CTI LOGISTICS LIMITED

Transcription

1 CTI LOGISTICS LIMITED ABN JUNE 2005 ANNUAL ACCOUNTS

2 DIRECTORY DIRECTORS David Robert Watson (Executive Chairman) Jonathan David Elbery (Executive) David Anderson Mellor (Executive) Bruce Edmond Saxild (Executive) Peter James Leonhardt (Non-Executive) SECRETARY David Anderson Mellor AUDITORS PricewaterhouseCoopers QV1, Level St. George s Terrace Perth Western Australia 6000 SHARE REGISTRY Computershare Investor Services Pty Ltd Level 2, 45 St. George s Terrace Perth Western Australia 6000 Telephone (08) REGISTERED OFFICE AND PRINCIPAL PLACE OF BUSINESS 1 Drummond Place West Perth Western Australia 6005 Telephone (08) Facsimile (08) corporate@ctilogistics.com Web CTI Logistics Limited is a company limited by shares incorporated and domiciled in Australia CONTENTS Directors Report Auditors Independence Declaration Statements of Financial Performance Statements of Financial Position Statements of Cash Flows Notes to the Financial Statements Directors Declaration Independent Audit Report Corporate Governance Statement Page 1-3 Page 4 Page 5 Page 6 Page 7 Page 8-38 Page 39 Page Page 42-44

3 CTI LOGISTICS LIMITED ABN DIRECTORS REPORT YOUR DIRECTORS PRESENT THEIR REPORT ON THE CONSOLIDATED ENTITY CONSISTING OF CTI LOGISTICS LIMITED AND THE ENTITIES IT CONTROLLED AT THE END OF, OR DURING, THE YEAR ENDED 30 JUNE Directors of the in office during the whole of the financial year and up to the date of this report are: David Robert Watson Mr Watson is the founder and executive chairman of the consolidated entity. Mr Watson is a member of the remuneration committee. Mr Watson has not held any other directorships in listed companies over the past 3 years. Jonathan David Elbery Mr Elbery is a Chartered Accountant who has been with the consolidated entity since He is responsible for the consolidated entity s security operations. Mr Elbery is a member of the audit committee. Mr Elbery has not held any other directorships in listed companies over the past 3 years. Peter James Leonhardt Mr Leonhardt is a non-executive director of CTI Logistics Limited and has been with the consolidated entity since During the past 3 years Mr Leonhardt has also served as a director of Alliance Finance Corporation Limited (May 2002 and continuing), Carnarvon Petroleum Limited (March 2005 and continuing), Titan Resources Limited (June 2005 and continuing) and Voyager Energy Limited (2001 to September 2005). Mr Leonhardt was a former managing partner of Coopers & Lybrand. Mr Leonhardt is the chairman of the audit committee and the remuneration committee. David Anderson Mellor Mr Mellor is a Chartered Accountant who has been with the consolidated entity since He is responsible for the consolidated entity s finances and accounts. Mr Mellor has not held any other directorships in listed companies over the past 3 years. Bruce Edmond Saxild Mr Saxild has been with the consolidated entity since He is responsible for the consolidated entity s logistics and transport operations. Mr Saxild has not held any other directorships in listed companies over the past 3 years. Principal activities of the consolidated entity The principal activities of the consolidated entity during the year were the provision of logistics, transport and security services, printing, manufacturing of plastic products and investment. Dividends The directors have declared a fully franked final dividend of 1.5 cents per ordinary share subsequent to the end of the financial year. This dividend is not recognised as a liability at year end. During the financial year a 1 cent fully franked dividend for the year ended 30 June 2004 and a 1.5 cents fully franked interim dividend for the year ended 30 June 2005 were paid to members. Review of operations and results Net profit attributable to the members of the was 1,818,038, compared to 2,847,367 in the previous corresponding period. Revenue from ordinary activities was 55,985,393, compared to 74,301,761. Net cash flows from operating activities was 4,633,723 down from 5,918,135 in the prior year. Last year s results, revenue and cash flows were positively affected by previously reported one-off profits and losses relating to the sale of the logistics and transport businesses located in the eastern states and certain wharf related assets. Last year s after tax result was also affected by a credit to income tax expense of 1,136,291 being an adjustment to deferred tax balances on implementation of tax consolidation. There is a current on-market share buy-back of up to 15% of the s share capital. Since the buy-back was approved by shareholders in January, the has purchased a total of 755,355 shares to 30 June 2005 and a further 145,217 since that date. Changes in the state of affairs No other significant changes in the state of affairs of the consolidated entity have occurred other than those matters referred to elsewhere in this Annual Report. Events subsequent to balance date The directors are not aware of any other matters or circumstances not otherwise dealt with in this Annual Report or the financial statements that has significantly or may significantly affect the operations of the consolidated entity, the results of those operations, or the affairs of the consolidated entity in subsequent financial years. Likely developments The major objectives encompassed in the Business Plan of the consolidated entity are: (i) expansion of existing operations by aggressive (ii) marketing and by acquisition; establishment or acquisition of businesses in fields related to or compatible with the consolidated entity s existing core operations; and (iii) to maximise the profits and returns to shareholders by constant review of existing operations. Directors benefits No director of the has, since the end of the previous financial year, received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of emoluments received by directors as shown in the consolidated entity s accounts) by reason of a contract made by the or a controlled entity or a related body corporate with the director or with an entity of which the director is a member, or with an entity in which the director has a substantial financial interest other than those transactions detailed in Note 23. secretary The company secretary is Mr D A Mellor, who was appointed to the position in He is a Chartered Accountant. CTI Logistics Limited and Controlled Entities Page 1

