
considered an essential business to
support the energy sector and we
have continued providing services
but at lower revenues, reduced
margins and higher costs in recent
months. At the end of February
2020, our revenues and EBITDA were
higher than the previous period but
the COVID-19 impact was quickly
felt, predominantly in the Hunter
Valley. The slowdown of economic
growth, mainly in China, resulted in a
significant reduction in metallurgical
coal prices as demand reduced
leading to our customers reducing
their production and costs. Despite
this, the mining equipment business
has achieved a positive EBITDA each
month in the past financial year.
SHAREHOLDER SUPPORT
PPK diversified its shareholder base
by issuing 2M shares in October
2019 to a small group of institutional
investors at $4.25 per share, raising
$8.500M. The funds received were
used to finance the initial BNNT
application ventures, to acquire
Craig International Ballistics and
for working capital.
The total number of shareholders
has almost doubled since the last
financial year to more than 2,800 -
we are very thankful for the support
we received from our current and
new shareholders.
PPK Group Limited We are also pleased to be able to
again issue a final dividend of $0.01
per share fully franked and continue
with the dividend reinvestment plan.
FINANCIAL RESULTS
PPKME
The profit from this business unit
was $2.676M (FY2019: $3.765M),
a decrease of $1.089M from the
previous year. This was partially due
to the increased warranty costs of
$0.416M for the replacement of parts
that have been re-engineered for
better reliability and performance,
these new part designs are standard
features to the new CoalTram. We
also made an accounting provision of
$0.100M for a used CoalTram to write
it down to realisable value which in
the previous year was a reversal of
an inventory impairment of $0.483M
creating additional profit. Hence,
despite the slowdown in the industry
was a comparable result.
Revenues of $41.102M (2019:
$40.932M) were on par with the
previous year.
We continue to develop new
technology and are completing the
next model of the CoalTram with
new features requested from our
customers, and enhanced parts for
longer life and durability.
In the 2019 Annual Report, we
advised of the development of
a modern and efficient twelve
man battery electric vehicle
(mantransporter) and are pleased
this will be launched to the market
shortly. This project went into
development more than two years
ago and further work is required
to meet government regulatory
approval but customers have
indicated a keen interest of a battery
electric vehicle for the underground
coal industry. The man-transporter
is also designed for more than
just underground coal and should
be applicable for use in the much
larger hard rock area.
BNNT
The BNNTTL manufacturing plant
has been built with total costs
incurred for plant and equipment
of more than $2.530M and further
costs are being incurred to refine the
manufacturing process. Production
continues and inventory is being
increased pending the sales pipeline
opening up.
Li-S Energy
Li-S Energy has incurred $0.428M in
development costs in relation to the
Li-S battery project.
CIB
CIB revenues increased from
$8.438M in 2019 to $11.296M in
2020, a 34% increase, leading to
a significantly higher increase in
after tax profit. As a result, PPK
is expecting to receive a material
dividend from CIB for the 2020
financial year once declared.
OUTLOOK
PPK has strengthened its financial
position with current assets of
$24.663M (2019: $21.747M) of
which $13.327M (2019: $11.496M) is
highly liquid, net working capital of
$16.916M (2019: $13.235M), including
cash of $2.309M, and net assets have
increased by $23.929M to $54.193M
(2019: $30.264M). All interest-
bearing debt from the previous year
has been paid out and the Group has
a short-term undrawn finance facility
up to a maximum of $4.000M from a
major Australian bank
PPK is in a strong financial position
and well poised to invest further
in the both mining technology and
exploit new and enhanced products
using BNNT. We will continue to seek
new customers for BNNT and open
new ventures with partners that see
the potential BNNT has to offer for
their industries and products.
The OEM mining technology and
equipment segment is also in a
strong position within its industry
and well positioned for when the
metallurgical coal prices increase,
and our customers increase
coal production. We have new
technologically advanced products
coming to market which should
generate additional revenue in the
near future with an expectation that
improvement in group revenues will
bring about a return to overall group
profitability in the 20-21 Financial
Year.
To reiterate, the Board of PPK will
continue to review PPK mining
business position within the Group
believing a separation of our BNNT
commercialisation activities from
our mining interests will allow us to
maximise PPK Group shareholder
value.
We see 2021 as a flagship year
for PPK and I am excited, as the
Executive Chairman, to have this
opportunity.
PPK intends to hold its AGM on
24 Tuesday November 2020
and, in keeping with the current
requirements, it will be via video
conferencing. Further details will be
provided and I look forward to your
attendance on line.
Robin Levison
Executive Chairman
5
PPK Group Limited FINANCIAL REPORT
Financial
Report
FY20
For the year ended 30 June 2020
Contents
7 Directors’ Report
23 Auditor’s Independence Declaration
24
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
26 Consolidated Statement of Financial Position
27 Consolidated Statement of Cash Flows
28 Consolidated Statement of Changes in Equity
30 Notes to the Consolidated Financial Statements
83 Directors’ Declaration
84
Independent Auditor’s Report
6
PPK Group Limited DIRECTORS’ REPORT
Directors’ Report
Your directors present their report together with the financial statements of the consolidated entity, being PPK Group
Limited and its controlled entities (“PPK” or the “Group”) for the financial year ended 30 June 2020.
DIRECTORS
The names of directors in office at any time during or since the financial year are:
– Robin Levison
– Glenn Robert Molloy
– Graeme Douglas Webb
– Dale William McNamara
– Anthony John McDonald
Directors have been in office since the start of the financial year to the date of this report.
INFORMATION ON DIRECTORS
Details of the current directors’ qualifications, experience and special responsibilities are detailed below:
Robin Levison CA MBA F.A.I.C.D. (Age 62)
Executive Chairman
Member of the PPK Group Limited Board since 22 October 2013.
Member of the PPK Group Limited Audit Committee since 14 August 2017, resigned 25 January 2018.
Executive Chairman from 22 October 2013 to 29 April 2015 and re-appointed from 28 February 2016.
Non-Executive Chairman from 29 April 2015 to 28 February 2016.
Robin Levison has 19 years of public company management and board experience. During this time, he has served as
Managing Director at Industrea Limited and Spectrum Resources Limited and has held senior roles at KPMG, Barclays
Bank and Merrill Lynch. He is a Non-Executive Director of PPK’s associated unlisted companies Li-S Energy Limited,
3D Dental Technology Limited and an alternative Non-Executive Director of BNNT Technology Limited.
Robin holds a Masters of Business Administration from the University of Queensland, is a Member of the Institute of
Chartered Accountants Australia and NZ and is a Graduate and Fellow of Australian Institute of Company Directors.
Robin recently retired as Chair of the University of Queensland Business, Economics and Law Alumni Ambassador
Council.
Other listed public company directorships held in the last 3 years:
– Founders First Limited, Non-executive Director & Chairman (Appointed: 17 December 2019)
– Eureka Group Holdings Limited, Non-executive Director & Chairman (Appointed: 24 December 2013,
Resigned: 29 March 2018)
Glenn Molloy (Age 65)
Executive Director
Member of the PPK Group Limited Board since listing on 21 December 1994.
Chairman of the PPK Group Limited Audit Committee since 14 August 2017.
Founder of the former entity Plaspak Pty Limited in 1979, appointed Executive Director in September 2009.
Glenn Molloy founded the former entity Plaspak Pty Ltd in 1979 and has acted as a director of PPK since that time. He
has extensive experience on public company boards, and in advising publicly listed and private entities on commercial
aspects of mergers, acquisitions and divestment activities. He is the Executive Chairman of BNNT Technology Limited
and Li-S Energy Limited and Non-executive Director of 3D Dental Technology Limited.
Other listed public company directorships held in the last 3 years: Nil
7
PPK Group Limitedfor the year ended 30 June 2020Directors’ Report Graeme Webb (Age 70)
Non-Executive Director
Member of the PPK Group Limited Board since 1 August 2011.
Graeme Webb is a substantial shareholder of PPK Group Limited.
Graeme is Chairman of EDG Capital Limited and has over 48 years of experience in building, construction and property
development undertaking over $1 billion of projects during his career to date.
In addition, Graeme has a broad range of business experience having acted as a director and/or chairman of a number
of private and public companies engaged in a range of industries including plastics packaging, merchant banking,
aluminium fabrication, glazing and glass toughening.
Other listed public company directorships held in the last 3 years: Nil
Dale McNamara (Age 62)
Executive Director
Member of the PPK Group Limited Board since 30 April 2015.
Dale McNamara first joined PPK in an executive capacity in late 2013. Dale has more than 30 years of experience in
operational and management roles in the coal mining industry in Australia and China.
Dale founded Wadam Industries, a subsidiary of Industrea Ltd and served as its Managing Director since 1993. Dale
was then appointed as Deputy Chief Executive Officer of Industrea in 2009. Following the takeover of Industrea in
November 2012 Dale assumed the position of Global Director, Mining with the new owner.
Other listed public company directorships in the last 3 years: Nil
Anthony John McDonald LL.B, (Age 62)
Non-Executive, Independent Director
Member of the PPK Group Limited Board since 13 September 2017.
Member of the PPK Group Limited Audit Committee since 25 January 2018.
Tony McDonald graduated with a Bachelor of Laws from the Queensland University of Technology in 1981 and was
admitted as a solicitor in 1981. He has been involved in the natural resource sector for many years both within Australia
and internationally and for the past 18 years has held senior management roles in this sector. He is a Director of Santana
Minerals Limited.
Other listed public company directorships held in the last 3 years:
– Santana Minerals Limited, Executive Director (Appointed: 15 January 2013)
– Planet Gas Limited, Independent and Non-Executive Director (Appointed: 19 November 2003, resigned
20 June 2019)
INFORMATION ON COMPANY SECRETARY
Andrew J. Cooke (Age 60) LL.B, FCIS
Group Company Secretary
Andrew Cooke was appointed as Group Company Secretary on 9 May 2012.
Andrew has extensive experience in law, corporate finance and is the Company Secretary of a number of ASX listed
companies. He is responsible for corporate administration together with stock exchange and regulatory compliance.
PRINCIPAL ACTIVITIES
The principal activities of PPK during the financial year were:
– Technology - manufacture of high-grade boron nitride nanotubes (BNNT) to;
–
–
8
supply to select industries to further research and development into the blending/infusing of BNNT into
conventional materials; and
investment in and enhancement of selected BNNT product applications such as armaments (Craig International
Ballistics Pty Ltd and Ballistic Glass Pty Ltd), lithium sulphur battery products (Li-S Energy Limited and Zeta Energy
LLC), dental applications (3D Dental Technology Limited) and precious metals (BNNT Precious Metals Limited).
–
the design, manufacture, service, support and distribution of CoalTram and other underground diesel vehicles,
alternators, electrical equipment, drilling and bolting equipment and mining consumables and the hire of
underground coal mining equipment.
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) Following the acquisition of a 50% interest in BNNT Technology Limited (BNNTTL) in March 2019, and the joint venture
with Deakin University to manufacture high-grade BNNT in commercial quantities, PPK and Deakin University signed
a joint venture research agreement (JVRA) in October 2019. The JVRA provided for the research, development and
commercialisation of both new and existing technologies and products where BNNT can be used to create and/or
improve these technologies and products. As a result, PPK has entered into commercial arrangements with third parties
for the following BNNT application projects:
– Li-S Energy – development of BNNT as a nano-insulator in lithium sulphur batteries to significantly increase the
energy density capability, lower re-charge times, increase discharge/charge cycles while addressing existing
stability and safety issues relating to the use of lithium in batteries in general.
– 3D Dental Technology – development of nanocomposites of frequently used dental materials including zirconia,
lithium disilicate, alumina and ceramic composite resins, based on the fabrication of BNNT in the molecular matrix
to manufacture advanced dental applications commonly used in prosthetic and implant dentistry (i.e. inlays, onlays,
veneers, crowns, bridges) to lower the risk of implant failure, smaller configurations and more fracture resistant.
– Ballistic Glass – development of BNNT for use in bullet resistance glass to improve resistance at a lower weight thus
reducing the cost.
– BNNT Precious Metals – development of BNNT in the molecular matrix of gold and silver to improve their strength,
hardness and durability for use in electronics, jewellery, dentistry, medicine and other industries.
PPK will continue to pursue additional BNNT applications with third parties where these parties provide specialist skills
and/or experience in new and/or existing technologies and products.
OPERATING RESULTS
PPK reported a net profit after tax attributable to owners of PPK of $8.269M for the 12 months to 30 June 2020 (2019:
$1.800M profit), after writing back as income a contingent consideration of $9.041M. Group revenue for the 12 months
was $41.102M (2019: $40.932M), all from mining equipment sales and mining services.
PPK also had other income of $9.447M which was mainly due to the writeback of $9.041M to income of the contingent
consideration made in the 2019 financial year. This was in relation to the 100% probability determined at the time of
the acquisition that PPK would have to make a further $10.000M payment to the vendors of AICIC should specific
EBIT targets be met for AICIC. The accounting standards required the discounted payment to be recognised in the
purchase price. The directors have reviewed the assumptions based on the current financial and economic environment
underlying this contingent consideration and have formed the view that the probability of a payout is now unlikely. As a
result, the contingent consideration has been written back as other income.
The directors have also considered the value of the investment in BNNTTL and did not impair it as the discounted future
cash flows exceeded the value of the investment. The payment of the contingent consideration is based on discounted
cash flow estimates to 30 June 2021 but the value of the investment in BNNTTL is based on discounted cash flows that
are projected beyond 30 June 2021.
PPK Group’s loss for the year, ignoring the writeback of the contingent consideration, would have been $0.772M (2019:
$2.150M profit). The Group has generated $3.315M of cash from operations (2019: $1.701M used) and raised $8.500M
for its investment in Craig International Ballistics, funding for the BNNT application ventures and working capital leaving
$2.309M available cash, excluding cash held in trust, at the year end.
The Group has current assets of $24.663M (2019: 21.747M) of which $13.327M (2019: $11.496M) is highly liquid and
net working capital of $16.916M (2019: 13.235M). Overall, net assets have increased by $23.929M to $54.193M (2019:
$30.264M) thus leaving the company in a strong financial position. It also has an undrawn finance facility up to a
maximum of $4.000M from an Australian major bank.
Mining Segment
PPK Mining Equipment (PPKME) had a comparable result to the previous year with revenue of $41.102M (2019:
$40.932M), a profitable EBITDA of $5.342M (2019: $4.786M) and a total profit of $2.676M (2019: $3.765M). After
a promising first six months of revenues of $22.053M and EBITDA of $3.107M we saw the impact of COVID-19 with
the last six months revenues of $19.049M and EBITDA of $2.235M. Each month in the financial year reported a
profitable EBITDA.
Technology Segment
The acquisition of an investment in 45% interest in Craig International Ballistics Pty Ltd on 1 July 2019 and a number
of new BNNT application ventures moving to commercial operations has resulted in revenues of $0.802M and a
segment profit of $0.331M in the technology segment.
9
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) In particular, a capital raising by Li-S Energy Limited valued the company at $35.750M at year end and it has taken an
economic interest in Zeta Energy LLC, a Delaware limited liability company that is in a pre-IPO period with a valuation
of USD70.000M. Zeta Energy LLC is developing and commercialising battery technology developed at Rice University
in Houston, Texas and has an exclusive license to seven US and foreign patents and approximately 30 pending patents.
The battery being developed uses a hybrid anode created from graphene and carbon nanotubes. This investment is
valued at $2.547M in PPK’s financial statements. Zeta Energy LLC has also taken a 2% equity position in Li-S Energy
prior to the Li-S Energy’s capital raise.
Corporate Expenses
Total corporate costs of $3.066M include $0.550M of legal and professional expenses to defend a NSW Supreme Court
action in relation to a business acquired in 2014. The additional costs are primarily in relation to commencement of the
BNNT technology ventures noted above.
There is also an increase in the non-cash share based payment expenses of $0.967M (2019: $0.321M) which is due to
the accounting realisation of the performance rights and the additional 50,000 performance rights, valued at $6.50
each, issued to a director pursuant to an approval granted at the Annual General Meeting .
DIVIDENDS PAID OR DECLARED
Dividends paid or recommended for payment are as follows:
Final ordinary dividends recommended:
Dividends paid in the year:
Interim ordinary dividends
Cents
$’000
0.01
856
0.01
852
REVIEW OF OPERATIONS
The review of operations is outlined in the Executive Chairman’s Report set out on pages 2 to 5 and which forms part
of this report.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The 2019 Chairman’s Report noted the importance of commercialising the BNNT manufacturing technology and
identifying existing intellectual property created by Deakin University for new application ventures using BNNT.
This has underpinned PPK’s efforts during the financial year.
BNNT Manufacturing Technology
PPK has made several ASX announcements during the reporting period in relation to commercialising the BNNT
manufacturing technology. The most recent relates to the production by BNNTTL of 10 grams per day of 99% pure
grade BNNT from a single furnace on a single shift and that BNNTTL has ordered additional plant and equipment to
move to a two plant multi shift operation to increase the production of 99% pure grade BNNT.
BNNTTL’s scientists and engineers are continuing to work on improvements in both batch production techniques and
continuous production. Continuous production means a production unit producing BNNT essentially around the clock,
without having to cool down and then reheat the production unit for each batch of production.
BNNT Application Ventures
In October 2019 PPK announced it had entered into a formal Joint Venture Research Agreement (JVRA) with Deakin
University to allow for the research, development and commercialisation of both new and existing technologies
and products where BNNT can be used to create and/or improve these technologies and products. Six new BNNT
application ventures, some of which were already undergoing research, were identified.
In October 2019 raised $8.500M capital at $4.25 per share and issued 2.000M shares to a range of institutional
investors. The funds were raised to finance the BNNT ventures and the advancement of BNNT applications.
In December 2019 PPK completed the acquisition of 45% of the equity in Craig International Ballistics Pty Ltd (CIB),
a manufacturer of soft and hard ballistic (body armour) products primarily for the security and defence sectors. The
acquisition price was $5.000M and it was funded by issuing 500,000 shares at $4.50 per share, and a cash payment
of $2.750M. PPK saw the strategic opportunity of using BNNT in CIB’s current and future product range.
10
In June 2020 PPK announced three BNNT application ventures: Li-S Energy, 3D Dental Technology and Ballistic Glass.
These applications are explained further in the Principal Activities section and in the Chairman’s Report.
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) These ventures engage Deakin University to undertake research and development, BNNTTL for the supply of BNNT
and its skills and know how, third parties with appropriate industry and/or product skills and experience and PPK to
commercialise the new or enhanced products.
Mining Equipment Segment (PPKME)
During the reporting period PPKME signed contracts for provision of parts and services with its two largest customers
each for three year periods with options to extend for one or two years at the customers discretion.
PPKME continued to play an important part of PPK’s operations by generating surplus cash to support its own product
development and corporate activities. PPKME’s two major product developments have been the twelve-man battery
electric vehicle (Mantransporter) and enhancements to the CoalTram LHD machine.
The Mantransporter will be initially launched to the wider mining industry in the coming months as a non-explosion
protected machine with modern technology introduced – there has been wide industry interest already. The option for
a diesel-powered version will also be available. It will then be developed so that its battery electric powertrain will be
approved to meet the underground coal regulatory requirements.
The CoalTram enhancements will be launched later this calendar year and additional features will be made to meet the
customers’ requirements.
It is important to note that the workshops in Port Kembla and Tomago have gone six years and five years respectively,
without a long term injury.
Capital Management
The Company raised $2.750M in June 2019 and a portion of these funds were used to repay the outstanding finance
facility in place at that time. The Company negotiated a finance facility up to a maximum of $4.000M to support the
anticipated growth from long term contracts signed with its major mining customers. This facility has not been used
during the year.
COVID-19
The Company has provided regular updates of the effect of COVID-19 and with business operations in NSW, Victoria
and Queensland, it has been a challenging time to interpret and follow changing government regulations/guidance and
to adapt work practices to protect the safety of staff, customers and other stakeholders. As a result of conscientious
personnel the Company has not suffered a reported COVID-19 illness.
The Company has experienced supply chain disruptions, increased costs for overseas shipping and reduced customer
orders but has continued with business operations, albeit at a slower pace. Manufacturing in the BNNT manufacturing
plant, BNNT application research, CIB and PPKME have all continued to operate and there have been no shutdowns.
Dividends
We are pleased we have maintained our dividends during this period and the Board has approved a 1 cent per share
dividend relating to the second half of the reporting period.
There have been no other significant changes in the state of affairs during the 2020 financial year or existing at the time
of this report.
REVIEW OF FINANCIAL CONDITION
The Group has maintained its strong balance sheet:
– A strong current asset position of $24.663M (2019: $21.747M) of which $13.327M (2019: $11.496M) is highly liquid and
a net working capital position of $16.916M (2019: $13.235M)
– All debt from the previous year has been repaid
– The only interest bearing loan on the statement of financial position was that of a subsidiary and was repaid to
related parties in July 2020
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
In August 2020, the Board declared a 1 cent final ordinary fully franked dividend for the 2020 financial year.
Li-S Energy Limited received $3.250M of cash prior to 30 June 2020 for the issuance of 5.000M shares at $0.65 per
share and issued the shares subsequent to the reporting period.
PPK Mining Equipment operates in three facilities in NSW; Tomago, Port Kembla and Mt Thorley. Its customers and
most suppliers operate in close proximity to the facilities and the operations continue to operate. However, if one or
more of the facilities should be required to close it is unknown how long the closure would be, or if there were impacts
on its customers and/or suppliers operations, the impact on the operations of PPK Mining Equipment is unknown.
11
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) BNNT Technology Limited’s manufacturing plant and Li-S Energy Limited’s laboratory are located at Deakin
University’s Waurn Ponds facility in Geelong, Victoria. To slow the spread of COVID-19 in Victoria, the Victorian
government imposed Stage 4 restrictions for metropolitan Melbourne from 2 August 2020 and Stage 3 restrictions
for regional Victoria from 5 August 2020, which includes Geelong. Stage 3 restrictions allow employees to work at
the manufacturing plant so this facility continues to operate. At this date of these financial statements we believe the
manufacturing plant will be able to continue to operate for the foreseeable future. However, if the manufacturing plant
or the laboratory should be required to close, it is unknown how long this closure would be and the impact on the
operations of both companies.
Deakin University has had its own restrictions with access to campus by staff, students and visitors restricted to help
maintain health and safety protocols, with staff and visitor access reviewed case-by-case. As a result, limits have been
placed on the number of staff and contractors permitted in the workspace at one time. We are however continuing with
the installation of new equipment during this time whilst adhering to these restrictions. It is unknown whether stricter
restrictions will be imposed and what the impact of these would be on the operations of the companies.
Craig International Ballistics is located at the Gold Coast in Queensland. Its customers are located in various Australian
states and internationally and some key supplier are also located overseas. While its supply chain has been interrupted
due to COVID-19 and some customer orders have been delayed, the company continues to operate. However, if the
manufacturing plant should be required to close it is unknown how long this closure would be, or if there were impacts
on its customers and/or suppliers operations, the impact on the operations of Craig International Ballistics is unknown.
PPK issued 252,500 shares to the Long Term Incentive Plan Trust Account for the two directors, an executive and senior
managers of the Group whose Tranche 2 Performance Rights vested on 1 July 2020.
No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in
this report or in the Consolidated Financial Statements that has significantly affected or may significantly affect the
operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity
in subsequent financial years.
FUTURE DEVELOPMENTS
The likely developments in the operations of PPK and the expected results of those operations in financial years
subsequent to the year ended 30 June 2020 are included in the Executive Chairman’s Report set out on pages 2 to 5
and which forms part of this report.
ENVIRONMENTAL ISSUES
PPK remains committed to:
the effective management of environmental issues having the potential to impact on its remaining business; and
–
– minimising the consumption of resources utilised by its operations.
The Company has otherwise complied with all government legislation and regulations with respect to disposal of
waste and other materials and has not received any notices of breach of environmental laws and/or regulations. The
Company’s approach to environmental sustainability is outlined in its Environmental Policy at www.ppkgroup.com.au.
PROCEEDINGS ON BEHALF OF COMPANY
The Company is defending a claim in the Supreme Court of NSW in relation to a dispute pertaining to the vesting
conditions of a business acquired in 2014 with a vendor employee for the issue of a second tranche of $0.500M of
shares plus interest and costs. As advised in the 2016 Annual Report, the Company does not believe the vesting
conditions were met and still maintains this position. The Company has incurred $0.550M this financial year to defend
this position.
No other matter or circumstance has arisen which is not otherwise dealt with in this Annual Report that has significantly
affected or may significantly affect the operations of the consolidated entity, the results of those operations or the state
of the consolidated entity in subsequent years.
REMUNERATION REPORT (audited)
The Directors of PPK present the Remuneration Report for non-executive directors, executive directors and other
management personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations
2001. The Directors have determined that they and the Chief Financial Officer are the key management personnel.
12
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) Remuneration Policy
The remuneration policy of the Company has been designed to align directors’, executives’ and senior managers’
objectives and performance with shareholder and business results by providing a fixed remuneration component and
offering specific Short Term Incentives (STIs) based on key performance areas affecting the Group’s financial results
and Long Term Incentives (LTIs) based on increases to PPK’s share price and retention of key people.
The PPK Board believes the remuneration policy to be appropriate and effective in its ability to attract, retain and
motivate directors, executives and senior managers of high quality and standard to manage the affairs of the Group,
as well as, create goal congruence between directors, executives, senior managers and shareholders.
The remuneration policy, setting the terms and conditions for executive directors, executives and senior managers
was developed by the Board. The policy for determining the nature and amount of remuneration for board members,
executives and senior managers of the consolidated entity is detailed in the paragraphs which follow.
Remuneration of non-executive directors is determined by the Board from the maximum amount available for
distribution to the non-executive directors as approved by shareholders. Currently this amount is set at $0.400M per
annum in aggregate as approved by shareholders at the Annual General Meeting on 26 November 2019.
In determining the appropriate level of directors’ fees, data from surveys undertaken of other public companies similar
in size or market section to the Company is taken into account.
Non-executive directors are remunerated by means of cash benefits. They are not entitled to participate in performance
based remuneration practices unless approved by shareholders. The Company will not generally use options as a means
of remuneration for non-executive directors and will continue to remunerate those directors by means of cash benefits.
However, A McDonald was offered 50,000 performance rights due to the time and services provided in connection with
the BNNT acquisition and its subsequent development and advancement and this was approved by the shareholders at
the Annual General Meeting on 26 November 2019.
PPK does not provide retirement benefits for its non-executive directors. Executive directors do not receive director’s
fees.
The Board is responsible for approving remuneration policies and packages applicable to executive directors,
executives and senior managers of the Company. The broad remuneration policy is to ensure that the remuneration
package properly reflects the person’s duties and responsibilities and that the remuneration is competitive in attracting,
retaining and motivating people of high quality and standard.
A review of the compensation arrangements for executive directors, executives and managers is conducted by the full
Board at a duly constituted Directors’ meeting.
The Board conducts its review annually based on established criteria which includes:
–
–
–
–
the individual’s performance;
reference to market data for broadly comparable positions or skill sets in similar organisations or industry;
the performance of the Group during the relevant period; and
the broad remuneration policy of the Group.
Executive directors, executives and senior managers may receive bonuses and/or fees based on the achievement
of specific goals of the consolidated entity.
Company Performance and Shareholder Wealth for Executive and Senior Managers Remuneration
The two methods employed in achieving this aim are:
Short Term Incentives
PPK has an STI in place which is designed to reward the efforts and positive outcomes of the executive and senior
managers who play key roles during the year. The executive and senior managers have an opportunity to earn an
annual incentive which is paid as salary and superannuation above their normal contracts and are aligned with key
performance indicators (KPIs) as determined by the board. The KPIs are developed from the operating plans, the
outcomes are agreed and are monitored throughout the period. There is also a shared incentive for all participants
dependent on the Group achieving certain financial performance targets. Participation in the STI is considered on an
annual basis and is offered to participants for performance over and above their normal roles and responsibilities.
13
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) Who is eligible?
The board determines each year whether it will provide STIs to executives and senior
managers and which executives and senior managers will have the opportunity to
participate in the STIs.
How is it paid?
Executives and senior managers have a target STI opportunity of 10% to 50% of their fixed
salary component of their remuneration.
How is performance
measured?
The STI performance measures are chosen to reflect the core drivers of short-term
performance and also provide a framework for delivering sustainable value to the Group, its
shareholders and its customers. STI’s include a corporate financial target, which is shared
by executives and senior managers, as well as individual targets that each executive or
senior manager can influence the outcome in their own right.
When is it paid?
What happens if an
executive or senior
manager leaves?
Executives
Senior Managers
Financial
Corporate
Financial
Individual
Non-Financial
50%
25%
0%
50%
0% - 75%
0% - 75%
The STI is determined after the end of the financial year following a review of the executive
and senior managers performance over the year. The board approves the STI based on this
assessment of performance.
If an executive or senior manager resigns or is terminated for cause before the end of the
financial year, no STI is awarded for that year.
If an executive or senior manager ceases employment during the performance period by
reason of redundancy, ill health, death or other circumstances approved by the board,
the executive or senior manager will be entitled to a pro-rata cash payment based on
assessment of performance up to the date of ceasing employment for that year, subject to
board discretion.
Long Term Incentives (LTI)
PPK has an LTI in place which is managed as a Trust on behalf of two directors, an executive and senior managers of
the Group. The Directors determine who will be offered Performance Rights, which can be converted to PPK shares on
a one-for-one basis subject to the PPK share price meeting set price targets and the executive director and employees
continuing their employment to the vesting date. The LTI was approved by shareholders at the Annual General Meeting
on 27 November 2018.
At the time that the Directors set the share price targets, PPK shares were trading at $0.21 per share and the
performance rights to be issued were 2,520,000. As a result of the increase in PPK’s share price, the share price targets
were met, and the vesting conditions are now subject to the two director and employees continuing their employment
to the vesting dates. However, the board considered that as the intent was to reward the executives and senior
managers with a value of shares equivalent to their total remuneration to be realised over a period of time, the ASX
announcement on 13 November 2018 for the Group to acquire 100% of the shares in AICIC, and the resulting strategic
50% holding in BNNT Technology Limited, led to a significant increase in the PPK share price in a short period of time
and that this was not the direct outcome of the executives or senior managers actions of the Mining Services segment.
As a result, in July 2019 the board modified the performance rights to the executives and senior managers that would
14
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) deliver a total remuneration value that was equal under the original LTI and the modified LTI. The board considers there
to be no change in the original vesting conditions. The share price targets, based on a 5-trading day volume weighted
average price, the vesting conditions and the total number of performance rights offered, as modified in July 2019, are:
Share Price Targets
Vesting Conditions
$0.30 per share by 1 January 2019
Fully vest on 1 January 2020(2)
$0.40 per share by 1 January 2020
Fully vest on 1 July 2020
$0.50 per share by 1 January 2021
Fully vest on 1 January 2021
$0.60 per share by 1 January 2021
Fully vest on 1 July 2021
Original
No of
Performance
Rights(1)
Amended
No of
Performance
Rights(1)
380,000
380,000
140,000
140,000
380,000
140,000
380,000
140,000
1,520,000
560,000
(1)
The performance rights have been adjusted for those foregone by a senior manager who left employment before the performance
rights vested.
(2) On 1 January 2020, 140,000 modified performance rights vested.
As at 30 June 2020, the Trust held 0.204M shares in PPK. The Directors have determined PPK will not consolidate the
Trust with the entities of PPK as the Trust is for the benefit of the Participants and PPK does not control the Trust.
Who is eligible?
How is it paid?
The board determines which, if any, executives and senior managers they will offer
Performance Rights to and the vesting conditions attaching to those Performance Rights.
PPK can issue shares to the Trustee or fund the purchase of PPK shares, in the open market,
on behalf of the Trustee. Once this occurs, the Trustee will hold the PPK shares on behalf of
the participants until such time that the vesting conditions for Performance Rights are met.
Once the vesting conditions are met, the participants can apply to have the shares sold or
transferred to the applicable participant.
How is performance
measured?
Performance Rights generally have a performance condition and a vesting condition
attached to them and are managed under a Trust Deed, The performance conditions were
based on a 5 day volume weighted average share price and, at the time that the Directors
set the share price targets, PPK shares were trading at $0.21 per share.
The vesting condition dates were selected based on sustainable share price growth over a
reasonable period of time. A summary of the share price targets and the vesting conditions are:
Share Price Targets
Vesting Conditions
$0.30 per share by 1 January 2019
Fully vest on 1 January 2020
$0.40 per share by 1 January 2020
Fully vest on 1 July 2020
$0.50 per share by 1 January 2021
Fully vest on 1 January 2021
$0.60 per share by 1 January 2021
Fully vest on 1 July 2021
What happens if an
executive or senior
manager leaves?
In general, if an executive or senior manager ceases to be an employee of the Company
before the performance rights vest, all unvested performance rights will lapse on the day
employment ceases unless the Board determines that some or all of the performance rights
can be retained (on such terms as the Board determines, including the Conditions that must
be satisfied) or will vest immediately upon cessation of employment.
Are Performance Rights
eligible for dividends?
Are there other restrictions
on the performance rights?
Performance rights are not eligible for dividends.
Performance rights are not transferable and may not be dealt with (except with Board
approval or by force of law upon death or bankruptcy) and will lapse immediately if an
executive or senior manager purports to deal with them in breach of these terms. An
executive or senior manager are prohibited from entering into any scheme or arrangement
under which performance rights are “hedged” or alter the economic benefit that an
executive or senior manager may derive in respect of their performance rights.
15
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D)
Company Performance and Shareholder Wealth for Directors
Two directors, D McNamara and A McDonald, participate in the LTI on the same terms and conditions as the Executives
and Senior Managers. D McNamara was offered 400,000 performance rights with 100,000 performance rights vesting
in Tranche 1 through to Tranche 4 subject to retention of his services to meet the vesting conditions. The performance
rights were approved by the shareholders at the Annual General Meeting on 27 November 2018. As noted above,
in July 2019 the board modified the performance rights to the D McNamara that would deliver a comparative total
remuneration value and the board has considered this to be no change in the original vesting conditions. The share
price targets, based on a 5-trading day volume weighted average price, the vesting conditions and the total number
of performance rights offered, as modified in July 2019, are:
Share Price Targets
Vesting Conditions
$0.30 per share by 1 January 2019
Fully vest on 1 January 2020
$0.40 per share by 1 January 2020
Fully vest on 1 July 2020
$0.50 per share by 1 January 2021
Fully vest on 1 January 2021
$0.60 per share by 1 January 2021
Fully vest on 1 July 2021
Original
No of
Performance
Rights
Amended
No of
Performance
Rights
250,000
100,000
250,000
100,000
250,000
100,000
250,000
100,000
1,000,000
400,000
A McDonald was offered 50,000 performance rights due to the time and services provided in connection with the
BNNT acquisition and its subsequent development and advancement and this was approved by the shareholders at the
Annual General Meeting on 26 November 2019. The performance rights will vest in four equal tranches of 12,500 at the
same dates as the existing performance rights, subject to retention of his services to meet the vesting conditions.
For D McNamara and A McDonald, the 1st tranche of 100,000 and 12,500 performance rights respectively, were vested
on 1 January 2020.
Consequences of company performance on shareholder wealth
The following table outlines the impact of company performance on shareholder wealth:
Data
2020
2019
2018
2017
2016
2015
2014
Net profit/(loss) after tax ($’000)
8,254
1,800
(1,561)
Earnings per share (cents)
9.8
2.6
(2.3)
560
0.8
(7,873)
(11,822)
2,951
(13.4)
(21.2)
4.8
Full year ordinary dividends (cents)
per share
Year-end share price
Shareholder return (annual)
2.0
$3.11
13%
1.0
$2.77
823%
–
–
–
1.5
3.5
$0.30
$0.20
$0.20
$0.40
$0.66
50%
106%
(50%)
(37%)
58%
The above table shows the annual returns to shareholders calculated to include the difference in percentage terms
between the dividend yield for the year (based on the average share price during the period) and changes in the price
at which shares in the Company are traded between the beginning and the end of the relevant financial year. The share
price for 2017 and 2016 is the last traded price, being 29th September 2015 when the Group voluntarily suspended
trading on the ASX and 16 August 2017, when it was relisted on the ASX.
16
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) Remuneration Details for the year ended 30 June 2020 for Directors’ and Key Management Personnel
Details of the nature and amount of each element of the remuneration of each director and key management personnel
(‘KMP’) of PPK Group Limited are shown in the table below:
Short term benefits
Salary &
fees
($)
Cash
bonus
($)
Non-
Monetary
($)
Post
employment
Super-
annuation
($)
Long
Term
Benefits
($)
Terminat-
ion
Payments
($)
(1) Share
based
payments
($)
Perform-
ance
Related
(%)
Total
($)
2020
Directors
Non–Executive
G Webb
A McDonald
Executive
R Levison
G Molloy
40,000
45,833
215,000
240,000
–
–
–
–
–
–
D McNamara
200,000(2)
Total Directors
740,833
Other Key Management Personnel
K Hostland
Total Other
325,000 157,625(3)
325,000
157,625
Total Key Management Personnel
1,065,833
157,625
–
–
–
–
–
–
–
–
–
–
–
25,000
–
–
25,000
25,000
25,000
50,000
–
–
–
–
–
–
–
–
–
–
–
40,000
– 236,943 282,776
–
–
–
– 240,000
– 240,000
236,108 436,108
– 473,051 1,238,884
–
–
188,886
696,511
188,886
696,511
–
84
–
54
–
50
–
661,937 1,935,395
–
(1)
Equity settled share based payments. Performance rights granted are expensed over the performance period, which includes the
year to which the bonus relates and the subsequent vesting period of the rights.
(2) D McNamara also has use of a fully maintained motor vehicle.
(3) Related to the 2019 financial year.
Amounts reported above include both paid and unpaid entitlements.
17
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) Remuneration Details for the year ended 30 June 2019 for Directors’ and Key Management Personnel
Details of the nature and amount of each element of the remuneration of each director and key management personnel
(‘KMP’) of PPK Group Limited are shown in the table below:
Short term benefits
Salary &
fees
($)
Cash
bonus
($)
Non-
Monetary
($)
Post
employment
Super-
annuation
($)
Long
Term
Benefits
($)
Terminat-
ion
Payments
($)
(1)Share
based
payments
($)
Perform-
ance
Related
(%)
Total
($)
2019
Directors
Non–Executive
G Webb
A McDonald
Executive
R Levison
G Molloy
40,000
40,000
170,000
39,600
–
–
–
–
–
–
D McNamara
200,000(2)
Total Directors
489,600
Other Key Management Personnel
K Hostland
Total Other
325,000 115,529(3)
325,000
115,529
Total Key Management Personnel
814,600
115,529
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
25,000
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,000
40,000
170,000
39,600
108,864 308,864
108,864 598,464
87,091
552,620
87,091
552,620
–
–
–
35
–
37
–
195,955 1,151,084
–
(1)
Equity settled share based payments. Performance rights granted are expensed over the performance period, which includes the
year to which the bonus relates and the subsequent vesting period of the rights.
(2) D McNamara also has use of a fully maintained motor vehicle.
(3) Related to the 2018 financial year.
Amounts reported above include both paid and unpaid entitlements.
Performance Income as a Proportion of Total Remuneration
In 2020, K Hostland received an STI award of $157,625 (2019: $115,529), after his assessment of annual performance,
for achieving targets noted below as set by the Directors for the 2019 financial year representing 97% of his targets. No
other bonuses were paid to Key Management Personnel during the year.
Targets
Results
Revised revenue of $25.891M
Achieved $26.689M
Revised management EBITDA of $2.294M
Achieved $3.143M
BNNT Acquisition, legal & refinancing
Achieved at Board’s discretion
STI
Allocation
Outcome
20%
30%
50%
100%
100%
94%
18
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) The table below shows a reconciliation of performance rights held by each KMP for the year ended 30 June 2020.
Name and
Grant dates
D McNamara
Tranche 1
Tranche 2
Tranche 3
Tranche 4
A McDonald
Tranche 1
Tranche 2
Tranche 3
Tranche 4
K Hostland
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Balance
at the
start of
year
Granted
during
year
Unvested
–
–
–
–
–
–
–
–
–
–
–
–
100,000
100,000
100,000
100,000
12,500
12,500
12,500
12,500
75,000
75,000
75,000
75,000
Vested Exercised
Forfeited
Balance at the end of the year
(unvested)
%
25
No.
Yes
–
–
–
Yes
25
Yes
25
–
–
–
No.
%
No.
Maximum
$ value to vest(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88,744
50,133
20,568
129,982
62,832
25,225
70,995
40,106
16,455
(1)
The maximum value of the performance rights yet to vest has been determined as the amount of the grant date fair value of the
performance rights that is yet to be expensed which was calculated using the number of performance rights that were going to
be granted.
Fair Value of each performance right at the grant date is:
D McNamara
A McDonald
K Hostland
Tranche 1
Tranche 2
Tranche 3
Tranche 4
$0.500
$6.500
$0.500
$0.500
$6.500
$0.500
$0.486
$6.500
$0.486
$0.430
$6.500
$0.430
Employment Agreements
R Levison
A consultancy agreement is in place between the parties on the following terms:
Term: Commencing on 1 October 2013 – no fixed term.
Remuneration: Base remuneration under the agreement is $0.240M per annum.
Duties: Executive Chairman.
Termination: The agreement may be terminated at any time by PPK Group Limited giving not less than 12 months
written notice or by Mr Levison giving not less than 6 months written notice.
G Molloy
A consultancy agreement is in place between the parties on the following terms:
Term: Commencing on 1 July 2019 – no fixed term.
Remuneration: Base remuneration under the agreement is $0.240M per annum.
Duties: Executive Director.
19
Termination: The agreement may be terminated at any time by PPK Group Limited giving not less than 12 months
written notice or by Mr Molloy giving not less than 6 months written notice.
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D)
D McNamara
A consultancy agreement is in place between the parties on the following terms:
Term: Commencing on 1 April 2014 – no fixed term.
Remuneration: Base remuneration under the agreement is $0.200M per annum plus a fully maintained motor vehicle
plus 400,000 performance rights to convert to PPK shares, payable in four equal tranches, on a one-for-one basis
subject to the PPK share price meeting set price targets and continuing his employment to the vesting date.
Duties: Director of Global Mining.
Termination: The agreement may be terminated at any time by PPK Group Limited by giving not less than 12 months
written notice or by Mr McNamara giving not less than 6 months written notice.
K Hostland
Employment agreement is in place between the parties on the following terms:
Term: Commencing 1 December 2017 (previously under a short term contract as Acting Chief Financial Officer)
Remuneration: Base remuneration of $0.325M plus $0.025M superannuation per annum. He also participates in the
STI, where he can receive a maximum bonus of 50% of his total base salary for meeting key performance indicators set
by the Directors, and the LTI, where he will receive 300,000 performance rights to convert to PPK shares, payable in
four equal tranches, on a one-for-one basis subject to the PPK share price meeting set price targets and continuing his
employment to the vesting date.
Duties: Group Chief Financial Officer/Group Chief Operating Officer
Termination: The agreement may be terminated at any time by either party giving 6 months written notice.
There are no formal employment agreements in place for G Webb or A McDonald.
As at the end of the financial year, the number of ordinary shares held by directors and Key Management Personnel
during the 2020 reporting period is set out below:
Directors
R Levison
G Molloy
G Webb
D McNamara
A McDonald
Total Directors
Other Key Management Personnel
K Hostland
Total Other
Balance at
Start of year
November
2019 DRP(1)
April 2020
DRP(2)
Shares
Acquired
Shares Sold
Held at the
End of the
Reporting
Period
4,450,404
14,506,499
9,676,585
4,496,625
404,878
10,582
33,455
22,958
10,667
960
22,981
72,656
49,856
23,169
2,086
33,534,991
78,622
170,748
404,878
404,878
–
–
–
–
33,939,869
78,622
170,748
–
–
–
–
–
–
–
–
–
(50,395)(3)
4,433,572
(30,000)(3)
14,582,610
–
–
–
9,749,399
4,530,461
407,924
(80,395) 33,703,966
(150,000)(3)
254,878
(150,000)
254,878
(230,395) 33,958,844
Shares issued @ $4.4129 per share being the price at which shares were issued to all shareholders participating in the Dividend
Reinvestment Plan regarding the dividend paid by the Company on 20 November 2019.
Shares issued @ $1.9455 per share being the price at which shares were issued to all shareholders participating in the Dividend
Reinvestment Plan regarding the dividend paid by the Company on 30 April 2020.
Total
(1)
(2)
(3)
Share were transferred off-market as a gift, at nil consideration, or to family members.
OTHER TRANSACTIONS WITH RELATED PARTIES OF THE GROUP
There were no transactions with directors and/or their related parties during the year.
20
(End of Audited Remuneration Report)
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D) MEETINGS OF DIRECTORS
During the financial year, meetings of directors (including committee meetings) were held. Attendances were:
R Levison
G Molloy
G Webb
D McNamara
A McDonald
DIRECTORS’ MEETINGS
AUDIT COMMITTEE MEETINGS
Number
Eligible to
attend
Number
Attended
Number
Eligible to
attend
Number
Attended
17
17
17
17
17
16
17
9
15
17
–
2
–
–
2
–
2
–
–
2
CORPORATE GOVERNANCE STATEMENT
PPK’s directors and management are committed to conducting the Group’s business ethically and in accordance
with high standards of corporate governance. A copy of PPK’s Corporate Governance Statement can be found in the
corporate governance section of PPK’s website at www.ppkgroup.com.au.
RISK & CONTROL COMPLIANCE STATEMENT
Under ASX Listing Rules and the ASX Corporate Governance Council’s Principles of Good Corporate Governance and
Best Practice Recommendations (“ASX Recommendations 3rd edition”), the Company is required to disclose in its
Annual Report the extent of its compliance with the ASX Recommendations.
Throughout the reporting period, and as at the date of signing of this Directors’ Report, the Company was in
compliance with a majority of the ASX Recommendations in all material respects as more fully detailed in PPK’s
corporate governance section as set out on its website.
In accordance with the Recommendations, the Board has:
–
–
received and considered reports from management regarding the effectiveness of the Company’s management of
its material business risks; and
received assurance from the people performing each of the Chief Executive Officer and Chief Financial Officer
functions regarding the consolidated financial statements and the effective operation of risk management systems
and internal controls in relation to financial reporting risks.
Material associates and joint ventures, which the company does not control, are not dealt with for the purposes of this
statement.
AUDIT COMMITTEE
The details of the composition, role and Terms of Reference of the PPK Audit Committee are available on the
Company’s website at www.ppkgroup.com.au.
During the reporting period, the PPK Audit Committee consisted of the following:
G Molloy (Appointed Chairman: 14 August 2017)
A McDonald (Appointed: 25 January 2018)
Executive Director
Non-Executive Independent Director
The Company’s lead signing and review External Audit Partner, Chairman, Chief Financial Officer and selected
consultants attend meetings of the Audit Committee by standing invitation.
DIRECTORS’ AND AUDITORS’ INDEMNIFICATION
During or since the end of the financial year the company has given an indemnity or entered an agreement to
indemnify, or paid or agreed to pay insurance premiums as follows:
The Company has paid premiums during 2020 of $0.111M (2019: $0.132M) for the year ending 31 May 2021 to insure all
directors of the parent entity and officers of the consolidated entity against liabilities for costs and expenses incurred
by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director or
officer of the Company, other than conduct involving a wilful breach of duty in relation to the Company.
21
To the extent permitted by law, the Company has agreed to indemnify its auditors, EY, as part of the terms of its audit
engagement agreement against claims by third parties arising from the audit (for an unspecified amount). No payment
has been made to indemnify EY during or since the financial year.
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D)
NON-AUDIT SERVICES
In 2020, the external auditors were engaged to provide tax compliance and an independent export report in relation to
a legal dispute and were paid $0.100M (2019: $0.008M to Grant Thornton who provided advice in relation to the review
of the Trust Deed for the Long Term Incentive Plan).
AUDIT INDEPENDENCE
The lead auditor has provided the Auditor’s Independence Declaration under section 307C of the Corporations Act
2001 (Cth) for the year ended 30 June 2020 and a copy of this declaration forms part of the Directors’ Report.
ROUNDING OF ACCOUNTS
The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable)
where noted ($’000) under the option available to the Company under ASIC Corporations (Rounding in Financial/
Directors’ Reports) Instrument 2016/191. The Company is an entity to which this legislative instrument applies.
Signed in accordance with a resolution of the Board of Directors.
Collection House Limited
Robin Levison
Executive Chairman
Glenn Molloy
Executive Director
Brisbane, 26 August 2020
22
PPK Group Limitedfor the year ended 30 June 2020Directors’ ReportDIRECTORS’ REPORT (CONT’D)
Auditor’s Independence Declaration
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of PPK Group
Limited
As lead auditor for the audit of the financial report of PPK Group Limited for the financial year ended
30 June 2020, I declare to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor 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 PPK Group Limited and the entities it controlled during the financial
year.
Ernst & Young
Brad Tozer
Partner
26 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
20
2323
PPK Group LimitedAuditor’s Independence DeclarationAUDITOR’S INDEPENDENCE DECLARATIONPPK Group Limited
Consolidated Statement of Profit or Loss
and Other Comprehensive Income
for the year ended 30 June 2020
Continuing operations
Revenue from contracts with customers
3.1, 4.1
39,847
38,921
Consolidated Entity
2020
$’000
2019
$’000
Notes
Cost of sales
GROSS PROFIT
Rental income
Other operating income
Mining services expenses
Technology expenses
Investment activity expenses
Corporate expenses
Share based payment expense
Finance costs
Finance income
Share of profit of an associate and a joint venture
PROFIT (LOSS) BEFORE TAX EXPENSE FROM CONTINUING OPERATIONS
Income tax (expense)/benefit attributable to profit
PROFIT (LOSS) AFTER TAX EXPENSE FROM CONTINUING OPERATIONS
Discontinuing operations
PROFIT (LOSS) AFTER TAX EXPENSE FROM DISCONTINUED OPERATIONS
PROFIT (LOSS) FOR THE YEAR
PROFIT (LOSS) IS ATTRIBUTED TO:
Owners of PPK Group Limited
Non-controlling interests
OTHER COMPREHENSIVE INCOME
Items that will not be reclassified to profit or loss, net of tax
Revaluation of land and buildings before related tax effects
Net other comprehensive income that will not be reclassified to profit or loss
in subsequent periods
NET OTHER COMPREHENSIVE INCOME (LOSS) FOR THE YEAR
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR
TOTAL COMPREHENSIVE INCOME (LOSS) FOR THE YEAR IS ATTRIBUTABLE TO:
Owners of PPK Group Limited
Non-controlling interests
24
4.1
3.1
3.2
4.1
4.1
4.1
19.3
4.1
4.1
(29,632)
(28,492)
10,215
1,255
9,447
10,429
2,011
835
(8,584)
(8,625)
(231)
–
(160)
(7)
(3,066)
(2,105)
(967)
(286)
5
766
8,554
(240)
8,314
(60)
8,254
8,269
(15)
8,254
–
–
–
–
8,254
8,269
(15)
8,254
(321)
(267)
10
–
1,800
–
1,800
–
1,800
1,800
–
1,800
–
350
350
350
2,150
2,150
–
2,150
PPK Group LimitedCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (CONT’D)
Earnings per share (in cents)
Basic
Diluted
Earnings per share from continuing operations (in cents)
Basic
Diluted
Earnings per share from discontinued operations (in cents)
Basic
Diluted
Consolidated Entity
2020
$’000
2019
$’000
Notes
9.8
9.7
9.8
9.7
–
–
2.6
2.6
2.6
2.6
–
–
The Group has applied AASB 16 Leases effective from the date of initial application, being 1 July 2019, and adopted the modified
retrospective method for implementation and elected to use the transition practical expedient thus the comparatives for the previous
year have not be restated.