4 DIRECTORS REPORT (continued) Directors meetings The number of directors meetings held in the period each director held office during the financial year and the number of meetings attended by each director were: Board of Directors Number Held Number Attended J D Elbery 7 7 P J Leonhardt 7 7 D A Mellor 7 7 B E Saxild 7 7 D R Watson 7 7 Audit committee Number Held Number Attended J D Elbery 5 5 P J Leonhardt 5 5 The board of directors has considered the position and, in accordance with the advice received from the audit committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act The directors are satisfied that the provision of non-audit services by the auditor, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: all non-audit services have been reviewed by the audit committee to ensure they do not impact the impartiality and objectivity of the auditor none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1. A copy of the auditors independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 4. Remuneration committee Number Held Number Attended P J Leonhardt 1 1 D R Watson 1 1 Particulars of directors interests in shares of CTI Logistics Limited at the date of this report Direct Holding Indirect Holding J D Elbery 162, ,210 P J Leonhardt - 53,086 D A Mellor 69, ,756 B E Saxild 63, ,221 D R Watson 3,484,315 1,964,861 Directors and officers indemnity insurance The s directors and officers indemnity insurance policy indemnifies the directors named in this report in respect of their potential liability to third parties for wrongful acts committed by them in their capacity as directors (as defined in the policy). The premium paid in respect of this policy was 15,394 ( ,235). Environmental regulation The operations of CTI Logistics Limited and its controlled entities are not subject to any particular or significant environmental regulation. However, the board believes that CTI Logistics Limited and its controlled entities have adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they apply to CTI Logistics Limited and its controlled entities. Non-audit services The may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor s expertise and experience with the and/or the consolidated entity are important. Details of the amounts paid or payable to the auditor, PricewaterhouseCoopers, for audit and non-audit services provided during the year are set out in Note 3(ii) of the financial statements. CTI Logistics Limited and Controlled Entities Page 2

5 DIRECTORS REPORT (continued) Remuneration report Principles used to determine the nature and amount of remuneration The remuneration committee makes specific recommendations on remuneration packages and other terms of employment for executive directors. No element of the remuneration is based upon the s performance and no bonus schemes operated during the financial year. Remuneration of non-executive directors is determined by the board within the maximum amount, approved by shareholders, from time to time. Details of remuneration Details of the nature and amount of each element of the emoluments of each director of the and the consolidated entity is set out in the following table Name Cash salary and fees Primary Post-employment Equity Nonmonetary Superannuation Retirement benefits benefits Options Cash bonus J D Elbery 236,238-6,199 12, ,757 P J Leonhardt 33, ,000 D A Mellor 210,455-9,986 16, ,261 B E Saxild 211,525-9,916 36, ,441 D R Watson 313,450-15,853 57, ,453 Total 1,004,668-41, , ,168,912 Service agreements There are no service agreements in existence and entitlements on termination would be subject to assessment by the remuneration committee within legislative framework at the time. Having regard to the size and structure of the consolidated entity, the nature of its operations, and the close involvement of the four executive directors, it is the opinion of the directors that there are no executive officers of the or the consolidated entity apart from the four executive directors. Loans to directors Information on loans to directors is set out in Note 23 of the financial statements. This report is made in accordance with a resolution of the directors. Total DAVID MELLOR Director Perth, 30 September 2005 CTI Logistics Limited and Controlled Entities Page 3

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7 STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 30 JUNE 2005 Notes Revenue from ordinary activities 2 55,985,393 74,301,761 7,596,404 6,678,371 Share of net profit of joint venture partnership accounted for using the equity method 120, Borrowing costs expense (792,805) (1,091,792) (103,935) (365,267) Other expenses from ordinary activities 3 (52,599,435) (71,199,860) (4,844,757) (5,754,187) Profit from ordinary activities before income tax expense 3 2,713,428 2,010,109 2,647, ,917 Income tax (expense)/benefit 4 (895,390) 837, , ,284 Net profit attributable to members of the 17 1,818,038 2,847,367 2,862, ,201 Total changes in equity other than those resulting in transactions with owners as owners 1,818,038 2,847,367 2,862, ,201 Cents Cents Basic earnings per share Diluted earnings per share The accompanying notes form an integral part of these financial statements. CTI Logistics Limited and Controlled Entities Page 5