The accompanying notes form part of these financial statements
25
PPK Group LimitedConsolidated Statement of Profit or Loss and Other Comprehensive Incomefor the year ended 30 June 2020 Consolidated Statement of Financial Position
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventories
Other current assets
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Investments in associates and a joint venture – equity accounted
Investment
Property, plant and equipment
Right-of-use assets
Intangibles
Other non-current assets
TOTAL NON-CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Lease and other liabilities
Interest-bearing loans and borrowings
Provisions
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities
Provisions
Contingent consideration
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Treasury shares
Reserves
Retained earnings (accumulated losses)
Capital and reserves attributable to owners of PPK Group Ltd
Non-controlling interests
26
TOTAL EQUITY
The accompanying notes form part of these financial statements.
Consolidated Entity
2020
$’000
2019
$’000
Notes
13
14
15
16
17
19
20
21
22
23
17
24
22, 25
26
27
22, 25
27
28
29.1
29.4
30
5,344
6,324
1,659
10,594
742
24,663
1,047
8,655
1,794
9,251
1,000
21,747
25,086
19,340
2,547
5,240
3,628
3,038
37
39,576
64,239
4,333
1,681
152
1,581
7,747
1,998
301
–
2,299
10,046
54,193
–
5,339
–
1,606
–
26,285
48,032
4,932
–
2,256
1,324
8,512
–
215
9,041
9,256
17,768
30,264
59,500
47,743
(227)
4,143
(220)
671
(11,325)
(17,930)
52,091
2,102
54,193
30,264
–
30,264
PPK Group Limitedas at 30 June 2020CONSOLIDATED STATEMENT OF FINANCIAL POSITION Consolidated Statement of Cash Flows
Consolidated Entity
2020
$’000
2019
$’000
Notes
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts from customers
Cash payments to suppliers and employees
Transaction costs related to acquisition
Interest received
Interest paid
Net cash provided by (used in) operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for purchases of plant and equipment
Proceeds from sale of property and equipment
Proceeds from sale of financial assets at fair value through profit or loss
Payments for intangibles
Payments for the acquisition of subsidiary, net of cash acquired
Payments for the acquisition of an associate
Payment for acquisition of investment
Transaction costs related to acquisition of an associate
Purchase of financial assets at fair value through profit or loss
19.2
18
19.2
48,350
41,911
(44,754)
(43,200)
–
5
(286)
3,315
(135)
10
(287)
(1,701)
(721)
(1,204)
28
–
(1,465)
–
(2,750)
(500)
(219)
–
563
793
(1,010)
(3,583)
–
–
–
(22)
Net cash provided by (used in) investing activities
(5,627)
(4,463)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from other borrowings
Proceeds from capital raisings
Repayment of other borrowings
Principal payment for lease liabilities
Transaction costs on issue of shares
Dividends paid
Dividends received for treasury shares
Net cash provided by (used in) financing activities
Net increase (decrease) in cash held
Cash at the beginning of the financial year
Cash outflow from discontinued operations
Cash at the end of the financial year
The accompanying notes form part of these financial statements.
5,150
11,750
(7,255)
(1,557)
(697)
(728)
6
6,669
4,357
1,047
(60)
5,344
6,852
6,285
(6,785)
–
(281)
(172)
–
5,899
(265)
1,312
–
1,047
29.2
10(d)
10(d)
6.2
27
PPK Group Limitedfor the year ended 30 June 2020CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
CONSOLIDATED ENTITY
Notes
Issued
Capital
(Note 29)
$’000
Treasury
Shares
(Note 29.4)
$’000
Accumulated
Losses
$’000
Capital
Reserves
(Note 30)
$’000
Total
Attributable
to Owners of
PPK Group
Ltd
$’000
Non-
Controlling
Interests
$’000
Total
Equity
$’000
At 1 July 2019
47,743
(220)
(17,930)
671
30,264
–
30,264
Total comprehensive
income (loss) for the
year
Profit (loss) for the year
Total comprehensive
income (loss) for the
year
Issue of share capital on
private placement
Issue of share capital on
acquisition
Issue of share capital on
dividend reinvestment
plan
Issue of share capital for
Long Term Incentive Plan
Issue of share capital for
Employee Share Scheme
Transaction costs for
issue of share capital
Changes in holding of
non-controlling interests
–
–
29.2
8,500
29.2
2,250
29.2
29.2
29.2
29.2
949
396
138
(476)
–
–
–
–
–
–
(7)
–
–
–
–
–
8,269
8,269
–
–
–
–
–
–
–
–
–
–
–
–
548
–
–
8,269
(15)
8,254
8,269
(15)
8,254
8,500
2,250
942
944
138
(476)
–
–
–
–
–
–
8,500
2,250
942
944
138
(476)
2,924
2,924
2,117
5,041
(1,664)
–
(1,664)
–
(1,664)
Dividends paid
10(d)
At 30 June 2020
59,500
(227)
(11,325)
4,143
52,091
2,102
54,193
The accompanying notes form part of these financial statements
28
PPK Group LimitedConsolidated Statement of Changes in EquityCONSOLIDATED STATEMENT OF CHANGES IN EQUITY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONT’D)
CONSOLIDATED ENTITY
Notes
Issued
Capital
$’000
Treasury
Shares
$’000
Accumulated
Losses
$’000
Options
Reserve
$’000
Asset
Revaluation
Surplus
$’000
Total
Attributable
to Owners
of PPK
Group Ltd
$’000
Total
Equity
$’000
At 1 July 2018
Adjustment for the
adoption of AASB 9
Adjusted balance at
1 July 2018
Total comprehensive
income (loss) for the
year
Profit (loss) for the year
Revaluation of land and
property
30.2
Total comprehensive income
(loss) for the year
Transactions with
owners in their capacity
as owners
Shares purchased
Shares sold
29.2
29.2
Issue of share capital on
private placement
Issue of share capital on
acquisition
Issue of share capital on
dividend reinvestment
plan
Issue of performance
rights
Dividends paid
30
10
Total transactions with
owners in their capacity
as owners
At 30 June 2019
34,451
(389)
(18,662)
–
–
(356)
34,451
(389)
(19,018)
–
–
–
–
–
–
–
–
(21)
199
–
–
29.2
6,028
29.2
6,633
29.2
541
(9)
–
–
–
–
1,800
–
1,800
–
–
–
–
–
–
(712)
13,202
47,743
169
(712)
(220)
(17,930)
The accompanying notes form part of these financial statements
–
–
–
–
–
–
–
–
–
–
–
321
–
321
321
–
–
–
–
15,490
15,490
(356)
(356)
15,134
15,134
1,800
1,800
350
350
350
350
2,150
2,150
–
–
–
–
–
–
–
–
(21)
199
(21)
199
6,028
6,028
6,633
6,633
532
532
321
321
(712)
(712)
12,980
12,980
350
30,264
30,264
29
PPK Group Limitedfor the year ended 30 June 2019Consolidated Statement of Changes in Equity NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Notes to the Consolidated Financial Statements
NOTE 1 CORPORATE INFORMATION
The financial statements of PPK Group Limited (“PPK”
or “the Group”) for the year ended 30 June 2020 were
authorised for issue in accordance with a resolution of
the Directors on 26 August 2020 and covers PPK Group
Limited and its controlled entities as required by the
Corporation Act 2001.
PPK is a for-profit company limited by shares,
incorporated in Australia. Its shares are publicly traded
on the Australian Securities Exchange.
Separate financial statements for PPK Group Limited
(“Parent Company”) as an individual entity are not
required to be presented, however, limited financial
information for PPK Group Limited is provided as an
individual entity in Note 12.
The nature of the operations and principal activities of
the Group are:
– Technology - to expand and profit from the
manufacture of high-grade boron nitride nanotubes
(BNNT) in commercial quantities using Deakin
University’s patented technology to;
–
supply BNNT to select industries to enable
industries to enable further research and
development into the blending/infusing of BNNT
into conventional materials. This process can be
transformative in terms of reduced weight and
increased strength; and
– maintain an ongoing equity interest in selected
BNNT product applications such as armaments
(Craig International Ballistics Pty Ltd and Ballistic
Glass Pty Ltd), lithium sulphur battery products
(Li-S Energy Limited and Zeta Energy LLC),
dental applications (3D Dental Technology
Limited) and precious metals (BNNT Precious
Metals Limited).
–
the design, manufacture, service, support and
distribution of CoalTram and other underground
diesel vehicles, alternators, electrical equipment,
drilling and bolting equipment and mining
consumables and the hire of underground coal
mining equipment.
NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
2.1 Basis of Preparation and Statement
of Compliance
The consolidated general purpose financial statements
of the Group have been prepared in accordance
with the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting
Standards Board. Compliance with Australian
Accounting Standards results in full compliance with the
International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board.
The financial statements have been prepared on
an accruals basis and are based on historical costs,
except for land and buildings, plant and equipment
and intangible assets which are measured at the lower
of carrying amounts and fair value, less costs to sell,
available for sale financial assets are held at fair value
and impairment is recognised when the fair value of the
asset is less than the historical cost.
The consolidated financial statements provide
comparative information in respect of the previous
period, except for adoption of new standards effective
as of 1 July 2019 as disclosed in Note 2.2.
The accounting policies have been consistently applied
to the entities of the consolidated entity unless otherwise
stated.
PPK is a type of company referred to in ASIC
Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 and therefore, amounts in the
financial statements and Directors’ report have been
rounded to the nearest thousand dollars, or in certain
cases, to the nearest dollar.
2.2 New and revised standards that are effective
for these financial statements
The Group applied AASB 16 Leases for the first time. The
nature and effect of the changes as a result of adoption
of this new accounting standard is described below.
Several other amendments and interpretations apply
for the first time for the year ending 30 June 2020, but
do not have an impact on the consolidated financial
statements of the Group. The Group has not early
adopted any standards, interpretations or amendments
that have been issued but are not yet effective.
AASB 16 Leases
AASB 16 Leases supersedes AASB 117 Leases and
Interpretation 4 Determining whether an Arrangement
contains a Lease sets out the principles for the
recognition, measurement, presentation and disclosure
of leases and requires lessees to account for most leases
under a single on-balance sheet method.
The Group adopted AASB 16 using the modified
retrospective method of adoption with the date of
initial application of 1 July 2019. Under this method, the
standard is applied retrospectively with the cumulative
effective of initially applying the standard recognised at
the date of initial application. The Group elected to use
the transition practical expedient allowing the standard
to be applied only to contracts that were previously
identified as leases applying AASB 117 and Interpretation
4 at the date of initial application. The Group also elected
to use the recognition exemptions for lease contracts
that, at the commencement date, have a lease term of
12 months or less and do not contain a purchase option
(“short-term leases”), and lease contracts for which the
underlying asset is of low value (“low-value assets”).
Upon adoption of AASB 16, the Group applied a single
recognition and measurement approach for all leases,
except for short-term leases and low- value assts. The
standard provides specific transition requirements and
practical expedients, which has been applied by the
Group.
30
PPK Group Limitedfor the year ended 30 June 2020 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 New and revised standards that are effective for these financial statements (continued)
The Group also applied the available practical expedients wherein it:
– use a single discount rate to a portfolio of assets with reasonably similar characteristics;
–
–
relied on its assessments of whether leases were onerous immediately before the date of initial application;
applied the short-term leases exemptions to leases with a lease term that ends 12 months or less and do not contain
a purchase option;
–
–
–
applied the low-value assets exemptions to leases for which the underlying asset is of low value;
excluded the initial direct costs from the measurement of the right-to-use asset at the date of the initial application;
used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.
The Group separated lease components from non-lease components.
The Group, as the lessor, classified each of its leases as an operating lease as in management’s judgement the leases do
not transfer substantially all the risks and rewards incidental to ownership of the underlying asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases of property (i.e. those leases
that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It
also applies the leases of low-value assets recognition exemption to leases of office equipment that are considered
of low-value. Lease payments on short-term leases and leases of low-value assets are recognised as expenses on a
straight-line basis over the lease term.
The effect of adopting AASB 16 is as follows:
Impact on the statement of financial position (increase/(decrease) as at 1 July 2019:
Non-current assets
Right-of-use assets
Total non-current assets
Current liabilities
Lease liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Total non-current liabilities
Net assets
$’000
5,236
5,236
1,729
1,729
3,507
3,507
–
The right-of-use assets are included in property, plant and equipment in the consolidated statement of financial
position.
a) Nature of the effect of adoption of AASB 16
The Group has the following lease contracts for which the short-term or low-value expedients have not been applied;
two properties, six forklifts and twenty four vehicles. Before the adoption of AASB 16, the Group classified each of
its leases (as lessee) at the inception date as an operating lease. In an operating lease, the leased property was not
capitalised and the lease payments were recognised as rent expense on a straight-line basis over the lease term in the
consolidated statement of profit or loss. Any pre-paid rent and accrued rent were recognised under Prepayments or
Trade and other payables in the consolidated statement of financial position.
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases,
except for short-term leases and low-value assets. The right-of-use assets were recognised based on the amount
equal to the lease liabilities, adjusted for any related prepaid and accrued lease payments previously recognised.
Lease liabilities were recognised based on the present value of the remaining lease payments, discounted using the
incremental borrowing rate at the date of the initial application.
31
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 New and revised standards that are effective for these financial statements (continued)
The lease liabilities as at 1 July 2019 can be reconciled to the operating lease commitments as at 1 July 2019 as
follows:
Operating lease commitments as at 1 July 2019
Weighted average incremental borrowing rate as at 1 July 2019
Discounted operating lease commitment as at 1 July 2019
Commitments relating to short-term leases
Commitments relating to leases of low-value asset
Lease liabilities as at 1 July 2019
$’000
6,126
5%
5,598
(243)
(119)
5,236
AASB Interpretation 23 Uncertainty Over Income Tax Treatments
AASB Interpretation 23 addresses the accounting for income taxes when tax treatments involve uncertainty that affects
the application of AASB 12 Income Taxes. It does not apply to taxes or levies outside the scope of AASB 12, nor does
it specifically include requirements relating to interest and penalties associated with uncertain tax treatments. The
Interpretation specifically addresses the following:
– Whether an entity considers uncertain tax treatments separately;
– The assumptions an entity makes about the examination of tax treatments by taxation authorities;
–
– How an entity considers changes in facts and circumstances.
How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates;
The Group determines whether to consider each uncertain tax treatment separately or together with one or more other
uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.
The Group applies significant judgement in identifying uncertainties over income tax treatments. Since the Group
operates in a complex taxation environment, it assessed whether the Interpretation had an impact on its consolidated
financial statements.
Upon adoption of the Interpretation, the Group considered whether it has any uncertain tax positions, particularly in
relation to tax losses carried forward. Management determined that, based on a review of the continuity of ownership
tests, it is probable that its tax treatment will be accepted by the taxation authorities. The Interpretation did not have an
impact on the consolidated financial statements of the Group.
AASB 2017-7 Amendments to Australian Accounting Standards – Long-term Interests in Associates and Joint
Ventures
The amendments clarify that an entity applies AASB 9 to long-term interests in an associate or joint venture to which
the equity method is not applied but that, in substance, form part of the net investment in the associate or joint venture
(long-term interests). This clarification is relevant because it implies that the expected credit loss model in AASB 9
applies to such long-term interests.
The amendments also clarified that, in applying AASB 9, an entity does not take account of any losses of the associate
or joint venture, or any impairment losses on the net investment, recognised as adjustments to the net investment in the
associate or joint venture that arise from applying AASB 28 Investments in Associates and Joint Ventures.
These amendments had no impact on the consolidated financial statements as the Group does not apply AASB 9
to its long-term interests in associates and joint ventures, and loans to associates are separately recorded.
Amendments to AASB 3 Business Combinations
The amendments clarify that, when an entity obtains control of a business that is a joint operation, it applies the
requirements for a business combination achieved in stages, including remeasuring previously held interests in the
assets and liabilities of the joint operation at fair value. In doing so, the acquirer remeasures its entire previously held
interest in that joint operation.
32
An entity applies those amendments to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after 1 July 2019.
These amendments had no impact on the consolidated financial statements of the Group as there is no transaction
where joint control was obtained in stages.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.2 New and revised standards that are effective
for these financial statements (continued)
Amendments to AASB 11 Joint Arrangements
A party that participates in but does not have joint
control might obtain joint control of the joint operation
in which the activity of the joint operation constitutes a
business as defined in AASB 3. The amendments clarify
that the previously held interests in that joint operation
are not remeasured.
An entity applies these amendments to transactions in
which it obtains joint control on or after the beginning
of the first annual reporting period beginning on or after
1 July 2019.
These amendments had no impact on the consolidated
financial statements of the Group as there is no
transaction where the Group participated in a joint
operation where subsequently joint control was
obtained.
Amendments to AASB 112 Income Taxes
The amendments clarify that the income tax
consequences of dividends are linked more directly to
past transactions or events that generated distributable
profits than to distributions to owners. Therefore, an
entity recognises the income tax consequences of
dividends in profit or loss, other comprehensive income
or equity according to where it originally recognised
those past transactions or events.
An entity applies the amendments for annual reporting
periods beginning on or after 1 July 2019. When the
entity first applies those amendments, it applies them to
the income tax consequences of dividends recognised
on or after the beginning of the earliest comparative
period.
Since the Group’s current practice is in line with these
amendments, the had no impact on the consolidated
financial statements of the Group.
Amendments to AASB 123 Borrowing Costs
The amendments clarify that an entity treats as part of
general borrowings any borrowing originally made to
develop a qualifying asset when substantially all of the
activities necessary to prepare that asset for its intended
use or sale are complete.
The entity applies the amendments to borrowing costs
incurred on or after the beginning of the annual reporting
period in which the entity first applies those amendments.
An entity applies those amendments for annual reporting
periods beginning on or after 1 July 2019.
Since the Group’s current practice is in line with these
amendments, they had no impact on the consolidated
financial statements of the Group.
2.3 New and revised standards that are issued but
not effective for these financial statements
AASB 2014–10 Amendments to Australian
Accounting Standards – Sale or Contribution of
Assets between an Investor and its Associate or
Joint Venture
The amendments address a current inconsistency
between AASB 10 Consolidated Financial Statements and
AASB 128 Investments in Associates or Joint Ventures.
The amendments clarify that, on a sale or contribution
of assets to a joint venture or associate or on loss of
control or significant influence is retained in a transaction
involving and associate or joint venture, any gain or loss
recognised will depend on whether the assets or subsidiary
constitute a business, whereas gain or loss attributable to
other investors’ interests is recognised when the assets or
subsidiary do not constitute a business.
This amendment effectively introduces an exception
to the general requirement in AASB 10 to recognise
full gain or loss on the loss of control over a subsidiary.
The exception only applies to the loss of control over
a subsidiary that does not contain a business, if the
loss of control is the result of a transaction involving an
associate or a joint venture that is accounted for using
the equity method. Corresponding amendments have
also been made to AASB 128.
The mandatory effective date of AASB 2014–10 has
been deferred to 1 January 2022 by AASB 2017–5.
AASB 2018-6 Amendments to Australian
Accounting Standards – Definition of a Business
AASB 2018-6 amends AASB 3 to clarify the definition
of a business, assisting entities to determine whether
a transaction should be accounted for as a business
combination or as an asset acquisition.
The amendments:
–
–
–
clarify that to be considered a business, an acquired
set of activities and assets must include, at a
minimum, an input and a substantive process that
together significantly contribute to the ability to
create outputs;
remove the assessment of whether market participants
are capable of replacing any missing inputs or
processes and continuing to produce outputs;
add guidance and illustrative examples to help
entities assess whether a substantive process has
been acquired;
– narrow the definitions of a business and of outputs
by focusing on goods and services provided to
customers and by removing the reference to an
ability to reduce costs; and
–
add an optional concentration test that permits a
simplified assessment of whether an acquired set
of activities and assets is not a business.
When these amendments are first adopted for the year
ending 30 June 2021, the amendment is not expected
to have a material impact on the financial statements.
33
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.3 New and revised standards that are issued but
not effective for these financial statements
(continued)
AASB 2018-7 Amendments to Australian
Accounting Standards – Definition of Material
AASB 2018-7 principally amends AASB 101 Presentation
of Financial Statements and AASB 108 Accounting
Policies, Changes in Accounting Estimates and Errors.
The amendments refine the definition of material and its
application by improving the wording and aligning the
definition across the Australian Accounting Standards
and other publications. The amendment also includes
some supporting requirements in AASB 101 in the
definition to give it more prominence and clarifies the
explanation accompanying the definition of material.
When these amendments are first adopted for the year
ending 30 June 2021, the amendment is not expected to
have a material impact on the financial statements.
AASB 2019-1 Amendments to Australian
Accounting Standards – References to the
Conceptual Framework
AASB 2019-1 amends Australian Accounting Standards,
Interpretations and other pronouncements to reflect
the issuance of the revised Conceptual Framework for
Financial Reporting (Conceptual Framework).
The application of Conceptual Framework is limited to
for profit entities that have public accountability.
When these amendments are first adopted for the year
ending 30 June 2021, the amendment is not expected to
have a material impact on the financial statements.
2.4 Basis of consolidation
The Group financial statements consolidate those of
the Parent Company, PPK Group Limited, and all of the
entities that the Group controls at 30 June each year.
The Parent Company controls an entity if it is exposed,
or has rights, to variable returns from its involvement
with the entity and could affect those returns through
its power over the entity. Potential voting rights that
are substantive, whether or not they are exercisable or
convertible, are considered when assessing control. All
entities have a reporting date of 30 June.
All intercompany balances and transactions, including
unrealised profits arising from intergroup transactions
have been eliminated on consolidation. Where unrealised
losses on intra-group asset sales are reversed on
consolidation, the underlying asset is also tested for
impairment from a group perspective.
Non-controlling interests, presented as part of equity,
represent the portion of an entity’s profit or loss and net
assets that is not held by the Group.
The Group attributes total comprehensive income or
loss of an entity between the owners of the parent and
the non-controlling interests based on their respective
ownership interests. A change in the ownership interest
of a subsidiary, without a loss of control, is accounted for
as an equity transaction.
2.5 Business combination
The Group applies the acquisition method in accounting
for business combinations. The consideration transferred
by the Group to obtain control of an entity is calculated
as the sum of the acquisition-date fair values of assets
transferred, liabilities incurred and the equity interests
issued by the group, which includes the fair value of any
asset or liability arising from a contingent consideration
arrangement. Acquisition costs are expensed as
incurred.
The Group recognises identifiable assets acquired and
liabilities assumed in a business combination regardless
of whether they have been previously recognised in the
acquiree’s financial statements prior to the acquisition.
Assets acquired and liabilities assumed are generally
measured at their acquisition-date fair values.
Goodwill is stated after separate recognition of
identifiable intangible assets. It is calculated as the
excess of the sum of: (a) fair value of consideration
transferred, (b) the recognised amount of any non-
controlling interest in the acquiree, and (c) acquisition-
date fair value of any existing equity interest in the
acquiree, over the acquisition-date fair values of
identifiable net assets. If the fair values of identifiable
net assets exceed the sum calculated above, the excess
amount (i.e. gain on a bargain purchase) is recognised in
profit or loss immediately.
2.6 Investment in joint venture
A joint arrangement is an arrangement of which
two or more parties have joint control. Joint control
is the contractually agreed sharing of control of an
arrangement, which exists only when decisions about
the relevant activities require the unanimous consent
of the parties sharing control. A joint venture is a joint
arrangement whereby the parties that have joint control
of the arrangement have rights to the net assets of the
arrangement.
34
Profit or loss and other comprehensive income of entities
acquired or disposed of during the year are recognised
from the effective date of acquisition, or up to the
effective date of disposal, as applicable.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.6 Investment in joint venture (continued)
The Group has a contractual arrangement whereby
decisions about the relevant activities of the joint
venture require the unanimous consent of the joint
venturers that control the joint venture. A joint venture
is accounted for in the consolidated financial statements
as an investment and accounts for the investment using
the equity method of accounting. Under the equity
method the Group’s share of the post-acquisition other
comprehensive income or loss of the joint venture is
recognised in consolidated profit or loss and the Group’s
share of the post-acquisition movements in reserves
of the joint venture is recognised in consolidated other
comprehensive income. However, before applying equity
accounting, the Group adjusts for any post-acquisition
movements attributable to investments in subsidiaries of
the Group. The cumulative post-acquisition movements
are adjusted against the carrying amount of the
investment. Dividends and distributions received from
the joint venture reduces the carrying amount of the
investment in the consolidated financial statements.
Any goodwill or fair value adjustment attributable to
the Group’s share in the joint venture is not recognised
separately and is included in the amount recognised as
an investment.
When the Group’s share of post-acquisition losses in
a joint venture exceeds its interest in the joint venture
(including any unsecured receivables), the Group does
not recognise further losses unless it has obligations to,
or has made payments, on behalf of the joint venture.
2.7 Investments in associates
Associates are entities over which the Group has
significant influence but not control. Associates are
accounted for in the consolidated financial statements
using the equity method of accounting. Under the
equity method the Group’s share of the post-acquisition
other comprehensive income or loss of the associates is
recognised in consolidated profit or loss and the Group’s
share of the post-acquisition movements in reserves
of associates is recognised in consolidated other
comprehensive income. The cumulative post-acquisition
movements are adjusted against the carrying amount
of the investment. Dividends and distributions received
from associates reduce the carrying amount of the
investment in the consolidated financial statements.
Any goodwill or fair value adjustment attributable to
the Group’s share in the associate is not recognised
separately and is included in the amount recognised as
investment.
When the Group’s share of post-acquisition losses in an
associate exceeds its interest in the associate (including
any unsecured receivables), the Group does not
recognise further losses unless it has obligations to, or
has made payments, on behalf of the associate.
2.8 Foreign currency translation
The consolidated financial statements are presented in
Australian Dollars ($AUD), which is also the functional
currency of the Parent Company.
Foreign currency transactions during the period are
converted to Australian currency at rates of exchange
applicable at the dates of the transactions (spot
exchange rate). Foreign exchange gains and losses,
whether realised or unrealised, resulting from the
settlement of such transactions, amounts receivable and
payable in foreign currency at the reporting date, and
from the re-measurement of monetary items at year end
exchange rates are recognised in profit and loss.
Non-monetary items are not retranslated at year end
and are measured at historical cost (translated using the
exchange rate at the date of the transaction), except for
non-monetary items measured at fair value which are
translated using the exchange rates at the date when fair
value was determined.
2.9 Revenue and revenue recognition
Revenue arises mainly from the:
–
–
sale of manufactured non-mining products; and
sale, service, support and rental of underground coal
mining vehicles, equipment and parts.
To determine whether to recognise revenue, the Group
follows a 5 step process:
1.
2.
3.
4.
5.
Identifying the contract with a customer;
Identifying the performance obligation;
Determining the transaction price;
Allocating the transaction price to the performance
obligations; and
Recognising revenue when/as performance
obligations are satisfied.
Revenue is recognised, based on the transaction
price allocated to the performance obligation, after
consideration of the terms of the contract and
customary business practices. The transaction price is
the amount of the consideration that the Group expects
to be entitled to receive in exchange for transferring the
promised goods or services to a customer, excluding
amounts collected on behalf of third parties (i.e. sales
taxes and duties), The consideration promised in a
contract with a customer may include fixed amounts,
variable amounts or both.
The following specific recognition criteria must also be
met before revenue is recognised:
Sale of goods
Revenue from the sale of manufactured non-mining
products, mining equipment, spare parts or CoalTrams
built for inventory purposes are recognised at a point in
time, in most cases when they leave the warehouse and
control has passed to the buyer. Revenue is measured at
the fair value of consideration received or receivable, net
of returns, trade allowances and duties and taxes paid.
35
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.9 Revenue and revenue recognition (continued)
Rendering of Services
Performance obligations for the repair and maintenance
of underground coal mining vehicles and equipment are
satisfied over time and the Group recognises the revenue
over time for one of the following reasons:
1.
2.
the Group’s performance creates or enhances an
asset (i.e. work in progress) that the customer
controls as the asset is created or enhanced or;
the Group’s performance does not create an
asset with an alternative use and the Group has
an enforceable right to payment for performance
completed to date.
In almost all cases, the asset that is being created or
enhanced is owned by the customer and the Group
only performs repair and maintenance on the asset. At
contract inception, it is determined that the customer
has contractual ownership of the asset and the Group
has an enforceable right to payment for performance
completed to date. The transaction price is determined
by customary business practices, generally a signed
purchase order from the customer, which identifies
the consideration the Group expects to be entitled
in exchange for transferring the promised goods or
services to the customer. The transaction price is the
stand-alone selling price at contract inception.
For each performance obligation satisfied over time,
the Group recognises revenue over time by measuring
the progress towards complete satisfaction of the
performance obligation. The Group uses the cost-based
input method to determine satisfaction of the performance
obligation by measuring the labour hours expended, the
cost of materials consumed and other costs incurred
relative to the total expected costs to be incurred at the
contract inception to satisfy the performance obligation
to determine the percentage of completion. The Group
then applies the percentage of completion to the total
transaction price to calculate the percentage of revenue
to be recognised at a point in time. On a monthly basis,
the Group remeasures its progress towards complete
satisfaction of a performance obligation over time.
In almost all cases, the performance obligation is
satisfied within one to two months of contract inception.
Lease Income on operating leases
Lease income on mining equipment is accounted for on
a straight-line basis over the term of the lease agreement
and is included in revenue in the statement of profit or
loss due to its operating nature.
36
Interest income
Revenue is recognised as it accrues using the effective
interest rate method. The effective interest method uses
the effective interest rate which is the rate that exactly
discounts the estimated future cash receipts over the
expected life of the financial asset.
Government Grants
Income from government grants are recognised at their
fair value where there is a reasonable assurance that
the grant will be received, and the Company will comply
with all attached conditions. When the grant relates
to an income item, it is recognised in the profit and
loss when the Company will comply with all attached
conditions. When the grant relates to an expense item,
it is recognised in the profit and loss as other operating
income on a systematic basis over the periods in which
the Company recognises as expense the related costs for
which the grants are intended to compensate. When the
grant relates to an asset, it is presented in the statement
of financial position by deducting the grant in arriving at
the carrying amount of the asset.
2.10 Operating expenses
Operating expenses are recognised in the profit or loss
upon utilisation of the services or at the date of their origin.
2.11 Share-based payments
The Group operates equity-settled share right-based
incentive plans for its directors and employees. None
of the Group’s plans feature any share rights for a cash
settlement.
All goods and services received in exchange for the
grant of any share-based payment are measured at their
fair values. Where directors and employees are rewarded
using share right-based payments, the cost of directors’
and employees’ services is determined by the fair value
at the date when the grant is made using an appropriate
valuation model and revalued when modified. Market
performance conditions and service conditions are
reflected within the grant date fair value.
All share-based remuneration is ultimately recognised
in employee benefits expense with a corresponding
credit to share rights reserve. If vesting periods or other
vesting conditions apply, the expense is allocated over
the vesting period, based on best available estimate of
the number of share rights expected to vest.
Non-market vesting conditions are included in assumptions
about the number of share rights that are expected to
become exercisable. Estimates are subsequently revised
if there is any indication that the number of share rights
expected to vest differs from previous estimates. Any
cumulative adjustment prior to vesting is recognised in
the current period. No adjustment is made to any expense
recognised in prior periods if share rights ultimately
exercised are different to that estimated on vesting.
When the terms of an equity-settled award are modified,
the minimum expense recognised is the grant date fair
value of the unmodified award, provided the original
vesting terms of the award are met. An additional
expense, measured as at the date of modification, is
recognised for any modification that increases the total
fair value of the share-based payment transaction,
or is otherwise beneficial to the employee. Where an
award is cancelled by the entity or by the counterparty,
any remaining element of the fair value of the award is
expensed immediately through profit or loss.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) 2.16 Inventories
Inventories include raw materials, work in progress and
finished goods and are stated at the lower of cost and
net realisable value. Costs comprise all direct materials,
direct labour and an appropriate portion of variable and
fixed overheads. Fixed overheads are allocated based
on normal operating capacity. Costs are assigned to
inventory using an actual costing system. Net realisable
value is the estimated selling price in the ordinary course
of business, less the estimated cost of completion and
selling expenses.
2.17 Property, plant and equipment
Land and buildings are brought to account at cost less,
where applicable, any accumulated depreciation. After
initial recognition, land and buildings are measured at
fair value at the date of revaluation less any subsequent
accumulated depreciation and subsequent accumulated
impairment losses.
Plant and equipment are brought to account at cost
less, where applicable, any accumulated depreciation
or amortisation and impairment. The cost of fixed
assets constructed within the Group includes the cost
of materials used in construction, direct labour and an
appropriate proportion of fixed and variable overheads.
The depreciable amount of all fixed assets, including
buildings and capitalised leased assets but excluding
freehold land, is depreciated over their useful lives to
the consolidated entity commencing from the time the
asset is held ready for use. Leasehold improvements
are amortised over the shorter of either the unexpired
period of the lease or the estimated useful lives of the
improvements.
The gain or loss on disposal of all fixed assets is
determined as the difference between the carrying
amount of the asset at the time of disposal and the
proceeds of disposal, and is included in the profit before
income tax of the consolidated entity in the year of
disposal.
The depreciation rates used for each class of depreciable
assets are:
Class of Fixed Asset
Buildings
Depreciation Rate
Straight Line
2.5 %
Leasehold Improvements
over the term of the lease
Plant & Equipment
3-50 %
NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.12 Finance costs
All borrowing costs directly attributable to the
acquisition, construction or production of a qualifying
asset are capitalised during the period that is necessary
to complete and prepare the asset for its intended use
or sale. Other finance and borrowing costs are expensed
in the period in which they are incurred and reported in
finance costs.
2.13 Cash
For the purposes of the statement of cash flows, cash
includes cash on hand, and at call deposits with banks
or financial institutions, net of bank overdrafts as they
are considered an integral part of the Group’s cash
management.
2.14 Trade receivables and other receivables
The Group makes use of a simplified approach in
accounting for trade and other receivables as well as
contract assets and records the loss allowance at the
amount equal to the expected lifetime credit losses. The
Group uses its historical experience, external indicators
and forward-looking information to calculate the
expected credit losses using a provision matrix which
is based on the historical credit loss experience for
the customer segments. At every reporting date, the
historical credit loss experience is reviewed and updated,
if appropriate, and changes in the forward-looking
estimates are analysed.
All financial assets, except for those at fair value
through profit or loss (FVPL), are subject to review for
impairment at least at each reporting date to identify
whether there is any objective evidence that a financial
asset or a group of financial assets is impaired.
2.15 Contract assets
The costs incurred to fulfil a contract with a customer
are recognised when:
–
–
–
the costs relate directly to a contract or an
anticipated contract that the Group can specifically
identify;
the costs generate or enhance resources of the
Group that will be used in satisfying (or in continuing
to satisfy) performance obligations of the future; and
the costs are expected to be recovered.
The revenue for these costs will be recognised in
rendering of services (see Note 2.9).
The Group makes use of a simplified approach in
accounting for trade and other receivables as well as
lease receivables and contract assets and records the
loss allowance at the amount equal to the expected
lifetime credit losses. In using this practical expedient,
the Group uses its historical experience, external
indicators and forward-looking information to calculate
the expected credit losses using a provision matrix.
37
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.18 Intangible assets
Research and Development
Research is recognised as an expense as incurred.
Costs incurred on development (relating to the
design and testing of new or improved products) are
recognised as intangible assets when it is probable
that the project will, after considering its commercial
and technical feasibility, be completed and generate
future economic benefits and its costs can be measured
reliably. The expenditure capitalised comprises all
directly attributable costs, including costs of materials,
services, direct labour and an appropriate proportion
of overheads. Other development expenditures that do
not meet these criteria are recognised as an expense as
incurred. Development costs previously recognised as an
expense are not recognised as an asset in a subsequent
period. Capitalised development costs are recorded
as intangible assets at cost less any accumulated
amortisation and impairment losses and amortised over
the period of expected future sales from the related
projects which vary from 5 - 7 years. The carrying value
of development costs is tested annually for impairment
when the asset is not yet ready for use, or when events
or circumstances indicate that the carrying value may
be impaired.
2.19 Financial instruments
Initial recognition and measurement
A financial instrument is any contract that gives rise to
a financial asset of one entity and a financial liability
or equity instrument of another entity. The Company’s
investment in Zeta Energy LLC is at fair value through
profit and loss.
i) Financial assets
Financial assets are classified, at initial recognition, as
subsequently measured at amortised cost, fair value
through other comprehensive income (OCI), and fair
value through profit or loss.
Financial assets are classified according to the
characteristics of their contractual cash flow and the
Group’s business model for managing them. Except for
those trade receivables that do not contain a significant
financing component or for which the Group has applied
the practical expedient, the Group initially measures
a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss,
transaction costs. Trade receivables that do contain a
significant financing component for which the Group
has applied the practical expedient are measured at
the transaction price as disclosed in Note 2.14.
38
In order for a financial asset to be classified and
measured at amortised cost or fair value through OCI, it
needs to give rise to cash flows that are “solely payments
of principal and interest (SPPI)” on the principal
amount outstanding. This assessment is referred to as
the SPPI test and is performed at an instrument level.
Financial assets with cash flows that are not SPPI are
classified and measured at fair value through profit and
loss (“FVTPL)”, irrespective of the business model.
The Group’s business model for managing financial
assets refers to how it manages its financial assets
in order to generate cash flows. The business model
determines whether cash flows will result from collecting
contractual cash flows, selling the financial assets,
or both. Financial assets classified and measured at
amortised cost are held within a business model with
the objective to hold financial assets in order to collect
contractual cash flows while financial assets classified
and measured at fair value through OCI are held within
a business model with the objective of holding to collect
contractual cash flows and selling.
Purchases or sales of financial assets that require
delivery of assets within a time frame established by
regulation or convention in the market place (regular
way trades) are recognised on the trade date (i.e.
the date that the Group commits to purchase or sell
the asset).
Subsequent measurement
For purposes of subsequent measurement, financial
assets are classified in four categories:
– Financial assets at amortised cost (debt instruments)
– Financial assets at fair value through OCI with
recycling of cumulative gains and losses (debt
instruments)
– Financial assets designated at fair value through the
OCI with no recycling of cumulative gains or losses
upon derecognition (equity instruments)
– Financial assets at FVTPL
Financial assets at amortised cost
(debt instruments)
Financial assets at amortised cost are subsequently
measured using the effective interest (EIR) method
and are subject to impairment. Gains and losses
are recognised in profit or loss when the asset is
derecognised.
The Group’s financial assets at amortised cost includes
trade receivables.
Financial assets fair value through OCI
(debt instruments)
For debt instruments at fair value through OCI, interest
income, impairment losses or reversals are recognised
in the statement of profit and loss and computed in the
same manner as for financial assets measured at amortised
cost. The remaining fair value changes are recognised in
OCI. Upon derecognition the cumulative fair value change
recognised in OCI is recycled to profit or loss.
The Group has no debt instruments at fair value
through OCI.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.19 Financial instruments (continued)
Financial assets designated at fair value through
OCI (equity instruments)
Upon initial recognition, the Group can elect to classify
irrevocably its equity investments as equity instruments
designated at fair value though OCI when they meet
the definition of equity under AASB 32 Financial
Instruments: Presentation and are not held for trading.
The classification is determined on an instrument-by-
instrument basis.
Gains and losses on these financial assets are never
recycled to profit or loss. Dividends are recognised as
other income in the statement of profit or loss when the
right of payment has been established, except when
the Group benefit from such proceeds as a recovery
of part of the cost of the financial asset, in which case,
such gains are recorded in OCI. Equity instruments
designated at fair value through OCI are not subject to
impairment assessment.
The Group has no equity instruments at fair value
through OCI.
Financial assets at FVTPL
Financial assets at FVTPL are carried in the statement
of financial position at fair value with net changes in fair
value recognised in the statement of profit and loss.
This category includes derivative instruments, listed and
unlisted equity investments which the Group had not
irrevocably elected to classify at fair value through OCI.
Dividends on listed equity investments are recognised as
other income in the statement of profit or loss when the
right of payment has been established.
Derecognition
A financial asset (or, where applicable, a part of a
financial asset or part of a group similar financial assets)
is primarily derecognised (i.e. removed from the Group’s
consolidated statement of financial position) when:
– The rights to receive cash flows from the asset have
expired; or
– The Group has transferred its rights to receive cash
flows from the asset or has assumed an obligation
to pay the received cash flows in full without
material delay to a third party under a “pass-
through” arrangement, and either (a) the Group has
transferred substantially all the risks and rewards of
the asset, or (b) the Group has neither transferred
nor retained substantially all of the risks and rewards
of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive
cash flows from an asset or has entered into a “pass-
through” arrangement, it evaluates if, and to what extent,
it has retained the risks and rewards of ownership. When
it has neither transferred nor retained substantially all
of the risks and rewards of the asset, nor transferred
control of the asset, the Group continues to recognise
the transferred asset to the extent of its continuing
involvement. In that case, the Group also recognises
an associated liability. The transferred asset and the
associated liability are measured on a basis that reflects
the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the
lower of the original carrying amount of the asset and
the maximum amount of consideration that the Group
could be required to repay.
Impairment
Further disclosures relating to impairment of financial
assets are also provided in Note 2.26.
ii) Financial liabilities
Initial measurement and recognition
Financial liabilities are classified, at initial recognition,
as financial liabilities at FVTPL, loans and borrowings,
payables, or as derivatives as hedging instruments in an
effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value
and, in the case of loans and borrowings and payables,
net of directly attributable financial statements.
The Group’s financial liabilities include trade and
other payables, loans and borrowings including bank
overdrafts, and derivative financial instruments.
Subsequent measurement
For the purposes of subsequent measurement, financial
liabilities are classified in two categories:
Financial liabilities at FVTPL
–
– Financial liabilities at amortised cost (loans and
borrowings)
Financial liabilities at FVTPL
Financial liabilities at FVTPL include financial liabilities
held for trading and financial liabilities designated up
initial recognition as FVTPL.
Financial liabilities are classified as held for trading if
they are incurred for the purpose of repurchasing in
the near term. This category also includes derivative
financial instruments entered into by the Group that
are designated as hedging instruments in hedge
relationships as defined by AASB 9. Separated
embedded derivatives are also classified as held for
trading unless they are designated as effective hedging
instruments.
Gains or losses on liabilities held for trading are
recognised in the statement of profit or loss.
Financial liabilities designated upon initial recognition at
FVTPL are designated at the initial date of recognition,
and only if the criteria in AASB 9 are satisfied.
39
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.19 Financial instruments (continued)
Financial liabilities at amortised cost (loans and
borrowings)
After initial recognition, interest bearing loans and
borrowings are subsequently measured at amortised
cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are
derecognised as well as through the EIR amortisation
process.
Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs
that are an integral part of the EIR. The EIR amortisation
is included as finance costs in the statement of profit or
loss.
Derecognition
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as the derecognition of the original liability and the
recognition of a new liability. The difference in the
respective carrying amounts is recognised in the
statement of profit or loss,
iii) Offsetting of financial instruments
Financial assets and financial liabilities are offset and the
net amount is reported in the consolidated statement of
financial position if there is a current enforceable legal
right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and
settle the liabilities simultaneously.
2.20 Trade and other payables
These amounts represent unpaid liabilities for goods
received and services provided to the Group prior to the
end of the financial year. The amounts are unsecured
and are normally settled within 30 to 60 days, except for
imported items for which 90 or 120 day payment terms
are normally available.
2.21 Borrowings
All loans and borrowings are initially recognised at fair
value, net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption amount is recognised in the
profit or loss statement over the period of the loans and
borrowings using the effective interest method. Bank
loans are subject to set-off arrangements.
2.22 Employee benefit provisions
Salary, wages and annual leave
Liabilities for wages and salaries, including non-
monetary benefits and annual leave expected to be
settled wholly within 12 months of the end of the
reporting period are recognised in other liabilities or
provision for employee benefits in respect of employees’
services rendered up to the end of the reporting period
and are measured at amounts expected to be paid when
the liabilities are settled.
Long service leave
Liabilities for long service leave are recognised as part
of the provision for employee benefits and measure as
the present value of expected future payments to be
made in respect of services provided by employees
to the end of the reporting period using the projected
unit credit method. Consideration is given to expected
future salaries and wages levels, experience of employee
departures and period of service. Expected future
payments are discounted using high quality corporate
bond rates at the end of the reporting period with
terms to maturity that match as close as possible, the
estimated future cash outflows.
Retirement benefit obligations
The Group contributes to defined contribution
superannuation funds for employees. All funds are
accumulation plans where the Group contributed various
percentages of employee gross incomes, the majority
of which were as determined by the superannuation
guarantee legislation. Benefits provided are based
on accumulated contributions and earnings for each
employee. There is no legally enforceable obligation on
the Group to contribute to the superannuation plans
other than requirements under the superannuation
guarantee legislation. Contributions are recognised as
expenses as they become payable.
2.23 Income tax
The income tax expense for the period is the tax payable
on the current period’s taxable income based on the
notional income tax rate for each jurisdiction adjusted by
changes in deferred tax assets and liabilities attributable
to temporary differences between the tax base of assets
and liabilities and their carrying amounts in the financial
statements, and to unused tax losses.
Deferred tax assets are only recognised for deductible
temporary differences, between carrying amounts of
assets and liabilities for financial reporting purposes
and their respective tax bases, at the tax rates expected
to apply when the assets are recovered or liabilities
settled, based on those tax rates which are enacted or
substantially enacted for each jurisdiction. Exceptions
are made for certain temporary differences arising on
initial recognition of an asset or liability if they arose
in a transaction other than a business combination
that at the time of the transaction did not affect either
accounting profit or taxable profit.
40
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.23 Income tax (continued)
Deferred tax assets are only recognised for deductible
temporary differences and unused tax losses if there is
reasonable certainty that future taxable amounts will
be available to utilise those temporary differences and
losses.
Deferred tax assets and liabilities are not recognised for
temporary differences between the carrying amount and
tax bases of investments in subsidiaries, associates and
interests in joint ventures where the parent entity is able
to control the timing of the reversal of the temporary
differences and it is probable that the differences will not
reverse in the foreseeable future.
Current and deferred tax balances relating to amounts
recognised directly in other comprehensive income
or equity are also recognised directly in other
comprehensive income or equity.
PPK Group Limited and its wholly owned Australian
subsidiaries have implemented the tax consolidation
legislation and entered into a tax sharing agreement for
the whole of the financial year, where each subsidiary will
compensate PPK Group Limited for the amount of tax
payable that would be calculated as if the subsidiary was
a tax paying entity. PPK Group Limited is the head entity
in the tax consolidated group. The separate taxpayer
within a group approach has been used to allocate
current income tax expense and deferred tax expense
to wholly-owned subsidiaries that form part of the tax
consolidated group. PPK Group Limited has assumed
all the current tax liabilities and the deferred tax assets
arising from unused tax losses for the tax consolidated
group via intercompany receivables and payables
because a tax funding arrangement has been in place for
the whole of the financial year. The amounts receivable/
payable under tax funding arrangements are due upon
notification by the head entity. Interim funding notices
may also be issued by the head entity to its wholly-
owned subsidiaries in order for the head entity to be able
to pay tax instalments.
2.24 Dividends
Provision is made for dividends declared, and no longer
at the discretion of the Group, on or before the end of
the financial year but not distributed at the end of the
reporting period.
2.25 Leases
The Group assesses at contract inception whether a
contract is, or contains, a lease. That is, if the contract
conveys the right to control the use of an identifiable
asset for a period of time in exchange for consideration.
Group as a lessee
The Group applies a single recognition and measurement
approach for all leases, except for short-term leases and
leases of low-value assets. The Group recognises lease
liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
2.25.1 Right-of-use assets
The Group recognises right-of-use assets at the
commencement date of the lease (i.e. the date the
underlying asset is available for use). Right-of- use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for
any remeasurement of lease liabilities. The cost of right-
of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease
payments made at or before the commencement date
less any lease incentives received. Right-of-use assets
are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the
assets, as follows:
– Buildings
–
– Motor vehicles and other equipment
Plant and equipment
3 years
2 to 3 years
2 to 4 years
If ownership of the leased asset transfer to the Group
at the end of the lease term or the costs reflects the
exercise of a purchase option, depreciation is calculated
using the estimated useful life of the asset.
The right-of-use assets are also subject to impairment
(see Note 2.26).
2.25.2 Lease liabilities
At the commencement date of the lease, the Group
recognises lease liabilities measured at the present
value of lease payments to be made over the lease term.
The lease payments include fixed payments (including
in-substance fixed payments) less any lease incentives
receivable, variable lease payments that depend on
an index or rate, and amounts expected to be paid
under residual lease guarantees. The lease payments
also include the exercise price of a purchase option
reasonably certain to be exercised by the Group and
payments of penalties for terminating the lease, if the
lease term reflects the Group exercising the option to
terminate. Variable lease payments that do not depend
on an index or a rate are recognised as expenses (unless
they are incurred to produce inventories) in the period in
which the event or condition that triggers the payment
occurs.
In calculating the present value of lease payments,
the Group uses its incremental borrowing rate at the
lease commencement date if the interest rate implicit
in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying
amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in the
lease payments (i.e. changes to future payments resulting
from a change in an index or rate to be used to determine
such lease payments) or a change in the assessment of an
option to purchase the underlying asset.
The Group’s lease liabilities are included in lease and
other liabilities and lease liabilities (see Note 25).