8 STATEMENTS OF FINANCIAL POSITION AS AT 30 JUNE Notes CURRENT ASSETS Cash assets 26 1,887, ,526 1,887, ,526 Receivables 5 10,140,382 13,609,942 8,583,029 10,476,021 Inventories 7 1,703,902 1,453, Other assets , ,287 89, ,540 Total Current Assets 14,217,947 16,152,912 10,560,787 11,241,087 NON-CURRENT ASSETS Receivables 5 616,905 1,578, , ,155 Investment accounted for using the equity method , Other financial assets 6 138, ,185 8,439,981 8,439,981 Property, plant and equipment 8 23,266,408 22,868,890 2,882,218 2,562,852 Deferred tax assets 9 806, , , ,690 Intangible assets , , Other assets 11-2, Total Non-current Assets 25,286,800 25,828,980 12,745,729 12,186,678 TOTAL ASSETS 39,504,747 41,981,892 23,306,516 23,427,765 CURRENT LIABILITIES Payables 12 5,064,459 6,769, , ,579 Interest bearing liabilities 13 3,140,766 2,828, , ,255 Tax liabilities 14 87,059-87,059 - Provisions 15 1,407,295 1,213, , ,841 Total Current Liabilities 9,699,579 10,812,076 1,636,183 1,795,675 NON-CURRENT LIABILITIES Payables 12-83, Interest bearing liabilities 13 6,514,815 6,474, , ,428 Deferred tax liabilities , , , ,913 Provisions , , , ,765 Total Non-current Liabilities 7,270,994 7,775, , ,106 TOTAL LIABILITIES 16,970,573 18,587,315 2,411,594 2,716,781 NET ASSETS 22,534,174 23,394,577 20,894,922 20,710,984 EQUITY Contributed equity 16 17,939,045 20,044,219 17,939,045 20,044,219 Retained profits 17 4,595,129 3,350,358 2,955, ,765 TOTAL EQUITY 22,534,174 23,394,577 20,894,922 20,710,984 The accompanying notes form an integral part of these financial statements. CTI Logistics Limited and Controlled Entities Page 6

9 STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE Notes CASH FLOWS FROM OPERATING ACTIVITIES Receipts from trade and other debtors (inclusive of goods and services tax) 61,552,665 75,526,944 5,018,966 5,814,693 Payments of accounts payable to suppliers, creditors and employees (inclusive of goods and services tax) (56,056,900) (67,743,056) (4,895,162) (6,719,453) Interest received 180, ,769 78, ,981 Borrowing costs (792,805) (1,091,792) (103,935) (365,267) Dividends received 4,554 3,450 3,004,554 2,003,450 Income tax refund received 1,033, , ,781 - Income tax paid (1,288,102) (1,264,643) (100,680) - Net cash flows from operating activities 26(i) 4,633,723 5,918,135 3,407, ,404 CASH FLOWS FROM INVESTING ACTIVITIES Loan repayments received 26,250 21,000 1,142,322 7,817,840 Payment for investment in joint venture partnership (176,000) Repayment of investment from joint venture partnership 120, Payments for property, plant and equipment (2,389,907) (1,987,011) (389,779) (118,683) Deferred payment for purchase of business (333,333) (333,333) - - Proceeds from sale of property, plant & equipment 647,161 3,049, ,455 97,273 Proceed from sale of other investments 119, Deferred proceeds from sale of businesses 3,235,284 5,526, Net cash flows from investing activities 1,248,654 6,276, ,998 7,796,430 CASH FLOWS FROM FINANCING ACTIVITIES Repayment of borrowings (1,769,566) (11,166,132) (176,796) (7,608,975) Payments for shares bought back (2,105,174) - (2,105,174) - Dividends paid (573,267) (506,598) (573,267) (506,598) Net cash flows from financing activities (4,448,007) (11,672,730) (2,855,237) (8,115,573) NET INCREASE IN CASH HELD 1,434, ,261 1,434, ,261 Cash at the beginning of the financial year 453,526 (68,735) 453,526 (68,735) CASH AT THE END OF THE FINANCIAL YEAR 26(ii) 1,887, ,526 1,887, ,526 The accompanying notes form an integral part of these financial statements. CTI Logistics Limited and Controlled Entities Page 7