41
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.25 Leases (continued)
2.25.3 Short-term leases and leases of low-value
assets
The Group applies the short-term lease recognition
exemption to its short-term leases of buildings (i.e. those
leases that have a lease term of 12 months or less from
the commencement date and do not contain a purchase
option). It also applies the lease of low-value assets
recognition exemption to leases of office equipment that
are considered to be low value. Lease payments on short-
term leases and leases of low-value assets are recognised
as expenses on a straight-line basis over the lease term.
2.25.4 Group as lessor
Leases in which the group does not transfer substantially
all the risks and rewards incidental to ownership of
an asset are classified as operating leases. Rental
income arising is accounted for on a straight-line
basis over the lease terms and is included in revenue
in the consolidated statement of profit or loss due
to its operating nature. Initial direct costs incurred
in negotiating and arranging an operating lease are
added to the carrying amount of the leased asset and
recognised over the lease term on the same basis as
rental income. Variable lease payments are recognised
as revenue in the period in which they are earned.
When assets are leased out under finance leases, the
present value of the lease payments is recognised as
a lease receivable. The difference between the gross
receivable and the present value of the receivable is
recognised as unearned finance income.
Lease income is recognised over the lease term using
the net investment method which reflects a constant
periodic rate of return.
2.26 Significant accounting judgements,
estimates and assumptions
The preparation of the Group’s consolidated financial
statements requires management to make judgements,
estimates and assumptions that affect the reported
amounts of revenues, expenses, assets and liabilities,
and the accompanying disclosures, and the disclosure
of contingent liabilities. Uncertainty about these
assumptions and estimates could result in outcomes that
require a material adjustment to the carrying amount of
assets or liabilities in future periods.
Significant Management Judgements
In the process of applying the Group’s accounting policies,
management has made the following judgements,
which have the most significant effect on the amounts
recognised in the consolidated financial statements.
42
Determining the lease term of contracts with
renewal and termination options – Group as lessee
The Group determines the lease term as the non-
cancellable term of the lease, together with any
periods covered by an option to extend the lease
if it is reasonably certain to be exercised, or any periods
covered by an option to terminate the lease, if it is
reasonably certain not be exercised.
The Group has the option, under the property leases,
to lease the assets for an additional term of five years.
The Group applies judgement in evaluating whether it
is reasonably certain to exercise the option to renew.
That is, it considers all the relevant factors that create
an economic incentive for it to exercise the renewal and
reassesses the lease term if there is a significant event
or change in circumstances that is within its control
and affects its ability to exercise (or not to exercise) the
option to renew (i.e. change in business strategy). The
Group did not include the renewal period as part of the
lease term. PPK has 2 property leases that have options
to extend for a further 5 years as at 31 July 2022. Should
the Group exercise the option, the lease will be renewed
at a market rate determined at that time.
The renewal option for leases of motor vehicles are not
included as part of the lease term because the Group
typically leases motor vehicles for not more than four
years, hence it is not exercising any renewal periods. The
renewal option for leases of forklifts are not included as
part of the lease term because the Group typically does
not exercise any renewal periods.
Recognition of fixed contract revenues
Recognising the stage of completion for fixed price
contracts and applicable work in progress requires
significant judgement in determining the actual work
completed and the estimated amount of labour and
materials required to complete the work (see Note 2.15).
Impairment of raw materials and finished goods
Management has used significant judgement to determine
the net realisable value, based on the most reliable
evidence available at the time the estimates are made,
of the amount that inventories are expected to realise
and the estimate of costs to complete (see Note 2.16).
The net realizable value is based on management’s
analysis of stock movements for all individual stock items:
For CoalTrams, heavy machinery, pneumatic, hydraulic and
small mining equipment parts there is a four step process:
1.
Management reviews the stock items which had no
sales during the year and:
– Provides for 50% of the inventory value as
impaired for those stock items which have no
sales for more 1 year; and
– Provides for 100% of the inventory value as
impaired for those stock items which have no
sales for more than 3 years.
2.
Management then reviews the remainder of the stock
items and, for those which management consider to
be slow moving:
–
Provides for 15% of the inventory value as
impaired for those stock items with stock
holdings of 1 to 2 years;
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.26 Significant accounting judgements,
estimates and assumptions (continued)
– Provides for 35% of the inventory value as
impaired for those stock items with stock
holdings of 2 to 3 years;
– Provides for 55% of the inventory value as
impaired for those stock items with stock
holdings of 3 to 4 years;
– Provides for 75% of the inventory value as
impaired for those stock items with stock
holdings of 4 to 5 years;
– Provides for 95% of the inventory value as
impaired for those stock items with stock
holdings of more than 5 years.
3. Management then reviews the remainder of the
stock items, forecasts future stock sales for the next
1 year and, for those stock items which appear to be
in excess of sales, an impairment provision is made
using the same formulas as that of slow moving
stock.
4. Finally, management then performs a review of the
remainder of the stock items to determine the net
realisable value and, if any additional impairment
provisions should be made or if there is a reversal of
the impairment provisions made in previous years.
The review done in the 2020 financial year resulted in no
inventory impairment provision (2019: $0.483M reversal
of previous inventory impairment (see Note 2.16 and
Note 16) to account for inventories to net realisable value
and a total provision of $5.158M (2019: $5.524M).
Impairment of work in progress
Management has used significant judgement to
determine the net realisable value, based on the most
reliable evidence available at the time the estimates are
made, of the amount that work in progress are expected
to realise and the estimate of costs to complete (see
Note 2.16 and Note 16). The net realizable value is based
on management’s analysis of work in progress for
individual jobs on a three step process:
1.
2.
Provides for 50% of the work in progress value as
impaired for those jobs which have been in progress
for more than 6 months;
Management then performs a review of these jobs to
determine if any specific jobs will be completed and
total costs will be less than the expected revenue to
determine if any jobs should be removed from the
impairment provision;
3. Reviews individual jobs that are less than 6 months
old to determine if they will be completed, total costs
will be less than the expected revenue to determine if
any additional impairment provision should be made
to determine net realisable value.
Impairment of intangibles – development costs
The Group capitalises costs for product development
projects. Initial capitalisation of costs is based on
Management’s judgement, after making inquiries from
engineers, scientists and other qualified professionals
that technological and economic feasibility is confirmed.
In determining the amounts to be capitalised,
Management makes assumptions regarding the
expected future cash generation of the project, discount
rates to be applied and expected period of benefits.
In the technology segment, this includes significant
investment in the development of new manufacturing
processes to produce 99% pure BNNT in commercial
quantities in batch production and ultimately in
continuous production. Further investment is incurred
in BNNT application projects to undertake the research
and development of new and existing technologies and
products where BNNT can be used to create and/or
improve these technologies and products.
In the mining services segment, this includes significant
investment in the development of new technology
and enhancements for the CoalTram and a new
battery electric vehicle for transporting personnel
(mantransporter).
Intangible assets not yet ready for use require an annual
impairment test. Management has used significant
judgement to determine there was no impairment that
occurred after the initial recognition of the intangible
asset. Management made this assessment using
estimated future cash flows from the investment. Based
on the information available to support the estimates
made, Management concluded there was no impairment
charge of the intangibles at the reporting date (2019: nil)
(see Note 2.18).
Key assumptions used by Management in their
assessment include customer projections of future
capital spend for load haul dump machines and
mantransporters and a discount rate of 9.20%.
New CoalTram sales of between 4 and 6 over a five year
period commencing 2021 based on discussions with
customers, known mine expansion plans, estimated
new mines opening and estimated retirement of
existing LHDs in operation. Gross margins are based
on projections as estimated by the Executive Director –
Mining using cost to build, core inventory parts in stock
at impaired value and sale price of comparative LHDs
sold in the industry.
Mantransporter sales of between 6 and 12 for both hard
rock mining and underground coal mining commencing
2021 based on discussions with hard rock mining
companies and current customers. Gross margins are
based on projections as estimated by the Executive
Director – Mining using costs to build a prototype
machine as an estimated cost and sale price based
on discussions with hard rock mining companies and
current customers.
43
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.26 Significant accounting judgements, estimates
and assumptions (continued)
Discount rate – the after tax discount rate of 9.20% was
calculated based on the Group’s weighted average cost
of capital, a five year beta for the Group, risk free rate
based on 10 year Australian government treasury bonds,
a market risk premium of 5.9% and a calculated after tax
cost of debt of 3.45% based on the Group’s current cost
of debt. In 2019, the discount rate was 6.22% primarily
due to the beta for the Group being 84% higher than the
industry average in 2019.
In 2019, new CoalTram sales were projected to be
between 6 and 12 over a five year period commencing
2020. Gross margins assumed were comparable to 2020.
In 2019, Mantransporter sales were projected to be
between 12 to 24 for both hard rock mining over a five
year period commencing 2021 and for underground coal
mining commencing 2022. Gross margins assumed were
approximately 50% lower than 2020 primarily due to an
estimated lower cost to build in the 2020 projections.
Impairment of non-current assets
Management has used significant judgement to evaluate
conditions specific to the Group that indicate individual
assets may be impaired in relation to property, plant
and equipment. Based on the information available
to Management, there were no such indicators at the
reporting date.
Provision for expected credit losses (ECL) of trade
receivables and contract assets
The Group uses a provision matrix to calculate ECLs for
trade receivables and contract assets. The provision rates
are based on days past due for groupings of customer
segments that have similar risk characteristics (i.e. customer
type, probable credit risk, market size). The provision
matrix is based on the historical credit loss experience for
the customer segments and adjusted for forward-looking
information. For example, if forecast economic conditions
are expected to deteriorate over the coming year in a
specific industry, which could lead to an increased number
of defaults, then the historical default rates are adjusted. At
every reporting date, the historical credit loss experience is
reviewed and updated, if appropriate, and changes in the
forward-looking estimates are analysed.
The assessment of the correlation between historical
credit loss experience, forecast economic conditions
and ECLs is a significant estimated. The amount of ECLs
is sensitive to changes in circumstances and forecast
economic conditions. The Group’s historical credit loss
experience and forecast economic conditions may also
not be representative of customer’s actual credit default
in the future. Management has considered the possible
impacts of the COVID-19 pandemic on the required
expected credit loss provisions and determined that no
material levels of increased risk are present based on
current conditions. The information about the ECLs on
the Group’s trade receivables is disclosed in Note 14.
44
Investment in a joint venture
Management has used significant judgement to
determine there was no objective evidence of
impairment as a result of one or more events that
occurred after the initial recognition of the investment
which might impact on the estimated future cash flows
from the investment. Based on the information available
to Management, there was no impairment indicators for
the investments in a joint venture at the reporting date
(see Note 19).
Investment in equity instruments
Management has used significant judgement to
determine the fair value of the investment in Zeta Energy
LLC which Li-S Energy Limited has made an investment
in (see Notes 18 and 20).
Contingent consideration
Management has used significant judgement to estimate
the future earnings before interest and tax of AICIC to
determine the probability of a payout of the contingent
consideration resulting from the acquisition of AICIC
in the 2019 financial year is unlikely, which resulted in a
reversal of contingent consideration liability of $9.041m
to other operating income (see Note 28).
Share-based payments
Estimating fair value for share-based payment
transactions requires determination of the most
appropriate valuation model, which depends on the
terms and conditions of the grant. The Group has a long
term incentive (LTI) in place which is managed by a Trust
on behalf of directors, an executive and senior managers
who are offered Performance Rights which can be
converted to PPK shares on a one-for-one basis subject
to the PPK share price meeting set price targets and
directors and employees continuing their employment
to the vesting date. The Group uses an independent
third party to measure the fair value of equity-settled
transactions with employees at the grant date using a
Monte-Carlo Simulation methodology. This estimate
requires determination of the most appropriate inputs
to the valuation model including the expected life of
the performance right, the risk free rate, dividend yield
and volatility and making assumptions about them. No
additional expense was recognised for the modification
as the total remuneration values was equal under the
original LTI and the modified LTI. The board considered
there to be no change in the original vesting conditions.
Tax Losses Carried Forward
Tax losses can be carried forward and deducted from
assessable income in later income years provided the
Group meets either the continuity of ownership test
or the business continuity test. Management uses
significant judgement to determine that the tax losses
can be carried forward.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 2 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (continued)
2.26 Significant accounting judgements, estimates
and assumptions (continued)
Deferred Tax Asset
Deferred tax asset is only recognised to the extent that
there is reasonable certainty of realising future taxable
amounts sufficient to recover the carrying value. Due
to carry forward tax losses and an expectation that the
current challenging industry conditions would continue
in the short term, the Directors assessed that deferred
tax assets would only be recognised to the extent of, and
offset against, available deferred tax liabilities.
The Mining Segment started the financial year very
strong but the decrease in coal prices, combined with
the impact of COVID-19 on international markets,
resulted in lower profits over the last three months than
expected. The Mining Segment increased revenues by
17% this financial year and achieved an earnings before
interest and tax of $5.342M and a segment profit of
$2.676M (see Note 4.1) (2019: $4.786M and $3.765M).
On 26 August 2020, being the date of approval of the
financial report, the Directors believe it is appropriate to
prepare the financial report on a going concern basis. In
making this assessment the Directors have identified and
considered:
No deferred tax assets were recognised during the year.
No impairment of previously recognised deferred tax assets
was recognised during the year (2019: $nil) (see Note 7).
– During the whole the of 2020 financial year, and at all
times subsequent, the Group has been able to meet
its obligations as and when they fell due;
2.27 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the
profit attributable to owners of PPK Group Limited,
by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus
elements in ordinary shares during the year.
Diluted earnings per share
Earnings used to calculate diluted earnings per share
are calculated by adjusting the basic earnings by the
after-tax effect of dividends and interest associated with
dilutive potential ordinary shares. The weighted average
number of shares used is adjusted for the weighted
average number of shares assumed to have been issued
for no consideration in relation to dilutive potential
ordinary shares.
2.28 GST
Revenues and expenses are recognised net of GST
except where GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item.
Receivables and payables are stated with the amount
of GST included. The net amount of GST recoverable
from, or payable to, the taxation authority is included
as part of receivables or payables in the balance sheet.
Cash flows are included in the cash flow statement on
a gross basis and the GST component of cash flows
arising from investing and financing activities, which is
recoverable from, or payable to, the taxation authority
are classified as operating cash flows. Commitments and
contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the taxation authority.
2.29 Going concern
The financial statements have been prepared on a going
concern basis, which contemplates continuity of normal
business activities and the realisation of assets and
settlement of liabilities in the normal course of business.
– The Group has current assets of $24.663M, of which
$10.292M is highly liquid, with net working capital of
$16.916M;
– PPK paid an interim dividend of $0.01 per share and
declared a final dividend of $0.01 per share;
– The Group has no fixed interest debt financing
required to be paid and the Directors are confident
that additional debt financing would be available, if
required;
– The Group has a finance facility up to a maximum
of $4.000M from a major Australian bank secured
against the debtors of PPK Mining Equipment Pty
Ltd, secured by a guarantee and indemnity from PPK
Group Limited, PPK Mining Equipment Group Pty
Ltd and the subsidiaries of the mining division. This
facility has not been drawn down.
–
Industry conditions and the operating performance
of the group’s mining equipment segment has been
slowed down in recent months due to the impact of
COVID-19 but we are seeing signs of improvement;
– The Group had one capital raise during the year
for a net total of $8,049M, at $4.25 per share, and
has a history of strong support from the majority of
shareholders and has an expectation that this will
continue;
– Li-S Energy Limited, a 58% owned subsidiary,
completed a $3.250M capital raising in June 2020
and issued 2.0% of Li-S Energy’s share capital to Zeta
Energy LLC and received 2.0% of the non-voting
limited liability interest in Zeta Energy LLC, who was
valued at USD70 million pre capital raise, thus valuing
Li-S Energy Limited of more than $100M;
– The Group has a joint venture with Deakin University
to commercialise Deakin University’s patented
Boron Nitride Nanotubes (BNNT) manufacturing
technology. The joint venture is in the process of
building the manufacturing plant and on 10 June
2020 Deakin University advised the Group that they
are producing 10 grams of 99% pure BNNT from
a single furnace in a single shift and has recently
ordered additional plant and equipment to ramp
up production.
45
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 3 REVENUE AND OTHER OPERATING INCOME
3.1 Revenue from contracts with customers
Disaggregated revenue information
Set out below is the disaggregation of the Group’s revenue from contracts with customers:
Segments
Type of goods or services
Sale of goods
Rendering of services
Total revenue from contracts with customers
Rental income
Total revenue
Timing of revenue recognition
Goods transferred at a point in time
Services rendered over time
Total revenue from contracts with customers
Notes
2.9
2.9
Consolidated Entity
2020
$’000
2019
$’000
15,225
24,622
39,847
1,255
41,102
15,225
24,622
39,847
14,355
24,566
38,921
2,011
40,932
14,355
24,566
38,921
Geographic location of Customers
The Group primarily operates in Australia with less than 1% of its revenue from the mining equipment segment from
customers located overseas. The geographical location of receivables, relating to these sales, is disclosed in Note 31.2
of these accounts.
Customer Concentration
The mining equipment segment revenue are concentrated on the top three customers as follows:
Consolidated Entity
Customer 1
Customer 2
Customer 3
3.2 Other Operating Income
Net gain on sale of fixed assets
Net gain on revaluation of FVTPL financial assets
Notes
2020
$’000
14,972
9,898
7,269
18
36
Reversal of contingent consideration on acquisition
28
9,041
Grant income
Recovery of debt previously written off
Net gain on sale of available-for-sale financial assets
Sundry income
50
264
–
38
9,447
2019
$’000
14,476
9,591
5,551
198
4
–
–
–
618
15
835
46
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 4 SEGMENT INFORMATION
The Group applies AASB 8 Operating Segments whereby segment information is presented using a “management
approach” i.e. segment information is provided on the same basis as information used for internal reporting purposes
by the chief operating decision makers.
Operating segments have been determined on the basis of reports reviewed by the Directors. The Directors are
considered to be the chief operating decision makers of the Group. The reportable segments for 30 June 2020 are
as follows:
– Technology - to expand and profit from the manufacture of high-grade boron nitride nanotubes (BNNT) in
commercial quantities using Deakin University’s patented technology to;
–
supply BNNT to select industries to enable industries to enable further research and development into the
blending/infusing of BNNT into conventional materials. This process can be transformative in terms of reduced
weight and increased strength; and
– maintain an ongoing equity interest in selected BNNT product applications such as armaments (Craig
International Ballistics Pty Ltd and Ballistic Glass Pty Ltd), lithium sulphur battery products (Li-S Energy Limited
and Zeta Energy LLC), dental applications (3D Dental Technology Limited) and precious metals (BNNT Precious
Metals Limited).
– Mining services - the design, manufacture, service, support and distribution of CoalTram and other underground
diesel vehicles, alternators, electrical equipment, drilling and bolting equipment and mining consumables and the
hire of underground coal mining equipment.
4.1 Year ended 30 June 2020
Reportable Segments
Revenue from contracts with customers
Rental income
Total revenue
Other income
Share of profit of associates and a joint venture
Net profit on disposal of property, plant and equipment
Grant income
Foreign exchange gain (loss) on financial assets at fair value
through profit or loss
Sundry income
Total revenue and other income
Segment expenses include
Cost of sales
Employee expenses
Administration expenses
Warranty costs
Allowance for expected credit losses
Short-term leases
Impairment of plant and equipment
Total expenses
Notes
Technology
$’000
Mining
Equipment
$’000
Total
$’000
39,847
39,847
1,255
41,102
1,255
41,102
–
18
50
–
8
76
766
18
50
36
8
878
41,178
41,980
–
–
(29,632)
(29,632)
–
–
–
766
–
–
36
–
802
802
–
–
–
(2,929)
(231)
(2,408)
–
–
–
–
(416)
–
(351)
(100)
(2,929)
(2,639)
(416)
–
(351)
(100)
(231)
(35,836)
(36,067)
47
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 4 SEGMENT INFORMATION (continued)
4.1 Year ended 30 June 2020 (continued)
Reportable Segments
Notes
Technology
$’000
Mining
Equipment
$’000
Total
$’000
Earnings before interest, tax, depreciation and amortisation
571
5,342
5,913
Depreciation and amortisation
Interest expense – other
Income tax benefit (expense)
Segment profit (loss)
–
–
(240)
331
(2,380)
(2,380)
(286)
–
(286)
(240)
2,676
3,007
9,041
265
34
(2,287)
(967)
(550)
(229)
8,314
28,098
9,987
38,085
2,250
19,897
22,147
4,007
30,348
29,884
64,239
–
160
2,295
7,430
2,295
7,590
161
160
9,725
10,046
Reconciliation of segment profit (loss) to group net profit before tax
Amounts not included in segment profit but reviewed by the Board:
Reversal of contingent consideration on acquisition
Recovery of debt previously written off
Other income
Unallocated corporate expense
Unallocated share based payment expense
Unallocated costs to defend a dispute of a business acquisition made in 2014
Short-term leases
Consolidated profit (loss) from continuing operations after income tax
attributable to owners of PPK Group Limited
Non-current assets
Segment assets
Unallocated
Total assets
Non-current liabilities
Segment liabilities
Unallocated
Total liabilities
48
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 4 SEGMENT INFORMATION (continued)
4.2 Year ended 30 June 2019
Notes
Investing
$’000
Technology
$’000
Revenue from contracts with customers
Rental income
Total revenue
Other income
Net profit on disposal of property, plant and
equipment
Net gain on sale of FVTPL financial assets
Interest income
Sundry income
Total revenue and other income
Segment expenses include
Cost of sales
Employee benefits expenses
Defined contribution superannuation expense
Administration expenses
Rental expense on operating lease
Warranty costs
Allowance for credit losses
Impairment of financial assets at fair value through
profit or loss
Reversal of inventory impairment
Acquisition costs
Total expenses
Earnings before interest, tax, depreciation and
amortisation
Depreciation and amortisation
Interest expense – director related entities
Interest expense – other
Segment profit (loss)
Mining
Equipment
$’000
38,921
2,011
Total
$’000
38,921
2,011
40,932
40,932
198
–
–
19
217
198
618
10
19
845
41,149
41,777
(28,492)
(28,492)
(2,765)
(2,765)
(247)
(2,030)
(10)
(102)
–
483
–
(247)
(3,230)
(2,030)
(10)
(102)
(2)
483
(135)
(36,363)
(36,530)
–
–
–
–
618
10
–
628
628
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
–
–
(7)
–
–
–
–
–
(135)
(160)
(5)
(25)
(3,200)
621
(160)
4,786
5,247
–
–
–
–
–
–
(754)
(124)
(143)
(754)
(124)
(143)
621
(160)
3,765
4,226
49
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 4 SEGMENT INFORMATION (continued)
4.2 Year ended 30 June 2019 (continued)
Notes
Investing
$’000
Technology
$’000
Mining
Equipment
$’000
Total
$’000
Reconciliation of segment profit (loss) to group net profit before tax
Amounts not included in segment profit but reviewed by the Board:
Unallocated corporate expense
Unallocated share based payment expense
Consolidated operating profit (loss) before income tax
Income Tax benefit (expense)
Consolidated profit (loss) after income tax attributable
to owners of PPK Group Limited
Non-current assets
Segment assets
Unallocated
Total assets
Segment liabilities
Unallocated
Total liabilities
(2,105)
(321)
1,800
–
1,800
26,251
19,340
6,911
19,357
28,518
47,875
157
19,357
28,518
48,032
–
–
8,512
8,512
8,512
8,512
–
–
–
–
–
NOTE 5 SHARE BASED PAYMENT EXPENSE
The company has two shared payment programs for employee remuneration; the Employee Share Plan and the Long
Term Incentive Plan.
Exempt Employee Share Plan (ESS)
The Board has the ability to determine the terms and conditions on which qualifying employees may be invited to
participate in the ESS. In this reporting period, the Board offered those qualifying employees to apply for up to $1,000
worth of fully paid ordinary shares in the capital of PPK. A total of 138 employees accepted the offer and 0.024M shares
were allotted in February 2020. Employees are restricted selling, transferring or otherwise dealing with their shares for
three years while they are an employee of the Group.
Long Term Incentive Plan (LTI)
PPK has an LTI in place which is managed as a Trust on behalf of an executive director, executives and senior managers
of the Group. The Directors determine who will be offered Performance Rights, which can be converted to PPK
shares on a one-for-one basis subject to the PPK share price meeting set price targets and the executive director and
employees continuing their employment to the vesting date. The LTI was approved by shareholders at the Annual
General Meeting on 27 November 2018.
At the time that the Directors set the share price targets, PPK shares were trading at $0.21 per share and the performance
rights to be issued were 2,920,000. As a result of the increase in PPK’s share price, the share price targets were met
and the vesting conditions are now subject to the executive director and employees continuing their employment to the
vesting dates. However, the Board considered that as the intent was to reward the executive director, executives and
senior managers with a value of shares equivalent to their total remuneration to be realised over a period of time, the ASX
announcement on 13 November 2018 for the Group to acquire 100% of the shares in AICIC, and the resulting strategic 50%
holding in BNNTTL led to a significant increase in the PPK share price in a short period of time and that this was not the
direct outcome of the executive director, executives or senior managers actions.