10 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial report is a general purpose financial report prepared in accordance with Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views and the Corporations Act The financial statements have been prepared on the basis of historical costs and, except where stated, do not take into account current valuations of non-current assets. Where the carrying amount of a non-current asset exceeds its recoverable amount, the asset is written down to its recoverable amount. The recoverable amount of an asset is assessed as the net amount expected to be recovered through the cash inflows and outflows arising from its continued use and subsequent disposal or via appropriate market indices. Except where stated recoverable amounts are not determined using discounted cash flows. The accounting policies adopted in preparing the financial statements have been consistently applied by entities in the consolidated entity except as otherwise indicated. Unless otherwise stated, the accounting policies are consistent with those of the previous year. a PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all entities controlled by CTI Logistics Limited ("" or "parent entity") as at 30 June 2005 and the results of all controlled entities for the year then ended. CTI Logistics Limited and its controlled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidated entity are eliminated in full. Where control of an entity is obtained during a financial year, its results are included in the consolidated statement of financial performance from the date on which control commences. Where control of an entity ceases during a financial year its results are included for that part of the year during which control existed. b ACQUISITION OF ASSETS The cost method of accounting is used for all acquisitions of assets regardless of whether shares or other assets are acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs incidental to the acquisition. Where shares are issued in an acquisition, the value of the shares is determined having reference to the fair value of the assets or net assets acquired, including goodwill or discount on acquisition where applicable. Goodwill is brought to account on the basis described in Note 1(h). c REVENUE RECOGNITION Revenue from operating activities represents revenue earned from the sale of the consolidated entity s products and services, net of returns, trade allowances and duties and taxes paid. Revenue from outside the operating activities includes interest income on short term investments, dividends received from other corporations, rent, proceeds from the sale of assets and, in the case of the, dividends and management fees received from controlled entities. d INVESTMENTS The s interests in companies and the consolidated entity s interests in companies which are not controlled are brought to account at cost and dividends are recognised in the statement of financial performance when receivable. Subsequently, the carrying amount of investments is the lower of cost or market value, the latter resulting in a provision for diminution. e INVENTORIES Finished goods, raw materials and stores and work in progress are stated at the lower of cost and net realisable value. Costs have been assigned to inventory quantities on hand at balance date using the first in first out basis. Cost comprises material, labour and an appropriate proportion of fixed and variable overheads. f PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, other than freehold land, are recorded at cost and are depreciated over their estimated useful lives to the consolidated entity using the straight line method. The expected useful lives are as follows: Buildings Plant and equipment Motor vehicles years 5-15 years 5-10 years g LEASED ASSETS Where property, plant and equipment is acquired by means of finance leases, the present value of the minimum lease payments is recognised as an asset at the beginning of the lease term and amortised on a straight line basis over the expected useful life of the leased asset. A corresponding liability is also established and each lease payment is allocated between the liability and finance charge. Other operating lease payments are charged to the statement of financial performance in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets. CTI Logistics Limited and Controlled Entities Page 8

11 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) h GOODWILL On acquisition of some, or all, of the assets of another entity or, in the case of an investment in a controlled entity, on acquisition of some, or all, of the equity of that controlled entity, the identifiable net assets acquired are measured at fair value. The excess of the fair value of the cost of acquisition over the fair value of the identifiable net assets acquired, including any liability for restructuring costs, is brought to account as goodwill and amortised on a straight line basis over the period of expected benefit, which has been assessed as up to 20 years from the date of gaining control of the entities for substantially all of the goodwill. i j BORROWING COSTS Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include interest on bank overdrafts, short-term and long-term borrowings, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, and finance lease charges. Certain ancillary costs incurred in connection with the arrangement of borrowings have been capitalised and are being amortised over the period of expected benefit. AMORTISATION PERIODS Intangible assets and other significant items of expenditure having a future benefit are amortised over their anticipated useful lives or the periods to which they relate. k RECEIVABLES A sale is recorded when goods have been despatched to a customer or services have been provided. All trade debtors are recognised at the amounts receivable as they are due for settlement no more than 30 days from the date of recognition. A provision is raised for any doubtful debts based on a review of all outstanding amounts at balance date. Bad debts are written off in the period in which they are identified. l TRADE AND OTHER CREDITORS These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the financial year and which are unpaid. The amounts are paid based on the terms of trade which are usually 30 to 60 days from the date of recognition. m INTEREST BEARING LIABILITIES Loans are carried at their principal amounts and interest is accrued over the period it becomes due. n EMPLOYEE ENTITLEMENTS Liabilities for wages and salaries, annual leave and long service leave expected to be settled within 12 months of the reporting date are recognised in respect of employees services up to the reporting date, and are measured as the amounts expected to be paid when liabilities are settled. A liability for long service leave expected to be settled more than 12 months from the reporting date is recognised, and is measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using interest rates on national government guaranteed securities with terms to maturity that match, as closely as possible, the estimated future cash outflows. Contributions to employee superannuation plans are charged as an expense as the contributions are paid or become payable. Employee Share and Option Plan Under the Employee Share and Option Plan, the at the director s discretion and with shareholder approval, may offer eligible employees the opportunity to purchase ordinary shares with the assistance of an interest free loan. The issue price of the shares is determined under the terms of the Employee Share and Option Plan (refer Note 16(iii)). The loan is for a term of 10 years and is repayable by dividends. The shares are recorded at the issue price in equity and the related loan is recorded as a non-current receivable. Options to acquire ordinary shares may also be offered to employees. The exercise price is determined under the terms of the Employee Share and Option Plan (refer Note 16(iii)). The options are not recorded in the financial statements until they are exercised. CTI Logistics Limited and Controlled Entities Page 9