50
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 5 SHARE BASED PAYMENT EXPENSE (continued)
As a result, in July 2019 post year end, the board offered a lesser number of performance rights, based on the higher
share price, to the executive director, executives and senior managers that would deliver a total remuneration value that
was equal under the original LTI and the modified LTI. The board considers there to be no change in the original vesting
conditions. As a result, the share price targets, based on a 5 trading day volume weighted average price, the vesting
conditions and the total number of performance rights offered, as modified in July 2019, are:
Share Price Targets
Vesting Conditions
$0.30 per share by 1 January 2019
Fully vest on 1 January 2020
$0.40 per share by 1 January 2020
Fully vest on 1 July 2020
$0.50 per share by 1 January 2021
Fully vest on 1 January 2021
$0.60 per share by 1 January 2021
Fully vest on 1 July 2021
Original
No of
Performance
Rights
Amended
No of
Performance
Rights
730,000
260,000
730,000
260,000
730,000
260,000
730,000
260,000
2,920,000
1,040,000
Under the Trust Deed, PPK can issue shares to the Trustee or fund the purchase of PPK shares, in the open market, on
behalf of the Trustee. Once this occurs, the Trustee will hold the PPK shares on behalf of the participants until such time
that the vesting conditions for Performance Rights are met. Once the vesting conditions are met, the participants can
apply to have the shares sold or transferred to the applicable participant.
The fair value of the Performance Rights granted were determined using a Monte Carlo Simulation Methodology for
1.000M simulations for each tranche with a valuation date of 27 November 2018. The following principal assumptions
were used in the valuation:
Performance Condition
$0.30
$0.40
$.050
$0.60
Tranche 1
Tranche 2
Tranche 3
Tranche 4
5 day VWAP to be equal to or exceed share price
Performance Period
Period to achieve performance condition (months)
1.15
13.14
25.17
25.17
Non-market based vesting condition
Period to remain employed by Company (months)
13.14
19.12
25.17
31.11
Amended number of shares to be issued if conditions met
260,000
260,000
260,000
260,000
Original number of shares to be issued if conditions met
730,000
730,000
730,000
730,000
Key Inputs
Valuation Date
PPK share price at start of Valuation Date
Risk-free Rate(1)
Dividend Yield
Volatility(2)
27/11/18
27/11/18
27/11/18
27/11/18
$0.50
1.95%
0.00%
$0.50
2.01%
0.00%
$0.50
2.02%
0.00%
$0.50
2.05%
0.00%
54.00%
54.00%
54.00%
54.00%
Fair Value of the Performance Right
$0.500
$0.500
$0.486
$0.430
(1)
(2)
The risk-free rate was determined to be the yield to maturity of an Australian government security on the Valuation Date with a
term equal to the later of: (a) the performance period to achieve condition; and (b) the earliest the Right can vest for each tranche.
The volatility was determined to be the standard deviation of the continuously compounding daily change in price of the
Company’s shares over a 13 month period being the term of Tranche 1.
51
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 6 CASH FLOW INFORMATION
6.1 Reconciliation of profit (loss) after income tax to the cash
provided by operating activities
Profit (loss) after income tax from continuing operations
8,314
1,800
Cash flows in operating activities but not attributable to operating result:
Notes
Consolidated Entity
2020
$’000
2019
$’000
Non-cash flows in operating profit:
Unrealised foreign exchange (gain) loss
Amortisation
Depreciation
Make good provision
Impairment of financial assets at fair value through profit or loss
Impairment of plant and equipment
Reversal of contingent consideration on acquisition
Share of profit of associates and a joint venture, after tax
Share based payments
Loss (profit) on sale of financial assets at fair value through profit or loss
Loss (gain) on sale of plant & equipment
Changes in assets and liabilities:
Decrease (increase) in trade and other receivables
Decrease (increase) in prepayments
Decrease (increase) in inventories
(Decrease) increase in provisions
(Decrease) increase in trade creditors and accruals
Net cash (used in) provided by operating activities
6.2 Reconciliation of Cash
For the purposes of the cash flow statement, cash includes:
Cash on hand
Call deposits with financial institutions
Cash held in trust
4.1
4.1
28
4.1
4.1
13
(36)
35
2,358
(40)
–
100
(9,041)
(526)
967
–
(18)
2,461
340
(1,343)
343
(599)
3,315
1
2,308
3,035
5,344
(4)
–
758
–
2
–
–
–
321
(618)
(198)
(2,723)
(457)
(1,052)
(626)
1,096
(1,701)
1
1,046
–
1,047
6.3 Non cash financing activities – dividend reinvestment, fair value of shares issued for Zeta Energy LLC
and CIB consideration (Notes 10, 18, 19 and 20)
52
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 7 INCOME TAX EXPENSE
(a) The prima facie tax payable (benefit) on the profit (loss) before
income tax is reconciled to the income tax expense as follows:
Profit (loss) before tax
Prima facie tax payable (benefit) at 27.5% (2019: 27.5%)
(Non-assessable income) non-deductible expenses
Current year losses for which no deferred tax asset was recognised
Current year temporary differences for which no deferred tax asset or liability
was recognised
Share of associates tax expenses
Income tax expense (benefit)
Consolidated Entity
2020
$’000
2019
$’000
Notes
8,254
2,270
(2,616)
1,046
1,800
495
41
(38)
(700)
(498)
240
240
–
–
The applicable weighted average effective tax rates are as follows:
2.9%
0%
(b) The components of tax expense comprise:
Current tax
Deferred tax
Share of associates tax expenses
(Over) provision in respect of prior years
Income tax expense (benefit)
(c) Recognised in the Statement of Financial Position
Deferred tax assets – tax losses
Deferred tax assets – temporary differences 1,121
Deferred tax liabilities – temporary differences
Total
(i)
–
–
240
–
240
–
–
(1,121)
–
–
–
–
–
–
188
(188)
–
At 30 June 2020, with the reversal of the contingent consideration shown in Note 28, the tax base of the Group’s
investment in BNNT Technology Limited is adjusted. As a result of the adjustment in the tax base, with no
adjustment to the accounting value a deferred tax liability of $2.75 million results. The Group has sufficient income
tax losses to recognise and offset this balance and as a result no net deferred tax liability is recognised. These
amounts are not shown in the values above.
53
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 7 INCOME TAX EXPENSE (continued)
(d) Not recognised in the Statement of Financial Position
Unrecognised deferred tax assets/deferred tax liabilities
Tax losses (ii)
Temporary differences
Total
Movements
Opening balance
Tax losses not recognised current year
Adjustment for change in applicable tax rate
Adjustment in respect of current income tax of previous years
Temporary differences not recognised current year
Adjustment related to transfer of losses from acquisition
Closing balance
See Note 2.26 for more detail.
(ii) Amount shown is prior to the deduction of amounts shown in Note c(i) above.
NOTE 8 AUDITORS’ REMUNERATION
Remuneration of the auditor of the Group, parent entity and controlled entity for:
– auditing or reviewing the financial report
EY
– Other – tax compliance and other corporate
compliance matters
EY
Audit and other fees for 2019 were paid to Grant Thornton.
NOTE 9 KEY MANAGEMENT PERSONNEL REMUNERATION
9.1 Key management personnel remuneration
Short-term benefits
Share-based payments
54
Post-employment benefits
Notes
Consolidated Entity
2020
$’000
2019
$’000
5,596
7
5,603
4,715
339
–
380
7
162
5,603
4,715
–
4,715
7,673
(38)
(639)
(1,783)
(498)
–
4,715
Consolidated
2020
$
2019
$
149,800
118,000
100,250
7,600
250,050
125,600
Consolidated
2020
$
1,223,460
661,935
50,000
2019
$
930,129
195,955
25,000
1,935,395
1,151,084
During the reporting period, the Group recognises the Directors and the Chief Financial Officer/Chief Operating Officer
as being the only key management personnel (see Note 34). See the Directors’ Report for details of their remuneration
policy and benefits.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 9 KEY MANAGEMENT PERSONNEL REMUNERATION (continued)
9.2 Equity Instruments
Two Directors and the Chief Financial Officer/Chief Operating Officer participate in the PPK Long Term Incentive Plan,
subject to retention of their services to meet the vesting conditions (see Note 34). The issuance of performance rights
were approved by the shareholders at the last two Annual General Meetings.
9.3 Loans
There were no loans or advances to key management personnel or their related parties in the current financial or
previous financial years.
NOTE 10 DIVIDENDS
(a) Dividends paid
2020 1 cent interim ordinary fully franked dividend was declared or paid
(2019: 1 cent ordinary fully franked dividend) 2020 No final ordinary dividend
was declared or paid (2019: nil)
Consolidated Entity
2020
$’000
2019
$’000
Notes
852
–
852
712
–
712
(b) Dividends declared after balance date
The directors have declared a 1 cent final ordinary fully franked dividend for the
2020 financial year (2019: 1 cent ordinary fully franked dividend).
856
825
(c) Franked dividends
Franking credits available for subsequent financial years based on a tax rate of
27.5% (2019 – 27.5%)
1,079
1,402
The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for:
(1)
franking credits that will arise from the payment of the current tax liability;
(2)
franking debits that will arise from the payment of dividends recognised as a liability at the reporting date;
(3) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and
(4)
franking credits that may be prevented from being distributed in subsequent financial years.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits
of subsidiaries were paid as dividends.
(d) reconciliation of dividends paid
2020 1 cent interim ordinary fully franked dividend paid
2019 1 cent final ordinary fully franked dividend paid
Dividends for treasury shares
2019 1 cent interim ordinary fully franked dividend paid
2018 1 cent final ordinary fully franked dividend paid
Consolidated Entity
$’000
Dividend
Reinvestment
Plan
$’000
Cash
380
348
728
(6)
722
164
–
164
472
477
949
(7)
942
548
–
548
$’000
Total
852
825
1,677
(13)
1,664
712
–
712
55
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 11 EARNINGS PER SHARE
Earnings per share (in cents)
Basic
Diluted
Earnings per share from continuing operations (in cents)
Basic
Diluted
Earnings per share from discontinued operations (in cents)
Basic
Diluted
(a) Reconciliation of Earnings to Net Profit
Earnings used in calculating Basic and Dilutive EPS from continuing operations
Earnings used in calculating Basic and Dilutive EPS from discontinued operations
Profit (loss) for the year
(b) Weighted average number of ordinary shares outstanding during the year
used in calculation of basic EPS
Effects of dilution from:
Employee performance rights
Less employee performance rights held as treasury shares
Consolidated Entity
2020
$’000
2019
$’000
9.8
9.7
9.8
9.7
–
–
2.6
2.6
2.6
2.6
–
–
$’000s
$’000s
8,314
(60)
8,254
1,800
–
–
No.
No.
84,334,389
70,135,788
757,500
1,040,000
–
(695,122)
(c) Weighted average number of potential ordinary shares outstanding during
the year used in calculation of diluted EPS)
85,091,889 70,480,666
56
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 12 PARENT ENTITY INFORMATION
The following detailed information relates to the parent entity, PPK Group Limited at 30 June 2020. The information
presented here has been prepared using consistent accounting policies as presented in Note 2.
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Contributed equity(1)
Retained earnings
Total equity
Profit (loss) for the year (including impairments)(2)
Dividends paid
Other comprehensive income (loss) for the year
Total comprehensive income (loss) for the year
Notes
Consolidated Entity
2020
$’000
1,101
44,051
45,152
309
–
309
2019
$’000
1,177
32,765
33,942
9
9,041
9,050
44,843
24,892
59,500
47,743
(14,657)
(22,851)
44,843
24,892
9,872
(1,678)
–
(5,138)
(721)
–
8,194
(5,859)
(1)
(2)
In addition to the Parent Entity contributed equity, the Group’s consolidated Contributed Equity includes Treasury Shares of
$0.227M (see Note 28.4).
Non-current asset balances include investments in subsidiaries which are held at cost or net recoverable value after impairments.
In the prior year the investments in the property entities have been impaired to ensure they are carried at no more than their
recoverable amount. The total amount of the impairment was $7.733M.
See Note 33 for contingent assets and liabilities.
NOTE 13 CASH AND CASH EQUIVALENTS – CURRENT
Cash at bank and on hand
Cash held in trust
Total
Notes
6.2
6.2
Consolidated Entity
2020
$’000
2,309
3,035
5,344
2019
$’000
1,047
–
1,047
57
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 14 TRADE AND OTHER RECEIVABLES – CURRENT
Current
Trade receivables
Less: allowance for expected credit losses
Ageing Analysis
Consolidated Entity
2020
$’000
2019
$’000
6,324
–
6,324
Current
$’000
> 30 days
$’000
6,190
134
8,757
(102)
8,655
Total
$’000
6,324
The Group recognises two distinct customer segments:
–
those that are major customers, the majority of which are listed public companies of which the Group has a long
history of providing goods and services. This customer segment represents 87% of the cash inflows during the
period for which the historical credit loss experience was determined and there were no historical losses during this
period.
– The other customer segment includes smaller listed public companies, large private companies and the remaining
customers that the Group provides goods and services. This customer segment represents 13% of the cash inflows
during the period for which the historical credit loss experience was determined. At 30 June 2020 no significant
provision was determined to be required for these customers.
– Management has considered the possible impacts of the COVID-19 pandemic on the required expected credit loss
provisions and determined that no material levels of increased risk are present based on current conditions.
The provision matrix for expected credit losses, based on historical credit loss experience for the other customer
segment is as follows:
Historical loss rate
1%
2%
23%
64%
79%
Current
30 days
past due
31 to 60 days
past due
61 to 90 days
past due
More than
90 days
past due
NOTE 15 CONTRACT ASSETS – CURRENT
Contract assets
Carrying amount at start of year
Consideration received for services rendered in the previous period
Revenue recognised for rendering services not yet received
Carrying amount at end of year
See Note 2.26 for more detail.
58
Notes
Consolidated Entity
2020
$’000
1,659
1,794
(1,794)
1,659
1,659
2019
$’000
1,794
1,779
(1,779)
1,794
1,794
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 16 INVENTORIES – CURRENT
Inventories
At net realisable value
Raw materials
Finished goods
Work in progress
See Note 2.26 for more detail.
Consolidated Entity
2020
$’000
10,594
624
5,774
4,196
10,594
2019
$’000
9,251
322
4,659
4,270
9,251
During 2020 $17.193M (2019: $17.531M) was recognised as an expense for inventories carried at net realisable value. This
is recognised in cost of sales.
During the year, the Group had no impairment provisions (2019: $0.483M was reversed for a previous impairment
provision).
NOTE 17 OTHER ASSETS
CURRENT
Prepayments
NON-CURRENT
Prepayments
Consolidated Entity
2020
$’000
2019
$’000
742
1,000
37
–
NOTE 18 SUBSIDIARY COMPANIES
PPK incorporated Li-S Energy Limited (Li-S Energy) as a proprietary company on 16 July 2019 as one of the initial
application projects identified in the Joint Venture Research Agreement with Deakin University and announced by PPK
Group Limited on 16 October 2019. Li-S Energy is registered in Queensland and has its head office at Level 27, 10 Eagle
Street, Brisbane, Queensland 4000.
The principal activity of Li-S Energy is to develop and commercialise a new type of battery based on Lithium Sulphur
(Li-S) and using boron nitride nanotubes (BNNT) as both an integrated protective insulation layer and a component
in composite anodes which will allow faster charging rates, greater energy capacity and increased battery cycle life.
This project has been under research at Deakin University for some 6 years and Deakin University has a patent pending
titled “Flexible Lithium-Sulfur Batteries” and Li-S Energy has the exclusive global license to commercialise products
using the patent for a period of twenty years.
On 20 February 2020, Li-S Energy completed a 500,000 for 1 share split and then transferred 25% of the shares to
Deakin University for a consideration of $25 and 10% to BNNT Technology Limited for a consideration of $10.
On 16 June 2020, Li-S Energy acquired an economic interest in Zeta Energy LLC, a Delaware limited liability company
that is in a pre-IPO period, by issuing 2.0% of Li-S Energy’s share capital (pre Li-S Energy’s capital raise) to Zeta Energy
LLC and receiving 2.0% of the non-voting limited liability interest in Zeta Energy LLC (also pre-IPO capital raise and
valued at USD70 million or $1.97 for each Li-S Energy share). Li-S Energy made a further cash investment of $500,000.
Zeta Energy LLC is developing and commercialising battery technology developed at Rice University in Houston, Texas
and has an exclusive license to seven US and foreign patents and approximately 30 pending patents. The battery being
developed uses a hybrid anode created from graphene and carbon nanotubes. Zeta Energy LLC is in the prototype
development stage, within the next years would have built a low volume pilot facility and within the next 2 years would
expect to have commercial sales.
59
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 18 SUBSIDIARY COMPANIES (continued)
Li-S Energy commenced a capital raising in May 2020 of $3.250M to issue 5.000M shares to sophisticated shareholders
at $0.65 per share which was completed in June 2020, the shares were issued in July 2020 and PPK’s interest was
diluted to 58.0%.
On 30 June 2020, Li-S Energy became a public company.
The summarised financial information of Li-S Energy is provided below. This information is based on amounts before
inter-company eliminations.
Assets
Cash and cash equivalents
Trade and other receivables
Other current assets
Intangible assets
Investments
Other non-current assets
Liabilities
Trade and other payables
Interest bearing loans
Total identifiable net assets
Non-controlling interest
Net assets attributable to the Group
The summarised statement of profit or loss for 2020:
Revenue from contracts with customers
Administration expenses
Finance costs
Foreign exchange gain (loss) on financial assets at fair value through profit or loss
Profit (loss) for the year before income tax (continuing operations)
Income tax benefit (expense)
Profit (loss) for the year after income tax (continuing operations)
Attributable to:
Equity holders of parent
Non-controlling interest
See Note 34.4 for related party balances.
60
2020
$’000
3,036
117
37
428
2,547
37
6,202
11
1,185
1,196
5,006
(2,102)
2,904
–
(62)
(9)
36
(35)
–
(35)
(21)
(15)
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 19 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE – NON – CURRENT
Investment in associates and a joint venture
Consolidated Entity
Notes
2020
$’000
2019
$’000
25,086
19,340
19.1 Investment in a joint venture
19,236
19,340
PPK has a 50% interest in BNNT Technology Limited, a joint venture with Deakin University, by way of a contracted
shareholder agreement with Deakin University and others, to commercialise Deakin University’s patented Boron Nitride
Nanotubes manufacturing technology. The Group’s interest in BNNT Technology Limited is accounted for using the
equity method in the financial statements. Summarised financial information of the joint venture, based on the audited
financial statements of BNNT Technology Limited, and reconciliation with the carrying amount of the investment in the
consolidated financial statements are set out below:
Summarised statement of financial position of BNNT Technology Limited:
Current assets (including cash and cash equivalents
$0.502M, 2019 $2.443M)
Non-current assets
Current liabilities (including current financial liabilities excluding trade and other payables
and provisions $0.060M, 2019 nil)
Non-current liabilities (including non-current financial liabilities excluding trade and other
payables and provisions nil, 2019 nil)
Equity
Group’s share in equity – 50% (2019: 50%)
Adjustment of investment in Li-S Energy at fair value
Recognition of Group’s share of the profit (loss) for the year ended 30 June 2019
Intangibles
Group’s carrying amount of the investment
672
8,115
2,462
3,423
(177)
(137)
(613)
7,997
3,999
(1,179)
(50)
16,466
19,236
–
5,748
2,874
–
–
16,466
19,340
61
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 19 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE – NON – CURRENT (continued)
Consolidated Entity
Notes
2020
$’000
2019
$’000
Summarised statement of profit or loss of BNNT Technology Limited:
Revenue from contracts with customers
Other income
Employee expenses
Administration expenses
Depreciation and amortisation
Finance costs
Foreign exchange gain (loss)
Profit (loss) for the year before income tax (continuing operations)
Income tax benefit (expense)
Profit (loss) for the year after income tax (continuing operations)
Total comprehensive income (loss) for the year after income tax (continuing operations)
Less investment in Li–S Energy at fair value
Less tax effect of investment in Li–S Energy at fair value
Adjusted total comprehensive income (loss) for the year after income tax
(continuing operations)
Group’s share of the profit (loss) for the year
Group’s share of profit (loss) from acquisition to the year end 30 June 2019
14
3,364
(157)
(108)
(261)
(4)
(6)
2,842
(593)
2,249
2,249
(3,250)
893
(108)
(54)
(50)
(104)
–
20
(119)
(136)
(7)
–
–
(242)
–
(242)
(242)
–
–
–
(121)
–
(121)
See Note 2.26 for more detail.
The joint venture has the following commitments to Deakin University:
Initial $0.500M payment to develop a research plan for the joint venture;
–
– $2.000M per annum for research funding once BNNT Technology Limited’s revenue exceeds $5.000 per annum;
– Quarterly royalty payment of 5% of the gross revenue received by BNNT Technology Limited or its sublicensees;
– To generate $50.000M of gross revenues within the first three years after the Evaluation Completion Date. Should
this condition not be met, BNNT will be required to take corrective actions, which may ultimately result in the licence
related to BNNT from Deakin being terminated. At 30 June 2020, the Directors have assessed that the likelihood of
this occurring is less than remote.
19.2 Investment in associates
5,850
–
Acquisition of Craig International Ballistics Pty Ltd (CIB)
The group acquired 45% of the ordinary shares in Craig International Ballistics Pty Ltd on 16 December 2019, an unlisted
Australian company that is a leading manufacturer of soft and hard ballistic (body armour) products primarily for the
security and defence sectors, with an effective date of 1 July 2019. The acquisition allows CIB to expand its product
range with the application of BNNT for reinforced transport armour by developing new manufacturing processes for
transparent materials such as polycarbonate, Perspex, acrylic and glass to enhance ballistic resistance performance
while reducing weight and thickness.
62
PPK issued 0.5000M shares at $4.50 per share, total value of $2.250M, and made a cash payment of $2.750M for
a total consideration of $5.000M. PPK equity accounts its investment in CIB and recognises it as an investment in
an associate.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 19 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE – NON – CURRENT (continued)
The Group’s share of the fair values of the identifiable assets and liabilities of CIB as at the date of acquisition, being
1 July 2019, were:
Assets
Cash and cash equivalents
Trade and other receivables
Inventories
Right-of-use assets
Intangibles
Fixed assets
Liabilities
Trade payables
Lease liabilities
Total identifiable net assets at fair value
Purchase consideration transferred
Purchase consideration transferred
Shares issued, at fair value
Cash
Transaction costs
Fair value
recognised
on
acquisition
$’000
39
314
984
2,231
3,660
1,084
8,312
(574)
(2,519)
(3,093)
5,219
5,219
2,250
2,750
219
5,219
CIB researches its own designs and develops its products to meet customer’s specifications, thus the Group recognises
the research and development as an intangible asset.
CIB has lease contracts for various items of property, equipment and vehicles and has adopted the same accounting
policies as the Group as per Note 2.2.
63
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 19 INVESTMENTS IN ASSOCIATES AND A JOINT VENTURE – NON – CURRENT (continued)
From the date of acquisition, CIB has contributed $0.631M to profit after tax from contribution operations.
Notes
Investment in CIB
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Group’s share in equity – 45%
Group’s carrying amount of investment in associate
Revenue from contracts with customers
Profit (loss) for the year before income tax (continuing operations)
Income tax benefit (expense)
Profit (loss) for the year after income tax (continuing operations)
Total comprehensive income (loss) for the year after income tax (continuing operations)
Group’s share of the profit (loss) for the year
Investment in Ballistic Glass Pty Ltd
Consolidated
Entity
2020
$’000
5,850
4,401
14,325
(1,475)
(4,250)
13,001
5,850
5,850
11,296
1,943
(541)
1,402
1,402
631
–
Ballistic Glass Pty Ltd was incorporated on 11 March 2020 to develop manufacturing processes for incorporating BNNT
into transparent materials to enhance ballistic performance in ballistic body armour and bullet resistant glass. PPK has
a 40% interest and CIB has a 20% interest in Ballistic Glass Pty Ltd. During the financial year Ballistic Glass Pty Ltd has
primarily undertaken research into these projects.
Investment in 3D Dental Technology Limited
–
3D Dental Technology Limited was incorporated on 11 March 2020 to focus on the development of nanocomposites
for a variety of dental materials including zirconia, lithium disilicate, alumina and composite resins based on the
incorporation of BNNT matrix of these materials. On 26 June 2020, the Directors of 3D Dental Technology Limited
resolved to change the company type to a public company, split the shares on a 500,000 for 1 basis with total paid
up capital remaining at $100, allot 10% of the new shares to Deakin University with PPK retaining a 45% interest in 3D
Dental Technology Limited. During the financial year 3D Dental Technology Limited has primarily undertaken research
into these projects.
19.3 Share of profit of an associate and a joint venture
BNNT Technology Limited
64
Group’s 45% interest of CIB’s profit (loss) for the year before income tax
(continuing operations)
Consolidated Entity
Notes
2020
$’000
2019
$’000
19.1
19.2
(104)
880
776
(121)
–
(121)
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 20 INVESTMENT – NON – CURRENT
Investment in Zeta Energy LLC
Consolidated Entity
Notes
2020
$’000
18
2,547
2019
$’000
–
Investment in Zeta Energy LLC through a subsidiary company (see Note 18). Li-S Energy has a contingent liability in
that if it doesn’t complete its initial public offering by 31 December 2021 then 50% of the share swap will be cancelled
retroactive to 16 June 2020.
NOTE 21 PROPERTY PLANT AND EQUIPMENT – NON – CURRENT
Land and buildings – at valuation
Less: Accumulated depreciation
Plant and equipment – at cost
Less: accumulated depreciation and impairment
Total property, plant and equipment of continuing operations
Consolidated – 2020
Carrying amount at start of year
Revaluation
Additions
Disposals
Transfers
Depreciation & amortisation expense
Carrying amount at end of year
Consolidated – 2019
Carrying amount at start of year
Revaluation
Additions
Disposals
Transfers
Depreciation & amortisation expense
Carrying amount at end of year
Notes
Consolidated Entity
2020
$’000
1,500
(34)
1,466
9,609
(5,835)
3,774
5,240
2019
$’000
1,500
–
1,500
9,036
(5,197)
3,839
5,339
Land &
Buildings
$’000
Plant &
Equipment
$’000
Total
$’000
1,500
3,839
5,339
–
–
–
–
(34)
1,466
1,175
350
–
–
–
(25)
1,500
–
721
(9)
(100)
(677)
–
721
(9)
(100)
(711)
3,774
5,240
4,560
–
1,204
(1,191)
(6)
(728)
5,735
350
1,204
(1,191)
(6)
(753)
3,839
5,339
65
The land and buildings at Mt Thorley, NSW, is where the Firefly and Rambor businesses operate, and were
independently valued on 11 June 2019.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 22 RIGHT-OF-USE ASSETS
Right-of-use assets – at cost
Less: accumulated depreciation and impairment
Consolidated Entity
2020
$’000
5,276
(1,648)
3,628
2019
$’000
–
–
–
As a result of applying, for the first time, AASB 16 the carrying amounts of the Group’s right-to-use assets and the
movements during the period are as follows:
Adoption of AASB 16 as at 1 July 2019
Depreciation expense
As at 30 June 2020
Property
$’000
Equipment
$’000
4,087
(1,325)
2,762
236
(57)
179
Motor
Vehicles
$’000
953
(266)
687
Total
$’000
5,276
(1,648)
3,628
The Group leases two buildings, both of which have five year lease periods with options for a further five years. Should
the Group exercise the option, the lease will be renewed at a market rate determined at that time.
The Group leases a fleet of mine specified utility vehicles over a four year period from a national fleet company. The
majority of the leases commenced between 18 June 2018 and 17 January 2019.
The Group leased laptops and photocopiers for a three year period commencing in July 2018 and August 2018 and
recognised expense from low- value assets of $0.29M for the period ended 30 June 2020.
The Group recognised expense from short-term leases of $0.551M for the period ended 30 June 2020.
The Group has not given or received any rent concessions.
NOTE 23 INTANGIBLE ASSETS – NON - CURRENT
Development costs - Mining equipment manufacturing - at cost
Less: Accumulated amortisation and impairment
(Amortisation charges are included in cost of goods sold)
Development Costs
Balance at the beginning of year
Additions at cost
Amortisation charge
Not yet ready for use
66
Other
Refer Note 2.18 and Note 2.26 for more detail.
Notes
Consolidated Entity
2020
$’000
3,081
(43)
3,038
1,606
1,467
(35)
3,038
2,976
62
3,038
2019
$’000
1,613
(7)
1,606
595
1,018
(7)
1,606
1,578
28
1,606
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 24 TRADE AND OTHER PAYABLES – CURRENT
Trade payables – unsecured
Sundry payables and accruals - unsecured
Consolidated Entity
2020
$’000
2,981
1,352
4,333
2019
$’000
3,732
1,200
4,932
NOTE 25 LEASE AND OTHER LIABILITIES
As a result of applying, for the first time, AASB16 the lease liabilities and movements during the period are disclosed
on the consolidated statement of financial position as follows:
Adoption of AASB 16 as at 1 July 2019
Interest expense
Payments
As at 30 June 2020
Current
Non-current
Total
NOTE 26 INTEREST-BEARINGS LOANS AND BORROWINGS - CURRENT
BNNT Technology Limited
Other loans - secured
Other loans - unsecured
See Note 31.
Lease
Liabilities
$’000
5,236
219
(1,776)
3,679
1,681
1,998
3,679
152
–
–
152
–
1,900
356
2,256
The Group has provided financing, as per the Shareholders Agreement, in the form of short term loan to fund the
purchase of equipment for the Li-S battery project. The loan is interest bearing at 4.5% per annum, unsecured and was
repaid on 20 July.
The Group has a finance facility up to a maximum of $4.000M from a major Australian bank (see Note 33). This facility
has not been drawn down and its balance at the reporting period was nil.
67
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 27 PROVISIONS
Current
Annual leave
Long service leave
Total current
Non-Current
Long service leave
Make good
Total Non-current
Consolidated Entity
2020
$’000
2019
$’000
1,247
334
1,581
261
40
301
1,057
267
1,324
215
–
215
Annual leave and current long service leave comprise amounts payable that are vested and could be expected to be
settled within 12 months of the end of the reporting period.
Non-current long service leave comprises amounts that are not vested at the end of the reporting period and the
amount and timing of the payments to be made when leave is taken is uncertain.
Make good provision comprise estimated costs to return leased premises and assets to their contractual agreed
condition on expiry of the lease.
Current
Non-current
Total
NOTE 28 CONTINGENT CONSIDERATION
1,581
301
1,882
1,324
215
1,539
Financial liability at fair value through profit or loss
–
9,041
See Note 2.26 for more detail.
As a consideration of the acquisition of AICIC in 2019, the Group had a contingent consideration of $10.000M to
the vendor if AICIC’s EBIT for the two financial years commencing subsequent to the acquisition was greater than
$10.000M. The vendor is entitled to a payment of 50% of the amount of the EBIT over the $10.000M to a maximum
payment of $10.000M. Under AASB 3: Business Combinations the Group recognised this contingent consideration at
the acquisition date in the purchase price accounting, discounted to its fair value using an indicative financing rate of
4.36%, calculated at $9.041M. The Directors at that time considered a 100% probability of payout likely.
The Directors have used significant judgement to determine that the probability of a payout is unlikely for the following
reasons:
– AICIC had accumulated losses of $0.961M as at 30 June 2020;
– On 10 June 2020, BNNT Technology Limited advised that:
– They were producing 10 grams per day of 99% pure BNNT on a single shift;
–
They could increase production with multiple production units and had ordered additional plant and equipment
to achieve this;
68
–
While continuously improving batch production techniques, they had not yet achieved continuous production;
– The impact of COVID-19, both in Australia and internationally, with company closures, financial constraints and
increased economic uncertainty will most probably have a negative impact on the sales of BNNT over the coming
year; and
–
AICIC is only entitled to its 50% joint venture interest in the profits of BNNT Technology Limited.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 29 SHARE CAPITAL
29.1 Issued capital
85,621M (2019: 82.488M) ordinary shares fully paid
Movements in ordinary share capital
Balance at the beginning of the financial year
New shares issued, net of transaction costs
Shares issued on acquisition, net of costs
Shares issued from dividend reinvestment plan
Shares issued for Employee Share Scheme
Shares issued for Long Term Incentive Plan
29.2 New shares issued
Consolidated Entity
2020
$’000
2019
$’000
59,500
47,743
47,743
8,049
2,241
941
137
389
34,541
6,028
6,633
541
–
–
59,500
47,743
Consolidated Entity
Notes
2020
$’000
2019
$’000
Issued for cash to fund the acquisition of CIB, JVRA application projects and
working capital @ $4.25 per share
Less transaction costs for issued share capital
Issued for cash to fund the acquisition of AICIC @ $0.35 per share
Less transaction costs for issued share capital
Issued for cash to pay off its fixed interest loans and working capital
@ $2.50 per share
Less transaction costs for issued share capital
New shares issued for cash, net of transaction costs
Issued on acquisition of 45% interest in CIB @ $4.50 per share
19.2
Less transaction costs for issued share capital
Issued on acquisition of AICIC
Less transaction costs for issued share capital
Issued from dividend reinvestment plan
10(d)
Less transaction costs for issued share capital
Issued for Employee Share Scheme @ $5.7803
Less transaction costs for issued share capital
Issue to Long Term Incentive Plan Trust Account
Less transaction costs for issued share capital
8,500
(451)
8,049
–
–
–
–
–
–
8,049
2,250
(9)
2,241
–
–
–
949
(8)
941
138
(1)
137
396
(7)
389
–
–
–
3,535
(161)
3,374
2,750
(96)
2,654
6,028
–
–
–
6,650
(17)
6,633
548
(7)
541
–
–
–
–
–
–
69
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 29 SHARE CAPITAL (continued)
29.2 New shares issued (continued)
The shares have no par value and each share is entitled to one vote at shareholder meetings. Ordinary shares
participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.
Reconciliation of transaction costs on issue of share
For the acquisition of CIB, JVRA application projects and working capital
For acquisition of 45% interest in CIB
For the Employee Share Scheme
For the Long Term Incentive Plan Trust Account
For the dividend reinvestment plan
For the acquisition of AICIC
For the raising of cash
For the issuance of shares on acquisition of AICIC
Transaction costs attributable to PPK
For the raising of cash in Li-S Energy Limited
29.3 Share movements
Movements in number of ordinary shares
Balance at the beginning of the financial year
New shares issued
29.4 Treasury share movements
Consolidated Entity
2020
$’000
(451)
(9)
(1)
(7)
(8)
–
–
–
(476)
(221)
(697)
2019
$’000
–
–
–
–
(7)
(161)
(96)
(17)
(281)
–
(281)
82,488,074
61,996,498
3,132,669
20,491,576
85,620,743
82,488,074
2020
2020
2019
No. of Shares
$’000 No. of Shares
2019
$’000
Opening balance of treasury shares
695,122
(220)
1,398,371
(389)
Shares purchased
Shares purchased in the Dividend Reinvestment Plan
Shares transferred to employees
Shares sold
–
1,649
–
–
–
(7)
–
–
66,629
10,651
(591,590)
(188,939)
(21)
(9)
139
60
Closing balance of treasury shares
696,771
(227)
695,122
(220)
29.5 Capital risk management
The Group considers its capital to comprise its ordinary shares, treasury shares, reserves and retained earnings.
In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return
for its equity shareholders through capital growth and distributions and through the payment of annual dividends to
its shareholders. In order to achieve this objective, the Group seeks to maintain a gearing ratio that balances risks and
returns at an acceptable level and to maintain a sufficient funding base to enable the Group to meet its working capital
and strategic investment needs. In making decisions to adjust its capital structure to achieve these aims, either through
altering its dividend policy, new share issues, share buy-backs, or the increase/reduction of debt, the Group considers
not only its short-term position but also its long-term operational and strategic objectives.
70
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 29 SHARE CAPITAL (continued)
29.5 Capital risk management (continued)
For the 2020 financial year, the Group’s policy is to maintain its gearing ratio within the range of 0% - 20% (2019: 20% -
50%). The Group’s gearing ratio at the balance sheet date is shown below:
Gearing ratios
Total borrowings
Less cash and cash equivalents
Net debt
Total equity
Total capital
Gearing ratio
Consolidated Entity
Notes
2020
$’000
2019
$’000
152
(2,309)
(2,157)
54,193
54,193
0%
2,256
(1,047)
1,209
30,264
30,264
4%
The gearing ratio is calculated excluding lease liabilities.
The Group changed its capital management objectives in the financial year with the intent to minimise debt, but have
the ability to access debt should it be necessary, with a focus on funding the technology application projects and
maintaining dividend payments. As a result, it changed it policies and processes in the year manage its cash flow
accordingly. There is no change as to what the Group considers to be its capital.
NOTE 30 CAPITAL RESERVES
Reserves
Share option reserve
Asset revaluation surplus
Share premium reserve
Movement in reserves
30.1 Share options reserve
Share options
Opening balance
Issue of performance rights
Closing balance
Consolidated Entity
2020
$’000
4,143
869
350
2,924
4,143
2019
$’000
671
321
350
–
671
321
548
869
–
321
321
The share options reserve is used to recognise the value of equity settled share-based payments provided to
employees, including key management personnel, as part of their remuneration.
The fair value of the options at issue date is deemed to represent the value of employee services received over the
vesting period, recognised as a proportional share-based payment expense during each reporting period, with the
corresponding credit taken to a share option reserve.
30.2 Asset revaluation surplus
Opening balance
Revaluation of land and buildings
Closing balance
71
350
–
350
–
350
350
The asset revaluation surplus is used to recognise the fair value movement of land and buildings upon revaluation.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 30 CAPITAL RESERVES (continued)
30.3 Share premium reserve
Opening balance
Increase in PPK’s interest in Li-S Energy’s issued capital and reserves
Closing balance
Consolidated Entity
2020
$’000
–
2,924
2,924
2019
$’000
–
–
–
The share premium reserve is used to recognise PPK’s 58% interest in Li-S Energy’s issued capital and equity reserve of
$5.041M.
NOTE 31 FINANCIAL INSTRUMENTS RISK
The Group’s financial instruments include investments in deposits with banks, receivables, payables and interest bearing
liabilities. The accounting classifications of each category of financial instruments, as defined in Note 2.13, Note 2.14,
Note 2.19, Note 2.20 and Note 2.21 and their carrying amounts are set out below.
Weighted
Average
Interest
Rate
Floating
Interest
Rate
$’000
Notes
Within 1
Year
$’000
1 to 5
Years
$’000
Non-
Interest
Bearing
$’000
Total
$’000
Consolidated 2020
Financial assets
Receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Interest–bearing loans and borrowings
Trade and other payables – current
Lease liabilities
Total financial liabilities at amortised cost
Fair value through profit or loss
Contingent consideration
Total fair value through profit or loss
Consolidated 2019
Financial assets
Receivables
Cash and cash equivalents
Total financial assets
Financial liabilities
Other loans
Trade and other payables – current
Total financial liabilities at amortised cost
72
0.0%
0.0%
4.5%
0.0%
5.2%
0.0%
0.0%
9.73%
0.0%
14
13
26
24
25
28
14
13
26
24
Fair value through profit or loss
Contingent consideration
4.36%
28
Total fair value through profit or loss
–
–
–
–
–
–
–
–
–
459
459
–
–
–
–
–
–
–
–
152
–
1,681
1,833
–
–
–
–
2,256
–
2,256
–
–
–
–
–
1,998
1,998
6,324
5,344
6,324
5,344
11,668
11,668
–
4,485
–
4,485
152
4,485
3,679
8,316
–
–
–
–
–
–
–
–
–
8,655
588
9,243
–
4,932
4,932
8,655
1,047
9,702
2,256
4,932
7,188
–
–
9,041
9,041
–
–
9,041
9,041
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 31 FINANCIAL INSTRUMENTS RISK (continued)
Financial risk management
The Board of Directors have overall responsibility for the establishment and oversight of the financial risk management
framework. The Group’s activities expose it to a range of financial risks including market risk, credit risk and liquidity
risk. The Group’s risk management policies and objectives are therefore designed to minimise the potential impacts
of these risks on the results of the Group where such impacts may be material. The Board receives monthly reports,
which it reviews and regularly discuss the effectiveness of the processes put in place and the appropriateness of the
objectives and policies to support the delivery of the Group’s financial targets while protecting future financial security.
The Group does not use derivatives.
31.1 Market risk
Market risk is the risk that the fair value of future cash flows of the Group’s and parent entity’s financial instruments will
fluctuate because of changes in market prices.
Market risk comprises three types of risk: equity price risk, interest rate risk and currency risk.
(i) Equity price risk
The Group has an unlisted equity investment which is susceptible to market price risk arising from uncertainties about
future value of the investment security. The Group manages the equity price risk through updates with the equity
investment’s executives to keep abreast of its activities and plans. As the equity investment intends to complete an IPO
in the near future, the Group will have access to a market price and public information to manage the market price risks.
At the reporting date, the exposure to the unlisted equity investment was $2.547M at fair value.
The Group has performed sensitivity analysis relating to its equity price risk based on the Group’s year end exposure.
This sensitivity analysis demonstrates the effect on after tax results and equity which could result from a movement of
market value of +/- 10%.
Change in profit before tax
– increase in unlisted market value by 10%
– decrease in unlisted market value by 10%
Notes
2020
$’000
2019
$’000
255
(255)
–
–
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a security will fluctuate due to changes in interest
rates. Exposure to interest risk arises due to holding floating rate interest bearing liabilities, investments in cash and
cash equivalents and loans to related parties and other persons. Although a change in the current market interest rate
may impact the fair value of the Group’s fixed interest financial liabilities and other receivables, it does not impact the
Group’s profit after tax or equity as these financial liabilities and other receivables are carried at amortised cost and not
fair value through profit or loss. Floating interest rates attached to the Group’s financial assets and liabilities give rise to
cash flow interest rate risk.
Sensitivity disclosure analysis
The Group’s exposure to its floating interest rate financial assets and liabilities follows:
Financial assets
Cash
Receivables
Financial liabilities
Interest bearing liabilities
Net Exposure
Consolidated Entity
Notes
2020
$’000
2019
$’000
–
–
–
–
–
–
459
–
459
–
–
459
73
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 31 FINANCIAL INSTRUMENTS RISK (continued)
31.1 Market risk (continued)
The Group has performed sensitivity analysis relating to its interest rate risk based on the Group’s year end exposure.
This sensitivity demonstrates the effect on after tax results and equity which could result from a movement in interest
rates of +/- 1%.
Change in profit before tax
– increase in interest rate by 1%
– decrease in interest rate by 1%
Consolidated Entity
2020
$’000
2019
$’000
–
–
4
(4)
(iii) Currency Risk
Currency risk is the risk that the fair value or future cash flows of a financial item will fluctuate as a result of movements
in international exchange rates. The Group was not exposed to exchange rate transaction risk on foreign currency
sales or foreign currency purchases during the year. Sales revenue for the Group for the year was all denominated in
Australian dollars (2019: 100%). The Group does not take forward cover or hedge its risk exposure.
The Group is exposed to currency risk in relation to its equity investment which is in US dollars (see Note 31.1(i)). At the
year end, the equity investment was converted from United States Dollars to Australian Dollars at the exchange rate of
$0.6863 at 30 June 2020.
– increase in USD currency rate by $.01
– decrease in USD currency rate by $.01
(29)
30
–
–
31.2 Credit risk
The Group’s maximum exposure to credit risk is generally the carrying amount trade and other receivables net of any
allowance for credit losses. The Group’s exposure is minimised by the fact that the trade receivables balance is with a
diverse range of Australian and multi-national customers. The Group has in place formal policies for establishing credit
approval and limits so as to manage the risk.
The Group also has a credit risk exposure in relation to cash at bank. The Group’s policy is to ensure funds are placed
only with major Australian banks thus minimising the Group’s exposure to this credit risk. Refer to Note 14 for detail on
the Group’s trade and other receivables.
The geographic location of customers, relating to these trade receivables, is disclosed in Note 3.1 of these accounts.
Australia
6,324
6,324
8,655
8,655
31.3 Liquidity risk
Liquidity risk is the risk that the Group and parent will encounter difficulty in meeting obligations associated with
financial liabilities. The Group’s objective to mitigate liquidity risk is to maintain a balance between continuity of funding
and flexibility through the use of bank loans, other loans and lease agreements. The Group and parent’s exposure
to liquidity risk is not significant based on available funding facilities and cash flow forecasts. Details of the Group’s
financing facilities are set-out in Note 26.
Financial liabilities maturity analysis
The tables below reflect the undiscounted contractual settlement terms for the Group’s financial liabilities of a fixed
period of maturity, as well as the earliest possible settlement period for all other financial liabilities. As such the amounts
may not reconcile to the balance sheet.
74
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 31 FINANCIAL INSTRUMENTS RISK (continued)
31.3 Liquidity risk (continued)
Carrying
amount
$’000
<6
months
$’000
6-12
months
$’000
1-3 years
$’000
>3 years
$’000
Contractual
Cash flows
$’000
Consolidated 2020
Financial liabilities (current & non-current)
Trade and other payables
Interest-bearing loans and borrowings
Lease liabilities
Contingent consideration
Total financial liabilities
Consolidated 2019
Financial liabilities (current & non-current)
Trade and other payables
Non-bank loans
Contingent consideration
Total financial liabilities
4,333
4,333
152
3,679
–
152
688
–
–
–
–
–
993
1,998
–
–
8,164
5,173
993
1,998
–
–
–
–
–
–
–
4,333
152
3,871
–
8,355
3,732
2,284
3,732
2,284
–
3,732
2,284
–
–
–
–
–
10,000
10,000
6,016
6,016
–
10,000
–
16,016
NOTE 32 FAIR VALUE MEASUREMENT
Fair value
The carrying values of financial assets and liabilities listed below approximate their fair value.
Estimated discounted cash flows were used to measure fair value, except for fair values of financial assets that were
traded in active markets that are based on quoted market prices.
Hierarchy
The following tables classify financial instruments recognised in the statement of financial position of the Group
according to the hierarchy stipulated in AASB13 as follows:
– Level 1 – the instrument has quoted prices (unadjusted) in active markets for identical assets or liabilities;
– Level 2 – a valuation technique is used using inputs other than quoted prices within Level 1 that are observable for
financial instruments, either directly (i.e. as prices), or indirectly (i.e. derived from prices); or
– Level 3 – a valuation technique is used using inputs that are not based on observable market data (unobservable inputs).
Assets
Group 2020
Non-current assets
Unlisted equity securities
Liabilities
Contingent consideration
Group 2019
Liabilities
Contingent consideration
Notes
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
20
28
28
–
–
–
–
–
–
–
–
–
–
2,547
2,547
2,547
2,547
–
–
9,041
9,041
9,041
9,041
75
The Level 3 fair value assessment of unlisted equity securities has been based on advice provided by the investee
company as to the most recent capital raise completed by it on or about 30 June 2020. This amount per share in United
States Dollars has been converted to Australian Dollars at the prevailing exchange rate of .6863 at 30 June 2020.
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 33 CONTINGENT ASSETS AND LIABILITIES
The Group has the following bank guarantees which are secured against cash of the same amounts:
– $0.359M (2019: $0.359M) for property leases; and
–
$0.100M (2019: $0.100M) for completion of a property development.
Non-bank guarantees and indemnities include:
–
–
a finance facility up to a maximum of $4.000M from a major Australian bank secured against the debtors of PPK
Mining Equipment Pty Ltd, secured by a guarantee and indemnity from PPK Group Limited, PPK Mining Equipment
Group Pty Ltd and the subsidiaries of the mining division. This facility has not been drawn down.
the lease motor vehicle fleet provider has a guarantee and indemnity from PPK Group Limited in relation to the
leased motor vehicle fleet.
The Group has the following contingent liabilities:
– $1.000M for a finance facility provided to BNNT Technology Limited to fund additional equipment, should it be
required.
– $0.445M for its proportion of funding the 3D Dental Technology Limited project, should it be required.
– $0.594M being the rental arrears owing under a previous property lease. The Group signed a new five year lease to
31 July 2022 and, as a condition of this lease, the Lessor has agreed to waive its right to recover the rent arrears if
the Group complies with all obligations and pays all amounts due and payable under the lease.
–
to the previous AICIC owners that should the value of the 6.633M consideration shares, calculated based on the
5 day VWAP share price of PPK immediately prior to the release of the consideration shares from escrow, be less
than $6.650M then PPK will be obligated to pay the previous AICIC owners the difference in cash as an adjustment
to the purchase price.
– Li-S Energy has a contingent liability in that if it doesn’t complete its initial public offering by 31 December 2021 then
50% of the share swap entered into with Zeta Energy LLC will be cancelled retroactive to 16 June 2020.
As a consideration of the acquisition of AICIC, the Group has a contingent consideration of $10.000M to the vendor
if AICIC’s EBIT for the two financial years commencing subsequent to the acquisition is greater than $10.000M. The
vendor is entitled to a payment of 50% of the amount of the EBIT over the $10.000M to a maximum payment of
$10.000M. At 30 June 2020 the exposure to this has been assessed as nil (see Note 28).
The Group is defending a claim in the Supreme Court of NSW in relation to a dispute pertaining to the vesting
conditions of a business acquired in 2014 with a vendor employee for the second tranche of $0.500 of share plus
interest and costs. As advised in the 2016 Annual Report, the Group does not believe the vesting conditions were met
and still maintains this position.
See Note 34 for additional contingent assets and liabilities.
76
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 34 RELATED PARTIES
For details on transactions between related parties refer to Note 9, Note 18, Note 19 and Note 33.
34.1 Details of the nature and amount of each element of the remuneration of each key management
personnel (‘KMP”) of PPK Group Limited are shown in the table below:
2020
Short term benefits
Salary &
fees ($)
Cash
bonus ($)
Non-
Monetary
($)
Post
employ-
ment
Super-
annuation
($)
Long
Term
Benefits
($)
Terminat-
ion
Payments
($)
(1)Share
based
payments
($)
Perform-
ance
Related
(%)
Total
($)
Directors
Non – Executive
G Webb
A McDonald
Executive
R Levison
G Molloy(2)
D McNamara
Total Directors
Other Key
Management
Personnel
K Hostland(1)
Total Other
Total Key
Management
Personnel
40,000
45,833
215,000
240,000
200,000
740,833
–
–
–
–
–
–
325,000
157,625
325,000
157,625
–
–
–
–
–
–
–
–
–
–
25,000
–
–
25,000
25,000
25,000
1,065,833
157,625
–
50,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,000
236,943
282,776
–
–
240,000
240,000
236,108
436,108
473,051
1,238,884
–
84
–
54
–
188,886
696,511
50
188,886
696,511
–
661,937 1,935,395
–
(1)
Equity settled share based payments. Performance rights granted are expensed over the performance period, which includes the
year to which the bonus relates and the subsequent vesting period of the rights.
Amounts reported above include both paid and unpaid entitlements.
(2)
PPK had a liability to a director, G Molloy, at the end of the financial period for $0.040 for Director’s fees which were paid in
July 2020. There are no other amounts owing to Directors.