12 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) o p FOREIGN CURRENCY Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables at balance date are translated at exchange rates at balance date. Exchange gains and losses are brought to account in determining the profit or loss for the year. INCOME TAX Tax effect accounting procedures are followed whereby the income tax expense in the statement of financial performance is matched with the accounting profit after allowing for permanent differences. The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is virtually certain of realisation. Income tax on cumulative timing differences is set aside to the deferred income tax or the future income tax benefit account at the rates which are expected to apply when those timing differences reverse. Tax consolidation legislation The economic entity implemented the tax consolidation legislation as of 1 July As a consequence, CTI Logistics Limited, as the head entity in the tax consolidated group, recognises current and deferred tax amounts relating to transactions, events and balances of the entities in the group (being wholly-owned controlled entities) as if those transactions, events and balances were its own, in addition to the current and deferred tax amounts arising in relation to its own transactions, events and balances. Amounts receivable or payable under an accounting tax sharing agreement with the tax consolidated entities are recognised separately as tax-related amounts receivable or payable. Expenses and revenues arising under the tax sharing agreement are recognised as a component of income tax expense (revenue). The deferred tax balances recognised by the parent entity in relation to the wholly-owned entities joining the tax consolidated group are measured based on their carrying amounts at the level of the tax consolidated group before the implementation of the tax consolidation regime, with one exception. The deferred tax balances relating to assets that had their tax values reset on joining the tax consolidated group, have been re-measured based on the carrying amount of those assets at the tax-consolidated group level and their reset tax values. The re-measurement adjustments of these deferred tax balances are also recognised in the consolidated financial statements as income tax expense or revenue. q r CASH FLOWS For the purpose of the statements of cash flows, cash includes cash on hand, deposits held at call with banks and investments in money market instruments, net of bank overdrafts. EARNINGS PER SHARE (i) Basic earnings per share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. s t SEGMENT INFORMATION Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by a segment and consist primarily of receivables, inventories, property, plant and equipment and goodwill and other intangible assets, net of related provisions. While most of these assets can be directly attributable to individual segments, the carrying amounts of certain assets used jointly by segments are allocated based on reasonable estimates of usage. Segment liabilities consist primarily of trade and other creditors, employee entitlements and provision for service warranties. Segment assets and liabilities do not include income taxes. DIVIDENDS Provision is made for the amount of any dividend declared, determined or publicly recommended by the directors on or before the end of the financial year but not distributed at balance date. CTI Logistics Limited and Controlled Entities Page 10

13 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) u JOINT VENTURE ENTITIES The interest in a joint venture partnership is accounted for using the equity method. Under this method, the share of the profits or losses of the partnership is recognised in the statement of financial performance, and the share of the movements in reserves is recognised in reserves in the statement of financial position. Profits or losses on transactions establishing the joint venture partnership and transactions with the joint venture are eliminated to the extent of the consolidated entity s ownership interest until such time as they are realised by the joint venture partnership on consumption or sale, unless they relate to an unrealised loss that provides evidence of the impairment of an asset transferred. CTI Logistics Limited and Controlled Entities Page 11

14 2. REVENUE Revenue from operating activities Sale of goods 22,319,735 18,661, ,032 Sale of services 31,142,752 42,514, Management fees - - 1,888,632 2,353,370 Services provided to related companies - - 1,577,715 1,399,558 Interest charged to related companies ,658 Rent charged to related companies , ,226 53,462,487 61,176,118 3,832,084 4,377,844 Revenue from outside the operating activities Interest 180, ,769 78,085 35,323 Dividends 4,554 3,450 4,554 3,450 Dividends from related companies - - 3,000,000 2,000,000 Rent 539, , Grant - 25, Proceeds from sale of: Businesses, property, plant and equipment 647,161 11,254, ,455 97,273 Other investments 119, Other 1,031,910 1,406, , ,481 2,522,906 13,125,643 3,764,320 2,300,527 Total revenue from ordinary activities 55,985,393 74,301,761 7,596,404 6,678, OPERATING PROFIT (i) OPERATING EXPENSES a) Other expenses from ordinary activities Other expenses from operating activities Changes in inventories of finished goods and work in progress 250,746 98, Raw materials and consumables used 10,550,738 9,497, ,791 Employee benefits expense 15,617,462 19,514,105 4,174,944 4,311,075 Subcontractor expense 13,330,071 16,886, Depreciation of non-current assets (refer Note 8) 3,545,950 3,354, , ,435 Amortisation and write-down of non-current assets 121, , Motor vehicle and transportation costs 3,357,260 5,671, ,980 94,227 Property costs 824, ,601 89,956 55,273 Insurance costs 462, , , ,466 Write-down of property 250, Provision for diminution of investment - 70, Write-back of provision for restricted recovery of share scheme loans (177,000) - (177,000) - Other expenses from operating activities 4,028,139 4,813,843 47, ,333 52,161,838 61,719,885 4,731,297 5,691,600 Other expenses from outside the operating activities Carrying value of: Businesses, property, plant and equipment sold Other investments sold 318, ,040 9,479, ,460-62, ,597 9,479, ,460 62,587 Expenses from ordinary activities, excluding borrowing costs expense 52,599,435 71,199,860 4,844,757 5,754,187 CTI Logistics Limited and Controlled Entities Page 12

15 3. OPERATING PROFIT (continued) b) Profit from ordinary activities before income tax expense for the year includes the following specific net gains and expenses: Cost of sale of goods 15,862,499 14,118, ,791 Net gain on disposal: Investments Businesses, property, plant and equipment ,604-1,774,865-15,995-34,686 Bad and doubtful debts expense: Trade debtors 281, , Rental expense relating to operating leases: Minimum lease payments 631, , (ii) AUDITORS REMUNERATION Amounts received, or due and receivable, by: The auditors of the for auditing and reviewing the financial statements 87,160 89,140 78,160 80,140 Other services - taxation 9,400 9, CTI Logistics Limited and Controlled Entities Page 13