77
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 34 RELATED PARTIES (continued)
34.1 Details of the nature and amount of each element of the remuneration of each key management
personnel (‘KMP”) of PPK Group Limited are shown in the table below: (continued)
Remuneration Details for the year ended 30 June 2019 for Directors’ and Key Management Personnel
Details of the nature and amount of each element of the remuneration of each director and key management personnel
(‘KMP”) of PPK Group Limited are shown in the table below:
2019
Short term benefits
Salary &
fees ($)
Cash
bonus ($)
Non-
Monetary
($)
Post
employ-
ment
Super-
annuation
($)
Long
Term
Benefits
($)
Terminat-
ion
Payments
($)
(1)Share
based
payments
($)
Perform-
ance
Related
(%)
Total
($)
Directors
Non – Executive
G Webb
A McDonald
Executive
R Levison
G Molloy
D McNamara
Total Directors
Other Key
Management
Personnel
K Hostland(1)
Total Other
Total Key
Management
Personnel
40,000
40,000
170,000
39,600
200,000
489,600
–
–
–
–
–
–
325,000
115,529
325,000
115,529
–
–
–
–
–
–
–
–
–
–
–
–
–
–
25,000
25,000
814,600
115,529
–
25,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
40,000
40,000
170,000
39,600
108,864
308,864
108,864
598,464
–
–
–
35
–
87,091
552,620
37
87,091
552,620
–
195,955 1,151,084
–
(1)
Equity settled share based payments. Performance rights granted are expensed over the performance period, which includes the
year to which the bonus relates and the subsequent vesting period of the rights.
Amounts reported above include both paid and unpaid entitlements.
Performance Income as a Proportion of Total Remuneration
In 2020, K Hostland received an STI award of $157,625 (2019: $115,529), after his assessment of annual performance,
for achieving targets noted below as set by the Directors for the 2019 financial year representing 97% of his targets.
No other bonuses were paid to Key Management Personnel during the year.
Targets
Results
Revised revenue of $25.891M
Achieved $26.689M
Revised management EBITDA of $2.294M
Achieved $3.143M
BNNT Acquisition, legal & refinancing
Achieved at Board’s discretion
STI
Allocation
Outcome
20%
30%
50%
100%
100%
94%
78
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 34 RELATED PARTIES (continued)
34.1 Details of the nature and amount of each element of the remuneration of each key management
personnel (‘KMP”) of PPK Group Limited are shown in the table below: (continued)
The table below shows a reconciliation of performance rights held by each KMP for the year ended 30 June 2020.
Name and
Grant dates
D McNamara
Tranche 1
Tranche 2
Tranche 3
Tranche 4
A McDonald
Tranche 1
Tranche 2
Tranche 3
Tranche 4
K Hostland
Tranche 1
Tranche 2
Tranche 3
Tranche 4
Balance
at the
start of
year
Granted
during
year
Unvested
–
–
–
–
–
–
–
–
–
–
–
–
100,000
100,000
100,000
100,000
12,500
12,500
12,500
12,500
75,000
75,000
75,000
75,000
Vested Exercised
Forfeited
Balance at the end of the year
(unvested)
%
25
No.
Yes
–
–
–
Yes
25
Yes
25
–
–
–
No.
%
No.
Maximum
$ value to vest(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
88,744
50,133
20,568
129,982
62,832
25,225
70,995
40,106
16,455
(1)
The maximum value of the performance rights yet to vest has been determined as the amount of the grant date fair value of the
performance rights that is yet to be expensed which was calculated using the number of performance rights that were going to
be granted.
Fair Value of each performance right at the grant date is:
D McNamara
A McDonald
K Hostland
Tranche 1
Tranche 2
Tranche 3
Tranche 4
$0.500
$6.500
$0.500
$0.500
$6.500
$0.500
$0.486
$6.500
$0.486
$0.430
$6.500
$0.430
34.2 The Group has the following related party agreements in place:
A Shareholders Deed with Deakin University, BNNT Technology Limited and two other shareholders which sets out the
respective rights and obligations of the shareholders as members of BNNT Technology Limited and the arrangements
for the management, control and funding of BNNT Technology Limited. Key terms of the deed in relation to the
shareholders and directors management and control are:
– PPK and Deakin University are entitled to appoint two directors each and each director is a nominee of the
shareholder who nominated them. Subject to the Director’s duties under applicable law and the Deed, the directors
may act in the interests of the shareholder who appointed them;
– A quorum for a board meeting requires a majority of the directors;
– Each director has one vote;
– Ordinary decisions require more than 50% of the total votes of all directors;
– Special majority decisions require more than 50% of the total votes of all directors; and
– Management vests in the Board.
– A quorum for a shareholders meeting will be constituted by the attendance of majority of the shareholders and
must include a representative from PPK and Deakin University
– Each shareholder has one vote;
– Ordinary decisions of the shareholders require more than 50% of the total votes of all shareholders; and
– Special majority decisions require more than 75% of the total votes of all shareholders.
79
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D)
NOTE 34 RELATED PARTIES (continued)
34.3 BNNT Technology Limited, as the joint venture, has the following related party agreements in place:
34.3.1 A Joint Venture Agreement with Deakin University and BNNT Technology Limited for the research, development
and commercialisation of new and existing technologies and products where BNNT can be used to create and/or
improve these technologies and products whereby:
– BNNT Technology Limited provides BNNT and related technologies, products, technical skills and know how;
– Deakin University provides existing intellectual property, services of specialist personnel from the Institute of
Frontier Materials and other equipment including the university’s specialist facilities where required; and
– PPK provides all other services to commercialise the new technologies and services, including the procurement of
other specialists with experience in the respective industries, and source or assist with funding and industry partners.
The agreement provides for an initial six BNNT application projects with a joint ownership of PPK having a 65% interest,
Deakin University having a 25% interest and BNNT having a 10% interest of those entities incorporated for each project.
However, the agreement provides for alternative ownership arrangements for BNNT application projects that are
entered into outside of the initial six BNNT application projects.
34.3.2 A Technology Licence Agreement with Deakin University to BNNT Technology Limited for an exclusive global
20 year licence, commencing 1 June 2018, to commercialise the BNNT manufacturing technology patented by
Deakin University.
A condition of the Technology License Agreement is BNNT Technology Limited has the following commitments to
Deakin University:
–
–
a commitment to generate $50.000M of gross revenues within the first three years after the Evaluation Completion
Date; and
a quarterly royalty payment of 5% of the gross revenue received by or payable to BNNT Technology Limited or any
of its sub- licensees.
34.3.3 A three year lease with Deakin University to BNNT Technology Limited for the premises at Waurn Pond, Geelong
to expire 31 May 2021 for $5,868 per month to 31 May 2020 with a 4% increase for June 2020 onwards.
A condition of the lease with Deakin University is that BNNT Technology Limited has the following commitments to
Deakin University:
–
–
an initial $0.500M payment for Deakin University to develop a research plan for BNNT Technology Limited; and
a $2.000M per annum payment for research funding once BNNT Technology Limited revenue exceeds
$5.000M per annum.
34.3.4 A Shareholders Agreement with Li-S Energy Limited in which BNNT Technology Limited must provide its
technical skills and know how for the Li-S battery project.
34.3.5 A Supply Agreement in which BNNT Technology Limited has agreed to supply 100 grams of BNNT per annum
at $1,000 per gram for a 2 year period to Li-S Energy Limited.
34.3.6 A Loan Agreement to a maximum amount of $0.500M for BNNT Technology Limited to fund the Li-S battery
project, interest bearing at 4.5% and maturing in 36 months from the date the loan is advanced or such other
date the parties agree in writing.
34.4 Related Party Balances
Li-S Energy Limited has short-term shareholder loans owing to PPK of $1.033M and to BNNT Technology Limited
of $0.152M to fund the development costs incurred by Deakin University and the purchase of equipment for the
Li-S battery project. The loans are interest bearing at 4.5% per annum, unsecured and were repaid on 20 July 2020.
The loan to PPK has been eliminated on consolidation.
80
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 35 INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES
Percentage Owned
Subsidiaries of PPK Group Limited:
Rutuba Pty Limited
Seven Hills Property Holdings Pty Ltd
PPK Properties Pty Ltd
Dandenong South Property Pty Ltd
PPK Willoughby Holdings Pty Ltd
PPK Willoughby Pty Ltd
PPK Aust. Pty Ltd
PPK Investment Holdings Pty Ltd
PPK Finance Pty Ltd
York Group Limited
Rambor Pty Ltd
Rambor Manufacturing Pty Ltd
Rambor Logistics & Asset Management Pty Ltd
PPK Firefly Pty Ltd
PPK Electrics Pty Ltd
Exlec Holdings Pty Ltd
QES Air Pty Ltd
PPK Mining Equipment Group Pty Ltd
PPK Mining Equipment Pty Limited
PPK Mining Repairs Alternators Pty Ltd
PPK Mining Equipment Hire Pty Ltd
Coaltec Pty Ltd
PPK IP Pty Ltd
PPK China Pty Ltd
PPK (Beijing) Mining Equipment Co., Ltd
PPK Plans Pty Ltd
PPK (CC) Pty Ltd
BNNT Ballistics Pty Ltd
AIC Investment Corporation Pty Ltd
Li-S Energy Limited
Associates of PPK Group Limited
Craig International Ballistics Pty Ltd
3D Dental Technology Limited
Ballistic Glass Pty Ltd
Joint venture with PPK Group Limited
BNNT Technology Limited
Country of
Incorporation
Notes
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
China
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
34.1
34.2
34.3
34.3
34.4
34.6
34.5
34.7
34.8
2020
%
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%
58%
45%
45%
40%
2019
%
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%
0%
0%
0%
0%
50%
50%
81
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) NOTE 35 INVESTMENTS IN SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES (continued)
34.1
PPK Willoughby Holdings Pty Ltd acts as the trustee company of the PPK Willoughby Funding Unit Trust. The Group holds 22.86%
of issued units of this trust which is considered an associate of the Group.
34.2 PPK Willoughby Pty Ltd acts as the trustee company of the PPK Willoughby Purchaser Unit Trust. PPK Willoughby Funding Unit
Trust holds 80% of issued units of this trust.
34.3 PPK China Pty Ltd and PPK (Beijing) Mining Equipment Co, Ltd have both been placed in voluntary liquidation to wind-up the
entities.
34.4 PPK Plans Pty Ltd is the trustee for the PPK Long Term Incentive Plan.
34.5 PPK acquired a 45% interest in Craig International Ballistics Pty Ltd on 28 October 2019
34.6 PPK incorporated Li-S Energy Limited on 12 July 2019 and had a 58% interest at the reporting date
34.7 PPK incorporated 3D Dental Technology Limited on 11 March 2020 and had a 45% interest at the reporting date
34.8 PPK incorporate Ballistic Glass Pty Ltd on 11 March 2020 and had a 40% interest at the reporting date
Note 36 EVENTS SUBSEQUENT TO THE END OF THE REPORTING PERIOD
In August 2020, the Board declared a 1 cent final ordinary fully franked dividend for the 2020 financial year.
Li-S Energy Limited received $3.250M of cash prior to 30 June 2020 for the issuance of 5.000M shares at $0.65 per
share and issued the shares subsequent to the reporting period.
PPK Mining Equipment operates in three facilities in NSW; Tomago, Port Kembla and Mt Thorley. Its customers and
most suppliers operate in close proximity to the facilities and the operations continue to operate. However, if one or
more of the facilities should be required to close it is unknown how long the closure would be, or if there were impacts
on its customers and/or suppliers operations, the impact on the operations of PPK Mining Equipment is unknown.
BNNT Technology Limited’s manufacturing plant and Li-S Energy Limited’s laboratory are located at Deakin
University’s Waurn Ponds facility in Geelong, Victoria. To slow the spread of COVID-19 in Victoria, the Victorian
government imposed Stage 4 restrictions for metropolitan Melbourne from 2 August 2020 and Stage 3 restrictions
for regional Victoria from 5 August 2020, which includes Geelong. Stage 3 restrictions allow employees to work at
the manufacturing plant so this facility continues to operate. At this date of these financial statements we believe the
manufacturing plant will be able to continue to operate for the foreseeable future. However, if the manufacturing plant
or the laboratory should be required to close, it is unknown how long this closure would be and the impact on the
operations of both companies.
Deakin University has had its own restrictions with access to campus by staff, students and visitors restricted to help
maintain health and safety protocols, with staff and visitor access reviewed case-by-case. As a result, limits have been
placed on the number of staff and contractors permitted in the workspace at one time. We are however continuing with
the installation of new equipment during this time whilst adhering to these restrictions. It is unknown whether stricter
restrictions will be imposed and what the impact of these would be on the operations of the companies.
Craig International Ballistics is located at the Gold Coast in Queensland. Its customers are located in various Australian
states and internationally and some key supplier are also located overseas. While its supply chain has been interrupted
due to COVID-19 and some customer orders have been delayed, the company continues to operate. However, if the
manufacturing plant should be required to close it is unknown how long this closure would be, or if there were impacts
on its customers and/or suppliers operations, the impact on the operations of Craig International Ballistics is unknown.
PPK issued 252,500 shares to the Long Term Incentive Plan Trust Account for the two directors, an executive and senior
managers of the Group whose Tranche 2 Performance Rights vested on 1 July 2020.
No other matter or circumstance has arisen since the end of the financial year which is not otherwise dealt with in
this report or in the Consolidated Financial Statements that has significantly affected or may significantly affect the
operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity
in subsequent financial years.
82
PPK Group Limitedfor the year ended 30 June 2020Notes to the Consolidated Financial StatementsNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONT’D) Directors’ Declaration
1.
In the opinion of the Directors of PPK Group Limited;
a)
The consolidated financial statements and notes of PPK Group Limited are in accordance with the
Corporations Act 2001, including
(i) Giving a true and fair view of is financial position as at 30 June 2020 and of its performance for the
financial year ended on that date; and
(ii) Complying with Australia Accounting Standards (including the Australian Accounting Interpretations) and
the Corporations Regulations 2001; and
b)
There are reasonable grounds to believe that PPK Group Limited will be able to pay its debts as and when they
become due and payable.
2.
3.
The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the
Chief Executive Officer and Chief Financial Officer for the financial year ended 30 June 2020.
Note 2 confirms that the consolidation financial statements also comply with International Financial Reporting
Standards.
Signed in accordance with a resolution of the Directors:
Collection House Limited
Robin Levison
Executive Chairman
Glenn Molloy
Executive Director
Dated this 26th day of August 2020
83
PPK Group Limitedfor the year ended 30 June 2020Directors’ DeclarationDIRECTORS’ DECLARATION
INDEPENDENT AUDITOR’S REPORT
Independent Auditor’s Report
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent Auditor's Report to the Members of PPK Group Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of PPK Group Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2020, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June
2020 and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants including Independence Standards (the Code) that are relevant to our audit of the
financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with
the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of
material misstatement of the financial report. The results of our audit procedures, including the
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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Revenue
Why significant
How our audit addressed the key audit matter
Revenue is a key item in the Statement of Profit
or Loss and Other Comprehensive Income.
Our audit procedures included the following:
The Group earns revenue from different business
streams, with each stream having differing
revenue recognition points under the Group’s
revenue recognition policies (Note 2.9) and
Australian Accounting Standards. Amounts
recorded as revenue but unbilled at 30 June are
recorded as contract assets. These amounts are
disclosed in Note 15.
• Documenting the design of the key revenue
systems and processes.
• Evaluating the revenue recognition policies for
compliance with AASB 15 Revenue from
Contracts with Customers and assessing revenue
recognised against these accounting policies and
accounting standards.
• Testing a sample of revenue transactions to
assess appropriate revenue recognition under
the Group’s accounting policies and accounting
standards.
• Performing analytical review over recognised
revenue.
• Testing the cut off controls applied to revenue
recognised at 30 June 2020 as contract assets.
• Assessing the adequacy of the related
disclosures within the financial statements.
Impairment Testing of Intangible Assets and Property Plant and Equipment
Why significant
How our audit addressed the key audit matter
Impairment testing of intangible assets and
property plant and equipment was a key audit
matter due to the value of the recorded assets
(30 June 2020: $3,038,000 (intangible assets)
$5,240,000 (property, plant and equipment) and
right of use assets ($3,628,000)) and the degree
of estimation required to be made by the Group
in assessing assets not yet in service which
comprised $2,976,000 of the intangible asset
balance at 30 June 2020 as disclosed in note
23.
The Group performs an annual impairment
assessment for indicators of impairment. Where
indicators of impairment are present for an
individual development asset the recoverable
amount of the asset is assessed and compared to
its carrying value. An assessment is also made of
indicators of impairment for each individual Cash
Generating Unit (CGU).
Significant assumptions used in the impairment
testing referred to above are inherently
Our audit procedures included the following:
• Evaluating the Group’s assessment of its CGUs for
consistency with the requirements of Australian
Accounting Standards.
• Evaluating the completeness of the Group’s
assessment of impairment indicators for
intangible assets in development and each CGU.
• Assessing management’s commercial basis for
the development and commercialisation of
products in process development.
• Assessing the key assumptions within the
impairment assessment of each asset and CGU
including the commercial prospects, growth rate
and discount rate.
• Applying our knowledge of the business and
corroborating our work with external information
where possible.
• Assessing the adequacy of the disclosures
included in Note 23 to the financial report.
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Why significant
How our audit addressed the key audit matter
subjective and in times of economic uncertainty
the degree of subjectivity is higher than it might
otherwise be. Based on the size of the assets
and the judgement involved in determining the
recoverable amount, we have considered this a
key audit matter.
Contingent Consideration - AIC Investment Corporation Pty Ltd
Why significant
How our audit addressed the key audit matter
The Group acquired 100% of the issued capital of
AIC Investment Corporation Pty Ltd (AICIC) and
gained control of the entity during the financial
year ended 30 June 2019.
As disclosed in Note 28, a component of the
consideration for the acquisition of AICIC was
contingent on future events. An amount of
$9,041,000 was provided for this liability at 30
June 2019.
During the year ended 30 June 2020, an
assessment was made by the Group and it was
determined it is no longer expected to be paid.
The value of this liability was assessed as $Nil
and taken to the profit and loss as “Other
Operating Income”. This is disclosed in Note 3.2.
Recoverable Value of Inventory
Our procedures included the following:
• Assessing the forward income projections for
AICIC used in the contingent consideration
calculation as outlined in the acquisition
agreement for this entity.
• Evaluating management’s conclusion, the
contingent consideration liability should be
revalued to $Nil.
• Assessing the recognition of the reversal of the
contingent consideration amounts in profit and
loss.
• Assessing the adequacy of the related
disclosures within the financial statements.
Why significant
How our audit addressed the key audit matter
The Group is required to carry its inventory at
the lower of cost or net realizable value in
accordance with AASB 102 Inventories. The
Group’s accounting policy is disclosed in Note
2.16. At 30 June 2020 $10,594,000 of
inventory was on hand as disclosed in Note 16.
The following factors add complexity or increase
the likelihood of errors in the determination of
the value of inventory:
•
large inventory holdings and slower inventory
turnover indicate that there may be obsolete
stock on hand; and
Our procedures included the following:
• Assessing the Group’s inventory valuation
methodology with the requirements of Australian
Accounting Standards.
• Recalculating for a sample of inventory items the
cost and net realisable value of inventories items.
• Testing the mathematical accuracy of the
inventory valuation model.
• Comparing the data underlying the model to the
accounting system or other sources.
• Assessing whether the recorded cost, after
factoring in valuation adjustments, was at the
lower of cost and net realisable value.
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Why significant
How our audit addressed the key audit matter
• Assessing the adequacy of the related disclosures
within the financial statements.
• methods of estimating inventory provisions
involve significant management judgment,
including predictions about market conditions
and future sales.
This area is a key audit matter due to the
materiality of inventory to the Statement of
Financial Position, and the significant level of
estimation involved in applying the “lower of cost
and net realisable value” measurement
methodology.
Accounting for Non-controlled Investments
Why significant
How our audit addressed the key audit matter
The Group holds a number of significant non-
controlled investments in its portfolio. The
investments are recorded as non-current assets
and are accounted for by the Group as follows:
Investee
Classification
Accounting
Method
Note
BNNT
Technology
Limited
Craig
International
Ballistics Pty
Ltd*
Zeta Energy
LLC*
19
19
20
Joint Venture
Entity
Equity
method
Associate
Entity
Equity
method
Financial
Asset at Fair
Value
Through
Profit and
Loss
Fair Value
Through
Profit and
Loss
* Acquired during the year ended 30 June 2020.
The accounting policies applied in recognising
and measuring the Group’s investments are
disclosed in Note 2 of the Group’s financial
report.
All Investments
Our procedures included the following:
• Reviewing investment and shareholder
documents and correspondence in relation to
each investment.
• Challenging the Group’s assessment as to the
method of accounting for each investment for
compliance with Australian Accounting
Standards.
• Confirming the Group’s interest in each investee
entity.
• Testing management’s impairment assessment
of the investment by considering forecasts of
forward earnings, commercial activities and
discount rates or recent arm’s length capital
raisings.
• Assessing the adequacy of the related
disclosures within the financial statements.
BNNT Technology Limited (“BMNT”) and Craig
International Ballistics Pty Ltd (“CIB”)
Our procedures included the following:
•
•
Evaluating the Group’s accounting for the initial
investment in CIB for consistency with Australian
Accounting Standards.
Determined the scope of audit work required to
be undertaken on the results and position of
BNNT and CIB for the purposes of the audit of
the Group.
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Why significant
How our audit addressed the key audit matter
This area is a key audit matter due to the
materiality of the investments to the Statement
of Financial Position, and the judgment involved
in assessing whether control, joint control,
significant influence or no influence exists.
Subjectivity also exists in assessing the value of
investments recorded at fair value.
•
•
•
Assessing the accounting policies of BNNT and
CIB for consistency with the Group’s policies.
Evaluating the Group’s share of net gains and the
equity method investment movement for the
year ended 30 June 2020.
Assessing the carrying amount of the Group’s
equity method investment at 30 June 2020.
Ernst & Young is the appointed auditor of all
investees listed above, except for Zeta Energy
LLC.
Zeta Energy LLC
Our procedures included the following:
•
Recalculating the fair value of the Group’s
investment at 30 June 2020 using current share
valuations, supported by recent capital raising
transactions and converting the US dollar
denominated investment value to Australian
dollars at 30 June 2020.
Acquisition of Controlling Interest in Li-S Energy Limited
Why significant
How our audit addressed the key audit matter
On 16 July 2019, the Group acquired a
controlling interest in Li-S Energy Limited. This
controlling interest has been maintained to 30
June 2020.
During the period the investment held by the
Group was diluted, with no loss of control being
incurred by the Group. The investment is
disclosed in Note 18.
This area is a key audit matter due to the
significance of the investment to the Statement
of Financial Position, and the judgment involved
in assessing whether control, joint control,
significant influence or no influence exists.
Our procedures included the following:
•
•
•
•
•
•
Reviewing investment and shareholder
documents and correspondence in relation to
the investment.
Evaluating the Group’s business combination
accounting for the acquisition of Li-S Energy
Limited, including the assessment of the fair
value of acquired assets, liabilities and
contingent liabilities.
Confirming with Li-S Energy Limited the Group’s
interest held at 30 June 2020.
Recalculating the amounts recognised in equity
reserves of $2,924,000 which arose on the
dilution of the Group’s interest in Li-S Energy
without a loss of control.
Determining the scope of audit work required to
be undertaken on the results and position of Li-S
Energy Limited for the purposes of the audit of
the Group.
Assessing the accounting policies of Li-S Energy
Limited for consistency with the Group’s policies.
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Why significant
How our audit addressed the key audit matter
•
•
Evaluating the consolidation and elimination of
intercompany amounts during the period ended
and as at 30 June 2020. This included the
calculation of the non-controlling interest.
Assessing the adequacy of the related
disclosures within the financial statements.
Information Other than the Financial Report and Auditor’s Report Thereon
The directors are responsible for the other information. The other information comprises the
information included in the Group’s 2020 Annual Report but does not include the financial report and
our auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors 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 gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
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•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the Group’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the financial report or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events
in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
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Report on the Audit of the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2020.
In our opinion, the Remuneration Report of PPK Group Limited for the year ended 30 June 2020,
complies with section 300A of the Corporations Act 2001.
Responsibilities
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.
Ernst & Young
Brad Tozer
Partner
Brisbane
26 August 2020
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
74
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PPK Group LimitedIndependent Auditor’s ReportINDEPENDENT AUDITOR’S REPORT (CONT’D)PPK Group Limited
SHAREHOLDER INFORMATION
Shareholder Information
(a) Number of PPK shareholders: 2,803
(b) Total shares issued: 85,873,243
(c) Percentage of total holdings by or on behalf of the 20 largest shareholders: 68.57%
(d) Distribution schedule of holdings
Holdings Ranges
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Less than a marketable parcel
Holders
Total Units
Total % Held
1,075
482,335
2,555,422
2,439,267
9,654,266
998
315
343
72
181
70,741,953
82.38
14,110
0.56
2.98
2.84
11.24
(e) Voting rights: Every member present personally or by proxy or attorney etc, shall, on a show of hands, have one
vote and on a poll shall have one vote for every share held.
(f) Top 20 Holders of Ordinary Fully Paid Shares
Name
Shares
%
1. Wavet Fund No 2 Pty Ltd
2.
3.
Equipment Company of Australia Pty Limited
Australian Innovation Centre Pty Ltd
4. McNamara Super Group Pty Ltd
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