16 4. INCOME TAX The income tax on the operating profit differs from the amount prima facie payable on that profit as follows: Prima facie income tax on the operating profit at 30% 814, , , ,675 Tax effect of permanent differences which: Reduce tax payable due to: Rebatable dividends (1,366) (1,035) (901,366) (601,035) Non-assessable profits on sale of businesses, property, plant and equipment - (352,114) - - Increase tax payable due to non-deductible: Amortisation 33,699 43, Depreciation 6,254 13,442 6,254 8,802 Expenses 2,617 1,703 1, Write-down of property 75, Provision - 21, Prima facie tax adjusted for permanent differences 930, ,187 (99,014) (423,626) Tax losses transferred to controlled entities ,601 Under/(over) provision in prior year (34,842) (31,154) (8,266) 741 Aggregate income tax expense/(benefit) before impact of tax consolidations 895, ,033 (107,280) (343,284) Prima facie income tax on the operating profit of the tax consolidated group (excluding parent entity) at 30% 19, ,358 Tax effect of permanent differences which Reduce tax payable due to: Non-assessable profits on sale of businesses, property, plant and equipment - (352,114) Increase tax payable due to non-deductible: Intercompany dividend 900, ,000 Amortisation 33,699 43,970 Depreciation - 4,640 Expenses Write-down of property 75,000 - Provision - 21,188 Prima facie tax adjusted for permanent differences 1,029, ,813 Eliminate tax losses transferred to controlled entities - (79,601) Over provision in prior year (26,576) (31,895) Aggregate income tax expense tax consolidated group (excluding parent entity) 1,002, , , ,033 Net deferred tax liabilities of the tax consolidated group entities assumed on implementation of tax consolidation (888,109) Adjustment to deferred tax balances on implementation of tax consolidation - (1,136,291) - - Understatement in prior year of tax related amounts payable to tax consolidated group entities ,255 - Compensation (received from)/paid to tax consolidated group entities - - (1,492,312) 245,792 Aggregate income tax expense/(benefit) 895,390 (837,258) (214,667) (343,284) Tax consolidation legislation CTI Logistics Limited and the controlled entities implemented the tax consolidation legislation as of 1 July The accounting policy on implementation of the legislation is set out in Note 1(p). The impact on the income tax expense for the year is disclosed in the tax reconciliation above. CTI Logistics Limited and Controlled Entities Page 14

17 4. INCOME TAX (continued) The entities have also entered into tax sharing and funding agreements. Under the terms of these agreements, the controlled entities will reimburse the for any current tax payable by the arising in respect of their activities and the will reimburse the controlled entities for any tax refund due to the arising in respect of their activities. The reimbursements are payable at the same time as the associated income tax liabilities fall due and have therefore been recognised as a current tax related payable by the. In the opinion of the directors, the tax sharing agreements are also valid agreements under the tax consolidated legislation and will limit the joint and several liability of the controlled entities in the case of default by the. 5. RECEIVABLES Current Trade debtors 9,383,242 9,098,848 58, ,921 Deduct provision for doubtful debts 523, , ,859,371 8,658,477 58, ,921 Loans to controlled entities - - 8,219,691 9,335,763 Income tax refund receivable - 974, ,337 Tax related amounts receivable from controlled entities ,888 - Deferred consideration for sale of businesses 1,174,223 3,380, Other 106, , ,140,382 13,609,942 8,583,029 10,476,021 Non-current Loans to directors (issued pursuant to the s Employee Share and Option Plan and secured by a lien over shares). Refer to Note , , , ,155 Deduct provision for restricted recovery 204, , , , , , , ,155 Deferred consideration for sale of a business - 1,112, ,905 1,578, , , OTHER FINANCIAL ASSETS Non-current Traded securities (at cost) Shares and other equity securities 138, , , ,840 Deduct provision for diminution - 461, , , , ,840 Other investments Shares in controlled entities (refer Note 21) At cost - - 8,334,141 8,334,141 Shares - at cost 70,625 70, Deduct provision for diminution 70,625 70, ,334,141 8,334, , ,185 8,439,981 8,439,981 NET FAIR VALUES Traded securities are listed. The aggregate net fair values of these securities are: Non-current 82, ,105 72,228 74,614 CTI Logistics Limited and Controlled Entities Page 15

18 7. INVENTORIES Current Raw materials and stores (at cost) 382, , Work in progress (at cost) 234, , Finished goods (at cost) 1,086, , ,703,902 1,453, PROPERTY, PLANT AND EQUIPMENT 2005 Cost 2004 Accumulated depreciation/amortisation Written down value 2004 Freehold land At cost 3,000,396 3,000, ,000,396 3,000,396 Buildings At cost 10,261,045 10,507,365 2,657,968 2,407,229 7,603,077 8,100,136 Plant and equipment At cost 26,741,859 23,880,682 17,612,732 15,263,145 9,129,127 8,617,537 Motor vehicles At cost 6,042,304 6,274,819 2,508,496 3,123,998 3,533,808 3,150,821 46,045,604 43,663,262 22,779,196 20,794,372 23,266,408 22,868,890 Freehold land At cost 560, , , ,973 Buildings At cost 1,945,838 1,945, , ,606 1,390,481 1,450,232 Plant and equipment At cost 2,175,755 1,859,891 1,847,646 1,734, , ,018 Motor vehicles At cost 751, , , , , ,629 5,433,862 5,162,890 2,551,644 2,600,038 2,882,218 2,562,852 CTI Logistics Limited and Controlled Entities Page 16

19 8. PROPERTY, PLANT AND EQUIPMENT (continued) Recent valuations of land and buildings Aggregate recent valuations of freehold land and buildings based on: Directors valuation ,812,680 12,059,000 2,550,000 2,550,000 In determining their valuation, the directors have utilised independent valuations conducted in May The basis of the valuation of land and buildings is market value, being the amounts for which the asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm s-length transaction, wherein the parties had each acted knowledgeably, prudently and without compulsion. Reconciliations Reconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below. Freehold Buildings Plant and Motor Total land equipment vehicles At cost At cost At cost At cost Carrying amount at 1 July ,000,396 8,100,136 8,617,537 3,150,821 22,868,890 Additions - 3,680 3,230,839 1,277,509 4,512,028 Disposals - - (98,868) (219,692) (318,560) Write-down - (250,000) - - (250,000) Depreciation/ amortisation expense - (250,739) (2,620,381) (674,830) (3,545,950) Carrying amount at 30 June ,000,396 7,603,077 9,129,127 3,533,808 23,266,408 Freehold Buildings Plant and Motor Total land equipment vehicles At cost At cost At cost At cost Carrying amount at 1 July ,973 1,450, , ,629 2,562,852 Additions , , ,995 Disposals (113,460) (113,460) Depreciation/ amortisation expense - (59,751) (112,772) (103,646) (276,169) Carrying amount at 30 June ,973 1,390, , ,655 2,882,218 CTI Logistics Limited and Controlled Entities Page 17

20 9. DEFERRED TAX ASSETS Non-current Future income tax benefit 806, , , ,690 The consolidated future income tax benefit for the year ended 30 June 2005 includes nil attributable to tax losses ( nil). 10. INTANGIBLE ASSETS Goodwill (at cost) 1,144,196 1,144, Deduct accumulated amortisation 861, , , , OTHER ASSETS Current Prepayments 485, ,287 89, ,540 Non-current Borrowing costs 266, , ,618 Deduct accumulated amortisation 266, , ,618-2, Deferred costs 221, , Deduct accumulated amortisation 221, , , CTI Logistics Limited and Controlled Entities Page 18

21 12. PAYABLES Current Trade (unsecured) 5,064,459 6,769, , ,787 Tax related amounts payable to controlled entities ,792 5,064,459 6,769, , ,579 Non-current Trade (unsecured) - 83, INTEREST BEARING LIABILITIES Current (secured) Other loans 1,260, Hire purchase creditors 1,880,766 2,828, , ,255 3,140,766 2,828, , ,255 Non-current (secured) Other loans 2,996,000 4,256, Hire purchase creditors 3,518,815 2,218, , ,428 6,514,815 6,474, , ,428 Other loans Other loans comprise of two interest only mortgages over freehold land and buildings. The mortgages have expiry dates of August 2006 and February The interest rates are subject to review on a three monthly basis and calculated with reference to the 90 day bank bill bid rate. Security provided The bank overdrafts, loans and hire purchase creditors are secured by mortgages over the consolidated entity s freehold land and buildings, rights to assets under lease or hire purchase which revert to the lessor in event of default and a fixed and floating charge over the remaining assets of the consolidated entity. CTI Logistics Limited and Controlled Entities Page 19

22 13. INTEREST BEARING LIABILITIES (continued) The carrying amounts of assets pledged as security are: Non-current Receivables 616,905 1,578, , ,155 Other financial assets 138, ,185 8,439,981 8,439,981 Property, plant and equipment 23,266,408 22,868,890 2,882,218 2,562,852 Intangible assets 282, , TAX LIABILITIES Current Provision for income tax 87,059-87,059 - Non-current Provision for deferred income tax 349, , , , PROVISIONS Current Employee entitlements 1,407,295 1,213, , ,841 Non-current Employee entitlements 406, , , ,765 Employee entitlement liabilities Current 1,407,295 1,213, , ,841 Non-current 406, , , ,765 Total 1,813,907 1,750, , ,606 Employee numbers Number of employees at year end CTI Logistics Limited and Controlled Entities Page 20

23 16. CONTRIBUTED EQUITY (i) Share capital 22,041,583 ( ,329,931) fully paid ordinary shares 17,939,045 20,044,219 17,939,045 20,044, (ii) Movements in issued share capital Number Balance at 30 June 2003 and 30 June ,329,931 20,044, Number Balance at 1 July ,329,931 20,044,219 Ordinary shares purchased under share buy back (refer Note 16 (iv)) (3,288,348) (2,105,174) Balance at 30 June ,041,583 17,939,045 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. (iii) Employee Share and Option Plan The Employee Share and Option Plan was approved by the shareholders at the 1998 annual general meeting. Under the plan, employees (including executive directors), that have been employed by the consolidated entity for at least two years, may be offered the opportunity to purchase ordinary fully paid shares or offered options to acquire ordinary fully paid shares at the directors discretion and subject to shareholder approval. The issue price of the plan shares is determined from the weighted average market price of all CTI Logistics Limited shares sold on the Australian Stock Exchange during the 30 days preceding the offer being extended. The exercise price of the plan options is determined by the last sale price of the s shares on the day prior to the offer being extended plus a premium of 15%. No options have been issued under this plan since inception. The, at the time of offering the plan shares, may also offer an interest free loan to assist with the purchase of these shares. The term of the loan is for 10 years. The loan is repayable by dividends earned on the plan shares and is secured by a lien over the plan shares. (iv) Share buy back During the period the undertook an on market buy-back of its issued shares. The share buy-back was undertaken under the terms of the relevant legislation and Australian Stock Exchange Listing Rules, allowing 10% of its shares to bought back within a 12 month period for a price not exceeding 5% above the average market price paid in the 5 trading days immediately preceding a purchase. The share buy-back operated from 20 September 2004 to 8 December 2004 with shares being repurchased for prices ranging from 58 cents per share to 61 cents per share. A total of 2,532,993 shares were repurchased at a total cost of 1,533,533. On 19 January 2005, an extension to the share buy-back was authorised at a General Meeting of Shareholders. The has been authorised to buy-back a further 15% of the s shares. A total of 755,355 shares were repurchased for prices ranging from 65 cents per share to 80 cents per share at a total cost of 571,641 during the year. CTI Logistics Limited and Controlled Entities Page 21

24 RETAINED PROFITS AND DIVIDENDS (i) RETAINED PROFITS Balance at the beginning of year 3,350,358 1,009, , ,162 Net profit for the year 1,818,038 2,847,367 2,862, ,201 Dividends provided for or paid (573,267) (506,598) (573,267) (506,598) Balance at the end of the year 4,595,129 3,350,358 2,955, ,765 (ii) DIVIDENDS Ordinary Final 2004 dividend of 1 cent per share paid on 12 November Franked at 30% 235, , , ,299 Interim dividend of 1.5 cents per share paid on 3 May Franked at 30% 337, , , ,299 Total dividends provided for or paid 573, , , ,598 Dividends were paid in cash. Dividends not recognised at year end Since the end of the year the directors have declared a final dividend of 1.5 cents per ordinary share, fully franked at 30%. The aggregate amount of the dividend payable on 22 December 2005 out of retained profits at 30 June 2005 is 330,623 ( ,299). Franking credits Franking credits available at the 30% corporate tax rate. 1,171, ,273 1,171, ,273 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: (a) franking credits/debits that will arise from the payment/refund of the current tax liability/receivable; (b) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; (c) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date; and (d) franking credits that may be prevented from being distributed in subsequent financial years CONTINGENT LIABILITIES Details and estimated maximum amounts of contingent liabilities (for which no amounts are recognised in the financial statements) arising in respect of: Guarantees by the in respect of leasing and hire purchase agreements entered into by controlled entities - - 4,980,478 4,770,345 Controlled entities Guarantees by the in respect of creditors and borrowings by controlled entities - - 8,622,170 10,376, ,602,648 15,146,652 CTI Logistics Limited and Controlled Entities Page 22

25 18. CONTINGENT LIABILITIES (continued) Under the terms of a Deed of Cross Guarantee (as detailed in Note 21) the has undertaken to meet any shortfall which might arise on the winding up of controlled entities which are party to the deed. The controlled entities are not in liquidation nor is there any indication that the controlled entities will be wound up. Details of controlled entities party to the deed are in Note SUPERANNUATION COMMITMENTS Superannuation contributions are made pursuant to the Government s Superannuation Guarantee Charge and are legally enforceable. Employees contribute various percentages of their gross income. Benefits provided under the s Superannuation Plan are based on the accumulated contributions for each employee over the period of employment. Funds are available to satisfy all benefits that are vested under the plan in the event of termination of the plan or termination of an employee s employment LEASE AND CAPITAL COMMITMENTS Total lease expenditure contracted for at balance date but not recognised in the financial statements: Payable no later than one year 723,223 1,021,857 26,143 14,423 Payable later than one, not later than five years 1,005,876 1,271,957 24,415 11,164 Payable later than five years 50,908 72, ,780,007 2,366,490 50,558 25,587 Representing: Non-cancellable operating leases 1,140,398 1,873, Future finance charges on hire purchase 639, ,423 50,558 25,587 Commitments not recognised in the financial statements 1,780,007 2,366,490 50,558 25,587 Analysis of non-cancellable operating lease commitments: Payable no later than one year 413, , Payable later than one, not later than five years 675,822 1,066, Payable later than five years 50,908 72, ,140,398 1,970, Deduct provision for surplus lease space - 97, Commitments not recognised in the financial statements 1,140,398 1,873, Analysis of hire purchase commitments: Payable no later than one year 2,188,664 3,116, , ,678 Payable later than one, not later than five years 3,850,526 2,423, , ,592 6,039,190 5,540, , ,270 Deduct future finance charges on hire purchase 639, ,423 50,558 25,587 Recognised as a liability 5,399,581 5,047, , ,683 Representing hire purchase liabilities: Current 1,880,766 2,828, , ,255 Non-current 3,518,815 2,218, , ,428 5,399,581 5,047, , ,683 CTI Logistics Limited and Controlled Entities Page 23